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February 3, 1994


Appeal from the Circuit Court of Marion County. No. 92-MR-37. Honorable Dennis Middendorff, Judge Presiding.

Maag, Goldenhersh, Rarick

The opinion of the court was delivered by: Maag

JUSTICE MAAG delivered the opinion of the court:

This is an interlocutory appeal pursuant to Supreme Court Rule 307(a)(1) (134 Ill. 2d R. 307(a)(1)), from an order of the circuit court of Marion County which denied the motion of defendant-appellant, Natkin & Company, to stay judicial proceedings and compel arbitration. The trial court granted the motion of plaintiff-appellee, City of Centralia, to stay arbitration. For the reasons set forth below, we reverse.

On July 6, 1988, the City of Centralia (the City) and Natkin & Company (Natkin) entered into a written contract wherein Natkin agreed to furnish all materials, supplies, tools, equipment, labor, and other necessary services for the construction of a project referred to as the "Centralia Downtown Streetscape Improvements" (the Project). According to the contract, the City agreed to pay Natkin $899,256.00 for the construction work. Pursuant to the contract, Natkin was to commence work within 10 days after the date that it received the notice to proceed and was to complete the job within 300 calendar days unless the period for completion was extended by the contract documents. The contract encompassed a general conditions provision that included an arbitration clause that stated as follows:


30.1 All claims, disputes and other matters in question arising out of, or relating to, the CONTRACT DOCUMENTS or the breach thereof, except for claims which have been waived by the making and acceptance of final payment as provided by Section 20, shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association. This agreement to arbitrate shall be specifically enforceable under the prevailing arbitration law. The award rendered by the arbitrators shall be final, and judgment may be entered upon it in any court having jurisdiction thereof."

The City sent a notice to proceed to Natkin stating that it was to commence work on or before July 22, 1988, making the completion date May 18, 1989. Natkin did not receive this notice, however, until July 27, 1988. The contract between the City and Natkin was changed six times in accordance with the provisions of the contract. The latest change order was dated May 15, 1989, and listed the current contract price after the change order to be $969,819.85. It also changed the completion date to June 9, 1989.

The City executed a separate contract between it and EG&G, Inc., on September 18, 1986. EG&G was to prepare the specifications and drawings for the Project. This contract did not contain an arbitration clause.

Several disputes arose between the City and Natkin regarding payments on the Project. Natkin claimed that it was entitled to additional compensation, and the City claimed that it was entitled to certain credits. The City and Natkin eventually reached an impasse, and the City filed a complaint against Natkin on May 21, 1992. Instead of filing an answer, Natkin filed a motion to stay judicial proceedings and compel arbitration on July 10, 1992. On August 5, 1992, Natkin filed a demand for arbitration. The City filed a motion to stay arbitration on September 3, 1992. On September 18, 1992, the trial court made the following findings:

"(1) That the delay in seeking arbitration worked a substantial prejudice to the plaintiff, and constitutes waiver of arbitration.

(2) Defendants [sic] own affidavit of Michael Kelly and their demand for arbitration place fault for the conflict herein upon 3rd party engineers and "design errors" by persons not subject to arbitration, leading to the possibility of contradictory results. Motion to Stay Arbitration GRANTED. Motion to Compel Arbitration DENIED."

It is from this order that Natkin appeals.

Natkin claims that the trial court erred in its determination that the arbitration clause in their contract with the City did not compel the City to bring its claim against them through arbitration. The City claims, however, that Natkin has waived its right to arbitrate this dispute because of ...

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