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Plastic Recovery Technologies, Co., and Kevin Gavin v. Jerry Samson

July 28, 2011

PLASTIC RECOVERY TECHNOLOGIES, CO., AND KEVIN GAVIN, PLAINTIFFS,
v.
JERRY SAMSON, DEFENDANTS.



The opinion of the court was delivered by: Charles P. Kocoras, District Judge:

MEMORANDUM OPINION

This case comes before the Court on the motion of Defendant Jerry Samson ("Defendant" or "Samson") to dismiss the complaint of Plaintiffs Plastic Recovery Technologies, Co. ("Plastic Recovery") and Kevin Gavin ("Gavin") (collectively, "Plaintiffs") pursuant to Section 6 of the Federal Arbitration Act, 9 U.S.C. § 6, and Federal Rule of Civil Procedure 12(b)(6). This Court converts Plaintiffs' complaint into a motion to vacate and treats Defendant's motion to dismiss as its response to Plaintiffs' motion to vacate. For the reasons stated below, Plaintiffs' motion to vacate is denied.

BACKGROUND

I. The Parties

Gavin is the President of Plastic Recovery, a company that provides replacement parts to the waste industry. Beginning in February 2009, Samson spoke with Gavin concerning potential employment at Plastic Recovery. In May 2009, Samson and Plastic Recovery executed an employment agreement (the "Employment Agreement"). According to the Employment Agreement, Samson would begin working for Plastic Recovery on July 1, 2009. Among other benefits, Plastic Recovery agreed to pay Samson a base compensation of $10,000 per month and a guaranteed compensation of $5,417 for 12 months. The Employment Agreement contained an arbitration clause which required any claim or controversy arising out of, or related to, the Employment Agreement to be settled by arbitration.

II. The Arbitration Proceeding

After a relatively brief period of employment, Samson resigned and demanded payment from Plastic Recovery pursuant to the Employment Agreement. Because Plastic Recovery refused to pay the money to Samson, on December 3, 2009, Samson initiated arbitration proceedings with the American Arbitration Association ("AAA") pursuant to the arbitration clause in his Employment Agreement.

Throughout the arbitration, Plaintiffs objected to the fees charged by the AAA and refused to pay the AAA for administrative fees or the arbitrator's fees. The AAA initially scheduled the arbitration hearing for two full days, but later planned to suspend the arbitration because Plaintiffs failed to pay their portion of the fees. Rather than suspend the hearing, the arbitrator agreed to shorten the hearing to one day. Plaintiffs objected, arguing that a one-day hearing would prejudice them because they would not have sufficient time to present their case. On December 6, 2010, the arbitrator responded to Plaintiffs' objection. The arbitrator stated that the matter could be easily heard in a single day, since Plaintiffs had not identified any witnesses or exhibits. Even so, the arbitrator agreed to extend the hearing to two days if Plaintiffs could demonstrate that they needed an additional hearing day (by filing a list of witnesses and exhibits) and that the arbitrator's time for the second day would be compensated. For reasons that are unclear from the record, the arbitration hearing was not extended to two days.

On December 8, 2010, the parties presented evidence at the arbitration hearing. At the end of the day, the parties agreed to submit post-hearing briefs. At that time, the arbitrator asked both counsel about compensation for her time spent reviewing the briefs. During the course of the conversation, the arbitrator learned that Plaintiffs had previously refused to pay their fees. Both parties agreed to compensate the arbitrator for her time spent reviewing the post-hearing briefs. Plastic Recovery submitted a check to the AAA, which stated that the AAA, by endorsing the check, acknowledged that Plastic Recovery was prejudiced by the arbitrator's knowledge of its non-payment of fees.

On January 5, 2011, Plaintiffs sent a request to the AAA that the arbitrator recuse herself. On February 3, 2011, the AAA informed the parties that, in accordance with its rules, the AAA would determine whether to disqualify the arbitrator. The AAA also noted that the arbitrator was not made aware of the recusal request. On February 11, 2011, the arbitrator rendered an award in favor of Samson (the "Arbitration Award").

V. Plaintiffs' Complaint and Samson's Motion to Dismiss

On March 8, 2011, Plaintiffs filed a complaint in the Circuit Court of Cook County, Illinois, seeking to vacate the Arbitration Award pursuant to 710 Ill. Comp. Stat. 5/12 of the Illinois Uniform Arbitration Act.*fn1 Plaintiffs allege that the arbitrator exhibited evident partiality towards Samson because Plaintiffs initially refused to pay their fees and ultimately paid their fees under protest. On April 20, 2011, Samson removed the action to the United States District Court for the Northern District of Illinois. Samson now moves to dismiss the complaint.

VI. Preliminary Procedural Issues

Under the Federal Arbitration Act ("FAA"), applications made to the court should be "made and heard in the manner provided by law for the making and hearing of motions." 9 U.S.C. § 6. This provision removes actions to confirm or vacate arbitration awards from the realm of civil cases governed by the Federal Rules of Civil Procedure. Webster v. A.T. Kearney, Inc., 507 F.3d 568, 570 (7th Cir. 2007). When a party seeks to vacate an arbitration award, the party should not file a "complaint" or any other filing conceived by the Federal Rules of Civil Procedure. Id. at 571. Because the Federal Rules of Civil Procedure do not apply, the party challenging the award should file a motion to vacate the arbitration award and provide the court with all matters it would like the court to ...


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