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Las, Inc. v. Mini-Tankers

August 27, 2003

LAS, INC., PLAINTIFF-APPELLEE,
v.
MINI-TANKERS, USA, INC., DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Madison County. No. 00-MR-613 Honorable Ralph J. Mendelsohn, Judge, presiding.

The opinion of the court was delivered by: Justice Welch

UNPUBLISHED

The issue presented by this appeal is whether the defendant, Mini-Tankers, USA, Inc., waived its right to compel the arbitration of a dispute between it and the plaintiff, LAS, Inc., by its participation in the lawsuit filed by the plaintiff in the circuit court of Madison County. The trial court found that it had. We reverse. We will set forth the facts, and the history of the proceedings before the trial court, only as they pertain to this issue.

On December 26, 2000, the plaintiff filed, in the circuit court of Madison County, a two-count complaint against the defendant. The complaint sought (1) a declaratory judgment that the defendant had breached a subfranchise agreement between the parties, thereby excusing the plaintiff from performing its obligations under the agreement, and (2) damages for a breach of the agreement. Attached to the complaint and incorporated therein was a copy of the subject subfranchise agreement.

On March 8, 2001, the defendant filed a motion to dismiss the complaint pursuant to section 2-619(a)(6) of the Illinois Code of Civil Procedure (Code) (735 ILCS 5/2-619(a)(6) (West 2000)), because the plaintiff, through its controlling shareholder and president, had allegedly released the defendant from any and all claims that the plaintiff might have had against it. The plaintiff filed a response to the motion to dismiss on June 19, 2001. It alleged that the person who executed the release had no interest in the plaintiff at the time the release was executed. The motion to dismiss was never set for a hearing or presented to the trial court.

On August 10, 2001, the defendant filed a motion to dismiss or, alternatively, for a summary judgment, on the ground that the plaintiff's claims were based on alleged breaches of the subfranchise agreement and that the agreement contained a provision that any dispute relating to or arising out of the agreement must be submitted to non-binding mediation and then binding arbitration if necessary. Accordingly, the defendant claimed that the dispute between the parties could not be litigated in the circuit court but must be submitted to mediation and arbitration in accordance with the subfranchise agreement. On the same date, the defendant filed in the circuit court a motion to compel the mediation and arbitration of the dispute.

On October 19, 2001, the trial court entered an order directing the parties to file "motions for summary judgment on existence of a contract between the litigants such that the Court may rule on remaining issues." On January 7, 2002, the defendant filed a motion for a summary judgment in its favor because the subfranchise agreement out of which the dispute had arisen required that the dispute be submitted to mediation and, if necessary, arbitration.

In its June 27, 2002, response to the motion for a summary judgment, the plaintiff argued that the defendant had waived its right to mediation and arbitration by filing its initial motion to dismiss pursuant to section 2-619 of the Code. The plaintiff argued that any participation by the defendant in the circuit court that does not assert the defendant's right to arbitration is inconsistent with that right to arbitration and constitutes a waiver of that right. The plaintiff argued that had the defendant prevailed on its initial motion to dismiss, it would have resulted in the dismissal of the cause based on a factual and legal defense, not based on the arbitration clause. Accordingly, the plaintiff argued that the filing of the motion to dismiss was inconsistent with an assertion of the defendant's right to arbitration. The defendant filed a reply, arguing that it had not waived its right to arbitration by the filing of its section 2-619 motion to dismiss.

On December 19, 2002, the trial court denied the defendant's motion for a summary judgment. The defendant now brings this appeal pursuant to Illinois Supreme Court Rule 307(a)(1) (188 Ill. 2d R. 307(a)(1)).

The parties agree that this is an interlocutory appeal properly brought pursuant to Supreme Court Rule 307(a)(1), which allows interlocutory appeals from judgments involving the grant, denial, dissolution, or modification of an injunction. 188 Ill. 2d R. 307(a)(1). Because an order on a motion to compel arbitration is in the nature of injunctive relief, those orders are reviewable under Supreme Court Rule 307(a)(1). See Clark v. Country Mutual Insurance Co., 131 Ill. App. 3d 633, 636 (1985); Deien Chevrolet, Inc. v. Reynolds & Reynolds Co., 265 Ill. App. 3d 842, 844 (1994).

The parties disagree, however, on the proper standard of review. The defendant argues that because the facts are undisputed and the only issue before the trial court was one of law, the proper standard of review is de novo. See La Hood v. Central Illinois Construction, Inc., 335 Ill. App. 3d 363, 364 (2002). The plaintiff argues that the facts are not undisputed and that, in any event, the proper standard of review for an appeal brought pursuant to Supreme Court Rule 307(a)(1) is whether the trial court abused its discretion. See Schroeder Murchie Laya Associates, Ltd. v. 1000 West Lofts, LLC, 319 Ill. App. 3d 1089, 1092 (2001).

We are aware of the split of authority on the question of the appropriate standard of review to be applied to the question now before us on review. However, we believe that the proper standard of review is to be determined by the nature of the question presented to the trial court, not by the supreme court rule under which the appeal is brought. Those cases holding that an abuse of discretion is the proper standard of review do so primarily because the appeal had been brought pursuant to Supreme Court Rule 307(a)(1), and cases have generally held that in appeals brought pursuant to that supreme court rule, the proper standard of review is an abuse of discretion. While that may be the appropriate standard of review for most appeals brought from an interlocutory order "granting, modifying, refusing, dissolving, or refusing to dissolve or modify an injunction" (188 Ill. 2d R. 307(a)(1)), it is the not the appropriate standard of review to be applied to the case at bar.

We believe that the proper standard of review is dictated by the nature of the question presented to the trial court. In the instant case the facts simply are not in dispute, and the only issue presented to the trial court was whether those facts established a waiver of the defendant's right to arbitration as a matter of law. The trial court made no factual or credibility determinations. A reviewing court determines a legal question independently of the trial court's judgment, using a de novo standard of review. Clemons v. Mechanical Devices Co., 202 Ill. 2d 344, 352 (2002). Accordingly, we will review the issue presented using the de novo standard of review.

Our position regarding the proper standard of review is consistent with federal case law which holds that the review of a federal district court's decision regarding the waiver of a party's right to arbitrate is de novo, while the review of the factual findings on which the district court relied is by the clear error standard. See Thyssen, Inc. v. Calypso Shipping Corp., S.A., 310 F.3d 102, 104 (2d Cir. 2002); Iowa Grain Co. v. Brown, 171 F.3d 504, 509 (7th Cir. 1999); Britton v. Co-op Banking Group, 916 F.2d 1405, 1409 (9th Cir. 1990); Subway Equipment Leasing Corp. v. Forte, 169 F.3d 324, 326 (5th Cir. 1999); Stifel, Nicolaus & Co. v. Freeman, 924 F.2d ...


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