2009 WI App 167
court of appeals of
published opinion
Case No.: |
2008AP3071 |
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Complete Title of Case: |
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Alan Cirilli, Brian Carlson, Christina Johnson and John Shepperd,
Plaintiffs-Respondents, v. Country Insurance & Financial Services, Country Life Insurance Company, Country Investors Life Assurance Company, Country Mutual Insurance Company, Country Casualty Insurance Company, Country Preferred Insurance Company, Mutual Service Life Insurance Company, Mutual Service Casualty Insurance Company, Modern Service Insurance Company and MSI Preferred Insurance Company,
Defendants-Appellants. |
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Opinion Filed: |
October 28, 2009 |
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Submitted on Briefs: |
May 29, 2009 |
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JUDGES: |
Brown, C.J., Neubauer, P.J., and Anderson, J. |
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Concurred: |
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Dissented: |
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Appellant |
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ATTORNEYS: |
On behalf of the defendants-appellants, the cause was
submitted on the briefs of Todd G. Smith and Hamilton E. Arendsen of |
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Respondent |
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ATTORNEYS: |
On behalf of the plaintiffs-respondents, the cause was
submitted on the brief of James W. Hammes of Cramer, Multhauf & Hammes, LLP, |
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2009 WI App 167
COURT OF APPEALS DECISION DATED AND FILED October 28, 2009 David
R. Schanker Clerk of Court of Appeals |
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NOTICE |
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This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports. A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See Wis. Stat. § 808.10 and Rule 809.62. |
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Appeal No. |
2008AP3071 |
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STATE OF |
IN COURT OF APPEALS |
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Alan Cirilli, Brian Carlson, Christina Johnson and John Shepperd,
Plaintiffs-Respondents, v. Country Insurance & Financial Services, Country Life Insurance Company, Country Investors Life Assurance Company, Country Mutual Insurance Company, Country Casualty Insurance Company, Country Preferred Insurance Company, Mutual Service Life Insurance Company, Mutual Service Casualty Insurance Company, Modern Service Insurance Company and MSI Preferred Insurance Company,
Defendants-Appellants. |
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APPEAL
from an order of the circuit court for
Before
Brown, C.J., Neubauer, P.J. and
¶1 NEUBAUER, P.J.
Country Insurance & Financial Services appeals from a circuit court
order denying its motion to compel arbitration of a complaint brought by its
former agents. The former agents allege that
Country breached their Agent’s Agreement by refusing to pay them termination
commissions. The Agent’s Agreement
contains a mandatory arbitration provision applicable to any claim or
controversy relating to or arising out of the agency relationship with Country,
the Agent’s Agreement or termination of the Agent’s Agreement. The agents contend that the arbitration
provision is inapplicable because, in a separate settlement agreement and
release, Country released any claims or defenses it could assert as
justification for refusing to pay the termination commissions due to them under
their Agent’s Agreements. The trial
court agreed and found that the release, which does not contain an arbitration
clause, governs this dispute and effectively supersedes the Agent’s Agreement’s
mandatory arbitration clause. We
disagree. Because the former agents’
complaint seeks payment of commissions under the Agent’s Agreement, this
dispute falls squarely within that agreement’s mandatory arbitration clause. Whether Country released any claim or defense
to the agents’ claims for commissions requires an analysis of the merits of the
dispute, resolution of which is to be considered exclusively in arbitration. We reverse and remand with an order to compel
arbitration.
BACKGROUND
¶2 On July 18, 2007, Alan Cirilli, Brian Carlson, Christina
Johnson, and John Shepperd (the “Cirilli Plaintiffs”) filed a complaint in the
¶3 On September 28, 2007, Country filed a motion to compel arbitration (or in the alternative, to dismiss the complaint) pursuant to Wis. Stat. § 788.02 (2007-08).[1] Country requested the action be stayed and arbitration compelled in accordance with the terms of the Cirilli Plaintiffs’ Agent’s Agreements upon which their claims to commissions are based. Country maintains this dispute comes squarely within the plain and unambiguous language of the mandatory arbitration clause contained in each of the four Agent’s Agreements signed by the plaintiffs and Country. The arbitration clause contained in the Agent’s Agreement reads as follows:
[A]ny claim or controversy relating to or arising out of the relationship between the Agent and the Companies, this Agreement (and/or any agreement superseded by this Agreement), or the termination of this Agreement, whether the parties’ rights and remedies are governed or created by contract law, tort law, common law or otherwise, or by federal, state or local statute, legislation, rule or regulations, shall be resolved exclusively by binding arbitration in Bloomington, Illinois (unless otherwise provided by law), by one arbitrator selected by the Companies and the Agent, all in accordance with the commercial arbitration rules of the American Arbitration Association then in effect. Judgment upon any arbitration award lawfully rendered may be entered and enforced in any court having jurisdiction. Any claim governed by this arbitration clause must be brought within one year of the events giving rise to the claim or controversy by serving on the other party within such time a written request for arbitration stating the grounds for the claim and the relief requested. (Emphasis added.)
¶4 The Cirilli Plaintiffs opposed the motion to compel
arbitration based on conclusions reached in two prior lawsuits. The Cirilli Plaintiffs asserted that Country’s
refusal to pay the disputed termination commissions constituted a breach of
their contract rights under the Settlement Agreement and Release executed by
Country and Couri in settlement of lawsuits in Minnesota, and as adjudicated in
a final judgment of the circuit court of Waukesha county, Wisconsin, in
litigation brought by the Reis Plaintiffs, as discussed below. The relevant background of the
The
¶5 Beginning on or about April 6, 2006, Country filed complaints
against seven former Country agents, as well as Couri, in various counties in
Couri shall,
within 10 days after the execution of this Agreement, pay to Country the sum of
$75,000.00, which sum shall be consideration for the execution of this
Agreement. Couri, as of the date hereof
by execution of this Agreement, releases and forever discharges all claims,
causes of action, defenses, offsets, or counterclaims, whether known or
unknown, which it has, or may have, against Country relative to any cause of
action arising out of the kinds of allegations referenced in the lawsuits. Country,
as of the date hereof by execution of this Agreement, releases and forever
discharges all claims, causes of action, defenses, offsets, or counterclaims,
whether known or unknown, which it has, or may have, against Couri, and all
former Country agents who have terminated an agency relationship with Country
and have entered into a business arrangement or agreement with Couri under the
same, or substantially the same, business arrangement or agreement with Couri
under the same, or substantially the same, business arrangement as between
Couri and the individual Defendants which gave rise to this litigation. (Emphasis added.)
The Reis
Litigation
¶6 On April 5, 2006, prior to the filing of the
¶7 Following the signing of the Settlement Agreement and Release
in the
The Cirilli
Proceeding
¶8 On November 5, 2007, a hearing was held with regard to
Country’s motion to compel the arbitration in this matter. After oral argument, the trial court denied
Country’s motion to compel arbitration.
The trial court determined that (1) the Cirilli Plaintiffs were
substantially the same as those individual defendants in the
DISCUSSION
¶9 Country challenges the circuit court order denying its motion to compel arbitration under the Wisconsin Arbitration Act. Country asserts that the trial court erred in ruling that Country’s right to enforce the mandatory arbitration clause in the Agent’s Agreement was superseded by the execution of the Settlement Agreement and Release, which does not contain an arbitration clause. Country contends that the circuit court erred by considering the merits of the case. Country seeks reversal of the circuit court’s order denying Country’s motion to compel arbitration and remand for entry of an order to compel arbitration.
Applicable Law
¶10 At the outset, we note that the Cirilli Plaintiffs do not
challenge the validity of the Agent’s Agreement or its arbitration clause. Thus, at issue in this appeal is solely
whether the plaintiffs’ claims fall within the mandatory arbitration provision
of the Agent’s Agreement, which applies to any claim or controversy relating to
or arising out of the agency relationship, the agreement or termination of the
agreement. Country’s motion to compel
arbitration involves issues of contract interpretation and a determination of
substantive arbitrability, questions of law we review de novo. See Joint
School Dist. No. 10, City of Jefferson v. Jefferson Ed. Ass’n, 78
¶11 The Wisconsin Arbitration Act provides in relevant part:
If any suit or proceeding be brought upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.
Wis. Stat. § 788.02. The Wisconsin Arbitration Act embodies this state’s clearly established public policy to enforce agreements to arbitrate. See Wisconsin Auto Title Loans, Inc. v. Jones, 2006 WI 53, ¶28 & n.13, 290 Wis. 2d 514, 714 N.W.2d 155.
¶12 As guidance in determining the court’s function in arbitration
disputes,
¶13 In deciding whether the parties have agreed to submit a dispute
to arbitration, the court is not to rule on the potential merits of the
underlying claim. See Kimberly, 222
¶14 There is a strong presumption of arbitrability where the
contract in question contains an arbitration clause. See Kimberly, 222
The Plaintiffs’ Claims
for Termination Commissions Fall Within the Broad Mandatory Arbitration Clause Contained in the
Agent’s Agreement.
¶15 Here, the mandatory arbitration provision contained in the Agent’s Agreement provides that “any claim or controversy relating to or arising out of the relationship between the Agent and the Companies, this Agreement … or the termination of this Agreement … shall be resolved exclusively by binding arbitration.” In the complaint, the plaintiffs seek termination commissions under the terms of the agency contract. They allege that Country has refused to pay the commissions based on alleged violations of the postemployment noncompetition clause in that agent contract. Their prayer for relief seeks a judgment ordering Country to pay them the commissions under the terms of the contract between each of them and Country. While they do not specifically identify the Agent’s Agreement, the plaintiffs’ allegations and prayer for relief seek recovery of the termination commissions under the terms of the contract between each plaintiff and Country.[6]
¶16 We conclude that the Cirilli Plaintiffs’ complaint falls squarely within the plain language of the mandatory arbitration clause of the Agent’s Agreement. The Cirilli Plaintiffs’ claim for the disputed termination commissions relate to and arise out of the relationship between the Cirilli Plaintiffs and Country, the Agent’s Agreement and the termination of the Agent’s Agreement. Further, a review of the Agent’s Agreement reveals no other contract provision that specifically excludes arbitration of a dispute over termination commissions. The dispute is therefore arbitrable.
¶17 The release in the Settlement Agreement and Release does not
compel an opposite conclusion. Any
determination that the Settlement Agreement and Release releases Country’s
claims or defenses is a determination on the merits. As noted above, it is well established that
when determining arbitrability the court must not rule on the potential merits
of the underlying claim. See Kimberly,
222
¶18 Similarly, the Cirilli Plaintiffs’ attempt to avail themselves of issue preclusion, based on the prior Reis litigation judgment, is not properly before the court on Country’s motion to compel arbitration. The Reis litigation judgment incorporates the arbitrator’s finding that the release, by its express terms, released all claims, causes of action, defenses, offsets, or counterclaims which Country asserted as a basis for refusing to pay the former agents the termination commissions. The Cirilli Plaintiffs do not contend that the prior judgment bars their claim under the Agent’s Agreement, nor would they. Rather, they argue that issue preclusion bars Country from raising counterclaims or defenses to their claims for commissions. Evaluating the collateral estoppel effect of the prior judgment does not challenge the validity of the arbitration clause or call into question whether this dispute falls within the scope of the arbitration clause. Therefore, the effect of the prior judgment on this dispute is an issue to be decided by an arbitrator. See Zurich Am. Ins. Co. v. Watts Indus., Inc., 415 F.Supp.2d 887, 890 (N.D. Ill. 2006), aff’d, 466 F.3d 577 (7th Cir. 2006) (preclusion issues are to be decided by an arbitrator); see also, Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002) (the presumption is that the arbitrator should decide allegations of waiver, delay, or a like defense to arbitrability.) Once the trial court determined the suit was brought on an issue referable to arbitration under the arbitration provision of the Agent’s Agreement, it should have inquired no further into questions not properly before the court and granted Country’s motion to compel arbitration.[7]
CONCLUSION
¶19 In sum, the Cirilli Plaintiffs’ claim for the payment of disputed termination commissions under the Agent’s Agreement is arbitrable under the agreement’s mandatory arbitration clause. We reverse and remand with an order to compel arbitration.
By the Court.—Order reversed and cause remanded with directions.
[1] All references to the Wisconsin Statutes are to the 2007-08 version unless otherwise noted.
[2] The trial court found that, at the time the Settlement Agreement and Release was executed in the Minnesota litigation, the Cirilli Plaintiffs were former Country agents who had terminated their agency relationship with Country and entered into a business arrangement or agreement with Couri under the same or substantially the same business arrangement as between Couri and the individual former Country agents/defendants which gave rise to the Minnesota litigation.
[3] At the hearing on Country’s motion to compel arbitration, the trial court framed the issue as whether there is a global settlement that “trumps” the underlying agreement—the Agent’s Agreement. While the court had previously stated it would deny the motion to compel arbitration (having already determined that there was a global settlement that trumped the underlying Agent’s Agreement), the court acknowledged that if the global agreement did not “trump” the underlying Agent’s Agreement the dispute would be back to arbitration.
[4]
Country also appealed the circuit court’s grant of summary judgment in favor of
the plaintiffs, contending that there are material disputes of fact regarding
the scope of the release executed in the
[5] The
Steelworkers
Trilogy consists of United Steelworkers v. American Mfg. Co.,
363 U.S. 564 (1960); United Steelworkers v. Warrior & Gulf
Navigation Co., 363 U.S. 574 (1960); United Steelworkers v. Enterprise
Wheel & Car Corp., 363 U.S. 593 (1960).
While the Steelworkers Trilogy involved
collective bargaining disputes, the general principles have been applied by
[6]
While the Cirilli Plaintiffs maintain their right to the disputed termination
commissions also arises from the Settlement Agreement and Release attached to
their complaint, we are unconvinced. The
Settlement Agreement and Release was executed between Country Insurance and the
plaintiffs in the
[7]
We note that our conclusion is in accord with a recent federal court order
granting a motion to compel arbitration of a separate suit brought against
Country for post-termination commissions by a former Country agent. In Nelson v. Country Ins. & Fin. Servs. et
al.
(08-C-1041) (E.D. Wis. Feb. 20, 2009), the plaintiff, Nelson, also argued that
his claim arose from the Settlement Agreement and Release executed by Country in
the Minnesota litigation and that, by virtue of that agreement, Country waived
any defenses it had to his claim.