Opinion
No: 02 C 4733
August 22, 2002
MEMORANDUM OPINION AND ORDER
Defendant Suddath Moving Center, Inc. had an Agency Contract with plaintiff Allied Van Lines, Inc. that the parties executed in 1997 and that was supplemented by later agreements. In February 2002, Suddath sued Allied in a Florida state court, alleging various breaches of the Agency Contract. Allied moved to dismiss and compel arbitration, arguing that the agreement provided for arbitration of disputes and stating that it had filed a demand for arbitration on February 25, 2002. Suddath replied that the demand for arbitration was untimely. In late April 2002, the Florida court determined that Allied's motion presented issues that it could determine on a motion to dismiss, so it denied the motion, directed Allied to answer the complaint and raise its affirmative defenses, and directed the parties to conduct focused discovery aimed at the issue of timeliness, anticipating a later motion for summary judgment on the point. Allied answered the complaint, including a number of affirmative defenses beyond the issue of arbitrability. It also initiated discovery.
Allied then filed in this Court, on July 2, 2002, a petition to compel arbitration and to enjoin Suddath from pursuing the state court case. The Court has jurisdiction under 28 U.S.C. § 1332(a). Allied's claim arises under the Federal Arbitration Act, 9 U.S.C. § 4.
The first question is whether this Court should decline to hear the case due to the pending state court lawsuit or should defer to that court's decision. The fact that the state court has dealt with the issue of arbitrability does not divest this Court of jurisdiction. See We Care Hair Development, Inc. v. Engen, 180 F.3d 838, 842 (7th Cir. 1999). Though federal courts are required to give full faith and credit to state courts' judgments, see id., the state court's order was not final and not appealable, and indeed that court did not decide the merits of any aspect of the issue of arbitrability, instead deferring the matter to later determination. Thus there is no basis for this Court to step aside in favor of the state court. Id.
Suddath contends that Allied waived its right to arbitration by defending the state court case on its merits — that is, by filing an answer that contained affirmative defenses beyond that of arbitrability, and by conducting discovery that went to the merits of the dispute. But in filing its answer, Allied was complying with a court order that it answer the complaint, and if it had not included all of its affirmative defenses, they might have been deemed waived. And this Court is persuaded by Allied's argument that each of the matters it inquired about in its written discovery requests bore on the issue of arbitrability: for example, Suddath argued that Allied had waived arbitration by waiting too long after a dispute arose to make an arbitration demand, and Allied made a number of discovery requests directed to fleshing out that issue. Thus Allied did nothing in the state court that was "inconsistent with the right to arbitrate," see St. Mary's Medical Center v. Disco Aluminum Products Co., 969 F.2d 585, 588 (7th Cir. 1992), which it what it would take for a waiver to occur. Rather, it acted at all times in an effort to enforce its arbitration rights.
Suddath does not dispute that the subject matter of the parties' various disputes is within the scope of the arbitration clause. Rather, as we have noted, it argues that Allied waited too long to demand arbitration. In federal court, the issue of the timeliness of an arbitration demand is an issue for the court, not the arbitrator, unless there is "clear and unmistakable evidence" that the parties intended to arbitrate the issue of arbitrability of a dispute. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995); Chicago School Reform Board of Trustees v. Diversified Pharmaceutical Services, Inc., 40 F. Supp.2d 987, 992-93 (N.D. Ill. 1999). In this case, the contract reflects exactly such an intent, at least with regard to the type of timeliness dispute that is at issue here. Suddath's argument is that Allied waited too long after a dispute arose to demand arbitration. Based on the parties' submissions on that issue (primarily the briefs that they submitted in state court), resolution of the question will turn on the interpretation and/or application of Section 3.13(g) of the Agency Contract, which states that "[a] dispute must be submitted to arbitration within six months of its having arisen . . . ." Section 3.13 of the Agency Contract provides that any disputes "with respect to the enforcement, interpretation or application of any provisions of this Agreement" are to be submitted to arbitration. The dispute over timeliness is a dispute concerning the interpretation or application of Section 3.13(g), and thus it is a dispute that the parties clearly intended the arbitrator to decide.
For these reasons, the Court determines that the parties' disputes are indeed subject to arbitration. Suddath, however, is attempting to pursue resolution of the disputes in a court (i.e., the Florida case). That is contrary to the terms of the Agency Contract. The law is clear that a federal court may, in this situation, enjoin a party from proceeding in a state court lawsuit. See We Care Hair, 180 F.3d at 844; 28 U.S.C. § 2283.
Conclusion
For the foregoing reasons, the Court grants Allied's petition to compel arbitration and to stay state court proceedings. The Clerk is directed to enter judgment as follows:
Judgment is entered in favor of the plaintiff Allied Van Lines, Inc. Defendant Suddath Moving Center, Inc. is hereby ordered to cease immediately from further prosecution of its state court action against plaintiff Allied Van Lines, Inc. and is ordered to submit the disputes raised in the pending state court case to arbitration pursuant to the terms of Section 3.13 of the Agency Contract between the parties.