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. The sad thing is that no fish were thrown overboard The "greenhorn" who had never fished before those 5 days was interrogated for over 4 hours by 5 officers until his statement was illicited, "I don't want to go to prison....." The truth is that these fish were measured frozen off shore and thawed on shore. The FWC (state) officer did not know fish shrink, so the only reason that these fish could be bigger was a swap. There is no difference between a 19 1/2 fish or 19 3/4 fish, short fish is short fish, the ticket was written. In addition the FWC officer testified at trial, he does not measure fish in accordance with federal law. There was a document prepared by the FWC expert that said yes, fish shrink and if these had been measured correctly they averaged over 20 inches (offshore frozen). This was a smoke and mirror prosecution.

  2. I love this, Dave! Many congrats to you! We've come a long way from studying for the bar together! :)

  3. This outbreak illustrates the absurdity of the extreme positions taken by today's liberalism, specifically individualism and the modern cult of endless personal "freedom." Ebola reminds us that at some point the person's own "freedom" to do this and that comes into contact with the needs of the common good and "freedom" must be curtailed. This is not rocket science, except, today there is nonstop propaganda elevating individual preferences over the common good, so some pundits have a hard time fathoming the obvious necessity of quarantine in some situations....or even NATIONAL BORDERS...propagandists have also amazingly used this as another chance to accuse Western nations of "racism" which is preposterous and offensive. So one the one hand the idolatry of individualism has to stop and on the other hand facts people don't like that intersect with race-- remain facts nonetheless. People who respond to facts over propaganda do better in the long run. We call it Truth. Sometimes it seems hard to find.

  4. It would be hard not to feel the Kramers' anguish. But Catholic Charities, by definition, performed due diligence and held to the statutory standard of care. No good can come from punishing them for doing their duty. Should Indiana wish to change its laws regarding adoption agreements and or putative fathers, the place for that is the legislature and can only apply to future cases. We do not apply new laws to past actions, as the Kramers seem intent on doing, to no helpful end.

  5. I am saddened to hear about the loss of Zeff Weiss. He was an outstanding member of the Indianapolis legal community. My thoughts are with his family.

ADVERTISEMENT