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Weiss v. Waterhouse Securities

January 23, 2004

[5] MARK WEISS, INDIV. AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, APPELLEE,
v.
WATERHOUSE SECURITIES, INC., APPELLANT.



[6] The opinion of the court was delivered by: Justice Fitzgerald

[7]  Docket No. 95458-Agenda 29-September 2003.

[8]  The defendant, Waterhouse Securities, Inc., appeals the judgment of the appellate court affirming in part and reversing in part the trial court's order on Waterhouse Securities' motion to strike plaintiff Mark Weiss' class action allegations and compel arbitration. Weiss has filed a motion to dismiss this appeal for lack of appellate jurisdiction.

[9]  Accordingly, there are two central issues in this case: whether we have jurisdiction to hear Waterhouse Securities' interlocutory appeal, and, if so, whether the appellate court correctly held that Weiss' class action allegations are sufficient as a matter of law to survive Waterhouse Securities' motion to strike. For the reasons that follow, we deny Weiss' motion to dismiss this appeal and affirm the appellate court.

[10]   BACKGROUND

[11]   In October 1998, Weiss opened a "webBroker" account with Waterhouse Securities, a discount securities brokerage company. With this account and Waterhouse Securities' help, he hoped to trade securities on his personal computer, by telephone, or through an assigned broker. The Waterhouse Securities "Account Agreement Booklet" governing Weiss' account contained an arbitration clause, which provided in part:

[12]   "I agree that any controversy relating to any of my accounts or any agreement that I have with [Waterhouse Securities] will be submitted to arbitration conducted only under the provisions of the Constitution and Rules of the New York Stock Exchange, Inc. [NYSE] or pursuant to the code of the Arbitration of the National Association of Securities Dealers, Inc. [NASD] *** No person shall bring a putative or certified class action to arbitration, nor seek to enforce any pre-dispute arbitration agreement against any person who has initiated in court a putative class action, or who is a member of a putative class who has not opted out of the class with respect to any claims encompassed by the putative class action until: (i) the class certification is denied; or (ii) the class is decertified; or (iii) the customer is excluded from the class by the court." *fn1

[13]   Weiss soon encountered problems accessing his account, both online and by telephone. On January 19, 1999, he filed a "Class Action Complaint" against Waterhouse Securities on behalf of more than 1.5 million of its customers, asserting claims for violation of the Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 2002)), breach of contract, and fraud. On February 18, 1999, Waterhouse Securities removed the cause to federal court, but the United States District Court for the Northern District of Illinois remanded the cause back to the Cook County circuit court. More than six months later, on August 31, 1999, Waterhouse Securities filed a motion to dismiss under section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619(a)(9) (West 2002)) in lieu of an answer. Waterhouse Securities contended that the agreement with Weiss disclosed the possibility that he might experience interruptions or delays in accessing his account, disclaimed any liability for damages incurred from such service interruptions or delays, and contained a choice of law provision which barred his claim under the Consumer Fraud Act. The trial court denied this motion on April 14, 2000.

[14]   On April 10, 2000, Waterhouse Securities responded to Weiss' initial interrogatories and production requests. Waterhouse Securities responses included "GENERAL OBJECTIONS" to Weiss' initial discovery efforts as

[15]   "premature, unreasonable, unduly burdensome, oppressive, and seeking potentially unnecessary and wasteful discovery to the extent: (a) that they seek documents and/or information prior to the disposition of Waterhouse's pending motion to dismiss this action; (b) that they seek documents and/or information regarding the merits of [Weiss'] claims and the claims of the purported `class' prior to the disposition of a motion for class certification; and (c) that such discovery may be improper and/or impermissible under the Illinois Uniform Arbitration Act, 710 ILCS 5/1 et seq., and the parties' agreement to arbitrate this dispute, in the event that both the motion to dismiss and motion for class certification are denied."

[16]   Waterhouse Securities individually objected to 8 of Weiss' 10 interrogatories. It responded to interrogatories regarding potential fact and opinion witnesses by indicating that it had not determined what witnesses to call at trial and would supplement its answers in due time.

[17]   Waterhouse Securities also objected to 37 of Weiss' 39 production requests, stating that it would produce only "all responsive non-privileged documents" relating to Weiss himself. On April 25, 2000, Weiss' attorney sent Waterhouse Securities' attorney a Supreme Court Rule 201(k) letter (see 166 Ill. 2d R. 201(k)) attempting to resolve this discovery dispute. Waterhouse Securities' attorney responded to this letter on May 5, 2000, repeating and detailing Waterhouse Securities' objections to Weiss' discovery efforts and signaling its intention to file a motion to strike the class allegations and compel arbitration.

[18]   On May 18, 2000, Waterhouse Securities filed such a motion, specifically asking the trial court for "an Order striking the class allegations from the Complaint pursuant to 735 ILCS 5/2-801 [(West 2002)] and compelling plaintiff's individual claims to arbitration." Waterhouse Securities argued that Weiss' class action claims could not be certified because common issues of fact and law do not predominate and, therefore, asked that Weiss' individual claims be sent to arbitration, pursuant to the agreement. Waterhouse Securities conceded that the motion to compel was contingent on the trial court granting the motion to strike. While this motion was being briefed, Weiss filed a motion to compel discovery on August 30, 2000. Waterhouse Securities responded to this motion on November 8, 2000, reiterating its objections to Weiss' discovery efforts as an "enormous burden." The motion to compel remains pending.

[19]   On January 30, 2001, the trial court decided Waterhouse Securities' motion to strike and compel. The trial court's order opened by noting, "This matter is before the Court on Defendant WATERHOUSE SECURITIES, INC.'s Motion to Strike Class Allegations," omitting any reference to the arbitration request. The order then stated that "common questions of law and fact predominate over questions involving individual class members so that the class allegations as set forth by [Weiss] are sufficient as a matter of law." The order closed by holding, "it is hereby ADJUDGED, ORDERED and DECREED that Defendant's Motion to Strike Class Allegations and Compel Arbitration is DENIED." (Emphasis added.)

[20]   Waterhouse Securities appealed pursuant to Supreme Court Rule 307(a)(1) (188 Ill. 2d R. 307(a)(1)), which allows interlocutory appeals of orders denying injunctive relief. Waterhouse Securities claimed that because the trial court's order denied a motion to compel arbitration, that order was appealable under Notaro v. Nor-Evan Corp., 98 Ill. 2d 268, 271 (1983). In an unpublished order, the appellate court disputed Waterhouse Securities' characterization of the trial court's order. The appellate court stated that Waterhouse Securities had, in effect, filed two separate motions: a motion to dismiss Weiss' class action allegations under section 2-615(a) of the Code of Civil Procedure (see 735 ILCS 5/2-615(a) (West 2002)) and a motion to compel arbitration of his individual claims:

[21]   "Given the nature of Waterhouse's motion, the court was initially forced to consider the legal sufficiency of plaintiff's class action allegations. The court did that and, upon finding the class allegations adequate, denied Waterhouse's request to compel arbitration. Hence, the court's order constitutes two distinct rulings-one ruling denying Waterhouse's request for dismissal under section 2-615 and another ruling denying Waterhouse's motion to compel arbitration." No. 1-01-0680 (unpublished order under Supreme Court Rule 23).

[22]   The appellate court held it lacked jurisdiction over the trial court's order denying the first motion because that order was interlocutory and not appealable. The appellate court, however, decided that it had jurisdiction over the second motion under Rule 307(a)(1). Because none of the arbitration conditions in the agreement had been met, the appellate ...


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