The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
ANTHONY COLLINS and JAMES
POWELL, individually and as Class
Representatives,
Plaintiffs,
v. Case No. 24-cv-01120-SPM
CHRISTOPHER AUFFENBERG,
Defendant.
MEMORANDUM AND ORDER
McGLYNN, District Judge:
Before the Court is Defendant Christopher Auffenberg’s Motion to Compel
Arbitration and Stay Case. (Doc. 34). Having been fully informed of the issues
presented, the Motion is GRANTED.
RELEVANT FACTUAL AND PROCEDURAL BACKGROUND
Plaintiffs Anthony Collins and James Powell filed their Complaint on behalf of
themselves and as Class Representatives on April 4, 2024, in this Court. (Doc. 1).
Collins and Powell brought three claims related to Auffenberg’s alleged failure to pay
Plaintiffs and the members of the purported class the commissions they were owed
as employees at automobile dealerships managed, directed, and operated by
Auffenberg. (See id.). Auffenberg initially filed a Motion to Dismiss and/or Quash
Service for Insufficiency of Service of Process Under Federal Rule of Civil Procedure
12(b)(5) on June 10, 2024. (Doc. 13). Auffenberg appeared before this Court on
September 4, 2024, and withdrew his Motion on the same day. (Doc. 20). Auffenberg
filed his Answer to Plaintiffs’ Complaint on September 13, 2024. (Doc. 21). Auffenberg
filed a Jury Demand on September 24, 2024. (Docs. 26, 28). The parties appeared for
a Telephonic Scheduling Conference before this Court on November 7, 2024. (Doc.
31). The same day, this Court accepted the Joint Report and Proposed Scheduling
and Discovery Order proposed by the parties. (Doc. 32). On November 22, 2024,
Auffenberg filed a Motion for Leave to File his First Amended Answer, the instant
Motion to Compel Arbitration and Stay Case, and a Memorandum in Support of his
Motion to Compel Arbitration and Stay Case. (Docs. 33, 34, 35). Collins and Powell
filed their Response in Opposition to Auffenberg’s Motion to Compel Arbitration and
Stay Case on December 9, 2024. (Doc. 37). Auffenberg filed his Reply to Collins’ and
Powell’s Response on December 16, 2024. (Doc. 38).
APPLICABLE LAW AND LEGAL STANDARDS
The Federal Arbitration Act “governs the enforcement, validity, and
interpretation of arbitration clauses in commercial contracts in both state and federal
courts.” Jain v. de Mere, 51 F.3d 686, 688 (7th Cir. 1995). Section 2 of the FAA
provides that “an agreement in writing to submit to arbitration an existing
controversy . . . 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. This
provision “embodies both a liberal federal policy favoring arbitration and the
fundamental principle that arbitration is a matter of contract.” Gore v. Alltel
Commc’ns, LLC, 666 F.3d 1027, 1032 (7th Cir. 2012) (internal quotations omitted).
The Supreme Court has held that “arbitration is a matter of contract and a party
cannot be required to submit to arbitration any dispute which he has not agreed so
to submit.” AT&T Techs. v. Commc’s Workers of Am., 475 U.S. 643, 648 (1986). It is
important to note that a court, in deciding whether the parties have agreed to
arbitrate, is not to rule on the potential merits of the underlying claims. Id.
Under the FAA, “arbitration should be compelled if three elements are present:
(1) an enforceable written agreement to arbitrate; (2) a dispute within the scope of
the arbitration agreement; and (3) a refusal to arbitrate.” Scheurer v. Fromm Family
Foods LLC, 863 F.3d 748, 752 (7th Cir. 2017). As the party seeking arbitration,
Defendant bears the burden of proving that Plaintiffs “agreed to arbitrate the claim[s]
asserted here.” See Zurich Am. Ins. Co. v. Watts Indus., Inc., 466 F.3d 577, 580 (7th
Cir. 2006). To decide this question, courts apply an evidentiary standard similar to
the one that applies at summary judgment, meaning that “if the party seeking
arbitration offers sufficient evidence to allow a factfinder to conclude that the parties
agreed to arbitrate, the party opposing arbitration must identify facts showing a
genuine dispute as to the existence of the agreement.” Tinder v. Pinkerton Sec., 305
F.3d 728, 735 (7th Cir. 2002). Once an enforceable arbitration contract is shown to
exist, “questions as to the scope of arbitrable issues should be resolved in favor of
arbitration.” Scheurer, 863 F.3d at 752 (citing Moses H. Cone Mem’l Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 24–25 (1983)).
The FAA allows one party to an arbitration agreement to ask the court to put
the litigation on hold and force the other party to arbitrate the disputes. 9 U.S.C. § 4.
Indeed, Sections 3 and 4 of the FAA describe procedures through which federal courts
implement arbitration agreements, stating that courts “shall” stay proceedings and
order arbitration upon confirming the existence of an enforceable arbitration
agreement that covers the dispute at hand. Id. at §§ 3, 4. As such, a party moving for
arbitration also implicitly seeks a stay of judicial proceedings.
ANALYSIS
To begin, Collins and Powell clearly oppose arbitration in the instant action,
having filed their case in federal court and opposing Auffenberg’s Motion to Compel.
Further, no Party has disputed that, if the agreement is found enforceable, that
Collins’ and Powell’s claims for violations of the Missouri Sales Commission Act,
Illinois Wage Payment and Collections Act, and tortious interference with contract
are not within the arbitration agreement. Thus, key to this Court’s analysis of
Auffenberg’s Motion to Compel Arbitration and Stay Case is determining whether
there is a valid agreement to arbitrate that exists between Collins and Auffenberg
and Powell and Auffenberg, respectively. Before determining whether there is a valid
and enforceable agreement, however, this Court must first address Auffenberg’s
ability to enforce the arbitration provision and whether he has waived that right.
Because both Collins and Powell signed identical forms, they will be discussed
together. (See Doc. 34, Exs. A, B).
I. Waiver of Right to Arbitrate
An agreement to arbitrate, like other contractual rights, is waivable. Al-
Nahhas v. 777 Partners LLC, No. 23-2723, 2025 WL 546908, at *3 (7th Cir. Feb. 19,
2025) (citing Brickstructures, Inc. v. Coaster Dynamix, Inc., 952 F.3d 887, 891 (7th
Cir. 2020)). In the arbitration context, waiver encompasses “both intentional
relinquishments and implicit abandonments of the right to arbitrate,” and can be
express or implied through action. Id. at *5. “When we evaluate whether waiver can
be inferred, we consider whether ‘a party acted inconsistently with the right to
arbitrate.’” Id. (quoting Kawasaki Heavy Indus., Ltd. v. Bombardier Recreational
Prods., Inc., 660 F.3d 988, 994 (7th Cir. 2011)). This analysis requires the court to
evaluate the diligence or lack thereof of the party seeking arbitration, or, put another
way, to ask whether “that party [did] all it could reasonably have been expected to do
to make the earliest feasible determination of whether to proceed judicially or by
arbitration?” Id. (quoting Cabinetree of Wis., Inc. v. Kraftmaid Cabinetry, Inc., 50 F.3d
388, 391 (7th Cir. 1995)). A court must analyze such factors as “whether the allegedly
defaulting party participated in litigation, substantially delayed its request for
arbitration, or participated in discovery.” Id. (quoting Kawasaki, 660 F.3d at 994).
Plaintiffs argue that Auffenberg has waived his right to enforce the arbitration
agreement by “meaningfully participating in the litigation” prior to seeking to compel
arbitration. (Doc. 37, p. 3). In support of their argument, Plaintiffs point to
Auffenberg’s failure to pursue arbitration from the outset of the litigation and the
affirmative actions that Auffenberg has taken in federal court following Plaintiffs
having filed this action on April 17, 2024, but prior to moving to compel arbitration:
Auffenberg’s entry of his appearance before this Court and filing a Motion to Dismiss
and/or Quash Service for Insufficiency of Service of Process on June 10, 2024 (Docs.
12, 13); appearing before the Court for a hearing on the Motion to Dismiss and
subsequent withdrawal of that Motion on September 4, 2024 (Doc. 20); filing his
Answer on September 13, 2024 (Doc. 21); filing a Demand for a Trial by Jury on
September 24, 2024 (Doc. 27); appearing before the Court for a Rule 16 Scheduling
Conference on November 7, 2024 (Doc. 31); consenting to a Joint Report and Proposed
Scheduling and Discovery Order on November 7, 2024 (Doc. 32); and serving
discovery on Plaintiffs on November 25, 2024 (Doc. 37, p. 4). Auffenberg argues, in
response, that he has participated in the case thus far only to the extent he has been
required to do so by the Court and, subsequently, to assert his right to arbitrate. (Doc.
38, p. 2). Auffenberg states that his first objection to participating in the litigation
was made during the discovery process while gathering information to make his Rule
26 Initial Disclosures. (Id.). He further states that the employment applications
containing the arbitration provisions in question were not part of his personal
records, but were rather business records of Southern Illinois Autos, Inc. (Id.; see Doc.
34, Ex. 1).
In Al-Nahhas, the Seventh Circuit held that the defendants waived their right
to compel arbitration through their conduct during litigation. 2025 WL 546908, at *6.
The court reasoned that fourteen months had elapsed between the time the complaint
was filed until the defendants moved to compel arbitration, and that the Defendants
had engaged in substantial, inexcusable delay. Id. Furthermore, the plaintiff had
attached the arbitration provision in question to his complaint, and, therefore, could
not argue that they were unaware of their ability to compel arbitration. Id.
Defendants had produced thousands of documents in the discovery process, assured
the court that they would comply with the court’s discovery deadlines, sought
multiple extensions of those deadlines, and twice provided status updates as
requested by the court. Id. Defendants argued that their counsel’s poor performance
resulted in the delayed filing of their motion to compel arbitration, but ultimately,
the court stated that a party was bound by action of their counsel nonetheless and
held that Defendants had waived their arbitration rights. Id.
An analysis of Kashkeesh v. Microsoft Corp., 679 F. Supp. 3d 731, 737 (N.D. Ill.
2023), though decided prior to Al-Nahhas, is also instructive in the determination of
whether Auffenberg has waived his right to arbitrate. In Kashkeesh, the court found
that while defendant had demonstrated a lack of diligence through a lengthy, twenty-
month delay in moving to compel arbitration, there was no evidence that the
defendant knew about the possibility of arbitration earlier and had taken steps to
avoid litigation on the merits. Id. at 739. Defendant had initially removed the matter
to federal court in June 2021, which, according to the court, “manifest[ed] an
intention to resolve the dispute in federal court.” Id. at 738 (citing Cabinetree of Wis.,
50 F.3d at 390). It had also, in at least a limited manner, participated in the litigation
by filing a motion to dismiss and participating in some discovery related to that
motion. Id. at 738. It was not until nineteen months into the litigation that defendant
discovered the relevant arbitration agreements, at which point it promptly filed a
motion to compel arbitration. Id. The court found that the defendant, a sophisticated
corporation, could have done more to discover the arbitration agreements,
particularly given its knowledge that plaintiffs’ employment was governed by
contractual provisions and its failure to properly communicate with plaintiffs and
third parties at the outset of the case. Id. The court, however, found that defendant
was, at most, negligent in failing to identify whether plaintiffs’ claims could be
arbitrated earlier, and the court reasoned that negligence and oversight is not enough
to find waiver. Id. at 739 n.6. Further, the court noted that its participation of
responding to plaintiff’s motion to remand, moving to dismiss for lack of personal
jurisdiction, and responding to discovery requests, did not seek a determination of
merits by the court. Id. at 738. Thus, the court found that defendant had not waived
its right to arbitrate. Id. at 739.
It is clear from the facts and procedural history of this case that Auffenberg
has not intentionally or implicitly waived his right to arbitrate in this matter. Unlike
the Al-Nahhas and Kashkeesh cases, both of which featured defendants who waited
well over one year to compel arbitration, Auffenberg filed this Motion to Compel
Arbitration on November 22, 2024, six months from the date on which he was served.
(See Doc. 11). Further, the evidence supports that Auffenberg was not personally in
possession of the employment application records for Collins and Powell, but rather
these documents were kept in the course of the business he manages, directs, and
operates, and thus the delay was neither substantial nor inexcusable. (See Doc. 34,
Ex. 1). Upon discovering these records, Auffenberg acted promptly to compel
arbitration. In addition, Auffenberg’s participation in the litigation thus far has not
sought a determination of the case on its merits. Auffenberg initially sought to
challenge Plaintiffs’ service of process and appeared before this Court to argue that
Motion; and upon withdrawal of that Motion, he acted promptly to file an Answer to
comply with the Federal Rules of Civil Procedure and avoid a default. While
Auffenbterg did request a jury trial, participate in a scheduling conference with this
Court, and participated in the outset of the discovery process, the Rule 26 disclosures
he made to Collins and Powell (which included an objection to participating in
discovery due to the arbitration agreements) pale in comparison to the thousands of
documents produced by the Al-Nahhas defendants. Based on this record, this Court
does not find that Auffenberg waived his right to arbitrate.
II. Enforceability under the FAA
Having established that Auffenberg has not waived his right to compel
arbitration, the Court must consider whether there were, in fact, agreements between
Collins and Auffenberg and Powell and Auffenberg, respectively, to arbitrate.
A. Application of Illinois Law
In determining whether a valid arbitration agreement exists between parties,
federal courts apply the state law principles of contract formation. Gupta v. Morgan
Stanley Smith Barney, LLC, 934 F. 3d 705, 711 (7th Cir. 2019). An enforceable
contract under Illinois law requires an offer, acceptance, consideration, and mutual
assent. Nat’l Prod. Workers Union Ins. Trust v. Cigna Corp., 665 F.3d 897, 901 (7th
Cir. 2011).
Auffenberg argues that Collins and Powell, respectively, signed employment
applications in which they made certain promises (including to arbitrate certain
disputes) if they were hired and became employees of Southern Illinois Autos, Inc.
(Doc. 35, pp. 2–3). In support, Auffenberg attached to his Motion two Exhibits which
he alleges are the signed applications for employment submitted by Collins and
Powell which contains the provisions which would bind them to arbitrate their
disputes in this matter. (See Doc. 34, Exs. A, B).
In order for the employment applications, which contain the arbitration
provision in question, to be enforceable, there must be sufficient consideration
between the parties. Vassilkovska v. Woodfield Nissan, Inc., 830 N.E.2d 619, 624
(2005). Courts have found sufficient consideration where an employer promises to
consider an applicant for employment in exchange for the applicant’s return promise
to abide by company rules upon employment, including the arbitration of certain
claims. See Chatman v. Pizza Hut, Inc., 2013 WL 2285804, at *4 (N.D. Ill. May 23,
2013) (interpreting Illinois law); Johnson v. Orkin, LLC, 2013 WL 828506, at *12
(N.D. Ill. Mar. 6, 2013) (interpreting Illinois law). Additionally, continued
employment is sufficient consideration for the enforcement of an arbitration
agreement. Id. (citing Melena v. Anheuser–Busch, Inc., 847 N.E.2d 99 (Ill. 2006)).
Further, a mutual promise to arbitrate claims is sufficient consideration to support
an arbitration agreement. Id. (citing Matterhorn, Inc. v. NCR Corp., 763 F.2d 866,
869 (7th Cir. 1985); Gen. Motors Acceptance Corp. v. Johnson, 822 N.E.2d 30 (Ill. App.
Ct. 2004)).
Here, the employment applications signed by Collins and Powell, respectively,
contain promises to abide by rules and regulations of the Company in exchange for
consideration of employment. (See Doc. 34, Exs. A, B). Each agreement also contains
a provision by which the applicant agrees that claims, disputes, or controversies
concerning the employment relationship between the parties shall be submitted to
and determined exclusively by binding arbitration under the FAA. (See id.). This
provision further states that by agreeing to the binding arbitration provision, both
the applicant and the Company give up their right to a trial by jury. (See id.). Thus,
under Illinois law, there exists a binding agreement to arbitrate certain claims
between Collins and Auffenberg and between Powell and Auffenberg. By signing their
applications for employment with Defendant, Collins and Powell both agreed to
arbitrate certain claims.
B. Applicability of the Illinois Workplace Transparency Act
Plaintiffs next argue that the arbitration provision in question violates the
Illinois Workplace Transparency Act, 820 ILL. COMP. STAT. 96/1-25 (“IWTA”), and is
therefore void. (Doc. 37, p. 7). In the alternative, Plaintiffs argue that even if the
offending language in the arbitration provision was severed from the rest of the
agreement (which, Plaintiffs argue, is impossible due to Defendant’s choice to draft
such a broad arbitration provision), there is no language remaining that would
compel the Parties to arbitrate their dispute. (Id., p. 12).
The IWTA aims to “ensure that all parties to a contract for the performance of
services understand and agree to the mutual promises and consideration therein, and
to protect the interest of this State in ensuring all workplaces are free of unlawful
discrimination and harassment.” 820 ILL. COMP. STAT. 96/1-5. To achieve this, the
IWTA, in relevant part, places a limit on agreements that require employees to
arbitrate claims related to an unlawful employment practice (including
discrimination, retaliation, and harassment) to the extent that they deny an
employee a substantive or procedural right or remedy. Id. at 96/1-25.
The Court does not find that an analysis of whether, or to what extent, the
IWTA applies to this arbitration agreement is necessary in the instant matter. The
arbitration provision in question here states as follows:
I further agree that except for claims for injunctive relief relating to
trade secrets, claims brought under the National Labor Relations Act,
which are brought before the National Labor Relations Board, and
claims for medical and disability benefits under the states Worker’s
Compensation act, I agree that any claim dispute or controversy, which
would otherwise require or allow resort to any court or other
governmental dispute resolution forum (including, but not limited to
and all claims of discrimination and harassment), between myself and
the Company (or its owners, directors, and officers, employees, agents,
and parties affiliated with its employee benefit and health plans) arising
from related to, or having any relationship or connection whatsoever
with my seeking employment with, employment by, or other association
with, the Company, whether based on tort contract, statutory, or
otherwise shall be submitted to and determined exclusively by binding
arbitration under the Federal Arbitration Act, in conformity with the
procedures of the Uniform Arbitration Act; provided, however, that: In
addition to a requirements imposed by law, any arbitrator herein shall
be a retired Missouri circuit court judge and shall be subject to
disqualification on the same grounds as would apply to a judge of such
court.
(Doc. 34, Exs. A, B (emphasis added)). Further, the agreement states that: “Should
any portion, word, clause, phrase, sentence or paragraph of this Agreement be
declared void or unenforceable, such portion shall be considered independent and
severable from the remainder, the validity of which shall remain unaffected.” (See id.
(emphasis added)). Plaintiffs would have this Court strike the entire operative
language requiring arbitration altogether. (See Doc. 37, pp. 12–13). Even assuming
that the IWTA operates here to render the language purporting to limit arbitrability
of “all claims of discrimination and harassment” as Plaintiff contends is a question
this Court need not address here. The severability clause as stated above, to which
Plaintiffs agreed, allows this Court to sever the parenthetical information requiring
claims of discrimination and harassment to be arbitrated, leaving the rest of the
arbitration provision intact and enforceable.
Accordingly, this Court, having applied the proper principles of Illinois law
which apply to this Court sitting in diversity, Collins and Auffenberg and Powell and
Auffenberg, respectively, have entered into binding and enforceable contractual
agreements to arbitrate. Further, applying the three-part test under the FAA, this
Court concludes that there exists an enforceable arbitration provision in the instant
action and, accordingly, must stay the action pending arbitration.
CONCLUSION
For the reasons set forth above, Defendant Auffenberg’s Motion to Compel
Arbitration (Doc. 34) is GRANTED. All claims by Plaintiffs Collins and Powell
against Auffenberg are hereby STAYED pending arbitration. As such, Defendant
Auffenberg’s Motion for Relief from Scheduling Order (Doc. 42) is hereby DENIED
as moot.
IT IS SO ORDERED.
DATED: March 7, 2025
s/ Stephen P. McGlynn
STEPHEN P. McGLYNN
U.S. District Judge