Iowa Supreme Court Upholds NGFA Arbitration Decision and Grain Contracting Practices
Date Posted: April 18, 2013
WashingtonIn a significant recent court decision, the Iowa Supreme Court upheld a National Grain and Feed Association (NGFA) arbitration decision and validated the common trade practice of confirming oral agreements with signed written contracts.
The case, Bartlett Grain Co. vs. Steven Sheeder, focused on whether there was an enforceable agreement to arbitrate if two parties agreed over the phone to a sale of grain, and later confirmed that agreement with a signed, written document containing an arbitration clause that was not part of the phone conversation.
The Iowa Supreme Court ruled that because the parties signed final, written confirmations – which contained the arbitration clauses – those documents constituted valid agreements to arbitrate.
That ruling reversed an Iowa district court’s decision with directions to confirm the arbitration award in favor of the grain seller.
NGFA Vice President and General Counsel Charlie Delacruz called the Iowa Supreme Court decision “a notable affirmation” of the integrity of the NGFA’s Arbitration System and widely used trade practices for buying and selling grain across the country.
“The NGFA Arbitration System has been in operation for more than 100 years,” Delacruz said.
“This decision reinforces our history of providing a fair and effective way to resolve disputes involving grain and feed transactions.”
Delacruz noted that NGFA over the years has facilitated the resolution of thousands of disputes through arbitration decisions, which when challenged in court have been upheld continually.
“As detailed in the Iowa Supreme Court’s decision, the courts in a number of cases from other jurisdictions consistently have upheld NGFA arbitration awards against allegations that the process is unconscionable, biased, or otherwise unfair,” he said.
The NGFA is comprised of 1,050 member companies that operate more than 7,000 facilities and handle more than 70 percent of the U.S. grain and oilseed crop.
NGFA membership encompasses all sectors of the trade, including country, terminal and export grain elevators; commercial feed and feed ingredient manufacturers; biofuels producers; cash grain and feed merchants; end-users of grain and grain products, including grain and oilseed processors, corn and flour millers, and livestock and poultry integrators; commodity futures brokers and commission merchants; and allied industries.
The NGFA also consists of 26 state and regional affiliates.
In 2010, Sheeder entered into eight oral agreements with Bartlett for the sale of 155,000 bushels of corn to be delivered at various future dates.
Following each of the oral agreements, Bartlett sent Sheeder a “Purchase Confirmation” for both parties to sign; which they did. The purchase confirmations referred to the “legally binding” nature of these agreements and Sheeder’s right to object to or disagree with any of the terms provided.
The purchase confirmations further provided that they were subject to the NGFA Trade Rules and that any disputes arising out of the agreements were to be resolved through NGFA arbitration.
In April 2011, based upon “reasonable grounds for insecurity” on whether Sheeder was likely to fulfill the contracts, Bartlett requested “adequate assurances of performance” from Sheeder, which Sheeder failed to provide.
Bartlett then filed an arbitration complaint with NGFA against Sheeder.
In October 2011, after Sheeder failed to reply to various notifications from NGFA to initiate the arbitration process, NGFA entered a default judgment for Bartlett.
In November, Bartlett filed an application with the Montgomery County (Iowa) District Court for confirmation of the arbitration. Sheeder argued that the arbitration provisions in the written confirmations were not enforceable because they were not included in the initial oral agreements.
The district court denied Bartlett’s application and concluded there was “no enforceable agreement between the parties to arbitrate” even though the parties had signed the agreements containing those arbitration provisions.
Bartlett filed an appeal, and both the NGFA and the Agribusiness Association of Iowa were permitted to join in the appeal as amicus curiae.
At stake was not only enforcement of the arbitration provision, but also the district court’s decision to discount how oral agreements for the purchase of grain are widely and commonly confirmed in writing, which had significant potential implications for the trade.
The Iowa Supreme Court reversed the district court and ordered confirmation of the arbitration award stating, “because the parties signed final, written documents that included arbitration clauses, we conclude valid agreements to arbitrate existed.”
For further information, contact:
• Heather McElrath, NGFA Director of Communications, 202-289-0873, ext. 111; email@example.com