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Court rules arbitration provision null and void

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Tackling an issue of first impression, the Indiana Court of Appeals concluded that an arbitration provision in a loan agreement from a payday loan provider is null and void on the grounds of impossibility because the arbitrator named in the document is no longer available.

In Geneva-Roth Capital, Inc., et al. v. Akeala Edwards, No. 49A02-1101-PL-43, Akeala Edwards filed a lawsuit, on her behalf and a purported class, against LoanPoint USA claiming the loan agreement she entered into with the company violated the Indiana Consumer Credit Code’s Small Loans Act. She filled out an online application for a $300 loan, and part of the agreement included an arbitration provision that said the parties must arbitrate any disputes and that National Arbitration Forum would handle the disputes. Over the course of 90 days, LoanPoint USA deducted more than $700 in finance charges from Edwards’ account and only applied $23 to her original loan balance.

LoanPoint USA moved to stay the proceedings and compel Edwards to arbitrate her claim on an individual basis; Edwards argued since NAF was no longer available to arbitrate – the company was ordered by a Minnesota state court to not participate in any disputes after July 2009 based on fraud allegations filed by the Minnesota attorney general – the arbitration portion is invalid and unenforceable. The trial court concluded that the arbitration provision was null and void as impossible to perform since NAF is no longer available to serve in such a capacity. The trial court also found it could not appoint a replacement arbitrator pursuant to 9 U.S.C.A. Section 5 of the Federal Arbitration Act.

The appellate court looked to several jurisdictions – which have reached opposite results – to decide whether an arbitration agreement fails due to impossibility if the chosen forum cannot serve as arbitrator or if the trial court is obliged to appoint a substitute arbitrator pursuant to Section 5. The COA agreed with the rulings in Rivera v. Am. Gen. Fin. Servs. Inc., (259 P.3d 803 N.M. 2011), and Ranzy v. Tijernina, 393 F. App’x 174 (5th Cir. 2010), which found similar provisions to be null because they would be impossible to perform since the named arbitrator no longer could perform the duty.

“Having concluded that the NAF as the arbitral forum was integral to the arbitration agreement, and given that the NAF is no longer available to conduct consumer arbitrations, the arbitration provision is null and void on grounds of impossibility. Section 5 does not save the arbitration provision and cannot be used as a mechanism to appoint a substitute arbitrator. The trial court did not err in denying LoanPoint USA’s motion to compel arbitration,” wrote Judge Ezra Friedlander.
 

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  1. Bob Leonard killed two people named Jennifer and Dion Longworth. There were no Smiths involved.

  2. Being on this journey from the beginning has convinced me the justice system really doesn't care about the welfare of the child. The trial court judge knew the child belonged with the mother. The father having total disregard for the rules of the court. Not only did this cost the mother and child valuable time together but thousands in legal fees. When the child was with the father the mother paid her child support. When the child was finally with the right parent somehow the father got away without having to pay one penny of child support. He had to be in control. Since he withheld all information regarding the child's welfare he put her in harms way. Mother took the child to the doctor when she got sick and was totally embarrassed she knew nothing regarding the medical information especially the allergies, The mother texted the father (from the doctors office) and he replied call his attorney. To me this doesn't seem like a concerned father. Seeing the child upset when she had to go back to the father. What upset me the most was finding out the child sleeps with him. Sometimes in the nude. Maybe I don't understand all the rules of the law but I thought this was also morally wrong. A concerned parent would allow the child to finish the school year. Say goodbye to her friends. It saddens me to know the child will not have contact with the sisters, aunts, uncles and the 87 year old grandfather. He didn't allow it before. Only the mother is allowed to talk to the child. I don't think now will be any different. I hope the decision the courts made would've been the same one if this was a member of their family. Someday this child will end up in therapy if allowed to remain with the father.

  3. Ok attorney Straw ... if that be a good idea ... And I am not saying it is ... but if it were ... would that be ripe prior to her suffering an embarrassing remand from the Seventh? Seems more than a tad premature here soldier. One putting on the armor should not boast liked one taking it off.

  4. The judge thinks that she is so cute to deny jurisdiction, but without jurisdiction, she loses her immunity. She did not give me any due process hearing or any discovery, like the Middlesex case provided for that lawyer. Because she has refused to protect me and she has no immunity because she rejected jurisdiction, I am now suing her in her district.

  5. Sam Bradbury was never a resident of Lafayette he lived in rural Tippecanoe County, Thats an error.

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