United States District Court, Northern District of Illinois, Eastern Division
April 11, 2003
DIRECT MARKETING CONCEPTS, INC. PLAINTIFF,
KEVIN TRUDEAU, ROBERT BAREFOOT, SHOP AMERICA (USA) L.L.C., SHOP AMERICA MARKETING GROUP, LLC, DEFENDANTS. KEVIN TRUDEAU, ROBERT BAREFOOT, SHOP AMERICA (USA) L.L.C., SHOP AMERICA MARKETING GROUP, LLC, COUNTER-PLAINTIFFS, V. DIRECT MARKETING CONCEPTS, INC., COUNTER-DEFENDANT, AND TRIAD ML MARKETING, INC., AND KING MEDIA, INC., THIRD-PARTY COUNTER-DEFENDANTS
The opinion of the court was delivered by: Milton I. Shadur, Senior United States District Judge.
This is one of several fronts on which war is being waged over the profits from marketing what may or may not be the same product (depending on whom you listen to). In this district the attack was launched by Direct Marketing Concepts, Inc. ("Direct Marketing") against a number of targets, only to be met with a counterattack by one of them, Robert Barefoot ("Barefoot").
With the combatants having been unsuccessful in the most recent effort by Direct Marketing and others (but not Barefoot, according to some of the other litigants) to negotiate an armistice, let alone a peace treaty, Direct Marketing has just served notice of a Fed.R.Civ.P. ("Rule") 56 motion for summary judgment against Barefoot. Although that notice calls for a presentment date of May 12 (a date that is too far in any event under the District Court's LR 5.3(b)), this Court's review of the moving papers has led it to question why what seems to be an unanswerable ground for a judgment of dismissal should not be dealt with more swiftly.
Not a great deal needs to be said about the merits. Barefoot's Counterclaim against Direct Marketing sounds in quantum meruit*fn1 or, alternatively, breach of contract. But Barefoot's ability to do battle on those claims in this (or any other) court depends on his ability to dodge the bullet of a mandatory arbitration provision in Paragraph 10 of his Distribution Agreement with Direct Marketing. And that is a battle he has already lost — lost when District Judge Manuel Real, in a lawsuit brought in the Central District of California by Barefoot and Kevin Trudeau ("Trudeau," who is also his co-defendant here) against Direct Marketing and another defendant, rejected Barefoot's comparable claims — and in doing so rejected his argument that the selfsame arbitration clause was unenforceable — by dismissing those claims as having to be arbitrated and not litigated.
Barefoot, who was represented in the California action by the same Jenner and Block lawyers who are Trudeau's counsel in this case, filed a 15-page memorandum in opposition to Direct Marketing's dismissal motion there. Section III of that memorandum was captioned "The Purported Agreement Between Barefoot and Defendants Is Not a Valid Contract, Therefore its Arbitration Clause Is of No Effect," and it contained a page of argument and citation on that score, as well as referring back to the three-page Section I.B of the memorandum that urged Barefoot's substantive positions as to the invalidity of the Distribution Agreement. As stated earlier, Judge Real flatly turned down all of Barefoot's arguments and compelled his claims to go to arbitration instead.
This Court need not delve into the merits of Judge Real's decision (but see Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403-04 (1967) and such cases following its teaching as Sweet Dreams Unlimited, Inc. v. Dial-A-Mattress Int'l, Ltd., 1 F.2d 639, 643 (7th Cir. 1993), all holding that the asserted invalidity of an underlying contract does not invalidate or taint the enforceability of an arbitration clause within that contract unless an independent showing is made of the invalidity of the arbitration clause itself). What controls for purposes of claim preclusion and issue preclusion in this case is that Barefoot, having lost the battle of enforceability of the arbitration clause in one forum, cannot renew it in this one. And the preclusive effect of that California decision involving the selfsame adversaries is unaffected by the pendency of an appeal from Judge Real's decision to the Court of Appeals for the Ninth Circuit (see, e.g., Amcast Indus. Corp. v. Detrex Corp., 45 F.3d 155, 160 (7th Cir. 1995); 18 Moore's Federal Practice § 131.30  [c] [ii] (3d ed 2002)).
There may perhaps be an answer to all of this that has escaped this Court, though it presently sees none. Barefoot's counsel are ordered to file a memorandum addressing the preclusion issue in this Court's chambers (with a copy of course being transmitted to Direct Marketing's counsel) on or before April 23, 2003. At this point there seems to be no reason for Barefoot to comply fully with the detailed requirements of this District Court's LR 56.1, as contrasted with simply submitting such a legal memorandum — but this is not intended to foreclose Barefoot's counsel from tending other material, if they wish, by which they would hope to resist an adverse judgment on the grounds of claim preclusion and issue preclusion.