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Sherrill Sabo v. Michael Dennis and Dennis Technology

March 8, 2011

SHERRILL SABO,
PLAINTIFF,
v.
MICHAEL DENNIS AND DENNIS TECHNOLOGY, LLC, DEFENDANTS.
DENNIS TECHNOLOGY, LLC, THIRD-PARTY PLAINTIFF-APPELLANT,
v.
SPRINT NEXTEL CORPORATION, NEXTEL RETAIL STORES, LLC, NEXTEL OPERATIONS, INC., SPRINT SPECTRUM, L.P., SPRINT SOLUTIONS, INC., RALPH TRASK, AND DM COMMUNICATION SERVICES, INC.,



Appeal from the Circuit Court of Madison County. Honorable David A. Hylla, Third-Party Defendants-Appellees. Judge, presiding.

The opinion of the court was delivered by: Justices: Honorable Bruce D. Stewart, J.

Rule 23 order filed NO. 5-09-0568 January 28, 2011; Motion to publish granted IN THE March 8, 2011.

JUSTICE STEWART delivered the judgment of the court, with opinion.

Presiding Justice Chapman and Justice Wexstten concurred in the judgment and opinion.

OPINION

This case is on appeal from the order of the Madison County circuit court granting a motion to compel arbitration and staying the underlying trial court proceedings. On April 3, 2007, the plaintiff in the underlying action, Sherrill Sabo, filed a complaint against Michael Dennis (Dennis) and Dennis Technology, LLC (Dennis Technology), alleging they owed her in excess of $50,000 as a result of her employment with Dennis Technology. Hereinafter, we will refer to both defendants as Dennis Technology, except when we refer specifically and solely to Dennis.

Dennis Technology filed an answer, affirmative defenses, and a third-party complaint against Sprint Nextel Corp. (Sprint Nextel) and Nextel Retail Stores, LLC (Nextel Retail). Later, Dennis Technology filed an amended third-party complaint adding the remaining third-party defendants, Nextel Operations, Inc. (Nextel Operations), Sprint Spectrum, L.P. (Sprint Spectrum), Sprint Solutions, Inc. (Sprint Solutions), Ralph Trask (Trask), and DM Communication Services, Inc. (DM Communication) (collectively, the third-party defendants) (additionally, we collectively refer to all the third-party defendants except Trask and DM Communication as Sprint Nextel).

In the amended third-party complaint, Dennis Technology purported to allege causes of action for breach of contract, intentional interference with contractual relations, defamation, and false representation and requested both monetary damages and injunctive relief. Essentially, Dennis Technology alleged that the third-party defendants were responsible for its failure to pay Sabo.

On July 5, 2007, Sprint Nextel and Nextel Retail filed a motion to compel arbitration and stay the trial court proceedings, alleging that they had entered into certain agreements with Dennis Technology whereby Dennis Technology had waived its right to litigate disputes concerning those agreements and had agreed instead to submit those disputes to arbitration. Later, the remaining third-party defendants filed similar motions to compel arbitration and stay the trial court proceedings. Dennis Technology filed a response claiming that neither Sprint Nextel nor Nextel Retail had signed an agreement giving them the right to compel arbitration. Dennis Technology also alleged that it had a "variety of challenges to the arbitration provision, including unconscionability, violation of due process, [and] lack of mutuality." After an evidentiary hearing, the trial court granted the motion to compel arbitration with regard to Sprint Nextel and stayed the trial court proceedings with regard to all the third-party defendants. Dennis Technology filed this appeal pursuant to Illinois Supreme Court Rule 307(a)(1) (eff. Jan. 1, 2003).

On appeal, Dennis Technology makes four main arguments: (1) that we should reverse the trial court's grant of the motion to compel arbitration with regard to all the third-party defendants except Sprint Solutions because Sprint Solutions is the only third-party defendant who signed the 2006 "Authorized Representative Agreement" (2006 AR Agreement), (2) that we should reverse the trial court's stay with regard to the remaining third-party defendants,

(3) that the 2006 AR Agreement is unconscionable, and (4) that Sprint Nextel violated the requirement that the parties negotiate and mediate before arbitration and thereby constructively waived its right to arbitrate. We affirm.

BACKGROUND

At the evidentiary hearing on the motion to compel arbitration, the parties presented the following relevant evidence. On March 18, 2002, Dennis Technology entered into an "Authorized Representative Agreement" (2002 AR Agreement) with Nextel West Corp. (Nextel). In the 2002 AR Agreement, Nextel authorized Dennis Technology to sell its wireless telecommunication equipment and systems in southeastern Missouri and southwestern Illinois for an initial period of two years, with the possibility of three one-year extensions. Under the 2002 AR Agreement, either party was allowed to terminate the agreement without cause upon 30 days' written notice to the other party. In addition, both parties agreed to the following:

"Any controversy, dispute or claim arising out of the interpretation, performance or breach of this Agreement *** shall be resolved by binding arbitration, at the request of either party, in accordance with the rules of the American Arbitration Association. The arbitration shall be conducted by a panel of three arbitrators ***. The arbitration shall be held in New York City or such other location as shall be mutually agreeable ***."

The parties agreed that Dennis Technology would receive compensation according to specified plans, which included the eligibility to receive reimbursements on a sliding scale for customer accounts that remained active for up to 36 months, which they referred to as "Continuing Service Awards" (CSAs). Under the 2002 AR Agreement, Nextel reserved the right to "reduce or change" Dennis Technology's compensation plan, including its eligibility to receive CSAs. Additionally, the parties agreed that "[a]ll questions with respect to the construction" of the agreement "and the rights and liabilities of the parties" would be governed by Virginia law.

In 2003, Dennis Technology and Nextel entered into another AR Agreement (2003 AR Agreement), the relevant provisions of which were the same as the 2002 AR Agreement.

In August 2005, the merger that created Sprint Nextel was consummated. At that time, Nextel dealers, such as Dennis Technology, were generally not authorized to sell Sprint products and services, and Sprint dealers were generally not authorized to sell Nextel products and services. Blair Frock testified that he was employed by Sprint at the time of the merger with Nextel. After the merger, he was responsible for the accounts of Sprint Nextel dealers in several midwestern states, including Dennis Technology's account. In September 2005, Dennis Technology entered into an agreement with Sprint Nextel (the Addendum). Frock testified that, after the merger, there were more than 3,000 Nextel and Sprint dealers across the United States. Sprint Nextel required each of those dealers to execute virtually the same addendum with it in order to authorize the Nextel dealers to sell Sprint products and services and Sprint dealers to sell Nextel products and services.

Frock testified that, after the dealers signed the addendums and were allowed to begin selling both Sprint and Nextel products and services, Sprint Nextel still had tw o compensation plans, one for the former Sprint dealers and another for the former Nextel dealers, which "made it very operationally inefficient for the dealers as well as for *** Sprint Nextel." Frock testified that, in order to address those issues, Sprint Nextel sent all the dealers, including Dennis Technology, an AR Agreement with uniform terms and conditions. Under the May 1, 2006, AR Agreement between Dennis Technology and Sprint Nextel (2006 AR Agreement), Dennis Technology chose to become an exclusive dealer for Sprint Nextel. Prior to signing the 2006 AR Agreement, Dennis Technology and the other Sprint Nextel dealers were allowed to choose between three types of compensation plans, with the exclusive plan providing the highest ...


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