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O'Hare Accommodations, Inc. v. Aaron Corp.

May 25, 2010


The opinion of the court was delivered by: Marvin E. Aspen, District Judge


In the present case, plaintiff O'Hare Accommodations, Inc., d/b/a Airport Accommodations ("O'Hare") seeks nearly $270,000 in commission payments allegedly owed by defendant Aaron Corporation d/b/a ("Aaron"). Relying on the arbitration provision in the parties' written agreement, Aaron moves to dismiss or, alternatively, to stay proceedings pursuant to Federal Rule of Civil Procedure 12(b)(1). As set forth below, we deny the motion.


O'Hare and Aaron entered into a written contract on October 1, 2005 ("Agreement"). (Compl. ¶ 8.) Aaron agreed to "provide[] customers with access" to O'Hare's website for the purpose of making hotel reservations through the Internet. (Id. ¶ 1.) Among other things, the Agreement includes an arbitration clause, which states that "[a]ny controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration . . . ." (Reply, Ex. A, Agmt. ¶ 10.1.)

The Agreement expired by its own terms on August 31, 2007. (Compl. ¶ 4.) After the Agreement expired, O'Hare continued to perform "similar services" as required under that Agreement and Aaron continued to pay "the same percentage of commissions as required under the . . . Agreement." (Mem. at 5.) According to the complaint, however, Aaron "stopped making full payments," and beginning in July 2009, Aaron "admitted owing Plaintiff commissions on multiple occasions." (Compl. ¶¶ 14--15.) On September 17, 2009, O'Hare "terminated its business relationship with" Aaron. (Id. ¶ 17.)

O'Hare filed its complaint on September 21, 2009, in the Circuit Court of Cook County, Illinois, seeking unpaid commissions for services provided to Aaron's clients after the expiration of the Agreement. (Mem. at 1; Compl. ¶¶ 14--17.) Aaron subsequently removed the case to federal court on October 21, 2009. (Mem. at 1.) Arguing that we lack subject matter jurisdiction, Aaron moves to dismiss the complaint, or to stay the proceedings pending arbitration, pursuant to Federal Rule of Civil Procedure 12(b)(1). (Id. at 2.)


As the Seventh Circuit has stated on numerous occasions, "the proper course of action when a party seeks to invoke an arbitration clause is to stay the proceedings rather than to dismiss outright." Halim v. Great Gatsby's Auction Gallery, Inc. 516 F.3d 557, 561 (7th Cir. 2008) (internal quotation omitted); Cont'l Cas. Co. v. Am. Nat'l Ins. Co., 417 F.3d 727, 732 n.7 (7th Cir. 2005). Although moving parties, like Aaron, frequently cite to Federal Rules of Civil Procedure 12(b)(1) or 12(b)(6) in support of a motion to stay proceedings pending arbitration, the Seventh Circuit has not directly ruled on the applicability of Rule 12 to these circumstances. Cont'l Cas. Co., 417 F.3d at 731--33 & n.7; see Molton, Allen & Williams, LLC v. Cont'l Cas. Ins. Co., No. 09 C 6924, 2010 WL 780353, at *8 (N.D. Ill. Mar. 3, 2010). Regardless, our "authority to stay proceedings does not derive from Rule 12(b) . . . but rather from" the Federal Arbitration Act ("FAA"). Cont'l Cas. Co., 417 F.3d at 732 n.7. Section 3 of the FAA provides that a court may stay the trial of an action until arbitration has been completed, so long as the court is "satisfied that the issue involved in such suit or proceeding is referable to arbitration" pursuant to a written agreement. 9 U.S.C. § 3.

In evaluating whether a stay is appropriate, a court must bear in mind that the FAA "embodies a strong federal policy in favor of arbitration." Sweet Dreams, Unltd., Inc. v. Dial-A-Mattress Int'l, Ltd., 1 F.3d 639, 641 (7th Cir. 1993); see Moses H. Cone Mem'l Hosp. v. Mercury Constr., 460 U.S. 1, 24, 103 S.Ct. 927, 941 (1983). Indeed, the FAA "establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Moses H. Cone Mem'l Hosp., 460 U.S. at 24--25, 103 S.Ct. at 941; Cont'l Cas. Co., 417 F.3d at 730--31. Nonetheless, "[a] court's decision to stay proceedings pending arbitration is a question of contract interpretation, and an arbitration clause cannot be enforced against a party who has not agreed to be bound." Trustmark Ins. Co. v. Transam. Occidental Life Ins. Co., 484 F. Supp. 2d 850, 853 (N.D. Ill. 2007); Cont'l Cas. Co. v. LaSalle RE Ltd., 511 F. Supp. 2d 943, 946 (N.D. Ill. 2007); see Cont'l Cas. Co., 417 F.3d at 730--31 (providing that "whether the parties have agreed to arbitrate is a question" for the court regarding contract formation). The court's inquiry thus focuses on the existence and scope of the written agreement to arbitrate required by the FAA. See Sweet Dreams, 1 F.3d at 641 (stating that "we will not compel parties to arbitrate disputes unless they have agreed to do so" and evaluating the terms of the contract).


Here, the parties do not dispute that the Agreement included an arbitration provision. They also do not dispute that the fixed term of the Agreement expired on August 31, 2007. Aaron contends, however, that the parties mutually extended the Agreement, as evidenced by their continued relationship after August 31, 2007 and by O'Hare's lawsuit seeking commissions "as if the . . . Agreement were controlling."*fn1 (Mem. at 4; Reply at 2.) Aaron argues that because the parties modified the termination clause of the Agreement, (Reply at 5), it continues to be a valid, binding contract requiring arbitration of the present dispute (id. at 1--5; Mem. at 5).*fn2 In response, O'Hare asserts that because the dispute concerns only post-termination conduct, it cannot fall under the Agreement. (Resp. at 3, 5--9.) O'Hare emphasizes that the Agreement expired two years before it filed its complaint. (Id. at 6.)

A. Expiration

The first question before us is whether the arbitration provision encompasses the current dispute, despite the fact that it arose after the contract expired. Where a contract includes a broad arbitration provision, like the one found in the Agreement, the requirement to arbitrate disputes arising under that contract may continue even after its termination. See Sweet Dreams, 1 F.3d at 643 (citing Nolde Bros., Inc. v. Local No. 358, 430 U.S. 243, 255, 97 S.Ct. 1067, 1074 (1977)). In Sweet Dreams, a decision relied on by Aaron, the Seventh Circuit rejected the argument that expiration of the parties' agreement mooted the arbitration requirement. 1 F.3d at 643 (staying litigation pending arbitration of several post-expiration claims that had "their genesis in the [a]greement"). The court stated that "[i]f the parties had wished to limit the duty to arbitrate to the term of the [a]greement itself they could have said so explicitly." Id. Because the disputes in Sweet Dreams-tort claims arising after the parties' joint venture agreement expired and their subsequent relationship soured-"follow[ed] . . . on the heels of the [a]greement," the court found they were arbitrable. Id. at 643--44.

Here, however, Aaron does not contest that O'Hare's claim arose well after the Agreement's termination date, rather than on the heels of expiration as in Sweet Dreams. Although it is unclear precisely when Aaron stopped making full payments owed to O'Hare stemming from their post-Agreement relationship, the September 2009 complaint indicates that Aaron continued to pay commissions and recognize its obligation to do so "until recently." (Compl. ¶ 1.) The Seventh Circuit has stated that "the dead hand of a long-expired arbitration clause cannot govern forever." Kroll v. Doctor's Assocs., 3 F.3d 1167, 1169 (7th Cir. 1993); see Sweet Dreams, 1 F.3d at 643 (noting that the question would be "different and more difficult . . . if the disputes had arisen a significant time after the expiration of the [a]greement"); R.J. Corman Derailment Servs., LLC v. Int'l Union of Operating Eng'rs, Local 150, 422 F.3d 522, 526--27(7th Cir. 2005) ("[I]t remains true that at some point . . . beyond the expiration of the CBA, it would be utterly unreasonable to presume that the parties still had an agreement to arbitrate CBA-based grievances."). As the court explained in Local 703 v. Kennicott Brothers, the federal presumption in favor of arbitration ...

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