## Facts

- Georgiana N. Duncan financed the purchase of a mobile home under a retail installment/security agreement that included a mandatory arbitration provision.
- The financing contract was originally associated with Conseco and later transferred through a Chapter 11 bankruptcy sale; CFN Investment Holdings, LLC acquired servicing contracts in the bankruptcy proceeding and later became Green Tree Servicing, LLC (Green Tree).
- The arbitration provision required Duncan to waive court litigation (including a jury trial) and submit disputes to binding arbitration before an arbitrator selected by Green Tree, subject to Duncan’s consent.
- While the clause required the consumer to arbitrate, it preserved Green Tree’s ability to seek judicial remedies to enforce the security agreement, including repossession/foreclosure-related relief.
- Green Tree filed a repossession action in the Shiprock District Court of the Navajo Nation seeking possession of the mobile home.
- Duncan answered and asserted counterclaims alleging wrongful conduct connected to the transaction and collection efforts, described in the record summaries as including claims such as fraud, harassment/intentional infliction of emotional distress, and assault.
- Duncan also requested a jury trial; after the district court denied that request, Duncan sought extraordinary relief, and the Navajo Nation Supreme Court issued a writ directing the district court to conduct a jury trial.
- After the jury-trial issue, Green Tree moved to dismiss Duncan’s counterclaims and relied on Conseco’s federal bankruptcy proceedings.
- The Shiprock District Court dismissed Duncan’s counterclaims on the ground that it lacked jurisdiction because the federal Bankruptcy Code’s automatic stay barred the counterclaims.
- Duncan appealed the dismissal to the Navajo Nation Supreme Court. On appeal, Green Tree argued both that the automatic stay supported dismissal and that the arbitration clause independently required Duncan’s claims to be resolved in arbitration rather than Navajo court.

## Issues

1. Whether the federal Bankruptcy Code’s automatic stay barred a Navajo Nation district court from hearing a consumer’s counterclaims against a company that purchased the financing contract in a bankruptcy proceeding.
2. Whether the contract’s mandatory, creditor-favoring arbitration clause was valid and enforceable in Navajo Nation courts so as to prevent litigation of the consumer’s counterclaims in the repossession case.

## Decision

- The Navajo Nation Supreme Court reversed the district court’s dismissal of Duncan’s counterclaims.
- The court held that the federal automatic stay did not bar Duncan’s counterclaims against Green Tree in the Navajo repossession action.
- The court also held that the financing contract’s mandatory arbitration clause violated Navajo public policy and was invalid.
- The case was remanded for further proceedings consistent with the opinion, allowing Duncan’s counterclaims to proceed in the district court.

## Legal Principles

- The Bankruptcy Code’s automatic stay generally protects the bankruptcy debtor and the debtor’s estate; it does not automatically strip a tribal court of authority to hear counterclaims against a non-debtor entity that acquired a contract through a bankruptcy sale.
- A party that purchases or takes assignment of a consumer financing contract through bankruptcy proceedings is not, for that reason alone, entitled to dismissal of claims against it in tribal court based on the debtor’s automatic stay.
- Navajo Nation courts may decline to enforce contract terms that conflict with Navajo public policy, including terms that restrict access to Navajo courts and juries in disputes arising on the Nation.
- A mandatory arbitration clause may be invalid where it operates unfairly by requiring the consumer to give up court and jury-trial remedies while reserving court access and strong remedies (such as repossession-related judicial relief) for the creditor.
- When a creditor invokes Navajo Nation courts to obtain repossession/foreclosure-type relief, Navajo courts may refuse to allow that creditor to use a one-sided arbitration provision to keep closely related counterclaims out of the same judicial proceeding.

## Conclusion

The Navajo Nation Supreme Court reversed the Shiprock District Court’s order dismissing Duncan’s counterclaims, holding that the federal bankruptcy automatic stay did not bar the counterclaims against Green Tree and that the contract’s mandatory, asymmetric arbitration clause was invalid under Navajo public policy; the case was remanded for further proceedings on the counterclaims in Navajo Nation court.


Green Tree Servicing, LLC v. Duncan, 7 Am. Tribal Law 633, 2008 WL 5435566 (2008)