Opinion ID: 1804173
Heading Depth: 1
Heading Rank: 4

Heading: Enforceability of Arbitration Provision.

Text: In discussing the enforceability of the arbitration provision contained in the parties' contracts, we first address the validity of the district court's rationale for denying Penn Life's motions to dismiss. Because we find that rationale unpersuasive, we will consider the alternative grounds asserted by the agents to avoid their agreements to arbitrate. First, the agents contend that Penn Life's commencement of these actions in court operates as a waiver of its right to arbitrate the agents' claims against the company. Secondly, they argue that the arbitration provision is unenforceable under Iowa Code section 679A.1, which provides that a written agreement to arbitrate is not valid when it is part of a contract of adhesion or a contract between an employer and an employee. See Iowa Code § 679A.1(2)( a ), ( b ). We turn now to the reasoning expressed in the court's rulings. A. Convenience of parties. The district court appears to have relied on principles of convenience and judicious use of the parties' resources in concluding that all claims involving the parties should be tried in one forum. We do not think such concerns can override the express agreement of contracting parties to arbitrate. Under Iowa statutory law, [a] provision in a written contract to submit to arbitration a future controversy arising between the parties is valid, enforceable, and irrevocable unless grounds exist at law or in equity for the revocation of the contract. Id. § 679A.1(2). The agents do not claim there is a basis to revoke the contracts. Therefore, unless the contracts fall within one of the statutory exceptions to section 679A.1(2), the arbitration provision contained in them is enforceable. There are three instances in which the statute validating arbitration agreements does not apply: (1) contracts of adhesion; (2) contracts between an employer and an employee; and (3) with an exception not pertinent here, tort claims. Id. § 679A.1(2)( a )-( c ). Noticeably absent from this list is a provision that allows a party to avoid arbitration where it is more convenient for the parties to litigate the claim in court rather than to arbitrate. Therefore, we do not think the court is at liberty to decline to enforce an arbitration clause because it would be too inconvenient and costly for the parties to arbitrate their dispute. This court addressed a similar concern in Wesley Retirement Services, Inc. v. Hansen Lind Meyer, Inc., 594 N.W.2d 22 (Iowa 1999). In that case, like the present case, only part of the dispute between the parties was subject to arbitration. Wesley Retirement, 594 N.W.2d at 24. Although the parties had included an arbitration provision in the written contract between them, we held that the tort claim asserted by the plaintiff was not subject to arbitration under section 679A.1(2)( c ). Id. at 26. On the other hand, we affirmed the trial court's order requiring that the plaintiff's contract claims be arbitrated in accordance with the parties' agreement. Id. at 31. We rejected the plaintiff's argument that requiring one claim to proceed by arbitration and allowing the other claims to remain in court warranted a different interpretation of the tort claim exception because such bifurcation of the parties' dispute would generate inefficiencies. Id. at 26. Recognizing that such inefficiencies may result, we noted that it was still within the power of the parties to minimize these inefficiencies by voluntarily agreeing to have all the claims heard in court or all claims determined in arbitration. Id. The same rationale applies here. While there may be inefficiencies in requiring arbitration of some of the claims involving these parties, but not others, that is the agreement made by the parties. Unless on remand the agents show that the arbitration provision is unenforceable under one of the statutory exceptions, the contracts should be applied as the parties agreed. In summary, we reject the reasoning of the district court that the mere inconvenience of the parties and the inefficiencies that result from using two forums to resolve their dispute provide a sufficient basis to refuse to enforce the arbitration arrangements they made in their contracts. We find distinguishable our opinion in County of Jefferson v. Barton-Douglas Contractors, Inc., 282 N.W.2d 155 (Iowa 1979), a case relied upon by the district court and the agents. In County of Jefferson, this court held that the agreement to arbitrate at issue in that case could not be enforced on a statutory basis. 282 N.W.2d at 157. Therefore, we applied the common law principle that an agreement to arbitrate is revocable at any time. Id. This court went on to state that even if the agreement were enforceable, the court would decline to enforce it because of the policy favoring the resolution of related causes in one forum at one time. Id. at 158. In contrast to the County of Jefferson case, the contracts at issue here are governed by chapter 679A and therefore are irrevocable and enforceable. This court is not at liberty to outweigh the expression of legislative intent in section 679A.1(2) with our own notion that it would be more efficient to litigate multiple disputes in a single forum. B. Waiver. The agents claim that Penn Life waived its right to arbitrate. The test for waiver of arbitration is twofold. It requires conduct or activity inconsistent with the right to arbitration and prejudice to the party claiming waiver. Wesley Retirement, 594 N.W.2d at 30. Ordinarily, waiver is a fact question for the court to decide. See id. In the present case, however, the matter can be resolved on the pleadings, as our discussion of this issue will show. The agents alleged in their resistances to Penn Life's motions to dismiss that the company had waived any claim to enforcement of [the contractual arbitration provision] by commencing the instant litigation. Penn Life asserts that its commencement of litigation cannot, as a matter of law, operate as a waiver under the circumstances of this case. We agree. The written contracts between the parties required that only claims involving certain parts of the contracts were subject to arbitration. As noted earlier, the claims made by Penn Life against the agents were not subject to the arbitration clause. Therefore, we do not think the company's filing of the present lawsuits was inconsistent with the right to arbitration. Id. Particularly in view of the principle that evidence of waiver must be compelling, id., Penn Life's action does not provide a basis for application of the waiver doctrine. Accordingly, Penn Life can rely on the arbitration provision in the parties' contracts, to the extent it is enforceable under chapter 679A. That brings us to the final issue raised by the agentsthe enforceability of the arbitration clause under section 679A.1(2). C. Statutory exceptions. As we stated above, under Iowa law an arbitration provision contained in a contract of adhesion or an employment contract is not enforceable. See Iowa Code § 679A.1(2)( a ), ( b ). The agents claim that the contracts they had with Penn Life qualify as both adhesion contracts and employment contracts. We first consider the agents' contention that the contracts were between an employer and an employee. 1. Contract between an employer and an employee. The applicability of section 679A.1(2)( b ) turns on whether the defendants were independent contractors or employees. The agreements between Penn Life and the agents state the agents are independent contractors, but the agents allege they were employees. Although the parties' intent is an important consideration in determining employment status, many factors bear on this issue. Iowa Mut. Ins. Co. v. McCarthy, 572 N.W.2d 537, 542-43 (Iowa 1997). More importantly, whether a person is an independent contractor or an employee is a factual determination based on the nature of the working relationship and many other circumstances, not necessarily on any label used to identify the parties in the contract. Harvey v. Care Initiatives, Inc., 634 N.W.2d 681, 684 n. 2 (Iowa 2001). Because a factual dispute exists, we cannot decide at the pleading stage whether the agreements between the parties are ones between an employer and an employee so as to render the arbitration provision unenforceable. 2. Adhesion contract. A contract of adhesion is described as one that is drafted unilaterally by the dominant party and then presented on a `take-it-or-leave-it' basis to the weaker party who has no real opportunity to bargain about its terms. Restatement (Second) of Conflict of Laws § 187 cmt. b, at 135 (Rev.1988); accord Hofmeyer v. Iowa Dist. Ct., 640 N.W.2d 225, 230 (Iowa 2001). We have before us nothing more than speculation as to whether the agreements between Penn Life and the defendants qualify as adhesion contracts. There is nothing in the pleadings that indicates who drafted the contracts or the circumstances under which they were signed. We conclude, therefore, that this issue cannot be resolved until a factual record has been developed.