Courtyard Gardens Health & Rehabilitation, LLC v. Arnold
2016 Ark. 62
Ark.2016Background
- Residents Jessie and Annie Bullock signed nursing-home admission agreements; their daughter signed optional arbitration agreements on their behalf incorporating the National Arbitration Forum (NAF) Code of Procedure and invoking the Federal Arbitration Act (FAA).
- Arnold (personal representative/attorney-in-fact) sued Courtyard Gardens for negligence, malpractice, statutory and other claims; Courtyard Gardens moved to compel arbitration.
- NAF later ceased administering consumer pre‑dispute arbitrations, and Arnold defended that the arbitration agreement is impossible to perform because it effectively selected NAF as the exclusive arbitrator.
- The trial court found the arbitration agreement valid and not unconscionable but held the agreement impossible to perform because the NAF (the incorporated forum) was unavailable, and denied the motion to compel.
- On appeal the Arkansas Supreme Court reviewed de novo and held the NAF reference was an ancillary logistical term, §5 of the FAA authorized appointment of a substitute arbitrator, the severability clause allowed excision of the unenforceable portion, and arbitration must be compelled.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability when designated forum (NAF) is unavailable | Incorporation of NAF Code (which Rule 1(A) says is administered only by NAF) makes NAF the exclusive arbitrator; unavailability makes performance impossible | The agreement requires arbitration (not necessarily by NAF); FAA §5 permits court appointment of a substitute arbitrator when a designated forum is unavailable | Court held the NAF reference was ancillary/logistical, §5 applies, and unavailability does not render the agreement impossible to perform |
| Whether reference to NAF is integral or severable | The incorporation of the NAF Code and related NAF rules (including remedies if Code cancelled) show the NAF was integral; severance would rewrite the contract | The agreement primarily requires binding arbitration; the NAF appears only in a procedural reference; severability clause allows excision of unenforceable portion | Court held the NAF term was severable/ancillary and the arbitration obligation survives severance |
| Allocation of arbitrability questions and interpretive law | N/A (Plaintiff disputed enforceability under contract defenses) | Federal substantive arbitration law (FAA) governs; state contract law informs defenses but federal policy favors arbitration | Court applied FAA and state contract law: enforce arbitration according to terms and resolve doubts in favor of arbitration |
| Burden to prove impossibility of performance | Arnold must show objective impossibility—that arbitration cannot be effected by any means due to NAF unavailability | Courtyard Gardens argued plaintiff failed that burden because NAF Code can be followed by substitute forum and FAA §5 provides substitute appointee | Court concluded Arnold failed to meet the heavy burden of proving impossibility and reversed the trial court |
Key Cases Cited
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (arbitration agreements are enforced according to their terms)
- DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463 (federal policy favors enforcing arbitration agreements on equal footing with other contracts)
- Volt Info. Scis., Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468 (parties may structure arbitration agreements; enforce agreements according to their terms)
- Frigillana v. Frigillana, 266 Ark. 296 (1979) (party alleging impossibility bears heavy burden; must show objective impossibility)
- Brown v. ITT Consumer Financial Corp., 211 F.3d 1217 (11th Cir.) (distinguishes integral-term vs ancillary/logistical-term when designated forum becomes unavailable)
- Green v. U.S. Cash Advance Illinois, LLC, 724 F.3d 787 (7th Cir.) (interpretation that referencing a forum’s rules does not necessarily make the forum exclusive)
- Miller v. GGNSC Atlanta, LLC, 323 Ga. App. 114 (Ga. Ct. App.) (holding the availability of NAF was integral and made the arbitration clause unenforceable when NAF unavailable)
- Rivera v. Am. Gen. Fin. Servs., Inc., 150 N.M. 398 (N.M. 2011) (incorporation and pervasive references to an arbitral forum can make that forum integral to the agreement)