Opinion ID: 1857630
Heading Depth: 1
Heading Rank: 3

Heading: Whether Bullis is Subject to an Agreement to Arbitrate.

Text: All parties concede that this controversy is governed by the Federal Arbitration Act. 9 U.S.C. §§ 1-14. This legislation governs all written agreements to arbitrate in any contract evidencing a transaction involving commerce, and it provides that all such agreements are valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. Id. § 2. A party to an arbitration agreement may petition for a stay of judicial proceedings pending arbitration, id. § 3, and a court, on a motion of a party to an arbitration agreement, may compel arbitration, id. § 4. If the existence of an arbitration agreement is disputed, the court must try that issue. Id. To compel arbitration, Bear Stearns must show, at a bare minimum, that the protagonists have agreed to arbitrate some claims.  McCarthy v. Azure, 22 F.3d 351, 354-55 (1st Cir.1994). Specifically, Bear Stearns must show that, under Iowa law, Bullis is bound by one of the two arbitration agreements at issue. First Options of Chicago, Inc. v. Kaplan, ___ U.S. ___, ___, 115 S.Ct. 1920, 1924, 131 L.Ed.2d 985, 993 (1995); Perry v. Thomas, 482 U.S. 483, 492 n. 9, 107 S.Ct. 2520, 2527 n. 9, 96 L.Ed.2d 426, 437 n. 9 (1987); Progressive Cas. Ins. Co. v. C.A. Reaseguradora Nacional De Venezuela, 991 F.2d 42, 45-46 (2d Cir.1993). The Iowa law applied must not discriminate against arbitration agreements in establishing their validity; in other words, the Iowa law must not treat arbitration agreements differently than is provided in the general contract law of this jurisdiction. Perry, 482 U.S. at 492 n. 9, 107 S.Ct. at 2527 n. 9, 96 L.Ed.2d at 437 n. 9. We have stated that arbitration is a matter of contract and parties cannot be compelled to arbitrate a question which they have not agreed to arbitrate. Local Union No. 721, United Packinghouse Food & Allied Workers v. Needham Packing Co., 260 Iowa 908, 917, 151 N.W.2d 540, 546, cert. denied, 389 U.S. 830, 88 S.Ct. 94, 19 L.Ed.2d 87 (1967); see also Dubuque Community Sch. Dist. v. Dubuque Educ. Ass'n, 315 N.W.2d 847, 853-54 (Iowa App.1981). In deciding the issue of arbitrability, we will assume that Bullis's agreement to arbitrate disputes regarding her personal account did not extend to disputes involving the Silver Creek account. Consequently, we consider whether the arbitration agreement in the partnership account is binding upon her. Bullis asserts that, because she did not sign the Silver Creek agreement, she cannot be bound by the arbitration agreement in that contract. We are convinced however that, under well-recognized principles of agency law, nonsignatories to an agreement may in some circumstances be bound thereby. Consistent with this principle, it has been recognized that a nonsignatory can be bound by an agreement to arbitrate. A/S Custodia v. Lessin Int'l, Inc., 503 F.2d 318, 320 (2d Cir. 1974). Whether one is bound by an arbitration agreement that she did not sign depends on general principles of contract law, Fisser v. International Bank, 282 F.2d 231, 233 (2d Cir.1960), and ordinary agency law. A/S Custodia, 503 F.2d at 320. The district court's refusal to compel arbitration was based on its conclusion that Bear Stearns had failed to establish that Bullis was a partner in Silver Creek, in whose name the account was opened and the arbitration agreement was made. We do not find that circumstance to be dispositive. The issue is whether the Silver Creek managing partners were acting as her agents with power to bind her to arbitrate disputes over Bear Stearns' handling of funds or securities traded in the Silver Creek account. Agency is a contractual relationship. Andrew v. Farmers' Sav. Bank, 239 N.W. 551, 552 (Iowa 1931). The power of an agent to enter contracts on behalf of his principal may be express or implied. Reuter v. Middlebrook, 257 Iowa 158, 173, 131 N.W.2d 817, 820 (1964). In addition, the agent's power includes all powers necessarily implied from an express grant of power. Hall v. Crow, 240 Iowa 81, 90, 34 N.W.2d 195, 200 (1949). The partnership agreement signed by Bullis states that no agency relationship exists except as expressly provided herein. One of the express purposes of the Silver Creek partnership was to open an account at Bear Stearns funded with monies contributed to the Partnership by the Investors. The overarching purpose of the partnership was to make trades involving Bullis's investment. The account was opened. Bullis authorized Bear Stearns to transfer the balance of her personal account to the Silver Creek account. She authorized Foster and Sukowatey to make trades through that account. These facts establish, as a matter of law, that the Silver Creek partnership was acting as Bullis's agent when it opened the partnership account. Silver Creek was acting within the scope of its express authority both in signing the arbitration agreement and in making the trades. Consequently, Bullis is bound by the agreement to arbitrate disputes with Bear Stearns concerning the latter's handling of the Silver Creek account. No fact in the record leads to a contrary conclusion. The district court erred when it did not grant Bear Stearns' motion to stay the civil action and compel arbitration.