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Glazer's Distributors of Illinois, Inc. v. NWS-Illinois

September 7, 2007

GLAZER'S DISTRIBUTORS OF ILLINOIS, INC., AN ILLINOIS CORPORATION, PLAINTIFF-APPELLANT,
v.
NWS-ILLINOIS, LLC, AN ILLINOIS LIMITED LIABILITY COMPANY, AND NATIONAL WINE AND SPIRITS, INC., AN INDIANA CORPORATION, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County. No. 06 CH 10744 Honorable Mary Anne Mason, Judge Presiding.

The opinion of the court was delivered by: Justice O'malley

Published opinion

The issues presented in this interlocutory appeal involve plaintiff Glazer's Distributors of Illinois, Inc.'s (Glazer's) unsuccessful attempt to compel arbitration of its claims against defendant NWS-Illinois, LLC (NWS LLC), a subsidiary of defendant National Wine & Spirits, Inc., pertaining to NWS LLC's alleged breaches of two contracts.*fn1 In denying Glazer's request to compel arbitration, among other things, the circuit court determined that Glazer's claims were based on a contract that did not contain an arbitration provision, the parties did not agree to arbitrate the claims at issue, and Glazer's waived its right to arbitrate.

On appeal, Glazer's challenges the circuit court's order that (1) denied Glazer's motion to compel arbitration; (2) granted NWS LLC's motion to stay arbitration; (3) granted NWS LLC's motion to dismiss Glazer's amended motion that sought, in pertinent part, a claim for arbitration. Glazer's also seeks our review of the circuit court's refusal to allow Glazer's to obtain arbitration-related discovery and presentation of witnesses.*fn2

For the reasons that follow, we affirm the judgment of the circuit court.

BACKGROUND

In 2002, Glazer's, an Illinois corporation, sought to become a participant in the Illinois wholesale distribution market for alcoholic and nonalcoholic beverages. At that time, NWS LLC, an Illinois limited liability company, operated a wholesale distribution business for wine, spirits, and other beverages in Illinois.

In February 2003, as a result of negotiations among those parties, Glazer's and NWS LLC entered into a management services agreement that created an agreement whereby Glazer's would provide assistance, management, and consultation services for NWS LLC's wholesale distribution business in Illinois. Under that agreement, in pertinent part, Glazer's received 50% of the profits and shared 50% of the costs associated with that business arrangement.

A. Contracts at Issue on Appeal

Subsequently, on December 1, 2003, Glazer's and NWS LLC contemporaneously entered into two contracts, namely, a 20-page management services agreement (MSA) and a 43-page conditional sales agreement (CSA). Both of these contracts are at issue on appeal.

1. The MSA

The MSA was entered into by NWS LLC and Glazer's. The MSA identified NWS LLC as an indirect subsidiary of National Wine & Spirits, Inc. (an Indiana corporation), and identified Glazer's as a wholly owned subsidiary of Glazer's Wholesale Drug Company, Inc. (a Texas corporation). The parent corporations guaranteed performance of their respective subsidiaries. James LaCrosse signed the MSA on behalf of NWS LLC and National Wine & Spirits, Inc., and Bennett Glazer signed the MSA on behalf of Glazer's and Glazer Wholesale Drug Company, Inc.

Under the MSA, Glazer's received 80% of the profits and shared 80% of the costs of the contracted business arrangement with NWS LLC. Glazer's agreed to provide NWS LLC with general management and consulting services with respect to marketing alcoholic beverages, provide assistance and guidance in obtaining additional lines and brands of products, and maintain existing and establish new relationships with NWS LLC's suppliers.

The MSA established a six-member steering committee that would coordinate the business arrangement between NWS LLC and Glazer's in order to maximize the growth opportunities and profitability of that arrangement, and identified a number of duties and responsibilities of the steering committee.

NWS LLC retained all powers and authorities with respect to the operation, management and administration of the business that were not expressly granted to the steering committee. In addition, among other things, NWS LLC expressly retained "the sole and exclusive right, power and authority *** to enter into, modify, terminate, or otherwise extend any distribution contracts" under paragraph 12(a) of the MSA.

The MSA further provided that NWS LLC and Glazer's intended to contemporaneously enter into a conditional sales agreement (CSA, detailed infra), which would allow for the organization of a new Illinois limited liability company, referred to as Newco, that would be jointly owned by NWS LLC and Glazer's.

In relevant part, the MSA also contained a "Buy/Sell" provision in paragraph 16, which allowed either NWS LLC or Glazer's to make an offer to buy the entire interest of the other party. Specifically, if Glazer's sought to purchase the interest of NWS LLC, then the parties would form Newco in compliance with the CSA, and Glazer's would pay NWS LLC a specified amount to be calculated from various factors.

The MSA chose Illinois law as its governing law and fixed the venue in Cook County, Illinois. The MSA permitted attorney fees for a prevailing party if "any legal action or any arbitration or other proceeding is brought for enforcement" of the MSA. However, the MSA neither provided for nor discussed an express arbitration provision.

2. The CSA

Contemporaneously with the signing of the MSA on December 1, 2003, Glazer's and NWS LLC entered into the aforementioned CSA. LaCrosse signed the CSA on behalf of NWS LLC, and Glazer signed the CSA on behalf of Glazer's.

The CSA outlined Glazer's option to acquire an interest in certain assets of NWS LLC through the formation of a new entity to be called Newco. Under the CSA, upon Glazer's exercise of its option, NWS LLC would transfer certain of its assets to Newco on a specified "closing date." These assets included, in pertinent part, "all supplier, distributor, and wholesaler appointment agreements *** with which NWS LLC is doing business on the Closing Date, if assignable and transferable to [Newco] (the 'Supplier Contracts')." Ultimately, Glazer's would own an 80% interest in Newco, and NWS LLC would own a 20% interest in Newco. The CSA required NWS LLC to use its commercially reasonable best efforts to obtain the consent of its suppliers to the transfer of their contracts to Newco.

The CSA chose Illinois law as its governing law and provided that the parties agreed to settle any legal proceedings in Illinois courts, except as otherwise provided in the arbitration provision contained in section 9.5.

Section 9.5 of the CSA, titled "Dispute Resolution," contained the following arbitration provision:

"Except as otherwise provided in this Agreement or the MSA, any controversy or claim arising out of or relating to this Agreement, or the breach thereof, including the scope and applicability of this Agreement to arbitrate, shall be settled by arbitration.

***

Notwithstanding anything to the contrary contained in this Section 9.5, but without limiting the power of arbitrators to grant similar remedies that may be requested by a party in dispute, any party shall have the right to proceed in any court of proper jurisdiction to obtain injunctive or other relief, enforce a judgment rendered by an arbitrator, or obtain any other similar or ancillary remedies."

The CSA's arbitration provision provided that arbitration proceedings would be administered by the American Arbitration Assocation (AAA) in accordance with its rules. The CSA's arbitration provision further provided that the arbitration hearings would be conducted either in Indianapolis, Indiana, if Glazer initiated them, or Dallas, Texas, if NWS LLC initiated them.

B. Glazer's Original Complaint

On May 30, 2006, Glazer's filed in the circuit court a complaint seeking injunctive relief, declaratory judgment, and, in the alternative, a claim for breach of contract. Also on May 30, 2006, Glazer's filed a verified motion for temporary restraining order.

In their complaint, Glazer's alleged that on May 18, 2006, NWS LLC informed Glazer's that NWS LLC had entered or intended to enter into agreements to sell a number of NWS LLC's distribution contracts in Illinois. The next day, on May 19, 2006, Glazer's responded and informed NWS LLC that its sale of any distribution contracts would be a breach of both the MSA and the CSA. Glazer's demanded NWS LLC to rescind or terminate any such agreements to sell its distribution contracts. Glazer's further notified NWS LLC that Glazer's was exercising its right to purchase the assets of NWS LLC pursuant to the CSA.

Glazer's requested the court to enter a temporary restraining order enjoining NWS LLC's "threatened sale" of its Illinois distribution contracts. Glazer's further requested the court to enter an order that preliminarily and permanently enjoined NWS LLC from selling its distribution contracts, and declared that the MSA and CSA prohibited NWS LLC from selling such contracts. In the alternative, Glazer's ...


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