FIFTH DIVISION
March 31, 2003
1-02-1626
| PEREGRINE FINANCIALS AND SECURITIES, an Iowa Corporation, Plaintiff-Appellee, v. FARAMARZ B. HAKAKHA, Defendant-Appellant. | ) ) ) ) ) ) ) ) ) ) | Appeal from the Circuit Court of Cook County. Honorable Lee Preston, Judge Presiding. |
JUSTICE QUINN delivered the opinion of the court:
This appeal stems from an arbitration clause contained in an agreement entered into between plaintiff Peregrine Financialsand Securities (Peregrine) and defendant Faramarz Hakakha. Aftera dispute arose between the parties, Peregrine filed a suit inthe circuit court of Cook County seeking money damages. Hakakhafiled a motion to dismiss based on a mandatory arbitration clausein the agreement. Peregrine subsequently sought arbitration withthe National Association of Securities Dealers (NASD) and filed amotion to compel arbitration with the circuit court, which wasgranted in October 2001. After the NASD ordered that thearbitration take place in California, near where Hakakha lived,Peregrine successfully petitioned the circuit court to modify itsOctober 2001 order to require that the arbitration proceed inCook County, rather than California. In this interlocutoryappeal, Hakakha contests the propriety of the trial court's orderrequiring that the arbitration take place in Illinois. For thereasons set forth below, we reverse the judgment of the trialcourt.
BACKGROUND
In October 1999, Hakakha executed a client option agreementwith Peregrine regarding brokerage services. In the agreement,Hakakha listed his address as Encino, California. According tothe securities account and application agreement (accountagreement), the parties waived their rights to seek remedies incourt and agreed:
"[A]ll controversies that may arise between the partiesconcerning any transaction or the construction,performance, or breach of this or any other agreementbetween the parties pertaining to securities or otherproperty *** shall be determined by arbitration. Anyarbitration under this Agreement shall be conductedpursuant to the [F]ederal [A]rbitration [A]ct and thelaws of the State of Illinois, before the New YorkStock Exchange, Inc. or any arbitration facilityprovided by any other exchange of which [the clearingagent] is a member, or the NASD Regulation, Inc. or theMunicipal Securities Rulemaking Board and in accordancewith the applicable rules of the selected organization.*** The award of the arbitrators, or of the majority ofthem, shall be entered in any court, state or federal,having jurisdiction."
On March 28, 2001, Peregrine filed a complaint in thecircuit court of Cook County, wherein it alleged that Hakakha hadbreached the account agreement. Peregrine sought $39,504.97 indamages in addition to attorney fees and interest. On May 14,2001, Hakakha moved to dismiss the complaint, arguing that thetrial court lacked personal jurisdiction over him and that, underthe terms of the account agreement, the parties had agreed tosubmit all disputes and controversies to arbitration. He prayedfor an order dismissing Peregrine's complaint and compelling itto submit its claim to arbitration in accordance with thearbitration clause in the account agreement.
On June 26, 2001, Peregrine filed a combined response toHakakha's motion to dismiss and motion to compel arbitration. Relating to its motion to compel arbitration, Peregrine assertedthat pursuant to the Uniform Arbitration Act (710 ILCS 5/1 etseq. (West 2000)), a stay in the court proceedings wasappropriate because the previous day, Peregrine had commencedarbitration proceedings in the matter by filing a statement ofclaim with the NASD. Relating to the motion to compel, Peregrinestated that Hakakha "has no intention of filing, moving tocompel, or subjecting himself to arbitration. [Hakakha] istrying to avoid subjecting himself to the jurisdiction of anytribunal that would grant [Peregrine] the relief to which it isentitled." Both Peregrine's statement of claim and March 28,2001, complaint made identical claims and sought identical reliefagainst Hakakha. Peregrine requested in the statement of claimthat the arbitration be held in Chicago.
In his reply in support of his motion to dismiss, Hakakhanoted that Peregrine had conceded the validity of the arbitrationclause and he argued that Peregrine's complaint should thereforebe dismissed under section 2-619(a)(3) of the Illinois Code ofCivil Procedure (735 ILCS 5/2-619(a)(3) (West 2000)).
In a letter dated August 8, 2001, to Hakakha from a legalassistant at the NASD, Hakakha was informed that he was requiredto execute a uniform submission agreement (submission agreement)on or before September 27, 2001. This was necessary to show hisagreement to participate in the arbitration proceedings. Theletter also stated that, "If an arbitration involves a publiccustomer, NASD *** will generally select a hearing locationclosest to the customer's residence at the time the disputearose." The letter stated that the anticipated hearing locationwas Los Angeles, California.
In a surreply filed September 4, 2001, Peregrine argued thatdismissal of its complaint under section 2-619(a)(3) was notrequired because the likelihood it could obtain complete reliefin the arbitration proceeding was dependant upon Hakakhasubmitting himself to the proceeding by filing a submissionagreement with the NASD, which he had failed to do.
On October 2, 2001, the trial court entered a written orderdenying Hakakha's motion to dismiss. Finding that both partieshad conceded the validity of the arbitration clause contained inthe account agreement, the trial court granted Peregrine's motionto compel arbitration.
Although a receipt stamp was not affixed to Hakakha's submission agreement, the document was signed by him on September28, 2001. After the NASD had selected Los Angeles as the site ofthe arbitration, Peregrine filed a motion to change venue. In aletter dated December 6, 2001, the NASD informed the parties thatit had granted "Respondents" motion to change venue and that thevenue of the arbitration had been changed to Chicago. However,Hakakha, rather than Peregrine, was the respondent in thearbitration proceedings. After Hakakha filed a motion toreconsider the venue change, the NASD reinstated its originaldecision to hold the arbitration in Los Angeles.
On February 26, 2002, Peregrine filed an emergency motionfor clarification of the trial court's October 2, 2001, order. In the motion, Peregrine argued that after the trial court hadentered the October 2 order, Hakakha finally submitted to theNASD arbitration by filing the submission agreement. Citingsection 4 of the Federal Arbitration Act (9 U.S.C.