R.A. Bright Construction v. Weis Builders ( 2010 )

No. 3--09--0910
Filed June 9, 2010
IN THE
APPELLATE COURT OF ILLINOIS
THIRD DISTRICT
A.D., 2010
R.A BRIGHT CONSTRUCTION, INC.,) Appeal from the Circuit Court
an Illinois Corporation, ) of the 12th Judicial Circuit
) Will County, Illinois
Plaintiff-Appellee, )
)
v. ) No. 08--L--905
)
WEIS BUILDERS, INC., a )
Minnesota Corporation, )
) Honorable Barbara Petrungaro,
Defendant-Appellant. ) Judge, Presiding.
JUSTICE SCHMIDT delivered the opinion of the court:
Plaintiff, R.A. Bright Construction, Inc. (Bright), brought
this breach of contract action against defendant, Weis Builders,
Inc. (Weis), in the circuit court of Will County. Defendant
filed a motion to dismiss or, in the alternative, to stay the
action and compel arbitration. The trial court denied Weis's
motion. Weis filed this interlocutory appeal, claiming the trial
court erred when denying its motion to compel arbitration.
BACKGROUND
Weis entered into a contract with Wal-Mart Stores, Inc., for
the construction of a Wal-Mart Supercenter store in Lockport,
Illinois. Weis is a Minnesota corporation that maintains offices
in four states. Weis, as general contractor, engaged Bright to
act as a subcontractor to perform concrete work and underground
utilities work on the project. Bright is an Illinois corporation
with its principle place of business in Plainfield, Illinois.
Around October 20, 2006, Bright and Weis entered into a written
subcontract agreement wherein Bright agreed to perform the
concrete work for $2,930,000. Around November 14, 2006, Weis and
Bright entered into a second written subcontract agreement
wherein Bright agreed to perform the underground utilities work
for $679,567. The record is clear that both subcontract
agreements were properly signed by each party. There are no
allegations of fraud or misrepresentations leading to the
formation of these contracts. From the record, it appears that
each party freely entered into the contracts with full knowledge
of the contractual terms and conditions.
A dispute between the parties arose in which Bright claimed
it was owed $765,701 under both contracts. Weis denies that
Bright is entitled to these monies. On November 18, 2008, Bright
sued. In response, Weis filed a "motion to dismiss and compel
arbitration or, alternatively, to stay proceedings and to compel
arbitration," claiming that the Federal Arbitration Act (FAA) (9
U.S.C. §1 et seq. (2006)) mandated arbitration of this matter.
Before Weis's motion could be heard, Bright filed an amended
2
complaint seeking to foreclose a mechanics lien against Wal-Mart
in the disputed amount. Thereafter, hearings were held on Weis's
motion.
The trial court took the matter under advisement, then on
October 14, 2009, denied Weis's motions. This interlocutory
appeal followed.
ANALYSIS
Our standard of review is de novo. Melena v. Anheuser-
Busch, Inc., 219 Ill. 2d 135, 847 N.E.2d 99 (2006). Concerning
the substance of this appeal, Weis argues that the trial court
erred by failing to compel arbitration. Specifically, Weis notes
that section 2 of the FAA has been interpreted by our supreme
court to compel "judicial enforcement of arbitration agreements
'in any *** contract evidencing a transaction involving
commerce.'" Melena v. Anheuser-Busch, Inc., 219 Ill. 2d at 142,
847 N.E.2d at 103, quoting 9 U.S.C. §2 (1994). Therefore, Weis
concludes, section 2 of the FAA mandates this matter proceed to
arbitration.
Bright disagrees. Initially, Bright claims the FAA is not
applicable to this matter for two reasons. First, Bright argues
the FAA only applies to matters affecting interstate commerce and
since its activity was solely intrastate, the FAA is not
applicable. Alternatively, Bright contends that even if we find
its activity involved interstate commerce and that the clause was
3
indeed an arbitration clause, the trial court's denial of Weis's
motion was still proper. This is so, Bright argues, as the
applicable clause violates the Illinois Building and Construction
Contract Act (815 ILCS 665/1 et seq. (West 2006)).
The FAA states, "A written provision in *** a contract
evidencing a transaction involving commerce to settle by
arbitration a controversy thereafter arising out of such contract
or transaction, or the refusal to perform the whole or any part
thereof, *** shall be valid, irrevocable, and enforceable, save
upon such grounds as exist at law or in equity for the revocation
of any contract." 9 U.S.C. §2 (2006).
In Malena, after noting that it was called upon to apply the
FAA, our supreme court stated that when "construing a federal
statute, we generally look to federal decisions for its
interpretation of the statutory provisions." Melena, 219 Ill. 2d
at 141, 847 N.E.2d at 103. The first step of analysis taken by
the Malena court, after briefly mentioning the FAA's history and
purpose, focused on the language in section 2 of the FAA that
makes it applicable only when an arbitration clause exists "'in
any *** contract evidencing a transaction involving commerce.'"
Malena, 219 Ill. 2d at 142, 847 N.E.2d at 103, quoting 9 U.S.C.
§2 (1994). Likewise, we must first determine whether the
contract at issue involves commerce.
The United States Supreme Court has noted the FAA was
4
enacted pursuant to Congress’s substantive power to regulate
interstate commerce and admiralty (Prima Paint Corp. v. Flood &
Conklin Mfg. Co., 388 U.S. 395, 18 L. Ed. 2d 1270, 87 S. Ct. 1801
(1967)) and that it is preemptive of state laws hostile to
arbitration. Southland Corp. v. Keating, 465 U.S. 1, 79 L. Ed.
2d 1, 1045 S. Ct. 852 (1984). The court has found that the words
"involving commerce" in section 2 of the FAA "signal[ ] an intent
to exercise Congress' commerce power to the full." Allied-Bruce
Terminix Cos. v. Dobson, 513 U.S. 265, 277, 130 L. Ed. 2d 753,
763, 115 S. Ct. 834, 841 (1995).
We find Allied-Bruce to be particularly instructive to this
matter. Allied-Bruce involved a suit from a homeowner claiming
that Allied-Bruce failed to fulfil its contractual obligation to
keep a home free from termite damage. Allied-Bruce Terminix Cos.
v. Dobson, 628 So. 2d 354, 355 (Ala. 1993). Allied-Bruce moved
to stay the lawsuit and compel arbitration pursuant to an
arbitration clause in the contract. Allied-Bruce, 628 So. 2d at
355. Allied-Bruce argued that "because they are out-of-state
entities, and because some of the materials used in fulfilling
their duties imposed by the termite bond were brought into
Alabama from out-of-state, the bond has at least a 'slight nexus'
with interstate commerce" and, as such, section 2 of the FAA in
conjunction with the arbitration clause in the bond mandates that
the matter proceed to arbitration. Allied-Bruce Terminix Cos. v.
5
Dobson, 628 So. 2d 354, 355 (Ala. 1993).
The Alabama Supreme Court disagreed. The court found that
the proper standard to employ for determining whether a contract
evidences a transaction involving commerce was "'not whether, in
carrying out the terms of the contract, the parties did cross
state lines, but whether, at the time they entered into it and
accepted the arbitration clause, they contemplated substantial
interstate activity." (Emphasis omitted.) Allied-Bruce, 628 So.
2d at 355, quoting Metro Industrial Painting Corp. v. Terminal
Construction Co., 287 F.2d 382, 387 (2d Cir. 1961) (Lombard, J.,
specially concurring). The Alabama court found that the parties
contemplated a transaction that was primarily local and not
substantially interstate, and as such, the contract was not one
evincing a transaction involving commerce within the meaning of
section 2 of the FAA. Allied-Bruce, 628 So. 2d at 357.
The United States Supreme Court rejected the "contemplation
of the parties" approach used by the Alabama court, instead
finding that a "commerce in fact" analysis was "more faithful to
the statute." Allied-Bruce Terminix Cos. v. Dobson, 513 U.S.
265, 278, 130 L. Ed. 2d 753, 767, 115 S. Ct. 834, 841 (1995).
The Court noted that it "accept[s] the 'commerce in fact'
interpretation, reading the [FAA's] language as insisting that
the 'transaction' in fact 'involv[e]' interstate commerce, even
if the parties did not contemplate an interstate commerce
6
connection." Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265,
281, 130 L. Ed. 2d 753, 769, 115 S. Ct. 834, 843 (1995). The
Court concluded:
"The parties do not contest that the
transaction in this case, in fact, involved
interstate commerce. In addition to the
multistate nature of Terminix and Allied-
Bruce, the termite-treating and house-
repairing material used by Allied-Bruce in
its (allegedly inadequate) efforts to carry
out the terms of the Plan, came from outside
Alabama.
Consequently, the judgment of the
Supreme Court of Alabama is reversed ***."
Allied-Bruce Terminix Cos. v. Dobson, 513
U.S. 265, 282, 130 L. Ed. 2d 753, 769, 115
S. Ct. 834, 843 (1995).
While Bright contests that the transaction involved
interstate commerce, there is no doubt that this transaction
does, in fact, involve interstate commerce or, at the least, has
a slight nexus to interstate commerce. The record on appeal
includes a document completed by Bright, dated November 14, 2006,
indicating that it purchased $77,228 worth of materials from
County Materials of Marathon, Wisconsin. Bright has supplemented
7
the record with documents that indicate it actually acquired
$82,732.54 worth of materials from County Materials. The parties
dispute whether Bright has properly supplemented the record.
Assuming, arguendo, that Bright has properly supplemented the
record with information indicating that the materials supplied by
County Materials were "generated" from Illinois facilities, that
does not change the fact that a Wisconsin corporation supplied a
significant amount of materials for Bright. Bright does not deny
that County Materials is an out-of-state corporation or that
County Materials was paid a significant sum for materials it
supplied for this job.
Furthermore, also like Allied-Bruce, the multistate nature
of one of the parties to the contract (Weis Builders) cannot be
denied. Weis is a Minnesota corporation with offices in four
states. We find the agreement between Bright and Weis is a
contract evincing a transaction involving commerce as
contemplated by section 2 of the FAA.
Citing Kansas City Structural Steel Co. v. State of
Arkansas, 269 U.S. 148, 70 L. Ed. 204, 46 S. Ct. 59 (1925),
Bright notes the Court found that "delivery of materials from
Missouri to Arkansas for a subcontractor to build a bridge in
Arkansas was not interstate commerce." However, this language
cannot be reconciled with later Supreme Court cases dealing with
the reach of Congress's commerce powers. See Allied-Bruce
8
Terminix Cos. v. Dobson, 513 U.S. 265, 282, 130 L. Ed. 2d 753,
769, 115 S. Ct. 834, 843 (1995). Moreover, the ultimate holding
of the Kansas City Structural Steel case was that a Missouri
corporation could not use the commerce clause to invalidate an
Arkansas statute requiring every out-of-state corporation doing
business in Arkansas to file a certificate with the Secretary of
State identifying a general office and place of business in
Arkansas, as well as an agent authorized to be served within the
state. Kansas City Structural Steel Co. v. State of Arkansas,
269 U.S. 148, 70 L. Ed. 204, 46 S. Ct. 59 (1925).
Kansas City Structural Steel is a pre-New Deal commerce
clause case. It is beyond debate that following the 1937 case of
National Labor Relations Board v. Jones & Laughlin Steel Corp.,
301 U.S. 1, 81 L. Ed. 893, 57 S. Ct. 615 (1937), courts have
rapidly expanded the commerce clause's reach. See United States
v. Darby, 312 U.S. 100, 85 L. Ed. 609, 61 S. Ct. 451 (1941);
United States v. Wrightwood Dairy Co., 315 U.S. 110, 86 L. Ed.
726, 62 S. Ct. 523 (1942); Wickard v. Filburn, 317 U.S. 111, 87
L. Ed. 122, 63 S. Ct. 82 (1942).
This expansion continued during the civil rights movement
with the Court declaring that whether a person could sit at a
local lunch counter so substantially affected interstate commerce
that Congress could regulate the matter under its commerce clause
authority. Katzenbach v. McClung, 379 U.S. 294, 13 L. Ed. 2d
9
290, 85 S. Ct. 377 (1964); see also Heart of Atlanta Motel, Inc.,
v. United States, 379 U.S. 241, 13 L. Ed. 2d 258, 85 S. Ct. 348
(1964).
In Katzenbach, the Court acknowledged that the volume of
food supplied to Ollie's Barbecue ($70,000) from out-of-state
sources "was insignificant when compared with the total
foodstuffs moving in commerce." Katzenbach v. McClung, 379 U.S.
294, 300-01, 13 L. Ed. 2d 290, 296, 85 S. Ct. 377, 382 (1964).
Nevertheless, citing to Wickard v. Filburn, the Court reiterated
that while an individual transaction may be trivial by itself and
seemingly purely local, that "'is not enough to remove him from
the scope of federal legislation where, as here, his
contribution, taken together with that of many others similarly
situated, is far from trivial.'" Katzenbach v. McClung, 379 U.S.
294, 301, 13 L. Ed. 2d 290, 296, 85 S. Ct. 377, 382 (1964),
quoting Wickard v. Filburn, 317 U.S. 111, 127-28, 87 L. Ed. 122,
136, 63 S. Ct. 82, 90 (1942). Undoubtedly, when considering all
those similarly situated to Bright, which uses materials supplied
by out-of-state corporations to help build national retail
stores, the effect on interstate commerce is far from trivial.
Bright claims that even if we find this matter evinces a
transaction involving commerce, denial of Weis's motion was still
proper. Bright comes to this conclusion by reasoning that
section 2 of the FAA allows for consideration of its contract
10
defenses, namely, forum non conveniens and its assertion that the
Illinois Building and Construction Contract Act prohibits
enforcement of the clause. Bright also argues that the clause at
issue is a forum selection clause, not an arbitration clause,
and, therefore, outside the reach of the FAA. We disagree.
Bright correctly notes that section 2 of the FAA allows a
party to raise contract defenses if they are based "upon such
grounds as exist at law or in equity for the revocation of any
contract." 9 U.S.C. §2 (2006). Numerous courts have interpreted
the meaning of this provision in the FAA.
In OPE International LP v. Chet Morrison Contractors, Inc.,
258 F.3d 443 (5th Cir. 2001), the court concluded that a
Louisiana statute was preempted by the FAA because it conditioned
the enforceability of arbitration agreements on selection of a
Louisiana forum, a requirement not applicable to contracts
generally. OPE, 258 F.3d at 447. The contract at issue in OPE
stated:
"*** [I]f any question, dispute or difference
shall arise between CONTRACTOR and
SUBCONTRACTOR, and the parties cannot
mutually agree on a resolution thereof, then
the Parties agree that such question, dispute
or difference shall be finally settled by
arbitration in Houston, Texas, or in such
11
other location as may be mutually agreed, in
accordance with the Construction Industry
Rule of the American Arbitration Association
with a single arbitrator." OPE, 258 F.3d at
445.
The subcontractor filed suit seeking damages and a
declaration that the subcontract's arbitration clause, forum
selection clause and choice-of-law provision violated public
policy and were therefore void. The subcontractor supported this
argument by quoting a Louisiana statute that read:
"'A. The legislature finds that, with
respect to construction contracts, subcontracts,
and purchase orders for public and private
works projects, when one of the parties is
domiciled in Louisiana, and the work to be
done and the equipment and materials to be
supplied involve construction projects in
this state, provisions in such agreements
requiring disputes arising thereunder to be
resolved in a forum outside of this state or
requiring their interpretation to be governed
by the laws of another jurisdiction are
inequitable and against the public policy of
this state.
12
B. The legislature hereby declares null
and void and unenforceable as against public
policy any provision in a contract *** which
either:
(1) Requires a suit or arbitration proceeding
to be brought in a forum or jurisdiction outside
of this state.'" OPE, 258 F.3d at 446, quoting
La. Rev. Stat. Ann. §9:2779.
The OPE court held that the Louisiana "statute directly
conflicts with [section] 2 of the FAA because the Louisiana
statute conditions the enforceability of arbitration agreements
on selection of a Louisiana forum; a requirement not applicable
to contract generally. [Citation.] The FAA therefore preempts
the Louisiana statute ***. Accordingly, we conclude that the
district court properly compelled the parties to submit to
arbitration." OPE, 258 F.3d at 447-48. This holding is
consistent with those of other federal appellate circuits. See
KKW Enterprises, Inc. v. Gloria Jean's Gourmet Coffees
Franchising Corp., 184 F.3d 42 (1st Cir. 1999) (Rhode Island
statute that rendered unenforceable any provision in a franchise
agreement that restricted jurisdiction or venue to a forum
outside Rhode Island was not applicable to all contracts
generally and therefore the statute was preempted by the FAA);
Bradley v. Harris Research, Inc., 275 F.3d 884 (9th Cir. 2001)
13
(FAA preempts California statute that declared void any provision
in a franchise agreement restricting venue to a forum outside
California).
The similarities between OPE and this matter are striking.
The agreement between Bright and Weis states that, unless the
parties agree otherwise:
"Any dispute arising out of or related to
this subcontract, *** shall at contractor's
sole discretion *** (c) be settled by
arbitration venued in Hennepin County,
Minnesota in accordance with the Construction
Industry Arbitration Rules of the American
Arbitration Association, and judgment
rendered upon the award may be entered in any
court having jurisdiction thereof."
Like the Louisiana legislature, our legislature has declared that
any "provision contained in or executed in connection with a
building and construction contract to be performed in Illinois
that makes the contract subject to the laws of another state or
that requires any litigation, arbitration, or dispute resolution
to take place in another state is against public policy. Such a
provision is void and unenforceable." 815 ILCS 665/10 (West
2008). This declaration by the legislature is not applicable to
all contracts generally, but only to contracts involving building
14
and construction. Therefore, we find the FAA preempts the
Illinois Building and Construction Contract Act (815 ILCS 665/1
et seq. (West 2006)). This finding is consistent with the recent
case from our supreme court that holds the antiwaiver provisions
of the Nursing Home Care Act (210 ILCS 45/3--606, 3--607 (West
2006)) are preempted by the FAA. Carter v. SSC Odin Operating
Co., No. 106511 (Il April 15, 2010) (holding the language in
section 3--606 of the Nursing Home Care Act (210 ILCS 45/3--606
(West 2006)) that states any "waiver by a resident *** of the
right to commence an action under [this Act] *** shall be null
and void, and without legal force or effect," while a statement
of Illinois public policy, was not a defense applicable to all
contracts generally; therefore, the antiwaiver provisions of the
Nursing Home Care Act were preempted by the FAA and could not be
used to avoid arbitration).
Finally, Bright claims that the doctrine of forum non
conveniens is applicable to all contracts generally and,
therefore, section 2 of the FAA does not prohibit Bright from
asserting that, under the doctrine, this matter should be
adjudicated in Illinois. We disagree. Section 2 of the FAA
allows for pleading contract defenses "as exist at law or in
equity for the revocation of any contract." (Emphasis added.) 9
U.S.C. §2 (2006). Forum non conveniens is an equitable doctrine
that presupposes the existence of more than one forum with
15
jurisdiction over the parties and the subject matter. Griffith
v. Mitsubishi Aircraft International, Inc., 136 Ill. 2d 101, 554
N.E.2d 209 (1990). Forum non conveniens is not a contract
defense, but merely a procedural mechanism employed to transfer a
case to a forum in which adjudication "can be had more
conveniently." Olsson v. General Motors Corp., 318 Ill. App. 3d
87, 90, 742 N.E.2d 1251, 1254 (2001). Therefore, we hold forum
non conveniens is an improper basis to deny defendant's motion to
stay the proceedings and compel arbitration.
In the mechanics lien action against Wal-Mart, Bright seeks
the same funds it seeks in its contract dispute with Weiss.
Common sense requires that action be stayed pending arbitration.
We reverse the order of the trial court and remand with
directions to enter a stay of the proceedings below and compel
arbitration.
CONCLUSION
For the foregoing reasons, the judgment of the circuit court
of Will County is reversed and this cause is remanded with
direction.
Reversed and remanded with directions.
LYTTON, J., concurs
JUSTICE McDADE, dissenting:
The majority has found that "the agreement between Bright and Weis is a contract
16
evincing a transaction involving commerce as contemplated by section 2 of the FAA" (slip order
at 8) and that "the FAA preempts the Illinois Building and Construction Act" (slip order at 14).
The majority has also held that "forum non conveniens is an improper basis to deny defendant’s
motion to stay the proceedings and compel arbitration" (slip order at 16). Although I agree that
the FAA preempts the Illinois Building and Construction Act, I do not agree with the finding that
this agreement evinces a transaction involving interstate commerce. Because I would find that the
FAA does not apply, I would not reach Bright’s argument that under the doctrine of forum non
conveniens, this matter should be adjudicated in Illinois. Slip order at 15.
Nothing beyond "the multistate nature of one of the parties" (slip order at 8) demonstrates
that the transaction "in fact" involved interstate commerce. See slip order at 6. Further, nothing
in Allied-Bruce suggests that the Supreme Court would find the interstate nature of the parties
sufficient to hold that a transaction "in fact" involves interstate commerce. The Allied-Bruce
court wrote that "[i]n addition to the multi state nature of Terminix and Allied-Bruce, the
termite-treating and house-repairing material used by Allied-Bruce in its (allegedly inadequate)
efforts to carry out the terms of the Plan, came from outside Alabama." (Emphasis added.)
Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265, 282, 130 L. Ed. 2d 753, 769,
115 S. Ct. 834, 843 (1995). The majority does not find that the materials "in fact" moved
interstate, only that the corporation selling product intrastate is an out-of-state corporation. Slip
order at 8.
The majority, therefore, relies only on the interstate nature of the parties for its finding
-17-
that "the agreement *** is a contract evincing a transaction involving commerce ***." Slip order
at 8. However, the federal court has, since Allied-Bruce, found that the interstate nature of the
parties is not sufficient to find that a contract involves interstate commerce. In Cecala v. Moore,
982 F. Supp. 609, 611-612 (N.D. Ill., 1997), the district court held that the FAA did not apply
because the contract in question did not evince a transaction involving interstate commerce.
There, the seller of real estate was located outside Illinois, but there was no evidence that
transactions incident to the sale took place outside Illinois. See also Becker v. Amoco Pipeline
Co., No. 89 C 1732 (N.D. Ill. Sept. 25, 1989) ("the language of section 2 means that the
transaction which is the subject of the contract containing the arbitration provision must itself
involve interstate commerce. It is not enough that one party's business in general involves
interstate activity").
I would also note that Katzenbach is distinguishable because, although "insignificant when
compared with total foodstuffs moving in commerce" (slip order at 10) some of the food supplied
to Ollie’s Barbecue was "from out-of-state" (slip order at 10). None of the materials supplied to
Bright were from out-of-state.
I would hold that the contract does not involve interstate commerce and, therefore, that
the FAA does not apply. Accordingly, I dissent.
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