The Journal of The DuPage County Bar Association

Back Issues > Vol. 14 (2001-02)

Court Annexed Arbitration: A Case Law Update and One Arbitrator’s Thoughts
By Nick Alexander

This article provides recent case law and the author’s analysis for the arbitration practitioner. As a bonus, the author offers some thoughts regarding his experiences as an arbitrator in the Eighteenth Judicial Circuit. In connection with the cases, readers are encouraged to review the Supreme Court Rules, notably Rules 89-93, for the specific language, as well as the Committee Comments.

Case Law Update

State Farm Insurance Co. v. Jacquez, 749 N.E.2d 462, 255 Ill.Dec. 361 (1st Dist. 2001), is a motor vehicle accident case in which the arbitration panel found in favor of the plaintiff (subrogee), and the panel further made a finding that there was "no prejudice to the plaintiff" with respect to the defendant’s failure to appear at the hearing. The plaintiff filed a Supreme Court Rule 237 demand for the defendant’s appearance at the arbitration hearing. The trial court ultimately barred the defendant from rejecting the award.

The appellate court reversed the trial court, finding that "Supreme Court Rule 90 provides that a party may be debarred from rejecting an arbitration award for failing to comply with a notice pursuant to Rule 237(b)." The appellate court’s standard of review is whether the trial court abused its discretion, i.e., whether the trial court ruled arbitrarily on the sanctions.

In this case, the arbitration panel did not find that the defendant’s absence constituted a failure to participate in good faith or a meaningful manner. While a finding of absence of bad faith [by the arbitration panel] is not "dispositive," the appellate court held that the trial court’s ruling was arbitrary because the panel found the plaintiff was not prejudiced and that the trial court did not elaborate in its order debarring the defendant from rejecting the award.

Comment: Because the arbitration panel made a specific finding in its award, this case may be fact specific; the other cases distinguished in Jacquez will likely provide support to uphold awards where defendants fail to appear at the hearing and the panel makes the requisite findings.

In this vein, see Saldana v. Newmann, 318 Ill.App.3d 1096, 743 N.E.2d 663, 252 Ill.Dec. 795 (1st Dist. 2001), which upheld an order barring the plaintiff from rejecting her award for her failure to attend the arbitration hearing. The defendant did not issue a Rule 237 demand for the plaintiff’s appearance. In fact, the plaintiff was late arriving, apparently due to heavy traffic. Prior to her arrival, the arbitrators made an award in favor of the defendant, and found that the plaintiff failed to appear. On appeal, the plaintiff contended that she was simply tardy; the defendant contended that plaintiff’s counsel failed to participate in good faith and in a meaningful manner.

The appellate court found that plaintiff’s counsel’s presence satisfied Supreme Court Rule 91, since there was no Rule 237 notice. Despite the absence of any finding by the arbitration panel of the plaintiff’s failure to participate in good faith, the appellate court found that plaintiff’s counsel did not participate in a meaningful fashion. There was no evidence taken, no opening statement or closing argument, and the court found that the plaintiff’s attorney "simply agreed that the panel of arbitrators would enter an award in favor of the defendant." See West Bend Mut. Ins. Co. v. Herrera, 292 Ill.App.3d 669, 686 N.E.2d 645, 226 Ill.Dec. 862 (1997). The court found no abuse of discretion by the trial court.

Comment: Meaningful participation requires something more that simply showing up at the arbitration. Even in the client’s absence, the attorney should be prepared to actively arbitrate the case.

Also on the issue of participation, see Schmidt v. Joseph, 315 Ill.App.3d 77, 733 N.E.2d 694, 248 Ill.Dec. 19 (1st Dist. 2000). The court there held that there was insufficient evidence of the plaintiff’s attorney’s opening statement, presentation of Rule 90(c) materials, cross-examination of the defendant and closing argument to determine whether the plaintiff’s attorney "subjected the case to the type of adversarial testing expected at trial, which is necessary to maintain the integrity of the arbitration process."

In Schmidt, the plaintiff failed to appear at the arbitration hearing because she misdiaried the case. The defendant did not serve a Rule 237 notice upon the plaintiff. Following an award in the defendant’s favor, the trial court granted the defendant’s motion to bar the plaintiff’s rejection. The appellate court affirmed. While the court determined that

"[t]his was not a case where a party deliberately disregarded the rule by making no attempt to participate in the arbitration hearing in a meaningful manner," and the arbitration panel made no determination that the plaintiff failed to participate in the arbitration hearing in good faith, the appellate court refused to disturb the trial court’s finding that there was an inadequate record.

Comment: Recognizing that costs are issues for litigants, a hearing transcript may have changed the outcome of this case.

Eichler v. Record Copy Services, 318 Ill.App.3d 790, 742 N.E.2d 1245, 252 Ill.Dec. 381 (1st Dist. 2000), presents another fact pattern on the issue of whether a party failed to participate in good faith and in a reasonable manner. The parties and their respective attorneys appeared at the arbitration hearing. The plaintiff did not testify because there was a prior court order which required written discovery to be completed by a specific date stated that "failure to comply with this order will result in the plaintiff being barred from testifying and presenting any evidence at the arbitration and/or trial of this matter." An award was entered in the defendant’s favor and the court debarred the plaintiff from rejecting the award. In so holding, the court found that the plaintiff failed to meet her burden to overcome the presumption that she did not participate in good faith. The appellate court observed that the plaintiff did not make any attempt to comply with, modify or vacate the prior court order.

Comment: This is easy: pay attention to court orders.

In Johnson v. Saenz, 311 Ill.App.3d 693, 725 N.E.2d 724, 244 Ill.Dec. 301 (2d Dist. 2000), the court found the trial court abused its discretion in barring the defendant from rejecting the arbitration award. The plaintiff served defense counsel with a Rule 237 notice. The defendant failed to appear at the hearing. In opposition to the plaintiff’s motion to bar the defendant from rejecting the award, the defendant contended that there was a language barrier which prevented the defendant from appearing at the appropriate venue. The defendant went to the courthouse, not the arbitration center, and allegedly was told to stay there. The defendant contended that debarment is improper where the failure to appear resulted from reasonable and pursuant to extenuating circumstances

The court here found the common law record adequate to resolve the case.. The court decided that the defendant’s conduct in appearing in a timely fashion, albeit at the wrong location, coupled with the language barrier, was sufficient to meet the burden that the absence was reasonable and presented extenuating circumstances.

Comment: It is difficult to synthesize this "failure to appear" group of cases to form a definitive rule as to what constitutes reasonable conduct to support a rejection when faced with an absent party. Perhaps the best lesson to be learned is quoted from the next case: "Any party who chooses not to appear at the scheduled arbitration hearing obviously does so at his or her peril."

Eissman v. Pace Suburban Bus, 315 Ill.App.3d 574, 734 N.E.2d 940, 248 Ill.Dec. 649 (1st Dist. 2000), stands for the proposition that arbitration is jurisdictional. Once the case is transferred to the law division, the arbitrator’s award is void.

Lewis v. Collinsville Unit #10 School Dist., 311 Ill.App.3d 1021, 725 N.E.2d 801, 244 Ill.Dec. 328 (5th Dist. 2000), holds that a plaintiff may voluntarily dismiss his or her complaint, even after the arbitration hearing and plaintiff’s failure to participate, as long as proper notice of the motion is provided by the rules. The court rejected a first district opinion which barred those absent from an arbitration hearing from pursuing voluntary dismissal. The fifth district held that mandatory arbitration was not a hearing or trial contemplated by the voluntary dismissal statute.

Comment: Be aware of this district’s differing opinions.

On the subject of discovery, Supreme Court Rule 89 bars discovery after the hearing, except upon leave of court and good cause shown.

Comment: This rule poses sub-stantial concerns for the arbitration practitioner. On the one hand, there may be a tendency to conduct minimal discovery prior to arbitration. This approach may result in an unfavorable award which, even if rejected, will result in a trial without necessary preparation. The solution is not to delay or wait until it is too late; i.e., try to complete the discovery, address discovery concerns, and bring any appropriate motions before the arbitration hearing.

One Arbitrator’s Thoughts

When I agree to serve as an arbitrator, I always go into the Bar Center with the idea that I will do the best job possible to fairly decide the dispute. I always leave the building with the feeling that I accomplished my goal. While I can only speak for myself, I am satisfied that I consider and discuss all issues germane to the dispute. Arbitration is serious; the parties who appear before the panel expect nothing less. I expect the attorneys who present cases to be prepared. Their clients expect nothing less.

Here are some suggestions for case presentation:

1. Never underestimate the power of the appropriate Rule 90(c) materials. When they are not presented, the panel grouses. When there is too much, the panel grouses. It should be "just right," keeping in mind that there is limited time allotted to the panel to decide the case. Prepare materials which you think are significant to bolster your case. Deposition transcripts, for example, are sometimes important, but they are seldom read by the panel. Case authority, on the other hand, is welcome, particularly in cases where the cause of action is unusual. Always clearly mark and secure the materials. Make three copies for the panel. While I personally do not think objections to Rule 90(c) materials should be made at the hearing, you do so at a substantial risk, and you may find yourself rethinking your examinations, etc. at the last minute.

2. Do not underestimate the opening statement or closing argument in the arbitration process. As in court, these are good opportunities to educate and persuade the panel. Keep in mind that the panel may know less about the facts of the case than a jury at the commencement of the action. Discuss counterclaims or specific counts of the complaint.

3. Do not forget to seek remedies which have been pled in the complaint, counterclaim, etc. Absent evidence, the panel will not award relief.

I hope this information will provide assistance to you in the arbitration process.

Nick Alexander is an attorney with Clausen Miller PC who concentrates his practice in the fields of casualty,medical negligence defense and insurance coverage. He received his Law Degree in 1980 from The John Marshall Law School in Chicago and his Undergraduate Degree from the University of Illinois at Urbana-Champaign.

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