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 CourtWest Codenotes
Citation778 F.Supp.2d 971
Docket NumberNo. C 11–4008–MWB.
Decision Date21 April 2011
PartiesGerrit J. VIS, Plaintiff,v.AMERICAN FAMILY LIFE ASSURANCE COMPANY OF COLUMBUS, a Foreign Corporation, Defendant.

778 F.Supp.2d 971

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, N.D. Iowa, Western Division.

April 21, 2011.


West CodenotesRecognized as PreemptedI.C.A. § 679A.1(2)(a)

[778 F.Supp.2d 972]

Michael Jon Jacobsma, Jacobsma, Clabaugh & Freking, PLC, Sioux Center, IA, for Plaintiff.Alan E. Fredregill, Heidman Redmond Fredregill Patterson Plaza Dykstra & Prahl, Sioux City, IA, for Defendant.

MEMORANDUM OPINION AND ORDER REGARDING DEFENDANT'S MOTION TO COMPEL ARBITRATION AND TO STAY FURTHER PROCEEDINGS IN THIS COURT
MARK W. BENNETT, District Judge.
+-------------------+
                ¦TABLE OF CONTENTS ¦
                +-------------------¦
                ¦ ¦
                +-------------------+
                
I. INTRODUCTION 973
                
 A. Factual Background 973
                 B. Procedural Background 976
                 C. Arguments Of The Parties 976
                
 1. AFLAC's initial arguments 976
                 2. Vis's response 977
                 3. AFLAC's reply 977
                
II. LEGAL ANALYSIS 978
                
 A. The FAA 978
                 B. Arbitrability Under The FAA 979
                
 1. Arbitrability of the dispute 979
                 2. Validity of the arbitration agreement 979
                
 a. Contract of adhesion 980
                 b. Unconscionability 980
                
 C. Disposition 982
                
III. CONCLUSION 983
                

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, and discriminatory intent—may be in the eye of the beholder.2

[778 F.Supp.2d 973]

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 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”),

[778 F.Supp.2d 974]

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 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 ¶ 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.

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

[778 F.Supp.2d 975]

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 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.

Parts of other provisions of the Contract excepted from AFLAC's obligation to pursue arbitration also warrant closer examination. Specifically, ¶ 1.4.4 of the Contract, a subparagraph of the provision relating to AFLAC's intellectual property, ¶ 1.4, provides as follows:

1.4.4 Revocation, Expiration or Termination. Upon the revocation of Associate's limited license to use AFLAC's Marks or the Materials or the termination of this Agreement, Associate shall immediately cease all further use of the AFLAC Marks and the Materials in any manner. Associate agrees that any breach or threatened breach of this Paragraph 1. 4.4 would cause irreparable harm to AFLAC and that money damages would not provide an adequate remedy to AFLAC for the injury. Associate therefore consents to...

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4 practice notes
  • Johnson v. United States, No. C 09-3064-MWB
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • March 22, 2012
    ...constitute a single claim of ineffective assistance of counsel. 31.See, e.g., Vis v. American Family Life Assur. Co. of Columbus, 778 F. Supp. 2d 971, 972 n.2 (N.D. Iowa 2011) (examining the sources and applications of the phrase "eye of the beholder"). 32.I suggest, however, that......
  • Johnson v. United States , Nos. C 09–3064–MWB, CR 01–3046–MWB.
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • March 22, 2012
    ...phase constitute a single claim of ineffective assistance of counsel. 31.See, e.g., Vis v. American Family Life Assur. Co. of Columbus, 778 F.Supp.2d 971, 972 n. 2 (N.D.Iowa 2011) (examining the sources and applications of the phrase “eye of the beholder”). 32. I suggest, however, that, for......
  • Powell v. Fayram, No. C 10–4012–MWB.
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • April 21, 2011
    ...§ 2254 For Writ Of Habeas Corpus By A Person In State Custody (docket no. 1), as clarified by counsel, is denied in its entirety. [778 F.Supp.2d 971] A certificate of appealability is also denied. IT IS SO ORDERED.--------Notes: 1. Powell had other charges pending, in other cases, that aros......
  • Pinnacle Benefits Grp., LLC v. Am. Republic Ins. Co., 1:13CV186
    • United States
    • United States District Courts. 4th Circuit. Middle District of North Carolina
    • December 31, 2013
    ...Statute § 679A.1(2)(c). While Defendants are correct that the FAA preempts § 679A.1, see Vis v. Am. Family Life Ins. Co. of Columbus, 778 F. Supp. 2d 971, 980 (N.D. Iowa 2011), that determination does not control this case. PBG does not contend that the arbitration clause is invalid because......
4 cases
  • Johnson v. United States, No. C 09-3064-MWB
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • March 22, 2012
    ...constitute a single claim of ineffective assistance of counsel. 31.See, e.g., Vis v. American Family Life Assur. Co. of Columbus, 778 F. Supp. 2d 971, 972 n.2 (N.D. Iowa 2011) (examining the sources and applications of the phrase "eye of the beholder"). 32.I suggest, however, that, for the ......
  • Johnson v. United States , Nos. C 09–3064–MWB, CR 01–3046–MWB.
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • March 22, 2012
    ...phase constitute a single claim of ineffective assistance of counsel. 31.See, e.g., Vis v. American Family Life Assur. Co. of Columbus, 778 F.Supp.2d 971, 972 n. 2 (N.D.Iowa 2011) (examining the sources and applications of the phrase “eye of the beholder”). 32. I suggest, however, that, for......
  • Powell v. Fayram, No. C 10–4012–MWB.
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • April 21, 2011
    ...§ 2254 For Writ Of Habeas Corpus By A Person In State Custody (docket no. 1), as clarified by counsel, is denied in its entirety. [778 F.Supp.2d 971] A certificate of appealability is also denied. IT IS SO ORDERED.--------Notes: 1. Powell had other charges pending, in other cases, that aros......
  • Pinnacle Benefits Grp., LLC v. Am. Republic Ins. Co., 1:13CV186
    • United States
    • United States District Courts. 4th Circuit. Middle District of North Carolina
    • December 31, 2013
    ...Statute § 679A.1(2)(c). While Defendants are correct that the FAA preempts § 679A.1, see Vis v. Am. Family Life Ins. Co. of Columbus, 778 F. Supp. 2d 971, 980 (N.D. Iowa 2011), that determination does not control this case. PBG does not contend that the arbitration clause is invalid because......

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