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Radiant Star Enterprises, L.L.C. v. Metropolis Condominium Association

Court of Appeals of Illinois, First District, Fourth Division

June 7, 2018


          Appeal from the Circuit Court of Cook County. No. 15 CH 15357 The Honorable Michael T. Mullen, Judge Presiding.

          GORDON JUSTICE delivered the judgment of the court, with opinion. Presiding Justice Burke and Justice McBride concurred in the judgment and opinion.



         ¶ 1 The instant appeal arises from cross-motions for summary judgment filed by plaintiff Radiant Star Enterprises, L.L.C., and defendant Metropolis Condominium Association and involves a single question: if a party has allegedly breached an arbitration clause with respect to one dispute, may that same party nevertheless demand arbitration on a different, unrelated, dispute? The trial court determined that it could under the language of the parties' arbitration agreement, granting summary judgment in favor of plaintiff and denying defendant's cross-motion for summary judgment. For the reasons that follow, we affirm the trial court's judgment.

         ¶ 2 BACKGROUND

         ¶ 3 I. Complaint

         ¶ 4 On October 19, 2015, plaintiff filed a complaint for declaratory judgment to enforce an arbitration clause, seeking a ruling that defendant was required to arbitrate a particular dispute between plaintiff and defendant. The complaint alleges that plaintiff and defendant were owners of portions of the building located at 8 West Monroe Street[1] in Chicago. The building was divided into three zones-the "Residential Parcel, " the "Retail Parcel, " and the "Office Parcel." Plaintiff owned the Office Parcel, while defendant represented the owners of the Residential Parcel, which was comprised of condominium units.[2] The Retail Parcel consisted of the first two floors of the building, the Office Parcel consisted of the third floor, and the Residential Parcel consisted of all floors from the fourth floor to the top of the building. The relationship between the respective owners was governed by a document entitled the "Reciprocal Easement and Operating Agreement" (REA). The complaint alleges that "[t]he Retail Owner and the Office Owner own their respective portions of the Building, but they are not members of the Defendant. Because it owns a large majority of the Building and controls most of the common elements and building systems, as a practical matter the Residential Owner, embodied in and represented by the Defendant, has more power and more responsibilities pursuant to the REA." The complaint alleges that plaintiff began its efforts to build out the Office Parcel for its business use in January 2013 and that the dispute between the parties was the result of defendant's interference with deliveries of mail, packages, and materials to the Office Parcel; access to the building's utilities and systems; and electronic access to the building's elevator systems.

         ¶ 5 The complaint alleges that the REA required mandatory arbitration to resolve disputes between the parties, and on July 27, 2015, plaintiff made a formal demand for arbitration. However, on August 12, 2015, defendant responded, stating that it "reject[ed]" plaintiff's demand for arbitration. The sole count of the complaint was for declaratory judgment and sought a finding that the parties were bound by the terms of the REA and that defendant was obligated to arbitrate the dispute.

         ¶ 6 Attached to the complaint were excerpts from the REA, including article 13, which was entitled "Arbitration." Section 13.1 was entitled "Disputes Subject to Arbitration" and provided:

"Each of the questions, differences, disputes, claims or controversies arising among or between Owners under this Agreement which shall not be resolved within forty five (45) days after it shall arise (or other such shorter or longer time period expressly provided herein), shall be submitted for arbitration (including, without limitation, any matter expressly made an Arbitrable Dispute or subject to arbitration under this ARTICLE 13 by the terms of this Agreement). Notwithstanding anything to the contrary herein, in no event shall any arbitration under this ARTICLE 13 result in the change in the respective cost sharing percentages set forth in this Agreement."

         ¶ 7 Section 13.2 was entitled "Arbitration Procedure" and set forth the procedure for arbitration proceedings. Under this section, "[i]n the event of an Arbitrable Dispute, any Owner involved in the Arbitrable Dispute shall have the right to commence arbitration by written notice to the other Owners." Within seven days of the delivery of the notice, each of the owners involved in the arbitration was required to appoint one attorney to represent the owner in connection with the dispute; the two owner attorneys then collectively appointed one independent attorney and the three appointed attorneys comprised the arbitration panel. Within 30 days of the appointment of the third attorney, the arbitration panel was required to render its decision regarding the dispute. Section 13.2 also provided that "Owners may not seek injunctive relief in the arbitration." More importantly, section 13.2(f) provided:

"The decision of the Panel, and any award of the Panel, shall be final, binding upon the Owners and unappealable, and judgment thereon shall be entered by any court of competent jurisdiction. Failure to comply with the decision of the Panel shall be deemed a default under this Agreement. Any award including payment of delinquent amounts shall include interest on such delinquent accounts at the rate set forth in Section 12.4."

         ¶ 8 Also attached to the complaint was a letter dated July 27, 2015, from plaintiff to defendant, exercising plaintiff's right to arbitration with respect to disputes concerning access to utilities, mail and package delivery, and elevator access. The letter also contained a copy of an airbill from FedEx, showing that the letter had been sent via overnight delivery on July 27, 2015.

         ¶ 9 II. Motion to Dismiss

         ¶ 10 On November 16, 2015, defendant filed a motion to dismiss the complaint pursuant to section 2-619(a)(9) of the Code of Civil Procedure (Code) (735 ILCS 5/2-619(a)(9) (West 2014)), arguing that plaintiff had forfeited its right to rely on the REA's arbitration provision because plaintiff had failed to comply with a recent arbitration award, thereby expressly breaching the arbitration provision. Defendant argued that "[plaintiff's] breach constitutes a repudiation and default of that provision. As a result, [plaintiff] cannot enforce the arbitration provision of the REA to compel arbitration of a new dispute. Therefore, its complaint to compel arbitration should be dismissed."

         ¶ 11 Defendant claimed that plaintiff and defendant had engaged in arbitration in March 2015 with respect to disputes concerning plaintiff's buildout of the Office Parcel and that an arbitration award had been entered on April 8, 2015. According to defendant, while defendant complied with the award, plaintiff did not. Instead, plaintiff filed a petition to vacate the award in federal district court and, when the district court confirmed the award, plaintiff filed an appeal to the Seventh Circuit Court of Appeals. When plaintiff sent a demand to arbitrate the new disputes, defendant advised plaintiff that plaintiff's refusal to comply with the earlier arbitration award was a breach of the arbitration provision and that defendant would not participate in any further arbitration proceedings until plaintiff complied with the earlier award.

         ¶ 12 Attached to the motion to dismiss was a copy of an arbitration award, dated April 6, 2015.[3] The award indicated that the panel considered four categories of potential breaches: (1) the sewer pipes; (2) the heating, ventilation, and air conditioning (HVAC) system; (3) the third-floor windows; and (4) ingress/egress. With respect to the issue of sewer pipes, the panel ordered that defendant was to obtain "a complete survey of all the ceiling pipes existing on the third floor, at [defendant's] own expense, and to provide the same to [plaintiff]. Then [defendant] must pay for the cost of any necessary repairs." With respect to the issue of the HVAC system, the panel found that defendant had no obligation to supply the Office Parcel with an HVAC system and that the cost of improvements to the Office Parcel belonged exclusively to plaintiff.

         ¶ 13 With respect to the issue of the windows, the panel noted that the REA "is not a drafting masterpiece" but that, pursuant to its terms, plaintiff bore the cost of repairing and replacing the windows and "the evidence is undisputed that the remaining not yet replaced third floor windows are hazardous and must be immediately replaced." Finally, with respect to the issue of ingress and egress, the panel found that defendant "failed to reasonably cooperate with [plaintiff] in developing an appropriate scaffolding and Traffic Plan, as required by both Articles 16.1(b)(viii) and 16.1(b)(ix) and Article 3.3. [Defendant] was obligated to cooperate pursuant to the REA as well as under the common law doctrine of good faith and fair dealing implied in any contract." The panel continued: "The panel thus orders that Metropolis Exhibit 24 is to be executed by both parties within seven (7) calendar days, from the date of the entry of this Award, and will be the Traffic Plan adopted for the remainder of the construction of the project."[4]

         ¶ 14 The panel also ordered defendant to "immediately send notice to the Alderman that [defendant] withdraws its objections to any of [plaintiff's] permits." Finally, the panel ordered that plaintiff "must commence to immediately thereafter, construct scaffolding on Monroe Street and then, replace the third floor windows, to provide safety to the public, as well as residents of the [building] and workers and delivery persons to this building. If [plaintiff] fails, for any reason, to complete this replacement of the windows, [defendant] shall do so and shall be entitled to payment by [plaintiff] pursuant to Exhibit 7.6(cc), plus interest accruing thereon." As a final matter, the panel found that both parties failed to establish any damages and declined to enter a monetary award to either party.

         ¶ 15 Also attached to the motion to dismiss was a copy of an August 24, 2015, order from the federal district court, denying plaintiff's petition to vacate the arbitration award and granting defendant's cross-motion to confirm the award, and a September 21, 2015, notice of appeal to the Seventh Circuit Court of Appeals.

         ¶ 16 In response to the motion to dismiss, plaintiff claimed that it had complied with the earlier arbitration award. It claimed that it replaced the third floor windows, installed its own HVAC system, and bore the costs of those improvements. Plaintiff further claimed that "[i]n the course of the project, deliveries were made in accordance with the City-issued permits and the essential terms of the Traffic Management Plan were followed, although [plaintiff] did not formally sign off on it." Plaintiff claimed that "[w]hether this compliance was sufficiently strict is beside the point, because with construction complete, the Award's requirement that 'the parties' 'sign and implement' the Traffic Management Plan 'for the remainder of the construction project' became moot." Furthermore, plaintiff claimed that defendant had actually failed to comply with the arbitration award because defendant had failed to properly repair the sewer lines, as it was required to do under the award. Finally, plaintiff claimed that its seeking judicial review of the arbitration award did not violate the REA and did not preclude further arbitrations because both Illinois and federal law permitted judicial review of "final and unappealable" arbitration awards. Plaintiff also claimed that any issues concerning the appealability of the award was nevertheless moot, because it had chosen to dismiss the federal appeal.

         ¶ 17 Attached to the response was the affidavit of Duane Varan, plaintiff's principal, who averred that plaintiff complied with the arbitration award by replacing the third floor windows and installing its own HVAC system, both at its own expense. Varan averred that, with respect to the traffic management plan, "the Award required that [plaintiff] adopt the Traffic Management Plan 'for the remainder of the construction project.' [Plaintiff's] construction project is now complete, and there is no longer any need for a TMP. The proposed TMP was designed to address situations wherein construction deliveries would temporarily block access to the building's parking garage. The TMP issue has been mooted by the completion of [the] third floor build out." Varan further averred that the award required defendant to repair the sewer piping for the building, which it had not done. Varan averred that "[plaintiff] has registered complaints to [defendant] that the repairs undertaken by [defendant] to repair the sewer lines are shoddy, and that the [defendant's] sewer lines continue to leak. Despite these complaints, [defendant] has refused to repair the sewer lines, as ordered by the Award, at a time or times that do not interfere with [plaintiff's] business."

         ¶ 18 In its reply in support of the motion to dismiss, defendant claimed, inter alia, that plaintiff had not replaced the windows as plaintiff claimed but "has replaced only the glass window panes in the Office Parcel. [Citation.] It has not replaced any of the other dilapidated window components as required by the April 8th award. [Citation.] Indeed, the failing frames, systems, joints, and seals remain on windows throughout the Office Parcel." Defendant also clarified that "[plaintiff's] appeal to the Seventh Circuit was precluded by the REA and therefore a material breach. [Citation.] [Defendant] does not argue that the REA's arbitration provision precludes all judicial review, as [plaintiff] suggests." (Emphasis in original.)

         ¶ 19 On May 26, 2016, the trial court denied defendant's motion to dismiss.

         ¶ 20 III. Answer and Affirmative Defenses

         ¶ 21 On June 30, 2016, defendant filed its answer and affirmative defenses. Defendant raised three affirmative defenses. The first was for material breach and alleged that "[t]o date, [plaintiff] has failed to fully replace the Office Parcel Window Systems, as instructed by the arbitrators' April 8th award. It has thus failed to comply with that award and is in material breach of the REA's arbitration provision." Thus, defendant alleged that plaintiff was "precluded from invoking the arbitration provision of the REA to compel arbitration of new disputes while it materially breaches that provision." The second affirmative defense was for default and alleged that plaintiff had failed to comply with the arbitration award and "[i]nstead, [plaintiff] filed a petition to vacate the April 8th award in federal court, " where the arbitration award was confirmed. Defendant alleged that plaintiff "cannot enforce the arbitration provision of the REA now to compel arbitration of new disputes while it is in default." The third affirmative defense was for estoppel and alleged that on February 19, 2016, plaintiff filed a lawsuit in the circuit court of Cook County, in which it requested the court to resolve certain disputes for which it had not sought arbitration. Defendant thus alleged that plaintiff was "estopped from asserting that the arbitration provision of the REA requires arbitration of all disputes between Building Owners."

         ¶ 22 On July 15, 2016, plaintiff filed an answer to defendant's affirmative defenses, in which it alleged that the arbitration award required plaintiff to replace the "windows, " not the "window systems, " as defendant alleged. Plaintiff also alleged that it had replaced the windows as required by the arbitration award. Plaintiff admitted that it had filed a lawsuit in the circuit court of Cook County, which sought a temporary restraining order with respect to the issue of access to satellite TV facilities, and pointed to a provision in the REA indicating that owners were not permitted to seek injunctive relief in arbitration. Plaintiff further alleged that defendant consented to the jurisdiction of the court and that the case was resolved by the entry of an order negotiated between plaintiff and defendant, which occurred after the court had "specifically rejected [defendant's] argument that [plaintiff] was required to seek arbitration."

         ¶ 23 IV. Motions for Summary Judgment

         ¶ 24 A. Plaintiff's Motion

         ¶ 25 On August 3, 2016, plaintiff filed a motion for summary judgment, claiming that the instant dispute was arbitrable under the language of the REA, that plaintiff had "undisputedly" satisfied the conditions in the REA for arbitrating a dispute, and that defendant's affirmative defenses "have no factual or legal merit, and they are essentially the same as the arguments rejected by [the trial court] in denying the Motion to Dismiss."

         ¶ 26 Attached to the motion for summary judgment were a number of exhibits, including the report of Lyle Hill, the managing director of Keytech North America, a company that provided research and technical services focusing on the glass and metal industry. Hill's report was in the form of a December 16, 2014, letter to Adam Zarafshani of Panache Development & Construction, Inc. (Panache), plaintiff's general contractor, and provided:

"In follow up of our meeting yesterday at the above referenced site, I want to go on record as stating that I feel the glass condition on the south elevation overlooking Monroe Street is extremely hazardous. I put a thickness meter on all of the glass that I could reach and the thickest of the readings that I got indicated that the glass is ¼-inch thick. None of the glass was labeled as being safety glass of any type and should one of these lites break, anyone walking below at the time could potentially be seriously hurt. Minimally, a safety film should be applied to these pieces of glass as soon as possible. Ideally, a new framing system with safety glass would be installed providing both increased energy efficiencies as well as a much safer situation.
The fifth opening from the west on the south elevation (which has not been split with a division bar) is of primary concern to me. This piece of glass is approximately 122" wide by 129" in height and is a ¼-inch piece of monolithic annealed plate glass which doesn't even come close to complying with wind load requirements as per city code. While none of the glazed openings are adequately secure, this particular lite of glass which is over 100 square feet truly concerns me.
These glazed openings are simply not safe. My recommendation is that all of them be replaced with proper framing and glass that is in compliance with city code ...

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