Casablaca Trax v. Trax Records

              SIXTH DIVISION
June 6, 2008
No. 1-06-2194
CASABLANCA TRAX, INC., ) Appeal from the
) Circuit Court of
Plaintiff-Appellee, ) Cook County
)
v. )
)
TRAX RECORDS, INC.; SANLAR PUBLISHING; )
TRAX CONTINENTAL LTD.; PHAT TRAX; R&L )
RECORDS, INC.; SABER RECORDS, LTD.; HOT )
MIX 5 RECORDS; HOUSE-TIME RECORDS; )
DANGEROUS RECORDS; DEMAND RECORDS; MAAD )
RECORDS; PRECISION RECORDS, LTD.; LARRY )
SHERMAN; and RACHEL CAIN SHERMAN, ) Honorable
) Alexander P. White,
Defendants-Appellants. ) Judge Presiding
JUSTICE McNULTY delivered the opinion of the court:
What happens when the parties to a contract put a broad
arbitration clause in one document, but include no such clause in
a second document providing security for the promises made in the
first document? At least under the circumstances of this case,
we hold that the parties must submit the question of
arbitrability to the arbitrator first, before addressing any
claims that may not be subject to the arbitration clause.
BACKGROUND
Rachel Cain Sherman and Larry Sherman used a number of trade
names and record labels, including Trax Records, Inc., to create
and market "house" music. In 2002 they negotiated an agreement
with Casablanca Trax, Inc., for production and distribution of
recordings. On December 17, 2002, the parties signed three
separate documents detailing the terms of the agreement.