Wis. Court of Appeals: Arbitration clause unenforceable due to loss of forum

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A nursing home could not demand arbitration of a wrongful death claim when the service designated in its admissions contract had exited the consumer-arbitration business, the Wisconsin Court of Appeals has ruled in affirming judgment.

The plaintiff’s husband died after being admitted to the defendant’s nursing home. When the plaintiff sued for negligence, the defendant sought to compel arbitration pursuant to an alternative dispute resolution (ADR) agreement executed at the time of the husband’s admission. The agreement designated the National Arbitration Forum (NAF) as the parties’ exclusive forum for the arbitration of disputes.

The plaintiff argued that the clause was unenforceable because the NAF had ceased providing consumer arbitration services pursuant to a consent judgment with the state attorney general.

The court agreed that the loss of NAF as a forum for the parties’ dispute rendered the defendant’s arbitration clause unenforceable.

“After careful review of the ADR Agreement’s terms and the NAF Rules of Procedure’s provisions, we conclude in this case that the designation of NAF and its rules is integral to the ADR Agreement. The NAF Rules of Procedure, incorporated by reference into the ADR Agreement, are pervasive in that they govern all aspects of the arbitration. The mandatory language designating use of NAF’s rules draws NAF into the Agreement to a degree as integral as the agreement to arbitrate itself,” the court said.

Wisconsin Court of Appeals. Riley v. Extendicare Health Facilities, No. 2012AP311. Dec. 27, 2012. Lawyers USA No. 993-3730.