## I L L I N O I S 

## O F F I C I A L 

## RE P O R T S Appellate Court

Gilm ore v. Carey , 2011 IL App (1st) 103840

Appellate Court Caption CH RI ST O PH E R G I L M O RE
, Plaintiff-Appellee
, v. CHARL ES CA RE Y
, J OSEPH NICI FORO, and HENNI NG-CAREY PROP RI ETARY TRADI NG, L L C, Defe ndants-Appe llants.

District & N o. First District, Third Division Docke t No. 1–10–3840

Filed J une 29, 2011

Held (Note : T

his syl lab us

con st it ute s n o par t of the opi nio n of the cour t but has bee n pre

par ed by the Rep o rt er of D e c i s i o n s f

o r t h e

c o n v e n i e n c e o

f t h e

rea der

. ) I n an action for unpaid wag es and damag es for the brea ch of the terms of

an employ

ment ag ree ment, the trial court p roper ly denied defe ndants’ motion to stay

the proc eeding s and compe l arbitration, notwithstanding defe ndants’ contention that plaintiff owned an interest in one defe ndant,

a trading company that was a member of the Chicag o Boa rd of Trade
, and that pl ai n t i ff was subject to the rules of the Chicag o Boa rd of Trade
, including Rule 600, which require s arbitration of member disputes, since plaintiff’s claims wer e not direc tly exchang e-r elated and fell outside the mandatory

arbitration provisions of the Boa rd’s rule s.

Dec ision Under Review Appea l from the Circuit Court of Cook County
, No. 10–L –8708; the Hon. J ennife r Dunc an-B rice , J udg e, pre siding.

J udg ment Affir med.Counsel on

Appea l Peter B. Carey
, Kather ine T. Har tmann, and Hanh D. Mey ers, all of Carey & H artmann L L C, of Chicag o, for a ppellants.

Michae l A. Fica

ro, Dea n J . Polales, Kristopher J. S tark, a nd Richard H. Tilgma n, all of Ung are tti & Har

ris L L P, of Chicag o, for a ppellee.

Panel J USTI CE MURPHY de livered the judgme nt of the cour t, with opinion. Presiding J ustice Quinn and J ustice Steele concur red in the judgme nt and opinion.

OP INION

¶ 1 Pl a in

ti f f
, Ch r is to p h er Gilmore, filed a five-c ount complaint ag ainst defe ndants, Henning

Carey Proprietar

y Trading
, L L C (He nning- Carey ), Charles Ca re y and J oseph Niciforo, seeking unpaid wag es and damag es for brea ch of t h e t er m s o f an employ ment ag ree ment betwee n the parties. On Dec ember 21, 2010, the trial court denied defe n dants’ motion to dismiss count I

for unpa id wag es and to stay proce eding s and compe l arbitration of counts I I throug h V of plaintiff’s complaint. Def endants only appea l the trial court’s order denying their motion to stay proce eding s and co mpel arbitration. Def endants argue that beca

use plaintiff owns a Class B interest in Henning -Care y , a member of the Chicag o Boa rd of Trade (CBO T), plaintiff is subject to and obligated by all CBOT rules. Def endants argue that Rule 6 0 0
, which require s arbitration of member disputes, is applicable to this case and the trial
court err ed in denying the motion to stay proce eding s and compel arbitration. For the following rea sons, we af

firm the holding of the trial c ourt.

¶ 2 I . BA CKGROUND ¶ 3 On October 22, 2009, plaintiff enter ed into a “Servic es Ag ree ment” with Henning -Care y to work as a “business development manag er, product d ev el oper for trading
, trade r, and
manag er” on a salaried, one- y ear term. Plaintiff was to per form the functions of m anag ing the business development of Henning -Care y ’s trading operations on GOVX, which involved the trading of United States Trea sury s ec u ri ties. Plaintiff also was to manag e a separ ate proprieta ry tradingg roup for

which He nning- Carey

would provide liquidity

. ¶ 4 Plaintiff reporte d direc tly to defe ndants Nicifor o and Care y . Plaintiff w as g uara nteed a W-2 salary of $15,000 per month for managi n g t h e GO VX business and could ear n a quarte rly bonus at defendants’ discretion

. He n n i ng -Care y also contra cted to offe r pl aintiff “in the near future” a rig ht to buy a “B Share” interest in the corpo ra t i o n

. P l ai ntiff paid $250,000 for that membership and was entitled to demand return of this capital contribution

-2-upon withdrawa l from Henning -Care y

.

¶ 5 Plaintiff worke d throug h the end of Fe bruar y 2010 for Henning -Care y

. Plaintiff did not work on the trading floor and aver red that he was not a me mber of the Chicag o Merc antile Ex chang e Group, I n c. , C BO T or any other exchang e. Plaintiff rec eived his paychec ks as contra cted throug h Fe bruar y 12, 2010. The paychec k s we re i s sued by Twinfields Capital M an ag ement, an entity aff iliated with Henning -Care y , and it was not a CBOT m em b er

. Plaintiff stopped working afte r Fe bruar y 2 0 1 0 and did not rec eive any additional monthly
paychec ks or a r eturn of his c apital contribution. ¶ 6 On J uly 29, 2010, plaintiff fil ed h i s m u lticount complaint. The first count, not at issue here
, asser

ted a violation of the I llinois Wage Pay ment and Collection Act (820 I L CS 115/1 et seq. (West 2008)) for

defe ndants’ fa ilure to pay plaintiff his c ontrac ted salary . Counts I I throug h V are at issue on this appea l and involved cl ai m s fo r: brea ch of the Service s Ag ree ment based on the failure to pay plaintiff’s g uara nteed salary and provide benef its; brea ch of Henning -Care y ’s operating ag ree ment (Ope rating Ag ree ment) for failing to return plaintiff’s capital contribution; brea ch of fiduciar y duty based on misappropriation of plaintiff’s capital contribution, failing to provide proper support for plaintiff’s oper ations, and cre ating a neg ative work environment to forc e plaintiff to leave ; and conver sion for the failure to return plaintiff’s capital contribution. Def endants moved to dismiss count I and to stay the proc eeding s and compe l arbitration of c ounts I I throug h V. Def endants noted that,

as plaintiff alleg ed in his com p l ai nt, he was a “Class B” member of Henning -Care y

. Def endants cited section 2.6 of the Oper ating Ag ree ment to argue that arbitration was mandatory

per CB OT Rules. Section 2.6 states in full:
“In cases wh er e a Class B Member trade s the company ’s proprieta ry acc ount at [C BO T ]
, an d wher e the non-member trade r’s profit or l oss allocation is tied to the profitabilit y o f t h e specific proprieta ry acc ounts(s) [ sic ], in order for the trade s in such proprieta

ry acc ount to rec eive memb er fe e t reatment, eac h such Class B Member must make an initial capital contribution of $200,000 and must maintain at leas t $ 2 0 0
, 000 in the trading acc ount(s) and the $200,000 must be available to support the trad i n g activity on the Ex chang e and comply with all Rules and Reg ul at i o n s of [C BO T], including Rule 244.05. In the event that Rule 244.05 is chang ed such that the amounts require d are incre ased, the amounts set forth in t his
para g raph 2.6 are also incre ased. Class A and Class B Members shall be responsible for the f ull amount of any

losses sustained by

him.” ¶ 7 Def

endants argued t h at t h i s n ec es s ar i l y includes CBOT Rule 600, which states, in pertinent pa

rt: “It is contra

ry to the obj ectives and policy of t he Ex change fo r m ember s to litigate

cer tain Ex chang e-r ela ted disputes. Disputes betwee n and among members that are descr ibed below a

nd that are based upon f

acts and circ umstances that occur red at a time when the parties wer e members shall be subject to mandatory arbitration in

acc ordanc e with the rule s of this Chapter:
1. Claims betwee n members that related to or arise out of any transac tion on or subject to the r

ules of the Exchang e; and

-3-2. Claims betwe en or amongmembers r elatingto ownership of, or interests in, tradingrig hts on the Ex chang e; and 3. Claims between membe rs re lating to the e nforc eability of:

a. non-c ompete cla

uses to the extent they

rela te to the Exchang e, b. terms of e mploy

ment on the trading

floor, and

c. financ ial arr ang ements relating to the resolution of err or trade s that are included in any

employ ment ag ree ment. Nothing in this rule, howeve r, shall require a member employ ee t o s u bmit to arbitration any claim that includes alleg ations of a violation of fede ral, state or local employ ment discrimination, wag e pay ment or bene fits laws.” ¶ 8 Def

endants argued that the languag e of Rule 600 was clea r and there could be no doubt that the arbitra

tion provision applied to counts I I throug h V of plaintiff’s compl aint. Def endants asser

ted that eac h of plaintiff’s claims not only related to the parties’ owner ship

or interest in Ex chang e trading rig hts, they wer e predic ated on purported violations of those rig hts

. D e f

e n d a nts c o ncluded that since all claims related to trading business, member trading rig hts wer e nece ssarily implicated and the claims wer e subject to the mandatory arbitration provision in Rul e 600. ¶ 9 The motion was fully briefe d and the trial court issued an order d en y i n g defe ndants’ motion without a hear ing. The trial court disag ree d with plaintiff that he was not a member of CBOT beca

use he was a Class B member of a member firm, there by a member and subject
to all CBOT rules and regul at i o n s

. Howeve r, quoting the rule, the trial court opined that plaintiff’s claims did not “ ‘re late to or arise out of any transac tion on or subject to the rules of the Ex chang e.’ ” The trial court highlig hted that plaintiff’s count I I was a claim for brea ch of an employ

ment contra ct and the rema ining counts in v o l ved claims that plaintiff was entitled to return of

his capital contribution pursuant to the Ope ratingAgree ment. ¶ 10 I n addition, the trial court cited to section 1 0

. 1 4 o f t h e Oper ating Ag ree ment, which provides:
“10.14 Dispute Resolution

. Ex cept as otherwise specific ally provided in this Ag ree ment, any controve rsy or claim arising out of or relating to this Ag ree ment, its interpre tation, enfor ceme nt or brea ch
, and any matter relating to the business for which this limited liability company was formed shall be deter mined by the fede ral
or state c ourt in Chicag o, Cook County , I llinois .” ¶ 11 Since counts I I t h ro u gh V we re p remised upon plaintiff’s alleg ation that defe ndants misappropriate d his capital contribution in violation of t he Operating Ag ree ment, t h e t rial
court found that section 10.14 applied. Acc ording ly
, the trial court conclude d that Rule 600 did not apply and the action proper ly lay in the circ uit court of Cook County

. The trial court denied defe ndants’ motion to stay proce eding s and compel arbitration. Def end an t s appea l that order

.

¶ 12 I I . ANALYSI S ¶ 13 The trial co u rt b as ed i t s d ec i s i o n o n i t s i nterpre tation of Rule 600, the Service s

-4-Ag ree ment, and the Oper ating Ag ree ment. The construction, interpre tation and leg al eff ect of a co n t ra ct are questions of law. Gelderm ann, Inc. v. Mullins
, 171 I ll. App. 3d 255, 259 (1988). We c onsider a r

uling inter

pretingsuch ag ree ments de novo

. Casablanca Trax, Inc.

v. Trax Rec ords, Inc.
, 383 I ll. App. 3d 183, 187 (2008). Def endants add that, b ec ause arbitration is viewed favora bly by the cour ts as an ea sier, more eff

icient and cost-eff

ective

means for resolving disputes than litigation, the scope of arbitra ble issues oug ht to be resolved in favo r of arbitra tion. Heiden v. Galva Foundry Co.
, 223 I ll. App. 3d 163, 168 (1991). ¶ 14 Def

endants argue that plaintiff’s claims that he was not a CBOT member are an attempt to avoid case law cited by defe ndants and must fail. We ag ree on this point. As alleg ed in his complaint, plaintiff held a Class B membership i n Henning-Car ey , a proprieta ry trading
corpor ation with, acc ording to its o p e r ating ag ree ment, a CBOT membership. Whil e plaintiff is corr ect that defe ndants did not provide evidenc e on this issue, we ag ree with the trial court that this argument fails by plaintiff’s ex hibits and own alleg ation that he was a member of CBOT. Howeve r, we also ag ree with the trial court that, though the p ar ties are subject to CBOT rules, plaintiff’s claims fall outside the mandatory arbitration provision and are distinguishable f

rom the limited case la

w on this issue. ¶ 15 Defendants cite to Mullins and Gelderm ann, Inc. v. Stathis
, 177 I ll. App. 3d 41 4
, 4 1 9 (1988), t o argue that the trial court err ed in finding plaintiff’s claims outside the scope of CBOT activities and the arbitration clause

. In Mullins
, the pl ai ntiff, a commodities broker and CBOT member, filed a cause of action ag ainst the d ef en d an t s for misappropriating
p ersona l proper

ty

. The plaintiff argued that the defe ndants revised a computer t ra d i n g prog ram develope d for and owned by the plaintiff for their own g ain. The trial court denied the defendants’ moti on to stay t h e litigation and compel arbitration. Mullins
, 171 I ll. App. 3d at 256. This court reve rsed the trial court’s order
, finding t h at the g reat majority of business upon which the plaintiff’s claims wer e base d fell within the scope of CBOT Rule 600. Id. at 261. ¶ 16 The Mullins trial court cited the evidenc e that approximately 90% of trade s g en er ated from the computer prog rams at issue wer e executed on the CBOT. There fore
, the trial court found that the claims arose from both Ex chang e-r elated and non-Exchang e-r elated activities and the controve rsy did not fall squarely within Rule 600. This court, howe v er , n o t ed that

a prior ruling discussing this issue held that Rule 600 fell betwee n a broad arbitration clause and a limit ed arbitration clause and it mere ly require d that busi n es s must stem from Ex chang e-r elated activity
, “ ‘but does not ne cessa rily have to specific ally be trading on the Ex chang e.’ ” Id. at 259-60 (quoting Donaldson, Lufkin & Jenre tte Futures, Inc. v. Barr
, 151 I ll. App. 3 d 597, 605 (1987))

. Acc ording ly
, this court conclude d the trial court err ed in requiring 100% Ex chang e

- r elated activity to stay litigation and compel arbitration. Id. at 261. ¶ 17 I n Stathis
, which the trial court in the instant matter discusses extensively in its order
, the defe ndants enter ed int o an agr eeme nt with the pl ainti ff to manag e profit cente rs i nvolving floor broker ag e and clea

ring service s at the Chicag o Boa rd Options E x chang e (CBO E). Stathis
, 177 I ll. App. 3d at 416. The ag ree ment included languag e that the parties ag ree d to comply with all CBOE rules as well as a venue provision. Following a dispute o v er eac h partie s ’ perf

ormanc e, the defe ndants wer e terminated. One of the defe ndants filed a

-5-complaint for injunctive relief and motion for temporar y restra in i ng order

. After the defe ndant’s complaint was voluntarily dismiss ed, the plaintiff followed with its own cause of ac tion alleg ing br eac h of their a g ree ment. Id. at 416. ¶ 18 The trial court de nied a stay of arbitration afte r t he defenda nts invoked t he C BO E rule

on arbitration. This co u rt aff irmed, noting that “[r]ul es of a stock exchang e constitute a contra ct b et we en all members of the ex chang e; t he arbitration provisions embodied in the rules have contra ctual validity .” Id. at 418. This c ourt reje cted the plaintiff’s argument that the venue provision of their ag ree ment cou l d o v er come the arbitration provisions of their
ag ree ment and the CBOE r ules. The court also noted the parties’ activities involved interstate

commerc e and the Fe dera l Arbitration Act provided further support for compelling arbitration. Id. at 419. ¶ 19 Def

endants contend that Stathis require s follow i n g Ru l e 6 0 0 b as ed o n p l ai n t i ff’s alleg ations co n ce rning his and the parties’ CBOT memberships. They argue that the trial court’s citation to the venue provision of the Oper ating Ag ree ment to bolster its opinion was in error under Stathis . They

continue to ar g ue that, as stated under Mullins , Rule 600 must be followed if the actions complained of stem from Ex chang e-r elated business. Def endants contend that plaintiff’s claims conce rning defe ndants’ ac tions and use of plaintiff’s capital contribution are clea

rly Ex chang e-r elated a

nd conclude that arbitra

tion is required. ¶ 20 Whil e defenda nts d ec ry t h e t rial court’s failure to examine the facts and allegations of this case under eac h subsection of Rule 600, we conduct our revie w de novo and ag ree with plaintiff that the trial court proper ly deter mined that this matter falls outside of the scope of Rule 600. We ag ree with defe ndants that Stathis and Mullins require following CBOT rules for disputes betwe en member s on Ex chang e-r elated matters. Howe ver, both of the se ca ses involved disputes conce rningactivities that wer e dire ctly Ex chang e-r elated. ¶ 21 The United States District Court for the Norther n District of I llinois examined Rule 600 and Mullins and not ed t h at Rule 600 “does not compel arbitration of all inter-membe r disputes but rathe r is limit ed to controve rsies that ‘ar ise[ ] out of the Ex chang e business of’ the member parties.” Zechman v. Merrill Lynch, Pierce

, Fenne r & Smith
, Inc.
, 742 F. Supp. 1359, 1367 (N.D. I ll. 1990). Zechman involved a reta liatory discharg e claim arising from the plaintiff’s discharg e from employ ment in reta liation for his objections to cer tain trading
prac tices by the defe ndant in violation of CBOT’ s rules. Id. at 1368. Whil e the court stated that a broad view of the “ar ising under” languag e of the rule would be appropr iate under the holding in Mullins and the lac k of ava ilable authority to suppor t a narr ow view of the rule, the court noted that the plaintiff’s claim rested on the propriety of the trading prac tices of the defe ndant–business direc tly related t o the Ex chang e. Accordingly
, it held t hat t he claim at issue was less attenuate d than that in Mullins and it found arbitration was require d b y t he Rule. Id. at 1369. ¶ 22 This case involves a dispute over the terms of the employ ment contra ct and defe ndants’ withholding of funds alleg edly owed p l ai n t i ff. Unlike Zechman
, the subject matter is not direc tly Ex chang e-r elated, but is more attenuate d than that in Mullins and Stathis

. There fore
, we consider the provisions of Rule 600 and whethe r plaintiff’s employ ment claims are arbitra ble issues.

-6-¶ 23 The t ri al co u rt aff irmatively discussed the first subsection of Rule 600 and prope rly

conc luded that plaintiff’s claims did not “re late to or arise out of any transac tion on or subje ct t o the rules of the Ex chang e.” Plaintiff’s claims are based on brea ch of an emplo y m en t co n trac t and not related to or arising out of an Ex chang e transac tion. Acc ording ly
, this subsection does not compel arbitration. L ikewise, with respe ct to subsection 3 of Rule 600, plaintiff’s claims do not relate to the enfor cea bility of noncompete clause s, terms of employ

ment on the trading floor, or financ ial arr ang ements relating to the resolution of err or trade s. There fore
, under subsection 3 of Rule 600 and this subsection does not compel ar

bitration in this case. ¶ 24 As noted by defe ndants, the trial court did not specific al l y d i s cu s s t h e p ro v ision of subsection 2 of Rule 600, but, while closer on the fac ts, this provisi o n d o es n ot compel arbitration o f p l ai n t i ff’ s claims. Plaintiff’s claims are cente red on the pay ment of his
contra cted wa g es and the return of his c apital contribution per the ag ree ments betwee n the parties. Pl aintiff does not raise a lleg ations conce rning owner ship of, or interests i n trading rig hts. As the trial court c oncluded, plaintiff se eks dama g es for defe ndants’ alleg ed fa ilure
to comply with the terms of his employ ment contra ct and to return his funds. Unlike Stathis and Mullins
, plaintiff’s complaint does not have a direc t relation to Ex cha n ge activit y

. There fore
, the c o n s id e r ations supporting arbitration do not mandate arbitration in this matter. ¶ 25 Acc ording ly
, as conclu d ed b y t h e t ri al co urt, beca use the Oper ating Ag ree ment and Service s Ag re em en t do not specific ally require arbitration for such non-Exchang e-r elated activities as employ

ment issues, arbitration i s n o t require d. We also ag ree with plaintiff’s position that the dispute-re solution section of defe ndant’s Oper ating Ag ree ment, which, as previously elucidate d in this opinion, contains speci fi c p ro visions for venue, supports the conclusion that plaintiff’s brea ch of contra ct claims be resolved in a state or fede ral court in Cook County
, I llinois

. There fore
, the trial court’s denial of def en d an t ’s motion to compel arbitration and stay proce eding s is aff irmed. This matter is rema nded for further proce eding s.

¶ 26 I I I . CONCL USI ON ¶ 27 For

the af oreme ntioned rea sons, the decision of the tr ial court is af firmed. ¶ 28 Affir

med.

-7-