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Fuqua v. SVOX AG

Court of Appeals of Illinois, First District, Fifth Division

June 9, 2014

KURT FUQUA, Plaintiff-Appellant,
v.
SVOX AG; SVOX USA, INC.; NUANCE COMMUNICATIONS, INC.; VOLKER JANTZEN; EUGEN STERMETZ; MARTIN REBER; ERIC LEHMANN; and THOMAS SOSEMAN; Defendants-Appellees

Page 69

Appeal from the Circuit Court of Cook County. No. 12 L 3607. Honorable John C. Griffin, Judge Presiding.

SYLLABUS

The trial court's order granting defendants' motion to stay litigation and compel arbitration of a dispute arising from plaintiff's action challenging the termination of his employment was affirmed, notwithstanding his contention that the arbitration clause of his employment contract was procedurally and substantively unconscionable, since the parties bargained over the terms of the clause before it was executed, their relative bargaining power was not vastly unequal, and plaintiff negotiated and requested some of the terms that he later claimed were inequitable.

For Appellant: John Thomas Moran Jr., of counsel, The Moran Law Group, Chicago, IL.

For SVOX AG, SVOX USA, Inc. & Nuance Communications, Appellee: John A. Ybarra, Darren M. Mungerson, Amanda E. Inskeep, of counsel, Littler Mendelson, P.C., Chicago, IL.

For Thomas Soseman, Appellee: Daniel F. Konicek, Michael J. Corsi, of counsel, Konicek & Dillion, P.C., Geneva, IL.

JUSTICE CUNNINGHAM delivered the judgment of the court, with opinion. Presiding Justice Connors and Justice Delort concurred in the judgment and opinion.

OPINION

CUNNINGHAM, JUSTICE

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[¶1] This interlocutory appeal arises from a March 7, 2013 order entered by the circuit court of Cook County which granted the motion to stay litigation and compel arbitration and the motion to lift the stay of arbitration filed by defendants-appellees SVOX AG, SVOX USA, Inc. (SVOX USA), and Nuance Communications, Inc. (Nuance) (collectively, the SVOX defendants); and granted the motion to dismiss filed by defendant-appellee Thomas Soseman (Soseman). This appeal also arises from a May 7, 2013 order which denied the motion for reconsideration filed by plaintiff-appellant Kurt Fuqua (Fuqua). On appeal, Fuqua argues that: (1) the circuit court erred in granting the SVOX defendants' motion to lift the stay of arbitration; (2) the circuit court erred in granting the SVOX defendants' motion to stay litigation and compel arbitration; and (3) the circuit court erred in granting Soseman's motion to dismiss. For the following reasons, we affirm in part and reverse in part the judgment of the circuit court of Cook County.

[¶2] BACKGROUND

[¶3] The facts of this case are lengthy and complex. In the interest of clarity, we present only the facts that are pertinent to our resolution of the case. Fuqua is a computational linguist who has created numerous inventions in the field of computational linguistics. SVOX USA is a wholly owned subsidiary of SVOX AG, a foreign corporation.[1] At the time of the dispute between the parties, SVOX USA was a Delaware corporation located and doing business in Illinois. SVOX USA is a technology services company that researches and develops text-to-speech technology. On December 23, 2008, Fuqua was offered an employment position with SVOX USA and was asked to sign an employment agreement. Fuqua and SVOX USA negotiated some of the terms of the agreement, and on January 28, 2009, the employment agreement was executed. The employment agreement contained an arbitration clause, which states, in pertinent part:

" 16. Arbitration. Any dispute or controversy arising under or in connection with this Agreement or any other dispute concerning [Fuqua's] employment with [SVOX USA] *** shall be settled exclusively by arbitration, conducted before a single, mutually agreed upon arbitrator or, if no such single arbitrator can be mutually agreed upon, then before a panel of three arbitrators (with one arbitrator to be chosen by each party and the third arbitrator to be chosen by agreement of the first two), sitting in a location selected by mutual agreement within the City of Chicago, Illinois in accordance with the rules for commercial arbitration of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. Notwithstanding the agreement to arbitrate such disputes and controversies, Either party shall be entitled to enforce, in any court of competent jurisdiction, Fuqua's compliance with any restrictive

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covenant or confidentiality provision contained in this Agreement to the fullest extent permitted by law by seeking any remedy available at law or in equity, including but not limited to a temporary restraining order, injunction, and specific performance, without having to arbitrate and without need to post a bond to do so." (Emphasis added.)

Notably, Fuqua requested that the phrase " Either party" be included in the arbitration clause as a replacement for the term " Employer" in order to make the restrictive covenant provision " symmetric."

[¶4] On February 1, 2009, Fuqua began his employment as vice president--professional services for SVOX USA. In October 2009, SVOX USA decided to terminate Fuqua's employment and he was given 90 days' notice of his termination. On December 8, 2009, Fuqua filed a demand for arbitration with the American Arbitration Association (AAA), alleging, among other things, breach of contract and unauthorized withholding of wages. On January 3, 2010, Fuqua filed a second demand for arbitration with a claim amount of $10,000 alleging breach of contract and seeking payment of funds owed. Both arbitration demands were filed in accordance with the rules under the " Employment: Promulgated Plans" (employment rules) of the AAA. On February 10, 2010, SVOX USA filed a complaint for injunctive relief in the circuit court of Cook County against Fuqua. The complaint alleged that Fuqua refused to return SVOX computer equipment and software, which contained confidential and proprietary information. On February 11, 2010, SVOX USA's complaint was voluntarily dismissed. SVOX USA then refiled its complaint in the circuit court of Lake County. On March 18, 2010, SVOX USA's Lake County complaint was voluntarily dismissed. The AAA then consolidated Fuqua's arbitration demands.

[¶5] On April 6, 2010, SVOX USA filed an answer and counterclaims to Fuqua's arbitration demand. SVOX USA also filed a motion requesting that the AAA determine whether the employment rules or the commercial arbitration rules (commercial rules) apply to the arbitration between the parties. On July 7, 2010, AAA Arbitrator Timothy Klenk (Arbitrator Klenk) issued an order which determined that the commercial rules would apply to the arbitration between the parties. Applying the AAA rules, Arbitrator Klenk found that although the employment agreement contains a " standardized arbitration clause" which normally triggers the employment rules, in this case the commercial rules apply because the agreement was an " individually-negotiated employment agreement." Arbitrator Klenk's finding was significant because under the commercial rules, Fuqua and SVOX USA would be responsible for splitting the cost of arbitration whereas under the employment rules, it would be much less expensive for Fuqua to pursue arbitration. Notably, Arbitrator Klenk stated that he was troubled by the potential cost to Fuqua if the commercial rules applied. However, Arbitrator Klenk extended multiple opportunities to Fuqua to present legal and factual support to demonstrate that his financial position would make it burdensome for him to pay half the arbitration costs. Arbitrator Klenk ultimately opined that Fuqua did not meet his burden of establishing financial inability to meet his obligations under the commercial rules.

[¶6] On or around August 9, 2011, Fuqua filed a complaint in the United States District Court for the Northern District of Illinois against the SVOX defendants, Soseman, Volker Jantzen (Jantzen), Eugen Stermetz (Stermetz), Martin Reber (Reber), and Eric Lehmann (Lehmann) (collectively, the defendants). On March 12,

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2012, the district court ruled on Fuqua's complaint in a memorandum opinion and order. The district court noted that Fuqua's complaint alleged violations of the American Reinvestment and Recovery Act of 2009 (ARRA) and violations of state law. The district court also noted that the defendants filed a motion to dismiss Fuqua's complaint. The district court dismissed Fuqua's ARRA claim with prejudice. Because the district court dismissed the only federal law claim in the complaint, the court declined to exercise supplemental jurisdiction over Fuqua's state law claims and the state law claims were stricken without prejudice to be refiled in state court.

[¶7] On April 4, 2012, Fuqua filed a complaint in the circuit court of Cook County against the defendants. Fuqua's complaint alleged breach of contract, retaliatory discharge, and violations of the Illinois Wage Payment and Collection Act (820 ILCS 115/1 et seq . (West 2008)), the Illinois Whistleblower Act (Whistleblower Act) (740 ILCS 174/1 et seq . (West 2008)), the Illinois Employee Patent Act (Employee Patent Act) (765 ILCS 1060/1 et seq . (West 2008)), and the Illinois Personnel Record Review Act (820 ILCS 40/1 et seq . (West 2008)). On April 13, 2012, Fuqua filed a revised motion to stay arbitration pursuant to sections 1 and 2(b) of the Illinois Uniform Arbitration Act (Uniform Arbitration Act) (710 ILCS 5/1, 5/2(b) (West 2008)).

[¶8] Instead of filing an answer to Fuqua's motion to stay arbitration, on April 25, 2012, the defendants filed a notice of removal to the United States District Court for the Northern District of Illinois, on the basis of diversity jurisdiction. Additionally, on April 25, 2012, the defendants' notice of removal to federal court was filed in the circuit court of Cook County. Todd Church (Church), counsel for the SVOX defendants, executed a signed declaration (Church declaration) which stated that a " notice to adverse party of notice of removal" was hand-delivered to Fuqua's counsel by Velocity Courier on April 25, 2012. According to the Church declaration, the delivery tracking log of Velocity Courier shows that the notice to adverse party was delivered at 3:46 p.m. on April 25, 2012. On that same day, counsel for the SVOX defendants sent a letter to the presiding judge in the Cook County case informing him of the removal to federal court. The letter notes that Fuqua's counsel was copied. However, the record contains affidavits executed by Fuqua and Fuqua's counsel which state that they were not served with the notice to adverse party on April 25, 2012, as the letter from the SVOX defendants seems to indicate and did not become aware of the removal until April 26, 2012.[2]

[¶9] On April 26, 2012, the circuit court granted Fuqua's motion to stay arbitration. In the circuit court's order, it stated " [d]efendant's [ sic ] notice of removal has not been stamped by the clerk of the Northern District of Illinois and this court continues to retain jurisdiction." Litigation then proceeded in the Northern District of Illinois. On August 22, 2012, the district court ruled on a motion filed by Fuqua to remand the case to ...


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