Illinois Jones and the Arbitrators of the Lost Arc:
 
An Illinois Mandatory Arbitration Synopsis
 
Written by Josh R. Ladwig
As published in the Califf & Harper, P.C. December 2011 Newsletter
 
 
 
Do you have a civil lawsuit in Illinois that is more than $10,000 but less than $50,000? If so, your claim will be required to go before mandatory arbitration, the arching proceeding that occurs when your claim exceeds small claims but does not meet the minimum for trial court in Illinois.
 
The Jump Off
 
The theory behind mandatory arbitration is to streamline disputes. An arbitration proceeding can save parties both time and money if the parties cooperate; however, the proceeding may only become an extension of the claim if differences cannot be resolved.
 
General Background Information
 
This means that your claim will go before a panel of three arbitrators in a hearing that is less formal than a trial and has a set time limit. Following the hearing the arbitrators will make a decision and make a finding in favor of one of the parties, similar to the judgment at the conclusion of a trial. Any party present at the arbitration hearing may have the opportunity to reject the award if it is not satisfactory and proceed to a trial. The key word is "may" because a party, as a sanction for bad faith participation with respect to the arbitration, might be precluded from rejecting the award. If a party retains the right and rejects the arbitrator’s award, then the parties will proceed to trial.
 
Pitfalls, Snake Bites, and Disagreements
 
Just as in trial court, arbitrations are subject to the Illinois Code of Civil Procedure and Supreme Court rules. There are some differences, however, and knowing time limits and how rules are perceived in your particular District is important.
 
 A. Discovery
 
For instance, discovery must be completed prior to the arbitration hearing and, absent a showing of good cause and leave from the court, no discovery will be allowed after a hearing. Essentially, this means that if a party rejects the award and the claim proceeds to trial, unless the court is convinced more discovery is necessary or there is a new cause of action, the parties are stuck with the discovery they used in the arbitration hearing. (Ill. S. Ct. Rule 89).
 
Rule 90 requires that, at least 30 days prior to the arbitration hearing, parties submit to the opposing party any evidence that the party intends to submit including expert statements, documents, etc. This is referred to as the "90(c) Packet". A failure to comply with the rules of evidence, including the Rule 90(c) requirement may result in the arbitrators disallowing the use of the evidence not previously provided.
 
    B. "Good Faith" Participation
 
In all jurisdictions parties are required to participate in good faith throughout discovery and the arbitration proceedings. Occasionally an attorney may appear for arbitration and the client is not necessarily required to do so. Courts have stated, however, that if a party receives an Illinois Supreme Court Rule 237(b) notice requiring the party to appear and the party fails to appear, then sanctions are appropriate including a preclusion of the party from rejecting an arbitration award. (Ill. S. Ct. Rule 90(g)). Additionally, if a party fails to appear whether through an attorney or the party, then there is a waiver of the right to reject an award.
 
The "good faith" requirement is fully enforced by Rule 91(b), which states: "All parties to the arbitration hearing must participate in the hearing in good faith and in a meaningful manner." Basically, a party is required to abide by proceeding rules and take the arbitration hearing seriously. Courts have emphasized that arbitration hearings are not merely a hurdle before trial, thus parties must prepare for the hearing and act in a manner in which they would for the trial court. If a party fails in any of these respects a court may place sanctions upon a party including preclusion of the party from rejecting an award.
 
The Districts are torn, however, as to whether the "good faith" requirement applies only to the actual hearing or if sanctions may be imposed for bad faith actions prior to the hearing proceeding. The First District (Cook County) believes that participation "in the hearing in good faith" encompasses pre-arbitration hearing discovery, and has thus imposed sanctions including preclusion from rejection of the award when a party does not comply with discovery orders. See Campuzano v. Peritz, 875 N.E.2d 1234 (Ill. App. 2007). The Second District, which includes the very northern part of Illinois, does not agree, however, taking a more literal reading of the rule and only imposing strict sanctions for bad faith conduct during the arbitration hearing. The Second District has stated, "Rule 91 applies only to the arbitration hearing itself, not the entire arbitration process. Conduct outside the hearing is beyond the scope of Rule 91 sanctions." See Walikonis v. Halsor, 715 N.E.2d 326, 329 (Ill. App. 1999). Regardless of the District in which your claim is being arbitrated, it is a good idea to comply in good faith throughout the process to minimize giving the arbitrators or a court the opportunity to impose any sanctions.
 
The Rundown
 
The following is a brief synopsis of the Illinois Supreme Court Rules that apply to mandatory arbitrations. For a complete understanding of the rules please read each rule completely.
 
  • Rule 86: Actions Subject to Mandatory Arbitration 
    • civil actions on monetary claims in amounts exceeding $10,000 but not more than $50,000 (not including interest and costs)
    • cases may be ordered to arbitration on a motion by a party, agreement of the parties, or by Court order when a claim is found to not exceed $50,000 
    • the Illinois Code of Civil Procedure and the Rules of the Supreme Court are applicable in mandatory arbitration cases 
  • Rule 87: Appointment, Qualification and Compensation of Arbitrators
    • panel consists of three members of the bar or fewer as agreed upon by the parties
    • each panel is compensated one hundred dollars per hearing 
  • Rule 88: Scheduling of the Hearings
    • arbitration shall be scheduled on the earliest available date following the return of the Summons, but not fewer than sixty days shall be provided by the parties to prepare
    • the court may permit a continuation of an arbitration upon the motion of a party, however, be sure to check local practices as some courts may be adamant about avoiding continuances 
  • Rule 89: Discovery
    • discovery shall be completed prior to arbitration
    • no discovery shall be permitted after the arbitration except upon leave of the court and a showing of good cause
    •  parties are not precluded from filing new claims upon receiving leave of court, i.e. following an arbitration hearing, if the parties are proceeding to court a party may be allowed to file a new claim even though it was not raised during the arbitration 
  • Rule 90: Conduct of Hearings
    • arbitrators have the power to administer oaths to witnesses, determine the admissibility of evidence, and decide the law and the facts of the case
    • the arbitrators’ authority and power only exists in relation to the conduct of the hearing at the time it is held, other issues arising should be resolved by the court
    • the rules of evidence shall be followed at arbitrations
    • at least thirty days written notice of the intent to offer documents into evidence at the arbitration hearing must be given to opposing parties accompanied by a copy of the documents (this is the Rule 90(c) packet)
    • parties have the right to subpoena, or demand that a witness appear at the arbitration hearing in order to cross-examine the witness
    • a party’s failure to comply with an Illinois Supreme Court Rule 237(b) notice may result in the party being precluded from rejecting an arbitration award 
  • Rule 91: Absence of Party at Hearing
    • a party’s failing to appear for an arbitration hearing in person or by counsel is a waiver of the party’s right to reject an award
    • a party who fails to appear may move to vacate the award and the court in its discretion may do so, but may also order a sanction of costs, fees, and out of pocket expenses as a condition for granting the relief
    • the appearance of a party at arbitration is an obligation to participate in the hearing in good faith and in a meaningful manner
    • a unanimous finding by the arbitrators of a failure to participate in good faith may result in sanctions including, but not limited to, precluding the party from rejecting the award, attorney’s fees, and costs
    • the party must participate in the arbitration in good faith by acting in a type of adversarial custom that would be expected at trial; a party may be found to be acting in bad faith where there is a deliberate disregard for rules of the court or inept preparation
    • some jurisdictions have held that this good faith requirement for participation includes prehearing actions such as discovery orders, however, not all jurisdictions have followed that reading of the Rules 
  • Rule 92: Award and Judgment on Award
    • the arbitration panel shall render its decision and enter an award on the same day of the hearing
    • the award of the panel may not exceed the monetary limit of $50,000 not including interests and costs, however, if a party rejects an award and the claim proceeds to trial the court is not bound to the $50,000 limit
    • if there is not a timely rejection by the awarded party there shall be a judgment on the award upon a motion of a party or at a subsequent court appearance scheduled by the court 
  • Rule 93: Rejection of Award
    • within 90 days of the filing of an award with the court and upon payment to the clerk of courts in the sum $200 for awards of $30,000 or $500 for awards greater than $30,000, any party present at the arbitration may file a written notice of rejection of the judgment
    • filing of any single rejection by any party is sufficient to enable all parties to proceed to trial on all issues of the case
    • there may not be a withdrawal of the rejection once a rejection has been filed
    • the notice of a rejection is considered to be filed on time when the notice is mailed to the court within the thirty day period, even if it is not received by the court within the thirty day period
    • a valid rejection requires both the filing of the rejection within the thirty days and the payment of the appropriate fee; if a party fails to pay the fee within the thirty day period the rejection is not timely filed 
  • Rule 94: Form of Oath, Award, and Notice of Award – see this Rule for the statutory form 
  • Rule 95: Form of Notice of Rejection of Award – see this Rule for the statutory form
 
The End
 
A mandatory arbitration proceeding may be a faster and less expensive way to come to a conclusion on a claim assuming that the parties comply with all the rules and take the arbitration proceeding and hearing seriously. As with any proceeding, whether in equity or law, it is essential that rules and procedures are followed lest a party find itself in a position of potentially receiving sanctions by a court or having its claim dismissed. Regardless of the outcome, if either party is unhappy with the arbitrator’s award, that party may reject the award and proceed to trial with the mandatory arbitration simply an arch between filing and trial. Thus, while mandatory arbitration may streamline a cause of action, parties are ensured that they may still receive their day in court.
 
For more information on this topic please contact Califf & Harper, P.C. by calling 309-764-8300 or 1-888-764-4999. This article is intended to provide general information regarding the topic discussed herein but is not intended to constitute individual legal advice.