Keefe v. Allied Home Mortgage Corp.

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Appellate Court Date: 2017.01.23
15:50:56 -06'00'
Keefe v. Allied Home Mortgage Corp., 2016 IL App (5th) 150360Appellate Court ROSEMARY KEEFE, on Behalf of Herself and All Others Similarly
Caption Situated, Plaintiff-Appellant, v. ALLIED HOME MORTGAGE
CORPORATION and ALLIED HOME MORTGAGE CAPITAL
CORPORATION, Defendants-Appellees.
District & No. Fifth District
Docket No. 5-15-0360
Filed November 28, 2016
Decision Under Appeal from the Circuit Court of St. Clair County, No. 04-L-502; the
Review Hon. Vincent L. Lopinot, Judge, presiding.
Judgment Reversed and remanded.
Counsel on Jeffrey J. Lowe and James J. Rosemergy, of Carey, Danis & Lowe, of
Appeal St. Louis, Missouri, for appellant.
Michael A. Brockland, of Cosgrove Law Group, LLC, of St. Louis,
Missouri, for appellees.
Panel JUSTICE CATES delivered the judgment of the court, with opinion.
Justice Moore concurred in the judgment and opinion.
Presiding Justice Schwarm dissented, with opinion.
OPINION
¶1 The plaintiff, Rosemary Keefe, appeals from an order granting a motion to compel
arbitration filed by defendants, Allied Home Mortgage Corporation and Allied Home
Mortgage Capital Corporation. The plaintiff contends that the circuit court erred in finding
that the parties’ arbitration agreement was enforceable where the designated arbitrator was no
longer able to conduct consumer arbitrations and where there was no showing that the
designated procedures governing the arbitration agreement authorized the appointment of a
substitute arbitrator. For reasons that follow, we reverse and remand.
¶2 BACKGROUND
¶3 In 1999, the plaintiff, Rosemary Keefe, contacted the defendants for assistance with the
refinancing of a loan on her property in Berwyn, Illinois. The defendants were in the business
of brokering mortgages and providing mortgage related services in several states in the
United States, including Illinois. On May 18, 1999, the plaintiff signed several refinancing
documents, which included an arbitration rider. Two months later, the parties closed on the
loan.
¶4 On September 2, 2004, the plaintiff filed a class action complaint against the defendants.
The plaintiff alleged that the defendants engaged third parties to provide certain loan-related
services, such as credit reports and appraisals, and paid the fees charged for those services.
The plaintiff further alleged after payment of the third-party fees, the defendants then
charged the plaintiff, and similarly situated borrowers, sums in excess of those fees
(“upcharges”), and then concealed the “upcharges” by failing to disclose the actual fees that
the defendants had paid to the third parties. The plaintiff’s complaint included counts
asserting breach of fiduciary duty, breach of the covenant of good faith and fair dealing,
unjust enrichment, and consumer fraud.
¶5 On December 15, 2004, the defendants filed a motion to compel arbitration and stay
judicial proceedings based upon the arbitration rider. The plaintiff filed a memorandum in
opposition. The plaintiff asserted that the arbitration rider was unenforceable because it was
cost-prohibitive, unsupported by consideration, against public policy, and procedurally and
substantively unconscionable. Over the next several months, the parties submitted additional
oral and written arguments to the trial court. On July 18, 2007, the trial court denied the
defendants’ motion to compel arbitration. The court found that the arbitration rider was
illusory and procedurally and substantively unconscionable. The defendants appealed. In an
opinion issued on July 10, 2009, this court found that the arbitration rider was supported by
adequate consideration but that the provision prohibiting class arbitrations was substantively
unconscionable. Keefe v. Allied Home Mortgage Corp., 393 Ill. App. 3d 226, 912 N.E.2d 310(2009). This court also determined that the provision prohibiting class arbitrations was
severable from the remainder of the arbitration rider, leaving the agreement to arbitrate in
place. Keefe, 393 Ill. App. 3d at 236, 912 N.E.2d at 320. The case was remanded to the
circuit court with directions to sever the provision prohibiting class actions and to enforce the
remainder of the arbitration clause.
¶6 Within days after the opinion was issued, the parties’ chosen arbitrator, the National
Arbitration Forum (NAF), became embroiled in a controversy. On July 14, 2009, the
Minnesota Attorney General filed a complaint against the NAF, and alleged, among other
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things, that the NAF had systematically used arbitrators with pro-business biases, and thereby
engaged in consumer fraud and deceptive trade practices. On July 28, 2009, the NAF entered
into a consent decree with the Minnesota Attorney General and agreed to stop accepting all
consumer cases for arbitration. See State v. National Arbitration Forum, Inc., No.
27-CV-09-18550, 2009 WL 5424036 (Minn. 4th Dist. Ct. July 17, 2009) (consent decree); In
re National Arbitration Forum Trade Practices Litigation, 704 F. Supp. 2d 832, 835 (D.
Minn. 2010).
¶7 On September 23, 2009, the plaintiff filed a motion in the circuit court and argued that
the arbitration rider was unenforceable because the NAF was no longer able to arbitrate this
dispute. On October 27, 2009, the defendants filed a memorandum in opposition. The
defendants argued that the unavailability of the NAF did not render the arbitration rider
unenforceable because the NAF was not designated as the exclusive arbitral forum and
because the circuit court was authorized to appoint a substitute arbitrator under section 5 of
the Federal Arbitration Act (FAA) (9 U.S.C. § 5 (2006)). On October 29, 2009, the plaintiff
filed a reply and argued that the arbitration rider effectively designated the NAF as the
exclusive arbitral forum and that no other provision in the rider authorized the selection or
use of a substitute arbitrator. On January 7, 2011, the defendants filed a second motion to
compel arbitration. On October 14, 2014, the circuit court granted the defendants’ motion to
compel arbitration. This appeal followed.
¶8 ANALYSIS
¶9 Agreements to arbitrate are favored as a matter of policy in Illinois and federally.
QuickClick Loans, LLC v. Russell, 407 Ill. App. 3d 46, 52, 943 N.E.2d 166, 172 (2011).
Whenever possible, Illinois courts will construe arbitration agreements to uphold their
validity. Salsitz v. Kreiss, 198 Ill. 2d 1, 13, 761 N.E.2d 724, 731 (2001). This pro-arbitration
policy, however, is not intended to render arbitration agreements more enforceable than other
contracts, and it does not operate in disregard of the intent of the contracting parties. Carter v.
SSC Odin Operating Co., 2012 IL 113204, ¶ 55, 976 N.E.2d 344; Ervin v. Nokia, Inc., 349 Ill.
App. 3d 508, 510, 812 N.E.2d 534, 537 (2004). Rather, arbitration agreements are to be
enforced according to their terms, including those specifying the arbitral forum and the rules
under which the arbitration will be conducted. 9 U.S.C. § 4 (2006); American Express Co. v.
Italian Colors Restaurant, 570 U.S. ___, ___, 133 S. Ct. 2304, 2309 (2013).
¶ 10 Arbitration is consensual, and arbitration agreements, as creatures of contract, are
construed under ordinary principles of contract law. Carr v. Gateway, Inc., 241 Ill. 2d 15, 20,
944 N.E.2d 327, 329 (2011). Under ordinary contract principles, the primary objective is to
give effect to the intent of the parties. Thompson v. Gordon, 241 Ill. 2d 428, 441, 948 N.E.2d
39, 47 (2011). A contract must be construed as a whole, viewing each provision in light of
the other provisions, rather than in isolation. Thompson, 241 Ill. 2d at 441, 948 N.E.2d at 47.
If the words in the contract are clear and unambiguous, they must be given their plain,
ordinary and popular meaning. Central Illinois Light Co. v. Home Insurance Co., 213 Ill. 2d
141, 153, 821 N.E.2d 206, 213 (2004). If the terms of the contract are reasonably susceptible
of more than one meaning, they are ambiguous and will be strictly construed against the
drafter. Central Illinois Light Co., 213 Ill. 2d at 153, 821 N.E.2d at 213. An arbitration
agreement will not be extended by construction or implication. QuickClick Loans, 407 Ill.
App. 3d at 52, 943 N.E.2d at 172. In addition, an arbitration agreement may be invalidated
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under state law contract defenses, such as fraud, duress, and impossibility. Carter, 2012 IL
113204, ¶ 18, 976 N.E.2d 344.
¶ 11 In this case, we are asked to determine whether the parties’ agreement to arbitrate is
enforceable. The question of enforceability arises now because the NAF, as the designated
arbitral forum, is no longer able to conduct arbitrations involving consumer loans. The
NAF’s unavailability raises two fundamental, multilayered issues. The first is whether the
designation of the NAF as the arbitral forum was integral to the parties’ agreement to
arbitrate, and if not, whether any other provision in the arbitration rider authorizes the
appointment of a substitute arbitrator. The second is whether the term stating that the
arbitration rider shall be governed by the Code of Procedure of the National Arbitration
Forum (NAF Code) in effect at the date of the agreement is integral to the agreement to
arbitrate. If the NAF Code is integral to the agreement to arbitrate, then there are questions
about whether the applicable version of the NAF Code is available for use and whether it is
permissible for an arbitrator, other than the NAF or its affiliates, to conduct an arbitration
under the NAF Code. The interpretation of this arbitration rider presents questions of law that
are reviewed de novo. Carr, 241 Ill. 2d at 20, 944 N.E.2d at 329.
¶ 12 The Arbitration Rider
¶ 13 The arbitration rider at issue states in pertinent part:
“All disputes, claims or controversies arising from or related to the loan evidenced by
the Note, including statutory claims, shall be resolved by binding arbitration, and not
by court action, except as provided under ‘Exclusions from Arbitration’ below. This
arbitration agreement is made pursuant to a transaction involving interstate
commerce, and shall be governed by the Federal Arbitration Act (9 U.S.C. §§ 1-4)
and the Code of Procedure of the National Arbitration Forum as in effect at the date
of this agreement. Copies of rules and forms can be obtained and any claims can be
filed at any National Arbitration Forum office, www.arb-forum.com, or at P.O. Box
50191, Minneapolis, MN 55405.”
¶ 14 This provision, drafted by the defendants and agreed to by both parties, plainly states that
all claims and disputes arising from the loan “shall” be resolved by binding arbitration and
that the arbitration agreement “shall” be governed by sections 1 through 4 of the FAA and
the NAF Code in effect on the date of the agreement. The provision further states that copies
of the rules and forms can be obtained and claims can be filed at any NAF office, online, or
by mail. Thus, the arbitration rider contains three basic agreements. First, the parties agreed
to arbitrate their disputes. Second, the parties agreed that the arbitration would be governed
under sections 1 through 4 of the FAA and the version of the NAF Code that was in effect on
May 18, 1999, the date that the arbitration rider was executed. The third agreement, albeit
implicit, is that the parties intended to arbitrate their disputes before the NAF.
¶ 15 Although the arbitration rider does not expressly designate the NAF as the exclusive
arbitral forum, when the terms of the rider are considered together, the intent of the parties is
clear. The arbitration rider specifically mandates that the parties’ arbitration agreement
“shall” be governed by the 1999 NAF Code. The arbitration rider also directs the parties to
obtain copies of the rules and claim forms from any NAF office, or from its website, and to
file the claim forms at any NAF office, online, or through its post office box. The inclusion
of these directions supports a finding that the parties intended to arbitrate before the NAF.
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Indeed, these directions would be meaningless in the absence of the NAF’s designation as the
arbitral forum. When the arbitration rider is considered as a whole and the term mandating
the use of the 1999 NAF Code is read in conjunction with the provision directing the parties
on how to obtain the rules and claim forms and where to file the claim forms, the reasonable
and natural inference is that the parties intended that their disputes would be arbitrated
exclusively before the NAF and governed by the 1999 NAF Code.
¶ 16 Section 5 of the FAA and Enforceability of the Arbitration Rider
¶ 17 In this case, the NAF is no longer available to arbitrate this dispute. The parties disagree
on the impact of the NAF’s absence. The plaintiff contends that the designation of the NAF
is an integral part of the agreement, and that the NAF’s unavailability renders the arbitration
rider unenforceable. The defendants contend that the NAF’s unavailability does not doom the
arbitration rider because the circuit court can appoint a substitute arbitrator under section 5 of
the FAA (9 U.S.C. § 5 (2006)).
¶ 18 The FAA provides a comprehensive procedure for the arbitration of disputes between the
parties. 9 U.S.C. § 1 et seq. (2006). Generally, sections 1 through 4 of the FAA address the
applicability of the FAA to the parties’ disputes, as well as the ability of one party to compel
arbitration where another party has neglected or refused to comply with an arbitration
agreement. 9 U.S.C. §§ 1-4 (2006). Section 4 permits a party to petition the court for an order
directing that arbitration proceed in the manner provided in the arbitration agreement. 9
U.S.C. § 4 (2006). The remaining sections, including section 5, provide procedural rules
governing arbitration proceedings. 9 U.S.C. §§ 5-16 (2006).
¶ 19 Section 5 of the FAA provides a mechanism for appointing a substitute arbitrator, and
states as follows:
“If in the agreement provision be made for a method of naming or appointing an
arbitrator or arbitrators or an umpire, such method shall be followed; but if no method
be provided therein, or if a method be provided and any party thereto shall fail to
avail himself of such method, or if for any other reason there shall be a lapse in the
naming of an arbitrator or arbitrators or umpire, or in filling a vacancy, then upon the
application of either party to the controversy the court shall designate and appoint an
arbitrator or arbitrators or umpire, as the case may require, who shall act under the
said agreement with the same force and effect as if he or they had been specifically
named therein; and unless otherwise provided in the agreement the arbitration shall be
by a single arbitrator.” 9 U.S.C. § 5 (2006).
¶ 20 Generally, section 5 anticipates that a designated arbitrator may become unavailable, and
provides a procedure to appoint a substitute arbitrator. See 9 U.S.C. § 5 (2006); Carr, 241 Ill.
2d at 30, 944 N.E.2d at 335. But the procedure provided in section 5 may not be employed to
circumvent the parties’ designation of an exclusive arbitral forum. Accordingly, where the
designation of an arbitral forum is integral to the agreement to arbitrate and the arbitral forum
becomes unavailable to arbitrate the dispute, section 5 cannot be used to appoint a substitute
arbitral forum and thereby salvage the arbitration agreement. Carr, 241 Ill. 2d at 26, 944
N.E.2d at 333. In contrast, where the designation of an arbitral forum is “only an ancillary,
logistical concern and the primary consideration is the intent to arbitrate disputes, allowing a
court to appoint a substitute arbitrator fulfills the parties’ agreement to arbitrate.” Carr, 241
Ill. 2d at 27, 944 N.E.2d at 333.
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¶ 21 In determining whether the designated arbitral forum is integral to the parties’ agreement
to arbitrate, a court looks to the essence of the agreement. Carr, 241 Ill. 2d at 22, 944 N.E.2d
at 331; Brown v. Delfre, 2012 IL App (2d) 111086, ¶ 16, 968 N.E.2d 696. If the designation
of the arbitral forum and the agreement to arbitrate are of equal importance, then the
designation of the arbitral forum is integral and an alternate forum may not be substituted.
Carr, 241 Ill. 2d at 22, 944 N.E.2d at 331; Brown, 2012 IL App (2d) 111086, ¶ 16, 968
N.E.2d 696.
¶ 22 In this case, the arbitration rider does not use explicit language indicating that the NAF is
the exclusive arbitral forum. But, as discussed earlier, the arbitration rider specifically
mandates that the arbitration of disputes “shall” be conducted under the 1999 NAF Code and
specifically directs that copies of the rules and claim forms may be obtained from the NAF
and that claims may be filed with the NAF. After considering the arbitration rider as a whole
and viewing each provision in light of the others, we have determined that the parties
intended to arbitrate their disputes exclusively before the NAF, governed by the 1999 version
of the NAF Code. The language in the arbitration rider demonstrates that the designation of
the NAF as the arbitral forum, the designation of the 1999 NAF Code, and the agreement to
arbitrate were of equal importance. Because the designation of the NAF as the arbitral forum
and the agreement to arbitrate were of equal importance, the designation of the NAF was
integral to the parties’ agreement to arbitrate. Accordingly, section 5 cannot be used to
appoint a substitute arbitrator and thereby salvage the arbitration rider. Carr, 241 Ill. 2d at
26, 944 N.E.2d at 333.
¶ 23 Further, setting aside for a moment the “integral versus ancillary” debate over the NAF’s
designation, there emerges another clear and basic reason why section 5 of the FAA cannot
be invoked in the case. The arbitration rider, by its very terms, incorporates only sections 1
through 4 of the FAA. Section 5 of the FAA is not referenced in the rider. The arbitration
rider was crafted by the defendants. It is reasonable to infer that by incorporating only the
first four sections of the FAA, the defendants intended to omit the procedural sections of the
FAA and to rely instead on the provisions in the 1999 NAF Code to govern the arbitration
proceedings. To rewrite the arbitration rider to include section 5 of the FAA would violate
basic principles of contract law and run contrary to the clear intent of the parties as expressed
in the plain language of their agreement. Because section 5 of the FAA was intentionally
omitted from the parties’ agreement, the procedural mechanism in section 5 cannot be
employed to appoint a substitute arbitrator and thereby save the arbitration rider.
¶ 24 The NAF Code and Enforceability of the Arbitration Rider
¶ 25 Next, we consider whether the applicable version of the NAF Code authorizes the
appointment of a substitute arbitrator where the designated arbitrator is unavailable. In this
case, the arbitration rider clearly and unequivocally states that any disputes “shall” be
governed by the NAF Code in effect on the day of the agreement, May 18, 1999. The use of
the mandatory language “shall” demonstrates the parties’ intent that the rules in the 1999
NAF Code would govern any arbitrable disputes. The 1999 NAF Code was inextricably
woven into the fabric of the arbitration agreement. Thus, the 1999 NAF Code was integral to
the agreement to arbitrate, and it cannot be excised as some ancillary term.
¶ 26 Given the importance of the 1999 NAF Code, it is almost inconceivable that it was not
produced in the circuit court. When the defendants filed their motions to compel arbitration,
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they included the 1999 arbitration rider and an affidavit attesting to the authenticity of that
document, but they did not attach the 1999 NAF Code. In subsequent pleadings, the
defendants attached and referenced portions of the 2005 NAF Code. A copy of the 2003 NAF
Code was included with the plaintiff’s pleadings. Because the defendants moved to compel
arbitration, it was initially their burden to establish the enforceability of the arbitration
agreement. Hubbert v. Dell Corp., 359 Ill. App. 3d 976, 983, 835 N.E.2d 113, 121 (2005).
Any doubts about enforceability that arise from the absence of the 1999 NAF Code are
resolved against the defendants.
¶ 27 The dissent, however, contends that it was the plaintiff’s burden to present a sufficiently
complete record to support her claims of appellate error and that any doubts about the
enforceability of the arbitration agreement that arise from the absence of the 1999 NAF Code
should be construed against the plaintiff. In making this argument, the dissent has entwined
the defendants’ burden of proof in the trial court and the plaintiff’s duty in the appellate
court. The appellant has a duty to present a sufficiently complete record of the proceedings in
the trial court to support a claim of error. Foutch v. O’Bryant, 99 Ill. 2d 389, 391-92, 459
N.E.2d 958, 959 (1984). The appellant may not supplement the record on appeal with
documents that were available but not presented to the trial court. See Ill. S. Ct. R. 329 (eff.
Jan. 1, 2006) (a party may supplement the record on appeal only with documents that were
actually before the trial court); Deason v. Gutzler, 251 Ill. App. 3d 630, 631, 622 N.E.2d
1276, 1278 (1993). By all accounts, the record on appeal contains the complete record of
proceedings before the circuit court. This is not a case where the appellant failed to include
some portion of the circuit court record. The 1999 NAF Code was never presented to the trial
court, and the trial court never considered it. As the party moving to compel arbitration, the
defendants had the burden to establish the validity and enforceability of the arbitration
agreement. The plaintiff had no duty to make the defendant’s record in the trial court, and the
plaintiff could not include, in the record on appeal, a document that was not actually before
the trial court. As such, any doubts arising from the absence of the 1999 NAF fall squarely
on the defendants.
¶ 28 In this case, we do not have the text of the 1999 NAF Code. Therefore, we have no
means to determine whether the 1999 NAF Code would permit the appointment of a
substitute arbitrator, and if so, under what circumstances. See Carr, 241 Ill. 2d at 31-32, 944
N.E.2d at 336.
¶ 29 The absence of the 1999 NAF Code presents additional obstacles to the enforceability of
the arbitration rider. The parties are, without their designated rules of procedure, mandated
by the language of the rider itself. Can a different code of procedure be implemented, and if
so, who decides which code should be used? Where is the claim to be filed, and what is the
filing fee? What are the powers and duties of the substitute arbitrator? What rules determine
the availability and the scope of discovery, the format of the hearing, the introduction of
evidence, and the costs of arbitration? Who will be obligated to pay those costs? In the
absence of access to the 1999 NAF Code, any findings by this court regarding those
questions are based on pure speculation. See Carr, 241 Ill. 2d at 31-32, 944 N.E.2d at 336.
¶ 30 In this case, the plain language of the arbitration rider reveals that the parties never
intended that this court, or the circuit court, would choose the rules of procedure by which
this arbitration would proceed. The parties agreed that the arbitration of any disputes would
be governed by a specific set of procedural rules, the 1999 NAF Code. The procedural rules
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set forth in sections 5 through 16 of the FAA were specifically excluded. The 1999 NAF
Code was an integral part of the parties’ agreement to arbitrate, and it cannot be severed
without gutting the arbitration rider. The absence of the 1999 NAF Code renders the
agreement to arbitrate unenforceable.
¶ 31 The NAF Consent Judgment
¶ 32 Finally, we pause to consider what level of confidence should be placed in the neutrality
of the NAF Code in light of the consent judgment. Prior to 2009, the NAF was the largest
forum in the United States for consumer-based arbitrations. When complaints of fraud and
deceptive practices were raised by consumers, the Minnesota Attorney General began an
investigation into the NAF’s practices, including the appointment of anti-consumer
arbitrators. The Minnesota Attorney General found evidence that the NAF was not a neutral
forum for consumer arbitrations as contemplated by the FAA and Congress. As a result of
information obtained during the investigation, the Minnesota Attorney General filed a
complaint against the NAF, alleging consumer fraud, deceptive trade practices, and false
statements in advertising. Within a few weeks after the complaint was filed, the NAF settled
the case with the Minnesota Attorney General. A court-approved consent judgment was
entered on July 28, 2009. As part of the consent decree, the NAF agreed that it would not
“accept any fee for processing any new Consumer Arbitration,” and that it would not
“administer or process any new Consumer Arbitration.” See State v. National Arbitration
Forum, Inc., No. 27-CV-09-18550, 2009 WL 5424036 (Minn. 4th Dist. Ct. July 17, 2009)
(consent decree). Thus, the largest consumer-based arbitral forum in the United States agreed
to cease all consumer arbitrations immediately.
¶ 33 In this case, the designated 1999 NAF Code was crafted by an entity that has been
nationally discredited as an arbitral forum for consumer-based arbitrations. This should
generate serious questions about the neutrality of the NAF Code, and the fundamental
fairness and integrity of any proceeding conducted under the NAF Code. Such questions,
while troubling, are not presently before this court and must be saved for another day.
¶ 34 CONCLUSION
¶ 35 In summary, the unavailability of the NAF and the absence of the 1999 NAF Code leave
the parties without their designated arbitrator and the rules specifically chosen to govern the
arbitration. The designation of the NAF as the arbitral forum and the term mandating use of
the 1999 NAF Code were integral to the parties’ agreement to arbitrate. The arbitration rider
specifically omitted the procedural rules set forth in sections 5 through 16 of the FAA,
leaving the court without any rules by which this arbitration should proceed. It is not within
the province of this court, or the trial court, to rewrite the arbitration rider to reinstate omitted
terms or to add new terms. Such actions would violate basic rules of contract law and run
contrary to the clear intent of the parties as expressed by the plain language in the arbitration
rider. The unavailability of the NAF as an arbitral forum and the absence of the 1999 NAF
Code render the parties’ agreement to arbitrate unenforceable.
¶ 36 Accordingly, the order of the circuit court granting the defendants’ motion to compel
arbitration is reversed, and the cause is remanded for further proceedings.
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¶ 37 Reversed and remanded.
¶ 38 PRESIDING JUSTICE SCHWARM, dissenting.
¶ 39 I respectfully dissent. The majority argues that the arbitration rider contains an
“agreement, albeit implicit, *** that the parties intended to arbitrate their disputes before the
NAF.” Supra ¶ 14. However, the language of the arbitration rider does not support this
conclusion. The arbitration rider states that “[a]ll disputes *** arising from *** the loan ***
shall be resolved by binding arbitration, and not by court action.” The arbitration rider states
that claims can be filed at any NAF office but does not require it. The arbitration rider
concludes with a block-letter disclaimer stating that the signee is “AGREEING TO HAVE
ANY DISPUTE ARISING OUT [OF] THE MATTERS DESCRIBED *** ABOVE
DECIDED EXCLUSIVELY BY ARBITRATION.” Thus, the arbitration rider has no
language stating that the NAF must act as arbitrator. This case is unlike Carr v. Gateway,
Inc., 241 Ill. 2d 15, 944 N.E.2d 327 (2011), where the arbitration agreement contained a
clause “that allowed the arbitrator to impose monetary penalties on a party for bringing a
dispute in any forum other than the NAF.” Id. at 20, 944 N.E.2d at 329. Because the
arbitration rider in this case lacks a penalty provision or any other clause with a similar
effect, it does not contain an agreement, even implicitly, that all disputes be arbitrated before
the NAF.
¶ 40 Further, the designation of the NAF’s Code of Procedure without designating the NAF as
arbitrator indicates that the NAF was not considered to be the exclusive arbitrator for any
dispute. In Brown v. Delfre, 2012 IL App (2d) 111086, 968 N.E.2d 696, the parties had
agreed to an arbitration agreement stating that arbitration would be “ ‘conducted by and
according to the securities arbitration rules then in effect of the [arbitration company].’ ”
(Emphasis in original.) Id. ¶ 4. The appellate court noted that the plain language stated only
that arbitration “[would] be conducted ‘by and according to’ the rules” of the arbitration
company.” Id. ¶ 19. The court noted that “if the parties contemplated that [the arbitration
company] would be the exclusive arbitral forum, there would be no need to specify that the
arbitration must be conducted by [the arbitration company’s] rules.” Id. ¶ 20. The court
ultimately determined that the arbitration agreement did not require the use of the arbitration
company as arbitrators and, therefore, held the circuit court erred in finding the arbitration
agreement unenforceable. Id. ¶ 29. Similarly, if the parties in our case intended to have the
NAF arbitrate all disputes, then the arbitration rider would not need to state that it was to be
governed by the NAF’s Code of Procedure. Thus, the statement that arbitration was to be
governed by the NAF’s Code of Procedure without an indication that NAF was to be the
exclusive arbitrator supports the inference that the NAF was not to be the exclusive
arbitrator.
¶ 41 The majority further argues that the arbitration rider’s failure to include section 5 of the
FAA prevents us from affirming the circuit court’s decision. However, because the
arbitration rider does not designate the NAF as exclusive arbitrator, the lack of a right to
substitute arbitrator should have no bearing on this case. The arbitration rider did not require
that NAF act as exclusive arbitrator, and we therefore are not being asked to appoint a
substitute arbitrator to “replace” the NAF. The circuit court’s order simply compels the
parties to settle their dispute before an agreed-upon arbitrator. Because no arbitrator has been
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a part of this case, the arbitration rider’s failure to include the FAA provision regarding
procedures to appoint a substitute arbitrator should not affect our decision.
¶ 42 If the NAF were intended as an exclusive arbitrator, the parties may have included that
information in the 1999 NAF Code governing the arbitration agreement. However, the 1999
NAF Code is not a part of the record. The majority argues that “it was initially [the
appellees’] burden to establish the enforceability of the arbitration agreement” and thus
determines that “[a]ny doubts about enforceability that arise from the absence of the 1999
NAF Code are resolved against the [appellees].” Supra ¶ 26. However, “[t]he law is well
settled that the appellant bears the burden of presenting a sufficiently complete record to
support her claim of error and any doubts arising from the incompleteness of the record will
be resolved against her.” Lewandowski v. Jelenski, 401 Ill. App. 3d 893, 902, 929 N.E.2d
114, 123 (2010). “When the appellant has failed to present this court with a complete record,
the reviewing court must indulge in every reasonable presumption favorable to the judgment
and will presume the trial court followed the law and had a sufficient factual basis for its
ruling.” Id. See also Lamb-Rosenfeldt v. Burke Medical Group, Ltd., 2012 IL App (1st)
101558, ¶ 22, 967 N.E.2d 411 (failure to include full transcripts of discovery depositions,
response to motion for summary judgment, and transcript of hearing on the motion for
summary judgment resolved against the appellant); In re Estate of Matthews, 409 Ill. App. 3d
780, 783, 948 N.E.2d 187, 191 (2011) (petitioner’s failure to ensure her petition to vacate
respondent’s claim and the transcript of the hearing conducted on her petition appeared in the
record on appeal interpreted against her even when her petition was attached on the appendix
to her appellate brief); Han v. Holloway, 408 Ill. App. 3d 387, 390, 945 N.E.2d 45, 48 (2011)
(absence of appellant’s trial testimony, which was referenced throughout her brief and central
to her argument on appeal, is interpreted against her). Thus, throughout civil law, failure to
provide a sufficiently complete record is interpreted against the appellant. Even in criminal
law, it is the appellant’s burden to properly complete the record on appeal, and any doubts
arising from the incompleteness of the record are construed against the appellant unless the
appellant shows the record is incomplete due to no fault of his or her own and demonstrates
there is a colorable need for the missing portion of the record in order to have appellate
review. People v. Henderson, 2011 IL App (1st) 090923, ¶ 45, 961 N.E.2d 407. Therefore,
any doubts about enforceability that arise from the absence of the 1999 NAF Code should be
interpreted against the appellant, not the appellees.
¶ 43 Further, even if we could interpret the 1999 NAF Code’s absence against the appellees,
we should not do so in this case. The majority correctly notes that “[t]he party seeking to
compel arbitration has the burden of proving that an arbitration agreement exists and that the
claims raised are within the agreement’s scope.” Hubbert v. Dell Corp., 359 Ill. App. 3d 976,
983, 835 N.E.2d 113, 121 (2005). The appellees moved to arbitrate on December 15, 2004.
This motion was denied on July 18, 2007, and this court reversed the circuit court and
compelled arbitration on July 10, 2009. Throughout these proceedings, the appellees used the
arbitration rider to show that the arbitration agreement existed and that the claims were
within its scope. The 1999 NAF Code was not needed, nor likely relevant, to meet the
appellees’ burden. The 1999 NAF Code only became relevant when the appellant presented
the motion leading to this appeal on September 23, 2009, after the appellees had successfully
compelled arbitration. It was therefore the appellant’s burden to submit the 1999 Code before
the circuit court, just as it was her burden to provide it as part of a complete record on appeal.
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¶ 44 The arbitration rider here stated repeatedly and clearly that it was to require that all
disputes arising from the loan be resolved by binding arbitration. It contained no language
requiring that the NAF act as exclusive arbitrator. It contained no penalty provision to be
enforced if the parties chose an arbitrator other than the NAF. Based on the plain and obvious
meaning of the arbitration rider as a whole, it is clear that the parties’ primary intent by the
agreement was to arbitrate their disputes under NAF rules and not to require that the NAF
serve as arbitrator. The arbitration rider does not implicitly show an agreement between the
parties that the NAF will act as the exclusive arbitrator. Thus, the NAF is not the exclusive
arbitrator, and the failure to include section 5 of the FAA in the arbitration rider is irrelevant
because there has been no need for a substitute arbitrator. Moreover, even if the 1999 NAF
Code could support the appellant’s argument, it was the appellant’s burden to include the
1999 NAF Code both in the circuit court and on appeal, and any doubts arising from its
absence should be construed against the appellant. Therefore, I respectfully dissent.
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