The Missouri Court of Appeals, Western District, recently reversed a trial court decision and subsequent arbitration award in favor of an automobile repossessor. In Car Credit, Inc. v. Pitts, the Court of Appeals held that the trial court incorrectly allowed arbitration of Pitts’ claims against Car Credit. The contract at issue designated the National Arbitration Forum (“NAF”) as arbitrator of disputes arising between Car Credit and Pitts related to the vehicle purchase. At the time Pitts filed her lawsuit, the NAF was not available to serve as arbiter. Consequently, Car Credit could not resolve Pitts’ claims through arbitration.

Following Car Credit’s repossession of her vehicle in 2015, Pitts sued Car Credit and claimed breach of contract. Pitts also sought to pursue a class action lawsuit against Car Credit. Pitts alleged Car Credit engaged in a “deceptive pattern of wrongdoing . . . regarding collection of alleged deficiencies.” Car Credit moved to compel arbitration of Pitts’ claims. Pitts purchased the vehicle at issue from Car Credit in 2011 and financed the purchase. Pitts signed an arbitration agreement at the time of purchase:

You and we [Car Credit] agree that if any Dispute arises, either you or we may choose to have the Dispute resolved by binding arbitration under the rules then in effect of the Arbitration Organization shown below (if no Arbitration Organization is shown below, the Arbitration Organization shall be the National Arbitration Forum). If such rules conflict with this Arbitration Agreement, the terms of this Arbitration Agreement shall apply.

While the arbitration clause referenced an arbitration organization “listed below,” the arbitration agreement did not identify any specific organization, leaving the NAF as the applicable arbitration organization. Car Credit cited this arbitration agreement and moved to compel arbitration. Pitts correctly pointed out that the NAF was no longer available to serve as arbitrator. Pitts argued that since the NAF was the sole designated arbitration agency and was not available, the court should not compel arbitration. The NAF stopped providing arbitration services in 2009 after Minnesota’s Attorney General sued it for alleged consumer fraud, false advertising, and deceptive trade practices.

The trial court denied Car Credit’s first motion to compel arbitration. However, after Pitts moved to certify the class action claims against Car Credit, Car Credit made a renewed motion to compel arbitration. At the time, the Missouri Court of Appeals had recently held that an arbitration agreement was enforceable even though it designated the NAF as arbitrator in A-1 Premium Acceptance v. Hunter, WD79735, 2017 WL 3026917, at * 5 (Mo. App. W.D. July 18, 2017). The trial court granted Car Credit’s renewed motion and Pitts’ claims proceeded to arbitration. After the trial court granted arbitration of Pitts’ claims, the Missouri Supreme Court overruled the Court of Appeals’ decision in the separate case, A-1 Premium Acceptance v. Hunter, 557 S.W.3d 923, 929 (Mo. banc 2018), and held that separate organization could not arbitrate disputes where the NAF was unavailable.

Meanwhile, in Pitts’ case, since the NAF was unavailable, an arbitrator from the American Arbitration Association (“AAA”) reviewed Pitts’ claims. That arbitrator found in favor of Car Credit. Based on that determination, the trial court entered judgment in favor of Car Credit and decertified the class action claims. Pitts appealed.

The Court of Appeals reversed, holding that since Pitts and Car Credit agreed to resolve their disputes before the NAF, the AAA arbitrator lacked the authority to determine the validity of Pitts’ claims. The appellate Court held that the applicable federal law—the Federal Arbitration Act—does not require a court to compel arbitration when the parties agree to arbitrate only before a specified arbitrator. Furthermore, the Missouri Supreme Court’s recent decision in A-1 Premium Acceptance v. Hunter was on point. In both cases, the parties agreed that the NAF would resolve disputes: “[T]he agreement clearly provided the parties the opportunity to identify an organization other than NAF, and, with equal clarity, the parties unambiguously declined to do so . . .”

While Car Credit will have the opportunity to appeal this decision to the Missouri Supreme Court, it is likely that the recent decision in A-1 Premium Acceptance v. Hunter will result in Pitts’ claims against Car Credit, including Pitts’ class action claims, moving forward. If the applicable arbitration agreement had designated a different arbitrator from the NAF, or had provided an alternative arbitrator, Pitts’ claims likely would have been resolved through arbitration. Careless drafting was also a key factor here. Pitts entered into this agreement in 2011, nearly two years after the NAF had stopped arbitration. Had the applicable arbitration agreement been updated to remove the NAF as arbitrator and designate a different organization after Minnesota’s lawsuit in 2009, Car Credit may have been able to successfully compel arbitration. Parties seeking to resolve disputes through arbitration should be careful to ensure their agreements are up to date with the current law.