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Linda Construction, Inc. v. Republic Services Procurement, Inc.

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

June 16, 2017




         Because Plaintiff Linda Construction, Inc. (“LCI”) has waived its right to arbitration and no ground exists to allow it to rescind that waiver, LCI's Motion to Lift the Court's previously imposed stay on arbitration [ECF No. 194] is denied.

         I. BACKGROUND

         This case has had a tortured procedural history. Back in 2015, LCI brought a six-count Complaint against a number of Defendants. Among those sued were the City of Chicago, multiple corporate entities - including Republic Services, Inc. (“Republic”) and Allied Waste Transportation, Inc. (“Allied”) - and individual employees of the municipality and corporations. None of these Defendants is the one entity that still remains in the case: Republic Services Procurement, Inc. (“RSPI”). Indeed, LCI did not even mentioned RSPI in its original Complaint.

         The causes of action brought in the original Complaint fell into two categories: those alleging violations of LCI's civil rights and those stating claims in contract. The contract that LCI relied on to plead its case at this point was an agreement between the City of the Chicago and Allied - what the Court in its previous opinion called the Main Contract. See, Linda Constr. Inc. v. Allied Waste Indus., No. 15 C 8714, 2017 U.S. Dist. LEXIS 48367, at *5-7 (N.D. Ill. Mar. 31, 2017). A specific provision to that Contract is the fodder for the current Motion. Section 5.9 of the Main Contract contains the following arbitration clause:

In the event a contractor has not complied with the contractual MBEs/WBEs percentage in its Schedule D, underutilization of MBEs/WBEs shall entitle the affected MBE/WBE to recover from the contractor damages suffered by such entity as a result of being underutilized; provided, however, that this provision shall not apply to the extent such utilization occurs pursuant to a waiver or substitution approved by the City. The Ordinance and contracts subject thereto provide that any disputes between the contractor and such affected MBEs/WBEs regarding damages shall be resolved by binding arbitration before an independent arbitrator other than the City, with reasonable expenses, including attorney's fees, being recoverable by a prevailing MBE/WBE in accordance with these regulations.

ECF No. 149, Ex. C (Main Contract).

         Immediately after it filed the lawsuit in federal district court, LCI went on the offensive by bringing a Motion for a Preliminary Injunction. See, ECF Nos. 17-19. Defendants opposed the injunction and simultaneously moved to dismiss the Complaint for failure to state a claim. The parties fully briefed both sets of motions and appeared before the Court multiple times to air their disputes.

         On March 15, 2016, the Court issued its ruling, handing down an all-around loss to LCI. Not only did the Court deny the company an injunction, it also dismissed the Complaint in its entirety. See, Linda Constr. Inc. v. City of Chi., No. 15 C 8714, 2016 U.S. Dist. LEXIS 33376, at *25-26 (N.D. Ill. Mar. 15, 2016). In particular, the Court found that LCI was neither a signatory to, nor a third-party beneficiary of, the Main Contract and so did not have standing to sue under that Contract. Id. at *21-22. It thus dismissed the contract claims with prejudice. Id. at *25.

         LCI then amended its Complaint. Surprisingly, the First Amended Complaint looked remarkably like the original, just-dismissed Complaint. Compare, ECF No. 1 (Original Compl.), with ECF No. 65 (First Am. Compl.). However, LCI attached to this Amended Complaint a contract between it and RSPI - what the parties sometimes call the Services Agreement and what the Court referred to as the Transport Agreement in its last opinion. See, Linda Constr., 2017 U.S. Dist. LEXIS 48367, at *3.

         The key thing to keep in mind is that the Transport/Services Agreement and the Main Contract are two distinct legal documents. See, Id. at *38-39 (listing the differences between the two contracts). The parties to the Main Contract are the City of Chicago and Allied, which was at some point bought by Republic. The parties to the Transport Agreement, on the other hand, are LCI and RSPI. RSPI is not the same entity as Republic or Allied, however much LCI seems to treat them as fungible.

         In its First Amended Complaint, LCI continued to assert a breach of contract count against Republic and Allied (but not RSPI). However, LCI now relied on the Transport Agreement for this claim. See, ECF No. 65 at 5. The litigation on the contractual dispute thus proceeded apace despite language from the Transport Agreement mandating arbitration. See, ECF No. 65, Ex. E, at 6 (“Any disputes under the Services [or Transport] Agreement . . . that are not resolved by negotiation between the parties shall be resolved by binding arbitration.”). (Technically, this arbitration provision comes from an amendment to the Transport Agreement. However, the parties treat the original contract and its amendments as one integrated document, and the Court does the same, referring to them collectively as the Transport Agreement.)

         Defendants again moved to dismiss the Complaint. Just eight days before the motions became fully briefed, LCI dismissed its contract claim without prejudice. See, ECF No. 92. On June 6, 2016, 257 days after bringing suit in federal court, LCI tendered a demand to Republic and Allied for arbitration of the contract claim, “citing the Services [or Transport] Agreement between LCI and RSPI as the source of [its] right to arbitration.” ECF No. 104 at 3.

         Republic and Allied responded by asking the Court to stay LCI's demand for arbitration. See generally, ECF Nos. 103 (Mot. to Enjoin or Stay Arbitration) and 104 (Mem. in Support of Mot.). Defendants argued that LCI had waived its right to arbitrate by litigating the breach of contract claim in a judicial forum. See, ECF No. 104 at 4-7. As Defendants stated, LCI and its owners' “demand to arbitrate their breach of contract claim is pure gamesmanship” as they had shown “no intent to arbitrate . . . until they feared that their claim would be dismissed, for the second time, for failure to state a claim.” Id. at 5. Defendants also recited the time and money they have expended in responding to LCI's lawsuit. These included “hundreds of hours ...

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