Larry Gilberg v. Power Architects Corporation

In 2010, Mark Kesel filed Chapter 11 and signed under penalty of perjury a Schedule B that disclosed only a $5,235 brokerage account and omitted his 34.62% interest in Power Architects Corporation (“PA”). The case was dismissed — not discharged — and the PA shares were never scheduled, abandoned, or administered. A private arbitration panel, whose authority arose solely from a 1998 shareholder agreement that nowhere mentions the Bankruptcy Code, nonetheless adjudicated the federal status of those shares: it found that “although Kesel did not list his PA shares in his Chapter 11 case, those shares were part of the bankruptcy estate” under 11 U.S.C, § 541, held they “reverted back in ownership to Kesel” on dismissal under 11 U.S.C. § 349(b)(3), declined to find forfeiture under § 554(d), and declared Kesel a “legitimate shareholder” entitled to own, vote, and collect dividends. California compelled that arbitration, confirmed the award as a money judgment of approximately $5.3 million and reduced Petitioner’s Power Architects ownership, and applied a standard of review it held could not reach the panel’s “mixed question of fact and law.” The questions presented are:

1. Whether the Supremacy Clause permits a State to confirm and enforce, as a money judgment, a private arbitration award that adjudicated the ownership, voting rights, and dividend entitlement of property the award itself found had entered a federal bankruptcy estate, where 11 U.S.C. §§ 554(d) and 1334(e)(1) commit the status and disposition of such property to the federal courts, and no court exercising that jurisdiction has ever decided the estate-property question.

2. Whether property that a Chapter 11 debtor never scheduled, that was never abandoned, and that was never administered revests in the debtor on dismissal under 11 U.S.C. § 349(b)(3), or remains property of the estate under 11 U.S.C. § 554(d).

3. Whether a State may structure its arbitration-confirmation system so that a private tribunal’s adjudication of exclusively federal questions is at once insulated from constitutional