Hartz v. Brehm Preparatory Sch., Inc.

2021 IL App (5th) 190327

183 N.E.3d 172

451 Ill.Dec. 126

Cynthia HARTZ, Individually, and as Parent and Next Friend of L.R., a Minor; and James Ritchie, Plaintiffs-Appellees,

v.BREHM PREPARATORY SCHOOL, INC.; Brian Brown, Ph.D., its Director; and Richard Collins, Ph.D., Defendants-Appellants.

NO. 5-19-0327

Appellate Court of Illinois, Fifth District.

February 18, 2021

John C. Ryan, D. Brian Smith, and Bentley J. Bender, of Feirich Mager Green Ryan, of Carbondale, for appellants.

Joseph M. Baczewski and Jerrod H. Montgomery, of Carbondale, for appellees.

PRESIDING JUSTICE BOIE delivered the judgment of the court, with opinion.

¶ 1 The plaintiffs, Cynthia Hartz, individually, and as parent and next friend of L.R., a minor, and James Ritchie, filed a complaint against the defendants, Brehm Preparatory School, Inc. (Brehm), Dr. Brian Brown, Ph.D., and Dr. Richard Collins, Ph.D.,¹ alleging claims stemming from Brehm's expelling of Hartz's minor child, L.R., from Brehm's private boarding school for learning disabled children. Brehm moved to dismiss the plaintiffs’ complaint on the basis that the contractual agreement between Hartz and Brehm required Hartz to arbitrate the claims raised in the plaintiffs’ complaint. Brehm appeals from the trial court's order denying their combined motion to dismiss the plaintiffs’ complaint and for sanctions. For the reasons that follow, we reverse and remand for further proceedings consistent with this decision.

¶ 2 I. BACKGROUND

¶ 3 Brehm operates a private boarding school in Carbondale, Illinois, that provides educational and boarding school services for children with learning disabilities. Codefendant Dr. Richard Collins, Ph.D., served as Brehm's director, and codefendant Dr. Brian Brown, Ph.D., served as Brehm's executive director.

¶ 4 Hartz and Ritchie are husband and wife and reside in Pennsylvania along with Hartz's minor child, L.R. L.R. suffers from learning disabilities and other diagnoses which made him a potential candidate for services at Brehm's school. In the spring of 2017, Hartz began making arrangements for L.R.’s ninth grade school year. Hartz and L.R. traveled to Carbondale on April 21, 2017, to tour Brehm's facilities and meet with the school's leadership. During the visit, Collins met with L.R. and informed Hartz that L.R. was a fit for Brehm's program.

¶ 5 Brehm furnished Hartz with an unsigned copy of the Brehm contract, which set out the proposed terms of an agreement between Hartz and Brehm concerning L.R.’s ninth grade education at Brehm for the 2017-18 school year. According to Hartz, she reviewed the Brehm contract and concluded that the agreement was "patently unfair" and "completely one sided." Therefore, Hartz contacted Brehm and raised objections to the terms of the agreement with Brehm's controller and agent, Clatus Bierman. Hartz maintains that she asked Bierman whether the terms of the contract were negotiable, and Bierman told Hartz that any proposed changes would need to be discussed with Brown and that any discussions would have to take place on August 26 and 27, which was the weekend students, including L.R., were to move into the facility for the school year.

¶ 6 On August 26, 2017, the move-in weekend, Hartz and L.R. travelled to Carbondale, Illinois, to move L.R. into his dormitory at Brehm. Hartz met with Brown, who told Hartz to "either sign the agreement" in the proposed form or "go home." Hartz signed the Brehm contract; Ritchie did not.

¶ 7 The Brehm contract provided that Hartz would pay Brehm $77,500 in tuition for the 2017-18 school year, running from August 26, 2017, to June 2, 2018. Hartz and Ritchie paid the tuition in full, and L.R. began ninth grade at Brehm's school.

¶ 8 The Brehm contract, which was drafted by Brehm, contained an arbitration clause, which provided:

"ARBITRATION. Any dispute, controversy or claim arising out of or relating in any way to the Agreement, including without limitation any dispute concerning the construction, validity, interpretation, enforceability or breach of the Agreement, shall be exclusively resolved by binding arbitration upon a Party's submission of the dispute to arbitration. In the event of a dispute, controversy or claim arising out of or relating in any way to the Agreement, the complaining Party shall notify the other Party in writing thereof. Within thirty (30) days of such notice, the Parties shall attempt to resolve the dispute in good faith. Should the dispute not be resolved within thirty (30) days after such notice, the complaining Party shall seek remedies exclusively through arbitration. The demand for arbitration shall be made within a reasonable time after the claim, dispute or other matter in question has arisen, and in no event shall it be made after two years from when the aggrieved party knew or should have known of the controversy, claim, dispute or breach.

This agreement to arbitrate shall be specifically enforceable. The arbitration shall be conducted by one arbitrator. If the Parties are not able to agree upon the selection of an arbitrator, within twenty (20) days of commencement of an arbitration proceeding by service of demand for arbitration, each party shall select an arbitrator and the designated arbitrators shall independently select the arbitrator that will handle the arbitration. If the designated arbitrators cannot agree on the selection of the arbitrator within twenty (20) days of their appointment, the American Arbitration Association shall select such arbitrator in accordance with the terms of this agreement and its rules. The arbitration shall be conducted in accordance with the then existing Commercial Rules of the American Arbitration Association. The arbitration shall be conducted in Carbondale, Illinois.

The laws of the state of Illinois shall be applied in any arbitration proceedings, without regard to principles of conflict of laws."

¶ 9 In a separate section, at paragraph 11, the Brehm contract contained the following language:

"BREACH OF CONTRACT: In the event Parent defaults on any obligation pursuant to this Agreement, including the obligation for payment of money due and owing or any other obligation, and in the event Brehm is required to employ the services of an attorney due to the default, in addition to all other rights and remedies available at law or in equity, Brehm shall also be entitled to recover its reasonable attorneys’ fees, costs of litigation, and cost of collection, including attorneys’ fees incurred in efforts to collect after judgment.

In the event Parent defaults on any obligation for the payment of money due and owing to Brehm, and such default is not cured within ten (10) business days after Parent's receipt of written notice of default, then Brehm, at its sole option, may immediately dismiss Student and require Student to immediately vacate Brehm's premises and return home at Parent's cost.

In the event of such dismissal for breach of contract, all tuition fees, costs, etc. shall be due and payable in accordance with the provisions of this Agreement."

¶ 10 On or about October 28, 2017, Hartz attended a parent's weekend function at Brehm's school. At the function, Brehm's management informed Hartz that they had determined that L.R. was not a fit for Brehm's program, and that L.R. would have to leave the school immediately. Collins and Brown told Hartz that L.R. would no longer be allowed to attend Brehm. Brehm removed L.R. from Brehm's program after L.R. attended 56 days of the 245-day school year.

¶ 11 On April 10, 2018, the plaintiffs filed a six-count complaint against Brehm. The plaintiffs alleged claims based on breach of contract, unjust enrichment, and professional negligence. Brehm moved to dismiss the complaint pursuant to section 2-619(a)(9) of the Code of Civil Procedure (Code) ( 735 ILCS 5/2-619(a)(9) (West 2018)) and for sanctions. Brehm's motion to dismiss argued, among other things, that the Brehm contract contained an arbitration clause that required the plaintiffs’ claims to be submitted to arbitration.

¶ 12 In their response to the motion to dismiss, the plaintiffs argued that the arbitration clause was both substantively and procedurally unconscionable, as was the Brehm contract as a whole, and that their tort law claims were not subject to the arbitration clause.

¶ 13 On November 14, 2018, the circuit court conducted a nonevidentiary hearing on Brehm's motion to dismiss. After considering arguments of counsel, the circuit court entered an order denying Brehm's motion to dismiss on July 16, 2019. The circuit court noted that the Brehm contract "allows Brehm to litigate the claims but requires parents and/or guardians to arbitrate claims." The circuit court, therefore, concluded that the Brehm contract lacked mutuality with respect to resolving disputes that made the arbitration clause in the Brehm contract substantively unconscionable.

¶ 14 The plaintiffs moved to file a first amended complaint, and the circuit court granted the motion to amend the complaint. On August 2, 2019, Brehm filed a notice of appeal from the circuit court's order denying their motion to dismiss the plaintiffs’ complaint.

¶ 15 During the pendency of this appeal, the plaintiffs filed the first amended complaint, which included the same counts that were included in the first complaint (counts I through VI) and added additional counts (VII through XIII) alleging claims based on substantive unconscionability, procedural unconscionability, negligent infliction of emotional distress, fraudulent misrepresentation, and negligent misrepresentation. Brehm moved to dismiss the plaintiffs’ first amended complaint pursuant to sections 2-615 and 2-619 of the Code (id. §§ 2-615, 2-619 ).

¶ 16 II. ANALYSIS

¶ 17 On appeal, Brehm challenges the propriety of the interlocutory order denying their request to dismiss the plaintiffs’ complaint based on the arbitration clause contained in the Brehm contract. Before considering the merits of Brehm's appeal, we must first...