Gonzalez et al v. Pioneer Industrial Systems, LLC
Filing
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MEMORANDUM Opinion and Order: For the reasons stated in the accompanying Memorandum Opinion and Order, Third Party Defendant Menard, Inc.'s Motion to Dismiss 34 is granted. See Order for further details. Signed by the Honorable James B. Zagel on 12/1/2016. Mailed notice(ep, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
JUAN GONZALEZ and LORENA
GONZALEZ,
Plaintiffs,
v.
PIONEER INDUSTRIAL SYSTEMS, LLC,
Defendant.
____________________________________
No. 15 C 11583
Judge James B. Zagel
PIONEER INDUSTRIAL SYSTEMS, LLC,
Third-Party Plaintiff,
v.
MENARD, INC,
Third- Party Defendant.
MEMORANDUM OPINION AND ORDER
On June 20, 2016, Pioneer Industrial Systems, LLC filed a Third-Party Complaint
seeking contribution against Menard, Inc. based on the underlying lawsuit filed by Juan and
Lorena Gonzalez. Menard has filed a Motion to Dismiss the Third-Party Complaint, arguing that
Pioneer was bound by contract to submit any claim for contribution to arbitration. For the
reasons stated below, I am granting Menard’s Motion to Dismiss.
BACKGROUND
Pioneer is a corporation located in Ohio that is in the business of designing,
manufacturing, and selling material handling equipment. It manufactured a machine called a
“Pre-Hung Door Pick Car” and sold that machine for use at a facility owned by Menard, Inc.
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Juan Gonzalez was employed at the Menard facility and alleges that he was injured by the
machine. Gonzalez has filed a personal injury suit against Pioneer, and Pioneer filed a claim for
contribution against Menard, Inc.
The motion before me raises the question of whether the contribution suit must go to
arbitration. Menard, Inc. argues that it had a contract with Pioneer that requires arbitration in
circumstances such as this.
The contract at issue is a purchase order agreement between Pioneer and “Midwest
Manufacturing.” The purchase order agreement, entered into by Pioneer and Midwest
Manufacturing on April 24, 2012, contained the following statements: “This purchase order is
subject to the current terms and conditions issued by Midwest Manufacturing. All inconsistent
terms and conditions submitted by vendor shall have no effect. If vendor is unsure of Midwest
Manufacturing’s current terms and conditions, contact Midwest Manufacturing’s general office
for a copy.”
One of the conditions referenced by purchase order provides:
Vendor agrees that it will first attempt to resolve any dispute by contacting
Midwest directly. If Midwest and Vendor are unable to resolve the dispute by
these means, Midwest and Vendor agree to submit to final and binding
arbitration. Problems, claims, or disputes subject to binding arbitration include,
but are not limited to: non-statutory claims such as contractual claims, quasicontractual claims, tort claims, and any and all causes of action arising under
international, federal or state laws or common law.
Menard, Inc. argues that this clause requires Pioneer to pursue its claim via
arbitration. Pioneer argues that the purchase order constitutes a contract between Pioneer
and Midwest Manufacturing, but the third-party defendant Menard, Inc. was not a party
to the contract.
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LEGAL STANDARD
The Seventh Circuit follows the majority of courts in finding that Rule 12(b)(3) is the
appropriate basis for deciding a motion to enforce arbitration. Auto. Mechanics Local 701
Welfare & Pension Funds v. Vanguard Car Rental USA, Inc., 502 F.3d 740, 746 (7th Cir. 2007).
The plaintiff bears the burden of establishing that venue is proper. Marzano v. Proficio
Mortg. Ventures, LLC, 942 F. Supp. 2d 781, 787 (N.D. Ill. 2013) (citing Int'l Travelers Cheque
Co. v. BankAmerica Corp., 660 F.2d 215, 222 (7th Cir. 1981)). When ruling on a motion to
dismiss for improper venue, the Court takes all the allegations in the complaint as true, unless
contradicted by an affidavit. Id. The Court may consider facts outside the complaint and must
resolve the factual conflicts in the parties’ submissions in favor of the plaintiff. Id.
DISCUSSION
To compel arbitration, a party needs to show “(1) an agreement to arbitrate, (2) a dispute
within the scope of the arbitration agreement, and (3) a refusal by the opposing party to proceed
to arbitration.” Zurich Am. Ins. Co. v. Watts Indus., Inc., 466 F.3d 577, 580 (7th Cir. 2006).
Pioneer challenges whether Menard, Inc. can satisfy the first element required to compel
arbitration. The company makes two arguments. First, Pioneer argues that the “Conditions of
Order” were not a part of the contract documents, thus there was no arbitration clause in the
contract. Second, Pioneer argues that even if the contract contained an arbitration clause, the
agreement was with Midwest Manufacturing, rather than Menard, Inc., thus Menard, Inc. cannot
avail itself of the benefits of the contract.
I find neither of these arguments persuasive and conclude that Pioneer has not met its
burden of establishing that venue is proper in this Court.
I.
The Conditions of Order Were Part of the Contract Documents.
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The purchase order at issue is five pages long. It provides that the purchase order is
“subject to the current terms and conditions issued by Midwest Manufacturing…If vendor is
unsure of Midwest Manufacturing’s current terms and conditions, contact Midwest
Manufacturing’s general office for a copy.”
Pioneer argues that its president never saw the “Conditions of Order” document that
contains the arbitration clause until Menard filed the motion now before me. But even if Pioneer
was not aware of the Conditions of Order, it agreed to be bound by them by entering into the
purchase agreement. The purchase order clearly references additional conditions, and the
agreement places the burden on Pioneer to inquire about the meaning of the phrase “terms and
conditions.” The fact that no one at Pioneer made such an inquiry does not render these
conditions inapplicable. Rather, the “Conditions of Order” are properly considered part of the
purchase order agreement.
II.
Menard, Inc. Was a Party to the Agreement.
Under Illinois law, “a corporation is deemed a distinct legal entity, separate from other
corporations with which it may be affiliated.” Forsythe v. Clark USA, Inc., 361 Ill. App. 3d 642,
646 (1st Dist. 2005). If Menard, Inc. and Midwest Manufacturing are indeed separate
corporations, as Pioneer argues, then Pioneer is correct that Menard cannot avail itself of the
contract. But if Pioneer has failed to sufficiently prove that Midwest Manufacturing is a distinct
legal entity from Menard, Inc., then Menard may enforce the arbitration clause referenced in the
purchase order agreement.
Pioneer has not provided the Court with any document, legal or otherwise, that proves
that Midwest Manufacturing is a separate and distinct entity from Menard. The company
submitted a declaration by its president, Todd Hendricks, who states that he understood Midwest
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Manufacturing and Menard, Inc. to be two separate and distinct entities. Hendricks cites the
letterhead on all documents he received to support this conclusion, as the documents consistently
bore the name “Midwest Manufacturing.” Pioneer also submitted a screenshot from the website
menards.com, which refers to “Midwest Manufacturing, Inc.” But neither the impressions of
Pioneer’s president nor a line on a website constitute the sort of legally significant documents
that would prove Midwest Manufacturing is a distinct legal entity from Menard, Inc.
Menard, Inc. has submitted affidavits to support the position that Menard Inc. and
Midwest Manufacturing are indeed part of the same legal entity. Menard has submitted a
declaration of Jeff Sacia, the Director of Credit Card Operations of Menard, Inc. He declares that
Midwest Manufacturing is a division of Menard, Inc., and Midwest Manufacturing is not a
separate corporate entity. He stated that Midwest Manufacturing is not registered, licensed, or
authorized to do business in any state. This assertion by Sacia is not contradicted by any affivadit
submitted by Pioneer. Menard also points out that the contact information on the purchase order
directed Pioneer to a building on the corporate campus of Menard.
If there were a genuine factual conflict here about Midwest Manufacturing’s corporate
status, I would be required to resolve it in the plaintiff’s favor. But there is none. Pioneer has not
provided any document that establishes Midwest Manufacturing’s legal status as a distinct
corporation from Menard, Inc. The company has therefore failed to meet its burden of
establishing that venue is appropriate in this Court.
Pioneer makes one slightly different argument about why venue is proper in a sur-reply.
The company brought to the Court’s attention that Menard, Inc. filed an action against Pioneer in
Illinois state court on October 16, 2016, seeking to recover sums paid out to another Menard
employee on a worker’s compensation claim. Pioneer argues that Menard’s decision to file the
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claim in state court, rather than pursue arbitration, shows that the arbitration provision is “not
important” to Menard, and Menard is willing to resolve disputes with Pioneer in a court of law.
Pioneer does not cite any principle of law that suggests Menard’s decision to file one suit
in state court would therefore waive the company’s ability to compel arbitration in another suit.
Whether or not the arbitration clause applies to a separate dispute has no bearing on whether the
clause applies to the dispute before me.
III.
All of the Elements Required to Compel Arbitration Are Met
Having concluded that the “Conditions of Order” contained an arbitration clause, those
conditions were part of the agreement between Pioneer and Midwest Manufacturing, and Pioneer
has failed to draw a legal distinction between Menard, Inc. and Midwest Manufacturing, the first
element required to compel arbitration is met.
The second element requires that the arbitration clause covers the kind of dispute at issue.
The Third-Party Complaint filed by Pioneer states a tort claim against Menard, stemming from
an underlying personal injury lawsuit. The arbitration clause in the Conditions of Order specified
that tort claims are subject to arbitration.
The third element requires that Pioneer has refused to arbitrate. By naming Menard as
third-party defendant, rather than submitting the issue to arbitration, Pioneer has refused
arbitration. Therefore all three elements required to compel arbitration are met, and Pioneer must
pursue its claim via arbitration.
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CONCLUSION
For the foregoing reasons, Third-Party Defendant Menard, Inc.’s Motion to Dismiss is
granted. Pioneer’s claim against Menard, Inc. is dismissed without prejudice so that it may be
submitted to arbitration.
ENTER:
James B. Zagel
United States District Judge
DATE: December 1, 2016
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