ADR and Mediation

In action seeking to enforce through turnover order arbitrator’s $650,000 award in favor of plaintiff, Dist. Ct. erred in finding that defendant could choose to pay $500,000 portion of said award out of his future stock dividends, as well as his estate after his death. While arbitrator stated that plaintiff could satisfy instant $500,000 obligation “in such manner as plaintiff chooses,” arbitrator's award lacked any indication that arbitrator granted defendant complete discretion to decide if, when and how defendant would pay award during his lifetime. As such, plaintiff could use instant request for turnover order to satisfy this portion of arbitrator’s award. Also, Dist. Ct. did not err in directing defendant to turn over stock in plaintiff’s company to satisfy remaining $150,000 of arbitrator’s award, where, contrary to defendant’s contention, award failed to contain any language indicating that defendant remain as shareholder in plaintiff’s company.

Dist. Ct. did not err in dismissing in favor of arbitration plaintiff’s action alleging that defendant’s Snapchat service violated Illinois Biometric Privacy Act, where plaintiff’s Snapchat account contained arbitration clause. Record showed that plaintiff signed up for her Snapchat account when she was 11, under circumstances where defendant specified that persons must be 13 to have account. Plaintiff argued that because arbitration is matter of contract formation, judges, as opposed to arbitrators, must decide that contract has been formed before they may order arbitration, and that, as current minor, she could not form any contract. Ct. of Appeals, though, found that: (1) under Illinois law, plaintiff’s minor status merely made instant contract voidable, which could be ratified by plaintiff; (2) Illinois law treats age of contracting parties as defense to enforcement of contract; and (3) plaintiff’s potential defense must properly be decided by arbitrator. Ct. similarly noted that youth is defense to contract enforcement, as opposed to impediment to contractual formation.

Dist. Ct. erred in denying defendant-employer’s request to refer plaintiff-employee’s employment-related action to arbitration pursuant to arbitration clause contained in parties’ employment agreement. Although defendant did not contest Dist. Ct.’s finding that aspects of arbitration clause requiring plaintiff to bear all costs of arbitration, while defendant was permitted to select arbitrator and location of arbitration were unenforceable because they were too favorable to defendant, Dist. Ct. could not find that entire clause was unenforceable, where: (1) agreement reflected that both parties had agreed to arbitrate instant dispute; (2) agreement could be enforced without portions of agreement that Dist. Ct. found were too favorable to defendant; (3) decision on who pays for arbitration could be resolved by federal statute that formed basis of plaintiff’s claim; and (4) arbitration rules allowed Dist. Ct. to select arbitrator for arbitration that would occur in same judicial distract as instant litigation. As such, case was remanded with directions for Dist. Ct. to select arbitrator and to refer dispute to arbitration.

Dist. Ct. did not err in confirming $54.6 million attorney’s fee award that arbitration panel found in favor of plaintiff-law firm, even though defendant-former client of plaintiff argued that arbitration procedure, which included arbitration panel deciding merits of parties’ attorney’s fee dispute only on written submissions from plaintiff, was fundamentally unfair. Record showed that: (1) less that 72 hours prior to scheduled evidentiary hearing set by panel, defendant informed panel that he would not be attending hearing; (2) panel then stated that it planned to proceed with or without defendant, and that his non-attendance could subject him to default; (3) defendant replied that reason for his boycott of hearing was his contention that his attorney engagement agreement with plaintiff was invalid; (4) defendant also stated that even if he were inclined to attend hearing, he could not make trip from Japan to attend hearing because of undisclosed medical reasons; (5) defendant further announced that he was not authorizing his attorneys to participate in arbitration and was canceling all witnesses; and (6) arbitration panel held defendant in default, and, in relying on CPR Rule 16, issued decision based only on plaintiff’s written submissions. While defendant argued that procedure used by arbitration panel was unfair, Ct. of Appeals rejected defendant’s contention, where panel’s decision to proceed without defendant was fair because it was reasonable, where defendant had unequivocally announced his refusal to participate in hearing. It further noted that defendant’s claim of medical emergency was not supported by record, and that defendant never requested that panel consider his evidence notwithstanding his absence.

Dist. Ct. did not err in denying defendants’ motion to compel arbitration of plaintiff’s class action under section 1132(a)(2) of ERISA, alleging that defendants breached their fiduciary duties with respect to certain transactions that defendants-Board members made on behalf of defined contribution employee retirement plan to which plaintiff was member. Ct. of Appeals found that claims under ERISA are generally subject to arbitration. However, Ct. found that plan’s arbitration clause could not be enforced under “effective vindication exception,” where” (1) plan’s arbitration provision, which contained class action waiver, precluded plaintiff from seeking or receiving relief for individuals other than plaintiff; (2) plaintiff sought, among other things, removal of fiduciary under section 1109(a) of ERISA, which would provide relief to others; and (3) instant exception applied, where, as here, arbitration provision acted as prospective waiver of parties right to pursue statutory remedies under ERISA. Also, because plan’s arbitration provision was nonseverable, no claims under section 1132(a)(2) of ERISA could be arbitrated.

Dist. Ct. did not err in confirming arbitrators’ orders regarding dispute between parties-insurance companies about how certain claims for re-insurance should be billed. Record showed that both parties had entered into agreement calling for arbitration of parties’ disputes, and that parties disagreed as to how insurance losses covering multiple years should be treated. While plaintiffs believed that arbitrators’ decisions, that found that plaintiffs’ methodology on aggregation of claims was contrary to parties established course of dealing, and that defendant had fully and finally discharged its past, present and future obligations with respect to certain claims, were made outside authority given to them under arbitration agreement, Dist. Ct. could properly find that arbitration agreement gave arbitrators power to make such rulings, especially where agreement gave arbitrators power to resolve disputes on general principles and not just on legal entitlements. Moreover, arbitration agreement allowed arbitrators to not only decide specific billing methodology, but also to identify specific consequences of their ruling with respect to certain claims at issue in arbitration. Ct. emphasized narrow scope of their review when considering arbitral awards.

Dist. Ct. did not err in confirming $5.3 million arbitration award that resulted from finding that defendant had breached agreement to serve as third-party administrator of health-care policies issued by plaintiffs. Record also showed that arbitrator issued subsequent finding that rejected other claims submitted by parties and included statement that "all other claims for relief by the parties are denied.” Dist. Ct. could properly conclude that said statement did not cover initial $5.3 million award, since arbitrator made clear that $5.3 award was separate matter. Also, arbitrator could properly resolve indemnification claims, where defendant failed to invoke clause in agreement that allowed defendant to litigate said issues in federal or state court. Moreover, arbitrator could properly consider whether defendant took excessive administrative fees from plaintiffs, even though arbitrator labeled said claim as “embezzlement.”