What if the Agreed Upon Arbitrator No Longer Conducts Arbitrations? The North Carolina Court of Appeals Answers in Torrence


Defining the power of arbitration agreements has been a hot topic at the federal and state levels for the past couple of years.  In a recent post, we discussed two North Carolina Court of Appeals decisions that validated the reach of the U.S. Supreme Court’s AT&T Mobility v. Concepcion, 131 S.Ct. 1740 (2011) and Italian Colors v. American Express 133 S.Ct. 2304 (2013) decisions to enforce class arbitration waivers in the State.  In one of those cases, Torrence v. Nationwide Budget Finance, et. al., No. 05- CVS 447 (N.C. Ct. App. Feb. 4, 2014), a question also was raised regarding the viability of the arbitration agreement at issue because the arbitration organization the parties had agreed to use ceased conducting arbitrations.  The trial court invalidated the arbitration agreement based, in part, on the fact that the chosen organization serving as the sole arbitrator was an integral feature of the agreement.

The North Carolina Court of Appeals held that the trial court erred by invalidating the agreement instead of appointing a substitute arbitrator pursuant to § 5 of the FAA.  Last year, the Court of Appeals held in King v. Bryant, ___ N.C. App. ___, 737 S.E.2d 802 (2013) (see our King post) that an “agreement to agree” on an arbitration panel and procedures was definite enough to form a binding contract to arbitrate under the FAA.  Consistent with King, the Court of Appeals in Torrence relied upon § 5 of the FAA and North Carolina General Statutes § 1-567.45(a) (2013), which provide for the court to appoint a substitute arbitrator if there is evidence that the parties agreed to arbitration.   The court noted that U.S. Supreme Court and other precedent establishes that “the key aspect of the analysis of an agreement to arbitrate is the intent of the parties to arbitrate, not the identity of the arbitrator.”

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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