# United States Court of Appeal

FOR THE EIGHTH CIRCUIT

___________ No. 96-2010 No. 96-2094

___________ 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. * Appeals fro m the United States

* District Court for the Randy Stelk; John Craft; * Western District o f Missouri

* Defendants - Appellants, *
* Amerishare Communications, Inc., * a Florida corporation; Amerishare * Agency, Inc., a NewYork corporation; * Agent Investors Holding Company, a * Georgia corporation, *
* Defendants. *
*

## Amerishare Communications, Inc. and Amerishare Agency, Inc. are subsidiaries 1 

## of Amerishare Investors. Randy Stelk and John Craft founded Amerishare. We will sometimes refer to the appellants collectively as "Amerishare," and when necessary to our discussion, we will identify them separately. ___________ Submitted: February 13, 1997 Filed: January 9, 1997

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

___________ JOHN R. GIBSON, Circuit Judge.

Amerishare Investors, Inc. Randy Stelk, John Craft, Amerishar e Co mmunications, Inc. and Amerishare Agency, Inc. appeal from summar y judgment entered on ITT Hartford's action to collect on a loan and loa n guarantees. They argue that the district court erred in not enforcing the partie s' arbitration agreement and in entering summary judgment. W e affirm.

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

In early 1992, ITT approached Amerishare Investors about becomi ng the exclusive agent for I TT life insurance and annuity products. On February 6, 1992, ITT and Amer ishare Investors entered into a marketing agreement. Under the agreement, Amerishare Investors agreed to market and sell throug h its sales agents life insurance and annuity products underwritten by ITT. Amerishare Investors was to meet certain production goals, and ITT Hartfor d was "to provide Amerishare with certain services , financial assistance and other support."The marke ting agreement attached a letter agreement, dated February

6, 1992, memorializing ITT Hartford's obligation to provide bridg e financing. The letter agreement recognized that Amerishare Investors woul d need financing during the transition from its cu rrent insurance carrier to ITT Ha rtford. ITT Hartford agreed to provide temporary financia l assistanc e of up to $300,000 per month for up to six months (or unti l Amerishare Investors achieved a monthly cash flo w 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 woul d be r epaid in monthly installments as mutually agreed by the parties

. Repayme nt would begin when Amerishare achieved a monthly cash flow o f $300,000, or one year from the date of the loan.

The marketing agreement established that ITT Hartford would be th e underwriter for the i nsurance policies sold by Amerishare. The agreement set forth various duties of ITT Hartford, including ITT Hartford' s obliga tion to issue policies, pay commissions, obtain licensing, an d perform actuarial, billing, and collection services. The marketing agreement contained an arbitration provision:

It is the intention of the [ITT Life Insurance Corp oration] and Amer ishare that the customs and practices of the insuranc e ind ustry shall be given full effect in the operation an d interpretation of this A greement. The parties agree to act in all things with the goodfaith. If the Company and Amerishare cannot, however, mutually resolve a dispute which a rises out of
or relates to this Agreement, the dispute shall be decide d through arbitration as set forth herein. The arbit rators shall bas e their decision on the terms and conditions of thi s Agr eement and, as necessary, on the customs and practices o f the insurance industry rather than solely on a stric t interpretation of the applicable law.

Th e agreement outlined the procedure for the initiation o f arbitration, the

## Agent I nvestors Holding Company was also a signatory to the marketin g 2 

## agreement. The court dismissed Agent Investors from the case pursuant to a stipulation of the parties. select ion of the arbitrators, and the mechanics of the arbitratio n procee ding. 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 securit y 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 t he 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 t o Amerisha re in the transition, start-up and building of a large an d effective agency system." Amerishare agreed to borrow under the line of credit only to the extent necessary to meet its current working capita l requirements. The loan agreement provided that the first advance under th e loan agreement would be used to repay the $2,987,627 in promissory notes

exe cuted under the line of credit. These notes were amounts from th e brid ge financing that ITT Hartford had provided for in the marketin g agreement. The loan agreement also provided:

This Agreement and the writings executed herewith a nd hereafter constitute the sole agreement and understanding of Amerishare and ITT Life with respect to the transactions descr ibed herein, and supersede and replace all prior written and ora l agreements and understandings with respect thereto.

The parties contemplated that Amerishare would repay the loan fro m "all c ommissions and other amounts payable to Amerishare under th e Market ing Agreement or any other agreement between Amerishare and IT T Life." The agreement containedprovisions relating to the rights and remedies in the event of default ,

including a provision allowing ITT Life to terminate the line of credit an d decla re all principal interest and other charges due and payable. Th e agreement defined one of the events of default a s "[n]otice of termination of the Marketing Agreement." The loan agreement contained a paragrap h relati ng to jurisdiction and venue "in connection with any controvers y 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 i n con nection with any controversy related in any way to thi s Agr eement or any of the Loan Documents, waives any argumen t that venue in such forums is not convenient, and agrees tha t any litigation initiated by Amerishare against ITT Life i n con nection with this Agreement or any of the Loan Document s will be venued in either the District Court of Henn epin County, Minnesota, or the United States District Court, District o f Minnesota; provided that any proceeding commenced by ITT Life hereunder will be commenced and maintained in federal cour t unle ss the Minnesota federal courts lack subject matte r jurisd iction with respect to the claims made in suc h proceeding; and provided that ITT Life will not con test removal to or seek remand from any Minnesota federal district cour t with respect to any proc eeding commenced by ITT Life hereunder except on the basis of lack of federal court subject matte r jurisdiction.
The agreement did not contain an arbitration clause.
Amerishare Investors secured its repayment obligation by granti ng ITT Hartford a first secu rity interest in all of its assets, including shares of sto ck 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 an d Amerishare Agency secured their guaranties by granting ITT Hartford a firs t security interest in their assets. Stelkand Cra ft granted ITT Hartford a first security interest in accounts ,

inventory, various claims they owned, and their shares of Amerishare stock

. Ame rishare agreed that it would not sell or dispose of any of th e collatera l. The guarantors agreed to pay all costs of collection. Th e security agreements contained the same jurisdiction and venue clause set forth in the loan agreement, specifically providing that the guarantor s
con sented to "the personal jurisdiction of the state and federal court s loca ted in the State of Minnesota in connection with any controvers y relate d in any way to this Agreement." Like the loan agreement, th e 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 th e reduce d production requirements, and on January 3, 1995, ITT Hartfor d notified Amerishare t hat it was terminating the marketing agreement. The notic e of termination caused an "Event of Default" under the loa n agreement. ITT Hartford declared all principal and interest immediately due and filed suit to collect under the note and guaranties.

Amerishar e filed a motion to dismiss for lack of subject matte r jurisdiction, arguing that ITT's claims were subject to arbitration. In the alternative, Amerishare moved to compel arbitration and to stay th e action pending arbitration. The magistrate judge denied Amerishare' s mot ion to dismiss and motion to compel arbitration, concluding that th e loan agreement was not subject to the arbitration provisions of th e marketing agreement. The magistrate judge reasoned that the loan document s and marketing agreeme nt "are not so closely linked as to impose or confer arbi tration on issues and parties who did not contractually agree t o arbitration."

ITT Hartf ord filed a motion for summary judgment. Although th e magistrate judge was "inclined to grant" the mot ion because Amerishare did not deny liabilityunder the loan agreem ents, it nevertheless granted Amerishare 120 days to

conduct discovery. No discovery was conducted. Instead, Amerishare filed affidavits from five people detailing ITT Hartford's alleged breaches of the marketing agreement and arguing that ITT Hartford caused its failure to meet production goals. Specifically, the aff idavits explained that ITT Hartford was unable to handle the business generated by Amerishare and tha t it breached the marketing agreement by failing t o obtain licensing to sell insurance in New Jersey, by incompetently handling applications for life insurance, and by refusing to pay commissions. The affidavits stated that ITT Hartford regularly lost blood and urine samples, failed to make timel y decisions on insuranc e, and that ITT hired away Amerishare's sales force. Amerishare contended that the district court must order arbitration becaus e the affidavits showed that ITT Hartford's complaint is premised on a breac h of t he marketing agreement, containing a mandatory arbitration clause

. Amerishare argued alternatively that the affidav its raised a genuine issue of material fact as to liability and damages under the loan agreements

. The district court rejected Amerishare's arguments, reasoning that th e counterclaims based on the marketing agreement c ould proceed independently of the claims on the loan agreements.

The district court denied Amerishare's motion for reconsideration , pointing out that the parties filed a stipulation agreeing to dismiss the counte rclaims based on alleged breaches of the marketing agreement an d agreeing to submit the counterclaims to arbitration.

Amerishare now appeals, contending that the district court erred in refusin g to compel arbitration of its claims, and in ordering summar y judgment because there are disputed issues of material facts.

I.

When a party moves to compel arbitration, our role is to determin e whether thereis an agreement betwe en those parties which commits the subject matter of

the dispu te to arbitration. I.S. Joseph Co. v. Michigan Sugar Co. , 80 3 F.2d 396, 399 (8th Cir. 1986). We examine arbitration agreements in the

same light we examine any other contractual agreement. See Perry v

. Thomas , 482 U.S. 483, 492 & n. 9 (1987).

The Federal Arbitration Act mandates that courts shall direct p arties to arbitration on issues to which an arbitration agreement has been signed

. See Dean Witter Reynolds, Inc. v. Byrd , 470 U.S. 213, 218 (1985). There is a presumption of arbitrability if the governing agreement contains an arbitra tion clause. See AT&T Tech. Inc. v. Communications Workers o f America , 475 U.S. 643, 650 (1986). "[A]rbitration should not be denie d unless it may be saidwith positive assurance that the arbitration clause is not susceptible of an interpretation that cov ers the asserted dispute." IBEW, Local 4 v. KTVI-TV, Inc. , 985 F.2d 415, 416 (8th Cir. 1993) (interna l quotation and citation omitted). We resolve ambiguities as to the scope of an arbitration cla use in favor of arbitration. See id. Nevertheless, neither state nor federal law confers a right of arbitration; the righ t must be found in a contract between the parties seeking to compe l arbitration. See , e.g. , Volt Info. Sciences, In c. v. Board of Trustees of Leland Stanford Junior University , 489 U.S. 468, 474-75 (1989); Schoenborn

v. Stat e Farm Auto Ins. Co. , 495 N.W.2d 460, 463 (Minn. Ct. App. 1993)

. Aparty who has not agreed to arbitrate a dispute cannot be forced to do

so. AT&T Tech. , 475 U.S. at 648.

The district court held the arbitration provision of the marketin g agreement did not control because the loan agreements did not contain an arbitration provision, and because Amerishare Communications, Amerishar e Agency, Stelk, and Cr aft were not signatories to the marketing agreement.

Amerishare contends that given the broad "arising out of" languag e contained in the marketing agreement, ITT Hartford's claims fall within th e scope of the arbitration provision. Amerishare contends that the district court violated a key rule of contract

## The guar antors do not argue there is a duty owed to them under the marketing 3 

## agreement. interpretation, and that "[a] contract and several writings relating to th e
same transaction must be construed with reference to each other." Knut. Co. v. K nutson Const. Co. , 433 N.W. 2d 149, 151 (Minn. Ct. App. 1988)

. Amerishare contends the district court misconstr ued the holding in Knutson by concluding that several writings should be co nstrued together only when the writings are executed contemporaneously, and that the loan agreement is subject to the arbitration provision of the m arketing agreement because the agreements are all part of a "single, unified contractual scheme." In Knuts on , plaintiffs sued to collect under a promissory note an d personal guarantees. 433 N.W.2d at 150. The ap pellants executed the note and pe rsonal guaranties in connection with an asset purchase agreement

. Id. The purchase agreement contained an arbitration provision. Th e Minnes ota court ordered arbitration, concluding that the scope of th e agreem ent showed that the parties intended the arbitration provision t o apply to the loan dispute, noting that the arbit ration language was broad; the Note and the Guaranty were executed at the s ame time as the Agreement; the Agreement specifically mentioned the Note and Guaranty, and provided that the Note was subject to the Agreement's ter ms and conditions. Id. at 150 -151. Contrary to Amerishare's argument, the district court did no t decide t hat the loan documents were not subject to the arbitratio n provision because the loan documents were not executed contemporaneously with the marketing agreement. The timing of the execution of the document s was simply one factor in deciding whether the pa rties intended to be bound by the arbitration provision.

In general, a stranger to a contract has no rights under the co ntract unless the third party is an intended beneficiary of the contract, or ther e is a duty owed to the third party that is discharged by the cont ract. See 3 Chard Realty Inc. v. City of Shakopee , 392 N.W.2 d 716, 720 (Minn. Ct. App. 1986); Anderson v. First Northtown Nat'l Bank ,

## A t

oral argument, Amerishare stated that it had requested arbitration of it s 4 

## claims against ITT by filing its motion to compel arbitration in this case. The marketing agreement, however, sets forth a detaile d procedure for the initiation of arbitration and selection of arbitrators. At the time of oral argument, Amerishare admitted that it had not yet initiated arbitration proceedings under the marketing agreement. 361 N.W.2d 116, 118 ( Minn. Ct. App. 1985). Amerishare Agency, Amerishare Commun ications, Stelk, and Craft are not signatories to the marketin g agreement, and the ma rketing agreement does not show an intent to benefit the g uarantors. See Chard , 392 N.W.2d at 720-21 (alleged third-part y beneficiary not menti oned in contract). The fact that the loan documents did not exist when Am erishare Investors and ITT Hartford entered into the marketing agreement demonstrates against intended beneficiary status. See , e.g. , Gold'N Plump Poultry Inc. v.. Simmons Eng. Co. , 805 F.2d 1312, 1318- 19 (8th Cir. 1986).

In Lee v. Chica , 983 F.2d 883 (8th C ir.), cert. denied , 510 U.S. 906 (1993 ), we held that an arbitration agreement between a customer and a brokera ge firm can bind the agent who traded in the account even if th e agent d id not sign the customer agreement. Id. at 886-87. We reasone d that the plain language of the arbitration clause covered the customer's claims against the agent who was managing her account as an employee of th e brokerage firm. Id. at 887. In Lee , however, t he only agreement at issue

was t he customer agreement and the customer sued for claims under tha t agreement. Cf. Schoenborn , 495 N.W.2d at 463 (r efusing to extend policy's arbitration clause). Here, ITT Hartford sued to collect money under the loan agreements. The loan transaction was a separate agreement, distinct from t he marketing agreement. The loan agreements involved differen t entities and obligations. Cf. Anda Constr. Co. v. First Fed'l Savings & Loan , 349 N.W.2d 275, 278 (Minn. Ct. App. 1984). The fact that Amerishare may hav e claims against ITT Hartford under another agreement does no t transform the two agreements into one unified tr ansaction. ITT Hartford's claimto recover under the loan agreement has no bearing on Amerishare's ability to arbitrate its claims, as readily conceded by ITT Hartford. 4Amer ishare also argues that the arbitration provision in th e

market ing agreement extends to this dispute because the guaranty an d

sec urity agreements expressly incorporated Amerishare's obligation t o arbitrate. The guaranties provide:

Gua rantor absolutely, irrevocably and unconditionall y guarantees to Secured Pa rty the payment and performance of all lia bilities and obligations of Amerishare Investors, Inc

. ("Debtor") promptly when due, by acceleration or otherwise , under that certain Loan Agreement of even date by and between Debtor and Secured Party. . . .

This language, however, is a guarantee of Amerishare's obligatio n "under that certain l oan agreement." It does not obligate the guarantors under the marketing agreement. This presents a far different scenario tha n that in Compania Espanola de Petroleos, S.A. v. Nereus Shipping, S.A. , 527 F.2d 966 (2d Cir. 1975), cert. denied , 426 U.S. 936 (1976), where the cour t foun d the guarantors bound by the arbitration clause in the origina l contract. Id. at 973-74. Although the guaranty in that case did no t contain an arbitration provision, the guarantors in that case not onl y agreed to perform the balance of the original co ntract, but also agreed to assume the rights and obligations under the original contract. Id.

Altho ugh we recognize that we must resolve any ambiguities in th e marketi ng agreement in favor of arbitration, we can say with positiv e assurance that the ar bitration clause does not cover the instant dispute. Amerishare and ITT Ha rtford executed the marketing agreement eight months before the execution of the promissory note and guaranties. Although the promissory note refers to the marketing agreement, it does not provide tha t the note o r guaranties are subject to the provisions of the marketin g agreement. Cf. Knutson , 433 N.W. 2d at 151. In deed, the note states that the note and the writ ings constitute the sole agreement of Amerishare and ITT Life and supersede all prior agreements. The loan agreements do not discu ss arbitration and, in fact, expressly provide that Amerishar e consents to the personal jurisdiction of the Min nesota courts with respect to the loan documents. It is evident to us that the agreements are not so connected as to impose the arbitration provision to the loandocuments.
The district court did not err in refusing to compel arbitration.

II.
Even if the court disagrees that arb itration is required, Amerishare contends that reversal is still warranted because of genuine issues o f material fact. Amerishare contends that there exists a genuine issue of mater ial fact as to whether the contract performance is excused by th e prevention doctrine. Amerishare contends that "contract performance i s excused when it is hindered or rendered impossible by the other party. " LaSociete Generale Immobiliere v. Minneapolis Community Dev. Agency , 4 4 F.3d 629, 638 (8th Cir. 1994) (quoting Zobel & D ahl Constr. v. Crotty , 356 N.W.2d 42, 45 (Minn. 1984)), cert denied , 116 S. Ct. 58 (1995).
Amerishare contends that it raised numerous factual issues supp orting

com plete defenses to ITT's claims; most importantly, a defense based o n ITT's breach of its d uty of good faith. Amerishare argues the affidavits it filed raised a gen uine issue of material fact both as to liability and damages. Amerishare contends that there exists a genuine issue of fact as to whether ITT breached the marketing agreement creating liability under the loan agreement and guaranties. Amerishare f urther contends that there

are genuine issues of fact as to damages under the loan agreement an d guaranties. In addition to the affidavits detailing ITT Hartford's action s which constitute liability under the marketing agreement, Stelk filed an affidavit stating that the promissory note upon which ITT is suing will be paid i n full by September 1996, due to residual income that is bein g generated monthly from Amerishare accounts now c ontrolled by ITT Hartford. The c ontroller for ITT Hartford filed an affidavit stating that it ha d redu ced Amerishare's debt to ITT Hartford by $276,300, the amount o f commissions due Amerishare. He further stated that ITT Hartford had not received the payments that Amerishare claimed would pay off the remaining note balance, and that ITT Hartford did not expe ct any further commissions generated by Amerishare.The district court stated that in light of the fact that the IT T

Hartford had stipulated to a dismissal of the counterclaims and agreed tha t counte rclaims were subject to arbitration, there was no basis fo r withholding summary judgment.

Ameri share raises the identical arguments before this court , cha racterizing its counterclaims and affirmative defenses as absolut e defenses to liability, creating a genuine issue of material fact. The onl y argu ment that Amerishare identifies as to why the arbitration of th e counterclaims cannot proceed independently is that if the arbitration pane l decides that ITT wrongfully terminated the marketing agreement, then ITT had no right to "call" its loan under the loan agreement. If thi s happened, the distric t court rulings would be irreconcilable. Amerishare cites two cases which hold that a factual finding by a panel of arbitrator s can collaterally estop a related issue in a court proceeding.

We are unconvinced by Amerishare's argument. An arbitrator' s subsequent ruling in favor of Amerishare on its claims under the marketing agr eement would not be irreconcilable to the judgment on the promissor y note. The district court only decided liability under the loan documents. The cases cited by Am erishare establish only that a factual finding of an arbitrator can be collateral estoppel in a later court proceeding. See , e.g. , Vacca v. Viacom Broadcasting , 875 F.2d 1337, 1339 (8th Cir. 1989). This principle of collateral estoppel does not apply here because there ha s not been an arbitrati on. See Dean Witter Reynolds, Inc. , 470 U.S. at 223 ("The collateral-esto ppel effect of an arbitration proceeding is at issue only after arbitration is completed"). Should Amerishare institut e arbitration and the arbitration panel find in favor of Amerishare on its counterclaims, the arbitration panel can simply award damages accordingly. There are no genuine issues of disputed fact. See Anderson v. Libert y Lobby, Inc. , 477 U.S. 242, 248 (1986).
We affirm the district court's judgment.A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.