Bartlett Grain Co. v. Sheeder

• Decision Date: 23 April 2013
• Docket Number: No. 12–0790.,12–0790.
• Citation: 829 N.W.2d 18
• Parties: BARTLETT GRAIN COMPANY, LP, Appellant, v. Steven Carl SHEEDER and Maureen Jeanette Pace, Appellees.
• Court: Iowa Supreme Court

829 N.W.2d 18

BARTLETT GRAIN COMPANY, LP, Appellant,

v.Steven Carl SHEEDER and Maureen Jeanette Pace, Appellees.

No. 12–0790.

Supreme Court of Iowa.

April 5, 2013.

Rehearing Denied April 23, 2013.

Erin C. Herbold, Mark C. Feldmann, and Eldon L. McAfee of Beving, Swanson & Forrest, P.C., Des Moines, for appellant.

David L. Leitner of Leitner Law Office, West Des Moines, for appellees.

Douglas E. Gross, Adam C. Gregg, and Jonathan M. Gallagher of Brown, Winick, Graves, Gross and Schoenebaum, P.L.C., Des Moines, for amicus curiae Agribusiness Association of Iowa.

Judd N. Kruse of Kruse & Dakin, L.L.P., Des Moines, and Marc L. Fleischaker, Donald C. McLean, and Jennifer S. Allen of Arent Fox LLP, Washington, D.C., for amicus curiae National Grain and Feed Association.

MANSFIELD, Justice.

Is there an enforceable agreement to arbitrate if two parties agree over the phone to a sale of grain and later confirm that agreement with a signed, written document containing an arbitration clause that was not part of the phone conversation? That is the question we must answer in this case. Bartlett Grain Co. (Bartlett) appeals the district court's denial of its application to confirm an arbitration award against Steven Sheeder.

Because the parties signed final, written documents that included arbitration clauses, we conclude valid agreements to arbitrate existed. Accordingly, we reverse the district court's order with directions to confirm the arbitration award in favor of the grain buyer.

I. Facts and Procedural Background.

In 2010, Steven Sheeder entered into eight oral agreements with Bartlett for the sale of a total of 155,000 bushels of corn to be delivered at various future dates. Sheeder stated in an affidavit that “[t]he only terms of the oral contract were price and quantity and anticipated delivery date. No other terms were discussed or agreed upon.”

Following each of the oral agreements, Bartlett sent to Sheeder a two-page “Purchase Confirmation” for both parties to sign. It is undisputed that both Sheeder and Bartlett signed the confirmations. All were identical, except for variations in price, quantity, and delivery dates. The quantity ranged from 10,000 to 45,000 bushels; the price from $3.77 to $4.26 per bushel. The delivery dates were in 2011, generally after the 2011 harvest. Each of these two-page documents contained the following statement on the first page:

THE LAW RECOGNIZES TELEPHONE TRANSACTIONS TO BE LEGALLY BINDING. CONTRACTS ARE SENT TO CONFIRM PHONE CONVERSATIONS, ENSURING THAT BOTH PARTIES UNDERSTAND THE TERMS, AND AS A MATTER OF RECORD. PLEASE REVIEW THIS CONFIRMATION AND NOTIFY BARTLETT IF THERE ARE ANY TERMS YOU DO NOT UNDERSTAND OR THAT MAY BE IN ERROR.

... PLEASE SIGN AND RETURN ONE COPY IMMEDIATELY UPON RECEIPT.

Just below that appeared the signatures of Sheeder and a Bartlett representative.

Page two began with an introductory paragraph:

Bartlett is sending you this document to confirm its Contract to purchase grain, feed or feed ingredients according to the terms set forth on both sides of this document. Failure to advise Bartlett immediately of any discrepancies, objections to or disagreement with this confirmation of the terms constitutes acceptance of those terms.

There then followed various terms, numbered 1 through 16, relating to the sale of grain. The first term—the subject of this appeal—read as follows:

1. NGFA Trade and Arbitration Rules. Unless otherwise provided herein, this Contract is subject to the Trade Rules of the National Grain Feed Association (NGFA) current on the date of this Contract, which rules are incorporated here in by reference. All disputes RELATING to Contract creation, performance and liability will be arbitrated according to the Arbitration Rules of the NGFA. The decision and award of the NGFA arbitrators will be final and binding on both parties. Judgment upon an NGFA arbitration award may be entered and enforced in any court of competent jurisdiction. Copies of the NGFA Trade and Arbitration Rules are available from Buyer or from www. ngfa. org.

The next term contained an integration clause that stated: “2. Final and Complete Agreement. This contract represents the final, complete and exclusive statement of agreement between the parties.”

On or about April 19, 2011, Bartlett maintains that it discovered “reasonable grounds for insecurity” as to whether Sheeder was going to perform the contracts by delivering grain at the contracted prices. SeeIowa Code § 554.2609(1) (2011); Top of Iowa Coop. v. Sime Farms, Inc., 608 N.W.2d 454, 466–68 (Iowa 2000) (discussing a grain buyer's reasonable grounds for insecurity). Accordingly, Bartlett requested adequate assurance of performance. SeeIowa Code § 554.2609(1). Allegedly, Sheeder did not provide such assurance and thereby repudiated the contracts. See id. § 554.2609(4). Bartlett thereafter initiated an NGFA arbitration to recover damages from Sheeder for breach of the contracts.

Pursuant to NGFA arbitration rules, Bartlett filed a complaint with the NGFA against Steven Sheeder on May 19.¹ The NGFA responded by sending Bartlett an arbitration services contract, which Bartlett executed and returned with the required arbitration fee. Meanwhile, the NGFA sent by certified mail a notice letter to Sheeder that included copies of Bartlett's complaint and attachments, the NGFA trade rules, and the NGFA arbitration rules. Sheeder signed for this mailing on June 20.

After receiving the signed arbitration services contract and fee from Bartlett, the NGFA sent the same contract by FedEx to Sheeder asking him to execute it and pay his fee within fifteen days as required by NGFA arbitration rules. Sheeder failed to respond to this letter. A follow-up FedEx mailing by the NGFA to Sheeder in July also drew no response. Finally, on August 4, the NGFA sent Sheeder yet another FedEx letter asking him once more to sign the arbitration contract and pay the required fee within fifteen days. This letter warned,

Based upon the lack of any response from you thus far, we must anticipate that you do not intend to respond. This is our last attempt to elicit a response from you. A default judgment may be entered against you at any time, which the Plaintiff may enforce in a court of law.

When Sheeder failed to respond to this letter, the NGFA, on October 5, entered a default judgment for Bartlett in the amount of $406,475, the sum calculated by Bartlett as due for breach of the eight contracts.²

On November 15, 2011, Bartlett filed an application with the Montgomery County District Court for confirmation of the arbitration award. Sheeder filed a resistance to the application on January 23, 2012. He argued there were no written agreements to arbitrate, and, alternatively, the purported agreements to arbitrate were unconscionable.

In reply, Bartlett stated that Sheeder had consented to arbitration by his “signing of the written confirmation on each of the eight grain sales contracts.” It also disputed Sheeder's claims that the written agreements to submit to arbitration were unenforceable.

Following a hearing, the district court ordered on March 23, 2012, that Bartlett's application for confirmation of the award be denied. The court concluded there was no enforceable agreement between the parties to arbitrate.

Bartlett now appeals. It contends that Sheeder agreed to arbitrate when he executed the confirmations and that his agreements to arbitrate are not unconscionable.

II. Scope of Review.

This is an appeal from an order denying confirmation of an arbitration award. Iowa Code section 679A.17(2) provides that such an “appeal shall be taken in the manner and to the same extent as from orders or judgments in a civil action.” Accordingly, we review the district court's judgment here for errors at law. See $99 Down Payment, Inc. v. Garard, 592 N.W.2d 691, 693 (Iowa 1999).

III. Legal Analysis.

A. Was There an Agreement to Arbitrate? Iowa law favors arbitration. $99 Down Payment, 592 N.W.2d at 694. “Arbitration avoids the expense and delay generally associated with traditional civil litigation, and draws on experts in the specific area of the dispute to resolve the matter.” Id. Hence, “every reasonable presumption will be indulged in favor of the legality of an arbitration award.” Humphreys v. Joe Johnston Law Firm, P.C., 491 N.W.2d 513, 514 (Iowa 1992).

Nonetheless, the court must make two threshold determinations before enforcing an arbitration award: “whether there is a valid agreement to arbitrate and ... whether the controversy alleged is embraced by that agreement.” Lewis Cent. Educ. Ass'n v. Lewis Cent. Cmty. Sch. Dist., 559 N.W.2d 19, 21 (Iowa 1997). Here, the dispute centers on the former determination.

Unless there is some ground “at law or in equity for the revocation of the written agreement,” a written agreement to arbitrate is enforceable. Iowa Code § 679A.1(1). Following arbitration, a party may apply for confirmation of the award to the district court, which “shall confirm an award” unless certain grounds exist to vacate the award. See id. §§ 679A.11–.13. One such ground is if “[t]here was no arbitration agreement, the issue was not adversely determined in proceedings [to compel or stay arbitration], and the party did not participate in the arbitration hearing without raising the objection.” Id. § 679A.12 (1) ( e ).³

Sheeder argued below that there was no written arbitration agreement, and the district court agreed, based on “ordinary contract principles.” We must determine whether the district court erred in determining that “there is simply not adequate evidence that Steven Sheeder and Bartlett entered a written arbitration agreement.”

This case involved the sale of grain, which is a good. Accordingly, the UCC governs. See St. Ansgar Mills, Inc. v. Streit, 613 N.W.2d 289, 293–94 (Iowa 2000) (applying the UCC statute of frauds in a dispute regarding the sale of corn). Iowa Code section 554.2204(1) states, “A contract for...