In Inetianbor v. Cashcall, Inc., No. 13-13822 (11th Cir. Oct. 2, 2014) (click here for a copy of the decision), the Eleventh Circuit affirmed a district court’s order refusing to compel arbitration because the forum specified in the arbitration clause was not available.
The underlying dispute involved a consumer suing a loan servicer for charging excessively high interest rates, and the loan agreement contained an arbitration clause providing for arbitration before the Cheyenne River Sioux Tribal Nation. After the district court compelled arbitration, the consumer attempted to comply with the court order, but his attempts were futile because the Tribal Nation was not involved with handling arbitration. The district court then agreed to hear the original lawsuit because the Tribal Nation was not available to hear the dispute.
On appeal, the Eleventh Circuit addressed whether the district court should have enforced the arbitration clause through the use of section 5 of the FAA, which permits a court to appoint an arbitrator if there is a “lapse” in the naming of an arbitrator. The Eleventh Circuit held that where the choice of a forum is an “integral” part of the agreement to arbitrate and the chosen forum is not available, section 5 cannot be used to fill the gap with another arbitrator. The Eleventh Circuit found that the chosen forum, the Tribal Nation, was integral and not ancillary to the arbitration agreement because the arbitration agreement contained multiple references to arbitration before the Tribal Nation. A concurring judge also refused to enforce the arbitration agreement, believing the agreement to be a sham and illusion since the Tribal Nation was not involved in arbitration.
The Eleventh Circuit also noted that the Seventh Circuit had previously disagreed with the Eleventh Circuit’s test relying on the “integral” nature of a provision in an arbitration agreement.