United States District Court, N.D. Illinois, Eastern Division
December 1, 2004.
ROSEE TORRES; OUSSAMA and GHINA JAMMAL; ELIAS and RAIDA ABUELIZAM; PRATIMA J. MUZUMDAR; TRANQUIL PASSAGE LLC; ABDUL and SHAHEEN RASHID; WAQAR and SHAFQUT KHAN; McERLEAN-CAREY; MAHMOUD YASSIN and TAGHREED NASSAR; ALI S. and NABILAH SALEH; and HAMID and MAIMOONA KHAN, Plaintiffs,
WELLNESS INTERNATIONAL NETWORK, LTD., A/K/A WIN; WIN NETWORK, INC.; RALPH OATS; CATHY OATS; and SHERI MATTHEWS, Defendants.
The opinion of the court was delivered by: SAMUEL DER-YEGHIAYAN, District Judge
This matter is before the court on Defendants' motion to compel
arbitration and motion to dismiss. For the reasons stated below,
we vacate our denial of Defendants' motion to compel arbitration,
grant the motion to compel arbitration, and grant the motion to dismiss.
Plaintiffs entered into agreements with Defendants to sell
Defendants' health and personal care products. Plaintiffs allege
that Defendants' business was actually an illegal pyramid scheme
and that Defendants engaged in fraud. Plaintiffs brought the
instant action seeking to have their agreements with Defendants
declared null and void as contrary to Illinois law and public
policy, and to recover for loss and damage to Plaintiffs'
businesses and property. On October 20, 2003, Defendants filed a
motion to compel arbitration, asserting that the agreements
signed by Plaintiffs contained a clause that provided that
disputes between Plaintiffs and Defendants would be referred to
arbitration. On October 23, 2003, we denied the motion to compel
arbitration. Defendants appealed the ruling and on November 7,
2003, Defendants moved to stay this action pending the appeal. On
December 4, 2003, we denied the motion to stay, finding that the
action should not be stayed because Defendants had a motion to
dismiss for improper venue pending at the time that the motion to
compel arbitration was filed. (12/4/03 ruling p. 2-3). On appeal
the Seventh Circuit remanded the case back to this court and
ordered the court to vacate the denial of Defendants' motion to
compel arbitration and to "order arbitration on those claims
subject to arbitration." Sharif v. Wellness Intern. Network,
Ltd., 376 F.3d 720, 727 (7th Cir. 2004). DISCUSSION
The parties agree that seven of the Plaintiffs' claims are
subject to arbitration and therefore should be ordered to
arbitration. Therefore, we order to arbitration the claims of: 1)
Rosee Torres, 2) Peggy Carey, 3) Oussama and Ghina Jammal, 4) Ali
and Abida Jammal, 5) Mahmoud Yassin and Taghreen Nassar, 6)
Abdullatif and Nabilah Saleh, and 7) Hamid and Maimoona Khan.
I. Abuelizam Claims
In regards to the claims brought by Plaintiffs Elias and Raida
Abuelizam ("Abuelizam claims"), Plaintiffs argue that the
Abuelizam claims involve more than $100,000 and are therefore
exempt from the arbitration provision. Plaintiffs argue that the
Abuelizam claims are worth $90,000 in damages and that
Plaintiffs' attorneys will receive a twenty-five percent
contingency fee. On appeal the Seventh Circuit clearly stated
that "only those plaintiffs with claims less than $100,000 must
be compelled to arbitrate" and that "[a]ccording to the
complaint, the majority of plaintiffs have such claims" and that
"the plaintiffs plead that 8 of the 11 claims are for damages of
less than $100,000." Id. The Abuelizam claims would be included
in the Seventh Circuit's computation of "8 of the 11 claims" and
Plaintiffs' contention that only 7 of the 11 claims are subject
to arbitration is inconsistent with the Seventh Circuit's ruling.
In fact Plaintiffs specifically argued in their reply brief before the Seventh Circuit on appeal that "Elias and Raida
Abuelizam, had lost investments of $90,000 . . .; even allowing
for minor attorneys' fees and costs, they easily satisfy the
$100,000 exclusion figure." (App. Reply. 15). However, even after
Plaintiffs' argument was made, the Seventh Circuit issued its
ruling, finding that "8 of the 11" claims are plead for less than
$100,000. Sharif, 376 F.3d at 727.
The Seventh Circuit also found on appeal that Plaintiffs'
attempts to artificially raise the claims above the $100,000
amount were improper noting that the legal certainty test is not
the proper test and noting that the Plaintiffs could not
aggregate their claims to meet the amount in question. Id. We
also note that Defendants assert that typically a contingency fee
is based upon the total recovery on the Abuelizam claims and that
Plaintiffs' attorneys would be paid out of the total $90,000
recovered. Plaintiffs have not sought to file a sur-reply to
contest this fact. Therefore, we order the Abuelizam claims to
II. Remaining Claims
Defendants argue that this court should dismiss the remaining
three claims of Plaintiffs that have allegedly sustained damages
of more than $100,000. Defendants argue that for the Plaintiffs
bringing the remaining three claims there was a forum selection
clause in the Associate Agreements signed by Plaintiffs providing
that disputes would be addressed in Texas. The Seventh Circuit
has held that where a forum selection clause specifies venue with
"mandatory or obligatory language," the clause is a mandatory forum selection clause, limiting litigation
to the designated venue. Paper Express Ltd. v. Pfankuch
Maschinen GmbH, 972 F.2d 753, 757 (7th Cir. 1992). However, if
the clause instead merely refers to "jurisdiction," it is
generally not mandatory unless some further language expresses
"the parties' intent to make venue exclusive." Id.
In the Associate Agreements signed by plaintiffs, the forum
selection clause stated the following: "Jurisdiction and venue
over any disputes arising out of this agreement shall be proper
only in the federal or state courts in Dallas County, Texas."
(Agr. Par. 24). Such language clearly indicates that the clause
is mandatory and that it provides for exclusive jurisdiction in
Plaintiffs argue that the forum selection clause should not be
interpreted as mandatory because of language in the
consent-to-personal jurisdiction clause in the Distribution
Agreements signed by Plaintiffs that refers to "non-exclusive
jurisdiction." However, as Defendants correctly point out the
consent-to-personal jurisdiction and venue clauses serve
different purposes and the consent-to-personal jurisdiction
clause in the Distribution Agreements in no way detract from the
clear and express statement in the forum selection clause that
all actions will be brought in Dallas, Dallas County, Texas. See
CIT Group/Credit Finance Inc. v. Lott, 1993 WL 157617, at *1
(N.D. Ill. 1993) (upholding forum selection clause despite the
fact that in regards to personal jurisdiction the agreement
stated that the "Guarantor hereby irrevocably submits and
consents and to the non-exclusive jurisdiction of the state and federal courts. . . ."). Therefore, we grant Defendants'
motion to dismiss the remaining three claims of Plaintiffs that
have allegedly sustained damages of more than $100,000.
Based on the foregoing analysis, we vacate our denial of
Defendants' motion to compel arbitration, grant the motion to
compel arbitration, and order certain claims to arbitration as
indicated above. We also grant Defendants' motion to dismiss the
remaining three claims of Plaintiffs that have allegedly
sustained damages of more than $100,000.
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