Trimble v. Graves ( 2011 )

NO. 5-10-0075
NOTICE
Decision filed 04/14/11. The text of
IN THE
this decision may be changed or
corrected prior to the filing of a
APPELLATE COURT OF ILLINOIS
Peti tion for Rehearing or th e
disposition of the same.
FIFTH DISTRICT
R. JOE TRIMBLE, ) Appeal from the
) Circuit Court of
Plaintiff-Appellant, ) Richland County.
)
v. ) No. 08-MR-6
)
JIM GRAVES, JERRY GRAVES, and )
TONY GRAVES, d/b/a CLOVER FARMS, ) Honorable
) Christopher L. Weber,
Defendants-Appellees. ) Judge, presiding.
JUSTICE GOLDENHERSH delivered the judgment of the court, with opinion.
Justices Welch and W exstten concurred in the judgment and opinion.
OPINION
Plaintiff, R. Joe Trimble, filed in the circuit court of Richland County a petition to
vacate an award of arbitration (710 ILCS 5/12 (West 2008)). The circuit court denied the
petition and plaintiff appealed. On appeal, the issue is whether the arbitrators exceeded their
powers. We reverse and remand with directions.
FACTS
On December 10, 1998, defendants, Jim Graves, Jerry Graves, and Tony Graves,
doing business as Clover Farms, entered into an agreement to lease registered Jersey cows
from plaintiff and John S. Trimble, doing business as Trimble Farms. The terms of the lease
were for one year beginning on December 10, 1998, and ending on December 10, 1999.
On May 4, 2006, the parties entered into an "Arbitration Agreement" (Agreement).
The Agreement stated, "The purpose of this arbitration is to decide by three competent
arbitrators that will be discussed later in this agreement[] the amount of money due, if any,
1
from collectively the [defendants] to [plaintiff]." The Agreement provided that the parties
were entering into binding arbitration to resolve issues which had arisen concerning the
lease. The Agreement outlined the nature of the dispute:
"At the conclusion of the contract, [plaintiff] did not pick up the cow s, but they
remained in the possession of and under the responsibility of [defendants].
[Defendants] paid rent on said cows provided in the lease agreement until a time
certain. [Plaintiff] ultimately picked up the remaining twelve (12) cows on or about
September 23, 2005[,] and left four (4) cows due to the fact that they were not
sound."
Plaintiff nominated Tim Butikofer as his arbitrator. Defendants nominated Fred
Kuenstler as their arbitrator. The Agreement provided that the two selected arbitrators would
select a third, neutral arbitrator. Arbitrator Kertz was selected later. The Agreement set
prehearing rules for discovery, including the disclosure of documents and expert and lay
witnesses.
Paragraph 6 of the Agreement provided as follows:
"6. That once the arbitration is completed, the arbitrators will at that time start
the deliberations and will not separate until the matter is resolved to their satisfaction
and a written document prepared, which can be handwritten, making the award as
them [sic] deem best supported by the evidence. At that same time, the arbitrators
will fix the costs of the arbitration and the costs shall be shared 50% by each side to
this dispute. This paragraph can be modified only by the acceptance of all three
arbitrators and the parties."
The Agreement established rules for the conduct of the arbitration hearing. The
Agreement set forth an order of proof with plaintiff going first, followed by defendants and
a rebuttal by plaintiff:
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"12. Since this is an arbitration proceeding, the strict formal rules of evidence
do not apply, but the arbitrators will have to determine whether the evidence is or is
not credible. Either side can argue that the evidence is not credible.
13. That the attorneys who represent the parties will [be] the only persons who
can speak on behalf of their client(s) and that would be Robert L. Douglas for
[plaintiff] or a designee, but nobody other than one attorney per side can address the
arbitrators. For [defendants], Mr. John A. Clark of the law firm of Croegaert, Clark
& Hough, Ltd., or a designee."
The Agreement called for the arbitrators to select one among themselves to conduct the
hearing to ensure proper decorum during the hearing. The Agreement also provided as
follows:
"17. The arbitrators are by this agreement permitted to ask questions of any
witness if they do not understand the answer or they want clarification for any
purpose."
The Agreement set forth the following provisions for the conclusion of the arbitration:
"20. The arbitration will close and the arbitrator conducting the proceedings
will inquire of the parties through their counsel if they have any additional evidence.
The arbitrator will then request final arguments and the parties will have the absolute
right to argue their final arguments and the procedure will be the same as is in this
agreement that [plaintiff's] attorney will go first, followed by the attorney for
[defendants], but it will be limited to rebuttal argument only and not a rehash of all
the proceedings.
21. When the proofs are closed and after final argument, the arbitrators will
retire to a place certain and commence their arbitration and any two arbitrators can
make the decision for the award. In other words, the majority rule applies in favor
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of or against [plaintiff], or in favor of or against [defendants]. Two of the three
arbitrators will make the decision and that is all that is necessary by this Arbitration
Agreement."
The arbitration hearing was held on December 19, 2007. The transcript of the hearing
shows that plaintiff testified on his own behalf and presented testimony from three other
witnesses. Jerry Graves, Jim Graves, and Tony Graves testified for the defense. The end of
the transcript describes that after counsel for both sides presented closing arguments, the
parties agreed to leave the conference room and arbitrator Kertz stated he would let the
parties know when the arbitrators reached an agreement.
The arbitrators issued a written award of $7,676 for plaintiff, signed by arbitrators
Kertz and Kuenstler. At the bottom of the document, arbitrator Butikofer wrote that he
dissented and would, in the future, send in an opinion letter.
On January 15, 2008, arbitrator Butikofer issued an opinion letter. Butikofer laid out
what he labeled the "simple facts of this situation" and offered what he called a proposed fair
settlement of $158,675. Butikofer concluded by describing the conference of the arbitrators:
"Alois Kertz led the discussion and started out by saying that he felt that
[plaintiff] was deserving of nothing because he had not enforced the contract. Tim
Butikofer tried for well over two hours to convince Alois that the damages exceeded
$100,000.00 and that even [defendants] were convinced that they owed something to
[plaintiff]. It was not necessary for Fred Kuenstler to say much of anything because
Alois Kertz took such control.
It seemed Alois Kertz's focus was to punish [plaintiff] for not being more
proactive in recovering his leased property after the lease had been completed. It
became very evident there was not going to be an agreement that all of us could
support. Finally Alois Kertz made a motion that we would let [defendants] decide on
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how much they owed and that would be the final amount of the settlement. Alois
Kertz and Fred Kuenstler voted 'YES' and Tim Butikofer voted 'NO'. Motion passed.
[Defendants], [plaintiff], and their attorneys were called back into the meeting
room. Alois Kertz asked Tony Graves how much he thought would be fair for
[defendants] to pay [plaintiff]. Tony responded that he felt that he would be happy
to pay $7,000.00 and it would be fair. Then Alois Kertz declared that the settlement
amount would be set at $7,000.00 that [defendants] owed [plaintiff]. Case closed."
Plaintiff filed a petition to vacate the award pursuant to the Uniform Arbitration Act
(710 ILCS 5/12 (West 2008)), in the circuit court of Richland County. After the petition was
amended, defendants filed a motion to strike.
On January 26, 2010, the court entered an order denying the petition to vacate. The
court found no evidence that the award was procured by corruption, fraud, or other undue
influence. The court also found that there was no evident impartiality by the neutral
arbitrator. The court found that plaintiff had stated a cause of action for the arbitrators
exceeding their powers, but it also found that the arbitrators had not exceeded their authority.
The court concluded as follows:
"H. This Court finds that the arbitrators did not exceed the powers set forth in
paragraph 6 of the [Agreement] when they voted to and did ask Defendants
what they thought they owed Plaintiff. The arbitrators did not separate, did
reach a majority decision, and reduced it to writing.
I. This Court further finds that pursuant to paragraph 12 the parties had agreed
to relax strict formal rules of evidence. This Court finds that this agreement
permitted the arbitrators to re-open evidence in the manner they did when the
majority voted to ask the Defendants what they thought they owed Plaintiff.
J. This Court further finds that pursuant to paragraph 17 the parties had agreed
5
to allow the arbitrators to ask questions of any witness. This is exactly what
the majority of the arbitrators voted to do when they determined to re-open the
evidence and ask Defendants that [sic] they thought they owed Plaintiff."
Plaintiff timely appealed.
ANALYSIS
In an apparent attempt to reach a diplomatic result, the arbitrators inquired into what
defendants thought would be a fair result. This type of inquiry is perfectly acceptable in
mediation. The difficulty with the present case is that the parties had entered into an
agreement to arbitrate, not to mediate. The contrast between arbitration and mediation has
been described concisely:
"Mediation is a form of alternative dispute resolution 'in which a mediator
facilitates communication and negotiation between parties to assist them in reaching
a voluntary agreement' about a dispute. Unlike arbitrators, mediators do not apply the
law, resolve factual disputes, or adjudicate cases." M ary Patricia Benz, The
Mediation Option for Attorney Discipline Cases, 98 Ill. B.J. 262, 262-63 (2010).
See 710 ILCS 5/1 et seq. (West 2008) (Uniform Arbitration Act); 710 ILCS 35/1 et seq.
(West 2008) (Uniform Mediation Act). The arbitrators delegated their duties. This
delegation exceeded their powers. See 710 ILCS 5/12(a)(3) (West 2008). The severity of
their error is compounded by the fact that the arbitration was binding.
As an initial matter, the veracity of Butikofer's account of this aspect of the arbitration
is not in dispute. Defendants did not present any alternative description to the circuit court,
and in its order that court implicitly accepted Butikofer's statement. Similarly, the record on
appeal contains nothing that differs from the description given by Butikofer.
Instead, this appeal revolves around whether the actions of the arbitrators exceeded
the terms of the Agreement. The contract to arbitrate circumscribes the powers of the
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arbitrators. American Family Mutual Insurance Co. v. Stagg, 393 Ill. App. 3d 619, 622, 912
N.E.2d 1283, 1286 (2009); see In re American Arbitration Ass'n Arbitration, 109 Ill. App.
2d 370, 374, 248 N.E.2d 756, 758 (1969). The circuit court found that the inquiry of the
arbitrators fit under the relaxed rules for gathering evidence provided for in the Agreement.
The flaw of the circuit court's ruling is twofold. First, the inquiry itself was not justified by
the terms of the Agreement. Second, and of most importance, the analysis of the circuit court
ignores the delegation of duty made by the arbitrators when they passed a motion to allow
defendants to determine the amount of the award.
I. The Impropriety of the Inquiry
The circuit court focused on the propriety of the question asked by the arbitrators.
The circuit court based its decision on provisions in the Agreement allowing for the
arbitrators to receive evidence in manners that would not be allowed at a trial. In particular,
the circuit court noted that paragraphs 12 and 17 of the Agreement allowed for the arbitrators
to deviate from the rules for litigation, and it found that these provisions permitted the
arbitrators to ask defendants what they owed.
The Agreement did not, however, authorize an examination that was not aimed at
gathering evidence. The circuit court pointed out that in paragraph 12 the parties "had agreed
to relax strict formal rules of evidence." Similar language has been read to allow the
admission of statements that would otherwise be barred as unreliable, such as hearsay. See
Montalbano v. Department of Children & Family Services, 343 Ill. App. 3d 471, 478, 797
N.E.2d 1078, 1083 (2003) (discussing an administrative rule that called for " 'formal hearing
in which the strict rules of evidence do not apply' " (quoting 89 Ill. Adm. Code
§336.120(b)(1) (Conway Green CD-ROM April 2001)). Indeed, evidence that would not be
admissible at a trial has supported arbitration awards. See Christian Dior, Inc. v. Hart
Schaffner & Marx, 265 Ill. App. 3d 427, 437, 637 N.E.2d 546, 553 (1994) (the consideration
7
of hearsay evidence is consistent with the guidelines of the Uniform Arbitration Act).
Nonetheless, the plain language of paragraph 12 reiterated the principle that the
arbitrators should base their decision on relevant evidence. See 6 C.J.S Arbitration §6
(2004). Paragraph 12 reads as follows:
"12. Since this is an arbitration proceeding, the strict formal rules of evidence
do not apply, but the arbitrators will have to determine whether the evidence is or is
not credible. Either side can argue that the evidence is not credible."
See 6 C.J.S. Arbitration §6 (2004).
The question asked by the arbitrators fell outside the framework of paragraph 12. The
question was not in the pursuit of relevant facts. Butikofer reported, "Alois Kertz asked
Tony Graves how much he thought would be fair for [defendants] to pay [plaintiff]." Unlike
evidence that might be barred by a strict and formal application of the rules, this question
delved into the highly prejudicial and irrelevant topic of what defendants thought was fair.
Evidence of settlement matters is barred because it is prejudicial and irrelevant. Garcez v.
Michel, 282 Ill. App. 3d 346, 348-49, 668 N.E.2d 194, 196 (1996). The question of what
Tony Graves thought was fair did not go to any fact of consequence. See Green v. Lake
Forest Hospital, 335 Ill. App. 3d 134, 139, 781 N.E.2d 658, 663 (2002). The impropriety
of the question does not derive from a strict and formal application of the rules. Instead, the
question itself went beyond the realm of evidence and delved into the irrelevant.
Furthermore, the deviation by the arbitrators was not permissible under paragraph 17.
The trial court properly noted that this paragraph allowed the arbitrators to ask questions of
any witnesses, but the plain language of the paragraph also placed limitations on the types
of questions that the arbitrators could ask. This paragraph allowed the arbitrators to ask
questions under two circumstances. First, the arbitrators were permitted to ask questions if
they did not understand the initial answer of the witness. The inquiry by the arbitrators was
8
no such followup. Second, the paragraph allowed the arbitrators to ask for clarification for
any purpose. Clarification is a means of responding to doubt, confusion, or an incomplete
answer. See Cress v. Recreation Services, Inc., 341 Ill. App. 3d 149, 179, 795 N.E.2d 817,
846 (2003) (discussing the ability of juries as fact finders to seek clarification); CFC
Investment, L.L.C. v. McLean, 387 Ill. App. 3d 520, 531-32, 900 N.E.2d 716, 726 (2008);
(same); see also Church v. State, 164 Ill. 2d 153, 161, 646 N.E.2d 572, 577 (1995)
(discussing the administrative clarification of a statute). Clarification was not the basis for
the question asked by the arbitrators. The question did not respond to doubt or confusion
regarding a matter that had previously been addressed in the arbitration but was a new
avenue of inquiry not aimed at the facts contested at the hearing.
The inquiry into opinions regarding fairness was outside the powers of the arbitrators
listed in the Agreement. More disquieting, the inquiry was made after two of the arbitrators
had passed a motion to base the award on the answer.
II. The Improper Motion
The circuit court characterized the proceedings as a simple reopening of the evidence.
Butikofer stated as follows: "Finally Alois Kertz made a motion that we would let
[defendants] decide on how much they owed and that would be the final amount of the
settlement. Alois Kertz and Fred Kuenstler voted 'YES' and Tim Butikofer voted 'NO'.
Motion passed." As the trial court likened the events to a reopening of the evidence, its
analysis failed to address the fact that the arbitrators had voted to delegate their duty to
adjudicate.
The motion violated the plain language of several provisions in the Agreement. The
motion violated the stated purpose contained in the preamble for the arbitrators "to decide"
the matter. In other words, the arbitration called for the matter to be arbitrated, not mediated.
Although "the strict formal rules of evidence" were relaxed in paragraph 12, the same
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paragraph stated that "the arbitrators will have to determine whether the evidence is or is not
credible." Furthermore, the Agreement set forth an order for the proofs, calling for the
presiding arbitrator to inquire if there would be any additional evidence before the closing
arguments. Regardless of whether an opening of the proofs for more evidence was
permissible, paragraph 21 reiterated that after the close of the proofs and final arguments the
"arbitrators" would "make the decision for the award."
In particular, the motion violated paragraph 6 of the Agreement. That paragraph
addresses situations where the arbitrators are deadlocked. The circuit court found that this
paragraph did not prohibit the reopening of the evidence. The court ignored, however, other
requirements of the provision. According to the paragraph, once the hearing was completed,
the arbitrators were to engage in "deliberations" and make "the award as them [sic] deem best
supported by the evidence." Any alternative resolution to a deadlock required the consent
of all the arbitrators. By two arbitrators passing a motion to let defendants decide on how
much they owed and allowing that to be the final amount to resolve the claim, the arbitrators
did not deliberate, nor did they make an award they deemed best supported by the evidence,
nor did they have the consent of all the arbitrators to use this alternative resolution to a
deadlock.
The arbitrators exceeded their powers when they failed to adhere to the terms of the
Agreement. Illinois favors arbitration. Nonetheless, arbitration is a contractual matter, and
arbitrators exceed their powers if they do not proceed according to the terms of the
agreement. See In re American Arbitration Ass'n Arbitration, 109 Ill. App. 2d 370, 374, 248
N.E.2d 756, 758 (1969).
The actions of the arbitrators in this case also violated a settled principle underlying
arbitration. In contrast to mediation, the purpose of arbitration is not to reach a diplomatic
solution. Arbitrators may not abdicate their duty to decide the merits of the matter before
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them. Lefkovitz v. Wagner, 291 F. Supp. 2d 764, 772 (N.D. Ill. 2003), aff'd on other
grounds, 395 F.3d 773 (7th Cir. 2005). Although arbitrators may seek the consultation of
experts, arbitrators may not delegate their responsibility to determine the facts submitted for
arbitration. See Sunshine Mining Co. v. United Steelworkers of America, 823 F.2d 1289 (9th
Cir. 1987). This general principle is described in Corpus Juris Secundum as follows:
"It is contemplated that arbitrators named in an agreement will personally make
decisions unless it is otherwise provided. As a general rule, arbitrators have no power
to delegate to others the whole or any material portion of the authority confided to
them or the judicial functions devolving on them under a submission. In addition,
they must use their individual judgment in all decisions, and cannot delegate to one
of themselves the power to decide any question, although they may each defer to the
opinion of the others, basing their award on a compromise of opinion.
However, arbitrators are not precluded from honestly seeking the advice of
outsiders to enable them to understand better the matters before them and to perform
the duties confided to them, and to this end, they may properly consult experts and
legal counsel. Nevertheless, it is essential to the proper exercise of the arbitrators'
duty that, in acting on the advice so received, they should exercise their individual
judgment and not accept as final the advice received unless it is in accordance with
their own views." 6 C.J.S Arbitration §105 (2004).
Plaintiff also argues that the award was procured by undue means and that arbitrator
Kertz did not perform in a neutral manner. The arbitrators undoubtedly went beyond the
normal processes of arbitration, but because the award is being reversed for the arbitrators
having exceeded their powers, this court need not address the other contentions raised by
plaintiff. Plaintiff asks for relief in the form of the assignment of different arbitrators. The
Uniform Arbitration Act states that in vacating an award on any grounds other than the
11
absence of an agreement to arbitrate, a court may order a rehearing before new arbitrators.
710 ILCS 5/12(c) (West 2008). The same section gives the option, in instances where the
arbitrators improperly did not grant a continuance or otherwise exceeded their powers, to
send the matter back to the same arbitrators. 710 ILCS 5/12(c) (West 2008). Prudence calls
for the former option in this instance.
Accordingly, the order of the circuit court is hereby reversed, and the matter is
remanded with directions that the court vacate the award of the arbitrators and direct the
parties to engage in arbitration under the terms of the Agreement with new arbitrators.
Reversed; cause remanded with directions.
12
NO. 5-10-0075
IN THE
APPELLATE COURT OF ILLINOIS
FIFTH DISTRICT
___________________________________________________________________________________
R. JOE TRIMBLE, ) Appeal from the
) Circuit Court of
Plaintiff-Appellant, ) Richland County.
)
v. ) No. 08-MR-6
)
JIM GRAVES, JERRY GRAVES, and )
TONY GRAVES, d/b/a CLOVER FARMS, ) Honorable
) Christopher L. Weber,
Defendants-Appellees. ) Judge, presiding.
___________________________________________________________________________________
Opinion Filed: April 14, 2011
___________________________________________________________________________________
Justices: Honorable Richard P. Goldenhersh, J.,
Honorable Thomas M. Welch, J., and
Honorable James M. Wexstten, J.,
Concur
___________________________________________________________________________________
Attorney Robert L. Douglas, Law Offices of Robert L. Douglas, Ltd., 103 Old Indian
for Boundary Road, P.O. Drawer 8600, Robinson, IL 62454
Appellant
___________________________________________________________________________________
Attorney John A. Clark, Clark, Hough & Racklin, Ltd., 305 East M ain Street, Olney, IL
for 62450-2117
Appellees
___________________________________________________________________________________