Chicago Southshore & South Ben R.R. v. Northern Indiana Commuter Transportation District

June 23, 1997

No. 1-96-0358
Cons. 1-96-2757 

CHICAGO SOUTHSHORE and                  )    APPEAL FROM THE 
SOUTH BEND RAILROAD,                    )    CIRCUIT COURT OF 
                                        )    COOK COUNTY
     Petitioner-Appellee,               )
                                        )
     v.                                 )    No. 94 CH 9719
                                        )
NORTHERN INDIANA COMMUTER               )    
TRANSPORTATION DISTRICT,                )    THE HONORABLE
                                        )    AARON J. JAFFE
     Respondent-Appellant.              )    JUDGE PRESIDING.


     PRESIDING JUSTICE COUSINS delivered the opinion of the
court:
     The Chicago SouthShore and South Bend Railroad (SouthShore)
initiated the instant action in Illinois, seeking confirmation of
an arbitration award entered on August 11, 1994. The Northern
Indiana Commuter Transportation District (NICTD) filed suit in
Indiana seeking review of the arbitration award.  SouthShore
petitioned the Illinois trial court to confirm the award.  NICTD
contested the jurisdiction of the Illinois courts.  The Illinois
trial court denied NICTD's jurisdictional argument and confirmed
the award.  NICTD appealed.  NICTD subsequently moved the
Illinois trial court to vacate its judgment confirming the award. 
The trial court denied NICTD's motion to modify or vacate the
judgment confirming the award.  NICTD again filed an appeal.  The
two appeals have been consolidated.  On appeal, NICTD contends
that the Illinois courts: (1) did not have subject matter
jurisdiction to review the arbitration award; (2) should not have
exercised jurisdiction over NICTD under the principles of comity;
(3) erred in refusing to enforce the arbitration contract between
the parties as written; and (4) erred in refusing to allow NICTD
a full and fair hearing on the merits of its claim and in failing
to grant NICTD's petition to vacate judgment.
BACKGROUND
     NICTD is an Indiana State Transportation District created
pursuant to Indiana statute (Ind. Code 8-5-15-1 et seq. (1992)). 
SouthShore is an Indiana partnership.  On September 27, 1989,
SouthShore and NICTD entered into a contract that governed the
purchase of the assets of the bankrupt old South Shore Railroad
and the subsequent operation of rail freight and passenger
services over the line purchased.  Pursuant to the contract,
NICTD was to operate the passenger service while SouthShore would
run the freight operation.  
     Section 16.7 of the contract provided for the method by
which disputes were to be resolved by the parties.  Specifically,
section 16.7 of the contract provided, in relevant part:
     "If any dispute remains unresolved 30 days after            
notice of the existence of a dispute as delivered by one         
party to the other, either party, may, thereafter, submit        
the matter to arbitration in accordance with the provisions
     of this paragraph.  In the event a dispute is submitted to 
     arbitration under the terms of this Agreement, SSA
     (SouthShore) and NICTD each shall appoint one arbitrator and
     those two arbitrators shall select a third arbitrator. The  
     decision of the majority of the three parties shall be final
     and conclusive between the parties, except that if either
     party claims that the arbitrator's decision is based upon an
     error of law, it may, within 30 days after receipt of such
     decision, institute an action at law within the State of
     Indiana to determine such legal issue.  All arbitration
     proceedings shall take place within the State of Indiana
     and shall be governed by the rules of the American          
     Arbitration Association."
Section 16.8 provides:
     "This Agreement is to be interpreted pursuant to the laws of
     the State of Indiana."
The last relevant provision is section 16.9, which provides:
     "It is intended that the subject matter hereof shall be
     embodied in definitive agreements to be prepared and
     executed by the parties subsequent to the date hereof. 
     However, pending execution of such definitive agreements,
     this Agreement shall be deemed binding and enforceable and
     shall reflect the entire agreement of the parties with
     respect to the subject matter hereof, superseding any prior
     agreements or understandings."
     During 1992, a dispute arose between NICTD and SouthShore
concerning the interpretation of certain provisions contained
within the contract.  The parties were unable to resolve that
dispute; therefore, NICTD invoked the arbitration provisions in
the contract during 1993.  All three appointed arbitrators were
attorneys practicing in Chicago, Illinois.  Also, SouthShore's
attorney practices in Chicago.  For the convenience of the
arbitrators, NICTD agreed to allow the arbitration hearing to
proceed in Chicago.  The agreement to arbitrate in Chicago was
reached before the arbitrators in a pre-arbitration memorandum. 
The arbitration hearings were held in Chicago on July 11-15 and
August 2-3, 1994.  The award was issued on August 11, 1994.
     NICTD challenged the portion of the award dealing with the
maintenance of way (MOW) fee by filing a complaint for
declaratory judgment in Indiana on September 9, 1994.  On
February 22, 1995, the Indiana trial court found that, because
the arbitration hearings took place in Illinois, Indiana courts
lacked subject matter jurisdiction to hear NICTD's complaint for
declaratory judgment.  The Indiana trial court, therefore,
dismissed NICTD's complaint for declaratory judgment action.  
     On October 28, 1994, SouthShore filed a motion for
confirmation of the arbitration award in the Illinois trial
court.  In response, NICTD filed a special and limited appearance
and contested the Illinois court's subject matter jurisdiction
over the dispute and also contended that, under the principles of
comity, the Illinois court should decline to exercise
jurisdiction over NICTD.  
     On March 14, 1995, the Illinois trial court entered its
order, determining that Illinois courts did have jurisdiction to
review and confirm the arbitrator's award because Illinois was
the situs of the arbitration hearings.  The court based its
decision on the Indiana trial court's finding that Indiana lacked
subject matter jurisdiction to hear NICTD's petition for review
of the arbitrator's purported errors.
     On April 12, 1995, NICTD filed a motion to modify or vacate
the arbitration award in the Illinois trial court.  On September
6, 1995, the trial court entered an order striking, as untimely,
NICTD's motion to modify or vacate the arbitration award. On
October 30, 1995, NICTD was granted leave to file its response
brief to SouthShore's motion to confirm the arbitration award. 
The response asked the trial court, inter alia, to stay any
confirmation of the arbitrator's award pending a complete
adjudication of the complaint for declaratory judgment, which was
then before the Indiana Court of Appeals.  In the alternative,
NICTD sought a hearing as to that portion of the arbitrator's
award dealing with the MOW fee.  On November 6, 1995, the
Illinois trial court refused to stay the proceedings or to allow
a hearing on the MOW fee.  The court entered its judgment
confirming the arbitration award on December 20, 1995.  NICTD
filed a notice of appeal from this judgment.
     Subsequent to the Illinois trial court's entry of judgment,
the Indiana Court of Appeals reversed the Indiana trial court and
held that Indiana courts did have subject matter jurisdiction and
that, under Indiana law, the arbitrator's decision should have
been reviewed by the Indiana courts.  Based on the Indiana Court
of Appeals decision, NICTD filed a petition to vacate or modify
the Illinois trial court's December 20, 1995, order. The Illinois
trial court denied the petition on July 24, 1996.  NICTD then
filed a second notice of appeal.  Both appeals have been
consolidated.
ANALYSIS
                                   I
     NICTD first contends that the Illinois court lacked subject
matter jurisdiction to confirm the underlying arbitration award. 
SouthShore argues that the Illinois court has jurisdiction under
the Illinois Uniform Arbitration Act (the Act) 710 ILCS 5/1 et
seq. (West 1992)).  
     Subject matter jurisdiction gives the right to hear and
determine causes.  Fredman Brothers Furniture Co. v. Department
of Revenue, 109 Ill. 2d 202, 215, 486 N.E.2d 893 (1985).  The
subject matter jurisdiction of the trial court to review an
arbitration award is limited and circumscribed by statute.  The
parties may not, by agreement or otherwise, expand that limited
jurisdiction.  Konicki v. Oak Brook Racquet Club, Inc., 110 Ill.
App. 3d 217, 224, 441 N.E.2d 1333 (1982).  Judicial review is
limited because the parties have chosen the forum and must
therefore be content with the informalities and possible
eccentricities of their choice.  Konicki, 110 Ill. App. 3d at
223.  
     Specifically, NICTD argues that Illinois did not have
jurisdiction to confirm the award because the arbitration
agreement explicitly sets forth:
     "If either party claims that the arbitrator's decision
     is based upon an error of law, it may, within 30 days after
     receipt of such decision, institute an action at law within
     the State of Indiana to determine such legal issue.  All
     arbitration proceedings shall take place within the State of
     Indiana and shall be governed by the rules of the American
     Arbitration Association.
                              * * *
          This agreement is to be interpreted pursuant to the
     laws of the State of Indiana.
                              * * *
          It is intended that the subject matter hereof shall be
     embodied in definitive agreements to be prepared and
     executed by the parties subsequent to the date hereof. 
     However, pending execution of such definitive agreements,
     this Agreement shall be deemed biding and enforceable and
     shall reflect the entire agreement of the parties with
     respect to the subject matter hereof, superseding any prior
     agreements or understandings." 
NICTD asserts that, based on the above provisions, the parties
clearly intended that any judicial proceedings ancillary to the
arbitration process be brought in the State of Indiana.          
     SouthShore contends that, because section 17 of the Act
provides that any application to court "shall be made to the
court of the county in which the agreement provides the
arbitration hearing shall be held or, if the hearing has been
held, in the county in which it was held" (710 ILCS 5/17 (West
1992), jurisdiction to enforce and enter judgment on the award
arose in Illinois, the situs of the arbitration. SouthShore
refers to section 1 of the Act, which requires that the Act be
construed so as "to effectuate its general purpose to make
uniform the law of those states which enact it."  710 ILCS 5/20
(West 1992).  Southshore also refers to section 16 of the Act,
which provides:
          "The term 'court' means any circuit court of this
     State. The making of an agreement described in Section 1
     providing for arbitration in this State confers jurisdiction
     on the court to enforce the agreement under this Act and to
     enter judgment on an award thereunder."  710 ILCS 5/16 (West
     1992).
     SouthShore asserts that the parties' agreement to arbitrate
in Illinois expressed the parties' intent under the Act to have
the agreement enforced in Illinois.  SouthShore relies on Kress
Corp. v. Edw. C. Levy Co., 102 Ill. App. 3d 264, 430 N.E.2d 593
(1981), to support its argument. In Kress, the parties agreed to
arbitrate in Peoria, Illinois. Kress filed an action in Peoria,
Illinois, to confirm the award, which the court affirmed.  On
appeal, Levy argued that the Federal Arbitration Act (9 U.S.C. 1
et seq. (1976)), rather than the Illinois Uniform Arbitration
Act, governed because the transaction between the parties
involved interstate commerce.  The court held that, although the
underlying contract did not explicitly answer this question, both
the conduct of the parties in petitioning for confirmation and
moving to dismiss pursuant to the Illinois Uniform Arbitration
Act, and the express agreement to arbitrate in the State of
Illinois, implied that the parties agreed to submit their dispute
to the law of Illinois as it applied to arbitration.  Kress, 102
Ill. App. 3d at 268.
     SouthShore also relies on the Missouri Court of Appeals case
of State ex rel. Tri-City Construction Co. v. Marsh, 668 S.W.2d 148 (Mo. App. 1984), to support its argument. In Tri-City, the
arbitration agreement called for the application of the Kansas
Uniform Arbitration Act, but did not specify the location for
arbitration.  The court held that, because the arbitration was
conducted in Missouri, only the Missouri courts had jurisdiction
to confirm the arbitration award.  Tri-City, 668 S.W.2d  at 152. 
     We note that the Indiana Court of Appeals  agreed with
NICTD, holding that, where the parties have entered into an
agreement, that agreement, and not the place of arbitration,
controls the determination of which state has jurisdiction over
an appeal of an arbitration decision.  The court reasoned that,
had the parties intended to change the agreement to confer
jurisdiction in Illinois, the parties would have executed an
amendment to the agreement.  The court further stated that,
although NICTD agreed to waive the situs of the arbitration, this
waiver did not alter or nullify the provisions in the parties'
agreement that conferred subject matter jurisdiction on the
courts of Indiana.
     We disagree.  An arbitration agreement is construed in the
same manner as any other agreement.  Schroud v. Van C. Argiris &
Co., 78 Ill. App. 3d 1092, 1096, 398 N.E.2d 103 (1979).  An
agreement must be construed according to the language of the
agreement.  Schroud, 78 Ill. App. 3d at 1096.  A contractual
right with respect to arbitration can be waived as can any other
contract right.  Ure v. Wangler Construction Co., 232 Ill. App.
3d 492, 498, 597 N.E.2d 759 (1992).  Waiver of a contract term
may occur when a party conducts itself in a manner that is
inconsistent with the subject clause, thereby indicating an
abandonment of its contractual right.  Ure, 232 Ill. App. 3d at
498-99.
     We believe that, in the instant case, the statutory language
of the Uniform Arbitration Act, as well as the circumstances
surrounding the arbitration and the confirmation of the award,
determines jurisdiction of the award.  The parties initially
agreed that the arbitration would take place in Indiana and
Indiana law would govern the parties' contract. Subsequently, the
parties agreed during a preliminary arbitration hearing that the
arbitration would take place in Illinois.  NICTD filed its
complaint for declaratory judgment in Indiana on September 9,
1994. On October 28, 1994, SouthShore petitioned for confirmation
of the arbitration award in Illinois.  The Indiana trial court
dismissed NICTD's complaint on February 22, 1995, stating that,
because the arbitration hearings took place in Illinois, Indiana
courts lacked subject matter jurisdiction to hear NICTD's
complaint.  On March 14, 1995, the Illinois trial court entered
its order, finding that Illinois courts had jurisdiction to
review and confirm the award.  The Indiana appellate court did
not issue its initial decision holding that Indiana had
jurisdiction until February 20, 1996.  Thus, there was no binding
decision by the Indiana court regarding jurisdiction of the award
at the time that SouthShore petitioned for the confirmation
award. If the Illinois court had not accepted jurisdiction,
SouthShore would then have had no forum for enforcing the
arbitration award. Furthermore, as noted in Tri-City, "the place
of contracting is not always, or even frequently, the convenient
location for the arbitration.  Modern business operates in a
multistate environment, and the parties should be permitted to
choose the place of arbitration and confirmation upon
consideration of convenience, and not upon artificial concepts of
the place of contracting."  Tri-City, 668 S.W.2d  at 152.  Based
upon the statutory language of the Act, the Act's direction to
construe the Act uniformly, and the "common sense application of
the Act to meet the needs of the parties" (Tri-City Construction
Co., 668 S.W.2d at 152), we hold that the trial court did not err
in finding that Illinois had jurisdiction of the arbitration
award.  
                              II
     NICTD next contends that it is an Indiana state agency and,
therefore, Illinois courts should decline to exercise
jurisdiction over it based on comity and sovereign immunity.  The
Office of the Attorney General for the State of Indiana also
argues, as amicus curiae, that principles of sovereign immunity
preclude suit against NICTD in an Illinois forum.  SouthShore
argues that neither statute nor common law provides NICTD with
sovereign immunity. 
     The State of Indiana no longer strictly adheres to the
doctrine of sovereign immunity and is, therefore, not immune from
liability in a state court proceeding for damages resulting from
the exercise of its proprietary or governmental functions.  Burr
v. Duckworth, 547 F. Supp. 192, 195 (N.D. Ind. 1982), aff'd, 746 F.2d 1482 (7th Cir. 1984).  NICTD asserts, however, that, as a
state agency, it is immune from suits outside the state of
Indiana, unless it consents thereto.  Article 4, section 24, of
the Constitution of the State of Indiana provides as follows:
          "Provision may be made, by general law, for bringing   
     suit against the State; but no special law authorizing such
     suit to be brought, or making compensation to any person
     claiming damages against the State, shall ever be passed."
     Ind. Const. art. IV, 24.
We do not believe that this provision controls the case sub
judice.  The Uniform Arbitration Act explicitly provides that
"[u]pon application of a party, the court shall confirm an
award."  (Emphasis added.) 710 ILCS 5/11 (West 1992). NICTD
agreed to submit to arbitration in the event of any disputes
between it and SouthShore. Therefore, NICTD agreed to sue and be
sued in court by virtue of the arbitration agreement, which
incorporates the requirements of the Uniform Arbitration Act.    
     
                                    III
     NICTD also contends that the Illinois court's refusal to
recognize NICTD's right to commence the action in the State of
Indiana and its refusal to recognize its right to complete the
dispute resolution process in Indiana provided for in the
contract, violated the full faith and credit clause of the United
States Constitution.  U.S. Const., art. IV, 1.  
     The full faith and credit clause requires each state to give
effect to official acts of other states; a judgment entered in
one state must be respected in another provided that the first
state had jurisdiction over the parties and the subject matter. 
Nevada v. Hall, 440 U.S. 410, 59 L. Ed. 2d 416, 99 S. Ct. 1182
(1979).  However, a state's recognition of another state's laws
or judicial decisions is based on state policy, rather than a
constitutional command.  Hall, 440 U.S. 410, 59 L. Ed. 2d 416, 99 S. Ct. 1182.  Also, the doctrine that no sovereign may be sued in
its own courts without its consent affords no support for a claim
of immunity in another sovereign's courts.  Hall, 440 U.S.  at
416, 59 L. Ed. 2d  at 422, 99 S. Ct.  at 1186.
     In the instant case, both Indiana and Illinois claim
jurisdiction over the arbitration award.  However, we believe
that Illinois had jurisdiction.  Also, significantly, the
decision of the Illinois court to confirm the arbitration award
was not in derogation of any decision then existing by the
Indiana court. Therefore, we do not believe that the decision of
the Illinois court to confirm the award has abridged the full
faith and credit clause of the United States Constitution.
                                    IV
     NICTD further argues that, even if jurisdiction properly lay
in the Illinois courts, the Illinois trial court erred in
refusing to consider NICTD's substantive arguments in its motion
to modify or vacate the arbitration award. SouthShore argues that
NICTD failed to seek timely relief in the Illinois trial court. 
The trial court refused to consider NICTD's substantive arguments
because they were not raised in the Illinois court within 90 days
of the entry of the arbitrator's award.
     Section 12 of the Uniform Arbitration Act permits a party to
petition the circuit court to vacate the arbitrator's award, as
long as the petition is filed within 90 days after delivery of a
copy of the award to the petitioner; if the petition is based
upon fraud, it must be filed 90 days from the date the fraud was
known or should have been known. 710 ILCS 5/12 (West 1992).  The
mere filing of a petition to confirm the award in the circuit
court by the opposing party does not extend the 90-day period
within which a request for vacatur must be presented; thus, if
grounds to vacate are raised in response to a petition to
confirm, they are timely only if asserted within the 90-day
period.  Hough v. Howington, 254 Ill. App. 3d 452, 456-57, 627 N.E.2d 36 (1993); Konicki, 110 Ill. App. 3d at 220-21.
     In the instant case, the arbitration award was issued on
August 11, 1994.  NICTD filed its complaint for declaratory
judgment and other appropriate  relief in the Indiana trial court
on September 9, 1994.  On October 28, 1994, SouthShore filed its
petition in Illinois to confirm the award; however, NICTD chose
not to enforce its rights under the Act to seek to vacate the
award.  Instead, NICTD filed a special and limited appearance to
contest the jurisdiction of the Illinois trial court.  After
losing its jurisdictional challenge, NICTD, on April 12, 1995,
filed a motion to modify or vacate the arbitration award in
Illinois.  On September 6, 1995, the trial court entered an order
striking, as untimely, NICTD's motion to modify or vacate the
arbitration award.  In entering that order, the trial court
concluded that NICTD had "adopt[ed] a flawed strategy" by
choosing only to contest jurisdiction and that NICTD should also
have answered and raised defenses to SouthShore's motion to
confirm within the statutory period.  
     NICTD argues that, because it commenced its action in a
court of competent jurisdiction, principles of fundamental
fairness require that NICTD receive a hearing on the merits of
its complaint whether it was instituted in Indiana or Illinois. 
NICTD relies on Hourly Messengers, Inc. v. Insurance Co. of North
America, 163 N.J. Super. 276, 394 A.2d 880 (1978).  In Hourly
Messengers, at issue was whether the plaintiff's action was
barred by the 12-month contractual period of limitation.  The
plaintiff had initially filed suit against an insurer in May
1969, in Pennsylvania.  The plaintiff filed a similar suit in New
Jersey on May 28, 1971.  Subsequently, the first suit was
voluntarily dismissed by the plaintiff.  The New Jersey appellate
court held that the limitations period was not implicated because
the timely action in Pennsylvania was pending and not
discontinued until after the second complaint was filed in New
Jersey.  The court noted that the insured had notice in the first
action of the claim and the second, overlapping action did not
advance a distinctly new or different claim.  Consequently, the
reasons for applying the contractual period of limitations did
not exist and the complaint should not have been dismissed. 
Hourly Messengers, 163 N.J. Super at 280, 394 A.2d  at 882.
     NICTD also relies on Cook v. Britt, 8 Ill. App. 3d 674, 290 N.E.2d 908 (1972).  In Cook, a Georgia plaintiff effected
substitute service of process on an Illinois resident pursuant to
Georgia statute.  The statute was later determined to be
unconstitutional and the Georgia action was dismissed.  The
Georgia plaintiff filed in Illinois after the statute of
limitations had run but within a year of the dismissal.  The
court allowed the Georgia plaintiff to proceed because Georgia
had jurisdiction over the matter and the service statute was
presumptively valid at the time.  Cook, 8 Ill. App. 3d at 679.
     We acknowledge that, for purposes of comity and the full
faith and credit clause, an argument can be made that, because
NICTD filed a timely motion for declaratory relief in Indiana,
the Illinois court should have allowed NICTD to proceed on its
motion to vacate or modify the award.  However, we do not believe
that Cook and Hourly Messengers are apposite to the case sub
judice.  Here, unlike Hourly Messengers and Cook, the complaint
filed by NICTD for declaratory judgment in Indiana was dismissed
by the Indiana trial court on February 22, 1995, for lack of
subject matter jurisdiction.  SouthShore, on October 28, 1994,
filed a motion for confirmation of the arbitration award in the
Illinois trial court.  NICTD then filed a special and limited
appearance in Illinois contesting the Illinois court's subject
matter jurisdiction.  On March 14, 1995, the Illinois trial court
entered an order determining that Illinois did have jurisdiction. 
In our view, the Illinois trial court did not err. Significantly,
the March 14, 1995, decision of the Illinois trial court was in
conformity with the February 22, 1995, decision of the Indiana
trial court.  Illinois had jurisdiction at the time that NICTD
filed its motion in Indiana and at the time that SouthShore
sought to confirm the award in Illinois.  NICTD chose not to
present its motion to vacate the arbitrator's award at the time
SouthShore filed its motion to confirm the award. When NICTD, on
April 12, 1995, filed its motion to modify and vacate the
arbitration award in Illinois, more than 90 days had elapsed from
the time the arbitrators issued the award. See Konicki, 110 Ill.
App. 3d at 220-21; Hough, 254 Ill. App. 3d at 456-57.
Accordingly, NICTD's petition was barred pursuant to section 12
of the Uniform Arbitration Act. 710 ILCS 5/12 (West 1992).
     For the reasons cited herein, the judgment of the circuit
court of Cook County is affirmed.
     Affirmed. 
     GORDON and LEAVITT, JJ., concur.