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Herricane Graphics, Inc. v. Blinderman Construction Co.

December 13, 2004


Appeal from the Circuit Court of DeKalb County. No. 02-LM-558. Honorable Kurt P. Klein, Judge, Presiding.

The opinion of the court was delivered by: Justice Byrne


Defendant, Blinderman Construction Company, Inc., appeals the judgment of the circuit court of DeKalb County denying its motion to confirm an arbitration award in its favor and granting the motion of plaintiff, Herricane Graphics, Inc., to vacate the award and enter judgment in its favor in the amount of $47,163. Defendant contends that the trial court exceeded its authority in vacating the arbitrator's decision. Plaintiff cross-appeals the trial court's failure to award plaintiff interest under the State Prompt Payment Act (Payment Act) (30 ILCS 540/0.01 et seq. (2002)) and the court's failure to compensate plaintiff for the labor-related component of its work. We reverse the trial court's judgment and confirm the arbitrator's award.


Plaintiff and defendant entered into contract negotiations for plaintiff to furnish and install signs for defendant at a construction project at Northern Illinois University (NIU). Defendant was to be the general contractor for the project, and plaintiff was to be the subcontractor.

On July 7, 1998, defendant faxed plaintiff the initial draft of its subcontract agreement. Plaintiff acknowledged receipt of the contract and agreed to the terms by letter dated July 9, 1998. However, plaintiff never sent defendant a signed version of the contract or any subsequent contract. The initial contract contained several terms of importance to the proceedings: an arbitration clause and two clauses regarding certified payrolls. The arbitration clause provided, in relevant part, that any controversy or claim arising out of or relating to the subcontract, or breach thereof, was to be settled by arbitration.

The clauses regarding certified payrolls provided, in relevant part:

"Payment will be made once each month equal to 90% of the value of the work satisfactorily completed as received from the Owner. Written request for payment must be in the hands of the Contractor not later than the 1st of each month covering work satisfactorily completed during the previous month, in a form as required by the Contractor. *** The Subcontractor shall furnish to the Contractor a breakdown of costs of said Subcontract, showing monetary value of each item of labor and material, in accordance with terms of the General Contract, and in a form acceptable to the Contractor.

Compliance with Applicable Laws[.] *** Subcontractor will submit required compliance reports, including weekly certified payrolls as required by federal law."

The parties modified the contract terms between the time defendant sent plaintiff the initial proposal and August 25, 1998. However, defendant alleged that the arbitration and payroll terms were never revised, amended, or excluded. During the contract modification period, plaintiff commenced installation of the signs. A significant portion of the work was fully performed prior to receipt of the August 25, 1998, contract modification. Plaintiff points out that this contract contains a rider entitled "Instructions For Subcontractors," which provides the following instruction regarding payroll certification and Equal Employment Opportunity reporting requirements:

"You are advised that the Owner has a right to order funds withheld from payments equal to the amount of the labor expended in the event that these records are not completed." (Emphasis added.)

By letters dated September 9, 1998, November 16, 1998, and March 22, 1999, defendant acknowledged to plaintiff that the owner ,NIU, had approved all of plaintiff's work and had paid defendant for that work. Plaintiff alleged that approximately 90% of that work, or $47,163, represented the selling price of hardware and other goods that plaintiff had installed at the jobsite. Plaintiff alleged that the balance, $5,240, represented the labor component of plaintiff's work.

Plaintiff believed that its performance was based on a bid contract that was accepted by defendant, and plaintiff objected to the execution of the August 25, 1998, contract because it did not contain the correct scope of work. Plaintiff acknowledged that defendant was withholding the funds that defendant had received from NIU until defendant received a certified payroll from plaintiff. Plaintiff also acknowledged that the execution of the contract was a condition of payment.

Defendant alleged that, during plaintiff's performance of the contract, defendant repeatedly attempted to obtain certified payrolls from plaintiff. Defendant also alleged that it repeatedly advised plaintiff that payment would be issued only upon receipt of those certified payrolls. However, plaintiff never delivered ...

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