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THIRD DIVISION
September 24, 2003

This interlocutory appeal arises from an order of the circuit court of Cook County denyingplaintiffs', Acme-Wiley, Icon and Stonebridge, motion to stay arbitration of claims asserted bydefendant Sieg Buck.

The pertinent facts are as follows. Sieg Buck was hired by Icon as its chief executiveofficer in November of 2000. Buck and plaintiffs entered into an employment agreement whichset out such matters as defendant's base salary, annual bonuses, employee benefits, equityparticipation, etc. It further provided:

"SEVERANCE - In the event we terminate your employment forany reason other than Cause, the Company will continue, for atwelve month period, your base salary, medical benefits andinsurance, and provide reasonable outplacement services of yourchoice. Cause shall be defined for the purposes of this agreementas gross negligence, willful misconduct, fraud, or commission of afelony. It shall also include failure to apply your full business timeand best efforts to the requirements of the Company, failure toroutinely and openly communicate and collaborate withStonebridge's Operating partners on Company matters, and failureto implement the directives of Stonebridge's Operating partnersregarding the Company in a timely manner. Termination for Cause,other than for matters involving commission of a felony or fraud,will be preceded by written notification to you of Stonebridge'sconcerns and a single, 30-day opportunity for you to permanentlycure the issues of concern, after which no other opportunities forcure will be contractually required or provided.

DISPUTE RESOLUTION - Any dispute related to youremployment, performance or compensation shall be resolvedexclusively through arbitration, held in Chicago, Il. by and inaccordance with the rules of the American Arbitration Association. Decisions of the arbitrator shall be in accordance with applicablestate law and not based upon the principle of ex-aequo et bono. The arbitrator shall state the reason for any award and shall nothave the power to amend or modify this agreement. Theunsuccessful party shall pay all costs of arbitration, including costsof the other party."

In October of 2002, Icon terminated Buck for cause as defined in the employmentagreement. At that time, Icon offered Buck an opportunity to resign and tendered to him aseparation agreement, which offered severance compensation for Buck and provided:

"Releases: You agree to release Stonebridge Partners and itsportfolio companies as well as the Company and any of its affiliates,including all investors, lenders, advisors, partners, and employees,from any and all claims related to or arising from our associationand your employment. Likewise, Stonebridge Partners and itsportfolio companies as well as the Company and any of its affiliates,all as previously defined, agree to release you from any and all suchclaims, unless related to illegal or fraudulent actions uncoveredduring the term of this agreement."

Unlike the employment agreement, the separation agreement does not contain anarbitration clause with respect to dispute resolutions.

Defendant signed the separation agreement on October 24, 2002, and was compensatedby plaintiffs as per the terms of that agreement.

On November 19, 2002, defendant sent a letter to plaintiffs demanding additional lump-sum payments based upon the salary continuation obligations contained in the employmentagreement and declared that the separation agreement was unenforceable due to a lack ofconsideration and null and void because it was unconscionable and signed under duress and asnull.

Plaintiffs responded by letter urging defendant to retract his repudiation of the separationagreement and to honor it since he had agreed to its terms and signed it. They also advised himthat if they did not receive adequate assurances that he was going to honor the separationagreement, they would seek a declaratory judgment in the circuit court.

Thereafter, defendant commenced arbitration proceedings before the American ArbitrationAssociation (AAA) in Chicago, Illinois, in accordance with the terms of the original employmentagreement. The arbitration complaint alleged that Buck had been improperly terminated and libeled by plaintiffs in that Icon falsely stated that he inflated revenues in order to enhance hisbonus. Plaintiffs then filed a verified complaint in chancery court for declaratory relief andinjunctive relief, seeking to stay and permanently enjoin the arbitration proceedings on thegrounds that no agreement to arbitrate existed in the separation agreement. Plaintiffs also soughta declaration that the arbitration clause in the employment agreement did not apply to anydisputes regarding the separation agreement, which was a valid and enforceable contract. Inaddition, plaintiffs argued that by executing and receiving the benefits of the separationagreement, defendant had released any and all claims for severance payments pursuant to theterms of the employment agreement. Plaintiffs argued that the validity of the release containedwithin the separation agreement was a question of law to be decided by the court, not anarbitrator, and that defendant's libel claim was outside the scope of the arbitration clausecontained within the employment agreement.

The court denied plaintiffs' motion to stay arbitration as to Icon and Stonebridge andfound that the severance provision contained within the employment agreement requiredcompensation only in the event Icon terminated defendant, but that according to the terms of thesettlement agreement, defendant had not been terminated but had resigned instead, and that thequestion of whether there had been a resignation or a termination was a "dispute related to *** employment" to be determined by an arbitrator. The court further held that defendant's libel claimwas a dispute related to his employment, performance and compensation, which fell within thebroad scope of the arbitration provision contained within the employment agreement. The courtstayed the arbitration as to Acme-Wiley on the grounds that it was not a signatory to theemployment agreement. On the other hand, the court denied the stay as to Stonebridge on thegrounds that it was not clear whether it had been a signatory to the employment agreement.

Two issues have been raised for our consideration: (1) whether the circuit court erred inallowing defendant to pursue his claim in arbitration without first overcoming the validity of therelease agreement in court; and (2) whether it was error to require Stonebridge to arbitrate withBuck even though Stonebridge was not a signatory to the employment agreement.

In rendering its decision, the court relied on a federal labor law case, Niro v. FearnInternational, Inc., 827 F.2d 173 (7th Cir. 1987). In that case, plaintiff worked for defendant,Fearn International, Inc., and was represented in collective bargaining by his union. Fearn firedplaintiff for reporting to work while under the influence of alcohol or drugs, and the union filed agrievance on plaintiff's behalf protesting the discharge. After negotiations, the parties entered intoa settlement agreement pursuant to which plaintiff would be reinstated contingent upon hissuccessful completion of an alcohol abuse program. However, before completing that program,plaintiff was hospitalized for overdosing on PCP. Upon learning of plaintiff's use of PCP, Fearndeemed him in breach of the settlement agreement and terminated his employment for a secondtime. The union filed an action against Fearn to compel arbitration over the alleged breach of thesettlement agreement. The district court ordered arbitration over the alleged breach of thesettlement agreement, the second discharge. Fearn appealed, arguing that the alleged breach ofthe settlement agreement was not an arbitrable subject. The Seventh Circuit found in favor of theunion and held that a settlement agreement is an arbitrable subject when the underlying dispute isarbitrable, except in circumstances where the parties expressly exclude the settlement agreementfrom being arbitrated. The court went on to say:

"We begin with the axiom that 'arbitration is a matter ofcontract and a party cannot be required to submit to arbitration anydispute which he has not agreed so to submit.' [Citations.] Butarbitration is favored and should be ordered 'unless it may be saidwith positive assurance that the arbitration clause is not susceptibleof an interpretation that covers the asserted dispute.' [Citation.] Itis of course for the court to determine whether a dispute is subjectto arbitration, unless the parties have 'clearly and unmistakably'established that an arbitrator is to determine issues of arbitrability. We conclude that a settlement agreement is an arbitrable subjectwhen the underlying dispute is arbitrable, except in circumstanceswhere the parties expressly exclude the settlement agreement frombeing arbitrated. To hold otherwise would eviscerate the usefulnessof settlements reached in grievance and arbitration settings, bycomplicating what should be a relatively simple and cheapprocedure." Niro, 827 F.2d at 175.

The court stated that in uncertain situations the presumption should favor arbitrability andthat, if the parties desire that a settlement agreement should not be arbitrable, they may soprescribe. Fearn maintained, however, that the union had failed to pursue preliminary grievanceprocedures, but the court found that that alleged failure was an issue to be determined by thearbitrator, especially in view of the fact that the alleged violation of the settlement agreement bythe employee was a subject the parties had intended to be a matter of arbitration. The courtconcluded that once it is determined that the underlying dispute concerns a subject matter coveredby arbitration provisions, the court's only role is to order arbitration.

In the instant case, plaintiffs seek to distinguish Niro on the basis that it occurred withinthe confines of a collective bargaining context. They contend that Niro can only apply tocollective bargaining situations because to do otherwise would make it unworkable, since certainemployees would be exempt from the collective bargaining agreement's grievance and arbitrationprocedures simply because they had previously negotiated a settlement, which would defeat theentire purpose of the grievance scheme. They point out that the rule of Niro follows other laborrelations cases which recognize that settlement agreements entered into in the context of resolvinggrievances of union employees are really "but a small part of the larger collective bargainingagreement" (see L.O. Koven & Brother, Inc. v. Local Union No. 5767, 381 F.2d 196 (3rd Cir.1967); Harrison F. Blades, Inc. v. Jarman Memorial Hospital Building Fund, Inc., 109 Ill. App. 2d224, 227, 248 N.E.2d 289, 290-91 (1969)), and that Niro's rationale is inapplicable in anindividual employment context, such as the one we have here, because there is no ongoingemployer-union relationship. Furthermore, plaintiffs contend that the circuit court erred byapplying federal labor law to what is essentially an individual contract case which, in turn, isgoverned by ordinary state contract law.

The Illinois Uniform Arbitration Act (the Act) (710 ILCS 5/1 et seq. (West 2000))embodies a legislative policy favoring enforcement of agreements to arbitrate future disputes. Donaldson, Lufkin & Jenrette Futures, Inc., v. Barr, 124 Ill. 2d 435 (1988). Accordingly, the Actempowers the circuit court, upon application of a party to a dispute, to compel or stay arbitration,or to stay court action pending arbitration. 710 ILCS 5/2 (West 2000); United Cable TelevisionCorp. v. Northwest Illinois Cable Corp., 128 Ill. 2d 301, 306 (1989).

The courts of this state favor arbitration. Arbitration is regarded as an effective,expeditious, and cost-efficient method of dispute resolution. United Cable, 128 Ill. 2d at 306. Thus, wherever possible, the courts construe arbitration awards so as to uphold their validity. Rauh v. Rockford Products Corp., 143 Ill. 2d 377, 386 (1991). While arbitration is a favoredmethod of dispute resolution, the courts have consistently cautioned that an agreement toarbitrate is a matter of contract. Salsitz v. Kreiss, 198 Ill. 2d 1 (2001). The United StatesSupreme Court has determined that "arbitration is a matter of contract and a party cannot berequired to submit to arbitration any dispute which he has not agreed so to submit." UnitedSteelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 4 L. Ed 2d.1409, 1417, 80 S. Ct. 1347, 1353 (1960). However, the question whether the parties havesubmitted a particular dispute to arbitration, i.e., the "question of arbitrability," is an issue forjudicial determination unless the parties clearly and unmistakably provide otherwise. Howsam v.Dean Witter Reynolds, Inc., 537 U.S. __, 154 L. Ed 2d 491, 123 S. Ct. 588 (2002). The partiesto an agreement are bound to arbitrate only those issues they have agreed to arbitrate, as shownby the clear language of the agreement and their intentions expressed in that language. Rauh, 143Ill. 2d at 387.

In an interlocutory appeal, the scope of review is normally limited to an examination ofwhether the trial court abused its discretion in granting or refusing the requested interlocutoryrelief. Where the question presented is one of law, a reviewing court determines it independentlyof the trial court's judgment. In re Lawrence M., 172 Ill. 2d 523, 526 (1996). Therefore, ourstandard of review is de novo.

We are unable to find any Illinois cases that squarely address the particular issue withwhich we are presented. Therefore, we must turn to other jurisdictions for some guidance. InRiley Manufacturing Co. v. Anchor Glass Container Corp., 157 F.3d 775 (10th Cir. 1998),plaintiff, a manufacturer of "sun tea" jars with copyrighted ornamental designs stenciled on glassand plastic containers, and defendant, a supplier of glass jars, entered into a manufacturingagreement whereby plaintiff agreed to provide all of defendant's needs for sun tea jars anddefendant agreed to use reasonable efforts to market plaintiff's sun tea products. Containedwithin this agreement was an arbitration clause to the effect that the parties agreed to submit anydisputes to arbitration in Tampa, Florida. That agreement expired by its own terms and was notrenewed. Subsequently, plaintiff discovered that defendant was selling various sun tea jars whichincorporated several ornamental designs allegedly copied from its designs. Plaintiff threatened tofile a copyright lawsuit against defendant, but the parties resolved their dispute by entering into asettlement agreement. Under that agreement plaintiff agreed to drop its threatened copyrightlawsuit, and defendant agreed to drop any threatened counterclaims. The agreement included arelease, which stated: "Anchor fully and forever releases and discharges Riley and its respectiveagents *** of and from any and all responsibilities, duties, obligations, claims, demands, debts,sums of money, accounts or causes of action or actions *** which Anchor or anyone claimingunder, by or through it now has or could ever have become entitled to assert against any of theReleasees by reason of the claims raised in the Threatened Lawsuit or defenses thereto, or arisingout of any of the following matters existing between the parties ***." Riley, 157 F.3d at 777 n.3.Also contained in that agreement was a merger clause, which read as follows: "This Agreementconstitutes the entire agreement of the parties hereto and cancels, terminates and supersedes anyand all prior representations and agreements relating to the subject matter thereof." Riley, 157F.3d at 778. It should be noted that the settlement agreement did not include an arbitrationprovision, nor make reference to the arbitration clause in the manufacturing agreement or mentionany other dispute resolution mechanisms.

Eight months later, plaintiff discovered that defendant was selling sun tea jars that plaintiffbelieved infringed upon three of its designs. Accordingly, plaintiff filed a lawsuit in federal court. In response, defendant filed a motion to dismiss or to stay that lawsuit on the grounds that it wasinvoking the arbitration clause of the manufacturing agreement. The district court ruled that therelease in the settlement agreement released any obligation of plaintiff found in the manufacturingagreement to submit its claims to arbitration. The court also cited the merger clause of thesettlement agreement as "buttressing" its conclusion.

The Tenth Circuit held that, while the settlement agreement did not terminate thearbitration clause in the manufacturing agreement in toto as to certain specified items, the validityand enforceability of the arbitration agreement was for the courts to decide. Specifically, thecourt held:

"[T]he existence of the merger clause in the SettlementAgreement raises at least an ambiguity on the question of the intentof the parties to allow an arbitrator to decide the validity of the1991 arbitration clause. The merger clause expressly states that the Settlement Agreement 'cancels, terminates and supersedes' any prior agreement relating to the subject matter of the Manufacturing Agreement. *** [W]e do believe that this language raises legitimate questions as to the continuing existence and scope of the arbitration clause in the Manufacturing Agreement. Furthermore, the Settlement Agreement is noteworthy for its lack of an arbitration clause. Thus, because the Settlement Agreement creates an ambiguity on the question of arbitrability - - an ambiguity that the Settlement Agreement does not expressly delegate to an arbitrator for resolution - - we find that the question of whether an agreement to arbitrate continues to exist for Riley and Anchor Glass is for the courts." Riley, 157 F.3d at 780-81.

Similarly, in the case of Borough of Atlantic Highlands v. Eagle Enterprises, Inc., 312 N.J.Super. 188, 711 A.2d 407 (1998), the parties entered into a construction contract for theconstruction of an emergency services building. That contract contained an arbitration clausewhich provided, in pertinent part:

"Any controversy or Claim arising out of or related to theContract, or the breach thereof, shall be settled by arbitration." Borough of Atlantic, 312 N.J. Super. at 193, 711 A.2d at 409.

A dispute arose over the delay of the project, and plaintiff threatened to assess $60,000 asdamages. However, the parties resolved their differences, resulting in the preparation andexecution of a "Final Agreement" which read as follows:

"[The parties] hereby agree that the $12,500 deduction(credit) *** is in full settlement of any and all claims by either partyfor damages by reason of delay or late completion of the project.*** [The parties] agree *** this Agreement constitutes the full andfinal satisfaction of all claims for compensation and neither partyhas any further claims for compensation or damages against theother." (Emphasis added.) Borough of Atlantic, 312 N.J. Super. at191, 711 A.2d at 408-09.

Two months after the execution of the Final Agreement, defendant rescinded it in a letteraddressed to plaintiff alleging "duress" as the reason for its prior acceptance and filed its formaldemand for arbitration in accordance with the terms of the original construction contract. Thatdemand did not mention the Final Agreement or defendant's claim that it was induced to executethe agreement by reason of fraud or economic duress. Plaintiff instituted an action to enjoin thearbitration proceedings. The trial court held that the Final Agreement did not abrogate the initialarbitration clause. In reversing the trial court, the New Jersey appellate court found that theoriginal construction contract, which included the arbitration clause, was knowingly canceled andsettled-out by virtue of the Final Agreement in clear and unambiguous language. The court wenton to say:

"[T]here is no claim of fraud or economic duress in theinducement of the original construction contract between plaintiffand defendant. Defendant's claim relates to fraud or economicduress solely in the inducement of the Final Agreement which,significantly, does not contain an arbitration clause. Hence ***defendant's claim, since it only seeks to vitiate an agreement whichdoes not contain an arbitration clause, must first be addressed in acourt of general jurisdiction. *** If it is found that the FinalAgreement was induced by fraud or economic duress, thendefendant may arbitrate its claim for additional monies inaccordance with its demand for arbitration.

In sum, our determination is that the parties never agreed tosubmit this particular dispute to arbitration. The Final Agreement,which we assume to be binding, unambiguously on its face wasintended to operate as a general release. Nothing was left forarbitration. Any change in this posture of the case must come froma judicial ruling." Borough of Atlantic, 312 N.J. Super. at 194, 711A.2d at 410.

We find the rulings in Riley and Borough to be persuasive. In the case at bar, thesettlement agreement states that defendant agrees to release any and all claims against plaintiffrelating to or arising from their association and defendant's employment. That language, whichoperates as a general release, is clear and unambiguous, and we are at a loss as to how we mightinterpret it to mean anything other than that the original employment agreement was to beregarded as history. See Borough of Atlantic, 312 N.J. Super. at 193, 711 A.2d at 410. Furthermore, the settlement agreement does not contain an arbitration clause, so it is clear thatthe parties never intended to submit this particular dispute to arbitration. Therefore, since Buck isseeking to vitiate the settlement agreement, which does not contain an arbitration clause, his claimmust first be addressed in court, not by an arbitrator. To put it another way, the question ofwhether an agreement to arbitrate continues to exist for plaintiffs and Buck is a question to beresolved by the court, not an arbitrator.

We agree with plaintiffs' analysis that Niro and other labor law cases must be read withinthe context of the collective bargaining situation. If there is an outstanding collective bargainingagreement between a union and an employer, obviously the terms of the agreement as it relates toarbitration must remain in force despite the existence of an individual settlement agreement. However, in a private employment situation such as we have here, there is no ongoing employer-union relationship wherein an individual settlement agreement could arguably extinguish theoverarching agreement to arbitrate between an employer and a union contained within a collectivebargaining agreement.

We, therefore, reverse and remand this case with instructions that the circuit court is toaddress Buck's claims that he entered into the settlement agreement under duress. If the courtfinds in favor of Buck, thereby vitiating the settlement agreement, it is instructed to once againdeny plaintiff's motion to stay the arbitration proceedings, and the matter may proceed toarbitration in accordance with the terms of the original employment agreement. If, however, thecourt finds Buck's claims of duress in the inducement of the settlement agreement andunconscionability to be without merit and that the settlement agreement is viable and in force, it isinstructed to grant plaintiff's motion to stay the arbitration proceedings.

Based upon our ruling, we need not address plaintiffs' second issue. However, in theevent the trial court determines that the settlement agreement is vitiated by reason of duress in theinducement and that the matter should proceed to arbitration, it is advised to conduct anevidentiary hearing with respect to Stonebridge and its status as a signatory to the employmentagreement. When the trial court determined that Stonebridge could be bound by the employmentagreement, its stated reason was that it was not clear whether Robert Raziano, the chairman ofthe board of Icon, had signed the employment agreement on behalf of Stonebridge and Icon. Plaintiffs argue on appeal that Raziano is the chairman of the board of Icon but not ofStonebridge. However, there is insufficient evidence contained in this record for us to resolve this issue.

Accordingly, the judgment of the circuit court is reversed and remanded with instructions.

Reversed and remanded.

HOFFMAN, P.J., and KARNEZIS, J., concur.