Reed v. Doctor's Associates, Inc.

• Decision Date: 27 June 2002
• Docket Number: No. 5-01-0885.,5-01-0885.
• Citation: 265 Ill.Dec. 334,331 Ill. App.3d 618,772 N.E.2d 372
• Parties: Ruth REED, Dan Keating, Dennis DeSpain, Terry DeSpain, and Charles Mansfield Smith III, Plaintiffs-Appellees, v. DOCTOR'S ASSOCIATES, INC., Frederick DeLuca, and Peter H. Buck, Defendants-Appellants.
• Court: United States Appellate Court of Illinois

772 N.E.2d 372

331 Ill. App.3d 618

265 Ill.Dec. 334

Ruth REED, Dan Keating, Dennis DeSpain, Terry DeSpain, and Charles Mansfield Smith III, Plaintiffs-Appellees, v. DOCTOR'S ASSOCIATES, INC., Frederick DeLuca, and Peter H. Buck, Defendants-Appellants.

No. 5-01-0885.

Appellate Court of Illinois, Fifth District.

June 27, 2002.

Kurt E. Reitz, Heath H. Hooks, Thompson Coburn, LLP, Belleville, for Appellants.

David M. Duree, David M. Duree & Associates, P.C., O'Fallon, for Appellees.

Justice GOLDENHERSH delivered the opinion of the court:

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

FACTS

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

"Any controversy or claim arising out of or relating to this contract or the breach thereof shall be settled by Arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association at a hearing to be held in Bridgeport, Connecticut[,] and judgement [sic ] upon an award rendered by the Arbitrator(s) may be entered in any court having jurisdiction thereof. The commencement of arbitration proceedings by an aggrieved party to settle disputes arising out of or relating to this contract is a condition precedent to the commencement 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 caption Wolf v. Doctor's Associates, Inc., No. 98-LM-652. Count I of the original complaint alleged a breach of contract, and count II requested that the arbitration clause in the franchise agreement be declared unenforceable.

At the time of the filing of that complaint, a class action lawsuit captioned Hargett v. Doctor's Associates, Inc., No. 98-L-410, was filed in Madison County. DAI then filed a motion in the United States District Court for the District of Connecticut, and in the motion DAI sought to enjoin the Illinois actions on the grounds that a November 25, 1996, federal court 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 into arbitration. Subsequently, the Hollingsworth plaintiffs withdrew from being class representatives in No. 98-L-410, but according to defendants, they remained as unnamed members of the plaintiff class in No. 98-LM-652.

On July 29, 1998, the Connecticut district court enjoined the two Illinois class actions in their entirety. On appeal, the United States Court of Appeals for the Second Circuit vacated the challenged portion of the July 29, 1998, order as being overly broad and being directed 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 (2nd 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 for malicious prosecution and abuse of process for requesting the injunctions from the district court of Connecticut.

After the Second Circuit decision in Reinert & Duree, P.C. was handed down, DAI filed another series of petitions in the district court of Connecticut. DAI sought to enjoin No. 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 barred in 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 plaintiffs would be able to prosecute claims on behalf of the franchisees compelled to arbitrate. The district court entered an injunction barring all parties, including plaintiffs in this case, from prosecuting No. 98-LM-652. On appeal, the Second Circuit affirmed the orders compelling other franchisees to arbitrate, but it vacated the injunction against plaintiffs in this case. In its decision, dated August 24, 2000, the court stated:

"In the instant case, however—as in Reinert & Dureethe District Court's injunction bars the non[ ]parties `from litigating actions in their own names and on behalf of other nonparties, even though such actions would not benefit the parties,' [citation] since they now expressly have been excluded from the class definitions in the Illinois actions, whether as named or unnamed plaintiffs. As such, the injunction exceeded 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 second amended complaint in this action, which includes a second malicious-prosecution count and a second abuse-of-process count based on alleged actions taken by defendants in seeking the injunction in Qasim. Plaintiffs also filed a notice of partial dismissal, which effectively changed the caption of the case to the present caption. The second amended complaint contained six counts: count I (class action for the violation of the franchise agreement), count II (declaratory judgment on the arbitration clause), count III (malicious prosecution relating 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), and count VI (abuse of process relating to the Qasim injunction).

In September 2000 DAI made arbitration demands upon plaintiffs and filed, in Connecticut state court, actions demanding arbitration. On November 13, 2000, plaintiffs filed, also in the state court of Connecticut, a motion to stay. Plaintiffs requested that the Connecticut state court stay the applications for arbitration until the claims for declaratory judgment filed in Illinois were resolved. The Connecticut state court apparently denied the motion 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 Connecticut state court entered a memorandum of decision granting the applications for an order to proceed with arbitration.

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

ANALYSIS

We note at the outset that Illinois public policy favors arbitration. See City of Centralia v. Natkin & Co., 257 Ill.App.3d 993, 996, 196 Ill.Dec. 523, 630 N.E.2d 458, 460 (1994). Illinois public policy also favors consistency with other states in the enforcement and interpretation of arbitration agreements. See Bass v. SMG, Inc., 328 Ill.App.3d 492, 262 Ill. Dec. 471, 765 N.E.2d 1079 (2002). Illinois has reflected these policy concerns in its adoption of the Uniform Arbitration Act (Uniform Act) (710 ILCS 5/1 et seq. (West 1998)). As was recently stated:

"The Uniform Act governs the interpretation and enforcement of arbitration agreements. As an initial interpretive matter, we note that our supreme court has held that 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 consistent the laws of the states that have enacted it., [Citation.] Similarly, because the Uniform Act and the Federal Arbitration Act (9, U.S.C. § 1 et seq. (1976)) share a common origin, courts interpreting the former look for guidance to federal court decisions interpreting similar provisions in the federal act. [Citation.]

In considering appellate review of motions to compel arbitration, our supreme court has concluded that `[t]he [Uniform] Act embodies a legislative policy favoring enforcement of agreements to arbitrate future disputes.'" Bass, 328 Ill. App.3d at 497, 262 Ill.Dec. 471, 765 N.E.2d at 1084-85 (quoting Donaldson, Lufkin & Jenrette Futures, Inc. v. Barr, 124 Ill.2d 435, 443, 125 Ill.Dec. 281, 530 N.E.2d 439, 443 (1988)).

Defendants contend that the order of the state court of Connecticut mandates that all of plaintiffs' claims be arbitrated. Aside from our policy concerns underlying the Uniform Act, we are obligated to give a final judgment of another state the finality it has in the state where it was rendered. The full faith and credit clause of the United States Constitution requires each state to give full faith and credit to the judicial proceedings of every other state. U.S. Const., art. IV, § 1; Hamwi v. Zollar, 299 Ill.App.3d 1088, 1094, 234 Ill. Dec. 253, 702 N.E.2d 593, 597 (1998).

Plaintiffs argue that the Connecticut state court did not make any findings regarding the claims made in counts III through VI of plaintiffs' complaint. Plaintiffs contend that the Connecticut state court did not rule on issues of...