Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-15-01471/USCOURTS-ca7-15-01471-0/pdf.json

Nature of Suit Code: 896
Nature of Suit: Other Statutes - Arbitration
Cause of Action: 

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In the

United States Court of Appeals

For the Seventh Circuit ____________________

No. 15-1471

BANKERS LIFE & CASUALTY INSURANCE CO.,

Plaintiff-Appellant,

v.

CBRE, INC.,

Defendant-Appellee.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 14 C 7907 — Harry D. Leinenweber, Judge.

____________________

ARGUED DECEMBER 10, 2015 — DECIDED JULY 29, 2016

____________________

Before POSNER, MANION, and SYKES, Circuit Judges.

POSNER, Circuit Judge. A dispute between the parties was 

referred to a panel of arbitrators, who voted in favor of 

CBRE, a large real estate company. Its opponent, Bankers, an 

insurance company, challenged the arbitrators’ decision in 

federal district court, lost there, and appeals.

In 2011 Bankers leased office space at 600 West Chicago 

Avenue in Chicago. Its lease was set to expire in 2018. AnCase: 15-1471 Document: 32 Filed: 07/29/2016 Pages: 12
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other tenant in the building was Groupon, the well-known

online merchant, which needed more office space. CBRE approached Bankers about the possibility of Bankers’ subleasing its space in the building to Groupon and relocating elsewhere, and Bankers responded to CBRE’s overtures by hiring it to negotiate a sublease to Groupon and find an alternative location for Bankers. Bankers and CBRE signed a Listing 

Agreement which provided that CBRE would “accept delivery of and present [to Bankers] all offers and counteroffers to 

buy, sell, or lease ... property” of Bankers; “would assist 

[Bankers] in developing, communicating, negotiating, and 

presenting offers, counteroffers, and notices”; and would 

“answer [Bankers’] questions relating to the offers, counteroffers, notices, and contingencies.” These terms were required by Illinois law. 225 ILCS 454/15-5(a), 15-75.

Bankers was unwilling to sublease its space at 600 West 

Chicago Avenue without obtaining a comparable lease elsewhere; moreover, it wanted its revenue from subleasing its 

space in that building to Groupon to exceed the cost of its 

new lease elsewhere. CBRE agreed, consistently with its having agreed in the Listing Agreement to present “offers” to 

Bankers and answer any questions Bankers might have 

about the offers that CBRE obtained. Bankers told CBRE that 

it wanted to net $7 million from its deals with Groupon and 

the lessor of the space that Bankers would obtain to replace 

the space it would be subleasing to Groupon. The $7 million 

would be the consequence of the generous income that 

Bankers would receive from its sublease to Groupon combined with Bankers’ inexpensive relocation elsewhere.

CBRE responded by presenting Bankers with a series of 

cost-benefit analyses (CBAs), comparing the costs of leasing 

Case: 15-1471 Document: 32 Filed: 07/29/2016 Pages: 12
No. 15-1471 3

new space with the benefits of subleasing the old space to 

Groupon. A CBA delivered by CBRE to Bankers in May 2011 

showed a net savings to Bankers from relocating to 111 East 

Wacker Drive of $6.9 million. As this was within $100,000 of 

the deal Bankers was seeking, it responded to the information in the CBA by subleasing its West Chicago Avenue 

space to Groupon and leasing the space on East Wacker 

Drive for itself.

CBRE’s calculation was inaccurate. It omitted Bankers’ 

promise, as part of the deal with Groupon, to give Groupon 

a $3.1 million tenant improvement allowance to enable 

Groupon to improve the space formerly occupied by Bankers. The uncontradicted evidence is that had Bankers known 

it would profit by only $3.8 million ($6.9 million – $3.1 million) from the deal package (lease plus sublease), it would 

have rejected the deal and thus not have relocated and CBRE 

would not have obtained the $4.5 million in commissions 

that it received as compensation for having arranged the 

sublease to Groupon and Bankers’ relocation to East Wacker 

Drive.

The upshot was an arbitration proceeding conducted by

Judicial Arbitration and Mediation Services (JAMS), in 

which Bankers sought to recoup the lost $3.1 million and to 

avoid having to pay commissions to CBRE because by failing to provide Bankers with accurate information CBRE had 

violated the Listing Agreement, failed to perform the duties 

imposed on it by the Illinois Real Estate License Act, and 

committed the tort of negligent misrepresentation. In February 2014 the arbitration panel issued its award (actually it 

turned out to be only its first award), ruling that while CBRE 

had indeed erred in greatly exaggerating the value of the 

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sublease/lease deal that it had arranged for Bankers, it had 

not violated the Listing Agreement because the agreement 

did not explicitly require CBRE to furnish Bankers with a 

correct CBA, and CBRE had not violated its obligations, set 

forth in the Listing Agreement, to assist Bankers “in developing, communicating, negotiating and presenting offers,

counteroffers and notices” and “to answer [Bankers’] questions relating to offers, counteroffers, notices, and contingencies.” Oddly, the panel said that “the mistake in CBRE’s 

analysis on the summary pages of the CBAs is not a violation of its obligation to assist Bankers ‘in developing, communicating, negotiating and presenting offers[,] counteroffers and notices’” nor a failure to “answer [Bankers’] questions relating to offers, counteroffers, notices, and contingencies.” It’s hard to imagine what else the mistake might be. 

The panel rejected Bankers’ other arguments as well.

Evidently the panel had misgivings. For four months later (June 2014), in response to Bankers’ unsurprising motion 

for reconsideration of the award, the panel changed course. 

It now acknowledged “that the Listing Agreement obligated 

CBRE to answer questions accurately” and that “CBRE [had] 

made a mistake and that mistake was material.” Yet the 

panel adhered to its earlier ruling in favor of CBRE, on the 

ground that “as stated by Bankers, the required answers [to 

questions Bankers had put to the brokerage firm concerning 

the sublease to Groupon and the leasing of alternative premises for Bankers] “were the CBAs” (emphasis in original) and

“the CBAs ... included a disclaimer that provided that CBRE 

was not guaranteeing that there were not any errors contained in the CBA. Here, there was an arithmetic error, or an

error in aligning the columns of numbers. The disclaimer 

clearly provides that CBRE was not responsible for errors.”

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No. 15-1471 5

The next month the panel issued another “final award”

(the original award having been downgraded to interim status), again in favor of CBRE, to which it now awarded costs.

The panel exceeded its authority. It was authorized to interpret the contract. The contract did not include the costbenefit analyses. The panel’s reliance on the disclaimer in the 

CBAs was therefore unjustified. The disclaimer is not part of 

the Listing Agreement; it was not negotiated by the parties 

but merely inserted by CBRE unilaterally. The CBAs—the 

only places in which the disclaimer appears—not only are 

not part of the agreement; they are not mentioned in it. They 

were just the format, the vehicle, in which CBRE responded 

to Bankers’ inquiries about the progress of the negotiations 

for the subleasing of Bankers’ space on West Chicago Avenue and the relocation of Bankers to East Wacker Drive. But 

as such responses—responses to Bankers’ “questions relating to offers, counteroffers, notices, and contingencies”—

were inaccurate, they were not responsive, and thus violated 

the Listing Agreement, which as the panel said in its order

required “that ... CBRE ... answer questions accurately.”

The arbitrators’ role was to interpret the agreement, not 

additions to it by one party without the consent of the other—such additions could not amend the agreement. Having 

belatedly discovered that it had failed to disclaim liability 

under the Listing Agreement, CBRE should have asked 

Bankers for a modification of the agreement. Instead it snuck 

the disclaimer into documents that had not been agreed upon by the parties. It was like Mr. A agreeing in writing to 

pay Mr. B $10 dollars, and B responding (with hand held 

out, and palm open): “I have changed $10 to $20.” The arbitrators attempted to amend the contract with a document 

Case: 15-1471 Document: 32 Filed: 07/29/2016 Pages: 12
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that was not part of the contract. The district court let them 

get away with it.

True, an error does not normally invalidate an arbitration 

award; otherwise such awards would have no greater immunity from judicial review than decisions by district judges 

or administrative agencies. The idea is that by electing arbitration the parties have chosen to bypass the judicial system.

As we said in Wise v. Wachovia Securities, LLC, 450 F.3d 265, 

269 (7th Cir. 2006), “when parties agree to arbitrate their 

disputes they opt out of the court system, and when one of 

them challenges the resulting arbitration award he perforce 

does so not on the ground that the arbitrators made a mistake but that they violated the agreement to arbitrate, as by 

corruption, evident partiality, exceeding their powers, etc.—

conduct to which the parties did not consent when they included an arbitration clause in their contract.” Or as the Illinois Supreme Court said in Garver v. Ferguson, 389 N.E.2d 

1181, 1183–84 (Ill. 1979), Illinois courts will not vacate an arbitration award for mere “errors in judgment or mistakes of

law” unless “gross errors of judgment in law or a gross mistake of fact” are “apparent upon the face of the award”—

which is this case. See also Rauh v. Rockford Products Corp., 

574 N.E.2d 636, 644 (Ill. 1991), which attributes that rule to

the Illinois Uniform Arbitration Act, 710 ILCS 5/12(3), which 

governs this case because it is a diversity case arising under 

Illinois law. And similarly in First Merit Realty Services, Inc. v. 

Amberly Square Apartments, L.P., 869 N.E.2d 394, 399 (Ill. 

App. 2007), we read that because “arbitrators’ authority is 

limited by the unambiguous contract language,” they “do 

not have the authority to ignore the plain language of the 

contract and to alter the agreement, as the ultimate award 

must be grounded on the parties’ contract.” And so when 

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No. 15-1471 7

“arbitrators ma[k]e an evident miscalculation of figures in 

arriving at the award, the reviewing court will modify or 

correct the award.” Shearson Lehman Brothers, Inc. v. Hedrich, 

639 N.E.2d 228, 232 (Ill. App. 1994). In this case the arbitrators made, or more precisely endorsed, a $3.1 million miscalculation.

There was a time when commercial arbitration awards 

contained no reasoning, in order to avoid attracting the scrutiny of judges, who were fiercely hostile to arbitration, which 

they viewed as a competitor of adjudication. Thomas E. Carbonneau, “Rendering Arbitral Awards with Reasons: The 

Elaboration of a Common Law of International Transactions,” 23 Columbia Journal of Transnational Law 579, 583–84 

(1985); Andermann v. Sprint Spectrum, L.P., 785 F.3d 1157, 

1159 (7th Cir. 2015). But increasingly parties to arbitration 

insist on “reasoned awards.” See Judith Resnik, “Diffusing 

Disputes: The Public in the Private of Arbitration, the Private 

in Courts, and the Erasure of Rights,” 124 Yale L.J. 2804, 2809 

(2015); Stephen L. Hayford, “A New Paradigm for Commercial Arbitration: Rethinking the Relationship Between Reasoned Awards and the Judicial Standards for Vacatur,” 66 

George Washington L. Rev. 443, 446 and n. 9 (1998). They did 

in this case, by selecting JAMS to arbitrate; for JAMS requires the award to “contain a concise written statement of

the reasons for the Award” unless the parties agree otherwise, which they didn’t in this case.

Because the parties bargained for a reasoned award, reasoning should be part of the “face of the award.” But the 

award in this case was based on documents outside the parties’ agreement and ignored the agreement itself—the Listing Agreement. Cf. Rauh v. Rockford Products Corp., supra, 574 

Case: 15-1471 Document: 32 Filed: 07/29/2016 Pages: 12
8 No. 15-1471

N.E.2d at 644. The arbitration panel realized or at least 

sensed that it had ignored the Listing Agreement when it 

issued its June revision of the award, but the new reasoning 

in that revision confused the cost-benefit analyses with the 

Listing Agreement. The district court should not have upheld the award. Its judgment is therefore reversed and the 

case remanded for further proceedings consistent with this 

opinion.

REVERSED AND REMANDED

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No. 15-1471 9

SYKES, Circuit Judge, dissenting. I part company with my 

colleagues based on the narrow scope of our review. This 

case is governed by the Illinois Uniform Arbitration Act 

(“IAA”). Like its federal counterpart, the IAA permits only 

very limited judicial review. A court may vacate an arbitration award only if the arbitrators “exceeded their powers.” 

710 ILL. COMP. STAT. 5/12(a)(3). The Federal Arbitration Act 

(“FAA”) uses identical language, see 9 U.S.C. § 10(a)(4), and 

the statutes share the same origin (the Uniform Arbitration 

Act), so the state statute has long enjoyed parallel construction with the federal. J & K Cement Constr., Inc. v. Montalbano 

Builders, Inc., 456 N.E.2d 889, 893 (Ill. 1983); Rexnord Indus., 

LLC v. RHI Holdings, Inc., 906 N.E.2d 682, 684 (Ill. App. Ct.

2009); Cook County v. Am. Fed’n of State, Cnty. & Mun. Emps., 

Local 3315, 691 N.E.2d 777, 780 (Ill. App. Ct. 1998).

In its seminal decision on judicial review of arbitration 

awards, the Illinois Supreme Court held that “an arbitrator’s 

award will not be set aside because of his errors in judgment 

or mistakes of law or fact.” Garver v. Ferguson, 389 N.E.2d 

1181, 1183 (Ill. 1979). Garver continues:

The fact that arbitrators have made an erroneous decision will not vitiate their award. If they 

have acted in good faith, the award is conclusive upon the parties; and neither party is 

permitted to avoid it[] by showing that the arbitrators erred in their judgment, either respecting the law or the facts of the case. 

Id. (quoting Merritt v. Merritt, 11 Ill. 565, 567 (1850)). Finally, 

Garver explains that “[w]henever possible a court must 

construe an [arbitration] award so as to uphold its validity, 

and gross errors of judgment in law or a gross mistake of 

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10 No. 15-1471

fact will not serve to vitiate an award unless these mistakes 

or errors are apparent upon the face of the award.” Id. at 

1184 (citation omitted). Later cases are in accord. See, e.g., 

Rauh v. Rockford Prods. Corp., 574 N.E.2d 636, 641 (Ill. 1991).

We’ve said much the same thing when describing the 

scope of judicial review under the FAA. Almost three decades ago we explained that a gross error in interpreting the 

parties’ contract will not suffice to vacate an arbitration 

award, but a plainly gross misinterpretation might, in an 

appropriate case, support a conclusion that “the arbitrators 

weren’t interpreting the contract at all.” Hill v. Norfolk & W.

Ry. Co., 814 F.2d 1192, 1194–95 (7th Cir. 1987). As we put it 

more recently, a court may vacate an arbitration award only 

when “the arbitrators’ interpretation was ‘so wacky that it 

was no interpretation at all.’” Prostyakov v. Masco Corp., 

513 F.3d 716, 723 (7th Cir. 2008) (quoting Tice v. Am. Airlines, 

Inc., 373 F.3d 851, 854 (7th Cir. 2004)).

This heightened degree of deference is essential to enforce the private ordering reflected in the parties’ choice to 

resolve their disputes in arbitration. “[T]he parties have 

chosen in their contract how their dispute is to be decided, 

and judicial modification of an arbitrator’s decision deprives 

the parties of that choice.” Tim Huey Corp. v. Global Boiler & 

Mech., Inc., 649 N.E.2d 1358, 1362 (Ill. App. Ct. 1995).

Predictably then, the circumstances under which Illinois

courts have been willing to vacate arbitration awards have 

generally been limited to awards that contain what are 

essentially calculation errors by the arbitrators. See First 

Merit Realty Servs., Inc. v. Amberly Square Apartments, L.P., 

869 N.E.2d 394 (Ill. App. Ct. 2007); Shearson Lehman Bros., 

Inc. v. Hedrich, 639 N.E.2d 228 (Ill. App. Ct. 1994). Awards 

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No. 15-1471 11

that hinge on an interpretation or application of a particular 

contract provision have been left undisturbed, even when 

the arbitrators’ interpretation seems bizarre. See, e.g., Herricane Graphics, Inc. v. Blinderman Constr. Co., Inc., 820 N.E.2d 

619 (Ill. App. Ct. 2004).

Applying the deferential standard here, I see no basis to 

vacate this arbitration award. The arbitrators did not exceed 

their authority in the relevant sense; nothing in the award 

suggests that their decision wasn’t drawn from the contract. 

The arbitrators resolved this dispute in three separate steps. 

The panel issued its merits decision on February 21, 2014;

denied a motion for reconsideration on June 3, 2014; and 

awarded attorney’s fees on July 15, 2014. In the February 

decision, the panel rejected Bankers’ breach-of-contract 

claim, focusing mostly on paragraph 19 of the Listing 

Agreement, which required CBRE to assist Bankers in 

developing, communicating, negotiating, and presenting 

offers and counteroffers regarding the Chicago Avenue 

property. The panel concluded that CBRE could not be liable 

for the $3.1 million miscalculation in its cost-benefit analysis 

because the cost-benefit analysis was not an “offer” or 

“counteroffer” and thus wasn’t covered by paragraph 19. 

Paragraph 20 of the Listing Agreement—the provision 

requiring CBRE to “answer questions” about offers and 

counteroffers—was mentioned but not separately analyzed.

Later, in denying reconsideration, the panel acknowledged that paragraph 20 required CBRE to answer Bankers’ 

questions about offers and counteroffers, and this implied a 

requirement of accurate answers. This paragraph, the panel 

concluded, does cover the challenged cost-benefit analysis

(the one containing the $3.1 million miscalculation), but 

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12 No. 15-1471

CBRE wasn’t liable for breach because the cost-benefit 

analysis contained a disclaimer warning that the firm wasn’t 

responsible for errors. 

That may be an erroneous interpretation of the contract, 

but the decision is plainly grounded in the contract, so we 

cannot vacate the award. My colleagues say the arbitration 

panel ignored explicit language in the Listing Agreement 

and “confused the cost-benefit analyses with the Listing 

Agreement.” Majority op. at 8. I disagree. The arbitrators 

quoted and construed the relevant language in the agreement (paragraphs 19 and 20) and clearly understood that the 

cost-benefit analyses were the “answers” required by paragraph 20—the bargained-for performance, not the contract 

itself. On plenary review I might agree with my colleagues 

that the arbitrators mistakenly read the disclaimer and the 

agreement together. But the limited judicial review that the 

IAA permits requires us to uphold an arbitration decision 

that “draws [its] essence from the parties’ contract,” as this 

one does. Tim Huey, 649 N.E.2d at 1364.

Finally, my colleagues have misapplied Shearson Lehman 

Brothers. There the Illinois Appellate Court held that when 

“arbitrators ma[k]e an evident miscalculation of figures in 

arriving at the award, the reviewing court will modify or 

correct the award.” 639 N.E.2d at 232. But the arbitration 

panel did not make a calculation error. The arbitrators 

concluded that CBRE was not liable; there is no miscalculation to modify or correct. Shearson Lehman Brothers does not 

apply. 

Accordingly, however much we might disagree with the 

arbitrators’ reasoning, we cannot vacate the award. I respectfully dissent.

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