State Farm Fire and Casualty Company v. Watts Regulator Company , 63 N.E.3d 304 ( 2016 )

2016 IL App (2d) 160275
No. 2-16-0275
Opinion filed September 29, 2016
_____________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
SECOND DISTRICT
______________________________________________________________________________
STATE FARM FIRE AND CASUALTY ) Appeal from the Circuit Court
COMPANY, as Subrogee of Cecilia Montero, ) of McHenry County.
)
Plaintiff-Appellee, )
)
v. ) No. 15-AR-148
)
WATTS REGULATOR COMPANY, ) Honorable
) Michael J. Chmiel,
Defendant-Appellant. ) Judge, Presiding.
______________________________________________________________________________
JUSTICE JORGENSEN delivered the judgment of the court, with opinion.
Justices Hutchinson and Zenoff concurred in the judgment and opinion
OPINION
¶1 After plaintiff, State Farm Fire and Casualty Company, filed a subrogation suit against
defendant, Watts Regulator Company, seeking to recover payments it made to its insured, Cecilia
Montero, Watts moved to compel arbitration through Arbitration Forums, Inc. The parties were
signatories to that entity’s “Property Subrogation Arbitration Agreement” (Arbitration
Agreement), and they disagreed over the interpretation of an amendment to the Arbitration
Agreement, which would determine whether Montero’s claim was subject to compulsory
arbitration. Watts argued that the claim’s accrual date (i.e., the date of loss) was determinative of
whether the amendment applied, and State Farm took the position that the filing date was
2016 IL App (2d) 160275
determinative. The trial court ruled in State Farm’s favor, denying Watts’s motion to compel
arbitration. We affirm.
¶2 I. BACKGROUND
¶3 This case arose after Montero’s home sustained water damage. The event occurred on
September 7, 2013. At that time, the Arbitration Agreement mandated that signatories forgo
litigation and submit certain personal, commercial, or self-insured property subrogation claims to
arbitration. Specifically, arbitration was compulsory for property subrogation claims seeking up
to $100,000.
¶4 On November 4, 2014, Arbitration Forums posted a bulletin on its website, notifying its
members that the Arbitration Agreement would be amended, effective January 1, 2015, to
exclude all product-liability claims from the compulsory-arbitration provision. Specifically, the
amendment stated that “cases filed prior to January 1, 2015, will remain in arbitration’s
jurisdiction and will be processed to hearing.” (Emphasis added.)
¶5 On April 15, 2015, State Farm filed its suit against Watts, seeking recovery of certain
amounts it paid to Montero. In an amended complaint, State Farm alleged that, on September 7,
2013, a fitting on a Watts-manufactured FloodSafe-brand supply line to Montero’s Wonder Lake
home fractured and flooded the kitchen, hallway, and dining room, causing extensive damage.
State Farm raised two counts, strict liability and negligence, 1 alleging that it paid Montero
$14,385 for expenses and repairs under the terms of Montero’s policy and that it also sustained a
loss of $1,000 in the form of the deductible amount under the policy, thereby becoming
subrogated to her rights thereunder. State Farm sought a judgment of $15,385.
1
There are two types of product-liability claims: strict-liability and negligence claims.
Blue v. Environmental Engineering, Inc., 215 Ill. 2d 78, 89 (2005).
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¶6 On August 21, 2015, Watts filed its answer, denying the allegations and raising several
affirmative defenses, including contributory negligence and spoliation. It also reserved the right
to assert additional affirmative defenses, “once evidence is uncovered during discovery in this
litigation that would support such additional defenses.”
¶7 On December 22, 2015, Watts moved to compel arbitration through Arbitration Forums
and to stay or dismiss the arbitration proceedings through the trial court, 2 asserting that the claim
here accrued on September 7, 2013, which was prior to the effective date of the Arbitration
Agreement amendment, and that thus the amendment did not apply. It also noted that State Farm
had stipulated in other cases that claims that accrued prior to the amendment were subject to the
Arbitration Agreement. Watts argued, as it does in this appeal, that: (1) State Farm was
judicially estopped from refusing to arbitrate Montero’s claim through Arbitration Forums; and
(2) the amendment did not apply to the claim.
¶8 The Arbitration Agreement, which the parties agree was effective when the claim accrued
in this case, states that Arbitration Forums is authorized by signatory companies to make
appropriate rules and regulations for the presentation and determination of controversies under
the agreement. The amendment at issue states, in relevant part: “While the use of the Property
Program to resolve disputes involving product liability claims arising from an alleged defective
product will no longer be compulsory as of January 1, 2015, cases filed prior to January 1, 2015,
will remain in arbitration’s jurisdiction and will be processed to hearing.” (Emphasis added.)
2
Pursuant to Illinois Supreme Court Rule 86 (eff. Jan. 1, 1994), the circuit court of
McHenry County’s local rules provide that certain civil actions, including claims such as
Montero’s, are subject to mandatory arbitration. 22nd Judicial Cir. Ct. R. 17.01 (June 1, 2007).
The trial court had set this case for arbitration pursuant to the local rule.
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¶9 On February 25, 2016, State Farm filed its response to Watts’s motion to compel, arguing
that, because the filing date determined whether the amendment applied, and because it filed its
suit after the amendment’s effective date, the claim need not be arbitrated under the Arbitration
Agreement. It also noted that Watts filed its motion to compel after it filed an appearance and an
answer to State Farm’s complaint. State Farm noted that Watts was a signatory to the
Arbitration Agreement and in other jurisdictions had unsuccessfully challenged Arbitration
Forums’ ability to alter the terms of the Arbitration Agreement.
¶ 10 On March 4, 2016, Watts moved to continue the court-set arbitration hearing, which was
scheduled for April 8, 2016. As relevant here, Watts alleged that, shortly after Watts answered
the amended complaint, State Farm approached Watts about resolving the claim through
Arbitration Forums, although State Farm ultimately refused to submit the matter to arbitration
through that entity. Watts noted that it continued to take the positions that State Farm should be
ordered to submit to arbitration through Arbitration Forums and that the court-set arbitration
should be stayed or dismissed, but, alternatively, Watts asked that the court continue the court-
set arbitration for 60 days.
¶ 11 In its reply in support of its motion to compel, Watts argued that, because State Farm
failed to address judicial estoppel in its response to Watts’s motion, it had conceded the issue.
Watts also alleged that State Farm had initially, including in September 2015, represented that it
would agree to voluntarily dismiss the suit and submit the matter to arbitration through
Arbitration Forums. It attached correspondence between the parties’ counsel, including a
September 23, 2015, email wherein State Farm’s counsel stated that he “will file a motion to
voluntarily dismiss the suit and strike the [court-set] Arb date.”
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¶ 12 On March 18, 2016, the trial court denied Watts’s motion to compel arbitration. It also
struck the April 8, 2016, court-set arbitration hearing date and set a new date.
¶ 13 Pursuant to Illinois Supreme Court Rule 307(a)(1) (eff. Jan. 1, 2016) (interlocutory
appeals as of right concerning an injunction), Watts appeals the denial of its motion to compel
arbitration.
¶ 14 II. ANALYSIS
¶ 15 A. Forfeiture
¶ 16 Preliminarily, we address State Farm’s argument that Watts has forfeited any challenge to
arbitration through the trial court, because Watts did not raise the issue in its answer and
affirmative defenses. Watts responds that State Farm’s argument is itself forfeited because State
Farm raises it for the first time on appeal. We agree with Watts that State Farm’s argument is
forfeited. Indeed, as noted above, State Farm’s counsel stated in a September 23, 2015, email
that he “will file a motion to voluntarily dismiss the suit and strike the Arb date.” Given these
circumstances, we decline to find Watts’s arbitration argument forfeited.
¶ 17 B. Judicial Estoppel
¶ 18 Turning to the merits, Watts argues first that judicial estoppel precludes State Farm from
opposing arbitration through Arbitration Forums, because its opposition is directly contrary to its
position in other cases across the country against Watts. Watts acknowledges that the trial court
did not address the application of judicial estoppel here, but it notes that it raised the issue in its
motion to compel arbitration. Watts contends that State Farm should have been considered to
have forfeited any opposition to the application of judicial estoppel and that the trial court erred
in denying Watts’s motion to compel. Watts also contends that judicial estoppel applies to
shifting legal, not merely factual, positions. For the following reasons, we conclude that judicial
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estoppel does not apply, because State Farm’s opposition to arbitration through Arbitration
Forums is based on its legal interpretation of the Arbitration Agreement and judicial estoppel
applies only to inconsistent factual positions.
¶ 19 Judicial estoppel is an equitable doctrine invoked by the court at its discretion. New
Hampshire v. Maine, 532 U.S. 742, 750 (2001); see also Ceres Terminals, Inc. v. Chicago City
Bank & Trust Co., 259 Ill. App. 3d 836, 850-51 (1994) (trial court’s determination of whether to
apply judicial estoppel is reviewed under abuse-of-discretion standard). The doctrine’s purpose
is to protect the integrity of the judicial process by prohibiting parties from “deliberately
changing positions” according to the exigencies of the moment. (Internal quotation marks
omitted.) New Hampshire, 532 U.S. at 749-50. The judicial-estoppel doctrine applies when
litigants take a position in a judicial proceeding, benefit from that position, and then seek to take
a contrary position in a later proceeding. Barack Ferrazzano Kirschbaum Perlman & Nagelberg
v. Loffredi, 342 Ill. App. 3d 453, 460 (2003).
¶ 20 Generally, for judicial estoppel to apply, five requirements must be shown. The party to
be estopped must: (1) have taken two positions (2) that are factually inconsistent (3) in separate
judicial or quasi-judicial proceedings, (4) with the intent that the trier of fact accept the facts
alleged as true, and (5) have succeeded in the first proceeding and received some benefit from it.
Id. A statement under oath is not required. Seymour v. Collins, 2015 IL 118432, ¶ 38.
¶ 21 Here, Watts contends that State Farm’s position in this case—that the filing date
determines whether Montero’s claim is subject to compulsory arbitration through Arbitration
Forums—is contrary to a recent position that it took in a Tennessee case. Specifically, in State
Farm Fire & Casualty Co. v. Watts Water Technologies, Inc., No. 1750549, slip op. at ___ (D.
Tenn. Nov. 5, 2015), State Farm consented to an agreed order that the Arbitration Agreement
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was in effect when the claim “arose and accrued (i.e., the date of loss, which was January 20,
2013)”; thus, the court ordered arbitration through Arbitration Forums and noted that the case
was nonsuited by State Farm. 3 Watts argues that State Farm should be estopped from taking a
contrary position here on the same issue. Furthermore, Watts contends that State Farm forfeited
the judicial-estoppel issue because it did not respond to it when Watts raised it in its motion to
compel arbitration. Thus, Watts reasons, State Farm cannot now argue that the amendment to
the Arbitration Agreement applies to the Montero claim, which accrued in 2013.
¶ 22 It has been noted that the judicial-estoppel doctrine:
“does not apply to all types of inconsistency, but only inconsistency in assertions of fact.
See People v. Jones, 223 Ill. 2d 569, 598 (2006) (State was not judicially estopped from
changing its position on whether surcharge under section 5-9-1.1(c) of the Unified Code
of Corrections (730 ILCS 5/5-9-1.1(c) (West 2004)) for a spinal research fund was a ‘fee’
rather than a ‘fine’ because these positions were ‘legally inconsistent,’ not ‘factually
inconsistent’); Cress v. Recreation Services, Inc., 341 Ill. App. 3d 149, 172 (2003)
(plaintiff was not barred from arguing that federal law preempted his state law contract
claims even though he previously argued the opposite; judicial estoppel ‘does not apply
to legal positions’).” McNamee v. Sandore, 373 Ill. App. 3d 636, 649-50 (2007).
Contrary to Watts’s claim, although older and federal cases have applied judicial estoppel to
inconsistent legal positions (see Pepper Construction Co. v. Palmolive Tower Condominiums,
LLC, 2016 IL App (1st) 142754, ¶ 66 (citing cases)), the supreme court has rejected this position
(People v. Jones, 223 Ill. 2d 569, 598 (2006) (judicial estoppel does not apply to positions that
were “merely legally inconsistent”)).
3
Watts attached a copy of this order to its motion to compel arbitration.
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¶ 23 We conclude that judicial estoppel does not prevent State Farm from taking a position in
this case concerning the interpretation of the amendment to the Arbitration Agreement―a legal
question―allegedly inconsistent with the position it has taken in other cases concerning the
same contract. Judicial estoppel does not apply to inconsistent legal positions.
¶ 24 C. Arbitration Agreement
¶ 25 Next, turning to the primary issue on appeal, Watts argues that the trial court erred in
denying its motion to compel arbitration pursuant to the parties’ agreement with Arbitration
Forums, because claims that accrued prior to the amendment of the Arbitration Agreement, such
as Montero’s, remain subject to compulsory arbitration thereunder. For the following reasons,
we disagree.
¶ 26 Interpretation of an arbitration agreement presents a question of law, which we review de
novo. Brown v. Delfre, 2012 IL App (2d) 111086, ¶ 11. The standard of review is also de novo
where the trial court’s denial of a motion to compel arbitration, such as here, is based upon the
interpretation of the underlying contract. Id. (citing Caligiuri v. First Colony Life Insurance Co.,
318 Ill. App. 3d 793, 800 (2000)).
¶ 27 Arbitration contracts are interpreted in the same manner and according to the same rules
as are all other contracts. J&K Cement Construction, Inc. v. Montalbano Builders, Inc., 119 Ill.
App. 3d 663, 669 (1983). “The primary objective in construing a contract is to give effect to the
intent of the parties.” Gallagher v. Lenart, 226 Ill. 2d 208, 232 (2007). A court may resort to
rules of construction only where the language of the agreement is ambiguous. In re Estate of
Chaitlen, 179 Ill. App. 3d 287, 291 (1989). Where the terms of an agreement are clear and
unambiguous, they will be given their plain and ordinary meanings, and the parties’ intent must
be determined from the language of the agreement alone. Reynolds v. Coleman, 173 Ill. App. 3d
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585, 593 (1988). A contract is ambiguous when it is reasonably capable of being understood in
more than one way. Zurich Midwest, Inc. v. St. Paul Fire & Marine Insurance Co., 159 Ill. App.
3d 961, 963 (1987). The mere fact that the parties have different views of the meaning of the
contract does not render the contract ambiguous. Id.
¶ 28 Illinois public policy favors arbitration. See City of Centralia v. Natkin & Co., 257 Ill.
App. 3d 993, 996 (1994). It also favors consistency with other states in the enforcement and
interpretation of arbitration agreements. See Bass v. SMG, Inc., 328 Ill. App. 3d 492, 497
(2002). However, the presumption of arbitration is overcome where an express provision in an
arbitration agreement excludes certain claims from arbitration. AT&T Technologies, Inc. v.
Communications Workers of America, 475 U.S. 643, 650 (1986).
¶ 29 Watts relies on case law that, it contends, stands for the proposition that an arbitration
clause survives the contract’s expiration because public policy favors arbitration and any
ambiguity in a contract containing an arbitration provision must be resolved in favor of
arbitration. See Litton Financial Printing Division, a Division of Litton Business Systems, Inc. v.
National Labor Relations Board, 501 U.S. 190, 205-10 (1991) (collective bargaining agreement
that contained arbitration provisions expired, and, one year later, company laid off certain
employees; Court noted that, absent explicit agreement that benefits continue past expiration, a
postexpiration grievance arises under contract only where (1) it involves facts that arose before
expiration, (2) a postexpiration action infringes a right that accrued or vested under the
agreement, or (3) under normal contract-interpretation principles, the right survives expiration of
the remainder of the agreement; however, Court held that layoff dispute was not arbitrable,
because order of layoffs was to be determined by nonconstant factors and, thus, it could not be
inferred whether parties intended to freeze any particular order of layoffs or vest any contractual
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right as of the agreement’s expiration); Nolde Brothers, Inc. v. Local No. 358, Bakery &
Confectionery Workers Union, AFL-CIO, 430 U.S. 243, 253-55 (1977) (union’s claim for
severance pay pursuant to expired collective bargaining agreement was subject to contract’s
arbitration provisions; Court noted that, where the dispute involves provision in expired
agreement, presumptions favoring arbitration must be expressly negated or negated by clear
implication; further noting that an alternative holding “would permit the employer to cut off all
arbitration of severance-pay claims by terminating an existing contract simultaneously with
closing business operations”); Huffman v. Hilltop Cos., 747 F.3d 391, 394-97 (6th Cir. 2014)
(broadly worded arbitration clause in employment agreement applied after expiration of contract,
even though it (and noncompete, severability, and integration clauses) was not listed in
agreement’s survival clause; there is a strong policy in federal arbitration statute favoring
arbitration and, thus, a presumption of arbitrability; any ambiguity concerning the applicability
of arbitration clause is resolved in favor of arbitration; fact that arbitration clause was not
included in survival clause was not determinative, because survival clause was not an exhaustive
list and, thus, this created ambiguity that court resolved in favor of arbitration); Goshawk
Dedicated Ltd. v. Portsmouth Settlement Company I, Inc., 466 F. Supp. 2d 1293, 1298-1301
(N.D. Ga. 2006) (applying Georgia law and holding that novation—assignment—of insurance
contract did not extinguish arbitration provision; arbitration provision controlled any dispute
arising out of the performance of the original agreement; “arbitration agreements are presumed
to survive the termination of a contract”); Liberty University, Inc. v. Kemper Securities Group,
Inc., 758 F. Supp. 1148, 1152-53 (W.D. Va. 1991) (noting that arbitration clause survives
termination of a contract as to matter occurring prior to termination of contract or subject to the
obligations of the contract, but holding that arbitration clause at issue in expired investment-
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banking agreement did not survive agreement’s termination; after expiration, parties embarked
on a new contract that was ultimately memorialized but not executed and that contained no
arbitration clause; this second contract and dispute—negligence for failure to underwrite and
purchase and/or distribute securities—arose three months after expiration of first contract);
Mendez v. Trustees of Boston University, 285 N.E.2d 446, 448 (Mass. 1972) (noting that a
contract’s termination does not necessarily terminate an arbitration provision therein, but holding
that provision did not apply where a teacher had abandoned her employment contract and had
not rendered services thereunder); In re Primex International Corp. v. Wal-Mart Stores, Inc., 679
N.E.2d 624, 628 (N.Y. 1997) (parties entered into three successive service agreements, of which
only the first two contained an arbitration clause; during the term of the third agreement, which
contained a merger clause, a dispute arose, and the defendant sued for breach of all three
agreements; court held that the merger clause did not act to retroactively revoke parties’
obligations to arbitrate claims arising under the first two agreements; court noted that, absent
clear manifestation of a contrary intent, there is a presumption that the parties intended
arbitration clause to survive termination of agreement as to subsequent disputes arising under the
agreement; further noting that there was no good reason why the same principle should not apply
as to arbitration arising out of antecedent contracts, when termination of those contracts is
attributable to a general merger clause in a subsequent agreement).
¶ 30 We find the cases upon which Watts relies distinguishable because they involve contracts
that contain arbitration clauses. Here, in contrast, the issue is the interpretation of an amendment
to an existing arbitration agreement. It is not whether an arbitration clause continued to be in
effect despite the expiration of an underlying contract. We must interpret the amendment and, as
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explained below, need not assess the presumptions that were necessary in the analyses in the
foregoing cases, where the contracts were ambiguous.
¶ 31 To that end, we next determine whether the amendment is ambiguous. It provides, in
relevant part: “While the use of the Property Program to resolve disputes involving product
liability claims arising from an alleged defective product will no longer be compulsory as of
January 1, 2015, cases filed prior to January 1, 2015, will remain in arbitration’s jurisdiction and
will be processed to hearing.” (Emphases added.) We conclude that the amendment is not
ambiguous. In our view, the amendment unambiguously reflects that the filing date, not the
event date or date of loss, determines whether compulsory arbitration applies to a claim. The
amendment clearly states that cases filed prior to January 1, 2015, will remain subject to
compulsory arbitration. Necessarily, if a claim was filed on or after January 1, 2015, the only
reading of the amendment is that the claim does not remain subject to the agreement. Here,
Montero’s claim was filed on April 15, 2015, and, therefore, it is not subject to compulsory
arbitration through Arbitration Forums.
¶ 32 We reject Watts’s argument that the agreement is silent as to claims that accrued prior to
the amendment’s effective date and that thus there is a presumption of arbitrability. Again, in
our view, the amendment is clear that, because Montero’s claim was filed after January 1, 2015,
it is not subject to compulsory arbitration through Arbitration Forums. We need not engage in
any presumptions. We also reject Watts’s contentions that it never agreed to retroactively nullify
its rights that accrued under the Arbitration Agreement. Watts ignores the fact that, by signing
the Arbitration Agreement, it expressly agreed to be bound by Arbitration Forums’ rules. Article
5 of the Arbitration Agreement, effective May 2, 2005, states that Arbitration Forums, as
representative of the signatory companies, is authorized to “make appropriate Rules and
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Regulations for the presentation and determination of controversies under this Agreement.”
Watts does not assert, for example, that the amendment somehow exceeded Arbitration Forums’
authority under the Arbitration Agreement or is otherwise invalid. Rather, it essentially argues
that we should adopt its reading of the amendment. We decline to do so when the key language
in the amendment is clear.
¶ 33 Watts also argues that “claims” and “cases” are distinct concepts and that, because the
amendment addresses only “cases filed prior to January 1, 2015” (emphasis added), it is
ambiguous with respect to claims that arose (i.e., had a date of loss) before that date, such as the
Montero claim, and thus there arises a presumption of arbitration with respect to the claim. This
argument also fails. The amendment, again, states that “cases filed prior to January 1, 2015, will
remain in arbitration’s jurisdiction and will be processed to hearing.” (Emphases added.) This
provision is clear that the only disputes that “will be processed to hearing” are “cases filed prior
to January 1, 2015” (emphasis added). Indeed, illustrating the fact that the date upon which a
claim arose is not significant for purposes of the agreement, article 2 (addressing exclusions) of
the agreement states that an excluded claim includes “any claim [for] which a lawsuit was
instituted prior to, and is pending, at the time the [Arbitration] Agreement is signed.” Thus,
when an entity becomes a signatory, a claim for which a lawsuit has been filed and is pending is
excluded from the agreement. Had Arbitration Forums intended that the date a claim arose
would determine when arbitration is compulsory, the agreement would explicitly say so.
However, it does not.
¶ 34 Watts also argues that this case raises the concern that parties like State Farm can avoid
their obligations to arbitrate by waiting until an arbitration agreement expires. This concern,
according to Watts, has been acknowledged in case law. See Litton, 501 U.S. at 205-10; Nolde
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Brothers, 430 U.S. at 253-55. We disagree with Watts that the scenario it outlines is precisely
what occurred here. The concern raised in the cases it cites is that parties to a contract might
avoid their obligations to arbitrate by waiting until a contract expires and bringing an action
concerning a dispute that arose while the contract was in effect. However, the court-fashioned
presumption of arbitrability forecloses such manipulation and avoidance of obligations. In any
event, we do not believe that this case presents exactly such a scenario. The Arbitration
Agreement and the amendment were presumably drafted exclusively by Arbitration Forums, and
Watts and State Farm agreed to the agreement’s terms, including to be bound by Arbitration
Forums’ rules. To engage in the manipulation and delay that Watts suggests, State Farm would
have had to divine that Arbitration Forums was going to amend the agreement in a fashion that it
deemed favorable to it with respect to Montero’s claim. This is fantastical. We do acknowledge
that, once Arbitration Forums announced the amendment (on November 4, 2014), State Farm
theoretically could have delayed filing the Montero claim until January 1, 2015, a period of 56
days. However, Watts points to no evidence that State Farm actually manipulated its filing date
for this purpose, and, as in every case, State Farm had to be cognizant of the two-year limitations
period for product-liability claims (735 ILCS 5/13-213(d) (West 2014)).
¶ 35 In summary, the amendment to the Arbitration Agreement unambiguously excludes
Montero’s claim from compulsory arbitration through Arbitration Forums.
¶ 36 D. Motion Taken With the Case
¶ 37 In a motion we ordered taken with this case, Watts moves to strike the affidavit and
declaration of Timothy McKernan that State Farm included in the appendix to its brief. The
affidavit, dated October 8, 2015, and submitted to a California trial court in Neighborhood Spirit
Property & Casualty Co. v. Watts Regulator Co., No. 8:15-CV-00199 DOC (C.D. Cal. Nov. 2,
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2015), states that McKernan is the manager of quality, training, and arbitration rules for
Arbitration Forums and that he oversees the application of the arbitration agreements and rules
governing disputes between signatory companies. Addressing the arbitration agreement in that
case (which is presumably identical to the one at issue here), McKernan averred that no
Arbitration Forum rules “support the position that the date of loss dictates whether the product
liability dispute falls within the jurisdiction of Arbitration Forums, Inc.” He also averred that
Arbitration Forums has no jurisdiction over claims filed after January 1, 2015, unless both parties
consent.
¶ 38 In its motion, Watts argues that McKernan’s affidavit consists of his interpretation of the
Arbitration Agreement here and was also submitted in two foreign cases between Farmers
Insurance and Watts, where State Farm was not a party. Watts also contends that State Farm did
not submit the affidavit to the trial court in this case. Watts argues that, because the affidavit was
not submitted to the trial court, is mentioned merely in a footnote in State Farm’s brief, and
addresses the key issue in this case (i.e., interpretation of the Arbitration Agreement), it is
inappropriate and should be stricken. 4
¶ 39 State Farm responds that this court may take judicial notice of affidavits filed in collateral
actions, that McKernan’s/Arbitration Forums’ position on the interpretation of the agreement is
essential to this case, that Watts’s motion improperly argues the merits of its appeal, and that
Watts was aware of the affidavit in the trial court and did not disclose it.
4
Watts also notes that the affidavit was submitted in a Michigan case by Farmers
Insurance and that the Michigan trial court ruled in Watts’s favor. Farmers Insurance v. Watts
Regulator Co., No. 15-005184-NP (Wayne Co., Mich. (Feb. 19, 2016) (granting Watts’s motion
to compel arbitration).
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¶ 40 Pursuant to Illinois Rule of Evidence 201(b) (eff. Jan. 1, 2011), we may take judicial
notice of facts that are “either (1) generally known within the territorial jurisdiction of the trial
court or (2) capable of accurate and ready determination by resort to sources whose accuracy
cannot reasonably be questioned.” See also People v. Crawford, 2013 IL App (1st) 100310, ¶
118 n.9 (“[W]e may take judicial notice of information on a public website, even where the
information does not appear in the record.”); Metropolitan Life Insurance Co. v. American
National Bank & Trust Co., 288 Ill. App. 3d 760, 764 (1997) (appellate court may take judicial
notice of public documents that are included in the records of other courts). We may take
judicial notice of readily verifiable facts if doing so will aid the court in the efficient disposition
of a case, even if the parties did not seek judicial notice in the trial court. Aurora Loan Services,
LLC v. Kmiecik, 2013 IL App (1st) 121700, ¶ 37 (citing Department of Human Services v.
Porter, 396 Ill. App. 3d 701, 725 (2009)).
¶ 41 We deny Watts’s motion to strike, and we take judicial notice of the fact that McKernan’s
affidavit was filed in other cases. However, as to McKernan’s averments concerning the
interpretation of the Arbitration Agreement (including the amendment), we place no weight on
his statements, most significantly because, as we held above, the amendment is not ambiguous;
thus, we do not consider any extrinsic evidence such as the affidavit.
¶ 42 III. CONCLUSION
¶ 43 For the reasons stated, the judgment of the circuit court of McHenry County is affirmed.
¶ 44 Affirmed.
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