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Keefe v. Allied Home Mortgage Corporation

Court of Appeals of Illinois, Fifth District

November 28, 2016

ROSEMARY KEEFE, on Behalf of Herself and All Others Similarly Situated, Plaintiff-Appellant,
v.
ALLIED HOME MORTGAGE CORPORATION and ALLIED HOME MORTGAGE CAPITAL CORPORATION, Defendants-Appellees.

         Appeal from the Circuit Court of St. Clair County. No. 04-L-502 Honorable Vincent J. Lopinot, Judge, presiding.

          Attorneys for Appellant Jeffrey J. Lowe, James J. Rosemergy, Carey, Danis & Lowe

          Attorney for Appellees Michael A. Brockland, Cosgrove Law Group, LLC, Pierre Laclede Tower II

          JUSTICE CATES delivered the judgment of the court, with opinion. Justice Moore concurred in the judgment and opinion. Presiding Justice Schwarm dissented, with opinion.

          OPINION

          Honorable Judy L. Cates, Justices

         ¶ 1 The plaintiff, Rosemary Keefe, appeals from an order granting a motion to compel arbitration filed by defendants, Allied Home Mortgage Corporation and Allied Home Mortgage Capital Corporation. The plaintiff contends that the circuit court erred in finding that the parties' arbitration agreement was enforceable where the designated arbitrator was no longer able to conduct consumer arbitrations and where there was no showing that the designated procedures governing the arbitration agreement authorized the appointment of a substitute arbitrator. For reasons that follow, we reverse and remand.

         ¶ 2 BACKGROUND

         ¶ 3 In 1999, the plaintiff, Rosemary Keefe, contacted the defendants for assistance with the refinancing of a loan on her property in Berwyn, Illinois. The defendants were in the business of brokering mortgages and providing mortgage related services in several states in the United States, including Illinois. On May 18, 1999, the plaintiff signed several refinancing documents, which included an arbitration rider. Two months later, the parties closed on the loan.

         ¶ 4 On September 2, 2004, the plaintiff filed a class action complaint against the defendants. The plaintiff alleged that the defendants engaged third parties to provide certain loan-related services, such as credit reports and appraisals, and paid the fees charged for those services. The plaintiff further alleged after payment of the third-party fees, the defendants then charged the plaintiff, and similarly situated borrowers, sums in excess of those fees ("upcharges"), and then concealed the "upcharges" by failing to disclose the actual fees that the defendants had paid to the third parties. The plaintiff's complaint included counts asserting breach of fiduciary duty, breach of the covenant of good faith and fair dealing, unjust enrichment, and consumer fraud.

         ¶ 5 On December 15, 2004, the defendants filed a motion to compel arbitration and stay judicial proceedings based upon the arbitration rider. The plaintiff filed a memorandum in opposition. The plaintiff asserted that the arbitration rider was unenforceable because it was cost-prohibitive, unsupported by consideration, against public policy, and procedurally and substantively unconscionable. Over the next several months, the parties submitted additional oral and written arguments to the trial court. On July 18, 2007, the trial court denied the defendants' motion to compel arbitration. The court found that the arbitration rider was illusory and procedurally and substantively unconscionable. The defendants appealed. In an opinion issued on July 10, 2009, this court found that the arbitration rider was supported by adequate consideration but that the provision prohibiting class arbitrations was substantively unconscionable. Keefe v. Allied Home Mortgage Corp., 393 Ill.App.3d 226, 912 N.E.2d 310 (2009). This court also determined that the provision prohibiting class arbitrations was severable from the remainder of the arbitration rider, leaving the agreement to arbitrate in place. Keefe, 393 Ill.App.3d at 236, 912 N.E.2d at 320. The case was remanded to the circuit court with directions to sever the provision prohibiting class actions and to enforce the remainder of the arbitration clause.

         ¶ 6 Within days after the opinion was issued, the parties' chosen arbitrator, the National Arbitration Forum (NAF), became embroiled in a controversy. On July 14, 2009, the Minnesota Attorney General filed a complaint against the NAF, and alleged, among other things, that the NAF had systematically used arbitrators with pro-business biases, and thereby engaged in consumer fraud and deceptive trade practices. On July 28, 2009, the NAF entered into a consent decree with the Minnesota Attorney General, and agreed to stop accepting all consumer cases for arbitration. See Minnesota v. National Arbitration Forum, Inc., No. 27-CV-09-18550 (Minn. 4th Dist. Ct. July 17, 2009) (consent decree); In re National Arbitration Forum Trade Practices Litigation, 704 F.Supp.2d 832, 835 (D. Minn. 2010).

         ¶ 7 On September 23, 2009, the plaintiff filed a motion in the circuit court, and argued that the arbitration rider was unenforceable because the NAF was no longer able to arbitrate this dispute. On October 27, 2009, the defendants filed a memorandum in opposition. The defendants argued that the unavailability of the NAF did not render the arbitration rider unenforceable because the NAF was not designated as the exclusive arbitral forum and because the circuit court was authorized to appoint a substitute arbitrator under section 5 of the Federal Arbitration Act (FAA) (9 U.S.C. § 5 (Supp. III 2010)). On October 29, 2009, the plaintiff filed a reply and argued that the arbitration rider effectively designated the NAF as the exclusive arbitral forum and that no other provision in the rider authorized the selection or use of a substitute arbitrator. On January 7, 2011, the defendants filed a second motion to compel arbitration. On October 14, 2014, the circuit court granted the defendants' motion to compel arbitration. This appeal followed.

         ¶ 8 ANALYSIS

         ¶ 9 Agreements to arbitrate are favored as a matter of policy in Illinois and federally. QuickClick Loans, LLC v. Russell, 407 Ill.App.3d 46, 52, 943 N.E.2d 166, 172 (2011). Whenever possible, Illinois courts will construe arbitration agreements to uphold their validity. Salsitz v. Kreiss, 198 Ill.2d 1, 13, 761 N.E.2d 724, 731 (2001). This pro-arbitration policy, however, is not intended to render arbitration agreements more enforceable than other contracts, and it does not operate in disregard of the intent of the contracting parties. Carter v. SSC Odin Operating Co., 2012 IL 113204, 55, 976 N.E.2d 344; Ervin v. Nokia, Inc., 349 Ill.App.3d 508, 510, 812 N.E.2d 534, 537 (2004). Rather, arbitration agreements are to be enforced according to their terms, including those specifying the arbitral forum and the rules under which the arbitration will be conducted. 9 U.S.C. § 4 (Supp. III 2010); American Express Co. v. Italian Colors Restaurant, 570 U.S.,, 133 S.Ct. 2304, 2309 (2013).

         ¶ 10 Arbitration is consensual, and arbitration agreements, as creatures of contract, are construed under ordinary principles of contract law. Carr v. Gateway, Inc., 241 Ill.2d 15, 20, 944 N.E.2d 327, 329 (2011). Under ordinary contract principles, the primary objective is to give effect to the intent of the parties. Thompson v. Gordon, 241 Ill.2d 428, 441, 948 N.E.2d 39, 47 (2011). A contract must be construed as a whole, viewing each provision in light of the other provisions, rather than in isolation. Thompson, 241 Ill.2d at 441, 948 N.E.2d at 47. If the words in the contract are clear and unambiguous, they must be given their plain, ordinary and popular meaning. Central Illinois Light Co. v. Home Insurance Co., 213 Ill.2d 141, 153, 821 N.E.2d 206, 213 (2004). If the terms of the contract are reasonably susceptible of more than one meaning, they are ambiguous and will be strictly construed against the drafter. Central Illinois Light Co., 213 Ill.2d at 153, 821 N.E.2d at 213. An arbitration agreement will not be extended by ...


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