The opinion of the court was delivered by: MARK FILIP, District Judge
MEMORANDUM OPINION GRANTING DEFENDANT MONTELL
MOTION TO STAY PENDING ARBITRATION
This matter conies before the Court on Defendant Montell Chrysler,
Inc.'s motion to stay pending arbitration. For the reasons set forth
below, the motion to stay is granted.
Plaintiff filed her complaint against Defendant on December 19, 2003.
Plaintiff alleges that she purchased a car from Defendant and that, in
short, "Defendant engaged in a pattern of deception in connection with
the sale and financing of the car." (D.E. 1 at ¶ 6). Plaintiff has
asserted causes of action under the Truth in Lending Act, 15 U.S.C. § 1601,
et seq. (Count One); the Equal Credit Opportunity Act, 15 U.S.C. § 1691,
et seq. (Count Two); and the Illinois Consumer Fraud and Deceptive
Business Practices Act, 815 ILCS 505/1, et seq. (Count Three).*fn1 After
being served on January 26, 2004, Defendant filed its motion to stay
pending arbitration on February 17, 2004. Plaintiff has not disputed that
she entered into the arbitration agreement that Defendant attached to its motion. The arbitration agreement states
that "[y]ou and we agree that if any Dispute arises, the Dispute will be
resolved by binding arbitration by a single arbitrator under the
`Supplementary Procedures for Consumer-Related Disputes' of the American
Arbitration Association then in effect, and such arbitration shall be
held in Chicago, Illinois." (D.E. 4 at Ex. A). Included within the
definition of "Dispute"
is any controversy or claim . . . arising or relating
to the Vehicle. The term `Dispute' also includes, but
is not limited to, claims relating to the negotiation
or breach of any purchase order and/or bill of sale
relating to the Vehicle, the financing or negotiation
of financing of the Vehicle, any dispute relating to
any vehicle service contract . . . [and] any question
regarding whether a matter is subject to arbitration
under this Agreement.
Id. The parties have not engaged in any other motion practice, nor have
they participated in any discovery. Defendant has not filed an answer.
The parties also have not commenced arbitration proceedings. This case
was originally assigned to Judge Kennelly and has since been transferred
to this Court.
Defendant's motion to stay is brought pursuant to Section 3 of the
Federal Arbitration Act ("FAA"), which provides, in its entirety, that
[i]f any suit or proceeding be brought in any of the
courts of the United States upon any issue referable
to arbitration under an agreement in writing for such
arbitration, the court in which such suit is pending,
upon being satisfied that the issue involved in such
suit or proceeding is referable to arbitration under
such an agreement, shall on application of one of the
parties stay the trial of the action until such
arbitration has been had in accordance with the terms
of the agreement, providing the applicant for the stay
is not in default in proceeding with such
9 U.S.C. § 3. A district court "must grant the requested stay where two
conditions are satisfied: (1) the issue is one which is referable to
arbitration under an agreement in writing for such arbitration, and (2) the party applying for the stay is not in default in
proceeding with such arbitration." C. Itoh & Co. (America) Inc. v. The
Jordan Int'l Co., 552 F.2d 1228
, 1231 (7th Cir. 1977); accord Tarrson v.
BLC Partners, LP, No. 01-7761, 2003 WL 732391, at *6 (N.D. Ill. Feb. 14,
2003) (same). The first condition is met here because Plaintiff has not
disputed that she entered the written arbitration agreement or that her
claims fall within its scope.*fn2
This conclusion is buttressed by a
recent decision of this Court compelling arbitration and staying
proceedings and finding valid and enforceable an arbitration agreement
that was very similar, if not substantively identical, to the one in this
case. See Morgan v. Bill Kay Chrysler Plymouth, No. 01-3871, 2002 WL
31133102 (N.D. Ill. July 17, 2002).*fn3
Plaintiff's objection to the motion to stay concerns the second
condition that Defendant not be in default. According to Plaintiff,
Defendant is in default within the meaning of Section 3, and the motion
to stay is premature, because Defendant has not also commenced
arbitration proceedings either by moving to compel arbitration or by
submitting the dispute to the American Arbitration Association. Put
differently, Plaintiff's view is that "in order for a court to stay the
litigation in favor of arbitration under Section 3, there must be
something in place to stay the proceedings in favor of." (D.E. 7 at 2.)
The Court respectfully disagrees.
Precedent teaches that Section 3 of the FAA does not function as
Plaintiff suggests. As explained by the Seventh Circuit, "[a] plaintiff
who wants arbitration moves for an order to arbitrate. 9 U.S.C. § 4. A
defendant who wants arbitration is often content with a stay [pursuant to
Section 3], since that will stymie the plaintiff's effort to obtain
relief unless he agrees to arbitrate." Cabintree of Wise., Inc. v.
Kraftmaid Cabinetry, Inc., 50 F.3d 388, 389 (7th Cir. 1995); accord
LaPrade v. Kidder Peabody & Co., Inc., 146 F.3d 899, 903 (D.C. Cir.
1998) ("Section 3 empowers a district court only to stay an action,
leaving to the claimant the choice of arbitrating the claims or
abandoning them."); id. ("[T]he district court stayed . . . [plaintiff's]
actions, instructing her, in effect, that she could not litigate her
claims directly in court, but could only arbitrate them or abandon
them."). In other words, once a stay is granted under Section 3,
litigation of the dispute may end there if the claimant chooses not to
pursue its claims in arbitration. Because a stay under Section 3 need not
result in arbitration (consistent with any number of legal doctrines,
such as burdens of proof and statutes of limitations, which teach that a
defendant is not generally required to push claims forward against
itself), there is little reason to require that an arbitration be
commenced by a defendant against itself before a stay can be ordered.
Accordingly, the United States Supreme Court, the Seventh Circuit, and
the other Circuit Courts to address the issue have directed, apparently
uniformly, that a defendant may properly move to stay proceedings in the
district court, where the Defendant has not otherwise acted
inconsistently with its right to arbitrate, without also moving to compel
or otherwise commencing arbitration. See Drake Bakeries, Inc. v. Local
50, Am. Bakery & Confectionary Workers Int'l, AFL-CIO, 370 U.S. 254, 267
(1962) (affirming stay where the "case was filed [by the
employer-plaintiff] on January 4. This was the first occasion for the .
. . [union-defendant] to insist upon its right to arbitrate the
employer's claim for damages. This it promptly did by moving for a stay
in the District Court."); see also Cabintree of Wise., Inc., 50 F.3d at
389; Mid-west Mech. Contractors, Inc. v. Commonwealth Constr. Co.,
801 F.2d 748, 753 (5th Cir. 1986) ("Contrary to Midwest's suggestion, so
long as a written agreement to arbitrate exists there is no specific
requirement that arbitration actually be pending before a stay of
litigation can be granted.") (citing Shanferoke Coal & Supply Corp. v.
Westchester Serv. Corp., 293 U.S. 449 (1935)); Maxum Founds., Inc. v.
Salus Corp., 779 F.2d 974, 983 (4th Cir. 1985); Local Lodge No 595 of
Dist. No. 152, Int'l Ass'n of Machinists v. Howe Sound Co., 350 F.2d 508,
510 (3d Cir. 1965) (granting stay until "an arbitrator has acted upon the
controversy should it be submitted to him").
As reflected by the Fifth Circuit's citation of Shanferoke Coal, this
rule concerning the availability of a stay appears to have a venerable
and distinguished pedigree. In Coal & Supply Corp. v. Westchester Serv.
Corp., 70 F.2d 297 (2d Cir. 1934), the plaintiff, a sales agent for a
coal company, sued the defendant corporation for an alleged breach of a
promise to buy certain coal. The defendant moved to stay under Section 3 of the Arbitration
Act, referencing a contractual provision that stated that "either party
may apply to the Supreme Court of the State of New York for an order
compelling the specific performance of this arbitration agreement in
accordance with the arbitration laws of the State of New York." Id at
298. Among the plaintiff's other objections, it stated that the defendant
could not obtain a stay because it was in default within the meaning of
Section 3 because it had not named any arbitrator, but rather had only
expressed a general willingness to arbitrate if required. See id. at
Judge Learned Hand, joined by Judges Swan and Augustus Hand, found that
the defendant did not need to have named any arbitrator in order to
warrant a stay:
The plaintiff further objects that the defendant is
`in default in proceeding with such arbitration'
within the meaning of section 3. True, it has not
named its arbitrator, but in its answer and moving
affidavits has merely expressed its willingness to
submit to arbitration. This appears to us enough. It
was the plaintiff who declared the contract to be at
an end; and with that the defendant was contented. If
the plaintiff meant to proceed further and enforce a
claim for damages, the initiative rested upon it; it
should have named the first arbitrator. If it did not
but sued instead, it was itself the party who fell `in
default in proceeding with such arbitration,' not the
Id. Justice Brandeis, writing for a unanimous Supreme Court, affirmed.
See Shanferoke Coal & Supply Corp. v. Westchester Serv. Corp.,
293 U.S. 449
(1935). The Supreme Court did not elaborate at length about
the issue of whether the defendant had waived its right to arbitration,
but instead endorsed the views of the Second Circuit. See id. at 454-55.
The Supreme Court did make clear, however, that it appreciated that the
District court had not been asked to compel arbitration, but rather was
asked only to enter a stay. See id. at 452-53. And the Supreme Court held
that the district court could properly grant a stay, even if one assumed
arguendo that the district court never could compel arbitration in the
case and that only a state court could. See id. at 452-53. All of this teaching counsels strongly against any rule
that would require a defendant seeking a stay under Section 3 to also
have either moved to compel pursuant to Section 4 or otherwise commenced
Against all of this authority, plaintiff cites only Briggs & Stratton
Corp. v. Local 232, Int'l Union, Allied Indus. Workers of Am. (AFL-CIO),
36 F.3d 712 (7th Cir. 1994), and argues that it mandates a different
result. The Court respectfully disagrees.
In Briggs, the Seventh Circuit confronted the question of whether there
was appellate jurisdiction under Section 16 of the FAA concerning a
district court's refusal to stay certain litigation pending arbitration.
See id. at 715. The Seventh Circuit found that "at oral argument counsel
for both sides treated arbitration as a poor cousin" and that "[b]ecause
arbitration is contractual, and subject to principles of waiver, a
district judge cannot order an arbitration that neither side wants," Id.
As a result, the Seventh Circuit treated the appeal as a denial of a
"request for dismissal under Rule 12(b)(6)" rather than an appeal of a
denial of a motion to stay pending arbitration, and dismissed the matter
for want of appellate jurisdiction. See id. at 716 ("Section 16 of the
Arbitration Act does not authorize an interlocutory appeal when there is
no arbitration in prospect."); see also id. ("In sum, dismissing the
appeal does not frustrate the arbitral process or create any risk of
duplication or delay.").
In this case, by contrast, Defendant has made no statements repudiating
its arbitration rights or taken any actions inconsistent with
arbitration. Indeed, in Defendant's reply in support of its motion to
stay, Defendant has reiterated "its intent to enforce its right to
arbitration under the executed arbitration agreement." (D.E. 10 at 4.)
Plaintiff also has not expressed that she will not arbitrate her claims.
Thus, this case is distinguishable from Briggs. Accord Briggs, 36 F.3d at 716 (twice referencing the fact that in Briggs both sides preferred
litigation to arbitration). Moreover, this case does not involve any
issue of interlocutory jurisdiction in any event.
Nor is a denial of the motion to stay commanded by the dicta in Briggs
that "[w]hen the parties have commenced an arbitration, the court stays
the litigation under § 3 to prevent duplicative proceedings (unless the
party requesting the stay is `in default')." Id. at 715. It is true that,
when read in isolation, this passage may be interpreted to suggest that
Section 3 stays are ordered only when the parties have commenced
arbitration proceedings. However, two paragraphs later, Briggs clarifies
that "[t]his is not at all to say that a dispute is `referable to
arbitration' only if a party has made a formal demand; as we discuss
below, requests in the course of litigation may suffice." Id. at 716; see
also id. at 717 ("[T]he majority is unquestionably correct in its
assertion that a formal demand for arbitration is not a prerequisite for
making a proper motion under Section 3 of the FAA for a stay of district
court proceedings.") (Cummings, J. concurring in part and dissenting in
part). Nor is a different result directed by dicta in Briggs that states
that "[b]ecause each side had elected not to arbitrate, there is no
pending arbitral proceeding. There is nothing to wait for, making a stay
inappropriate." Id. at 716. That sentence is explained by the next
one-which reads that "[b]ecause arbitration is contractual, and subject
to principles of waiver, a district judge cannot order an arbitration
that neither side wants." Id. ...