Summary
noting that the arbitration provision "reaches 'any dispute' between the parties"; adding that, "[t]hough it may be unreasonable to understand the parties as intending that any dispute that may arise between them even if unrelated to the Agreement would be subject to arbitration, that is not the case here"
Summary of this case from E & E Co. v. Light in the Box Ltd.Opinion
2:02-CV-0237-JDT-WTL
February 6, 2003.
This cause comes before the court on four motions (1) the Defendants' Motion to Dismiss or, in the alternative, to Compel Arbitration and Issue Stay; (2) the Plaintiffs' Motion for a Preliminary Injunction; (3) the Plaintiffs' Motion for Emergency Application for Hearing and/or Ruling on Motion for Preliminary Injunction; and (4) the Plaintiffs' Notice to the Court and Request for Immediate Hearing. Having carefully considered these motions, the parties' arguments, and the applicable law, the court makes the following entry.
This background information is taken from the Plaintiffs' Complaint, the affidavit and supplemental affidavit of Thomas A. Shumate, the two affidavits of Mr. McBride, and the affidavit of Ms. McBride as well as exhibits attached to the affidavits and the Plaintiffs' Emergency Application. The Plaintiffs have renewed their motion to strike the Shumate affidavit. The renewed motion is denied for the same reasons the original motion to strike was denied.
In or about 1995, the Plaintiffs, John M. McBride and Lauren V. McBride, contacted Father Bert Heise, then Field Sales Director for the St. Anthony Messenger, a monthly Catholic publication, about selling the magazine for a commission. The Plaintiffs and Fr. Heise had several contacts both by telephone and in person, and the Plaintiffs subsequently agreed to solicit subscriptions for the magazine.
On November 2, 1995, the McBrides each entered into a separate agreement with the Franciscan Friars of St. John the Baptist Province (the "Franciscans"), publishers of the St. Anthony Messenger. The agreements are identical in all relevant respects, and for ease the court will refer to both agreements as the "Agreement." Under the terms of the Agreement, the McBrides were to sell subscriptions for the St. Anthony Messenger and the Franciscans were to pay the McBrides "a commission on all sales made, in accordance with the current commission schedule," with commissions paid twice a month. (Thomas A. Shumate Aff. ¶¶ 2-3; Agreement ¶¶ 2, 3, 6.) The Agreement provides that "[a]ll subscriptions become property of the Franciscans who give the right to Independent Contractors to sell renewals (before their expiration date) as well as new subscriptions." (Id. ¶ 1.) The Agreement states:
Since February 1996 Mr. Shumate has been the Business Manager and Controller for the St. Anthony Messenger Press. (Shumate Aff. ¶ 1.) In that position, he oversees the business functions of the Press including oversight of independent contractor sales of the magazine, personnel that work with the independent contractors, and the business records. (Shumate Suppl. Aff. ¶ 3.)
It is further understood and agreed to by Second Party [the McBrides] that no property rights are acquired by Second Party to any subscription renewals pertaining to this agreement. . . . If is further understood and agreed by Second Party that filing of bankruptcy by Second Party during the pendency of this agreement, or its renewed extension, shall act to automatically terminate the agreement. . . .
(Id. ¶ 12.)
The Agreement provides: "This agreement shall be for a period of sixty (60) days from date of execution. It shall automatically renew unless notice is given by either Party not to renew prior to the expiration of any 60-day period." (Shumate Aff. ¶ 3 Agreement ¶ 7.) The Agreement further provides:
It shall be deemed an unprofitable relationship if there is a failure of the [McBrides] to sell any subscriptions or report sales for any four consecutive weeks. For these reasons, this agreement shall automatically terminate and be deemed void at the end of the existing contract term.
(Id. ¶ 10(A)). The Agreement contains a choice of law provision and arbitration clause which read as follows:
This agreement is deemed executed in the state of Ohio and governed by Ohio law. Any dispute shall be resolved solely by arbitration through the facilities of the American Arbitration Association in the city closest to Second Party where such facilities are available.
(Shumate Aff. ¶ 3; Agreement ¶ 17.) The Agreement appears to have been signed by Father Bert Heise, Director of Field Sales, on behalf of the Franciscans, the designated "First Party" and by each of the McBrides, the designated "Second Party." (Shumate Aff. ¶ 3; Agreement at 1, 3.)
The Plaintiffs appear to want to challenge the authenticity of the copies of the Agreements, but offer no evidence to contradict Mr. Shumate's assertions in his affidavit and supplemental affidavit that the documents attached thereto are true and accurate copies of the Agreements into which they entered.
The McBrides were successful with their work for the Franciscans, consistently receiving awards and commendations. They even assisted Fr. Heise in the development of a system for obtaining pastor support for lay ministers and authored an article published in the St. Anthony Messenger in January 2002. All went well in the relationship between the McBrides and the St. Anthony Messenger until about November 2001 when the Plaintiffs' income from sales of the magazine took a drastic downturn.
Sometime prior, Mr. Shumate had purchased a new computer and software system. The Defendants converted from the old system to the new system around November 2001 despite warnings from the McBrides that precautions were necessary to protect lay ministers such as themselves during the installation and start up of the new system. The Plaintiffs claim that as a result of the conversion, thousands of subscriptions were lost or altered in such a way that they and other contractors have been deprived of their commissions on said subscriptions. The new computer system also brought about a change in forms used for subscriptions which new form the Plaintiffs find more expensive and time-consuming to use. In addition, in the Plaintiffs' view, the new commission summary is misleading, amounts to gross misrepresentation and mail fraud and precludes them from determining how much in commissions they are losing.
For several months the McBrides tried to improve the computer related problems through correspondence and telephone calls to several of the Defendants, but to no avail. Finally, in April 2002, the McBrides sent an invoice to the Defendants for lost sales and commissions and demanded payment. The Plaintiffs followed up with a second invoice in May 2002 and a final notice in June 2002, which threatened litigation. They received no response to any of those communications.
The Plaintiffs commenced this action on September 11, 2002, by filing their Complaint against the Defendants, St. Anthony Messenger Magazine, St. Anthony Messenger Press, Franciscan Communications, the Franciscans, and numerous individuals affiliated with these aforementioned defendants, who are sued both individually and in their official capacities as officers, directors, board members, managers, and/or employees or representatives of the aforementioned defendants. The Plaintiffs allege as against all Defendants: theft and conversion of commissions and residual commissions; fraud and deception in the mailing of deficient paychecks and commission summaries; negligence and negligent misrepresentation in connection with the purchase and operation of the new computer system; lack of due diligence; breach of contract; and promissory estoppel. The Plaintiffs assert constructive fraud against Defendant Pfaff based on his promise of a guaranteed income and actual fraud by allegedly lying about the amount of their paychecks. They allege mail fraud against Defendant Desmond in connection with invoices he sent them and allege extortion against Defendant Connell in attempting to have them terminated from their positions.
St. Anthony Messenger Press is the business umbrella under which the St. Anthony Messenger and Franciscan Communications, a division of St. Anthony Messenger Press, both operate; the Franciscans are a Catholic religious order of priests and brothers which purports to control St. Anthony Messenger, St. Anthony Messenger Press and Franciscan Communications. The individuals are: Thomas A. Shumate, Loren Connell, Jenny Desmond, Gene Pfaff, Fred Link, Jeremy Harrington, Jack Wintz, Pat McCloskey, Barbara Beckwith, Kenan Freson, Greg Friedman, Tom Bruce, and Lisa Biedenbach. (Compl. ¶¶ 7-22.)
The Plaintiffs seek compensatory and punitive damages as well as injunctive relief preventing the Defendants from terminating the Plaintiffs from their positions as contractors for St. Anthony Messenger and otherwise jeopardizing their income from those positions, and costs. However, the Complaint alleges that the Defendants have "so poisoned the relationship between Plaintiffs and Defendants that, even if massive procedural changes and audits were to be forthcoming . . . it is doubtful if a mutually-acceptable, -beneficial, and/or -profitable arrangement could ever again exist between the parties." (Compl. ¶ 39.) The Plaintiffs also assert their desire to "part company . . . completely with Defendants[.]" (Id. ¶ 71(j)).
By letter dated December 13, 2002, Mr. Shumate for the Franciscans gave the McBrides notice of non-renewal pursuant to paragraph 7 of the Agreement. The letter states that the notice is effective as of its date and the sixty day period described in the Agreement commences as of that date as well.
II. Motion to Dismiss or Stay Proceedings and Compel Arbitration
The Defendants move for an order dismissing the Complaint, or, in the alternative, for an order compelling the Plaintiffs to arbitrate their claims against them. The Plaintiffs oppose the motion. They argue that the entire Agreement, including the arbitration clause, is void or at the least voidable because it was induced by fraud and oppression, lack of mutual assent, and breach of contract by the Defendants. They also contend that the Defendants have waived any right to arbitration.
The Federal Arbitration Act (the "FAA"), 9 U.S.C. § 1-16, provides that: "A written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract . . . or the refusal to perform the whole or any part thereof . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. "The FAA also provides for stays of proceedings in federal district courts when an issue in the proceeding is referable to arbitration, § 3; and for orders compelling arbitration when one party has failed, neglected, or refused to comply with an arbitration agreement, § 4." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25 (1991) (citing 9 U.S.C. § 3, 4).
"Unless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator." AT T Tech., Inc. v. Communications Workers of Am., 475 U.S. 643, 649 (1986). Whether a dispute is subject to arbitration is a question of contract interpretation, since "a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." Schact v. Beacon Ins. Co., 742 F.2d 386, 390 (7th Cir. 1984). There is a strong federal policy favoring arbitration, see AGCO Corp. v. Anglin, 216 F.3d 589, 593 (7th Cir. 2000) (citation omitted); and any doubts as to the arbitrability of a dispute are to be resolved in favor of arbitration, ATT Tech., 475 U.S. at 650. Thus, an order to arbitrate a particular dispute should not be denied "unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." Id.
In deciding whether the parties agreed to arbitrate a dispute, the court examines the applicable state contract law. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943 (1995); Koveleskie v. SBC Capital Markets, Inc., 167 F.3d 361, 366-67 (7th Cir. 1999); Gibson v. Neighborhood Health Clinics, Inc., 121 F.3d 1126, 1130 (7th Cir. 1997). The Agreement states that it is deemed executed in the state of Ohio and Ohio law governs. Therefore, the court looks to Ohio law in determining whether the arbitration clause is enforceable.
The Plaintiffs submit that under Ohio law the court can reach the question of whether the entire contract was fraudulently induced. They are wrong about this. The cases cited do not support their position. To the contrary, one of the cases relied on by them observed that the United States Supreme Court, the highest court of the land, has said that the issue of fraudulent inducement of the entire contract is an issue to be resolved in arbitration, absent evidence that the parties intended to withhold the issue from arbitration. See Ferro Corp. v. Garrison Indus., Inc., 142 F.3d 926, 931 (6th Cir. 1988) (citing Prima Paint Corp. v. Flood Conklin Mfg. Co., 388 U.S. 395, 403 (1967)). Prima Paint held that when presented with a motion for a stay pending arbitration, "a federal court may consider only issues relating to the making and performance of the agreement to arbitrate." 388 U.S. at 404; accord In re Oil Spill by the AMOCO Cadiz, 659 F.2d 789, 794 (7th Cir. 1981). Thus, to avoid arbitration, the Plaintiffs "`must show that the arbitration clause itself . . . is vitiated by fraud, or lack of consideration or assent . . .; that in short the parties never agreed to arbitrate their disputes.'" Sphere Drake Ins. Ltd. v. Local No. 458-3M, All Am. Ins. Co., 256 F.3d 587, 592 (7th Cir. 2001) (quotation omitted).
The Plaintiffs claim that in a conversation with Fr. Heise held before the McBrides signed the Agreement, Mr. McBride was assured that the arbitration clause only applied to the choice of law clause. (McBride Aff. 12/30/02 ¶ 8h-j; see also id. ¶ 8j (stating "I felt confident that we were going to be signing Agreements. . . .")). Thus, the Plaintiffs ask the court to consider extrinsic evidence which directly contradicts the express terms of the parties' Agreement.
The parol evidence rule prohibits a party from using extrinsic evidence to contradict or add to the terms of an unambiguous contract. Tri-State Group, Inc. v. Ohio Edison Co., No. 02 BA 14, 2002 WL 31888665, at *5 (Ohio Ct.App. Dec. 26, 2002). "The parol evidence rule states that `absent fraud, mistake or other invalidating cause, the parties' final written integration of their agreement may not be varied, contradicted or supplemented by evidence of prior or contemporaneous oral agreements, or prior written agreements.'" Id. (quoting 11 Williston on Contracts (4 ed. 1999) 569-570, § 33:4). Under Ohio law, "parol evidence directed to the nature of a contractual relationship is admissible where the contract is ambiguous and the evidence is consistent with the written agreement which forms the basis of the action between the parties." Ill. Controls, Inc. v. Langham, 639 N.E.2d 771, 779 (Ohio 1994); see also Tri-State Group, 2002 WL 31888665, at *5 (stating that "parol evidence cannot be used to contradict express terms of a contract.") (quotation omitted).
The Plaintiffs argue that under Ohio law oral modifications to a contract are binding "if a refusal to enforce the modification would result in a fraud or injury to the promisee." Software Clearing House, Inc. v. Intrak, Inc., 583 N.E.2d 1056 (Ohio Ct.App. 1990), cited by them is inapposite. There, the court actually said that "[a] gratuitous oral agreement to modify a prior written agreement is binding if it is acted upon by the parties and if a refusal to enforce the modification would result in a fraud or injury to the promisee." Id. at 1061 (emphasis added). The Plaintiffs have not shown any subsequent oral modifications to the Agreement, but rather they allege prior and contemporaneous oral statements. And, they have not shown that the parties acted on any such alleged oral modification.
The Plaintiffs cite to Matterhorn, Inc. v. NCR Corp., 763 F.2d 866 (7th Cir. 1985), as holding that an oral agreement can supersede a written one containing an arbitration clause. This was not the case's holding as the subsequent agreement at issue was a written agreement. So, the case does not assist the Plaintiffs.
The court finds that the alleged oral assurance made by Fr. Heise to Mr. McBride that the arbitration clause only applied to the choice of law provision directly contradicts the clear, unambiguous language in the Agreement that any dispute will be resolved by arbitration. The court also finds that this alleged assurance was made before or contemporaneous with the making of the Agreement. Therefore, the court concludes that under Ohio law the alleged oral assurance attributed to Fr. Heise is inadmissible parol evidence.
The same result appears to be portended in respect to Fr. Heise's alleged assurances that cause was necessary for termination, the McBrides would have property rights in renewal commissions, a new contract would be forthcoming, and his only concern was the independent contractor provision. (See McBride Aff. 12/30/02 ¶ 8.) But since none of these matters directly pertains to the arbitration clause itself, the court does not make any specific finding as to them and leaves these matters for arbitration.
Furthermore, a view that the arbitration clause covered only the choice of law provision borders on the absurd. Under such a view, the parties agreed to arbitrate the choice of law issue despite the express agreement in the immediately preceding sentence that Ohio law would govern. The placement of the arbitration clause in the same numbered paragraph as the choice of law provision does not create a reasonable inference that the clause applies only to latter provision.
The Plaintiffs assert they were continually reassured that their prior understanding with Fr. Heise that the Agreement was a meaningless formality except as to their independent contractor status was still valid and a new contract would be forthcoming. The Plaintiffs, however, have offered no evidence for support. Instead, Mr. McBride states "we were never given any reason to believe that any of the named Defendants interpreted the subject Agreements in any way differently than do we[.]" (McBride Aff. 12/30/02 ¶ 9.) That is far different from saying that the Plaintiffs were reassured that their professed understanding was shared by the Defendants.
To the extent the McBrides offer evidence of Fr. Heise's alleged assurances that the arbitration clause only applied to the choice of law provision to establish fraudulent inducement in respect to the arbitration clause their efforts are unavailing. "The parol evidence rule may not be avoided `by a fraudulent inducement claim which alleges that the inducement to sign the writing was a promise, the terms of which are directly contradicted by the signed writing. Accordingly, an oral agreement cannot be enforced in preference to a signed writing which pertains to exactly the same subject matter, yet has different terms." Galmish, 734 N.E.2d at 790 (quotation omitted). The court said:
[T]he proffered evidence of fraud must show more than a mere variation between the terms of the written and parol agreement. . . . Thus, . . . the parol evidence rule does apply to . . . fraud if the evidence in question is offered to show a promise which contradicts an integrated written agreement. Unless the false promise is either independent of or consistent with the written instrument, evidence thereof is inadmissible.
Id. at 790-91 (quotations and citations omitted).
Applying this law, the McBrides' cannot establish their fraudulent inducement claim in respect to the arbitration clause. Fr. Heise's alleged assurances that the arbitration clause applied only to the choice of law provision are not independent of or consistent with the arbitration agreement. Instead, the alleged assurances directly contradict the plain, unambiguous terms of the arbitration clause. Thus, the McBrides' evidence of Fr. Heise's alleged assurances is inadmissible, and the Plaintiffs cannot prove fraudulent inducement in respect to the arbitration clause.
In addition, it should be noted that Mr. McBride professes that before he and his wife were presented with the Agreement, they had "considerable experience with the law and litigation." (McBride Aff. 12/30/02 ¶ 7.) The McBrides even offered to prepare a replacement contract. Mr. McBride also says that they discussed and annotated a copy of the Agreement and then discussed their concerns and questions with Fr. Heise. (Id. ¶ 8.) The McBrides can clearly read and understand the English language. Even if the evidence of Fr. Heise's alleged assurances were admissible, it would be difficult to see how the McBrides could prove justifiable reliance on those assurances which directly conflicted with the language of the arbitration clause.
The Plaintiffs assert that they were desperate for income and completely trusted the Franciscans' integrity, so they signed and returned copies of the Agreement. For support, Mr. McBride cites the Plaintiffs' economic situation — having just declared bankruptcy, reliance on food stamps, need for employment, etc., as well as his trustworthiness of priests and religious. (McBride Aff. 12/30/02 ¶¶ 7, 8.) Thus, the court understands them to claim that they agreed to the arbitration provision under economic duress and/or undue influence of the Franciscans. The evidence of the McBride's financial situation does not support a finding of undue influence. Nothing in the record suggests that they did not voluntarily enter into the Agreement. Though they were in need of income, there is insufficient evidence of the kind of dependency necessary to show undue influence. The McBrides seem mentally sound and capable of handling their affairs. Their own evidence establishes their astuteness in questioning the terms of the Agreement before they entered into it.
Gilmer v. Interstate/Johnson Lane Corporation, 500 U.S. 20 (1991), noted that a claim of unequal bargaining power between employers and employees might be a reason to find an arbitration agreement unenforceable. In Gilmer the Court said that "[m]ere inequality in bargaining power, however, is not a sufficient reason to hold that arbitration agreements are never enforceable in the employment context." Id. at 33. The Court said that "courts should remain attuned to well-supported claims that the agreement to arbitrate resulted from the sort of fraud or overwhelming economic power that would provide grounds for the revocation of any contract." Id. (quotation omitted). The Plaintiffs, who profess much legal experience, have not well supported their claims that Fr. Heise or the Franciscans had "overwhelming economic power" over them.
The Plaintiffs urge that Fr. Heise abused a fiduciary relationship. They, however, offer no evidence to establish the existence of such a relationship between themselves and Fr. Heise or the Franciscans. The "mere fact that a party to a contract is unable to obtain the terms he desires through negotiation does not mean that he can later attempt to avoid his obligations under the contract by claiming that he agreed to the contract . . . under economic duress." Resolution Trust Corp. v. Ruggiero, 977 F.2d 309, 314 (7th Cir. 1992). It appears that is exactly what the Plaintiffs are trying to do here.
The Plaintiffs also claim mutual mistake in the making of the arbitration clause. As the term suggests, the mistake must be mutual. "A `mutual' mistake does not rise where one party insists that the contract expresses the agreement of the parties, while the other party claims that all which the parties intended was not placed in the written contract." Heinrichsdorf v. Stengel, 1911 WL 863, at *1 (Ohio Com. Pl. July 6, 1911). Such is the case here. The Defendants have not conceded to a mutual mistake as to the meaning of the arbitration clause, but to the contrary, have moved to compel arbitration on the basis of that clause, which conduct demonstrates they do not share the Plaintiffs' limited view of the reach of the clause. Furthermore, the written contract is the best evidence of the parties' intent; thus, mutual mistake must be proven with clear and convincing evidence. See id. at *1-2. The Plaintiffs' evidence of alleged mutual mistake cannot be said to be clear and convincing.
The Plaintiffs argue that the Defendants have breached the Agreement. A breach of the underlying contract alone, however, cannot waive the right to arbitrate; otherwise, a breach of contract claim could not be arbitrable. See, e.g., Ivax Corp. v. B. Braun of Am., Inc., 286 F.3d 1309, 1319 (11th Cir. 2002). None of the authorities cited by the Plaintiffs hold to the contrary.
The McBrides remark that under the Agreement they could have been terminated any number of times over the years for not making any sales over a four or more week period, but they were not. Thus, they are complaining that the Defendants treated them better in some ways than they were required to do under the Agreement. To the extent the Plaintiffs are claiming that the Defendants' failure to strictly enforce rights under the Agreement makes the entire Agreement unenforceable, their claim would appear bound for failure. See Ryan v. Union Pac. R. Co., 286 F.3d 456, 460 (7th Cir.) ("the failure to enforce a contractual term does not abrogate the term unless the conditions for a waiver or estoppel are established"), cert. denied, 123 S.Ct. 89 (2002). But this is for the arbitrator to decide, as any estoppel arguments occasioned by such alleged conduct relate to provisions of the Agreement other than the arbitration clause.
It is interesting that the Plaintiffs declare the Agreement nonbinding and unenforceable in its entirety when it suits them, but nonetheless in this action seek to recover commissions allegedly due them under the same Agreement.
The McBrides assert that the Defendants knew for nine months that they had threatened litigation numerous times, yet did not initiate arbitration. Something more is required to establish waiver of the right to arbitration. None of the authorities relied on by the Plaintiffs hold that a party's failure to initiate arbitration in response to another party's threat of litigation alone constitutes waiver of the right to arbitrate. In Dickinson v. Heinold Securities, Inc., 661 F.2d 638, 644 (7th Cir. 1981), the court in considering whether a party had waived the arbitration clause observed that by waiting eighteen months after the controversy arose to assert arbitration, the defendant did not act inconsistent with its arbitration right. The employer in Hooters of America, Inc. v. Philips, 173 F.3d 933 (4th Cir. 1999), preemptively filed suit to compel arbitration, but nothing in the opinion suggests that it had to do so in order to retain a right to arbitrate, had such a right existed.
The Plaintiffs state that arbitration poses disadvantages for them: it would be more expensive than litigation, discovery is limited, the rules of evidence are inapplicable, punitive damages are unavailable, they are unfamiliar with the arbitration process and cannot afford counsel, and they have invested a lot of resources into this litigation. But these alleged disadvantages alone do not warrant denying the Defendants a right to arbitrate. Shankle v. B-G Maintenance Management of Colorado, Inc., 163 F.3d 1230 (10th Cir. 1999), and Cole v. Burns International Security Services, 105 F.3d 1465 (D.C. Cir. 1997), are distinguishable as the arbitration agreements there contained provisions requiring the parties to share the arbitrator's fee. The Agreement in this case has no such provision. The Plaintiffs offer no admissible evidence to support their claim that they would be forced to pay all costs of the arbitration. One authority cited by the Plaintiffs notes that the informal procedures of arbitration make it a desirable forum for contract disputes, Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 648 (1985) (Stevens, J., dissenting), and, in the end, that is what this litigation is — a contractual dispute. The Plaintiffs offer no authority for the proposition that punitive damages always are unavailable in arbitration, and the court is unaware of any. Cf. Smith Barney Inc. v. Schell, 53 F.3d 807, 809 (7th Cir. 1995) (holding that punitive damages were available in arbitration pursuant to contract between securities brokerage firm and customers). It does not appear that the arbitration clause or any other part of the Agreement limits the full range of remedies available to the Plaintiffs that would otherwise be available in a court of law, provided such remedies are allowable under the governing (Ohio) law.
Mr. McBride offers statements that he allegedly was told by or information from documents he allegedly received from individuals with the American Arbitration Association regarding many matters such as payment of arbitration costs as well as an alleged opinion that the arbitration clause in this case was vague and incomplete. (McBride Aff. ¶ 11.) All of this constitutes inadmissible hearsay and, therefore, will not be considered by the court. Anyway, even if all these things were true and accurate, they would make no difference to today's decision.
The Plaintiffs point out that in Gilmer v. Interstate/Johnson Lane Corporation, 500 U.S. 20 (1991), the Supreme Court left unanswered the question of whether the FAA applies to employment contracts. The Seventh Circuit, which court of appeal this district court is bound to follow, however, has said that it does. See Koveleskie v. SBC Capital Markets, Inc., 167 F.3d 361, 363-64 (7th Cir. 1999) and cases cited therein. Thus, even if the Agreement constitutes an employment contract, the FAA would apply.
The Plaintiffs attempt to distinguish the case on the ground that it involved arbitration under securities industry rules rather than the rules of the American Arbitration Association ("AAA"). While the Plaintiffs are correct in noticing this difference, they have cited no case which holds that arbitration under the AAA rules is beyond the scope of the FAA, and there are numerous decisions applying the FAA to employment agreements where the AAA rules were used. See, e.g., Brown v. Coleman Co., 220 F.3d 1180, 1182 (10th Cir. 2000), cert. denied, 531 U.S. 1192 (2001).
The Plaintiffs have advanced several arguments as to why the arbitration clause is unenforceable, but none are availing. Mr. McBride points out what he describes as "intrinsic facial defects" in the Agreement and conflicts with other documents the Plaintiffs received from the Defendants such as the change in the appropriate address to which notice was to be sent, the reference to field assignments, and the McBride's bankruptcy. (McBride Aff. 12/30/02 ¶ 6.) To the extent the Plaintiffs imply the Agreement was invalid simply because of their then pending bankruptcy, they offer no authority to establish that they lacked the legal capacity to enter valid and enforceable contracts simply because they had filed bankruptcy. The Plaintiffs may mention their bankruptcy to support their claim that the Defendants did not intend the Agreement to be binding. The McBrides were in bankruptcy, and the Agreement states that it is automatically terminated on the "filing of bankruptcy by Second Party during the pendency of this agreement, or its renewed extension," (Shumate Aff. ¶ 4; Agreement ¶ 12); thus, the Plaintiffs suggest the Agreement was not intended to be binding as it was effectively "terminated" from its inception. But there is nothing in the record to suggest that the McBrides filed bankruptcy during the pendency of the Agreement or any extension thereof; instead, they had filed bankruptcy before entering into the Agreement. Thus, the provision on which they rely seems inapplicable, and the conflict which they perceive is illusory.
Mr. McBride complains that the McBrides' signatures on the Agreements were neither witnessed nor notarized (but stops short of claiming they did not sign the Agreements), but does not offer any authority to show why this should matter with respect to the arbitrability issue. Mr. McBride argues that the Agreement is incomplete because it incorporates a "current commission schedule"; yet cites no authority to establish that the mere incorporation of other documents in an agreement renders an arbitration clause in that agreement unenforceable. He notes that the Agreement does not contain an integration clause unlike many contracts at issue in reported cases, but offers no authority that such a clause is required. It appears that one is not. See Galmish v. Cicchini, 734 N.E.2d 782, 790 (Ohio 2000) ("The presence of an integration clause makes the final written agreement no more integrated than does the act of embodying the complete terms into the writing."). None of these things, however, has any bearing on whether the arbitration clause is enforceable.
Mr. McBride states that both before and after the execution of the Agreement Fr. Heise and his staff sent the Plaintiffs many other documents which supplemented the Agreement, forbade actions taken by the Defendants which are challenged in this case, and even contradicted some of the Agreement's provisions. (McBride Aff. 12/30/02 ¶ 4.) While these things may pertain to the merits of the Plaintiffs' claims, none of them concern whether the parties agreed to arbitrate their disputes. The Plaintiffs submit that neither they nor Fr. Heise intended the Agreement to encompass developments such as the computer conversion, the appointments of a new Field Sales Director and Business Manager, and "all the tortious acts of the Defendants to this litigation." (Resp. at 5.) Mr. McBride states that the Plaintiffs developed expanding responsibilities with St. Anthony Messenger such as training new contractors which are not covered by the Agreement and were compensated for doing so. These issues and other similar issues, e.g., whether the special parish rates and the new commission structure are covered by the Agreement, are for the arbitrator not this court to decide. Lastly, Mr. McBride complains about the nonrenewal notice they received from Mr. Shumate. His concerns relative to the letter relate to the merits of the Plaintiffs' claims and, again, are for the arbitrator to decide, not this court. He suggests that sanctions or a contempt citation might be in order because the Plaintiffs' motion for preliminary injunction was pending. The court declines this invitation. No injunction had been entered when the letter was authored and sent to the Plaintiffs, nor, as explained below, will any injunction be issued now.
The court, therefore, concludes that the arbitration clause in the Agreement is valid and enforceable. The next question, then, is whether the disputes in this case fall within the ambit of the parties' arbitration agreement. The answer is assuredly yes.
The McBrides maintain that the arbitration clause in this case is "more limited and vague" than any other found by them in "dozens" of cases because of its failure to use language such as "the Agreement as a whole" or "disputes arising thereunder". A number of courts have found enforceable arbitration agreements also lacking such language. See, e.g., Hampton v. ITT Corp., 829 F. Supp. 202, 203-04 (S.D.Tex. 1993) (concluding arbitration agreement was enforceable which provided for arbitration of "any dispute between [the parties] or claim by either against the other"); Hoffelder v. Zinzow, No. 90 C 5450, 1991 WL 104178, at *1 (N.D.Ill. June 12, 1991) (ordering arbitration of dispute pursuant to agreement to arbitrate "[a]ll disputes between the [parties] and all other matters with respect to which the [parties] are not in agreement"). Sweet Dreams Unlimited v. Dial-A-Mattress International, 1 F.3d 639 (7th Cir. 1993), cannot be reasonably read as requiring "arising out of" language in an arbitration clause in order to cover disputes such as those in the instant case. The same is true with respect to 9 U.S.C. § 2 and Industrial Electronics Corp. v. iPower Distribution Group, Inc., 215 F.3d 677 (7th Cir. 2000), also relied on by the Plaintiffs. The arbitration clause at issue in Bruno v. Pepperidge Farm, Inc., 256 F. Supp. 865 (E.D.Pa. 1966), is so different from the one at issue here that the court's analysis of the clause simply is unhelpful to this case.
The court disagrees that the arbitration clause can be viewed as a limited one. Rather, it is extremely broad and appears to be broader than any of those in the cases cited by the Plaintiffs. The clause reaches "[a]ny dispute" between the parties to the Agreement. Though it may be unreasonable to understand the parties as intending that any dispute that may arise between them even if unrelated to the Agreement would be subject to arbitration, that is not the case here. All of the Plaintiffs' claims in this case arise out of or relate to the Agreement, despite their characterization of certain claims as non-contractual claims. The disputes concern sales, commissions, renewals, and termination of the McBrides' positions with St. Anthony Messenger — all areas covered by the terms of the Agreement. The court concludes that the arbitration clause is susceptible of an interpretation that covers the Plaintiffs' claims in this case. Those claims are, therefore, arbitrable. See In re Oil Spill by the AMOCO Cadiz, 659 F.2d 789, 794 (7th Cir. 1981). It would defeat the arbitration agreement if the McBrides could avoid arbitration merely by characterizing their claims as non-contractual claims when, in reality, all their claims are covered by the arbitration agreement.
The Plaintiffs point out that not all the Defendants signed the agreements containing the arbitration clauses. They are correct. However, numerous courts have held that non-signatories of arbitration agreements may be bound by the agreements under ordinary contract and agency principles. See, e.g., Javitch v. First Union Secs., Inc., Nos. 02-3352, 02-3355, 02-3353, 02-3354, 2003 WL 73018, at *8 (6th Cir. Jan. 10, 2003); MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir. 1999); Pritzker v. Merrill Lynch, Pierce, Fenner Smith, 7 F.3d 1110, 1121-22 (3rd Cir. 1993); Letizia v. Prudential Bache Sec., Inc., 802 F.2d 1185, 1187-88 (9th Cir. 1986). Thus, a non-signatory may be bound where the non-signatory is an agent of the signing party. See, e.g., Pritzker, 7 F.3d at 1121-22; Arnold v. Arnold Corp., 920 F.2d 1269, 1281-82 (6th Cir. 1990); Letizia, 802 F.2d at 1187-88. This is especially applicable where allowing the nonsignatory to require arbitration is necessary to avoid defeating the parties' arbitration agreement. See MS Dealer Corp., 177 F.3d at 947; In re Oil Spill by the AMOCO Cadiz, 659 F.2d at 796.
In a related claim, Mr. McBride argues that there is some ambiguity in the Agreement as to whom they contracted with. In support, he observes that the Agreement initially identifies the Franciscans as "First Party" but subsequently refers to the "Director" as "First Party" in paragraph 10(C). The court perceives no such ambiguity. It is clear that the Agreement was entered into with the Franciscans. The signature page, like the first page, again refers to the Franciscans as "First Party". True, Fr. Heise signed the Agreement, but he did so as Director of Field Sales on behalf of the Franciscans.
Because the McBrides and the Franciscans intended to arbitrate disputes between them, their arbitration agreement should be extended to the McBrides' claims against the individual defendants who are sued because of actions they took or did not take in their capacities as officers, employees or other agents of the Franciscans. If such agents were not extended the benefit of the arbitration clause, then it would be all too easy for a crafty litigant to defeat an arbitrate agreement by naming nonsignatories as defendants and/or by naming nonsignatories in their individual capacities only. See Arnold, 920 F.2d at 1281. Thus, all Defendants in both their official and individual capacities should and will get the benefit of the arbitration clause.
Of course, this is not a situation in which a nonsignatory is being compelled to submit his or her claims to arbitration, but rather, where the nonsignatories seek the benefit of their principal's arbitration agreement. By filing their motion to stay and compel arbitration, the court understands all nonsignatory defendants as having consented to arbitration.
Mr. McBride asserts that the Plaintiffs knew that the Agreement would be unenforceable, so they just signed and returned it. (McBride Aff. 12/30/02 ¶ 7.) That was a gamble they were willing to take; as it turns out, they were wrong — at least with respect to the arbitration clause. Whether the gamble pays off with respect to the remainder of the Agreement must be determined in arbitration.
In the instant case the arbitration clause is readily susceptible of an interpretation that covers the asserted disputes. Therefore, the court concludes that Plaintiffs' claims are subject to arbitration. Accordingly, pursuant to the FAA, the court should stay this action until arbitration has been had in accordance with the terms of the arbitration clause of the Agreement and enter an order compelling the Plaintiffs to arbitrate their claims against the Defendants.
The court, however, retains jurisdiction over this action for the purpose of confirming, vacating or modifying the arbitration award, see Marine Transit Corp. v. Dreyfus, 284 U.S. 263, 275-76 (1932) ("We do not conceive it to be open to question that, where the court has authority under the statute, as we find that it had in this case, to make an order for arbitration, the court also has authority to confirm the award or to set it aside for irregularity, fraud, ultra vires, or other defect."). Under the FAA, a party has ninety days after an arbitration award is filed or delivered within which to challenge the award, 9 U.S.C. § 12, and one year within which to move for a court order confirming the award, 9 U.S.C. § 9.
III. Motion for Preliminary Injunction
The Plaintiffs move for a preliminary injunction prohibiting the Defendants from: (1) terminating them from their positions as contractors for St. Anthony Messenger; (2) failing or refusing to timely provide them with their semi-monthly paychecks in the amounts which they earned during that pay period; (3) failing or refusing to timely provide them with their monthly renewal forms in the proper number; (4) failing or refusing to provide them with specific supplies ordered and needed by them; and (5) performing or failing to perform any other act which might hinder, delay or otherwise interfere with their ability to continue earning commissions from or being paid commissions by St. Anthony Messenger. The Defendants oppose the motion.
Though the court has concluded that this action should be stayed pending arbitration, it has the authority to consider the motion for preliminary injunction. See, e.g., IDS Life Ins. Co. v. SunAmerica, Inc., 103 F.3d 524, 527 (7th Cir. 1997). A preliminary injunction has as its purpose the minimization of the hardship to the parties pending resolution of their lawsuit or arbitration. Kiel v. City of Kenosha, 236 F.3d 814, 816 n. 4 (7th Cir. 2000). The standards for obtaining a preliminary injunction are as follows:
A party seeking to obtain a preliminary injunction must demonstrate: (1) its case has some likelihood of success on the merits; (2) that no adequate remedy at law exists; and (3) it will suffer irreparable harm if the injunction is not granted. If the court is satisfied that these three conditions have been met, then it must consider the irreparable harm that the nonmoving party will suffer if preliminary relief is granted, balancing such harm against the irreparable harm the moving party will suffer if relief is denied. Finally, the court must consider the public interest (non-parties) in denying or granting the injunction. The court then weighs all of these factors . . . when it decides whether to grant the injunction.
Ty, Inc. v. Jones Group, Inc., 237 F.3d 891, 895 (7th Cir. 2001) (citations omitted).
The Plaintiffs have not shown that they have satisfied the standards for the issuance of a preliminary injunction. Putting aside the question of whether they have some likelihood of success on the merits of their claims, the Plaintiffs have not demonstrated the inadequacy of a remedy at law and that they will suffer irreparable injury if an injunction is not issued. To establish irreparable harm Mr. McBride states that he and his wife are dependent upon their renewal commissions from the St. Anthony Messenger for most of their income and if they no longer have that income, they would be reduced to poverty, might be forced into bankruptcy, and might even lose their home. (J. McBride Aff. ¶¶ 10-14.) As unfortunate as such results may be, money damages are available to fully compensate the Plaintiffs should they prevail on the merits of their claims, thus precluding injunctive relief. See, e.g., Frank's GMC Truck Ctr., Inc. v. Gen. Motors Corp., 847 F.2d 100, 102 (3rd Cir. 1988) ("The availability of adequate monetary damages belies a claim of irreparable injury."). Also, the temporary deprivation of employment and loss of income does not usually constitute irreparable injury. See Sampson v. Murray, 415 U.S. 61, 90 (1974); Shegog v. Bd. of Educ. of City of Chicago, 194 F.3d 836, 839 (7th Cir. 1999) (holding former teachers not entitled to preliminary injunction awarding salary and benefits where complete relief could be obtained in final judgment).
As the Plaintiffs have not demonstrated either an inadequate remedy at law or irreparable harm, they are not entitled to a preliminary injunction. Because the Plaintiffs' evidence is insufficient to even imply that they can establish an inadequate remedy at law or irreparable harm, a hearing on their motion for preliminary injunction is unnecessary. Even the Plaintiffs at one time recognized that there would be "no real evidentiary purpose" to such a hearing. (Pls.' Emergency Application at 3, ¶ 6.) They have now reversed their position, (Pls.' Notice to the Court and Request for Immediate Hrg.), but their latest filings do not establish that a hearing is required. The motion for a preliminary injunction is not denied on mootness grounds, and the Plaintiffs have not suggested that the alleged manipulation and "apparent perjury" by defense counsel in any way prevented them from discharging their burden of demonstrating an inadequate remedy at law and irreparable harm. Thus, the court finds that the Plaintiffs' Motion for a Preliminary Injunction should be denied; and, consequently, their Emergency Application for Immediate Hearing and Request for Immediate Hearing should also be denied, and the request for ruling on the motion for preliminary injunction should be denied as moot.
This conclusion eliminates the need to balance the harms or consider the public interest.
IV. Conclusion
For the foregoing reasons, the Motion to Compel Arbitration of the Defendants will be GRANTED, this case will be STAYED pending compliance with the arbitration agreement between the Plaintiffs and the Defendants or until further order of this court, and the Plaintiffs will be ORDERED to submit their claims to arbitration. In addition, the Plaintiffs' Motion for Preliminary Injunction is DENIED, the Plaintiffs' Emergency Application for Immediate Hearing and their Request for Immediate Hearing are both DENIED, and their request for ruling on the motion for preliminary injunction is DENIED AS MOOT.
One last comment is appropriate. The Plaintiffs complain about the "abbreviated briefing deadline" imposed by the Defendants' motions and filings. The McBrides have been given the same amount of time to respond to motions and filings as any other litigant in this court, as allowed under the Local Rules. The Plaintiffs do not get any special treatment in respect to deadlines just because they are without counsel. They certainly have demonstrated themselves capable of filing motions and other papers, even including motions for enlargement of time, see, e.g., Plaintiffs' Motion for Additional Enlargement of Time in Which to File Their Response to Defendants' Motion to Dismiss, or in the Alternative, to Compel Arbitration and Issue Stay, filed November 21, 2002. Had they believed they needed more time, nothing stopped them from asking for it.
This assertion was made on December 30, 2002, and therefore, could not refer to the subsequent service with postage due of the Defendants' filings of that same date.
ALL OF WHICH IS ORDERED this 6th day of February 2003.