#25953-rev & rem-SLZ 

2011 S.D. 95 

IN THE SUPREME COURT 

OF THE 

STATE OF SOUTH DAKOTA 

* * * * 

LEWELLYN WRIGHT and DELLA 

RICHARDS, SPECIAL COADMINISTRATORS OF THE 

ESTATE OF KATHERINE G. WRIGHT, Plaintiffs and Appellees, 

 

v. 

GGNSC HOLDINGS LLC d/b/a GOLDEN 

HORIZONS and GOLDEN LIVING, 

GGNSC-RAPID CITY BLACK HILLS LLC, 

d/b/a GOLDEN LIVING CENTER – 

BLACK HILLS, SOUTH DAKOTA – 

BEVERLY ENTERPRISES, INC. 

d/b/a BEVERLY HEALTHCARE – 

BLACK HILLS, BEVERLY ENTERPRISES, INC., 

JEFFERY L. GENGLER, FRANCES K. 

FRANKE and JOHN DOES 1-10, 

NAMES UNKNOWN AND ADDRESSES 

UNKNOWN, and JOHN DOES 11-30, 

NAMES UNKNOWN AND ADDRESSES 

UNKNOWN, Defendants and Appellants. 

 

* * * * 

APPEAL FROM THE CIRCUIT COURT OF 

THE SEVENTH JUDICIAL CIRCUIT 

 PENNINGTON COUNTY, SOUTH DAKOTA 

* * * * 

THE HONORABLE JANINE M. KERN 

Judge 

* * * * 

CONSIDERED ON BRIEFS 

ON NOVEMBER 14, 2011 

 OPINION FILED 12/28/11
CAROL A. PAHLKE 

Rapid City, South Dakota 

and 

 

KYLE J. LONG of 

The Robert Pahlke Law Group 

Scottsbluff, Nebraska Attorneys for plaintiffs 

 and appellees. 

JEANELLE R. LUST 

KEVIN R. McMANAMAN of 

Knudsen, Berkheimer, 

 Richardson & Endacott, LLP 

Lincoln, Nebraska Attorneys for defendants 

 and appellants. 
-1-

#25953

ZINTER, Justice

[¶1.] The parties’ arbitration agreement provided that arbitration would 

occur “in accordance with the National Arbitration Forum Code of Procedure,” but 

the National Arbitration Forum (NAF) became unavailable to administer its Code 

and the arbitration. Defendants-Appellants (collectively “GGNSC”) moved the 

circuit court to appoint a substitute arbitrator under Section 5 of the Federal 

Arbitration Act (FAA). The circuit court concluded that a substitute arbitrator 

could not be appointed under Section 5 because the NAF Code of Procedure was 

integral to the parties’ agreement to arbitrate and the NAF was unavailable to 

administer its Code. Considering the language of the arbitration agreement, the 

language of the NAF Code, and the federal policy expressed in the FAA, we reverse. 

We hold that Section 5 applies, and that absent some other defense, Section 5 

requires the appointment of a substitute arbitrator.

Facts and Procedural History

[¶2.] In October 2004, Katherine Wright was admitted to a GGNSC nursing 

home in Rapid City. Katherine’s husband, Lewellyn Wright, signed a Resident and 

Facility Arbitration Agreement on Katherine’s behalf. Katherine transferred to 

another nursing home, but returned to the GGNSC facility a few months later. 

Upon her readmission, Lewellyn signed another Resident and Facility Arbitration 

Agreement.

[¶3.] The agreements were identical. In bold, capital letters, the 

agreements (the “agreement”) provided:

THE PARTIES UNDERSTAND AND AGREE THAT THIS 

CONTRACT CONTAINS A BINDING ARBITRATION 
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PROVISION WHICH MAY BE ENFORCED BY THE 

PARTIES, AND THAT BY ENTERING INTO THIS 

ARBITRATION AGREEMENT, THE PARTIES ARE 

GIVING UP AND WAIVING THEIR CONSTITUTIONAL 

RIGHT TO HAVE ANY CLAIM DECIDED IN A COURT OF 

LAW BEFORE A JUDGE AND A JURY, AS WELL AS ANY 

APPEAL FROM A DECISION OR AWARD OF DAMAGES.

In accordance with this provision, the agreement provided that all disputes 

regarding Katherine’s care would be resolved “exclusively by binding arbitration . . . 

and not by a lawsuit or resort to court process.” The agreement also provided that 

the arbitration would occur “in accordance with the National Arbitration Forum 

Code of Procedure.”

1 To obtain the NAF Code of Procedure, a footnote informed the 

reader to contact the NAF. The footnote provided: “Information about the National 

Arbitration Forum, including a complete copy of the Code of Procedure, can be 

 

1. The arbitration agreement provided:

It is understood and agreed by Facility and Resident that any 

and all claims, disputes, and controversies (hereafter collectively 

referred to as a “claim” or collectively as “claims”) arising out of, 

or in connection with, or relating in any way to the Admission 

Agreement or any service or health care provided by the Facility 

to the Resident shall be resolved exclusively by binding 

arbitration to be conducted at a place agreed upon by the 

Parties, or in the absence of such an agreement, at the Facility, 

in accordance with the National Arbitration Forum Code of 

Procedure, which is hereby incorporated into this Agreement

[footnote 1], and not by a lawsuit or resort to court process. This 

agreement shall be governed by and interpreted under the 

Federal Arbitration Act, 9 U.S.C. Sections 1-16.

(Emphasis added.)
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obtained from the Forum . . . .” The footnote provided the NAF’s contact 

information and website address.2

[¶4.] Katherine died while in the nursing home. In April 2008, the special 

co-administrators of Katherine’s estate, Della Richards and Lewellyn Wright

(collectively “Wright”), brought this action for wrongful death in circuit court. 

GGNSC moved to compel arbitration. Wright objected and started discovery 

regarding the authenticity of Lewellyn’s signatures on the arbitration agreement. 

Almost two years later, Wright abandoned the invalid signature defense and began 

discovery regarding Katherine’s competency and Lewellyn’s authority to enter into 

the agreement.

[¶5.] At some point before the arbitration motion was decided by the circuit 

court, the Minnesota Attorney General filed suit against the NAF. The NAF 

subsequently entered into a settlement in which it agreed to discontinue arbitrating 

consumer disputes. Therefore, the NAF became unavailable to administer an 

arbitration of this dispute.

 

2. The arbitration agreement also contained a severance clause. The parties 

devote significant briefing to the fact that the severance clause provided that 

if any portion of the arbitration agreement was unenforceable, the remainder 

of the agreement would be effective. Reliance on severance-clauses in similar 

cases has subjected those cases to criticism. See, e.g., Stewart v. GGNSCCanonsburg, L.P., 9 A.3d 215, 220 (Pa. Super. Ct. 2010) (criticizing Jones v. 

GGNSC Pierre LLC, 684 F. Supp. 2d 1161 (D.S.D. 2010), for relying on the 

arbitration agreement’s severance clause to require arbitration by a 

substitute arbitrator without first determining whether the provision 

designating the NAF was integral to the contract). We do not rest our 

opinion on the existence of a severance clause. In our view, the NAF Code 

and the other language of the arbitration agreement are sufficiently clear to 

decide the issue.
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[¶6.] The circuit court conducted a day-long hearing on the motion to compel 

arbitration. Six depositions, four live witnesses, and ninety-five exhibits were 

submitted. The hearing related to Wright’s arguments that Lewellyn had no 

authority to execute the arbitration agreement and that Katherine was not bound 

by it. The unavailability of the NAF was not an issue. However, after briefing was 

completed, the circuit court raised the unavailability of the NAF as a potential bar 

to arbitration.

[¶7.] Following further briefing on this new issue, the circuit court denied 

GGNSC’s motion to compel arbitration because the NAF was no longer available. 

GGNSC appeals the court’s order allowing the case to proceed in circuit court.

Decision

[¶8.] GGNSC argues that the NAF and its Code of Procedure were not 

integral to the parties’ agreement to arbitrate, and therefore, Section 5 of the FAA

required the appointment of a substitute arbitrator. “[W]e review de novo the 

circuit court’s interpretation of an arbitration agreement.” Masteller v. Champion 

Home Builders, Co., 2006 S.D. 90, ¶ 9, 723 N.W.2d 561, 563.

[¶9.] The parties agreed to arbitrate any dispute “arising out of, or in 

connection with, or relating in any way to . . . any service or health care provided”

by GGNSC. Wright’s complaint involved a dispute about the service and health 

care Katherine received. Such disputes were to be resolved “exclusively by binding 

arbitration . . . and not by a lawsuit or resort to court process.” The boldface type in 

the agreement informed the parties that the residential care agreement required 

binding arbitration and that Wright was giving up the right to have “any claim 
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decided in a court.” The words “arbitration” or “arbitrate” appeared eighteen times 

in the agreement.

[¶10.] But the agreement also provided that the arbitration was to occur “in 

accordance with the National Arbitration Forum Code of Procedure.” Furthermore, 

the NAF Code contained a rule that the Code could not be administered by any 

entity other than the NAF, and the NAF was unavailable to perform its 

administrative duties. Therefore, the question is whether Section 5 of the FAA 

requires this dispute to be arbitrated by a substitute arbitrator when the NAF is 

unable to administer its Code.

[¶11.] There is no dispute the FAA applies. The agreement provided that it

was to be governed by and interpreted under the FAA. The FAA also governs 

because the nursing home services were provided as a part of GGNSC’s business 

operating in interstate commerce. See Prima Paint Corp. v. Flood & Conklin Mfg. 

Co., 388 U.S. 395, 401-02, 87 S. Ct. 1801, 1804-05, 18 L. Ed. 2d 1270 (1967) (noting 

that a contract evidencing a transaction in interstate commerce falls within the 

provisions of the FAA). And because this agreement fell “within the scope and 

coverage of the Federal Arbitration Act . . . [, it] must be enforced in state . . . 

courts.” KPMG LLP v. Cocchi, 565 U.S. ___, 132 S. Ct. 23, ___ L. Ed. 2d ___ (2011).

[¶12.] Section 5 of the FAA requires that upon request of a party, the court 

shall appoint a substitute arbitrator when there is an agreement requiring 

arbitration and for any reason there is a vacancy or lapse in the naming of an 

arbitrator.

If in the agreement provision be made for a method of naming or 

appointing an arbitrator or arbitrators or an umpire, such 
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method shall be followed; but if no method be provided therein, 

or if a method be provided and any party thereto shall fail to 

avail himself of such method, or if for any other reason there 

shall be a lapse in the naming of an arbitrator or arbitrators or 

umpire, or in filling a vacancy, then upon the application of 

either party to the controversy the court shall designate and 

appoint an arbitrator or arbitrators or umpire, as the case may 

require, who shall act under the said agreement with the same 

force and effect as if he or they had been specifically named 

therein . . . .

9 U.S.C. § 5 (2010).

[¶13.] GGNSC argues that Section 5 fills the gap created by the 

unavailability of the NAF and requires the appointment of a substitute arbitrator. 

Wright, however, emphasizes that the arbitration agreement required that the 

arbitration occur in accordance with the National Arbitration Forum Code of 

Procedure. Wright argues that Section 5 does not apply because the NAF Code of

Procedure was “integral” to the arbitration agreement and that Code cannot be 

applied by a substitute arbitrator. Courts that have considered identical and 

analogous arbitration agreements are divided on the issue.

[¶14.] Courts applying Section 5 in similar circumstances have utilized two 

approaches. Most cases apply the approach adopted by the Ninth and Eleventh

Circuit Courts of Appeals. Under that approach, if the designated forum becomes 

unavailable, Section 5 requires the appointment of a substitute arbitrator unless 

“the choice of forum is an integral part of the agreement to arbitrate” and not 

merely an “‘ancillary logistical concern.’” Reddam v. KPMG LLP, 457 F.3d 1054, 

1060 (9th Cir. 2006) (quoting Brown v. ITT Consumers Fin. Corp., 211 F.3d 1217, 

1222 (11th Cir. 2000) (quoting Zechman v. Merrill Lynch, Pierce, Fenner & Smith, 

Inc., 742 F. Supp. 1359, 1364 (N.D. Ill. 1990))). Stated conversely, a substitute 
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arbitrator need not be appointed under Section 5 if “it is clear that the failed term is 

not an ancillary logistical concern but rather is as important a consideration as the 

agreement to arbitrate itself.” Zechman, 742 F. Supp. at 1364.

3 Under the other 

approach, courts look to whether designation of an arbitrator or arbitration forum is 

tantamount to a forum selection clause.4 Because the parties here do not contend 

that this agreement was tantamount to a forum selection clause, we apply the 

“integral v. ancillary” approach.

[¶15.] The circuit court analyzed the conflicting cases, including a number of 

cases involving the unavailability of the NAF. The court concluded that designation 

of the NAF’s Code was integral to the arbitration agreement for two reasons. First, 

the court relied on cases finding an arbitral designation integral when the

agreement designated both the administrator and the applicable rules. See, e.g.,

Carr v. Gateway, Inc., 241 Ill. 2d 15, 944 N.E.2d 327 (2011). The circuit court 

acknowledged that the Wright-GGNSC agreement only specified that the NAF Code 

of Procedure was to govern the arbitration and did not expressly designate an NAF 

arbitrator or an NAF-administered arbitration. But the court concluded that

 

3. In re Salomon Inc. Shareholders’ Derivative Litigation, 68 F.3d 554 (2d Cir. 

1995), is an example of an arbitral forum designation that was as important a 

consideration as the agreement to arbitrate. That case involved a Wall Street 

securities dispute. The parties had designated the New York Stock Exchange 

as the arbitral forum to resolve such matters.

4. The Second and Fifth Circuit Courts of Appeals note that exclusive 

designation of an arbitration administrator, or restricting application of the 

rules to a particular administrator, may be tantamount to a forum selection

clause. See Salomon, 68 F.3d at 559; Nat’l Iranian Oil Co. v. Ashland Oil 

Inc., 817 F.2d 326 (5th Cir. 1987). In those cases, the particularized expertise 

of the designated arbitrator or the unique location of the arbitral forum was 

critical to the arbitration agreement. That is not our case.
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express designation of the NAF Code of Procedure was an implicit selection of an

“NAF arbitrator.” The court further noted that Rule 1A of the NAF Code of 

Procedure provided that the “Code shall be administered only by the National 

Arbitration Forum.” And because the NAF was unavailable to administer its Code, 

the court concluded that a non-NAF administered arbitration was not contemplated 

by the parties’ agreement. Second, the court observed that under NAF Rule 47B, 

costs and expenses were to be assessed against a party seeking resolution of the 

underlying dispute through any “lawsuit, administrative proceeding, or other 

action.” Because the court assumed that use of a substitute arbitrator would trigger 

this penalty provision, the court again concluded that the parties’ agreement did not 

contemplate a non-NAF administered arbitration. For both reasons, the circuit

court concluded that designation of the NAF’s Code was integral to the parties’

agreement to arbitrate and Section 5 of the FAA could not be applied.

[¶16.] We arrive at the opposite conclusion for two reasons. First, “[t]he 

Federal Arbitration Act reflects an ‘emphatic federal policy in favor of arbitral 

dispute resolution.’” KPMG LLP, 565 U.S. at ___, 132 S. Ct. at 25 (quoting 

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631, 105 S. 

Ct. 3346, 3356, 87 L. Ed. 2d 444 (1985)). South Dakota has also “consistently 

favored the resolution of disputes by arbitration. . . . It is an overriding policy that 

arbitration will be favored, when provided for in a contract provision, as a means to

the resolution of disputes.” Thunderstik Lodge, Inc. v. Reuer, 1998 S.D. 110, ¶ 14, 

585 N.W.2d 819, 822 (internal citations omitted); see also Rossi Fine Jewelers, Inc. 

v. Gunderson, 2002 S.D. 82, ¶ 7, 648 N.W.2d 812, 814. For these reasons,
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“questions of arbitrability must be addressed with a healthy regard for the federal 

policy favoring arbitration.” Moses H. Cone Mem’l Hosp. v. Mercury Const. Corp., 

460 U.S. 1, 24, 103 S. Ct. 927, 941, 74 L. Ed. 2d 765 (1983). And under “[t]he 

Arbitration Act . . . , as a matter of federal law, any doubts concerning the scope of 

arbitrable issues should be resolved in favor of arbitration, whether the problem at 

hand is the construction of the contract language itself or an allegation of waiver, 

delay, or a like defense to arbitrability.” Id. at 24-25, 103 S. Ct. at 941.

[¶17.] Second, we read the NAF Code differently than the circuit court. In 

our view, the NAF Code did not require the appointment of an “NAF arbitrator.” 

Further, the Code did not preclude a substitute arbitrator, in a non-NAF 

administered arbitration, from using the same substantive law and procedural rules

as would have been applied under the NAF Code. Finally, we do not believe that 

the penalty provision in the NAF Code was intended to apply when the NAF

became unavailable and a resolution of the dispute was sought through arbitration

by a substitute arbitrator.

[¶18.] Under the NAF Code, an “NAF arbitrator” was not required. NAF 

Code of Procedure Rules 2F and 21 governed the selection of arbitrators. Those 

rules provided for the mutual selection of any arbitrator, and in the absence of an

agreed arbitrator, a selection process was specified. But the specified selection 

process did not restrict who could act as an arbitrator (other than the arbitrator

could not be a director or officer of the NAF). Further, Wright has cited no 

provision that required the appointment of an “NAF arbitrator.” On the contrary, 

Wright notes that the question in this case is whether an “independent arbitrator”
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can apply NAF rules. We conclude the circuit court erred in determining the 

arbitration agreement contemplated that only an “NAF arbitrator” could arbitrate 

the parties’ dispute.

[¶19.] We acknowledge that the NAF rules did provide that only the NAF 

could “administer” its Code of Procedure. But we find that point of little 

significance. A review of the NAF Code reflects that NAF administration involved

what is commonly provided by many arbitration services available today. See 

generally Wilson v. Dell Fin. Servs., L.L.C., No. CIV.A. 5:09-CV-00483, 2010 WL 

503093, at *2 (S.D.W. Va. Feb. 8, 2010) (identifying the NAF, the American 

Arbitration Association (AAA), and the Judicial Arbitration and Mediation Services 

(JAMS) as three general arbitration administrators); N.C. Gen. Stat. Ann. § 1-569.1

cmt. 1 (2011) (listing the AAA, JAMS, NAF, Center for Public Resources (CPR), 

NASD Regulation, Inc., American Stock Exchange, New York Stock Exchange, and 

International Chamber of Commerce as arbitration services). More importantly, 

Wright has not identified any unique NAF administrative provision that would 

have substantively affected the outcome of this arbitration. The NAF Code did not 

require the application of any particular substantive law. It required that the 

arbitrator apply the “applicable substantive law.”

[¶20.] Procedurally, the NAF’s responsibility to administer its Code is of even 

less significance. Wright concedes that the NAF Code of Procedure merely covered 

“the topics of civil procedure that . . . public codes cover,” and it regulated “how to 
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litigate the parties’ dispute.”

5 In those circumstances, both Wright’s and GGNSC’s 

authorities recognize that although a substitute arbitrator may not administer the 

NAF Code, a competent substitute arbitrator can apply the NAF’s rules of 

procedure that public codes cover. See Carr, 241 Ill. 2d at 31, 944 N.E.2d at 335 

(“[I]t is possible in some cases for a substitute arbitrator to use the rules specified in 

an arbitration agreement and where that is so, the mere designation of particular 

rules to govern an arbitration will not prevent the naming of a substitute arbitrator 

under [S]ection 5.” (citing Reddam, 457 F.3d at 1060; Brown, 211 F.3d at 1222; 

Zechman, 742 F. Supp. at 1365)); see also Adler v. Dell Inc., No. 08-CV-13170, 2009 

WL 4580739, at *5 (E.D. Mich. Dec. 3, 2009) (“The court instructs the parties to 

confer and agree on an alternative arbitrator who will apply the rules of NAF under 

its Code of Procedure, if possible.”); Levy v. Cain, Watters & Assocs., P.L.L.C., No. 

2:09-CV-723, 2010 WL 271300, at *11 (S.D. Ohio Jan. 15, 2010) (ordering same).6

 

5. This concession belies Wright’s later assertion that the Code of Procedure has 

numerous provisions that “substantively affect the rights of the parties.”

6. We disagree with the circuit court and Wright’s contrary cases. See, e.g.,

Stewart, 9 A.3d 215; Grant v. Magnolia Manor-Greenwood, Inc., 383 S.C. 125, 

678 S.E.2d 435 (2009). In Stewart, a Pennsylvania superior court examined 

an identical nursing home arbitration agreement and found its designation of 

the NAF Code integral to the agreement. 9 A.3d at 217. That court reasoned 

that the parties had agreed the arbitration proceedings would be conducted 

pursuant to the NAF Code, and under that Code “the arbitrators would be 

members of the NAF, who are the only people authorized to administ[er] and 

apply the NAF code.” Id. at 220. As previously discussed, we see no 

impediment to a substitute arbitrator applying the same substantive law and 

using common procedural rules like those found in the NAF Code.

In Grant, the South Carolina Supreme Court considered an agreement 

requiring “binding arbitration administered by the National Health Lawyers 

Association.” 383 S.C. at 128, 678 S.E.2d at 437. That court found this 

(continued . . .)
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[¶21.] We conclude that designation of the NAF Code of Procedure did not 

require an “NAF arbitrator”; a substitute arbitrator could apply common procedural 

rules like those found in the NAF Code of Procedure and public domain; and a 

substitute arbitrator would be required to apply the same substantive law. 

Therefore, the parties’ contractual expectations regarding both the substantive and 

procedural aspects of arbitration would not be frustrated by the appointment of a 

substitute arbitrator.

[¶22.] Wright and the circuit court, however, also relied on the penalty 

provision in the NAF Code. The penalty applied if Wright commenced or pursued

resolution of the dispute by a “lawsuit, administrative proceeding, or other action.” 

Some courts have concluded that the use of a substitute arbitrator constitutes 

pursuit of a prohibited alternative action. When an arbitration forum’s code of 

procedure penalizes such alternatives, those courts conclude that the penalty 

provision reflects the parties’ intent that the designated arbitration forum was 

integral to the agreement to arbitrate. See, e.g., Carr, 241 Ill. 2d at 32-33, 944 

N.E.2d at 336-37 (interpreting a penalty provision that prohibited the parties from

resolving the dispute “in a forum other than [the] NAF”).

________________________

(. . . continued)

designation integral because: the parties could not vary the “rules on 

communications, service, counting of days, publication and form of the award, 

release of documents, or administration”; the parties were “bound by a panel 

of arbitrators selected by the service”; and the designation of the American 

Health Lawyers Association “affect[ed] the substantive outcome of the 

resolution.” Id. at 131-32, 678 S.E.2d at 439. Wright and GGNSC, however, 

could vary rules under the NAF Code of Procedure, and they could select the

arbitrator. In addition, Wright has not demonstrated how a substitute 

arbitrator could substantively affect the outcome of this arbitration.
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[¶23.] In this case, we find reliance on such cases misplaced. First, the

penalty language in Carr applied to dispute resolutions in any forum other than the 

NAF. Therefore, that language effectively prohibited substitute arbitrations in 

other arbitral forums. In contrast, the penalty provision in this case applied only if 

a party resorted to a “lawsuit, administrative proceeding or other action.” Clearly,

substitute arbitration is not a lawsuit or administrative proceeding, and it is 

unclear whether the parties intended the phrase “other action” to include 

arbitration before a substitute arbitrator.

7 But even if the phrase “other action”

could be interpreted to prohibit a non-NAF arbitration when the NAF was 

available, the parties could not have intended that penalty to apply to a substitute

arbitration if the NAF became unexpectedly unavailable. After all, the parties

agreed that the agreement would be governed by the FAA, and Section 5 of the FAA

provided for the appointment of a substitute if the designated arbitrator failed.

[¶24.] We finally observe that “[w]hether the agreement to arbitrate is entire 

or severable turns on the parties’ intent at the time the agreement was executed, as 

determined from the language of the contract and the surrounding circumstances.”

Great Earth Cos. v. Simons, 288 F.3d 878, 890 (6th Cir. 2002). Therefore, courts

 

7. Because the phrase “other action” follows the words lawsuit or administrative 

proceeding, other actions may have been intended to be limited to actions 

similar to lawsuits or administrative proceedings, which would not include 

arbitration. See generally State v. Douglas, 70 S.D. 203, 212-13, 16 N.W.2d 

489, 494 (1944) (applying the canon noscitur a sociis: “Where any particular 

word is obscure or of doubtful meaning, taken by itself, its obscurity or doubt 

may be removed by reference to associated words and the meaning of a term 

may be enlarged or restrained by reference to the whole clause in which it is 

used.”).
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have also looked to whether there is a “factual basis for the plaintiff’s assertion that 

the specification of the [arbitration organization] was so material to the contract 

that it must fail if they are unavailable.” Owens v. Nat’l Health Corp., 263 S.W.3d 

876, 886 (Tenn. 2007); see also New Port Richey Med. Investors, LLC v. Stern ex rel. 

Petscher, 14 So. 3d 1084, 1087 (Fla. Dist. Ct. App. 2009) (noting that the plaintiff 

“did not present any evidence in the circuit court that the choice of the AAA as the 

forum for any arbitration proceedings was an integral part of the agreement to 

arbitrate”); Brown, 211 F.3d at 1222 (finding “no evidence that the choice of the 

NAF as the arbitration forum was an integral part of the agreement to arbitrate”); 

Zechman, 742 F. Supp. at 1365 (stating that the parties may not have contemplated 

the CBOT arbitration mechanism).

[¶25.] In this case, Lewellyn could not have intended the NAF Code to be 

integral to the agreement to arbitrate. Wright never raised the unavailability of the 

NAF Code as a defense. The circuit court raised the issue sua sponte after the 

matter had been fully litigated and briefed on Wright’s other defenses. Because the 

NAF Code was not important to Lewellyn at the time he was litigating defenses to 

arbitration, it could not have not been important to him at the time he signed the 

arbitration agreement. See Jones, 684 F. Supp. 2d at 1168 (appointing a substitute 

arbitrator under an identical arbitration agreement in part because the testimony 

of the plaintiff did not suggest the NAF rules were integral to the plaintiff’s decision 

to sign the arbitration agreement).
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Conclusion

[¶26.] The FAA embodies an emphatic federal policy in favor of arbitral 

dispute resolution. Additionally, the relevant cases hold that when a designated

arbitral forum becomes unavailable, courts should appoint a substitute arbitrator

under Section 5 unless it is clear that the designated forum was not an ancillary 

logistical concern but was as important a consideration as the agreement to 

arbitrate itself.

[¶27.] In this case, there is nothing in the language of the agreement that 

suggests the NAF’s Code of Procedure was as important as the agreement to 

arbitrate. On the contrary, the arbitration agreement was primarily concerned with 

the resolution of all disputes “exclusively by binding arbitration . . . and not by a 

lawsuit or resort to court process.” This provision was emphasized in boldface type

and in eighteen references to arbitrators and arbitration. Although the 

administrator of the designated code of procedure became unavailable, even one of 

Wright’s primary authorities recognizes that designating an arbitral service and the 

rules to be applied does not alone make that designation integral to the agreement.

Carr, 241 Ill. 2d at 30, 944 N.E.2d at 335. “If [that] were so, [S]ection 5 of the 

Arbitration Act would not apply in any case where the parties specif[ed] an 

arbitrator that later becomes unwilling or unable to handle the arbitration.” Id.

[¶28.] Further, this is not a case in which the record suggests that the 

experience of the NAF in the nursing home field was vital to the parties and no 

other arbitrator could perform the arbitration. Cf. Salomon, 68 F.3d 554. Our 

review of the Code reflects that any competent arbitrator could follow rules of 
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procedure like those in the NAF Code – rules similar to rules of civil procedure that 

attorneys routinely follow. Even more importantly, a substitute arbitrator would be 

required to follow the same substantive law that would have been applied if the 

NAF Code were available. Under these circumstances, we conclude that 

designation of the NAF’s Code of Procedure was an ancillary logistical concern that 

was not as important to the agreement as the agreement to arbitrate. Therefore, 

the appointment of a substitute arbitrator was required under Section 5 of the FAA.

[¶29.] Reversed and remanded for the appointment of a substitute 

arbitrator.8

[¶30.] GILBERTSON, Chief Justice, and KONENKAMP, SEVERSON, and 

WILBUR, Justices, concur.

 

8. The circuit court’s decision was based solely on the unavailability of the NAF. 

The court did not reach Wright’s other pending defenses to arbitration. Our 

decision does not preclude the circuit court’s consideration of those other 

defenses on remand.