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RKS recently won a motion to compel arbitration of common law claims brought by a liquidating trustee in the U.S. Bankruptcy Court for the District of Delaware against RKS’ client. The Court rejected the Trustee’s arguments that the arbitration provision was unenforceable because the pre-petition contract containing the provision had been rejected and because it provides for the arbitration to be seated in Tel Aviv, Israel. The Court found that rejection of a contract containing an arbitration provision cannot relieve a trustee from the requirement to arbitrate prepetition debtor-derived claims that are otherwise subject to an agreement to arbitrate. It also found, despite the current conflict in the region, that the arbitration’s being seated in Tel Aviv was not sufficient to render the arbitrable forum unavailable, particularly in light of the forum’s ability to provide remote participation options.
The Court also dismissed claims brought under the Bankruptcy Code’s avoidance provisions seeking to claw back pre-petition payments. In keeping with previous decisions of the U.S. Bankruptcy Court for the District of Delaware, the Court dismissed the avoidance claims for failure to specifically identify the recipient of the alleged transfers the trustee was seeking to claw back.
Enforcement of the arbitration provision was important to preserve the parties’ bargained-for dispute resolution agreement and to ensure the claims, which are subject to Israeli law, will be adjudicated by an arbitration panel familiar with Israeli law.
RKS will continue to assist its client in vigorously defending against the Trustee’s claims.