Shaw v. First Commc'ns, LLC
| Decision Date | 14 January 2021 |
| Docket Number | No. 19-cv-08070,19-cv-08070 |
| Parties | MARGARET SHAW, Plaintiff, v. FIRST COMMUNICATIONS, LLC, et al., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
MEMORANDUM OPINION AND ORDER
Plaintiff Margaret Shaw (Plaintiff) was the President of Defendant First Communications, LLC (FC) from approximately January 2013 until January 2019. As part of her employment, she entered into an employment agreement with FC, pursuant to which FC had the right to terminate Plaintiff's employment without cause. The employment agreement contains certain post-employment restrictive covenants, including non-competition and non-solicitation provisions. In early January 2019, FC informed Plaintiff that she was being terminated. No cause for termination was offered. On January 9, 2019, Plaintiff signed a separation agreement and general release. The separation agreement provides that Plaintiff would be paid an amount equal to one year of her base salary payable over a one-year period. Following her termination, Plaintiff opened her own consulting business. On November 21, 2019, FC informed Plaintiff that it would no longer pay her severance based on Plaintiff's alleged breach of the restrictive covenants in her employment agreement.
Plaintiff subsequently filed suit against FC; Sandi Murphy, FC's General Counsel (Murphy); Mark A. Sollenberger, FC's Chief Financial Officer (Sollenberger); and three members of FC's Board of Directors, Mark T. Clark (M. Clark), Joseph R. Morris (Morris), and Robert T. Clark (R. Clark) (collectively, Defendants). R. 1, Compl.1 In Count I, Plaintiff alleges violation of the Illinois Wage Payment and Collection Act (IWPCA) against all Defendants; in Count II, she alleges breach of the separation agreement against FC; and in Count III, she seeks a declaratory judgment against FC that certain provisions of the employment agreement are unenforceable as a matter of law. Id. Before the Court is Defendants' Motion to Dismiss Plaintiff's Complaint, or in the alternative, to Stay any Remaining Claims Pending Arbitration based on lack of subject matter jurisdiction, improper venue, lack of personal jurisdiction, and failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). R. 15, Mot. Dismiss. Defendants also request that if the Court does not dismiss any or all of Plaintiff's claims, it should stay any remaining claims pending arbitration. Id. For the reasons that follow, Defendants' motion is granted based on improper venue, as a result of the underlying arbitration provision.
Plaintiff began working for FC, an Ohio limited liability company with an office in Illinois, on or around January 7, 2013 as its President. Compl. ¶¶ 8, 15. Several weeks later, an employment agreement was finalized, and Plaintiff accepted the agreement. Id. Although Plaintiff signed the employment agreement after January 17, 2013, it was backdated to January 7, 2013 at the request of Murphy and Morris (the Employment Agreement). Id. ¶ 15. Section 10(d) of the Employment Agreement permits FC to terminate Plaintiff's employment at any time with or without cause upon thirty days' written notice to Plaintiff. Compl., Exh. A, Employment Agreement at 9. If FC terminates Plaintiff without cause, "upon execution and delivery (and non-revocation) of the Separation and General Release in the form attached hereto as Exhibit A, [FC] shall continue to pay [Plaintiff] for one (1) year following the date of termination." Id. (emphasis in original). Section 6 of the Employment Agreement is a non-competition and non-solicitation clause, which restricts Plaintiff's activities during the term of the agreement and for a period of one year after the expiration or termination of Plaintiff's employment with FC for any reason. Id. at 4-6.
Section 11 of the Employment Agreement states that it "shall be governed and construed in accordance with the laws of the State of Ohio, without regard to principles of conflicts of laws." Employment Agreement at 10. Section 19 of the Employment Agreement also contains an arbitration provision which states that ". . . if any contest or dispute arises between the parties with respect to this Agreement, such contest or dispute shall be submitted to binding arbitration for resolution in Akron in accordance with the rules or procedures of the American Arbitration Association then in effect." Id. at 11-12.
On May 14, 2018, Plaintiff signed an amendment to the Employment Agreement, by which she released any rights to distributions from a license sale in exchange for a higher base salary, bonus potential, and other consideration (the Amendment). Compl. ¶ 19. Section 5 of the Amendment states that the Amendment "shall be governed by and construed in accordance with the laws of the State of Ohio, without regard to conflicts of law principles, and shall be subject to the arbitration provisions set forth in Section 19 of the Employment Agreement." Compl. Ex. A, Amendment at 2.
In early January 2019, Defendants informed Plaintiff that she was being terminated without cause. Compl. ¶ 21. On January 9, 2019, Plaintiff signed a Separation Agreement and General Release (Separation Agreement). Id. ¶ 22. Pursuant to Section 3 of the Separation Agreement, FC agreed to pay Plaintiff "an amount equal to one (1) year Base Salary payable over such period in accordance with [FC's] regular payroll practices and beginning immediately following the revocation Period Expiration Date, as defined in Section 5(g) of this Agreement." Compl., Exh. B, Separation Agreement at 1. Section 8 of the Separation Agreement states that it "shall be governed and construed in accordance with the laws of the State of Ohio without regard to provisions or principles thereof relating to conflicts of laws." Id. at 4.
Plaintiff's last date of employment with FC was February 8, 2019. After her termination from FC, Plaintiff opened her own consulting business. Id. ¶ 25. On November 15, 2019, FC notified Plaintiff that FC will not pay Plaintiff her severance starting November 18, 2019, because she was in breach of the restrictive covenants in the Employment Agreement. Id. ¶¶ 33, 35. Plaintiff alleges that Defendants owe her $67,307.69 in severance. Id. ¶¶ 36, 37.
Plaintiff subsequently filed a multi-count complaint against Defendants. Count I alleges violation of the Illinois Wage Payment and Collection Act (IWPCA) against all Defendants (Compl. ¶¶ 38-45); Count II alleges breach of the Separation Agreement against FC (id. ¶¶ 46-52); and Count III seeks a declaratory judgment against FC that certain provisions of the Employment Agreement are unenforceable as a matter of law (id. ¶¶ 53-61). Defendants move to dismiss the Complaint based on improper venue and lack of subject matter jurisdiction due to the underlying arbitration provision. Mot. Dismiss. They also seek dismissal based on lack of personal jurisdiction and failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). Alternatively, Defendants request that if the Court does not dismiss any or all of Plaintiff's claims, it should stay any remaining claims pending arbitration. Id.
A case may be dismissed for lack of proper venue. FED. R. CIV. P. 12(b)(3). Dismissal is appropriate when the forum selection clause of a contract requires arbitration in another district. HTG Cap. Partners, LLC v. Doe, 2016 WL 612861, at *8 (N.D. Ill. Feb. 16, 2016) (citing Cont'l Cas. Co. v. Am. Nat'l Ins. Co., 417 F.3d 727, 733 (7th Cir. 2005)). The plaintiff bears the burden of establishing that venue is proper. Nagel v. ADM Inv. Servs, Inc., 995 F. Supp. 837, 843 (N.D. Ill. 1998). Under Federal Rule of Civil Procedure 12(b)(3), the court is "not obligated to limit its consideration to the pleadings nor to convert the motion to one for summary judgment." Nagel, 995 F. Supp. at 843 (). The court must resolve factual conflicts in the parties' submissions and draw any reasonable inferences in the plaintiff's favor. Id. Any written instrument attached as an exhibit to a pleading is considered a part of the pleading. FED. R. CIV. P. 10(c).
Defendants advance several arguments in their motion to dismiss. First, Defendants argue3 that due to the arbitration provision in the Employment Agreement, which was incorporated into the Separation Agreement, the Court should dismiss the Complaint for lack of subject matter jurisdiction and improper venue.4 Mot. Dismiss at 6-11. Next, Defendants assert that Plaintiff's IWPCA claim against the individual Defendants must be dismissed because the individual Defendants are not subject to personal jurisdiction in Illinois and because Plaintiff fails to sufficiently plead an IWPCA claim against the individual Defendants. Id. at 11-14. Finally, Defendants posit that if the Court deems dismissal of any or all of Plaintiff's claims at this stage, then any remaining claims should be stayed pursuant to Section 3 of the Federal Arbitration Act while arbitration on the remaining claims proceeds. Id. at 14-15. In her Response, in addition to other counterarguments, Plaintiff contends that the choice of law provisions in the Employment Agreement and Separation Agreement should not be enforced as they violate Illinois public policy. R. 22, Pl.'s Resp. at 10-11.
Before addressing the arbitration provision, the Court must first address the validity of the choice-of-law provisions in the Employment Agreement and the Separation Agreement. Plaintiff argues in her Response that they should not be enforced because her IWPCA claim is not a contractual dispute covered by the agreements, but rather a dispute over whether Defendants violated Plaintiff's statutory rights. Pl.'s Resp. at 10. In their Reply, Defendants contend that the Court should disregard this argument, because Plainti...
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