Edward Elec. Co. v. Automation, Inc.

• Decision Date: 07 May 1992
• Docket Number: 1-91-1745,Nos. 1-91-1630,s. 1-91-1630
• Citation: 229 Ill.App.3d 89,593 N.E.2d 833,171 Ill.Dec. 13
• Parties: , 171 Ill.Dec. 13 EDWARD ELECTRIC COMPANY, Plaintiff-Appellant, v. AUTOMATION, INC., Emery Air Freight, Inc., et al., Defendants-Appellees (Emery Air Freight, Inc., Counterplaintiff-Appellee v. Anchor Conveyors, Inc., Counterdefendant-Appellant).
• Court: United States Appellate Court of Illinois

Page 833

593 N.E.2d 833

229 Ill.App.3d 89, 171 Ill.Dec. 13

EDWARD ELECTRIC COMPANY, Plaintiff-Appellant, v. AUTOMATION, INC., Emery Air Freight, Inc., et al Defendants-Appellees (Emery Air Freight, Inc. Counterplaintiff-Appellee v. Anchor Conveyors, Inc. Counterdefendant-Appellant).

Nos. 1-91-1630, 1-91-1745.

Appellate Court of Illinois,

First District, Fourth Division.

May 7, 1992.

Rehearing Denied June 11, 1992.

Joseph D. Keenan, III, of Puchalski, Keenan & Reimer, Chicago, for appellant Edward Elec. Co.

Jeanine L. Stevens, Chicago, Kasimer & Ittig, P.C., Washington, D.C. (Gerard W. Ittig, Judith B. Ittig, of counsel), for appellant Anchor Conveyors.

Elliott D. Hartstein, of Cohon, Raizes & Regal, Chicago, for appellee Emery Air Freight, Inc.

Presiding Justice JIGANTI delivered the opinion of the court:

These consolidated appeals arise from the circuit court's denial of motions by plaintiff Edward Electric Company (Edward) and counterdefendant Anchor Conveyors, Inc. (Anchor), to confirm an arbitration award. The court instead granted the motion of defendant Emery Air Freight, Inc. (Emery), to vacate the award in its entirety. Edward and Anchor have appealed, contending that the circuit court conducted an impermissibly broad review of the arbitration award and erred in concluding that grounds existed for vacating the award.

The arbitration proceedings stemmed from the construction of a package handling and sortation system at Emery's facility in Des Plaines, Illinois. Anchor was the general contractor on the project and was responsible for installing both the package handling and sortation system and a unified loading device (ULD) system. Automation, Inc., had a subcontract with Anchor to provide the electrical work and solicited Edward's participation in the project. According to Edward, it initially entered the project as a joint venturer with Automation but subsequently became a subcontractor of Automation.

Edward filed suit against Emery, Anchor and Automation requesting various forms of relief including damages, an accounting and a mechanic's lien. Emery filed a counterclaim against Anchor seeking damages for delay and incomplete work, and Anchor filed a counterclaim against Emery seeking money damages. Anchor also filed a motion to compel arbitration which was denied. On appeal, this court reversed the trial court and ordered Anchor and Emery to submit their disputes to arbitration. Edward Electric Co. v. Automation, Inc. (1987), 164 Ill.App.3d 547, 115 Ill.Dec. 647, 518 N.E.2d 172.

Anchor filed an arbitration demand with the American Arbitration Association (AAA) asserting a demand against Emery in the amount of $726,364.22 plus interest and costs. In its brief to the arbitrators, Anchor requested damages from Emery in the amount of $1,628,305.84. When Anchor and Emery were unable to agree upon a panel of arbitrators, the AAA in accordance with paragraph 13 of its construction industry arbitration rules appointed three arbitrators. The panel consisted of two architects and a general contractor. Emery objected to the panel on the grounds that at least one of the arbitrators should have been a lawyer. The AAA rejected Emery's objection and confirmed the appointment of the panel.

Before the arbitration proceedings began, Emery filed a motion to compel the admission of Edward as a party to the arbitration. Edward agreed to participate. On May 11, 1989, Emery, Anchor and Edward executed a written arbitration agreement. The agreement provided in pertinent part that:

"[Emery, Anchor and Edward] hereby agree to submit to binding arbitration all controversies, claims, and disputes arising out of or relating to the parties' involvement in the construction and installation of a ULD Handling System and a Package Handling System at Emery Air Freight Corporation's facility in Des Plaines, Illinois. * * * The extent of Edward's claims in arbitration will be the same claims that Edward has raised against Anchor and Emery in court. * * * This arbitration shall be conducted in accordance with the Construction Industry Rules of the American Arbitration Association."

The agreement also stated that the dispute would be submitted to "the arbitration panel which had been nominated to arbitrate the disputes between Anchor Conveyors, Inc. and Emery Air Freight Corporation." The parties agreed "to abide by and perform any award(s) rendered by the arbitrators, and that a judgment of the court having jurisdiction may be entered upon the award(s), subject to all rights of the parties under the Illinois Uniform Arbitration Act * * * and the Construction Industry Rules of the American Arbitration Association."

One of the claims which Edward submitted to the arbitrators was a mechanic's lien claim against Emery in the amount of $119,633.50 based on labor and materials furnished in connection with the installation of "a package handling system and ULD handling system" at Emery's facility. The first amended complaint filed by Edward in the circuit court similarly sought a mechanic's lien in the amount of $119,633.50, but referred only to a "package to sortation system" and did not specifically mention the ULD handling system. ¹ Both the arbitration claim and the court complaint filed by Edward sought money damages against Emery for breach of contract. In count V of its arbitration claim, Edward alleged that Emery made false representations that were "willful, wanton and in reckless disregard of truth" and requested punitive damages in excess of $100,000. In count II of its arbitration claim, Edward asserted a contract claim against Anchor in the amount of $30,324.78 plus interest.

The arbitration hearings took place over the course of 15 days between June 1, 1989, and December 1, 1989. On May 3, 1990, the arbitrators issued a unanimous award which provided as follows:

"1. Emery Air Freight Corporation shall pay to Anchor Conveyors, Inc. the sum of Eight Hundred Sixty-Eight Thousand, Three Hundred Sixty Dollars and Fifty-Eight Cents ($868,360.58).

2. Emery Air Freight Corporation shall pay to Edward Electric Company the sum of One Hundred Seventy-Nine Thousand, Eight Hundred Dollars and Nineteen Cents ($179,800.19) plus punitive damages in the amount of One Hundred Fifty Thousand Dollars and No Cents ($150,000.00).

3. If Emery Air Freight Corporation doesn't pay Edward Electric Company, Edward Electric Company shall have a mechanic's lien in the amount of $119,633.50 upon the leasehold interest of Emery Air Freight Corporation on premises at 401 West Touhy Avenue, Des Plaines, Illinois, said amount, $119,633.50 is included in the $179,800.19 Emery Air Freight Corporation must pay to Edward Electric Company.

[Paragraph 4 divided the administrative fees and expenses of the AAA among the parties.]

5. This Award is in full settlement of all claims and counterclaims submitted to this arbitration."

On May 18, 1990, Emery filed a request for clarification and correction of the arbitration award pursuant to section 9 of the Illinois Uniform Arbitration Act. (Ill.Rev.Stat.1989, ch. 10, par. 109.) On May 23, 1990, the AAA advised Emery that the request had been denied. Counsel for Emery learned that one of the arbitrators advised the AAA not to forward the request to the arbitrators and to inform Emery that it was denied.

Edward and Anchor then filed motions in the circuit court for a judgment confirming the arbitration award. Emery filed a petition to vacate the award. Following argument, the trial court denied the motions to confirm the award, vacated the award in its entirety and remanded the matter to a new panel of arbitrators specifying that one of the arbitrators should be a lawyer with a background in mechanic's lien laws. In vacating the award, the trial court found that the arbitrators were biased, that they failed to make a complete determination of all the issues and that they improperly considered a certain claim raised by Edward. The court further found that the arbitrators made a gross mistake of law in failing to award a mechanic's lien jointly against Emery and Anchor and that the arbitrators exceeded their authority in awarding punitive damages.

Edward and Anchor have appealed, contending that the trial court erred in conducting an impermissibly broad review of the arbitration award and in finding that grounds existed for vacating the award.

The object of arbitration is to avoid the formalities, delay and expenses of litigation in court. (Seither & Cherry Co. v. Illinois Bank Building Corp (1981), 95 Ill.App.3d 191, 195, 50 Ill.Dec. 672, 419 N.E.2d 940.) It is well established that judicial review of an arbitrator's award is intended to be more limited than appellate review of a trial court's decision. (Rauh v. Rockford Products Corp. (1991), 143 Ill.2d 377, 394, 158 Ill.Dec. 523, 574 N.E.2d 636.) As the Supreme Court stated in Burchell v. Marsh (1855), 58 U.S. (17 How.) 344, 15 L.Ed. 96:

"Arbitrators are judges chosen by the parties to decide the matters submitted to them, finally and without appeal. As a mode of settling disputes, it should receive every encouragement from courts of equity. If the award is within the submission, and contains the honest decision of the arbitrators, after a full and fair hearing of the parties, a court of equity will not set it aside for error either in law or fact. A contrary course would be a substitution of the judgment of the chancellor in place of the judges chosen by the parties, and would make an award the commencement, not the end, of litigation." (Burchell, 58 U.S. (17 How.) at 349, 15 L.Ed. at 99.)

Thus, whenever possible, a court must construe an award so as to uphold its validity. Garver v. Ferguson (1979), 76 Ill.2d 1, 10, 27 Ill.Dec. 773, 389 N.E.2d 1181.

In determining whether grounds exist to vacate an arbitration award, judicial review generally extends only to those areas expressly stated by statute. (Konicki v. Oak Brook Racquet...