Keefe v. Allied Home Mortgage Corporation
2016 IL App (5th) 150360
| Ill. App. Ct. | 2016Background
- In 1999 Keefe refinanced a mortgage and signed an arbitration rider stating all disputes "shall" be resolved by binding arbitration governed by sections 1–4 of the Federal Arbitration Act (FAA) and the National Arbitration Forum (NAF) Code in effect on May 18, 1999; the rider directed how to obtain NAF rules and where to file claims.
- Keefe sued Allied in 2004 alleging upcharges and consumer-fraud/related claims; Allied moved to compel arbitration; trial court denied that motion in 2007; this court in 2009 severed an anti-class-arbitration clause and directed enforcement of the remainder of the rider.
- Shortly after the 2009 opinion, the NAF entered a consent decree and agreed to stop accepting new consumer arbitrations, making the designated forum unavailable.
- Defendants sought to re-compel arbitration; plaintiff argued the agreement was unenforceable because (a) the NAF was effectively designated as the exclusive forum and is now unavailable, and (b) the rider incorporated only sections 1–4 of the FAA (omitting section 5) and specified the 1999 NAF Code (which was not in the record).
- The circuit court granted the motion to compel arbitration in 2014; on appeal the Fifth District reversed, holding the NAF designation and the 1999 NAF Code were integral to the parties’ agreement and, because the forum and the specific procedural code are unavailable/not in the record and section 5 of the FAA was excluded, the agreement is unenforceable and cannot be salvaged by appointing a substitute arbitrator.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the arbitration rider required arbitration before NAF exclusively | Keefe: rider’s mandate to use the 1999 NAF Code and directions to obtain/file with NAF show parties intended NAF as exclusive forum | Allied: rider did not name NAF exclusively; forum designation is non‑integral/logistical and court can appoint substitute under FAA §5 | Held: NAF designation (and the 1999 NAF Code) was integral; parties intended exclusive NAF forum, so §5 substitute cannot be used to change forum |
| Whether FAA §5 permits court to appoint substitute arbitrator | Keefe: §5 cannot be used because parties expressly incorporated only FAA §§1–4 and omitted §5; defendants should not be allowed to add omitted procedural provisions | Allied: §5 allows court appointment where designated arbitrator is unavailable | Held: Rider incorporated only §§1–4; omission of §5 indicates parties excluded that procedural remedy, so court may not invoke §5 to salvage agreement |
| Whether the 1999 NAF Code (not in record) permits substitution or otherwise supports enforcement | Keefe: absence of the 1999 NAF Code in the trial record prevents determination whether substitution or procedures are authorized; missing integral rule set renders agreement unenforceable | Allied: prior proceedings and existence of rider sufficed; plaintiff bears burden to supply missing code on appeal | Held: Because the 1999 NAF Code is integral but was not produced, doubts about enforceability fall on defendants who moved to compel; absence of the Code makes enforcement impossible |
| Whether consent decree/discrediting of NAF affects enforceability | Keefe: NAF’s consent judgment and cessation of consumer arbitrations undermines neutrality and practical availability of forum | Allied: neutrality/credibility issues do not change contractual obligation to arbitrate | Held: The court noted the NAF’s discrediting raises serious questions but reserved those concerns; primary ground for reversal was unavailability of forum and absence of the 1999 NAF Code |
Key Cases Cited
- Carr v. Gateway, Inc., 241 Ill. 2d 15 (Ill. 2011) (distinguishes when a designated forum is integral versus ancillary and limits use of FAA §5 to appoint substitutes if forum is integral)
- Keefe v. Allied Home Mortgage Corp., 393 Ill. App. 3d 226 (Ill. App. 2009) (appellate decision severing the anti-class-arbitration term and enforcing the remaining arbitration clause)
- Salsitz v. Kreiss, 198 Ill. 2d 1 (Ill. 2001) (Illinois courts favor enforcement of arbitration agreements when possible)
- QuickClick Loans, LLC v. Russell, 407 Ill. App. 3d 46 (Ill. App. 2011) (articulates pro‑arbitration policy in Illinois)
- American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (U.S. 2013) (arbitration agreements are to be enforced according to their terms)
- Hubbert v. Dell Corp., 359 Ill. App. 3d 976 (Ill. App. 2005) (party seeking to compel arbitration bears burden to prove existence and scope of agreement)