Cruz v. Northwestern Chrysler Plymouth Sales, Inc.

Cruz v. Chrysler Plymouth Sales, Nos. 82619, 82726 cons. (11/20/97)

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Court. Therefore, because the following slip opinion is being made available prior
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of the Court. The official copy of the following opinion will be published by the
Supreme Court's Reporter of Decisions in the Official Reports advance sheets
following final action by the Court.

Docket Nos. 82619, 82726 cons.--Agenda 24--September
1997.
VIRGINIA CRUZ, Appellant, v. NORTHWESTERN
CHRYSLER PLYMOUTH SALES, INC., et al., Appellees.--
JEFFREY KOLAR et al., Appellants, v. ARLINGTON
TOYOTA, INC., Appellee.
Opinion filed November 20, 1997.

JUSTICE HARRISON delivered the opinion of the court:
These two consolidated appeals present a common issue:
What procedure should plaintiffs follow to obtain statutory
attorney fee awards where their causes of action have been
submitted to mandatory court-annexed arbitration in accordance
the rules of this court? In each of the cases before us, the fee
petitions were presented to and ruled upon by the circuit court
after it entered judgment on the arbitration panel's award. For
the reasons that follow, we have concluded that this procedure
was improper. Plaintiffs should have presented their requests for
fees to the arbitration panel, and the arbitration panel should
have disposed of the fee requests along with all of plaintiffs'
other claims for relief. Accordingly, the judgments of the
appellate court setting aside the fee awards must be affirmed.
Both of the appeals before us today arose from consumer
complaints against automobile dealerships and manufacturers. In
No. 82619, plaintiff, Virginia Cruz, brought an action in the
circuit court of Cook County against Northwestern Chrysler
Plymouth Sales (Northwestern), Chrysler Credit Corporation
(CCC), and Chrysler Corporation (Chrysler) alleging that the
Chrysler automobile she purchased from Northwestern and
financed through CCC was defective.
Cruz's complaint sought recovery based on breach of
express and implied warranties, revocation of acceptance and
unconscionability. She also asserted statutory claims under the
Consumer Fraud and Deceptive Business Practices Act (the
Consumer Fraud Act) (Ill. Rev. Stat. 1987, ch. 121«, par. 261
et seq.) and the Magnuson-Moss Warranty Act (15 U.S.C. sec.
2310 (1988)), both of which authorize recovery of reasonable
attorney fees and costs.
The circuit court of Cook County is one of those judicial
circuits which has, with the approval of our court, elected to
utilize the mandatory arbitration procedures set forth in the
Supreme Court Rules 86 through 95 (155 Ill. 2d Rs. 86, 92; 134
Ill. 2d Rs. 87, 88, 94, 95; 166 Ill. 2d Rs. 89, 90, 93; 145 Ill. 2d
R. 91). Because Cruz was seeking only monetary relief and
because the amount she was seeking, exclusive of interest and
costs, did not exceed the monetary limit authorized by this court
for arbitration in Cook County, her case was submitted to a
hearing before a panel of arbitrators.
The arbitration panel awarded Cruz $3,361.00. When none
of the defendants filed a notice of rejection of the award and did
not request a trial, the circuit court entered judgment on the
award in favor of Cruz and against the three defendants in the
amount of $3,361.00 plus costs. See 155 Ill. 2d R. 92; 166 Ill.
2d R. 93.
Following entry of judgment on the arbitration award, Cruz
filed a petition with the circuit court asking for an award of her
reasonable attorney fees. Cruz premised her petition on section
10a(c) of the Consumer Fraud Act, which provides that
"[i]n any action brought by a person under this
Section, the Court may award, in addition to the relief
provided in this Section, reasonable attorney's fees and
costs to the prevailing party." Ill. Rev. Stat. 1987, ch.
121«, par. 270a(c).
Cruz had advised the arbitrators and the defendants that she
intended to seek such fees if she ultimately prevailed, but stated
that she would not present her petition to the arbitration panel.
Her view was that she would not qualify as a "prevailing party"
and therefore not be eligible for fees under the statute until the
circuit court had entered judgment on the arbitration award.
Defendants opposed Cruz's request, invoking Supreme
Court Rule 92(b) (155 Ill. 2d R. 92(b)), which provides that the
arbitration panel's award "shall dispose of all claims for relief."
Defendants asserted that under this rule, Cruz's request for
attorney fees had to be submitted to and disposed of by the
arbitration panel along with Cruz's claim for money damages.
Because that was not done, defendants asserted that Cruz was
precluded from seeking her fees in the circuit court.
Defendants contended, in the alternative, that the circuit
court had no basis for granting an award of attorney fees.
Defendants pointed out that attorney fees were authorized only
if Cruz prevailed on her statutory claims under the Consumer
Fraud Act or Magnuson-Moss Warranty Act. As previously
indicated, however, Cruz's complaint asserted numerous other
claims besides those, any of which would have supported the
arbitration panel's decision. Because the arbitrator's award did
not specify which claims it was relying on when it granted the
award to Cruz, defendants claimed that it was pure speculation
to conclude that Cruz had prevailed on her statutory claims.
The circuit court rejected defendants' arguments. It held that
the failure of the arbitration panel to specify the basis for its
decision was immaterial because the panel had no power to
determine the question of attorney fees. In the circuit court's
view, the arbitration process was intended to be inexpensive and
timely and brief, and having fee questions determined by
arbitration panels was inconsistent with those objectives. The
circuit court believed that attorney fee awards fell within the
provence of the courts, not the arbitrators, and that fee petitions
should be decided by the circuit court in the first instance.
Accordingly, the court granted Cruz's petition and awarded her
a total of $19,078.28 in attorney fees and costs.
Defendants appealed, claiming that Cruz's recovery should
have been limited to the $3,361.00 awarded by the arbitration
panel and that the circuit court had no right to award additional
amounts for fees and costs. The appellate court agreed.
Adopting one of the arguments asserted by defendants, the court
noted that a fee award would only be authorized if Cruz
prevailed on her statutory claims under the Consumer Fraud Act
or the Magnuson-Moss Warranty Act. As defendants argued,
however, there was no basis for concluding that the arbitrators
meant to premise their award on a finding that defendants had
violated either of those statutes. The arbitration panel's award
was silent as to which of Cruz's theories it was based on, and
any of Cruz's theories would have supported the full amount of
the award.
The appellate court rejected any notion that the matter could
be remanded to the arbitration panel for clarification of its
decision. The court held that once an arbitration panel has made
its award, the litigants must accept it or reject it. The courts in
Illinois have no authority to resubmit an award to the arbitration
panel for clarification or to modify the arbitrators' award.
Although the court can correct an award on timely application
of a party "[w]here the record and the award disclose an obvious
and unambiguous error in mathematics or language" (155 Ill. 2d
R. 92(d)), that exception is inapplicable here. Accordingly, the
appellate court reversed the circuit court's judgment awarding
fees and costs. 285 Ill. App. 3d 814. The judgment on the
underlying arbitration award of $3,361.00 remained intact.
In No. 82726, plaintiffs, Jeffrey and Linda Kolar, brought
an action in the circuit court of Cook County against Arlington
Toyota, Inc., alleging that the company deceived them about a
used vehicle they purchased there. The Kolars' complaint, as
finally amended, sought recovery from Arlington based on
breach of contract and violation of the Consumer Fraud Act.
The Kolars' Consumer Fraud Act claim included a request for
an award of their reasonable attorney fees.
As with Cruz's cause of action, the Kolars' claims were
subject to mandatory court-annexed arbitration and were
submitted to a panel of arbitrators. The panel issued an award
to the Kolars in the amount of $4,500, and the circuit court
entered judgment on that award.
When they presented their claims to the arbitrators, the
Kolars did not address the question of attorney fees, as Cruz had
in her case. Although their complaint included a request for
fees, as did Cruz's, the Kolars made no mention of their intent
to press that request until after the circuit court had entered
judgment on the arbitrators' award.
Once judgment was entered on the award by the circuit
court, the Kolars petitioned the court for an award of their
reasonable attorney fees and costs. The Kolars claimed that they
were entitled to such fees and costs under section 10a(c) of the
Consumer Fraud Act.
In opposing the Kolars' petition, Arlington asserted
arguments similar to those advanced by Northwestern, Chrysler
and CCC in opposing Cruz's fee petition. The company
contended that because the arbitrator's award did not indicate
which of the Kolars' claims it was based on, the circuit court
had no grounds for concluding that the Kolars were entitled to
a fee award under Consumer Fraud Act. The company also
argued that under Supreme Court Rule 92(b), the Kolars should
have presented their fee petition to the arbitrators along with
their other claims for relief. Because the Kolars failed to do so
and did not reject the panel's subsequent award, the company
contended that their fee petition was barred and that the Kolars
were precluded from seeking attorney fees from the circuit
court.
The circuit court granted the Kolars' petition and awarded
them $17,707.20 in attorney fees and $911.01 in costs. It
subsequently granted a supplemental petition, awarding the
Kolars an additional $8,323.20 in attorney fees and $23.62 in
costs.
Arlington appealed. The company did not challenge the
underlying judgment of $4,500 or the court's award of $934.63
($911.01 plus $23.62) in costs. Its sole contention was that the
circuit court should not have awarded the Kolars any attorney
fees.
The appellate court agreed with Arlington's position and
vacated the attorney fees portion of the circuit court's judgment.
286 Ill. App. 3d 43. In reaching that result the court took a
different approach than the court in Cruz's case. As we have
just discussed, the court in Cruz premised its decision on the
failure of the arbitrators to set forth the basis for their decision.
Had the arbitrators specified that their award was premised on
a violation of the Consumer Fraud Act or the Magnuson-Moss
Warranty Act, the court presumably would have reached the
opposite conclusion, i.e., that the statutory fee award by the
circuit court was proper.
Implicit in the Cruz court's approach is the belief that the
power to adjudicate fee requests remains with the circuit court
even where the underlying claim is subject to mandatory court-
annexed arbitration. In the Kolars' case, the appellate court
rejected that view. Relying on Supreme Court Rule 90(a) (166
Ill. 2d R. 90(a)), which expressly empowers arbitrators to decide
the law and the facts of the case, and Rule 92(b) (155 Ill. 2d R.
92(b)), which requires the arbitration panel's award to dispose
of all claims for relief, the appellate court held that the
arbitration system is not to be used as a supplement to trial or
to decide certain issues piecemeal. The court opined that every
claim a plaintiff has, including claims for attorney fees, must be
presented to the arbitration panel for consideration, and once the
panel rules, its award must be accepted or rejected in its
entirety. In the appellate court's view, the circuit court has no
power to grant additional relief or to modify the award in any
respect except under the limited circumstances set forth in Rule
92(d) (155 Ill. 2d R. 92(d)), which allows correction of an
"obvious and unambiguous error in mathematics or language."
Because the Kolars failed to present their claim for statutory
fees to the arbitration panel along with their other claims for
relief and because they opted not to reject the arbitrator's award
and proceed to trial, the appellate court ruled that the circuit
court should not have entertained their fee petition. Accordingly,
the appellate court vacated that portion of the circuit court's
judgment awarding the Kolars their attorney fees.
In their respective cases, Cruz and the Kolars petitioned for
leave to appeal from the appellate court's judgments. 166 Ill. 2d
R. 315. We allowed both petitions in order to clarify the
procedures litigants should follow in applying for statutory fees
awards where their cases are subject to mandatory court-annexed
arbitration under the rules promulgated by this court. The cases
were subsequently consolidated and are now before us for
disposition.
In assessing the question of fee petitions under mandatory
arbitration, the threshold issue we must resolve is who should
consider those petitions, the arbitration panel or the circuit court.
As our discussion has indicated, the appellate court panels here
took divergent views on this subject. While the court in Cruz
assumed that fee petitions could be submitted to the circuit court
following the arbitration panel's award, the court in the Kolars'
case concluded that any request for fees had to be submitted to
the arbitration panel along with all of the other claims for relief
in the case. We believe that the approach taken by the court in
Kolar is the correct one and is the only one that can be squared
with the arbitration rules we have enacted.
Under our rules for mandatory court-annexed arbitration, the
role of the circuit court is limited. Where, as here, a case is
subject to mandatory arbitration and is submitted to a panel of
arbitrators for hearing, the responsibility for administering oaths,
ruling on the admissibility of evidence, and, most importantly,
deciding the law and facts of the case is expressly vested in the
arbitrators. 166 Ill. 2d R. 90(a). The circuit court plays no role
in adjudicating the merits of the case. Authority for making a
determination in favor of one party or the other rests exclusively
with the arbitrators, and Rule 92(b) expressly states that the
arbitration panel's award "shall dispose of all claims for relief."
155 Ill. 2d R. 92(b).
Once the arbitration panel has made its award, the parties
must accept or reject the award in its entirety. If none of the
parties file a notice of rejection of the award and request to
proceed to trial within the time specified under the rules, the
circuit court has no real function beyond entering judgment on
the award. 155 Ill. 2d R. 92(c). Although the court can correct
an "obvious and unambiguous error in mathematics or language"
(155 Ill. 2d R. 92(d)), it cannot modify the substantive
provisions of the award or grant any monetary relief in addition
to the sums awarded by the arbitrators.
A claim for statutory attorney fees is as much a "claim for
relief" under this rule as is a prayer for damages. Indeed, in
consumer fraud cases the attorney fee awards can easily
constitute the largest part of a plaintiff's recovery. The
legislature realized this when it enacted the fee-shifting
provision of the Consumer Fraud Act. That provision is
premised on the recognition that plaintiffs would be reluctant to
seek redress for consumer fraud if the recovery would be nearly
or completely consumed by attorney fees and was designed to
encourage plaintiffs who have a cause of action to sue even if
recovery would be small. See Haskell v. Blumthal, 204 Ill. App.
3d 596, 602 (1990).
Because statutory fee awards can be a substantial, even
predominate portion of a party's ultimate recovery, excluding
fee petitions from consideration by the arbitrators would make
the arbitration process pointless. The system of mandatory
arbitration we have adopted will function only if defendants can
rely on the arbitrator's award as fixing their maximum exposure
to liability. That is why Rule 92(b) requires the award to
dispose of all claims for relief. If a defendant may still face a
judgment for attorney fees following an adverse arbitration
award, he will have no incentive to accept the award no matter
how small it might be. The result will be that awards will be
rejected as a matter of course. If that happens, the arbitration
will have accomplished nothing but to protract the litigation and
to make it more costly, complicated, and time consuming for the
litigants, the very evils mandatory arbitration was designed to
combat.
Allowing the substantive claims in a case to be heard and
decided by the arbitration panel while reserving the assessment
of fees for later consideration by the circuit court is improper
for another reason as well. The determination as to whether fees
should be awarded under the Consumer Fraud Act involves
consideration of the time and labor required, the novelty and
difficulty of the questions involved, the experience and ability
of counsel, the skill necessary to perform the legal services
rendered, the customary fees charged for such services, and the
benefits resulting to the client. See Chesrow v. Du Page Auto
Brokers, Inc., 200 Ill. App. 3d 72, 76 (1990). Virtually all of
these factors require direct knowledge of the underlying
litigation and counsel's performance. Where a matter has
undergone mandatory arbitration, the body that possesses that
knowledge is the arbitration panel, not the circuit court. The
circuit court will know virtually nothing about the issues in the
case, how difficult it was to litigate, or how effectively counsel
represented his clients. The arbitration panel, not the circuit
court, is therefore the proper body to rule on statutory fee
requests.
Because the fee petitions in these two consolidated appeals
were not presented to the arbitration panels for a determination
along with plaintiffs' other claims for relief, the appellate courts
properly set aside the attorney fee awards in plaintiffs' favor. In
view of this conclusion, there is no reason to address the
additional issue, discussed by the appellate court in Cruz, as to
whether the fee awards where invalid because the arbitration
panels failed to indicate that plaintiffs had prevailed on claims
for which statutory fees were recoverable. Regardless of what
the arbitrators said or failed to say in their awards, the circuit
court had no authority to consider and allow plaintiffs' petitions
for attorney fees. When none of the parties filed notice of
rejection of the awards or moved for correction of an error in
the awards, the circuit court's power was limited to taking the
awards and entering judgment on them.
For the foregoing reasons, the judgments of the appellate
court are affirmed.

Judgments affirmed.