Federal Policy Favoring Arbitration Trumps Choice-Of-Law Clause


When an arrangement to jointly design health insurance products went sour, the product company (“PBG”) brought breach of contract and tort claims against its insurance agents. Acknowledging an existing arbitration agreement, PBG admitted that the contract claims should be arbitrated, but tried to keep the tort claims alive in the judicial system based on an Iowa choice-of law provision. PBG argued that the provision evinced the parties’ intent that an Iowa statute carving out tort claims from valid arbitration clauses should apply. Finding no ambiguity in the arbitration agreement that would allow for consideration of extrinsic evidence like the Iowa statute, and relying on the strong federal policy favoring arbitration, the court disagreed and ordered all claims, contract and tort, to arbitration. Pinnacle Benefits Group, LLC v. American Republic Insurance Company, Case No. 1:13CV186 (M.D.N.C. Dec. 13, 2013).

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