Harter, Lowell E. v. Iowa Grain Company ( 2000 )

In the
United States Court of Appeals
For the Seventh Circuit
Nos. 98-3010 & 98-3817
Lowell E. Harter and Doretta Harter,
Plaintiffs-Appellants,
v.
Iowa Grain Co., et al.,
Defendants-Appellees.
Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 96 C 2936--Milton I. Shadur, Judge.
Argued September 13, 1999--Decided April 21, 2000
Before Posner, Chief Judge, and Cudahy and Kanne,
Circuit Judges.
Cudahy, Circuit Judge. The recent proliferation
of so-called "hedge-to-arrive" contracts for the
sale of grain has pitted many American farmers
against their counterparts in the grain storage
and marketing industry. The case before us
involves these contracts, and these players, but
it also wends its way into questions of
arbitration and attorney’s fees. A familiarity
with hedge-to-arrive contracts will be helpful to
understanding the issues in the case.
I. Introduction
Farmers often contract to sell grain to grain
elevators at some specific time in the future.
Such contracts guarantee farmers a buyer for
their grain and guarantee grain elevators a
supply of a commodity. The contracts generally
specify the quantity and quality of grain to be
sold, as well as a delivery date and a price for
the grain. Both parties, by agreeing in advance
to the grain price, take a risk that the market
will move against them. The farmer’s risk is that
grain prices will be higher at the time of
delivery, thus causing him to forego profit by
selling at too low a price; the elevator’s risk
is that prices will drop, causing it to purchase
unduly expensive grain. "Hedge-to-arrive"
contracts (HTA contracts) attempt to alleviate
these risks by introducing price flexibility. See
The Andersons, Inc. v. Horton Farms, Inc., 166
F.3d 308, 319 (6th Cir. 1998). HTA contracts use
two price indices--a "futures reference price,"
set by the Chicago Board of Trade for some time
in the future, and a "local cash basis level,"
which is a local adjustment to the national
price. See id. In an HTA contract, the parties
generally agree at the time of contracting on the
national portion of the price, and defer
agreement on the local part of the price. See id.Many HTA contracts are "flexible," meaning the
parties may "roll" the established delivery date
to some point in the future. See id. When an
elevator enters an HTA contract, it usually
"hedges," or tries to offset the risk of paying
unduly high prices, by buying an equal and
opposite position in the futures market. See id.If either party to an HTA contract rolls the
delivery date forward, the elevator buys back its
original hedge and rehedges by purchasing a new
futures contract. See id. The spread between the
original hedge position and the "rolled" hedge
position is attached to the price per bushel of
the original HTA contract, and the farmer runs
the risk of assuming a debit. See id.The Commodity Exchange Act (CEA), codified at 7
U.S.C. sec. 1 et seq., and regulations
promulgated under it govern contracts for sale of
a commodity for future delivery--futures
contracts. The CEA specifically excludes from the
definition of futures contracts--and thus from
its reach--the sale of a cash commodity for
deferred shipment or delivery--cash forward
contracts. See 7 U.S.C. sec. 1a(11); see also The
Andersons, 166 F.3d at 318. "HTAs began as simple
variants of cash forward contracts, but soon
began to acquire more and more characteristics of
futures contracts. This process has progressed to
the point that it is now possible to argue that
newer versions of HTAs are more like speculative
futures contracts than cash forward contracts."
Charles F. Reid, Note, Risky Business: HTAs, the
Cash Forward Exclusion and Top of Iowa
Cooperative v. Schewe, 44 Vill. L. Rev. 125, 134
(1999). Several courts have concluded that HTA
contracts are cash forward contracts that may be
sold off-exchange./1 But the CFTC has leaned
towards characterizing HTAs as futures contracts
that must be sold on designated exchanges./2
II. Background
Lowell Harter was, until his retirement, a corn
farmer in Grant County, Indiana. "The Andersons"
is a corporation that operates grain elevators
around the Midwest. The Andersons was not, at the
time of the transactions in question, a futures
commission merchant (FCM) registered with the
Commodity Futures Trading Commission./3 In 1993,
The Andersons began marketing HTA contracts. The
Andersons solicited Harter, who entered into five
such contracts in November 1994. Harter contends
that an employee of The Andersons told him the
contracts were "no risk" plays on the futures
market. The Andersons counters that the contracts
clearly stated that "the commodities represented
under this contract will be tangibly exchanged."
Appellee’s Br. at 4. The Andersons implies that
Harter understood that the contracts called for
him to turn over corn or its cash equivalent at
some point in the future, suggesting that the
risk of loss was apparent.
Harter claims that a few months later,
presumably at the delivery obligation date, The
Andersons notified him that he owed them
$16,941.69 (we assume--neither party specifies--
that The Andersons requested and Harter refused
delivery of the corn, thus giving rise to an
obligation to furnish its cash equivalent).
Harter was surprised, he says, because he thought
the HTAs were "no risk." Harter says that the
parties agreed he would tender a check for the
amount, and they would simultaneously enter into
new HTA contracts designed to capitalize on the
market and generate enough profit to cover the
initial loss. See Appellant’s Br.I at 3./4 The
Andersons does not directly respond to this, but
states that the parties agreed to extend the
delivery periods for the contracts, or roll the
contracts forward.
In May of 1995, apparently when the new
delivery obligation date arrived, The Andersons
sought delivery of the corn, which Harter again
refused. The Andersons then told Harter he owed
it approximately $50,000. The Andersons explains
that this figure represents "the difference
between the market price of corn and the price
for the corn established by the contracts."
Appellee’s Br. at 6-7. Harter says that the
figure represents the entire loss throughout the
HTA contract period, less a $16,000 payment
Harter made to cover the initial loss.
Appellant’s Br.I at 3.
Harter filed a class action lawsuit in the
Northern District of Illinois against The
Andersons, its subsidiary AISC and introducing
broker Iowa Grain. Appellant’s Supp. App.I at 24-
35 (Harter v. Iowa Grain Co., No. 96 C 2936 (N.D.
Ill. July 26, 1999) (first amended complaint)).
Harter later dropped Iowa Grain, which Harter had
erroneously believed to be The Andersons’
principal, from the suit. See Appellant’s Supp.
App.II at 218-225 (Harter v. Iowa Grain, No. 97-
2671 (7th Cir. July 15, 1998) (unpublished order
reversing award of sanctions against Harter’s
attorney)). Harter alleged that The Andersons had
violated the Commodity Exchange Act, the federal
Racketeer Influenced and Corrupt Organizations
Act (RICO), the Indiana RICO statute, and had
committed common law fraud, breach of fiduciary
duty and intentional infliction of emotional
distress. The contracts Harter had signed
expressly provided that in the event of a
dispute, the National Grain & Feed Association
(NGFA) would arbitrate. After Harter filed suit,
The Andersons petitioned the district court,
pursuant to the Federal Arbitration Act, 9 U.S.C.
sec. 1 et seq., to stay proceedings and to compel
arbitration. The district judge granted the
motion. The NGFA arbitrators entered an award in
favor of The Andersons, and ordered Harter to pay
contract damages of $55,350 plus interest, as
well as $85,000 in attorney’s fees plus interest.
Harter moved to vacate or modify the award; The
Andersons moved to confirm it. On July 24, 1998,
the district court entered an order confirming
the arbitration award in its entirety. It
subsequently granted The Andersons’ request that
Harter bear the attorney’s fees that The
Andersons incurred in non-arbitration portions of
the litigation. Harter now appeals the district
court’s order compelling arbitration, its order
affirming the award and its order regarding
attorney’s fees.
III. The Order Compelling Arbitration
The contracts at issue provide for the
arbitration of "any disputes or controversies
arising out of" those contracts. See, e.g.,
Appellant’s Supp. App.I at 71-82 (duplicates of
Harter HTA contracts). The Federal Arbitration
Act provides that a court must stay its
proceedings and compel arbitration if it is
satisfied that an issue before it is arbitrable
under the parties’ agreement. See 9 U.S.C. sec.
3. The district court in the present case did
just that, and Harter protests. We review the
district court’s order compelling arbitration de
novo. See Matthews v. Rollins Hudig Hall Co., 72
F.3d 50, 53 (7th Cir. 1995).
"The primary issue before the court," Harter
explains, "is whether [CFTC regulations governing
predispute arbitration] invalidate[ ] the
arbitration clause in the . . . contracts."
Appellant’s Reply Br. at 1. Harter does not
identify any respect in which the clauses
themselves violate CFTC regulations, for instance
by excluding required consumer protection
language. However, Harter insists that "the . .
. contracts violate the prohibition of the
Commodity Exchange Act . . . against the sale of
off-exchange futures contracts . . . by
unregistered persons or entities through fraud."
Id. (citations omitted). We understand him to
argue that the contracts themselves are illegal;
if this argument is correct, he posits, the
contracts are void and the arbitration clauses in
them are ineffective. Consequently, the district
court order compelling arbitration would have
been in error.
Under section 4 of the Federal Arbitration Act,
9 U.S.C. sec. 4, a federal court must order
arbitration "once it is satisfied that ’the
making of the agreement for arbitration or the
failure to comply [with the arbitration
agreement] is not in issue.’" Prima Paint Corp.
v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403
(1967) (quoting 9 U.S.C. sec. 4). Courts "will
not allow a party to unravel a contractual
arbitration clause by arguing that the clause was
part of a contract that is voidable . . . ."
Colfax Envelope Corp. v. Local No. 458-3M,
Chicago Graphic Communications Int’l Union, 20
F.3d 750, 754 (7th Cir. 1994). "The party must
show that the arbitration clause itself, which is
to say the parties’ agreement to arbitrate any
disputes over the contract that might arise, is
vitiated by fraud, or lack of consideration or
assent . . . ." Id. (emphasis added). Neither
Harter’s complaint nor his motion opposing
compelled arbitration alleges that the
arbitration provisions themselves were the
product of fraud, inadequate consideration or the
like. Instead, he attacks the legality of each
contract as a whole. Thus, under the Federal
Arbitration Act and cases construing it, the
dispute arising from the contracts-- namely, the
legality of the contracts under the CEA--is
arbitrable.
In this respect, Harter’s case is a duplicate
of Sweet Dreams Unlimited, Inc. v. Dial-A-
Mattress Int’l, Ltd., 1 F.3d 639 (7th Cir. 1993).
In that case, two parties signed an agreement
under which one would market the other’s
trademarked product. The agreement called for all
disputes "arising out of" it to be arbitrated.
The marketer was offered a franchise agreement,
which was never executed. Eventually the producer
severed the relationship entirely and allegedly
attempted to put the marketer out of business.
See id. at 640. The marketer sued in state court,
and the producer removed to federal court and
asked the court to stay proceedings pending
arbitration. The marketer argued that it was the
purchaser of an unregistered franchise; the
Illinois Franchise Act allowed such purchasers to
sue for recision of the offending contract. See
id. The marketer therefore argued that the
contract which called for arbitration should be
rescinded by the court, and the dispute should be
resolved in court. We stated that the
"interesting, if not somewhat metaphysical"
question at issue was whether "a dispute, which
has as its object the nullification of a
contract, ’arise[s] out of’ that same contract."
Id. at 641.
We held in Sweet Dreams that where a dispute
has its origins in an agreement that calls for
arbitration, the court cannot decide the merits
because the dispute "arises out of" the agreement
and is subject to arbitration. Id. at 642-43.
Therefore, in Sweet Dreams, whether the marketer
was the purchaser of a registered or unregistered
franchise under state statute was, pursuant to
the Federal Arbitration Act, a matter for the
arbitrator and not for the court. See id. Just so
here./5 The Harter contracts say that any
dispute "arising out of" the contract will be
arbitrated. See, e.g., Supp. App.I at 71-83
(duplicates of HTA contracts; attorney’s fee
provision found at para. 5 in each). Harter, like
the marketer in Sweet Dreams, makes a legal
argument that he is protected by a statute that
would invalidate the agreement. Because his
contentions "arise out of" his contract, they are
matters for the arbitrator.
Next, Harter embarks down an alternate
rhetorical route to arrive at his preferred
destination--federal court. He suggests that even
if the court cannot decide the merits of his
claim, the court must assume that the claim is
valid for the purpose of evaluating the motion to
compel arbitration./6 If we were to accept this
sophistry, we would essentially be directing the
case to the district court. For if, based on our
assumption, the arbitrators have no power, who
but the court may hear this case? Fortunately,
the argument is meritless, and we need not tax
the district court further. Harter marshals
Schacht v. Beacon Insurance Co., 742 F.2d 386(7th Cir. 1984), which states that "an order to
arbitrate the particular grievance should not be
denied unless it may be said with positive
assurance that the arbitration clause is not
susceptible of an interpretation that covers the
asserted dispute." Id. at 390 (quoting United
Steelworkers v. Gulf Navigation Co., 363 U.S.
574, 582-83 (1960)) (emphasis added). Based on
this single word, Harter would have us take as
true his assertions that these contracts violated
the CEA and are therefore void. But reading
Schacht as a whole, this is clearly wrong.
In Schacht, a reinsurance company contracted to
cover the losses of an insurance company. 742
F.2d at 388-89. The contract included an
arbitration clause. See id. The reinsurer asked
the insurer for an "advance premium," and when
none was forthcoming, sent a notice of
cancellation to the insurer. Id. The insurer
responded that the contract called for 180 days
notice before cancellation, and stated that it
assumed the contract remained in force. See id.The insurer later sought coverage for its losses,
and the reinsurer failed to pay the claim. See
id. The insurer sought arbitration, and the
reinsurer stated that the contract was void, thus
relieving it of the duty to arbitrate. See id. We
said that it was clear the parties had a
contractual relationship, but granted the
possibility that if the reinsurer was correct,
some of the contractual provisions were
unenforceable. We then concluded that "[t]he
claims raised by [the reinsurer] are susceptible
to resolution through the arbitral process." Id.
at 390. So despite Harter’s creative
interpretation of Schacht, the case ultimately
weighs against his point of view. Clearly the
parties in the present case had a contractual
relationship--the record includes copies of the
documents signed by both parties. See Appellant’s
Supp. App.I at 71-83 (duplicates of Harter’s HTA
contracts). Notwithstanding the merits of
Harter’s claims that the contractual terms with
The Andersons were not enforceable, Schacht
(along with Sweet Dreams, Colfax Envelope and
Prima Paint) instructs that the NGFA arbitration
panel was the ultimate forum for those claims./7
Not easily deterred, Harter makes an alternative
effort to keep this dispute out of the
arbitrators’ hands. He argues that even if the
arbitration clauses are valid, a court is better
suited to pass on the legal status of the
contracts than is an arbitrator. This argument is
not altogether fanciful. The Ninth Circuit has
stated that questions of law regarding statutory
rights are best left to judicial interpretation.
Marchese v. Shearson Hayden Stone, Inc., 734 F.2d
414, 419-20 (9th Cir. 1984). The Marchese court
concluded that "[i]t is up to case-by-case
interpretation to determine which statutes are
such that an arbitrator can consider the
statutory claim." Id. The plaintiff in Marchese
had asked for a declaratory judgment stating that
the Commodity Exchange Act allowed customers to
retain "interest and increment" on margin
deposits in excess of their brokerage fees. See
id. at 419. The Ninth Circuit considered this a
claim requiring pure legal interpretation of the
Commodity Exchange Act, and held that it was
uniquely suited for judicial resolution, and that
the district court’s order to compel arbitration
was in error. See id. at 421.
Though Marchese nicely reflects Harter’s point
of view, it does not persuade us. Why? First, the
CEA claim at issue here--that Harter’s HTA
contracts are futures instruments rather than
cash market transactions--is not a pure question
of law, but requires a fact-intensive inquiry. We
have stated that "[a]lthough cash forward
contracts and futures contracts are easily
distinguishable in theory, it is frequently
difficult in practice to tell whether a
particular arrangement between two parties is a
bona fide cash forward contract for the delivery
of grain or whether it is a mechanism for price
speculation on the futures market." Lachmund, 191
F.3d at 787. Lachmund instructed that we examine
the facts of the case, beginning with the words
of the contract itself, and moving on to "the
course of dealings between the parties and the
totality of the business relationship." Id. Thus,
this case is unlike the pure question of law
presented in Marchese./8
Harter takes a final swipe at the arbitration
order. He rightly recounts that arbitration is a
matter of contract, and that "a party cannot be
required to submit to arbitration any dispute
which he has not agreed so to submit." See United
Steelworkers, 363 U.S. at 582. Based on this
truism, he floats two contractual arguments:
first, he did not intend for a claim regarding
the validity of the HTA contracts to be
arbitrated; second, The Andersons did not intend
that this claim be arbitrated. Harter claims to
have received "something completely different"
than what he "bargained for" when his claim was
adjudicated by the NGFA panel. Appellant’s Br.I
at 26. But the arbitration clauses in his
contracts state that "any disputes or
controversies arising out of th[ese] contract[s]
shall be arbitrated by the National Grain & Feed
Association, pursuant to its arbitration rules."
Appellee’s Supp. App. at 49-58 para. 136 of
"Standard Purchase Contract Terms" (emphasis
added). So Harter--like it or not--got exactly
what he bargained for.
Equally implausible is Harter’s claim that The
Andersons did not intend the NGFA to arbitrate
the claim. He furnishes us records showing that
the NGFA had not arbitrated claims of fraud or
misrepresentation before the groundswell of HTA
disputes. This evidence does not suggest that the
Andersons did not intend NGFA to arbitrate such
a dispute. In fact, if any inference can be drawn
from the fact that the NGFA began hearing fraud
and misrepresentation claims as soon as the HTA
controversies arose, it is that the NGFA was the
natural forum to which the parties to these
disputes turned. We therefore affirm the district
court’s grant of the motion to compel
arbitration.
IV. Structural Bias of the NGFA Arbitration Panel
The Andersons asked the district court to
confirm the NGFA panel’s award, which it did.
Harter now argues to us, as he did below, that
this decision was erroneous because the NGFA
panel was biased against him. When reviewing the
district court’s confirmation of the arbitration
award, we decide questions of law de novo and
review findings of fact for clear error. See
Employers Ins. of Wausau v. Banco de Seguras Del
Estado, 199 F.3d 937, 941 (7th Cir. 1999).
Parties to an arbitration contract agree to
trade procedural niceties for expeditious dispute
resolution. See Dean v. Sullivan, 118 F.3d 1170,
1173 (7th Cir. 1997). The Federal Arbitration Act
permits us to upset the parties’ bargain by
vacating an arbitration award only in very
specific situations. See 9 U.S.C. sec. 10. Harter
argues that this arbitration is such a situation
because there was "evident partiality . . . in
the arbitrators . . ." in violation of section
10(a)(2) of the Act. 9 U.S.C. sec. 10(a)(2). We
have stated that "evident partiality" exists when
an arbitrator’s bias is "direct, definite and
capable of demonstration rather than remote,
uncertain, or speculative." United States
Wrestling Federation v. Wrestling Division of the
AAU, Inc., 605 F.2d 313, 318 (7th Cir. 1979).
Harter now asks us to recognize a subset of
arbitral partiality, "structural bias." He
contends that the NGFA is "structurally biased"
against farmers because its members include grain
elevators like The Andersons. Thus, he was
"placed in the unenviable position of having to
attempt to persuade NGFA members that a
widespread practice of the association’s
membership is illegal." Appellant’s Br.I at
32./9 Harter no doubt feels that the farmers’
traditional adversaries were sitting in judgment
over him.
Some notable jurists have harbored similar
suspicions about the fate of customers appearing
before arbitration panels populated by industry
"insiders." For instance, when the Second Circuit
required a securities buyer to arbitrate a fraud
claim under the 1933 Securities Act against his
broker, Judge Clark dissented. See Wilko v. Swan,
201 F.2d 439, 445-46 (2d Cir.), rev’d 346 U.S.
427 (1953). Judge Clark stated that "the persons
to [adjudicate the dispute] would naturally come
from the regulated business itself. Adjudication
by such arbitrators . . . is surely not a way of
assuring the customer that objective and
sympathetic consideration of his claim which is
envisaged by the Securities Act." Id. at 445(Clark, J., dissenting). The Supreme Court
adopted Judge Clark’s point of view, stating that
Congress’s intent in passing section 14 of the
Securities Act was to "assure that sellers could
not maneuver buyers into a position that might
weaken their ability to recover under the
Securities Act." Wilko v. Swan, 346 U.S. 427, 432
(1953). Section 14 created a non-waivable right
to bring suit in federal court for such
maneuvers, the Court determined. See id. at 434-
35.
The Seventh Circuit adopted this reasoning in
Weissbuch v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 558 F.2d 831 (7th Cir. 1977). In
Weissbuch, we relied on Wilko to find that a Rule
10b-5 consumer fraud claim was not arbitrable.
See Weissbuch, 558 F.2d at 835-36. The same year
we decided Weissbuch, we held that an analogous
CEA claim was arbitrable. See Tamari v. Bache &
Co. (Lebanon) S.A.L., 565 F.2d 1194, 1199-1200
(7th Cir. 1977) (Tamari II). We reasoned that
unlike the Securities Act of 1933 at issue in
Wilko, the CEA had no non-waivable consumer
protection provision. See Tamari II, 565 F.2d at
1199. Judge Swygert, in a persuasive dissent,
relied on Wilko and Weissbuch to argue that
commodities investors, like securities investors,
were "vulnerable to fraudulent schemes
perpetrated by industry insiders," and thus
deserved a judicial forum for their claims. See
id. at 1206 (Swygert, J., dissenting).
However perceptive Judge Swygert and Judge Clark
may have been, the opposing view favoring
arbitration has firmly won out. In 1989, the
Supreme Court explicitly overruled Wilko, stating
that it had "fallen far out of step with our
current strong endorsement of the federal
statutes favoring [arbitration as a] method of
resolving disputes." Rodriguez de Quijas v.
Shearson/American Express, Inc., 490 U.S. 477,
481 (1989). Rodriguez de Quijas was the
culmination of a series of pro-arbitration cases
decided in the 1980s. In Mitsubishi Motors Corp.
v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614(1985), the Court held that foreign arbitration
panels could hear international antitrust claims
under the Sherman Act. See id. at 639. In
Shearson/American Express, Inc. v. McMahon, 482
U.S. 220 (1987), the Court held that industry
panels could arbitrate most consumer claims under
the Securities Exchange Act of 1934 and under
RICO. See id. at 232-33, 238-39. Rodriguez de
Quijas removed the final barrier to arbitration
of section 14 Securities Act claims contained in
Wilko./10
To avoid the arbitration pitfalls identified by
Judges Swygert and Clark, we have required
arbitrators to provide a "fundamentally fair
hearing." See, e.g., Generica Ltd. v.
Pharmaceutical Basics, Inc., 125 F.3d 1123, 1130
(7th Cir. 1997). We guarantee fairness by
steering clear of "evident partiality." And, in
settings where arbitrators and litigants were
structural adversaries, as Harter suggests they
are here, we have never found evident partiality.
For instance, we refused to set aside an award
rendered in favor of a financial services company
by a panel whose members were "drawn from persons
in the commodities business." Tamari v. Bache
Halsey Stuart, Inc., 619 F.2d 1196, 1201 (7th
Cir. 1980) (Tamari IV, see id. at 1197 n.1). We
reasoned that disqualifying arbiters with
experience in the business would eviscerate the
goals of arbitration. See id. at 1202 n.11. We
also noted in Tamari IV that the customer had
agreed to arbitrate before the "industry" panel.
See id. at 1201-02. We have elsewhere stated that
by virtue of their expertise in a field,
arbitrators may have interests that overlap with
the matter they are considering as arbitrators.
See, e.g., Health Servs. Mgt. Corp. v. Hughes,
975 F.2d 1253, 1264 (7th Cir. 1992). Such overlap
has not amounted to prima facie partiality. See
id. at 1264; Tamari IV, 619 F.2d at 1201. Thus,
even a prior business association between an
arbitrator and a party is not sufficient evidence
of bias to vacate an award. See Health Servs.,
975 F.2d at 1264. Reviewing these cases, we find
it difficult to imagine how courts might apply
the "structural bias" standard Harter advocates.
In an economy increasingly populated by large
conglomerates with diverse interests, many
individual arbitrators could be affiliated with
companies only arguably adverse to one of the
parties. Harter’s standard would require
disqualification, despite the practical reality
that the arbitrators themselves would quite
likely be impartial.
Although as a matter of first impression we
might sympathize with Harter’s frustration, we
are in the mainstream in rejecting his
"structural bias" argument./11 The First
Circuit recently rejected an argument that an
arbitration panel comprising financial employers
was so inclined to side with employers that it
could not adjudicate the claim of a female worker
alleging gender discrimination. See Rosenberg v.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 170
F.3d 1, 14-15 (1st Cir. 1999). The Eleventh
Circuit has affirmed the impartiality of a panel
whose members were in the business of collecting
futures debit balances from customers in a
situation where the panel held a customer liable
for such obligations. See Scott v. Prudential
Sec., Inc., 141 F.3d 1007, 1015-16 (11th Cir.
1998). And, of particular relevance to us, the
Sixth Circuit recently found in favor of The
Andersons in a challenge to an NGFA arbitral
award involving an HTA contract almost identical
to Harter’s. See Horton Farms, 166 F.3d at 328-
30. So precedent in this circuit and others, as
well as the broad policy goals served by
arbitration, require us to reject Harter’s
argument of "structural bias" in the NGFA. This
issue is no longer open.
Thus, we will vacate the arbitration award only
if Harter can show that the NGFA panel had direct
bias against him. This standard is difficult to
meet. For instance, in one of the few cases
vacating an award because of arbitral bias, the
Second Circuit objected when a son served as
arbitrator of a dispute involving a local unit of
an international union of which his father was
president. See Morelite Constr. Corp. v. New York
City Dist. Council Carpenters Benefit Funds, 748
F.2d 79, 84 (2d Cir. 1984).
Harter observes that the NGFA is an
organization of grain merchandisers and their
affiliates. See Appellant’s Br.I at 30-31.
Apparently, however, a number of farmer-owned
cooperatives are also NGFA members. See Horton
Farms, 166 F.3d at 326. On the other hand, one of
The Andersons’ top employees sits on the NGFA
board. See id. at 325. The Andersons pays more
than $26,000 in dues annually to the NGFA. See
Appellant’s Br.I at 31. And the NGFA has taken
the public position that HTA contracts are not
futures instruments. See id. Harter charges that
a significant portion of NGFA members have
written HTA contracts, and that NGFA arbitration
rules do not disqualify arbitrators who have
written HTA contracts. See id. at 32. Harter also
charges that, prior to the influx of HTA cases,
the NGFA arbitrated fewer than twenty cases
involving farmers, and only vindicated farmers
twice. See id. at 27 n.26. Harter alleges that
almost half of the NGFA’s members have written
HTA contracts, while the NGFA points out that
just half of those members responding to an HTA
survey have done so. See Amicus Br. at 13 n.10.
Even if all of these facts are true, they do not
establish the direct, definite, demonstrable bias
required by United States Wrestling Federation,
605 F.2d at 318. See also Horton Farms, 166 F.3d
at 325-26 (finding that combination of procedural
safeguards and membership of farmer-owned
cooperatives indicated fairness of NGFA arbitral
proceedings).
Under NGFA arbitration rules, an aggrieved party
must first file a complaint with the NGFA
national secretary. The parties then fully brief
the dispute, and either party may request oral
argument, though the requesting party bears the
cost. The NGFA national secretary then appoints
a three-member arbitration committee selected
from the membership. The individual arbitrators
must have expertise in the industry sector at
issue, but must be commercially disinterested in
the particular dispute. See Amicus Br. at 12.
Arbitrators must disclose any bias or financial
interest that could influence their analysis;
either party may object to any of the
arbitrators. See id. The panel issues written
opinions, and the parties may appeal. These facts
suggest significant procedural safeguards for the
parties.
Finally, Harter argues that the panel
demonstrated its bias by granting an
unsubstantiated request by The Andersons for
attorney’s fees, and delegating to the NGFA
national secretary the task of verifying The
Andersons’ expenditures. It is true that, when a
party claims arbitral bias, we must "scan the
record" for evidence of partiality. See, e.g.,
Health Servs., 975 F.2d at 1258. Here, the NGFA
panel unanimously found in favor of The
Andersons, and awarded damages reflecting The
Andersons’ actual market loss, plus cancellation
fees, plus compound interest calculated at 9
percent. It also cited a provision in Harter’s
contract stating that "seller shall also be
liable for The Andersons’ attorney’s fees . . ."
and stated that the Andersons "indicated that
outside counsel fees and costs totaled
approximately $85,000 through November 1996 in
connection with the federal court case resulting
from Harter’s refusal to arbitrate the dispute .
. . ." Appellant’s App.I at 9 (The Andersons,
Inc. v. Harter, NGFA Case No. 1788). The
arbitration panel’s written decision also
recounted the ongoing court battle between the
parties. Thus, although The Andersons had not
submitted actual billing records, the panel had
before it contract language calling for Harter to
pay The Andersons’ legal fees, The Andersons’
estimate of its legal fees and evidence of the
court battle giving rise to those fees. The
decision to award attorney’s fees subject to a
detailed review by the NGFA national secretary
was reasonable, and certainly does not prove
direct bias against Harter. We therefore affirm
the district court’s confirmation of the arbitral
award.
V. Attorney’s Fees
Harter finally complains that the district judge
erred in finding that The Andersons was entitled
to recover attorney’s fees incurred for
proceedings following the arbitration. Harter
protests the award on two grounds: the Federal
Arbitration Act does not authorize post-
arbitration awards of attorney’s fees and the
contract authorizing fee shifting does not apply
to proceedings ancillary to enforcement of the
arbitration decision. We review the district
court’s award of attorney’s fees for abuse of
discretion. See Connolly v. National Sch. Bus
Serv., Inc., 177 F.3d 593, 595 (7th Cir. 1999).
As for Harter’s first contention, he is correct
that the Federal Arbitration Act does not
authorize a district court to award attorney’s
fees to a party who successfully confirmed an
arbitration award in federal court. See Menke v.
Monchecourt, 17 F.3d 1007, 1009 (7th Cir. 1994).
But Menke, the linchpin of Harter’s argument
against attorney’s fees, recognizes two bases for
deviating from the American rule that each party
bear its own fees: (1) statutory authority for
fee shifting and (2) contractual agreement
between the parties. See id. Here, The Andersons
invoked the words of the contract that Harter
signed. That document provides that "[f]ailure to
fulfill this contract will result in minimum
contract cancellation charges to the seller
[Harter], the total of which will be the
difference between the contract price and the
replacement cost at the time of cancellation,
plus the cancellation charge in effect. Seller
shall also be liable for The Andersons’ attorney
fees, cost of collection, plus interest."
Appellant’s Supp. App.I at 71-83 (duplicates of
HTA contracts; attorney’s fee provision found at
para. 5 in each).
In a similar case in the Ninth Circuit, one
party to an arbitral agreement moved to vacate
the arbitral award, as Harter did here. See
LaFarge Conseils et Etudes v. Kaiser Cement &
Gypsum Corp., 791 F.2d 1334 (9th Cir. 1986). The
court concluded that the motion was an action
"based on the contract," which provided for
attorney’s fees in actions to enforce the
contract. See id. at 134. Therefore, the party
that successfully defended the motion to vacate
was entitled to reimbursement for fees expended
in that defense. See id. Analogously, The
Andersons, which successfully defended against
Harter’s motion to vacate, was entitled under the
terms of the contract to seek reimbursement from
the district court for fees expended in that
defense. For the district court to consider and
grant such a request was not an abuse of
discretion.
Harter next argues that the trial judge erred
in awarding fees for litigation ancillary to The
Andersons’ enforcement of the arbitral award.
This "collateral" litigation included:
Harter’s unsuccessful interlocutory appeal
from the district court order compelling
arbitration. See Appellant’s Supp. App.II at 218-
25 (Harter v. Iowa Grain Co., No. 96-3907 (7th
Cir. July 15, 1998) (unpublished order)) (also
found at 1999 WL 754333).
Harter’s appeal of Rule 11 sanctions against
his attorneys, imposed for naming Iowa Grain as
a defendant, when there was questionable proof
that Iowa Grain was linked to The Andersons in
such a way as to make it liable for any alleged
wrongdoing. Apparently, The Andersons was
involved in discovery related to the litigation,
which focused on whether AISC or The Andersons
was an agent of Iowa Grain. See Appellant’s Supp.
App.II at 218-25 (Harter v. Iowa Grain Co., No.
97-2671 (7th Cir. July 15, 1998) (unpublished
order reversing award of sanctions against
Harter’s attorney)) (also found at 1999 WL
754333).
Harter’s appeal of the district court’s
decision to dismiss as a defendant The Andersons’
subsidiary AISC. Harter initially named AISC, The
Andersons’ wholly owned subsidiary, apparently
believing that AISC did business as The Andersons
(they were in fact separate entities). The
district court conditionally dismissed AISC, and
we refused to review the dismissal, stating that
until the conditions upon which AISC could be
reinstated were moot, the dismissal was not a
final, appealable order. See Appellant’s Supp.
App.II at 218-25 (Harter v. Iowa Grain Co., No.
96-4074 (7th Cir. July 15, 1998) (unpublished
order dismissing interlocutory appeal)) (also
found at 1999 WL 754333).
The Andersons’ efforts to limit the scope of
Harter’s subpoena of the NGFA, served after the
NGFA arbitration award was announced. Harter
requested from the NGFA information that would
help it prove arbitral bias. See Appellant’s
App.II at 4 (Harter v. Iowa Grain Co., No. 96 C
2936 (N.D. Ill. Oct. 28, 1998) (memorandum
opinion and order regarding attorney’s fees)).
The Andersons’ request for an injunction
forcing Harter to place in escrow profits he
received on the sale of farm assets. See id.Harter urges that the fee-shifting provision in
the contract applies only to attorney’s fees
required to pursue a breach of contract action
against him. He contends that the proceedings
listed above are unrelated to The Andersons’
breach of contract claim, and thus do not come
within the ambit of the fee-shifting provision.
The district judge disagreed, stating that "in
each instance Andersons would not have been
required to incur, but for Harter’s contractual
breaches, Andersons’ attorney’s fees and related
expenses . . . ." See Appellant’s App.II at 3
(Harter v. Iowa Grain Co., No. 96 C 2936 (N.D.
Ill. Oct. 28, 1998) (memorandum opinion and order
regarding attorney’s fees)). We review this
decision for abuse of discretion. See, e.g.,
Kossman v. Calumet County, 849 F.2d 1027, 1030
(7th Cir. 1988).
Whether the contract’s fee-shifting provision
covers satellite litigation is a question of
contract interpretation. We interpret the
contract with reference to Illinois law./12 In
Illinois, "[p]rovisions for attorney’s fees are
to be construed strictly, and such fees cannot be
recovered for any services, unless so provided by
the [contract]." Northern Trust Co. v. Sanford,
308 Ill. 381, 389-90 (1923). Further, any
ambiguity in a contract must be strictly
construed against the party that wrote the
contract. See Glidden v. Farmers Auto. Ins.
Ass’n, 57 Ill. 2d 330, 336 (1974). Thus, for
example, where a contract authorizes the shifting
of attorney’s fees incurred in contract
enforcement, a party may not recover fees
incurred in bringing or defending a declaratory
judgment action. See, e.g., Zimmerman v. First
Prod. Credit Ass’n, 89 Ill. App. 3d 1074, 1076
(1980); Arrington v. Walter E. Heller Int’l
Corp., 30 Ill. App. 3d 631, 642 (1975). In
addition to limiting the type of action for which
a party may recover attorney’s fees, Illinois
courts have suggested that fee-shifting
provisions do not apply to attorney work that has
only an indirect connection to the subject matter
of the contract. For instance, in Helland v.
Helland, 214 Ill. App. 3d 275 (1991), a husband
gave his ex-wife a promissory note for $12,000
plus 8 percent interest, and the note called for
the husband to reimburse the wife for attorney’s
fees in the event he defaulted on the obligation.
See id. at 276. The husband defaulted, and the
wife sued for the $12,000 principal and simple
interest, which the husband paid. See id. The
wife then petitioned to receive compound
interest, and the court rejected her petition.
See id. The trial court held that she was
entitled to recover attorney’s fees expended in
pursuit of the compound interest claim, but the
appellate court disagreed: "[s]uch a claim
obviously was not caused by defendant’s default
because he had paid the promissory note. . . .
[P]laintiff was entitled to attorney fees
incurred prior to cure." Id. at 278 (emphasis
added).
In a case that more closely resembles Harter’s,
an auctioneer received a winning bid for farm
equipment, but the purchaser’s check was returned
for insufficient funds. See Kruse v. Kuntz, 288
Ill. App. 3d 431, 432 (1996). The purchaser then
signed a written statement agreeing to pay the
full amount due by a deadline, plus attorney’s
fees. See id. He did not meet the deadline, and
the auctioneer filed suit; the purchaser filed a
counterclaim seeking recision of the contract and
filed a third-party claim against his bank. See
id. The court held that the auctioneer was
entitled to attorney’s fees incurred in
connection with the "collateral" counterclaim and
third-party claim because those claims were
"necessitated" by the purchaser’s actions to
avoid his contractual obligations. See id. at
436.
In this case, Harter’s contract states that
"[f]ailure to fulfill this contract will result
in minimum contract cancellation charges to the
seller [Harter] . . . . Seller shall also be
liable for The Andersons’ attorney fees, cost of
collection, plus interest." Appellant’s Supp.
App.I at 71-83 (duplicates of HTA contracts;
attorney’s fee provision found at para. 5 in
each). Following the example of Zimmerman and
Arrington, we interpret this provision to limit
The Andersons to fees incurred to collect its
damages under the contract. Thus, applying the
principles of Kruse and Helland, it seems that
only actions necessary to The Andersons’
collection effort are covered by the attorney’s
fee provision. Harter need not reimburse The
Andersons for its discretionary litigation
efforts unnecessary to the collection. Clearly,
opposing Harter’s interlocutory appeal from the
district court order compelling arbitration was
necessary to collection of damages. These
portions of the award are confirmed. Also
necessary to The Andersons’ collection of damages
was The Andersons’ request for an injunction
forcing Harter to place in escrow profits he
received on the sale of farm assets.
The district court, in approving attorney’s fees
for other collateral litigation, stated that "but
for" Harter’s actions, The Andersons would not
have incurred legal bills. With respect, we
believe that Illinois authorities require a more
direct link between the losing party’s acts and
the winning party’s attorney’s fees than a "but
for" relation. At some point, Harter’s opponents
must take responsibility for their own trial
strategy. For instance, clearly unnecessary to
the collection of damages was The Andersons’
involvement in a co-defendant’s effort to recover
Rule 11 sanctions from Harter’s attorney.
Although the district judge correctly stated that
but for Harter’s legal complaint, co-defendant
Iowa Grain would not have moved for Rule 11
sanctions against Harter, that conclusion does
not justify attorney’s fees. Rather, we must ask
whether Harter’s actions made the collateral
litigation necessary to the collection of fees.
We have previously held, in an unpublished
opinion, that Harter’s lawyer did nothing so
egregious that sanctions were warranted. See
Harter v. Iowa Grain Co., 202 F.3d 273 (7th Cir.
1998) (unpublished order) (also found at 1999 WL
754333). Following this logic, the effort to
sanction Harter’s lawyer for wrongdoing was not
required to collect damages. Thus, the onus for
the Rule 11 action falls on Iowa Grain, which
elected to pursue the sanctions action, and not
on Harter. Similarly, The Andersons’ effort to
limit the scope of Harter’s subpoena on the NGFA
was not necessary to The Andersons’ collection of
the arbitration award. Harter sought information
from the NGFA that would help him undermine the
objectivity of the NGFA process and thus justify
vacating the award. In the present circumstances,
because the NGFA moved on its own to quash the
subpoena and The Andersons elected to duplicate
the NGFA’s efforts, we do not think The
Andersons’ effort was necessary to collecting
Harter’s debt. See Harter v. Iowa Grain Co., No.
98-014 (D. D.C. May 12, 1998) (order quashing
subpoena), vacated as moot, Harter v. Iowa Grain
Co., No. 98-7108 (D.C. Cir. Oct. 28, 1998).
The most difficult question we address in terms
of attorney’s fees is whether Harter should be
required to repay The Andersons for its appellate
defense of the district court’s decision to
dismiss The Andersons’ subsidiary, AISC. Whether
AISC was named as a defendant seems anything but
crucial to The Andersons right to collect damages
in this case. Further, the contract clearly
states, "Seller shall also be liable for The
Andersons’ attorney fees . . ." but not a
subsidiary’s fees. These two factors militate
against fee shifting in this case. But Harter
initially named AISC as a defendant because he
believed that AISC did business as The Andersons.
See Harter, 1999 WL 754335, at *1. Thus, when
Harter signed the contract agreeing to bear the
attorney’s fees of The Andersons, he must have
believed he was agreeing to cover the fees of
AISC doing business as The Andersons. Given
Harter’s apparent belief that AISC and The
Andersons were essentially the same entity, and
given the wide latitude the district court enjoys
in awarding attorney’s fees, we affirm its
decision to allow reimbursement for fees incurred
in defense of the AISC dismissal.
Harter’s last gasp is a series of complaints
about the fees themselves: they were not properly
documented, they are excessive, they cover non-
legal work, they are duplicative and they were
not billed contemporaneously. See Appellant’s
Br.II at 20-37. Again, a court’s award of
attorney’s fees is reviewed for abuse of
discretion. See Ustrak v. Fairman, 851 F.2d 983,
987 (7th Cir. 1988). Harter first argues that The
Andersons has inadequately documented the fees.
This is nonsense. Illinois courts have stated
that to justify a fee, a petition must specify
"the services performed, by whom they were
performed, the time expended thereon and the
hourly rate charged therefor." Kaiser v. MEPC Am.
Properties Inc., 164 Ill. App. 3d 978, 982
(1987). In Fidelity & Deposit Co. of Maryland v.
Krebs Engineers, 859 F.2d 501 (7th Cir. 1988), we
held that mere testimony that fees and expenses
were incurred fell short of the requirement. See
id. at 508. Somehow, Harter has adduced from
these cases a requirement that the proponent of
attorney’s fees submit a petition setting forth
why the fees were reasonable. See Appellant’s
Br.II at 24. But detailed billing records that a
proponent avers are accurate provide the district
judge--who presided over this case--with all the
basis he needs to determine whether the fees are
reasonable.
The Andersons has provided billing records
generated by its law firm, Foley & Lardner, which
specify the task completed, the time (in 10-
minute increments) spent on the task, and the
identity of the attorney who completed the
task./13 Descriptions of conferences and phone
conversations specify who participated, and
descriptions of legal research and analysis
specify the motion, hearing or document on which
the attorney worked. See Appellant’s App.II at
44-87. The Andersons has also submitted an
affidavit stating that the billing records
accurately reflect Foley & Lardner’s work on
behalf of The Andersons.
Relatedly, Harter argues that the fees must be
unreasonable because together with the fees
awarded in arbitration, The Andersons will have
recovered $140,000 in order to enforce a $55,000
claim. However, as the trial judge pointed out,
Harter elected to bring a class action putting
millions of dollars at stake. Further, Harter
decided to take interlocutory appeals, thereby
driving up the fees at issue. In short, Harter
raised the stakes in this litigation, and now
must pay for that strategy./14
Harter argues that "excessive and duplicative"
work has been charged. What is excessive is a
matter of opinion, and under Ustrak, it is the
district court’s opinion that matters. See 851
F.2d at 987. We cannot say we disagree with the
district court’s exercise of its discretion in
approving these fees. For instance, Harter
complains that several of The Andersons’
attorneys spent more than thirty hours preparing
an appellate brief. Given the numerous and
complex issues involved in this litigation, we
would be more surprised if the judge had rejected
these billings as unreasonable. A properly
drafted appellate brief may require many hours of
research, analysis, writing and editing, and we
would hardly encourage appellate litigants--who
have spent hundreds of hours below--to economize
unduly at the appellate level. We affirm the
award of attorney’s fees for all matters except
the NGFA subpoena and the Rule 11 litigation.
VI. Conclusion
The district court correctly determined that
under the parties’ contract, the legal status of
the HTA contracts and the resulting resolution of
claims was a matter for the arbitrators. We AFFIRM
the district court’s order compelling
arbitration. We also agree with the district
court that the NGFA arbitration panel did not
demonstrate direct bias--the only kind of bias
sufficient to require vacation of an arbitral
award--in its adjudication of this dispute. We
AFFIRM the district court’s confirmation of the
arbitral award. We agree with the district
court’s conclusion that Harter is responsible for
attorney’s fees arising from litigation
collateral to the arbitration, except for the
fees The Andersons incurred in relation to the
Rule 11 litigation and the opposition to the NGFA
subpoena. We REVERSE the district court’s award of
attorney’s fees for these two matters, and AFFIRM
the remainder of the award.
/1 See, e.g., Lachmund v. ADM Investor Servs., Inc.,
191 F.3d 777, 788-90 (7th Cir. 1999); The
Andersons, Inc. v. Horton Farms, Inc., 166 F.3d
308, 318-20 (6th Cir. 1998); Nagel v. ADM
Investor Servs., Inc., 65 F. Supp. 2d 740, 750-53
(N.D. Ill. 1999); Barz v. Geneva Elevator Co., 12
F. Supp. 2d 943, 953-54 (N.D. Iowa 1998); Top of
Iowa Coop. v. Schewe, 6 F. Supp. 2d 843, 853-58
(N.D. Iowa 1998); In re Grain Land Coop., 978 F.
Supp. 1267, 1272-77 (D. Minn. 1997).
/2 See, e.g., In re Grain Land Coop., CFTC Docket
No. 97-1 (Nov. 6, 1998); In re Competitive
Strategies for Agric. Ltd., CFTC Docket No. 98-4
(Aug. 24, 1998). One district court has refused
to dismiss a claim similar to Harter’s on a Rule
12(b)(6) motion, reasoning that whether the HTAs
in that case were futures contracts was a
question of fact rather than of law. See
Gunderson v. ADM Investor Servs., Inc., No. C96-
3148-MWB, 2000 WL 235390 (N.D. Iowa, Feb. 28,
2000).
/3 At that time, a subsidiary, Andersons Investment
Services Corp. (AISC), cleared its transactions
through FCM Iowa Grain. The same individual
manages The Andersons’ facility and the AISC
operation at the Dunkirk, Indiana, office with
which Harter dealt.
/4 Harter originally brought two appeals, which have
been consolidated, but he filed separate briefs
and separate appendices. We will refer to the
first brief, appendix and supplemental appendix,
pertaining to the Commodity Exchange Act claims,
as Br.I, App.I and Supp. App.I. We will refer to
the second set of materials, pertaining to
attorney’s fees, as Br.II, App.II and Supp.
App.II.
/5 Harter implies that because the dispute here
involves interpretation of a federal statute,
rather than a common-law claim, the dictates of
the Federal Arbitration Act are trumped by the
Commodity Exchange Act. He is wrong. Numerous
courts have held that claims under the CEA are
arbitrable. See, e.g., Tamari v. Bache & Co.
(Lebanon) S.A.L., 565 F.2d 1194, 1200 (7th Cir.
1977) (Tamari II). See also Smoky Greenhaw Cotton
Co., Inc. v. Merrill Lynch, Pierce, Fenner &
Smith, 720 F.2d 1446, 1449-50 (5th Cir. 1983);
Ingbar v. Drexel Burnham Lambert Inc., 683 F.2d
603, 605 (1st Cir. 1982); Salcer v. Merrill
Lynch, Pierce, Fenner & Smith, Inc., 682 F.2d
459, 460 (3d Cir. 1982). Further, the dispute
aimed at nullifying the contract in Sweet Dreams
Unlimited, Inc. v. Dial-a-Mattress Int’l, Ltd.,
1 F.3d 639 (7th Cir. 1993) involved
interpretation of an Illinois statute; we
pointedly held that the FAA and cases construing
it applied. See id. at 642-43.
/6 On the day we heard oral arguments in Harter, a
separate Seventh Circuit panel spoke for the
first time on the legality of HTA contracts. See
Lachmund v. ADM Investor Servs., Inc., 191 F.3d
777 (7th Cir. 1999). Harter explained at oral
argument and in a supplemental brief that if we
decided the HTA contracts were legal as a matter
of law, then he would not have a valid "claim"
under the CEA, meaning the contracts and the
arbitration clauses in them would be
presumptively valid. See Appellant’s Supp. Br. at
2. Conversely, if we decided in Lachmund that the
legality of HTA contracts is a question of fact,
then Harter maintains we must consider his CEA
claim presumptively valid, and these contracts
and arbitration clauses presumptively invalid.
See id. We decided in Lachmund that the legality
of HTA contracts is a question of fact. But for
reasons outlined above, we reject Harter’s
premise that we must presume his CEA claim is
valid and decide the arbitration question based
on this presumption. The validity of the CEA
claim, and all consequences that follow from it,
are questions for the arbitrators.
/7 For the purposes of argument, the district court
did indulge Harter’s legal contentions. The court
assumed that the HTA contracts were futures
contracts, but decided that that assumption did
not take Harter as far as he would like. The
court concluded that even if The Andersons was a
futures commission merchant because it dealt in
a "futures" contract, and even if it was
therefore governed by CFTC arbitration
regulations, this particular dispute was not
susceptible to those regulations. The court
hypothesized that Harter was not a "customer"
protected by the regulations because The
Andersons did not directly trade on the Chicago
Board of Trade. See 17 C.F.R. sec. 180.1(b). The
court found that the dispute was not a "claim or
grievance" governed by the regulations because it
required the testimony of third parties over whom
the relevant contract market did not have
jurisdiction. See 17 C.F.R. sec. 180.1(a). We do
not necessarily agree. As Harter urges, if the
HTAs were futures instruments, then The Andersons
arguably might have traded on the Board of Trade,
and arguably should have been registered with the
Board of Trade. The Board may then have had
jurisdiction over some of the key witnesses. But
our disagreement with the district court on this
point is of no moment. The court was not obliged
to adopt Harter’s legal view of the contracts,
and we are not obliged to apply legal results
that follow from them. The status of the
contracts was a matter for the arbitrators alone.
No matter how Harter phrases his disagreement
with the district court on this point, he will be
rudely awakened by the holdings of Sweet Dreams
and like precedents.
/8 Further, it seems to us Mitsubishi Motors Corp.
v. Soler Chrysler-Plymouth, 473 U.S. 614, 626-27
(1985) may deal a serious blow to Marchese. That
case held that unless Congress specified
otherwise, statutory rights were not to be
treated differently under arbitration agreements
than contractual rights. See id. at 626-27.
Neither party addresses this issue, perhaps
because they understand Marchese to hold that
only pure questions of law--statutory or
contractual--may be better handled by the courts
than by arbitrators. Because we reject the
application of Marchese in this case, we need not
assess its ongoing validity in light of
Mitsubishi.
/9 About one thousand grain merchandising companies,
which operate more than five thousand facilities,
belong to the NGFA. Appellant’s Br.I at 30 n.28.
Of the NGFA’s grain elevator members, about 45%
offer HTA contracts. Amicus Br. at 13 n.10.
/10 Notably, the legislative and judicial enthusiasm
for arbitration does not extend to arbitration
clauses contained in contracts of adhesion. The
Federal Arbitration Act explicitly allows the
courts to give relief where the party opposing
arbitration presents "well-supported claims that
the agreement to arbitrate resulted from the sort
of fraud or overwhelming economic power that
would provide grounds ’for the revocation of any
contract.’" Mitsubishi, 473 U.S. at 627 (quoting
9 U.S.C. sec. 2). Indeed, both Judge Swygert and
Judge Clark, in opposing the specific
arbitrations before them, were motivated by the
apparent oppression involved in the contracts at
issue. Judge Swygert specifically stated that he
assumed the contracts at issue in Tamari were
contracts of adhesion. 565 F.2d at 1204 (Swygert,
J., dissenting). Judge Clark stated that in six
pages of "finely printed" boilerplate language
drafted by the brokerage firm and imposed upon
customers, "the intent of the contracting party
having the superior bargaining power is not
concealed." Wilko, 201 F.2d at 445 (Clark, J.,
dissenting). Harter does not argue on appeal that
these HTA contracts were contracts of adhesion.
Therefore, we cannot weigh any commercial
oppression that The Andersons may have brought to
bear on this individual farmer, and we cannot
vacate the award on this ground. Moreover,
another farmer challenging his HTA contracts with
The Andersons specifically argued the contracts
were adhesive. Analyzing the issue under Michigan
law, the Sixth Circuit rejected that argument.
See Horton Farms, 166 F.3d at 323-26 (finding
that farmer failed to show The Andersons was the
only grain elevator offering HTA contracts,
failed to show the HTA contract terms were non-
negotiable, and failed to show that the arbitral
process was oppressive).
/11 This position reflects the Supreme Court’s
admonition in Mitsubishi Motors that courts
should presume the parties’ selected arbitrators
are competent and impartial until presented with
evidence to the contrary. 473 U.S. at 633-34.
/12 Harter is a citizen of Indiana; The Andersons is
incorporated in Ohio. The Andersons maintains a
post office box in Chicago, Illinois, and
instructs farmers that payments should be made to
that address. Moreover, Harter suggests that if
the HTA contracts were futures contracts, they
should have been traded on the Chicago Board of
Trade; The Andersons’ relationship to the CBOT is
also a factor in the resolution of the legal
status of the contracts. Further, Iowa Grain,
originally a defendant, is incorporated in
Illinois, where the lawsuit was filed. The
contract itself, which envisioned that all
disputes would be resolved in arbitration, states
that it is made "in accordance with the Grain
Trade Rules" of the NGFA and that any disputes
would be arbitrated by the NGFA, "pursuant to its
arbitration rules." Appellee’s App. at 213. Thus,
the parties did not select a state law to apply
to the contract. Ordinarily, this would require
us to undertake a choice of law analysis.
However, Harter assumes that Illinois law
applies. See Appellant’s Br.II at 8-9. And The
Andersons does not dispute this assumption; in
fact, it cites two Illinois cases dealing with
the proper method of billing for attorney’s fees.
Appellee’s Br. at 44. Where the parties agree on
the law that governs a dispute, and there is at
least a "reasonable relation" between the dispute
and the forum whose law has been selected by the
parties, "we will forego an independent analysis
of the choice-of-law issue and apply [the
parties’ choice]," Bird v. Centennial Ins. Co.,
11 F.3d 228, 231 n.5 (1st Cir. 1993). The parties
agree that Illinois law applies, and there are
numerous contacts with Illinois suggesting a
"reasonable relation" between that state and the
dispute. Thus, we apply Illinois law.
/13 Some billing entries are attributed to
unidentified timekeepers. Although this practice
is not ideal, we recognize that in large law
firms with numerous billing attorneys, it may
occasionally be unavoidable. It does not vitiate
this otherwise adequate fee petition. Similarly,
billing separately for services other than
attorney time is a well-accepted law firm
practice. We agree with the district court that
such non-legal billings were proper.
/14 Harter continues his aggressive tactics by
representing to us that Foley & Lardner engaged
in fraud. Foley & Lardner’s billing records
furnished to the NGFA include entries that read
"Redact Anderson bills so they only reflect
’Harter v. Andersons.’" Harter contends that this
redaction was intended to "dupe the NGFA into
granting its full request [for fees.]" Unlike
Harter, we are not at all sure what is meant by
this entry; the firm could have been trying to
make sure Harter was not billed for Andersons’
work unrelated to his claim. To conclude that the
firm was engaging in fraud is unfounded and
inflammatory. The district court had an
opportunity to review the records, probe counsel
for their meaning and entertain the "fraud"
argument. We are satisfied that if it did not
view this entry as fraud, it did not err.