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Target Media Partners v. Owen

June 11, 2010

TARGET MEDIA PARTNERS, PLAINTIFF,
v.
GREG OWEN, DEFENDANT.



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge

MEMORANDUM OPINION AND ORDER

Gregg Owen has filed an arbitration proceeding before JAMS, a private arbitration firm in Chicago, against his former employer Target Media Partners (TMP). TMP has filed suit to enjoin the arbitration, on the grounds that it did not consent to arbitrate disputes before JAMS and the claims at issue are governed by an arbitration provision that states that disputes should be arbitrated before the American Arbitration Association (AAA) in Las Vegas, Nevada. Owen moves for summary judgment. For the reasons stated below, the Court denies the motion. (Based on plaintiff's recent submission, the Court finds that it has subject matter jurisdiction.)

Facts

From 2000 to 2002, Owen was employed as the general manager of "Autofocus," a trade publication owned by Target Media Partners Operating Company, a Nevada corporation (TMPNV). Owen's employment at TMPNV was governed by an employment agreement. Under the employment agreement, Owen received a salary and several kinds of stock options, including direct awards of stock for each year of employment, traditional stock options, and warrants that gave him the right to purchase a 1.57 percent share in TMPNV (his "warrant percentage") in the event of an initial public offering or a sale of the company. The warrants were governed by a separate warrant agreement, which was incorporated by reference into the employment agreement. Under the warrant agreement, Owen also received cash disbursements, called "dividends," that were calculated by multiplying the free cash flow of the company by his warrant percentage.

In March 2002, TMPNV terminated Owen's employment and subsequently filed suit in state court in DuPage County, Illinois to prevent Owen engaging in competing business activities. Owen counterclaimed, alleging that TMPNV had dismissed him without cause and had therefore violated the terms of the employment agreement.

Owen's employment agreement included an arbitration clause that provided that employment disputes be arbitrated before the AAA in Chicago. The parties agreed, however, to arbitrate their dispute before JAMS instead. Arbitration of TMPNV's claim and Owen's counterclaim began before JAMS in 2003 (the "first arbitration"). In 2007, the JAMS arbitrator issued an award in Owen's favor that included unpaid salary, unpaid bonus, shares of TMPNV stock, and "warrant dividend payments" for the years 2001-2006.*fn1 The arbitrator ruled that his awards were final, and the awards were later confirmed by Judge Robert Gettleman of this district. Owen v. Target Media Partners Op. Co., Case No. 07-6027. A full satisfaction and release of judgment was entered on October 8, 2008, and the case was dismissed with prejudice on November 7, 2008.

In 2005, TMPNV merged into Target Media Partners, a Delaware corporation (TMP). TMPNV stock shares were repurchased in a recapitalization transaction and became TMP stock. The arbitration award gave Owen "2,000 shares of TMP stock." Although TMPNV did not exist at the time of the arbitration award, Owen appears to have been unaware of the merger with TMP, and he requested (and was issued) stock certificates for 2000 shares of stock in the then-defunct TMPNV. Owen also received a check for the cash portion of the award, including the warrant dividends for the 2001-2006 period.

On August 11, 2009, Owen initiated a second arbitration against TMP before JAMS, claiming TMP had failed to pay him warrant dividends for 2007 and 2008 to which he was entitled. Before an arbitrator was selected, TMP notified JAMS that commencement of this second arbitration was improper because it violated JAMS rule 5, which requires both parties to consent to arbitration. TMP argued that although it had agreed to use JAMS in the first arbitration, that agreement ended with the conclusion of the first arbitration in 2007. On October 22, 2009, JAMS sent the parties a letter instructing them to proceed with selecting an arbitrator and stating that TMP's argument about whether Owen's claim was arbitrable would be decided by the arbitrator.

After receiving the letter from JAMS, TMP filed the current lawsuit to enjoin the arbitration. TMP contends the parties' agreement to arbitrate before JAMS in the first arbitration was limited to disputes arising out of the employment agreement and that TMP never consented to use JAMS to arbitrate future disputes. According to TMP, Owen's action seeking warrant dividends for 2007 and 2008 falls outside of the scope of the first arbitration. TMP contends that Owen's request for 2007 and 2008 warrant dividends is instead governed by the warrant agreement, which it claims identifies AAA in Las Vegas, Nevada as the proper forum for arbitration. Therefore, TMP contends, the arbitration before JAMS is improper.

Owen contends that his request for warrant dividends from 2007 and 2008 is merely a continuation of an issue that was already litigated in the first arbitration, and therefore arbitration before JAMS is appropriate. He argues that TMP is precluded from arguing that it has not consented to arbitration before JAMS, because TMP made the same argument in the first arbitration, and the arbitrator ruled against it. Therefore, Owen contends, arbitration before JAMS is appropriate and he is entitled to summary judgment on TMP's current claim before this court.

Discussion

A. Substantive Claims About Warrant Dividends

The Court notes at the outset that the parties agree that Owen's claim for 2007 and 2008 warrant dividends is subject to arbitration; they dispute only where such arbitration should take place. The Court therefore does not address the merits of Owen's claim. To make its current ruling, the Court discusses some of the facts underlying Owen's claim for 2007 and 2008 dividends, ...


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