376 F.3d 720 (7th Cir. 2004), 03-3944, Sharif v. Wellness Intern. Network, Ltd.

Docket Nº:03-3944, 04-1358.
Citation:376 F.3d 720
Party Name:Richard SHARIF and Rosee Torres et al., Plaintiffs-Appellants, Cross-Appellees, v. WELLNESS INTERNATIONAL NETWORK, LTD., a Texas corporation, a/k/a Win, Win Network, Inc., Ralph Oats, Cathy Oats, and Sheri Matthews, Defendants-Appellees, Cross-Appellants.
Case Date:July 21, 2004
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit
 
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Page 720

376 F.3d 720 (7th Cir. 2004)

Richard SHARIF and Rosee Torres et al., Plaintiffs-Appellants, Cross-Appellees,

v.

WELLNESS INTERNATIONAL NETWORK, LTD., a Texas corporation, a/k/a Win, Win Network, Inc., Ralph Oats, Cathy Oats, and Sheri Matthews, Defendants-Appellees, Cross-Appellants.

Nos. 03-3944, 04-1358.

United States Court of Appeals, Seventh Circuit

July 21, 2004

Argued June 9, 2004.

Rehearing Denied August 23, 2004.

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[Copyrighted Material Omitted]

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John G. Jacobs (argued), Reem Odeh, Chicago, IL, for Plaintiffs-Appellants.

John L. Henmdricks (argued), Akin, Gump, Strauss, Hauer & Feld, Dallas, TX, Peter F. Lovato, III, Boundas, Skarzynski, Walsh & Black, Rebecca Alfert, Wildman, Harrold, Allen & Dixon, Chicago, IL, for Defendants-Appellees.

Before FLAUM, Chief Judge, and BAUER and EVANS, Circuit Judges.

TERENCE T. EVANS, Circuit Judge.

This case concerns two procedural decisions issued by District Judge Samuel Der-Yeghiayan. The first arises from the court's dismissal of a suit for want of prosecution after plaintiffs' counsel failed to appear for a hearing date. Second, the court denied Wellness International Network's motion to compel arbitration. We consolidated both appeals.

This suit stems from distributorship contracts that the plaintiffs signed with Wellness International Network (WIN). 1 The suit claims that WIN was only nominally engaged in the business of selling health and wellness products and that they were actually running an illegal pyramid scheme. The suit alleged violations of RICO, federal securities law, and the Illinois Consumer Fraud Act as well as violations of the criminal law giving rise to an alleged right to void the contracts as against public policy. An amended complaint was filed in January 2003 in the Northern District of Illinois.

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Shortly thereafter, in March 2003, the plaintiffs filed another lawsuit against the same defendants alleging substantially similar claims. This suit was, however, styled a class action. Budner v. Murnighan, No. 03 C 2100 (N.D.Ill.). In Budner, WIN filed a motion to compel arbitration based on contractual arbitration provisions which provided:

ANY DISPUTE OR CLAIM ARISING UNDER OR IN CONNECTION WITH THE AGREEMENT OR WITH RESPECT TO THE BUSINESS RELATIONSHIP ESTABLISHED BY THIS AGREEMENT SHALL BE RESOLVED EITHER BY BINDING ARBITRATION CONDUCTED IN ACCORDANCE WITH THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION OR BY A COURT OF COMPETENT JURISDICTION ....

District Judge James Moran granted WIN's motion, 2003 WL 21544236 (N.D.Ill. June 9, 2003). The Budner plaintiffs did not appeal; and they proceeded to file a demand for arbitration with the American Arbitration Association.

Returning to the present case, WIN filed motions to dismiss under Federal Rule of Civil Procedure 12(b)(6) and 28 U.S.C. § 1406(a), alleging improper venue. The motions were fully briefed before District Judge Blanche Manning. Significant for our purposes, Judge Manning granted plaintiffs' motions for two short extensions of time to file their briefs.

Before the motions were ruled on, in August 2003, the case was transferred to Judge Der-Yeghiayan. Upon receiving the case, the court "apparently" set an initial status date for October 20, 2003. We say apparently because there is only a docket entry to reflect this. There is no order in the district court file and no docket number assigned to that entry on the docket sheet. Moreover, plaintiffs' counsel insists that he never received notice of the hearing. For whatever reason, plaintiffs' counsel, as well as counsel for one of the defendants, did not appear. That day, the court checked to see what motions were outstanding and set a status date of February 2, 2004. Also on October 20, WIN filed a motion to compel arbitration. The motion was identical to the one presented to Judge Moran; and WIN included a copy of Judge Moran's order granting the motion.

Three days later, on October 23, the district court held a hearing on WIN's motion to compel arbitration. Counsel for all parties were present. At the hearing, nothing was said about counsels' absence 3 days earlier. Judge Der-Yeghiayan orally denied WIN's motion. The court later wrote "defendant already had before this court a motion to dismiss this action for lack of venue pursuant to 28 U.S.C. § 1406(a)" wherein the "defendant presented to this court an agreement between the parties that provided that proper venue for the matter was in the state of Texas and that arbitration shall take place in the state of Texas." Accordingly, the district court found that the motion to compel arbitration was...

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