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Shore v. Johnson & Bell

United States District Court, N.D. Illinois, Eastern Division

February 22, 2017

JASON SHORE and COINABUL LLC, Plaintiffs,
v.
JOHNSON & BELL, Defendant.

          MEMORANDUM OPINION AND ORDER

          JOHN W. DARRAH United States District Court Judge

         On April 15, 2016, Plaintiffs filed a Complaint, Motion for Temporary Restraining Order, and Motion to Temporarily Seal, claiming Plaintiffs' confidential information was at risk because of Defendant's IT security failures. Plaintiff's Motion to Unseal the Case was granted on December 8, 2016. Defendant has filed a Motion to Direct Plaintiff to Proceed to Arbitration on an Individual Basis and Enjoin Class Arbitration [39]. For the reasons discussed below, Defendant's Motion [39] is granted.

         BACKGROUND

         Defendant Johnson & Bell represented Plaintiffs Jason Shore and Coinabul LLC in Hussein v. Coinabul, LLC, et al., No. 14-cv-5735. Plaintiffs signed a client engagement letter, which set out the terms of the legal representation and included an arbitration clause. The arbitration clause stated:

Although we do not expect that any dispute between us will arise, in the unlikely event of any dispute under this agreement, including a dispute regarding the amount of fees or the quality of our services, such dispute shall be determined through binding arbitration with the mediation/arbitration services of JAMS Endispute of Chicago, Illinois. Any such arbitration shall be held in Chicago, Illinois[, ] unless the parties agree in writing to some other location. Each party to share the costs of the arbitration proceeding equally. Each party will be responsible for their own attorney's fees incurred as a result of the arbitration proceeding.

(Compl. Exh. 2.) The Hussein case ended after an Order of Deafult Judgment was entered against Coinabul, LLC and Jason Shore on July 6, 2015. Jason Shore was dismissed with prejudice via stipulation on July 1, 2016.

         Plaintiffs' Complaint specifically alleged that Defendant's information-technology infrastructure was compromised by three instances of a “JBoss Vulnerability”[1] and that Plaintiffs' confidential information was exposed because of those vulnerabilities. The Motion to Temporarily Seal stated that the documents initiating the case should be filed under seal because they “reveal[ed], in explicit detail, where and how [Defendant] has left its clients' confidential information unsecured and unprotected” and left Plaintiffs under “a heightened risk of . . . injuries.” The Motion to Temporarily Seal was granted on April 21, 2016. On May 4, 2016, counsel for Defendant represented that the “JBoss Vulnerability” had been fixed; and Plaintiffs' counsel confirmed that on the same day. On May 26, 2016, Plaintiffs dismissed their claims without prejudice to refiling the claims in arbitration.

         On July 12, 2016, Plaintiffs filed a related Complaint in arbitration as well as a demand for class arbitration before JAMS.

         LEGAL STANDARD

         Pursuant to the Federal Arbitration Act (“FAA”):

A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under Title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement.

9 U.S.C. § 4. “An agreement to arbitrate is treated like any other contract, ” and a “party can be forced to arbitrate only those matters that he or she has agreed to submit to arbitration.” Dr. Robert L. Meinders, D.C., Ltd. v. UnitedHealthcare, Inc., 800 F.3d 853, 857 (7th Cir. 2015).

         ANALYSIS

         Defendant argues that whether or not Plaintiffs may proceed to class arbitration is a gateway question for the Court to decide and not the arbitrator and that the client ...


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