FIFTH DIVISION FEBRUA RY 26, 2010
No. 1-09- 2093
GRE GORY RUFF, ) Appe al fro m the ) Ci rcu i t Cou rt of Pl ai n ti f f -A pp el l an t, ) Co o k C o un t y.

) v. ) No. 08 L 51292 ) SPLIC E, INC., ) ) Defe ndan t-Appell ee. ) Ho no r ab le

) Al exan der P. Whi

te, ) Judge Presidin

g.
JU STI CELA

VI N del i v ered th e op i n i on of th e c our t: In t his case , w e ar e as ked t o r einst at e a d efault judg ment a rising o ut of a n employment contract that took a serp en tin e path f rom a Cal i f orni a La bor Com m i ssi oner to the

supe ri or court of Cal if ornia to the clerk of

the ci rcuit court o f Cook County, onl y to be vacated by

a trial judge wh o de t er mined t ha t t he Ca lifo rniaco ur t lac ke d s ub jec t mat t er jur isd ict io n be ca us e t he co nt r ac t in question contai ne d an arb i tration claus e. We af

f i rm the decision of

the tri al court. BACK GROUND On Apr il 2, 20 07, Gr ego ry Ruff and Sp lice, I nc. (S plice) ent er ed int o a n employment
con tract un de r wh i ch Ru f f wa s to b ec ome the c hi

ef executi ve of f i cer (C EO) of

the corp orati on f or a pe rio d o f tw o yea rs, follow ed by su cce ssive o ne- year t er ms, fo r a n agr eed -u po n salar y and ben efi t package. This

arm' s-le ngth agreem

ent contain

ed num erous provisi

ons, the last of whi

ch was a relativel

y com monplace contr actual pro vi sion establ ish in g that any disputes that mi

ght arise
wo uld be ha ndled in ar bitr at ion:1-09-2093

2

"An y di spute arisi ng out o f this Agreem

ent shal l be determi

ned b y a rbi trat ion i n San Franci sco, Cali forni a under the rules of the A me rican Arbi trat ion Associa

tion then i n ef fect
and j udgm

en t upon a ny awar d purs uan t to such a

rbi tration may be enf orced i n a ny court having jur isdict ion t her eo f, pr ovid ed e ach o f the par t ies t o t his Agre ement will appo int o ne pers on as an ar b i tra tor to h ea r a n d dete rm i n e th e d i sp ute , a n d if th e p ar ti es are u n ab l e to agree on a thi

rd arbi trat or, t hen

the two arbitrato r so chosen wi ll select a third i

mpa rtial
ar bitr at or and t he de cision o f such a rbit ra t ion p anel will be final and co nclusive u po n t he parties to this Agreem

en t." The agreem

ent al so contained a c

hoic e of law provis ion i

n paragraph 15(c), whi

ch provided: "This a gr eement shall be go ver ned by and co nst ru ed in ac co rd ance wit h t he laws of t he State of Ill i noi s." Inevi tably , disputes b etween the parties di d aris e and j ust three months l ater, Ruff resigned from hi s position with Spl

ic e. Af ter leavi ng hi s position as CEO, Ruf

f cl ai me d that Splice owed hi m a pproxim ately $160,000 in

unpai d wages, vacation pay , reim bursab le expenses, and s everan

ce pay . Spli ce too k a decidedl

y di ff erent view of the events that led to Ruff ’s departure and adv

is ed Ruff t hat no c omp ensa t ion wo uld be fo rt hco ming due t o his a lleged mismanag ement of t he
co mpa ny dur ing his b r ief t en ur e a t t he he lm. On Novem be r 9, 200 7, R

uf f f i l ed a c l ai m wi th th e L ab or Com

m i ss i one r of the State of Cal i f orni a (a rem ed y now he re m en ti one d i n h i s em pl oy men t con tract) se ek

i ng the pa y men ts f rom Sp lice he allege d we re ow ed t o him. A he ar ing was co nduc t ed by t he Co mmi ssio ner re gar ding t he cla im, b ut Sp lice ap pa r en t ly de cid ed no t t o pa r t icip at e. T he Co mmiss io ne raw ar de d R uff h is1-09-2093

3

r eq ue st ed da mag es o f $1 85 , 51 9. 49 an d a de fau lt jud gme nt o n t he aw ar d w as su bse qu en t ly
en tered i n that am ount by the c l erk of

the C al i f orni a su peri or court for Sa

n Franci sco Coun

ty. Ru ff t he n r eg ist er ed t he Ca lifo rniajud gme nt in t he cir cu it co ur t o f Co o k C o un t y in I llino is, in order t o att em

pt t o enforce the f

oreign j udgme

nt agai nst the Ill in ois corporation. Spli

ce fi le d a
m otion to dis m i ss a nd s et asi de th e j udgm

en t, argui ng, inter al

ia , t hat t he ar bitr at ion clau se in t he
co nt r ac t r emo ve d a ny su bje ct mat t er jur isd ict io n fr o m t he Co mmiss io ne r . Ru ff, pr ed ict ab ly
en o ug h, t o o k a diffe r en t vie w a nd ar gu ed t ha t t he ar bit r at io n c lau se did no t r emo ve t he Ca lifo rnia
co ur t s o r Co mmi

ssio ner fro m jurisdict ion o ver t he disp ut e. Afte r a hear ing o n t he mot ion, t he ci rcuit court granted Splic e’s m ot ion a nd set asi de the Cal

if ornia j udgme

nt for want of proper juri sdiction. Ruff

timel y appeals. AN

AL YSIS Ru f f con ten dstha t the Cal i f orni a supe

rior cou rt pos se ss ed

su bj ec t matter j urisd

i cti on des pit e t he Agr eement ’s ar bitr at ion clau se a nd t hat Sp lice waived what ever right s it ha d und er t he arb i tration claus e by f ail i ng to ap pear i n a ny of the Ca l i f orni a proce edi

ngs . Sec t ion 2 of t he Fed er al Arbit ra t ion Act pr ovid es t hat a wr itt en ar bitr at ion ag re ement contain ed wi thin a comm ercia l c ontract "shal

l b e val id, i rrevocable, and enforceabl e." 9 U.S.C. §2 (2006 ). The

Uni ted States C onsti

tution provi desthat the

j udgm en ts of on e state’ s court are ent itled t o fu ll f

aith a nd cr edit in every o t her st at e. U. S. Co nst ., ar t . I V, §1. Tha t full f aith a nd credit cl ause was i

mpl em ented by Ill in ois through The Un

if orm Enf orcemen t o f J udgme nts Act (Act), which provides:

"A cop y of an y f orei gn j udg men t au the nti ca ted i n a cc orda nc e w i th th e actsof1-09-2093

4

Co ngr ess o r t he st at ut es o f this S t at e may be filed in the o ffi ce o f the circu it cler k fo r a ny count y of this Stat e. The clerk shal l treat t he f

oreign judgm

ent in the sam

e man ner as a judgm ent of the circuit cour t for any county of this State. " 735 ILCS 5/1 2-652( a) (West 2008)
. Despi te this respect gi

ven to foreign j udgme

nts, Ill in ois courts recognize that a colla teral attack on a f oreign judgm

en t ma y be sustai ne d i n l i m i ted si tuati ons, i nc l udi ng w here the renderi ng c ourt l acke d sub

j ect m atter j uri sdi

cti on of the c ase or person

al j uri sdi cti on ove r the d ef endi ng p arty . Docto r’s As sociates, Inc. v . Duree , 319 Ill. App. 3d 10 32, 1 040 ( 2001) . Becau se the t rial court ’s ruli ng was a m

att er of law, the standard o f revi ew for this i ssue is de novo
. McRai th v. BDO Seidman, LLP , 391 Il

l . Ap p. 3d 56 5, 587 ( 2009)
. Altho ugh t he I lli

nois c ou rt s have not yet a ddr esse d t he sp ecific issue r aised by Ruff, t he Unit ed St at es Su pr eme Co ur t ca se o f Preston v. Ferrer , 552 U.S. 346, 169 L . Ed. 2d 917, 128 S. Ct . 9 78 ( 200 8) , is inst ru ct ive. I n Pre ston , the p l ai n ti f f sou gh t to re cov er f ee s a l l eg ed l y owe d to hi m pur suan t to a c ontr

ac t f or s erv i ce s wi th th e def en da nt. Th e c ontr

ac t con tai ne d a n a rb i trati on claus e, simi

lar t o t he ar bitr at ion clau se in t he inst ant cas e, re quir ing t he pa rt ies t o a rbit ra t e any dispu t es r elat ing t o t he co nt ra ct . T he plaint iff at t empt ed t o init iate ar bitr at ion p ro cee dings bu t t he de f en da nt f i l ed a c om pl ai nt w i th th e L ab or Com

m i ss i one r of the State of Cal i f orn i a. The que sti on of jurisdiction was bro ught before t he California superior cou rt , which denied the plain tiff ’s mot ion t o c omp el arbit ra t ion and enjoined t he plaint iff fro m pro cee ding befo re an ar bitr at or . T he Califor nia Co ur t of Ap pea l affi rmed t he low er co ur t ’s o rd er , st at ing t hat Califor nia law vest ed t he Comm issi oner with "excl

usiv e original juri sdiction." Pre ston , 552 U.S. at 351, 169 L. Ed. 2d at1-09-2093

5

924, 128 S. Ct. at 982, quo ting Fe rrer v . Pre ston , 145 Cal. A pp. 4th 440, 447, 51 Cal. Rptr. 3d 628 , 6 34 ( 200 6) . T he Unit ed S t at es S upr eme Co ur t re ver sed , st at ing t hat nat ional po licy f avo ring arbi trati on of di spute s " f

orec l ose [s ] s tatel eg i sl

ati ve atte m ptsto un dercu t the en f orce ab i l i ty of arbitration agreements." Pre ston , 552 U.S. at 353, 169 L. Ed. 2d at 925, 128 S. Ct. at 983, quot in g So ut hland Co rp . v. Keat ing , 465 U.S. 1, 16, 79 L. Ed. 2d 1, 15, 104 S. Ct. 852, 861 (1 984 ). The Su pr eme Co ur t furt her held t hat when p ar t ies ag re e t o a rbit ra t e any disp ut e ar ising
un der a c ontr

ac t, th e F edera

l A rb i trati on A ct " su pers edessta

te l aw s l odgi ng pri mary j urisd i cti on in another for um, whether judi cial or ad mi ni strat iv e." Pre ston , 552 U.S. at 360, 169 L. Ed. 2d at 929, 128 S. Ct. at 987. Califor nia, in fact , ha d r eco gnized t his principle e ven pr ior t o t he ho lding in Pre ston . In Bake r v. A ubr y , 2 16 C al. Ap p. 3d 1 259 , 2 65 C al. Rp t r. 381 (1 990 ), t he plaint iff fil ed a co mplaint with the C omm

is si oner seeki

ng overtim

e pay from an em ploy er. The Baker

co ur t held t hat , in t he
con tex t of a b i nd i ng arbi trati on a gre em en t, ques ti ons

con cerni ng the constru cti on a nd sc opeof the a rbi tration claus e are

determ i ne d by f edera l l aw. Baker , 21 6 C al. Ap p. 3d at 12 63 , 26 5 C al. Rptr. at 383
. Baker

also ack now ledge d t hat t he Fed er al Arbit ra t ion Act ser ved t o e ffect uat e t he nationa l pol ic y of fav oring arb itration b

y w ithdrawi ng the power of the states to require a judic ia l f orum f or the re sol

uti on of clai m s wh i ch parties a greed to resol ve through arb i tration
. Baker , 216 Cal . A pp. 3d a t 126 5. Th

e C om m i ss i one r ul ti mate l y di sm i ss ed the pl ai nti f f ’s com pl ai nt u pon f i n di n g th at th e m atte r w as su b j ect to a w

ri tten ar b i tra ti on ag re em en t. In the i nstant case, the Com

mi ssioner rendered a j udgme nt pursuant to st ate laws that alleged ly veste d it wit h jurisd ictio n, bu t t he ho lding in Pre ston ma kes i t clear that the Federal1-09-2093

6

Arbi trat ion A ct preempts Cal

if ornia state law vesti

ng j urisdi ction i n the Com

mi ssioner rather than an arbi trat ion proceedi

ng, conducted under the rules of the A me rican Arbi trat ion A ssocia tion, as pr ovid ed in t his co nt ra ct . As a re sult , t he Co mmi ssio ner lacke d jur isdict ion t o e nt er t he judg ment that Ru ff sought to enf

orce in Ill in ois. Ruff at t empt s t o d istingu ish Pre ston by arg uing t hat , u nlike Sp lice, t he plaint iff in Pre ston cho se t o a ppe ar befo re t he Co mmi ssio ner and t he Ca lif

or nia sup er ior co ur t , e ssent ially co nt ending t hat Sp lice so mehow waived its r ight s und er t he ar bitr at ion clau se by faili ng t o a ppe ar in the Cal i f orni a proce edi

ngs . This arg

um en t is both u npe rsua si ve and dev oid of b i ndi ng a uthori ty. No t hing in Pre ston

suggests that its holdin

gs were lim

ited to situations wh

ere both parties app ear ed be for e t he fo ru m that lacke d jur isdict ion. Su ch a limitat ion wo uld se rve no p ur po se a nd would onl y res ult i n i ncreased e

xpense on the parties a

nd unn ecessary strain on the judi

ci al sys t em. Simp ly pu t , we se e n o r ea so n w hy S plic e s ho uld ha ve be en r eq uir ed t o en ga ge in l i tig ati on i n a f orum that l acke d j uri sdi

cti on. Sp lice ’s de cis io n no t t o pa r t icip at e in t he Ca lifo rnia pr o ce ed ing s w as bo t h e minen t ly sensible and co nsist ent wit h its c ont ra ct ual r ight t o a rbit ra t ion. Fur t her mor e, des pit e any intimat ion t o t he co nt ra ry, s ubject matt er jurisd ictio n canno t be co nferr ed by wa iver, st ipulat ion,
cons en t or estoppel
. Jones v. I ndust rial Comm ’n , 335 Ill . App. 3d 340, 343 (2002). Subject
ma tt er jurisdi ction can

be rai sed at any

tim e and m ay even be rai sed sua sp onte

by a review ing court. Jones , 335 Ill . App. 3d at 343. Furth erm ore, Ill i noi s courtsare pr

operl y rel uctan t to fi nd wai ver i n th i s con text. TSPHop e, I nc. v. Ho me Innovato rs o f Ill inois, LLC , 3 82 I ll. App. 3d 1 171 , 1 174 (2 008 ). The1-09-2093

7

pr imar y inquir y in d et er mining wh et he rwa ive rha s o cc ur r ed is if a pa r t y has ac t ed inc o nsis t en t ly wi th i ts right to arb i

trate, suc h a s su bm i ttin g arb i trabl e i ssues to a cour

t for de ci sion. TSP-Ho pe, Inc. , 382 Ill . App. 3d at 1174. Ruff's final arg ument t hat Califor nia law ho lds "an a rbit ra t ion p ro vision do es no t ou st t he court of juri sdi

cti on to he ar the

matter, bu

t me rel y means if one p arty chooses to arb i

trate, a pe t it io n ma y be f

iled t o st ay p r o ce ed ing s, o r de rar bit r at io n a nd t he n c o nfir m t he aw ar d" is si mi la rly unpersuasi

ve. See Dia

l 800 v . Fesbi

nder , 118 Cal. A

pp. 4th 32, 44-46, 12 Cal. Rptr. 3d 711, 719-20 (2004). Ruff f ails to recogniz e that it is

not t he agreem

ent’s arbi trat ion c la use that ousted t he Com

mi ssioner’s j urisdi

ction, but i

nstead section 2 of the Federal Arbi trat ion A ct as discu ssed in Pre ston

and Baker . Furth

erm ore, Dia l 800 predat es Pre ston

by approxim

ately four yea rs . F i n al l y , i t i s worth n oti n g th at Dia l 800 is a Cal if ornia case and that the agreem ent between Ruf f and Spl i ce expl i ci tly provi ded that i t woul d be

gove rne d an d con strued

by Ill i noi s law. Accordin gly , we fi nd that the ci

rcuit court did not err here. Fo rt he fo r eg o ing r ea so ns , we af fir m t he ju dg men t o f t he cir cu it co ur t o f Co o k C o un t y. Af fi rmed. TOOM IN, P.J., a

nd F ITZGER

AL D SMITH , J.,, con

cur.1-09-2093

8 REPORT ER OF D ECI SION S – ILLI NOIS APPE LLATE COURT

(Front S heet to b e Attac

hed to Each C ase) GREG ORY R

UFF , Pl ai n ti f f -A pp el l an t, v. SPLIC E, INC., Defe ndan t-Appell ee.

No. 1-09- 2093 Appellate Cour t of Illinois Fir st D istr ict, FIF TH Division February 26, 2010 (Giv e mo nth, da y and y ear)
JUSTICE LA VI N d el ivere d th e o pin io n o f th e c ourt: Toomin, PJ. and

Fit zg erald Sm ith , J. concur [s] dissent[s] Lo w er C ou rt and Trial J udge( s) in f

orm indi ca te d in t he m argi n: The Ho norable Alexand

er P. Wh ite , Judge Presiding.
Indicate if attorney represe nts APPELLANTS o

r APPELLEES and include attorneys o f co

unsel. Indicate the word NONE if not represe nted. Attorne y fo r Plaintiff -A ppe llant : Beau T. Gre im an Grego ry Ruff The Law Offi ce s of Beau T. Grei

man, P.C. 24115 W. 103 rd St ., Su ite B Naperv ill e, IL 60564 Phon e: 630-369-99 01 Atto rne ys f or De fe nd ant- Appellee: Eric

D. Stube nv oll, Jo se ph R. D ie tz Splice, Inc. Fish er K anaris , P.C. 200 South

Wacke r Drive , 22 nd Floor Chic ago, IL 60606 Phon e: 312-474-14 00 Plea se Use Following For m: Comple te TIT LE of Case

Dock et N o. COURT Opi ni on Filed

JU STICES

APPE AL from th e Ci rcu it Ct. of Co ok Co un t y, Law D iv.

For APPEL LA NTS, Joh n Doe , of Chi cago. For APPEL LEES, Smith and S mith of Chi cago, Joseph Brown, (of Co unsel) Also add at tor ne ys for third- party ap pe ll an ts or appellees.