A federal court in Illinois held that where membership in an industry association provides a mechanism for members to arbitrate disputes, parties to a contract who later join the association are still subject to the jurisdiction of the association’s arbitral tribunal.

In The Andersons, Inc. v. Walker, Nos. 08-CV-2083, 08-CV-2098, 2008 WL 3983244 (C.D. Ill. Aug. 28, 2008), The Andersons, a company, filed suit against the Walkers regarding contracts for the purchase of corn and wheat from Fall Grain. The Walkers had allegedly agreed to guarantee the obligations of Fall Grain to The Andersons.

After Fall Grain and the Walkers (hereinafter, Fall Grain) allegedly failed to deliver or provide adequate assurance of delivery, the Andersons canceled their corn and wheat contracts, resulting in a breach worth approximately $5.5 million in total. The Andersons began arbitration proceedings regarding just the corn contracts. Fall Grain did not participate in arbitration, and the National Grain and Feed Association (NGFA) issued an award for approximately $3.68 million in favor of the Andersons.

Fall Grain claimed that the NGFA lacked jurisdiction to hear the claim regarding the corn contracts and pending claims over the wheat contracts because neither party was a member of the NGFA at the time the contract was formed. As such, Fall Grain sought to enjoin the Andersons from seeking confirmation of the arbitration award and a declaratory judgment that the NGFA lacked jurisdiction to hear the disputes regarding both the corn and wheat contracts in arbitration. The Andersons joined the NGFA after the contract was formed.

The Court determined that Fall Grain was not entitled to the requested injunction or declaratory relief. The NGFA’s rules of arbitration do not suggest that the parties must have been members at the time the contract was formed. Rather, the language states that the NGFA may consider disputes between active members and nonmembers, if agreed to by the parties.

The Court determined that the parties agreed to arbitrate disputes, and that Fall Grain did not object to the arbitration over the corn contracts. Because Fall Grain’s argument challenged only the fact that neither party was a member of the NGFA at the time the contract was formed, Fall Grain did not meet its burden of proving the arbitration agreement unenforceable. Thus, the Andersons’ motion to compel arbitration was granted.