                 IN THE SUPREME COURT OF THE STATE OF IDAHO

                                        Docket No. 36245

TIFANI WATTENBARGER AND JARED           )
WATTENBARGER, a married couple,         )
                                        )
    Plaintiffs-Appellants,              )                  Boise, May 2010 Term
                                        )
v.                                      )                  2010 Opinion No. 69
                                        )
A.G. EDWARDS & SONS, INC., a Missouri )                    Filed: June 28, 2010
corporation; and GENE GILLETTE, an      )
individual,                             )                  Stephen W. Kenyon, Clerk
                                        )
    Defendants-Respondents.             )
_______________________________________ )

       Appeal from the District Court of the Seventh Judicial District of the State of
       Idaho, Bonneville County. Honorable Gregory S. Anderson, District Judge.

       The order of the district court is affirmed.

       Beard St. Clair Gaffney McNamara Calder, P.A., Idaho Falls, for appellants.
       Michael D. Gaffney argued.

       Hawley Troxell Ennis & Hawley, LLP, Pocatello, for respondents. Howard D.
       Burnett argued.
                             ________________________

J. JONES, Justice.

       Jared and Tifani Wattenbarger appeal the district court‘s order dismissing their case,
compelling arbitration, and awarding attorney fees and costs to A.G. Edwards & Sons, Inc. and
Gene Gillette (the respondents). We affirm.
                                              I.
                                 Facts and Procedural History
       Tifani first sought financial planning services from A.G. Edwards in March of 1993 when
she and her then husband, Shan Clement, met with Gillette to open individual retirement
accounts (IRAs). On March 31, 1993, Tifani signed a new account card that contained the
following provision above the signature line:
               I hereby adopt the A.G. Edwards and Sons, Inc. Custodian Account
       Agreement; provided, that the Custodial Account Agreement shall be in force if
       and only if this Adoption Agreement is accepted below.
       ....
               By signing this agreement, I acknowledge that this agreement contains a
       binding and enforceable arbitration provision on page 21 in paragraph 13 of
       Article XII of the Custodial Account Agreement.

Article XII of the custodial account agreement provides, in part:
              (12) The following disclosure is required by various regulatory bodies
       but shall not limit the applicability of the following arbitration provision to any
       controversy claim or issue in any controversy or claim which may arise between
       the Depositor and the Custodian:

               (a) ARBITRATION IS FINAL AND BINDING ON THE PARTIES.

               (b) THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK
               REMEDIES IN COURT, INCLUDING THE RIGHT TO JURY TRIAL.

               (c) PRE-ARBITRATION DISCOVERY IS GENERALLY MORE
               LIMITED     THAN   AND   DIFFERENT  FROM   COURT
               PROCEEDINGS.

               (d) THE ARBITRATORS’ AWARD IS NOT REQUIRED TO
               INCLUDE FACTUAL FINDINGS OR LEGAL REASONING AND
               ANY PARTY’S RIGHT TO APPEAL OR TO SEEK MODIFICATION
               OF RULINGS BY THE ARBITRATORS IS STRICTLY LIMITED.

               (e) THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A
               MINORITY OF ARBITRATORS WHO WERE OR ARE AFFILIATED
               WITH THE SECURITIES INDUSTRY.

              (13) The Depositor agrees and, by carrying any account for the
       Depositor, the Custodian agrees that all controversies between the Depositor
       and the Custodian or any of the Custodian’s present or former officers,
       directors, agents or employees which may arise for any cause whatsoever,
       shall be determined by arbitration. Any arbitration under this agreement
       shall be before the National Association of Securities Dealers, Inc., or the
       New York Stock Exchange, Incorporated, or an arbitration facility provided
       by any other securities exchange of which the Custodian is a member, or the
       American Arbitration Association, or the Municipal Securities Rulemaking
       Board, and in accordance with the rules obtaining of such organization. The
       Depositor may elect in the first instance whether arbitration shall be before
       and in accordance with the rules of one of the aforementioned arbitration
       forums by registered letter or telegram addressed to the Custodian at the
       Custodian’s office in St. Louis, Missouri. If the Depositor fails to notify the

                                                2
       Custodian of such election as specified within five (5) days after receipt from
       the Custodian of a request to make such election, then the Custodian may
       make such election.

       At least one of the arbitrators appointed to hear any controversy to be settled by
       arbitration shall be currently employed full time by a member organization of the
       New York Stock Exchange, Inc., unless otherwise agreed in writing prior to the
       time of the arbitration.

       This arbitration provision shall apply to any controversy or claim or issue in any
       controversy arising from events which occurred prior, on or subsequent to the
       execution of this arbitration agreement. This arbitration provision shall be
       interpreted according to federal law and the Federal Arbitration Act. The award of
       the arbitrators, or of the majority of them, shall be final, and judgment upon the
       award rendered may be entered into any court, state or federal, having
       jurisdiction.

       In September of 1994, Shan Clement was killed in an accident and Tifani collected a
$200,000 life insurance policy. Tifani met with Gillette in March of 1995 for advice on investing
the life insurance proceeds. Specifically, Tifani alleged that she sought advice on investment
growth accounts to provide for the future college and mission expenses for her two children,
Mitchell and Kylie. Gillette invested $15,000 for each child in annuity accounts that cannot be
withdrawn, without severe penalties, until the children reach 59½ years of age. Gillette opened
another, similar annuity account for each child in the amount of $4,000 in September of 1995.
       Tifani married Jared Wattenbarger in December of 1999. Gillette‘s alleged error was
discovered by the Wattenbargers in January of 2007 when they met with Jared‘s investment
advisor to discuss the children‘s impending educational expenses. The Wattenbargers filed suit
against the respondents on December 20, 2007, alleging professional negligence/malpractice and
fraud. The respondents appeared and moved to stay the matter and compel arbitration on the
basis of the custodial account agreement or, in the alternative, to dismiss the claim. The
Wattenbargers argued that the matter should proceed in district court because the annuities were
outside the scope of the arbitration clause and, even if they were not, the arbitration clause was
unconscionable.
       The district court found that the arbitration clause was not unconscionable and that the
dispute between the parties fell within the scope of the arbitration provision. Consequently, the
district court granted the motion to dismiss and awarded attorney fees and costs to the
respondents. The Wattenbargers appealed to this Court, arguing that the district court erred in:

                                                3
(1) applying the wrong standard of review to the motion to dismiss; (2) finding that the
Wattenbargers agreed to arbitrate their claims against the respondents as a matter of law; (3)
finding that the Wattenbargers‘ claims were within the scope of the arbitration agreement; (4)
finding that the arbitration clause was not unconscionable; and (5) awarding costs and attorney
fees to the respondents.
                                                II.
                                        Issues on Appeal
       The following issues are presented on appeal: (1) whether this matter is governed by
federal arbitration law; (2) whether arbitrability can be determined as a matter of law; (3)
whether the tort claims fall within the scope of the arbitration agreement; (4) whether the
Wattenbargers are bound by the arbitration agreement; (5) whether the arbitration clause is
unconscionable; (6) whether the district court should have awarded attorney fees to the
respondents; and (7) whether the respondents are entitled to an award of attorney fees on appeal.
                                                III.
                                               A.
                                       Standard of Review
       The district court dismissed the claims presented in this case on the respondents‘ Motion
to Dismiss or, in the Alternative, to Stay and Compel Arbitration. ―Arbitrability is a question of
law to be decided by the court.‖ Mason v. State Farm Mut. Auto. Ins. Co., 145 Idaho 197, 200,
177 P.3d 944, 947 (2007). Accordingly, we exercise free review over questions of arbitrability
and may draw our own conclusions from the evidence presented. Id. ―A court reviewing an
arbitration clause will order arbitration unless ‗it may be said with positive assurance that the
arbitration clause is not susceptible of an interpretation that covers the asserted dispute.‘ Doubts
are to be ‗resolved in favor of coverage.‘‖ Storey Constr., Inc. v. Hanks, 148 Idaho 401, 412, 224
P.3d 468, 479 (2009) (quoting Int’l Assoc. of Firemen, Local No. 672 v. City of Boise, 136 Idaho
162, 168, 30 P.3d 940, 946 (2001)).
       Determining the scope of an arbitration clause is a question of contractual interpretation.
In determining the meaning of a contract, ―[w]hen the language of a contract is clear and
unambiguous,‖ its meaning and legal effect are questions of law over which we exercise free
review. Lamprecht v. Jordan, LLC, 139 Idaho 182, 185, 75 P.3d 743, 746 (2003). ―A contract is
ambiguous if it is reasonably subject to conflicting interpretations,‖ which will render
interpretation of the contract a question of fact. Id. at 185–86, 75 P.3d at 746–47. The relevant

                                                 4
inquiry in determining whether a contract is ambiguous is the meaning intended by the parties at
the time of contracting, not at some future time. Id. at 185, 75 P.3d at 746.
        When reviewing the district court‘s findings on unconscionability, we must accept the
factual findings as true if supported by substantial and competent evidence. Lovey v. Regence
Blueshield of Idaho, 139 Idaho 37, 41, 72 P.3d 877, 881 (2003). The determination of whether a
contractual provision is unconscionable under the facts as found is a question of law over which
this Court exercises free review. Id.
                                                    B.
                                               Governing Law
        There is a dispute between the parties about which law governs the interpretation of the
arbitration agreement and which law governs the contract as a whole. The Wattenbargers argue
that the Federal Arbitration Act (FAA) applies and, under the act, an arbitration clause is only
applicable to claims arising from the contract in which it is contained. Traditionally, the FAA
applies in all cases in which the underlying transaction affects interstate commerce. Moore v.
Omnicare, Inc., 141 Idaho 809, 815, 118 P.3d 141, 147 (2005) (citing 9 U.S.C. § 2 (2003)).
However, where the parties have explicitly agreed to the application of Idaho‘s Uniform
Arbitration Act (UAA), it will govern ―as the substantive law in arbitration.‖ Id. In this case,
there is no agreement between the parties that the UAA should apply and, in fact, they explicitly
agreed that the FAA should apply to the agreement. Accordingly, the FAA applies to all
substantive issues concerning arbitration because of the parties‘ agreement and because the sale
of securities, such as IRAs and annuities, is a transaction in interstate commerce. See Reece v.
U.S. Bancorp Piper Jaffray, Inc., 139 Idaho 487, 490, 80 P.3d 1088, 1091 (2003) (―Despite the
parties and activities residing primarily within the same state, securities transactions still involve
interstate commerce.‖).1
        The Wattenbargers contend that because the FAA applies, the district court erred in
granting the respondents‘ motion to dismiss based on section 2 of the FAA and the Sixth Circuit
Court of Appeals‘ decision in Glazer v. Lehman Bros., 394 F.3d 444 (6th Cir. 2005). Section 2 of
the FAA provides:



1
  This Court has also noted that the distinction between state and federal substantive arbitration law is largely a
distinction without a difference, and has often applied the UAA even in the face of an agreement to apply the FAA
because the applicable legal principles are one and the same. Mason, 145 Idaho at 200 n.1, 177 P.3d at 947 n.1.

                                                        5
         A written provision in any . . . contract evidencing a transaction involving
         commerce to settle by arbitration a controversy thereafter arising out of such
         contract or transaction, or the refusal to perform the whole or any part thereof, or
         an agreement in writing to submit to arbitration an existing controversy arising
         out of such a contract, transaction, or refusal, shall be valid, irrevocable, and
         enforceable, save upon such grounds as exist at law or in equity for the revocation
         of any contract.

9 U.S.C. § 2. The court in Glazer, in turn, held that an arbitration provision is not a separate
contract from the contract in which it is contained and an arbitration provision is only separable
in the sense that its validity may be considered separately from the validity of the contract as a
whole. 394 F.3d at 453–54.
         The Wattenbargers somehow contend that Glazer and section 2 of the FAA, taken
together, require an arbitration clause to be contained in the agreement out of which the dispute
arises. We are unable to reach this conclusion based on the authority presented. The Glazer
court, while holding that an arbitration provision contained in a contract is not a separate and
distinct contract, in no way indicated that an arbitration provision contained in one agreement
cannot apply to a dispute arising from another.2 Furthermore, while the language of section 2
provides that an agreement to arbitrate claims arising out of a contract involving commerce is
valid and enforceable, section 2 does not provide that the parties cannot enter into an agreement
to arbitrate all future claims between them, including those arising from subsequent transactions
or contracts. Accordingly, the Wattenbargers‘ arguments based on the application of the FAA are
without merit.
         All other issues raised by the Wattenbargers deal with the validity and scope of the
contract itself and require the interpretation of contractual terms. Issues of substantive law
concerning the interpretation of a contract and defenses to enforcement of a contract are matters
of state law. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995) (―When
deciding whether the parties agreed to arbitrate a certain matter . . . courts generally . . . should


2
  The Wattenbargers also cite Battaglia v. McKendry, 233 F.2d 720 (3d Cir. 2000), and Alticor, Inc. v. National
Union Fire Insurance Co., 411 F.3d 669 (6th Cir. 2005), in support of their argument that federal law requires a
claim that is subject to arbitration to arise out of the agreement in which the arbitration clause is contained.
However, the arbitration provision at issue in both of those cases contained language limiting arbitration to claims
arising out of those agreements, and the courts in no way indicated that their limited reading of the arbitration clause
was based on section 2 of the FAA or the Glazer rationale. Alticor, Inc., 411 F.3d at 670; Battaglia, 233 F.3d at 723.
As discussed below, the language of the arbitration provision at issue in this case is much broader. Accordingly, we
do not find Battaglia and Alticor, Inc. persuasive.

                                                           6
apply ordinary state-law principles that govern the formation of contracts.‖). Thus, state law will
apply to all other issues presented in this matter.
                                              C.
                       Determination of Arbitrability as a Matter of Law
       The Wattenbargers argue that the district court failed to properly apply the summary
judgment standard to the respondents‘ motion to dismiss and, as a result, improperly dismissed
the matter because the case could not be dismissed as a matter of law. The Wattenbargers
contend that they raised several factual questions that must be resolved in their favor and against
arbitrability of their claims. The respondents argue that even if the district court was required to
convert the motion to dismiss into a motion for summary judgment and failed to do so, that
failure did not constitute reversible error because the standard of review is the same.
       The respondents‘ motion should have been treated as one for summary judgment. Despite
the fact that the respondents captioned their motion as one to dismiss or compel arbitration, the
dismissal motion, in essence, is also a motion to compel arbitration. This Court treats mislabeled
claims according to their substance in civil cases. Carroll v. MBNA America Bank, N.A., 148
Idaho 261, 268, 220 P.3d 1080, 1087 (2009). Accordingly, any relief resulting from the
respondents‘ motion should have been treated as a decision on a motion to compel arbitration.
When ruling on a motion to compel arbitration, the district court applies the same standard as if
ruling on a motion for summary judgment. See, e.g., Kaneff v. Delaware Title Loans, Inc., 587
F.3d 616, 620 (3d Cir. 2009) (―A district court decides a motion to compel arbitration under the
same standard it applies to a motion for summary judgment. . . . On appeal, a ‗question
concerning the applicability and scope of an arbitration agreement‘ is subject to de novo review.‖
(quoting Harris v. Green Tree Fin. Corp., 183 F.3d 173, 176 (3d Cir. 1999))); Cox v. Ocean
View Hotel Corp., 533 F.3d 1114, 1119 (9th Cir. 2008); Tenn. Health Mgm’t, Inc. v. Johnson,
No. 1080762, 2010 WL 1424018, at *4 (Ala. April 9, 2010) (―A motion to compel arbitration is
analogous to a motion for summary judgment.‖). This is because issues of arbitrability are
questions of law. Mason, 145 Idaho at 200, 177 P.3d at 947. As a result, this Court is free to
draw its own conclusions from the evidence presented concerning arbitrability. Id. Accordingly,
when determining arbitrability, the court may consider all evidence before it and determine
whether the controversy is arbitrable as a matter of law.




                                                  7
       When reviewing the grant of a motion for summary judgment, we apply the same
standard used by the district court in ruling on the motion. Van v. Portneuf Med. Ctr., 147 Idaho
552, 556, 212 P.3d 982, 986 (2009). ―Summary judgment is properly granted when ‗the
pleadings, depositions, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the moving party is entitled to judgment
as a matter of law.‖‘ Id. (quoting Idaho R. Civ. P. 56(c)). We must construe the record in favor of
the nonmoving party, drawing all reasonable inferences in that party‘s favor. Id. If we find that
reasonable minds could differ on conclusions drawn from the evidence presented, the motion
must be denied. Id. The burden of demonstrating the absence of a genuine issue of material fact
is on the moving party. Id.
       If the moving party has demonstrated the absence of a question of material fact, the
burden shifts to the nonmoving party to demonstrate an issue of material fact that will preclude
summary judgment. Idaho R. Civ. P. 56(e); Kiebert v. Goss, 144 Idaho 225, 228, 159 P.3d 862,
865 (2007). The nonmoving party must come forward with evidence, by affidavit or otherwise,
that contradicts the evidence submitted by the moving party in order to survive summary
judgment. Kiebert, 144 Idaho at 228, 159 P.3d at 865. The district court is not required to search
the record for evidence of an issue of material fact; it is the nonmoving party‘s burden to bring
that evidence to the court‘s attention. Vreeken v. Lockwood, Eng’g, B.V., 148 Idaho 89, 103–04,
218 P.3d 1150, 1164–65 (2009). A mere scintilla of evidence is not enough to create a question
of fact that will preclude summary judgment. Callies v. O’Neal, 147 Idaho 841, 846, 216 P.3d
130, 135 (2009).
       Thus, if the district court found that the respondents met their burden, the Wattenbargers
were required to present more than a scintilla of evidence demonstrating the existence of a
question of fact that must be resolved in their favor. This standard allows the district court and
this Court to determine arbitrability as a matter of law under the summary judgment standard.
Consequently, the district court‘s finding of arbitrability as a matter of law does not constitute
reversible error unless the record contains evidence that indicates the agreement to arbitrate is
invalid or the claims presented are not within the scope of the arbitration clause. The
Wattenbargers have identified two issues that they contend preclude a finding of arbitrability: (1)
whether the custodial account agreement produced by the respondents is actually the one




                                                8
referenced in the new account card; and (2) whether the terms of the custodial account agreement
are ambiguous, making its interpretation a question of fact.
                                               1.
                                 Authenticity of the Agreement
       Questions concerning the authenticity of the custodial account agreement do not require
the district court to infer that the arbitration agreement is invalid. The respondents produced
three key pieces of evidence that remove the authenticity of the agreement from the realm of
factual dispute: (1) the affidavit of Gene Gillette; (2) the new account card; and (3) the custodial
account agreement. Gillette‘s affidavit notes that Tifani signed a new account card when she
decided to open an IRA with A.G. Edwards and that signing such a card was A.G. Edwards‘
standard procedure. The new account card signed by Tifani was attached to the affidavit as
Exhibit A. The new account card provides that, by signing the card, the signatory is bound by an
arbitration clause contained in the custodial account agreement. Tifani‘s signature appears below
this statement in the copy of the agreement provided by Gillette. While Tifani alleges that she
does not remember signing this document, she does not argue that she did not sign it, nor has she
produced any evidence indicating that she did not sign it. Tifani also alleges that she does not
remember being provided with or reviewing the custodial account agreement. The custodial
account agreement was provided as Exhibit B to Gillette‘s affidavit. Page 21, article XII,
paragraph 13 of that agreement provides that any and all claims arising out of the relationship
between the respondents and Tifani shall be arbitrated. The agreement indicates the form was
adopted by A.G. Edwards in 1988, meaning that, unless superseded by a subsequent agreement,
it was in effect in 1993 when Tifani signed the new account card.
       The Wattenbargers argue that there is a question of fact that must be resolved in their
favor because of the print quality of the new account card that was produced. They argue that the
number 12 appears after the word ―paragraph‖ in the account card, which, if true, would mean
that the account card refers to a provision of the custodial account agreement containing general
disclosures about arbitration without any agreement to arbitrate. The Wattenbargers contend that,
based on this reading, it is possible that the custodial account agreement provided is the incorrect
version. They provide no other evidence that the document provided by the respondents is not
the document referenced in the new account card.




                                                 9
       Given the evidence surrounding the agreement produced and the new account card, the
Wattenbargers have failed to raise any questions concerning the validity of the agreement that
must be resolved in their favor. The quality of the new account card produced is sufficient to
show that it refers to a provision of article XII of the custodial account agreement that appears on
page 21. There are three paragraphs of article XII on page 21—paragraphs 11, 12, and 13. The
paragraph number on the new account card could be either a 12 or a 13, although it does appear
to be a 13. Given the disclosures made in the new account card and the context in which they are
made, it was not unreasonable for the district court to conclude that new account card referred to
paragraph 13 because that paragraph contained the arbitration clause. Further, because the new
account card adopts the entire custodial account agreement, all provisions of the arbitration
clause are part of the new account card. In addition, the custodial account agreement produced
was in effect at the time the new account card was signed. Accordingly, merely raising a general
question about the print quality of a copy is the type of mere scintilla of evidence insufficient to
meet the summary judgment burden. Because the whole agreement was adopted, it is irrelevant
whether the number in the card is a 12 or a 13 because Tifani is bound by both provisions. As a
result, the Wattenbargers have failed to show that the district court erred in determining the copy
of the custodial account agreement was authentic.
                                              2.
                                   Ambiguity of the Contract
       The language of the agreement entered into between Tifani and A.G. Edwards does not
create an ambiguity that must be resolved in the Wattenbargers‘ favor. In order for the
interpretation of a contract to become a question of fact, its language must be ambiguous.
Lamprecht, 139 Idaho at 185, 75 P.3d at 746. A contract is ambiguous if it is reasonably subject
to conflicting interpretations. Id. The Wattenbargers argue that the custodial account agreement
is ambiguous because of the use of quotation marks around the term ―account‖ in the contract.
They argue that the use of quotations marks, along with references to Internal Revenue Code
section 408(a), indicates the intention that the agreement only apply to IRAs. They attempt to
bolster this argument by pointing out that there is no other definition of ―account‖ in the
agreement.
       Any potential ambiguity in the use of the term ―account‖ will not render the arbitration
clause ambiguous. Even if the term ―account‖ was meant only to refer to IRAs, the use of that



                                                10
term is irrelevant in deciding whether the Wattenbargers‘ claims are arbitrable. The relevant
portion of the custodial account agreement, paragraph 13 of article XII, provides that ―all
controversies between the Depositor [Tifani] and the Custodian [A.G. Edwards] or any of the
Custodian‘s present or former . . . agents or employees which may arise for any cause
whatsoever, shall be determined by arbitration.‖ The only use of the term ―account‖ within that
paragraph is in the phrase ―by carrying an account for the Depositor [Tifani]‖ in describing when
A.G. Edwards will become bound by the agreement. Otherwise, the plain language of the
agreement states that all claims between Tifani and the respondents will be subject to arbitration
regardless of whether they arise from Tifani‘s accountholder status. As a result, the claim
presented in this matter is subject to arbitration regardless of the meaning of the term ―account‖
because Tifani has fulfilled the conditions of the arbitration clause by opening an A.G. Edwards
IRA. By fulfilling that condition, all claims between Tifani and the respondents are subject to
arbitration under the plain language of the clause. Accordingly, any confusion over the context of
the term ―account‖ does not create an inference that the claim presented is not within the scope
of the arbitration agreement.
                                                3.
       The respondents were successful in producing sufficient evidence of the existence of an
agreement to arbitrate disputes arising between themselves and the Wattenbargers. The
Wattenbargers have failed to produce any evidence of a question of fact that must be resolved in
their favor. Accordingly, it was not reversible error for the district court to rule in the
respondents‘ favor and we may freely review the issue of arbitrability.
                                               D.
                                          Arbitrability
       The Wattenbargers‘ claims are subject to arbitration under the plain language of the
arbitration clause. ―A court reviewing an arbitration clause will order arbitration unless ‗it may
be said with positive assurance that the arbitration clause is not susceptible of an interpretation
that covers the asserted dispute.‘ Doubts are to be ‗resolved in favor of coverage.‘‖ Hanks, 148
Idaho at 412, 224 P.3d at 479 (quoting Int’l Assoc. of Firemen, 136 Idaho at 168, 30 P.3d at 946).
The Wattenbargers argue that regardless of the language used in the arbitration clause, their tort
claims are not subject to arbitration under our holding in Lovey v. Regence Blueshield of Idaho,
139 Idaho 37, 72 P.3d 877 (2003), which they contend requires the claims to be ―arising out of or



                                                11
relating to the contract‖ that contains the arbitration clause. Because the contract that contained
the clause in this case concerned IRAs and the tort claims presented are based on a separate
contract for the provision of annuities, the Wattenbargers contend that their claims do not fall
within the scope of the clause.
       The Wattenbargers‘ reliance on Lovey is misplaced because of the language of the
arbitration clause at issue in that case. In Lovey, the arbitration clause read: ―Any controversy or
claim arising out of or relating to this Policy, or the breach thereof, shall be settled by arbitration
in accordance with the applicable rules of the American Arbitration Association . . . .‖ Id. at 44,
72 P.3d at 884 (emphasis added). Our holding in Lovey was based on this language, and the
holdings of other courts that we reviewed in reaching our decision were based on the same or
similar language. Id. at 46–48, 72 P.3d at 886–88. In contrast, the arbitration clause at issue in
this matter provides: ―all controversies between the Depositor [Tifani] and the Custodian [A.G.
Edwards] or any of the Custodian‘s present or former . . . agents or employees which may arise
for any cause whatsoever, shall be determined by arbitration.‖
       The Lovey holding does not affect our interpretation of this clause because the language
used is much broader than that in Lovey. The clause at issue here, unlike the one in Lovey, does
not contain the ―arising out of or related to‖ language; instead, it makes clear that all claims,
whether or not related to the contract, are subject to arbitration. The key provision of the clause
at issue here is ―all controversies between the Depositor and the Custodian,‖ meaning that the
key relationship for determining the scope of the contract is not of the claim to the contract, but
of the parties to each other. As a consequence, because Tifani and the respondents are both
parties to the claim, it is a controversy between the depositor and the custodian that falls within
the scope of the clause. Thus, unless the arbitration clause is invalid for some reason, the claims
presented in this case fall within the scope of the clause and are subject to arbitration.
                                                 E.
                                  Binding Effect of the Agreement
       The Wattenbargers argue that Tifani‘s claims are not subject to arbitration because she
did not sign the custodial account agreement that contains the clause. This argument ignores
well-established Idaho law. In Loomis v. Cudahy, this Court held that the terms of another
agreement not signed by the parties can be incorporated into the signed agreement by reference
when the unsigned terms are readily available for inspection by the parties. 104 Idaho 106, 118–



                                                  12
19, 656 P.2d 1359, 1371–72 (1982). The new account card signed by Tifani makes clear
reference to the portion of the custodial account agreement that contains the arbitration clause.
Furthermore, as noted above, there is no evidence that Tifani was not provided with the custodial
account agreement or that it was not available to her. Thus, Tifani is bound by the arbitration
clause even though it is not contained in the signed agreement.
       The Wattenbargers also argue that Jared Wattenbarger has a claim against the
respondents because Tifani and Jared merged their investments, rendering them community
property. As a result, the Wattenbargers contend that Jared‘s claims are not subject to arbitration
because he was not a signatory of the agreement between Tifani and the respondents. The district
court rejected this argument based on our holding in Dan Wiebold Ford, Inc. v. Universal
Computer Consulting Holding, Inc., 142 Idaho 235, 127 P.3d 138 (2005). In that case, we cited a
Michigan case as authority for the proposition that where one spouse bases his or her legal rights
on a contract entered into by another spouse, the nonsignatory spouse is bound by the terms of
the contract, including an arbitration clause. Id. at 242–43, 127 P.3d at 145–46.
       The Wattenbargers do not dispute this holding, but instead argue that it is inapplicable in
this case because Jared and Tifani were not married at the time the agreement with the
respondents was executed. They provide no authority in support of this argument, only noting
that it stands to reason that spousal agency cannot reach so far into the past. As adequately
pointed out by the respondents and the district court, the Wattenbargers‘ argument would
produce an absurd result. The essence of the Wattenbargers‘ argument is that a party whose legal
rights are solely based on an agreement signed by another is not subject to the terms of that
agreement if he had no relationship with the signatory party at the time the agreement was
executed. As the district court noted ―[t]he same rationale would apply in a situation where a
plaintiff attempts to avoid arbitration by naming a co-plaintiff who did not sign the arbitration
agreement.‖ Accordingly, in the absence of any authority supporting their argument, and because
of the absurd result it would produce, we affirm the district court‘s finding that both parties are
bound by the arbitration agreement.
                                               F.
                                        Unconscionability
       The Wattenbargers argue that even if their claims fall within the scope of the arbitration
clause, their claims are not subject to arbitration because the arbitration clause is unconscionable.



                                                 13
Equitable principles allow a court to intervene to change the terms of a contract in the face of
evidence of unconscionable conduct serious enough to justify court interference. Lovey, 139
Idaho at 41–42, 72 P.3d at 881–82. In order for a contractual provision to be voided for
unconscionability, it must be both procedurally and substantively unconscionable. Id. at 42, 72
P.3d at 882. Procedural unconscionability concerns the bargaining process leading to the
formation of a contract while substantive unconscionability focuses on the contract‘s terms. Id.
       Procedural unconscionability exists ―when the contract ‗was not the result of free
bargaining between the parties.‘‖ Id. (quoting N.W. Pipeline Corp. v. Forrest Weaver Farm, Inc.,
103 Idaho 180, 183, 646 P.2d 422, 425 (1982)). Indicators of procedural unconscionability
generally include a lack of voluntariness and a lack of knowledge. Id. Indicators of lack of
voluntariness include ―the use of high-pressure tactics, coercion, oppression or threats short of
duress.‖ Id. A lack of voluntariness can be shown by an imbalance in bargaining power resulting
from the non-negotiability of the stronger party‘s terms and the inability to contract with another
party due to time, market pressures, or other factors. Id. Indicators of a lack of knowledge
include a ―lack of understanding regarding the contract terms arising from the use of
inconspicuous print, ambiguous wording, or complex legalistic language; the lack of opportunity
to study the contract and inquire about its terms; or disparity in sophistication, knowledge, or
experience of the parties.‖ Id.
       The focus of substantive unconscionability is solely on the terms of the contractual
provision at issue. Id. A provision is substantively unconscionable if it is a bargain no reasonable
person would make or that no fair and honest person would accept. Id. If a contract term is one-
sided or oppressive, it may be substantively unconscionable. Id. In determining whether a term is
unconscionable, a court must consider ―the purpose and effect of the terms at issue, the needs of
both parties and the commercial setting in which the agreement was executed, and the
reasonableness of the terms at the time of contracting.‖ Id. at 42–43, 72 P.3d at 882–83.
       We found unconscionability sufficient to invalidate a contractual limitation of liability in
Walker v. American Cynamid Co., 130 Idaho 824, 948 P.2d 1123 (1997). In that case, we found
procedural unconscionability because Walker had no opportunity to bargain with American
Cynamid concerning the terms contained on a product label, he lacked knowledge of the terms
because they were ambiguous, and American Cynamid had superior knowledge of the contract
terms. Id. at 830–31, 948 P.2d at 1129–30. We also found substantive unconscionability because


                                                14
the ambiguity in the terms of the label resulted in an unfair surprise to Walker because a
reasonable purchaser would have expected the type of damages he suffered to be recoverable. Id.
at 831, 948 P.2d at 1130.
         We refused to invalidate an arbitration clause in an insurance contract on the basis of
unconscionability in Lovey. In that case, the district court found procedural unconscionability
based on the fact that the clause was in an adhesion contract3 and, due to market forces in the
insurance industry, Lovey lacked the ability to shop around for an insurance policy with more
favorable terms. Lovey, 139 Idaho at 43, 72 P.3d at 883. The district court also based its finding
of procedural unconscionability on the fact that Lovey was not given the opportunity to read the
contract before signing it. Id. at 44, 72 P.3d at 884. Finally, the district court‘s finding of
procedural unconscionability was based on the fact that the arbitration clause was on the twenty-
first page of a twenty-five-page contract. Id. We rejected those findings because they lacked
support in the record. Id. We found that the record contained no evidence that other insurers used
similar clauses, that Lovey had asked for a copy of the arbitration agreement or asked any
questions concerning its terms, that the arbitration clause was written in confusing or unclear
language, or that an arbitration clause is required to be found at any specific location in a
contract in order to be valid. Id. at 43–45, 72 P.3d at 883–85. As a result, this Court held that the
arbitration clause was valid and remanded the case for arbitration. Id. at 49, 72 P.3d at 889.
         The district court in this case found that the arbitration clause was neither procedurally
nor substantively unconscionable. The district court rejected an argument for procedural
unconscionability because it found the issue was controlled by Lovey. The Wattenbargers argued
that the clause was procedurally unconscionable because it was contained in an adhesion
contract, Tifani did not understand the clause, and Tifani did not have an opportunity to read and
study the contract. The district court rejected these arguments based on Lovey because the record
did not reflect that Tifani was unable to open an IRA elsewhere or that she had ever asked for a
copy of the arbitration clause or asked questions about it. The court also rejected an argument for
procedural unconscionability based on the fact that the clause would prevent Tifani‘s children
from pursuing their claims, despite their infancy at the time the agreement was signed. The



3
  An adhesion contract is a standardized contract drafted by the more powerful party when the parties are of unequal
bargaining strength and presented to the weaker party on a take-it-or-leave-it basis. Lovey, 139 Idaho at 43, 72 P.3d
at 883.

                                                         15
district court refused to consider this argument because the children were not parties to the
litigation. The Wattenbargers also argued that the clause was substantively unconscionable
because it required a member of the New York Stock Exchange to be involved in the arbitration,
resulting in bias in favor of the respondents. The district court rejected this argument because the
Wattenbargers failed to present any evidence of potential bias. The Wattenbargers also based
their substantive unconscionability argument on the clauses‘ effects on Tifani‘s children. The
district court again rejected this argument because the children were not parties to the action.
         The Wattenbargers reassert their district court arguments on appeal, along with additional
arguments focused on the manner in which the agreement was entered and the public policy
implications of upholding the agreement. First, the Wattenbargers reassert their argument that it
is inappropriate to give effect to an arbitration clause that is incorporated by reference into
another agreement signed by the parties. The Wattenbargers cite no authority for this
proposition, and it is against the great weight of authority from other jurisdictions.4 As for the
procedural unconscionability arguments asserted by the Wattenbargers, we reject those
arguments for the same reason they were rejected in Lovey. First, the Wattenbargers point to no
evidence in the record that Tifani was precluded by market pressures from seeking an IRA or
other financial planning services from another firm. Second, there is no indication in the record
that Tifani ever asked to see the custodial agreement or that she asked any questions about its
terms. Third, the plain language of the arbitration clause demonstrates that it does not use overly
complex or legalistic language. The clause provides: ―all controversies between the Depositor
[Tifani] and the Custodian [A.G. Edwards] or any of the Custodian‘s present or former . . .

4
  See, e.g., World Rental & Sales, LLC v. Volvo Const. Equip. Rents, Inc., 517 F.3d 1240, 1245 (11th Cir. 2008) (―It
is clear, however, that an arbitration clause can be incorporated even if the relevant incorporation language does not
specifically refer to it.‖); Ibeto Petrochemical Indus., Ltd. v. M/T Beffen, 475 F.3d 56, 63 (2d Cir. 2007) (―We long
have held that ‗a broadly-worded arbitration clause which is not restricted to the immediate parties may be
effectively incorporated by reference into another agreement.‘‖ (quoting Progressive Cas. Ins. Co. v. C.A.
Reaseguradora Nacional de Venezuela, 991 F.2d 42, 48 (2d Cir. 1993))); Seborowski v. Pittsburgh Press Co., 188
F.3d 163, 169–70 (3d Cir. 1999) (holding that arbitration was appropriate where the ERISA plan incorporated by
reference terms of a supplemental agreement, which included an arbitration clause); R.J. O’Brien & Assocs. v.
Pipkin, 64 F.3d 257, 261 (7th Cir. 1995) (contract did not need to contain an explicit arbitration clause if it validly
incorporated by reference an arbitration clause in another document); ISP.com, LLC v. Theising, 805 N.E.2d 767,
776 (Ind. 2004) (―There is no requirement that an arbitration clause be included in all potentially relevant documents
to be binding if it covers the dispute at hand.‖); MS Credit Center, Inc. v. Horton, 926 So. 2d 167, 177 (Miss. 2006)
(finding that Borrower‘s allegations that she did not read the arbitration agreement, which was executed as separate
document in connection with loan transaction, and that the arbitration agreement was not brought to her attention or
explained to her, did not establish the arbitration agreement was procedurally unconscionable); Helen Whiting, Inc.
v. Trojan Textile Corp., 121 N.E.2d 367, 371 (N.Y. 1954); 4 AM. JUR. 2D Alternative Dispute Resolution § 52
(2009).

                                                         16
agents or employees which may arise for any cause whatsoever, shall be determined by
arbitration.‖ This provision states in plain language that all claims Tifani might have against the
respondents are subject to arbitration. Fourth, had Tifani read the custodial agreement, the
arbitration provisions are clearly set off from the rest of the provisions of the agreement in a
different type and font. As we noted in Lovey, an arbitration clause does not have to appear in
any particular place in the agreement. Accordingly, under Lovey, the district court‘s finding that
the agreement to arbitrate is not procedurally unconscionable is affirmed. As a result, the clause
cannot be voided on the basis of unconscionability because it is not both procedurally and
substantively unconscionable. Consequently, we find that the agreement to arbitrate is not
unconscionable without reaching the issue of substantive unconscionably.
                                             G.
                 Statutory Unconscionability/Idaho Consumer Protection Act
       The Wattenbargers also argue that the arbitration clause should not be enforced because it
is unconscionable as a matter of statutory law. The Wattenbargers argue that the arbitration
clause is unconscionable because it constitutes an ―[u]nconscionable method[], act[] or
practice[]‖ as defined in Idaho Code section 48-603C. Section 48-603C provides that an
―unconscionable method, act or practice violates the‖ Consumer Protection Act if it occurs
―before, during, or after the conduct of trade or commerce.‖ I.C. § 48-603C(1). Factors in
determining unconscionability under the act include: (1) knowing exploitation of some mental or
physical weakness of the consumer; (2) charging a grossly excessive price for goods or services;
(3) knowing inducement of the consumer to enter into a one-sided transaction favoring the seller;
and (4) conduct or a pattern of conduct that would offend the public conscience. I.C. § 48-
603C(2). The Wattenbargers argue that A.G. Edwards, in entering into the arbitration agreement
with Tifani, engaged in conduct that is prohibited by section 48-603C. Specifically, the
Wattenbargers argue that the breadth of the agreement and potential arbitrator bias render the act
of offering the agreement an unconscionable behavior under the statute. Although it is unclear
exactly what relief the Wattenbargers are seeking on the basis of this statutory argument, it
appears that they are asking this Court to invalidate the clause on the basis of their potential
statutory cause of action.
       Regardless of the relief the Wattenbargers are seeking, the statutory argument will not be
addressed because it was raised for the first time before this Court. ―Appellate court review is



                                                17
limited to the evidence, theories and arguments that were presented . . . [in the district court].‖
Meyers v. Hansen, 148 Idaho 283, 292, 221 P.3d 81, 90 (2009) (quoting Obenchain v. McAlvain
Constr., Inc., 143 Idaho 56, 57, 137 P.3d 443, 444 (2006)). In order to preserve an issue for
appeal, the issue must be raised in the district court. St. Alphonsus Diversified Care, Inc. v. MRI
Assocs., LLP, 148 Idaho 479, 491, 224 P.3d 1068, 1080 (2009). This is because the district court
must rule on an issue before it can be presented for appeal. Id. We do not review an issue unless
the parties can point to an adverse ruling on that issue in the record. Id. Appellate courts follow
this rule because it would be unfair to overrule the district court on issues not presented to it on
which it did not have an opportunity to rule. See Gasstop Two, LLC v. Seatwo, LLC, 225 P.3d
1072, 1076 (Wyo. 2010). Accordingly, we will not address the statutory issue raised by the
Wattenbargers.
       Even though we freely review the issue of unconscionability, Lovey, 139 Idaho at 41, 72
P.3d at 881, and freely review issues of statutory construction, Kelso & Irwin, P.A. v. State Ins.
Fund, 134 Idaho 130, 134, 997 P.2d 591, 595 (2000), it is inappropriate for the Wattenbargers to
raise new theories on appeal that were not pursued below. The Wattenbargers freely admit that
they did not raise this issue in the district court, but argue that it is appropriate for us to review
the issue because of our power to freely review statutes. This argument is unavailing because the
statutory issue must be raised in district court before we may review it. As a result, because the
district court did not rule on the issue presented, we will not address it.
                                                H.
                                  Attorney Fees in District Court
       Finally, the Wattenbargers argue that the district court erred in awarding the respondents
attorney fees. The Wattenbargers argue that the district court: (1) failed to adequately perceive
the award of attorney fees as a matter of discretion; (2) erred in determining the respondents
were prevailing parties; (3) incorrectly determined that there was a basis to award fees; and (4)
awarded excessive fees. Determination of prevailing party status and the amount of a fee award
are matters within the discretion of the district court. Jorgensen v. Coppedge, 148 Idaho 536,
538, 224 P.3d 1125, 1127 (2010). In determining whether the district court abused its discretion,
we consider whether the district court: (1) perceived the issue as one of discretion; (2) acted
within the bounds of its discretion and consistent with applicable legal standards and (3) reached




                                                  18
its decision through the exercise of reason. Id. We will only reverse the district court‘s decision
on prevailing party status in the rarest of circumstances. Id.
        The prevailing party in an action, in some situations, is entitled to an award of
discretionary costs and attorney fees. Idaho R. Civ. P. 54(d)(1); Jorgensen, 148 Idaho at 538, 224
P.3d at 1127. Idaho Rule of Civil Procedure 54(d)(1) guides the district court‘s determination of
prevailing party status. Jorgensen, 148 Idaho at 538, 224 P.3d at 1127. It provides that ―[i]n
determining which party to an action is the prevailing party and entitled to [attorney fees], the
[district] court shall in its sound discretion consider the final judgment or result of the action in
relation to the relief sought by the respective parties.‖ Idaho R. Civ. P. 54(d)(1)(B). In order for
the prevailing parties to be entitled to attorney fees, they must demonstrate that entitlement under
the provisions of a governing statute or contract. Idaho R. Civ. P. 54(e)(1).
        The district court found that the respondents were entitled to fees under article XII,
paragraph 10 of the Custodial Account Agreement. Paragraph 10 provides:
        ―any expense, including attorney[] fees, incurred by [A.G. Edwards] . . . in
        defense in an action brought by [Wattenbarger] . . . to recover damages for the
        activities of [A.G. Edwards] or its agents or employees in handling any account of
        the [Wattenbargers] shall be borne solely by the account, or the [Wattenbargers]
        as the case may be, should [A.G. Edwards] prevail.‖

The Wattenbargers argue that this clause only applied to IRA-account disputes because of the
language ―in handling any account.‖ This argument is based on another portion of the agreement
that provides ―individual retirement account (the ‗account‘),‖ arguably defining ―account‖ as an
―IRA.‖ We decline to read the contract so narrowly. In light of the breadth of other provisions of
the agreement, it seems unlikely that the parties sought to limit their entitlement to fees to
situations dealing with an IRA. Accordingly, because the Wattenbargers brought an action for
damages based on the respondents handling of an account, if the respondents are prevailing
parties, then they are entitled to attorney fees.
        The respondents argue that they are also entitled to fees under Idaho Code section 12-
120(3). The district court refused to award fees under section 12-120(3) because the respondents
did not argue that they were entitled to fees under that section in their initial fee request. The
district court was correct that a party is required to specify the basis for its fee request in its
I.R.C.P. 54(e)(5) fee request. Eighteen Mile Ranch, LLC v. Nord Excavating & Paving, Inc., 141




                                                    19
Idaho 716, 720–21, 117 P.3d 130, 134–35 (2005). The district court did not err in denying the fee
request.
       The district court found the respondents to be the prevailing parties because they sought
dismissal based on the arbitration clause, they were granted dismissal, and the district court‘s
order of dismissal constitutes a final judgment. We addressed a similar situation in Deelstra v.
Hagler, 145 Idaho 922, 188 P.3d 864 (2008). In that case, the district court awarded attorney fees
incurred in the course of arbitration and for a motion to dismiss the case after the arbitration was
concluded. Id. at 924, 188 P.3d at 866. We found that the district court was not entitled to award
fees for the arbitration itself, but correctly ordered fees for the motion to dismiss the underlying
district court action. Id. at 925, 188 P.3d at 867. We noted that if fees were awardable for any
proceedings leading up to arbitration, they should be awarded by the district court rather than the
arbitrator. Id. We recently reached a similar result in Grease Spot, Inc. v. Harnes, 148 Idaho 582,
586, 226 P.3d 524, 528 (2010). In that case, the appellants were awarded partial attorney fees
from a successful motion to compel arbitration. Id. We found that the appellants were the
prevailing parties because the action was a civil action and compelling arbitration ended
consideration of the merits of the action and resulted in a judgment in favor of the appellants. Id.
Thus, under the logic of Deelstra and Harnes, successfully dismissing an action on the basis of
an arbitration clause is sufficient to confer the prevailing party status necessary for an award of
attorney fees.
       Furthermore, we find the amount of fees awarded by the district court to be reasonable.
The district court is required to consider the factors listed in I.R.C.P. 54(e)(3) in determining the
amount of an attorney fee award. Idaho R. Civ. P. 54(e)(3). The rule does not require the district
court to make specific findings on each factor. Smith v. Mitten, 140 Idaho 893, 902, 104 P.3d
367, 376 (2004). Consequently, where, as here, the district court‘s opinion shows that it
considered the rule 54(e)(3) factors and the amount of fees awarded is not demonstrably
excessive, the amount of fees awarded should be affirmed.
       In conclusion, the district court properly found that the respondents were entitled to
attorney fees under the contract and that they were prevailing parties. The district court also
awarded an appropriate amount of fees. Accordingly, the district court‘s decision to award
attorney fees is affirmed.




                                                 20
                                               I.
                                    Attorney Fees on Appeal
       Respondents presented the same bases for their request of attorney fees on appeal as they
did for their request for fees in district court. They argue that they are entitled to fees based on
article XII, paragraph 10 of the custodial account agreement and Idaho Code section 12-120(3).
As discussed above, the respondents are entitled to fees under the contract. Finding the contract
provides a basis to award fees, we need not address the request for fees under section 12-120(3).
Thus, we award respondents their attorney fees on appeal.
                                                IV.
       Because the arbitration agreement is valid, the claims presented fall within the scope of
the agreement, and the agreement is not unconscionable, the district court‘s judgment and award
of attorney fees to the respondents is affirmed. We award the respondents their costs and attorney
fees on appeal.


       Chief Justice EISMANN, and Justices BURDICK, W. JONES and HORTON CONCUR.




                                                21
