The Indiana Court of Appeals has affirmed the denial of a payday loan company’s motion to compel arbitration in a lawsuit filed by a customer. The COA relied on a nearly identical case involving the same plaintiff in which another appellate panel found that since the arbitrator named in the agreement is no longer available, the arbitration provision is null and void on grounds of impossibility.
In Apex 1 Processing, Inc. v. Akeala Edwards, on Behalf of Herself and Others Similarly Situated, No. 49A05-1103-PL-85, Akeala Edwards filed a class-action lawsuit against Apex 1 Processing Inc., alleging it engaged in unfair trade practices. She got a payday loan through Apex’s company doing business as Paycheck Today, and she was charged $360 in finance charges on her $300 loan. The suit has not yet been certified as a class action.
Apex sought to compel Edwards to arbitrate her claim individually based on a provision in the loan agreement. The National Arbitration Forum was named as the arbitrator to be used, but the NAF has been ordered to not participate in any arbitration of consumer disputes after July 2009 based on a suit filed by the Minnesota attorney general.
This suit is similar to one Edwards filed against Geneva-Roth Capital Inc. An appellate panel in November found that the arbitration provision in that suit was null and void on the grounds of impossibility because NAF is not longer available to arbitrate. At the time, the issue was one of first impression in Indiana. In Geneva-Roth Capital v. Edwards, No. 49A02-1101-PL-43, the COA also found that 9 U.S.C.A. Section 5 of the Federal Arbitration Act does not oblige the trial court to appoint a substitute arbitrator.
“The language of the Apex contract, like that in the Geneva-Roth contract, provides claims ‘shall be resolved by binding . . . arbitration by and under the Code of Procedure of [NAF],’” wrote Judge Melissa May. “Thus, the identification of NAF as the arbitrator was integral to the contract, and the arbitration provision fails.”
The panel in the instant case adopted the reasoning in Geneva-Roth and affirmed the denial of Apex 1’s motion to compel arbitration.