Herman v. Katten Muchin Rosenman LLP

Background

Stewart B. Herman, a former partner at Katten Muchin Rosenman LLP, sued Katten, its CEO Noah S. Heller, and its general counsel Michael I. Verde. Herman alleged that Katten wrongfully stifled his aviation finance practice, denied him benefits, retaliated against him, and terminated him from the partnership because of his age. He litigated the case without a lawyer.

The firm’s partnership agreement included a broad arbitration provision covering legal or equitable disputes arising from the agreement, a partner’s business activities, or a partner’s relationship with the firm or other partners. The agreement required a written demand, good-faith settlement discussions, and mediation before arbitration. It designated Chicago as the place of arbitration, selected Illinois law, and incorporated American Arbitration Association procedures.

The defendants moved under the Federal Arbitration Act to stay the federal case and compel arbitration. Herman opposed the motion. He argued that the defendants had waived arbitration by rejecting his $15 million settlement demand and refusing to proceed with mediation during pre-litigation negotiations.

Arbitration and Stay Rulings

The court explained that the parties did not dispute either the validity of the arbitration agreement or the fact that Herman’s claims fell within its scope. The dispute concerned whether the defendants had waived their right to arbitrate.

The court held that Herman’s waiver argument was based on conduct before the lawsuit, not on the defendants’ litigation conduct. Waiver based on pre-litigation conduct is generally an issue for the arbitrator rather than the court. The court therefore did not decide whether the defendants had actually waived arbitration and ruled that the arbitrator should decide that issue.

The court granted the defendants’ motion to stay. Because the lawsuit involved a dispute covered by the arbitration agreement and the defendants requested a stay, the Federal Arbitration Act required the court to stay the case pending arbitration.

The court denied the defendants’ request for an order compelling arbitration in Chicago, to the extent the request had not been withdrawn. The court held that a federal court in that district could not order arbitration outside the district without the parties’ consent, and Herman had not consented to arbitration in that district. The court could stay the case even though it could not issue that order.

Herman’s Procedural Arguments

The court rejected Herman’s arguments that the stay should be denied because the defendants did not provide courtesy copies of unpublished cases, misstated the time for his opposition, or violated procedures concerning sealed filings. The court found that Herman had access to the cited unpublished material, that the court had given him more than four weeks to respond, and that the defendants had not filed documents under seal or sought permission to do so.

Other Requests for Relief

The court denied Herman’s request for a default judgment because the defendants timely filed their motion seeking a stay and arbitration and requested additional time to answer. The court denied without prejudice his request to amend the complaint because the case was stayed.

The court denied without prejudice Herman’s request to disqualify defense counsel. It found the request premature because the case had not reached discovery or trial and arbitration might resolve the dispute. The court also denied without prejudice his request for sanctions because he had not filed a separate sanctions motion or followed the required procedures. His request for a pretrial conference was moot in light of the stay.

Disposition

Judge Robert W. Lehrburger granted the defendants’ motion to stay, and the case was stayed pending arbitration. The court denied the request for a default judgment and denied Herman’s other requests without prejudice, while treating the pretrial-conference request as moot. The parties must file a joint status letter within five days after the arbitration concludes.