ILLINOIS OFFICIAL REPORTS

Appellate Court

Bovay v. Sears, Roebuck & Co., 2013 IL App (1st) 120789

Appellate Court

Caption

ARIN A . BOVAY, Individually and on Behalf of All Others Similarly

Situated, Plaintiffs-Appellees, v. SEARS, ROEBUCKANDCOMPANY,

Defendant-Appellant.

 District & No. First District, Sixth Division

Docket No. 1-12-0789

Filed July 19, 2013

Held

(Note: This syllabus

constitutes no part of

the opinion of the court

but has been prepared

by the Reporter of

Decisions for the

convenience of the

reader.)

The order denying defendant’s motion to compel arbitration of plaintiffs’

putative class action alleging that defendant injured plaintiffs by

disclosing confidential data to third parties, including the numbers of

credit cards defendants had issued to plaintiffs and the balances on those

accounts, was affirmed on the ground that defendant’s request was

untimely and the right to arbitrate had been waived, since defendant had

a known right to arbitration when plaintiffs’ actions were filed, there was

no showing that the assertion of the right to arbitration would have been

futile, and defendant’s litigation of the case for many years before

requesting arbitration prejudiced plaintiffs.

Decision Under 

Review

Appeal from the Circuit Court of Cook County, Nos. 01-CH-18096, 02-

CH-4693, 03-CH-7605 cons.; the Hon. Richard J. Billik, Judge,

presiding.

Judgment Affirmed.
Counsel on

Appeal

Francis A. Citera, Jane B. McCullough, and Paul J. Ferak, all of

Greenberg Traurig LLP, of Chicago, for appellant.

Ben Barnow, Sharon Harris, and Erich P. Schork, all of Barnow &

Associates, P.C., Norman A. Rifkind, Leigh Lasky, and Amelia S.

Newton, all of Lasky & Rifkind, Ltd., and William J. Harte, all of

Chicago, and BonnyE. Sweeney and Carmen A. Medici, both of Robbins

Geller Rudman & Dowd LLP, of San Diego, California, for appellees.

Panel JUSTICE REYES delivered the judgment of the court, with opinion.

Presiding Justice Lampkin and Justice Gordon concurred in the judgment

and opinion.

OPINION

¶ 1 In this interlocutory appeal brought pursuant to Illinois Supreme Court Rule 307(a)(1)

(eff. Feb. 26, 2010), defendant Sears, Roebuck & Company (Sears) seeks the reversal of an

order of the circuit court of Cook County denying its motion to compel arbitration of claims

brought by plaintiffs in a consolidated class action. Sears maintains the circuit court erred in

ruling Sears waived its right to arbitrate the claims and untimely demanded arbitration,

arguing a United States Supreme Court opinion issued in 2011 represented a significant

change in the law justifying its decision to seek arbitration years after plaintiffs filed their

respective complaints. For the following reasons, we affirm.

¶ 2 BACKGROUND

¶ 3 The limited record on interlocutory appeal submitted by Sears and supplemented by

plaintiffs fails to include the plaintiffs’ initial complaints in this matter. Nevertheless, the

record discloses plaintiffs Arin A. Bovay, Nancy Woods and Elizabeth Turner filed a

putative class action complaint against Sears in 2001 (Bovay lawsuit). Plaintiffs Mark

Triezenberg and Mary Lawson filed a putative class action complaint against Sears in 2002

(Triezenberg lawsuit). Plaintiffs Patricia Clark, Terrel Gore and Mary Rodriguez filed a

putative class action complaint against Sears in 2003 (Clark lawsuit). These complaints, as

subsequently amended, each alleged the respective plaintiffs were Sears credit card holders

who were injured when Sears unlawfully disclosed confidential data, including credit card

numbers and account balances, to third parties. The complaints alleged causes of action

including: (1) violations of the Illinois Consumer Fraud and Deceptive Business Practices

Act (815 ILCS 505/1 et seq. (West 2000)); (2) intrusion upon seclusion; (3) public disclosure

of private facts; and (4) unjust enrichment. On April 25, 2002, the circuit court entered an

order consolidating the Bovay lawsuit with the Triezenberg lawsuit. On May 13, 2003, the

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circuit court entered an order consolidating the Clark lawsuit with the Bovay lawsuit.

¶ 4 Depositions of the plaintiffs conducted by Sears disclose each of these named plaintiffs

was a Sears credit card holder prior to 2000 through the end of 2003, with the exception of

Woods, who stopped receiving credit from Sears in 2000. The credit card agreement 1

between Sears and plaintiffs in effect as of March 2000 provides in part:

“Section 22. ARBITRATION. Any and all claims, disputes or controversies of any

nature whatsoever (whether in contract, tort, or otherwise) arising out of, relating to, or

in connection with: (a) this Agreement; (b) any prior Agreement you may have had with

us ***; (c) the application for the Account, this Agreement or any prior agreement; (d)

the relationships which result from this Agreement or anyprior agreement (including any

relationship with us ***); or (e) the validity, scope or enforceability of this arbitration

section or this Agreement or any prior agreement *** shall be resolved, upon your

election or our election, by final and binding arbitration before a single arbitrator, on an

individual basis without resort to any form of class action, except that each party retains

the right to seek reliefin a small claims court, on an individual basis without resort to any

form of class action, for claims within the scope of its jurisdiction.

Arbitration may be elected at any time, regardless of whether a lawsuit has been filed

or not, unless such a lawsuit has resulted in a final judgment or the other party would

suffer substantial prejudice as a result of the delay in demanding arbitration. The

arbitrator shall be a lawyer or retired judge with not less than 15 years’ experience in the

practice of law. This arbitration agreement will not apply to claims previously asserted,

or which are later asserted, in lawsuits filed before the effective date of this Agreement,

but it will apply to all other claims, even if the facts and circumstances upon which the

claims are based existed before the effective date of this Agreement ***.

All arbitrations shall be administered by the National Arbitration Forum (‘NAF’) in

accordance with the Code of Procedure in effect at the time the claim is filed ***.

Any arbitration you attend will take place at a location within the federal judicial

district that includes your billing address at the time the claim is filed. We will advance

either all or part of the fees on your behalf to the NAF and the arbitrator if you send us

a written request. The arbitrator will decide whether you, us or any toher party will

ultimately be responsible for these fees. You agree to return the amount of any advanced

fees as finally allocated by the arbitrator. The arbitrartor shall apply relevant substantive

law and applicable statutes of limitation and shall provide written, reasoned findings of

fact and conclusions of law.

This arbitration section of this Agreement is made pursuant to a transaction involving

interstate commerce and shall be governed by the Federal Arbitration Act ***. If any

portion of this arbitration section is deemed invalid or unenforceable, it shall not

invalidate the remaining portions of this arbitration section ***.

In addition, motions filed by the parties indicate Bovay withdrew his claims in 2009 for 1

health reasons.

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YOUUNDERSTAND AND AGREE, AND WE UNDERSTAND AND AGREE,

THAT BECAUSEOFTHIS ARBITRATION CLAUSE NEITHER YOU NOR WE

WILL HAVE THE RIGHT TO GO TO COURT EXCEPT AS PROVIDED

ABOVE OR TO HAVE A JURY TRIAL, OR TO PARTICIPATE AS A

REPRESENTATIVE OR MEMBER OF ANY CLASS OF CLAIMANTS

PERTAINING TO ANY CLAIM.

Section 29. GOVERNING LAW. This Agreement and your Account will be

governed by and interpreted in accordance with the laws of the United States and, to the

extent governed by state law, the laws of the State of Arizona, regardless of where you

live or where you use the Account. This Agreement is entered into in Arizona.”

¶ 5 The credit card agreement between Sears and plaintiffs in effect as of March 2003 differs

in several respects from the version in effect in 2000. The 2003 agreement places “the

establishment, operating, handling or termination of the Account” and “any transaction or

attempted transaction relating to the Account” expressly within the scope of the arbitration

provision. The arbitrator need only have 10 years’ experience in the practice of law.

Moreover, the arbitration provision specifies it will not apply to “claims of a class certified

prior to the effective date of [the] Agreement.” The arbitration provision will apply to all

other claims, including class claims not yet certified. In addition, the 2003 version of the

credit card agreement further provides that arbitration will be administered by NAF, the

American Arbitration Association or JAMS, in accordance with their respective rules.2

¶ 6 Furthermore, the 2003 version of the credit card agreement provides:

“Whoeverfiles the arbitration pays the initial filing fee. If we file, we pay; if you file; you

pay, unless you get a fee waiver under the applicable rules of the arbitration firm. If you

have paid the initial filing fee and you prevail, we will reimburse you for that fee. If there

is a hearing, we will pay any fees of the arbitrator and arbitration firm for the first day of

that hearing. All other fees will be allocated as provided by the rules of the arbitration

firm and applicable law. However, we will advance or reimburse your fees if the

arbitration firm or arbitrator determines there is good reason for us to do so, or if you ask

us in writing and we determine there is a good reason for doing so. Each party will bear

the expense of that party’s attorneys experts and witnesses, and other expenses,

regardless of which party prevails, but a party may recover any or all expenses from

another party if the arbitrator, applying applicable law, so determines.”

¶ 7 Sears answered plaintiffs’ complaints, as amended, and asserted affirmative defenses. In

the Bovay lawsuit, Sears asserted plaintiffs’ claims were barred by: a statute of limitation;

laches, waiver and estoppel; and various failures to allege sufficient facts to state claims for

relief. In the Triezenberg and Clark lawsuits, Sears asserted similar defenses and also

asserted the alleged disclosure of customer data was protected by federal law. Sears did not

assert a right to arbitration in these answers. Subsequently, plaintiffs further amended their

NAF, as noted in the Sears agreements, is an acronym for the National Arbitration Forum.

2

JAMS was an acronym for Judicial Arbitration and Mediation Services, Inc. See

http://www.jamsadr.com/about-the-jams-name/.

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complaints in all three lawsuits to seek punitive damages. Sears again answered and raised

affirmative defenses to the claims for punitive damages, but did not assert a right to arbitrate

plaintiffs’ claims.

¶ 8 The record on appeal does not contain the motions to dismiss Sears filed pursuant to

section 2-615 of the Code of Civil Procedure (Code) (735 ILCS 5/2-615 (West 2004)). The

supplemental record on appeal includes a June 9, 2005, order granting the motions to dismiss

in part and denying them in part. In the order, the circuit court struck allegations regarding

the misappropriation of names and likenesses from the invasion of privacy claim in the

Bovay lawsuit. The circuit court also granted the motion to dismiss the breach of contract

claims in the Triezenberg and Clark lawsuits without prejudice.

¶ 9 The record on appeal also does not contain plaintiffs’ consolidated motion for class

certification. The supplemental record on appeal includes aFebruary19, 2008, order granting

plaintiffs’ consolidated motion for class certification in part, denying the motion in part, and

directing plaintiffs to revise their proposed class definition, which the circuit court found to

be overly broad. The supplemental record on appeal also includes an April 7, 2008, order

approving a class definition of all persons and entities in the United States, excluding

members of a California class action, who, between September 9, 1995, and June 22, 2001,

held a Sears credit card and had certain information disclosed to any third-party vendor with

whom Sears had agreements under which Sears would receive money, directly or indirectly

from sales made by the third parties to Sears credit card holders.

¶ 10 Sears petitioned for review of the circuit court’s certification of the class. The petition

was denied by this court and later by the Illinois Supreme Court. See Clark v. Sears, Roebuck

& Co., 229 Ill. 2d 664 (2008) (table).

¶ 11 The record on appeal does not contain Sears’s motion to seek review in this court

pursuant to Illinois Supreme Court Rule 308(a) (eff. Feb. 1, 1994). The supplemental record

on appeal, however, includes a January 13, 2009, order denying said motion. The

supplemental record on appeal also includes an April 30, 2009, order approving plaintiffs’

plan for notice to the class, which included the publication of a press release in one weekend

and one weekday edition of the USA Today newspaper, as well as the establishment of a

website on the Internet allowing public access to the operative complaints and orders entered

in the litigation.

¶ 12 On August 19, 2011, Sears filed a motion to compel arbitration and stay the proceedings

pursuant to section 3 of the Federal Arbitration Act (FAA) (9 U.S.C. § 3 (1994)). Sears

asserted the United States Supreme Court decision in AT&T Mobility, LLC v. Concepcion,

563 U.S. ___, 131 S. Ct. 1740 (2011), established for the first time that Sears had a known,

existing right to compel arbitration of plaintiffs’ individual claims and avoid class arbitration.

According to the motion, Sears served demands for arbitration on plaintiffs on August 10,

2011, and was notified of plaintiffs’ refusal to arbitrate on August 17, 2011.

¶ 13 Plaintiffs filed a response in opposition to the motion to compel arbitration on September

27, 2011. Plaintiffs argued Sears waived any right to arbitration by actively and aggressively

litigating these cases for nearly a decade. Plaintiffs also argued Sears could not demonstrate

asserting the right to arbitrate would have been futile under Illinois or Arizona law during

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the period prior to the Concepcion decision. Plaintiffs further argued Concepcion did not

excuse Sears’s waiver of arbitration. In addition, plaintiffs argued: (1) the 2003 version of

the Sears credit card agreement did not apply to this litigation; (2) the 2000 version of the

agreement was unenforceable because NAF was barred from arbitrating cases between

consumers and businesses by a Minnesota consent decree; and (3) Sears’s arbitration clause

is unconscionable under both Arizona and Illinois law.

¶ 14 Sears filed a reply in support of the motion on November 1, 2011. Plaintiffs filed their

surreply opposing arbitration on November 28, 2011.

¶ 15 The record further contains a transcript of proceedings for August 11, 2011, regarding

the motion to compel arbitration, as well as a motion by Sears to strike exhibits related to

plaintiffs’ motion for summary judgment. Sears objected to plaintiffs’ use of a settlement 3

agreement apparently reached in the California class action to support their motion for

summary judgment. The court ruled it would disregard any use of the settlement agreement

to imply any liability of Sears in the matter. The court did not rule on the motion to compel

arbitration at that time.

¶ 16 On February 22, 2012, after hearing argument, the circuit court denied the motion to

compel arbitration. The circuit court recited the reasons for its decision. The circuit court

found that in the years between the filing of plaintiffs’ complaints and the decision in

Concepcion, there was “extensive litigation” in this case, involving dispositive motions

challenging the pleadings, answers and affirmative defenses, the motion for class

certification (which required discovery, briefing and a hearing), attempts to seek review of

the class certification, the parties’ cross-motions for partial or total summary judgment, and

additional discovery matters which remained pending. The circuit court also referred to

“conferences, including those even held by the [c]ourt for the purposes of trying to resolve

this matter at an early date.” Sears failed to file any affidavit to explain why it had not sought

arbitration at an earlier date.

¶ 17 The circuit court rejected the argument that it would have been futile for Sears to assert

their right to arbitrate prior to the Concepcion decision. The circuit court found Sears acted

inconsistentlywith its right to arbitrate in the litigation. The circuit court also found plaintiffs

would suffer prejudice at this stage of the litigation if the motion to compel arbitration was

granted, “particularly in view of the litigation efforts, as well as mediation efforts, that the

parties have engaged in throughout this litigation.” Accordingly, the circuit court ruled Sears

waived its right to arbitrate the claims involved in this litigation.

¶ 18 In addition, the circuit court ruled plaintiffs’ claims were governed by the 2003 version

of the Sears credit card agreement, with the exception of Woods, whose claims were

governed by the 2000 version of the agreement. The circuit court further ruled plaintiffs

failed to demonstrate the credit card agreements were unconscionable under either Arizona

Plaintiffs assert they filed a consolidated motion for summary judgment on July 22, 2010,

3

and Sears filed its response and cross-motion for summary judgment on March 30, 2011. Plaintiffs,

however, cite to their own response opposing the motion to compel arbitration, which does not

mention these dates.

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or Illinois law. Moreover, the court specifically ruled the unavailability of NAF as a forum

did not render the 2000 agreement as unenforceable.

¶ 19 The circuit court entered a written order on February 22, 2012, denying the motion to

compel arbitration and stay proceedings. On March 22, 2012, Sears filed a notice of

interlocutory appeal to this court.

¶ 20 DISCUSSION

¶ 21 On appeal, Sears contends the circuit court erred in ruling Sears waived its right to

arbitrate and its assertion of the right to arbitrate was untimely. Plaintiffs argue the circuit

court did not err on these points. Plaintiffs also assert alternate grounds to affirm, arguing,

as they did in the circuit court: (1) the 2003 version of the Sears credit card agreement did

not apply to this litigation; (2) the 2000 version of the agreement was unenforceable because

NAF was barred from arbitrating cases between consumers and businesses; and (3) Sears’s

arbitration clause is unconscionable under both Arizona and Illinois law.

¶ 22 I. The Standard of Review

¶ 23 The parties disagree regarding the properstandard of review of this interlocutory appeal.

Sears maintains the standard of review is de novo, while plaintiffs argue the standard is

whether the trial court abused its discretion in denying the motion to compel arbitration.

¶ 24 This court has jurisdiction to review the circuit court’s order denying the motion to

compel arbitration pursuant to Illinois Supreme Court Rule 307(a)(1) (eff. Feb. 26, 2010).

See, e.g., Glazer’s Distributors of Illinois, Inc. v. NWS-Illinois, LLC, 376 Ill. App. 3d 411,

419 (2007) (citing Weiss v. Waterhouse Securities, Inc., 208 Ill. 2d 439, 448 (2004)). The

rule generally allows for appeals from denial of injunctive relief. Glazer’s Distributors of

Illinois, Inc., 376 Ill. App. 3d at 423. This court has “split on the issue of whether an abuse

of discretion standard or de novo standard applies to cases such as this one.” Id. A number

of decisions from the First District of this court have determined an abuse of discretion

standard applies to a review of the circuit court’s decision regarding waiver of arbitration

rights. Id. (and cases cited therein). In contrast, “[t]he Second, Third, and Fifth Districts of

this court have determined that a de novo review is appropriate where the circuit court has

determined the issue of waiver of the right to arbitration because the circuit court in such

instances reviews undisputed facts and makes a waiver determination as a matter of law.” Id.

(and cases cited therein).

¶ 25 This split in authority may be reconciled by reference to general principles established

by our supreme court. “[I]n an interlocutory appeal, the scope of review is normally limited

to an examination of whether or not the trial court abused its discretion in granting or

refusing the requested interlocutory relief.” In re Lawrence M., 172 Ill. 2d 523, 526 (1996).

“However, where the question presented is one of law, a reviewing court determines it

independently of the trial court’s judgment.” Id. Moreover, “ ‘where the exercise of

discretion has been frustrated by the application of an erroneous rule of law, review is

required to permit the exercise in a manner “consistent with the law.” ’ ” Loyola Academy

v. S&S Roof Maintenance, Inc., 146 Ill. 2d 263, 274 (1992) (quoting People v. Brockman,

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143 Ill. 2d 351, 363 (1991)).

¶ 26 Accordingly, in interlocutory appeals of orders denying a motion to compel arbitration,

questions of law are reviewed de novo, while any findings of fact are reviewed for an abuse

of discretion in light of a proper understanding of the law. This approach is generally

consistent with the standards of review applied by federal courts in cases involving the

waiver of the right to arbitrate. See LAS, Inc. v. Mini-Tankers, USA, Inc., 342 Ill. App. 3d

997, 1001 (2003) (and cases cited therein). De novo consideration means we perform the

same analysis a trial judge would perform. Khan v. BDO Seidman, LLP, 408 Ill. App. 3d 564,

578 (2011). An abuse of discretion occurs only when the ruling is arbitrary, fanciful, or

unreasonable, or when no reasonable person would take the same view. See People v.

Ortega, 209 Ill. 2d 354, 359 (2004); People v. Illgen, 145 Ill. 2d 353, 364 (1991).

¶ 27 II. Waiver of the Right to Arbitrate

¶ 28 The FAA governs the enforceability of arbitration agreements in contracts involving

interstate commerce. In re Toyota Motor Corp. Hybrid Brake Marketing, Sales, Practices

& Products Liability Litigation, 828 F. Supp. 2d 1150, 1157 (C.D. Cal. 2011) (Toyota); see

9 U.S.C. § 1 et seq. (1994). Section 3 of the FAA provides:

“If any suit or proceeding be brought in any of the courts of the United States upon

any issue referable to arbitration under an agreement in writing for such arbitration, the

court in which such suit is pending, upon being satisfied that the issue involved in such

suit or proceeding is referable to arbitration under such an agreement, shall on

application of one of the parties stay the trial of the action until such arbitration has been

had in accordance with the terms of the agreement, providing the applicant for the stay

is not in default in proceeding with such arbitration.” 9 U.S.C. § 3 (1994).

Generally, under the FAA, “courts shall stay further proceedings and order arbitration if: (1)

a valid agreement to arbitrate exists, and the (2) the agreement encompasses the dispute at

issue.” Toyota, 828 F. Supp. 2d at 1157. The first issue is generally a question of state law,

while the second issue is generally one of federal substantive law. Id. at 1157-58. “Although

4

the FAA favors the enforcement of private arbitration agreements, 9 U.S.C. § 2, the court

may refuse to enforce an arbitration agreement on the ground that the party seeking

enforcement has waived such right.” Toyota, 828 F. Supp. 2d at 1162 (and cases cited

therein). Nevertheless, “as a matter of federal law, any doubts concerning the scope of

arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is

the construction of the contract language itself or an allegation of waiver, delay, or a like

defense to arbitrability.” Moses H. Cone Memorial Hospital v. Mercury Construction Corp.,

460 U.S. 1, 24-25 (1983).

¶ 29 Federal courts considering purported waivers of the right to arbitrate have employed a

Regarding the second issue, the parties may contract otherwise. See Volt Information 4

Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University, 489 U.S. 468, 479 (1989).

In this case, however, both versions of the Sears credit card agreement in this case contain arbitration

clauses which refer to the FAA.

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variety of overlapping approaches to the issue. E.g., In re Pharmacy Benefit Managers

Antitrust Litigation, 700 F.3d 109, 117 (3d Cir. 2012) (and cases cited therein); Louisiana

Stadium &Exposition District v. Merrill Lynch, Pierce, Fenner &Smith, Inc., 626 F.3d 156,

159 (2d Cir. 2010) (and cases cited therein); Johnson Associates Corp. v. HL Operating

Corp., 680 F.3d 713, 717 (6th Cir. 2012) (and cases cited therein); In re Tyco International

Ltd. Securities Litigation, 422 F.3d 41, 44 n.2 (1st Cir. 2005); Fisher v. A.G. Becker Paribas

Inc., 791 F.2d 691, 694 (9th Cir. 1986). Indeed, some of these federal courts stress a

determination of waiver must be based on the circumstances and context of the particular

case. In re Pharmacy Benefit Managers Antitrust Litigation, 700 F.3d at 118; In re Tyco

International Ltd. Securities Litigation, 422 F.3d at 44 (citing Cabinetree of Wisconsin, Inc.

v. Kraftmaid Cabinetry, Inc., 50 F.3d 388, 390 (7th Cir. 1995)).

¶ 30 In this litigation, Sears adopts the approach taken by the Ninth Circuit, which holds “[a]

party seeking to prove waiver of a right to arbitration must demonstrate: (1) knowledge of

an existing right to compel arbitration; (2) acts inconsistent with that existing right; and (3)

prejudice to the partyopposing arbitration resulting from such inconsistent acts.”Fisher, 791

F.2d at 694. Plaintiffs have not urged this court to adopt any alternative approach, but

structure their response to meet the points Sears asserts. Although federal case law

demonstrates a number of factors may be considered, the Ninth Circuit’s approach is

sufficiently broad for the purposes of this opinion. Accordingly, we turn to consider the

factors discussed in Fisher.

¶ 31 A. Knowledge of an Existing Right to Arbitrate

¶ 32 Sears does not deny the plain language of the agreements at issue grants Sears a right to

demand arbitration. Rather, Sears argues it could not have successfully relied on the

agreements to demand arbitration until the Supreme Court issued its decision in Concepcion.

Thus, Sears asserts until the arrival of Concepcion, Sears did not “know” it had the right to

demand arbitration.

¶ 33 In this regard, Sears believes this case is similar to Fisher. The Ninth Circuit in Fisher

examined whether a defendant’s decision not to file a motion to compel arbitration prior to

the Supreme Court’s rejection of the intertwining doctrine–which held when it was

impractical or impossible to separate nonarbitrable from arbitrable contract claims, a court

should deny arbitration in order to preserve its exclusive jurisdiction over federal securities

claims–constituted waiver. See Fisher, 791 F.2d at 695. Prior to the Supreme Court’s

decision in Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213 (1985), the Ninth Circuit had

approved of the intertwining doctrine and had said in De Lancie v. Birr, Wilson & Co., 648

F.2d 1255 (9th Cir. 1981), arbitration should be denied where common law claims are

intertwined with securities law violations. Fisher, 791 F.2d at 693. The defendant relied on

the doctrine and the Ninth Circuit’s decision in De Lancie in deciding not to file a motion

to compel arbitration, because it would have been “futile” prior to the Supreme Court’s

ruling in Byrd. Id. The Ninth Circuit concluded there was no waiver in Fisher because the

defendant was entitled to rely on the intertwining doctrine and that court’s prior decisions

in deciding it would be futile to file a motion to compel arbitration. Id. Because the

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arbitration agreement was unenforceable before the Supreme Court’s decision in Byrd, the

Ninth Circuit held the defendant did not act inconsistently with a known existing right to

compel arbitration and had not waived the right to arbitration. Id. at 697.

¶ 34 Sears argues Concepcion wrought a similar change in the law. In Discover Bank v.

Superior Court, 113 P.3d 1100 (Cal. 2005), the California Supreme Court held certain class

action arbitration waivers were unconscionable under California law and should not be

enforced. Id. at 1110 (quoting Cal. Civil Code § 1668 (West 1998)). In Concepcion, the

United States Supreme Court abrogated the holding in Discover Bank, explaining the

“overarching purpose” of the FAA is to “ensure the enforcement of arbitration agreements

according to their terms so as to facilitate streamlined proceedings” and requiring the

availability of classwide arbitration “interferes with fundamental attributes of arbitration.”

Concepcion, 563 U.S.___, 131 S. Ct. at 1748. Accordingly, the ConcepcionCourt concluded

the Discover Bank rule was preempted by the FAA. Id. at ___, 131 S. Ct. at 1753.

¶ 35 Sears argues, similar to the defendant in Fisher, it did not act inconsistentlywith a known

existing right to compel arbitration. The Ninth Circuit, however, rejected a similar argument

after the Concepcion decision. In Gutierrez v. Wells Fargo Bank, NA, 704 F.3d 712, 721 (9th

Cir. 2012), the court ruled the futility of an arbitration demand prior to Concepcion was not

clear cut. The Ninth Circuit noted “[i]n contemporaneous consumer litigation, litigants did

succeed in compelling arbitration despite the existence of the Discover Bank rule.” Id. (citing

cases). The Gutierrez court concluded, “[e]specially because the [customer account

agreement] did not prohibit class arbitration, a motion to compel arbitration was not

inevitably futile under the prescribed case-by-case analysis.” Id.

¶ 36 Similarly, in Garcia v. Wachovia Corp., 699 F.3d 1273 (11th Cir. 2012), the Eleventh

Circuit rejected the argument that any motion to compel arbitration would have been futile

before the Supreme Court decided Concepcion. According to Garcia, “absent controlling

Supreme Court or circuit precedent foreclosing a right to arbitrate, a motion to compel

arbitration will almost never be futile.” Id. at 1278. The Garcia court also rejected a more

lenient “unlikely to succeed” standard, reasoning it would only encourage litigants to delay

arbitration and undermine one of the basic purposes of arbitration, i.e., the fast inexpensive

resolution of disputes. Id. at 1279. Adopting the Eighth Circuit’s position, the Eleventh

Circuit concluded “a party must move to compel arbitration whenever ‘it should have been

clear to [the party] that the arbitration agreement was at least arguably enforceable.’ ” Id. at

1278 (quoting Southeastern Stud & Components, Inc. v. American Eagle Design Build

Studios, LLC, 588 F.3d 963, 967 (8th Cir. 2009)).

¶ 37 The District of Coulmbia Circuit took an analogous position in National Foundation for

Cancer Research v. A.G. Edwards & Sons, Inc., 821 F.2d 772 (D.C. Cir. 1987), which, like

Fisher, addressed waiver of the right to arbitrate prior to the Byrd Court’s rejection of the

“intertwining doctrine.” The District of Coulmbia Circuit noted it had never adopted the

“intertwining doctrine,” either explicitly or by implication. Id. at 776. Accordingly, the

defendant “had no reason to believe that its right to arbitration was unenforceable.” Id. at

776-77. Moreover, as the District of Coulmbia Circuit observed, “only three circuits had

followed the intertwining doctrine, while three other circuits had expressly rejected it.” Id.

at 777 (citing Byrd, 470 U.S. at 216-17). The court ruled: “[i]n this legal climate, we fail to

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see how [defendant’s] assertion of its right to arbitrate the claims covered by its agreement

with [plaintiff] would have been futile.” Id.

¶ 38 The cases cited by Sears do not compel a contrary conclusion. Sears relies on Curtis

Publishing Co. v. Butts, 388 U.S. 130 (1967), which considered whether Curtis’s failure to

raise constitutional defenses in a libel case prior to New York Times Co. v. Sullivan, 376 U.S.

254 (1964), amounted to a knowing waiver. The Court generally stated “the mere failure to

interpose such a defense prior to the announcement of a decision which might support it

cannot prevent a litigant from later invoking such a ground.” Curtis Publishing Co., 388 U.S.

at 143. In rejecting the waiver argument, however, the Court reasoned in relevant part:

“Although our decision in New York Times did draw upon earlier precedents in state law

[citation], and there were intimations in a prior opinion and the extra-judicial comments

of one Justice, that some applications of libel law might be in conflict with the guarantees

of free speech and press, there was strong precedent indicating that civil libel actions

were immune from general constitutional scrutiny. Given the state of the law prior to our

decision in New York Times, we do not think it unreasonable for a lawyer trying a case

of this kind, where the plaintiff was not even a public official under state law, to have

looked solely to the defenses provided by state libel law.” Id. at 143-44.

Thus, the Court rejected waiver because the state of the law prior to New York Times

indicated civil libel actions were immune from general constitutional scrutiny. Accordingly,

Curtis does not support Sears’s position.

¶ 39 Sears also cites Big Horn County Electric Cooperative, Inc. v. Adams, 219 F.3d 944, 954

(9th Cir. 2000). In that case, however, the Ninth Circuit observed Strate v. A-1 Contractors,

520 U.S. 438 (1997), implicitly overruled Burlington Northern R.R. Co. v. Blackfeet Tribe

of the Blackfeet Indian Reservation, 924 F.2d 899, 904 (9th Cir. 1991). Big Horn County

Electric Cooperative presented a situation similar to Curtis, in which it would have been

futile to assert an argument in light of the then-prevailing case law. Thus, Big Horn County

Electric Cooperative is also consistent with the Ninth Circuit’s later opinion in Gutierrez.

¶ 40 Sears next cites Ackerberg v. Johnson, 892 F.2d 1328 (8th Cir. 1989), in which the

Eighth Circuit stated “especially in cases in which any delay in making a motion to compel

arbitration is based on unfavorable or uncertain law, waiver should not be found.” Id. at

1332. More recently, in Southeastern Stud &Components, Inc., the Eighth Circuit discussed

this aspect of Ackerberg:

“AEDBS points to Ackerberg v. Johnson, 892 F.2d 1328 (8th Cir. 1989), in support

of its argument that it did not knowingly waive its right to arbitrate because the ‘delay

in filing a motion to compel arbitration was based on unfavorable or uncertain law.’

(Appellant’s Br. at 22.) In Ackerberg, the defendants failed to file a motion to compel

arbitration on a claim related to the Securities Act of 1933, 15 U.S.C. §§ 77a to 77aa, in

spite of an arbitration agreement. Ackerberg, 892 F.2d at 1332. At the time the complaint

was filed, the issue was controlled by Wilko v. Swan, 346 U.S. 427, 74 S. Ct. 182, 98 L.

Ed. 168 (1953), which prohibited arbitration of claims made under the 1933 Act.

However, after the complaint was filed, the Supreme Court reversed Wilko in Rodriguez

de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 484, 109 S. Ct. 1917, 104

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L. Ed. 2d 526 (1989). After Rodriguez de Quijas, the defendants moved to compel

arbitration on the 1933 Act claims, but the district court held that the defendants waived

their right to arbitration by acting inconsistently with their right to arbitration by

participating in the litigation process. Ackerberg, 892 F.2d at 1331. We disagreed,

explaining that before Rodriguez de Quijas, the defendants correctly relied on Wilko for

the proposition that their 1933 Act claims were not arbitrable, and a motion to compel

arbitration on those claims would have been futile. Id. at 1332. Because the defendants

moved to compel arbitration ‘as soon as the law appeared to allow an arbitration

procedure’ and because any motion to compel arbitration prior to that would have been

futile, we held that the defendants did not waive their right to arbitrate the 1933 Act

claims. Id. at 1333.” Southeastern Stud & Components, Inc., 588 F.3d at 968.

Given this discussion, it appears the Eighth Circuit no longer adheres to the Ackerberg dicta

regarding “uncertain” law. See Garcia, 699 F.3d at 1278 (quoting Southeastern Stud &

Components, Inc., 588 F.3d at 967).

¶ 41 Sears further cites Fisher, overlooking the Ninth Circuit’s subsequent rejection of its

argument in Gutierrez.

¶ 42 In addition, Sears relies on a number of unpublished federal district court decisions. In

the interest of uniformity, Illinois courts give considerable weight to the decisions of lower

federal courts interpreting federal statutes. State Bank of Cherry v. CGB Enterprises, Inc.,

2013 IL113836, ¶ 35. However, this court has often declined to consider unpublished federal

decisions. See, e.g., Horwitz v. Sonnenschein Nath & Rosenthal, LLP, 399 Ill. App. 3d 965,

976 (2010); Burnette v. Stroger, 389 Ill. App. 3d 321, 329 (2009). In this case, the published

federal appellate decisions obviate any need to consider unpublished federal district court

decisions.5

¶ 43 In short, the question of whether Sears had a known right to arbitrate turns on the

question of whether it would have been futile for Sears to invoke its right to arbitration prior

to the decision in Concepcion. Absent controlling precedent foreclosing a right to arbitrate,

a motion to compel arbitration will almost never be futile. See Garcia, 699 F.3d at 1278.

Thus, “a party must move to compel arbitration whenever ‘it should have been clear to [the

party] that the arbitration agreement was at least arguably enforceable.’ ” Id. (quoting

Southeastern Stud &Components, Inc., 588 F.3d at 967). Accordingly, we examine whether

the agreements at issue were at least arguably enforceable under the controlling law at the

outset of this litigation.

¶ 44 As previously noted, the question of whether a valid agreement to arbitrate exists is

For the purpose of completeness, we note: (1) two of the unreported decisions cited are

5

from the Northern District of California and conflict with the Ninth Circuit’s decision in Guitierrez;

(2) two more unreported decisions predate 2007 and thus cannot be cited as precedent even in federal

court (Fed. R. App. P. 32.1); (3) the remaining unreported decision, Valentine v. WideOpen West

Financial, LLC, No. 09-C-07653, 2012 WL 1021809 (N.D. Ill. Mar. 26, 2012), addresses the waiver

issue in a single paragraph and runs contrary to the detailed analyses found in the federal appellate

decisions previously discussed in this opinion.

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generally a question of state law. Toyota, 828 F. Supp. 2d at 1157-58. The credit card

agreements in this case specifically provide they are entered into in the state of Arizona and,

to the extent state law applies, the law of Arizona is to be applied. Hutcherson v. Sears

Roebuck & Co., 342 Ill. App. 3d 109, 116 (2003).

¶ 45 In its brief, Sears acknowledges “[t]here is a dearth of Arizona law addressing the

enforceability of arbitration provisions that include class action waivers.” In fact, Sears does

not cite any decision from any Arizona state court addressing the issue. Instead, Sears

discusses cases from other courts addressing the issue. Moreover, not all of these other courts

were required to attempt to apply Arizona law to decide the enforceability of the arbitration

provisions including class action waivers. Three of these cases, however, involved Sears

asserting its right to enforce arbitration agreements similar to those at issue in this litigation.

¶ 46 For example, in Vigil v. Sears National Bank, 205 F. Supp. 2d 566 (E.D. La. 2002), the

plaintiff consumer argued an arbitration clause similar to the one in this case was

unconscionable because it eliminated the right to a jury trial and the right to bring a class

action. Id. at 569. Sears argued both federal and Arizona law mandated the enforcement of

the arbitration clause. Id. The Vigil court also noted “plaintiff can cite to no court decision

that has found such clauses to be unconscionable for the argued reasons under Arizona or any

other law.” Id. at 573. Thus, relying on decisions from the Eleventh Circuit and a federal

district court in Texas, the Vigil court concluded the arbitration clause was not

unconscionable under Arizona law. Id.

¶ 47 In Szetela v. Discover Bank, 118 Cal. Rptr. 2d 862 (Cal. Ct. App. 2002), the California

Court of Appeal ruled the class action waiver in the defendant credit card company’s

arbitration agreement was both procedurally and substantively unconscionable under

California law. Faced with the options of either closing his account or accepting the credit

card company’s “take it or leave it” terms, plaintiff, the Szetela court ruled, established

procedural unconscionability despite the fact he could have simply taken his business

elsewhere. Id. at 867. The Szetela court also held the class action waiver was substantively

unconscionable because it gave the advantage to the bank, where customers such as the

proposed class members would be essentially prevented “from seeking redress for relatively

small amounts of money, such as the $29 sought by [the plaintiff].” Id. The court found this

“manner of arbitration” was harsh and unfair, and violated both the legislature’s stated policy

of discouraging unfair business practices, as well as the public policy of promoting judicial

economy, which the court noted is inherent in the procedural mechanism of the class action.

Id. at 868.

¶ 48 In Hutcherson, the issue was whether an amendment to a Sears credit card agreement

adding arbitration clauses similar to those in this case was unconscionable. Similar to Vigil,

“[n]either party cite[d] to, nor did we find, an Arizona case addressing whether an

amendment adding an arbitration agreement to a credit card agreement such as the one here

was unconscionable.” Hutcherson, 342 Ill. App. 3d at 117. This court, citing federal cases

from other jurisdictions, as well as decisions from Alabama and Ohio, ruled the addition of

the arbitration provision was not procedurally unconscionable under Arizona law. Id. at 118-

20. The court, relying on Vigil and other decisions–and rejecting the reasoning of

Szetela–also concluded the agreement, which included a class action waiver, was not so one-

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sided or oppressive as to render the agreement substantively unconscionable under Arizona

law. Id. at 124.

¶ 49 In Sears Roebuck & Co. v. Avery, 593 S.E.2d 424 (N.C. Ct. App. 2004), the court, while

acknowledging a lack of Arizona law on point, rejected the reasoning in Hutcherson and

Vigil. Instead, the Avery court relied in part on California decisions regarding standardized

contracts and modification of contracts. Id. at 429. The court concluded: “Because the

arbitration clause was a wholly new term that did not fall within the universe of subjects

included in the original agreement, Sears did not have authority under its ‘Change of Terms’

provision to condition continued use of its credit card on acceptance of the arbitration

clause.” Id. at 434.6

¶ 50 As discussed earlier, in 2005, the California Supreme Court, adopting the reasoning in

Szetela, held certain class-action arbitration waivers were unconscionable under California

law and should not be enforced. Discover Bank, 113 P.3d at 1110.

¶ 51 In Cooper v. QC Financial Services, Inc., 503 F. Supp. 2d 1266, 1286 (D. Ariz. 2007),

the federal district court considered whether a class action waiverin an arbitration agreement

was unconscionable under Arizona law. The Cooper court stated:

“It is well-established among the Arizona courts that ‘if Arizona law has not addressed

an issue, we “look approvingly to the laws of California,” especially when interpreting

a similar or identical statute. The caveat to that principle, however, is that we “follow the

California cases in so far as their reasoning is sound.” ’ ” Id. at 1285 (quoting Moore v.

Browning, 50 P.3d 852, 860 (Ariz. 2002), quoting State v. Vallejos, 358 P.2d 178, 182

(Ariz. Ct. App. 1960)).

Thus, following Szetela and Discover Bank, the judge in Cooper concluded the class action

waiver was unconscionable, severed the waiver and directed the action to proceed to class

arbitration. Cooper, 503 F. Supp. 2d at 1290-01; see also In re DirecTV Early Cancellation

Litigation, 738 F. Supp. 2d 1062, 1081 (C.D. Cal. 2010) (similarly concluding Arizona

would follow California law on this issue).

¶ 52 Sears asserts “California case law was and still is the only and most valid predictor of

how an Arizona court would decide this question under Arizona law.” Accordingly, Sears

concludes Concepcion represented a change in Arizona law excusing its delay in seeking

arbitration of the claims here.

¶ 53 The foregoing case law, however, points toward the opposite conclusion. The complaints

at issue here were filed in 2001, 2002 and 2003. During this period, there was no controlling

legal authority in Arizona regarding the enforceability of class action waivers in arbitration

agreements. Moreover, in Vigil and Hutcherson, courts purporting to apply Arizona law to

Sears credit card agreements held similar waivers were not unconscionable. Sears now

seemingly disavows the very decisions Sears sought in Vigil and Hutcherson, claiming

California law should have been applied instead. Sears overlooks Szetela was not decided

Given the nature of this case, we note in passing the Avery court also concluded in 6

dicta Sears waived its right to arbitrate by filing suit against Avery. Id. at 434-35.

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when the complaint was filed in the Bovay litigation and was not adopted by the California

Supreme Court until 2005, years after these complaints were filed. Sears also overlooks the

fact that no Arizona state court ever adopted Szetela or Discover Bank. Sears cannot

demonstrate it would have been futile for Sears to assert its right to arbitrate in these cases,

given that Sears itself successfully defended at least two of three challenges to its arbitration

agreements during the early years of this litigation. It should have been clear to Sears the

arbitration agreements were at least arguably enforceable, which should have required Sears

to move to compel arbitration.

¶ 54 In short, the circuit court did not err in ruling Sears knew of its right to arbitrate and

could have asserted it for years after these complaints were filed, but decided against

proceeding accordingly. Concepcion abrogated the holding in Discover Bank, and mayaffect

future decisions regarding class action waivers, even outside California. Nevertheless, Sears

has failed to demonstrate it would have been futile to assert its right to arbitrate prior to the

decision in Concepcion.

¶ 55 Following oral argument in this case, Sears obtained leave to cite American Express Co.

v. Italian Colors Restaurant, 570 U.S. ___, 133 S. Ct. 2304 (2013), as supplemental

authority to argue: (1) “courts must ‘rigorously enforce’ arbitration agreements according to

their terms” (id. at ___, 133 S. Ct. at 2309 (quoting Dean Witter Reynolds Inc., 470 U.S. at

221)); and (2) the United States Supreme Court “specifically rejected the argument that class

arbitration was necessary to prosecute claims ‘that might otherwise slip through the legal

system’ ” (American Express Co., 570 U.S. at ___, 133 S. Ct. at 2312 (quoting Concepcion,

563 U.S. at ___, 131 S. Ct. at 1753)).

¶ 56 Neither of these points, however, assists Sears. First, while courts are required to enforce

arbitration agreements according to their terms, the agreements here provided: “Arbitration

may be elected at any time, regardless of whether a lawsuit has been filed or not, unless ***

the other party would suffer substantial prejudice as a result of the delay in demanding

arbitration.” Thus, when the trial court found plaintiffs would suffer substantial prejudice as

a result of Sears’s 10-year delay in demanding arbitration, it was rigorously enforcing a term

of the arbitration agreement. American Express Co., 570 U.S. at ___, 133 S. Ct. at 2309

(quoting Dean Witter Reynolds Inc., 470 U.S. at 221).

¶ 57 Second, while the United States Supreme Court “specifically rejected the argument that

class arbitration was necessary to prosecute claims ‘that might otherwise slip through the

legal system’ ” (American Express Co., 570 U.S. at ___, 133 S. Ct. at 2312 (quoting

Concepcion, 563 U.S. at ___, 131 S. Ct. at 1753), the trial court did not decide these cases

on this public policy ground. Instead, the trial court followed the letter of the agreement,

ruling in part Sears’s delay in demanding arbitration created substantial prejudice to the

plaintiffs. We now turn to consider whether the trial court erred in ruling the delay was

substantially prejudicial to the plaintiffs.

¶ 58 B. Inconsistent Acts Resulting in Prejudice to the Opponent

¶ 59 Sears’s brief addresses the remaining factors discussed in Fisher, i.e., acts inconsistent

with an existing right and prejudice to the party opposing arbitration resulting from such

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inconsistent acts, in an abbreviated fashion. Sears’s arguments largely proceed from the

premise it did not have an existing right to arbitrate prior to Concepcion. As the circuit court

did not err in ruling Sears had a known right to arbitrate from the inception of these lawsuits,

the circuit court did not abuse its discretion in finding Sears’s acts were inconsistent with the

known right. Given that Sears successfully asserted its right to arbitrate in Vigil and

Hutcherson (and unsuccessfully asserted this right in Avery), the acts undertaken by Sears

for nearlya decade of litigation in the circuit court are acts entirely inconsistent with a known

right to demand arbitration. Indeed, while Sears now suggests Hutcherson was incorrect in

its attempt to discern Arizona law on the enforceability of the class action waiver in its

arbitration agreements, the decision of this court could not have been ignored by the circuit

court in this litigation.

¶ 60 Sears additionally argues plaintiffs cannot demonstrate prejudice based on the time and

money spent pursuing litigation plaintiffs initiated themselves. Sears primarily relies on

Fisher, which refers to litigation expenses as a self-inflicted wound. Fisher, 791 F.2d at 698.

The Fisher court, however, also noted plaintiffs in that case “were parties to an agreement

making arbitration of disputes mandatory” and violated the agreement by filing their lawsuit.

Id. In contrast, the credit card agreements here provide for arbitration upon election of either

party. Accordingly, plaintiffs’ litigation expenses cannot be characterized as a self-inflicted

wound in this case.

¶ 61 Lastly, Sears asserts in a footnote to its brief various litigation expenses currently

incurred by plaintiffs ultimately would not be paid by plaintiffs. This assertion, however, is

supported only by Sears’s reference to plaintiffs’ failure to contradict Sears’s prior assertion

in their surreply to Sears’s reply brief on the motion to compel. On neither occasion did Sears

present evidence or argument in support of its assertion.

¶ 62 The circuit court found plaintiffs were prejudiced in view of the extensive litigation and

mediation which occurred during the first 10 years of these disputes. In determining whether

the party opposing arbitration was prejudiced by delay, federal courts tend to consider: (1)

timeliness or lack thereof of the motion to arbitrate; (2) extent to which the party seeking

arbitration has contested the merits of the opposing party’s claims; (3) whether the party

seeking arbitration informed its adversary of its intent to pursue arbitration prior to seeking

to enjoin the court proceedings; (4) the extent to which a party seeking arbitration engaged

in nonmerits motion practice; (5) the party’s acquiescence to the court’s pretrial orders; and

(6) the extent to which the parties have engaged in discovery. See, e.g., In re Pharmacy

Benefit Managers Antitrust Litigation, 700 F.3d at 117.

¶ 63 In this case, the record establishes Sears’slengthydelayin seeking arbitration. The record

sets forth that Sears filed a motion to dismiss and a cross-motion for summary judgment.

Sears also participated in pretrial discovery, including depositions of the plaintiffs. The trial

judge found Sears further participated in settlement and mediation conferences. Sears

zealously litigated the class certification. Given this record, Sears’s unsupported assertion

plaintiffs ultimately would not bear certain litigation expenses fails to establish the circuit

court abused its discretion in finding plaintiffs were prejudiced in this case.

¶ 64 In short, Sears failed to demonstrate the circuit court erred in denying the motion to

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compel arbitration. Accordingly, we need not address the the parties’ alternative arguments

on appeal.

¶ 65 CONCLUSION

¶ 66 In sum, we conclude the circuit court did not err in ruling Sears had a known right to

demand arbitration when plaintiffs’ filed their complaints. Sears failed to establish it would

have been futile for Sears to assert its right to arbitrate in these cases. Accordingly, the circuit

court did not abuse its discretion in finding Sears acted inconsistently with its known right

to arbitrate and prejudiced the plaintiffs by actively litigating the case for years. For all of the

aforementioned reasons, the order of the circuit court of Cook County denying the motion

to compel arbitration and stay proceedings is affirmed.

¶ 67 Affirmed.

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