United States District Court, N.D. Illinois, Eastern Division
September 9, 2005.
Metropolitan Life Insurance Co., Plaintiff,
Michael K. O'Malley, et al., Defendants.
The opinion of the court was delivered by: CHARLES NORGLE, District Judge
OPINION AND ORDER
Plaintiff Metropolitan Life Insurance Company ("MetLife")
brings this Complaint for unfair competition in violation of the
Lanham Act, 15 U.S.C. § 1125(a), breach of contract, breach of
fiduciary duty, tortious interference with contracts and business
relations, conversion, civil conspiracy, and violations of the
Illinois Trade Secrets Act. The contract signed by Defendant
Michael K. O'Malley ("O'Malley"), includes an Arbitration
Disclosure Statement. For that reason, the court, sua sponte,
dismisses the Complaint for improper venue.
MetLife has operated an insurance agency in Downers Grove,
Illinois for over twenty-five years, providing sophisticated
financial planing and insurance services to its clients in the
Chicagoland area. From 1998 through 2005, the Downers Grove
agency was known as "O'Malley and Associates." In April 2005, MetLife changed the name of the Downers Grove
agency to "Preferred Planning Group," yet continued to use the
name and logo of O'Malley and Associates for business purposes.
MetLife alleges that it spent a great deal of money in the
development and distribution of marketing materials under the
O'Malley and Associates logo. Some of these materials and logos
are still in circulation in the tri-state area.
O'Malley worked at MetLife from 1978 to 2005. In 1986, he was
promoted to Managing Director, and in 1998, the Downers Grove
agency became known as "O'Malley and Associates." Additionally in
1986, O'Malley signed an employment agreement that contained
non-compete and non-solicitation provisions, as well as
prohibitions against taking client files and revealing trade
The individual defendants in this case are former employees of
the Downers Grove agency who left MetLife between April 28 and
July 1, 2005. Around July 1, MetLife alleges that the individual
defendants formed a competing agency, which is affiliated with
the corporate Defendants, and is also named "O'Malley and
Associates." MetLife further alleges that Defendants formed this
competing agency to confuse and deceive MetLife's clients and the
general public as to who worked for which agency. Additionally,
MetLife alleges that O'Malley, as the former managing director of
the Downers Grove agency, induced former MetLife employees to
leave MetLife and breach their employment agreements. These
alleged breaches include the solicitation of MetLife clients by
these former employees and the unlawful taking of client files.
Furthermore, the Complaint alleges that sometime before April
2005, while O'Malley was still employed by MetLife, he began to
negotiate with Guardian Life ("Guardian") to open a competing
office in Downers Grove. Guardian offers financial products and
services through its subsidiaries Park Avenue Securities LLC ("PAS") and Guardian Investor Services LLC
("GIS"). O'Malley's new agency allegedly offers the same
securities as MetLife's Downers Grove office.
B. Procedural History
MetLife filed its ten-count Complaint on July 29, 2005,
alleging violations of the Lanham Act, breach of contract and
fiduciary duty, tortious interference with contract, tortious
interference with business relations, conversion, and violation
of the Illinois Trade Secrets Act. On August 3, 2005, Defendants
filed a Motion to Dismiss pursuant to the Colorado River
abstention doctrine, and MetLife responded on August 18. Because
the court sua sponte dismisses the Complaint on improper venue
grounds, Defendant's Colorado River motion is denied as moot.
A. Standard of Review
1. Federal Court Jurisdiction
The court "has an independent obligation to satisfy itself that
federal subject matter jurisdiction exists before proceeding to
the merits in any case." Am. Gen. Life & Accident Ins. Co.,
337 F.3d 888, 892 (7th Cir. 2003). Federal courts are "always obliged
to inquire sua sponte whenever a doubt arises as to the
existence of federal jurisdiction." Tylka v. Gerber Prods. Co.,
211 F.3d 445, 447-48 (7th Cir. 2000) (quotation and internal
marks omitted). "The first thing a federal judge should do when a
complaint is filed is check to see that federal jurisdiction is
properly alleged." Wisconsin Knife Works v. National Metal
Crafters, 781 F.2d 1280, 1282 (7th Cir. 1986). In Market Street
Assocs. Ltd. Partnership v. Frey, the Seventh Circuit stated:
"We remind the bench and bar of this circuit that it is their
nondelegable duty to police the limits of federal jurisdiction
with meticulous care. . . ." Market Street Assocs. Ltd
Partnership, 941 F.2d 588, 590 (7th Cir. 1991); see also
Hart v. Terminex Intern., 336 F.3d 541, 544 (7th Cir. 2003) (reiterating the admonition
that litigants and courts must "meticulously review the limits of
federal jurisdiction" so as to avoid the "waste of federal
judicial resources and delay of justice" that occurs where a case
is found to lack subject matter jurisdiction only after
proceeding on the merits); see also U.S. v. Lloyd,
398 F.3d 978 (7th Cir. 2005).
2. Rule 12(b)(3)
Federal Rule of Civil Procedure 12(b)(3) provides for the
dismissal of an action for improper venue. FED. R. CIV. P.
12(b)(3). Under this rule, the court is not "obligated to limit
its considerations to the pleadings nor convert the motion to one
for summary judgment." Continental Cas. Co. v. American Nat.
Ins. Co., 417 F.3d 727, 733 (7th Cir. 2005) (case dismissed
because forum selection clause in contract required arbitration).
Furthermore, upon "holding an evidentiary hearing to resolve
material disputed facts, the district court may weigh evidence,
assess credibility, and make finds of fact." Id. (citing
Murphy v. Schneider Nat'l Inc., 362 F.3d 1133, 1140 (9th Cir.
3. Arbitration Disclosure Statement
As a preliminary matter, the court notes that one of the
agreements included an arbitration clause, which states:
You are agreeing to arbitrate any dispute, claim or
controversy that may arise between you and your firm,
or a customer, or any other person that is required
to be arbitrated under the rules of self-regulatory
organizations with which you are registering. This
means you are giving up the right to sue a member,
customer, or other associated person in court,
including the right to a trial by jury, except as
provided by the rules of the arbitrat on forum in
which a claim is filed. Compl., Ex. A.
The court is mindful that arbitration forgoes the costly
expenses of litigation for a more economical method to solve
legal disputes. "Parties that opt for arbitration trade the
formalities of the judicial process for the expertise and
expedition associated with arbitration, a less formal process of
dispute resolution by an umpire who is neither a generalist judge
nor a juror but instead brings to the assignment knowledge of the commercial setting in which the
dispute arose." Lefkovitz v. Wagner, 395 F.3d 773, 780 (7th
Cir. 2005) (internal citations omitted). In addition, "parties
are bound to an arbitration provision even if they did not read
the provision." James v. McDonald's Corp., 417 F.3d 672
(7th Cir. 2005). Arbitration is contractual by nature; "a party
can be compelled to arbitrate only those matters that she has
agreed to submit to arbitration." Id. at 677 (citing First
Options of Chicago Inc. v. Kaplan, 514 U.S. 938
, 945 (1995);
Gibson v. Neighborhood Health Clinics, Inc., 121 F.3d 1126,
1130 (7th Cir. 1997)). Federal courts have long approved of
arbitration as a legitimate form of dispute resolution. Anthony
Longo, Agreeing to Disagree: A Balanced Solution to Whether
Parties May Contract for Expanded Judicial Review Beyond the
FAA, 36 J. MARSHALL L. REV. 1005, 1026-1027 (2003) (noting the
federal courts' "jealous preference for arbitration"). Lastly,
the issue of whether the parties agreed to arbitrate is governed
by state law principles of contract formation. See Continental
Cas. Co., 417 F.3d at 730.
Pursuant to the Federal Arbitration Act ("FAA"), arbitration
may be compelled if the following three elements are shown: "(1)
a written agreement to arbitrate, (2) a dispute within the scope
of the arbitration agreement, and (3) a refusal to arbitrate."
Zurich American Ins. Co. v. Watts Industries, Inc.,
417 F.3d 682, 687 (7th Cir. 2005). "The [Federal Arbitration Act] directs
courts to place arbitration agreements on equal footing with
other contracts, but it `does not require parties to arbitrate
when they have not agreed to do so.'" BCS Ins. Co. v. Wellmark,
Inc., 410 F.3d 349, 351 (7th Cir. 2005) (quoting EEOC v. Waffle
House, Inc., 534 U.S. 279, 293 (2002)).
First, it is undisputed that there is a written agreement to
arbitrate. See Compl., Ex. A. Second, the unambiguous language
in the arbitration statement mandates that the parties agree to
"arbitrate any dispute, claim or controversy that may arise
between you and your firm. . . ." Id. The Complaint includes
claims of tortious interference with contract and business
relations, as well as violations of the Lanham Act. The arbitration clause in the
agreement is broad. See Continental Cas. Co.,
417 F.3d at 733. Therefore, such claims certainly fall under the "any
dispute, claim, or controversy" clause of the arbitration
agreement. Lastly, there is a demonstrable refusal to arbitrate,
by virtue of MetLife's initiation of this current action. "As a
matter of federal law, any doubts concerning the scope of
arbitrable issues should be resolved in favor of arbitration."
Id. (quoting Moses H. Cone Mem'l Hosp. v. Mercury Const.
Corp., 460 U.S. 1, 24 (1983)).
"This approach makes eminent sense." Id. at 733. The
Complaint must therefore be dismissed under Rule 12(b)(3) for
improper venue. See id. As a matter of contract
interpretation, "if the language unambiguously answers the
question at issue, the inquiry is over." Emergency Medical Care,
Inc. v. Marion Memorial Hosp., 94 F.3d 1059, 1061 (7th Cir.
1996). Here, O'Malley and Ernst both signed the Arbitration
Disclosure Agreement. The language is unambiguous as to the
intent of the parties. In 2002, both sides agreed to arbitrate
any dispute or claim. They traded "the formalities of the
judicial process for the expertise and expedition associated with
arbitration." Lefkovitz, 395 F.3d at 780. Now, in 2005, the
parties are not allowed to ignore this signed agreement in favor
of litigation in federal court. While the court has jurisdiction
over this case, the Northern District of Illinois is an
inappropriate venue. See Continental Ins. Co. v. M/A ORSULA,
354 F.3d 603, 608 (7th Cir. 2003) (district court has wide
discretion to dismiss a case for improper venue if the decision
is in conformity with established legal principles and, in terms
of the court's application of those principles to the facts of
the case, is within the range of options from which a reasonable
trial judge would select). The court "must be mindful that the
FAA `is a congressional declaration of a liberal federal policy
favoring arbitration agreements' and `that questions of
arbitrability must be addressed with a healthy regard for the
federal policy favoring arbitration.'" Continental Cas. Co.,
417 F.3d at 730-731 (quoting Moses H. Cone Mem'l Hosp., 460 U.S. at 24). The proper venue for this
action is therefore before the arbitrator and not in the United
States District Court for the Northern District of Illinois.
For the reasons stated above, the Complaint is dismissed
pursuant to Federal Rule of Civil Procedure 12(b)(3).
IT IS SO ORDERED.
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