LAW NOTES from the Law Offices of
Kay & Andersen, LLC

February, 2013
What Every Insurer Should Know . . . . . . . . . . . . . . . 
      ABOUT ENFORCEABILITY OF MANDATORY ARBITRATION PROVISIONS ​
​​Disclaimer: The information contained on this page is not legal advice. The information provided on this website is for general informational purposes and is not necessarily updated to account for changes in the law. You should consult with an attorney for legal advice regarding your individual circumstances.
In an effort to avoid significant litigation costs, many businesses incorporate mandatory arbitration provisions into their contracts. While courts will generally enforce such provisions, there are certain instances in which a challenge to the arbitration provision will be upheld. One such example is Riley v. Extendicare Health Facilities, Inc., Appeal No. 2012 AP 311 (Dec. 27, 2012) found at: http://www.wicourts.gov/ca /opinion/DisplayDocument.html?content=html&seqNo= 91015 (recommended for publication). In this case, Carl Riley was admitted to an Extendicare facility for health care treatment, at which time his wife signed an alternative dispute resolution agreement on his behalf. The ADR agreement provided that disputes between the parties shall be resolved by binding arbitration with the National Arbitration Forum (“NAF”) (or an alternative service selected by the parties if NAF was unable or unwilling to serve) and that the process was to be conducted in accordance with the NAF Rules and Code of Procedure. After Carl Riley passed away, his wife sued various Extendicare entities, alleging negligence and wrongful death claims. Extendicare moved to stay the circuit court proceedings and compel enforcement of the agreement requiring arbitration. Judy Riley opposed this motion on the basis that the agreement was void and unenforceable because NAF no longer engaged in consumer arbitration. The circuit court denied Extendicare’s motion and an appeal followed. Citing Wis. Stat. §788.01, the Court of Appeals acknowledged that the Wisconsin Arbitration Act generally provides that arbitration provisions are valid, irrevocable, and enforceable . Id, ¶12. However, a court must decline to appoint a substitute arbitrator if the arbitrator was so integral to the arbitration agreement that the unavailability of the arbitrator brings the agreement to an end. Id, ¶19. Conversely, if the choice of arbitrator was an ancillary logistical concern, the court could appoint a substitute arbitrator. Id. This case presented an agreement containing a non-exclusive arbitrator designation clause with a clause mandating use of the NAF Rules of Procedure. However, because NAF was referenced throughout the rules of procedure, its presence (or lack thereof) substantially affected the dispute resolution. Id, ¶40. As such, the Court of Appeals determined that the party’s designation of the NAF Rules of Procedure was integral to their agreement to arbitrate, but because there were no NAF rules in effect at the time of the lawsuit, the arbitration agreement could not be enforced. Id, ¶44. The Court of Appeals also concluded that the NAF provisions could not be severed because the contract would be left without an arbitrator or a set of rules, requiring the court to rewrite substantial portions of the agreement not contemplated by the parties and to devise a new form and mode of arbitration. Id, ¶47. The lesson from this case is that parties should use clear and precise language to express their intentions regarding an arbitration agreement. If the terms of the agreement may result in an impossibility of performance, there is a risk that the arbitration provision may not be enforced.

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