IV.

CONCLUSION

Plaintiff has failed to properly plead facts to support his claim that he was fraudulently

induced to sign the Arbitration Agreement. He does not argue that the claims set forth in his

amended complaint are not otherwise subject to arbitration pursuant to the terms of the

Arbitration Agreement. As such, and for the reasons set forth in this memorandum, defendant

Ogden Chrysler Plymouth, Inc. prays that this Court enter an order staying these proceedings and

compelling arbitration.

Stuart D. Gordon

Zukowski, Rogers, Flood & McArdle
One North LaSalle Street, 45" Floor
Chicago, Illinois 60602

(312) 377-4450

Attorney No. 18842

Ogden Chrysler Plymouth, Inc.,
Defendant,

By:

“One of its Attorneys

14


misrepresentation. Rather, he believes it is sufficient to attribute the silence (or the
misrepresentation) to unnamed salespersons.’
Third, plaintiff's reliance argument is fatally undercut by the very document he signed.*
While he claims that he would not have given up his right to a jury trial, or to recover punitive
damages and attorneys’ fees, the Arbitration Agreement (Ex. A) contains the following
language:
“By agreeing to arbitrate, you and we are giving up some rights,

including the right to go to court, the right to a jury trial, and any
right that buyer may have to seek punitive damages.”

sek

“The arbitrator shall not have the right to award punitive damages
or attorneys’ fees to either party.”

Plaintiff, of course, does not suggest that he was not given an opportunity to read the
Arbitration Agreement before he signed it (on a line immediately below a large print, capitalized
acknowledgment of having read the Arbitration Agreement). If he failed to take that
opportunity, he cannot claim to have been a victim of fraud. Cozzi Iron & Metal, Inc. v. U.S.
Office Equipment, Inc., 250 F.3d 570, 574-5 (7" Cir. 2001); Novitsky v. American Consulting
Engineers, L.L.C., 196 F.3d 699, 702 (7" Cir. 1999).

In our initial memorandum, we cited (at p. 4) six rulings from judges of this Court
wherein complaints, with considerably more specificity than plaintiff's here, were found to be

deficient. Plaintiff has not elected to address those rulings. The omission is telling, because

3 One wonders how Bill Kay is to respond to a claim that an unnamed person did

not say something. Given the alternative nature of the complaint, perhaps the allegation should
be both admitted and denied.

4 Plaintiff does not deny signing the Arbitration Agreement. As such, it is difficult
to understand how he could claim that “he never agreed to arbitrate.”

5


detriment. Peddinghaus v. Peddinghaus, 295 Ill.App.3d 943, 692 N.E.2d 1221, 1225 (1* Dist.
1998); Douglas v. Wones, 120 Ill_App.3d 36, 458 N.E.2d 514, 523 (2TM Dist. 1983).

As with any claim of fraud, plaintiff is required to recite the facts giving rise to the fraud
claim with specificity and particularity. See, Fed.R.Civ.P. 9(b); General Electric Capital Corp.
v. Lease Resolution Corp., 128 F.3d 1074, 1078 (7" Cir. 1997). The person claiming fraud is
expected to provide allegations containing the identity of the person who made the
misrepresentation, the time, place and content of the misrepresentation, and the method by which
the misrepresentation was communicated. Vicom, Inc. v. Harbridge Merchant Serv., Inc., 974
F.2d 918, 924 (7" Cir. 1992); DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7" Cir. 1990). This
obligation requires the plaintiff to plead the content of the misrepresentation. Corley v.
Rosewood Care Center, Inc. of Peoria, 142 F.3d 1041, 1050 (7" Cir. 1998). Moreover, a person
cannot enter into a transaction, closing his eyes to available information, and then claim to have
been deceived by the words or conduct of another party. Broberg v. Mann, 66 I\.App.2d 134,
213 N.E.2d 89 (2TM Dist. 1965). Furthermore, reliance upon a misrepresentation must be
reasonable. (/d.) When the alleged fraud involves the execution of an instrument, the
misrepresentation must be such as to induce the party to allegedly defraud to execute an
instrument which he did not intend to execute. Mt. Zion State Bank & Trust v. Weaver, 226
IILApp.3d 783, 589 N.E.2d 983, 986 (4" Dist. 1992).

Here, plaintiff does not deny that his signature is on the Arbitration Agreement. He does
not tell us what misrepresentation was made to him, who made the misrepresentation, or when it
was made. Yet his signature appears less than one inch below a capitalized sentence
acknowledging that he had read the “ARBITRATION AGREEMENT” and that he agreed “TO

ITS TERMS AND CONDITIONS.”

10


The plaintiff, like plaintiff here, claimed that the arbitration agreement was unconscionable and
should not be enforced. However, the Supreme Court refused to hold that the arbitration
agreement was unenforceable, and instead upheld its validity. (121 S.Ct. at 523)

Plaintiff's claim that an Arbitration Agreement is somehow one-sided and that this
provides a basis for ignoring an Arbitration Agreement is also flawed. The law is clear that
unequal bargaining positions do not provide a basis for voiding an Arbitration Agreement. See,
We Care Hair Development, Inc. v. Engen, 180 F.3d 838, 843 (7" Cir. 1999); DeValk Lincoin
Mercury, Inc. y. Ford Motor Co., 811 F.2d 326, 333 (7" Cir. 1987); Parker v. American Family
Insurance Co., 315 Il.App.3d 431, 734 N.E.2d 83, 85 (3" Dist. 2000). This Arbitration
Agreement is not one sided - after all, both parties must submit disputes to arbitration, and
arbitrations conducted by the neutral and well respected American Arbitration Association can
hardly be considered “oppressive.”

Similarly, plaintiff cannot make the Arbitration Agreement simply go away by claiming
that unequal bargaining positions render it “unconscionable.” He must demonstrate something
more than the mere allegation. Pierson v. Dean, Witter, Reynolds, Inc., 742 F.2d 334, 339 (7*
Cir. 1984). As part of his claim of unconscionability, plaintiff must also show that the
Arbitration Agreement was “due to a prodigious amount of bargaining power on behalf of the
stronger parties, which is used to the stronger party’s advantage and is unknown to the lesser
party”... See, Weaver v. American Oil, 276 N.E.2d 144 (Ind. 1971), (emphasis added) cited with
approval in Furgason v. McKenzie Check Advance of Indiana, 2001 WL238129, *S (S.D. Ind.,
Jan. 3, 2001). Where, as here, a party has signed a separate Arbitration Agreement, it is
enforceable, even if the party failed to inquire into its ramifications. Pierson, supra, 742 F.2d at
339, Ferguson, supra, at *5. Moreover, unequal bargaining positions do not provide a basis for
voiding an Arbitration Agreement. See, We Care Hair Development, Inc. v. Engen, 180 F.3d

7


quite simply, any analysis of the complaint demonstrates it to be deficient. As such, his apparent
claim that the Arbitration Agreement is not enforceable because it was obtained by fraud must
fail.

Ii.

THE ARBITRATION AGREEMENT
1S NOT UNCONSCIONABLE

In his Response (at pp. 8-10), plaintiff claims that the Arbitration Agreement is
unconscionable because it exempts certain “wrongdoing” by the buyer from the obligation to
arbitrate. In support of that contention, plaintiff cites cases that he claims hold that contracts are
unconscionable where they are “improvident, oppressive or totally one sided,” and he notes that
a factor to consider includes gross disparity in bargaining terms. However, Morgan’s response
does not suggest that any of those factors were present. Had he made such a suggestion, his
argument would still be without legal merit. He also relies on Walter E. Heller Co., Inc. v.
Convalescent Home of the First Church of Deliverance, 49 Il.App.3d 213, 219, 365 N.E.2d
1285 (1 Dist. 1977), in support of a claim that the Arbitration Agreement created a “one sided
contract clause” brought about by Bill Kay, the “stronger party.” This argument was not made
when plaintiff resisted Bill Kay’s first motion to stay and compel arbitration. Moreover, it is not
contained in the amended complaint. In any event, it is without merit, because the Arbitration
Agreement, which obligates Bill Kay to arbitrate disputes as well, is not one-sided.

Recently, the United States Supreme Court had an opportunity to reject claims of
unconscionability and to enforce an agreement to arbitrate. In Green Tree Financial
Corporation - Alabama v. Randolph, 53\ U.S. 79, 121 S.Ct. $13 (2000), a purchaser of a mobile
home filed a lawsuit which alleged a violation of the Truth In Lending Act. The plaintiff, like

plaintiff here, had signed an agreement which required all disputes to be submitted to arbitration.


appeal denied, 185 Ill.2d 666, 720 N.E.2d 1105; Edward Electric Co. vy. Automation, Inc., 229
Ill.App.3d 89, 593 N.E.2d 833 (1992) (emphasis added), Here, the Arbitration Agreement did
not expressly authorize relief in the form of punitive damages. As such, the prohibition against
punitive damages is neither of consequence, nor a basis for disregarding the plaintiffs obligation
to submit to arbitration.

As to attorneys’ fees, it is noteworthy that under both the Illinois Consumer Fraud and
Deceptive Business Practices Act, 815 ILCS 505/10a(c), and the Federal Odometer Act, 49
U.S.C. 32710, only a “court” can award attorneys’ fees. Thus, the fact that the Arbitration
Agreement bars an arbitrator from awarding such fees is of no consequence. To uphold
Morgan’s argument would mean that no agreement to arbitrate claims under either act would be
enforceable.

Furthermore, it is noteworthy that under the Arbitration Agreement, both plaintiff and
Bill Kay have agreed to forego the opportunity to claim punitive damages and attorneys’ fees.*
This mutual relinquishment of a so-called “right” demonstrates, if anything, that the Arbitration
Agreement was not one sided.

For plaintiff to sustain a claim that he was fraudulently induced to execute the Arbitration
Agreement, he must allege and then prove a statement of material fact, made to induce the other
party to act, the statement is false and known by the party making it to be false, and the party to

whom the statement is made must reasonably believe it to be true and rely upon it to his

5 An automobile dealer who successfully defends a Consumer Fraud Act claim can

recover attorneys’ fees. See, Graunke v. Elmhurst Chrysler Plymouth, Inc., 247 Ill.App.3d 1015,
617 N.E.2d 858, 863 (2TM Dist. 1993). The Federal Odometer Act has no provision allowing an
award of punitive damages. See, 49 U.S.C. § 32710(a). The Consumer Fraud Act allows for
punitive damages, against a car dealer, by the “court” only for conduct which is “willful or
intentional and done with an evil motive or reckless indifference. (815 ILCS 505/10a(a)).

9


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

co
6 3
EASTERN DIVISION ° say
Ga D2
JAMES MORGAN, ,) Be
) a
Plaintiff, ) Oo =
v. y No. 01 C 3871 S 5
,) Judge Joan Gottschall 2
BILL KAY CHRYSLER PLYMOUTH, __)
)
Defendant. )

DEFENDANT’S REPLY MEMORANDUM IN
SUPPORT OF ITS MOTION TO STRIKE AND DISMISS

COUNTS VI AND VII OF PLAINTIFF’S AMENDED
COMPLAINT AND TO STAY AND

aorlis \
COMPEL ARBITRATION qi: \
_ PayAN\\)
L pec @
INTRODUCTION

On January 26, 2001, plaintiff purchased a used 1997 Chrysler Sebring from Bill Kay

Chrysler Plymouth (“Bill Kay”). At the time, he signed, among other things, an Arbitration
Agreement (Exhibit 1) wherein he agreed to arbitrate all disputes arising from the purchase. He
signed the Arbitration Agreement in a space less than one inch below the following statement:

BY SIGNING BELOW YOU ACKNOWLEDGE THAT YOU

HAVE READ THIS ARBITRATION AGREEMENT AND THAT
YOU AGREE TO ITS TERMS AND CONDITIONS.

Claiming that the Sebring’s odometer was inaccurate, plaintiff filed this lawsuit. After
Bill Kay moved to stay these proceedings, plaintiff responded with an affidavit (“Aff.”), and a

claim that there was no agreement to arbitrate. Although plaintiff did not deny signing the

Arbitration Agreement, he claimed that he was not shown the Arbitration Agreement in its
entirety (Aff. { 4), and that the “first time I was made aware of such an agreement was when my

attorney told me of its existence “after the commencement of this lawsuit.” (Aff. { 6) However,

4-qaus

tya-

ot


Because plaintiff has not suggested a contract of adhesion, and because the facts do not
support a claim of “overwhelming” economic power, plaintiff can resist arbitration if, and only
if, he has properly alleged facts which would demonstrate that his signature on the Arbitration
Agreement was obtained by fraud. Clearly he has not, and thus he should be compelled to
submit his claims to arbitration.

When reviewing a motion to stay a judicial proceeding and to compel arbitration, the trial
court must concern itself solely with whether an agreement exists to arbitrate the dispute in
question. See, Galt v. Libbey-Owens-Ford Glass Co., 376 F.2d 711, 715-6 (7" Cir. 1967); JK.
Cement Construction, Inc. y. Montalbano Builders, Inc., 119 Ill. App.3d 663, 669, 456 N.E.2d
889 (2TM Dist. 1983).

If there is a claim that a party was fraudulently induced to enter into an agreement to
arbitrate, the trial court must address that issue first. See, Sphere Drake Ins. Lid. y. All
American Ins. Co., 256 F.3d 587 (7" Cir. 2001); Aste v. Metropolitan Life Ins. Co., 312
Ill App.3d 972, 982-84, 728 N.E.2d 629, 637-38 (1* Dist. 2000); Goldberg v. Focus Affiliates,
Inc., 2001 WL 649556 (N.D.IIL, June 8, 2001). If the party claiming fraud in the inducement
has not met his burden of alleging facts which would support the claim, the trial court must then
determine whether the dispute at issue is covered by the arbitration agreement. See, e.g., First
Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 115 S.Ct. 938 (1995); Herwig v. Hahnaman-
Albrecht, Inc., 1997 WL 72079, *2 (N.D.IIL., Feb. 13, 1997). Here, as shown above, plaintiff's
allegations, as set forth in his amended complaint and in his affidavit, even if true, fall far short
of demonstrating fraud in the inducement. Thus, the only issue is whether the claims raised in
the complaint are covered by the Arbitration Agreement.

Plaintiff does not argue that his claims are not covered by the Arbitration Agreement, nor
could he. In the Arbitration Agreement, plaintiff agreed to arbitrate “any controversy or claim”

12


Clearly, the information concerning the document was not only available to him, but it
was in front of his eyes. As shown below, the fact that he may have chosen not to read the
document (or “closed his eyes” to the acknowledgment), bars his fraudulent inducement claim.

Vv.
PLAINTIFF’S FAILURE TO ADEQUATELY
PLEAD FRAUD IN THE INDUCEMENT BARS AN
EXAMINATION OF HIS FRAUD CLAIM

Plaintiff’s final argument (Response, pp. 12-13) is that because he alleged fraud in
obtaining his “assent” to the Arbitration Agreement, the Court, as the trier of fact, must
determine that issue. Plaintiff cites Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7
F.3d 110 (3 Cir. 1993).

Of course, plaintiff's amended complaint does not adequately plead fraud® and does not
comply with the pleading requirements of Rule 9(b). (See, pp. 3-5, supra) That alone dooms
plaintiffs argument.

Moreover, plaintiff's reliance on Pritzker does not save the argument. Plaintiff claims
that in Pritzker the “court found that if there is a well founded claim that the arbitration
agreement resulted from fraud or coercion a party may not be compelled to arbitrate claims.”
(Response, p. 7) The Pritzker court made no such finding. In fact, it upheld an arbitration
agreement by “rejecting an insinuation” that an arbitration clause represented a contract of

adhesion, or was a result of fraud or overwhelming economic power. (7 F.3d at 1118)

6 In order to successfully allege fraud, a plaintiff must plead (1) a false statement of

material fact; (2) known or believed to be false by the party making it; (3) an intent to induce the
other party to act; (4) reasonable reliance on the truth of the statement, and (5) damage resulting
from such reliance. Damian Services Corp. v. White, 1998 WL 596466 (N.D. Ill. 1998); see
also, Lagen v. Balcor Co., 274 Ill.App.3d 11, 653 N.E.2d 968 (2TM Dist. 1995).

11


838 843 (7" Cir, 1999); DeValk Lincoln Mercury, Inc. v. Ford Motor Co., 811 F.2d 326 333 (7"
Cir. 1987); Parker v. American Family Insurance Co., 315 Il.App.3d 431, 734 N.E.2d 83, 85
(3" Dist. 2000). Only one sided or oppressive Arbitration Agreements can be voidable. As
noted above this Arbitration Agreement is neither one sided nor oppressive. /d.

Finally, plaintiffs reliance on the decision in Walter v. Heller & Co., Inc. v.
Convalescent Home, supra, is difficult to understand. Heller did not even involve an arbitration
agreement - instead, it involved an equipment (computer) lease. Moreover, the court refused to
apply the “unconscionability doctrine” because the lease gave rights to, and imposed duties on,
both the lessor and lessee. (365 N.E.2d at 1290) Here too the Arbitration Agreement gave rights
to, and imposed duties on, both plaintiff an Bill Kay, and both are required to submit most of
their disputes with each other to arbitration.

Iv.

THE FACT THAT PLAINTIFF GAVE UP
CERTAIN “RIGHTS” AS A RESULT OF
THE ARBITRATION AGREEMENT DOES
NOT RENDER IT UNENFORCEABLE

In his Response (at pp. 10-11), but without citation to supporting authority, plaintiff
argues that the Arbitration Agreement is unconscionable, and thus not enforceable, because it
requires him to give up the right to recover punitive damages and attorneys’ fees. This
agreement was not advanced when plaintiff resisted Bill Kay’s first motion to stay and compel
arbitration, and it is not in plaintiff's complaint.

As to punitive damages, even if the Arbitration Agreement was silent with respect to
punitive damages, an arbitrator could not award them. In Illinois an arbitrator is prohibited from
awarding punitive damages unless “there is an express provision authorizing such relief in the

arbitration agreement.” Ryan v. Kontrick, 304 Ill_App.3d 852, 710 N.E.2d 11, 14 (1" Dist. 1999),


968 (2 Dist. 1995). The Seventh Circuit has referred to this as “the who, what, when, where

and how” of the fraud being alleged. DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7" Cir. 1990).

In his Response (at p. 4)!, plaintiff, without citation to any authority, suggests that Rule
9(b) “should not be seen as requiring exacting pleadings of fact.” Yet that is precisely what the
rule and the cases decided thereunder do require.

Plaintiff goes on to argue (Response, pp. 5-6) that his pleading was sufficient because:

1. Bill Kay’s unnamed “sales person” failed to properly explain the documents he

(plaintiff) was asked to sign,

2. The effect of the Arbitration Agreement was not explained to him”, or if an

explanation was given, the explanation (which plaintiff does not plead) was false.

3. If plaintiff had known that certain unspecified representations “were untrue,” he

would not have purchased the vehicle if he had known that he was giving up the
right to a jury trial, punitive damages, and attorneys’ fees.

Plaintiff's attempt to camouflage his pleading deficiencies are, for a number of reasons,
interesting. First, he alternatively argues that no representation (thus no misrepresentation) was
made, but if one was made, it was misleading. That, of course, does not come close to satisfying
the requirements of Rule 9(b). Second, he does not even attempt to identify the person who

either failed to explain the Arbitration Agreement, or who alternatively stated an unspecified

' The pages of the Response are not numbered. The reference is found on the

fourth page of the Response.
2 Plaintiff's July 18, 2001 affidavit conflicts with his complaint. In that the
affidavit (at { 5), he admits that brief explanations of the documents he signed were provided.

4


Arbitration Agreement

26 JAN 2001
Date

In this Arbitration Agreement, the term "you" refers to the buyer(s), who sign below, The terms.”we" and “us" refers to
Ogden Chrysler Plymouth, Inc., do/a Bill Kay Chrysler Plymouth of Downers Grove. By agreeing to arbitrate, you and we
sive up some rights, including the right to go to court, the right to a jury trail, and any right that buyer might have to seek
punitive damages. :

The term “vehicle” is the vehicle which is the subject of a purchase order executed on this date and is more
fully described as: Make __ 4.997 GURY » Modet 26 JAN 2001 .

VIN ACZAUSZNSVE193160 .

A “Dispute” is any controversy or claim (other than: a claim relating to the buyer's failure to pay an
agreed upon down payment or failure to pay any amount due pursuant to a promissory note executed in lieu of a
cash down payment; as to the issuance, by buyer, of a check which is net honored by the buyer's bank; a buyer's
failure to provide good title to a trade-in vehicle; a misrepresentation. by buyer, concerning the amount remaining
due on any loan concerning a trade-in vehicle; any claim relating to the possession, repossession or replevin of the
vehicle; or relating to actions to enforce any Retail Installment Contract executed by you in connection with the
purchase of the vehicle) arising from or relating to the vehicle you have purchased from us on the date shown above,
The term “dispute” also includes, but is not fimited to, claims relating to the negotiation or breach of any purchase
order and/or bill of sale relating to the vehicle, and any dispute relating to any vehicle service contract purchased
or provided at the time the vehicle was purchased or within thirty (30) days thereafter. The term “dispute” also
includes any question regarding whether a matter is subject to arbitration under this Arbitration Agreement.

You and we agree that if any Dispute arises, the Dispute will be resolved by binding arbitration by a single
arbitrator under the rules of the Better Business Bureau then in effect, and such arbitration shall be held in
either Wheaton, Illinois or Chicago, Ilinois, with the arbitrator rendering a written decision with separate

findings of fact and conclusions of law.

An award by the arbitrator shall be final and binding on all parties to the proceeding. The arbitrator shall not have
the right to award punitive damages or attorneys’ fees to any party. All arbitration costs and expenses shall be shared
equally by the parties. Judgment on the award may be entered by either party in the highest local, state or federal
court or before any administrative body. This Arbitration Agreement shall, with respect to such dispute. survive the
termination or expiration of any purchase order and/or bill of sale. or any retail installment contract executed at the
time the vehicle is purchased. Nothing in this Arbitration Agreement shall be deemed to give the arbitrator(s) any
authority, power or right to alter, change, amend, modify, add. to or subtract from the provisions of the documents

executed at the time of the purchase of the vehicle.

The parties agree that the transactions relating to the Obligation involve interstate commerce and that this Arbitration
Agreement shall be subject to and governed by the Federal Arbitration Act, 9 U.S.C. §§ | et. seq., and the Uniform
Arbitration Act, 710 ILCS 5/1 et. seq. The parties further agree that if any provisions of this Arbitration Agreement are
found to be invalid, the remainder of this Arbitration Agreement remain in full force and effect, the parties agree that
this Arbitration Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective
heirs, educators, administrators, representatives, subsidiaries, affiliates, successors, and assigns.

BY SIGNING BELOW YOU ACKNOWLEDGE THAT YOU HAVE READ THIS ARBITRATION AGREEMENT.
AND THAT YOU AGREE TO ITS TERMS AND CONDITIONS.

JAMES E MORGAN
OL Aires
ral

Buyer “/

if . on
ZE EXHIBIT
Seller: Odgen Chrysler Plymouth, inc., d/b/a

Bill Kay Chrysler Plymouth of Downers Grove

Co-Buyer

tabbies*



his earlier affidavit, he now alleges that he was told nothing about what he was signing ({{ 48
and 50) or “if” he was told something, it must have been untrue. (451)

Defendant has filed a motion to strike Counts VI and VII because they fail to comply
with the pleading requirements of Rule 9(b). The motion also seeks to stay these proceedings
and to compel plaintiff to submit his claims to arbitration.

Plaintiff has filed a Response, in which he argues that his amended complaint does
comply with Rule 9(b). Although it appears that his new counts attempt to allege fraud in the
inducement (which, as this Court noted is “a matter for the arbitrator”). Plaintiff then devotes
most of the Response to three arguments as to why the Arbitration Agreement should be
disregarded. Those arguments, which were not made when plaintiff addressed Bill Kay’s first
motion to compel arbitration, are as follows:

a. The Arbitration Agreement is unconscionable.

b. The Arbitration Agreement is contrary to public policy.

c. The Arbitration Agreement should not be enforced because plaintiff's signature

was obtained by fraud.

This reply memorandum will address plaintiff's arguments.

Il.

PLAINTIFF HAS FAILED TO PROPERLY AND
ADEQUATELY PLEAD FRAUD

In our motion and supporting memorandum, we argued that plaintiff's amended
complaint failed to comply with Rule 9(b) because it failed to set forth a false statement of
material fact, that the person making the statement knew it to be false, and reliance on the

statement. Such allegations are necessary to properly plead fraud. Damain Services Corp. v.

White, 1998 WL 596466 (N.D. Ill. 1998); Lagen v. Balcor Co., 274 tll. App.3d 11, 653 N.E.2d


he admitted that he was given a “brief explanation of each” document he had signed. (Aff., 45)
No other arguments against arbitration were offered.

Bill Kay then provided the affidavit of Steve Flores, which demonstrated that Morgan’s
statements were either untrue or, at least, contested. Thereafter, on October 1, 2001, this Court
denied Bill Kay’s motion without prejudice and provided plaintiff with an opportunity to file an
amended complaint. The Court’s order assumed that plaintiff was contending that he never
agreed to arbitrate, and plaintiff was asked to “amend his complaint to lay out his theory of
fraud.” The Court cautioned that any amendment must comply with Rule 9(b), and the Court
explained that:

“Only if plaintiff lays out his theory of fraud, can the court
determine with reasonable certainty whether plaintiff is merely
claiming fraud in the inducement (a matter for the arbitrator), or is
adequately alleging that he never agreed to arbitrate.”

Plaintiff then filed an amended complaint, Instead of seeking to void the Arbitration
Agreement, plaintiff has added two new counts wherein he seeks to recover damages alleged
caused by virtue of his having executed the Arbitration Agreement. In Count VI, he alleges that
Ogden violated the Illinois Consumer Fraud and Deceptive Business Practices Act (“CFA”) by
not explaining the nature of the Arbitration Agreement, and he seeks damages resulting from the
fact that he “unwillingly gave up his rights to a jury trial and to recover punitive damages and
attorneys’ fees.” (Count VI, { 68) Count VII is identical to Count VI, except it seeks damages
under a common law fraud theory. The relief sought in Counts VI and VII is identical to the
relief sought in the first five counts of the amended complaint.

Significantly, plaintiff does not allege that the Arbitration Agreement was hidden from

his view, or that he thought he was signing something else. Instead, in an apparent conflict with

on

2


other than those specifically excluded. The claims raised in plaintiffs amended complaint are
not excluded from arbitration. Federal law favors interpretation of arbitration agreements “with
a healthy regard for the federal policies favoring arbitration.” Moses H. Cohen Memorial
Hospital v. Mercury Construction, 460 U.S. 1, 103 S.Ct. 927, 941 (1983). Moreover, any doubts
concerning arbitrability should be resolved in favor of arbitration, regardless of the problem at
hand. See also, Tyco Laboratories, Inc. y. DASI Industries, Inc., 1993 WL 356929 (N.D. Ill.
1993). There is no question that the “generic” arbitration provision in the Arbitration
Agreement requires the arbitration of all plaintiff’s claims. See, Nagle v. Nadelhoffer, Nagle,
Kuhn, et al., 244 Ill.App.3d 920, 925, 613 N.E.2d 331, 335 (2TM Dist. 1993); Johnson v.
Baumgardt, 216 Il. App.3d 658, 576 N.E.2d 515, 520 (2TM Dist. 1991).

The purpose of arbitration is to avoid the formalities, delay and expenses of litigation in
court. Hough v. Osswald, 198 Il.App.3d 1056, 1057, 145 Ill.Dec. 147, 556 N.E.2d 765 (1* Dist.
1990). Arbitration as a means of dispute resolution is favored and is regarded by courts as an
effective and cost-efficient method of resolving disputes. United Cable Corp. v. Northwest
Hlinois Cable Corp., 128 I11.2d 301, 306, 538 N.E.2d 547 (1989).

A party who has agreed to submit disputes to arbitration bears the burden of proving that
his claims are not suitable for arbitration. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20,
25 (1991). Even claims arising under a statute designed to further important social policies may
be arbitrated as long as a prospective litigant may effectively vindicate his statutory claim in the
arbitral forum. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637
(1985). Courts are required to give due regard to the federal policy favoring arbitration and to
resolve ambiguities as to the scope of an arbitration clause in favor of arbitration. Mastrobuono

v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 115 S.Ct. 1212, 1218 (1995).

13


IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS = & ca
EASTERN DIVISION eo 2a 8
2 oO
na
JAMES MORGAN, ) xe 2 5
) 5 m
Plaintiff, —) = =
v. ) No, 01 C3871 2 i)
) Judge Joan Gottschall 2
BILL KAY CHRYSLER PLYMOUTH, _)
)
)

Defendant.

NOTICE OF FILING

pacreTen
To: Larry P. Smith, Esq. 2 2004
Krohn & Moss, Ltd, pac 27 200%

120 West Madison Street

10" Floor
Chicago, Illinois 60602

PLEASE TAKE NOTICE that on December a4] , 2001, I filed the attached
Defendant’s Reply Memorandum in Support of Its Motion to Strike and Dismiss Counts VI

and VII of Plaintiff’s Amended Complaint and to Stay and Compel Arbitration with the
Clerk of the Court for the Northern District of Illinois, Eastern Division.

Ogden Chrysler Plymouth, Inc.,
Defendant,

By:

One of its Attorney’
Stuart D. Gordon

Zukowski, Rogers, Flood & McArdle
One North LaSalle Street, 45" Floor
Chicago, Illinois 60602

(312) 377-4450

CERTIFICATE OF SERVICE

I, Sydette Macklis, a non-attorney, duly sworn on oath, state that I caused the service of

the above-referenced document(s) by placing a copy of same, proper postage prepaid, in the U.S
Mail at One North LaSalle Street, Chicago, Hlinois, on December o’/ _, 2001.

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