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Janiga v. Questar Capital Corp.

August 2, 2010


Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 09 C 2462-Milton I. Shadur, Judge.

The opinion of the court was delivered by: Wood, Circuit Judge.


Before WOOD, EVANS, and SYKES, Circuit Judges.

This case poses the question whether the court or an arbitrator is responsible for deciding whether a particular document that the parties signed qualifies as a contract, and if so, whether that contract includes an arbitration clause. Alfred Janiga is a Polish immigrant who has lived and worked in Illinois for more than 20 years; nevertheless, to this day (by his account) he understands only limited English. Janiga's brother, Weislaw Hessek, runs Hessek Financial Services, LLC ("Hessek Financial") and is a registered representative of Questar Capital Corporation ("Questar"), a securities broker-dealer. Problems erupted after Hessek arranged for his brother to invest with Questar. Janiga signed one page of Questar's New Account Form and began depositing money into his new account. The Form included an arbitration clause. One year after opening the account, and unhappy with the returns on his investment, Janiga sued Hessek, Hessek Financial, and Questar.

Defendants (to whom we refer collectively as "Questar" unless the context requires otherwise) asked the district court to stay proceedings and order arbitration under the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 3, 4. The district court decided that it could not order arbitration immediately because it was not clear whether a contract between Questar and Janiga even existed. It therefore denied the motions without prejudice and told Questar that it could renew its motion if and when the court concluded that there was a contract. Construing this as an order denying a motion to refer the case to arbitration, all three defendants filed this immediate appeal. Id. § 16.

The Supreme Court has said that the responsibility to determine the validity of the contract as a whole is assigned to the arbitrator, while specific challenges to an arbitration clause normally remain with the court. See Rent-A-Center, West, Inc. v. Jackson, 130 S.Ct. 2772, 2778 (2010) (agreements to arbitrate are on an equal footing with other contracts and are subject to generally appli- cable contract defenses). But who decides whether a contract exists at all? Janiga believes that this is an issue for the district court. Questar takes the opposite position and urges that the arbitrators have this responsibility. The district court decided that it should address the contract-formation question, but it refrained from doing so on the ground that it lacked sufficient evidence to reach a conclusion. We agree with the district court that the existence of a contract is an issue that the courts must decide prior to staying an action and ordering arbitration, unless the parties have committed even that gateway issue to the arbitrators. Id. at 2779-81. Unlike the district court, however, we are satisfied that the record contains enough evidence to resolve the question. That evidence shows that the parties formed a contract and that their agreement included an arbitration clause. We therefore reverse the district court's order and remand with instructions to grant Questar's motion to stay and to order arbitration.


Janiga is the President and Secretary of Polkraft Builders Corporation, an Illinois company that specializes in residential and commercial remodeling. According to Janiga, Hessek lobbied him for two years to invest with Questar. After Janiga finally agreed to open an account in March 2008, Hessek brought Janiga a "piece of paper" and told him to sign it. The paper Hessek proffered was page three of Questar's New Account Form. Janiga represents that Hessek never discussed "any terms of any agreement . . . including the meaning and existence of arbitration as a dispute resolution" and, despite Janiga's explicit request, Hessek never provided copies of any documents related to the account. Janiga speaks and understands only limited English. According to Janiga, all of his communications with Hessek were in Polish.

The New Account Form is actually just one in a series of three connected documents; the other two forms are the Client Agreement and the Sponsorship Program Disclosure. All contract documents are written in English. Janiga admits that he saw and signed page three of the New Account Form when Hessek gave it to him, but he says that this is all that he saw. Page three, however, made no secret of the fact that there was an arbitration clause in the picture. Directly above Janiga's signature, it proclaims: "I/WE HAVE READ AND UNDERSTOOD THE PRE-DISPUTE ARBITRATION AGREEMENT CONTAINED ON PAGE 4, PARAGRAPH 9 OF THE CLIENT AGREEMENT AND HAVE RECEIVED A COPY THEREOF."

As that language indicates, the arbitration clause appears in the separate Client Agreement, which follows the page that Janiga signed. The clause states in part:

I (we) understand that my (our) account is subject to the arbitration rules of the Financial Industry Regulatory Authority. Arbitration is used to resolve a dispute between two parties. . . .


(A) All parties to this agreement are giving up the right to sue each other in court, including the right to a trial by jury, except as provided by the rules of the arbitration forum in which a claim is filed.

(B) Arbitration awards are final and binding; a party's ability to have a court reverse or modify an ...

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