Bosworth v. Ehrenreich

John Bosworth (plaintiff) co-owned and co-managed Hi-Pro Marketing, Inc. (Hi-Pro), an Illinois closely held corporation in the sports-cards-manufacturing business, with John Scalice and Melvin Ehrenreich (defendants). The shareholders’ agreement for Hi-Pro contained a broadly worded arbitration clause covering any controversy arising out of or relating to the agreement or any modification, extension, or termination of the agreement. The arbitration clause specifically provided for arbitration in New York City. The co-owners started to disagree on how to run Hi-Pro. Initially, Bosworth and Ehrenreich sought to oust Scalice from the company. According to Bosworth, Scalice had resigned from Hi-Pro on February 10, 1993, when the co-owners signed a handwritten document in which Scalice allegedly agreed to sell back all of his stock in Hi-Pro. However, Scalice denied that he ever agreed to sell back all of his stock or to resign as a director of the company. Ehrenreich and Scalice subsequently worked out their differences, making Bosworth the odd man out. On May 21, 1993, Ehrenreich and Scalice voted to terminate Bosworth as an officer of Hi-Pro. Thereafter, Bosworth filed a three-count lawsuit against Ehrenreich and Scalice. Scalice moved to enforce the arbitration clause in the shareholders’ agreement. Bosworth conceded that the third count seeking injunctive relief to prevent Ehrenreich and Scalice from terminating his employment constituted an arbitrable claim. However, Bosworth argued that the arbitration clause did not encompass the first two counts, which respectively alleged that the purported termination of Bosworth was illegal and oppressive and sought the appointment of a provisional director to resolve deadlocks between Bosworth and Ehrenreich in operating Hi-Pro.