Dacres v. John Deere Ins. Co., 94-1855

• Decision Date: 22 May 1996
• Docket Number: No. 94-1855,94-1855
• Citation: 548 N.W.2d 576
• Parties: Jean DACRES, Appellant, v. JOHN DEERE INSURANCE COMPANY, Appellee.
• Court: Iowa Supreme Court

Page 576

548 N.W.2d 576

Jean DACRES, Appellant, v. JOHN DEERE INSURANCE COMPANY, Appellee.

No. 94-1855.

Supreme Court of Iowa.

May 22, 1996.

Paul M. Bengford and Stanley E. Munger of Munger & Reinschmidt, Sioux City, for appellant.

John D. Ackerman of Eidsmoe, Heidman, Redmond, Fredregill, Patterson & Schatz, Sioux City, for appellee.

Considered by HARRIS, P.J., and LARSON, CARTER, SNELL, and TERNUS, JJ.

CARTER, Justice.

Appellant, Jean Dacres, who sold various product lines under contract with John Deere Insurance Company (JDIC), a casualty insurer, appeals from a judgment refusing to vacate an arbitration decision entered with respect to a dispute between Dacres and JDIC. After reviewing the record and considering the arguments of the parties, we affirm the judgment of the district court.

The record reflects that Dacres had been a successful agent in selling insurance lines on behalf of American Family Insurance Company. He later changed his affiliation and contracted to sell products for JDIC. His contract with the latter company was ultimately terminated pursuant to the provisions thereof. The subject of the termination is not in dispute. Dacres does claim, however, that he is entitled to damages for breach of contract during the time that the agreement was in force and for fraud with respect to certain representations made to him at the time he was recruited by the company and thereafter.

When Dacres commenced an action in the Iowa District Court to recover damages for breach of contract and fraud, JDIC invoked an arbitration clause that was contained in both Dacres' initial contract with that company and in a subsequently negotiated agreement concerning the terms of his employment. The district court ordered that the pending action be stayed and that the issues be settled by arbitration. Dacres' claims were then heard by a panel of three arbitrators that determined by a two-to-one vote that his claims lacked merit. Subsequently, Dacres petitioned the district court to vacate the arbitration decision. That request was denied and this appeal ensued.

Dacres urges four grounds on which he contends the district court should have vacated the arbitration decision. These are: (1) that the arbitration clause was induced by fraud or misrepresentation and is thus not enforceable; (2) that there was a procedural irregularity in the selection of one of the arbitrators who voted in the majority; (3) that one of the arbitrators that voted in the majority was ill and physically infirm and thus was not able to comprehend the evidence presented; and (4) that the decision is not supported by substantial evidence. We will separately consider these contentions.

I. The Fraud in the Inducement Claim.

Dacres' contention that the arbitration agreement was procured by fraud is based on claims that misrepresentations were made that induced him to enter into the agreement in which the arbitration clause was contained. These alleged misrepresentations go to issues involving JDIC's proposed product lines and Dacres' role with respect to those lines under the insurance agency agreement. They had no specific application to the arbitration clause as such.

We are convinced that the decision of the Supreme Court in Prima Paint Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967), interpreting the Federal Arbitration Act should be applied to claims made under Iowa contract law involving alleged fraud in the inducement. The Court held in that case that, if a claim of fraud in the inducement is aimed at the entire contract and that contract includes an agreement for arbitration of disputes with respect thereto, the fraud claim is properly to be determined by the arbitrators. Only if the fraud in the inducement claim is specifically directed at the arbitration clause itself is it subject to litigation in a court. Id. at 404, 87 S.Ct. at 1806, 18 L.Ed.2d at 1277. We approve that rule and apply it in the present case. Because Dacres' allegations of fraud in the inducement go to the entire agreement, they were properly determined by the arbitrators.

II. Procedural Irregularities in Selecting One of the Arbitrators.

The arbitration agreement between the parties provided that each one should designate an arbitrator and that these two arbitrators would select the third arbitrator. It also provided that, if either party failed to designate an arbitrator within a...