Reed v. Doctor's Associates, Inc.

Case Date: 06/27/2002
Court: 5th District Appellate
Docket No: 5-01-0885 Rel

Notice

Decision filed 06/27/02. The text of this decision may be changed or corrected prior to the filing of a Petition for Rehearing or the disposition of the same.

NO. 5-01-0885

IN THE

APPELLATE COURT OF ILLINOIS

FIFTH DISTRICT


 

RUTH REED, DAN KEATING, ) Appeal from the
DENNIS DeSPAIN, ) Circuit Court of
TERRY DeSPAIN, and ) Madison County.
CHARLES MANSFIELD SMITH III, )
)
          Plaintiffs-Appellees, )
)
v. ) No. 98-LM-652
)
DOCTOR'S ASSOCIATES, INC., )
FREDERICK DeLUCA, and )
PETER H. BUCK, ) Honorable
) Clarence W. Harrison II,
Defendants-Appellants. ) Judge, presiding.

 


 JUSTICE GOLDENHERSH delivered the opinion of the court:

Doctor's Associates, Inc., Frederick DeLuca, and Peter H. Buck (defendants) appealan order of the circuit court of Madison County that denied, in part, defendants' motion tostay this case in favor of arbitration. On appeal, defendants raise the issue of whether thetrial court erred in denying their motion to stay in regard to the plaintiffs' claims of abuse ofprocess and malicious prosecution while at the same time finding that a prior order of aConnecticut state court mandated staying the plaintiffs' other claims.

FACTS

Ruth Reed, Dan Keating, Dennis DeSpain, Terry DeSpain, and Charles MansfieldSmith III (plaintiffs) were franchisees of "Subway" sandwich shops. Defendant Doctor'sAssociates, Inc. (DAI), was the national franchisor of Subway, and defendants DeLuca andBuck were the founders and co-owners of DAI. The franchise agreements containedarbitration clauses that read in part:

"Any controversy or claim arising out of or relating to this contract or thebreach thereof shall be settled by Arbitration in accordance with the CommercialArbitration Rules of the American Arbitration Association at a hearing to be held inBridgeport, Connecticut[,] and judgement [sic] upon an award rendered by theArbitrator(s) may be entered in any court having jurisdiction thereof. Thecommencement of arbitration proceedings by an aggrieved party to settle disputesarising out of or relating to this contract is a condition precedent to thecommencement of legal action by either party."

In 1998, plaintiffs, along with numerous other franchisees also named as plaintiffs,filed the original class action complaint in this case in Madison County under the captionWolf v. Doctor's Associates, Inc., No. 98-LM-652. Count I of the original complaint allegeda breach of contract, and count II requested that the arbitration clause in the franchiseagreement be declared unenforceable.

At the time of the filing of that complaint, a class action lawsuit captioned Hargettv. Doctor's Associates, Inc., No. 98-L-410, was filed in Madison County. DAI then fileda motion in the United States District Court for the District of Connecticut, and in the motionDAI sought to enjoin the Illinois actions on the grounds that a November 25, 1996, federalcourt order in Doctor's Associates, Inc. v. Hollingsworth, 949 F. Supp. 77 (D. Conn. 1996),compelled many of the named class representatives in the Illinois actions to enter intoarbitration. Subsequently, the Hollingsworth plaintiffs withdrew from being classrepresentatives in No. 98-L-410, but according to defendants, they remained as unnamedmembers of the plaintiff class in No. 98-LM-652.

On July 29, 1998, the Connecticut district court enjoined the two Illinois class actionsin their entirety. On appeal, the United States Court of Appeals for the Second Circuitvacated the challenged portion of the July 29, 1998, order as being overly broad and beingdirected against parties not subject to the jurisdiction of the Connecticut district court action. Doctor's Associates, Inc. v. Reinert & Duree, P.C., 191 F.3d 297 (2d Cir. 1999).

Subsequently, on October 8, 1999, plaintiffs filed a first amended complaint in No.98-LM-652. The first amended complaint contained additional counts that stated claims formalicious prosecution and abuse of process for requesting the injunctions from the districtcourt of Connecticut.

After the Second Circuit decision in Reinert & Duree, P.C. was handed down, DAIfiled another series of petitions in the district court of Connecticut. DAI sought to enjoinNo. 98-LM-652 in its entirety. Doctor's Associates, Inc. v. Qasim, No. 99-9434 (August 24,2000) (unpublished summary order). DAI claimed that No. 98-LM-652 should be barredin its entirety, despite the district court lacking jurisdiction over plaintiffs in this case,because No. 98-LM-652 was still being pled as a class action and the remaining plaintiffswould be able to prosecute claims on behalf of the franchisees compelled to arbitrate. Thedistrict court entered an injunction barring all parties, including plaintiffs in this case, fromprosecuting No. 98-LM-652. On appeal, the Second Circuit affirmed the orders compellingother franchisees to arbitrate, but it vacated the injunction against plaintiffs in this case. Inits decision, dated August 24, 2000, the court stated:

"In the instant case, however-as in Reinert & Duree-the District Court'sinjunction bars the non[]parties 'from litigating actions in their own names and onbehalf of other nonparties, even though such actions would not benefit the parties,'[citation] since they now expressly have been excluded from the class definitions inthe Illinois actions, whether as named or unnamed plaintiffs. As such, the injunctionexceeded the District Court's allowable discretion, under both Rule 65 and the Anti-Injunction Act, substantially for the reasons set forth in Reinert & Duree." Qasim,summary order at 8.

After the Second Circuit issued its decision in Qasim, plaintiffs filed their secondamended complaint in this action, which includes a second malicious-prosecution count anda second abuse-of-process count based on alleged actions taken by defendants in seeking theinjunction in Qasim. Plaintiffs also filed a notice of partial dismissal, which effectivelychanged the caption of the case to the present caption. The second amended complaintcontained six counts: count I (class action for the violation of the franchise agreement),count II (declaratory judgment on the arbitration clause), count III (malicious prosecutionrelating to the July 29, 1998, injunction), count IV (abuse of process relating to the July 29,1998, injunction), count V (malicious prosecution relating to the Qasim injunction), andcount VI (abuse of process relating to the Qasim injunction).

In September 2000 DAI made arbitration demands upon plaintiffs and filed, inConnecticut state court, actions demanding arbitration. On November 13, 2000, plaintiffsfiled, also in the state court of Connecticut, a motion to stay. Plaintiffs requested that theConnecticut state court stay the applications for arbitration until the claims for declaratoryjudgment filed in Illinois were resolved. The Connecticut state court apparently denied themotion in a memorandum of decision dated April 25, 2001, which is absent from our record. On May 21, 2001, in separate and identical orders regarding each plaintiff, the Connecticutstate court entered a memorandum of decision granting the applications for an order toproceed with arbitration.

On September 7, 2001, defendants filed a motion for a stay in the circuit court ofMadison County. Defendants contended that a stay was necessitated by the order of theConnecticut state court of May 21, 2001. On October 19, 2001, the trial court granted themotion to stay as to counts I and II of the second amended complaint but denied it as tocounts III through VI. Defendants appeal this order.

ANALYSIS

We note at the outset that Illinois public policy favors arbitration. See City ofCentralia v. Natkin & Co., 257 Ill. App. 3d 993, 996, 630 N.E.2d 458, 460 (1994). Illinoispublic policy also favors consistency with other states in the enforcement and interpretationof arbitration agreements. See Bass v. SMG, Inc., 328 Ill. App. 3d 492, 765 N.E.2d 1079(2002). Illinois has reflected these policy concerns in its adoption of the UniformArbitration Act (Uniform Act) (710 ILCS 5/1 et seq. (West 1998)). As was recently stated:

"The Uniform Act governs the interpretation and enforcement of arbitrationagreements. As an initial interpretive matter, we note that our supreme court has heldthat judicial opinions from other jurisdictions interpreting such acts are given greater-than-usual deference since the general purpose of a uniform act is to make consistentthe laws of the states that have enacted it. [Citation.] Similarly, because the UniformAct and the Federal Arbitration Act (9 U.S.C.