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Omni v. Apartment Investment and Management Company

December 10, 2003


Appeal from the Circuit Court of Du Page County. No. 03-AR-693 Honorable John T. Elsner, Judge, Presiding.

The opinion of the court was delivered by: Justice O'malley


Plaintiffs, Ron and Ann Louise Onni, appeal from the judgment of the circuit court ordering arbitration of the claims they brought against defendants, Apartment Investment and Management Company and Chesapeake Landing I, LP. We reverse and remand.

Plaintiffs, who are tenants of properties owned by defendants, filed a class action on behalf of themselves and other tenants challenging defendants' practice of charging late fees on overdue rent payments. Pursuant to the Illinois Uniform Arbitration Act (Act) (710 ILCS 5/1 et seq. (West 2000)), defendants moved to compel arbitration of plaintiffs' claims and stay all court proceedings. Defendants relied on an arbitration clause in plaintiffs' lease that provides in relevant part:

"30. ARBITRATION. All disputes between the parties concerning the provisions of this Lease shall be submitted to arbitration pursuant to the procedures of the state in which the Apartment Community is located before a panel of three (3) independent third party arbitrators ***. The arbitrators shall have no authority to award punitive, exemplary, consequential, special, indirect or incidental damages or attorneys' fees. The parties shall share equally the fees and costs of the arbitrators and shall otherwise bear their own costs and expenses of arbitration. *** Notwithstanding the preceding paragraph, LESSOR shall not be required to submit to binding arbitration disputes arising from (1) the enforcement of rental payments; (2) the repossession of the premises; or (3) the termination of the Lease by reason of a default by LESSEE under the Lease. LESSOR shall have all rights and remedies under law and equity with respect to any such disputes. LESSEE acknowledges and agrees that this paragraph constitutes a waiver of all rights to civil court action for a dispute arising under the terms of this Lease, subject to the provisions hereof, and only the arbitrators, not a judge or jury, will decide the dispute."

In their reply to defendants' motion to compel, plaintiffs challenged the validity of the arbitration clause on several grounds. Plaintiffs argued that the clause is unconscionable both because it is hidden within fine print and was not recognized by plaintiffs before they signed the agreement and because it is fundamentally unfair in that it requires arbitration of any claim brought by a tenant, yet permits the landlord to bring most of its claims in court. Plaintiffs further argued that the clause violates public policy because its requirement that tenants pay one-half of the arbitrator's fees and bear their own costs of arbitration deters tenants from bringing claims. In support of this argument, plaintiffs attached to their reply an affidavit from an official of the American Arbitration Association who estimated arbitration fees in the Chicago area. Lastly, plaintiffs argued that the arbitration clause illegally seeks to deny tenants their statutory rights to attorney fees, punitive damages, and injunctive relief.

The trial court held a hearing on the motion to compel. At the close of the parties' arguments, the trial court said the following:

"Okay. I have read the briefs. I have read the cases cited by the defendants, the Illinois cases, both the federal courts applying Illinois law, and the Illinois courts [that] have decided the issues in this case. The motion to compel arbitration is granted. The state lawsuit is stayed. Thank you for your patience."

Subsequently, the court issued an order consisting of one sentence:

"Defendants' motion to compel arbitration is granted; all proceedings are stayed." Plaintiffs appealed.

In an appeal from an interlocutory order granting or denying a motion to compel arbitration, the only issue before the reviewing court is whether there was a showing sufficient to sustain the order of the trial court granting or denying the motion. Travis v. American Manufacturers Mutual Insurance Co., 335 Ill. App. 3d 1171, 1174 (2002). Plaintiffs argue that the trial court erred in failing to state the factual findings and legal conclusions supporting its rejection of their arguments attacking the arbitration clause. The applicable statutory provision is section 2(a) of the Act (710 ILCS 5/2(a) (West 2000)), which provides:

"§ 2. Proceedings to compel or stay arbitration. (a) On application of a party showing an agreement described in section 1 [(710 ILCS 5/1 (West 2000))], and the opposing party's refusal to arbitrate, the court shall order the parties to proceed with arbitration, but if the opposing party denies the existence of the agreement to arbitrate, the court shall proceed summarily to the determination of the issue so raised and shall order arbitration if found for the moving party, otherwise, the application shall be denied."

As plaintiffs note, the trial court must render a "substantive disposition" of a motion to compel arbitration. Cohen v. Blockbuster Entertainment, Inc., 338 Ill. App. 3d 171, 178 (2003); Comdisco, Inc. v. Dun & Bradstreet Corp., 285 Ill. App. 3d 796, 800 (1996); Farris v. Hedgepeth, 58 Ill. App. 3d 1040, 1044 (1978); Liberty Mutual Insurance Co. v. Duray, 5 Ill. App. 3d 187, 190 (1972). Plaintiffs argue that the trial court's conclusory resolution of the issues raised in the parties' briefs was not a substantive disposition and, therefore, the trial court's judgment should be reversed.

Comdisco and Cohen illustrate what is meant by a "substantive disposition." In Comdisco, the parties signed an agreement to arbitrate a dispute concerning the terms of a lease agreement. Sometime after arbitration commenced, the plaintiff filed a four-count complaint seeking a declaratory judgment that the arbitration agreement was void. Comdisco, 285 Ill. App. 3d at 797-98. Counts IV and V of the complaint alleged, respectively, that the defendants fraudulently induced the plaintiff to sign the agreement and that there was no meeting of the minds regarding the agreement. Subsequently, the defendants filed a motion to compel arbitration pursuant to the agreement. Comdisco, 285 Ill. App. 3d at 798. Following oral argument on the motion, the trial court entered an order denying the defendants' motion. The transcript of the hearing showed that the trial court based its ruling on counts IV and V of the plaintiff's complaint. Comdisco, 285 Ill. App. 3d at 798. The defendants appealed, and the appellate court reversed the judgment of the trial court and remanded the case for further ...

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