Bankruptcy Filing Does Not Abrogate Contractual Arbitration Provision

In HCB Enterprises, LLC v. Dickey’s Barbecue Restaurants, Inc., a restaurant franchisee, having filed for bankruptcy under Chapter 11, filed a plan that purported to reject the arbitration clauses in agreements with a creditor. The court rejected the debtor’s attempt to avoid arbitrating disputes, holding that, under recent Supreme Court precedent, a rejection of contract under the bankruptcy code “breaches a contract but does not rescind it. And that means all the rights that would ordinarily survive a contract breach . . . remain in place.” Thus, the court determined it was required to stay the case and compel arbitration.

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