No. 3--10--0194 Opinion filed May 9, 2011

IN THE APPELLATE COURT OF ILLINOIS THIRD DISTRICT A.D., 2011 LRN HOLDING, INC., and DAVID ) Appeal from the Circuit Court P. RANSBURG, ) of the 10th Judicial Circuit ) Peoria County, Illinois Plaintiffs-Appellants, ) ) v. ) No. 09--L--230 ) WINDLAKE CAPITAL ADVISORS, ) LLC, ) ) Honorable Joe Vespa, Defendant-Appellee. ) Judge, Presiding. JUSTICE SCHMIDT delivered the judgment of the court, with opinion. Justice Wright specially concurred in the judgment and opinion. Justice Holdridge dissented, with opinion.

OPINION Plaintiffs, LRN Holding, Inc. (LRN), and David Ransburg, brought this declaratory judgment action against defendant,Windlake Capital Advisors, LLC, seeking a declaration that a

contract entered into by the parties is void. As such, plaintiffs claimed they were entitled to recover fees associated with the sale of LRN. Defendant, Windlake Capital Advisors, LLC., moved to dismiss the action or, in the alternative, to stay the action and compel arbitration. The trial court granted defendant's motion to stay the proceeding and ordered the matter to proceed to arbitration. Plaintiffs appeal from that order. FACTS Plaintiffs' complaint alleges that they entered into a contract with defendant which stated that defendant would act as the exclusive brokerage agent seeking to secure a purchaser of the assets or stock of LRN. The contract called for plaintiffs to pay defendant a $35,000 engagement fee upon the signing of thecontract and a success fee of "$200,000 + 2% of all consideration" upon the closing of the transaction.Plaintiffs' complaint acknowledges that defendant successfully brokered a transaction through which Robert Bosch Tool Corporation purchased LRN assets. Defendant received $1,226,340 in compensation for its services. The complaint contains no 2allegations suggesting defendant's services were in any way

inadequate or that the transaction somehow harmed plaintiffs. Plaintiffs' complaint alleges, however, that their contract with defendant should be declared void as defendant failed to properly register its services with the State of Illinois. As such, plaintiffs claim they are entitled to collect defendant's $1,226,340 fee, as well as interest on those monies and attorney fees. Attached to the complaint is a photocopy of an "LLC File Detail Report" from the Illinois Secretary of State, the agreement between the parties, and photocopies of two pages associated with a "broker search" from the Illinois Secretary of State's Web site. Defendant never answered plaintiffs' complaint but instead filed a "Motion to Dismiss or Stay Proceedings and to Compel Arbitration" pursuant to section 2-619 of the Code of Civil Procedure. 735 ILCS 5/2-619(a)(9) (West 2008). In its memorandum in support of its motion, defendant noted the agreement between it and plaintiffs contained an arbitration provision mandating that any controversy between the parties relating to this agreement shall be resolved by binding 3arbitration.

Defendant submitted that arbitration was mandated by both the Federal Arbitration Act (9 U.S.C. §1 et seq. (2006)) and the Illinois Uniform Arbitration Act (710 ILCS 5/1 et seq. (West 2008)). The trial court agreed and granted defendant's motion to stay the proceedings and compel arbitration. Plaintiffs appeal. ANALYSIS The sole issue raised on appeal is whether the trial court erred when granting defendant's motion. "[T]he decision whether to compel arbitration is not discretionary. Where there is a valid arbitration agreement and the parties' dispute falls within the scope of that agreement, arbitration is mandatory and the trial court must compel it. [Citation.] *** On the other hand, where there is no valid arbitration agreement or where the parties' dispute does not fall within the scope of that agreement, the trial court may not compel it. [Citation.] *** Accordingly, we will employ a de novo standard of review ***." Travis v. American Manufacturers Mutual Insurance Co., 335 Ill. App. 3d 1171, 1175 (2002). While our standard of review is de novo, our supreme court 4has clearly indicated that when a trial court is "presented with

a motion to stay litigation pending arbitration under section 3 of the FAA, the court's inquiry is limited to whether an agreement to arbitrate exists and whether it encompasses the issue in dispute." Jensen v. Quik International, 213 Ill. 2d 119, 123-24 (2004). Plaintiffs make numerous arguments to support their claim that the trial court improperly compelled arbitration. The plaintiffs' first argument centers on their assertion that no contract existed between them and defendant. As such, plaintiffs suggest, "Illinois case law clearly mandates that the court, and not an arbitrator, make the determination regarding whether a contract with an unlicensed professional is void." Intertwined with this theory is plaintiffs' assertion that the "Illinois Arbitration Act applies to this case, and requires that the court determine that the purported agreement is void, notwithstanding federal cases interpreting the Federal Arbitration Act." The gravamen of plaintiffs' initial argument is that an Illinois statute renders the agreement between plaintiffs and defendant void ab initio. As such, no enforceable arbitration 5clause existed and, therefore, the trial court erred in

compelling arbitration. To support this proposition, plaintiffs direct our attention to the Illinois Business Brokers Act of 1995 (Brokers Act) (815 ILCS 307/10-5.10 et seq. (West 2008)), Aste v. Metropolitan Life Insurance Co., 312 Ill. App. 3d 972 (2000), and Kaplan v. Tabb Associates, Inc., 276 Ill. App. 3d 320 (1995). Defendant disagrees with the plaintiffs, claiming even a broad challenge to the agreement as a whole must be decided in arbitration. To support its position, defendant cites to the Federal Arbitration Act (FAA) (9 U.S.C. §1 et seq.) and numerous cases that interpret it.

A. The Agreement, Brokers Act and FAA The arbitration provision in the agreement between the parties reads as follows:

"Arbitration. Any controversy, dispute, or claim between the parties relating to this Agreement shall be resolved by binding arbitration in accordance with the rules of the American Arbitration Association, as amended from time to time. The parties 6agree that the venue for any such arbitration shall be Chicago, Illinois." Section 10-10 of the Brokers Act mandates that every "person engaging in the business of business brokering" register with the Illinois Secretary of State. 815 ILCS 307/10-10 (West 2008). It further notes that if "a business broker commits a material violation of Section 10-10, 10-20, or 10-30 of this Act, in connection with a contract for business brokering services, the contract is void, and the prospective client is entitled to receive from the business broker all sums paid to the business broker, with interest and any attorney's fee required to enforce this Section." 815 ILCS 307/10-60 (West 2008). Plaintiffs' allegations that defendant is a business broker and never properly registered under the Brokers Act must be taken as true. See 735 ILCS 5/2-619 (West 2008); Fremont Compensation Insurance Co. v. Ace-Chicago Great Dane Corp., 304 Ill. App. 3d 734 (1999). Nevertheless, we hold the trial court did not err in compelling arbitration, as an agreement to arbitrate existed and it encompassed this dispute. In Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 7(2006), the United States Supreme Court reviewed a matter in

which the Florida Supreme Court held that the issue of whether an underlying contract between the parties was illegal and, therefore, void ab initio, must be decided by the trial court before arbitration of other disputes could be compelled. Cardegna v. Buckeye Check Cashing, Inc., 894 So. 2d 860 (Fla. 2005). The Florida Supreme Court reasoned that to enforce an agreement to arbitrate in a contract challenged as unlawful "could breathe life into a contract that not only violates state law, but also is criminal in nature." Cardegna, 894 So. 2d at 862. Reaffirming its holdings in Southland Corp. v. Keating, 465 U.S. 1 (1984), and Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967), the Buckeye Check Cashing Court reversed, holding that the challenge to the validity of the contract should "be considered by an arbitrator, not a court." Buckeye, 546 U.S. at 446. The Buckeye Court noted that section 2 of the FAA allows for challenges " 'upon such grounds as exist at law or in equity for the revocation of any contract' " which can take two forms. Buckeye, 546 U.S. at 444 (quoting 9 U.S.C. §2). "One type 8challenges specifically the validity of the agreement to

arbitrate." Buckeye, 546 U.S. at 444 (citing Southland Corp., 465 U.S. at 4-5). That type of challenge is not at issue in this matter as plaintiffs' complaint seeks a declaration that the contract as a whole is void ab initio. "The other challenges the contract as a whole, either on a ground that directly affects the entire agreement (e.g., the agreement was fraudulently induced), or on the ground that the illegality of one of the contract's provisions renders the whole contract invalid." Buckeye, 546 U.S. at 444. The Court noted that in Southland Corp., it held that the FAA created a body of federal substantive law applicable to both state and federal courts alike. Buckeye, 546 U.S. at 445 (quoting Southland, 465 U.S. at 12). The Court specifically "rejected the view that state law could bar enforcement of §2, even in the context of state-law claims brought in state court." Buckeye, 546 U.S. at 445. With this as its backdrop, the Buckeye Court went on to note: "First, as a matter of substantive federal 9arbitration law, an arbitration provision is severable from the remainder of the contract.Second, unless the challenge is to the arbitration clause itself, the issue of thecontract's validity is considered by the arbitrator in the first instance. Third, this arbitration law applies in state as well as federal courts. *** [W]e conclude that because respondents challenge the Agreement, but not specifically its arbitration provisions, those provisions are enforceable apart from the remainder of the contract. The challenge should therefore be considered by an arbitrator, not a court." Buckeye, 546 U.S. at 445-46. The Buckeye Court then noted that the Florida Supreme Court attempted to distinguish Prima Paint by relying "on the distinction between void and voidable contracts." Buckeye, 546 U.S. at 446. The Court noted the Florida Supreme Court's proclamation that Florida law permitted " 'no severable, or salvageable, parts of a contract found illegal and void' " was 10"irrelevant." Buckeye, 546 U.S. at 446 (quoting Cardegna, 894

So. 2d at 864). The Court noted that Prima Paint "expressly disclaimed any need to decide what state-law remedy was available" and, as such, the Court specifically rejected "the Florida Supreme Court's conclusion that enforceability of the arbitration agreement should turn on 'Florida public policy and contract law.' " Buckeye, 546 U.S. at 446 (quoting Cardegna, 894 So. 2d at 864). Justice Scalia acknowledged that the Prima Paint "rule permits a court to enforce an arbitration agreement in a contract that the arbitrator later finds to be void. But, it is equally true that respondents' approach permits a court to deny effect to an arbitration provision in a contract that the court later finds to be perfectly enforceable. Prima Paint resolved this conundrum-and resolved it in favor of the separate enforceability of arbitration provisions. We reaffirm today that, regardless of whether the challenge is brought in federal or state court, a challenge to the validity of the contract as a whole, and notspecifically to the arbitration clause, must go to the arbitrator." Buckeye, 546 U.S. at 448-49. 11Two years after Buckeye, in Preston v. Ferrer, 552 U.S. 346

(2008), the Court revisited the question of what forum properly decides the validity of a contract that includes an arbitration provision. Preston involved a contract dispute between "Judge Alex" and his attorney/agent. Preston, 552 U.S. at 350. The attorney/agent invoked the arbitration agreement when seeking fees allegedly due under the contract. Preston, 552 U.S. at 350. Judge Alex countered his attorney/agent's demand for arbitration by filing a petition to the California labor commissioner charging that the contract was invalid and unenforceable under the California Talent Agencies Act (TAA) (Cal. Lab. Code §1700 et seq. (West 2003 & Supp. 2008)). Preston, 552 U.S. at 350. Judge Alex asserted that the attorney/agent acted as a talent agent without the license required by the TAA and, therefore his unlicensed status rendered the entire contract void. Preston, 552 U.S. at 355. The trial court in California denied the attorney/agent's motion to compel arbitration and the California appellate court affirmed that ruling holding that relevant portions of the TAA vested "exclusive original jurisdiction" over the dispute in the 12Labor Commissioner. Ferrer v. Preston, 51 Cal. Rptr. 3d 628, 634

(Cal. Ct. App. 2006). The California appellate court further ruled that Buckeye was "inapposite" because Buckeye "did not involve an administrative agency with exclusive jurisdiction over a disputed issue." Ferrer v. Preston, 51 Cal. Rptr. 3d at 634. The California Supreme Court denied the attorney/agent's petition for review. Ferrer v. Preston, No. S149190, 2007 Cal. LEXIS 1539 (Cal. Feb. 14, 2007). The Preston Court noted that the "dispositive issue" was not whether the FAA preempts the TAA but instead "who decides whether Preston acted as a personal manager or as talent agent." Preston, 552 U.S. at 352. The Preston Court noted that a "recurring question under [section] 2 [of the FAA] is who should decide whether 'grounds ... exist at law or in equity' to invalidate an arbitration agreement." Preston, 552 U.S. at 353 (quoting 9 U.S.C. §2). The Court recounted its holdings from Prima Paint and Buckeye regarding the two types of challenges one may bring, either to the contract as a whole or the arbitration clause specifically, and the corresponding path of analysis taken. Preston, 552 U.S. at 353-54. The Court then reaffirmed its prior holdings and 13found that since Judge Alex challenged the contract as a whole,

the issue of the contract's validity must proceed to arbitration and not to the labor commissioner. Preston, 552 U.S. at 359 ("When parties agree to arbitrate all questions arising under a contract, the FAA supersedes state laws lodging primary jurisdiction in another forum, whether judicial or administrative."). The Preston Court acknowledged that the TAA specifically stated that " 'an unlicensed person's contract with an artist to provide services of a talent agency is illegal and void.' " Preston, 552 U.S. at 355 (quoting Styne v. Stevens, 26 P. 3d 343, 349 (Cal. 2001)). Nevertheless, the ultimate holding of the Court made clear that it was for an arbitrator to decide the "dispositive" issue of whether the attorney/agent acted as a talent agent. Preston, 552 U.S. at 359.Similarly in the case at bar, LRN posits that the defendant's unregistered status renders the entire contract void ab initio pursuant to the Brokers Act. LRN claims that, as such, it is for the trial court to determine whether any contract existed before the case can be submitted to arbitration pursuant to the arbitration agreement. We disagree. 14LRN does not attack the arbitration agreement specifically;

it seeks to invalidate the entire contract. The arbitration clause, similar to the clauses in Preston and Buckeye, notes that "any controversy, dispute, or claim between the parties relating to this Agreement shall be resolved by binding arbitration inaccordance with the rules of the American Arbitration Association." Clearly, pursuant to Buckeye and Preston, the dispute between the parties must proceed to arbitration. Our supreme court seemingly acknowledged the Prima Paint "severability" principle in Jensen v. Quik International, 213 Ill. 2d 119 (2004). T h e J e n s e n c o u r t n o t e d t h a t w h e n p r e s e n t e d w i t h a m o t i o n t o s t a y l i t i g a t i o n p e n d i n g

a r b i t r a t i o n p u r s u a n t t o t h e F A A , " t h e c o u r t ' s i n q u i r y i s l i m i t e d t o w h e t h e r a n a g r e e m e n t t o a r b i t r a t e e x i s t s a n d

w h e t h e r i t e n c o m p a s s e s t h e i s s u e i n d i s p u t e . " J e n s e n , 2 1 3

I l l . 2 d a t 1 2 3 . W e n o t e t h e J e n s e n c o u r t d i d n o t s a y t h e i n q u i r y e n c o m p a s s e d w h e t h e r t h e c o n t r a c t b e t w e e n t h e p a r t i e s i s v a l i d , b u t i n s t e a d w h e t h e r a n " a g r e e m e n t t o a r b i t r a t e "

e x i s t e d . T h e J e n s e n c o u r t c o n t i n u e d t h a t i f " t h e c o u r t

15f i n d s t h a t a n a g r e e m e n t t o a r b i t r a t e e x i s t s a n d t h e i s s u e

p r e s e n t e d i s w i t h i n t h e s c o p e o f t h a t a g r e e m e n t , a s t a y * * * i s m a n d a t o r y . " J e n s e n , 2 1 3 I l l . 2 d a t 1 2 3

- 2 4 . T h e J e n s e n c o u r t c a u t i o n e d t h a t w h e n " p a r t i e s c h o o s e

a r b i t r a t i o n i n t h e i r c o n t r a c t , t h e p a r t y l a t e r s e e k i n g t o

a v o i d a r b i t r a t i o n s h o u l d n o t b e a l l o w e d t o d o s o b y m e r e l y

a l l e g i n g t h a t n o c o n t r a c t e x i s t s " a n d t h a t " a l m o s t a n y p l a i n t i f f c a n f i n d s o m e t h e o r y o r c l a i m u p o n w h i c h t o a l l e g e t h a t n o c o n t a c t e x i s t e d , t h e r e b y a v o i d i n g a r b i t r a t i o n . " J e n s e n , 2 1 3 I l l . 2 d a t 1 2 6 , 1 2 9 . T h e J e n s e n c o u r t h e l d t h a t t h e i s s u e o f w h e t h e r o n e p a r t y t o t h e c o n t r a c t i n d i s p u t e

w a s e n t i t l e d t o r e s c i s s i o n o f t h e c o n t r a c t a s a w h o l e m u s t b e s u b m i t t e d t o a r b i t r a t i o n . J e n s e n , 2 1 3 I l l . 2 d a t 1 2 8

- 2 9 . W e a c k n o w l e d g e t h a t d i c t a i n J e n s e n s u g g e s t e d t h a t t h e h o l d i n g m a y b e d i f f e r e n t h a d t h e l e g i s l a t u r e s p e c i f i c a l l y p r o v i d e d t h a t s p e c i f i c c o n t r a c t s w e r e v o i d a n d u n e n f o r c e a b l e i n s t e a d o f m e r e l y p r o v i d i n g t h e r e m e d y o f r e s c i s s i o n . J e n s e n , 2 1 3 I l l . 2 d a t 1 2 7 ( " H a d t h e l e g i s l a t u r e i n t e n d e d

16t h a t a f r a n c h i s e a g r e e m e n t e n t e r e d i n t o i n v i o l a t i o n o f

s e c t i o n s 5 a n d 1 0 b e u n e n f o r c e a b l e , i t c o u l d h a v e e a s i l y s o p r o v i d e d . " ) . H o w e v e r , J e n s e n ( 2 0 0 4 ) i s a p r e - B u c k e y e ( 2 0 0 6 )

a n d p r e - P r e s t o n ( 2 0 0 8 ) c a s e . B. The I llinois Uniform Ar bitration Act Plaintiffs also arg ue that the Unif orm Arbitra tion Act (Arbitra tion Act), and not the F AA, applies to this matter and the A rbitration Act mandates we a llow the trial court to dete rmine the validity of the c ontrac t. Plainti ffs c laim it is well settled that whe re pa rties to a contr act ha ve ag ree d to arbitrate in acc ordanc e with state law , the FA A does not apply even w here interstate

commerc e is involved. Plaintiffs note that section 2(a ) of the A rbitration Act state s that when a n "opposing party denies the e x istence of

the ag ree ment to arbitrate ," a "c ourt shall proce ed summarily to the deter mination of the issue." 710 I L CS 5/ 2(a) (West 2008). Plaintiffs claim that section 10 of the contra ct mandate s the Arbitra tion Act and not the F AA applies to this matter. Sec tion 10 states,

" Gove rning Law . This Ag ree ment shall be interpr eted unde r and g overne d in acc ordanc e with the laws of the State of I llinois ." Def endant c laims plaintiffs have wa ived this matter by failing to raise it below. Howeve r, a r eview of

plaintiffs' "r esponse in opposition to mot ion to dism iss or stay proce eding s and to compel a

rbitration" indicates that plaintiffs, in fa ct, ar g ued to the trial c ourt that pursuant to "Sec tion 2(a) of

the I llinois Arbitration Ac t," they wer e denying the exis tence of an a g ree ment. 17We find that the plaintiffs have not waived this issue.

Plaintiffs are c orre ct that courts have he ld where parties to a c ontrac t ag ree to arbitrate in

acc ordanc e with state law , the FA A does not apply , even w here interstate c ommerce is involved. See Tortori ello v. Ge rald Nis san of Nort h Aurora, Inc ., 379 I ll. App. 3d 214 (2008); see also Glazer's Distr ibutors of Ill inois, Inc. v. NW S-Illinois, LL C, 376 I ll. App. 3d 411 (2007). Howeve r, def

endant de nies that it "a g ree d to arbitrate in acc ordanc e with state law " and notes that the ar bitration provision clear ly indicates that a

rbitration will proce ed base d upon the rules of the Ame rica n Arbitration Associa tion and not the Arbitration Ac t. Ag ain, the United States Supreme Court has se ttled this i ssue. Plaintiffs read Volt Information Science s, Inc. v . Board of Trust ees of Leland Stanford Junior Unive rsity , 489 U.S. 468 (1981), to support its positi on that the Arbitration Act should apply to this controversy . I n Volt , the Court held that wher e " the par ties have a g ree d to abide by state rules of

arbitra tion, enforc ing those rules ac cording to the terms of the a g ree ment is fully consistent with the g oals of the F AA, eve n if the re sult is t hat ar bitration is stay ed whe re the [FAA] would otherwise permit it to go f orwa rd." Volt , 489 U.S. at 479. We acknowle dg e that the Volt Court specifica lly found that " the applica tion of the California statute is not pre -empted by the [FAA] *** in a case wher e the pa rties have ag ree d that their ar bitration ag ree ment will be g overne d by

the law of

California." Volt , 489 U.S. at 470. Plaintiffs fail to addre ss, however , subsequent United States Supreme Court case law that cla rifies the holding of Volt

and lea ds us to the conclusion that the F AA and r ules of the Ame rica n Arbitration Associa tion apply to this

18matter, not the Ar bitration Act. I n Mastrobuono v. Shearson Lehman H utton, Inc. , 514 U.S. 52 (1995), the Court held that fede ral rule s of ar

bitration applied to a dispute despite the fac t that the contra ct at issue contained a

clause providing that the contra ct " ' shall be g overne d by the laws of the State of Ne w York.' " Mastrobuono , 514 U.S. at 53. Mastrobuono dictates that g ener al choice -of- law clauses do not incorpora te state rule s which g overn a llocation of authority betwee n arbitra tors and courts. Mastrobuono , 514 U.S. at 60. Courts that have interpr eted Mastobuono have note d that the "c onstruction of an a g ree ment to arbitrate is gove rned by the FA A unless the ag ree ment expressly provides that state la w should g overn." Dominium Austin Partners, L.L .C. v. Emerson , 248 F.3d 720, 729 n.9 ( 8th Cir. 2001) (citing UHC Managem ent Co. v. Computer Scie nces Corp ., 148 F.3d 992 ( 8th Cir. 1998)). See a lso Roadway Pack age Syste m, Inc . v. Kayser , 257 F.3d 287 ( 3d Cir. 2001); Sovak v . Chugai Pharmaceutical Co. , 280 F.3d 1266 ( 9th Cir. 2002); Ferro Corp. v. Garrison Industries, Inc. , 142 F.3d 926 ( 6th Cir. 1998). The 2008 Preston case further clar ified the Court' s holding in Volt . As noted above , Preston involved an attempt by one par ty to a contra ct to have a

dispute over the va lidityof the contra ct settled, pursua nt to California statute, by an administrative a g ency instead of throug h arbitra tion. Preston , 552 U.S. at 349. The c ontrac t in Preston contained a n arbitra tion clause mandating that " ' any

dispute ... relating to ... the brea ch, validity , or leg ality ' " of the contra ct should be arbitra ted in acc ordanc e with the AAA rules as w ell as a c hoice- of-law clause stating that the " ' ag ree ment shall be g overne d by the laws of the state of Califor nia.' " Preston , 552 U.S.

19at 361. When one of the Preston parties de manded a rbitration to settle the dispute, the other petitioned the California la bor commissioner asking that the contra ct be de clar ed void pursuant to the California Ta lent Ag encie s Act. Cal. L ab. Code §1700 et seq . (West 2003 & Supp. 2008); Preston , 552 U.S. at 350. The California state courts concluded tha t the California Ta lent Ag encie s Act vested " exclusive origina l jurisdiction" over the dispute with the L abor Commi ssioner. Preston , 552 U.S. at 352. The pa rty in Preston attempting to a void arbitration arg ued that the holding in Volt mandated a ffirma tion of the California state courts. The Court disag ree d, noting:

"F err er' s relianc e on Volt

is mispl ace d for two discr ete r easons. F irst, arbitration was stay ed in Volt

to acc ommodate litigation involving third parties who wer e strang ers to the ar bitration ag ree ment. Nothing in the arbitra tion ag ree ment addre ssed the orde r of proce eding s when pe nding litig ation with third parties pr esente d the prospec t of inconsistent ruling s. We thought it proper , in those circ umstances, to re cog nize state law as the g ap filler.

20Her e, in contra st, the arbitra tion clause speaks to the matter

in controver sy ; it st ates that ' any dispute ... relating to ... the brea ch, validity , or leg ality ' of the c ontrac t should be arbitra ted in acc ordanc e with the American Arbitration Associa tion (AAA) r ules. [C itation.] Both pa rties ar e bound by

the ar bitration ag ree ment; the question of Preston' s status as a talent a g ent rela tes to the validity

or leg ality

of the c ontrac t; there is no risk that related litig ation will y ield conflicting ruling s on common issues; and there is no other proc edura l void for the choic eof-law clause to fill. Second, we are g uided by our more r ece nt decision in Mastrobuono [citation] . Although the contra ct in Volt

provided for

' arbitra tion in acc ordanc e with the Construction I ndustry Arbitration Rules of the A merica n Arbitration Association,' [citation] (interna l quotation marks omitted), Volt neve r ar g ued that incorpor21ation of those rule s trumped the choic e-of -law clause contained in the c ontrac t ***.

*** Preston and F err er' s contrac t, as noted, provides for

arbitra tion in accor dance with the AAA r ules. [C itation.] One of

those rules states that ' [t ]he arbitrator sha ll have the power to determine the exis tence or validity of a contr act of

which an a

rbitration clause forms a part.' [Citation.] The incor poration of the AAA r ules *** weig hs ag ainst inferr ing f rom the choice -of- law clause an unde rstanding share d by Fe rre r and Pre ston that their disputes would be hear d, in the first instance, by the L abor Commi ssioner. F ollowing the g uide Mastrobuono provides, the ' best way

to harmonize' the parties' adoption of the AA A rules a nd their selec tion of California law is to read the la tter to enc ompass presc riptions gove rning the substantive rig hts and obliga tions of the parties, but not the State' s

22' specia l rules limiti ng the authority of arbitrators.' [C itation.] " Preston , 552 U.S. at 361-63. J ust as in Preston , the contra ct in this matter contained a g ener ic state c hoice- of-law clause but also incorpora ted the AAA rules of a rbitration. As such, we cannot f ind that the parties e x plicitlyintended, by the mere inclusion of the g eneric choice -of- law clause, that disputes encompasse d by the ar bitration ag ree ment be settled pursua nt to the Arbitration Act. 710 I L CS 5/ 2(a) (West 2008). CONCL USI ON I n a nutshell, the plaintiffs ag ree d that "a ny controve rsy , dispute or claim betwe en the parties r elating to this agr eeme nt shall be resolve d by binding a rbitration in acc ordanc e with the rules of the Americ an Ar

bitration Association." Certainly , the issue of whe ther or not the ag ree ment is void ab initio is a " controve rsy , dispute, or claim betwe en the pa rties re lating to [t he] ag ree ment." T he law is c lear ; the issue must be arbitra ted. For the fore g oing r easons, the judg ment of the c ircuit court of Peoria County

is affirme d. Affir med. J USTI CE WR I GHT, spec ially concur ring : Rely ing on Aste v M

etropolitan L ife Insurance Co. , 312 I ll App. 3d 972 (2000) and Kaplan v. Tabb Associates, Inc. , 276 I ll. App. 3d 320 (1995), plaintiff c ontends that I llinois law require s the court

to first determine w hether the entire contra ct at issue is void and unenf orce able befor e re fer

ring the matter to a n arbitra tor. Ba sed only on the conc essions of the plaintiff in this

23case and the lang uag e of this spec ific ag ree ment, now subject to our r eview, I specia lly concur . Howeve r, I

rec og nize that the outcome of this decision may be inconsistent with the first district

case s previously

decide d, but our dec ision is entirely consistent with the United States Supreme Court’s holding in Preston v. Fe rrer , 552 U.S. 346, 128 S. C t. 978 (2008). I t is im portant to reme mber that plaintiff c oncede s that interstate c ommerce is involved in this case a nd ag ree s the parties c ontemplated their c ontrac tual disputes would be re solved by an arbitra tion process. I n my view, these conce ssions are sig nificant. 1 When the parties dispute whe ther a n arbitra tion clause or se para te ar bitration ag ree ment

was c ontemplated by

the par ties to become pa

rt of their a g ree ment, then under I llinois law, the court must first dec ide if the pa rties ac tually

ag ree d to resolve disputes by means of a

rbitration. Donaldson, Lufkin, & Jenre tte Futures, Inc. v . Barr , 124 I ll. 2d 435, 443-45 (1988). Such is not the ca se her e. I n this case, plaintiff conce des the ar bitration clause w as the subjec t of a mee ting

These c ircumstance s are distinguishable f rom those consider ed by

this court in Peterson 1 v. Re sidential Alternati ves of Illinois, Inc. , 402 I ll. App. 3d 240 (2010). I n Peterson , the primary issue was whe ther the pa

rties ag ree d to arbitration at a ll. The parties in that c ase sig ned two separ ate a g ree ments, which included an inartful attempt to cr eate a sepa rate arbitra tion ag ree ment. This court found that ne ither contra ct sig ned by the parties ref

err ed to the other contra ct and ther efor e, af

ter e x amining both a g ree ments separ ately , we c oncluded a n ag ree ment to arbitrate the nursing home hea lth care contra ct was ne ither conte mplated by nor ag ree d upon by both parties. 24of the minds. I nstead, the issue be fore us is whether the arbitra tion clause a nd the contra ct,

which the pa

rties dra fted, now r equire s the court or the ar bitrator to dec ide whethe r plaintiff’s contention that the contr act wa s void, based on State law, ha s merit. The c ontrac t at the hea

rt of this appea l contains expli cit lang uag e ag ree ing that the arbitra tion process would be controlled by the rules of

the Amer ican Ar

bitration Association (AAA ). Signific antly , when the r ules of the AA A ar e incor porate d into a contra ct, as they wer e in this case, those same rules manda te that the parties to this contract “sha ll be deeme d to have made these rules [of the AAA] a pa rt of their a

rbitration ag ree ment.” American A rbitrati on Association , Commercial Ar bitration Rules, R-1. Thus, I find it very

difficult to acc ept plaintiff’s cla im that the parties to this appea l ag ree d to arbitrate in acc ordanc e with I llinois law. Further, the A AA rule s, ag ree d to by plaintiff, g rant the arbitrator “the powe r to deter mine the exist ence or validity of a c ontrac t of which a n arbitra tion clause forms a part.” American A rbitrati on Association , Commercial Ar bitration Rules, R-7(b). These AAA r ules, not State or F eder al law, r equire the arbitrator to separa tely consider the arbitra tion clause fr om other provisions of this contra ct. Also ac cording to these rules, the arbitra tor is give n the authority to determine w hether

the contra ct is void and if so, then dete rmine the c ontinued validity of the a rbitration clause

. American A rbitrati on Association , Commercial Ar bitration Rules, R-7(b). The c ontrac t in this case provides not only that the ar

bitration proce ss would be controlled by

the AAA r

ules, but also that the proc eeding s would take plac e in Chicag o.

25Obviously , based upon the contra ctual lang uag e at issue, we could not requirethe parties to

trave l to Peoria rathe r than Chicag o for the a rbitration hea

ring . Simi larly , we c annot allow the court to first examine whether the contra ct in this case is void when the rules of the AAA, selec ted by

the parties, require the ar bitrator to first make this determination. I n this appeal, we do not have a

contra ct which is silent

reg arding whether

the ar bitration proce ss will be gove rned by g uidelines consistent with the Fe dera l Arbitration Act ( FAA ) or will be g overne d by rules that may differ from the F AA. Consequently , I

respe ctfully

sug g est that we ne ed not eng ag e in a leng thy discussion explaining the re lationship of the I llinois Arbitration Ac t to the FAA in or der to re solve this appea l. Although, I

ag ree with the majority ’s ana ly sis of the ca se law a s discussed, I write separ ately to emphasize that the trial court, and now this court, have simplyupheld the explicit contra ctual choic es incorpor ated by the parties to this contract which pr ovide the blueprint for the

course of their dispute re solution. Here, a s part of the ir contra ct, the parties specific ally ag ree d that all disputes would be re solved throug h arbitra tion and, in turn, also ag ree d their ar bitration proce eding s would be controlled by the rules of

the AAA. For these re asons, I

specia lly concur . J USTI CE HOL DRI DGE, dissenting : I disag ree with the majority ’s holding tha t Buck eye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006), and Preston v. Fe rrer, 552 U.S. 346 (2008), pre vent an I llinois court fr om enfor cing section 10-10 of the I llinois Business B roker s Act of 1995 ( Br okers Ac t) (815 IL CS

26307/10-5.10 et seq. (West 2008)). I , there fore , respe ctfully dissent. I

would reve rse the tr ial court’s or der staying the plaintiffs’ ac tion for dec lara tory judgme nt and compelling arbitra tion. I would rema nd this matter to the circ uit court with directions to adjudica te whethe r Windlake is in compliance with the Br okers Ac t and, if not, the court should order a ll relief mandated under that statute. I t is well settled that an ar bitration clause in a n ag ree ment enter ed into in contrave ntion of an I llinois statute requiring a party to reg ister with the state prior to eng ag ing in a ny

licensed activity does not divest I llinois courts of jurisdiction to hea r cla ims that a party

has violated the licensing statute. Aste v. M etropolitan L ife Insurance Co., 312 I ll. App. 3d 972 (2000); Kaplan v. Tabb Associates, Inc ., 276 I ll. App. 3d 320 (1995). The court in Aste, quoting se ction 181 of the Restatement ( Second) of Contracts, noted that " ‘[i] f a pa rty is prohibited from doing an ac t beca use of his failure to comply with a licensing , reg istration or similar require ment, a promise in consideration of his doing that ac t or his promise to do it is unenfor cea ble on g rounds of public policy if (a) the re quirement ha s a re g ulatory purpose, a nd (b) the inter est in the enfor ceme nt of the promise is clea

rly outweig hed by

the public policy

behind the re quirement.’ " Aste , 312 I ll. App. 3d at 980 (quoting Restatement (Sec ond) of Contrac ts §181 (1981). He re, the re is no question that the Br okers Ac t has a re g ulatory purpose a nd a cle ar public policy purpose of protec ting I llinois citizens from unlicensed business broke rs. Moreove r, the Kaplan court noted tha t not onlythe contra ct as a whole, but ea ch of the clause s, including the arbitra tion clause, is void as ag ainst public policy wher e a pa

rty has fa iled

27to obtain a license require d to protect the public f rom unlicensed pr actitioners. Kaplan , 276 I ll. App. 3d at 325 (" the Ag ree ment betwee n the plaintiffs and the defe ndant, including the arbitra tion clause, is void beca use the de fenda nt filed to obtain a license to provide ar chitectur al service s") . I n other wor ds, not onlythe putative ag ree ment as a w hole, but eac h and eve ry provision of the ag ree ment, including the arbitra tion clause, made in consideration of the promise by a nonlicense d party

to provide business broke r ser vices is void. Clearly , if a pa rty lacks the leg al ca pacity to enter into a c ontrac t, it mus t also lack the le g al ca pacity to enter into any

of that contra ct’s provisions. I

would there fore find that the ar bitration provision, upon which the majority relies to find that this dispute must be arbitrate d, is void and cannot divest the c ircuit court of jur isdiction over suits broug ht under the B roker s Act. Rely ing upon Buck eye Check Cashing, the majority

finds that the ar

bitration clause contained in the pa

rties’ a g ree ment mandates that the question of whethe r the de fenda nt was in compliance with the Br okers Ac t at the time it entere d into the contrac t must be decided by an arbitra tor. I

disag ree with the majority and take issue with its application of the holding in Buck eye Check

Cashing to the fac ts in the instant matter. As the majority points out, i n Buck eye Check Cashing, the Court held that the validity of a c ontrac t as a whole should "be considere d by

an ar bitrator, not a c ourt." Buck eye , 546 U.S. at 446. Howeve r, whe re the challeng e is to the validity of the a rbitration clause , independe nt of a c halleng e to the validity of the c ontrac t as a whole, it is appropria te for the court to dec ide the matter

. Buck eye , 546 U.S. at 445-46.

28What Buck eye Check Cashing does not addre ss is what happens if the challeng e is to both the contra ct as a

whole and

the validity

of the a rbitration clause . Such is the matter her ein. Although the majority

char acte rizes the plaintiffs’ complaint as se eking a dec lara tion that the contra ct as a

whole is void ab initio , the plaintiffs ac tually soug ht a dec lara tion that the defe ndant had violated the B roker s Act and the n soug ht all appropria te re medies under that statute. Under the B roker s Act, a c ontrac t for business broke rag e ser vices e ntere d into by a nonlicense d broker is void, as is each pr ovision of the ag ree ment, including a n ag ree ment to arbitrate disputes under the putative ag ree ment. Kaplan , 276 I ll. App. 3d at 325. The plaintiffs’ challeng e is not only to the leg ality

of the c ontrac t as a whole , but also the leg ality of ea ch and e very

provision of the ag ree ment. I n other wor ds, what is at issue her e is whethe r a pa rty that cannot leg ally

enter into a business broker ag e contr act c an nonethe less leg ally enter into an ag ree ment to arbitrate any disputes arising under tha t contrac t. I find nothing in law cited by the majority

to support a conclusion that an a g ree ment to arbitrate contained w ithin an illega l contrac t is any more enfor cea ble independe ntly

than the ag ree ment itself. Both the e ntire ag ree ment and ea ch clause contained the rein a

re e qually susceptible to a c halleng e. The arbitration clause, a s part of the ag ree ment enter ed into in violation of the Br okers Ac t, is also independently in violation of the Br okers Ac t and is, theref ore, subjec t to the same cha lleng e as the ag ree ment as a w hole. Consist ent with Buck eye Check Cashing, I

would hold that the plaintiffs cha lleng ed the leg ality of the a rbitration clause as well as the contra ct as a whole, and I

would find that the court is the appropr iate for

um in which to bring a ca use of a ction under the Br okers Ac t.

29I

would also find that Preston v. Fe rrer is disti ng uishable fr om the instant matter in that Preston prese nted a spe cific f actua l question as to whether a California

statute cove ring talent ag ents applied to the c ontrac t at issue. Preston , 552 U.S. at 352 (" The dispositive issue, then, contra ry to Fer rer ’s sug g estion, is not whether the F AA [Fede ral Ar bitration Act] preempts the TAA [Talent Ag ent Act] wholesale. [Citation.] *** I nstead, the que stion is s implywho dec ides whether Preston acte d as [a] personal manag er or as [a] t alent ag ent" ). The Court he ld that such a fa ctual question wa s within the arbitrator’ s ken. Preston , 552 U.S. at 353. Her e, ther e is no question that the defe ndant was a cting as a business br oker a nd that the B roker s Act there fore applied. I n addition, there is nothing in the holdings of e ither Buck eye Check Cashing or Preston that overr ules our supre me court’s g uidance in Jense n v. Quik I nternational , 213 I ll. 2d 119, 127 (2004), whe rein the c ourt noted that whe re r eg istration pursuant to statute is a statutory prer equisite to entering into a valid ag ree ment, the entire ag ree ment, including a rbitration provision, is unenforc eable

. Jense n, 213 I ll. 2d at 127 (" Had the le g islature intended tha t a fra nchise a g ree ment enter ed into in violation of sections 5 and 10 be une nforc eable , it could have easily so provided." ). See Galasso v. KNS Cos., Inc. , 364 I ll. App. 3d 124, 128 (2006) (c iting Jense n for the pr oposition t hat wher e a sta tute require s reg istration as a c ondition prece dent to a valid ag ree ment and not mere ly as a ba sis for re scission of the ag ree ment, the ar bitration provision contained in the a g ree ment is likewise void). Her e, unlike the Franc hise Disclosure Act of 1987 ( 815 I L CS 705/ 5 (West 2008) at issue in Jense n , the B roker s Act conta ins an

30express provision that proper r eg istration as a business broke r is a condition pre cede nt to a valid

business broker

ag ree ment (815 I L CS 307/ 10-60 (West 2008)). I would find that Jense n still dictates the r esult in this m atter a nd should guide our re solution of this matter. Moreove r, the instant matter is distinguishable from all other case s relied upon by

the majority in that, here , the contra ct at issue is fully executed. The defe ndant has be en paid in full for its servic es, and the plaintiffs raise d no controve rsy , dispute or claim re lating to the ag ree ment. The only

issue raised in the instant litiga tion was whethe r the de fendant was a proper ly reg istered a nd licensed business br oker unde r the B roker s Act. B ased upon the pleading s, there w as no question of fa ct as to whe ther the de fendant was ac ting a s a business broker . The only

question was whe ther the de fenda nt was prope rly reg istered a s a business broker . The a nswer to that que stion is either a simple "y es," in which ca se the litiga tion is at an end and the defe ndant is allowed to kee p the fe e it rec eived unde r the c ontrac t, or a simple " no," in which ca se the de fendant must return the fee s char g ed in violation of the B roker s Act and pa y the plaintiffs’ a ttorney

fee s in bringing this action under the B roker s Act. 2

I am somewha t perplexed by the def endant’ s insist ence in prolong ing the litigation in 2 this matter. The B roker s Act is very clea r that strict complianc e with the re g istration and licensing require ments of sec tion 10-10 is required in or der to e ng ag e in the pra ctice of business broker ing in this state. Either the defe ndant is in strict compliance w ith the Broke rs Act or it is not, and it should answer the question forthwith so that this matter may be conc luded in a judicious manner. 31Be cause I would find that the matter of the def endant’ s abilityto rende r business broke r service s in I llinois is not a matter within the ken of an ar bitrator, I would reve rse the judg ment of the circ uit court of Peoria Countycompelling arbitra tion and I would rema nd this matter to the circ uit court with direction that the de fenda nt be orde red to a nswer the complaint. Depe nding upon the answe r, the c ourt should then enter an appr opriate judg ment forthwith.

32