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Claussen v. American Family Life Assurance Co.

United States District Court, D. South Dakota, Southern Division

October 15, 2018




         Pending before the Court is Defendant American Family Life Assurance Company's (AFLAC's) Motion to Compel Arbitration and Dismiss or Stay the Proceedings, Doc. 12, filed August 20, 2018. Plaintiff has not responded.

         Plaintiff Nancy Claussen is a former independent contractor, referred to as an "associate," with AFLAC, who entered into an Associate's Agreement with AFLAC (Agreement) in January 2003 to work as an AFLAC sales associate. On July 25, 2018, Plaintiff filed the instant complaint alleging one count of breach of contract and one count of "bad faith," with the latter including allegations of tortious interference, breach of the duty of good faith and fair dealing, and fraud and deceit. Plaintiff asserts that Plaintiff had an ongoing disagreement with her Supervisor which ultimately resulted in Plaintiff terminating her work with AFLAC. Plaintiff states that, contrary to their agreement and to company custom, Defendant ended her renewal premiums. Plaintiff also claims that her former Supervisor is interfering with her ability to work for AFLAC in a different territory. Defendant moves to compel arbitration and dismiss or stay the proceedings, arguing that this dispute falls within the scope of the Agreement's arbitration provision., STANDARD OF REVIEW

         The Federal Arbitration Act does not identify what evidentiary standard a party seeking to avoid arbitration must meet. Neb. Mack Co. v. Cargotec Solutions, LLC, 762 F.3d 737, 741-42 (8th Cir. 2014); see also Henry Techs. Holdings, LLC v. Giordano, 2014 WL 3845870, at *3 (W.D. Wis. Aug. 5, 2014) ("The FAA does not define a standard for a district court's determination of a motion to compel arbitration[.]"). Courts that have addressed the issue have used a summary judgment standard. Id.; see also Schwalm v. TCF Nat'l Bank, 226 F.Supp.3d 937, 940 (D.S.D. 2016); Technetronics, Inc. v. Leybold-Graeus GmbH, 1993 WL 197028, at *2 (E.D. Pa. June 9, 1993) ("[I]n a motion to stay proceedings and/or compel arbitration, the appropriate standard of review for the district court is the same standard used in resolving summary judgment motions pursuant to [Federal Rule of Civil Procedure] 56(c)."). Therefore, the court may consider all evidence in the record, viewing that evidence in the light most favorable to the non-moving party. Id.; see also Lee v. Credit Acceptance Corp., 2015 WL 717637, at *1 (W.D. Wis. Nov. 12, 2015).



         Both state and federal governments have strong policies favoring arbitration. See Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 89-90 (2000); Rossi Fine Jewelers, Inc. v. Gunderson, 648 N.W.2d 812, 814 (S.D. 2002) ("We have consistently favored the resolution of disputes by arbitration.") Questions of arbitration are governed by the Federal Arbitration Act (or "FAA"), 9 U.S.C. § 1 et seq. The FAA was enacted to "reverse the longstanding judicial hostility to arbitration agreements" and treat arbitration agreements like any other contract. Green Tree, 531 U.S.at89. South Dakota has adopted the Uniform Arbitration Act. See SD.C.L. 21-25A-1, which provides:

A written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract. This chapter also applies to arbitration agreements between employers and employees or between their respective representatives.

S.D.C.L. § 21-25A-1.

         In general, the FAA "provides that written agreements to arbitrate controversies arising out of an existing contract 'shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.'" Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985) (quoting 9 U.S.C. § 2). The FAA "mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed." Id. (citing 9 U.S.C. §§ 3, 4). The "court's role under the FAA is therefore limited to determining (1) whether a valid agreement to arbitration exists and, if it does (2) whether the agreement encompasses the dispute. Pro Tech Indus., Inc. v. URS Corp., 377 F.3d 868, 871 (8th Cir. 2004).

         Whether there is a binding arbitration agreement is "an issue for judicial determination unless the parties clearly and unmistakably provide otherwise." Howsam v. Dean Witter Reynolds, Inc. , 537 U.S. 79, 83 (2002) (quoting AT&T Tech., Inc. v. Commc'ns Workers, 475 U.S. 643, 649 (1986)). In examining whether the parties agreed to arbitrate, courts must ordinarily apply "state-law principles that govern the formation of contracts." First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). In applying state law, however, "due regard must be given to the federal policy favoring arbitration, and ambiguities as to the scope of the arbitration clause itself must be resolved in favor of arbitration." Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Jr. Univ., 489 U.S. 468, 475-76 (1989).

         In the present case, the question whether the parties formed a valid agreement to arbitrate is governed by the contract law of South Dakota.[1] South Dakota courts apply ordinary contract principles to arbitration agreements. Masteller v. Champion Home Builders, Co., 723 N.W.2d 561, 564 (S.D. 2006). The required elements to form a valid contract in South Dakota are (1) parties capable of contracting; (2) their consent; (3) a lawful purpose; and (4) sufficient consideration. 'Setliff v. Akins, 616 N.W.2d 878 (S.D. 2000) (citing S.D.C.L. § 53-1-2).

In determining whether claims come within the scope of an arbitration provision, the district court does not reach the potential merits of any claim but construes the clause liberally, resolving any doubts in favor of arbitration and granting the motion unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.

3M Co. v. Amtex Sec, Inc., 542 F.3d 1193, 1199 (8th Cir. 2008) (internal citations omitted). The employment agreement contains a broad arbitration clause that applies to "any dispute arising under or related in any way to this Agreement ("Dispute"), to the maximum extent allowed under the Federal Arbitration Act ("FAA")." See Agreement at ¶ 10.1. "Disputes" are defined by the Agreement to include "any dispute arising under or relating in any way to this Agreement." Id. Specifically, the provision includes "any Dispute arising under federal, state or local laws, statutes or ordinances (for example, statutes prohibiting anti-competitive conduct, unfair business practices and discrimination or harassment...) or arising under federal or ...

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