                               REVISED
              IN THE UNITED STATES COURT OF APPEALS

                      FOR THE FIFTH CIRCUIT


                          ___________________

                             No. 96-11140




In the Matter of: NATIONAL
GYPSUM COMPANY, a Delaware
Corporation; AANCOR HOLDINGS, INC.,
a Delaware Corporation,
                                        Debtors
                     -----------------------

INSURANCE COMPANY OF NORTH AMERICA,
                                            Appellant,

     versus

NGC SETTLEMENT TRUST & ASBESTOS CLAIMS
MANAGEMENT CORPORATION,
                                            Appellee.




        ________________________________________________

      Appeal from the United States District Court for the
                   Northern District of Texas
        ________________________________________________

                          July 24, 1997
Before GARWOOD, BENAVIDES and STEWART, Circuit Judges.

GARWOOD, Circuit Judge:

     Appellees Asbestos Claims Management Corporation (ACMC) and

the NGC Settlement Trust (Trust), successors to National Gypsum

Company, a Chapter 11 debtor, brought this declaratory judgment

adversary proceeding in the bankruptcy court seeking a declaration

that collection efforts by National Gypsum’s liability insurance
carrier,   appellant    Insurance     Company        of    North      America   (INA),

seeking to recover certain pre-confirmation debts were violative of

the Chapter 11 discharge injunction or otherwise precluded by the

terms of the Chapter 11 confirmed reorganization plan.                       INA filed

a motion to stay ACMC and the Trust’s adversary proceeding in favor

of arbitration pursuant to the terms of a contractual arbitration

clause.    The Bankruptcy Court, holding that it had discretion to

refuse to order the arbitration of core bankruptcy matters, denied

the motion to stay.       INA appealed.        The district court affirmed.

INA now appeals to this Court.          We affirm.

                       Facts and Proceedings Below

     As this appeal involves the application of an arbitration

provision in a contract assumed by National Gypsum Company pursuant

to its confirmed plan of reorganization, a brief synopsis of

National   Gypsum’s    journey    through       the       bankruptcy     process    is

appropriate.

     National Gypsum, a Delaware corporation with its principal

place of    business    in   Garland,       Texas,    was    a   manufacturer      and

supplier of products and services for the building, construction,

and shelter markets.          Through its various divisions, National

Gypsum manufactured, sold, and distributed products serving the

residential, commercial, industrial, and repair and remodeling

markets.       National      Gypsum   also      performed          engineering     and

construction    services.        Historically,            some   of    the    products

manufactured by National Gypsum contained asbestos.

     Beginning in the 1970s, National Gypsum, as well as many other


                                        2
producers of asbestos-containing products, were named as defendants

in many lawsuits across the country involving bodily-injury claims.

INA was one of National Gypsum’s insurers.1               On June 19, 1985, as

a result of the plethora of asbestos bodily-injury lawsuits and in

recognition of various insurance coverage disputes, National Gypsum

entered into an agreement (the Wellington Agreement) with sixteen

property and casualty insurers and thirty-three former asbestos

products producers         regarding    the    handling    of   asbestos-related

bodily-injury claims.         The Wellington Agreement established the

Asbestos Claims Facility to evaluate, defend, and settle all

pending, threatened,         and   future     asbestos    bodily-injury   claims

presented to it by the signatory producers and to pay settlements,

judgments (except for portions of awards attributable to punitive

damages),    and   legal    expenses    incurred    in    the   defense   of   all

asbestos    bodily-injury      claims    advanced    against      the   signatory

producers.

     The Wellington Agreement, among other things, called for

signatory insurers to advance liability payments on behalf of

participating asbestos producers for amounts covered by insurance

contracts issued by nonsignatory insurers.2                Signatory producers

1
     Century Indemnity Company, successor to CCI Insurance Company
(which was the successor to INA), has assumed INA’s interest in
this adversary proceeding. Century is an indirect, wholly-owned
subsidiary of CIGNA Corporation.
2
     More precisely, the Wellington Agreement provided:

     “3. Whenever an insurance policy described in Paragraph
     1 hereinabove [an insurance policy issued by a non-
     signatory insurer] would have had to make payments or to
     pay expenses on a particular claim under the Agreement

                                         3
who benefitted from such payments were required by the Wellington

Agreement to pursue claims against the nonsignatory insurers, to

repay the amounts advanced by the signatory insurers, and to pay

interest on the amounts advanced beginning two years after the date

the payments were made.3

      During the relevant period, on several occasions and in

amounts not material to this appeal, INA contends that it advanced

payments on behalf of National Gypsum for amounts owed by National

Gypsum’s nonsignatory insurers.       ACMC and the Trust do not contest

that these payments were made on National Gypsum’s behalf.

      On October 28, 1990, National Gypsum and Aancor Holdings, Inc.

(a   Delaware   corporation   and   100%   owner   of   National   Gypsum’s

outstanding     shares)   filed   voluntary   petitions   for   bankruptcy

protection under Chapter 11 of the Bankruptcy Code in the United

States Bankruptcy Court for the Northern District of Texas, Dallas

Division.

      National Gypsum and Aancor filed a “Debtors’ First Amended and


     had the Insurer in question become a signatory hereto,
     and the Subscribing Producer has not received monies from
such non-signatory Insurer pursuant to Paragraphs 1 and 2
hereinabove, each insurance policy in the coverage block covering
a part of the exposure period for such claim shall make payments
and pay expenses, subject to applicable limits of liability, on a
pro rata basis in lieu of the non-signatory insurance policy and to
the extent that such insurance policy would have had to make
payments under the Agreement, up to the applicable limits of such
insurance policy . . . .” Wellington Agreement ¶ XX(3).
3
        Wellington Agreement ¶ XX(1),(4).     The Asbestos Claims
Facility was dissolved on October 3, 1988. The parties agree that
the Wellington Agreement remains operative between and among the
signatory producers (including National Gypsum) and the signatory
insurers (including INA) with respect to insurance coverage issues
resolved therein.

                                     4
Restated Joint Plan of Reorganization” dated September 4, 1992.

The Bankruptcy Court entered an order confirming the reorganization

plan on March 9, 1993.   Pursuant to the reorganization plan and the

confirmation    order,   National   Gypsum   assumed    the     Wellington

Agreement.4    INA neither objected to, nor appealed, the Bankruptcy

Court’s confirmation of the reorganization plan.5

     National    Gypsum’s   reorganization    plan     called    for   the

establishment of a qualified settlement fund under section 468B of

the Internal Revenue Code (the “NGC Settlement Trust (Trust)”),

which became the sole shareholder of the reorganized National


4
        Paragraph 7.1 of the reorganization plan assumed those
executory contracts set forth in the “Schedule of Executory
Contracts” (annexed to the plan as Exhibit F). Exhibit F lists the
Wellington Agreement under Paragraph VII (Asbestos-Related
Agreements)   with   a  prepetition   balance  of   zero  and   an
“[i]ndefinite” term.
     As discussed below, this appeal involves neither a
determination of the “cure” amount (if any) required to assume the
Wellington Agreement under section 365 of the Bankruptcy Code, nor
the amount (if any) of interest owed by National Gypsum at any
time——either pre- or post-confirmation——under the Wellington
Agreement.
5
      INA, however, has maintained consistently that it was never
given the requisite notice for assumption of the Wellington
Agreement. The Bankruptcy Court, in a subsequent ruling, rejected
INA’s notice argument and observed that National Gypsum provided
INA with notice of the hearing to approve the disclosure statement,
and that the notice contained the last date for objections to the
disclosure statement.      The disclosure statement, as usual,
included, as “Annex 1,” the reorganization plan that was ultimately
confirmed by the Bankruptcy Court.      The plan, as noted above,
listed the Wellington Agreement as an executory contract to be
assumed in Exhibit F.
     The Bankruptcy Court ruled that, under our opinion in In re
Christopher, 28 F.3d 512, 517 (5th Cir. 1994), INA had sufficient
notice to permit it to object to the cure amount under section 365.
     The merit of INA’s notice objection to the assumption of the
Wellington Agreement is also not before this Court in the present
appeal.

                                    5
Gypsum (which, in turn, became known as “Asbestos Claims Management

Corporation (ACMC)”).

     In a letter to the Trust dated July 12, 1995, INA demanded

payment of $3,866,055, representing the amount purportedly advanced

under paragraph XX(3) of the Wellington Agreement, plus $1,027,118

accrued interest under paragraph XX(4). INA’s demand letter stated

that, if payment were not received within thirty days, INA would

“institute formal proceedings to collect the amount due.”                   In a

letter to INA dated October 9, 1995, counsel for the Trust and ACMC

stated their position that the confirmed reorganization plan had

discharged National Gypsum “from the obligations asserted in the

Demand Letter” and admonished INA that post-confirmation collection

efforts were violative of the section 524(a) discharge injunction,

section 6.5 of the reorganization plan, and section 8(a) of the

confirmation order.    INA, through counsel, repeated its demand in

a letter dated October 13, 1995.              INA asserted that, as the

Wellington Agreement was assumed by the reorganized National Gypsum

(ACMC) rather than assigned to the “New NGC,” the obligations were

not subject to discharge.

     On October 20, 1995, ACMC and the Trust filed this adversary

proceeding-declaratory     judgment       complaint   against   INA    in    the

National Gypsum Company Chapter 11 case in the United States

Bankruptcy   Court   for   the   Northern     District   of   Texas,   Dallas

Division.    The complaint alleged that National Gypsum’s confirmed




                                      6
reorganization plan barred INA’s collection efforts6 and sought

declarations from the court that (1) INA was barred from obtaining

recovery by operation of the Bankruptcy Code7 and that (2) no

assets of the Trust be permitted to satisfy INA’s claims regardless

of ACMC’s liability.8   The complaint asserted no other defenses to

6

     “The Trust and ACMC contend that INA is barred from
     obtaining recovery for some or all of the alleged
     acceleration interest arising under Section XX of the
     Wellington Agreement from the Trust and ACMC pursuant to
     the discharge and other provisions of the Bankruptcy
     Code, the Plan and the order of this Court confirming the
     Plan (the “Confirmation Order”). Recovery by Defendant
     Insurer of alleged acceleration interest from the Trust
     or ACMC would be contrary to the provisions of the
     Bankruptcy Code, including without limitation Sections
     524 and 1141 thereof, and would defeat the purposes of
     the confirmed Plan and of the Trust formed pursuant to
     the Plan. Confirmation of the Plan is binding on all
     parties affected by the Plan, including without
     limitation INA, and constitutes res judicata as to INA.
     The Trust and ACMC also contend that INA, the Defendant
     Insurer, has been enjoined under applicable provisions of
     the Bankruptcy Code and of the Plan and this court’s
     Confirmation   Order    from   obtaining   such   alleged
     acceleration interest.    INA is estopped from claiming
     such alleged acceleration interest.” Complaint ¶ 20.
7

     “The Trust and ACMC seek a declaration from the Court
     under 28 U.S.C. §§ 2201-2202, declaring that INA, the
     Defendant Insurer, is barred and enjoined pursuant to the
     Bankruptcy Code, the Plan and the Confirmation Order from
     obtaining recovery from either the Trust or ACMC from
     [sic] any interest arising under Section XX of the
     Wellington Agreement that accrued from insurer payments
     made prior to March 9, 1993 [the date of confirmation].”
     Complaint ¶ 23.
8

     “The Trust and ACMC seek a declaration from the Court
     under 28 U.S.C. §§ 2201-2202 declaring that regardless of
     the contractual liability of ACMC, if any, under Section
     XX of the Wellington Agreement, no assets of the Trust
     may be used to satisfy the claims of INA, the Defendant
     Insurer, with respect to any interest arising under

                                 7
the Trust and ACMC’s liability for the amounts set forth in INA’s

demand letter other than those premised on the operation of the

confirmed reorganization plan and the injunctions provided by the

Bankruptcy    Code;    other      issues,       such    as     ACMC      and    the   Trust’s

liability     for     post-confirmation           date        interest,         the   proper

calculation     of    interest     under        the    Wellington         Agreement,       and

equitable    defenses      to    collection           were    not     addressed       by   the

complaint.      ACMC and the Trust sought attorneys’ fees and costs.

      On December 4, 1995, counsel for INA sent a letter to the CPR

Institute for Dispute Resolution requesting immediate docketing of

the   dispute     between       INA,   ACMC,      and        the    Trust,      citing     the

alternative      dispute    resolution          provisions          of    the    Wellington

Agreement.      That same day, in lieu of an answer, INA also filed a

motion in the Bankruptcy Court seeking, alternatively, abstention

in favor of arbitration (28 U.S.C. § 1334(c)(1)), a stay pending

arbitration (9 U.S.C. §§ 1-3), or a dismissal for lack of subject

matter jurisdiction (28 U.S.C. § 1334(b); 28 U.S.C. § 157(c)(1)).

      On January 26, 1996, the Bankruptcy Court entered an order

denying INA’s motion.            The Bankruptcy Court found that, as the

adversary proceeding sought to ascertain whether its Confirmation

Order and the reorganization plan precluded INA’s claim, it had

“core” jurisdiction under 28 U.S.C. §§ 157 (b)(2)(B) and (C).                              The

Bankruptcy Court, further observing that its jurisdiction was

concurrent (rather than exclusive), stated that ordinarily, given


      Section XX of the Wellington Agreement that accrued from
      insurer payments made prior to March 9, 1993, pursuant to
      the Plan and the Conformation Order.” Complaint ¶ 26.

                                            8
the passage of time after the substantive consummation of the

confirmed    plan,   it    would   have   abstained     in     favor   of   the

nonbankruptcy forum (where ACMC and the Trust could have asserted

bankruptcy discharge, the discharge injunction, and res judicata as

affirmative defenses).       The Bankruptcy Court, however, noted the

absence     of   ongoing   arbitration    proceedings        and   found    that

bankruptcy court was the most efficient forum to determine the

issue raised in the complaint.       Accordingly, the Bankruptcy Court

refused to abstain or to stay the adversary proceeding pending

arbitration.9

     INA appealed the denial of its motion for a stay pending

arbitration under the Federal Arbitration Act (the Act), 9 U.S.C.

§ 3, to the District Court.        INA argued that the Bankruptcy Court

applied an incorrect standard for determining whether to grant a

motion to stay under the Act, that the Bankruptcy Court had a duty

to grant a stay pending arbitration, and that the Bankruptcy Court

did not have core jurisdiction over the adversary proceeding.                The

District Court affirmed the Bankruptcy Court, holding that the

issues raised in the declaratory judgment action were “core”

bankruptcy matters and that the Bankruptcy Court had discretion to

refuse to order arbitration of core bankruptcy matters.                INA now

appeals to this Court the denial of its motion to stay under the




9
      The Bankruptcy Court, citing 28 U.S.C. § 1334(c)(2), noted
that mandatory abstention did not apply to a declaratory judgment
action raising a core matter.

                                      9
Act.10    We affirm.

                                Discussion

     Although this appeal arises out of a dispute between INA and

ACMC and the Trust about whether, and to what extent, National

Gypsum’s    confirmed    reorganization   plan   bars   post-confirmation

collection efforts by INA for National Gypsum’s alleged pre-

confirmation liability to INA under the Wellington Agreement, the

merits of that dispute are not before this Court.           Rather, this

appeal concerns only the Bankruptcy Court’s determination that,

assuming the Wellington Agreement’s arbitration provision can be

read broadly enough to cover the present dispute, it nevertheless

had discretion to decide not to stay the adversary proceeding

pending arbitration under the Act.

     A bankruptcy court’s refusal to stay an adversary proceeding

pending arbitration, though inherently interlocutory in nature, is

nevertheless appealable because of section 16 of the Federal

Arbitration Act.       Section 16, by providing that an appeal may be

taken from an order “refusing a stay of any action under section

3,” 9 U.S.C. § 16(a)(1)(A),11 promotes arbitration “‘by permitting

10
     Although INA, in its brief to this Court, stated that “[t]his
appeal only addresses the denial of [INA’s] motion to stay in favor
of arbitration,” it listed the Bankruptcy Court’s determination
that it possessed core bankruptcy jurisdiction as an issue on
appeal and presented arguments in support of that issue.
11
         Section 16 of the Federal Arbitration Act provides:

     “(a) An appeal may be taken from——
          (1) an order——
               (A) refusing a stay of any action under
               section 3 of this title,
               (B) denying a petition under section 4 of this

                                    10
interlocutory   appeals     of   orders   favoring     litigation     over

arbitration and precluding review of interlocutory orders that

favor arbitration,’” McDermott Int’l, Inc. v. Underwriters at

Lloyd’s Subscribing to Memorandum of Ins. No. 104207, 981 F.2d 744,

746-47 (5th Cir. 1993) (quoting Forsyth Int’l, S.A. v. Gibbs Oil

Co., 915 F.2d 1017, 1020 (5th Cir. 1990)); see also American Cas.

Co. of Reading, Pa. v. L-J Inc., 35 F.3d 133, 135 (4th Cir. 1990)

(“It matters not whether these orders [refusing arbitration] are

final or interlocutory because orders that favor litigation over

arbitration are ‘immediately appealable, even if interlocutory in

nature.’”)   (citation    omitted).     Accordingly,   this   Court   has

jurisdiction over INA’s appeal.

                                   I.

     INA contends that the Bankruptcy Court erred by concluding


     title to order arbitration to proceed,
               (C) denying an application under section 206
               of this title to compel arbitration,
               (D) confirming or denying confirmation of an
               award or partial award, or
               (E) modifying, correcting, or vacating an
               award;
          (2) an interlocutory order granting, continuing, or
          modifying an injunction against an arbitration that
          is subject to this title; or
          (3) a final decision with respect to an arbitration
          that is subject to this title.
     (b) Except as otherwise provided in section 1292(b) of
     title 28, an appeal may not be taken from an
     interlocutory order——
          (1) granting a stay of any action under section 3
          of this title;
          (2) directing arbitration to proceed under section
          4 of this title;
          (3) compelling arbitration under section 206 of
          this title; or
          (4) refusing to enjoin an arbitration that is
          subject to this title.” 9 U.S.C. § 16.

                                   11
that ACMC’s declaratory judgment action constituted a core issue

under   28   U.S.C.    §   157(b)(2)(B)&(C),12     and    argues    that   ACMC’s

declaratory judgment action was instead a preemptive assertion of

a federal defense to a state law contract claim.                    A bankruptcy

court’s conclusion that a proceeding is “core” under 28 U.S.C. §

157(b) is a question of law which this Court reviews de novo.                 In

re United States Abatement Corp., 79 F.3d 393, 397-98 & n.9 (5th

Cir. 1996).      INA       first   argues   that   ACMC    and     the Trust are

attempting to utilize the Declaratory Judgment Act to transform an

affirmative defense of discharge in bankruptcy into a federal cause

of action “arising under” title 11.           In support of its argument,

INA cites Skelly Oil Co. v. Phillips Petroleum Co., 70 S.Ct. 876,

878-79 (1950), and Franchise Tax Bd. v. Construction Laborers

Vacation Trust, 103 S.Ct. 2841, 2849-50 (1983), for the proposition

that, as federal defenses to state law actions do not “arise under”

federal law for the purpose of federal question jurisdiction even

when asserted in a declaratory judgment complaint, the discharge

injunction    granted       pursuant   to   National      Gypsum’s     confirmed

reorganization plan cannot confer “arising under” core bankruptcy


12
      28 U.S.C. § 1334(b) confers on the federal district courts
“original but not exclusive jurisdiction of all civil proceedings
arising under title 11, or arising or related to cases under title
11.” 28 U.S.C. § 157(b)(1) gives bankruptcy judges the power to
determine “all core proceedings arising under title 11, or arising
in a case under title 11” and to enter appropriate judgments and
orders. 28 U.S.C. § 157(b)(2) provides a nonexclusive list of core
proceedings, two of which the Bankruptcy Court (and the District
Court) found applicable.      Id. § 157(b)(2)(B) (“allowance or
disallowance of claims against the estate”); id. § 157(b)(2)(C)
(“counterclaims by the estate against persons filing claims against
the estate”).

                                       12
jurisdiction under sections 157(b) and 1334.    INA contends that

Skelly and Franchise Tax Board required the Bankruptcy Court to

realign the parties as if ACMC were asserting discharge as a

defense to a state law contract action brought by INA.

     INA also argues that any affirmative right conferred by 11

U.S.C. § 524(a)13 does not confer an independent federal cause of

action. INA cites Fabrique, Inc. v. Corman, 813 F.2d 725, 726 (5th

Cir. 1987), for the proposition that “an action for a declaratory

judgment stating a preemptive bankruptcy defense to a state law

claim [does] not constitute a cause of action for the purpose of

federal jurisdiction.”

     ACMC and the Trust counter that a proceeding to determine

whether a creditor violated section 524(a)’s discharge injunction,

the reorganization plan, or the confirmation order is a core

13
        Section 524(a) provides a debtor with a post-discharge
injunction against the collection of debts discharged in
bankruptcy:

     “(a) A discharge in a case under this title——
     . . . .
          (2)   operates  as   an  injunction   against   the
          commencement or continuation of an action, the
          employment of process, or an act, to collect,
          recover or offset any such debt as a personal
          liability of the debtor, whether or not discharge
          of such debt is waived . . . .”        11 U.S.C. §
          524(a)(2).

     Section 1141(d) discharges a Chapter 11 debtor (with certain
exceptions) from preconfirmation debts:

     “(d)(1) Except as otherwise provided in this subsection,
     in the plan, or in the order confirming the plan, the
     confirmation of a plan——
          (A) discharges the debtor from any debt that arose
          before the date of such confirmation . . . .” 11
          U.S.C. § 1141(d)(1)(A).

                               13
proceeding    under      section   157(b)    and    that     INA’s      reliance     on

declaratory judgment/federal question cases is inapposite.                       ACMC

and the Trust first argue that In re Wood’s statement that “a

proceeding is core under section 157 if it invokes a substantive

right provided by title 11 or if it is a proceeding that, by its

nature, could arise only in the context of a bankruptcy case,” 825

F.2d 90, 97 (5th Cir. 1987), is controlling because their claim

that INA violated the discharge injunction “invokes a substantive

right provided by title 11.” Similarly, ACMC and the Trust contend

that their claim that INA also violated the reorganization plan and

the confirmation order could arise only in the context of a

bankruptcy case.      ACMC and the Trust dispute INA’s position that a

discharge in bankruptcy, though a potential affirmative defense in

a civil proceeding, cannot also confer positive rights under

section 524.

     ACMC and the Trust finally argue that the section 524(a)

discharge    injunction      grants    a    federal      right     to   be    free   of

collection efforts——an independent basis for federal bankruptcy

jurisdiction——that does not rely improperly on the Declaratory

Judgment     Act,   28    U.S.C.   §   2201,       as    a   basis      for   federal

jurisdiction.       ACMC and the Trust distinguish Fabrique as a case

involving    a   nonbankrupt,      declaratory          judgment     plaintiff       who

premised federal jurisdiction on the federal question statute, 28

U.S.C. § 1331, advancing 11 U.S.C. § 363(m)’s warrant of title to

good faith purchasers as the only federal issue. Accordingly, they

argue that the 11 U.S.C. § 363(m) right at issue in Fabrique,


                                       14
unlike the 11 U.S.C. § 524(a) discharge injunction, can arise only

as a defense.       ACMC and the Trust contend that the declaratory

judgment   action     concerning   section     524(a)   involves    only   an

interpretation of the reorganization plan and the confirmation

order to determine whether the debt asserted by INA is owed under

the confirmed plan; as the merits of INA’s claims under the

Wellington Agreement were not implicated by their complaint, they

argue that the adversary proceeding involves only a determination

of their federal rights under the Bankruptcy Code.

     The discharge injunction granted by section 524(a) is a

substantive right conferred by the Bankruptcy Code, often enforced

by a motion for contempt, see, e.g., In re Texaco, 182 B.R. 937,

944 (Bankr. S.D.N.Y. 1995) (“There can be no question that a

proceeding such as this [motion for contempt], to enforce and

construe a confirmation order issued by this Court in this case,

constitutes a proceeding ‘arising in or related to a case under

title 11.”), but also enforceable through a declaratory judgment

action, see, e.g., In re Christopher, 148 B.R. 832, 833 & n.2

(Bankr.    N.D.    Tex.   1992)    (reorganized      Chapter   11   debtor’s

declaratory judgment adversary proceeding seeking a declaration

that certain claims asserted in lawsuits were barred by 11 U.S.C.

§ 1141(d) was a core proceeding under 28 U.S.C. § 157(b)(2)(B) and

(O)), aff’d, 28 F.3d 512 (5th Cir. 1994);            In re Pettibone Corp.,

151 B.R.    166,    169-70   (Bankr.   N.D.   Ill.   1993)   (resolution   of

declaratory judgment action brought by Chapter 11 plaintiff to

declare a personal injury claim discharged and collection efforts


                                       15
violative of section 524(a) “affect[ed] the allowance of claims and

the administration of the estate [and] was a core proceeding under

28 U.S.C. § 157(b)(2)(A) and (B)”).             Courts have held that actions

to enforce the discharge injunction are core proceedings because

they call on a bankruptcy court to construe and enforce its own

orders.     In re Polysat, 152 B.R. 886, 888 (Bankr. E.D. Pa. 1993)

(“As the instant proceeding concerns the scope of the discharge

injunction arising from sections 524 and 1141 of the Code, it is a

core proceeding under 28 U.S.C. §§ 157(b)(2)(A), (I), or (O).”); In

re Jacobs, 149 B.R. 983, 989 (Bankr. N.D. Okla. 1993) (“An action

before the Court which issued a discharge, for the purpose of

determining the scope of            said discharge under 11 U.S.C. § 524 . .

. is not merely related to the bankruptcy, but arises under Title

11, and arises in a case under Title 11, is a ‘proceeding . . .

affecting     .   .     .     the    adjustment    of     the   debtor-creditor

relationship,’ and is therefore a core proceeding under 28 U.S.C.

§§ 157(b)(2)(O).”); cf. 4 Collier on Bankruptcy ¶ 524.02[2][c], at

524-18 (“A proceeding to enforce the discharge injunction is a core

proceeding under section 157(b)(2)(O) of title 28, and courts should

readily reopen a closed bankruptcy case to ensure that the essential

purposes of the discharge are not undermined.”).

     The District Court rejected INA’s argument that the true

nature of ACMC’s declaratory judgment action was a federal defense

to   a    state   law       contract    claim   because     “[t]he   scope   and

ramifications of the federal injunctions granted under Section

524(a) of the Bankruptcy Code, the Plan, and the Confirmation Order


                                         16
are issues which are independent of the nature of INA’s pre-

confirmation claims.”       The District Court was correct.       Although a

discharge in bankruptcy can constitute an affirmative defense to a

state law contract claim, ACMC’s action to enforce the discharge

injunction——and to construe the scope and effect of the confirmed

reorganization plan——need not, indeed cannot,14 resolve any state

law contract issues, only whether INA’s pre-confirmation claim, as

stated, was discharged or otherwise barred by the Bankruptcy

Court’s confirmation of National Gypsum’s reorganization plan.            As

such, the adversary proceeding is a federal cause of action,

asserting a statutory right under the Bankruptcy Code, that does

not depend improperly on the Declaratory Judgment Act as a basis

for core bankruptcy jurisdiction.

     The Skelly Oil/Franchise Tax Board line of decisions relied on

by INA and this Court’s Fabrique decision are not inconsistent with

the Bankruptcy Court’s finding of core bankruptcy jurisdiction.

First, unlike the Federal Power Commission’s “certificate of public

convenience and necessity” at issue in Skelly Oil, 70 S.Ct. at 880-

82, or the scope of ERISA preemption at issue in Franchise Tax

Board,   103   S.Ct.   at    2848-49,    the   section   524(a)   discharge

injunction is not solely a federal defense to potential state


14
       The declaratory judgment complaint filed by ACMC and the
Trust addressed only bankruptcy issues, specifically the operation
of the confirmed plan and the discharge injunctions. Before the
Bankruptcy Court, the parties agreed that the issues raised by the
complaint were exclusively matters of federal bankruptcy law.
Similarly, at oral argument before this Court, counsel for INA
acknowledged that the complaint did not raise any state law
contract issues.

                                    17
actions; instead, “[l]ike the automatic stay of section 362(a), the

discharge injunction is the equivalent of a court order,” 4 Collier

on Bankruptcy ¶ 524.02[2], at 524-14.             Second, unlike section

363(m)’s federal “copper-bottoming” of a state good faith purchaser

defense at issue in Fabrique, a proceeding to enforce or construe

a bankruptcy court’s section 524(a) discharge injunction issued

pursuant to its confirmation order——and whether the confirmed

reorganization plan precludes certain post-confirmation collection

efforts——necessarily arises under title 11 and supports a finding

that federal jurisdiction exists under 28 U.S.C. § 1334 and that

such a proceeding is “core” under 28 U.S.C. § 157(b).

     Accordingly, we agree with both the Bankruptcy Court and the

District Court and hold that a declaratory judgment action seeking

merely    a   declaration    that   collection    of    an   asserted   pre-

confirmation     liability    is    barred   by   a    bankruptcy   court’s

confirmation of a debtor’s reorganization plan (and the attendant

discharge injunctions under sections 524 and 1141 of the Bankruptcy

Code) is a core proceeding arising under title 11.           Wood, 825 F.2d

at 97; 28 U.S.C. § 157(b)(2)(B),(C), and (O).

                                     II.

     INA argues that the Bankruptcy Court erred when it concluded

that it had discretion to refuse to stay the adversary proceeding

in favor of arbitration pursuant to the Wellington Agreement’s

arbitration provision.15      Whether a bankruptcy court has discretion

15
         Paragraph VIII(6) of the Wellington Agreement provides:

     “6. Subscribing Producers and Subscribing Insurers shall

                                     18
to deny a motion to stay is a question of law which this Court

reviews de novo.   In the Matter of Complaint of Hornbeck Offshore

(1984) Corp., 981 F.2d 752, 754 (5th Cir. 1993).

     INA makes three arguments in support of its contention that

the Bankruptcy Court erroneously denied its motion to stay pursuant

to the Federal Arbitration Act.       First, INA argues that the legal

standard used by the Third Circuit in Hays and Co. v. Merrill

Lynch, Pierce, Fenner & Smith, Inc., 885 F.2d 1149, 1161 (3d Cir.

1989), providing that a court “should enforce [an arbitration]

clause unless that effect would seriously jeopardize the objectives

of the Code,” applies to the instant proceeding.               Second, INA

argues   that    the    Bankruptcy        Court   improperly       relied   on

considerations of efficiency as a basis for denying INA’s motion to

stay.    Finally, INA argues that the District Court erroneously

concluded that the Bankruptcy Court had discretion to determine

whether issues should be submitted to arbitration under the Act.

INA contends    that   cases   holding     that   a   bankruptcy    court   has

discretion to deny arbitration of core bankruptcy matters are

irreconcilable with the Supreme Court’s non-discretionary standard

set forth in Shearson/American Express, Inc. v. McMahon, 107 S.Ct.

2332 (1989) (holding claims under the Securities Exchange Act of

1934 and the federal RICO statute arbitrable and subject to the

Act), and Rodriguez de Quijas v. Shearson/American Express, Inc.,



     resolve through alternative dispute resolution, in the
     manner set forth in Appendix C hereto, any disputed
     issues within the scope of the Agreement and the
     Appendices hereto.”

                                     19
109 S.Ct. 1917 (1989) (holding claims under the Securities Act of

1933 arbitrable), and that whether a matter is “core” or “non-core”

under 28 U.S.C. § 157 is irrelevant to mandatory arbitration under

the Act.

     ACMC and the Trust, on the other hand, contend that the

arbitration clause in the Wellington Agreement does not trigger

mandatory arbitration under the Federal Arbitration Act of its

declaratory judgment action.    First, they argue that arbitration

and the objectives of the Bankruptcy Code conflict when core

bankruptcy issues are involved.        For example, ACMC and the Trust

note that the Third Circuit in Hays, although finding pre-petition,

non-core claims of the debtor arbitrable, found that the trustee’s

section 544(b) fraudulent conveyance claim was not subject to

arbitration.   Second, ACMC and the Trust argue that, even if the

core/non-core distinction is not appropriate, mandatory arbitration

of its section 524(a) claim would nevertheless conflict with

Bankruptcy Code objectives by allowing arbitrators to determine

discharge issues and to interpret bankruptcy court orders.       Third,

ACMC and the Trust make an argument that an interpretation of the

Act that would permit arbitrators to determine whether INA violated

the discharge injunction would violate the separation-of-powers

doctrine   because   Congress   would     be   “interfering   with   the

[bankruptcy] court’s ability to enforce its judgments.”        Finally,

they contend that the Wellington Agreement’s arbitration clause is

not broad enough to cover their claims set forth in the complaint.




                                  20
A.   The Standard for Enforcing an Applicable Arbitration Clause

      The parties disagree as to the standard a bankruptcy court

should use to determine whether to order arbitration of a core

bankruptcy issue.            INA contends that, provided an arbitration

clause is otherwise applicable, the bankruptcy court must order

arbitration unless it would seriously jeopardize the objectives of

the Bankruptcy Code.          ACMC and the Trust contend that arbitration

of core bankruptcy issues inherently present such a conflict.

      Section      3    of   the   Federal    Arbitration      Act   provides,    in

pertinent part, that a court “upon being satisfied that the issue

involved . . . is referable to arbitration under such an agreement,

shall on application of one of the parties stay the trial of the

action until such arbitration has been had in accordance with the

terms   of   the       agreement.”      9    U.S.C.   §   3.     Addressing      the

arbitrability of federal RICO and securities fraud claims brought

under the Securities Exchange Act of 1934 in McMahon, the Supreme

Court stated:

      “The Arbitration Act, standing alone, therefore mandates
      enforcement of agreements to arbitrate statutory claims.
      Like any statutory directive, the Arbitration Act’s
      mandate may be overridden by a contrary congressional
      command.     The burden is on the party opposing
      arbitration, however, to show that Congress intended to
      preclude a waiver of judicial remedies for the statutory
      rights at issue.    If Congress did intend to limit or
      prohibit waiver of a judicial forum for a particular
      claim, such an intent ‘will be deducible from [the
      statute’s] text or legislative history’ or from an
      inherent conflict between arbitration and the statute’s
      underlying purposes.” McMahon, 107 S.Ct. at 2337-38.

Two years later, addressing the arbitrability of securities fraud

claims brought under the Securities Act of 1933, the Supreme Court


                                         21
again used the standard set forth in McMahon to find the claims

arbitrable.     Rodriguez, 109 S.Ct. at 1921 (“[T]he party opposing

arbitration carries the burden of showing that Congress intended in

a separate statute to preclude a waiver of judicial remedies, or

that such a waiver of judicial remedies inherently conflicts with

the underlying purposes of that other statute.”) (overruling Wilko

v. Swan, 74 S.Ct. 182 (1953)).

     Citing the Supreme Court’s increased recognition of the force

of 9 U.S.C. § 3 in McMahon and Rodriguez, the Third Circuit, in

Hays and Co. v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,

ordered   the   arbitration    of   a    non-core     bankruptcy   adversary

proceeding.     In Hays, a Chapter 11 trustee brought a number of

federal and state claims against Merrill Lynch concerning various

securities transactions.      Merrill Lynch filed a motion to dismiss

the federal RICO and 1933 Act claims pursuant to an arbitration

clause contained in the brokerage agreement.            The district court

refused to compel arbitration.16        Hays, 885 F.2d at 1150-51.

     The Third Circuit, reversing the district court, rejected the

notion that the Bankruptcy Code impliedly modified the Act and

stated that a Chapter 11 trustee is bound by an arbitration clause

to the same extent as would be a debtor.            Id. at 1155.   The Third

16
       The district court premised its decision on Zimmerman v.
Continental Airlines, 712 F.2d 55 (3d Cir. 1983), cert. denied, 104
S.Ct. 699 (1984). In Zimmerman, decided before both McMahon and
the 1984 amendments to the Bankruptcy Code, the Third Circuit held
that, “because the underlying purposes of the Bankruptcy Reform Act
impliedly modify the Arbitration Act, the granting of a stay
pending arbitration, even when the arbitration clause is
contractual, is a matter left to the sound discretion of the
bankruptcy judge.” Id. at 56.

                                    22
Circuit held that, as the “‘trustee stands in the shoes of the

debtor and can only assert those causes of action possessed by the

debtor’” subject to defenses——such as a contractual arbitration

provision——as could have been asserted by a defendant, the trustee

was bound to arbitrate all causes of action derived from section

541.17    Id. at 1154.      Accordingly, the Third Circuit held that the

federal      RICO    and   securities    fraud     actions   must    be   ordered

arbitrated,     but     that    the   trustee’s    section   544(b)    avoidance

action——which was “not derivative of the bankrupt” but rather a

“statutory cause[] of action” under the Bankruptcy Code for the

benefit of the creditors——was not subject to the arbitration

provision.      Id. at 1155.

      The Hays opinion does go to some length to distinguish the

arbitrable      claims     as   “involv[ing]      non-core   proceedings”     and

highlighted the heightened role of nonbankruptcy court adjudication

brought about by the 1984 amendments.              Id. at 1159.      In light of

the   “clear        congressional     rejection    of    judicial    skepticism”

concerning arbitration recognized in McMahon and Rodriguez, the

Third Circuit concluded that an adversary proceeding involving

debtor-derivative, non-core matters would not “seriously jeopardize

the objectives of the Code.” Id. at 1160-61.

      With    respect      to   derivative,   non-core    matters,    the   Third

Circuit’s opinion in Hays makes eminent sense, particularly in

light of the 1984 amendments to the Bankruptcy Code.                  Indeed, in

17
         11 U.S.C. § 541 defines the property included in the
bankruptcy estate, which includes all legal and equitable interests
of the debtor.

                                         23
this regard it has been universally accepted.                   See Fred Neufeld,

Enforcement    of     Contractual     Arbitration           Agreements   under   the

Bankruptcy    Code,    65    Am.   Bankr.     L.J.    525    (1991)   (providing    a

circuit-by-circuit          analysis);      Mette     H.     Kurth,   Comment,     An

Unstoppable Mandate and an Immovable Policy: The Arbitration Act

and the Bankruptcy Code Collide, 43 U.C.L.A. 999 (1996) (same).

     Whether a bankruptcy court has discretion to enforce an

applicable arbitration clause where core bankruptcy issues are

involved was not addressed specifically by Hays, although other

courts have found the core/non-core distinction useful. See, e.g.,

Selcke v. New England Ins. Co., 995 F.2d 688, 691 (7th Cir. 1993)

(“Even broadly worded arbitration clauses are assumed not to extend

to claims that arise out of the provisions of the bankruptcy law

itself . . . .”); In re Spectrum Info. Techs., Inc., 183 B.R. 360,

363 (Bankr. E.D.N.Y. 1995) (“[E]specially with respect to core

proceedings, . . . arbitration should not triumph over the specific

jurisdiction    bestowed       upon   the     bankruptcy        courts   under   the

Bankruptcy Code.”) (citing cases); In re Sacred Heart Hosp., 181

B.R. 195, 202 (Bankr. E.D. Pa. 1995) (“[A]s to core proceedings,

this court may exercise its full panoply of discretion . . . in

determining    whether        to   refer      a     proceeding     before   it     to

arbitration.”); In re American Freight Sys., Inc., 164 B.R. 341,

347 (D. Kan. 1994) (“The teachings of Hays & Co. are not applicable

to an adversary proceeding involving a core matter.”); In re Glen

Eagle Square, Inc., 1991 WL 71782 (Bankr. E.D. Pa. May 1, 1991)

(holding that the court retained discretion to order arbitration of


                                         24
core     proceedings       because     “they      impact       upon        the    Debtor’s

relationship with its entire body of creditors”); In re FRG, 115

B.R. 72, 74-75 (E.D. Pa. 1990).             But see In re Barkman, Inc., 170

B.R. 321, 323 n.1 (Bankr. E.D. Mich. 1994) (“For purposes of

determining whether Congress intended to carve out an exception to

§ 3 of the Arbitration Act, the core/non-core distinction would

seem to be of only indirect significance.”).

       ACMC   and    the    Trust    urge   us      to    adopt      a   position        that

categorically finds arbitration of core bankruptcy proceedings

inherently irreconcilable with the Bankruptcy Code.                         Cognizant of

the Supreme Court’s admonition that, in the absence of an inherent

conflict with the purpose of another federal statute, the Federal

Arbitration Act mandates enforcement of contractual arbitration

provisions, McMahon, 107 S.Ct. at 2337-38, we refuse to find such

an inherent conflict based solely on the jurisdictional nature of

a bankruptcy proceeding. Rather, as did the Third Circuit in Hays,

we     believe     that    nonenforcement        of      an   otherwise          applicable

arbitration       provision    turns   on     the     underlying         nature     of   the

proceeding, i.e., whether the proceeding derives exclusively from

the    provisions     of    the   Bankruptcy        Code      and,    if    so,    whether

arbitration of the proceeding would conflict with the purposes of

the Code.        In this regard, we agree with INA that the discretion

enjoyed by a bankruptcy court to refuse enforcement of an otherwise

applicable arbitration provision depends upon a finding that the




                                         25
standard set forth in McMahon has been met.18                      But because we

believe   that   ACMC      and       the        Trust’s    declaratory    judgment

complaint——which concerned matters central to National Gypsum’s

confirmed reorganization plan and implicated contractual issues in

only the most peripheral manner (if at all)——met this standard, we

conclude that the Bankruptcy Court was within its discretion to

refuse to order arbitration of the adversary proceeding (which was

limited to the effect, if any, of National Gypsum’s confirmed

reorganization plan and attendant injunctions on INA’s collection

efforts).19

     The core/non-core distinction conflates the inquiry set forth

in McMahon and Rodriguez with the mere identification of the

jurisdictional   basis     of    a    particular          bankruptcy    proceeding.

Certainly not all core bankruptcy proceedings are premised on

provisions of the Code that “inherently conflict” with the Federal

Arbitration   Act;   nor    would      arbitration          of   such   proceedings

necessarily jeopardize the objectives of the Bankruptcy Code.

Although, as appellees suggest, “the core/non-core distinction is

18
       We disagree, however, with the narrowness of the example
offered by INA at oral argument of the type of arbitration that
would be “irreconcilable” with the purpose of the Bankruptcy Code:
a situation where a creditor and a debtor agreed pre-bankruptcy to
arbitrate the actual amount the creditor would be paid on a claim
under the contract in the event of bankruptcy (effectively
contracting out of a bankruptcy court’s power to adjust claims
among different classes of creditors).        Such a contractual
provision——essentially an ipso facto clause——would plainly be
unenforceable without regard to any conflict, real or apparent,
with the Federal Arbitration Act.      Cf. 11 U.S.C. §§ 363(l);
365(f)(1); 541(c).
19
       We note that at the time the instant complaint was filed,
arbitration had not even been set in motion.

                                           26
a practical and workable one,” it is nonetheless too broad.                       The

“discretion” that ACMC and the Trust urge should exist only where

a    particular      bankruptcy      proceeding       meets     the   standard    for

nonenforcement of an arbitration clause set forth in McMahon and

Rodriguez.     See In re Chorus Data Sys., 122 B.R. 845, 851 (Bankr.

N.H.   1990)      (“[U]nder    the    Supreme    Court     precedents     there       is

discretion     but    in   the    bankruptcy         context    there   must     be    a

demonstrated specific conflict between enforcing an arbitration

clause and the textual provisions and/or purposes of the Bankruptcy

Code to justify the exercise of discretion by a bankruptcy court in

refusing to enforce an arbitration clause.”)                   It is doubtful that

“core” proceedings, categorically, meet the standard.

       In   the     most   common       type    of     creditor-initiated        core

proceeding——a         motion      for     relief         from     the     automatic

stay20——bankruptcy courts regularly have permitted arbitration to

continue (or commence) in spite of the presence of core bankruptcy

jurisdiction.       In those cases permitting arbitration, courts have

typically found little difficulty with arbitration of disputes

where resolution would not involve matters of federal bankruptcy

law.

       For example, in In re Statewide Realty Co., 159 B.R. 719, 722

(Bankr. D. N.J. 1993), the debtor had objected to claims advanced

by Hilton International under a rejected management agreement, and

Hilton sought relief from the automatic stay to resolve the claim

20
      11 U.S.C. § 362(d) allows a bankruptcy court to grant relief
from the § 362(a) automatic stay when a creditor establishes
“cause.”

                                         27
pursuant   to    an     arbitration    provision        in   the   agreement.

Acknowledging    that    its   discretion   to   deny    enforcement   of   an

otherwise applicable arbitration provision rested on a finding that

arbitration would conflict with the provisions or purpose of the

Bankruptcy Code, the bankruptcy court rejected a reading of Hays

now advanced by ACMC and the Trust:

     “The fact that the matter before the court is a core
     proceeding   does    not   mean   that   arbitration   is
     inappropriate. The description of a matter as a core
     proceeding simply means that the bankruptcy court has the
     jurisdiction to make a full adjudication.        However,
     merely because the court has the authority to render a
     decision does not mean it should do so. The discussion
     in Hays regarding core and non-core proceedings is not
     read by this court as suggesting that core proceedings
     may not be subject to arbitration. Rather it appears
     that the Hays court sought to distinguish between actions
     derived from the debtor, and therefore subject to the
     arbitration agreement, and bankruptcy actions in essence
     created by the Bankruptcy Code for the benefit ultimately
     of creditors of the estate, and therefore not encompassed
     by the arbitration agreement.” Id. at 724.

The court went on to note that, although “a significant portion of

[Hilton’s] claim stems from damages that result from the Debtor’s

rejection of the Management Agreement pursuant to Bankruptcy Code

§ 365, the bankruptcy issues as to whether rejection of the

Management Agreement was a proper exercise of the Debtor’s business

judgment already have been determined in the hearings conducted by

the court.”     Id.   With only state contract issues concerning the

agreement left to resolve, the bankruptcy court was unable to

discern a conflict with the Bankruptcy Code posed by arbitration.

Id.; see also In re Chorus Data Systems, Inc., 122 B.R. 845 (Bankr.

D. N.H. 1990) (granting relief from the automatic stay to arbitrate

an   unliquidated       product   development      agreement       claim    and

                                      28
counterclaim where the Chapter 11 debtor’s reorganization plan was

not wholly contingent on the outcome and resolution involved only

state law contract issues); In re Bicoastal Corp., 111 B.R. 999

(Bankr. M.D. Fla. 1990) (granting relief from the automatic stay to

arbitrate an unliquidated claim arising from a stock purchase price

adjustment    dispute   involving      exclusively      contract      issues     and

application of generally accepted accounting principles).

     We find the Statewide bankruptcy court’s reading of Hays

persuasive.     Indeed, distinguishing between those actions derived

from the debtor and those created by the Bankruptcy Code explains

the consistent reluctance to permit arbitration of actions brought

to adjudicate bankruptcy rights.            There can be little dispute that

where a core proceeding involves adjudication of federal bankruptcy

rights wholly divorced from inherited contractual claims, the

importance of the federal bankruptcy forum provided by the Code is

at its zenith.      Arguably, these actions are simply beyond the

coverage of     most,   if   not    all,     arbitration    provisions.        But,

assuming   an    otherwise     applicable       arbitration       provision,     the

adjudication of these actions outside the federal bankruptcy forum

could in many instances present the type of conflict with the

purpose and     provisions     of   the    Bankruptcy      Code   alluded   to    in

McMahon.     See Hays, 885 F.2d at 1155 (“Claims asserted by the

trustee under section 544(b) are not derivative of the bankrupt.

They are creditor claims that the Code authorizes the trustee to

asset on their behalf.”); In re Barney’s Inc., 206 B.R. 336 (Bankr.

S.D.N.Y.   1997)    (finding       Chapter     11   debtor’s      section   544(a)


                                       29
avoidance action, section 549 avoidance action, and section 542

turnover action were not subject to arbitration); In re Dunes Hotel

Associates, 194 B.R. 967, 992 (Bankr. D.S.C. 1996) (finding Chapter

11 debtor’s section 544(a) avoidance action, section 542 turnover

action, and section 365 rejection action were not subject to

arbitration); In re Arentson, 126 B.R. 236, 238 (Bankr. N.D. Miss.

1991) (refusing to order arbitration of a wrongful termination

action brought by a Chapter 7 debtor under section 525(b), which

provides redress for discrimination against an individual because

of   a    bankruptcy     filing,    because    it    was   a   cause     of   action

“exclusively related to a bankruptcy statute . . . that literally

begs for resolution in a bankruptcy forum”); cf. In re Pate, 198

B.R. 841, 846 (Bankr. S.D. Ga. 1996) (finding Chapter 13 debtor’s

Federal Truth in Lending Act claim involving the financing of a

mobile     home,   which   was     core   under     28   U.S.C.   §   157(b)(2)(C)

(counterclaims by the debtor’s estate), was arbitrable).

         We think that, at least where the cause of action at issue is

not derivative of the pre-petition legal or equitable rights

possessed by a debtor but rather is derived entirely from the

federal rights conferred by the Bankruptcy Code, a bankruptcy court

retains significant discretion to assess whether arbitration would

be consistent with the purpose of the Code, including the goal of

centralized resolution of purely bankruptcy issues, the need to

protect      creditors     and     reorganizing      debtors      from   piecemeal

litigation,and the undisputed power of a bankruptcy court to

enforce its own orders.


                                          30
B.   The Bankruptcy Court’s Decision Not To Order Arbitration

     We turn now to whether the Bankruptcy Court’s decision not to

stay the adversary proceeding was an abuse of discretion.21     As

discussed above, the Bankruptcy Court possessed discretion to

refuse to enforce an otherwise applicable arbitration provision22

21
      INA contends that the Bankruptcy Court improperly relied on
efficiency concerns to refuse enforcement of the Wellington
Agreement’s arbitration provision. The Supreme Court has stated
that efficiency concerns are not an appropriate defense to an
otherwise applicable arbitration clause. Moses H. Cone Mem’l Hosp.
v. Mercury Constr. Corp., 103 S.Ct. 927, 939 (1983); Tai Ping Ins.
Co., Ltd. v. M/V Warschau, 731 F.2d 1141, 1146 (5th Cir. 1984) (“To
the extent that [a party contesting enforcement of an applicable
arbitration clause] relies on premises of economy of effort,
moreover, Moses Cone indicates that this reliance is misplaced.”).
In the bankruptcy context, however, efficient resolution of claims
and conservation of the bankruptcy estate assets are integral
purposes of the Bankruptcy Code.          Accordingly, insofar as
efficiency concerns might present a genuine conflict between the
Federal Arbitration Act and the Code——for example where substantial
arbitration costs or severe delays would prejudice the rights of
creditors or the ability of a debtor to reorganize——they may well
represent legitimate considerations. Cf. In re Day, 208 B.R. 358,
370 (Bankr. E.D. Pa. 1997) (refusing to order arbitration of claims
allowance issues where confirmation of the debtors’ Chapter 13
plans was dependent upon immediate resolution of objections to
creditors’ claims).    Here, the Bankruptcy Court noted that the
arbitration “process has not yet commenced” (indeed, when the
complaint was filed arbitration had not been requested) and that
“this court constitutes the most efficient and effective forum in
which to determine the core Bankruptcy Code issues” (and the court
went on to recite the several factors set out in In re Chicago,
Milwaukee, St. Paul & Pacific R.R. Co., 6 F.3d 1184, 1189 (7th Cir.
1993)).    The Bankruptcy Court was not so much saying that
efficiency concerns would of themselves authorize denial of the
stay as it was suggesting that had the arbitration process actually
been well advanced it might have been more inclined to grant the
stay. INA’s argument in this respect presents no reversible error.
22
      ACMC and the Trust contend that their declaratory judgment
action was not within the scope of the Wellington Agreement’s
arbitration provision, supra note 15, and that the stay provision
of the Federal Arbitration Act is therefore not applicable.
Neither the Bankruptcy Court nor the District Court explicitly
addressed the issue, apparently assuming the applicability of the
arbitration provision and finding that enforcement was nevertheless

                                31
only insofar as enforcement would conflict with the purpose or

provisions of the Bankruptcy Code.

     The declaratory judgment action brought by ACMC and the Trust

sought a declaration that the section 524(a) discharge injunction

barred INA’s collection efforts, or that the terms and provisions

of the reorganization plan or the Bankruptcy Court’s confirmation

order precluded collection of INA’s claim for prepetition debts

allegedly owing under the Wellington Agreement.                As stated, the

complaint raised no issues under the Wellington Agreement and was

restricted entirely to the adjudication of federal bankruptcy

issues.   The complaint asked, in fine, for the Bankruptcy Court to

construe its own order.       Nothing in the complaint permitted the

Bankruptcy Court to address the merits of INA’s claim under the

Wellington Agreement or ACMC and the Trust’s contract or equitable

defenses to INA’s claim under state law.            In short, if appellees

were successful, and the Bankruptcy Court determined that INA’s

collection   efforts   were    barred      either   by   the   section   524(a)

discharge    injunction   or     by     the    terms     of    the   confirmed

reorganization plan, INA’s collection efforts would be barred under

bankruptcy law.23 If appellees were unsuccessful, resolution of the


within the court’s discretion. Although we find the applicability
of the arbitration provision to this action subject to considerable
doubt, see United Offshore Co. v. Southern Deepwater Pipeline, 899
F.2d 405, 409-10 (5th Cir. 1990), we also assume its applicability
for the purposes of this appeal.
23
      INA argues that its collection efforts do not implicate the
section 524(a) discharge injunction because the pre-confirmation
debt it alleges stems from an assumed contract under section 365.
The Bankruptcy Court, in a bench ruling on March 28, 1997,
modifying its earlier October 22, 1996, order, essentially agreed.

                                      32
merits of INA’s claim under the Wellington Agreement would remain

open, presumably subject to any valid arbitration provision.24


The Bankruptcy Court ruled that the Chapter 11 discharge provision,
section 1141(d)(1), does not address claims based on the assumption
of an executory agreement because section 365(b)(1) requires the
debtor to cure any default as a prerequisite to assumption.
Accordingly, the Bankruptcy Court ruled that section 1141(d)(1)
addresses only claims based on the rejection of an executory
contract (by referring to section 502(g)). The Bankruptcy Court
stated that, as to amounts allegedly owed under an assumed
executory contract, the assumption order governs (which, in this
case, was incorporated in the relevant provisions of the
reorganization plan and the confirmation order). Observing that
section 1141(d)(1) cannot be read to provide for discharge of
amounts in default under assumed executory contracts without
nullifying the cure requirement of section 365(b)(1), the
Bankruptcy Court held that its adjudication of the plan——rather
than the discharge injunction provided by section 1141(d)(1) and
section 524(a)——precluded INA’s collection efforts. See Republic
Supply Co. v. Shoaf, 815 F.2d 1046 (5th Cir. 1987).
     Whether viewed as a question of the coverage of the discharge
injunction or as an issue concerning prior adjudication, it is
plain, however, that resolution of ACMC and the Trust’s declaratory
judgment action implicated issues arising exclusively from National
Gypsum’s rights conferred by its confirmed reorganization plan. As
stated, INA’s argument relates to whether the Bankruptcy Court
should have granted the relief sought by ACMC and the trust, not
whether it should have ordered arbitration. Although we express no
opinion as to the correctness of the Bankruptcy Court’s
determination, we are quite certain that it was the proper forum to
address the limited issues raised in the complaint.
24
      INA cited Picco v. Global Marine Drilling Co., 900 F.2d 846
(5th Cir. 1990), at oral argument for the proposition that it is
appropriate for other courts——and therefore arbitrators——to
interpret the preclusive effect of bankruptcy court orders.
     Picco, however, may not be read so broadly as to always
preclude bankruptcy court refusal to defer to a prospective,
nonbankruptcy, nonjudicial forum to entertain an action limited
solely to the scope of a bankruptcy court’s order. Picco involved
a Canadian personal-injury claimant (Picco) whose suit against a
Chapter 11 debtor was dismissed without prejudice on forum non
conveniens grounds during the pendency of the automatic stay.
Picco did not appeal the dismissal. After the bankruptcy court
lifted the automatic stay to permit personal-injury actions to
proceed, however, he refiled his claim in Canada. Later still, he
decided that Texas state court was a preferable forum, but the
statute of limitations had expired on his action. Picco therefore
moved the district court to set aside its prior judgment and re-

                                33
     We   are   convinced   that    arbitration   of   a   core   bankruptcy

adversary proceeding brought to determine whether INA’s collection

efforts were barred by the section 524(a) discharge injunction or

by the confirmation of National Gypsum’s reorganization plan, as a

nondebtor-derivative action to enforce asserted rights created by

the Bankruptcy Code that are completely divorced from National

Gypsum’s prepetition rights under the Welllington Agreement, would

be inconsistent with the Bankruptcy Code. Whether premised, as the

District Court suggested, on a finding that enforcement of the

arbitration     provision   would   irreconcilably     conflict    with   the

Bankruptcy Code,25 McMahon, 107 S.Ct. 2332, or on the view that


dismiss with conditions permitting him to refile in Texas state
court. The district court granted his motion. At issue in the
appeal was whether Picco——who chose not to appeal the initial
dismissal by the district court——could challenge jurisdiction to
enter the initial dismissal in a subsequent Rule 60(b)(4)
proceeding.   This Court concluded that, as Picco had had the
opportunity to challenge the district court’s jurisdiction on
appeal from the initial dismissal, he was barred from challenging
it in the context of a Rule 60(b) proceeding.
     Our unremarkable statement in Picco that “district courts
retain jurisdiction to determine the applicability of the [§ 362(a)
automatic] stay to litigation pending before them, and to enter
orders not inconsistent with the terms of the stay,” Picco, 900
F.2d at 850, did not, of course, foreclose a debtor’s ability to
redress violations of the automatic stay through contempt
proceedings in the bankruptcy court, nor was it intended to
diminish the ability of a bankruptcy court to entertain actions to
enforce or construe the effects of its own orders. Cf. Celotex
Corporation v. Edwards, 115 S.Ct. 1493 (1995) (where bankruptcy
court has jurisdiction to issue stay order, validity of that order
may not be collaterally attacked).
25
      The District Court noted that, although the Bankruptcy Court
“did not expressly analyze whether referring the core issues in the
Complaint would seriously jeopardize the underlying policies of the
Bankruptcy Code,” arbitration nevertheless would present a conflict
with the Code because it would “allow a panel of arbitrators to
decide whether and how to enforce the federal injunctions granted
under 11 U.S.C. Section 524(a) and how to apply the Plan and the

                                     34
bankruptcy   courts   have   discretion    to    deny   enforcement       of

arbitration clauses in core cases when the only rights at issue

were created by the Bankruptcy Code rather than inherited from a

debtor’s   pre-petition   property,    Hays,   885   F.2d    at   1155,   the

Bankruptcy Court was within its discretion to deny INA’s motion to

stay under the Federal Arbitration Act.26 Accordingly, the judgment

of the District Court, affirming the order of the Bankruptcy Court,

is



                                                            AFFIRMED.




Confirmation Order to these alleged pre-petition debts.”
26
      Accordingly, we have no need to address ACMC and the Trust’s
substantially more questionable argument that arbitration would run
afoul of the separation-of-powers principles set forth in Plaut v.
Spendthrift Farm, Inc., 115 S.Ct. 1447 (1995).

                                  35
