Aventine Renewable Energy, Inc. v. JP Morgan Securities, Inc.
940 N.E.2d 257
Ill. App. Ct.2010Background
- Aventine Renewable Energy invested in auction rate securities (ARS), specifically SLARS, from JP Morgan.
- Aventine alleged JP Morgan coaxed investment with promise to repurchase at full value if buyers could not be found.
- Account application contained an arbitration clause mandating arbitration under the FAA, with a class-action carve-out if a putative class action was pending.
- In Feb. 2008, ARS auctions failed; market for SLARS collapsed; Aventine allegedly lost $31.6 million selling below repurchase value.
- Aventine sued JP Morgan in Illinois; JP Morgan moved to compel arbitration or stay pending New York class action Ciplet v. JP Morgan Chase & Co.
- The trial court stayed the Illinois action; Aventine moved to lift the stay; the court denied lifting the stay, and Aventine appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the stay order is appealable under Rule 307(a)(1). | Aventine argues jurisdiction exists due to stay nature. | JP Morgan contends Rule 307(a)(1) applies to injunction-like stays. | We have jurisdiction; stay is injunctive in nature under Rule 307(a)(1). |
| Whether the trial court properly stayed pending New York class action. | Stay needed to avoid duplicative discovery; class action will resolve core issues. | Stay promotes judicial economy; issues are referable to arbitration later if class action resolves. | The stay was proper; court did not abuse discretion in staying pending the New York action. |
| Whether FAA governs the stay order in this context. | FAA arbitration clause carve-out should remove stay influence. | FAA supports stay when issues are referable to arbitration. | FAA stay authority applied to referable issues; stay upheld as proper under FAA analysis. |
| Whether the Ciplet New York action negates the arbitration carve-out. | Pending Ciplet triggers carve-out preventing arbitration. | Carve-out preserves potential arbitration after class action resolves. | Carve-out supports staying while New York class action proceeds; does not compel arbitration at this stage. |
Key Cases Cited
- Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (U.S. 1983) (federal arbitration act aims to promote arbitration; doubts resolved in favor of arbitration)
- Olson v. Jenkens & Gilchrist, 461 F.Supp.2d 710 (N.D. Ill. 2006) (class-action exception analyzed; disputes likely referable to arbitration if class not certified)
- Heiden v. Galva Foundry Co., 223 Ill.App.3d 163 (1991) (arbitration issues should be resolved in favor of arbitration where appropriate)
- May v. SmithKline Beecham Clinical Laboratories, Inc., 304 Ill.App.3d 242 (1999) (abuse of discretion standard for stay decisions)
- Marsh v. Illinois Racing Board, 179 Ill.2d 488 (1997) (injunction-like stay orders; breadth of Rule 307(a)(1) jurisdiction cautioned)
- Philip Morris, Inc., 198 Ill.2d 87 (2001) (distinguishes injunctive vs. ministerial/administrative orders for appealability)
- Short Brothers Construction, Inc. v. Korte & Luitjohan Contractors, Inc., 356 Ill.App.3d 958 (2005) (mediation order not appealable under Rule 307(a)(1) as noninjunctive)