Vis v. Am. Family Life Assurance Co. of Columbus, No. C 11-4008-MWB

CourtU.S. District Court — Northern District of Iowa
Writing for the CourtMARK W. BENNETT
PartiesGERRIT J. VIS, Plaintiff, v. AMERICAN FAMILY LIFE ASSURANCE COMPANY OF COLUMBUS, a Foreign Corporation, Defendant.
Docket NumberNo. C 11-4008-MWB
Decision Date21 April 2011

GERRIT J. VIS, Plaintiff,
v.
AMERICAN FAMILY LIFE ASSURANCE COMPANY OF COLUMBUS, a Foreign Corporation, Defendant.

No. C 11-4008-MWB

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF IOWA WESTERN DIVISION

Dated: April 21, 2011.


MEMORANDUM OPINION AND ORDER REGARDING DEFENDANT'S MOTION TO COMPEL ARBITRATION AND TO STAY FURTHER PROCEEDINGS IN THIS COURT

TABLE OF CONTENTS

I. INTRODUCTION.........................................3

A. Factual Background...................................3

B. Procedural Background................................ 8

C. Arguments Of The Parties...............................9

1. AFLAC's initial arguments........................9
2. Vis's response............................... 10
3. AFLAC's reply............................... 11

II. LEGAL ANALYSIS...................................... 13

A. The FAA......................................... 13

B. Arbitrability Under The FAA............................ 14

1. Arbitrability of the dispute....................... 15
2. Validity of the arbitration agreement................. 15
a. Contract of adhesion...................... 16
b. Unconscionability......................... 16
C. Disposition........................................ 20

III. CONCLUSION........................................ 21

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Although the parties' arguments have "morphed" somewhat since filing of this breach-of-contract action by a former agent for an insurance company, the essential question now is whether the clause of the contract between the parties requiring arbitration of the present dispute is unconscionable. This case, like the last one in which I addressed a claim that an arbitration clause was unconscionable, 1 suggests that "unconscionability"—like beauty, plain meaning, the line between impermissible patent claim construction and permissible interpretation of the court's construction, fraud, and2discriminatory intent—may be in the eye of the beholder.

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I. INTRODUCTION

A. Factual Background

This action for breach of contract is before me on a pre-answer motion to compel arbitration. Therefore, the factual background stated here is drawn from the plaintiff's state court Petition (docket no. 4), which the defendant removed to this federal court, and such further information as the parties' briefing on the motion to compel arbitration has provided.

Plaintiff Gerrit J. Vis, a resident of Sioux County, Iowa, alleges that he had a written contract (the Contract) with defendant American Family Life Assurance Company of Columbus (AFLAC), which he describes as a foreign corporation, 3 pursuant to which he agreed to market AFLAC's insurance services in exchange for commissions for sales of insurance policies to customers. Vis contends that the contract described him as an "associate."

Vis alleges that his Contract with AFLAC was terminated upon 30-days written notice, but that is not the breach of contract that he alleges in this action. Rather, he alleges that AFLAC breached the Contract when it stopped paying him renewal commissions to which he was entitled under the Contract, even after his termination. AFLAC explains, at least for purposes of its present Motion To Compel Arbitration, that it ceased paying Vis renewal commissions, because it determined that Vis had attempted

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to solicit or induce policyholders or accounts of AFLAC to relinquish, cancel, or surrender policies with AFLAC and encouraged them to replace them with policies issued by Colonial Life, the company with which Vis was still affiliated after his termination by AFLAC. AFLAC describes Vis's conduct as "twisting," which is prohibited by Iowa Code § 507B.4. AFLAC contends that such conduct forfeited Vis's right to renewal commissions pursuant to the Contract.4

Vis acknowledges in his Petition that the Contract with AFLAC included an arbitration clause, requiring that all disputes concerning the Contract, including claims of breach of contract, are subject to mandatory and binding arbitration. He alleges, however, that the arbitration clause is unenforceable.

More specifically, the Contract provides for arbitration as follows:

10.1 Arbitration Agreement. Except for an action by AFLAC to enforce the provisions contained in Paragraphs 1.4, 3, 8, 10.5 or 10.6, the parties agree that any dispute arising under or related in any way to this Agreement ("Dispute"), to the maximum extent allowed under the Federal Arbitration Act ("FAA"), shall be subject to mandatory and binding arbitration. [Sic] Including any Dispute arising under federal, state or local laws, statutes or ordinances (for example, statutes prohibiting anticompetitive conduct, unfair business practices and discrimination or harassment on the basis of race, sex, religion, color, national origin, age or disability) or arising under federal or state common law (for example, claims of breach of contract, fraud, negligence, emotional distress or breach of fiduciary duty). It is further agreed that, in any Dispute between the parties, all past and present officers, stockholders, employees, associates, coordinators, agents and

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brokers of AFLAC, who are alleged to be liable or may be liable in any manner to either party based upon the same allegations made against a party to this Agreement, are intended to be third-party beneficiaries of this Arbitration Agreement with full rights to enforce it. Associate also understands and agrees that, regardless of whether AFLAC is a party, this Arbitration Agreement shall be applicable to any dispute between Associate and any past and present officers, stockholders, employees, associates, coordinators, agents and brokers of AFLAC. THE PARTIES WAIVE ANY RIGHT TO TRIAL BY A JURY IN A COURT OF LAW TO RESOLVE ANY DISPUTE.

Defendant's Motion To Compel Arbitration, Exhibit C (docket no. 6-3) (Contract), ¶ 10.1 (emphasis added).5 Further subparagraphs of the arbitration clause establish the arbitration procedure (¶10.2), allow enforcement of the arbitration agreement in any court of competent jurisdiction (¶ 10.3), prohibit consolidation of claims or class actions without the consent of all parties (¶ 10.4), and set out a limitation of liability (¶ 10.7).

Two other provisions of the arbitration clause warrant quotation here, in light of the parties' arguments, because both are listed in f 10.1 as paragraphs that AFLAC may enforce by court action. The first is the provision providing for injunctive relief:

10.5 Injunctive Relief. Any court of competent jurisdiction is authorized to issue any injunctive or other equitable relief in aid of arbitration, including without limitation a temporary restraining order or preliminary injunction enjoining Associate from violating Paragraphs 1.4, 3, 8, 10.5 or 10.6.

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Contract, ¶10.5. This authority to pursue injunctive relief in court relates to precisely the same paragraphs of the Contract as the exception from AFLAC's obligation to arbitrate disputes in ¶ 10.1 of the arbitration clause.

The second provision of the arbitration clause that warrants quotation, because it is also a paragraph that AFLAC may enforce in a court action, is a covenant not to sue:

10.6 Covenant Not to Sue: Associate covenants and agrees that he/she shall not, directly or indirectly, assert or threaten to assert any claim, charge, action or cause of action (hereinafter "Claim") against (a) an Account or Prospective Account (Which is defined as any individual or entity that Associate ever solicited for the purposes of selling an AFLAC Policy or product), including all of the Account's or Prospective Account's past and present officers, trustees, directors, stockholders, employees, agents, partners and attorneys, or (b) a policy holder, which relates in any way to Associate's communications, dealings or relationship with the Account, Prospective Account or policy holder. Nothing contained in this Paragraph 10.6 shall prohibit Associate from asserting a claim against an Account or Prospective Account (including all of the entities or individuals described herein) or policy holder for a matter that is completely unrelated to AFLAC or Associate's representation of AFLAC. Moreover, in the event that an Account or Prospective Account (including any of the entities or individuals described herein) or policyholder should assert a claim against Associate, Associate shall be free to assert any counterclaim against the Account or Prospective Account (including all of the entities or individuals described herein) or policyholder. Associate acknowledges that this covenant not to sue is for the benefit of Accounts or Prospective Accounts (including any of the entities or individuals described herein) and policyholders and, in addition, for AFLAC in connection with its relationship with its Accounts, Prospective Accounts and policyholders. Associate further acknowledges that this covenant not to sue is

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an integral part of this Agreement and is supported by valuable consideration.

Contract, ¶ 10.6. Thus, this provision prohibits third-party legal proceedings by an associate without AFLAC's consent, unless the matter is completely unrelated to AFLAC or the associate's representation of AFLAC or is a counterclaim by the associate in an action by a third party against the associate.

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