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7-Eleven, Inc. v. Dar

March 29, 2001

7-ELEVEN, INC., FORMERLY KNOWN AS THE SOUTHLAND CORPORATION, PETITIONER-APPELLANT,
v.
K. MUSLEY DAR, RESPONDENT-APPELLEE.



Appeal from the Circuit Court of Cook County No. 99 CH 4544 Honorable Sidney A. Jones, III, Judge Presiding.

The opinion of the court was delivered by: Presiding Justice Hall

The petitioner, 7-Eleven, Inc., formerly known as The Southland Corporation, appeals from an order of the circuit court of Cook County denying its motion to vacate an arbitration award to the respondent, K. Musley Dar, and confirming the award to the respondent.

The petitioner owns and franchises 7-Eleven stores. On January 21, 1983, the petitioner and the respondent entered into a "Store Franchise Agreement" (agreement) under which the respondent would lease a 7-Eleven store and equipment from the petitioner. The agreement provided in pertinent part as follows:

"7. Term. The license, lease, and continuing obligations of the parties shall begin on the Effective Date and continue for a term expiring on the earlier of 15 years or the end of 7-Eleven's leasehold rights as specified in Exhibit A, unless sooner terminated or extended."

Exhibit A provided in pertinent part as follows:

"The present term (remainder of primary term or current extended term) of the master lease expires on 31st day of December, 1990. 7-ELEVEN has no obligation to renew or exercise any option to extend the master lease, but if the master lease is renewed or extended by 7-ELEVEN, the term of the Agreement shall then last until the earlier of the end of 7-ELEVEN's then current leasehold rights or 15 years after the Effective Date."

On February 6, 1989, the parties entered into "YEAR 2000 AMENDMENT" to their original agreement. The amendment provided in pertinent part as follows:

"(1) TERM; 7-ELEVEN Charge.

(a) Term. The term of the Agreement shall be extended to expire on August 31, 2000, unless earlier terminated as set forth below or pursuant to the terms of the Agreement[.]"

The amendment went on to provide as follows:

(2) TERMINATION - Loss of Leasehold Rights, Etc. This Agreement will terminate prior to the expiration of its term upon the loss of 7-ELEVEN's Leasehold Rights, a condemnation or transfer in lieu of condemnation which results in 7-ELEVEN's determination not to continue the Store as a 7-Eleven store, casualty damage to the Store building or Equipment which cannot reasonably be repaired or replaced within 30 calender days, or closing of the Store required by law if such closing was not the result of a violation by 7-ELEVEN."

The petitioner leased the property, which was subleased to the respondent, under the terms of a master lease, from The Southland's Employees' Trust. A modification to the master lease provided an option whereby the petitioner could extend the lease, which expired on December 31, 1990, for two periods, not to exceed five years each. The petitioner exercised the first option but not the second. Accordingly, the master lease expired on December 31, 1995.

On February 20, 1995, the respondent was notified by the petitioner that it was not renewing the master lease for the real estate and that, therefore, the parties' agreement would terminate on December 31, 1995. The respondent filed a demand for arbitration as provided for in the parties' agreement.

The arbitrator denied the petitioner's motion to dismiss count III of the respondent's second revised complaint in which the respondent alleged that the petitioner's failure to renew the lease amounted to wrongful termination. Inter alia, the arbitrator rejected the petitioner's argument that the wrongful termination count was time- barred because it was not filed within 10 days of the notification of termination as required under the arbitration provision in the agreement. The arbitrator determined that because the agreement provided a shorter limitations period than did the Illinois Franchise Disclosure Act of 1987 (815 ILCS 705/27 (West 1998)) (Act), it was ineffectual.

On December 24, 1998, the arbitrator granted the respondent's claim for wrongful termination and awarded him $195,720. The arbitrator also granted two of the respondent's claims for breach of good faith and fair dealing and awarded $5,000 on each claim. Additionally, the arbitrator ordered the petitioner to provide the respondent with final account statements and to pay to the respondent sums due him in connection with other alleged breaches of the agreement.

On March 24, 1999, the petitioner filed a petition to vacate the arbitration award. The respondent filed a motion to confirm the award and to strike the petition to vacate the award. The circuit court denied the petition to vacate and granted the petition to confirm the award.

On appeal, the petitioner raises the following issues: (1) whether the arbitrator exceeded his authority and/or committed gross error when he determined that the respondent did not waive his right to arbitration when he filed for arbitration after the time period for filing such a demand had expired pursuant to the agreement; (2) whether the arbitrator exceeded his authority and/ or committed gross error when he determined that the franchise agreement was wrongfully terminated; (3) whether the arbitrator exceeded his authority and/or committed gross error when he awarded damages for breaches of the covenant of good faith and fair dealing; and (4) whether the arbitrator exceeded his authority and/or committed gross error when he failed to identify a specific amount of damages owed on certain claims.

Arbitration awards should be construed, whenever possible, so as to uphold their validity. Ure v. Wangler Construction Co., 232 Ill. App. 3d 492, 496, 597 N.E.2d 759, 762 (1992). There is a presumption that the arbitrator did not exceed his or her authority. Ure, 232 Ill. App. 3d at 496, 597 N.E.2d at 762. If an award is within the submission and contains the honest decision of the arbitrator, after a full hearing, a court will not set it aside for error of law or fact. Ure, 232 Ill. App. 3d at 496, 597 N.E.2d at 762. However, if all fair and reasonable minds would agree that the construction of the contract made by the arbitrator was not possible under a fair interpretation of the contract, then the court is bound to vacate or refuse to confirm the award. See Rauh v. Rockford Products Corp., 143 Ill. 2d 377, 391-92, 574 N.E.2d 636, 643 (1991).

At the outset, the respondent points out that the agreement between the parties provided that if the arbitrator's decision was within the scope of his authority under the agreement, it was final and binding on the parties and that, with the exception of enforcement proceedings, judicial action was waived. The petitioner responds that, under the agreement, it did not waive its right to challenge the award based upon errors of the arbitrator that resulted from the arbitrator exceeding his authority. Therefore, in the absence of a finding by this court ...


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