ILLINOIS OFFICIAL REPORTS
Appellate Court
Duemer v. Edward T. Joyce & Associates, P.C., 2013 IL App (1st) 120687
Appellate Court WALTER DUEMER et al., Plaintiffs-Appellees, v. EDWARD T.
Caption JOYCE AND ASSOCIATES, P.C., Defendant-Appellant.
District & No. First District, Sixth Division
Docket No. 1-12-0687
Filed August 9, 2013
Held In an action arising from defendant’s representation of plaintiffs in the
(Note: This syllabus investigation and prosecution of their claims against various entities in
constitutes no part of connection with their purchase of certain stock, the trial court’s
the opinion of the court confirmation of the arbitration award and denial of defendant’s motion to
but has been prepared vacate or modify the award was upheld over defendant’s contentions that
by the Reporter of the arbitrator exceeded his authority and refused to consider evidence
Decisions for the relevant to the issue of damages and that the award of damages and costs
convenience of the should be modified, since the claim that the arbitrator exceeded his
reader.)
powers was waived by defendant’s failure to raise the issue during
arbitration, the arbitrator did not refuse to hear material evidence, and the
issue of modification of the award of damages and costs was forfeited by
defendant’s failure to cite authorities supporting its argument.
Decision Under Appeal from the Circuit Court of Cook County, No. 11-CH-34874; the
Review Hon. Mary Lane Mikva, Judge, presiding.
Judgment Affirmed.
Counsel on Michael H. Moirano and Claire Gorman Kenny, both of Nisen & Elliott,
Appeal LLC, of Chicago, for appellant.
Matthew T. Furton, of Locke Lord LLP, of Chicago, and Tracy Jackson
Cowart and Robert Bruce Wallace, both of Eggleston & Brisco, LLP, of
Houston, Texas, for appellees.
Panel JUSTICE HALL delivered the judgment of the court, with opinion.
Justices Gordon and Reyes concurred in the judgment and opinion.
OPINION
¶1 Following a hearing, the arbitrator entered a final award of $628,527.47 in favor of
Walter Duemer and other named plaintiffs1 and against the defendant, Edward T. Joyce and
Associates, P.C. The circuit court of Cook County granted the plaintiffs’ petition to confirm
the award and denied the defendant’s request to vacate or modify the award. The defendant
appeals.
¶2 On appeal, the defendant contends that the arbitration award must be vacated because the
arbitrator exceeded his authority, and he refused to consider relevant evidence on the
damages issue. The defendant further contends that the award of damages must be modified.
For the reasons set forth below, we affirm the judgment of the circuit court.
¶3 BACKGROUND
¶4 I. Securities Case
¶5 On April 19, 2002, the plaintiffs, members of the FFR group,2 and the defendant entered
into a retainer agreement (the 2002 retainer agreement) whereby the defendant agreed to
“provide professional legal services to the [plaintiffs] to investigate and prosecute any and
all claims which the [plaintiffs] may have against Deloitte & Touche, Jeffries Company, EPS
Solutions Corporation and Enterprise Profit Solutions Corporation (collectively ‘EPS’) and
others in connection with the [plaintiffs’] purchase of EPS stock.” The 2002 retainer
agreement provided that “[t]he [defendant] *** shall diligently investigate and prosecute the
Claims. The [defendant’s] obligation under this Agreement terminates upon the final
settlement of the Claims or the entry of a final judgment of award by a court or other duly
constituted authority (including an arbitrator), whichever shall first occur.”
1
The names of the all the plaintiffs are contained in Exhibit A attached to this opinion.
2
The FFR group consisted of some of the individuals and entities who purchased EPS stock.
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¶6 In consideration for the 2002 retainer agreement, the defendant was to receive “a
contingent fee equal to twenty-five (25) percent of any and all money or other benefits
recovered on the Claims.” The 2002 retainer agreement set forth a formula to determine the
defendant’s and the plaintiffs’ shares of any recovery. The plaintiffs were responsible for
specified costs and expenses incurred by the defendant, including the need to hire outside
counsel for ministerial assistance or to act as local counsel. But the defendant “may, at its
expense, associate with any other lawyers for the prosecution of the Claims.” If the costs
exceeded $150,000, the plaintiffs were entitled to a credit against the contingency fee for the
amount of costs in excess of $150,000.
¶7 The 2002 retainer agreement also contained an arbitration clause. The clause provided
in pertinent part as follows:
“All claims relating in any way to the interpretation or application of this Agreement
or arising out of this Agreement shall be resolved by arbitration. *** The arbitrators will
add their costs to their ruling and the party who does not prevail will pay all costs of
arbitration.”
Finally, the 2002 retainer agreement required the plaintiffs’ approval of any settlement or
compromise of their claims.
¶8 The defendant pursued and resolved successfully the plaintiffs’ claims with the exception
of the claim against Deloitte & Touche. The only unresolved claim under the 2002 retainer
agreement was against EPS, which had been held in abeyance because EPS was insolvent.
The defendant retained the law firm of Morgan Lewis as its insurance coverage consultant.
Following arbitration proceedings, the arbitrators entered an award for the plaintiffs and
against EPS. EPS’s insurers refused to pay the award.
¶9 II. Insurance Coverage Case
¶ 10 In September 2007, Morgan Lewis filed suit on behalf of the plaintiffs against the
insurers. The defendant informed the plaintiffs that its representation of them pursuant to the
2002 retainer agreement had ended and that it did not handle insurance coverage work.
However, Morgan Lewis had requested that the defendant provide limited assistance with
the suit against the insurers. The defendant proposed to the plaintiffs that for its participation,
it would be entitled to an hourly fee, which would be deferred until a recovery was obtained;
if there was no recovery, the defendant would waive its hourly fee. Plaintiff Duemer
questioned the applicability of the 2002 retainer agreement to the insurance coverage case
and discussed the matter with the defendant several times during 2008. Subsequently, a
settlement between the plaintiffs and EPS’s insurers was reached.
¶ 11 In a letter dated May 25, 2010, attorney Tracy Cowart of the law firm of Eggleston and
Briscoe advised the defendant that the firm had been retained by the plaintiffs to pursue their
claims against the defendant in connection with the insurance settlement proceeds. Attorney
Cowart asserted that the defendant failed to follow the formula for calculating the fees
contained in the 2002 retainer agreement and charged the plaintiffs hourly fees, local counsel
fees and unlimited expenses. Despite its assertion that the 2002 retainer agreement did not
apply to the insurance coverage case, the defendant also charged the plaintiffs a 25%
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contingent fee of the insurance settlement proceeds under that agreement. Attorney Cowart
maintained that the defendant had wrongfully converted client trust funds, made
misrepresentations and breached its fiduciary duty to the plaintiffs. In response to attorney
Cowart’s May 25, 2010 letter, the defendant filed a demand for arbitration with JAMS
arbitration services.
¶ 12 III. Arbitration Proceedings
¶ 13 In their request for relief, the plaintiffs claimed that the defendant collected legal fees
under the 2002 retainer agreement to which it was not entitled. They alleged causes of action
for breach of fiduciary duty, conversion and breach of contract and requested attorney fees
and costs incurred in pursuing their claims against the defendant. In its answer to the request
for relief, the defendant denied the claims and alleged the affirmative defenses of
performance of an oral retainer agreement, waiver and equitable estoppel. The defendant also
filed a counterclaim asserting a claim for quantum meruit. Retired Justice Robert E. Rose
(arbitrator Rose) was chosen to arbitrate the dispute. Over a three-day period in May 2011,
arbitrator Rose conducted an evidentiary hearing. The evidence included testimony by eight
witnesses and exhibits submitted by the parties. At the close of the evidentiary hearing, the
parties submitted written closing arguments.
¶ 14 A. The Interim Award
¶ 15 On July 8, 2011, arbitrator Rose issued his interim award. Based on the evidence from
the hearing, he made findings of fact and conclusions of law as set forth below.
¶ 16 Arbitrator Rose found that the pursuit of a bad-faith insurance coverage claim was not
contemplated by the parties under the 2002 retainer agreement. In an August 3, 2007
memorandum, the defendant advised the plaintiffs that once the final order was issued in the
EPS arbitration case, “ ‘we have to begin collection efforts against EPS’s insurers. Toward
that end, we have already retained insurance coverage experts on our clients’ behalf to lead
us through the process of fighting every coverage challenge the insurers may assert.’ ” In a
conference call on August 9, 2007, the defendant explained that coverage counsel had been
retained for the plaintiffs to assist in recovering from EPS’s insurers. Several of the plaintiffs
did not recall that the defendant explained that it would be assisting coverage counsel and
the terms of its assistance. The parties stipulated that some but not all the plaintiffs
participated in the conference call. On September 25, 2007, the law firm of Morgan Lewis
filed suit on behalf of the plaintiffs and against EPS’s insurers.
¶ 17 Arbitrator Rose found that the plaintiffs were unaware that the defendant had previously
retained the Morgan Lewis firm to assist it in the arbitration proceeding against EPS. It was
not until the January 30, 2008 memorandum from the defendant that the plaintiffs were
informed in writing that (1) the defendant considered it had fulfilled its obligations under the
2002 retainer agreement, (2) Morgan Lewis was the lead counsel in the suit against the EPS
insurers and working on an hourly basis, and (3) the defendant was charging the plaintiffs
a contingent hourly fee for its work performed in connection with the insurance case.
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¶ 18 1. Undue Influence
¶ 19 Based on the evidence, arbitrator Rose determined that the defendant had not overcome
the presumption of undue influence that arose when an attorney benefitted from the
modification of an existing fee agreement. The August 3, 2007 memorandum did not
mention that the defendant considered its obligations under the 2002 retainer agreement to
be completed or that it would be charging the plaintiffs an hourly fee in addition to its 25%
interest in all funds recovered. The memorandum never made it clear to the plaintiffs that a
new fee agreement was being reached and did not advise the plaintiffs that they could seek
independent legal advice as to the proposed retainer agreement. A considerable number of
the plaintiffs did not participate in the August 9, 2007 conference call, and the defendant
failed to establish by a presumption of the evidence the content of the conference call. While
the January 30, 2008 memorandum did advise the plaintiffs that the defendant considered the
2002 retainer agreement terminated, that it would be charging a contingent hourly fee, and
that Morgan Lewis would be the lead counsel, it did not state that the plaintiff should get
independent counsel or that the defendant would be collecting its contingent fee and hourly
billings, if the insurance suit was successful. As a result, the consideration charged for the
new agreement was more than it would have been had the plaintiffs obtained independent
counsel.
¶ 20 Arbitrator Rose found that the plaintiffs were presented with the terms of the 2007
retainer agreement on a “ ‘take it or leave it’ ” basis and that there was no meeting of the
minds as to the terms of the new retainer agreement. In addition, the new retainer agreement
was not reduced to writing in violation of Rule 1.5(c) of the Illinois Rules of Professional
Conduct (Ill. R. Prof. Conduct (2010) R. 1.5(c) (eff. Jan. 1, 2010)). He found that the January
30, 2008 memorandum was untimely and inadequate to serve as a written contingent fee
request. Arbitrator Rose concluded that the new retainer agreement must be set aside.
¶ 21 2. The Defendant’s Counterclaim
¶ 22 Arbitrator Rose found no evidence to support the defendant’s claim that the plaintiffs had
breached any of the agreements they entered into with the defendant or that there was a basis
for a quantum meruit recovery. He also rejected the defendant’s waiver and estoppel
defenses, based on evidence that plaintiff Duemer and the defendant had agreed to conclude
the litigation prior to addressing the costs and attorney fees issue.
¶ 23 3. Damages
¶ 24 a. Morgan Lewis Fees
¶ 25 While the 2002 retainer agreement no longer applied, and the new retainer agreement was
voided by the defendant’s actions, arbitrator Rose found that the plaintiffs needed counsel
to represent them in the insurance litigation. Since the defendant’s actions were not
intentional, arbitrator Rose determined that the plaintiffs were responsible for 75% of the
Morgan Lewis fees and, as a sanction, the defendant was responsible for the remaining 25%
of the Morgan Lewis fees.
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¶ 26 b. Contingent Hourly Fee
¶ 27 Arbitrator Rose noted that pursuant to case law, a retainer agreement resulting from
undue influence was voidable, and the return of the fees paid under such an agreement was
an appropriate sanction. He determined that such a sanction was appropriate in this case and
ordered the defendant to pay $405,674.87 to the plaintiffs.
¶ 28 B. Post-Interim-Order Proceedings
¶ 29 The defendant filed a motion to adjust and reduce the damages amount. Under the interim
award, the plaintiffs received a total of $555,802.02, consisting of a refund equal to 25% of
the Morgan Lewis fees they had paid and the refund of the fees paid under the 2007 retainer
agreement. The defendant maintained that the amount did not reflect the amount of the fees
it actually collected from the plaintiffs. According to the defendant, the amount of contingent
hourly fees actually paid to it by the plaintiffs was $210,007.94, not the $405,674.87 set forth
in the interim award. The defendant also argued that because of a credit given to the
plaintiffs, the defendant actually received only 15% rather than the 25% called for under the
2002 retainer agreement.
¶ 30 The defendant pointed out that in the interim order arbitrator Rose stated that his
intention was to award the plaintiffs only those amounts they actually paid to the defendant
and to require the defendant to pay a fair share of the costs of prosecuting the insurance
coverage suit. Therefore, the defendant maintained that the award of $555,802.02 should be
reduced to $300,084.
¶ 31 The plaintiffs filed a motion requesting the issuance of a final award. In addition, they
sought an award of costs and requested that arbitrator Rose make findings of fact and
conclusions of law on their conversion claim against the defendant.
¶ 32 C. Final Award
¶ 33 In the final award, arbitrator Rose denied the conversion claim based on the parties’
agreement to resolve the fee calculation disagreement after the distribution of the proceeds
was made and the fact that plaintiff Duemer did not state a specific amount to be placed in
trust.
¶ 34 Arbitrator Rose also rejected the defendant’s motion to reduce the amount of damages.
Under the 2002 retainer agreement, as the prevailing party, the plaintiffs were entitled to the
costs of arbitration. In addition to the $555,802.02, the plaintiffs were awarded $72,725.45
in costs from the defendant.
¶ 35 D. Post-Final-Award Proceedings
¶ 36 The defendant filed a motion to correct a computation error in the hourly fee portion of
the final award. The defendant argued that arbitrator Rose did not take into consideration a
$400,000 credit against the defendant’s hourly fees, which the plaintiffs received as part of
the settlement with one of ESP’s insurers. The defendant requested that the hourly fee
amount awarded to the plaintiff be reduced from $405,674.87 to $210,007.94.
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¶ 37 Arbitrator Rose denied the motion. He found the motion untimely since it was not filed
within seven days as required by JAMS Rule 24(j). He also found that the defendant’s
request was “not a request for relief from a miscomputation or faulty calculation of damages
as contemplated by JAMS Rule 24(j), but rather a re-argument of the Pre-Final Award issues
about the amount of contingent hourly fees charged.”
¶ 38 The defendant’s motion for reconsideration was denied. Arbitrator Rose found that the
$400,000 credit was not proven by a preponderance of the evidence. Moreover, under JAMS
Rule 22(c), the posthearing affidavit from a member of the defendant’s firm should have
been submitted as evidence during the hearing. Finally, arbitrator Rose explained that “[t]he
decision regarding a set-off was not made under the terms of the 2002 retainer agreement,
but was a simple matter of the damages flowing from the [defendant’s] conduct, and whether
a claimed set-off had been proven.”
¶ 39 IV. Circuit Court Proceedings
¶ 40 The plaintiffs filed a verified petition to confirm the arbitration award. The defendant
filed a verified answer and a verified counterclaim to vacate or modify the final award. In the
counterclaim, the defendant alleged that arbitrator Rose exceeded his powers, refused to
consider relevant evidence and refused to correct miscalculations in the amount of the
damages awarded. The defendant sought a correction of the damage amounts.
¶ 41 The circuit court entered an order denying the defendant’s counterclaim and confirming
the arbitration award. The court assessed additional costs of $19,846.04 and entered
judgment for the plaintiffs in the amount of $648,373.51. This appeal followed.
¶ 42 ANALYSIS
¶ 43 I. Whether the Final Award Must Be Vacated
¶ 44 The defendant contends that the final award must be vacated because arbitrator Rose
exceeded his powers and refused to hear evidence on the issue of damages. Pursuant to
section 12(a) of the Uniform Arbitration Act (the Act), an arbitration award must be vacated
where the arbitrator exceeded his powers or refused to hear evidence material to the
controversy. 710 ILCS 5/12(a)(3), (4) (West 2010).
¶ 45 A. Did Arbitrator Rose Exceed His Powers?
¶ 46 1. Standard of Review
¶ 47 Whether an arbitrator exceeded his powers presents a question of law, which the court
reviews de novo. TruServ Corp. v. Ernst & Young LLP, 376 Ill. App. 3d 218, 222 (2007).
The court also reviews de novo the question of whether a claim is subject to arbitration. First
Health Group Corp. v. Ruddick, 393 Ill. App. 3d 40, 48 (2009).
¶ 48 2. Discussion
¶ 49 The defendant maintains that the plaintiffs’ claims in their request for relief pertained
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only to violations of the 2002 retainer agreement. Therefore, arbitrator Rose exceeded his
authority when he adjudicated a claim under the 2007 retainer agreement that was not
covered under the arbitration provision of the 2002 retainer agreement and not asserted by
the plaintiffs in accordance with JAMS’ rules.
¶ 50 To preserve for review the issue of whether a claim was subject to arbitration, a party
must object to the arbitration proceedings in a timely manner. Ruddick, 393 Ill. App. 3d at
48. The objection should be made at the earliest opportunity and must occur no later than the
filing of the answer. Ruddick, 393 Ill. App. 3d at 48. Where a timely objection is made, the
issue may be judicially reviewed even if the objecting party participates in the arbitration
proceeding. Ruddick, 393 Ill. App. 3d at 48-49.
¶ 51 The defendant first objected to the claims decided by arbitrator Rose in the circuit court
proceedings. Failure to object during arbitration waives the issue, unless the party can justify
the delay, such as an opportunity to discover pertinent facts. Ruddick, 393 Ill. App. 3d at 49.
The defendant asserts that it could not have objected earlier because those claims were not
set forth in the plaintiffs’ request for relief, as required by JAMS’ rules.
¶ 52 JAMS Rule 9(a) requires that “[e]ach party shall afford all other Parties reasonable and
timely notice of its claims, affirmative defenses or counterclaims. *** No claim, remedy,
counterclaim or affirmative defense will be considered by the Arbitrator in the absence of
such prior notice to the other Parties, unless the Arbitrator determines that no Party has been
unfairly prejudiced by such lack of formal notice or all parties agree that such consideration
is appropriate notwithstanding the lack of prior notice.” JAMS Rule 10 provides that after
a claim is filed but prior to the appointment of the arbitrator, “any Party may make a new or
different claim against a Party or any third party that is subject to Arbitration in the
proceeding.”
¶ 53 In their request for relief, the plaintiffs alleged a breach of fiduciary duty, based on the
defendant’s actions in declaring that the 2002 retainer agreement did not cover the insurance
coverage case, but then charging the plaintiffs as though it did; changing the terms of its
representation of the plaintiffs without providing the advice required under such
circumstances, and wrongfully retaining client funds. The plaintiffs requested that the
defendant be ordered to forfeit all fees collected from the plaintiffs. The request for relief
complied with JAMS’ rules and served to notify the defendant that the plaintiffs’ claims were
not limited to whether the 2002 retainer agreement encompassed the attorney fees and costs
for the insurance coverage litigation.
¶ 54 Moreover, prior to filing its demand for arbitration, the defendant was on notice that the
plaintiffs’ claims concerned more than the 2002 retainer agreement. In her May 25, 2010
letter to the defendant, attorney Cowart advised the defendant as follows:
“[The plaintiff’s] claims against [the defendant] are not merely a dispute of contract
interpretation as to whether the [2002 retainer agreement] applies to the claims against
EPS’s insurers. Because [the defendant] withheld fees that cannot be justified under
either interpretation, [the plaintiffs’] claims are based on the wrongful conversion of
client trust funds, misrepresentation and breach of fiduciary duty.”
The defendant did not withdraw its demand for arbitration even after the question of
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arbitrability was raised. When attorney Cowart received the defendant’s demand for
arbitration, she advised the defendant’s attorney that “because [the defendant] has taken the
position that the 2002 Contingent Fee Agreement does not apply to the claims against EPS’s
insurers, the current dispute, which arises out of those claims, may not be subject to
arbitration.”
¶ 55 The defendant maintains that it cannot be held to have waived the issue because the 2007
retainer agreement did not contain an arbitration provision. It correctly notes that the parties
to an agreement to arbitrate are required to arbitrate only those issues they have agreed to
arbitrate as shown by the clear language of the agreement and their intentions as expressed
in that language. Salsitz v. Kreiss, 198 Ill. 2d 1, 13 (2001). In Salsitz, the defendants argued
that the plaintiff waived any objection to arbitrability by participating in the arbitration
hearings, relying on Tri-City Jewish Center v. Blass Riddick Chilote, 159 Ill. App. 3d 436
(1987). The supreme court found Tri-City Jewish Center distinguishable. In that case, the
plaintiff participated in the arbitration hearing and did not raise the arbitrability issue until
after the award was rendered. Salsitz, 198 Ill. 2d at 17; Tri-City Jewish Center, 159 Ill. App.
3d at 439. In contrast, the plaintiffs in Salsitz raised a timely objection to the arbitration
proceedings, sought a declaration that the arbitration clause did not apply to the claims in the
arbitration proceeding and a stay of the proceedings. Therefore, waiver did not apply. Salsitz,
198 Ill. 2d at 17-18.
¶ 56 “A timely objection preserves the right to challenge an award, even where the parties
participate in the arbitration proceedings.” Salsitz, 198 Ill. 2d at 18; see also 710 ILCS
5/12(a)(5) (West 2010) (providing that an award may be vacated where there was no
agreement to arbitrate, if “the party did not participate in the arbitration hearing without
raising an objection”). The defendant participated in the arbitration hearing without raising
an objection to the arbitrability of the plaintiffs’ claims. Despite numerous opportunities, the
defendant’s objection to arbitrability of the issues raised in the plaintiffs’ request for relief
was raised for the first time in the circuit court.
¶ 57 Based on attorney Cowart’s correspondence and the plaintiffs’ request for relief, the
defendant was on notice that the arbitration issues were not limited to whether the 2002
retainer agreement covered the attorney fees and expenses resulting from the insurance
coverage suit. The defendant’s failure to object timely to the plaintiffs’ claims waived the
issue that arbitrator Rose exceeded his authority in rendering the final award.
¶ 58 Even in the absence of waiver, arbitrator Rose did not exceed his authority by deciding
a claim not covered by the 2002 retainer agreement. An arbitration agreement “ ‘must be
given as broad an interpretation as its language will allow.’ ” Vascular & General Surgical
Associates, Ltd. v. Loiterman, 234 Ill. App. 3d 1, 8 (1992) (quoting Konicki v. Oak Brook
Racquet Club, Inc., 110 Ill. App. 3d 217, 224 (1982)). In Loiterman, the reviewing court
stated as follows:
“An award is sufficiently authorized by an arbitration agreement if authority for the
award
‘can in some rational manner be derived from the agreement, “viewed in the light of
its language, its context, and any other indicia of the parties’ intention.” ’ ”
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Loiterman, 234 Ill. App. 3d at 8 (quoting Amoco Oil Co. v. Oil, Chemical & Atomic
Workers International Union, Local 7-1, Inc., 548 F.2d 1288, 1294 (7th Cir. 1977),
quoting Ludwig Honold Mfg. Co. v. Fletcher, 405 F.2d 1123, 1128 (3d Cir. 1969)).
¶ 59 There is a presumption that the arbitrator did not exceed his authority. Canteen Corp. v.
Former Foods, Inc., 238 Ill. App. 3d 167, 179 (1992). “ ‘An arbitrator exceeds his authority
when he decides matters which were not submitted to him.’ ” Perkins Restaurants Operating
Co. v. Van Den Bergh Foods Co., 276 Ill. App. 3d 305, 310 (1995) (quoting Water Pipe
Extension, Bureau of Engineering Laborers’ Local Union 1092 v. City of Chicago, 238 Ill.
App. 3d 43, 47 (1992)). Where the award is within the submission by the parties, rendered
after a full and fair hearing, and contains the honest decision of the arbitrator, we will not set
it aside for errors of fact or law or because we would have reached a different result. Perkins
Restaurants Operating Co., 276 Ill. App. 3d at 310.
¶ 60 The 2002 retainer agreement provided that “[a]ll claims relating in any way to the
interpretation or application of this Agreement or arising out of this Agreement shall be
resolved by arbitration.” The plaintiffs’ breach of fiduciary duty claim arose out of the
defendant’s assertion that the 2002 retainer agreement did not apply to the insurance
coverage litigation and its insistence that the plaintiffs owed fees and costs pursuant to the
2007 retainer agreement. In light of the broad language of the arbitration clause in the 2002
retainer agreement, the plaintiffs’ breach of fiduciary duty claim was subject to arbitration.
See Loiterman, 234 Ill. App. 3d at 8-9 (where the parties agreed to submit to arbitration any
controversy or claim arising out of or relating to an employment or its breach and in the
absence of express limitations, the arbitrator had authority to determine the enforceability of
a noncompetition covenant and to enforce it by injunctive relief).
¶ 61 “Where a controversy is submitted to arbitration, the arbitrator may make an award that
will fully settle the controversy.” Loiterman, 234 Ill. App. 3d at 8. Arbitrator Rose’s
determination that the 2002 retainer agreement did not contemplate the defendant’s
representation of the plaintiffs in the insurance coverage suit left unresolved the plaintiffs’
claims that the defendant wrongfully withheld the settlement proceeds and that it was not
entitled to fees under both the 2002 and 2007 retainer agreements. Arbitrator Rose’s further
determination that the 2007 retainer agreement was void and his allocation of the
responsibility for the payment of attorney fees and costs between the parties resolved the
controversy between the parties.
¶ 62 We conclude that the defendant waived the issue of whether arbitrator Rose exceeded his
powers. Waiver aside, the plaintiffs’ breach of fiduciary duty claim arose out of the 2002
retainer agreement and was related to the determination of whether the agreement applied
to the insurance coverage case. Therefore, arbitrator Rose did not exceed his authority.
¶ 63 B. Refusal to Hear Evidence
¶ 64 The defendant contends that the final award must be vacated because arbitrator Rose
refused to hear material evidence on the issue of damages. 710 ILCS 5/12(a)(4) (West 2010).
The defendant maintains that arbitrator Rose awarded damages based on an equitable remedy
theory that neither party raised or argued to the court. The defendant claims it was entitled
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to an evidentiary hearing on the damages issue in order to introduce evidence of the actual
amount of fees it was paid and/or its percentage share of the insurance coverage litigation.
However, an examination of the record reveals that arbitrator Rose did not refuse to hear
evidence as to the amount of fees the defendant had actually received.
¶ 65 In its post-interim-award motion to adjust and reduce the damages awarded, the
defendant relied on arbitrator Rose’s expressed intention to award the plaintiffs only that
amount paid to the defendant as contingent hourly fees. The defendant asserted that it
received only $210,007.94 in contingent hourly fees from the plaintiffs and only 15% of the
insurance settlement proceeds rather than the 25% to which it was entitled. The motion was
supported by the affidavit of attorney Arthur Aufmann, the attorney responsible for
representing the plaintiffs in the securities fraud case and insurance coverage litigation. In
the affidavit, attorney Aufmann explained how the defendant’s share of the various
settlements with EPS’s insurers was calculated. The calculation included a credit to the
plaintiffs of $400,000, in exchange for the plaintiffs’ acceptance of a lesser settlement
amount. As a result, the defendant received only $210,007.94 in contingent hourly fees from
the plaintiffs. In addition, attorney Aufmann explained that the $400,000 credit also resulted
in decreasing the defendant’s percentage interest in the recovery in the insurance coverage
litigation from 25% to 15%. In denying the motion, arbitrator Rose pointed out that the
defendant’s contention was premised on the 2002 retainer agreement after successfully
arguing that the 2002 retainer agreement did not apply to the insurance litigation.
¶ 66 Following the issuance of the final award, the defendant filed a motion to correct the
computation in the award of damages to reflect the actual amount in contingent hourly fees
it received. In denying the defendant’s motion, arbitrator Rose stated as follows:
“The term ‘actually paid and received by the [defendant]’ was used in the Interim Award.
Perhaps this clause was misleading because [in] this case it was not a ‘bill and pay’
situation but rather the disbursal of fees by the [defendant] of the settlement proceeds and
the calculation of the net amount owed to the [plaintiffs]. This terminology was used to
emphasize that the Arbitrator wanted to determine the total amount of contingent hours
billed and that the benefit received by the [defendant] either in payments or in the
calculation of the net amount to be paid the [plaintiffs].”
Arbitrator Rose pointed out he had rejected the defendant’s calculation of the damages,
finding that, based on the exhibits and attorney Aufmann’s testimony at the hearing:
“ ‘[t]he total charges to the FFR group made by the [defendant] was $466,975.40. These
fees were assessed against the two FFR Subgroups and deducted from the proceeds they
were to receive. There is no question that these fees were paid by virtue of reductions to
the settlement proceeds FFR was to receive, and the [defendant] received the benefit of
these deductions.’ ”
Based on the plaintiffs’ percentage of the FFC subgroup, arbitrator Rose found the defendant
charged the plaintiffs $405,674.87 in contingent hourly fees. In addition, arbitrator Rose
found that motion was untimely under JAMS Rule 24(j) (requiring the motion to correct be
served on the other party and JAMS within seven calendar days after the service of the final
award by JAMS).
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¶ 67 In denying the defendant’s motion for reconsideration, arbitrator Rose explained that in
calculating the final award, he did not include the $400,000 credit because the defendant
failed to prove by a preponderance of the evidence that it had credited the plaintiffs with that
amount. While attorney Aufmann averred in his affidavit that the credit was given, he failed
to establish his authority to make such an agreement on behalf of the plaintiffs, which
amounted to a setoff in the defendant’s favor in the calculation of the contingent hourly fees.
Even if the Aufmann affidavit established that the credit was given, arbitrator Rose found
that the credit was substantive evidence and should have been presented at the hearing since
the issues of damages and setoffs were included in the arbitration hearing. Moreover, “[t]he
decision concerning a set-off was not made under the terms of the 2002 [retainer]
Agreement, but was a simple matter of the damages flowing from the [defendant’s] conduct
and whether a claimed set-off had been proven.”
¶ 68 Where the record fails to show that the arbitrator excluded any material evidence offered
by the parties, there is no merit to the argument. Rauh v. Rockford Products Corp., 143 Ill.
2d 377, 390 (1991). Our detailed review of the record reveals that arbitrator Rose did not
refuse to hear evidence pertinent to the issue of damages that the defendant wished to
present. The defendant’s motions presented its calculations of the damages and its arguments
for reducing the amount of damages. Arbitrator Rose did not refuse to hear the evidence, but
considered it and provided detailed reasons for rejecting the evidence.
¶ 69 We conclude that arbitrator Rose did not refuse to hear material evidence relating to the
defendant’s damages and therefore did not violate section 12(a)(4) of the Act.
¶ 70 II. Modification of Damages Award and Costs Award
¶ 71 The defendant contends if this court determines that arbitrator Rose properly exercised
his authority, the damages in the final award must be modified to reflect the actual amount
of fees the contingent hourly fees and the actual percentage of the insurance settlement the
defendant received. The defendant’s failure to support its argument with citations to authority
violates Illinois Supreme Court Rule 341(h)(7) (eff. July 1, 2008). Accordingly, the argument
is forfeited.
¶ 72 The defendant contends arbitrator Rose erred in awarding the plaintiffs $72,725.45 in
arbitration costs. The 2002 retainer agreement provided, “[t]he arbitrators will add their costs
to their ruling and the party who does not prevail will pay all costs of arbitration.” The
defendant maintains that because arbitrator Rose denied the plaintiffs’ breach of contract and
conversion claims, the plaintiffs were not the “prevailing party” entitled to costs under the
arbitration provision of the 2002 retainer agreement.
¶ 73 “A party can be considered a ‘prevailing party’ for the purposes of awarding fees when
he is successful on any significant issue in the action and achieves some benefit in bringing
suit [citation], receives a judgment in his favor [citation] or by obtaining an affirmative
recovery. [Citation.]” Grossinger Motorcorp, Inc. v. American National Bank & Trust Co.,
240 Ill. App. 3d 737, 753 (1993). This court has observed that “in the context of arbitration,
the determination of whether a party can be said to have prevailed may well be solely within
the arbitrator’s purview without being subject to review by a court.” Spencer v. Ryland
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Group, Inc., 372 Ill. App. 3d 200, 207-08 (2007). The plaintiffs were successful on their
breach of fiduciary duty count and achieved an affirmative recovery, whereas the defendant’s
counterclaim was denied, and it achieved no affirmative relief. Therefore, the plaintiffs were
the prevailing party in this case.
¶ 74 The defendant then maintains that arbitrator Rose erred by awarding costs not
contemplated in the arbitration provision of the 2002 retainer agreement. Arbitrator Rose’s
award of costs was based on an affidavit from Michelle Brandon, averring that the amount
of the plaintiffs’ costs and expenses incurred in connection with the arbitration proceedings
was $71,225.45.3 That amount included the expenses incurred by the three plaintiffs who
attended the arbitration hearing, including their travel expenses, the travel expenses of the
plaintiffs’ attorney before the hearing and in connection with the hearing, and expenses
relating to the arbitration, including expert witness fees and all clerical costs and expenses.
Arbitrator Rose found the $71,225.45 amount to be reasonable and necessary for the
prosecution of the arbitration in this case. Since the parties had each prepaid its half of the
$3,000 cost for the proceedings following the interim fee award, arbitrator Rose added
$1,500 for a total award of $72,725.45 in costs.
¶ 75 An agreement to arbitrate is a matter of contract. Salsitz, 198 Ill. 2d at 13. In construing
the provisions of a contract, the cardinal rule is to give effect to the parties’ intention, which
we discern from the language of the contract. Virginia Surety Co. v. Northern Insurance Co.
of New York, 224 Ill. 2d 550, 556 (2007). Where the words used are unambiguous, they
should be given their plain and ordinary meaning by the court. Virginia Surety Co., 224 Ill.
2d at 556. If the words are susceptible to more than one reasonable interpretation, they will
be considered ambiguous. American Zurich Insurance Co. v. Wilcox & Christopoulos,
L.L.C., 2013 IL App (1st) 120402, ¶ 29. “A term is not ambiguous ‘merely because the
parties disagree on its meaning’; rather, ‘[a]mbiguity exists where language is obscure in
meaning through indefiniteness of expression.’ ” Wilcox & Christopoulos, L.L.C., 2013 IL
App (1st) 120402, ¶ 38 (quoting Hot Light Brands, L.L.C. v. Harris Realty, Inc., 392 Ill.
App. 3d 493, 500 (2009)).
¶ 76 The defendant asserts that under the 2002 retainer agreement, the “costs of arbitration”
were limited to the amounts paid to JAMS for the services of arbitrator Rose. We view the
disputed language in the context of the entire provision. See Wilcox & Christopoulos, L.L.C.,
2013 IL App (1st) 120402, ¶¶ 38-39 (the parties’ intent must be considered in the context of
the entire provision). The phrase reads “[t]he arbitrators will add their costs to their ruling
and the party who does not prevail will pay all costs of arbitration.” (Emphasis added.)
¶ 77 The above provision is not ambiguous. As written, the provision draws a distinction
between the arbitrators’ cost and all costs of the arbitration and does not limit what may be
included in the costs of arbitration. Therefore, the defendant’s argument that the costs of
arbitration are limited to JAMS’ cost for the services of the arbitrator is not a reasonable
interpretation of the provision as written. Moreover, even if we were to determine that the
3
Ms. Brandon’s affidavit could not be located in the record. However, the defendant is not
contesting the accuracy of amounts set forth in her affidavit.
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language was ambiguous, the ambiguity must be construed against the defendant as the
drafter of the 2002 retainer agreement. Dowd & Dowd, Ltd. v. Gleason, 181 Ill. 2d 460, 479
(1998).
¶ 78 We conclude that arbitrator Rose did not err in his award of $72,725.45 in arbitration
costs to the plaintiffs.
¶ 79 CONCLUSION
¶ 80 For all the foregoing reasons, we affirm the order of the circuit court confirming the final
award of the arbitrator and denying the defendant’s motion to vacate the final award.
¶ 81 Affirmed.
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