Ruff v. Splice, Inc.

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State: Illinois

Court: 1st District Appellate

Docket No: 1-09-2093 Rel

Case Date: 02/26/2010

Preview:FIFTH DIVISION FEBRUARY 26, 2010

No. 1-09-2093

GREGORY RUFF, Plaintiff-Appellant, v. SPLICE, INC., Defendant-Appellee.

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Appeal from the Circuit Court of Cook County. No. 08 L 51292

Honorable Alexander P. White, Judge Presiding.

JUSTICE LAVIN delivered the opinion of the court: In this case, we are asked to reinstate a default judgment arising out of an employment contract that took a serpentine path from a California Labor Commissioner to the superior court of California to the clerk of the circuit court of Cook County, only to be vacated by a trial judge who determined that the California court lacked subject matter jurisdiction because the contract in question contained an arbitration clause. We affirm the decision of the trial court. BACKGROUND On April 2, 2007, Gregory Ruff and Splice, Inc. (Splice) entered into an employment contract under which Ruff was to become the chief executive officer (CEO) of the corporation for a period of two years, followed by successive one-year terms, for an agreed-upon salary and benefit package. This arm's-length agreement contained numerous provisions, the last of which was a relatively commonplace contractual provision establishing that any disputes that might arise would be handled in arbitration:

1-09-2093 "Any dispute arising out of this Agreement shall be determined by arbitration in San Francisco, California under the rules of the American Arbitration Association then in effect and judgment upon any award pursuant to such arbitration may be enforced in any court having jurisdiction thereof, provided each of the parties to this Agreement will appoint one person as an arbitrator to hear and determine the dispute, and if the parties are unable to agree on a third arbitrator, then the two arbitrator so chosen will select a third impartial arbitrator and the decision of such arbitration panel will be final and conclusive upon the parties to this Agreement." The agreement also contained a choice of law provision in paragraph 15(c), which provided: "This agreement shall be governed by and construed in accordance with the laws of the State of Illinois." Inevitably, disputes between the parties did arise and just three months later, Ruff resigned from his position with Splice. After leaving his position as CEO, Ruff claimed that Splice owed him approximately $160,000 in unpaid wages, vacation pay, reimbursable expenses, and severance pay. Splice took a decidedly different view of the events that led to Ruff's departure and advised Ruff that no compensation would be forthcoming due to his alleged mismanagement of the company during his brief tenure at the helm. On November 9, 2007, Ruff filed a claim with the Labor Commissioner of the State of California (a remedy nowhere mentioned in his employment contract) seeking the payments from Splice he alleged were owed to him. A hearing was conducted by the Commissioner regarding the claim, but Splice apparently decided not to participate. The Commissioner awarded Ruff his 2

1-09-2093 requested damages of $185,519.49 and a default judgment on the award was subsequently entered in that amount by the clerk of the California superior court for San Francisco County. Ruff then registered the California judgment in the circuit court of Cook County in Illinois, in order to attempt to enforce the foreign judgment against the Illinois corporation. Splice filed a motion to dismiss and set aside the judgment, arguing, inter alia, that the arbitration clause in the contract removed any subject matter jurisdiction from the Commissioner. Ruff, predictably enough, took a different view and argued that the arbitration clause did not remove the California courts or Commissioner from jurisdiction over the dispute. After a hearing on the motion, the circuit court granted Splice's motion and set aside the California judgment for want of proper jurisdiction. Ruff timely appeals. ANALYSIS Ruff contends that the California superior court possessed subject matter jurisdiction despite the Agreement's arbitration clause and that Splice waived whatever rights it had under the arbitration clause by failing to appear in any of the California proceedings. Section 2 of the Federal Arbitration Act provides that a written arbitration agreement contained within a commercial contract "shall be valid, irrevocable, and enforceable." 9 U.S.C.

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