Orth is no longer in business. Defendants argue that a showing of bad faith is not required, because
preclusion was the real concern of the JDS Life court. Though the court there was specifically
authorizing a stay in what it labeled as “evasion cases,” we believe the case allows a parallel
proceeding analysis in a case where bad faith is not alleged.

As the Second Circuit has noted, “district courts . .. may stay a case pursuant to the power
inherent in every court to control the disposition of the causes on its docket with economy of time
and effort for itself, for counsel, and for litigants.” WorldCrisa Corp. v. Armstrong, 129 F.3d 71,
76 (2nd Cir. 1997) (internal quotations and citations omitted). A stay may be warranted “where the
pending proceeding is an arbitration in which issues involved may be determined.” Nederlandse
Erts-Tankersmaatschappij, N.V. v. Isbrandsten Co., 339 F.2d 440, 441 (2d Cir.1964). However,
if a stay is granted, the movant may not “take any steps to hamper the progress of the arbitration
proceeding, that the arbitration may be expected to conclude within a reasonable time, and that such
delay as may occur will not work undue hardship.” /d. at 442. In the present case, the interests
of judicial economy favor a stay as the issues in Allied’s claims against Orth are nearly identical to
those against the Medinas. Moreover, the hardship faced by the Medinas of having to defend both
the litigation and arbitration simultaneously in two different states favors a stay. Meanwhile, Allied
has not alleged that any harm will come to them from staying the litigation. We will thus grant the
stay, with the condition that Orth proceed to arbitration without undue delay; failure to do so will

result in the stay being vacated.


incorporate the arbitration clause of the agency contract. As Allied correctly notes, a non-signatory
to a contract cannot be compelled by a signatory to arbitrate under the provisions in the contract.
Grundstad v. Ritt, 106 F.3d 201, 205 (7th Cir. 1997) (finding that guarantors were not bound by
arbitration clause in contract they did not sign). However, as Defendants correctly counter, the
reverse situation may be allowed where claims against the non-signatory are “intimately founded in
and intertwined with the underlying contract obligations.” Hughes Masonry Co. v. Greater Clark
County School Bldg. Corp., 659 F.2d 836, 841& n.9 (7th Cir. 1981). In any event, we need not
analyze the issue because the Medinas do not seek such a remedy. Instead, they have requested a
stay of the litigation against them pending the outcome of arbitration between Allied and Orth.

The Medinas do not wish to pursue arbitration proceedings on behalf of Orth in California
while simultaneously defending themselves as individuals against Allied in a lawsuit in Chicago.
Allied argues that Defendants are not entitled to a stay. The Seventh Circuit has ruled that a stay
may be appropriate, in accordance with the principles of parallel-proceeding abstention, where “a
party to an arbitration agreement, trying to get around it, sues not only the other party to the
agreement, but some related party with which it has no arbitration agreement, in the hope that the
claim against the other party will be adjudicated first and have preclusive effect in the arbitration.”
IDS Life Ins. Co. v. Sunamerica, Inc., 103 F.3d 524, 530 (7th Cir. 1996) (rejecting stay for non-
signatory based on section 3 of the Federal Arbitration Act (“FAA”), but allowing one under
principles of parallel proceeding abstention).

Allied claims that /DS Life does not apply because Allied did not sue the Medinas in order
to get around the arbitration agreement. Rather, it insists that it named the Medinas because they

voluntarily guaranteed the financial obligations of Orth and because Allied has been informed that

4.


Conclusion

For the foregoing reasons, we grant Defendants’ motion to dismiss Count I of Plaintiffs
complaint and compel this matter to arbitration. Defendants’ motion to stay litigation between

Allied and Defendants Medina and Aquino-Medina pending arbitration proceedings is granted.

ENTER:

UNITED STATES DISTRICT JUDGE

patep: __ YUN 3 2005

-6-


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

ALLIED VAN LINES, INC.,
a Delaware Corporation

No. 04 C 6004
Paul E. Plunkett, Senior Judge

Plaintiff,
v.
ORTH VAN AND STORAGE, INC.,

and ALAN L. MEDINA and DIANE
AQUINO-MEDINA

wenwerververve rere ew

Defendants.

MEMORANDUM OPINION AND ORDER
Allied Van Lines, Inc. (“Allied” or “Plaintiff’) has sued Orth Van and Storage, Inc. (“Orth”)
and Orth’s owners, Alan L. Medina and Diane Aquino-Medina (“Medinas” or, collectively,
“Defendants”), for breach of an agency contract between Allied and Orth. Orth demanded the
dispute be settled by arbitration, pursuant to the agency contract, and Defendants now file a motion
to dismiss Count I of Allied’s complaint and to compel arbitration of its claims against Orth.
Defendants also move to stay the litigation against the Medinas pending the arbitration proceedings.

For the reasons set forth below, we grant Defendants’ motions.

Background

Allied, a national moving company, depends on an extensive network of agents throughout

the United States to perform its moving services. In December 2002, Allied entered into an agency


contract with Orth, a trucking company owned by the Medinas based in California. Allied claims
that Orth breached the contract by failing to pay $257,196.23 it says was owed. Allied first notified
Orth that it believed Orth breached the contract in a letter dated January 2, 2004. In September 2004,
Allied filed a two-count lawsuit in federal court against Orth and the Medinas, who had signed a
guaranty attached to the agency contract by which they personally guaranteed all financial
obligations of Orth to Allied. Count I of the complaint seeks recovery from Orth, and Count II from
the Medinas. On January 19, 2005, Orth notified Allied that it wished to demand arbitration,

pursuant to the agency contract’s arbitration provision.

Discussion

As a preliminary matter, Allied urges us to deny Orth’s motion to compel arbitration on the
grounds of timeliness. Section 3.13(g) of the arbitration provision contained in the agency contract
between Allied and Orth reads, “A dispute must be submitted to arbitration within six months of its
having arisen or prior to the expiration of any cure period associated with a Notice of Termination
based on the same factual situation for which arbitration is sought.” (P1.’s Resp. Opp’n Def.’s Am.
Mot. Dismiss & Compel Arbitration, Ex. 1.) Allied argues that Orth demanded arbitration more than
a year after Allied sent a letter notifying Orth that Orth was in breach of the contract, and therefore
the arbitration demand was untimely. Orth disagrees with this characterization of when the dispute
arose, but says the issue must be resolved by an arbitrator, not this Court. In general, the question
of timeliness in an arbitration agreement falls to the court, unless the agreement “contains clear and
unmistakable evidence that the parties intended for the arbitrator to decide.” Chicago Sch. Reform

v. Diversified Pharm., 40 F.Supp.2d 987, 993 (N.D.IIl.1999) (citing First Options of Chicago, Inc.

-2-


vy. Kaplan, 514 U.S. 938, 944 (1995).

Defendants point to Allied Van Lines, Inc. v. Suddath Moving Center, Inc., another case in
this district involving Allied and an interpretation of a remarkably similar arbitration provision, to
show that the agreement between Orth and Allied meets this test. See id., No. 02-C4733, 2002 WL
1941378, at *2 (N.D. Ill. Aug. 22, 2002). In Suddath, Allied argued that the arbitration provision
clearly and unmistakably required the issue of timeliness to be decided by an arbitrator. Allied is
careful to refrain from arguing that we should interpret the provision differently now. However, it
does ask us to resolve the timeliness issue by finding that Orth waited too long to demand arbitration.
As Defendants correctly argue, we cannot decide that issue until we determine whether the issue
belongs in this Court or whether it should be resolved by an arbitrator. Looking at the terms of the
agency contract, we find that the parties clearly and unmistakably intended for an arbitrator to decide
the timeliness issue.

As in Suddath, the arbitration provision at issue here states that “[a]ny disagreement, dispute
or controversy which arises between CARRIER and AGENT with respect to the enforcement,
interpretation or application of any provisions of this Agreement” is subject to arbitration. The court
there found that “[t]he dispute over timeliness is a dispute concerning the interpretation or
application of Section 3.13(g), and thus it is a dispute that the parties clearly intended the arbitrator
to decide.” Suddath , 2002 WL 1941378, at *2. We agree. Defendants’ motions to dismiss Count
I of Allied’s complaint and to compel arbitration of Allied’s claims against Orth are therefore
granted.

Allied next argues that the Medinas lack standing to compel arbitration because they were

not signatories to the agency contract. They signed a guaranty that Allied contends did not

3.