Weiss v. Waterhouse Securities, Inc.

Case Date: 11/26/2002
Court: 1st District Appellate
Docket No: 1-01-0680 Rel

SECOND DIVISION
NOVEMBER 26, 2002



No. 1-01-0680


MARK WEISS, individually and on, 
behalf of all others similarly situated

          Plaintiff-Appellee,

                    v.

WATERHOUSE SECURITIES, INC.,

          Defendant-Appellant.

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Appeal from the
Circuit Court of
Cook County.




Honorable
Aaron Jaffe,
Judge Presiding.


JUSTICE CERDA delivered the opinion of the court:

In January 1999, plaintiff, Mark Weiss, individually and onbehalf of all others similarly situated, filed a class actionlawsuit against defendant, Waterhouse Securities, Inc.(Waterhouse), a discount securities brokerage firm, allegingfraud and breach of contract in connection with Waterhouse'ssolicitation and administration of web-based brokerage accountsbetween January 1, 1999 and the present. Waterhouse, assertedlypursuant to section 2-801 of the Code of Civil Procedure (Code)(735 ILCS 5/2-801 (West 1998)), filed a "Motion to Strike ClassAllegations and To Compel Arbitration" of plaintiff's claims. Waterhouse's motion specifically first sought to strike the classallegations of plaintiff's complaint and then to compel thearbitration of the remaining individual claims in accordance withthe terms of plaintiff's account agreement with the company (the"Account Agreement"). The circuit court denied Waterhouse'smotion to strike and compel, purportedly finding plaintiff'sfactual allegations are sufficient to meet the class actionprerequisites set forth in section 2-801 of the Code of CivilProcedure (Code) (735 ILCS 5/2-801 (West 1998)). Waterhousefollowed by seeking review of the court's interlocutory rulingspursuant to Supreme Court Rule 307(a)(1) (177 Ill. 2d R.307(a)(1)).

In an unpublished opinion issued December 12, 2001, we foundappellate jurisdiction lacking over that portion of the circuitcourt's order denying Waterhouse's motion to strike and,accordingly, dismissed that portion of Waterhouse's appeal. Indismissing Waterhouse's appeal in part, we declined to addressWaterhouse's contention that the circuit court erred in denyingits motion to strike plaintiff's class action allegations. Finding jurisdiction over the remaining portion of the court'sorder, we affirmed the denial of Waterhouse's motion to compelplaintiff's claims to arbitration. Weiss v. WaterhouseSecurities, Inc., No. 1-01-0680 (December 12, 2001).

On April 9, 2002, the Illinois Supreme Court entered asupervisory order directing this court to vacate our December 12opinion and "to reconsider its judgment, including the proprietyof the trial court's order denying defendant's motion to strike class allegations." Weiss v. Waterhouse, No. 93090 (April 9,2002). Upon reconsideration of the issues and our originaldecision, we now find jurisdiction to review Waterhouse's entireappeal and reverse and remand for further proceedings consistentwith this opinion.

Waterhouse is a New York corporation engaged in the businessof providing discount brokerage services to the investing public. One of the services offered by Waterhouse is an on-line brokerageaccount, known as webBroker, that allowed customers to engage intrading of securities through their personal computers, bytelephone, or through an assigned Waterhouse broker. At allrelevant times, plaintiff maintained a webBroker account withWaterhouse.

Plaintiff brings the instant class action complaintindividually and on behalf of all Waterhouse customers who hadwebBroker trading accounts with Waterhouse between January 1,1999, to the present. The complaint generally alleges thatWaterhouse represented to plaintiff and the class members that,if they opened trading accounts with Waterhouse, they couldobtain instant access to their accounts in order to buy and sellsecurities through their personal computers and/or their assignedbrokers. However, plaintiff and the class members were unable toaccess their trading accounts via either their personal computersor assigned brokers during the class period in order to executetheir desired security transactions. The complaint furthercontains allegations of the statutory prerequisites for themaintenance of a class action lawsuit.

Plaintiff's complaint asserts claims for: deceptive andunfair practices under the Illinois Consumer Fraud and DeceptiveBusiness Practices Act, and the Uniform Deceptive Trade PracticesAct, as well as like statutes found in the states where the classmembers reside (count I); breaches of contract and the impliedcovenant of good faith and fair dealing predicated onWaterhouse's customer account contracts entered into by plaintiffand the class members (count II); and common law fraud based onWaterhouse's pre-account representations (count III). Thecomplaint alleges plaintiff and the class members have been"irreparably harmed and damaged in an amount to be determined atthe trial of this action," and specifically seeks an award ofcompensatory and punitive damages, legal costs and expenses, andextraordinary, equitable, and/or injunctive relief including theimposition of a constructive trust upon certain funds charged andretained by Waterhouse in its administration of the tradingaccounts.

After unsuccessfully attempting to remove the matter tofederal court and moving to dismiss plaintiff's complaintpursuant to section 2-619 of the Code, Waterhouse filed theinstant motion to strike plaintiff's class action allegationsand, thereafter, to compel plaintiff's individual claims toarbitration. In moving to strike the class allegations,Waterhouse assertedly moved pursuant to section 2-801 of theCode, which sets forth the statutory prerequisites for classcertification and, in relevant part, requires any alleged classclaim to present "questions of fact or law common to the class,which common questions predominate over any questions affectingonly individual members." 735 ILCS 5/2-801(2) (West 1998). According to Waterhouse's motion, plaintiff's claims are notcertifiable because it is clear from the complaint's class actionallegations that individualized issues of fact and lawpredominate.

Under the Account Agreement, plaintiff agreed to arbitrateany controversy arising between him and Waterhouse in relation toany account he held with the company. In this regard, theAccount Agreement expressly provides, in pertinent part, that"[no person shall *** seek to enforce any pre-dispute arbitrationagreement against any person who has initiated in court aputative class action *** until: (i) the class certification isdenied; or (ii) the class is decertified; or (iii) the customeris excluded from the class by the court." Because dismissal ofthe class allegations would leave plaintiff only with hisindividual claims, Waterhouse asserted plaintiff's claims wouldthen have to be submitted to arbitration in accordance with theterms of the agreement.

Following a hearing on Waterhouse's motion, the circuitcourt entered an order stating:

"The Court finds that commons questionsof law and fact predominate over questionsinvolving individual class members so thatthe class allegations as set forth by theplaintiff are sufficient as a matter of law. Therefore, it is hereby ADJUDGED, ORDERED andDECREED that Defendant's Motion to StrikeClass Allegations and Compel Arbitration isDENIED."

We initially discuss the nature of Waterhouse's motion andour jurisdiction to hear the instant appeal. Waterhouse's motionsought to compel the arbitration of plaintiff's claims by havingthe circuit court find plaintiff's class allegations insufficientas a matter of law. Essentially, Waterhouse attempted to bringplaintiff's claims within the arbitration clause of the AccountAgreement by securing an order dismissing the complaint's classaction allegations.

Appellate jurisdiction is generally limited to review offinal orders (Pekin Insurance Co. v. Benson, 306 Ill. App. 3d367, 375, 714 N.E.2d 559, 565 (1999)), and review of an appealfrom a non-final order may be entertained only as provided bysupreme court rule. Department of Central Management Services v.American Federation of State, County and Municipal Employees, 182Ill. 2d 234, 238, 695 N.E.2d 444, 446 (1998).

Waterhouse asserts review of the circuit court's order inthis case is proper under Rule 307(a)(1). Rule 307 provides forinterlocutory appeals as a matter of right and paragraph (a)(1)of that section authorizes review of orders, inter alia, refusingrequests for injunctive relief. 188 Ill. 2d R. 307(a)(1). Characterizing its motion solely as one to compel arbitration,Waterhouse claims jurisdiction lies in Rule 307(a)(1) because thedenial of a motion to compel arbitration is akin to an orderrefusing to issue an injunction. Notaro v. Nor-Evan Corporation,98 Ill. 2d 268, 271, 456 N.E.2d 93, 94-95 (1983); Federal SignalCorp. v. SLC Technologies, Inc., 318 Ill. App. 3d 1101, 1105, 743N.E.2d 1066, 1070 (2001); Amalgamated Transit Union, Local 900 v.Suburban Bus Division of the Regional Transportation Authority,262 Ill. App. 3d 334, 337, 634 N.E.2d 469, 472 (1994).

Waterhouse expressly acknowledges on appeal that any ordercompelling arbitration was wholly contingent upon the courtstriking the class allegations. Waterhouse could seek dismissalof the class action allegations only by proceeding under section2-615 of the Code. See 735 ILCS 5/2-615(a) (West 1998) ("Allobjections to pleadings shall be raised by motion. The motionshall point out specifically the defects complained of, and shallask for appropriate relief," including, inter alia, "that apleading or portion thereof be stricken because substantiallyinsufficient at law"). Thus, Waterhouse, despite its assertionsthat it was proceeding solely under section 2-801 of the Code(1),effectively brought two separate and distinct motions seeking,first, dismissal under section 2-615 and, second, arbitration ofplaintiff's individual claims.(2)

While Waterhouse correctly observes that an order denying amotion to compel arbitration represents an appealable order, thecircuit court's order in the instant case does not simplyrepresent a refusal to submit plaintiff's claims to arbitration. Given the nature of Waterhouse's motion, the court was initiallyforced to consider the legal sufficiency of plaintiff's classaction allegations. The court did so and, upon finding the classallegations adequate, denied Waterhouse's request to compelarbitration. Hence, the court's order constitutes two distinctrulings - one ruling denying Waterhouse's request for dismissalunder section 2-615 and another ruling denying Waterhouse'smotion to compel arbitration.

While an order denying a motion for dismissal is not a finaland appealable determination but, rather, is interlocutory innature (Desnick v. Department of Professional Regulation, 171Ill. 2d 510, 540, 665 N.E.2d 1346, 1362 (1996); Chapman v. UnitedInsurance Co. of America, 234 Ill. App. 3d 968, 970, 602 N.E.2d45, 46 (1992); Findley v. Posway, 118 Ill. App. 3d 824, 826, 455N.E.2d 861, 863 (1983)), we nonetheless have jurisdiction toreview the circuit court's denial of Waterhouse's motion tostrike because that motion was a necessary and attendant part ofthe court's refusal to compel arbitration. Pursuant to case law,a non-appealable order may be reviewed where it is subsumed in anfinal, appealable ruling. See Federal Signal, 318 Ill. App. 3dat 1106, 743 N.E.2d at 1070 (finding appellate jurisdiction toreview trial court's decision denying defendant's section 2-615motion to dismiss where the court's denial of defendant's motionto compel arbitration was predicated on its dismissal ruling);see also In Interest of Summerville, 190 Ill. App. 3d 1072, 1076,547 N.E.2d 513, 516 (1989); Olympic Federal v. Witney DevelopmentCo., Inc., 113 Ill. App. 3d 981, 984, 447 N.E.2d 1371, 1373(1983); Alfred Engineering, Inc. v. Illinois Fair EmploymentPractices Commission, 19 Ill. App. 3d 592, 600, 312 N.E.2d 61, 67(1974). We cannot fairly review the circuit court's denial ofWaterhouse's motion to compel without reviewing the predicatemotion to strike class allegations. We, therefore, will reviewthe court's ruling on Waterhouse's motion to strike.

A motion to dismiss brought pursuant to section 2-615attacks the legal sufficiency of the complaint, and presents thequestion of whether the complaint state a cause of action uponwhich relief could be granted. Grund v. Donegan, 298 Ill. App.3d 1034, 1037, 700 N.E.2d 157, 159 (1998). When ruling on asection 2-615 motion, the court may only consider the factsapparent from the face of the complaint, matters of which thecourt may take judicial notice and judicial admissions in therecord. Storm & Associates, Ltd. v. Cuculich, 298 Ill. App. 3d1040, 1047, 700 N.E.2d 202, 206 (1998). All pleadings areconstrued in a light most favorable to the nonmoving party (In reChicago Flood Litigation, 176 Ill. 2d at 184, 680 N.E.2d at 268),and all well-pleaded facts in the complaint, as well as allreasonable inferences drawn therefrom, are taken as true. Lawsonv. City of Chicago, 278 Ill. App. 3d 628, 634, 662 N.E.2d 1377,1382 (1996). Since the determination of whether a viable causeof action has been pled is one of law, our review is conducted denovo. Lawson, 278 Ill. App. 3d at 634, 662 N.E.2d at 1382.

The circuit court's ruling in this case can be construed twodifferent ways. On the one hand, the circuit court's decisionseems to indicate that the court confined its analysis todetermining whether plaintiff's complaint adequately stated aclaim for a class action. Another reading of the court's ordersuggests the court passed on the issue of class certificationpursuant to section 2-801 of the Code based solely on thecomplaint's factual allegations.

The extent to which a plaintiff asserting a claim as a classaction must plead the statutory requirements listed in section 2-801 of the Code is not clear under Illinois law. McCarthy v.LaSalle National Bank & Trust Co., 230 Ill. App. 3d 628, 633, 595N.E.2d 149, 152 (1992); 4 R. Michael, Illinois Practice, Civil,