11th Circuit Refuses to Compel Arbitration Where Forum Was Unavailable

According to his complaint, Abraham Inetianbor borrowed $2600 from Western Sky Financial, LLC in January 2011.  Over the next twelve months, he paid $3252 to the servicer of the loan, CashCall, Inc. (CashCall).  Believing that he had paid off the loan, Mr. Inetianbor then refused further payments. According to the complaint, CashCall responded by reporting a default to credit agencies, harming Mr. Inetianbor’s credit rating.  He sued, alleging defamation and usury, as well as a violation of the federal Fair Credit Reporting Act.

 CashCall moved to compel arbitration pursuant to a clause in the loan agreement that called for “Arbitration, which shall be conducted by the Cheyenne River Sioux Tribal Nation by an authorized representative . . . .”  The District Court initially granted the motion, but it proved impossible for the parties to arbitrate since the Sioux Tribe “does not authorize arbitration.”  Eventually, the District Court denied the motion to compel CashCall appealed.

Before the 11th Circuit, Inetianbor v. CashCall, Inc., CashCall argued that; 1) the failure of the arbitral forum should not void the arbitration agreement even if the forum selection is integral to the agreement; 2) even if that were the rule, it only applies when the forum clause is “integral” to the agreement, and this forum clause was not “integral”; and 3) the District Court erred in finding the aribral forum unavailable.  The Court rejected all three arguments.

First, under Circuit rules, the panel could not reverse a rule adopted by a previous panel.  Such a reversal could only occur by the entire Court sitting en banc.  Thus the panel was bound to hold to the Circuit’s rule that arbitral agreements cannot be enforced where the forum fails and the forum clause is integral to the agreement.   Second, after a lengthy discussion, the Court concluded that the forum clause at issue in this case was integral.  Finally, the Court agreed with the District Court that the Tribe’s involvement was essential and that arbitration involving the Tribe was unavailable.

Judge Restani, United States Court of International Trade Judge, sitting by designation, concurred.  She agreed with the majority’s conclusion that the arbitration agreement was unenforceable, but she  would have struck it as unconscionable.