Riley v. Extendicare Health Facilities, Inc.
2013 WI App 9
| Wis. Ct. App. | 2012Background
- In July 2009, Minnesota sued NAF for fraud and questioned NAF's ties to consumer lending and debt collection.
- NAF entered a consent judgment agreeing not to administer new consumer arbitrations after July 24, 2009.
- Extendicare appeals a nonfinal circuit-court order denying a motion to stay proceedings and compel arbitration under an ADR Agreement.
- The ADR Agreement designates NAF as arbitrator and requires use of NAF Rules of Procedure; it also provides a substitute arbitrator if NAF is unavailable.
- Carl Riley was admitted to an Extendicare facility; Judy Riley signed the ADR Agreement as guardian for Carl Riley.
- After Carl Riley’s death, Judy Riley sued Extendicare; Extendicare moved to stay and enforce arbitration; the circuit court denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the ADR Agreement enforceable when NAF is unavailable? | Riley argues unavailability voids the ADR Agreement; replacement arbitrator cannot satisfy mandatory NAF rules. | Extendicare argues substitute arbitrator can apply NAF rules; contract can be enforced despite NAF's unavailability. | ADR agreement unenforceable due to integral NAF designation. |
| Are the NAF Rules of Procedure an integral term or severable from the ADR Agreement? | NAF rules are integral; severance would rewrite the agreement. | NAF rules are severable if unenforceable provisions exist. | NAF designation is integral; severability rejected. |
| Does the ADR Agreement survive unconscionability challenges if unenforceable terms are present? | If unenforceable, unconscionability analysis would still apply to remaining terms. | Unconscionability was not proven and should be considered. | Unconscionability not reached; contract deemed unenforceable overall. |
| What governing law governs the enforceability of arbitration agreements here? | Wisconsin Arbitration Act governs enforceability as with FAA analogs. | FAA and Wisconsin Act parallel; federal interpretations assist. | Arbitration enforceability analyzed under Wisconsin Act and FAA guidance. |
Key Cases Cited
- Geneva-Roth Capital, Inc. v. Edwards, 956 N.E.2d 1195 (Ind. Ct. App. 2011) (integral-designation analysis of NAF rules)
- Rivera v. American Gen. Fin. Servs., 259 P.3d 803 (N.M. 2011) (NAF rules' integration into arbitration agreements)
- Carr v. Gateway, Inc., 944 N.E.2d 327 (Ill. 2011) (mandatory NAF rules and exclusivity indicate integral design)
- Stewart v. GGNSC-Canonsburg, L.P., 9 A.3d 215 (Pa. Super. Ct. 2010) (severability and integration considerations in arbitration clauses)
- Wright v. GGNSC Holdings LLC, 808 N.W.2d 114 (S.D. 2006) (forum-designation vs. substitution under FAA analysis)