EDWARDSVILLE - Ryan Mahoney and David Cates, former partners in a $10 million dispute over fees from settlements, both plan to appeal an order of Circuit Judge Sarah Smith awarding each of them a partial victory on arbitration.
In favor of Mahoney, Smith retained jurisdiction over fraud and concealment claims; and in favor of Cates, she ordered arbitration of claims that he breached a fiduciary duty and a contract.
Mahoney first filed an appeal notice on Feb. 6, and Cates filed one later that day.
They signed an operating agreement as the Cates Mahoney firm in 2013.
Cates dissolved the firm in May 2022, and they signed a separation agreement in August 2022.
Mahoney sued Cates as an individual and on behalf of Cates Mahoney in November 2022, seeking $9,450,000.
His counsel Thomas Rosenfeld claimed Cates settled a case without Mahoney’s knowledge two days before he dissolved the firm.
He added that Cates settled a case without Mahoney’s knowledge in June 2022, while they negotiated a separation.
Rosenfeld claimed Cates concealed and misrepresented the status of the cases, omitting from their firm’s files evidence of the settlements in direct response to written inquiries.
He claimed the court should award the fees entirely to Mahoney as a penalty.
He alleged breach of fiduciary duty on behalf of Cates Mahoney and as an individual.
He also alleged constructive fraud, actual fraud, and breach of contract as an individual.
Cates’s counsel John Kurowski moved to compel arbitration, claiming a provision in the operating agreement required it.
Smith held a hearing last year and issued an order on Jan. 8 finding the provision valid because the operating agreement applied to the separation agreement.
“If the parties have a valid arbitration clause the question is whether the issues in dispute fall within the scope of the arbitration clause,” she wrote.
Smith found that while the Supreme Court favors arbitration, parties to an agreement are bound to arbitrate only those issues they agreed to arbitrate.
She found the operating agreement contained specific language relating to the duty of a member in dissolution.
She found both agreements silent as to issues of fraud or concealment.
When Kurowski filed Cates’s appeal notice, he moved to stay proceedings in Smith’s court.
“Failure to grant a stay would unnecessarily perpetuate a multiplicity of actions in two unrelated forums pending appellate review,” he wrote.
He wrote that the appeal will be expedited and he expected resolution to come swiftly.
He also moved to extend time for answering Mahoney’s complaint at least until Smith rules on the motion to stay.