# Appendix — Snyder v. Smith > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_2352%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1984 - **Citation:** 469 U.S. 1037 ## Text DS = SY | Me Supreme Cour. Us. } FILED: | = . ALEXANDER L. STEVAS In THR | CLERK Supreme Court of the Gnited States Octoser TERM, 1984 ELEANOR SNYDER, EXECUTRIX OF THE ESTATE OF LEROY LILJEDAHL, Petitioner, BRUTON SMITH, Respondent. APPENDIX TO THE PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT Donatp L, Moore * Ricuarp D. Garnes Steven C. ScuppEr HOLMSTROM & GREEN, P.C. 800 North Church Street P.O. Box 589 Rockford, Illinois 61105 (815) 962-7071 Attorneys for Petitioner Of Counsel: Micuet A. Coccta Francois D. Morrissey * Counsel of Record Midwest Law Printing Co., Chicago 60611, (312) 321-0220 Wwe XN 7 INDEX TO APPENDIX DEMAND FOR ARBITRATION (July 14, 1980) . PROCEEDINGS BEFORE THE UNITED STATES DISTRICT COURT FOR THE NORTH- ERN DISTRICT OF ILLINOIS. A. B. a Petition to Compel Arbitration (August 4, a er en a eee re Excerpt from Viking Investment Associates’ Partnership Agreement .................. Magistrate P. Michael Mahoney’s Report and Recommendation (Docketed 1/29/81) ....... Judge Stanley J. Roszkowski’s Order adopt- ing Report and Recommendation (Docketed SE than wevissschktobeses since. pi nekindire Judge Stanley J. Roszkowski’s Order compel- ling arbitration in Rockford, Illinois (Docketed RE Re RRR are hone aren, ere ny e e n Award of Arbitrators (Dated 10/82) ....... Judge Stanley J. Roszkowski’s Order confirm- ing arbitration award (Docketed 5/4/83) ... Judge Stanely J. Roszkowski’s Order—Judg- ment in favor of Plaintiff (Docketed 5/20/83) . Notice of Appeal (of Bruton Smith) (Filed EE 6056654 KAN den nie dneskdenesenenvin Page 1 15 ii PROCEEDINGS BEFORE THE SEVENTH CIRCUIT COURT OF APPEALS. A. Order and Accompanying Opinion Reversing the Decision of the District Court for the Northern District of Illinois (Docketed 6/7/84) [736 F.2d 409 (7th Cir. 1984)] ............ B. Order Denying Petition for Rehearing En Bane (Docketed 7/3/84) ..........cc ee ee ee ORDER OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS (Cause No. H-80-2018) (Docketed 6/19/81) . LETTER DATED 7/28/80 FROM JOHN L. CARTER ON BEHALF OF BRUTON SMITH TO THE AMERICAN ARBITRATION ASSOCI- ATION (Refusal to Arbitrate) ................ COMPLAINT FILED BY BRUTON SMITH IN THE STATE COURT FOR THE DISTRICT OF HARRIS COUNTY, TEXAS (Filed 7/28/80) ... STATUTES AND RULES INVOLVED ...... 30 51 52 59 In Tue Supreme Court of the United States Ocroser Term, 1984 ELEANOR SNYDER, EXECUTRIX OF THE ESTATE OF LEROY LILJEDAHL, Petitioner, v. BRUTON SMITH, Respondent. ee APPENDIX TO THE PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT App. 1 AMERICAN ARBITRATION ASSOCIATION COMMERCIAL ARBITRATION RULES DEMAND FOR ARBITRATION Date: July 14, 1980 (Name) Mr. BRuUTON SMITH (Address) 5401 East Independence Blvd. (City and State) Charlotte, NC (Zip Code) 28218 (Telephone) 704 536-5600 Named claimant, a party to an arbitration agree- ment contained in a written contract, dated September, 1971, providing for arbitration, hereby demands arbitration thereunder. (attach arbitration clause) Artice VII of the Viking Associates Partnership Agreement is attached NATURE OF DispuTE: Leroy Liljedahl, a partner in Vik- ing Investment Association died on December 9, 1976. On aT 31, 1977 Bruton Smith, a surviving partner, notified the decedent’s executor of his election, under Ar- ticle V of the Partnership Agreement, to purchase the decedent’s entire interest in the Partnership. Bruton Smith then breached the Partnership Agreement by fail- ing to ~— with the provisions in Article V with respect to the procedures and time limits for determin- ing the fair market value of the real estate owned by the partnership and by failing to comply with the a, in Article V with res to the determination of the book value of the decedent’s entire partnership interest. Bruton Smith also failed to dispute the adjusted book value of ys ee interest in accordance with the procedures 0 cle V. App. 2 CLAIM OR RELIEF SOUGHT: (amount, if any) A determination of the adjusted book value of Mr. Leroy Liljedahl’s “Entire Partnership Interest” in accordance with the Viking Associates Partnership ment and an Award directing Mr. Smith to purchase the decedent’s entire partnership interest in accordance with the part- nership agreement. HEARING LOCALE REQUESTED: Rockford, Illinois You are hereby notified that copies of our arbitration agreement and of this demand are being filed with the American Arbitration Association at its Chicago, Illinois Regional Office, with the request that it commence the administration of the arbitration. Under Section 7 of the Commercial Arbitration Rules, you may file an answer- p> Be mor a within seven days after notice from the inistrator. Signed John D. Whitcher Title Attorney for Executrix of the Estate of Leroy Liljedahl, deceased Name of Claimant Mrs. Eleanor Snyder Address (to be used in connection with this case) 1909 Boscobel Court City and State Rockford, IL Zip Code 61107 Telephone 815 399-1783 Name of Attorney John D. Whitcher Address 800 North Church City and State Rockford, IL Zip Code 61103 Telephone 815 962-7071 To institute proceedings, please send three copies of this Demand with the administrative fee, as provi in Sec- tion 47 of the Rules, to the AAA. Send original Demand to Respondent. App. 3 UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS WESTERN DIVISION In the matter of the Arbitration between ELEANOR SNYDER, Executrix of the Estate of Leroy Liljedahl, Petitioner, Civil Action No. [80 C 0103) v. BRUTON SMITH, Respondent. PETITION TO COMPEL ARBITRATION To The Honorable Judge Of The United States District — For The Northern District Of Illinois, Western vision: Now Comes ELEANOR SNYDER, Executor of the Estate of Leroy E. Liljedahl, Petitioner by her attorneys, Welsh, Holmstrom, Gaines & Lindstedt, Ltd., and for her Peti- tion to Compel Arbitration states as follows: 1. This Petition to Arbitration is made pursuant to Section 4 of the United States Arbitration Act 9 U.S.C. 1 et a . ¢ 1 ' diverse citizenship P the parties, 28 U.S.C. 1332, it: interest and costs. 3. In September 1971, Petitioner and Respondent entered into an agreement in writing. The agreement is App. 4 a partnership ment for Viking Investment Asso- ciates. A copy of the rship agreement is attached and incorporated as Exhibit A. 4. The t contains the following clause relating at te ARTICLE VII Arbitration Any controversy or claim arising out of or relati to this agreement, or to the interpretation, breac or enforcement thereof, shall be submitted to three arbitrators and settled by arbitration in the City of Houston, Texas, in accordance with the rules then obtaining of the American Arbitration Association; provided, however, and notwithstanding other provisions of such rules, if the matter submitted to arbitration shall involve a dispute as to the adjusted book value of a deceased, disabled, incompetent, or retixing Partner’s Entire Partnership Interest, such arbitration shall be held before three arbitrators, one of whom shall be a certified public accountant and the other two of whom shall be licensed real estate se nge maintaining offices and doing business in arris County, Texas. The arbitrators shall be Any a made by any majority of the Arbitrators shall be final, binding, and conclusive on all parties hereto for all purposes, and a judgment may be en- —, thereon in any court having jurisdiction 5. Leroy E. Liljedahl, a partner in Viking Investment Associates died on December 9, 1976. On = 31, 1977 Bruton Smith, a surviving partner, notified t’s executor of his election, under Article V of the Partner- ship t, to the decedent’s entire interest in the ip. Smith then breached the Part- nership Agreement by failing to comply with the provi- sions in Article V with respect to the procedures time limits for determining the fair market value of the real Hal ae . He ‘ a Ht > S “a oa controversy having arisen between the Petitioner and the 8. The making of the agreement, including the agree- ment to submit the dispute in controversy to Arbitration is not in issue. WHEREFORE, Petitioner respectfully moves the Court for an order that Arbitration between the parties and for such other and further relief as the deem just and proper together with costs o application. ‘si John D. Whitcher Wetsx, Hotmstrom, Gaines & Linpstept, LTD. 800 North Church St. P.O. Box 589 Rockford, IL 61105 815/962-7071 App. 6 ARTICLE VII Arbitration Any controversy or claim arising out of or relating to this agreement, or to the interpretation, breach or enforce- ment thereof, shall be submitted to three arbitrators and settled by arbitration in the City of Houston, Texas, in accordance with the rules then obtaining of the American Arbitration Association; provided, however, and notwith- standing any other provisions of such rules, if the mat- ter submitted to arbitration shall involve a dispute as to the adjusted book value of a deceased, disabled, incom- petent, or retiring Partner’s Entire Partnership Interest, such arbitration shall be held before three arbitrators, one of whom shall be a certified public accountant and the other two of whom shall be licensed real estate appraisers maintaining offices and doing business in Harris County, Texas. The arbitrators shall be selected by the American Arbitration Association. Any award made by any majority of the Arbitrators shall be final, binding, and conclusive on all parties hereto for all purposes, and a judgment may 0 — thereon in any court having jurisdiction thereof. App. 7 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS WESTERN DIVISION Name of Presiding Judge: Honorable P. Michael Mahoney, Magistrate Cause No. 80 C 0103 Date Jan. 29, 1981 Title of Cause: Eleanor Snyder v. Bruton Smith REPORT & RECOMMENDATION It is the report and recommendation of the Magistrate that the defendant’s motion to dismiss be denied. DRaFt. Each party is given ten (10) days within receipt of this recommendation to file any written objections with the office of the Clerk, Room 252, Federal Bldg., Rockford, Illinois addressed to Judge Stanley J. Roszkowski. Mahoney, M. App. 8 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLIN IS WESTERN DIVISION ELEANOR SNYDER, Executrix of the Estate of Leroy Liljedahl, Plaintiff, Civil Action No. 80 C 0103 Vv. BRUTON S.muiTH, Defendant. REPORT AND RECOMMENDATION Plaintiff filed this petition to compel arbitration on August 4, 1980. Jurisdiction of this court is based upon the United States Arbitration Act, 9 USC §1, et seq. and diversity of citizenship in that the petitioner is a citizen of the State of Illinois and the defendant is a citizen of North Carolina and the matter in controversy exceeds the sum of $10,000. The plaintiff alleges that in September, 1971 the dece- dent and defendant entered into a partnership agreement for Viking Investment Associates. The agreement con- tained an arbitration clause. Plaintiff alleges that on December 9, 1976 Leroy Liljedahl, a partner in Viking Investment Associates, died. On January 31, 1977, defendant, Bruton Smith, a surviving partner notified the decedent’s executrix of his election to purchase the decedent’s entire interest in the partner- ship. Plaintiff alleges that the defendant then breached the partnership agreement by failing to comply with the rovisions for arbitration in Article V of the agreement or determining the fair market value of the real estate owned by the partnership. App. 9 Plaintiff asks this court to enter an order that arbitra- tion between the parties proceed and for other relief as may be just and proper. On September 3, 1980 the de- fendant filed a motion to dismiss for lack of jurisdiction over the person and insufficient service of process. This motion was fully briefed on October 27, 1980 and is before the Magistrate for report and recommendation. In his motion to dismiss, filed pursuant to Rule 12(b) of the Federal Rules of Civil Procedure, the defendant states by way of affidavit that he was served with proc- ess by personal service upon him in Charlotte, North Carolina by a United States Marshal. It is defendant’s contention that inasmuch as Charlotte, North Carolina is outside the territorial limits of the State of Illinois per- sonal service is improper under Rule 4 of the Federal Rules of Civil Procedure and, therefore, this cause should be dismissed for improper service of process. Secondly, the defendant states that he is not subject to the jurisdiction of this court because he is not a citizen of the State of Illinois, was not served with process within this state and does not maintain any contact with the State of Illinois. Further, the defendant contends that the contract upon which plaintiff bases her claim was made in the State of Texas, to be performed in the State of Texas and that the State of Illinois has no contact with the parties other than that being the residence of the plaintiff. Opinion There are two parts to defendant’s motion to dismiss: (1) insufficient service of process; and (2) lack of in per- sonam jurisdiction. Defendant argues that the personal service of process was improper because there is no Fed- eral statute which would permit service of process on him outside the State of Illinois. Rule 4(dX7) of the Federal Rules of Civil Procedure provides for service of process “in the manner prescribed by any statute of the United States or in the manner prescribed by the law of the state App. 10 in which a district court is held for the service of sum- mons or other like process upon any such defendant in an action brought in the court’s general jurisdiction of that state.” If the defendant was properly served under the Illinois Revised Statute then this service would be valid in Federal Court. Ill. Rev. Stat. ch. 110 § 17(2) provides: “Service of process upon any person who is subject to the jurisdiction of the courts of this State, as pro- vided in this Section, may be made by personally ser- ving the summons upon the defendant outside this State, as provided in this Act, with the same force and effect as though summons had been personally served within this State.” Ill. Rev. Stat. ch. 110 § 16(1) provides that: “Personal service of summons may be made upon any party outside the State. If upon a citizen or resident of this State or upon a person who has submitted to the jurisdiction of the courts of this State, it shall have the force and effect of personal service of sum- mons within this State; .. .” The above cited statutes clearly provide for personal ser- vice of process on an out of state defendant if he has sub- mitted to the jurisdiction of the courts of this state. The only question, therefore, that remains is whether the de- fendant, Bruton Smith, has submitted to the jurisdiction of the courts of the State of Illinois, therefore, making personal service proper. It is the plaintiff's contention that the defendant, Bruton Smith, is subject to the personal jurisdiction of this court pursuant to the long-arm statute of the State of Illinois. Ill. Rev. Stat. ch. 110 § 17 provides: “(1) Any person, whether or not a citizen or resi- dent of this State, who in person or through an agent does any of the acts hereinafter enumerated, thereby submits such person, and, if an individual, his per- sonal representative, to the jurisdiction of the courts of this State as to any cause of action arising from the doing of any of such acts: App. 11 (a) The transaction of any business within this State; (b) The commission of a tortious act within this State; (c) The ownership, use, or possession of any real estate situated in this State; (d) Contracting to insure any person, property or risk located within this State at the time of contracting; (e) With respect to actions of dissolution of mar- riage and legal separation, the maintenance in this State of a matrimonial domicile. (2) Service or process upon any person who is sub- ject to the jurisdiction of the courts of this State, as provided in this Section, may be made by personal- ly serving the summons upon the defendant outside this State, as provided in this Act, with the same force and effect as though summons had been per- sonally served within this State. (3) Only causes of action arising from acts enumer- ated herein may be asserted against a defendant in an action in which jurisdiction over him is based upon this Section. (4) Nothing herein contained limits or affects the right to serve any process in any other manner now or hereafter provided by law.” Plaintiff contends that the defendant had transacted business within the State of "linois and has tommitted a tortious act within the State of Illinois out of which this cause of action arose. Personal jurisdiction over a non-resident defendant does not depend solely upon the physical presence of the de- fendant within the state. It is sufficient that the act or transaction itself has a substantial connection with the forum state. App. 12 The legislative intent of the Illinois long-arm statute is to exert jurisdiction over non-residents to the extent per- mitted under the due process clause of the United States Constitution. Nelson v. Miller, 11 Tll.2d. 378; 143 N.E.2d. 673 (1957). Sufficient minimum contacts must exist in the forum state so that jurisdiction over a non-resident de- fendant is reasonable and just according to the traditional concepts of fair play and substantial justice. International Shoe Co. v. Washington, 326 U.S. 310 (1945). The relevant question is whether the defendant has engaged in some act or conduct by which he may be said to have invoked the benefits and protection of the law of the forum state. Gray v. American Radiator and Standard Sanitary Corp., 22 Ill.2d. 482, 440; 176 N.E.2d. 761, 765 (1961). Illinois courts have exercised jurisdiction over non-resident defendants even though the contact with the state involved only a single business transaction. Ziegler v. Hodges, 224 N.E.2d. 12 (2nd Dist. 1967). The plaintiff has asserted two bases for jurisdiction over Mr. Smith under the Illinois long-arm statute. The first being the transaction of business within the state, and secondly the commission of a tortious act within the state. In support of the first proposition the plaintiff has sup- plied the court with brief affidavits and exhibits. The first is the affidavit of David W. Knapp, President of the American National Bank & Trust Comneny in Rockford, Illinois. Mr. Knapp in his affidavit states that Viking Investments Associates was a partnership which was formed in 1971 and at the time the partnership was formed all of the members of the partnership were IIli- nois residents. Further, that the partnership agreement was prepared by a Rockford attorney. The affidavit goes on to point out that the mailing address of the partner- ship was a Rockford address and that the American Na- tional Bank & Trust Company of Rockford made several loans to the partnership and that the a rgae 3 had a checking account in Rockford, Illinois. Further, according to the affidavit of Mr. Knapp, at the time that Mr. Smith App. 13 exercised the option to purchase the decedent’s share of the partnership Smith was a resident of the State of Illi- nois and was conducting business for the partnership from his office in Rockford, Illinois. Knapp states that on Oc- tober 26, 1979 he himself discusse d settlement of this dispute with Bruton Smith, in Smith’s office in Rockford, and at that time Mr. Knapp was acting as an intermediary between the plaintiff and the defendant. The affidavit of John Holmstrom is also offered. Mr. Holmstrom is an attorney in Rockford, Illinois and he is the attorney representing the plaintiff in this cause. Ac- cording to Mr. Holmstrom the mailing address of the part- nership called “Viking Investment Associates” is in Rock- ford, Illinois and as attorney for the executrix he has mailed several letters to that address in Rockford. He fur- ther states that he has had numerous telephone con- ferences with Bruton Smith in Rockford concerning the dispute which is the subject of this lawsuit. Most impor- tantly to the Magistrate, Mr. Holmstrom had received one letter from Bruton Smith, the defendant, dated January 31, 1977, signed by Mr. Smith, with the Rockford return address on the letter. This letter expressed Smith’s desire a the partnership vw aloe 4 of the decedent. (Ex- it 2C) There is also the affidavit of the executrix which restates many of the previously mentioned facts. In ad- dition, attached to that document is “Exhibit 3A” pon is a letter from Bruton Smith to Mrs. Liljedahl, — a return address in Rockford, that says the following: “Per Article V of the Viking Investment Associates Partnership Agreement, it is the desire of the — nership to purchase the interest of Leroy E. Lilj dahl.” After reviewing this document it seems entirely incredi- ble to the Magistrate that anyone would seriously con- tend that the defendant, Bruton Smith, was not trans- acting business within the State of Illinois within the meaning of Section 17. In regard to this transaction and App. 14 the controversy which is the subject of this lawsuit the defendant’s sole defense seems to be that he is now a resident of North Carolina, that the partnership agree- ment was executed in the State of Texas, that it was to be performed in the State of Texas and, therefore, it should be up to the Texas courts to determine what law should be applied and that is where the arbitration agree- ment should be interpreted. It is the opinion of the Magistrate that none of the de- fendant’s contentions are determinative of whether or not the defendant transacted business or committed a tort within the State of Illinois. Further, the Magistrate declines to comment as to the applicability of Texas law with regards to the interpretation of the other provisions of the contract. The only questiun before the court is the in personam jurisdiction over the defendant and it is the opinion of the Magistrate that the numerous jurisdictional facts related in plaintiff's affidavits are sufficient to assert jurisdiction over this defendant without offending tradi- tional notions of fair play and substantial justice. It is, therefore, the opinion of the Magistrate that the defendant, Bruton Smith, has transacted business within Illinois sufficiently for this court to maintain in personam jurisdiction over him and that, therefore, the defendant’s motion to dismiss should be denied. JANUARY 29, 1981. /s/ P. Michael Mahoney United States Magistrate App. 15 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS WESTERN DIVISION Name of Presiding Judge: Honorable STANLEY J. ROSZKOWSKI Cause No. 80 C 0108 Date March 3, 1981 Title of Cause: ELEANOR SNYDER, etc., vs. BRUTON SMITH ORDER This court, after carefully reviewing the January 29, 1981 report and recommendation of the Mashtuehe, hereby adopts that recommendation. Accordingly, it is ordered that defendant’s, Bruton Smith, motion to dismiss be and the same is hereby denied. Roszkowski, J. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS WESTERN DIVISION Name of Presiding Judge: Honorable STANLEY J. ROSZKOWSKI Cause No. 80 C 0103 Date September 1, 1981 Title of Cause: ELEANOR SNYDER, etc., vs. BRUTON SMITH ORDER Respondent Smith is hereby ordered to arbitrate the mat- ters in dispute in Rockford, Illinois. (DRAFT). Roszkowski, J. App. 16 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS WESTERN DIVISION In the Matter of the Arbitration between ELEANOR SNYDER, Executrix of the Estate of Leroy E. Liljedahl, Petitioner, No. 80 C 0108 v. BRUTON SMITH, Respondent. ORDER Before the court is petitioner, Eleanor Snyder’s motion to compel the respondent, Bruten Smith, to arbitrate. For the reasons herein stated, that motion is granted. Petitioner is the Executrix of the estate of Leroy Lil- jedahl. The respondent, Smith, is a partner in the partnership, Viking Investment Associates, that was formed between ty ee Smith, Leroy Liljedahl, and Robert E. Hitt in September, 1971. On December 9, 1976, ae died. Pursuant to Article V, Section 5.01, of er Se respondent Smith elected to purchase the ’s in- terest or share of the partnership. Thereafter, a dispute arose between petitioner and respondent with respect to the adjusted book value of the decedent’s interest." 1 A related case is now pending in the U. S. District Court for the Southern District of Texas App. 17 That dispute forms the underlying basis for the present motion. Petitioner has sought to arbitrate the dispute in Rockford, Illinois. Respondent maintains that the arbitra- tion must proceed in Houston, Texas. The partnership provides in relevant part that: 1) the Uniform Partnership Act of Texas will govern the rights and obligations of the which are not otherwise expressly provided for (Article I, Section 1.01, agp nd Fag Fs emennsy Bs podbeodbemnner ghee t, management of prop- erty, and land acquired by the i t to the Area of Interest as defined in Section 02 (Article 2. pry tek he Re ee claim arising out of agreement shall be submitted to arbitration “provided, haweeer, . . . if the matter sub- mitted to arbitration shall involve a dispute as to the ad- justed book value of a deceased . Partner’s Entire Interest, such arbitration shall be held before three arbitrators, one of whom shall be a certified accountant and the other. two of whom shall be licensed estate appraisers main offices doing ness in Harris County, Texas. arbitrators shall be ode VID? the American Arbitration Association.” (Ar- ticle ee se are as follows: first, that peti- tioner’s de for and initiation of arbitration in Rock- ford, Illinois was not in accordance with the Agreement; second, that the American Arbitration Asso- ciation failed to comply with the Agreement in its selection of the types of arbitrators to be appointed; and lastly, that, since the Agreement provides that Texas law is to govern and since Texas law provides that ar- bitration provisions executed in 1971 that do not contain signatures of counsel for the parties are void, the arbitra- tion provisions in the instant case cannot be enforced. Title 9 U.S.C. § 4 provides for redress to the federal courts. That section states in pertinent part that, OS ee to arbitrate under a written agree- z ef | gi ra i eke EB i i! i +t as. =| 5 ‘ a fo :. Hf ir | Section 2, Title 9 U.S.C., limits the ion of the Federal Act to maritime transactions transactions in- volving interstate commerce. “Commerce”, as employed in § 2, is defined in § 1 as meaning “commerce the several states.”’ Interstate commerce is a necessary basi for application of the United States Arbitration Act, and a contract or agreement not upon interstate commerce must be governed 1 oe Ra Sine get Se 106 (N.D F.Supp. oe, ot ds oy 3 _— = has yay 8 Hy - fren othe ne under 9 U.S.C. § 1 et i+ —- 7 pany v. Glenwall Co., F Supp. 86, 89 (S.D. N . 1970) affirmed 442 F.2d 1350 (2d Cir. 1971). Second, it is clear that there is no dispute as to the of the arbitration agreement and the failure to comply therewith. Consequently, it is within this court’s power to order “that hearings and ings” to arbitrate under the in- stant t place in this district and that they in accordance with the arbitration agreement. and doing business in Harris ty, Texas and that the arbitrators shall be selected by the American Arbitrators Dated 9-1-81 App. 20 AMERICAN ARBITRATION ASSOCIATION COMMERCIAL ARBITRATION TRIBUNAL In the Matter of the Arbitration between ELEANOR SNYDER, EXECUTRIX OF THE ESTATE OF LEROY LILJEDAHL, DECEASED AND BRUTON SMITH Case No. 51 180 0440 80 E AWARD OF ARBITRATORS WE, THE UNDERSIGNED ARBITRATORS, having veen designated in accordance with the Arbitration Agreement entered into by the above named Parties, and dated September of 1971 and having been duly sworn and hav- ing duly heard the proofs and allegations of the Parties, AWARD as follows: I. BRUTON SMITH shall pay to ELEANOR SNYDER, EXECUTRIX OF THE ESTATE OF LEROY LILJEDHAL, DECEASED the sum of FIVE HUNDRED FORTY NINE THOUSAND SEVEN HUNDRED FIFTY FIVE DOLLARS ($549,755.00), by certified check on or before November 10, 1982. II. A. The administrative fee of the American Arbitra- tion Association shall be borne by BRUTON SMITH and paid as directed by the Association. App. 21 B. Compensation of the Arbitrators shall be borne equally by the parties and paid as directed by the Association. III. This Award is in full settlement of all claims sub- mitted to this Arbitration. [Signatures of Arbitrators omitted in printing.] UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS WESTERN DIVISION Name of Presiding Judge: Honorable STANLEY J. ROSZKOWSKI Cause No. 80 C 0103 Date May 4, 1983 Title of Cause: ELEANOR SNYDER, etc. vs. BRUTON SMITH ORDER Petitioner’s application for confirmation of an arbitra- tion award is granted. The arbitration award of October 15, 1982 is confirmed. Respondent’s motion to vacate or modify the award is denied. (DRAFT) Roszkowski, J.— App. 22 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS WESTERN DIVISION ELEANOR SNYDER, EXECUTRIX OF THE ESTATE OF LEROY E. LILJEDAHL, No. 80 C 103 vs. Petitioner, BRUTON SMITH, Respondent. ORDER Before the court is petitioner’s application for confirma- tion of an arbitration award and Respondent’s Motion to Vacate or modify the award. For the reasons stated here- in, petitioner’s application is granted and respondent’s mo- tion is denied. Jurisdiction is invoked pursuant to the Federal Arbitra- tion Act, 9 U.S.C. §1 et seq., and diversity of citizen- ship. The amount in controversy exceeds $10,000. Petitioner Eleanor Snyder is Executrix of the Estate of Leroy E. Liljedahl, who was a partner of Viking In- vestment Associates. Respondent Bruton Smith is a sur- viving partner of the partnership. The partnership agree- ment provided an option for surv‘.*ng partners to pur- chase the partnership interest of a aeceased partner. The agreement also provided for arbitration in the event the parties cannot agree on the value of the partnership interest. On December 9, 1976 Leroy Liljedahl died, and on January 31, 1977 respondent elected to purchase the dece- dent’s entire partnership interest. The Executrix peti- tioned this court to compel arbitration, alleging that App. 23 respondent refused to submit to arbitration. On Septem- ber 1, 1981 this court ordered the parties “to arbitrate the matters in dispute . . . in accordance with the provi- sions of the Arbitration Agreement.”’! On October 15, 1982 an arbitration panel of the American Arbitration Association awarded petitioner the sum of $549,755 in full settlement of all claims submitted to arbitration, to be paid by November 10, 1982. On No- vember 19, 1982 Petitioner applied to this court for con- firmation of the arbitration award. Respondent moved to vacate or modify the award. He argues that the arbitrators exceeded their authority under the partnership agreement by awarding Petitioner $549,755. Respondent contends the award was contrary to the parties’ submissions at the arbitration hearing since petitioner set the adjusted book value of decedent’s part- nership interest at $321,145. The Federal Arbitration Act provides that district courts may confirm, vacate, or modify an arbitration award. 9 U.S.C. S9-11. The court may vacate an award “where the arbitrators exceeded their powers, or so im- perfectly executed them that a mutual, final, and definite award upon the subject matter was not made.” 9 U.S.C. § 10(d). The court may modify an award “where the ar- bitrators have awarded upon a matter not submitted to them.” 9 U.S.C. § 11(b). Arbitrators are, however, given discretion in making awards, and the scope of judicial inquiry into the propriety of an award is narrow. The Supreme Court in United 1 This court also previously decided two ancillary issues which the respondent “hs raised in his memorandum. Respondent — the arbitration award be set aside on the basis of lack of in sonam jurisdiction over the defendant and improper venue. court decided on March 3, 1981 that respondent had transacted business and had contacts in Illinois sufficient for the court to maintain personam F eigen nae The court further decided on Sunener | 1, 1981 that arbitration was tu take place in Illinois. App. 24 States Steel v. Enterprise Wheel, 363 U.S. 593, 80 S.Ct. 1358 (1960) set out the role of arbitrators when inter- preting parties’ agreements. The arbitrator is to bring his informed judgment to bear in order to reach a fair solution of a problem. This is especially true when it comes to formulating remedies. There the need is for flexibility in meeting a wide variety of situations. The draftsmen may never have thought of what specific remedy should be awarded to meet a particular contingency. 363 U.S. at 597, 80 S.Ct. at 1861. The court further stated that interpretation of the parties’ agreements is the role of the arbitrator, not the court. It is the arbitrator’s construction which was bar- gained for; and so far as the arbitrator’s decision con- cerns construction of the contract, the courts have no business overruling him because their interpreta- tion of the contracts is different from his. 363 U.S. at 599, 80 S.Ct. at 1362. The proper inquiry for the court is whether the arbitra- tion award draws its essence from the parties’ - ments. United States Steel v. Enterprise Wheel, 363 U.S. at 597, 80 S. Ct. at 1361. The Seventh Circuit has considered the United States Steel standard. In Amoco Oil Co. v. Oil, Chemical, and Atomic Workers, 548 F.2d 1288 (7th Cir., 1977), cert. denied, 431 U.S. 905, 97 S.Ct. 1697 (1977), the court held that an arbitration award draws its essence from the par- ties’ agreements “so long as the interpretation can in some rational manner be derived from the agreement ‘viewed in the light of its language, its context, and any other indicia of the parties’ intention’.” 548 F.2d at 1294. And in National Railroad Passengers Corp. v. Chesa- peake and Ohio Railway, 551 F.2d 136 (7th Cir., 1977) the court held that “arbitrators do not exceed their powers by misconstruing a contract.” If “irrationality of an award is a ground for reversing, its application will ar or ok for truly extraordinary circumstances.” 551 2d at 142. App. 25 This court’s inquiry is whether the award draws its essence from the partnership agreement and whether there was evidence submitted at arbitration to support the award. The partnership agreement provides that all controver- sies arising out of the ment and all disputes per- to the purchase of decedent’s partnership interest be submitted to arbitration. (Art. VII; Art. V, § 5.01). It also provides for the payment of interest. (Art. V, § 5.01 (f)). It contemplates that arbitrators may depart from the amount designated by the accountant as the adjusted book value of the deceased partner’s interest, and increase the purchase price. (Art. V, § 5.01(h)). The agreement allows the seller to accelerate payment if all or part of the prin- cipal or interest remains unpaid. (Art. a § 5.01(f). At the hearing the arbitrators heard evidence that Respondent elected to purchase the decedent’s entire part- nership agreement, and that Respondent breached the partnership agreement in several respects. And on the issue of damages, the arbitrators heard the testimony of Rolland Emerson, a Certified Public Accountant, who testified that the entire amount of damages borne by the estate due to Respondent’s breach totalled $535,000. (Ar- bitration Hearing Transcript, September 28, 1982 at 143). This amount represented the adjusted book value of dece- dent’s partnership interest if paid according to the schedule set out in the agreement, plus interest and in- come lost due to Respondent’s non payment. Petitioner further alleged damages to the estate in appraisal and ar- bitration costs, taxes, and attorney’s fees. In assessing the propriety of the arbitrator’s award, it is clear that the arbitrators possessed the authority to resolve the parties’ entire dispute. Article VII of the Agreement provided that “[aIny controversy or claim aris- ing out of or relating to this agreement, or to the inter- pretation, breach or enforcement thereof, shall be submit- ted to three arbitrators.” Such broad language has been held to “cover contract-generated or contract-related dis- putes between the parties however labeled.” Acevedo App. 26 Maldonado v. PPG Industries, Inc., 514 F.2d 614 (ist Cir. 1975). Cf. Kurt Orban Co. v. Angel Metal Systems, 573 F.2d 739, 740 (2d Cir. 1978) (“Any doubts about the scope of the submission agreement should be resolved in favor of coverage.”) Consequently, the arbitrators were em- — to decide all aspects of the parties’ contractual ispute. Employing the Seventh Circuit test of Amoco Oil Co. v. Oil, Chemical and Atomic Workers, su the arbitra- tion award is “in some rational manner derived from the agreement.” 548 F.2d at 1294. The arbitrators were authorized to consider all the disputes of the parties and to establish a purchase price including but not limited to the accountant’s adjusted book value of the decedent’s partnership interest. The agreement called for interest and an option of accelerating all payments when a payment is overdue. It is within the arbitrator’s discretion to use their judgment in formulating remedies and to view the parties’ agreement in light of the circumstances of the case. Therefore it was within the arbitrator’s discretion to look beyond the adjusted book value to the totality of damage suffered by petitioner in making its award. The totality of the loss, set by the arbitrators at $549,755, was rationally supported by the record. Mr. Emerson’s testi- mony, alone, established a loss of $535,000, excluding costs, taxes and legal fees. After accounting for these ad- ditional factors, it cannot be said that the $549,755 award was _ Consequently, the award will not be over- turned. Respondent also argues the arbitration award should be vacated because it is in “manifest disregard”’ of applicable law. Respondent argues that the partnership agreement is silent on the payment of interest for past due amounts. The agreement provides that when it is silent as to a term, Texas law governs the term. Texas law provides that interest be paid at 6%. Tex.Rev.Civ.Stat.Ann. § 5069- 1.03. The argument continues that the arbitrators disregarded Texas law in awarding an amount which ex- ceeds $321,145 plus @% interest. App. 27 The “manifest disregard’’ of law test has been derived from dicta in Wiiko v. Swain, 346 U.S. 427, 74 S. Ct. 182 (1953). The Seventh Circuit er on the standard in National Railroad Pass ae v. Chesapeake and Ohio Railway, 551 F.2d 136 (7th Cir. 1977). We share the reservations recently expressed by the Second Circuit as to whether the Wilko dictum was actually intended to add “manifest disregard” of the law to the statutory grounds for vacating an award in 9 U.S.C. §10 . . . How courts are to distinguish in the Supreme Court’s phrase between ‘erroneous interpretation’ of a statute . .. and ‘manifest disregard’ of it, we do not know; one man’s ‘inter- pretation’ may be another’s ‘disregard’. Moreover, since arbitrators have no obligation to state the ra- tionale underlying their award, there may be no basis whatsoever for a court to determine whether they have manifestly disregarded the law or simply misinterpreted it. 551 F.2d at 143 n.9 (Citations omitted). Notwithstanding the questionable viability of the stand- ard, the arbitrator’s award does not evidence a manifest disregard of Texas law. The partnership agreement pro- vides that interest is to be paid at the prevailing prime rate. Art. V, §5.01(f). The arbitrators were entitled to interpret this provision and rely on the prime rate, as well as all other provisions of the agreement in settling the parties’ dispute. This court therefore finds that the arbitrator’s award was proper. The arbitration award of October 15, 1982 is confirmed. Respondent’s motion to vacate or modify the award is denied. ENTER: /s/ Stanley J. Roszkowski Judge United States District Court Dated May 4, !983 App. 28 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS WESTERN DIVISION Name of Presiding Judge: Honorable STANLEY J. ROSZKOWSKI Cause No. 80 C 01038 Date May 20, 1983 Title of Cause: ELEANOR SNYDER, etc. vs. BRUTON SMITH JUDGMENT * * * Judgment is entered in this cause in favor of the Peti- tioner, ELEANOR SNYDER, as Executrix of the estate of Leroy E. Liljedahl against Respondent, BRUTON SMITH, the Respondent to pay immediately the total sum of $576,041.59 to the Petitioner in exchange for Leroy E. Liljedahl’s Entire Partnership Interest. upon payment of $576,041.59 together with costs to be taxed by the clerk and interest from the date of entry of the judgment to the date of payment the Petitioner shall deliver to the Respondent the appropriate duly executed instruments assi and transferring good and marketable title to Leroy E. Liljedahl’s Entire Partnership Interest. Roszkowski, J.— App. 29 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS WESTERN DIVISION ELEANOR SNYDER EXECUTRIX of the Estate of Leroy E. Liljedahl, Petitioner-Appellee, No. 80-C-00103 vs. BRUTON SMITH, Respondent-Appellant. NOTICE OF APPEAL (Docketed June 21, 1983) Notice is hereby given that Bruton Smith, Respondent above named, hereby appeals to the United States Court of Appeals for the Seventh Circuit from the Judgment (directing Respondent to pay FIvE HUNDRED SEVENTY- Six THOUSAND ForTy-ONE AND 59/100THS DOLLARS ($576,041.59) to Petitioner in exchange for Leroy E. Lil- jedahl’s entire partnership interest) entered in this action on the 20th day of May, 1983. Counsel responsible for briefs and oral argument will be designated at a later date. /s/ Edward J. Fahy Fahy & Cheney, Ltd. Suite 202 303 North Main Street Of Counsel: Rockford, Illinois 61101 John L. Carter Telephone: (815) 962-5534 Vinson & Elkins Local Attorney for 3007 First City Tower Respondent-Appellant Houston, Texas 77002 Telephone: (713) 652-2124 App. 30 Opinion by Judge Flaum Judge Bauer dissenting in part JUDGMENT—ORAL ARGUMENT UNITED STATES COURT OF APPEALS For the Seventh Circuit Chicago, Illinois 60604 June 7, 1984. Before Hon. WILLIAM J. BAUER, Circuit Judge Hon. JOEL M. FLaum, Circuit Judge Hon. LUTHER M. SwyGeErt, Senior Circuit Judge ELEANOR SNYDER, Executrix of the Estate of Leroy Liljedahl, Plaintiff-Appellee, No. 83-2151 vs. BRUTON SMITH, Defendant-Appellant. Appeal from the United States District Court for the | Northern District of Illinois, Western Division. | No. 80 C 00108—Judge Stanley Revekowski. This cause was heard on the record from the United States District Court for the Northern District of Illinois, Western Division, and was argued by counsel. On consideration whereof, Ir Is ORDERED AND Ap. JUDGED by this Court that the judgment of the said Dis- trict Court in this cause from be, and the same is hereby REVERSED with ions, with costs, in accord- ance with the opinion of this Court filed this date. ee App. 31 (736 F.2d 409 (1984)) IN THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT ELEANOR SNYDER, EXECUTRIX OF THE EsTaTE OF LEROY LILJEDAHL, Plaintiff-Appellee, No. 83-2151 v. BRUTON SMITH, Defendant-A ppellant. Appeal from the United States District Court for the Northern District of Illinois, Western Division. No. 80 C 00108—Stanley J. Roszkowski, /udge. ARGUED JANUARY 18, 1984—DECIDED JUNE 7, 1984 Before BAUER and FLAuUM, Circuit Judges, and SwyGERT, Senior Circuit Judge. FLauM, Circuit Judge. This appeal from the district court’s order confirming an arbitration award challe that order on a number of grounds. The district court ordered the parties to arbitration in Rockford, Illinois. In that order, the court held that it had personal juris- diction over appellant Bruton Smith. The court further held that the arbitration clause was contained in a “‘con- tract evidencing a transaction involving commerce”’ and thus the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-14 (1982), was applicable to the dispute. Finally, the court held that it could compel arbitration to take place in the pe t we senden the court’s holding that it poe compel arbitration in the Northern District of Illinois. I Appellee Eleanor Snyder is the executrix of the estate of Leroy Liljedahl. 5 Sees Case, Sater with a third indivi named Robert Hitt, were in Viking Investment Associates (Viking). The Viking is limited to the ownership of certain property ocated in Harris County, Texas, and to any pur- chased by the partnership within one mile of that prop- erty. The partnership agreement was executed in September 1971. At that time, all three partners were [Illinois residents. The partnership mailing address was in Rockford, Illinois. For a period of time, Smith conducted the partnership’s business from an office in Rockford.? The partnership borrowed mo from and maintained a checking account with a bok in Rockford. The partnership agreement pee one the death of a partner does not terminate the hee ey the surviving partners with the t on terest of the deceased partner. The 0 purchase father provides that if the surviving partners or partner exer- cisé the option to purchase, the parties are to attempt ob canes dh b pundaks alin ke oie OG eae : BE con 0 machines of tit Cetin ond eon ened Wh process by a federal marshal in North Carolina. 2 The office, however, was Smith's, not the partnership's. Magis- trate’s Report and Recommendation at 7. App. 33 on a price, the price shall be determined by arbitration. The partnership agreement states in pertinent part: Any controversy or claim arising out wd or to this agreement, or to the in or enforcement thereof, shall be ined te thane arbitrators and settled by arbitration in the City of Houston, Texas, . . . provided, however, . . . if the matter submitted to Y esdeaaiien shall involve a whom shall be a certified public accountant and the other two of whom shall be licensed real estate ap- Ffarris Coun maintaining offices and doing business in , Texas. . award made by any of the Arbitrators be final, binding, and conclusive on all parties hereto for all purposes, and a judgment may be enforced thereon in any court having jurisdiction thereof. Viking Partnership Agreement, Article VII. Liljedahl died on December 9, 1976. On January 31, 1977, Smith notified by letter a byte dress in Rockford, Illinois. At some time after January 1977, Smith became a resident of North Carolina. The parties were unable to agree on a purchase price. Smith returned to Tiincis severel times to negotiate the price. On July 15, 1980, Snyder served Smith with ten demand for arbitration. On On July 28, Smith notified American Arbitration Association that he refused to ticipate in the arbitration. On that date, Smith also ep he ay dy Pep. to lish a purchase price for the partnership interest and * The other partner, Hitt, elected not to exercise his option to purchase. App. 34 alleging a cause of action for breach of contract. Snyder removed the case to federal district court in Texas. On August 4, 1980, Snyder filed a petition to compel arbi- tration in the district court for the Northern District of Illinois under section 4 of the FAA, 9 U.S.C. § 4 (1982). Smith moved to dismiss the Illinois action for improper service of process and lack of personal jurisdiction. The matter was referred to a magistrate, who recommended that the court deny the motion to dismiss. On March 3, 1981, the court denied the motion. Smith subsequently submitted to the court a memorandum arguing that ar- bitration under the agreement could not take place in Illinois. The district court in Texas, pursuant to agreement of the parties, entered an order staying its proceedings pend- ing resolution of the Illinois action. On September 1, 1981, the district court in Illinois ordered the parties to arbi- pe a in Rockford, Illinois. Smith did not appeal that order. On October 15, 1982, the arbitration panel awarded Snyder the sum of $549,755.00 plus administrative fees. Snyder applied to the district court in Illinois for an order confirming the arbitration award; Smith moved to vacate or modify the award. The court confirmed the arbitration award and entered judgment against Smith. Smith appealed. On appeal, Smith raises four issues. First, Smith argues that the district court lacked personal jurisdiction over him. He contends that his casual and sporadic activities in Illinois are insufficient to meet the “transaction of business test” of the Illinois long-arm statute and that the cause of action did not “arise from” any transaction of business of his in Illinois. Second, he argues that the FAA is not applicable because the partnership agreement was not a “contract evidencing a transaction involving commerce” as required by 9 U.S.C. § 2 (1982). Smith maintains that the agreement itself must evidence in- terstate commerce, that “involving commerce” is a much narrower test than “affecting commerce,” and that any App. 35 casual and sporadic interstate activities in which the part- nership engaged are not sufficient to meet the statutory standard for application of the FAA. Third, Smith argues that the district court lacked the power to compel arbi- tration in the Northern District of Illinois because the ar- bitration agreement provided that arbitration was to take place in Houston, Texas; Section 4 of the FAA provides that the court shall order the parties to arbitrate “in ac- cordance with the terms of the agreement.” Finally, Smith argues that the order of confirmation and judgment violates article III of the Constitution. Snyder argues that the district court correctly compelled arbitration and confirmed the award. First, Snyder con- tends that the district court’s exercise of personal juris- diction over Smith satisfies both the requirements of due process and the standards of the Illinois long-arm statute. She argues that the “arising from” requirement is broadly construed, and as such, this cause of action arises from Smith’s transaction of business in Illinois. Second, she argues that the FAA is applicable because the “involv- ing commerce” requirement must be construed broadly and that the facts support a finding that interstate commerce is involved. Third, Snyder asserts that the district court could compel arbitration in the Northern District of IIli- nois because the only statutory requirement is that the district court have subject matter jurisdiction over the controversy, which it had here. According to Snyder, any valid objection Smith could have would be as to venue, and Smith has waived any venue objection through failure to comply with rule 12(g) & (h) of the Federal Rules of Civil Procedure. Finally, Snyder argues that Smith did not raise his constitutional objections below and that in * A ae the district court’s order did not violate arti- cle III. II We first must determine whether we have jurisdiction to examine the merits of the issues raised. At oral argu- ment, counsel for Snyder requested this court to dismiss App. 36 the appeal on the basis of the decision in University Life Insurance Co. of America v. Unimarc Ltd., 699 F.2d 846 (7th Cir. 1983), which held that an order compelling arbi- tration is final and appealable under section 1291 even though the district court retains jurisdiction solely for the purposes of resolving further disputes over arbitrability and enforcing any arbitration award. Jd. at 849. Smith did not appeal from the order compelling arbitration. Snyder argues that the time for appeal from that order has expired, see Fed. R. App. P. 4(a), and thus this court lacks jurisdiction to review any issues decided in that order. See Northcross v. Board of Education, 611 F.2d 624, 635 (6th Cir. 1979), cert. denied, 447 U.S. 911 (1980). In this case, the district court compelled arbitration, in a proceeding where the only judicial remedy sought was an order to arbitrate, and it retained jurisdiction to enforce any arbitration award. Thus, it is clear that the order com- pelling arbitration was final and appealable when entered according to this court’s decision in University Life In- surance. That case, however, was decided in January 1983; the order to compel arbitration in this case was issued in September 1981. We conclude, for the reasons below, that we will not apply the decision in University Life Insurance retroactively. Whether to apply a decision retroactively depends on a number of factors: the prior history of the rule in ques- tion, that is, whether the new rule overrules past prece- dent or decides an issue of first impression; whether retroactivity will further or retard the rule’s operation; and the inequity imposed by retroactive application. Chevron Oil Co. v. Huson, 404 U.S. 97, 106-07 (1971); cf Salem v. Stumes, 104 S. Ct. 1338 (1984). Prior to Univer- sity Life Insurance, this court had not squarely held that such an order was final and appealable. Indeed, this court had stressed a strong policy against encouraging such piecemeal appeals. See, e.g., Whyte v. THinc Consulting Group International, 659 F.2d 817, 818 n.2 (7th Cir. 1981). When the district court ordered arbitration, in Septem- ber 1981, responsible counsel would have believed that App. 37 the order was interlocutory. The area of appealability of arbitration orders is one of ‘medieval if not Byzantine pecularities,”” New England Power Co. v. Asiatic Petroleum Corp., 456 F.2d 183, 189 (ist Cir. 1972), and a “source of understandable confusion to the bar,” Timberlake v. Oppenheimer & Co., 729 F.2d 515, 517 (7th Cir. 1984), where the law is constantly changing.* In such an area of law, counsel cannot be expected to anticipate the twists and turns that the law may take. The effect of applying the decision in University Life Insurance retrozctively here would be to deprive the appellant of any opportunity to present his claims to this court for review. This obviously unfair result leads us to conclude that we will not dismiss the appeal for lack of jurisdic- tion. See de Mouy v. Ingvoldstad, 664 F.2d 21, 23 n.2 (2d Cir. 1981) (Adams, J., concurring) (‘‘{iJn such a situation, it would be inequitable for an appellate court to decline to hear the appeal’’). See also West v. Keve, 721 F.2d 91 (3d Cir. 1983). The Supreme Court, in Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 379 (1981), held, “A court lacks discretion to consider the merits of a case over which it is without jurisdiction, and thus, by definition, a jurisdic- tional ruling may never be made prospective only.” In that case, the court of appeals held that an order denying a motion to disqualify counsel was not appealable prior to final judgment but, because its holding was contrary to precedent, it determined the merits of the order. The Supreme Court held that when an appellate court finds an order interlocutory and nonappealable, the court must dismiss the appeal. The Court did not address the issue of whether an appellate court must dismiss the appeal 4 Compare, e.g., Timberlake v. Oppenheimer & Co., 729 F.2d 515 (7th Cir. 1984) (order refusing stay of arbitration not appealable under § 1292(aX1)) with Whyte v. THinc Consulting Group Intern., 659 F.2d 817 (7th Cir. 1981) (order granting stay of arbitration appealable) with Dickinson v. Heinold Securities, Inc., 661 F.2d (7th Cir. 1981) (denial of stay pending arbitration appealable under § 1292(aX1)). App. 38 where a party who relies on a jurisdictional ruling is, under a subsequent decision, foreclosed from ever rais- ing his issues in the appellate court. Thus, Firestone does not require this court to dismiss this appeal. Ill We turn to the issue of whether the district court had personal jurisdiction over Smith. A federal district court has personal jurisdiction over a party in a diversity suit only if a court of the state in which the district court sits would have such jurisdiction. Deluxe Ice Cream Co. v. R.C.H. Tool Corp., 726 F.2d 1209, 1212 (7th Cir. 1984). In Illinois, a nonresident party can be sued if it performs one of the acts enumerated in the Illinois long-arm stat- ute or if it is doing business in Illinois, as long as the due process “minimum contacts” requirement is met. /d.; see International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). There is no claim that Smith is doing business in Illinois, and thus we limit our inquiry to the long-arm statute. The constitutional due process requirement is satisfied by “some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protection of its laws.””’ Hanson v. Denckla, 357 U.S. 235, 253 (1958). In cases such as this, where the claim is that a controver- sy “arises from” the defendant’s contacts with the forum, the “ ‘relationship among the defendant, the forum and the litigation’ is the essential foundation” of personal jur- isdiction. Helicopteros Nacionales de Columbia, S.A. v. Hall, 52 U.S.L.W. 4491, 4492 (U.S. April 24, 1984) (quoting Shaffer v. Heitner, 433 U.S. 186, 204 (1977)).5 Re- 5 In Helicopteros Nacionales de Columbia, S.A. v. Hall, 52 U.S.L.W. 4491 (U.S. April 24, 1984), the Supreme Court addressed the minimum contacts necessary for personal jurisdiction in suits not “arising out of” or “related to” the defendant’s contacts with the forum. Court did not discuss the minimum contacts neces- sary where, as here, the suit “arises out of’ the defendant’s con- tacts with the forum. App. 39 cent cases have emphasized the reasonableness of subject- ing a defendant to suit. Deluxe Ice Cream Co. v. R.C.H. Tool Corp., 726 F.2d at 1213; Honeywell, Inc. v. Metz Ap- paratewerk, 509 F.2d 11387 (7th Cir. 1975). Several factors are relevant to an assessment of reasonableness: the de- fendant’s physical presence in the forum state while trans- acting business, Deluxe Ice Cream Co. v. R.C.H. Tool Corp., 726 F.2d at 1214; and the foreseeability that the defendant would be subject to suit in the forum, id. at . 1212 n.4; see World-Wide Volkswagen Corp. v. Woodsen, 444 U.S. 286, 297 (1980). Illinois has imposed additional personal jurisdiction re- quirements through its long-arm statute. This statute pro- vides that a person submits itself to the jurisdiction of Illinois courts if it “engages in the transaction of any business” within Illinois and if the cause of action “arises from” this transaction. The question of personal juris- diction under the Illinois statute is separate from the uestion of the requirements of due process. Deluxe Ice ream Co. v. R.C.H. Tool Corp., 726 F.2d at 1213; Cook Associates, Inc. v. Lexington United Corp., 87 Ill. 2d 190, 197, 429 N.E.2d 847, 850 (1981) (boundaries of Illinois 6 The statute provides in pertinent part: Acts submitting to jurisdiction—Process. (a) Any person, whether or not a citizen or resident of this State, who in person or through an agent does any of the acts hereinafter enumerated, thereby submits such person, and, if an individual, his or her personal representative, to the juris- diction of the courts of this State as to any cause of action arising from the doing of any such acts: (1) The transaction of any business within this State; *x* * * * (c) Only causes of action arising from acts enumerated herein may be asserted against a defendant in an action in which jur- isdiction over him is based upon this Section. Ill. Rev. Stat. ch. 110, § 2-209a)(1), (c) (1983) (formerly codified at Ill. Rev. Stat. ch. 110, § 17). App. 40 statute are not to be equated with the test under the due process clause). Illinois cases establish that, to qualify as a transaction of business that establishes jurisdiction under the long-arm statute, an act by the nonresident defendant must give rise to the plaintiff’s cause of action; in other words, the plaintiff's claim must “‘lie[ ] in the wake of the commercial activities by which [the] defendant submitted to the jurisdiction of Illinois courts.”’ Loggans v. Jewish Community Center, 113 Ill. App. 3d 549, 557, 447 N.E.2d 919, 925 (1983); see also Deluxe Ice Cream Co. v. R.C.H. Tool Corp., 726 F.2d at 1215; Cook Associates, Inc. v. Lexington United Corp., 87 Ill. 2d at 198-99, 429 N.E.2d at 851. The “‘transaction of business” standard does not require that the nonresident defendant conduct business within Illinois regularly or systematically; a single act may be sufficient, as long as the cause of action arises from that act. Johnson v. United Presbyterian Church, 103 Il. App. 3d 869, 874, 481 N.E.2d 1275, 1279 (1981). Turning to the facts of this case, we hold that Smith’s activities in Illinois are sufficient to qualify as a transac- tion of business that establishes jurisdiction under the long-arm statute. While he was an Illinois resident, Smith mailed a letter to Snyder, notifying her that he was ex- ercising his option to purchase Liljedahl’s share of the partnership. Smith also came to Illinois and negotiated with Snyder over the purchase price for the partnership interest. These activities constitute the transaction of business. Snyder’s claim for arbitration over the purchase price arises from the letter and the failed negotiations; the claim “lies in the wake” of Smith’s actions while in Illinois. Thus, we hold that the district court had juris- diction over Smith under the Illinois long-arm statute. We further hold that the exercise of jurisdiction here comports with the “minimum contacts” requirement of the due process clause. Smith’s sending a letter, while a resi- dent of Illinois, to another Illinois resident, exercising an option to purchase, and returning to Illinois to negotiate the price, makes it reasonable for an Illinois court to ex- ercise jurisdiction. By taking these actions in Illinois, App. 41 Smith chose to invoke the benefits and protections of IIli- nois law. His connections with Illinois, particularly trans- ret | business while present within the state, are such that he should have anticipated that he could be sued there. His physical presence in Illinois while taking these actions gives Illinois an interest in adjudicating this — Any inconvenience to Smith in conducting the suit in Illinois, although perhaps not minimal, is not seriously ater than it a be if the suit were conducted in exas. Thus, the relationship between this defendant, this forum, and this litigation is such that the requirements of the due process clause are met. IV We turn next to the question of whether the Federal Arbitration Act, 9 U.S.C. §§ 1-14 (1982), is applicable to this dispute. The FAA makes enforceable only those arbi- tration agreements “in any maritime transaction or a con- tract evidencing a transaction involving commerce.” 9 U.S.C. § 2 (1982). There is no maritime transaction involved here, and thus we must decide whether the partnership agree- ment evidences a transaction involving commerce. The re- quirement that transactions involving interstate commerce be “evidenced by” the contract does not limit a court to considering only those transactions expressly authorized on the face of the contract in determining whether the FAA applies. In Prima Paint Corp. v. Flood & Coughlin Manufacturing Co., 388 U.S. 395, 401 n.6 (1967), the Su- preme Court relied on an affidavit submitted to the district court in concluding that interstate commerce was involved. Thus, in this case, we may look to the partnership agree- ment and affidavits to determine whether there is a trans- action involving interstate commerce. The Supreme Court has stated that “([slection 2 is a con- gressional declaration of a liberal federal policy favoring arbitration agreements.” Moses H. Cone Memorial Hos- pital v. Mercury Construction Corp., 103 S. Ct. 927, 941 (1983). For that reason, courts have declared a strong App. 42 policy favoring the arbitration of contract disputes. See, e.g., id.; Societe Generale de Surveillance, S.A. v. Raytheon European Management and Systems Co., 643 F.2d 863, 867 (1st Cir. 1981). For example, any questions as to whether an issue is arbitrable are to be resolved in favor of arbitration. Moses H. Cone Memorial Hospi v. Mercury Construction Corp., 103 S. Ct. at 941; Dickin- son v. Heinold Securities, Inc., 661 F.2d 638, 643 (7th Cir. 1981). Similarly, because of the strong policy favoring ar- bitration, the requirement of “evidencing a transaction in- volving commerce” must be construed broadly. See Societe Generale de Surveillance, S.A. v. Raytheon European Management and Systems Co., 643 F.2d at 867. A broad interpretation of the “involving commerce”’ re- quirement ” supported by several decisions. In Prima Paint Corp lood & Coughlin Manufacturing Co., 388 U.S. 305, 4 401 n.7 (1967), the Court refused to limit. the applicability of the FAA to contracts for the interstate shipment of goods. The Court quoted from the House Report accompanying the FAA: “ {tJhe control over inter- state commerce [one of the bases for the. legislation] reaches not only the actual physical interstate shipment of goods but also contracts relating to interstate com- merce.’ ” Jd. (quoting H.R. Rep. No. 96, 68th Cong., Ist Sess. 1 (1924) (emphasis supplied)). In Bernhardt v. Poly- phic Co., 350 U.S. 198, 200-01 (1956), the Court stated that the contract did not involve commerce because there was no showing that the petitioner was working in com- merce, producing goods for commerce, or e ing in ac- tivity that affected commerce. See also Grand Bahama Petroleum Co. v. Asiatic Petroleum, 550 F.2d 1320, 1824 (2d Cir. 1977). The Supreme Court has recently discussed the purpo of the “involving commerce’’ requirement in ding whether the FAA applies in state courts. The Court stated: We would expect that if Congress, in enacting the Arbitration Act, was creating what it thought to be App. 48 a procedural rule applicable only in federal courts, it would not so limit the Act to transactions involving commerce. On the other hand, Congress would need to call on the Commerce Clause if it intended the Act to apply in state courts. Yet at the same time, its would be limited to transactions involving inter- state commerce. We therefore view the “involving commerce” requirement in § 2, not as an inexplicable limitation on the power of federal courts, but as a necessary qualification on a statute intended to apply in state and federal courts. Southland Corp. v. Keating, 104 S. Ct. 852, 860 (1984). Thus, the Court equated the breadth of “involving com- merce”’ with the extent of Congress’s power to regulate under the commerce clause. Under the commerce clause, Congress may reach activities “affecting” interstate com- merce. See, e.g., Hodel v. Virginia Surface Mining & Reclamation Ass’n, 452 U.S. 264, 276-77 (1981). That the requirement that an arbitration agreement involve com- merce is not a limitation but a qualification suggests that Congress intended the FAA to apply to all contracts that it constitutionally could regulate. Thus, it is clear that the “involving commerce” must be construed very broadly. We need not decide to- day whether Congress intended the FAA to apply to all contracts affecting interstate commerce, for it is clear that the partnership agreement presented in this case falls well within the constitutional limits. The real estate at issue was located in Texas; the partners lived in, and the part- nership was managed from, Illinois. The ——- bor- rowed money from and maintained a c with a bank in Illinois. Thus, the partnership agreement involved interstate commerce and the ‘AA is applicable. V We turn finally to the question of whether, under sec- tion 4 of the FAA, the district court for the Northern District of Iilinois could compel arbitration to take place App. 44 in that district when the gevong ays rong provides that arbitration is to take place in Houston, Texas. Sec- tion 4 provides in pertinent part: A party ieved by the alleged failure, neglect, or refusal of another to arbitrate under a ieee agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under Title 28, in a civil ac- tion or in admiralty of the my we 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... . (Tjhe court shall make an order directing the parties to proceed to arbitration in accordance with terms of the ment. The hearing and proceedings, under such agreement, shall be within the district in which the petition for an order directing such arbi- tration is filed. Under the statute, a district court has no power to order arbitration to take place outside of its own district. Econo- Car International, Inc. v. Antilles Car Rentals, Inc., 499 F.2d 1391 (3d Cir. 1974); see also Couleur International Ltd. v. Saint-Tropez West, 547 F. Supp. 176 (S.D.N.Y. 1982). Yet under the statute, the court must order the parties to arbitrate “in accordance with the terms of the agreement”; one term of the agreement is the parties’ forum selection clause.’ 7 Several other circuits have considered this dilemma, although none has considered it in the procedural posture that is presented here. In Continental Grain Co. v. Dant & Russell, 118 F.2d 967 (9th Cir. 1941), the court held that a district court in Oregon could compe! arbitration in its district despite the fact that the arbitra- tion agreement provided that arbitration was to take place in New York. However, in that case, the party challenging the district court’s order had itself b t the action to 1 arbitration in Oregon. In Hilti, Inc. v. , 392 F.2d 368 (ist Cir. 1968), the court held that the district court in Puerto Rico could stay its proceedings pending arbitration in Connecticut that was pur- (Footnote continued on following page) App. 45 We first must determine whether Smith’s failure speci- fically to raise the forvym selection clause as improper venue in his rule 12(b) motion to dismiss means that he waived the defense. Rule 12(g) provides that if a party makes a motion under rule 12(b) and fails to raise im- proper venue, he waives the defense. Some courts have considered forum selection clauses to be a type of venue provision. See, e.g., Bense v. Interstate Battery System, 683 F.2d 718, 72022 (2d Cir. 1982); In re Fireman’s Fund Insurance Co., 588 F.2d 98 (oth Cir. 1979); Aacon Auto Transport v. State Farm Mutual Automobile Insurance Co., 587 F.2d 648 (2d Cir. 1976), cert. denied, 429 U.S. 1042 (1977); Plum Tree, Inc. v. Stockment, 488 F.2d 754, 757 (8d Cir. 1973). We need not decide whether a forum selection clause constitutes “venue’’ within the meaning of rule 12, for we find that Smith sufficiently raised his defense based on the clause in his rule 12 motion. In that motion, Smith labelled his grounds to dismiss as lack of proper service of process hae lack of personal jurisdic- tion. ey at ee pee ty jurisdiction, Smith clear- ly laid out his argument that any arbitration could only take place in Texas because of the forum selection clause. This was sufficient to alert the district court that Smith was arguing that a district court in the Northern District of Illinois could not enter an order to compel arbitration. 7 continued suant to the parties’ ment. However, that case involved a motion to stay arbitration and not a petition to compel arbitra- tion. In Econo-Car International, Inc. v. Antilles Car Rentals, Inc., 499 F.2d 1391 (rd Cir. 1974), the court held that the district court in the Virgin Islands could not compel arbitration in New York Any even though the — ment provided for ar- bitration in New York City. court not decide whether the district court could order aritration in the Vi Islands. In tea Fd inves Ob Gees Agency v. Ambassador Insurance Co Cir. SOtaL the court babd that whore the sabia to. coal ecliiedien taaae oad suit in a forum other than the one provided for in the contract, the other party had to file its motion to compel in that forum and that district court could com- pel arbitration. bitrate disputes is purely a matter of con mnt between te part. Ts one hs the “volun commercial arbitration. Merit Jn- surance gy ee ~~ 714 F.2d 673, 678 (7th Cir.), cert. denied, 104 S. Ct. 529 (1983). An ar. bitration agreement, including its forum selection clause, is a freely-negotiated contract between the parties. Courts must give effect to such freely-negotiated forum selection clauses. M/S Bremen v. Off-Shore Co., 407 U.S. 1, 15-19 (1972). “The choice |] Serum was made cetisainiinie weaen ib dood ies eae og Be and enforced by the courts.” Jd. at 12. See also Scherk v. Alberto-Culver Co., 417 U.S. 506, 519-20 (1974) (holding enforceable forum selection clauses in arbitration ments); Sam Rei t & Son I Co. v. S. A. 530 F.2d 679, 1 (th Cir. 1 Snyder has not argued that ting is any “compelling or counterv ’ reason that the forum selection clause compel arbitration only in its own district. We do not find this reason to be sufficient to override the parties’ freely- ted agreement. Moreover, if Snyder were to pre- here, any party to an arbitration agreement could 2753: ila é t1t2et 3 i" : er 452574 fl : aE aly : S5A54 ee5e 88 TAT ig ePuEE! 282 ati eke 3 He HE fe abet fi VI tration in the Northern District of order compelling arbitration and the firming the award with directio vacate its orders and judgment App. 48 BAvUER, Circuit Judge, dissenting in part. Although I agree with most of the majority’s well-written opinion, I am convinced that the district court properly compelled arbitration in the Northern District of Illinois. Section 4 extends the power to compel arbitration to ‘‘any United States district court which, save for such agreement, would have jurisdiction under Title 28.” 9 U.S.C. §4 (1982) (emphasis added). The phrase “save for such agree- ment” apparently means “in the absence of the arbitra- tion agreement.” See Couleur International Ltd. v. Saint- Tropez West, 547 F. Supp. 176, 177 (S.D.N.Y. 1982); Warren Brothers Co. v. Community Building Corp. of Atlanta, Inc., 386 F. Supp. 656, 665 (M.D.N.C. 1974). Here, the diversity of citizenship between the parties and the amount in controversy would vest the district court with subject matter jurisdiction in the absence of the par- ties’ agreement to arbitrate. Because the district court also had personal jurisdiction over the defendant, Section 4 seems to give the court the power to compel arbitra- tion here. The majority, however, finds a conflict between Section 4’s requirement that the district court compel ar- bitration only in its own district, and the Section’s man- date that the parties arbitrate according to “the terms of the agreement.’’ Because the agreement here specified that the arbitration must occur in Houston, Texas, the majority holds that the district court could compel arbitra- tion neither in its own district nor in any other district. The provisions of Section 4 are inconsistent only if the parties’ forum selection clause is a “term of the agree- ment.’’ Under the majority’s interpretation, the broad power conferred on the district courts in Section 4 is com- pletely negated whenever an arbitration agreement in- eludes such a forum selection clause. The frustrating results of this interpretation are apparent in the instant case, where the majority concludes that the district court is powerless to compel arbitration, even though the court meets the Section 4 jurisdictional requirement. Courts generally give effect to forum selection clauses, but such provisions need not be honored in the face of ‘“‘some com- App. 49 pelling and countervailing reason.” M/S Bremen v. Zapata * Off-Shore Co., 407 U.S. 1, 12 (1972). The interest in honor- ing the choice of forum here is outweighed by the need to give full effect both to the jurisdiction conferred under Section 4 and to the policy favoring arbitration that under- lies the Federal Arbitration Act. Although I appreciate the majority’s concern that this interpretation might lead to forum shopping, it is important to remember that a district court may act under Section 4 only if it would have jurisdiction in the absence of the arbitration agree- ment and venue would be proper. Accordingly, I would affirm the district court’s order in its entirety. A true Copy: Teste: Clerk of the United States Court of Appeals for the Seventh Circuit App. 50 UNITED STATES COURT OF APPEALS For the Seventh Circuit Chicago, Illinois 60604 July 3, 1984. Before Hon. WILLIAM J. BAUER, Circuit Judge Hon. JOEL M. FLauM, Circuit Judge Hon. LUTHER M. SwyGeErT, Senior Circuit Judge ELEANOR SNYDER, EXECUTRIX of the ESTATE of LEROY LILJEPAHL, Plaintiff-Appellee, No. 83-2151 Vs. BRUTON SMITH, Defendant-Appellant. Appeal from the United States District Court for the Northern District of Illinois, Western Division. No. 80 C 00103—Stanley Roszkowski, Judge. ORDER On consideration of the petition for rehearing and sug- gestion for rehearing in banc filed in the above-entitled cause by Plaintiff-Appellee, no judge in active service has requested a vote thereon, and all of the judges on the — panel having voted to deny a rehearing. Accord- ingly, IT Is ORDERED that the aforesaid petition for rehear- ing be, and the same is hereby, DENIED. App. 51 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION BRUTON SMITH, | Plaintiff, No. H-80-2018 Vs. ELEANOR SNYDER, Executrix of the Estate of Leroy Liljedahl, Defendant. ORDER On the 19th day of June, 1981, came on to be heard Agreed Motion for Temporary Stay of Proceedings, and the Court having considered the same is of the opinion that it is good and should be granted, therefore, it is, ORDERED, ADJUDGED AND DECREED that this cause of action and all proceedings herein are STAYED pending final action by the Federal District Court for the Northern District of Illinois, Western Division on the Defendant Eleanor Snyder’s Petition to Compel Arbitration. SIGNED and ENTERED this 19th day of June, 1981. /s/ Ross N. Sterling Judge Presiding App. 52 (letterhead of) VINSON & ELKINS Attorneys at Law First City National Bank Building Houston, Texas 77002 July 28, 1980 Mr. James P. Hill Tribunal Administrator American Arbitration Association Chicago Regional Office 230 W. Monroe Street Chicago, Illinois 60606 RE: Demand for Arbitration of Mrs. Eleanor Snyder, Executrix of the Estate of Leroy Liljedahl Dear Mr. Hill: This letter is to notify you that Mr. Bruton Smith, upon whom a demand for arbitration has been served by the attorney representing Mrs. Eleanor Snyder, Executrix of the Estate of Leroy Liljedahl, declines to arbitrate the dispute made the subject of that demand for arbitration for the following reasons: 1. The demand for arbitration is not in accordance with the Viking Investment Associates partnership agreement; 2. Arbitration was not initiated by Mrs. Snyder in accordance with the Viking Investment Associates partnership agreement; 3. The American Arbitration Association has not complied with the provisions of the Viking Invest- ment Associates partnership agreement concerning the types of arbitrators to be appointed; App. 53 4. The Viking Investment Associates partnership a provides that it is governed by the laws of the State of Texas. Under Texas law, arbitration provisions such as those contained in the Viking In- vestment Associates partnership agreement are void, because the arbitration agreement does not contain the signature of counsel for the parties. Consistent with his position, as stated above, Mr. Bruton Smith objects to all of the potential arbitrators whose names are contained on the list that you recently forwarded to him. Upon receipt of this formal notice of refusal to par- ticipate in the commercial arbitration initiated by Mrs. Snyder, please cease all further proceedings in this mat- tl 4 further direction of the appropriate judicial tribunal. Please acknowledge receipt of this letter by placing your file mark in the lower portion of the enclosed carbon copy of this letter and returning it to me in the enclosed, self- addressed, stamped envelope. Thank you for your cooperation. Very truly yours, VINSON & ELKINS By: /s/ John L. Carter Attorneys for Mr. Bruton Smith ec: Mr. John D. Whitcher Attorney at Law 800 North Church Rockford, Illinois 61103 App. 54 IN THE DISTRICT COURT OF HARRIS COUNTY, TEXAS 133RD JUDICIAL DISTRICT BRUTON SMITH, Plaintiff, No. 80-34288 vs. ELEANOR SNYDER, Executrix of the Estate of Leroy Liljedahl, Defendant. PLAINTIFF’S ORIGLJAL PETITION To The Honorable Judge Of This Court: Comes Now, Bruton Smith, plaintiff, complaining of Mrs. Eleanor Snyder, Executrix of the Estate of Leroy Liljedahl, defendant, and as his cause of action would show as follows: I. Bruton Smith is a resident of the State of North Caro- lina and is doing business in Houston, Harris County, Texas. Il. Mrs. Eleanor Snyder, Executrix of the Estate of Leroy Liljedahl, resides at 1909 Boscedel Court, Rockford, Illi- nois. Mrs. Eleanor Snyder, Executrix of the Estate of Leroy Liljedahl, does not maintain a regular place of busi- ness within this state and has no designated agent for service of process within the State of Texas. Eleanor App. 55 Snyder, Executrix of the Estate of Leroy Liljedahl, is a y to a contract to be performed in whole or in part in the State of Texas and claims to be the owner of a twenty-five percent (25%) partnership interest in Viking Investment Associates, a partnership which is doing busi- ness and owns real estate within the State of Texas, as more fully set forth below. Accordingly, Mrs. Eleanor Snyder, Executrix of the Estate of Leroy Liljedahl, is do- ing business within the State of Texas and may be served with process, pursuant to Art. 2031b, Tex. Rev. Civ. Stat. Ann., by service of 4 ~ icate original citations upon the Secretary of State of Texas. BACKGROUND ITI. Bruton Smith and Leroy Liljedahl were partners in Vik- ing Investment Associates. A copy of the Viking Invest- ment Associates partnership agreement is attached as Ex- hibit “A” and here incorporated by reference. Pursuant to that partnership agreement provision was made for the purchase by a surviving partner of a deceased partner’s interest in the partnership for its fair market value. IV. Leroy Liljedahl died on December 9, 1976. ¥. Pursuant to the Viking Investment Associates partner- ship agreement, Bruton Smith gave timely notice of his intention to purchase the interest of Leroy Liljedahl. Ar- ticle V(c) of the partnership agreement provides that the purchase price shall be book value thereof, as of the close of business on the date of such decedent’s death, adjusted, however, by substituting in place of book value, the fair market value as of such date of any real estate owned by the partnership. App. 56 VI. The fair market value of the real estate owned by the gg on December 9, 1976, was less than One illion Five Hundred Thousand Dollars ($1,500,000.00). VII. Based upon the fair market value of the real estate owned by the partnership as of December 9, 1976, Bruton Smith offered to pay more than the fair market value for the interest of Leroy Liljedahl in Viking Investment Asso- ciates partnership. VIII. Mrs. Eleanor Snyder, as the Executrix of the Estate of Leroy Liljedahl, has refused to convey the partnership interest of Leroy Liljedahl to Bruton Smith in exchange for its fair market value. IX. Further, the certified public accountants employed by the partnership failed to procure an independent analysis of the fair market value.of the property as of December 9, 1976. Finally, Mrs. Eleanor Snyder, the Executrix of the Estate of Leroy Liljedahl, has attempted to institute arbitration proceedings in violation of the partnership agreement. (Such arbitration provision, even if it were properly followed, is void and unenforceable in this State.) X. Due to the failure of Mrs. Eleanor Snyder, as Executrix of the Estate of Leroy Liljedahl, to convey the interest of Leroy Liljedahl in Viking Investment Associates part- nership to Bruton Smith on time as agreed, Bruton Smith has incurred damages in the form of increased expenses in an amount of approximately One Hundred Thousand Dollars ($100,000.00). App. 57 XI. Pursuant to the partnership agreement, the parties have, in Article 8.06 agreed that the “respective rights and obligations of the partners under the partnership agreement shall be enforceable by specific performance, injunction, or other equitable remedy, but nothing herein contained is intended to, nor shali it, limit or affect any rights or rights at law or statute or otherwise if any party aggrieved as against the other for a breach or sboveiened breach of any provision hereof. . . .” CAUSE OF ACTION XII. Mrs. Eleanor Snyder, the Executrix of the Estate of Leroy Liljedahl, has breached her obligations under the Viking Investment Associates ——t agreement. Specifically, she has refused to convey to Bruton Smith the interest of the Estate of Leroy Liljedahl in that nership in accordance with the provisions of Article 5. RELIEF XIII. Bruton Smith seeks an order of specific performance from this Court decreeing that Eleanor Snyder, as Ex- ecutrix of the Estate of Leroy Liljedahl, shall convey to him all right, title, and interest in and to the Viking In- vestment Associates partnership owned by the Estate of Leroy Liljedahl in exchange for its fair market value. XIV. Bruton Smith seeks to recover the done to him as a result of the failure of Mrs. Eleanor Snyder to per- form the obligations of the Estate of Leroy Liljedahl in accordance with the terms of the Viking Investment Asso- ciates partnership. App. 58 XV. Pursuant to Article 2226, Tex. Rev. Civ. Stat. Ann., Bruton Smith seeks to recover his reasonable attorney’s fees incurred in the prosecution of this action for breach of contract which he alleges to be in the amount of Twenty-Five Thousand Dollars ($25,000.00). WHEREFORE, PREMISES CONSIDERED, Bruton Smith re- spectfully prays that Eleanor Snyder, the Executrix of the Estate of Leroy Liljedahl, be served with process in this cause and directed to appear and answer herein, and, after trial, that he be awarded a _ oy of specific performance of the provisions of the Viking Investment Associates partnership requiring Eleanor Snyder to con- vey the interest of Leroy Liljedahl to him in exchange for its fair market value, that he recover the a a to him in the amount of One Hundred Thousand Dollars ($100,000.00), that he recover his attorney’s fees incurred in connection with the prosecution of this action, and that he have such other and further relief, both at law and in equity, to which he may show himself to be entitled. Respectfully submitted, VINSON & ELKINS By /s/ John L. Carter 2100 First City National Bank Bldg. Houston, Texas 77002 State Bar No. 03920700 (713) 651-2124 ATTORNEYS FOR PLAINTIFF BRUTON SMITH App. 59 STATUTES AND RULES INVOLVED Federal Arbitration Act § 2. Validity, irrevocability and enforcement of agreements to arbitrate A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy the r arising out of such contract or transaction, or the refusal to perform the whole or pn Fe thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. § 3. Stay of proceedings where issue therein referable to arbitration If Se ee ee 2 oa Son ae of the United States upon any issue referable to arbitra- tion under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satis- fied that the issue involved in such suit or as referable to arbitration under such an ment, on application of one of the ies stay the trial of the action until such arbitration been had in accordance with the terms of the agreement, providing the icant for the stay is not in default in p with such arbitration. App. 60 § 4. Failure to arbitrate under agreement; petition to United States court having jurisdiction for order to compel arbitration; notice and service thereof; hearing and determination A ye | ateerieved by the failure, neglect, or refusal to arbitrate a written agreement for arbitration petition any United States district the subject matter of a suit arising out of the controver- arbitration proceed in the manner provided for in such agreement. Five ’ notice in writing of such ica- tion shall be served upon the part” in default. Service thereof shall be made in the manne: provided by the Federal Rules of Civil Procedure. The court shali hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to ly therewith is not in issue, the court shall make an order oT # Ht t ie ‘ll Beet : 5 é EE = tet | fai Boos ql 5. such i App. 61 that an agreement for arbitration was § 1291. Final decisions of district courts The courts of appeals shall have jurisdiction of from all final decisions of the district courts of the nited Federal Rules of Appellate Procedure Rule 4. Appeal as of Right—When Taken (a) Appeals in Civil Cases. (1) In a civil case in which an appeal is permitted by ae ae Se See © Ce Sees °e 0 Caen ape the notice og be pale foe AE dn — date of entry of the judgment or order appealed from; a en yoy on the date so noted. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_2352%3A2. Public record. Not legal advice.