Pennsylvania Life Insurance Co. v. Simoni, 00-1001.

• Decision Date: 03 April 2002
• Docket Number: No. 00-1001.,00-1001.
• Parties: PENNSYLVANIA LIFE INSURANCE COMPANY, Appellant, v. Jeffrey G. SIMONI and Timothy P. Winders, Appellees.
• Court: Iowa Supreme Court

641 N.W.2d 807

PENNSYLVANIA LIFE INSURANCE COMPANY, Appellant, v. Jeffrey G. SIMONI and Timothy P. Winders, Appellees.

No. 00-1001.

Supreme Court of Iowa.

April 3, 2002.

Lyle W. Ditmars of Peters Law Firm, P.C., Council Bluffs, for appellant.

Jeffrey A. Silver, Omaha, and Jon M. McCright, Cedar Rapids, for appellees.

TERNUS, Justice.

This interlocutory appeal concerns the enforceability of a contractual provision to arbitrate certain disputes between the contracting parties, appellant, Pennsylvania Life Insurance Company [hereinafter "Penn Life"], and two of its former agents, appellees, Jeffrey Simoni and Timothy Winders. The district court refused to require arbitration of counterclaims filed by the agents on the basis that it would be more convenient to try the counterclaims at the same time and in the same forum as the company's claims, which were not subject to the arbitration provision. On this basis, the court denied the company's motions to dismiss the agents' counterclaims.

Upon our review, we disagree with the district court's reasoning that the convenience of the parties can override a contractual provision requiring arbitration. We also reject an alternative basis upon which the agents seek to uphold the district court's rulings—waiver. We hold that the company did not waive its right to have the claims of the agents arbitrated by filing a lawsuit against the agents on claims not subject to arbitration.

Nonetheless, we uphold the district court's rulings denying dismissal at this stage of the proceedings. We do so on the basis of the agents' contention that the arbitration provision is unenforceable because it is contained in an adhesion contract or an employment contract. Whether the written agreement between the parties is an adhesion contract or an employment contract is an issue that cannot be resolved on the pleadings, as is required for a successful motion to dismiss. Accordingly, we affirm and remand for further proceedings.

I. Background Facts and Proceedings.

In 1997 and 1994, respectively, Penn Life entered into "agent agreements" with Simoni and Winders. Pursuant to these agreements Simoni and Winders represented Penn Life in the sale and service of insurance products until their contracts were terminated in 1999 and 1996, respectively.

In March 2000, Penn Life filed petitions against both agents, seeking permanent injunctive relief. Penn Life alleged that Simoni violated paragraph 11 of their agreement, which prohibited an agent from inducing any policyholder to cancel or replace any product of Penn Life for two years after termination of the agent's contract. With respect to Winders, the company asserted that he violated paragraph 6 of the contract, dealing with the use of trade secrets and confidential information by a former agent. A copy of the agent agreement was attached to each petition.

Both agents responded with a counterclaim. In count I of the counterclaims, they alleged that Penn Life breached the agent agreements by failing to pay the required renewal commissions. This claim was based on paragraph 9 of the parties' contracts, which provided that after cancellation of the agreements the agents were entitled to receive renewal commissions on the life insurance business produced by the agents while the agreements were in force. In count II of the counterclaims, the agents asserted they were employees of Penn Life and the company had failed to comply with the Fair Labor Standards Act with respect to payment of social security, withholding taxes and overtime. Only count I is at issue in this appeal.

Penn Life filed motions to dismiss count I of each counterclaim, asserting that these claims were subject to the arbitration clause in the parties' contracts and therefore must be dismissed. This contractual arbitration provision stated in pertinent part:

Any dispute, controversy or claim between the parties hereto arising out of or relating to Sections 3, 4, 7, 8, 9 or 10 of this Agreement or an alleged breach of these sections which the parties are unable to resolve amicably shall be submitted to and settled by arbitration pursuant to the Commercial Rules of the American Arbitration Association.

The agents resisted the company's motions to dismiss on several grounds: (1) Penn Life had waived its arbitration rights by instituting the present litigation; (2) the arbitration provision was unenforceable because it was part of a contract between an employer and an employee; and (3) the arbitration provision was unenforceable because it was unconscionable and part of an adhesion contract.¹

The trial court overruled Penn Life's motions to dismiss. It noted that the company's claims against the agents and the agents' counterclaims against the company were interrelated, but the company's claims were not subject to the arbitration clause. The court reasoned that "[a]ll related causes should be joined so that they can be resolved in one forum at one time." Therefore, it refused to dismiss the counterclaims so they could be arbitrated stating, "Under the circumstances here fairness to the parties dictates that all the issues between them arising out of the single agreement be resolved in the same forum."

Penn Life filed applications for interlocutory appeal.² While those applications were pending, the district court, pursuant to the parties' stipulation, consolidated the cases filed by Penn Life. This court then granted interlocutory review of the consolidated cases.

II. Scope of Review.

Review of a district court's ruling on a motion to dismiss is for correction of errors at law. McCormick v. Meyer, 582 N.W.2d 141, 144 (Iowa 1998). "A motion to dismiss is sustainable only when it appears to a certainty that the plaintiff would not be entitled to relief under any state of facts that could be proved in support of the claims asserted." Haupt v. Miller, 514 N.W.2d 905, 911 (Iowa 1994). For purposes of ruling on a motion to dismiss, we accept as true the facts alleged in the pleading sought to be dismissed. Id. at 907. Where the facts pertinent to the determinative issue in a motion to dismiss are disputed, the case usually cannot be resolved on such a motion. Hayden v. Ameristar Casino Council Bluffs, Inc., 641 N.W.2d 723, 724 (Iowa 2002).

III. Choice of Law.

Before we address the merits of the court's dismissal rulings, we first consider the parties' dispute as to whether Iowa or North Carolina law governs. In amendments to its petitions, Penn Life pled that North Carolina law applied, based on a contractual provision stating that the agreement was to be governed by the law of the state of North Carolina. Although the court noted in its rulings on the motions to dismiss that the contract provided that North Carolina law applied, the court relied solely on Iowa case law to support its decision. It may have done so because, as our review of the record shows, Penn Life failed to prove the law of North Carolina.

Our cases are clear that it is not sufficient to merely plead the applicability of foreign law; it must also be proven. In re Estate of Allen, 239 N.W.2d 163, 169 (Iowa 1976). A party relying on foreign law may ask the court to take judicial notice of foreign statutory law and may introduce into evidence statutes or cases to prove the foreign law. Id.; see Iowa R. Civ. P. 1.415 (setting out procedure for judicial notice of foreign statutes); Iowa Code § 622.61 (2001) (setting out procedure for proving "foreign unwritten law"). Citation to foreign opinions in a party's brief is not adequate "because it is not the introduction of evidence." In re Estate of Allen, 239 N.W.2d at 169; accord EFCO Corp. v. Norman Highway Constructors, Inc., 606 N.W.2d 297, 300 (Iowa 2000)

(noting that foreign decisional law is not subject to judicial notice, but must be proved).

Here, the choice-of-law question with which we are confronted arose in the context of a motion to dismiss. Therefore, the parties introduced no evidence. Nor is there anything in the record to show that the court took judicial notice of any North Carolina statute. Under these circumstances, we must apply Iowa law to resolve the dispute before us. See EFCO Corp., 606 N.W.2d at 300 (holding that upon failure of party seeking to assert foreign law to prove it, the court presumes the law to be the same as its own); In re Estate of Allen, 239 N.W.2d at 169 (same). Our inability to apply unproven foreign law makes it unnecessary to determine the choice-of-law question presented by the parties on appeal. EFCO Corp., 606 N.W.2d at 300 (refusing to decide whether Texas law governed parties' dispute because party relying on foreign law had failed to prove it); In re Estate of Allen, 239 N.W.2d at 168 (same). We turn now to the other issues raised on appeal.

IV. Enforceability of Arbitration Provision.

In discussing the enforceability of the arbitration provision contained in the parties' contracts, we first address the validity of the district court's rationale for denying Penn Life's motions to dismiss. Because we find that rationale unpersuasive, we will consider the alternative grounds asserted by the agents to avoid their agreements to arbitrate. First, the agents contend that Penn Life's commencement of these actions in court operates as a waiver of its right to arbitrate the agents' claims against the company. Secondly, they argue that the arbitration provision is unenforceable under Iowa Code section 679A.1, which provides that a written agreement to arbitrate is not valid when it is part of a contract of adhesion or a contract between an employer and an employee. See Iowa Code § 679A.1(2)(a), (b). We turn now to the reasoning expressed in the court's rulings.

A. Convenience of parties. The district court appears to have relied on principles of convenience and judicious use of the parties' resources in concluding that all claims involving the parties should be tried in one forum. We do not think such concerns...