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AIR FREIGHT SERVS. v. AIR CARGO TRANSP.

March 26, 1996

AIR FREIGHT SERVICES, INC., and JEFFREY SCHIFF, Plaintiffs,
v.
AIR CARGO TRANSPORT, INC., PAU PAU, INC., HAROLD HAMBY, WILLIAM MOULTRIE, and AIRGROUP CORPORATION, Defendants.



The opinion of the court was delivered by: ALESIA

 Before the court are defendants Airgroup Corporation's ("Airgroup"), William Moultrie's ("Moultrie"), Air Cargo Transport, Inc.'s ("Air Cargo"), Pau Pau, Inc.'s ("Pau Pau"), and Harold Hamby's ("Hamby") (collectively, "defendants") motion for a stay of the proceedings in the case brought by Air Freight Services, Inc. ("Air Freight") and Jeffrey Schiff ("Schiff') (collectively, "plaintiffs") pending arbitration, and motion for enlargement of time to respond to plaintiffs' complaint. For the reasons that follow, the court grants defendants' motions.

 Air Freight, an Illinois corporation with its principal place of business in Illinois, provides transportation services in the Chicago area. Schiff, also an Illinois resident, is Air Freight's secretary, treasurer, and shareholder. Airgroup, a Washington corporation with its principal place of business in Washington, provides freight customers with accounting and communication services, under the trade name "Airgroup Express," through local independent agents. Moultrie, Airgroup's president, is a Washington resident. Air Cargo and Pau Pau, both Missouri corporations with their principal places of business in Washington, are agents of Airgroup Express. Hamby, their president, is a Missouri resident. This case is before the court on the basis of diversity of citizenship. See 28 U.S.C. § 1332.

 In March 1992, Air Freight and Airgroup entered into a Transportation Services Agreement ("1992 Agreement"), pursuant to which Air Freight became the exclusive agent for Airgroup Express in the region of Illinois north of U.S. Highway 36. Under the 1992 Agreement, Air Freight provided solicitation, tracking, billing, and cartage services to Chicago-area Airgroup Express customers. Air Cargo operated in the St. Louis area under an agreement contanting terms identical to the 1992 Agreement.

 On May 15, 16, and 17, 1995, Schiff met with Moultrie, Hamby, and James Boyle, general manager of Pau Pau. By the close of the meeting, Schiff and defendants agreed on a relationship between Air Freight, Air Cargo and Airgroup.

 On May 17, 1995, Schiff wrote Moultrie a letter, also signed by Hamby and apparently memorializing the agreement reached at the meeting. In sum, the letter stated that Hamby would open a sales operation office for Airgroup Express in the Chicago area, and Schiff would maintain the cartage operation for Airgroup Express in the Chicago area. The letter stated that Schiff would maintain existing accounts and receive revenue from the accounts, and would receive commissions on future accounts sold by Schiff. The letter stated that Hamby would take over the existing phone numbers for the Chicago Airgroup Express agency, and would employ personnel to handle domestic and international operations. The letter stated, finally, that Schiff would move into an unidentified Airgroup Express location, presumably wherever Hamby set up the location.

 On May 23, 1995, Moultrie responded to Schiff's May 17, 1995, letter with a letter in which Moultrie agreed that the 1992 Agreement would be terminated as of June 1, 1995, unless Schiff advised him otherwise. Moultrie advised Schiff that, effective June 1, 1995, Schiff could not represent himself in any manner as Airgroup Express.

 On May 27, 1995, Schiff responded to Moultrie's letter, stating that his understanding was that Hamby would operate a sales and operations facility, for which Schiff would be the exclusive cartage agent; and that the 1992 Agreement would be terminated, and a new agreement would be put into place reflecting the new company, which would retain all existing accounts.

 Apparently, Moultrie adhered to his May 23, 1995, letter. As of June 1, 1995, Boyle and Hamby, acting as agents for their respective companies and Airgroup Express, did not contact Schiff and Air Freight to provide cartage services and did not provide information on customers to Schiff.

 Shortly after the foregoing events occurred, plaintiffs filed suit against defendants in Cook County Circuit Court, alleging violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 - 505/12 ("Count I"); breach of the May 17, 1995, letter agreement ("Count II"); unlawful termination of the 1992 Agreement ("Count III"); conspiracy to commit fraud ("Count IIIA"); *fn1" breach of the 1992 Agreement ("Count V"); and interference with prospective economic advantage ("Count VI"); and requesting an accounting under the May 17, 1995, letter agreement ("Count IV"). Defendants removed the case to this court on the basis of diversity of citizenship, and now move to stay the proceedings for reasons explained in section II, below.

 II. DISCUSSION

 Defendants base their motion for a stay of proceedings pending arbitration on a provision in the 1992 Agreement providing for mandatory and binding arbitration of any dispute regarding Air Freight's and Airgroup's respective rights and obligations under the 1992 Agreement. (See Complt. Ex. 1 P 14.1.) Defendants contend that this provision requires the court to stay the ...


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