R.A. Bright Construction v. Weis Builders

No. 3--09--0910

Filed June 9, 2010
IN THE

APPELLATE COURT OF ILLINOIS

THIRD DISTRICT

A.D., 2010

R.A BRIGHT CONSTRUCTION, INC.,) Appeal from the Circuit Court
an Illinois Corporation, ) of the 12th Judicial Circuit
) Will County, Illinois
Plaintiff-Appellee, )
)
v. ) No. 08--L--905
)
WEIS BUILDERS, INC., a )
Minnesota Corporation, )
) Honorable Barbara Petrungaro,
Defendant-Appellant. ) Judge, Presiding.

JUSTICE SCHMIDT delivered the opinion of the court:

Plaintiff, R.A. Bright Construction, Inc. (Bright), brought

this breach of contract action against defendant, Weis Builders,

Inc. (Weis), in the circuit court of Will County. Defendant
filed a motion to dismiss or, in the alternative, to stay the

action and compel arbitration. The trial court denied Weis's

motion. Weis filed this interlocutory appeal, claiming the trial

court erred when denying its motion to compel arbitration.

BACKGROUND

Weis entered into a contract with Wal-Mart Stores, Inc., for

the construction of a Wal-Mart Supercenter store in Lockport,
Illinois. Weis is a Minnesota corporation that maintains offices

in four states. Weis, as general contractor, engaged Bright to

act as a subcontractor to perform concrete work and underground

utilities work on the project. Bright is an Illinois corporation

with its principle place of business in Plainfield, Illinois.

Around October 20, 2006, Bright and Weis entered into a written

subcontract agreement wherein Bright agreed to perform the

concrete work for $2,930,000. Around November 14, 2006, Weis and
Bright entered into a second written subcontract agreement

wherein Bright agreed to perform the underground utilities work

for $679,567. The record is clear that both subcontract

agreements were properly signed by each party. There are no

allegations of fraud or misrepresentations leading to the

formation of these contracts. From the record, it appears that

each party freely entered into the contracts with full knowledge

of the contractual terms and conditions.

A dispute between the parties arose in which Bright claimed

it was owed $765,701 under both contracts. Weis denies that
Bright is entitled to these monies. On November 18, 2008, Bright

sued. In response, Weis filed a "motion to dismiss and compel

arbitration or, alternatively, to stay proceedings and to compel

arbitration," claiming that the Federal Arbitration Act (FAA) (9

U.S.C. §1 et seq. (2006)) mandated arbitration of this matter.

Before Weis's motion could be heard, Bright filed an amended

2
complaint seeking to foreclose a mechanics lien against Wal-Mart

in the disputed amount. Thereafter, hearings were held on Weis's

motion.

The trial court took the matter under advisement, then on

October 14, 2009, denied Weis's motions. This interlocutory

appeal followed.

ANALYSIS

Our standard of review is de novo. Melena v. Anheuser-
Busch, Inc., 219 Ill. 2d 135, 847 N.E.2d 99 (2006). Concerning

the substance of this appeal, Weis argues that the trial court

erred by failing to compel arbitration. Specifically, Weis notes

that section 2 of the FAA has been interpreted by our supreme

court to compel "judicial enforcement of arbitration agreements

'in any *** contract evidencing a transaction involving

commerce.'" Melena v. Anheuser-Busch, Inc., 219 Ill. 2d at 142,

847 N.E.2d at 103, quoting 9 U.S.C. §2 (1994). Therefore, Weis

concludes, section 2 of the FAA mandates this matter proceed to

arbitration.
Bright disagrees. Initially, Bright claims the FAA is not

applicable to this matter for two reasons. First, Bright argues

the FAA only applies to matters affecting interstate commerce and

since its activity was solely intrastate, the FAA is not

applicable. Alternatively, Bright contends that even if we find

its activity involved interstate commerce and that the clause was

3
indeed an arbitration clause, the trial court's denial of Weis's

motion was still proper. This is so, Bright argues, as the

applicable clause violates the Illinois Building and Construction

Contract Act (815 ILCS 665/1 et seq. (West 2006)).

The FAA states, "A written provision in *** a contract

evidencing a transaction involving commerce to settle by

arbitration a controversy thereafter arising out of such contract

or transaction, or the refusal to perform the whole or any part
thereof, *** shall be valid, irrevocable, and enforceable, save

upon such grounds as exist at law or in equity for the revocation

of any contract." 9 U.S.C. §2 (2006).

In Malena, after noting that it was called upon to apply the

FAA, our supreme court stated that when "construing a federal

statute, we generally look to federal decisions for its

interpretation of the statutory provisions." Melena, 219 Ill. 2d

at 141, 847 N.E.2d at 103. The first step of analysis taken by

the Malena court, after briefly mentioning the FAA's history and

purpose, focused on the language in section 2 of the FAA that
makes it applicable only when an arbitration clause exists "'in

any *** contract evidencing a transaction involving commerce.'"

Malena, 219 Ill. 2d at 142, 847 N.E.2d at 103, quoting 9 U.S.C.

§2 (1994). Likewise, we must first determine whether the

contract at issue involves commerce.

The United States Supreme Court has noted the FAA was

4
enacted pursuant to Congress’s substantive power to regulate

interstate commerce and admiralty (Prima Paint Corp. v. Flood &

Conklin Mfg. Co., 388 U.S. 395, 18 L. Ed. 2d 1270, 87 S. Ct. 1801

(1967)) and that it is preemptive of state laws hostile to

arbitration. Southland Corp. v. Keating, 465 U.S. 1, 79 L. Ed.

2d 1, 1045 S. Ct. 852 (1984). The court has found that the words

"involving commerce" in section 2 of the FAA "signal[ ] an intent

to exercise Congress' commerce power to the full." Allied-Bruce
Terminix Cos. v. Dobson, 513 U.S. 265, 277, 130 L. Ed. 2d 753,

763, 115 S. Ct. 834, 841 (1995).

We find Allied-Bruce to be particularly instructive to this

matter. Allied-Bruce involved a suit from a homeowner claiming

that Allied-Bruce failed to fulfil its contractual obligation to

keep a home free from termite damage. Allied-Bruce Terminix Cos.

v. Dobson, 628 So. 2d 354, 355 (Ala. 1993). Allied-Bruce moved

to stay the lawsuit and compel arbitration pursuant to an

arbitration clause in the contract. Allied-Bruce, 628 So. 2d at

355. Allied-Bruce argued that "because they are out-of-state
entities, and because some of the materials used in fulfilling

their duties imposed by the termite bond were brought into

Alabama from out-of-state, the bond has at least a 'slight nexus'

with interstate commerce" and, as such, section 2 of the FAA in

conjunction with the arbitration clause in the bond mandates that

the matter proceed to arbitration. Allied-Bruce Terminix Cos. v.

5
Dobson, 628 So. 2d 354, 355 (Ala. 1993).

The Alabama Supreme Court disagreed. The court found that

the proper standard to employ for determining whether a contract

evidences a transaction involving commerce was "'not whether, in

carrying out the terms of the contract, the parties did cross

state lines, but whether, at the time they entered into it and

accepted the arbitration clause, they contemplated substantial

interstate activity." (Emphasis omitted.) Allied-Bruce, 628 So.
2d at 355, quoting Metro Industrial Painting Corp. v. Terminal

Construction Co., 287 F.2d 382, 387 (2d Cir. 1961) (Lombard, J.,

specially concurring). The Alabama court found that the parties

contemplated a transaction that was primarily local and not

substantially interstate, and as such, the contract was not one

evincing a transaction involving commerce within the meaning of

section 2 of the FAA. Allied-Bruce, 628 So. 2d at 357.

The United States Supreme Court rejected the "contemplation

of the parties" approach used by the Alabama court, instead

finding that a "commerce in fact" analysis was "more faithful to
the statute." Allied-Bruce Terminix Cos. v. Dobson, 513 U.S.

265, 278, 130 L. Ed. 2d 753, 767, 115 S. Ct. 834, 841 (1995).

The Court noted that it "accept[s] the 'commerce in fact'

interpretation, reading the [FAA's] language as insisting that

the 'transaction' in fact 'involv[e]' interstate commerce, even

if the parties did not contemplate an interstate commerce

6
connection." Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265,

281, 130 L. Ed. 2d 753, 769, 115 S. Ct. 834, 843 (1995). The

Court concluded:

"The parties do not contest that the

transaction in this case, in fact, involved

interstate commerce. In addition to the

multistate nature of Terminix and Allied-

Bruce, the termite-treating and house-
repairing material used by Allied-Bruce in

its (allegedly inadequate) efforts to carry

out the terms of the Plan, came from outside

Alabama.

Consequently, the judgment of the

Supreme Court of Alabama is reversed ***."

Allied-Bruce Terminix Cos. v. Dobson, 513

U.S. 265, 282, 130 L. Ed. 2d 753, 769, 115

S. Ct. 834, 843 (1995).

While Bright contests that the transaction involved
interstate commerce, there is no doubt that this transaction

does, in fact, involve interstate commerce or, at the least, has

a slight nexus to interstate commerce. The record on appeal

includes a document completed by Bright, dated November 14, 2006,

indicating that it purchased $77,228 worth of materials from

County Materials of Marathon, Wisconsin. Bright has supplemented

7
the record with documents that indicate it actually acquired

$82,732.54 worth of materials from County Materials. The parties

dispute whether Bright has properly supplemented the record.

Assuming, arguendo, that Bright has properly supplemented the

record with information indicating that the materials supplied by

County Materials were "generated" from Illinois facilities, that

does not change the fact that a Wisconsin corporation supplied a

significant amount of materials for Bright. Bright does not deny
that County Materials is an out-of-state corporation or that

County Materials was paid a significant sum for materials it

supplied for this job.

Furthermore, also like Allied-Bruce, the multistate nature

of one of the parties to the contract (Weis Builders) cannot be

denied. Weis is a Minnesota corporation with offices in four

states. We find the agreement between Bright and Weis is a

contract evincing a transaction involving commerce as

contemplated by section 2 of the FAA.

Citing Kansas City Structural Steel Co. v. State of
Arkansas, 269 U.S. 148, 70 L. Ed. 204, 46 S. Ct. 59 (1925),

Bright notes the Court found that "delivery of materials from

Missouri to Arkansas for a subcontractor to build a bridge in

Arkansas was not interstate commerce." However, this language

cannot be reconciled with later Supreme Court cases dealing with

the reach of Congress's commerce powers. See Allied-Bruce

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Terminix Cos. v. Dobson, 513 U.S. 265, 282, 130 L. Ed. 2d 753,

769, 115 S. Ct. 834, 843 (1995). Moreover, the ultimate holding

of the Kansas City Structural Steel case was that a Missouri

corporation could not use the commerce clause to invalidate an

Arkansas statute requiring every out-of-state corporation doing

business in Arkansas to file a certificate with the Secretary of

State identifying a general office and place of business in

Arkansas, as well as an agent authorized to be served within the
state. Kansas City Structural Steel Co. v. State of Arkansas,

269 U.S. 148, 70 L. Ed. 204, 46 S. Ct. 59 (1925).

Kansas City Structural Steel is a pre-New Deal commerce

clause case. It is beyond debate that following the 1937 case of

National Labor Relations Board v. Jones & Laughlin Steel Corp.,

301 U.S. 1, 81 L. Ed. 893, 57 S. Ct. 615 (1937), courts have

rapidly expanded the commerce clause's reach. See United States

v. Darby, 312 U.S. 100, 85 L. Ed. 609, 61 S. Ct. 451 (1941);

United States v. Wrightwood Dairy Co., 315 U.S. 110, 86 L. Ed.

726, 62 S. Ct. 523 (1942); Wickard v. Filburn, 317 U.S. 111, 87
L. Ed. 122, 63 S. Ct. 82 (1942).

This expansion continued during the civil rights movement

with the Court declaring that whether a person could sit at a

local lunch counter so substantially affected interstate commerce

that Congress could regulate the matter under its commerce clause

authority. Katzenbach v. McClung, 379 U.S. 294, 13 L. Ed. 2d

9
290, 85 S. Ct. 377 (1964); see also Heart of Atlanta Motel, Inc.,

v. United States, 379 U.S. 241, 13 L. Ed. 2d 258, 85 S. Ct. 348

(1964).

In Katzenbach, the Court acknowledged that the volume of

food supplied to Ollie's Barbecue ($70,000) from out-of-state

sources "was insignificant when compared with the total

foodstuffs moving in commerce." Katzenbach v. McClung, 379 U.S.

294, 300-01, 13 L. Ed. 2d 290, 296, 85 S. Ct. 377, 382 (1964).
Nevertheless, citing to Wickard v. Filburn, the Court reiterated

that while an individual transaction may be trivial by itself and

seemingly purely local, that "'is not enough to remove him from

the scope of federal legislation where, as here, his

contribution, taken together with that of many others similarly

situated, is far from trivial.'" Katzenbach v. McClung, 379 U.S.

294, 301, 13 L. Ed. 2d 290, 296, 85 S. Ct. 377, 382 (1964),

quoting Wickard v. Filburn, 317 U.S. 111, 127-28, 87 L. Ed. 122,

136, 63 S. Ct. 82, 90 (1942). Undoubtedly, when considering all

those similarly situated to Bright, which uses materials supplied
by out-of-state corporations to help build national retail

stores, the effect on interstate commerce is far from trivial.

Bright claims that even if we find this matter evinces a

transaction involving commerce, denial of Weis's motion was still

proper. Bright comes to this conclusion by reasoning that

section 2 of the FAA allows for consideration of its contract

10
defenses, namely, forum non conveniens and its assertion that the

Illinois Building and Construction Contract Act prohibits

enforcement of the clause. Bright also argues that the clause at

issue is a forum selection clause, not an arbitration clause,

and, therefore, outside the reach of the FAA. We disagree.

Bright correctly notes that section 2 of the FAA allows a

party to raise contract defenses if they are based "upon such

grounds as exist at law or in equity for the revocation of any
contract." 9 U.S.C. §2 (2006). Numerous courts have interpreted

the meaning of this provision in the FAA.

In OPE International LP v. Chet Morrison Contractors, Inc.,

258 F.3d 443 (5th Cir. 2001), the court concluded that a

Louisiana statute was preempted by the FAA because it conditioned

the enforceability of arbitration agreements on selection of a

Louisiana forum, a requirement not applicable to contracts

generally. OPE, 258 F.3d at 447. The contract at issue in OPE

stated:

"*** [I]f any question, dispute or difference
shall arise between CONTRACTOR and

SUBCONTRACTOR, and the parties cannot

mutually agree on a resolution thereof, then

the Parties agree that such question, dispute

or difference shall be finally settled by

arbitration in Houston, Texas, or in such

11
 other location as may be mutually agreed, in

accordance with the Construction Industry

Rule of the American Arbitration Association

with a single arbitrator." OPE, 258 F.3d at

445.

The subcontractor filed suit seeking damages and a

declaration that the subcontract's arbitration clause, forum

selection clause and choice-of-law provision violated public
policy and were therefore void. The subcontractor supported this

argument by quoting a Louisiana statute that read:

"'A. The legislature finds that, with

respect to construction contracts, subcontracts,

and purchase orders for public and private

works projects, when one of the parties is

domiciled in Louisiana, and the work to be

done and the equipment and materials to be

supplied involve construction projects in

this state, provisions in such agreements
requiring disputes arising thereunder to be

resolved in a forum outside of this state or

requiring their interpretation to be governed

by the laws of another jurisdiction are

inequitable and against the public policy of

this state.

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 B. The legislature hereby declares null

and void and unenforceable as against public

policy any provision in a contract *** which

either:

(1) Requires a suit or arbitration proceeding

to be brought in a forum or jurisdiction outside

of this state.'" OPE, 258 F.3d at 446, quoting

La. Rev. Stat. Ann. §9:2779.
The OPE court held that the Louisiana "statute directly

conflicts with [section] 2 of the FAA because the Louisiana

statute conditions the enforceability of arbitration agreements

on selection of a Louisiana forum; a requirement not applicable

to contract generally. [Citation.] The FAA therefore preempts

the Louisiana statute ***. Accordingly, we conclude that the

district court properly compelled the parties to submit to

arbitration." OPE, 258 F.3d at 447-48. This holding is

consistent with those of other federal appellate circuits. See

KKW Enterprises, Inc. v. Gloria Jean's Gourmet Coffees
Franchising Corp., 184 F.3d 42 (1st Cir. 1999) (Rhode Island

statute that rendered unenforceable any provision in a franchise

agreement that restricted jurisdiction or venue to a forum

outside Rhode Island was not applicable to all contracts

generally and therefore the statute was preempted by the FAA);

Bradley v. Harris Research, Inc., 275 F.3d 884 (9th Cir. 2001)

13
(FAA preempts California statute that declared void any provision

in a franchise agreement restricting venue to a forum outside

California).

The similarities between OPE and this matter are striking.

The agreement between Bright and Weis states that, unless the

parties agree otherwise:

"Any dispute arising out of or related to

this subcontract, *** shall at contractor's
sole discretion *** (c) be settled by

arbitration venued in Hennepin County,

Minnesota in accordance with the Construction

Industry Arbitration Rules of the American

Arbitration Association, and judgment

rendered upon the award may be entered in any

court having jurisdiction thereof."

Like the Louisiana legislature, our legislature has declared that

any "provision contained in or executed in connection with a

building and construction contract to be performed in Illinois
that makes the contract subject to the laws of another state or

that requires any litigation, arbitration, or dispute resolution

to take place in another state is against public policy. Such a

provision is void and unenforceable." 815 ILCS 665/10 (West

2008). This declaration by the legislature is not applicable to

all contracts generally, but only to contracts involving building

14
and construction. Therefore, we find the FAA preempts the

Illinois Building and Construction Contract Act (815 ILCS 665/1

et seq. (West 2006)). This finding is consistent with the recent

case from our supreme court that holds the antiwaiver provisions

of the Nursing Home Care Act (210 ILCS 45/3--606, 3--607 (West

2006)) are preempted by the FAA. Carter v. SSC Odin Operating

Co., No. 106511 (Il April 15, 2010) (holding the language in

section 3--606 of the Nursing Home Care Act (210 ILCS 45/3--606
(West 2006)) that states any "waiver by a resident *** of the

right to commence an action under [this Act] *** shall be null

and void, and without legal force or effect," while a statement

of Illinois public policy, was not a defense applicable to all

contracts generally; therefore, the antiwaiver provisions of the

Nursing Home Care Act were preempted by the FAA and could not be

used to avoid arbitration).

Finally, Bright claims that the doctrine of forum non

conveniens is applicable to all contracts generally and,

therefore, section 2 of the FAA does not prohibit Bright from
asserting that, under the doctrine, this matter should be

adjudicated in Illinois. We disagree. Section 2 of the FAA

allows for pleading contract defenses "as exist at law or in

equity for the revocation of any contract." (Emphasis added.) 9

U.S.C. §2 (2006). Forum non conveniens is an equitable doctrine

that presupposes the existence of more than one forum with

15
jurisdiction over the parties and the subject matter. Griffith

v. Mitsubishi Aircraft International, Inc., 136 Ill. 2d 101, 554

N.E.2d 209 (1990). Forum non conveniens is not a contract

defense, but merely a procedural mechanism employed to transfer a

case to a forum in which adjudication "can be had more

conveniently." Olsson v. General Motors Corp., 318 Ill. App. 3d

87, 90, 742 N.E.2d 1251, 1254 (2001). Therefore, we hold forum

non conveniens is an improper basis to deny defendant's motion to
stay the proceedings and compel arbitration.

In the mechanics lien action against Wal-Mart, Bright seeks

the same funds it seeks in its contract dispute with Weiss.

Common sense requires that action be stayed pending arbitration.

We reverse the order of the trial court and remand with

directions to enter a stay of the proceedings below and compel

arbitration.

CONCLUSION

For the foregoing reasons, the judgment of the circuit court

of Will County is reversed and this cause is remanded with
direction.

Reversed and remanded with directions.

LYTTON, J., concurs

JUSTICE McDADE, dissenting:

The majority has found that "the agreement between Bright and Weis is a contract

16
evincing a transaction involving commerce as contemplated by section 2 of the FAA" (slip order

at 8) and that "the FAA preempts the Illinois Building and Construction Act" (slip order at 14).

The majority has also held that "forum non conveniens is an improper basis to deny defendant’s

motion to stay the proceedings and compel arbitration" (slip order at 16). Although I agree that

the FAA preempts the Illinois Building and Construction Act, I do not agree with the finding that

this agreement evinces a transaction involving interstate commerce. Because I would find that the

FAA does not apply, I would not reach Bright’s argument that under the doctrine of forum non

conveniens, this matter should be adjudicated in Illinois. Slip order at 15.

Nothing beyond "the multistate nature of one of the parties" (slip order at 8) demonstrates

that the transaction "in fact" involved interstate commerce. See slip order at 6. Further, nothing

in Allied-Bruce suggests that the Supreme Court would find the interstate nature of the parties

sufficient to hold that a transaction "in fact" involves interstate commerce. The Allied-Bruce

court wrote that "[i]n addition to the multi state nature of Terminix and Allied-Bruce, the

termite-treating and house-repairing material used by Allied-Bruce in its (allegedly inadequate)

efforts to carry out the terms of the Plan, came from outside Alabama." (Emphasis added.)

Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265, 282, 130 L. Ed. 2d 753, 769,

115 S. Ct. 834, 843 (1995). The majority does not find that the materials "in fact" moved

interstate, only that the corporation selling product intrastate is an out-of-state corporation. Slip

order at 8.

The majority, therefore, relies only on the interstate nature of the parties for its finding

-17-
that "the agreement *** is a contract evincing a transaction involving commerce ***." Slip order

at 8. However, the federal court has, since Allied-Bruce, found that the interstate nature of the

parties is not sufficient to find that a contract involves interstate commerce. In Cecala v. Moore,

982 F. Supp. 609, 611-612 (N.D. Ill., 1997), the district court held that the FAA did not apply

because the contract in question did not evince a transaction involving interstate commerce.

There, the seller of real estate was located outside Illinois, but there was no evidence that

transactions incident to the sale took place outside Illinois. See also Becker v. Amoco Pipeline

Co., No. 89 C 1732 (N.D. Ill. Sept. 25, 1989) ("the language of section 2 means that the

transaction which is the subject of the contract containing the arbitration provision must itself

involve interstate commerce. It is not enough that one party's business in general involves

interstate activity").

I would also note that Katzenbach is distinguishable because, although "insignificant when

compared with total foodstuffs moving in commerce" (slip order at 10) some of the food supplied

to Ollie’s Barbecue was "from out-of-state" (slip order at 10). None of the materials supplied to

Bright were from out-of-state.

I would hold that the contract does not involve interstate commerce and, therefore, that

the FAA does not apply. Accordingly, I dissent.

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