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Christopher Gilmore v. Charles Carey

June 29, 2011

CHRISTOPHER GILMORE,
PLAINTIFF-APPELLEE,
v.
CHARLES CAREY, JOSEPH NICIFORO, AND HENNING-CAREY PROPRIETARY TRADING, LLC,
DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of Cook County, Illinois. No. 10 L 8708 Honorable Jennifer Duncan-Brice, Judge Presiding.

The opinion of the court was delivered by: Justice Murphy

JUSTICE MURPHY delivered the judgment of the court, with opinion. Presiding Justice Quinn and Justice Steele concurred in the judgment and opinion.

OPINION

Plaintiff, Christopher Gilmore, filed a five-count complaint against defendants, Henning-Carey Proprietary Trading, LLC (Henning-Carey), Charles Carey and Joseph Niciforo, seeking unpaid wages and damages for breach of the terms of an employment agreement between the parties. On December 21, 2010, the trial court denied defendants' motion to dismiss count I for unpaid wages and to stay proceedings and compel arbitration of counts II through V of plaintiff's complaint. Defendants only appeal the trial court's order denying their motion to stay proceedings and compel arbitration. Defendants argue that because plaintiff owns a Class B interest in Henning-Carey, a member of the Chicago Board of Trade (CBOT), plaintiff is subject to and obligated by all CBOT rules. Defendants argue that Rule 600, which requires arbitration of member disputes, is applicable to this case and the trial court erred in denying the motion to stay proceedings and compel arbitration. For the following reasons, we affirm the holding of the trial court.

I. BACKGROUND

On October 22, 2009, plaintiff entered into a "Services Agreement" with Henning-Carey to work as a "business development manager, product developer for trading, trader, and manager" on a salaried, one-year term. Plaintiff was to perform the functions of managing the business development of Henning-Carey's trading operations on GOVX, which involved the trading of United States Treasury securities. Plaintiff also was to manage a separate proprietary trading group for which Henning-Carey would provide liquidity.

Plaintiff reported directly to defendants Niciforo and Carey. Plaintiff was guaranteed a W-2 salary of $15,000 per month for managing the GOVX business and could earn a quarterly bonus at defendants' discretion. Henning-Carey also contracted to offer plaintiff "in the near future" a right to buy a "B Share" interest in the corporation. Plaintiff paid $250,000 for that membership and was entitled to demand return of this capital contribution upon withdrawal from Henning-Carey.

Plaintiff worked through the end of February 2010 for Henning-Carey. Plaintiff did not work on the trading floor and averred that he was not a member of the Chicago Mercantile Exchange Group, Inc., CBOT or any other exchange. Plaintiff received his paychecks as contracted through February 12, 2010. The paychecks were issued by Twinfields Capital Management, an entity affiliated with Henning-Carey, and it was not a CBOT member. Plaintiff stopped working after February 2010 and did not receive any additional monthly paychecks or a return of his capital contribution.

On July 29, 2010, plaintiff filed his multicount complaint. The first count, not at issue here, asserted a violation of the Illinois Wage Payment and Collection Act (820 ILCS 115/1 et seq. (West 2008)) for defendants' failure to pay plaintiff his contracted salary. Counts II through V are at issue on this appeal and involved claims for: breach of the Services Agreement based on the failure to pay plaintiff's guaranteed salary and provide benefits; breach of Henning-Carey's operating agreement (Operating Agreement) for failing to return plaintiff's capital contribution; breach of fiduciary duty based on misappropriation of plaintiff's capital contribution, failing to provide proper support for plaintiff's operations, and creating a negative work environment to force plaintiff to leave; and conversion for the failure to return plaintiff's capital contribution. Defendants moved to dismiss count I and to stay the proceedings and compel arbitration of counts II through V. Defendants noted that, as plaintiff alleged in his complaint, he was a "Class B" member of Henning-Carey. Defendants cited section 2.6 of the Operating Agreement to argue that arbitration was mandatory per CBOT Rules. Section 2.6 states in full:

"In cases where a Class B Member trades the company's proprietary account at [CBOT], and where the non-member trader's profit or loss allocation is tied to the profitability of the specific proprietary accounts(s) [sic], in order for the trades in such proprietary account to receive member fee treatment, each such Class B Member must make an initial capital contribution of $200,000 and must maintain at least $200,000 in the trading account(s) and the $200,000 must be available to support the trading activity on the Exchange and comply with all Rules and Regulations of [CBOT], including Rule 244.05. In the event that Rule 244.05 is changed such that the amounts required are increased, the amounts set forth in this paragraph 2.6 are also increased. Class A and Class B Members shall be responsible for the full amount of any losses sustained by him."

Defendants argued that this necessarily includes CBOT Rule 600, which states, in pertinent part:

"It is contrary to the objectives and policy of the Exchange for members to litigate certain Exchange-related disputes. Disputes between and among members that are described below and that are based upon facts and circumstances that occurred at a time when the parties were members shall be subject to mandatory arbitration in accordance with the rules of this Chapter:

1. Claims between members that related to or arise out of any transaction on or subject to the rules of the Exchange; and

2. Claims between or among members relating to ownership of, or interests in, trading rights on the Exchange; and

3. Claims between members relating to the enforceability of:

a. non-compete clauses to the extent they relate ...


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