2013 IL App (1st) 120687
Ill. App. Ct.2013Background
- In 2002 FFR plaintiffs retained Edward T. Joyce & Associates under a contingent-fee retainer (25%) to pursue claims related to EPS stock; the agreement included a broad arbitration clause and required plaintiff approval of settlements.
- After arbitration against EPS, EPS’s insurers refused to pay; Morgan Lewis was retained as lead coverage counsel and Joyce provided limited assistance, later charging both hourly fees and a contingent fee for insurance-recovery work.
- Plaintiffs alleged Joyce changed the fee arrangement without proper written disclosure or advice, wrongfully charged fees, and committed conversion and fiduciary breaches; Joyce demanded arbitration and counterclaimed in quantum meruit.
- Arbitrator Robert E. Rose held a hearing, found the 2007 fee arrangement voidable for undue influence and set aside the new retainer, awarded plaintiffs refunds and allocated Morgan Lewis fees (plaintiffs 75% / defendant 25%), and ordered Joyce to pay $405,674.87 as a sanction plus arbitration costs; final award totaled $628,527.47 (plus later court-added costs).
- Joyce sought adjustments post-award (arguing actual fees received were $210,007.94 and claiming a $400,000 credit), which the arbitrator rejected as untimely and insufficiently proven; the circuit court confirmed the award and denied vacatur/modification, and Joyce appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether arbitrator exceeded authority by deciding claims beyond 2002 retainer | Plaintiffs argued their breach of fiduciary duty and related claims arose from or related to the 2002 agreement and were encompassed by its arbitration clause | Joyce argued plaintiffs’ claims primarily concerned a separate 2007 retainer (without arbitration clause), so arbitrator lacked authority to decide them | Waiver: Joyce failed to timely object in arbitration; alternatively, arbitration clause was broad enough—arbitrator did not exceed authority (affirmed) |
| Whether arbitrator refused to hear material evidence on damages | Plaintiffs argued arbitrator considered evidence and explained rejections; damages were based on proved deductions from settlement proceeds | Joyce argued arbitrator refused to accept evidence of actual fees received and a $400,000 credit, depriving him of a hearing on damages | Arbitrator considered submissions, rejected Joyce’s proffered setoff as unproven and untimely; no refusal to hear evidence (affirmed) |
| Whether damages award should be modified to reflect Joyce’s asserted actual receipts/percentage | Plaintiffs maintained award reflected proven deductions and equitable damages caused by Joyce’s conduct | Joyce asked reduction to reflect $210,007.94 received and lower percentage interest, contending arithmetic/computation errors | Argument forfeited for lack of legal citation; arbitrator’s factual findings upheld; no modification granted |
| Whether arbitration costs award was improper or limited to arbitrator fees | Plaintiffs asserted they prevailed on breach of fiduciary duty and were entitled to all arbitration costs under the retainer clause | Joyce argued “costs of arbitration” meant only JAMS/arbitrator fees, and plaintiffs didn’t prevail on contract/conversion counts | Court interpreted clause broadly; plaintiffs were prevailing party; arbitrator’s award of $72,725.45 in costs was permissible and not error (affirmed) |
Key Cases Cited
- TruServ Corp. v. Ernst & Young LLP, 376 Ill. App. 3d 218 (standard of review for arbitrator authority)
- First Health Group Corp. v. Ruddick, 393 Ill. App. 3d 40 (timeliness required to preserve arbitrability objections)
- Salsitz v. Kreiss, 198 Ill. 2d 1 (timely objection preserves right to challenge arbitrability despite participation)
- Vascular & General Surgical Assocs., Ltd. v. Loiterman, 234 Ill. App. 3d 1 (broad interpretation of arbitration clauses and arbitrator authority)
- Rauh v. Rockford Products Corp., 143 Ill. 2d 377 (no vacatur where record does not show arbitrator excluded material evidence)
- Dowd & Dowd, Ltd. v. Gleason, 181 Ill. 2d 460 (ambiguities in contract construed against drafter)