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 from

the United States

* District Court for the

Randy Stelk; John Craft; * Western District of

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, 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 was an insurance marketing company which had a 1

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
Agent Investors Holding Company was also a signatory to the marketing

2

agreement. The court dismissed Agent Investors from the case pursuant to a stipulation

of the parties.

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

magistrate judge was "inclined to grant" the motion because Amerishare did

not deny liability
under the loan agreements, 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 affidavits explained that ITT

Hartford was unable to handle the business generated by Amerishare and that

it breached the marketing agreement by failing to 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 timely

decisions on insurance, and that ITT hired away Amerishare's sales force.

Amerishare contended that the district court must order arbitration because

the affidavits showed that ITT Hartford's complaint is premised on a breach

of the marketing agreement, containing a mandatory arbitration clause.

Amerishare argued alternatively that the affidavits 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 the

counterclaims based on the marketing agreement could 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

counterclaims based on alleged breaches of the marketing agreement and

agreeing to submit the counterclaims to arbitration. 

Amerishare now appeals, contending that the district court erred in

refusing to compel arbitration of its claims, and in ordering summary

judgment because there are disputed issues of material facts. 

I. 

When a party moves to compel arbitration, our role is to determine

whether there
is an agreement between those parties which commits the subject matter of

the dispute to arbitration. I.S. Joseph Co. v. Michigan Sugar Co., 803

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 parties

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

arbitration clause. See AT&T Tech. Inc. v. Communications Workers of

America, 475 U.S. 643, 650 (1986). "[A]rbitration should not be denied

unless it may be said with positive assurance that the arbitration clause

is not susceptible of an interpretation that covers the asserted dispute."

IBEW, Local 4 v. KTVI-TV, Inc., 985 F.2d 415, 416 (8th Cir. 1993) (internal

quotation and citation omitted). We resolve ambiguities as to the scope

of an arbitration clause in favor of arbitration. See id. Nevertheless,

neither state nor federal law confers a right of arbitration; the right

must be found in a contract between the parties seeking to compel

arbitration. See, e.g., Volt Info. Sciences, Inc. v. Board of Trustees of

Leland Stanford Junior University, 489 U.S. 468, 474-75 (1989); Schoenborn

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

A party 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 marketing

agreement did not control because the loan agreements did not contain an

arbitration provision, and because Amerishare Communications, Amerishare

Agency, Stelk, and Craft were not signatories to the marketing agreement.

 

Amerishare contends that given the broad "arising out of" language

contained in the marketing agreement, ITT Hartford's claims fall within the

scope of the arbitration provision. Amerishare contends that the district

court violated a key rule of contract
The guarantors 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 the

same transaction must be construed with reference to each other." Knut.

Co. v. Knutson Const. Co., 433 N.W. 2d 149, 151 (Minn. Ct. App. 1988).

Amerishare contends the district court misconstrued the holding in Knutson

by concluding that several writings should be construed together only when

the writings are executed contemporaneously, and that the loan agreement

is subject to the arbitration provision of the marketing agreement because

the agreements are all part of a "single, unified contractual scheme." 

In Knutson, plaintiffs sued to collect under a promissory note and

personal guarantees. 433 N.W.2d at 150. The appellants executed the note

and personal guaranties in connection with an asset purchase agreement.

Id. The purchase agreement contained an arbitration provision. The

Minnesota court ordered arbitration, concluding that the scope of the

agreement showed that the parties intended the arbitration provision to

apply to the loan dispute, noting that the arbitration language was broad;

the Note and the Guaranty were executed at the same time as the Agreement;

the Agreement specifically mentioned the Note and Guaranty, and provided

that the Note was subject to the Agreement's terms and conditions. Id. at

150-151. Contrary to Amerishare's argument, the district court did not

decide that the loan documents were not subject to the arbitration

provision because the loan documents were not executed contemporaneously

with the marketing agreement. The timing of the execution of the documents

was simply one factor in deciding whether the parties intended to be bound

by the arbitration provision.

In general, a stranger to a contract has no rights under the contract

unless the third party is an intended beneficiary of the contract, or there

is a duty owed to the third party that is discharged by the contract. See 3

Chard Realty Inc. v. City of Shakopee, 392 N.W.2d 716, 720 (Minn. Ct. App.

1986); Anderson v. First Northtown Nat'l Bank,
At oral argument, Amerishare stated that it had requested arbitration of its

4

claims against ITT by filing its motion to compel arbitration in this case. The marketing

agreement, however, sets forth a detailed 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

Communications, Stelk, and Craft are not signatories to the marketing

agreement, and the marketing agreement does not show an intent to benefit

the guarantors. See Chard, 392 N.W.2d at 720-21 (alleged third-party

beneficiary not mentioned in contract). The fact that the loan documents

did not exist when Amerishare 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 Cir.), cert. denied, 510 U.S. 906

(1993), we held that an arbitration agreement between a customer and a

brokerage firm can bind the agent who traded in the account even if the

agent did not sign the customer agreement. Id. at 886-87. We reasoned

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 the

brokerage firm. Id. at 887. In Lee, however, the only agreement at issue

was the customer agreement and the customer sued for claims under that

agreement. Cf. Schoenborn, 495 N.W.2d at 463 (refusing 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 the marketing agreement. The loan agreements involved different

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 have claims against ITT Hartford under another agreement does not

transform the two agreements into one unified transaction. ITT Hartford's

claim to recover under the loan agreement has no bearing on Amerishare's

ability to arbitrate its claims, as readily conceded by ITT Hartford.4
Amerishare also argues that the arbitration provision in the

marketing agreement extends to this dispute because the guaranty and

security agreements expressly incorporated Amerishare's obligation to

arbitrate. The guaranties provide:

Guarantor absolutely, irrevocably and unconditionally

guarantees to Secured Party the payment and performance of all

liabilities 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 obligation

"under that certain loan agreement." It does not obligate the guarantors

under the marketing agreement. This presents a far different scenario than

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 court

found the guarantors bound by the arbitration clause in the original

contract. Id. at 973-74. Although the guaranty in that case did not

contain an arbitration provision, the guarantors in that case not only

agreed to perform the balance of the original contract, but also agreed to

assume the rights and obligations under the original contract. Id. 

Although we recognize that we must resolve any ambiguities in the

marketing agreement in favor of arbitration, we can say with positive

assurance that the arbitration clause does not cover the instant dispute.

Amerishare and ITT Hartford 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 that

the note or guaranties are subject to the provisions of the marketing

agreement. Cf. Knutson, 433 N.W. 2d at 151. Indeed, the note states that

the note and the writings constitute the sole agreement of Amerishare and

ITT Life and supersede all prior agreements. The loan agreements do not

discuss arbitration and, in fact, expressly provide that Amerishare

consents to the personal jurisdiction of the Minnesota 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 loan
documents. 

The district court did not err in refusing to compel arbitration.

II.

Even if the court disagrees that arbitration is required, Amerishare

contends that reversal is still warranted because of genuine issues of

material fact. Amerishare contends that there exists a genuine issue of

material fact as to whether the contract performance is excused by the

prevention doctrine. Amerishare contends that "contract performance is

excused when it is hindered or rendered impossible by the other party."

LaSociete Generale Immobiliere v. Minneapolis Community Dev. Agency, 44

F.3d 629, 638 (8th Cir. 1994) (quoting Zobel & Dahl 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 supporting

complete defenses to ITT's claims; most importantly, a defense based on

ITT's breach of its duty of good faith. Amerishare argues the affidavits

it filed raised a genuine 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 further contends that there

are genuine issues of fact as to damages under the loan agreement and

guaranties. In addition to the affidavits detailing ITT Hartford's actions

which constitute liability under the marketing agreement, Stelk filed an

affidavit stating that the promissory note upon which ITT is suing will be

paid in full by September 1996, due to residual income that is being

generated monthly from Amerishare accounts now controlled by ITT Hartford.

The controller for ITT Hartford filed an affidavit stating that it had

reduced Amerishare's debt to ITT Hartford by $276,300, the amount of

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 expect any further commissions

generated by Amerishare.
The district court stated that in light of the fact that the ITT

Hartford had stipulated to a dismissal of the counterclaims and agreed that

counterclaims were subject to arbitration, there was no basis for

withholding summary judgment. 

Amerishare raises the identical arguments before this court,

characterizing its counterclaims and affirmative defenses as absolute

defenses to liability, creating a genuine issue of material fact. The only

argument that Amerishare identifies as to why the arbitration of the

counterclaims cannot proceed independently is that if the arbitration panel

decides that ITT wrongfully terminated the marketing agreement, then ITT

had no right to "call" its loan under the loan agreement. If this

happened, the district court rulings would be irreconcilable. Amerishare

cites two cases which hold that a factual finding by a panel of arbitrators

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

agreement would not be irreconcilable to the judgment on the promissory

note. The district court only decided liability under the loan documents.

The cases cited by Amerishare 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 has

not been an arbitration. See Dean Witter Reynolds, Inc., 470 U.S. at 223

("The collateral-estoppel effect of an arbitration proceeding is at issue

only after arbitration is completed"). Should Amerishare institute

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. Liberty

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.