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SIXTH DIVISION

NOVEMBER 13, 1998

No. 1-97-0297

PRESIDING JUSTICE CAMPBELL delivered the opinion of the court:

Plaintiff, Father & Sons, Inc. (Father & Sons), an Illinois corporation, appeals from an order ofthe circuit court of Cook County denying its petition to vacate an arbitration award made in favorof defendants, Joseph and Christine Taylor (the Taylors), pursuant to section 12 of the UniformArbitration Act. 710 ILCS 5/12, et. seq. (West 1996). On appeal, Father & Sons contends that thetrial court erred in denying its petition to vacate the arbitration award and in confirming theaward in that: (1) the arbitrator improperly determined that Father & Sons violated the IllinoisConsumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) 815 ILCS505/10a(e) (West 1996); (2) the arbitrator exceeded his authority in awarding attorney fees; and(3) the arbitrator violated both the rules of the American Arbitration Association and due processby barring crucial testimony at the arbitration hearing. For the following reasons, we affirm thejudgment of the trial court.

The record reveals the following relevant facts. On December 21, 1990, the Taylors entered intoa construction contract (contract) with Father & Sons to construct a room addition on their homelocated 1409 52nd Place, LaGrange Highlands, Illinois, for approximately $42,000. The contractcontained the following arbitration provision:

"Any controversy or claim arising out of or relating to this contract or the breach thereofshall be settled by arbitration in accordance with the Construction Industry ArbitrationRules of the American Arbitration Association and judgment upon the award rendered bythe Arbitrator(s) may be entered in any Court having jurisdiction thereof."

As of July 1991, the Taylors had paid Father & Sons approximately $24,000 on the contractprice. Father & Sons failed to complete the work in accordance with the contract, and onFebruary 18, 1992, the parties entered into a second contract. The second contract incorporatedthe first contract, and detailed numerous breaches of the first contract. The second contractrequired Father & Sons to complete the work for the remaining balance of $19,215.

On September 22, 1992, Father & Sons filed its first of three complaints against the Taylors inthe Fifth Municipal District for their refusal to pay the balance allegedly due under the secondcontract. The trial court dismissed the complaint on Father & Sons motion for voluntarydismissal on November 16, 1992.⁽¹⁾ On June 29, 1993, Father & Sons filed its "First AmendedComplaint" in the Fourth Municipal District for breach of contract and unjust enrichment.⁽²⁾

On May 11, 1994, the Taylors filed a five-count counterclaim for breach of contract, breach ofimplied warranty, breach of express warranty, common law fraud and statutory fraud, allconcerning Father & Sons' failure to properly complete the work for which the Taylorscontracted.⁽³⁾ The trial court dismissed Father & Sons ' first amended complaint with prejudice onJuly 8, 1994, while the Taylors' counterclaim remained pending.

On March 21, 1995, Father & Sons moved to compel arbitration of the pending matters, and theTaylors objected. On June 9, 1995, the Fourth Municipal District transferred all pending mattersto the American Arbitration Association (AAA). The transfer order provided as follows:

"[A]ll matters presently pending before this court will go to arbitration and this action isstayed pending resolution of the arbitration proceedings. If any matters are not resolved bythe arbitrator in his final decision they can return to this court."

On December 18, 1995, prior to the commencement of the arbitration proceeding, the arbitrator,Harvey X. Koloms, ruled that he would not hear arguments relating to Father & Sons' previouslydismissed complaint against the Taylors or relating to several pending motions for fees and costsconcerning attorney conduct during discovery, as these matters were not the proper subject of thearbitration. On January 10, 1996, Father & Sons sought an order from the Fourth MunicipalDistrict requiring the arbitrator to hear Father & Sons' previously dismissed complaint. The trialcourt refused to rule on the motion, but the Taylors agreed to allow the arbitrator to hear Father &Sons' complaint in an effort to prevent further delay by the possibility of an interlocutory appeal.

The arbitration hearing proceeded on February 7, 1996, and concluded on March 5, 1996. OnMay 20, following the submission of post-trial memoranda the arbitrator returned an award infavor of the Taylors and against Father & Sons on all counts. The arbitrator made several specialfindings, including, inter alia, that Father & Sons failed to complete all the work required by thecontracts with the Taylors in a good and workmanlike manner, and therefore materially breachedthe contracts; and that Father & Sons' work was so defective, deficient, incomplete, negligent andincompetent, that the construction materially decreased the fair value of the Taylors' home,resulting in the home becoming structurally unsound and dangerous.

The arbitrator further found that Father & Sons, by and through its agent, Ronald Kafka (Kafka),engaged in deceptive acts and practices in violation of the Consumer Fraud Act, and that thepreponderance of the evidence proved that Kafka was not merely a sales representative, but ratherexercised and maintained substantial control and direction over the affairs, policies, andoperations of Father & Sons. The arbitrator therefore declared Kafka principally responsible forthe deceptive acts and practices of Father & Sons found to be violations of the Consumer FraudAct.

The arbitrator awarded the Taylors $40,000 to remedy the deficient design and defects in theirhome, and $22,006 in litigation costs for services rendered by architectural and constructionengineering consultants for a total judgment to the Taylors of $62,006. The arbitrator alsoawarded $75,000 to the Taylors' attorneys for fees. In addition, the arbitrator ordered Father &Sons to bear the administrative fees and expenses of the AAA for a total of $1,400. The arbitratorfurther declared all mechanic liens filed against the home of the Taylors by Father & Sons to benull and void.

Father & Sons filed a petition to vacate the Arbitration Award in the Chancery Division of theCircuit Court of Cook County. On December 16, 1996, the circuit court entered an order denyingFather & Sons' petition to vacate the order of the arbitrator, and confirmed all awards in additionto awarding the Taylors post judgment interest. The trial court entered a finding pursuant toSupreme Court Rule 304(a) finding no just reason to delay enforcement or appeal of this matter.

Father & Sons filed its notice of appeal from the order of December 16, 1996, on January 14,1997.

Subsequently, on April 22, 1998, Father & Sons filed a motion to supplement its brief on appeal.On May 5, 1998, the Taylors filed a motion to strike Father & Sons' supplemental brief. Thismotion was taken with the case. On appeal, Father & Sons contends that the trial court erred indenying its petition to vacate the arbitration award and in confirming the award.

A. Award Under The Consumer Fraud Act

Initially, Father & Sons contends that the that the arbitrator exceeded his authority in deciding theTaylors' claim under the Consumer Fraud Act (Act), and in finding Father & Sons in violation ofthe Act. Father & Sons argues that the Taylors' statutory claim was barred by the statute oflimitations, which provides that an action must be commenced within three years after the causeof action accrued (815 ILCS 505/10(a)(e)).

Our supreme court has long established that arbitration awards should be construed, whereverpossible, so as to uphold their validity. Merritt v. Merritt, 11 Ill. 565 (1850); Rauh v. RockfordProducts Corp., 143 Ill. 2d 377, 574 N.E.2d 636 (1991). Section 12 of the Uniform ArbitrationAct (710 ILCS 5/12 West 1996) sets forth the grounds for vacating an award. Section 12(a)(3),relied upon by Father & Sons, provides, in pertinent part:

"Vacating an award. (a) Upon application of a party, the court shall vacate an award where:

* * * * * *

(3) The arbitrators exceeded their powers." 710 ILCS 5/12(a)(3) West 1996.

A presumption exists that the arbitrator did not exceed his or her authority. Darst v. Collier, 86Ill. 96 (1877); see also White Star Mining Co. v. Hultberg, 220 Ill. 578, 77 N.E. 327 (1906).Further, it is well-established that judicial review of an arbitrator's award is intended to be morelimited than appellate review of a trial court's decision. Bernhardt v. Polygraphic Co. of America,350 U.S.198, 203, 76 S.Ct. 273, 276, 100 L.Ed. 199, 205 (1956); Garver v. Ferguson, 76 Ill.2d 1,389 N.E.2d 1181 (1979). As the Supreme Court stated in Burchell v. Marsh, 58 U.S. 344, 17How. 344, 15 L.Ed. 96 (1855):

"Arbitrators are judges chosen by the parties to decide the matters submitted to them,finally and without appeal. As a mode of settling disputes it should receive everyencouragement from courts of equity. If the award is within the submission, and containsthe honest decision of the arbitrators, after a full and fair hearing of the parties, a court ofequity will not set it aside for error either in law or fact. A contrary course would be asubstitution of the judgment of the Chancellor in place of the judges chosen by the parties,and would make an award the commencement, not the end, of litigation." Burchell, 58 U.S.at 349, 15 L.Ed. at 99.

This rationale also applies to this court of review.

The record shows that the Taylors filed their counterclaim, including common law and statutoryconsumer fraud claims on May 11, 1994, while Father & Sons' first amended complaint (filedJune 1993) was still pending. The counterclaim addressed both breaches of the original contract,and the second contract, which superseded the original contract. The Taylors alleged that by July1991, Father & Sons failed to complete work contracted for on December 21, 1990. The partiesentered into a new contract on February 18, 1992, which superseded and controlled the contractof December 1991. The Taylors counterclaim was timely filed prior to February 1995, three yearsfrom entry of the second contract.

Father & Sons' alternative contention that the contract itself provides a statute of limitations ofonly one year, as it includes a guarantee of one year on labor and materials, is unavailing. Thecontract clearly provides a guarantee that the work will "be free of all problems for a period ofone year from the completion of the work described in this agreement." This lawsuit arose out ofthe fact that the work was never completed.

Father & Sons further contends that the trial court failed to rule on the Taylors' claim for commonlaw consumer fraud and that an arbitrator is not statutorily enabled to make findings as toviolations of the Consumer Fraud Act. The record shows that on June 9, 1995, the circuit courttransferred all matters "presently pending before the court" to arbitration. The Taylors'counterclaim, including the consumer fraud claims, was still pending and was properlytransferred to arbitration. Father & Sons misleads this court by stating that "only a Court isstatutorily enabled to make findings as to violation [sic] of the Consumer Fraud Act." In fact,section 10(a) of the Act provides that a court "in its discretion may award actual damages or anyother relief which the court deems proper." 815 ILCS 505/10(a) (West 1996). The Act does notprohibit the resolution of a dispute by arbitration. See, e.g., Cruz v. Northwestern ChryslerPlymouth Sales, 179 Ill. 2d 271, 280, 688 N.E.2d 653 (1997) (consumer complaints underConsumer Fraud Act against automobile dealerships and manufacturers submitted to arbitration).At the arbitration hearing, evidence established both common law fraud and violations of theConsumer Fraud Act. The arbitrator specifically made a finding that Father & Sons violated theAct, and made his award appropriately according to the statute.

Finally, Father & Sons contends that the arbitrator improperly made formal findings againstRonald W. Kafka for violations of the Act. The record belies Father & Sons' assertion that thearbitrator made a finding that Ronald Kafka, a non-party, violated the Act. The arbitrator foundthat:

"the preponderance of the evidence proved that Ronald Kafka exercised and maintainedsubstantial control and direction over the affairs, policies, and operations of Father & Sons,totally inconsistent with a position of 'sales representative'; and, therefore, Ronald Kafka isfound to be a responsible principal and party in control and in direction of those acts andpractices of Father & Sons which were violations of the Consumer Fraud and DeceptiveBusiness Practices Act."

The record shows that the arbitrator entered an award against Father & Sons, not Ronald Kafka.Father & Sons has failed to show that the arbitrator exceeded his authority in finding that Father& Sons violated the Consumer Fraud Act.

B. Attorney Fees

Father & Sons further argues that the arbitrator erred in awarding attorney fees to the Taylors.Father & Sons argues that the contract did not specifically allow for attorney fees, and that theaward of attorney fees and costs is disfavored in Illinois at common law.

In the present case, as stated above, the Taylors' alleged both statutory and common lawconsumer fraud against Father & Sons. The Consumer Fraud Act specifically provides forattorney fees to a prevailing party alleging fraudulent and deceptive practices. 815 ILCS505/10(a) (West 1996); Casey v. Jerry Yusim Nissan, Inc., 296 Ill. App. 3d 102, 694 N.E.2d 206(1998); Prior Plumbing and Heating v. Hagins Co., 258 Ill. App. 3d 683, 630 N.E.2d 1208(1994). In addition, actions at common law fraud provide for the award of attorney fees andcosts, as well as punitive damages. Black v. Iovino, 219 Ill. App. 3d 378, 580 N.E.2d 139, 149-51(1991).

Our supreme court has determined that where a case is submitted to arbitration for a hearing, it isthe responsibility of the arbitrator to dispose of all claims for relief, including those for attorneyfees: "Because statutory fee awards can be a substantial, even predominate portion of a party'sultimate recovery, excluding fee petitions from consideration by the arbitrators would make thearbitration process pointless." Cruz 179 Ill. 2d at 280. The determination as to whether feesshould be awarded under the Consumer Fraud Act involves consideration of the time and laborrequired, the novelty and difficulty of the questions involved, the experience and ability ofcounsel, the skill necessary to perform the legal services rendered, the customary fees charged forsuch services, and the benefits resulting to the client. Cruz, 179 Ill. 2d at 280 (citing Chesrow v.Du Page Auto Brokers, Inc., 200 Ill. App. 3d 72, 76, 557 N.E.2d 1301 (1990). These factorsrequire direct knowledge of the underlying action as well as counsel's performance, and it is thearbitrator who possesses that knowledge. Therefore, it is proper for the arbitrator to rule onstatutory fee requests. Cruz, 179 Ill. 2d at 281.

The record shows that the arbitrator reviewed a detailed petition for attorney fees and costs filedby Clausen Miller P.C., the Taylors' counsel, requesting $101,453,26. The arbitrator similarlyreviewed a petition filed by William P. Danna, the attorney for Father & Sons, requesting feesand costs in the amount of $61,206.74. The arbitrator noted that the case involved a collectionmatter of $19,215. The Arbitrator awarded $75,000 to the Taylors for attorney fees, and no awardfor attorney fees to Father & Sons.

The Taylors note that in its petition for administrative review of the arbitrator's award before thecircuit court, Father & Sons failed to include the fee petitions reviewed by the arbitrator.Subsequently, this court granted Father & Sons' motion to supplement the record on appeal withfee petitions that were never filed before the circuit court. We note that any documentation notbefore the trial court is not properly reviewable before this court on appeal. We therefore declineto consider the fee petitions contained in the supplemental material submitted by Father & Sons.

Under these circumstances, in light of the policy in favor of arbitration, and absent any otherstatutory ground for vacating or modifying the award, there is no basis for disturbing thearbitrator's award of attorney fees to the Taylors.

C. Barring Crucial Testimony

Father & Sons further contends that the arbitrator improperly excluded Ronald Kafka from thearbitration proceeding thereby barring "crucial testimony." Father & Sons argues that thearbitrator violated Rule 25 of the Construction Industry Rules of the AAA as well as due processby excluding Kafka from the hearing, other than for his testimony.

Rule 25 of the AAA provides as follows:

"Any person having a direct interest in the arbitration is entitled to attend hearings. Thearbitrator shall otherwise have the power to require the exclusion of any witness other thana party or other essential person during the testimony of any other witness and it shall bediscretionary with the arbitrator to determine the propriety of the attendance of any otherperson."

Father & Sons argues that the evidence at the arbitration proceeding revealed that Kafka had botha "direct interest" in the arbitration and that he was an "essential person" for the case of Father &Sons. Although Kafka testified at the hearing as a witness, Father & Sons argues that thearbitrator's exclusion of Kafka from the all remaining aspects of the hearing denied Kafka hisright to cross examine "his accusers."

The Taylors initially respond that because Father & Sons made no offer of proof as to whatadditional evidence Kafka might have offered to his extensive 300-plus page testimony, the issueis waived for review. Schaffner v. Chicago & N.W. Transp. Co., 129 Ill. 2d 1, 541 N.E.2d 643(1989).

Nevertheless, the record shows that the arbitrator properly excluded Kafka from remainder of thearbitration hearing where Kafka continually denied his affiliation with Father & Sons, other thanas an "independent contractor." Although the Taylors testified that Kafka told them that he wasthe president and that he owned and controlled the business, at the hearing, Kafka and hisattorney insisted that Kafka was neither a shareholder, director, officer or manager of Father &Sons. Michael Kafka (Kafka's son) confirmed Kafka's assertion.

Father & Sons cannot have it both ways on this issue. On the one hand, Father & Sons stands byits position that Kafka was nothing but an independent contractor salesman for the company. Onthe other hand, Father & Sons argues that because the arbitrator made a special finding thatKafka is a "responsible principal and party in control and in direction," of the acts of Father &Sons, Kafka should have been included in the entirety of the proceedings. The Taylors suggestthat Kafka's evasiveness regarding his status as a principal in Father & Sons emanates from the1989 consent decree into which Kafka entered with the Illinois Attorney General, and on behalfof various of his pseudonym companies. (See, e.g., People ex. rel.Hartigan v. Kafka, 252 Ill.App. 3d 115 (1993).) Had Kafka admitted a controlling connection to Father & Sons, he wouldhave been required to submit to the provisions of the consent decree.⁽⁴⁾ Under the facts presentedhere, Father & Sons has failed to show that the arbitrator improperly barred Kafka fromparticipating in all aspects of the hearing.

D. Removal of Mechanics Liens

Lastly, Father & Sons contends that the trial court improperly affirmed the portions of thearbitrator's award requiring Father & Sons to remove all subcontractors' mechanics liens filedagainst the Taylors. Father & Sons argues that this relief is injunctive in nature, that thesubcontractors were not parties to the arbitration proceedings, and that Father & Sons cannotcontrol the actions of its subcontractors. Therefore, Father & Sons concludes that the arbitratorexceeded his authority in this aspect of the award resulting in prejudice to Father & Sons.

The relevant award entered by the Arbitrator provided as follows:

"6. All mechanic liens filed against the home of Joseph and Chris Taylor by Father & Sons,Inc., and/or its subcontractors are declared null and void and ordered removed forthwith."

This order is valid in that it is incumbent upon any subcontractors with a separate and distinctlegal interest to assert a lien on the property. State Bank of Lake Zurich v. Winnetka Bank, Inc.,245 Ill. App. 3d 984, 614 N.E.2d 862 (1993). The Taylors call our attention to a portion of thetranscript of the hearing on Father & Sons' petition to vacate the award, wherein the trial courtnoted that the lien of one subcontractor was prepared by Father & Sons vice president, and wasplaced against the Taylors' home for work performed by the subcontractor on the Taylors' homeunder the authority, direction and control of Father & Sons.

Father & Sons has failed to demonstrate either that the arbitrator exceeded his authority or that itwas prejudiced by the award nullifying all mechanics liens. For this reason, as well as all of thereasons stated above, we affirm the judgment of the trial court.

Affirmed.

BUCKLEY, J., and QUINN, J., concur.

Footnotes

1. At oral argument, Father & Sons stated that it filed three lawsuits, the first complaint in the5th District, which was dismissed, a second complaint in the 4th District, and the third in theChancery Division of the circuit court of Cook County, after entry of the award of the arbitrator.The Taylors stated that Father & Sons filed one lawsuit in the 5th District, two lawsuits in the 4thDistrict, and the fourth action in the Chancery Division.

2. The record on appeal contains several copies of Father & Sons' "First Amended ComplaintFor Breach of Contract, Unjust Enrichment and For Other Legal And Equitable Relief," but allcopies bear a court file stamp of April 22, 1994.

3. An order entered on December 18, 1995, by arbitrator Harvey X. Koloms, states that theTaylors filed their counterclaim on May 11, 1994, and that Father & Sons answered thecounterclaim on June 1, 1994. The answer does not appear in the record on appeal.

4. See also, People ex. rel. Ryan v. Kafka, No. 1-95-3852 (September 29, 1997), filed pursuant toSupreme Court Rule 23. 155 Ill. 2d R.23(b). This unpublished order is not precedential. 155 Ill.2d R.23(e).