This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2000).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

C4-00-1785

 

Mike T. Hurd,

Appellant,

 

vs.

 

Spine-Tech, Inc., and its successor,

Sulzer Medica, et al.,

Respondents.

 

 

Filed June 5, 2001

Affirmed

Foley, Judge*

 

Hennepin County District Court

File No. CT-99-13759

 

 

Michael R. Cunningham, Gray, Plant, Mooty, Mooty & Bennett, P.A., 3400 City Center, 33 South Sixth Street, Minneapolis, MN 55402 (for appellant)

 

Kristen M. Ludgate, James M. Samples, Faegre & Benson LLP, 2200 Wells Fargo Center, 90 South Seventh Street, Minneapolis, MN 55402-3901 (for respondents)

 

Considered and decided by Amundson, Presiding Judge, Foley, Judge, and Huspeni, Judge.*


U N P U B L I S H E D   O P I N I O N

FOLEY, Judge

            Appellant seeks reversal of the district court’s denial of his motion to compel arbitration.  Because we find that the arbitration agreement does not govern the parties’ dispute, we affirm.

FACTS

            Appellant Mike Hurd wishes to arbitrate a dispute in which he claims Spine-Tech owes him commission income he earned as an independent sales representative.  As a sole proprietor doing business as MTH & Associates, appellant began working as an independent contractor for Spine-Tech in 1993.  He remained an independent contractor until July 1996, after which he became Spine-Tech’s employee, a position he held until October 1997.

As part of appellant’s independent contractor status, the parties entered into a sales representative agreement in May 1994 (1994 agreement).  The 1994 agreement contains an arbitration clause, stating that “[a]ny dispute between the parties arising out of or in connection with this Agreement which cannot be settled amicably between them shall be finally resolved by arbitration.”  The agreement was to terminate on March 31, 1997, but either party could terminate it earlier with or without cause by giving 120 days written notice to the other party.  The parties also agreed that “[o]nce Spine-Tech receives PMA [pre-market] approval this contract cannot be canceled without cause.”  The parties agree that the 1994 agreement was not extended by written agreement.

Spine-Tech manufactures medical devices, including spinal implants and instruments for the treatment of spinal conditions.  Mid-1996, it anticipated that the FDA would grant pre-market approval to its “BAK-L” device, a metal cage to be implanted in the spine to treat degenerative disk disease.  Because it anticipated that its sales would increase following the BAK-L gaining pre-market approval, Spine-Tech decided to stop relying on independent sales representatives and instead hire its own sales force.  As a result, Spine-Tech offered and appellant accepted employment as a sales representative on July 22, 1996.  Soon after, on September 20, 1996, the FDA granted Spine-Tech pre-marked approval for its BAK-L product.

            Prior to being hired, appellant and Spine-Tech negotiated the terms of his employment.  Spine-Tech offered appellant the compensation package it paid all its sales representatives.  In addition, Spine-Tech allowed appellant a four percent “commission override” on sales within his former sales territory for one year following his transition from independent contractor to employee.  This was negotiated because when appellant became a Spine-Tech employee, Spine-Tech reduced his geographic sales area.  However, because he had worked to build customer relations in those areas, Spine-Tech, after negotiation, agreed to pay appellant a four percent commission for one year, an “override” commission on sales for certain accounts in the sales areas he no longer covered.  Appellant accepted this arrangement.

            Spine-Tech and appellant also executed an employment agreement in September 1996.  They intended the 1996 agreement to govern his future employment relationship with Spine-Tech, replacing the 1994 sales representative agreement.  Although neither party can produce an executed copy of the agreement, appellant testified at his deposition that he signed and returned the agreement to Spine-Tech.  There is no dispute about its content.

            Spine-Tech terminated appellant from his sales position in October 1997.  Relying on the 1994 agreement, he contended that Spine-Tech owed him commission income and demanded Spine-Tech submit to arbitration to settle the dispute.  Spine-Tech refused to arbitrate in September 1999, and in response, appellant filed a motion to compel arbitration. The district court denied the motion to compel arbitration by order dated August 15, 2000, finding that the parties did not agree to arbitrate the dispute and the dispute was outside the scope of the arbitration agreement.  This appeal followed.

D E C I S I O N

            Arbitration is a proceeding favored by the law as an efficient and inexpensive means of resolving disputes between contracting parties.  Correll v. Distinctive Dental Servs., P.A., 607 N.W.2d 440, 445 (Minn. 2000); Ehlert v. Western Nat’l Mut. Ins. Co., 296 Minn. 195, 199, 207 N.W.2d 334, 336 (1973).  In an action to compel arbitration, this court looks to the parties’ intentions as evidenced by the arbitration agreement’s language.  Minnesota Fed’n of Teachers v. Independent Sch. Dist. No. 361, 310 N.W.2d 482, 484 (Minn. 1981). Generally, contracting parties are free to determine the scope and extent of their arbitration agreement, Lucas v. American Family Mut. Ins. Co., 403 N.W.2d 646, 648 (Minn. 1987), and a written agreement to arbitrate is presumptively valid.  Minn. Stat. § 572.08 (2000).  Thus, if an agreement to arbitrate exists, the court must compel arbitration.  Minn. Stat. § 572.09(a) (2000); Michael-Curry Cos., Inc.  v. Knutson Shareholders Liquidating Trust, 449 N.W.2d 139, 140 (Minn. 1989).  But, if there is no agreement to arbitrate or if the controversy sought to be arbitrated is not within the scope of the contract’s arbitration clause, the court may interfere to protect a party from being compelled to arbitrate.  Atcas v. Credit Clearing Corp. of Am., 292 Minn. 334, 341, 197 N.W.2d 448, 452 (1972).

An appellate court independently reviews a district court determination that the parties did not agree to submit disputes to arbitration.  Johnson v. Piper Jaffray, Inc., 530 N.W.2d 790, 795 (Minn. 1995).  Here, the district court denied the motion to compel arbitration, finding no arbitration agreement covering the time period that appellant claims he was not paid commissions: after he was hired as a Spine-Tech employee in July 1996.  But appellant contends that the 1994 agreement, containing the arbitration clause, is still in effect because the FDA granted Spine-Tech approval for its BAK-L product on September 20, 1996, within 120 days of July 22, 1996, the date that appellant became a Spine-Tech employee and the date that he states began the 120-day termination notice period specified in the agreement.  Because the 1994 agreement could only be cancelled for cause after the FDA granted pre-market approval and, according to appellant, the agreement was not cancelled for cause, he argues that the 1994 sales representative agreement is still in effect despite his becoming a Spine-Tech’s employee in July 1996.  Thus, relying on the 1994 agreement, appellant contends that (1) he is entitled to commissions on all of Spine-Tech’s sales of the BAK-L device made since July 1996 in his former sales territory area, and (2) that Spine-Tech must arbitrate the dispute.  We disagree.

            The evidence shows that the parties intended appellant’s independent contractor relationship with Spine-Tech to end and an employee relationship to begin in 1996 when the parties executed the 1996 employment agreement.  The 1996 agreement, which both parties agree they entered into, does not refer to the 1994 agreement or extend its terms.  Most importantly, the 1996 agreement states that it “supercedes all previous negotiations, commitments, writings and understandings between the parties * * *.” 

            “[I]f a contract is a complete integration of the parties’ agreements, prior agreements within the scope of the contract are discharged regardless of consistency.”  Stromberg v. Smith, 423 N.W.2d 107, 109 (Minn. App. 1988) (citing Restatement (Second) of Contracts § 213 (1981)) (emphasis in original).  Thus, by its terms, the 1996 agreement replaced the 1994 agreement.  Because the 1996 agreement does not contain an arbitration clause, and appellant is claiming commission income during the time period that the 1996 agreement was in effect and after the 1994 agreement expired, there is no arbitration agreement covering appellant’s claim.

            Further, appellant’s claim that he was simultaneously a Spine-Tech employee and an independent contractor does not make sense and is not supported by the evidence. Appellant’s contention that he is entitled to commissions on BAK-L sales in his former sales territory is belied by his negotiating and receiving a four percent commission override on some of those same accounts after he became a Spine-Tech employee.  This agreement, fixing the commissions, is further evidence that appellant considered himself governed by an employee relationship with Spine-Tech. 

            But, to support his assertion that the parties intended for appellant to continue as an independent contractor earning commission income under the 1994 agreement even after he became a Spine-Tech employee and executed the 1996 agreement, appellant points out that in October 1996, after he had become a Spine-Tech employee, Spine-Tech prepared a check for $18,486 payable to him for commissions earned as an independent contractor.  But Spine-Tech voided the check before it was issued, indicating that Spine-Tech considered appellant’s independent contractor relationship ended. 

            Also, appellant points to Ted Schwarzrock’s deposition testimony as evidence that Spine-Tech still considered appellant to be an independent contractor even after it decided to employ appellant.  Schwarzrock, a Spine-Tech vice-president who had executed the 1994 agreement on behalf of the company, testified that the 1994 agreement had not been cancelled and that as a result, appellant is entitled to the claimed commissions.  But Schwarzrock’s testimony is not persuasive because he had no part in negotiating the 1996 agreement and mistakenly testified that he thought the parties had executed a written extension to the 1994 agreement.

            Because we find that the 1994 agreement’s arbitration clause agreement does not govern this dispute, we need not consider the district court’s finding that the claim was outside the scope of the arbitration clause.

II.

            Appellant also argues that the district court erred because under the Minnesota Uniform Arbitration Act, the court is not permitted to consider the merits of the case or make factual findings. 

            “In judicial proceedings to stay or compel arbitration, the limited issue presented is the existence and scope of the arbitration agreement.”  United States Fidelity & Guar. Co. v. Fruchtman, 263 N.W.2d 66, 71 (Minn. 1978).  The district court may not examine the merits of the case nor make factual findings when considering a motion to compel arbitration.  Local No. 1119, American Fed’n State, County, and Mun. Employees v. Mesabi Reg’l Med. Ctr., 463 N.W.2d 290, 297 (Minn. App. 1990).  Also, the court may not refuse an arbitration order because the claim in issue lacks merit or because the parties have not shown any fault or grounds for the claim sought to be arbitrated.  Minn. Stat. § 572.09(e) (2000). 

            But, when one party denies the existence of an arbitration agreement, the district court “shall proceed summarily to the determination of the issue so raised and shall order arbitration if found for the moving party, otherwise, the application shall be denied.”  Minn. Stat. § 572.09(a) (2000).  Also, a district court may make factual findings as to whether an arbitration agreement governs a dispute.  See Minnesota Teamsters Pub. & Law Enforcement Employees’ Union, Local No. 320 v. County of St. Louis, 611 N.W.2d 355, 359 (Minn. App. 1990) (concluding that district court must establish “perimeters of an arbitration clause’s coverage” in a dispute over whether or not claimant was covered by agreement mandating arbitration); see also Fruchtman, 263 N.W.2d at 71 (allowing district court to make fact findings when considering whether insurance policy precondition was satisfied and therefore, arbitration clause applied, because “[w]here coverage is preconditioned on the establishment of facts, * * * such factual disputes must be tried and resolved by the trial court accompanied by findings of fact”).  Under these circumstances, the district court did not err in making the factual findings necessary to ascertain whether or not this dispute was governed by the parties’ arbitration agreement.

            Affirmed.



* Retired judges of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.