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In re Wire Comm Wireless

September 15, 2008

IN RE: WIRE COMM WIRELESS, INC., DEBTOR.
NEW CINGULAR WIRELESS SERVICES, INC., A DELAWARE CORPORATION, APPELLANT,
v.
MICHAEL F. BURKHART, AS TRUSTEE, APPELLEE.



The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge

MEMORANDUM AND ORDER

New Cingular Wireless Services, Inc. ("New Cingular") appeals from the bankruptcy court's refusal to compel arbitration of its dispute with Wire Comm Wireless, Inc. ("Wire Comm").

For the reasons set forth below, this Court reverses the decision of the bankruptcy court and directs the parties to arbitrate their claims against each other in accordance with their written agreement to do so.

BACKGROUND

Wire Comm operated retail stores selling cellular phone equipment and services, and was a dealer for New Cingular. New Cingular claims it advanced $934,797.47 to Wire Comm in late 2004 and early 2005 because of delays in resolving commission disputes. Ultimately, however, after taking into account commissions actually owed Wire Comm, New Cingular alleges Wire Comm still owed a net $864,192.47 in un-recouped advances. In June of 2005, after a brief meeting to discuss repayment of these advances, Wire Comm terminated its dealer agreement with New Cingular, claiming that it in fact was still owed additional commissions and residuals.

The August 1, 2004 Exclusive Dealer Agreement between Wire Comm and AWS, New Cingular's predecessor,*fn1 required that "all claims... and disputes between Dealer [Wire Comm] and Company [AWS] must be resolved by submission to binding arbitration. (See Compl., Ex. B). In September 2005, shortly after termination of its dealer agreement with New Cingular, Wire Comm invoked the provisions of that arbitration clause by commencing an arbitration proceeding against New Cingular.

That proceeding sought recovery of unpaid commissions which Wire Comm claimed estimated at approximately $1,225,000.00. New Cingular counterclaimed, however, for reimbursement of debts totaling $1,120,825.70 and for damages totaling $1,828,887.47.

During the following year the parties completed discovery in anticipation of an arbitration hearing, which was continued several times. On December 8, 2006, just four days before arbitration was finally scheduled to begin, and after preliminary motions had been decided, Wire Comm filed for bankruptcy under Chapter 7 of the United States Bankruptcy Code.

The December 12, 2006 arbitration hearing was suspended because of Wire Comm's bankruptcy filing. On February 6, 2007, New Cingular filed a proof of claim with the bankruptcy estate in the amount of $2,949,703.17. The appointed bankruptcy trustee (and appellee herein), Michael F. Burkhart, then reasserted Wire Comm's claims against New Cingular by initiating an adversary proceeding and objecting to New Cingular's proof of claim.

On September 17, 2007, New Cingular moved to stay the trustee's adversary proceedings so as to permit completion of the aborted arbitration hearing. The bankruptcy court denied that motion, and the instant appeal followed.

STANDARD

The decision to grant or stay relief from the automatic stay occasioned by bankruptcy, in this case for purposes of permitting arbitration to proceed, is committed to the sound discretion of the bankruptcy court and is accordingly reviewed under an abuse of discretion standard. In re Conejo Enterprises, Inc., 96 F.3d 346, 351 (9th Cir. 1996).

The decision of the bankruptcy judge will be reversed only if based on an erroneous conclusion of law or when the record contains no evidence on which the bankruptcy court ...


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