Indiana Court of Appeals Denies Motion to Compel Arbitration Because Arbitration Firm is no Longer Available

In Geneva-Roth Capital, Inc. v. Edwards, 956 N.E.2d 1195 (Ind. Ct. App. Nov. 16, 2011) the Indiana Court of Appeals held that when the parties to an arbitration agreement select a specific arbitrator, and that arbitrator is no longer available, the arbitration agreement is null and void on grounds of impossibility.

In the present case, Akeala Edwards filed a class action suit on behalf of herself and a purported class of Indiana residents who obtained small, short-term pay-day loans from LoanPoint USA. The loan agreement included an arbitration provision, which provided:

Arbitration: Both parties agree that any claim, dispute, or controversy between
us, any claim by either party against the other or the agents, services, or
assigns of the other, including the validity of this agreement to arbitrate
disputes as well as claims alleging fraud or misrepresentation shall be resolved
by binding arbitration by and under the Code of Procedures of the National
Arbitration Forum (NAF) at the time the claim is filed. Rules and form of the
NAF may be obtained and all claims shall be filed at any NAF office on the
World Wide Web at or at P.O. Box 50131, Minneapolis,
MN 55405. Any arbitration hearing, if one is held, will take place at a location
near Customer’s residence. Customer’s arbitration fees will be waived by the
NAF in the event you cannot afford to pay them. This arbitration agreementis
made pursuant to a transaction involving interstate commerce and shall be
governed by the Federal Arbitration Act 9 USC Section 1-18. Judgment upon
the award may be entered by any party in court having jurisdiction. Notice:
Without this arbitration agreement, both parties have the right to litigate
disputes through the law courts but we have agreed instead to resolve disputes
through binding arbitration.

When LoanPoint USA moved to compel arbitration of the suit pursuant to the above arbitration clause, Edwards claimed that the arbitration clause in her loan agreement with LoanPoint USA was invalid and unenforceable due to unconscionability and due to impossibility because the named arbitrator, the National Arbitration Forum (the NAF), was no longer available.

The trial court ruled that that the loan agreement was not unconscionable, but that the arbitration provision contained within the loan agreement was “null and void as impossible to perform” because the forum selected to serve as the arbitrator of disputes (the NAF) is no longer available to serve in such capacity.

The appellate court, applying ordinary contract principles, affirmed.

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