Linzy v. Conifer Care Communities , 2020 COA 88 ( 2020 )

The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.
SUMMARY
June 4, 2020
2020COA88
No. 18CA2405, Johnson-Linzy v. Conifer Care Communities —
Courts and Court Procedure — Arbitration — Colorado Uniform
Arbitration Act; Contracts — Impossibility of Performance
A division of the court of appeals considers a question of first
impression in Colorado — whether an arbitration agreement’s
incorporation of an arbitral forum’s rules that require a now
defunct arbitrator to administer them renders the agreement
impossible to perform. Based on the plain language of the
arbitration agreement, the majority concludes that the parties
agreed to arbitrate any disputes that arose between them, without
regard to who was named as arbitrator. Accordingly, the majority
reverses the district court’s order invalidating the agreement on the
grounds of impossibility.
COLORADO COURT OF APPEALS 2020COA88
Court of Appeals No. 18CA2405
City and County of Denver District Court No. 18CV32187
Honorable Kenneth M. Plotz, Judge
Shalandra M. Johnson-Linzy, individually and as Personal Representative of
the Estate of Damien R. Linzy,
Plaintiff-Appellee,
v.
Conifer Care Communities A, LLC, d/b/a Amberwood Court Rehabilitation and
Care Community; Pinon Management, LLC; and QP Health Care Services, LLC,
d/b/a Vivage,
Defendants-Appellants.
ORDER REVERSED AND CASE
REMANDED WITH DIRECTIONS
Division III
Opinion by JUDGE GROVE
Vogt*, J., concurs
Berger, J., dissents
Announced June 4, 2020
Reddick Moss, PLLC, Brian D. Reddick, Brent L. Moss, Robert W. Francis,
Little Rock, Arkansas, for Plaintiff-Appellee
Messner Reeves, LLP, Doug C. Wolanske, Kendra N. Beckwith, Mary Byrne
Fletcher, Dara N. Keller, Denver, Colorado, for Defendants-Appellants
*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art.
VI, § 5(3), and § 24-51-1105, C.R.S. 2019.
¶1 Plaintiff, Shalandra M. Johnson-Linzy, signed an arbitration
agreement when her husband, Damien R. Linzy, was admitted to
Amberwood Court Rehabilitation and Care Community (Amberwood
Court), a skilled nursing facility owned and managed by
defendants.1 Linzy stayed at Amberwood Court for several weeks
and passed away shortly after he was discharged. Johnson-Linzy
then sued defendants for negligence and wrongful death, but
defendants moved to stay her lawsuit and compel arbitration. The
district court denied the motion because it found that compliance
with the arbitration agreement was impossible. Defendants now
appeal that order under section 13-22-228(1)(a), C.R.S. 2019. We
reverse.
¶2 The parties’ dispute hinges on the validity of the arbitration
agreement that Johnson-Linzy signed when she admitted her
husband to Amberwood Court. As relevant here, the agreement
provides that any legal claim arising from care provided by
1The defendants are Conifer Care Communities A, LLC, d/b/a
Amberwood Court Rehabilitation and Care Community, Pinon
Management, LLC, and QP Health Care Services, LLC, d/b/a
Vivage.
1
Amberwood Court “shall be resolved exclusively by binding
arbitration,” to be conducted
in accordance with the Colorado Uniform
Arbitration Act and the Code of Procedure of
the National Arbitration Forum, and not by a
lawsuit or resort to court process, except to the
extent that applicable state or federal law
provides for judicial review of arbitration
proceeding or the judicial enforcement of
arbitration agreements and awards.
Toward the end of the two-page agreement, in bold type and in all
capital letters, the agreement states, “NOTE: BY SIGNING THIS
AGREEMENT YOU ARE AGREEING TO HAVE ANY ISSUE OF
MEDICAL MALPRACTICE DECIDED BY NEUTRAL BINDING
ARBITRATION RATHER THAN BY A JURY OR COURT TRIAL.”
¶3 These provisions are unremarkable; similar language regularly
appears in various consumer arbitration agreements. However, the
organization whose code of procedure the agreement identifies —
the National Arbitration Forum (NAF) — exited the consumer
arbitration business in 2009, nearly eight years before Linzy was
admitted to Amberwood Court. See In re Nat’l Arbitration Forum
Trade Practices Litig., 704 F. Supp. 2d 832, 835 (D. Minn. 2010)
(“On July 14, 2009, the Minnesota Attorney General brought a
2
complaint . . . against NAF alleging consumer fraud act and
deceptive trade practices act violations and false advertising. NAF
settled that litigation less than a week later, agreeing to cease
performing consumer arbitrations and entering into a consent
judgment to that effect.”).
¶4 The demise of NAF’s consumer arbitration business affected a
wide variety of contracts and has spawned a substantial amount of
litigation over the enforceability of arbitration agreements that
identify NAF as arbiter or otherwise rely on its procedures. See
Frazier v. W. Union Co., 377 F. Supp. 3d 1248, 1265-67 (D. Colo.
2019) (collecting cases). Analyzing similar arbitration provisions,
some courts have, like the district court here, held that NAF’s
unavailability makes it impossible to fulfill the parties’ contractual
expectations. See, e.g., Miller v. GGNSC Atlanta, LLC, 746 S.E.2d
680, 688 (Ga. Ct. App. 2013). Others have found NAF’s status
inconsequential because the language in question “does not
mandate that the NAF actually conduct the arbitration — it requires
only that the NAF Code be applied by the arbitrator.” Meskill v.
GGNSC Stillwater Greeley LLC, 862 F. Supp. 2d 966, 972 (D. Minn.
2012).
3
¶5 The arguments in this case follow similar contours. As she did
in the district court, Johnson-Linzy contends that the parties
agreed to have NAF arbitrate any disputes between them and that
its retreat from the consumer arbitration business renders the
agreement invalid due to impossibility.2 Defendants argue that the
heart of the agreement is the desire to arbitrate disputes rather
than litigate them and that the arbitration agreement’s designation
of the Code of Procedure of the National Arbitration Forum (NAF
Code) is only a means to that end.3
¶6 In a brief written order, the district court agreed with
Johnson-Linzy’s argument that the arbitration agreement is
unenforceable under the doctrine of impossibility and denied
defendants’ motion to compel arbitration:
The Court specifically finds that the motion to
compel arbitration and the motion for a stay in
these proceedings are both denied. The Court
finds that the agreement to arbitrate is
impossible to comply with. The Court also
2 Because the district court has not yet ruled on them, we do not
consider any additional issues, such as unconscionability, that
Johnson-Linzy has also argued make the arbitration agreement
unenforceable.
3 References to the NAF Code throughout this opinion are to its last
revision, issued August 1, 2008.
4
finds impossibility with regard [to] the use of
the rules of NAF[.]
Defendants now appeal that order.
I. Analysis
¶7 At the threshold, defendants contend the district court did not
have subject matter jurisdiction to determine the enforceability of
the arbitration agreement because “[t]he parties agreed that solely
an arbitrator would have the power to rule on issues relating to the
Arbitration Agreement’s validity, including objections concerning
the Arbitration Agreement’s enforceability.”
¶8 In the alternative, defendants argue that NAF’s unavailability
is immaterial because the arbitration agreement does not require
NAF to serve as the arbitral forum or arbiter, and instead only
directs the parties to conduct arbitration “in accordance with” the
NAF Code.4
4Because we conclude that this issue is dispositive, we do not
address defendants’ remaining contention, that section 13-22-
211(1), C.R.S. 2019, of the Colorado Uniform Arbitration Act (CUAA)
provides for appointment of a substitute arbitrator when the
appointed arbitrator is unable to act.
5
A. The District Court Had Jurisdiction to Determine
Enforceability of the Arbitration Agreement
¶9 We first address defendants’ argument that the order denying
the motion to compel should be vacated because, by incorporating
the NAF Code into their arbitration agreement, the parties agreed
that only an arbitrator could resolve disputes concerning its
enforceability. We conclude that the district court had jurisdiction
to determine enforceability of the arbitration agreement because the
parties did not plainly and unambiguously empower an arbitrator to
decide that issue.
1. Preservation
¶ 10 Johnson-Linzy contends that defendants waived their
argument that the validity of the arbitration agreement is a question
for the arbitrator by failing to raise it in the district court, and that
we should therefore decline to consider it. Defendants respond that
“[t]he enforceability issue is non-waivable because it concerns
subject matter jurisdiction.” We agree with defendants.
¶ 11 Arbitration is “a matter of contract between the parties; it is a
way to resolve those disputes — but only those disputes — that the
parties have agreed to submit to arbitration.” First Options of Chi.,
6
Inc. v. Kaplan, 514 U.S. 938, 943 (1995). A court must defer to an
arbitrator’s arbitrability decision — i.e., whether a particular
dispute should be arbitrated — when the parties submit that matter
to arbitration. Id. However, when the arbitrability decision is
originally submitted to the court, rather than the arbitrator, the
court’s initial task “is to determine whether the agreement contains
a valid and binding [arbitration] clause using traditional principles
of contract interpretation.” City & Cty. of Denver v. Dist. Court, 939
P.2d 1353, 1363 (Colo. 1997). The court must determine the
threshold arbitrability issue because “[a] valid and enforceable
arbitration provision divests the courts of jurisdiction over all
disputes that are to be arbitrated pending the conclusion of
arbitration.” Mountain Plains Constructors, Inc. v. Torrez, 785 P.2d
928, 930 (Colo. 1990).
¶ 12 Thus, because objections to the enforceability of an arbitration
agreement implicate the court’s subject matter jurisdiction, they
may be raised for the first time on appeal. Kaplan, 514 U.S. at 943;
Colo. Dep’t of Pub. Health & Env’t v. Caulk, 969 P.2d 804, 807 (Colo.
App. 1998) (“[C]hallenges to subject matter jurisdiction cannot be
waived and may be asserted at any time . . . .”).
7
2. Enforceability Determination is for the Court
¶ 13 We turn next to defendants’ argument that the NAF Code,
which, by its terms “shall be deemed incorporated by reference in
every Arbitration Agreement[] which refers to the National
Arbitration Forum . . . or this Code of Procedure unless the Parties
agree otherwise,” requires that an arbitrator, not a court, determine
issues of enforceability. NAF Code, Rule 1.A.
¶ 14 Johnson-Linzy responds that the arbitration agreement is
ambiguous because it incorporates the CUAA — which provides for
judicial resolution of arbitrability, see § 13-22-206(2), C.R.S. 2019
— along with the NAF Code, which states that “[a]n Arbitrator shall
have the power to rule on . . . the existence, scope, and validity of
the Arbitration Agreement including all objections relating to
jurisdiction, unconscionability, contract law, and enforceability of
the Arbitration Agreement.” NAF Code, Rule 20.F.
a. Standard of Review
¶ 15 We review de novo the question whether arbitrability is for the
court or for the arbitrator to decide. See Taubman Cherry Creek
Shopping Ctr., LLC v. Neiman-Marcus Grp., Inc., 251 P.3d 1091,
1093 (Colo. App. 2010).
8
b. Applicable Law
¶ 16 Colorado’s preference for the resolution of disputes through
arbitration is embedded in both the Colorado Constitution and the
CUAA. Colo. Const. art. 18, § 3; see also J.A. Walker Co. v. Cambria
Corp., 159 P.3d 126, 128 (Colo. 2007). Under the CUAA, “[t]he
court shall decide whether an agreement to arbitrate exists or a
controversy is subject to an agreement to arbitrate.” § 13-22-
206(2). Parties may waive or vary the effect of the CUAA “to the
extent permitted by law.” § 13-22-204(1), C.R.S. 2019. To deviate
from the CUAA, however, “the law requires that parties must plainly
and unambiguously empower an arbiter to decide arbitrability and
that they must clearly and knowingly assent to terms incorporated
by reference.” Taubman, 251 P.3d at 1095.
c. Discussion
¶ 17 Parties may incorporate specific arbitration rules, such as the
NAF Code, by expressly providing that those rules will govern any
dispute within the scope of their arbitration agreement. Taubman,
251 P.3d at 1094. And courts generally accept that if parties to an
arbitration agreement have explicitly incorporated a rule that
empowers the arbitrator to determine arbitrability, that
9
incorporation amounts to clear and unmistakable evidence of the
parties’ intent to delegate that issue to the arbitrator. See, e.g.,
Ahluwalia v. QFA Royalties, LLC, 226 P.3d 1093, 1098 (Colo. App.
2009) (collecting cases).
¶ 18 Although the arbitration agreement here incorporates the NAF
Code, it also incorporates the CUAA. In our view, the incorporation
of both authorities creates an ambiguity as to which entity is
empowered to decide whether the underlying agreement is valid.
Compare § 13-22-206(2) (“The court shall decide whether an
agreement to arbitrate exists or a controversy is subject to an
agreement to arbitrate.”), with NAF Code, Rule 20.F (“An Arbitrator
shall have the power to rule on all issues, Claims, Responses,
questions of arbitrability, and objections regarding the existence,
scope, and validity of the Arbitration Agreement including all
objections relating to jurisdiction, unconscionability, contract law,
and enforceability of the Arbitration Agreement.”). The
incorporation of both sets of rules cannot “plainly and
unambiguously empower an arbiter to decide arbitrability.”
Taubman, 251 P.3d at 1095.
10
¶ 19 We are not persuaded otherwise by defendants’ argument that
“the express reference to both the CUAA and [the NAF] Code does
not create ambiguity, but instead clarifies the applicable procedural
rules.” To the contrary, determining arbitrability is presumptively
the court’s job, unless the parties “clearly and knowingly assent to
terms incorporated by reference.” Taubman, 251 P.3d at 1095.
Here, the parties incorporated by reference two sets of rules into the
arbitration agreement. Expecting a consumer in Johnson-Linzy’s
position to read and reconcile both sources, and, based on that
evaluation, definitively conclude that she is consenting to forgo
judicial review of the agreement’s enforceability, simply does not
meet that threshold. As another court aptly put it, the
incorporation of forty-two pages of arbitration rules, not to mention
the entire CUAA, into an arbitration clause “is tantamount to
inserting boilerplate inside of boilerplate, and to conclude that a
single provision contained in those rules amounts to clear and
unmistakable evidence of an unsophisticated party’s intent would
be to take ‘a good joke too far.’” Allstate Ins. Co. v. Toll Bros., Inc.,
171 F. Supp. 3d. 417, 429 (E.D. Pa. 2016) (citation omitted).
11
B. The Arbitration Agreement Is Enforceable
¶ 20 Having determined that the district court had jurisdiction to
determine whether the arbitration agreement is enforceable, we
turn next to defendants’ contention that NAF’s unavailability is
“irrelevant to the agreement’s enforcement.” In defendants’ view,
the arbitration agreement does not explicitly or implicitly require
NAF to serve as the arbitral forum or arbitrator — meaning that,
notwithstanding the termination of NAF’s consumer arbitration
business, another arbitrator could use the NAF Code to preside over
the arbitration. Johnson-Linzy responds that, by invoking the NAF
Code, the parties agreed to employ NAF to arbitrate any dispute,
and that NAF’s unavailability thus renders their agreement
impossible to perform.
1. Standard of Review
¶ 21 We review “de novo the district court’s decision on a motion to
compel arbitration, employing the same legal standards that the
district court employed.” Lujan v. Life Care Ctrs. of Am., 222 P.3d
970, 972 (Colo. App. 2009).
12
2. Applicable Law
¶ 22 The CUAA requires the court to decide whether an agreement
to arbitrate exists and whether a controversy is subject to an
agreement to arbitrate — that is, whether the dispute is within the
“scope” of the arbitration clause. City & Cty. of Denver, 939 P.2d at
1363. Thus, there are only two grounds upon which a court may
deny a motion to compel arbitration: (1) there is no valid agreement
to arbitrate; or (2) the issue sought to be arbitrated is clearly
beyond the scope of the arbitration provision. If the court
determines that there is no enforceable agreement, it may not order
the parties to arbitrate. § 13-22-207(3), C.R.S. 2019.
¶ 23 “The party seeking to stay proceedings in a judicial forum and
to compel arbitration has the burden of establishing that the matter
is subject to arbitration.” Smith v. Multi-Fin. Sec. Corp., 171 P.3d
1267, 1270 (Colo. App. 2007). “As a general rule, courts should
follow state law principles governing contract formation to
determine whether the parties agreed to submit an issue to
alternative dispute resolution.” City & Cty. of Denver, 939 P.2d at
1361. “The right of parties to contract freely is well developed in
our jurisprudence.” Id. That right “encompasses the correlative
13
power to agree to a specific [alternative dispute resolution]
procedure for resolving disputes.” Id. We construe an arbitration
agreement’s terms “in a manner that best effectuates the intent of
the parties and allows each party to receive the benefit of the
bargain.” Id.
¶ 24 In determining the parties’ intent at the time they agreed to
the contract, we “must construe the [c]ontract as a whole and effect
must be given to every provision, if possible.” Id. at 1365. And,
under Colorado law, arbitration agreements are “valid, enforceable,
and irrevocable” except where a ground exists under law or equity
for the contract’s revocation. § 13-22-206(1).
¶ 25 As the Missouri Supreme Court put it, for our purposes, “there
are two types of arbitration agreements: (1) agreements in which the
parties agree to arbitrate regardless of the availability of a named
arbitrator, and (2) agreements in which the parties agree to
arbitrate before — but only before — a specified arbitrator.” A-1
Premium Acceptance, Inc. v. Hunter, 557 S.W.3d 923, 926 (Mo.
2018). We conclude that the parties here agreed to arbitrate
without regard to who was named as arbitrator.
14
3. Discussion
¶ 26 We reach this conclusion based on the plain language of the
arbitration agreement. Most importantly, the agreement does not
state that arbitration will be conducted “by” NAF, or even by an
arbiter affiliated with or approved by NAF. To the contrary, the
agreement requires only that “binding arbitration . . . be conducted
. . . in accordance with the [CUAA] and the [NAF Code], and not by
a lawsuit or resort to court process . . . .” And the bolded, all-
capital disclaimer at the close of the agreement (“NOTE: BY
SIGNING THIS AGREEMENT YOU ARE AGREEING TO HAVE ANY
ISSUE OF MEDICAL MALPRACTICE DECIDED BY NEUTRAL
BINDING ARBITRATION RATHER THAN BY A JURY OR COURT
TRIAL”) similarly emphasizes its core goal — requiring arbitration —
without suggesting that carrying through with the process is
contingent on the selection of any particular arbitrator.
¶ 27 To be sure, the NAF Code, which is “deemed incorporated by
reference” into every arbitration agreement that refers to NAF,
provides that “[t]his Code shall be administered only by [NAF] or by
any entity or individual providing administrative services by
agreement with [NAF].” NAF Code, Rule 1.A. Johnson-Linzy argues
15
that this provision makes “[t]he availability of the NAF to administer
the parties’ arbitration an all-or-nothing proposition.” We are
unpersuaded because “if the parties had contemplated the NAF
would be their exclusive arbitral forum, they could have easily said
so — there would be no need for them to do so obliquely by
‘specify[ing] that the arbitration must be conducted by [the NAF’s]
rules.’” Meskill, 862 F. Supp. 2d at 973 (alterations in original)
(citation omitted). Indeed, we note that in a number of cases,
courts have relied on just such an explicit designation as grounds
for invalidating the agreement. See, e.g., Wert v. Manorcare of
Carlisle PA, LLC, 124 A.3d 1248, 1263 (Pa. 2015) (emphasizing
arbitration agreement’s provision that any disputes “shall be
resolved exclusively by binding arbitration to be conducted . . . in
accordance with the [NAF] Code of Procedure, which is hereby
incorporated into this Agreement”); see also GGNSC Atlanta, LLC,
746 S.E.2d at 686 (same).
¶ 28 On the other hand, most cases analyzing language similar to
the arbitration agreement at issue here have concluded that the
agreement remains enforceable despite NAF’s unavailability. See
Robinson v. EOR-ARK, LLC, 841 F.3d 781, 784 (8th Cir. 2016)
16
(declining to invalidate arbitration agreement that provided for
arbitration “in accordance with the National Arbitration Forum
Code of Procedure, (‘NAF’) which is hereby incorporated into th[e]
agreement, and not by a lawsuit or resort to court process”); GGNSC
Holdings, LLC v. Lamb, 487 S.W.3d 348, 356 (Ark. 2016) (same);
Wright v. GGNSC Holdings LLC, 808 N.W.2d 114 (S.D. 2011) (same);
see also Paulozzi v. Parkview Custom Homes, L.L.C., 122 N.E.3d
643, 646 (Ohio Ct. App. 2018) (declining to invalidate arbitration
agreement calling for “arbitration [to] be conducted under the
auspices of the [now defunct] Ohio Arbitration and Mediation
Center in accordance with its rules”). We agree with the analysis in
these cases. As with our jurisdictional analysis above, we are
reluctant to examine “boilerplate inside of boilerplate,” Toll Bros.,
Inc., 171 F. Supp. 3d at 429, particularly where the primary
document — the arbitration agreement itself — invokes the NAF
Code without explicitly designating NAF as the arbitrator, thereby
suggesting that “the parties anticipated an entity other than the
NAF might conduct the arbitration.” Meskill, 862 F. Supp. 2d at
973. And the express incorporation of the CUAA in the agreement
17
that we consider here only bolsters our conclusion that its intent is
to require arbitration without regard to the identity of the arbitrator.
¶ 29 In sum, we conclude that while the arbitration agreement
memorializes both the parties’ intention to arbitrate and the rules
that would govern that arbitration, it leaves open the possibility
that an individual other than NAF could conduct the proceedings.
The parties thus did not designate NAF as the exclusive arbiter of
any future disputes; NAF’s cessation of consumer arbitrations as a
result of the consent judgment therefore does not stand as a barrier
to the arbitration of Johnson-Linzy’s claims.
II. Conclusion
¶ 30 The order is reversed and the case is remanded to the district
court. If the district court denies the remaining challenges to the
enforceability of the arbitration agreement that it did not resolve
before this appeal, then it must compel arbitration and stay the
case while arbitration proceeds.
JUDGE VOGT concurs.
JUDGE BERGER dissents.
18
JUDGE BERGER, dissenting.
¶ 31 Arbitration is a matter of contract. N.A. Rugby Union LLC v.
U.S. Rugby Football Union, 2019 CO 56, ¶ 20. As with any contract,
the parties, not judges, prescribe the terms. W. Stone & Metal Corp.
v. DIG HP1, LLC, 2020 COA 58, ¶ 10. It follows that courts must
enforce all, not just some, of the terms of an arbitration agreement.
And when the terms of the parties’ arbitration agreement are

I recognize the reality that in most consumer arbitrations, the
arbitration agreement is a contract of adhesion. See Lamps Plus,
Inc. v. Varela, 587 U.S. ___, ___, 139 S. Ct. 1407, 1420-22 (2019)
(Ginsburg, J., dissenting); DIRECTV v. Imburgia, 577 U.S. ___, 136
S. Ct. 463, 471-78 (2015) (Ginsburg, J., dissenting); Circuit City
Stores, Inc. v. Adams, 532 U.S. 105, 124-33 (2001) (Stevens, J.,
dissenting). It is absurd to think that either the plaintiff or the
plaintiff’s husband in this case actually wanted to arbitrate any
claims of improper care; they had no choice because admission to
the nursing home almost certainly was dependent on their agreeing
to the terms of adhesion, including the arbitration agreement.
Despite these realities, the United States Supreme Court has
expanded, beyond recognition, the modest and salutary policies
enshrined in the Federal Arbitration Act, 9 U.S.C. §§ 1-307 (2018).
See Lamps Plus, 587 U.S. at ___, 139 S. Ct. at 1420-22 (Ginsburg,
J., dissenting); DIRECTV, 577 U.S. at ___, 136 S. Ct. at 471-78
(Ginsburg, J., dissenting); Circuit City, 532 U.S. at 124-33 (Stevens,
J., dissenting). But nothing in the cases decided by the United
States Supreme Court or the Colorado Supreme Court (or the
provisions of the Colorado Uniform Arbitration Act, sections 13-22-
201 to -230, C.R.S. 2019) require or permit a court to disregard the
terms of the parties’ agreement and order arbitration when the
express terms of the arbitration agreement are impossible to
perform.
19
impossible to perform, the arbitration agreement, like any other
contract, fails. City of Littleton v. Emp’rs Fire Ins. Co., 169 Colo.
104, 108-09, 114, 453 P.2d 810, 812, 815 (1969). This, of course,
does not mean that the parties forfeit any of their substantive
contractual rights; it means only that their dispute is resolved by a
court, not an arbitrator.
¶ 32 These contract principles are not diluted or dispensed with
because public policy favors arbitration. Public policy favors
arbitration only when the parties have agreed to it. Public policy
does not authorize judges to substitute provisions they think are
better or more reasonable, for those prescribed by the parties.
¶ 33 As the majority recognizes, the parties’ arbitration agreement
expressly requires the arbitration to be governed by the NAF Code.
The NAF Code, in turn, expressly provides that “[t]his Code shall be
administered only by [NAF] or by any entity or individual providing
administrative services by agreement with [NAF].” (Emphasis
added.) That is impossible because after being accused by the
Minnesota Attorney General of being partial to businesses and
merchants, and prejudiced against consumers, NAF ceased
20
providing consumer arbitration services. Supra ¶ 3 (majority
opinion).
¶ 34 To avoid invalidation of the arbitration agreement, the majority
relies on the fact that the provision designating NAF as the
administrator is contained in the NAF Code, rather than in the body
of the agreement. This, the majority reasons, signals that the
parties did not actually intend to be bound by that provision, even
though the agreement clearly states that the NAF Code controls.
¶ 35 It is black letter law that when a contract is clear and
unambiguous, we apply its terms without regard to the parties’
subjective intent. Travelers Indem. Co. v. Bailey, 557 U.S. 137, 150
(2009) (citing 11 R. Lord, Williston on Contracts § 30:4 (4th ed.
1999)). This objective analysis requires that we interpret the
arbitration agreement as written and hold that it fails.

The majority wisely does not rely on the “integral part” test
adopted by some courts to justify ignoring disfavored provisions of
an arbitration agreement. As agreed by both the majority and
dissent in Green v. U.S. Cash Advance Illinois, LLC, 724 F.3d 787
(7th Cir. 2013) (Easterbook, C.J., writing for the majority and
Hamilton, J., dissenting), the integral part test finds no support in
the Federal Arbitration Act or other law. It simply was made up by
judges and, as Judge Hamilton explains, is plainly at odds with
basic concepts of contract law. Id.
21
¶ 36 To disregard the clear language in the NAF Code, the majority
relies on Allstate Insurance Co. v. Toll Brothers, Inc., 171 F. Supp.
3d 417 (E.D. Pa. 2016). But that Pennsylvania case, which in any
event is not binding on this court, is inapposite. There, the court
declined to enforce a provision of the separate arbitration rules
referenced in a sale agreement against an individual homebuyer
because the homebuyer was “unsophisticated” and it would be a
“joke” to think the homebuyer signed the agreement having read the
entirety of the rules cross-referenced in the agreement. Id. at 429.
¶ 37 We have the exact opposite situation here. The defendants —
sophisticated, corporate entities presumably acting on the advice of
counsel — drafted the agreement. They selected the NAF Code to
govern arbitration — despite the fact that NAF had been defunct for
a number of years and the NAF Code clearly provides that only NAF
or an affiliated entity may administer it. The defendants must live
with that decision.
¶ 38 As the Allstate court recognized, its decision represented an
exception — based on the sophistication of one of the parties —
from the holdings of almost every other circuit court that had
addressed the issue. Id. at 427. Irrespective of whether that
22
exception is consistent with the United States Supreme Court’s
expansive reading of the Federal Arbitration Act, see supra note 1,
at 19-20, the exception has no application here. To hold otherwise
would be to render meaningless references to governing rules in all
agreements, a result that finds no support in the law.
¶ 39 The fact that the parties “could” have included an express
designation of NAF as the sole administrator elsewhere in their
agreement is irrelevant. Supra ¶ 27 (majority opinion). The parties
could have done a lot of things. The plaintiff and her husband,
assuming they even knew what rights they were forgoing by
agreeing to arbitration, could have attempted to search for a
nursing home that did not require arbitration. Or they could have
delayed the husband’s admission to the nursing home for the two
years it would have taken to resolve a declaratory judgment action
against the nursing home, asserting that the arbitration agreement
was a contract of adhesion and was, therefore, unenforceable. But
the fact that the plaintiff and her husband did none of these things
simply has no bearing on whether a court should or must enforce a
clear provision of the contract.
23
¶ 40 The choices made by contracting parties have consequences
and demand respect by courts. That respect compels the
conclusion that the parties’ arbitration agreement failed.
¶ 41 For these reasons, I would affirm the district court order
denying arbitration, and I respectfully dissent from the majority’s
contrary disposition.

I agree with the majority’s analysis that the court, rather than an
arbitrator, decides the question of the validity of the arbitration
agreement.
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