Court Opinion

ID: 9782596
Source: CourtListenerOpinion
Date Created: 2023-08-30 18:59:26.731874+00
Date Added: 2024-06-11T07:35:06.314767
License: Public Domain

JUSTICE HOLDRIDGE, dissenting: I disagree with the majority’s holding that Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006), and Preston v. Ferrer, 552 U.S. 346 (2008), prevent an Illinois court from enforcing section 10 — 10 of the Illinois Business Brokers Act of 1995 (Brokers Act) (815 ILCS 307/10—10 et seq. (West 2008)). I, therefore, respectfully dissent. I would reverse the trial court’s order staying the plaintiffs’ action for declaratory judgment and compelling arbitration. I would remand this matter to the circuit court with directions to adjudicate whether Wind-lake is in compliance with the Brokers Act and, if not, the court should order all relief mandated under that statute. It is well settled that an arbitration clause in an agreement entered into in contravention of an Illinois statute requiring a party to register with the state prior to engaging in any licensed activity does not divest Illinois courts of jurisdiction to hear claims that a party has violated the licensing statute. Aste v. Metropolitan Life Insurance Co., 312 Ill. App. 3d 972 (2000); Kaplan v. Tabb Associates, Inc., 276 Ill. App. 3d 320 (1995). The court in Aste, quoting section 181 of the Restatement (Second) of Contracts, noted that “ £[i]f a party is prohibited from doing an act because of his failure to comply with a licensing, registration or similar requirement, a promise in consideration of his doing that act or his promise to do it is unenforceable on grounds of public policy if (a) the requirement has a regulatory purpose, and (b) the interest in the enforcement of the promise is clearly outweighed by the public policy behind the requirement.’ ” Aste, 312 Ill. App. 3d at 980 (quoting Restatement (Second) of Contracts §181 (1981)). Here, there is no question that the Brokers Act has a regulatory purpose and a clear public policy purpose of protecting Illinois citizens from unlicensed business brokers. Moreover, the Kaplan court noted that not only the contract as a whole, but each of the clauses, including the arbitration clause, is void as against public policy where a party has failed to obtain a license required to protect the public from unlicensed practitioners. Kaplan, 276 Ill. App. 3d at 325 (“the Agreement between the plaintiffs and the defendant, including the arbitration clause, is void because the defendant failed to obtain a license to provide architectural services”). In other words, not only the putative agreement as a whole, but each and every provision of the agreement, including the arbitration clause, made in consideration of the promise by a nonlicensed party to provide business broker services is void. Clearly, if a party lacks the legal capacity to enter into a contract, it must also lack the legal capacity to enter into any of that contract’s provisions. I would therefore find that the arbitration provision, upon which the majority relies to find that this dispute must be arbitrated, is void and cannot divest the circuit court of jurisdiction over suits brought under the Brokers Act. Relying upon Buckeye Check Cashing, the majority finds that the arbitration clause contained in the parties’ agreement mandates that the question of whether the defendant was in compliance with the Brokers Act at the time it entered into the contract must be decided by an arbitrator. I disagree with the majority and take issue with its application of the holding in Buckeye Check Cashing to the facts in the instant matter. As the majority points out, in Buckeye Check Cashing, the Court held that the validity of a contract as a whole should “be considered by an arbitrator, not a court.” Buckeye, 546 U.S. at 446. However, where the challenge is to the validity of the arbitration clause, independent of a challenge to the validity of the contract as a whole, it is appropriate for the court to decide the matter. Buckeye, 546 U.S. at 445-46. What Buckeye Check Cashing does not address is what happens if the challenge is to both the contract as a whole and the validity of the arbitration clause. Such is the matter herein. Although the majority characterizes the plaintiffs’ complaint as seeking a declaration that the contract as a whole is void ah initio, the plaintiffs actually sought a declaration that the defendant had violated the Brokers Act and then sought all appropriate remedies under that statute. Under the Brokers Act, a contract for business brokerage services entered into by a nonlicensed broker is void, as is each provision of the agreement, including an agreement to arbitrate disputes under the putative agreement. Kaplan, 276 Ill. App. 3d at 325. The plaintiffs’ challenge is not only to the legality of the contract as a whole, but also the legality of each and every provision of the agreement. In other words, what is at issue here is whether a party that cannot legally enter into a business brokerage contract can nonetheless legally enter into an agreement to arbitrate any disputes arising under that contract. I find nothing in law cited by the majority to support a conclusion that an agreement to arbitrate contained within an illegal contract is any more enforceable independently than the agreement itself. Both the entire agreement and each clause contained therein are equally susceptible to a challenge. The arbitration clause, as part of the agreement entered into in violation of the Brokers Act, is also independently in violation of the Brokers Act and is, therefore, subject to the same challenge as the agreement as a whole. Consistent with Buckeye Check Cashing, I would hold that the plaintiffs challenged the legality of the arbitration clause as well as the contract as a whole, and I would find that the court is the appropriate forum in which to bring a cause of action under the Brokers Act. I would also find that Preston v. Ferrer is distinguishable from the instant matter in that Preston presented a specific factual question as to whether a California statute covering talent agents applied to the contract at issue. Preston, 552 U.S. at 352 (“The dispositive issue, then, contrary to Ferrer’s suggestion, is not whether the FAA [Federal Arbitration Act] preempts the TAA [Talent Agent Act] wholesale. [Citation.] *** Instead, the question is simply who decides whether Preston acted as [a] personal manager or as [a] talent agent.”). The Court held that such a factual question was within the arbitrator’s ken. Preston, 552 U.S. at 353. Here, there is no question that the defendant was acting as a business broker and that the Brokers Act therefore applied. In addition, there is nothing in the holdings of either Buckeye Check Cashing or Preston that overrules our supreme court’s guidance in Jensen v. Quik International, 213 Ill. 2d 119, 127 (2004), wherein the court noted that where registration pursuant to statute is a statutory prerequisite to entering into a valid agreement, the entire agreement, including the arbitration provision, is unenforceable. Jensen, 213 Ill. 2d at 127 (“Had the legislature intended that a franchise agreement entered into in violation of sections 5 and 10 be unenforceable, it could have easily so provided.”). See Galasso v. KNS Cos., 364 Ill. App. 3d 124, 128 (2006) (citing Jensen for the proposition that where a statute requires registration as a condition precedent to a valid agreement and not merely as a basis for rescission of the agreement, the arbitration provision contained in the agreement is likewise void). Here, unlike the Franchise Disclosure Act of 1987 (815 ILCS 705/5 (West 2008)) at issue in Jensen, the Brokers Act contains an express provision that proper registration as a business broker is a condition precedent to a valid business broker agreement (815 ILCS 307/10—60 (West 2008)). I would find that Jensen still dictates the result in this matter and should guide our resolution of this matter. Moreover, the instant matter is distinguishable from all other cases relied upon by the majority in that, here, the contract at issue is fully executed. The defendant has been paid in full for its services, and the plaintiffs raised no controversy, dispute or claim relating to the agreement. The only issue raised in the instant litigation was whether the defendant was a properly registered and licensed business broker under the Brokers Act. Based upon the pleadings, there was no question of fact as to whether the defendant was acting as a business broker. The only question was whether the defendant was properly registered as a business broker. The answer to that question is either a simple “yes,” in which case the litigation is at an end and the defendant is allowed to keep the fee it received under the contract, or a simple “no,” in which case the defendant must return the fees charged in violation of the Brokers Act and pay the plaintiffs’ attorney fees in bringing this action under the Brokers Act.2  Because I would find that the matter of the defendant’s ability to render business broker services in Illinois is not a matter within the ken of an arbitrator, I would reverse the judgment of the circuit court of Peoria County compelling arbitration and I would remand this matter to the circuit court with direction that the defendant be ordered to answer the complaint. Depending upon the answer, the court should then enter an appropriate judgment forthwith.  I am somewhat perplexed by the defendant’s insistence in prolonging the litigation in this matter. The Brokers Act is very clear that strict compliance with the registration and licensing requirements of section 10 — 10 is required in order to engage in the practice of business brokering in this state. Either the defendant is in strict compliance with the Brokers Act or it is not, and it should answer the question forthwith so that this matter may be concluded in a judicious manner.