What Happens When Your Selected Arbitral Forum Is Unavailable?

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Arbitration agreements often name a particular arbitral forum to conduct an arbitration, but what if, when a dispute arises, that arbitral forum no longer exists or is otherwise unavailable? In Inetianbor v. CashCall, Inc., 768 F.3d 1346, 1350 (11th Cir. 2014), the Eleventh Circuit held that "the failure of the chosen forum precludes arbitration whenever the choice of forum is an integral part of the agreement to arbitrate, rather than an ancillary logistical concern." This ruling reinforced Eleventh Circuit precedent and reflects the law in the majority of Circuit Courts that have considered the question.

Inetianbor and CashCall's arbitration agreement selected the Cheyenne River Sioux Tribal Nation ("Tribe") to conduct the arbitration in accordance with the Tribe's consumer dispute rules, however, the Tribe disavowed any involvement with the arbitration and evidence was presented demonstrating that the Tribe does not administer private arbitrations.

Faced with this dilemma, the Court held, "To decide whether the forum selection clause is integral, we must consider how important the term was to one or both of the parties at the time they entered into the agreement." Id., at 1350. The best evidence on this point is the language in the parties' contract. Here, Inetianbor's contract with CashCall referenced the Tribe in five out of nine paragraphs concerning arbitration and used mandatory language in the forum selection clause. The Court determined that the "designation of the...forum pervades the arbitration agreement" and that was "strong evidence that at least [one party] considered arbitration conducted by the Tribe to be an integral aspect of the arbitration agreement." Id., at 1351.

A forum selection clause can be integral to an arbitration agreement even where the forum is not designated as the "exclusive" forum. The Court rejected CashCall's argument on that point and held that the word "exclusive" can safely be implied where an arbitration agreement includes a clause naming a specific institution to conduct the arbitration. Based on its finding that the forum selection clause was integral to the arbitration agreement, the Court also rejected the idea that the forum selection clause could be severed from the rest of the arbitration agreement. Furthermore, because the chosen forum had failed, an arbitrator could not be substituted for the Tribe pursuant to 9 U.S.C. § 5.

The Federal Arbitration Act reflects a policy favoring arbitration, however, the Act directs courts to order a recalcitrant party "to proceed to arbitration in accordance with the terms of the agreement." In its Inetianbor decision, the Eleventh Circuit keyed on the last clause of § 4. Since it could not direct the parties to arbitrate "in accordance with the terms of the agreement," the Court refused to compel arbitration altogether and the dispute is slated to be heard in federal court.

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