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APEX 1 PROCESSING, INC., Appellant-Defendant, v. Akeala EDWARDS, with respect to Herself and Others likewise Situated, Appellee-Plaintiff.

APEX 1 PROCESSING, INC., Appellant-Defendant, v. Akeala EDWARDS, with respect to Herself and Others likewise Situated, Appellee-Plaintiff.

Court of Appeals of Indiana.

*664 Douglas B. King, Matthew M. Adolay, wood & McLaughlin LLP, Indianapolis, IN, Attorneys for Appellant.

Susan Verbonitz, Weir & Partners LLP, Philadelphia, PA, Attorney pro hac vice.

Irwin B. Levin, Richard E. Shevitz, Vess A. Miller, Cohen & Malad, LLP, Indianapolis, IN, Attorneys for Appellee.


Apex 1 Processing, a “payday loan” business, includes with its loan agreements an arbitration provision that is compulsory. Akeala Edwards brought a class action [1] alleging Apex, conducting business as payday lender Paycheck Today, involved with unfair trade methods. Apex relocated to compel arbitration of Edwards’ claim, nevertheless the test court denied the motion considering that the arbitrator designated in the contract had been no further permitted to perform arbitrations that are such. The trial court correctly determined that the agreement was impossible to perform and thus void as the designation of the arbitrator was integral to the arbitration provision. We consequently affirm. [2]


Apex makes payday loans [3] through its website, marketing using a testimonial it takes just “five full minutes to complete a straightforward online application.” (Appellee’s App. at 67.) The arbitration supply when you look at the loan contract provides “any and all sorts of claims. will probably be remedied by binding person (and not course) arbitration by and underneath the Code of Procedure of this National Arbitration Forum (“NAF”) in place during the time the claim is filed.” (Id. at 93.) It gives an internet address and an address that is postal NAF guidelines and types are acquired, and shows if somebody struggles to spend the price of arbitration, “fees might be waived because of the NAF.” (Id.) Rule *665 one of many NAF Code of Procedure is the fact that Code is administered just by NAF or by an entity supplying solutions by contract with NAF. (Appellant’s App. at 91.)

Apex loaned Edwards $300. On four occasions through the 8 weeks thereafter, Apex renewed Edwards’ loan after asking her a $90 finance cost every time. Therefore, Edwards had been eventually charged $360 in finance fees without the decrease in the $300 amount that is principal.

After Edwards brought her action, Apex relocated to dismiss also to compel Edwards to arbitrate as a person, never as a course agent. Edwards argued the arbitration clause is unconscionable [4] and it is impractical to perform because NAF, the known as arbitrator, can no more arbitrate such disputes. [5] The test court denied on the floor of impossibility Apex’s movement to compel arbitration, choosing the designation of NAF once the forum opted for by the events pursuant to the mortgage agreement ended up being “integral towards the arbitration”: “NAF could be the tool plumped for by Apex and Edwards to contour the arbitration procedure. Its designation is, hence, maybe perhaps not really a logistical information, but instead is main to your contract.” (Id. at 11.)


Another panel of the court recently addressed a nearly-identical arbitration provision in an agreement between Edwards and a payday lender that is different. Geneva-Roth Capital, Inc. v. Edwards, 956 N.E.2d 1195 (Ind.Ct.App.2011), petition for reh’g pending. The Geneva-Roth panel determined the agreement language, which needed arbitration “by and beneath the Code of Procedures of [NAF],” id. at 1197, and needed claims be filed at an NAF workplace, suggested the selection of NAF as arbitrator had been “integral” to your arbitration supply. Id. at 1203. As the consent judgment rendered NAF unavailable to arbitrate the dispute, the arbitration supply unsuccessful because of impossibility. Id.

The language associated with Apex contract, like this in the Geneva-Roth agreement, provides claims “will probably be settled by binding . arbitration by and underneath the Code of Procedure of [NAF].” (Appellee’s App. at 93.) Rule one of many NAF Code of Procedure is the fact that the Code may be administered by just NAF or an entity services that are providing contract with NAF. A claim needs to be filed at an NAF workplace or on an NAF internet site. As NAF is no longer arbitrating disputes, nor have the events suggested you can find any entities arbitrating by contract with NAF, collection of an alternative arbitrator whom could resolve the events’ disagreement “by and beneath the Code of Procedure of [NAF]” is impossible. Therefore, the recognition of NAF given that arbitrator ended up being integral to your agreement, plus the arbitration supply fails. We follow the Geneva-Roth panel’s thinking and consent with all the test court that the Apex arbitration supply is impractical to perform since the selection of arbitrator is important to the arbitration agreement.

In addition, we address a related issue extensively briefed and argued by the events during oral argument whether, in this instance, Section 5 for the Federal Arbitration *666 Act (FAA) mandates visit of an alternative arbitrator. Since it cannot, we additionally affirm on that separate ground.

Apex keeps in its brief that regardless of if the arbitration clause is impractical to enforce as a result of NAF’s unavailability, the test court however did not think about preemptive federal law that mandates enforcement of this events’ arbitration agreement under Section 5 of this FAA. That area states:

9 U.S.C. В§ 5. The appointment of an arbitrator in the event the arbitrator chosen by the parties is unavailable in other words, Section 5 provides a mechanism for, and in fact requires on application of a party. See, installment loans West Virginia e.g., Carr v. Gateway, Inc., 241 Ill. 2d 15 , 348 Ill. Dec. 374 , 944 N.E.2d 327 , 333 (2011) (part 5 regarding the Act can be used to call a replacement arbitrator where in fact the events’ designated arbitral forum fails). According to this part, Apex contends the test court ended up being authorized to pick and really should have appointed a replacement arbitrator.

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