Anderson v. Financial Matters, Inc.
Annotate this Case
No. 2--95--1444
_________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
SECOND DISTRICT
__________________________________________________________________
RICHARD G. ANDERSON and ) Appeal from the Circuit Court
ANN T. ANDERSON, Indiv. and as ) of Lake County.
Trustees under the Richard and )
Ann Anderson Charitable Trust, ) No. 93--L--796
)
Plaintiffs-Appellants, )
)
v. )
)
FINANCIAL MATTERS, INC., )
ALAN M.MISALE, Indiv., )
THOMAS JAMES ASSOCIATES, INC., )
and SHIRLEY A. McKINNEY, )
Indiv., ) Honorable
) William D. Block,
Defendants-Appellees. ) Judge, Presiding.
__________________________________________________________________
JUSTICE BOWMAN delivered the opinion of the court:
Plaintiffs Richard G. Anderson and Ann T. Anderson appeal
three orders of the circuit court of Lake County. The first order,
entered on October 13, 1993, granted defendants Thomas James
Associates, Inc. (Thomas James), and Shirley A. McKinney's motion
to stay the judicial proceedings and to compel arbitration. The
second order, entered on May 18, 1995, entered judgment in favor of
Thomas James and McKinney based on an earlier arbitration award.
The third order, entered on October 17, 1995, granted the motion
for summary judgment of defendants Financial Matters, Inc.
(Financial Matters), and Alan M. Misale.
BACKGROUND
The following brief summary of the facts is taken from the
record. On June 16, 1993, plaintiffs filed a complaint against
Financial Matters, Misale, Thomas James, McKinney, and Equitable
Life Insurance Company of America (Equitable). The complaint
contained six counts.
The complaint alleged the following facts common to all
counts. Misale has known plaintiffs since the 1980s when he was a
salesman for plaintiffs' insurance agent. Early in 1992, Misale,
who at this time was employed by Financial Matters, proposed that
plaintiffs change their retirement and estate plan. Misale
proposed that plaintiffs sell their stock in R.R. Donnelley & Sons
(Donnelley stock). A substantial portion of the proceeds of this
sale would be donated to a charitable remainder unit trust (CRUT).
The CRUT would then purchase other securities which would generate
a substantially higher income than the dividends plaintiffs
received from the Donnelley stock. The income earned by these
securities would be paid to plaintiffs on a current basis until
they died, it would equal 10% of the fair market value of the CRUT,
and it would average at least $75,000 per year through 2003. When
plaintiffs died, the remaining assets in the CRUT would fund a
charitable foundation. The beneficiary of this charitable
foundation apparently was plaintiffs' son.
After further investigation, Misale proposed a slightly
modified plan. This plan would create a wealth replacement trust,
which in turn would purchase a life insurance policy on Mrs.
Anderson and was payable to plaintiffs' son on her death. The plan
would also create the CRUT. The CRUT, which would still be funded
by the proceeds of the sale of the Donnelley stock, would invest in
debt securities. One-half of these securities would consist of
zero-coupon United States Treasury bonds, which would have a
maturity value in 2003 equal to the value of the Donnelley stock
originally donated to the CRUT. The remaining securities would
consist of securities that were paying and would continue to pay a
current yield greater than 10% of the fair market value of the
CRUT's assets. This yield would be paid to plaintiffs.
In connection with the purchase of these latter securities,
Misale introduced plaintiffs to McKinney, a registered broker at
Thomas James, a securities brokerage firm. McKinney recommended
the purchase of income-only stripped mortgage backed securities
certificates (I/O FNMA Strips). I/O FNMA Strips are not government
bonds. They are derivatives based on specified pools of mortgage
loans held by the Federal National Mortgage Association (FNMA).
From April through June 1992, McKinney and Misale made several
representations regarding the I/O FNMA Strips. McKinney and Misale
generally represented that investment in I/O FNMA Strips would
produce an income for plaintiffs in excess of 10% of the value of
the CRUT. This representation was based on the assumption that the
I/O monthly payments made to the FNMA pool would not decline by
more than 1% each month.
In reliance on these representations, plaintiffs established
the CRUT, which they funded with the Donnelley stock. At this
time, the stock had a market value in excess of $750,000. Upon
Misale's recommendation, the Donnelley stock was sold and the
proceeds invested by the CRUT. The sum of $329,000 was invested in
zero-coupon United States Treasury bonds that, if held to the
maturity date in 2003, would return a single payment of $750,000.
The sum of $425,000 was invested in I/O FNMA Strips in interest
trust 29-2. Plaintiffs also purchased a life insurance policy on
Mrs. Anderson. Although plaintiffs purchased the securities
through Thomas James, the purchases were cleared through RAF
Financial Corporation (RFC), Thomas James' clearing agent.
According to plaintiffs, Misale and McKinney intentionally or
recklessly misrepresented or omitted to state, inter alia, that the
I/O monthly payments made to the FNMA pool had been declining at a
rate much greater than 1% per month for many months before June
1992. The decline had in fact exceeded 4.5% per month in each of
March, April, and May 1992. In January or February 1993,
plaintiffs discovered that the I/O FNMA Strips had an apparent
market value of approximately one-half of the amount that they paid
for them. In March 1993 plaintiffs liquidated interest trust 29-2
for a significant loss.
Based on these allegations, count I of plaintiffs' complaint
alleged violations of section 12 of the Illinois Securities Law of
1953 (815 ILCS 5/12 (West 1994)); count II alleged common-law
fraud; count III alleged gross violation of trust and confidence;
count IV alleged a breach of contract of the life insurance policy;
count V alleged promissory estoppel; and count VI alleged an
implied right of recovery under the life insurance policy. Counts
I, II, and III were alleged against Financial Matters, Misale,
Thomas James, and McKinney, jointly and severally.
On August 20, 1993, Thomas James and McKinney filed a motion
to stay the judicial proceedings and to compel arbitration of the
claims asserted against them in plaintiffs' complaint. According
to the motion, plaintiffs had signed a document entitled "clearing
account agreement." Paragraph 10 of the agreement, entitled
"Arbitration," provided that all controversies which may arise
between plaintiffs and RFC and "the broker or the broker's
employees" shall be determined by arbitration. It also stated:
"ANY ARBITRATION UNDER THIS AGREEMENT SHALL BE CONDUCTED
PURSUANT TO THE FEDERAL ARBITRATION ACT AND THE LAWS OF THE
STATE DESIGNATED IN PARAGRAPH 7 [Colorado] HEREOF, BEFORE AN
ARBITRATION FACILITY PROVIDED BY THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC. ('NASD') ***.
* * *
THE AWARD IN SUCH ARBITRATION PROCEEDING SHALL BE FINAL, AND
JUDGMENT UPON THE AWARD RENDERED MAY BE ENTERED IN ANY
COURT, STATE OR FEDERAL, HAVING JURISDICTION. THE
CONTROVERSIES AND DISPUTES WHICH ARE THE SUBJECT OF THIS
ARBITRATION AGREEMENT INCLUDE, BUT ARE NOT LIMITED TO,
DISPUTES UNDER FEDERAL AND STATE LAWS, INCLUDING SECURITIES
LAWS, AND DISPUTES UNDER COMMON LAW."
Based on this agreement, Thomas James and McKinney argued that
plaintiffs were required to submit their claims against them to
arbitration under the Federal Arbitration Act (9 U.S.C. 1 et seq.
(1988)). On October 13, 1993, the trial court entered an order
granting the motion. The order further provided that the claims
against Thomas James and McKinney were dismissed and that it
retained personal jurisdiction over them solely for the purpose of
enforcing an arbitration award that may thereafter be awarded.
On February 28, 1994, plaintiffs filed their first amended
complaint. As with the original complaint, this complaint
contained six counts; each count's allegations mirrored those
contained in the original complaint.
On November 17, 1993, plaintiffs filed a statement of claim
(NASD claim) against Thomas James and McKinney with the National
Association of Securities Dealers (NASD). The NASD claim had three
counts, which were essentially identical to the first three counts
of plaintiffs' original complaint and first amended complaint. The
only significant difference was that the only named defendants in
the NASD claim were Thomas James and McKinney.
On October 6, 1994, plaintiffs filed a second amended
complaint. The complaint contained three counts. These counts
were essentially identical to the first three counts of the
original complaint and first amended complaint. Like the first
three counts in the earlier complaints, all three counts in this
complaint were directed against Financial Matters, Misale, Thomas
James, and McKinney, jointly and severally. Equitable was not
named as a defendant. For purposes of convenience, we will refer
to the second amended complaint simply as "the complaint."
From January 11 to 13, 1995, and February 28, 1995, the NASD
arbitration panel (NASD panel) conducted a hearing on plaintiffs'
NASD claim. At the beginning of the hearing the NASD panel stated
that all issues in the NASD claim were being put to the panel.
Testimony was heard from nine witnesses, including, inter alia,
plaintiffs, plaintiffs' expert witness, Misale, McKinney, and
defendants' expert witnesses. At the end of the hearing,
plaintiffs' counsel stated on the record that his clients had
presented all the evidence they had and that they had had an equal
opportunity to do so.
On April 7, 1995, the NASD panel issued a final written
decision. The decision stated that, after considering the
pleadings, the testimony, and the evidence presented, it had
decided in full and final resolution of the issues submitted for
determination that plaintiffs' NASD claim was "denied and
dismissed." No findings of fact or explanations were included in
the award. Plaintiffs did not attempt to vacate, modify, or appeal
the award. On May 18, 1995, Thomas James and McKinney moved the
trial court to confirm the award, which it did that same day.
On August 8, 1995, Financial Matters and Misale filed a motion
for summary judgment. Financial Matters and Misale argued that the
NASD award and the ensuing judgment collaterally estopped
plaintiffs from relitigating the issues that had been adjudicated
by the NASD panel. On October 17, 1995, the trial court granted
the motion for summary judgment. This appeal followed.
DISCUSSION
Plaintiffs have three principal contentions on appeal: (1) the
trial court erred in holding that the doctrine of collateral
estoppel barred their claims against Financial Matters and Misale;
(2) the trial court erred in holding that the doctrine of res
judicata barred their claims against Financial Matters and Misale;
and (3) the trial court erred in granting Thomas James and
McKinney's motion to stay the judicial proceedings and to compel
arbitration. We will address each contention separately.
Before doing so, however, we first address plaintiffs' motion
to supplement the record on appeal, which we ordered taken with the
case. Pursuant to Supreme Court Rule 329 (134 Ill. 2d R. 329),
plaintiffs request leave to supplement the record with exhibits
that were admitted into evidence by the NASD panel during the
arbitration hearing. Supreme Court Rule 329 (134 Ill. 2d R. 329)
provides that a party may supplement the record on appeal to
include omissions, correct errors, and settle controversies as to
whether the record accurately reflects what occurred in the trial
court. In re Estate of Albergo, 275 Ill. App. 3d 439, 444 (1995).
However, Rule 329 allows supplementation only with documents that
were actually before the trial court. Albergo, 275 Ill. App. 3d at
444. In the present case, plaintiffs have not shown that the
exhibits were before the trial court. We therefore deny their
motion. See Albergo, 275 Ill. App. 3d at 444.
I
Plaintiffs' first contention is that the trial court erred in
holding that the doctrine of collateral estoppel barred their
claims against Financial Matters and Misale. Collateral estoppel
is an equitable doctrine that precludes a party from relitigating
an issue decided in a prior proceeding. Herzog v. Lexington
Township, 167 Ill. 2d 288, 294 (1995). The requirements for
application of collateral estoppel are (1) that the issue decided
in the prior adjudication is identical to the one presented in the
case in question; (2) that there was a final judgment on the merits
in the prior adjudication; (3) that the party against whom estoppel
is asserted was a party or in privity with a party to the prior
adjudication; and (4) that the party against whom estoppel is
asserted had a full and fair opportunity to litigate the issue in
the prior adjudication. Congregation of the Passion, Holy Cross
Province v. Touche Ross & Co., 159 Ill. 2d 137, 152 (1994); Harmon
v. LaDar Corp., 200 Ill. App. 3d 79, 83-84 (1990).
In the instant case, plaintiffs maintain that the first three
requirements are not present. Plaintiffs argue that (1) the issues
decided by the NASD panel are not identical to the issues raised in
the complaint against Financial Matters and Misale; (2) the NASD
award was not a final judgment on the merits; and (3) Illinois has
not adopted the doctrine of nonmutual defensive collateral
estoppel.
Preliminarily, we note that this is an appeal of a summary
judgment entered pursuant to section 2--1005 of the Code of Civil
Procedure (735 ILCS 5/2--1005 (West 1994)). Summary judgment is
appropriate when there is no genuine issue of material fact and the
moving party's right to judgment is clear and free from doubt.
Espinoza v. Elgin, Joliet & Eastern Ry. Co., 165 Ill. 2d 107, 113
(1995). In cases involving summary judgment, we conduct a de novo
review of the evidence in the record. Espinoza, 165 Ill. 2d at
113.
Plaintiffs initially argue that the issues decided by the NASD
panel are not identical with the issues raised in their complaint
against Financial Matters and Misale. Plaintiffs essentially argue
that Financial Matters and Misale cannot establish with clarity and
certainty the precise issues determined by the NASD panel.
Plaintiffs reason that, because the NASD panel made no findings on
contested factual issues, it is impossible to ascertain whether the
issues it determined are identical to the issues raised by their
complaint against Financial Matters and Misale.
Financial Matters and Misale respond that the issues decided
by the NASD panel are identical to those raised in the complaint.
They argue that the NASD claim alleged the same facts and causes of
action as those raised in the complaint, the only difference being
that, whereas the NASD claim only named Thomas James and McKinney
as defendants, the complaint named Financial Matters, Misale,
Thomas James, and McKinney as defendants. Given these similarities
and relying on the general rule that an arbitration award need not
set out specific facts (Horwitz, Schakner & Associates, Inc. v.
Schakner, 252 Ill. App. 3d 879, 884 (1993)), Financial Matters and
Misale reason that the issues decided by the NASD panel must have
been identical to those raised by the complaint.
The doctrine of collateral estoppel applies only to
controlling facts or questions material to the determination of
both causes. Congregation of the Passion, Holy Cross Province, 159 Ill. 2d at 153-54. A judgment in a prior case operates as an
estoppel only as to the point or question actually litigated and
determined and not as to other matters which might have been
litigated and determined. Housing Authority v. Young Men's
Christian Ass'n, 101 Ill. 2d 246, 252 (1984). In other words, a
judgment is conclusive in a subsequent case on any issue actually
litigated and determined if its determination was essential to that
judgment. Best Coin-Op, Inc. v. Paul F. Ilg Supply Co., 189 Ill.
App. 3d 638, 661 (1989). A court cannot invoke the doctrine of
collateral estoppel on pure speculation as to what the trial court
found in the prior case. LaHood v. Couri, 236 Ill. App. 3d 641,
646 (1992).
Accordingly, in order for a former judgment to operate as an
estoppel, there must have been a finding of a specific, material,
and controlling fact in the former case, and it must conclusively
appear that the issue of fact was so in issue that it was
necessarily determined by the court rendering the judgment. Lange
v. Coca-Cola Bottling Co. of Chicago, Inc., 44 Ill. 2d 73, 75
(1969); Smith v. Chemical Personnel Search, Inc., 215 Ill. App. 3d
1078, 1082 (1991). If uncertainty exists because more than one
distinct factual issue was presented in the prior case, estoppel
will not be applied. Progressive Land Developers, Inc. v. Exchange
National Bank, 266 Ill. App. 3d 934, 944 (1994); Case Prestressing
Corp. v. Chicago College of Osteopathic Medicine, 118 Ill. App. 3d
782, 785 (1983). Moreover, the party asserting the estoppel bears
the heavy burden of showing with certainty that the identical and
precise issue sought to be precluded in the later adjudication was
decided in the previous adjudication. Streams Condominium No. 3
Ass'n v. Bosgraf, 219 Ill. App. 3d 1010, 1014 (1991). To speculate
on the grounds for the prior judgment would be to remove this
burden. LaHood, 236 Ill. App. 3d at 646.
Applying these principles to the case at bar, we conclude that
Financial Matters and Misale have not proved with certainty that
the identical and precise issues raised by the complaint were
actually decided by the NASD panel. The NASD award merely stated
that plaintiffs' NASD claim, which named only Thomas James and
McKinney as defendants, was denied and dismissed. It contained no
specific findings. Although the NASD claim and the complaint
alleged nearly identical facts and causes of action, we simply do
not know whether the issues raised by the complaint were actually
determined by the NASD panel.
For example, although the NASD award could have resulted from
a finding that neither McKinney nor Misale misrepresented the
investment risks to plaintiffs, it could have also resulted from a
finding that only Misale misrepresented certain investments risks.
Similarly, although the NASD award could have resulted from a
finding that plaintiffs were not injured by McKinney's
misrepresentations, such a finding does not mean that plaintiffs
were not injured by Misale's misrepresentations. As a further
example, the NASD award could have resulted from a finding that
Thomas James and McKinney did not owe a duty to plaintiffs while
not even concerning itself with whether Financial Matters and
Misale did owe a duty to plaintiffs.
The point is that we must speculate as to what the NASD panel
found when it issued the award. Illinois law, however, is clear
that we cannot speculate on such matters--we must be certain as to
the issues that were actually and necessarily decided in the prior
case. See, e.g., Housing Authority, 101 Ill. 2d at 252;
Progressive Land Developers, Inc., 266 Ill. App. 3d at 944.
Because we are not certain as to the issues actually and
necessarily decided by the NASD panel, collateral estoppel does not
apply. See Case Prestressing Corp., 118 Ill. App. 3d at 785-86
(where issues of both liability and damages are sent to jury and
jury simply returns a general verdict, collateral estoppel will not
apply because it is not certain whether the jury found against the
plaintiff on liability, on damages, or on both). Accordingly, we
conclude that the trial court erred in granting Financial Matters
and Misale's motion for summary judgment. As a result, we need not
address plaintiffs' remaining arguments under this contention.
II
Plaintiffs' second contention is that the trial court erred in
holding that the doctrine of res judicata barred their claims
against Financial Matters and Misale. We need not address this
contention, however, because our analysis of the first contention
renders this contention moot. Moreover, the trial court did not
hold, and Financial Matters and Misale have not argued, either on
appeal or in their motion for summary judgment, that the doctrine
of res judicata barred plaintiffs' claims.
III
Plaintiffs' third contention is that the trial court erred in
granting Thomas James and McKinney's motion to stay the judicial
proceedings and to compel arbitration. On October 13, 1993, the
trial court entered an order that granted Thomas James and
McKinney's motion to stay the judicial proceedings and to compel
arbitration. On May 18, 1995, the trial court entered an order
which denied and dismissed with prejudice plaintiffs' claims
against Thomas James and McKinney. Plaintiffs argue that the trial
court erred in entering the October 13, 1993, order, which severed
their claims against Thomas James and McKinney from their claims
against Financial Matters and Misale.
Before addressing the merits of this contention, we must first
address Thomas James and McKinney's motion to dismiss plaintiffs'
appeal of the October 13, 1993, order, which we ordered taken with
the case. Thomas James and McKinney argue that we lack
jurisdiction to hear plaintiffs' appeal of the October 13, 1993,
order. They argue that an order granting a motion to compel
arbitration and to stay the judicial proceedings is appealable only
under Illinois Supreme Court Rule 307(a) (155 Ill. 2d R. 307(a)),
which provides that the appeal must be perfected within 30 days
from the entry of the order. Because plaintiffs did not perfect
the appeal of the October 13, 1993, order within 30 days, they
argue that this court lacks jurisdiction to hear that portion of
plaintiffs' appeal pertaining to the order.
The jurisdiction of this court is limited to the review of
appeals from final judgments or orders, subject to statutory or
supreme court exceptions. In re Petition to Incorporate the
Village of Greenwood, 275 Ill. App. 3d 465, 469 (1995).
Interlocutory appeals as of right, as provided in Supreme Court
Rule 307(a), are one such exception. See 155 Ill. 2d R. 307(a).
Rule 307 provides in pertinent part:
"(a) Orders Appealable; Time. An appeal may be taken to
the Appellate Court from an interlocutory order of court:
(1) granting, modifying, refusing, dissolving, or
refusing to dissolve or modify an injunction;
* * *
Except as provided in paragraph (b), the appeal must be
perfected within 30 days from the entry of the interlocutory
order by filing a notice of appeal designated 'Notice of
Interlocutory Appeal' conforming substantially to the notice
of appeal in other cases." 155 Ill. 2d R. 307(a)(1).
A motion to compel or stay arbitration is analogous to a
motion for injunctive relief. Amalgamated Transit Union, Local 900
v. Suburban Bus Division of the Regional Transportation Authority,
262 Ill. App. 3d 334, 337 (1994); Robert A. Besner & Co. v. Lit
America, Inc., 214 Ill. App. 3d 619, 623 (1991). Thus, an order
granting a motion to compel or stay arbitration is an interlocutory
order appealable under Rule 307(a)(1). Amalgamated Transit Union,
Local 900, 262 Ill. App. 3d at 337; Robert A. Besner & Co., 214
Ill. App. 3d at 623. A notice of interlocutory appeal must be
filed within 30 days of such an order. 155 Ill. 2d R. 307(a)(1).
In the present case, the order granting Thomas James and
McKinney's motion to compel arbitration and to stay the judicial
proceedings was entered on October 13, 1993. This order was an
interlocutory order under Rule 307(a)(1). See, e.g., Notaro v.
Nor-Evan Corp., 98 Ill. 2d 268, 270-71 (1983) (order granting or
denying a motion to compel arbitration and stay court proceedings
or dismiss the lawsuit is appealable under Rule 307(a)(1)).
Plaintiffs therefore could have filed a notice of interlocutory
appeal within 30 days of that order.
However, the issue is not whether plaintiffs could have filed
a notice of interlocutory appeal when the court issued the October
13, 1993, order, but whether they had to. In other words, does a
party's failure to appeal an interlocutory order under Rule
307(a)(1) preclude our review of that order when a final judgment
is entered in the case?
When analyzing a supreme court rule, we must ascertain and
give effect to the supreme court's intent. Kellett v. Roberts, 276
Ill. App. 3d 164, 170 (1995). The same rules for statutory
construction apply to supreme court rules. Kellett, 276 Ill. App.
3d at 170. Statutory construction begins with the plain meaning of
the language employed and ends there when the meaning is clear.
Alpine Bank v. Yancy, 274 Ill. App. 3d 766, 768 (1995). When the
language of a supreme court rule is plain and unambiguous, courts
will not read in exceptions, limitations, or other conditions.
People v. Daniels, 172 Ill. 2d 154, 163 (1996).
Here, the language of Rule 307(a)(1) is plain and unambiguous:
a party is not required to appeal a Rule 307(a)(1) interlocutory
order in order to preserve later review of that order. Rule
307(a)(1) provides only that an appeal "may" be taken from an
interlocutory order that grants a motion to compel arbitration or
to stay the proceedings. 155 Ill. 2d R. 307(a)(1). As a rule of
statutory construction, the word "may" is permissive or
discretional as opposed to mandatory. Alpine Bank, 274 Ill. App.
3d at 768; Lake States Engineering Corp. v. One Naperville Corp.,
148 Ill. App. 3d 836, 841 (1986). Because Rule 307(a)(1) does not
require a party to appeal the interlocutory order, a reviewing
court may still review the merits of that order after a final
judgment in the case is rendered and appealed from. Alpine Bank,
274 Ill. App. 3d at 768; see People v. Franklin, 159 Ill. App. 3d
56, 60 (1987).
Thus, while plaintiffs could have appealed the October 13,
1993, order within 30 days of its entry under Rule 307(a)(1), they
were not required to do so. See Alpine Bank, 274 Ill. App. 3d at
768. Instead, plaintiffs waited to appeal until a final judgment
disposing of all the parties and all the claims was rendered in the
case--that is, the October 17, 1995, order granting Financial
Matters and Misale's motion for summary judgment. As such, we have
jurisdiction to consider the merits of the October 13, 1993, order.
See Alpine Bank of Illinois, 274 Ill. App. 3d at 768.
We are aware that other courts have apparently reached a
contrary result. See, e.g., Hwang v. Tyler, 253 Ill. App. 3d 43,
45-46 (1993); Williams v. Nagel, 251 Ill. App. 3d 176, 179 (1993);
Safeway Insurance Co. v. American Arbitration Ass'n, 247 Ill. App.
3d 355, 358 (1993); Robert A. Besner & Co., 214 Ill. App. 3d at
623; Baird & Warner, Inc. v. Gary-Wheaton Bank, 122 Ill. App. 3d
136, 138-39 (1984). However, those cases neither considered the
plain language of Rule 307(a) nor interpreted that language in
accordance with accepted rules of statutory construction. We
therefore decline to be guided by those cases to the extent they
hold that the right to challenge a Rule 307(a)(1) order is
permanently lost if a party does not appeal the order within 30
days.
In contrast, we believe our recent decision in Alpine Bank, a
case cited by none of the parties, is persuasive. See Alpine Bank,
274 Ill. App. 3d at 768. In Alpine Bank, we applied established
rules of statutory construction to Rule 307(a). After doing so, we
held that a party does not have to appeal a Rule 307(a)
interlocutory order to preserve later review of that order. Alpine
Bank, 274 Ill. App. 3d at 768. In our opinion, this approach--
which we follow here today--properly analyzed the jurisdictional
scope of Rule 307(a) by considering its language in light of
general principles of statutory construction.
We therefore turn to the merits of the contention. In
granting Thomas James and McKinney's motion to stay the judicial
proceedings and to compel arbitration, the trial court severed
plaintiffs' claims against Thomas James and McKinney from their
claims against Financial Matters and Misale. Plaintiffs argue that
the trial court erred in doing so because (1) the arbitration
agreement did not involve Financial Matters and Misale; (2) the
claims against all of the parties were interdependent; and (3)
arbitration would result in duplicative litigation with the
possibility of inconsistent results. Plaintiffs cite J.F. Inc. v.
Vicik, 99 Ill. App. 3d 815 (1981), for the proposition that
judicial economy and the avoidance of inconsistent results require
a trial court to deny a motion to compel arbitration.
The trial court did not err in severing the claims. The
United States Supreme Court has held that "[u]nder the [Federal]
Arbitration Act, an arbitration agreement must be enforced
notwithstanding the presence of other persons who are parties to
the underlying dispute but not to the arbitration agreement."
(Emphasis added.) Moses H. Cone Memorial Hospital v. Mercury
Construction Corp., 460 U.S. 1, 20, 74 L. Ed. 2d 765, 782, 103 S. Ct. 927, 939 (1983). The Supreme Court has also held that the
Federal Arbitration Act requires courts to compel arbitration of
pendent arbitrable claims, even where the result would be the
possibly inefficient maintenance of separate proceedings in
different forums. Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213,
217, 84 L. Ed. 2d 158, 163, 105 S. Ct. 1238, 1241 (1985).
We note that Illinois courts also hold that arbitration is a
favored method of settling disputes in Illinois, and the policy
favoring arbitration will not be ignored simply because multiple
parties and claims may be present. See Landmark Properties, Inc.
v. Architects International-Chicago, 172 Ill. App. 3d 379, 384
(1988); see, e.g., M.D. Building Material Co. v. 910 Construction
Venture, 219 Ill. App. 3d 509, 519 (1991) (rejecting "judicial
economy argument" as a bar to the enforcement of valid arbitration
agreements); Atkins v. Rustic Woods Partners, 171 Ill. App. 3d 373,
380 (1988) (noting that in general an arbitration agreement is
enforceable despite the existence of claims by third parties or of
pending multiparty litigation); Diersen v. Joe Kiem Builders, Inc.,
153 Ill. App. 3d 373, 377 (1987) (noting that the general rule in
Illinois is that "arbitration agreements in multiparty litigation
should be enforced despite the existence of claims which create the
potential for duplicative proceedings"). We further note that
Vicik, the case principally relied upon by plaintiffs, is
inconsistent with prevailing case law, and Illinois courts have
repeatedly criticized and distinguished it. See M.D. Building
Material Co., 219 Ill. App. 3d at 519; Kurland Steel Co. v. Carle
Foundation Hospital, 185 Ill. App. 3d 624, 627-29 (1989); Landmark
Properties, Inc., 172 Ill. App. 3d at 384; Geldermann, Inc. v.
Mullins, 171 Ill. App. 3d 255, 261 (1988); Diersen, 153 Ill. App.
3d at 377. We likewise choose not to follow Vicik.
In light of the foregoing cases, we conclude that the trial
court did not err in granting the motion to stay the judicial
proceedings and to compel arbitration. Although plaintiffs'
argument is well taken, prevailing federal and state case law
compelled the trial court to grant the motion and thereby sever the
claims. Also, we affirm the May 18, 1995, order which entered
judgment for Thomas James and McKinney based on the NASD award,
because the trial court properly compelled arbitration, and because
plaintiffs do not otherwise explain why the trial court improperly
entered that order. See 9 U.S.C. 9 (1988); see also Menke v.
Monchecourt, 17 F.3d 1007, 1009 (7th. Cir. 1994) ("Unlike the usual
civil appeal, where the successful party is usually defending the
lower court's decision on the merits, an action for confirmation
under 9 U.S.C. 9 is intended to be a summary proceeding that
merely makes the arbitrators' award a final, enforceable judgment
of the court"); Taylor v. Nelson, 788 F.2d 220, 225 (4th Cir.
1986) ("A confirmation proceeding under 9 U.S.C. 9 is intended to
be summary: confirmation can only be denied if an award has been
corrected, vacated, or modified in accordance with the Federal
Arbitration Act").
CONCLUSION
The judgment of the circuit court of Lake County is affirmed
in part and reversed in part. Plaintiffs' motion to supplement the
record on appeal is denied. Thomas James and McKinney's motion to
dismiss plaintiffs' appeal of the October 13, 1993, order is
denied. The cause is remanded for further proceedings consistent
with this opinion.
Affirmed in part and reversed in part; cause remanded; motion
to supplement the record on appeal is denied; motion to dismiss
appeal of the October 13, 1993, order is denied.
INGLIS and DOYLE, JJ., concur.
_________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
SECOND DISTRICT
__________________________________________________________________
RICHARD G. ANDERSON and ) Appeal from the Circuit Court
ANN T. ANDERSON, Indiv. and as ) of Lake County.
Trustees under the Richard and )
Ann Anderson Charitable Trust, ) No. 93--L--796
)
Plaintiffs-Appellants, )
)
v. )
)
FINANCIAL MATTERS, INC., )
ALAN M.MISALE, Indiv., )
THOMAS JAMES ASSOCIATES, INC., )
and SHIRLEY A. McKINNEY, )
Indiv., ) Honorable
) William D. Block,
Defendants-Appellees. ) Judge, Presiding.
__________________________________________________________________
JUSTICE BOWMAN delivered the opinion of the court:
Plaintiffs Richard G. Anderson and Ann T. Anderson appeal
three orders of the circuit court of Lake County. The first order,
entered on October 13, 1993, granted defendants Thomas James
Associates, Inc. (Thomas James), and Shirley A. McKinney's motion
to stay the judicial proceedings and to compel arbitration. The
second order, entered on May 18, 1995, entered judgment in favor of
Thomas James and McKinney based on an earlier arbitration award.
The third order, entered on October 17, 1995, granted the motion
for summary judgment of defendants Financial Matters, Inc.
(Financial Matters), and Alan M. Misale.
BACKGROUND
The following brief summary of the facts is taken from the
record. On June 16, 1993, plaintiffs filed a complaint against
Financial Matters, Misale, Thomas James, McKinney, and Equitable
Life Insurance Company of America (Equitable). The complaint
contained six counts.
The complaint alleged the following facts common to all
counts. Misale has known plaintiffs since the 1980s when he was a
salesman for plaintiffs' insurance agent. Early in 1992, Misale,
who at this time was employed by Financial Matters, proposed that
plaintiffs change their retirement and estate plan. Misale
proposed that plaintiffs sell their stock in R.R. Donnelley & Sons
(Donnelley stock). A substantial portion of the proceeds of this
sale would be donated to a charitable remainder unit trust (CRUT).
The CRUT would then purchase other securities which would generate
a substantially higher income than the dividends plaintiffs
received from the Donnelley stock. The income earned by these
securities would be paid to plaintiffs on a current basis until
they died, it would equal 10% of the fair market value of the CRUT,
and it would average at least $75,000 per year through 2003. When
plaintiffs died, the remaining assets in the CRUT would fund a
charitable foundation. The beneficiary of this charitable
foundation apparently was plaintiffs' son.
After further investigation, Misale proposed a slightly
modified plan. This plan would create a wealth replacement trust,
which in turn would purchase a life insurance policy on Mrs.
Anderson and was payable to plaintiffs' son on her death. The plan
would also create the CRUT. The CRUT, which would still be funded
by the proceeds of the sale of the Donnelley stock, would invest in
debt securities. One-half of these securities would consist of
zero-coupon United States Treasury bonds, which would have a
maturity value in 2003 equal to the value of the Donnelley stock
originally donated to the CRUT. The remaining securities would
consist of securities that were paying and would continue to pay a
current yield greater than 10% of the fair market value of the
CRUT's assets. This yield would be paid to plaintiffs.
In connection with the purchase of these latter securities,
Misale introduced plaintiffs to McKinney, a registered broker at
Thomas James, a securities brokerage firm. McKinney recommended
the purchase of income-only stripped mortgage backed securities
certificates (I/O FNMA Strips). I/O FNMA Strips are not government
bonds. They are derivatives based on specified pools of mortgage
loans held by the Federal National Mortgage Association (FNMA).
From April through June 1992, McKinney and Misale made several
representations regarding the I/O FNMA Strips. McKinney and Misale
generally represented that investment in I/O FNMA Strips would
produce an income for plaintiffs in excess of 10% of the value of
the CRUT. This representation was based on the assumption that the
I/O monthly payments made to the FNMA pool would not decline by
more than 1% each month.
In reliance on these representations, plaintiffs established
the CRUT, which they funded with the Donnelley stock. At this
time, the stock had a market value in excess of $750,000. Upon
Misale's recommendation, the Donnelley stock was sold and the
proceeds invested by the CRUT. The sum of $329,000 was invested in
zero-coupon United States Treasury bonds that, if held to the
maturity date in 2003, would return a single payment of $750,000.
The sum of $425,000 was invested in I/O FNMA Strips in interest
trust 29-2. Plaintiffs also purchased a life insurance policy on
Mrs. Anderson. Although plaintiffs purchased the securities
through Thomas James, the purchases were cleared through RAF
Financial Corporation (RFC), Thomas James' clearing agent.
According to plaintiffs, Misale and McKinney intentionally or
recklessly misrepresented or omitted to state, inter alia, that the
I/O monthly payments made to the FNMA pool had been declining at a
rate much greater than 1% per month for many months before June
1992. The decline had in fact exceeded 4.5% per month in each of
March, April, and May 1992. In January or February 1993,
plaintiffs discovered that the I/O FNMA Strips had an apparent
market value of approximately one-half of the amount that they paid
for them. In March 1993 plaintiffs liquidated interest trust 29-2
for a significant loss.
Based on these allegations, count I of plaintiffs' complaint
alleged violations of section 12 of the Illinois Securities Law of
1953 (815 ILCS 5/12 (West 1994)); count II alleged common-law
fraud; count III alleged gross violation of trust and confidence;
count IV alleged a breach of contract of the life insurance policy;
count V alleged promissory estoppel; and count VI alleged an
implied right of recovery under the life insurance policy. Counts
I, II, and III were alleged against Financial Matters, Misale,
Thomas James, and McKinney, jointly and severally.
On August 20, 1993, Thomas James and McKinney filed a motion
to stay the judicial proceedings and to compel arbitration of the
claims asserted against them in plaintiffs' complaint. According
to the motion, plaintiffs had signed a document entitled "clearing
account agreement." Paragraph 10 of the agreement, entitled
"Arbitration," provided that all controversies which may arise
between plaintiffs and RFC and "the broker or the broker's
employees" shall be determined by arbitration. It also stated:
"ANY ARBITRATION UNDER THIS AGREEMENT SHALL BE CONDUCTED
PURSUANT TO THE FEDERAL ARBITRATION ACT AND THE LAWS OF THE
STATE DESIGNATED IN PARAGRAPH 7 [Colorado] HEREOF, BEFORE AN
ARBITRATION FACILITY PROVIDED BY THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC. ('NASD') ***.
* * *
THE AWARD IN SUCH ARBITRATION PROCEEDING SHALL BE FINAL, AND
JUDGMENT UPON THE AWARD RENDERED MAY BE ENTERED IN ANY
COURT, STATE OR FEDERAL, HAVING JURISDICTION. THE
CONTROVERSIES AND DISPUTES WHICH ARE THE SUBJECT OF THIS
ARBITRATION AGREEMENT INCLUDE, BUT ARE NOT LIMITED TO,
DISPUTES UNDER FEDERAL AND STATE LAWS, INCLUDING SECURITIES
LAWS, AND DISPUTES UNDER COMMON LAW."
Based on this agreement, Thomas James and McKinney argued that
plaintiffs were required to submit their claims against them to
arbitration under the Federal Arbitration Act (9 U.S.C. 1 et seq.
(1988)). On October 13, 1993, the trial court entered an order
granting the motion. The order further provided that the claims
against Thomas James and McKinney were dismissed and that it
retained personal jurisdiction over them solely for the purpose of
enforcing an arbitration award that may thereafter be awarded.
On February 28, 1994, plaintiffs filed their first amended
complaint. As with the original complaint, this complaint
contained six counts; each count's allegations mirrored those
contained in the original complaint.
On November 17, 1993, plaintiffs filed a statement of claim
(NASD claim) against Thomas James and McKinney with the National
Association of Securities Dealers (NASD). The NASD claim had three
counts, which were essentially identical to the first three counts
of plaintiffs' original complaint and first amended complaint. The
only significant difference was that the only named defendants in
the NASD claim were Thomas James and McKinney.
On October 6, 1994, plaintiffs filed a second amended
complaint. The complaint contained three counts. These counts
were essentially identical to the first three counts of the
original complaint and first amended complaint. Like the first
three counts in the earlier complaints, all three counts in this
complaint were directed against Financial Matters, Misale, Thomas
James, and McKinney, jointly and severally. Equitable was not
named as a defendant. For purposes of convenience, we will refer
to the second amended complaint simply as "the complaint."
From January 11 to 13, 1995, and February 28, 1995, the NASD
arbitration panel (NASD panel) conducted a hearing on plaintiffs'
NASD claim. At the beginning of the hearing the NASD panel stated
that all issues in the NASD claim were being put to the panel.
Testimony was heard from nine witnesses, including, inter alia,
plaintiffs, plaintiffs' expert witness, Misale, McKinney, and
defendants' expert witnesses. At the end of the hearing,
plaintiffs' counsel stated on the record that his clients had
presented all the evidence they had and that they had had an equal
opportunity to do so.
On April 7, 1995, the NASD panel issued a final written
decision. The decision stated that, after considering the
pleadings, the testimony, and the evidence presented, it had
decided in full and final resolution of the issues submitted for
determination that plaintiffs' NASD claim was "denied and
dismissed." No findings of fact or explanations were included in
the award. Plaintiffs did not attempt to vacate, modify, or appeal
the award. On May 18, 1995, Thomas James and McKinney moved the
trial court to confirm the award, which it did that same day.
On August 8, 1995, Financial Matters and Misale filed a motion
for summary judgment. Financial Matters and Misale argued that the
NASD award and the ensuing judgment collaterally estopped
plaintiffs from relitigating the issues that had been adjudicated
by the NASD panel. On October 17, 1995, the trial court granted
the motion for summary judgment. This appeal followed.
DISCUSSION
Plaintiffs have three principal contentions on appeal: (1) the
trial court erred in holding that the doctrine of collateral
estoppel barred their claims against Financial Matters and Misale;
(2) the trial court erred in holding that the doctrine of res
judicata barred their claims against Financial Matters and Misale;
and (3) the trial court erred in granting Thomas James and
McKinney's motion to stay the judicial proceedings and to compel
arbitration. We will address each contention separately.
Before doing so, however, we first address plaintiffs' motion
to supplement the record on appeal, which we ordered taken with the
case. Pursuant to Supreme Court Rule 329 (134 Ill. 2d R. 329),
plaintiffs request leave to supplement the record with exhibits
that were admitted into evidence by the NASD panel during the
arbitration hearing. Supreme Court Rule 329 (134 Ill. 2d R. 329)
provides that a party may supplement the record on appeal to
include omissions, correct errors, and settle controversies as to
whether the record accurately reflects what occurred in the trial
court. In re Estate of Albergo, 275 Ill. App. 3d 439, 444 (1995).
However, Rule 329 allows supplementation only with documents that
were actually before the trial court. Albergo, 275 Ill. App. 3d at
444. In the present case, plaintiffs have not shown that the
exhibits were before the trial court. We therefore deny their
motion. See Albergo, 275 Ill. App. 3d at 444.
I
Plaintiffs' first contention is that the trial court erred in
holding that the doctrine of collateral estoppel barred their
claims against Financial Matters and Misale. Collateral estoppel
is an equitable doctrine that precludes a party from relitigating
an issue decided in a prior proceeding. Herzog v. Lexington
Township, 167 Ill. 2d 288, 294 (1995). The requirements for
application of collateral estoppel are (1) that the issue decided
in the prior adjudication is identical to the one presented in the
case in question; (2) that there was a final judgment on the merits
in the prior adjudication; (3) that the party against whom estoppel
is asserted was a party or in privity with a party to the prior
adjudication; and (4) that the party against whom estoppel is
asserted had a full and fair opportunity to litigate the issue in
the prior adjudication. Congregation of the Passion, Holy Cross
Province v. Touche Ross & Co., 159 Ill. 2d 137, 152 (1994); Harmon
v. LaDar Corp., 200 Ill. App. 3d 79, 83-84 (1990).
In the instant case, plaintiffs maintain that the first three
requirements are not present. Plaintiffs argue that (1) the issues
decided by the NASD panel are not identical to the issues raised in
the complaint against Financial Matters and Misale; (2) the NASD
award was not a final judgment on the merits; and (3) Illinois has
not adopted the doctrine of nonmutual defensive collateral
estoppel.
Preliminarily, we note that this is an appeal of a summary
judgment entered pursuant to section 2--1005 of the Code of Civil
Procedure (735 ILCS 5/2--1005 (West 1994)). Summary judgment is
appropriate when there is no genuine issue of material fact and the
moving party's right to judgment is clear and free from doubt.
Espinoza v. Elgin, Joliet & Eastern Ry. Co., 165 Ill. 2d 107, 113
(1995). In cases involving summary judgment, we conduct a de novo
review of the evidence in the record. Espinoza, 165 Ill. 2d at
113.
Plaintiffs initially argue that the issues decided by the NASD
panel are not identical with the issues raised in their complaint
against Financial Matters and Misale. Plaintiffs essentially argue
that Financial Matters and Misale cannot establish with clarity and
certainty the precise issues determined by the NASD panel.
Plaintiffs reason that, because the NASD panel made no findings on
contested factual issues, it is impossible to ascertain whether the
issues it determined are identical to the issues raised by their
complaint against Financial Matters and Misale.
Financial Matters and Misale respond that the issues decided
by the NASD panel are identical to those raised in the complaint.
They argue that the NASD claim alleged the same facts and causes of
action as those raised in the complaint, the only difference being
that, whereas the NASD claim only named Thomas James and McKinney
as defendants, the complaint named Financial Matters, Misale,
Thomas James, and McKinney as defendants. Given these similarities
and relying on the general rule that an arbitration award need not
set out specific facts (Horwitz, Schakner & Associates, Inc. v.
Schakner, 252 Ill. App. 3d 879, 884 (1993)), Financial Matters and
Misale reason that the issues decided by the NASD panel must have
been identical to those raised by the complaint.
The doctrine of collateral estoppel applies only to
controlling facts or questions material to the determination of
both causes. Congregation of the Passion, Holy Cross Province, 159 Ill. 2d at 153-54. A judgment in a prior case operates as an
estoppel only as to the point or question actually litigated and
determined and not as to other matters which might have been
litigated and determined. Housing Authority v. Young Men's
Christian Ass'n, 101 Ill. 2d 246, 252 (1984). In other words, a
judgment is conclusive in a subsequent case on any issue actually
litigated and determined if its determination was essential to that
judgment. Best Coin-Op, Inc. v. Paul F. Ilg Supply Co., 189 Ill.
App. 3d 638, 661 (1989). A court cannot invoke the doctrine of
collateral estoppel on pure speculation as to what the trial court
found in the prior case. LaHood v. Couri, 236 Ill. App. 3d 641,
646 (1992).
Accordingly, in order for a former judgment to operate as an
estoppel, there must have been a finding of a specific, material,
and controlling fact in the former case, and it must conclusively
appear that the issue of fact was so in issue that it was
necessarily determined by the court rendering the judgment. Lange
v. Coca-Cola Bottling Co. of Chicago, Inc., 44 Ill. 2d 73, 75
(1969); Smith v. Chemical Personnel Search, Inc., 215 Ill. App. 3d
1078, 1082 (1991). If uncertainty exists because more than one
distinct factual issue was presented in the prior case, estoppel
will not be applied. Progressive Land Developers, Inc. v. Exchange
National Bank, 266 Ill. App. 3d 934, 944 (1994); Case Prestressing
Corp. v. Chicago College of Osteopathic Medicine, 118 Ill. App. 3d
782, 785 (1983). Moreover, the party asserting the estoppel bears
the heavy burden of showing with certainty that the identical and
precise issue sought to be precluded in the later adjudication was
decided in the previous adjudication. Streams Condominium No. 3
Ass'n v. Bosgraf, 219 Ill. App. 3d 1010, 1014 (1991). To speculate
on the grounds for the prior judgment would be to remove this
burden. LaHood, 236 Ill. App. 3d at 646.
Applying these principles to the case at bar, we conclude that
Financial Matters and Misale have not proved with certainty that
the identical and precise issues raised by the complaint were
actually decided by the NASD panel. The NASD award merely stated
that plaintiffs' NASD claim, which named only Thomas James and
McKinney as defendants, was denied and dismissed. It contained no
specific findings. Although the NASD claim and the complaint
alleged nearly identical facts and causes of action, we simply do
not know whether the issues raised by the complaint were actually
determined by the NASD panel.
For example, although the NASD award could have resulted from
a finding that neither McKinney nor Misale misrepresented the
investment risks to plaintiffs, it could have also resulted from a
finding that only Misale misrepresented certain investments risks.
Similarly, although the NASD award could have resulted from a
finding that plaintiffs were not injured by McKinney's
misrepresentations, such a finding does not mean that plaintiffs
were not injured by Misale's misrepresentations. As a further
example, the NASD award could have resulted from a finding that
Thomas James and McKinney did not owe a duty to plaintiffs while
not even concerning itself with whether Financial Matters and
Misale did owe a duty to plaintiffs.
The point is that we must speculate as to what the NASD panel
found when it issued the award. Illinois law, however, is clear
that we cannot speculate on such matters--we must be certain as to
the issues that were actually and necessarily decided in the prior
case. See, e.g., Housing Authority, 101 Ill. 2d at 252;
Progressive Land Developers, Inc., 266 Ill. App. 3d at 944.
Because we are not certain as to the issues actually and
necessarily decided by the NASD panel, collateral estoppel does not
apply. See Case Prestressing Corp., 118 Ill. App. 3d at 785-86
(where issues of both liability and damages are sent to jury and
jury simply returns a general verdict, collateral estoppel will not
apply because it is not certain whether the jury found against the
plaintiff on liability, on damages, or on both). Accordingly, we
conclude that the trial court erred in granting Financial Matters
and Misale's motion for summary judgment. As a result, we need not
address plaintiffs' remaining arguments under this contention.
II
Plaintiffs' second contention is that the trial court erred in
holding that the doctrine of res judicata barred their claims
against Financial Matters and Misale. We need not address this
contention, however, because our analysis of the first contention
renders this contention moot. Moreover, the trial court did not
hold, and Financial Matters and Misale have not argued, either on
appeal or in their motion for summary judgment, that the doctrine
of res judicata barred plaintiffs' claims.
III
Plaintiffs' third contention is that the trial court erred in
granting Thomas James and McKinney's motion to stay the judicial
proceedings and to compel arbitration. On October 13, 1993, the
trial court entered an order that granted Thomas James and
McKinney's motion to stay the judicial proceedings and to compel
arbitration. On May 18, 1995, the trial court entered an order
which denied and dismissed with prejudice plaintiffs' claims
against Thomas James and McKinney. Plaintiffs argue that the trial
court erred in entering the October 13, 1993, order, which severed
their claims against Thomas James and McKinney from their claims
against Financial Matters and Misale.
Before addressing the merits of this contention, we must first
address Thomas James and McKinney's motion to dismiss plaintiffs'
appeal of the October 13, 1993, order, which we ordered taken with
the case. Thomas James and McKinney argue that we lack
jurisdiction to hear plaintiffs' appeal of the October 13, 1993,
order. They argue that an order granting a motion to compel
arbitration and to stay the judicial proceedings is appealable only
under Illinois Supreme Court Rule 307(a) (155 Ill. 2d R. 307(a)),
which provides that the appeal must be perfected within 30 days
from the entry of the order. Because plaintiffs did not perfect
the appeal of the October 13, 1993, order within 30 days, they
argue that this court lacks jurisdiction to hear that portion of
plaintiffs' appeal pertaining to the order.
The jurisdiction of this court is limited to the review of
appeals from final judgments or orders, subject to statutory or
supreme court exceptions. In re Petition to Incorporate the
Village of Greenwood, 275 Ill. App. 3d 465, 469 (1995).
Interlocutory appeals as of right, as provided in Supreme Court
Rule 307(a), are one such exception. See 155 Ill. 2d R. 307(a).
Rule 307 provides in pertinent part:
"(a) Orders Appealable; Time. An appeal may be taken to
the Appellate Court from an interlocutory order of court:
(1) granting, modifying, refusing, dissolving, or
refusing to dissolve or modify an injunction;
* * *
Except as provided in paragraph (b), the appeal must be
perfected within 30 days from the entry of the interlocutory
order by filing a notice of appeal designated 'Notice of
Interlocutory Appeal' conforming substantially to the notice
of appeal in other cases." 155 Ill. 2d R. 307(a)(1).
A motion to compel or stay arbitration is analogous to a
motion for injunctive relief. Amalgamated Transit Union, Local 900
v. Suburban Bus Division of the Regional Transportation Authority,
262 Ill. App. 3d 334, 337 (1994); Robert A. Besner & Co. v. Lit
America, Inc., 214 Ill. App. 3d 619, 623 (1991). Thus, an order
granting a motion to compel or stay arbitration is an interlocutory
order appealable under Rule 307(a)(1). Amalgamated Transit Union,
Local 900, 262 Ill. App. 3d at 337; Robert A. Besner & Co., 214
Ill. App. 3d at 623. A notice of interlocutory appeal must be
filed within 30 days of such an order. 155 Ill. 2d R. 307(a)(1).
In the present case, the order granting Thomas James and
McKinney's motion to compel arbitration and to stay the judicial
proceedings was entered on October 13, 1993. This order was an
interlocutory order under Rule 307(a)(1). See, e.g., Notaro v.
Nor-Evan Corp., 98 Ill. 2d 268, 270-71 (1983) (order granting or
denying a motion to compel arbitration and stay court proceedings
or dismiss the lawsuit is appealable under Rule 307(a)(1)).
Plaintiffs therefore could have filed a notice of interlocutory
appeal within 30 days of that order.
However, the issue is not whether plaintiffs could have filed
a notice of interlocutory appeal when the court issued the October
13, 1993, order, but whether they had to. In other words, does a
party's failure to appeal an interlocutory order under Rule
307(a)(1) preclude our review of that order when a final judgment
is entered in the case?
When analyzing a supreme court rule, we must ascertain and
give effect to the supreme court's intent. Kellett v. Roberts, 276
Ill. App. 3d 164, 170 (1995). The same rules for statutory
construction apply to supreme court rules. Kellett, 276 Ill. App.
3d at 170. Statutory construction begins with the plain meaning of
the language employed and ends there when the meaning is clear.
Alpine Bank v. Yancy, 274 Ill. App. 3d 766, 768 (1995). When the
language of a supreme court rule is plain and unambiguous, courts
will not read in exceptions, limitations, or other conditions.
People v. Daniels, 172 Ill. 2d 154, 163 (1996).
Here, the language of Rule 307(a)(1) is plain and unambiguous:
a party is not required to appeal a Rule 307(a)(1) interlocutory
order in order to preserve later review of that order. Rule
307(a)(1) provides only that an appeal "may" be taken from an
interlocutory order that grants a motion to compel arbitration or
to stay the proceedings. 155 Ill. 2d R. 307(a)(1). As a rule of
statutory construction, the word "may" is permissive or
discretional as opposed to mandatory. Alpine Bank, 274 Ill. App.
3d at 768; Lake States Engineering Corp. v. One Naperville Corp.,
148 Ill. App. 3d 836, 841 (1986). Because Rule 307(a)(1) does not
require a party to appeal the interlocutory order, a reviewing
court may still review the merits of that order after a final
judgment in the case is rendered and appealed from. Alpine Bank,
274 Ill. App. 3d at 768; see People v. Franklin, 159 Ill. App. 3d
56, 60 (1987).
Thus, while plaintiffs could have appealed the October 13,
1993, order within 30 days of its entry under Rule 307(a)(1), they
were not required to do so. See Alpine Bank, 274 Ill. App. 3d at
768. Instead, plaintiffs waited to appeal until a final judgment
disposing of all the parties and all the claims was rendered in the
case--that is, the October 17, 1995, order granting Financial
Matters and Misale's motion for summary judgment. As such, we have
jurisdiction to consider the merits of the October 13, 1993, order.
See Alpine Bank of Illinois, 274 Ill. App. 3d at 768.
We are aware that other courts have apparently reached a
contrary result. See, e.g., Hwang v. Tyler, 253 Ill. App. 3d 43,
45-46 (1993); Williams v. Nagel, 251 Ill. App. 3d 176, 179 (1993);
Safeway Insurance Co. v. American Arbitration Ass'n, 247 Ill. App.
3d 355, 358 (1993); Robert A. Besner & Co., 214 Ill. App. 3d at
623; Baird & Warner, Inc. v. Gary-Wheaton Bank, 122 Ill. App. 3d
136, 138-39 (1984). However, those cases neither considered the
plain language of Rule 307(a) nor interpreted that language in
accordance with accepted rules of statutory construction. We
therefore decline to be guided by those cases to the extent they
hold that the right to challenge a Rule 307(a)(1) order is
permanently lost if a party does not appeal the order within 30
days.
In contrast, we believe our recent decision in Alpine Bank, a
case cited by none of the parties, is persuasive. See Alpine Bank,
274 Ill. App. 3d at 768. In Alpine Bank, we applied established
rules of statutory construction to Rule 307(a). After doing so, we
held that a party does not have to appeal a Rule 307(a)
interlocutory order to preserve later review of that order. Alpine
Bank, 274 Ill. App. 3d at 768. In our opinion, this approach--
which we follow here today--properly analyzed the jurisdictional
scope of Rule 307(a) by considering its language in light of
general principles of statutory construction.
We therefore turn to the merits of the contention. In
granting Thomas James and McKinney's motion to stay the judicial
proceedings and to compel arbitration, the trial court severed
plaintiffs' claims against Thomas James and McKinney from their
claims against Financial Matters and Misale. Plaintiffs argue that
the trial court erred in doing so because (1) the arbitration
agreement did not involve Financial Matters and Misale; (2) the
claims against all of the parties were interdependent; and (3)
arbitration would result in duplicative litigation with the
possibility of inconsistent results. Plaintiffs cite J.F. Inc. v.
Vicik, 99 Ill. App. 3d 815 (1981), for the proposition that
judicial economy and the avoidance of inconsistent results require
a trial court to deny a motion to compel arbitration.
The trial court did not err in severing the claims. The
United States Supreme Court has held that "[u]nder the [Federal]
Arbitration Act, an arbitration agreement must be enforced
notwithstanding the presence of other persons who are parties to
the underlying dispute but not to the arbitration agreement."
(Emphasis added.) Moses H. Cone Memorial Hospital v. Mercury
Construction Corp., 460 U.S. 1, 20, 74 L. Ed. 2d 765, 782, 103 S. Ct. 927, 939 (1983). The Supreme Court has also held that the
Federal Arbitration Act requires courts to compel arbitration of
pendent arbitrable claims, even where the result would be the
possibly inefficient maintenance of separate proceedings in
different forums. Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213,
217, 84 L. Ed. 2d 158, 163, 105 S. Ct. 1238, 1241 (1985).
We note that Illinois courts also hold that arbitration is a
favored method of settling disputes in Illinois, and the policy
favoring arbitration will not be ignored simply because multiple
parties and claims may be present. See Landmark Properties, Inc.
v. Architects International-Chicago, 172 Ill. App. 3d 379, 384
(1988); see, e.g., M.D. Building Material Co. v. 910 Construction
Venture, 219 Ill. App. 3d 509, 519 (1991) (rejecting "judicial
economy argument" as a bar to the enforcement of valid arbitration
agreements); Atkins v. Rustic Woods Partners, 171 Ill. App. 3d 373,
380 (1988) (noting that in general an arbitration agreement is
enforceable despite the existence of claims by third parties or of
pending multiparty litigation); Diersen v. Joe Kiem Builders, Inc.,
153 Ill. App. 3d 373, 377 (1987) (noting that the general rule in
Illinois is that "arbitration agreements in multiparty litigation
should be enforced despite the existence of claims which create the
potential for duplicative proceedings"). We further note that
Vicik, the case principally relied upon by plaintiffs, is
inconsistent with prevailing case law, and Illinois courts have
repeatedly criticized and distinguished it. See M.D. Building
Material Co., 219 Ill. App. 3d at 519; Kurland Steel Co. v. Carle
Foundation Hospital, 185 Ill. App. 3d 624, 627-29 (1989); Landmark
Properties, Inc., 172 Ill. App. 3d at 384; Geldermann, Inc. v.
Mullins, 171 Ill. App. 3d 255, 261 (1988); Diersen, 153 Ill. App.
3d at 377. We likewise choose not to follow Vicik.
In light of the foregoing cases, we conclude that the trial
court did not err in granting the motion to stay the judicial
proceedings and to compel arbitration. Although plaintiffs'
argument is well taken, prevailing federal and state case law
compelled the trial court to grant the motion and thereby sever the
claims. Also, we affirm the May 18, 1995, order which entered
judgment for Thomas James and McKinney based on the NASD award,
because the trial court properly compelled arbitration, and because
plaintiffs do not otherwise explain why the trial court improperly
entered that order. See 9 U.S.C. 9 (1988); see also Menke v.
Monchecourt, 17 F.3d 1007, 1009 (7th. Cir. 1994) ("Unlike the usual
civil appeal, where the successful party is usually defending the
lower court's decision on the merits, an action for confirmation
under 9 U.S.C. 9 is intended to be a summary proceeding that
merely makes the arbitrators' award a final, enforceable judgment
of the court"); Taylor v. Nelson, 788 F.2d 220, 225 (4th Cir.
1986) ("A confirmation proceeding under 9 U.S.C. 9 is intended to
be summary: confirmation can only be denied if an award has been
corrected, vacated, or modified in accordance with the Federal
Arbitration Act").
CONCLUSION
The judgment of the circuit court of Lake County is affirmed
in part and reversed in part. Plaintiffs' motion to supplement the
record on appeal is denied. Thomas James and McKinney's motion to
dismiss plaintiffs' appeal of the October 13, 1993, order is
denied. The cause is remanded for further proceedings consistent
with this opinion.
Affirmed in part and reversed in part; cause remanded; motion
to supplement the record on appeal is denied; motion to dismiss
appeal of the October 13, 1993, order is denied.
INGLIS and DOYLE, JJ., concur.
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