APEX 1 PROCESSING, INC. v. Edwards
962 N.E.2d 663
Ind. Ct. App.2012Background
- Apex 1 Processing offers payday loans and includes a mandatory arbitration clause using the NAF Code of Procedure for arbitration.
- Edwards filed a class action alleging unfair trade practices; Apex moved to compel individual arbitration but the trial court denied due to NAF's unavailability.
- The trial court found the arbitration agreement impossible to perform because NAF, the designated forum, could no longer arbitrate such disputes.
- The contract language stated claims shall be resolved by binding arbitration by and under the NAF Code of Procedure, with access to NAF rules and fee waivers.
- Apex argued Section 5 of the FAA could appoint a substitute arbitrator, but the court and this panel held Section 5 does not save an impossibly-structured arbitration provision.
- The court adopted the Geneva-Roth approach, holding the NAF designation was integral to the arbitration provision, making the agreement void for impossibility.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the arbitration provision void for impossibility because NAF is unavailable? | Edwards argues NAF's unavailability makes arbitration impossible and the clause void. | Apex argues FAA Section 5 could substitute an arbitrator to enforce the agreement. | Yes; provision is impossible to perform and void; Section 5 cannot cure. |
| Is the designated arbitrator's integral role a factor in enforceability under Indiana law? | NAF's role as the forum is integral to the agreement. | If the forum is unavailable, arbitration could be salvaged under FAA or alternative arbitration forum. | Integral designation of NAF makes the clause void when NAF is unavailable. |
| Does FAA Section 5 authorize appointing a substitute arbitrator to save the agreement? | Section 5 could appoint a substitute arbitrator if the original is unavailable. | Section 5 does not apply when the arbitrator's identity is integral to the agreement. | No; Section 5 does not save the clause because the arbitrator is integral. |
| Should the court compel arbitration despite impossibility? | Arbitration should be compelled under FAA despite forum unavailability. | Arbitration should not be compelled where the agreement is void for impossibility. | Arbitration should not be compelled; the agreement is void. |
Key Cases Cited
- Geneva-Roth Capital, Inc. v. Edwards, 956 N.E.2d 1195 (Ind.Ct.App.2011) (arbitration clause fails for impossibility when forum (NAF) unavailable; integral designation)
- Rivera v. Am. Gen. Fin. Servs., Inc., 259 P.3d 803 (N.M.2011) (FAA section guidance on enforcing arbitration agreements)
- Ranzy v. Tijerina, 393 Fed.Appx. 174 (5th Cir.2010) (integration of mandatory arbitration provisions; forum designation importance)
- Carr v. Gateway, Inc., 944 N.E.2d 327 (Ill.2011) (FAA Section 5 appointment mechanism cited for substitute arbitrator)