ILNews

Court rules arbitration provision null and void

Back to TopCommentsE-mailPrintBookmark and Share

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.
 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Such things are no more elections than those in the late, unlamented Soviet Union.

  2. It appears the police and prosecutors are allowed to change the rules halfway through the game to suit themselves. I am surprised that the congress has not yet eliminated the right to a trial in cases involving any type of forensic evidence. That would suit their foolish law and order police state views. I say we eliminate the statute of limitations for crimes committed by members of congress and other government employees. Of course they would never do that. They are all corrupt cowards!!!

  3. Poor Judge Brown probably thought that by slavishly serving the godz of the age her violations of 18th century concepts like due process and the rule of law would be overlooked. Mayhaps she was merely a Judge ahead of her time?

  4. in a lawyer discipline case Judge Brown, now removed, was presiding over a hearing about a lawyer accused of the supposedly heinous ethical violation of saying the words "Illegal immigrant." (IN re Barker) http://www.in.gov/judiciary/files/order-discipline-2013-55S00-1008-DI-429.pdf .... I wonder if when we compare the egregious violations of due process by Judge Brown, to her chiding of another lawyer for politically incorrectness, if there are any conclusions to be drawn about what kind of person, what kind of judge, what kind of apparatchik, is busy implementing the agenda of political correctness and making off-limits legit advocacy about an adverse party in a suit whose illegal alien status is relevant? I am just asking the question, the reader can make own conclsuion. Oh wait-- did I use the wrong adjective-- let me rephrase that, um undocumented alien?

  5. of course the bigger questions of whether or not the people want to pay for ANY bussing is off limits, due to the Supreme Court protecting the people from DEMOCRACY. Several decades hence from desegregation and bussing plans and we STILL need to be taking all this taxpayer money to combat mostly-imagined "discrimination" in the most obviously failed social program of the postwar period.

ADVERTISEMENT