Williams v. Jo-Carroll Energy, Inc.

• Decision Date: 19 May 2008
• Docket Number: No. 2-07-0802.,2-07-0802.
• Citation: 890 N.E.2d 566,382 Ill.App.3d 781
• Parties: Judith WILLIAMS, Individually and as Independent Executor of the Estate of Kenneth Williams, Plaintiff-Appellant, v. JO-CARROLL ENERGY, INC., Defendant-Appellee. (BP Corporation North America, Inc., and ABC Corporation, Defendants).
• Court: United States Appellate Court of Illinois

890 N.E.2d 566

382 Ill.App.3d 781

Judith WILLIAMS, Individually and as Independent Executor of the Estate of Kenneth Williams, Plaintiff-Appellant, v. JO-CARROLL ENERGY, INC., Defendant-Appellee (BP Corporation North America, Inc., and ABC Corporation, Defendants).

No. 2-07-0802.

Appellate Court of Illinois, Second District.

May 19, 2008.

Joseph E. Nack, Nack, Richardson & Nack, Attorneys At Law, Galena, IL, Christopher D. Stombaugh, Kopp, McKichan, Geyer, Skemp & Stombaugh LLP, Platteville, WI, Alexander J. Mezny, Holmstrom & Kennedy, P.C., Attorneys At Law, Rockford, IL, Denis R. Vogel, Wheeler, Van Sickle & Anderson, S.C., Attorneys At Law, Madison, WI, for Appellant.

Brent A. Swanson, Heyl, Royster, Voelker & Allen, Attorneys At Law, Rockford, IL, for Appellee.

Justice McLAREN delivered the opinion of the court:

Plaintiff, Judith Williams, individually and as independent executor of the estate of Kenneth Williams, sued defendant Jo-Carroll Energy, Inc., alleging that stray voltage from its overhead power lines had injured cattle on her dairy farm. Defendant moved to dismiss the action, based on an arbitration clause in its bylaws. The trial court construed the motion as one to stay the proceedings pending arbitration and granted it. Plaintiff appeals, contending that the arbitration clause was both procedurally and substantively unconscionable. We disagree, affirm, and remand for further proceedings.

Plaintiff and her late husband, Kenneth, operated a dairy farm in Elizabeth. Defendant is a cooperative that provides electrical power in northwest Illinois. In 1974, plaintiff and her husband signed an application for membership and for electrical service. The application provided that it was subject to the "by-laws of the Cooperative, and such rules and regulations as may from time to time be adopted by the cooperative." The bylaws then in effect provided that the application was an agreement to "comply with and be bound by the certificate of incorporation of the Cooperative and these by-laws and any amendments thereto." Article XIV, section 2, of the bylaws provided that the bylaws could be amended by a majority vote of the active members present at any regular or special meeting.

In 2003, defendant proposed to amend its bylaws to include the arbitration provision. Defendant mailed to all members a notice of an annual meeting, including the complete text of the proposed amendment. The clause provides that any "claim or controversy between [defendant] and any Member which arises out of or relates to the provision by [defendant] to the member of electric power or other related services shall, at the request of any such party, be submitted to arbitration." Plaintiff does not deny receiving the notice.

At the meeting, on March 22, 2003, defendant's attorney introduced the arbitration proposal, which was the subject of a question-and-answer session. Ultimately, a majority of the members present approved the amendment. Plaintiff, who also worked for defendant, was at the meeting. However, according to plaintiff's affidavit, she was working at the registration desk and never entered the meeting room.

Plaintiff filed her complaint on December 13, 2006. Defendant moved to dismiss the action, citing the arbitration clause. In response to the motion, plaintiff filed an affidavit averring as follows. As an employee of defendant, plaintiff typically worked the registration tables during the annual meetings and "would not have paid attention to specific matters presented to consumer-members for voting." She further averred that "it was well understood by the employees and it was even written company policy that if an employee talked to a member of the Board of Directors about anything work-related, the employee in question could be fired." As a result of this "somewhat chilling" work environment, plaintiff did not concern herself "with challenging anything that the Board might set forth as a change in policy or procedure." As plaintiff saw it, "that was their job."

The trial court ordered the parties to submit to arbitration and stayed the court action. The trial court also stayed the action as it relates to defendant BP Corporation North America, Inc. (BP), and found that there was no just reason to delay the enforcement or appeal of its order. Plaintiff timely appeals. BP is not a party to this appeal. A third named defendant, "ABC Corporation," is identified as a "fictitious corporation," and its relationship to this action is not clear.

Before turning to the merits, we briefly clarify the basis of our jurisdiction. The trial court purportedly made a finding of immediate appealability pursuant to Supreme Court Rule 304(a) (210 Ill.2d R. 304(a)). Plaintiff asserts that jurisdiction is proper pursuant to Supreme Court Rule 301 (155 Ill.2d R. 301). In reality, we have jurisdiction under Supreme Court Rule 307(a)(1), which provides for the immediate appeal of an order granting an injunction (188 Ill.2d R. 307(a)(1)), because an order compelling arbitration is injunctive. See Salsitz v. Kreiss, 198 Ill.2d 1, 11-12 (2001).

Plaintiff argues on appeal that the trial court erred by compelling her to arbitrate her dispute with defendant, because the arbitration provision in defendant's bylaws is both procedurally and substantively unconscionable. She argues that the clause is procedurally unconscionable because it was not part of the bylaws when she and her husband signed the membership agreement in 1974; that the agreement was a contract of adhesion as there is no other provider of electrical power in the area where plaintiff lives; that she was not actually aware of the arbitration provision until after her claim arose; and that she believed a "chilling atmosphere" existed that prohibited defendant's employees from discussing the proposed amendment to the bylaws. Plaintiff believes the arbitration provision is substantively unconscionable because it imposes on her a portion of the costs of a proceeding without giving any indication of what those costs will be and deprives her of her constitutional right to a jury trial.

Defendant responds that the membership agreement was subject to the "by-laws and any amendments thereto" and that defendant properly amended the bylaws pursuant to the bylaws. Defendant further argues that the agreement imposes no unduly burdensome terms on plaintiff and merely designates a particular forum in which to resolve the parties' dispute.

Illinois courts favor using arbitration as a means of settling disputes. Jenkins v. Trinity Evangelical Lutheran Church, 356 Ill.App.3d 504, 507, 292 Ill. Dec. 195, 825 N.E.2d 1206 (2005). If a valid agreement to arbitrate exists, courts will enforce it. 710 ILCS 5/2(a) (West 2004); Jenkins, 356 Ill.App.3d at 511-12, 292 Ill.Dec. 195, 825 N.E.2d 1206. Nevertheless, a contract provision will not be enforced if it is unconscionable. Unconscionability may be either procedural or substantive, or a combination of both. Kinkel v. Cingular Wireless, LLC, 223 Ill.2d 1, 21, 306 Ill.Dec. 157, 857 N.E.2d 250 (2006). "`Procedural unconscionability refers to a situation where a term is so difficult to find, read, or understand that the plaintiff cannot fairly be said to have been aware he was agreeing to it * * *.'" Kinkel, 223 Ill.2d at 22, 306 Ill.Dec. 157, 857 N.E.2d 250, quoting Razor v. Hyundai Motor America, 222 Ill.2d 75, 100, 305 Ill.Dec. 15, 854 N.E.2d 607 (2006). This analysis also takes into account the disparity of bargaining power between the drafter of the contract and the party claiming unconscionability. Razor, 222 Ill.2d at 100, 305 Ill.Dec. 15, 854 N.E.2d 607. On the other hand, substantive unconscionability "`concerns the actual terms of the contract and examines the relative fairness of the obligations assumed' and is indicated by `contract terms so one-sided as to oppress or unfairly surprise an innocent party, an overall imbalance in the obligations and rights imposed by the bargain, and significant cost-price disparity.'" Hutcherson v. Sears Roebuck & Co., 342 Ill.App.3d 109, 121, 276 Ill.Dec. 127, 793 N.E.2d 886 (2003), quoting Maxwell v. Fidelity Financial Services, Inc., 184 Ariz. 82, 89, 907 P.2d 51, 58 (1995). Whether a portion of a contract is unconscionable is a question of law, which we review de novo. Kinkel, 223 Ill.2d at 22, 306 Ill.Dec. 157, 857 N.E.2d 250.

We do not find the arbitration provision in question to be procedurally unconscionable. Plaintiff and her husband signed the membership agreement, which explicitly stated that it was subject to defendant's bylaws. The bylaws provided that a membership agreement was subject to the bylaws then existing or as thereafter amended. Moreover, when the arbitration provision was added, defendant followed the procedure specified in the bylaws for amending the bylaws. The amendment was approved by a majority of the members attending defendant's annual meeting. Defendant provided a notice of the meeting, including the entire text of the proposed amendment. There was simply nothing unconscionable about this procedure.

Citing Razor, plaintiff argues that the arbitration provision was unconscionable because she did not learn about it until long after she signed the membership agreement. In Razor, the plaintiff purchased a new car. The warranty contained a provision excluding consequential damages. The court found the provision unconscionable primarily because the plaintiff was not given a copy of the warranty before she signed the sale contract. The warranty was part of the owner's manual, contained in the car's glove compartment; the plaintiff did not see it until she had driven the car off the lot. Razor, 222 Ill.2d at 100-01, 305 Ill.Dec. 15, 854 N.E.2d 607.

Here, by contrast, the membership agreement explicitly stated that it was subject to the bylaws, which in turn stated that they could be amended. Defendant provided notice of the proposed amendment, which was approved by a...