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12/29/95 LEE B. STERN & COMPANY v. DARRELL

December 29, 1995

LEE B. STERN & COMPANY, PLAINTIFF-APPELLANT,
v.
DARRELL ZIMMERMAN, ANTHONY CATALFO, DEFENDANTS, STEVEN RASOF, GERALD MAYER AND ALAN WEINSTEIN, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County. Honorable Richard L. Curry, Judge Presiding.

The Honorable Justice Rizzi delivered the opinion of the court: Tully, J., and Cerda, J., concur.

The opinion of the court was delivered by: Rizzi

The Honorable Justice RIZZI delivered the opinion of the court:

Plaintiff, Lee B. Stern & Co., appeals from an order of the circuit court: (1) denying plaintiff summary judgment on its motion to vacate that part of a Chicago Board of Trade (CBOT) arbitration award assessing attorney fees against plaintiff; and (2) granting summary judgment in favor of defendants, Gerald Mayer, Alan Wienstein and Steven Rasof, on their motion to confirm the CBOT award with respect to attorney fees assessed in defendants' favor. On appeal, plaintiff contends that the trial court erred in confirming the award of attorney fees. We reverse.

This appeal grew out of the events of October 22, 1992, on the Financial Room Trading Floor of the CBOT. On and prior to that date, plaintiff was a clearing member of the CBOT. Defendants were CBOT members and registered floor brokers. As floor brokers, defendants executed orders for other members and customers to buy and sell option contracts on the floor of the CBOT.

On October 22, 1992, Darrell Zimmerman (Zimmerman) and Anthony Catalfo (Catalfo), two CBOT delegate members authorized to trade at the CBOT, bought and sold numerous option contracts. These contracts were traded through defendants, as well as other brokers, who executed the orders submitted by Zimmerman and Catalfo. As a result of these trades, plaintiff suffered a financial loss of $8.6 million.

On October 29, 1992, pursuant to CBOT Rules and Regulations (the CBOT Rules), plaintiff filed an arbitration claim before the arbitration committee of the CBOT. Plaintiff alleged that various individuals, including defendants, were responsible for its financial loss. With respect to defendants, plaintiff claimed that but for defendants' actions in filling Zimmerman's and Catalfo's orders, plaintiff's $8.6 million loss would not have occurred. Defendants filed a counterclaim seeking payment of their brokerage commissions for filling Zimmerman's orders. Defendants also requested attorney fees as the costs for pursuing the unpaid brokerage and defending against plaintiff's claims.

The arbitrators awarded defendants their unpaid brokerage. Finding that plaintiff's claims against defendants were meritless, the arbitrators awarded defendants attorney fees in the amount of $77,442.41 as costs for defending and claiming in the arbitration proceeding. The parties filed cross petitions to vacate and confirm that part of the arbitration award granting attorney fees to defendants. The circuit court granted summary judgment in favor of defendants and against plaintiff thereby confirming the arbitrators' award of attorney fees. Plaintiff contends on appeal that the trial court erred in confirming the award of attorney fees because (1) the arbitrators exceeded their powers and (2) a gross error of law appears on the face of the award.

It is well-settled that when possible, a court should construe an arbitration award in a manner that upholds its validity. Rauh v. Rockford Products Corp. (1991), 143 Ill. 2d 377, 386, 574 N.E.2d 636, 641, 158 Ill. Dec. 523, citing Merritt v. Merritt (1850), 11 Ill. 565. While the arbitration scheme set forth in the Uniform Arbitration Act (the "Act") contemplates a limited role for the courts, arbitration awards are still subject to judicial review. 710 ILCS 5/1 et seq. (West 1992). Section 12(a) of the Act enumerates various grounds on which an arbitration award is to be vacated. Plaintiff relies on section 12(a)(3) of the Act which states that the court shall vacate an award where "the arbitrators exceeded their powers." 710 ILCS 5/12 (West 1992). Our supreme court has also established that the courts have the power to vacate an arbitration award where a gross error of law appears on the face of the award. Board of Education of City of Chicago v. Chicago Teachers Union, Local No. 1 (1981), 86 Ill. 2d 469, 477, 427 N.E.2d 1199, 1202, 56 Ill. Dec. 653.

We first address plaintiff's contention that the arbitrators exceeded their powers by assessing attorney fees against plaintiff. With respect to an arbitrator's authority to assess fees and expenses, the Act specifically states that:

"Unless otherwise provided in the agreement to arbitrate the arbitrators' expenses and fees, together with other expenses, not including attorney's fees, incurred in the conduct of the arbitration, shall be paid as provided in the award." 710 ILCS 5/10 (West 1992) (Emphasis added.)

Thus, absent a contrary provision in the arbitration agreement, the Act authorizes arbitrators to assess all fees and costs associated with an arbitration proceeding, except for attorney fees. With respect to attorney fees, the statute neither permits nor prohibits the arbitrators' assessment of attorney fees. Rather, the Act delegates this decision to the parties. As such, an arbitrator's authority to assess attorney fees derives solely from the agreement to arbitrate. See Hahn v. A.G. Becker Paribas, Inc. (1987), 164 Ill. App. 3d 660, 668, 518 N.E.2d 218, 223, 115 Ill. Dec. 693 (under section 10 of the Act attorney fees are not to be included in an arbitration award unless otherwise provided in the arbitration agreement); see also School Committee v. Dever (1979), 8 Mass. App. 920, 921, 395 N.E.2d 900, 900; County of Clark v. Blanchard Construction Co. (1982), 98 Nev. 488, 491, 653 P.2d 1217, 1220. The Act is to be construed "to make uniform the law of those states which enact it." 710 ILCS 5/20 (West 1992). To achieve this end, our supreme court instructed us to show greater than usual deference to opinions of the courts of other jurisdictions with the Uniform Arbitration Act. Garver v. Ferguson (1979), 76 Ill. 2d 1, 8, 389 N.E.2d 1181, 1183, 27 Ill. Dec. 773.

We now turn to the arbitration agreement at issue to determine whether the arbitrators exceeded their powers by assessing attorney fees. In this case, the CBOT Rules constitute the arbitration agreement. Plaintiff contends that the arbitration agreement does not empower the arbitrators to assess attorney fees. Defendants argue that the CBOT Rules do authorize the arbitrators to include attorney fees in their award.

In support of their argument, defendants cite to two of the CBOT Rules. First, defendants point to ...


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