Using a different analysis, but reaching the same result as a recent decision from the Seventh Circuit, the Eleventh Circuit agreed that a defendant could not compel arbitration of consumer claims before the Cheyenne River Sioux Tribal Nation in South Dakota. Inetianbor v. CashCall, __ F.3d__, 2014 WL 4922225 (11th Cir. Oct. 2, 2014). The Eleventh Circuit found that arbitral forum was integral to the parties’ agreement, but unavailable, and therefore the dispute could remain in federal court.
The consumer in this case sued the loan servicer in federal court and the servicer moved to compel arbitration. The loan agreement called for disputes to be “resolved by Arbitration, which shall be conducted by the Cheyenne River Sioux Tribal Nation by an authorized representative in accordance with its consumer dispute rules.” The district court initially compelled arbitration and the consumer twice tried to demand arbitration. In response, the Tribe explained it did not conduct arbitration. (In fact, the Tribal Elder that the servicer chose as an arbitrator explained that the “Tribe has nothing to do with any of this business.”) Based on that evidence, the district court changed course and refused to compel arbitration.
The Eleventh Circuit affirmed. First, it found that because the agreement had many references to the Tribe (it was referenced in five of nine paragraphs about arbitration), the choice of that arbitral forum was “integral” to the arbitration agreement. The pervasive references to the Tribe also prevented the court from using the severability clause to “sever” the choice of forum and compel arbitration in some alternative forum. Second, the court agreed with the district court that the chosen forum was unavailable. It noted that the Tribe did not authorize arbitration, the chosen arbitrator refused to serve, and the Tribe lacked any consumer dispute resolution rules.
An interesting aspect of this decision is how the analysis differs from the Seventh Circuit’s analysis of the same provision in August. The Seventh Circuit refused to enforce the arbitration agreement because it found it: 1) illusory; and 2) unconscionable. It did not analyze whether the forum was integral to the parties’ arbitration agreement.
Another interesting point of comparison is with the decisions that enforce arbitration provisions, even when they call for an arbitral forum that no longer accepts cases (like the National Arbitration Forum), because the forum was not integral to the parties’ arbitration agreement. A concurrence in Inetianbor distinguished those cases by noting that the NAF was a valid forum, with relevant rules, when the contracts were drafted and simply became unavailable over time. In contrast, in these payday loan cases it appears the Cheyenne River Sioux Tribal Nation was never prepared to handle consumer arbitration.