ITT Hartford Life & Annuity Ins. Co. v. Amerishare Investors, inc.

• Decision Date: 26 February 1998
• Docket Number: 96-2094,Nos. 96-2010,s. 96-2010
• Parties: ITT HARTFORD LIFE & ANNUITY INSURANCE COMPANY, formerly known as ITT Life Insurance Corporation, a Wisconsin Corporation, Plaintiff-Appellee, v. AMERISHARE INVESTORS, INC., a Florida corporation; Defendants. Randy Stelk; John Craft; Defendants-Appellants, Amerishare Communications, Inc., a Florida corporation; Amerishare Agency, Inc., a New York corporation; Agent Investors Holding Company, a Georgia corporation, Defendants.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 664

133 F.3d 664

ITT HARTFORD LIFE & ANNUITY INSURANCE COMPANY, formerly

known as ITT Life Insurance Corporation, a Wisconsin Corporation, Plaintiff-Appellee, v. AMERISHARE INVESTORS, INC., a Florida corporation; Defendants.

Randy Stelk; John Craft; Defendants-Appellants,

Amerishare Communications, Inc., a Florida corporation;

Amerishare Agency, Inc., a New York corporation;

Agent Investors Holding Company, a

Georgia corporation, Defendants.

Nos. 96-2010, 96-2094.

United States Court of Appeals,

Eighth Circuit.

Submitted Feb. 13, 1997.

Decided Jan. 9, 1998.

Rehearing Denied Feb. 26, 1998.

Peter W. Schneider, Atlanta, Georgia, argued (Kevin E. Broyles, Atlanta, Georgia, on the brief), for Defendants-Appellants.

Shannon Mary O'Toole, Minneapolis, MN,argued (Mark P. Wine, Minneapolis, MN, on the brief), for Plaintiff-Appellee.

Before McMILLIAN, JOHN R. GIBSON, and FAGG, Circuit Judges.

JOHN R. GIBSON, Circuit Judge.

Amerishare Investors, Inc. Randy Stelk, John Craft, Amerishare Communications, Inc. and Amerishare Agency, Inc. appeal from summary judgment entered on ITT Hartford's action to collect on a loan and loan guarantees. They argue that the district court erred in not enforcing the parties' arbitration agreement and in entering summary judgment. We affirm.

Amerishare Investors ¹ was an insurance marketing company which had a national distribution system of independent sales agents. ITT Hartford is a life, annuity, accident and health insurer.

In early 1992, ITT approached Amerishare Investors about becoming the exclusive agent for ITT life insurance and annuity products. On February 6, 1992, ITT and Amerishare Investors entered into a marketing agreement. Under the agreement, Amerishare Investors agreed to market and sell through its sales agents life insurance and annuity products underwritten by ITT. Amerishare Investors was to meet certain production goals, and ITT Hartford was "to provide Amerishare with certain services, financial assistance and other support."

The marketing agreement attached a letter agreement, dated February 6, 1992, memorializing ITT Hartford's obligation to provide bridge financing. The letter agreement recognized that Amerishare Investors would need financing during the transition from its current insurance carrier to ITT Hartford. ITT Hartford agreed to provide temporary financial assistance of up to $300,000 per month for up to six months (or until Amerishare Investors achieved a monthly cash flow of $300,000). Financial assistance was contingent upon the two parties entering into a marketing agreement. The letter agreement provided that the bridge financing loan would have an interest rate of 1% over prime as of the loan date, and would be repaid in monthly installments as mutually agreed by the parties. Repayment would begin when Amerishare achieved a monthly cash flow of $300,000, or one year from the date of the loan.

The marketing agreement established that ITT Hartford would be the underwriter for the insurance policies sold by Amerishare. The agreement set forth various duties of ITT Hartford, including ITT Hartford's obligation to issue policies, pay commissions, obtain licensing, and perform actuarial, billing, and collection services.

The marketing agreement contained an arbitration provision:

It is the intention of the [ITT Life Insurance Corporation] and Amerishare that the customs and practices of the insurance industry shall be given full effect in the operation and interpretation of this Agreement. The parties agree to act in all things with the good faith. If the Company and Amerishare cannot, however, mutually resolve a dispute which arises out of or relates to this Agreement, the dispute shall be decided through arbitration as set forth herein. The arbitrators shall base their decision on the terms and conditions of this Agreement and, as necessary, on the customs and practices of the insurance industry rather than solely on a strict interpretation of the applicable law.

The agreement outlined the procedure for the initiation of arbitration, the selection of the arbitrators, and the mechanics of the arbitration proceeding. The agreement provided that Minnesota law governed. Amerishare Investors was the signatory to the marketing agreement. ²

In November 1992, Amerishare Investors executed to ITT Hartford a loan agreement, a promissory note, and a security agreement. The preamble to the loan agreement referenced the marketing agreement, noting that: "Amerishare and ITT Life have entered into Marketing Agreement effective March 6, 1992," and the agreement "evidences a relationship of trust and mutual respect." The loan agreement stated that ITT agreed to advance a $4,350,000 line of credit to Amerishare to provide "assistance to Amerishare in the transition, start-up and building of a large and effective agency system." Amerishare agreed to borrow under the line of credit only to the extent necessary to meet its current working capital requirements. The loan agreement provided that the first advance under the loan agreement would be used to repay the $2,987,627 in promissory notes executed under the line of credit. These notes were amounts from the bridge financing that ITT Hartford had provided for in the marketing agreement. The loan agreement also provided:

This Agreement and the writings executed herewith and hereafter constitute the sole agreement and understanding of Amerishare and ITT Life with respect to the transactions described herein, and supersede and replace all prior written and oral agreements and understandings with respect thereto.

The parties contemplated that Amerishare would repay the loan from "all commissions and other amounts payable to Amerishare under the Marketing Agreement or any other agreement between Amerishare and ITT Life." The agreement contained provisions relating to the rights and remedies in the event of default, including a provision allowing ITT Life to terminate the line of credit and declare all principal interest and other charges due and payable. The agreement defined one of the events of default as "[n]otice of termination of the Marketing Agreement." The loan agreement contained a paragraph relating to jurisdiction and venue "in connection with any controversy related in any way to this Agreement or any of the Loan Documents."

The agreement provided:

Amerishare consents to the personal jurisdiction of the state and federal courts located in the State of Minnesota in connection with any controversy related in any way to this Agreement or any of the Loan Documents, waives any argument that venue in such forums is not convenient, and agrees that any litigation initiated by Amerishare against ITT Life in connection with this Agreement or any of the Loan Documents will be venued in either the District Court of Hennepin County, Minnesota, or the United States District Court, District of Minnesota; provided that any proceeding commenced by ITT Life hereunder will be commenced and maintained in federal court unless the Minnesota federal courts lack subject matter jurisdiction with respect to the claims made in such proceeding; and provided that ITT Life will not contest removal to or seek remand from any Minnesota federal district court with respect to any proceeding commenced by ITT Life hereunder except on the basis of lack of federal court subject matter jurisdiction.

The agreement did not contain an arbitration clause.

Amerishare Investors secured its repayment obligation by granting ITT Hartford a first security interest in all of its assets, including shares of stock it owned in Amerishare Agency and Amerishare Communications. Amerishare Communications and Amerishare Agency also executed guaranty and security agreements dated November 13, 1992. Amerishare Communications and Amerishare Agency secured their guaranties by granting ITT Hartford a first security interest in their assets. Stelk and Craft granted ITT Hartford a first security interest in accounts, inventory, various claims they owned, and their shares of Amerishare stock. Amerishare agreed that it would not sell or dispose of any of the collateral. The guarantors agreed to pay all costs of collection. The security agreements contained the same jurisdiction and venue clause set forth in the loan agreement, specifically providing that the guarantors consented to "the personal jurisdiction of the state and federal courts located in the State of Minnesota in connection with any controversy related in any way to this Agreement." Like the loan agreement, the security agreements did not contain an arbitration provision.

The parties amended the marketing agreement, effective August 8, 1994, lowering Amerishare's production requirements. The amendment gave ITT the right to terminate the marketing agreement if Amerishare did not meet the new production requirements. Amerishare failed to meet the reduced production requirements, and on January 3, 1995, ITT Hartford notified Amerishare that it was terminating the marketing agreement. The notice of termination caused an "Event of Default" under the loan agreement. ITT Hartford declared all principal and interest immediately due and filed suit to collect under the note and guaranties.

Amerishare filed a motion to dismiss for lack of subject matter jurisdiction, arguing that ITT's claims were subject to arbitration. In the alternative, Amerishare moved to compel arbitration and to stay the action pending arbitration. The magistrate judge denied Amerishare's motion to dismiss and motion to compel arbitration, concluding that the loan agreement was not subject to the arbitration provisions of the marketing agreement. The magistrate judge reasoned that the loan documents and marketing agreement "are not so closely linked as to impose or confer arbitration on issues and parties who did not contractually agree to arbitration."

ITT Hartford filed a motion for summary judgment. Although the...