                     IN THE COURT OF APPEALS OF IOWA

                                   No. 17-0482
                               Filed April 18, 2018


JM 48, LLC,
      Plaintiff-Appellee,

vs.

HEARTLAND CO-OP,
     Defendant-Appellant.
________________________________________________________________


       Appeal from the Iowa District Court for Polk County, Jeffrey D. Farrell,

Judge.



       Heartland Co-op appeals a district court ruling denying its motion to compel

arbitration. AFFIRMED.




       John F. Lorentzen of Nyemaster Goode, P.C., Des Moines, for appellant.

       Gina C. Badding of Neu, Minnich, Comito, Halbur, Neu & Badding, P.C.,

Carroll, for appellee.




       Heard by Vogel, P.J., and Potterfield and Mullins, JJ.
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MULLINS, Judge.

       Heartland Co-op (Heartland) appeals a district court ruling denying its

motion to compel arbitration. Heartland contends the parties entered into an

arbitration agreement that is enforceable under the Federal Arbitration Act (FAA)

as well as the Iowa Arbitration Act (IAA) and, therefore, the district court erred in

denying its motion to compel arbitration.          Heartland alternatively argues an

arbitration agreement should be enforced through the doctrine of promissory

estoppel.1

I.     Background Facts and Proceedings

       The following facts are generally undisputed. In May 2010, Gerald Murphy,

on behalf of JM 48, LLC (JM), signed a contract authorization form with Heartland.

The authorization form provided:

              I the customer grant the following individuals authorization to
       enter into grain contracts on behalf of the account name and number
       stated above, including credit sale contracts and warehouse
       receipts.
              ....
              Contracting of Grain: I represent to Heartland on behalf of the
       Customer that: (1) we routinely sell grain to elevator; (2) we have the
       particular skills and knowledge of grain trading practices that enable
       us to understand the terms of grain sale contracts enter into; (3) we
       are a merchant with respect to the sale of grain; and (4) each of the
       individuals names above is authorized to enter into grain contracts
       with Heartland on our behalf. National Grain and feed Association
       [(NGFA)] Rules apply to all contracts.

1
  Heartland also requests this court to overrule Des Moines Asphalt & Paving Co. v. Colcon
Industries Corp., 500 N.W.2d 70, 72 (Iowa 1993) to the extent it held “an order denying a
motion to compel arbitration is a final adjudication and . . . is appealable as a matter of
right.” The supreme court transferred this case to us knowing full well “[w]e are not at
liberty to overrule controlling supreme court precedent.” State v. Beck, 854 N.W.2d 56,
64 (Iowa Ct. App. 2014); see also Fell P’ship v. Heartland Co-op, No. 16-1180, 2017 WL
2875870, at *2 (Iowa Ct. App. July 6, 2017) (“To the extent it held an order to deny a
motion to compel arbitration is final and appealable as a matter of right, Des Moines
Asphalt is the law.”), further review denied (Aug. 30, 2017). We therefore decline to
entertain Heartland’s request.
                                              3


                I understand that it is my responsibility to notify Heartland Co-
         op of any changes in this authorization.

Rule 29 of the NGFA rules provides the following:

                Where a transaction is made subject to these rules in whole
         or in part, whether by express contractual reference or by reason of
         membership in this Association, then the sole remedy for resolution
         of any and all disagreements or disputes arising under or related to
         the transaction shall be through arbitration proceedings before the
         [NGFA] pursuant to the NGFA® Arbitration Rules; provided,
         however, that at least one party to the transaction must be a NGFA
         member entitled to arbitrate disputes under the NGFA Arbitration
         Rules.

There is nothing in the record to indicate that the NGFA rules or rule 29 specifically

were attached to the authorization form or that JM was otherwise provided with a

copy of them.

         In October 2011, roughly a year-and-a-half after Murphy signed the

authorization form, JM delivered corn to Heartland, and the parties entered into an

oral agreement whereby Heartland agreed to sell JM’s corn. Heartland prepared

a settlement confirmation document evidencing JM’s delivery of corn to Heartland,

but that document contained no contract terms and did not reference the contract

authorization form or the NGFA rules; and there is nothing in the record to indicate,

and no argument has been made, that the terms of the authorization form were

discussed in relation to the formulation of the oral agreement.

         In October 2016, JM filed a petition at law alleging Heartland breached the

oral contract.2      Heartland filed a motion to compel arbitration and stay the

proceedings. The district court denied the motion, concluding the parties never

entered into a legally enforceable arbitration agreement. Heartland filed a motion


2
    The petition also asserted claims of unjust enrichment and conversion.
                                           4


to amend requesting the court address its alternative promissory-estoppel

argument.    The court amended its ruling to address the promissory-estoppel

argument but affirmed its denial of Heartland’s motion to compel arbitration.

       As noted, Heartland appeals.

II.    Standard of Review

       Appellate review of a district court’s ruling on a motion to compel arbitration

is for correction of errors at law. Wesley Ret. Servs., Inc. v. Hansen Lind Meyer,

Inc., 594 N.W.2d 22, 29 (Iowa 1999); Gen. Conference of Evangelical Methodist

Church v. Faith Evangelical Methodist Church, 809 N.W.2d 117, 120 (Iowa Ct.

App. 2011). “[W]e begin with the established principle that the issue of arbitrability

is a question for the courts and is to be determined by the contract entered into by

the parties,” if any. Hawkins/Korshoj v. State Bd. of Regents, 255 N.W.2d 124,

127 (Iowa 1977).

III.   Discussion

       A.     Enforceability Under the FAA or IAA

       Heartland contends the parties entered into an arbitration agreement that is

enforceable under the FAA as well as the IAA and, therefore, the district court erred

in denying its motion to compel arbitration. The FAA provides:

       A written provision in . . . a 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. Similar to the FAA, the IAA provides: “A provision in a written contract

to submit to arbitration a future controversy arising between the parties is valid,
                                          5


enforceable, and irrevocable unless grounds exist at law or in equity for the

revocation of the contract.” Iowa Code § 679A.1(2) (2016).

       The FAA expressly requires the arbitration agreement to be represented in

“[a] written provision in . . . a contract evidencing a transaction involving commerce

to settle by arbitration a controversy thereafter arising out of such contract or

transaction.” 9 U.S.C. § 2. The IAA similarly requires an agreement to arbitrate to

be “a provision in a written contract.” Iowa Code § 679A.1(2).

       Heartland argues “[t]he written provision to arbitrate is found in Rule 29 of

the NGFA Rules” and JM agreed to arbitrate in May 2010 by signing the

authorization form, which stated the NGFA rules apply to all contracts. Heartland

further argues the alleged agreement to arbitrate became part of the subsequent

oral agreement in October 2011.

       The parties agree that the contract authorization form is not a contract.

Heartland contends the authorization form was instead an offer, and the so-called

mirror-image rule therefore incorporates the authorization form into any

subsequently-formed contract. Even if we were to accept Heartland’s argument

that the existence of the NGFA rules satisfies the “written provision” requirement,

an arbitration agreement is still only enforceable under the FAA or the IAA where

it is memorialized in a written contract or agreement. See 9 U.S.C. § 2; Iowa Code

§ 679A.1(2); see also Galloway v. Santander Consumer USA, Inc., 819 F.3d 79,

84 (4th Cir. 2016) (noting application of the FAA requires “a written agreement that

includes an arbitration provision” (citation omitted)); Caley v. Gulfstream

Aerospace Corp. 428 F.3d 1359, 1368–69 (11th Cir. 2005) (discussing the “written

agreement” requirement); Gen. Conference of Evangelical Methodist Church, 809
                                           6


N.W.2d at 121 (noting Iowa Code section 679A.1(2) “specifically references the

necessity of a written contract”).

       The validity and enforceability of an arbitration agreement is determined by

state contract law. See Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630–31

(2009). Heartland argues the May 2010 contract authorization form constituted a

standing offer that all future contracts between the parties would be subject to

NGFA rules. In oral arguments, Heartland seemed to base this contention on the

mirror-image rule, which requires that an acceptance conforms strictly to an offer

in all of its conditions, without any deviation whatsoever. See Shell Oil Co. v.

Kelinson, 158 N.W.2d 724, 728 (Iowa 1968). But the purpose of the mirror-image

rule is not to bootstrap terms into a contract; its purpose is to assess whether an

acceptance matches an offer such that the agreeing parties reached a mutual

manifestation of assent. See id. There is nothing in the record to indicate, and no

argument has been made, that the terms of the authorization form were included

in the offer or acceptance relating to the formulation of the October 2011 oral

agreement. Were we considering a situation in which the offer concerning that

agreement included an arbitration provision and the acceptance did not, or vice

versa, then consideration of the mirror-image rule might be appropriate to

determine whether the parties entered into an enforceable contract. The mirror-

image rule simply does not apply to the facts of this case.

       The authorization form is just that—a form authorizing a named individual

to enter into grain contracts in the future. “An offer is a manifestation of willingness

to enter into a bargain, so made as to justify another person in understanding that

his assent to that bargain is invited and will conclude it.” Heartland Express, Inc.
                                          7

v. Terry, 631 N.W.2d 260, 268 (Iowa 2001) (internal quotation marks omitted)

(quoting Anderson v. Douglas & Lomason Co., 540 N.W.2d 277, 285 (Iowa 1985)).

Heartland argues the form constituted an offer. If that were so, the acceptance of

that offer would be a contract. But, clearly, if Heartland’s response to the alleged

offer were, “We accept,” then what would be the terms of the contract beyond

simply an acceptance of JM’s offer to authorize the named individual to enter into

contracts with Heartland in the future? The contract authorization form contains

no language that can be construed as a manifestation of willingness to enter into

any transaction or that signing the form would consummate any transaction.

Beyond the parties agreeing who would be authorized to enter into future grain

contracts, the form was at most an agreement to agree or contract in the future,

which “is of no effect unless all of the terms and conditions of the contract are

agreed on and nothing is left to future negotiations.” Crowe-Thomas Consulting

Grp., Inc. v. Fresh Pak Candy Co., Inc., 494 N.W.2d 442, 444–45 (Iowa Ct. App.

1992); accord First American Bank v. Urbandale Laser Wash, LLC, 874 N.W.2d

650, 656 n.4 (Iowa Ct. App. 2015) (“At best, the parties had a nonbinding

agreement to agree. A writing that clearly contemplates the subsequent execution

of a formal agreement raises the inference that the parties to the writing did not

intend to be bound until the subsequent formal agreement is finalized.”); cf.

Moonsammy v. Mercy Hosp., No. 08-1638, 2009 WL 2525500, at *5 (Iowa Ct. App.

Aug. 19, 2009) (“[A]uthorization forms are generally not held to be contracts in and

of themselves.”).3


3
  We also note our concern as to whether the NGFA applicability provision contained in
the authorization form would even be enforceable against JM had the form amounted to
                                              8


       We conclude the May 2010 contract authorization form had absolutely no

effect on the October 2011 oral agreement, except to identify the person

authorized to make the oral agreement. We are therefore left with the October

2011 oral agreement between the parties.               This clearly did not involve “an

agreement in writing to submit to arbitration,” see 9 U.S.C. § 2, or “a written

contract to submit to arbitration.” See Iowa Code § 679A.1(2).

       The contract authorization form had no legal effect on the oral agreement

and the oral agreement did not amount to an enforceable arbitration agreement

under either the FAA or the IAA.             We conclude no enforceable arbitration

agreement existed between the parties and, therefore, the district court’s denial of

Heartland’s motion to compel arbitration did not amount to legal error.

       B.      Enforcement by Promissory Estoppel

       Heartland alternatively argues an arbitration agreement should be enforced

through the doctrine of promissory estoppel. “The theory of promissory estoppel

allows individuals to be held liable for their promises despite an absence of the

consideration typically found in a contract.” McKee v. Isle of Capri Casinos, Inc.,

864 N.W.2d 518, 532 (Iowa 2015) (quoting Schoff v. Combine Ins. Co. of Am., 604




a so-called standing offer. See generally Timmerman v. Grain Exch., LLC, 915 N.E.2d
113, 116, 120–21 (Ill. App. Ct. 2009) (concluding provision in contracts stating “this
contract is subject to the Rules of the National Grain and Feed Association” was
unenforceable to require arbitration because “[t]he contracts themselves made no direct
mention of arbitration. The Rules were not set forth in the contracts, nor had they been
provided to or made available to the plaintiffs prior to their entering into the contracts. The
plaintiffs were not directed to where to find the Rules. There is no indication that the
arbitration provision had been negotiated between the parties. The arbitration provision
of the contract was so difficult to find and read that the plaintiffs cannot fairly be said to
have been aware that they were agreeing to it”).
                                            9


N.W.2d 43, 48 (Iowa 1999)). A party attempting to employ promissory estoppel

must prove:

       (1) a clear and definite promise; (2) the promise was made with the
       promisor’s clear understanding that the promisee was seeking an
       assurance upon which the promisee could rely and without which he
       would not act; (3) the promisee acted to his substantial detriment in
       reasonable reliance on the promise; and (4) injustice can be avoided
       only by enforcement of the promise.

Schoff, 604 N.W.2d at 49. “[S]trict proof of all elements is required.” Id. at 50

(quoting Nat’l Bank of Waterloo v. Moeller, 434 N.W.2d 887, 889 (Iowa 1989)). As

to the first element, the supreme court has defined a “promise” as “[a] declaration

. . . to do or forbear a certain specific act.” Id. at 50–51 (alteration and ellipsis in

original) (quoting Black’s Law Dictionary 1213 (6th ed. 1990)). The supreme court

has distinguished between promises and representations, which are “statement[s]

. . . made to convey a particular view or impression of something with the intention

of influencing opinion or action.”        Id. at 51 (quoting Webster’s Third New

International Dictionary 1926 (unab. ed. 1993)).

       On the issue of promissory estoppel, the district court concluded:

                 . . . [T]he elements are not met in this case. . . . [T]here is no
       clear and definite promise to arbitrate. Rather, the reference to the
       NGFA rules was one sentence of an authorization form signed more
       than a year before the sale of any grain. Arbitration was never
       expressly referenced. Second, there was no showing that JM made
       the promise with the clear understanding that Heartland was seeking
       an assurance upon which it could rely and without which it would not
       act. . . . Heartland did not reference arbitration at all in the documents
       and did not confirm that the parties would follow NGFA rules at the
       time of delivery. If the arbitration provision was important to
       Heartland, it is certainly not reflected by the record in this case.
       Heartland likewise cannot show the substantial detriment or injustice
       elements . . . .
                                          10


Based upon our review of the record, we agree with the district court that JM never

made a clear and definite promise to arbitrate any disputes arising out of its

dealings with Heartland. There is absolutely no express reference to any promise

to arbitrate in the May 2010 contract authorization form. There is also no indication

in the record that JM made such a promise when it delivered corn to Heartland in

October 2011. Because the essential elements of promissory estoppel are not

present in this case, Heartland is not entitled to its application.

VI.    Conclusion

       Based on the foregoing, we affirm the district court’s denial of Heartland’s

motion to compel arbitration in its entirety.

       AFFIRMED.
