Metropulos v. FW Assocs., LLC

• Decision Date: 26 December 2017
• Docket Number: No. 1-16-3196,1-16-3196
• Parties: WILLIAM METROPULOS and SUZANNE METROPULOS, Petitioners-Appellants, v. FW ASSOCIATES, LLC, SMART BAR USA, LLC, FW INTERNATIONAL, LLC, SMART BAR INTERNATIONAL, LLC, BARRY FIELDMAN, JUANITA WASSERMAN, TIM KNECHT, KEVIN NEVALA, and TOM RECINE, Respondents-Appellees.
• Court: United States Appellate Court of Illinois

2017 IL App (1st) 163196-U

WILLIAM METROPULOS and SUZANNE METROPULOS, Petitioners-Appellants, v. FW ASSOCIATES, LLC, SMART BAR USA, LLC, FW INTERNATIONAL, LLC,

SMART BAR INTERNATIONAL, LLC, BARRY FIELDMAN, JUANITA WASSERMAN,

TIM KNECHT, KEVIN NEVALA, and TOM RECINE, Respondents-Appellees.

No. 1-16-3196

APPELLATE COURT OF ILLINOIS FIRST DISTRICT SECOND DIVISION

December 26, 2017

NOTICE: This order was filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1).

Appeal from the Circuit Court Of Cook County.

Nos. 15 CH 10108

The Honorable Thomas Allen, Judge Presiding.

PRESIDING JUSTICE NEVILLE delivered the judgment of the court.

Justices Hyman and Mason concurred in the judgment.

ORDER

¶ 1 Held: We review de novo the arbitrator's determination of the arbitrability of issues. The arbitrator did not exceed his authority when he resolved an issue the parties agreed to arbitrate by awarding a form of relief not requested by the parties. Alleged errors of law, which do not amount to gross errors apparent on the face of the award, do not give this court grounds to disturb the arbitrator's award. The circuit court correctly awarded attorney fees to appellees, the prevailing parties.

¶ 2 William Metropoulos (William) and FW Associates, LLC (FWA), agreed to arbitrate a dispute over the operation of a corporation they both owned, Smart Bar USA, LLC (SB USA). The arbitrator entered a final award ordering William to make payments to SB USA and FWA, and dissociating William from SB USA. The circuit court confirmed the award and added an award of attorney fees to FWA. In this appeal, William contends that the arbitrator exceeded his authority and made numerous legal errors. We find that the arbitrator did not decide any issue the parties did not agree to arbitrate, and he committed no gross errors of judgment apparent on the face of the award. Therefore, we affirm the circuit court's order confirming the arbitrator's award. We also uphold the award of attorney fees to FWA as the prevailing party. We remand for an award of fees for this appeal.

¶ 3 BACKGROUND

¶ 4 In 2012, William persuaded Barry Fieldman and Juanita Wasserman to invest $3 million in an invention William sought to market. For purposes of the investment, William created two entities, SB USA and Smart Bar International (SBI). SB USA would market the invention domestically and in Canada, while SBI would market the invention in other countries. Fieldman and Wasserman created two entities, FWA and FW International, LLC (FWI), to invest in SB USA and SBI, respectively. In the operating agreements for SB USA and SBI, the parties agreed that "[e]xcept as otherwise provided herein, any controversy or claim arising out of or relating to this Agreement or any alleged breach of Agreement shall be settled by arbitration in Chicago, Illinois, in accordance with the rules of the American Arbitration Association then in force, except that a written opinion of the arbitrators must be delivered to the parties notwithstanding any rules to the contrary."

¶ 5 The parties soon found themselves in conflict. In December 2013, SB USA filed a complaint against FWA, Fieldman and Wasserman, in an Illinois court. SB USA asked the court to remove FWA from membership in SB USA, and SB USA sought an order to prevent Fieldman and Wasserman from demonstrating the invention without requiring the observers to sign a nondisclosure agreement. Also in December 2013, William filed suit against the same three defendants, in a lawsuit which was removed to federal court. William claimed that the three defendants committed fraud and tortiously interfered with SB USA's sales.

¶ 6 In March 2014, Fieldman, Wasserman, FWA and FWI (collectively, Claimants) filed a demand for arbitration. Claimants sought resolution of both lawsuits, and they claimed that William and some other members of SB USA breached the operating agreements of SB USA and SBI, and breached their fiduciary duties to Claimants. Claimants alleged that "[t]he economic purpose of the Company has been and will continue to be unreasonably frustrated" because William "has engaged in conduct relating to the company's business that makes it not reasonably practicable to carry on the company's business with [William]."

¶ 7 William did not oppose arbitration. He filed a counterclaim, asking the arbitrator to find that Claimants committed fraud and breached the operating agreements and their fiduciary duties to William, SB USA and SBI. William specifically alleged that "Claimants have engaged in conduct relating to the company's business that makes it not reasonably practicable to carry on the business with [them]."

¶ 8 The parties asked the arbitrator to award relief under the Limited Liability Company Act (805 ILCS 180/1-1 et seq. (West 2016)). Claimants asked the arbitrator to dissolve both SB USA and SBI, and to retain jurisdiction during the dissolution process. William asked thearbitrator to dissociate Claimants from SB USA and SBI. All parties sought an award of attorney fees, as permitted by the operating agreement. William and SB USA agreed to orders staying proceedings on both of their complaints against the Claimants pending arbitration.

¶ 9 The parties presented testimony at arbitration hearings held in November 2014. On December 2, 2014, the arbitrator sent to the parties a document he titled, "Interim Award." In the document, he denied all of the claims presented by William and SB USA. He found that the Claimants had presented sufficient evidence to show grounds for dissolving SB USA and SBI. The arbitrator said:

"My conclusion is that the parties should try to wind up [SB USA and SBI] on their own. To aid the winding up process and prevent undue interference with it, Mr. Metropulos is hereby disassociated from [SB USA and SBI] ***.

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*** [The Claimants have] proven that Mr. Metropulos is guilty of a gross[] derelict[ion] of duties that has caused material and irreversible harm to the Smart Bar Entities. ***

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After reviewing the Complaints in the State Court Action and the Federal Action, as well as having reviewed all the pleadings and legal memoranda in this case and considered the evidence and the arguments of counsel, it is my ruling that this arbitration has disposed of all of the claims in the State Court Action and the Federal Action.

INTERIM AWARD

For the foregoing reasons, I find in favor of Claimants and against Respondents on all of Respondents' counterclaims and any other affirmative claims. Accordingly, all of Respondents' counterclaims are hereby dismissed with prejudice.

For the foregoing reasons, I find in favor of Claimants and against Respondents on the following claims and make the following Interim Award:

1. [SBI and SB USA] are hereby dissolved and directed to wind up their affairs unless they can take advantage of the other possibilities provided under Illinois law;

2. William Metropulos is hereby disassociated from [SB USA and SBI] and removed as a manager from each company ***.

***

All of the claims asserted in the State Court Action and the Federal Action have been resolved through this arbitration, and the parties are directed to so inform the respective courts and seek to have both lawsuits dismissed with prejudice.

***

This Award fully resolves all claims and counterclaims submitted to date in this arbitration and any and all claims and counterclaims not granted herein are hereby denied.

The prior sentence and anything herein to the contrary notwithstanding, I heard no evidence or argument and made no rulings as to any loans that William or Suzanne Metropulos may have made or caused to be made to either of the Smart Bar Entities and any claims, defenses or requests for relief relating to any such loans are preserved.

In addition, I retain jurisdiction to hear any future claims that may arise during the dissolution and winding up process or that otherwise fall within the provisions of the Operating Agreements."

¶ 10 On December 9, 2014, the Claimants filed a petition in the circuit court for confirmation of the interim award. In his answer, William asked the court to "declare the arbitration concluded, that the designation as an 'interim' award is a misnomer, and that any retained jurisdiction by the arbitrator is improper and void." William also filed a counterpetition for enforcement of the arbitrator's award of dissolution, and correction of the award to set aside the provision for disassociating William from SB USA and SBI.

¶ 11 On February 2, 2015, Claimants filed a motion to stay proceedings in court pending the arbitrator's issuance of a final award. William responded that the arbitrator had already entered a final award, and lacked authority to retain continuing jurisdiction.

¶ 12 In an order dated March 4, 2015, the circuit court denied all pending motions and dismissed the petition and counterpetition because the arbitrator had not entered a final arbitration award. William appealed. In an order dated December 29, 2015, the appellate court held that "the arbitrator entered an interim award, not a final award." FW Associates, LLC v. Metropoulos, 2015 IL App (1st) 150566-U, ¶ 17. The court added, "We agree withthe Claimants that they have prevailed in this appeal." FW Associates, 2015 IL App (1st) 150566-U, ¶ 20.

¶ 13 The members of SB USA and SBI other than William decided to "take advantage of the other possibilities provided under Illinois law," as permitted by the interim award. All of the members other than William signed a resolution waiving their rights to dissolve SB USA and SBI.

¶ 14 On April 6, 2015, the arbitrator entered a final award. He said:

"[T]he parties, minus Mr. Metropoulos whom the Interim Award disassociated from the LLCs and removed from management of them, held an election, elected new directors, and reached an agreement for moving forward with the business. I see no reason to interfere with this positive development.

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