The choice between arbitration and court litigation complicated. Arbitration is no panacea. Some disputes are definitely better suited to litigation in a court of competent jurisdiction than arbitration. However, Illinois courts and law are no longer hostile to arbitration, and recognize its many advantages.
Illinois law and Illinois Courts Favor Arbitration.
Our Supreme Court has characterized arbitration as “an effective, expeditious, and cost-efficient method of dispute resolution.” Salsitz v. Kreiss, 198 Ill.2d 1, 761 N.E.2d 724, 731, 260 Ill.Dec. 541 (2001). Illinois public policy favors arbitration because it “promotes the economical and efficient resolution of disputes.” Phoenix Insurance Co. v. Rosen, 242 Ill.2d 48, 949 N.E.2d 639, 647, 350 Ill.Dec. 847 (2011), citing Donaldson, Lufkin & Jenrette Futures, Inc. v. Barr, 124 Ill.2d 435, 530 N.E.2d 439, 443, 125 Ill.Dec. 281 (1988) (legislative policy favors agreements to arbitrate future disputes).
The prevailing Illinois and federal statutes that govern and favor arbitration represent a major departure from early 20th century judicial decisions hostile to arbitration. These decisions reasoned that agreements to arbitrate future disputes were invalid because they infringed on parties’ constitutional right to access the courts. See, e.g., Cocalis v. Nazlides, 308 Ill. 152, 139 N.E. 95, 98 – 99 (1923).
Arbitration Is Governed by the Agreement of the Disputing Parties
Whether a dispute is subject to arbitration depends on the parties’ arbitration agreement. “[P]arties who execute a contract containing a valid arbitration clause are irrevocably committed to arbitrate all disputes clearly arising under the agreement.” Timmerman v. Grain Exchange, LLC, 394 Ill.App.3d 189, 915 N.E.2d 113, 119, 333 Ill.Dec. 592 (5th Dist. 2009), quoting TDE Ltd. v. Israel, 185 Ill.App.3d 1059, 541 N.E.2d 1281, 1284, 133 Ill.Dec. 843 (1st Dist. 1989).
Parties may mutually agree to waive an arbitration agreement and use litigation to resolve a dispute. However, if one party to a valid arbitration agreement wishes to arbitrate a dispute that falls within the agreement’s scope, courts must stay litigation and compel arbitration, even over the other party’s objection.
If the parties have no valid agreement to arbitrate, or if a dispute falls outside of an arbitration agreement’s scope, a motion to compel arbitration may be denied because the dispute is not “arbitrable.” And a court may vacate an arbitration award if it determines that an arbitration was wrongfully allowed to proceed.
Arbitration Law Can Be Complex
Arbitration of construction disputes may be subject to various statutory authorities, including the Illinois Uniform Arbitration Act (Illinois Act), 710 ILCS 5/1, et seq., and the Federal Arbitration Act (FAA), ch. 392, §1, 61 Stat. 669 (1947), codified at 9 U.S.C. §1, et seq. These statutes can apply in both state and federal courts. Agreements to arbitrate are contractual, so the common law of contracts can resolve questions about whether the parties have agreed to submit a particular dispute to arbitration.
Sometimes courts resolve threshold questions of arbitrability; in other cases, judges refer that determination to arbitrators. Because federal law can preempt inconsistent state law, federal caselaw addressing who decides whether a case is arbitrable, and on what grounds, can apply.
The U.S. Supreme Court and other federal courts have issued many opinions on nuanced and complex issues of arbitrability, which sometimes bind state courts. See, e.g., Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 154 L.E.2d 491, 123 S.Ct. 588, 591 – 592 (2002) (recognizing there exists linguistic confusion over term “arbitrability” and meaning of phrase “question of arbitrability”). Arbitration jurisprudence is ever-evolving at both the state and federal level.
Arbitration Law Raises Many Diverse Issues
I co-authored a fifty page book chapter on Arbitration in 2018 (available for free download here), and even an effort of that magnitude could not cover dozens of arbitration law issues. Examples of topics outside the scope of my chapter include:
- international arbitration
- enforcement of foreign arbitration awards
- arbitration and class actions
- arbitrating statutory rights, including claims under consumer protection acts, claims under the Uniform Commercial Code, mechanics lien claims, statutory warranty claims, and claims under payment and performance bond statutes
- arbitration clauses in adhesion contracts
- arbitrating with public authorities and the role of sovereign immunity in arbitration
- arbitrating tort claims, including claims for contribution and indemnity
- Bankruptcy Code invalidation of arbitration agreements
- statute of limitation challenges
- disputes about arbitration hearing locale
- out-of-state lawyers participating in arbitration
- arbitrator disclosure obligations
- court intervention in arbitrator selection
- post-award discovery in motions to vacate
- res judicata and collateral estoppel
- specific state law defenses to enforcement of arbitration agreements
- assessing fees and costs in arbitration awards.
For a thorough examination of these and other unique arbitration law issues, see 7 Philip Lane Bruner and Patrick J. O’Connor, BRUNER & O’CONNOR ON CONSTRUCTION LAW, Ch. 21 (2014), a hugely influential treatise written by my friend Pat O’Connor.
Some of this content first appeared in Chapter 20 (Arbitration) of the Illinois Institute for Continuing Legal Education’s (IICLE) book entitled “Construction Dispute Litigation,” coauthors Paul M. Lurie and Jeremy S. Baker, in 2018. Citations to caselaw have not been updated and should be verified.
This publication is prepared for the general information of friends of Baker Law Group LLC in Illinois. It is not legal advice for you, or legal advice regarding any specific matter. Jeremy S. Baker is licensed to practice law only in Illinois. Under rules applicable to the professional conduct of attorneys in various jurisdictions, it may be considered attorney advertising material. Prior results do not guarantee a similar outcome.