FOURTH DIVI SION December 9, 2010 No. 1-10-0439 GERARD M. KENNY, as Trustee of the Trust of Ge ra rd M. Ke nn y,

Petitioner-Appellee,

v. KENNY INDUSTRI

ES, INC., Responde nt-Appe llant. ) ) ) ) ) ) ) ) ) ) Appeal from the Circuit Court of Cook County No. 09 CH 23413 Honorab le William O. Ma

ki, Judge Presi ding.

PRESID ING

JUSTICE

GALL AGHER de livered

the opinion of the c ourt: Petitioner -appell ee, the T

rust of Ge rard M. K enny (Trust) , filed a

petition to

confirm a final ar bitration award in favor of the Trust and ente r judgme nt there on aga

inst respondentappellant, Kenny

Industries, I

nc. The trial court granted the Trust’s motion for summary judgmen t, confir ming the arbitra tion awar d of $6,98 9,626 in tot

al, and e ntered j udgmen

t again st Kenny I ndustries in the amount of $3,074,846.95 through the date of the judgment plus future principal installments and interest as provided for in the arbitration award. K enny I ndustries request ed a stay of entry or enfor cement o f the judg

ment pend

ing the r esolution of a sepa rate proceeding; however, the trial cour t denied the request. On appeal, Kenny Industries contends that the trial court erred in reducing the a rbitration award to judgment without modification where the arbitrator ruled on an issue that was be yond the scope of

his authority. Kenny Industries further contends tha t the trial court abused its discretion in refusing to stay entry or enforcement of the judgment despite clea r evidence that failing to do so would work an injustice. For the r easons that follow , we aff irm.1-10-0439

2 BACKGROUND Gerard M. Kenny

, Mary Ann Kenn

y Smi th, John E. Ke

nny , Jr., Patric

k B. Ken ny, Philip B. Kenn y, Ja mes C. Ken

ny, and Joan Ke

nny Rose are siblings who owne d severa

l family businesses together. Kenny Industries was formed in 1985, with Ger ard, John, Patrick, Philip, James and Joan as shareholders, to serve as a holding company for several other family

-owned businesses. The shareholders transferre d all of their common stock of Kenny Construction Company (KCC) and Seven K Construction Company (Seven K) in exchang e for all of the common sto ck of Ke

nny Indu stries. I

n addition , KCC trans ferre d all of the shares i t owned in Northgate I

nvestment, Inc. (Northg ate), to Kenny Industries. As of Dece

mber 31, 2005, Kenny Industries was the sole share holder of KCC; Seven K and Northgate were owned by Ke

nny Indu stries (8 5.61%) a

nd Mary Ann (14.2 9%). Clint

on In dustries, LL C (Clinton) , is a sepa rate limited lia

bility company engag ed in the b

usiness of buy ing, own ing, sel ling and

investing in personalty (including

securities) and real estate. I ts members are Gerard, Mary Ann, John, Patrick, Philip, James and Joan. On March 25, 1987, Gerard, John, Patrick, Philip, James and Joan entered into a share purchase agreement ( SPA) with Kenny I ndustries. The SPA governs the purchase of share s by Kenny I ndustries upon the death, total disability, or termination of employ ment with the Kenny Group of any shareho lder. The

Kenny Group is d

efined i n the SPA as

Kenny Indu stries, Northgate, KCC and Seven K. The SPA details the method that will be used to determine the purchas e price

and sets t he terms o f pay

ment for p

urchase d shares . When the p urchase is due to the shareholder’s termination of employ ment, Kenny I

ndustries will make an initial payment1-10-0439

3

within 90 da

ys o f the ter

mination, b

ut only after the purcha se price

has been determined in accordance with the SPA. Kenny Industries will then pay

the balance due in 15 equal annual installments with interest. The SPA also contains the following offset provision: “If, at the time pay

ments are to be made under this Agree ment to the Shareholder ***, the Shareholder *** is indebted to any member of the Kenny

Group, then [Kenny Indu stries], in

its discre tion, may withhold a

ny p ay ment, in whole or in part, and apply suc

h withheld amount to the payment or par tial payment of such indebtedness.” The SPA provides that the shares cannot be transferre d without the prior written consent of Kenny I

ndustries and all other shareholders, except for the transfe r of shares during the shareholder’s lifetime to the shareholder as the sole trustee of a Clifford trust or revocable living trust, but any shares so tra nsferred remain subject to the terms of the SPA. I t also provides that the agreement shall be binding on any heirs, executors, administrators, successors and assigns of the shareholder. Finally , the SPA contains an arbitration provision that states that any controversy or

claim arising out of or relating to the SPA shall be settled by arbitration, “[t]he award by the arbitrator or arbitrators shall be final, and judg ment upon the award rendered may be entered in any

court having jurisdiction thereof.” On November 2, 1999, Gerard transfer red all of his shares of Kenny Industries common stock into the Trust , of which he is the sole trust ee and b enefic iary . Gerar d’s employme

nt with Kenny I ndustries and all of the Kenny related entities was terminated in November 2005, triggering the purc

hase provisions of the SPA. Subsequently, John (as president of Ke nny1-10-0439

4

Industries) sent a letter to Ger ard dated April 18, 2007. The letter contained a ca lculation of the value of the shares, but stated that Kenny Industries was entitled to offset $7.6 million under the SPA as monies owed by Gera rd personally to the Ke

nny Group under

a separate agree

ment. On August 2, 2007, Gerard, as trustee of the Tr ust, commenced arbitration proceedings. A f ive-day arbitra tion hear ing was held bef ore arb itrator E

rwin I . Katz in la

te 2008. T

he prima ry issues to be deter mined thro

ugh ar bitration were: ( 1) was the

share pr ice cal culation

perfor med in accordance with the SPA, and (2) did Kenny Industries have the rig

ht to offset $7.6 million against the amounts due to the Trust under the SPA. An interim award was entered on January 12, 2009. Arbitrator Katz determined that the calculation of the share price was untimely under the SPA, but that in all other respects, the calculation submitted by Kenny Industries conformed with the SPA. With regar d to the $7.6 million offset, the interim award noted that although the individual siblings claim that Gerard owes them $7.6 million, the balance sheets for KCC and Kenny Industries do not show a $7.6 million account receivable or note pay able from Gerard. The interim awar d further noted that there is no evidence that KCC ever sued Gera rd for the claimed $7.6 million loss or made any demand on Gerard to compensate for that purpor ted loss. Arbitrator Katz concluded: “[Kenny I ndustries] asserts that it has a right to offset due to the Contribution Agreement. Nothing contained ther ein, however, gives such a rig ht to [Kenny Indu stries]. The individu als are not part o f the ‘Ke

nny Group.’ No pay

ments have been offered or prove d made by the va rious entities which have not been covered by

Clinton. In short, there is no indebtedness to any member of the1-10-0439

1 The Trust asks this court to strike those portions of Kenny Industries’ appendix that contain r ecords o f filing s in this sep arate la wsuit, ca se No. 05 C H 20020, b ecause these document s are not

in the re cord on a

ppeal. T his court may take judi cial notic e of docu ments in the public record. Union Electric Co. v. Department of Revenue , 136 Ill. 2d 385, 399 (1990). Moreover, the trial court judge is the same in both proce edings and the interim arbitration award refer ences both the sep arate la wsuit and t

he agr eement that led to that lawsui t. 5 Kenny Group.” The interim award stated that the value of the Trusts’s share s in Kenny I ndustries, as of December 31, 2005, was $6,989,626. This amount was to be paid to the Trust in 15 y early e qual installments, plus interest, beginning October 1, 2006. On March 25, 2009, the f inal award was entered, incorporating the interim awa rd. The amount due as of the date of the final awa rd for the years 2006 through 2008, including prejudgment interest, wa s $2,253,041.58. The postjudg ment inter

est rate of 9% wa s to apply

from the d

ate of th e final a

ward to a ny a mounts unpaid g oing for

ward unt il the date s of pay

ment. On July

14, 2009, t

he Trust f iled a petition to confirm the arbitration award and for entr y of judgme

nt thereon (arbitration action). A separ ate laws uit 1 (contribution action) was also filed as a result of a demand le tter for pay ment unde

r a contr ibution ag reemen t (CA) en tered in to in May 2003 betw een Ger

ard, his siblings, and KCC. The demand letter was sent to Gerard on June 23, 2005, and was sig ned by Patrick, John, Philip and Joan on behalf of themselves and James. The letter stated that Gerard owed each of the five siblings $2,057,854. Accor ding to the letter, the calculation of this total was base d on the te

rms of the

CA, the mon

ies paid by Cli

nton on a hotel cons truction p roject,1-10-0439

6

and a $7.6 million loss to KCC on that project. On November 21, 2005, Gerard filed a complaint for declaratory

judgment against John, Patrick, Joan, Philip and James (Kenny claimants). Mary Ann was later added as a plaintiff and KCC, Northgate and Clinton were added as defe ndants. Gerard sought a declara tion that he had no pay ment oblig ations und

er the CA . The CA pr

ovided g uarante es and/or

agree ments to indemnify cer

tain obligations of Bry

n Mawr Hotel, LL C (BMH), which was engaged in the construction and development of the Bry n Mawr Hotel. The complaint alleged that the CA was invalid be cause Ma

ry Ann neve

r signe d it. I

n the alte rnative , the comp laint alle ged tha t even if the CA was valid, Gerard did not owe the Kenny claimants or KCC any money because neither the Kenny c laimants nor KCC ever made a BMH pay ment that was not paid or reimbursable by Clinton under the CA. Kenny I ndustries filed an answer in the arbitration action which included a ffirmative and additiona l defens es and no ted that in the contr ibution action, Ger

ard had a sserted

that the in

terim arbitration award contained findings that bar the defendants from seeking rec overy in the contribution action. Specifically, G erard argued during summary judgme

nt proceedings in the contribution action that the arbitration award constituted an express finding that he wa s not responsible for reimbursing his siblings for the $7.6 million advanced by KCC under the CA. Kenny I ndustries contended that the arbitration award could not be conf irmed to the extent the arbit rator made an y finding o r find ings ab out d ebts d ue und er the C A, beca use an y such fin dings would be outside the scope of the arbitrator’s authority . Kenny I ndustries further contended that because the two cases were inter twined, staying judg

ment on the arbitration award would serve1-10-0439

2 This court takes judicial notice of the fact that Gerar d subsequently filed a motion in limine in the contribution action on April 2, 2010, seeking to bar defendants fr om introducing any evidenc e that he was indebted to KCC for the $7.6 million in losses it allegedly suffered. Gerard contended that the issue of indebtedness wa s fully litigated in the prior a rbitration proceeding and thus, the doctrine of collate ral estoppel barred defendants from re litigating that issue in the contribution action. 7 the interests of justice. Kenny Indu stries al so filed a

motion to consolidate

the two ca ses. The

motion to

conso lidat e was de nied, but t he arbi trati on act ion wa s tran sferre d as a re lated case to the ju dge who was presiding over the contribution action. The Trus t then file d a motion f or summar

y ju dgment i n the arb itration a

ction. I n its motion in opposition, Kenny I ndustries argued that the motion for summary judgment should not be ruled on until after the trial in the contribution action was complete and that the a rbitration award should not be confirmed because it exceede d the scope of the arbitrator’s authority

. Kenny Indu stries sta

ted that it s interpr

etation o f the inte

rim arbit ration a ward is a s follows: arbitrator Katz held that the CA did not give Kenny Industries the right to offse t $7.6 million against the amou

nt owed to

the Trust under the SPA, but he d

id not rule

on any indebted ness to the individual siblings. However, Kenny Industries learned throug h the summary judg

ment proceedings in the contribution action that Gerard inter preted the ruling as an express finding that he was no t respons ible for r eimbursin g his indi vidual sib lings und

er the CA

2

. On Januar

y 28 , 2010, the

trial cou rt hear d the Trust’s motion f

or summar

y ju dgment i n1-10-0439

8

the arbitration action. Kenny Industries aga

in argued in opposition that the arbitration award could not be confirmed to the extent that the award purported to adjudicate the pa rties’ rights and responsibilities under the CA. The trial court granted the Trust’s motion for summary judgment on January 29, 2010, and denied K enny I ndustries’ request for a stay pending the resolution of the contr ibution action. This a

ppeal fo llows.

ANA LYSIS Summary judgmen t is prope r when th e pleadi

ngs, de positions, and aff

idavits de monstrate that no g enuine is sue of ma terial f act exists a

nd that the

moving pa

rty is entitle d to judgment as a matter of law. 735 I

LCS 5/2 -1005(c ) (West 200 8); State Farm Mutual Automobile Insurance Co. v. Coe , 367 Ill. App. 3d 604, 607 (2006). We review de novo an order granting summary judgment. Jones v. Country Mutual Insurance Co. , 371 Ill. App. 3d 1096, 1098 (2007). The order granting summary judgment contained two primary components. First, the trial court confirmed t

he arbit ration a ward an d entere d judgme

nt there on. I

t is well se

ttled in Illinois law that a court’s review of an arbitra tor’s award is extremely

limited. American Federation of State, County & Munic ipal Employees v. Department of Central Management Services , 173 I ll. 2d 299, 304 (1996) (and cases cited therein). “Whene ver possible a court must construe an award to uphold its validity ***.” Garver v. Ferguson , 76 Ill. 2d 1, 10 (1979). Moreover, ther e is a presumption that the arbitrator did not exceed his authority

. Herricane Graphics, Inc. v. Blinderman Construction Co. , 354 Ill. App. 3d 151, 155 (2004). The limited circumstances in which a court may modify or vaca

te an arbitration award are set forth in the Uniform Arbitration Act (Arbitration Act) (710 I LCS 5/1 et seq. (West 2008)).1-10-0439

9

Section 13 of the Ar

bitration Act provides: “(a) Upon application made within 90 day s after delivery

of a copy of the award to the applicant, the court shall modify or correct the award where: (1) There was an evident miscalculation of fig ures or an evident mistake in the description of any person, thing or property

referred to in the award; (2) The arbitrators have awar ded upon a matter not submitted to them and the award may be corrected without affecting the merits of the decision upon the issues submitted; or (3) The award is imperfect in a matter of form, not af fe ct in g t he me ri ts of

th e c on tr ov er sy. (b) If the applica

tion is granted, the court shall modify and correct the award so as to effect its intent and shall confirm the awa rd as so modified and corrected. Otherwise, the cour t shall affirm the award as made.” 710 IL CS 5/13(a), (b) (West 2008). Under section 12(a) of the Arbitration Act (710 I LCS 5/12(a) (West 2008)), the court shall vacate the award where: ( 1) it was procured by corruption, fraud or other undue means; (2) there wa s evident

partiali ty, corrupt

ion or misc onduct; ( 3) the ar bitrators exceede d their powers; (4) the arbitrator refused to postpone a hea ring or hear material evidenc e, or otherwise conducted1-10-0439

10

the hearing so as to substantially prejudice a party ; and (5) there was no arbitration ag reement. Se ct io n 1 2 f

ur th er pr ov id es th at “[ a] n a pp li ca ti on un de r t hi s S ec ti on sh al l b e m ad e w it hi n 9 0 d ays after delivery

*** of the award to the applicant.” 710 I LCS 5/12(b) (West 2008). On appeal, Kenny

Industries contends that the trial court er red in confirming the arbitration award because the ar bitrator exceeded the scope of his authority . The arbitration provision in the SPA limited the parties’ agreement to arbitrate to only those disputes arising out of or relating to the SPA. Kenny Industries argue s that the arbitrator seemed to have interpreted sections of the CA that were not before him. For example, the interim awa rd states that nothing in the CA gave a right of offse t to Kenny I

ndustries because the individuals are not part of the Kenny Group a

nd “[n]o payments have been of fered or proved made by

the various entities which have not been covered by Clinton.” The arbitrator concluded that the CA evidenced “no indebtedness to any membe r of the Kenny

Group.” Because the parties did not ag ree under the SPA to arbitrate the meaning of the CA and Kenny Industries had no countercla im seeking affirmative relief under the CA, Kenny Industries contends the arbitrator went beyond the sc ope of his aut hority . Moreove

r, there is a sepa rate law suit curr

ently pending in which G erard a

nd his siblings are seeking an interpre tation of their respective rights and responsibilities under the CA. The Trust argues that because K enny I ndustries did not challenge the award within the 90-day per

iod allowed under the Arbitration Act, its argument that the ar bitrator exceeded the scope of his author

ity i s waived . Kenny

Indu stries re

plies that the part ies did not

agree to arbitrate their rights under the CA, nor was this issue submitted for ar bitration, and issues not subm itte d to ar bitra tion are not subj ect to the Ar bitra tion Act, c itin g Shultz v. Atlantic Mutual1-10-0439

11

Insurance Co. , 367 Ill. App. 3d 1, 10 (2006). Both the trial court and the Trust are corre ct in noting that under the Arbitration Act, a party that wishes to vac ate or modify a n arbitration award must do so within 90 day s of delivery of the final award. See 710 I LCS 5/12(b), 13(a) (West 2008). However, our interpretation of the argument raised by

Kenny I ndustries is that it is not requesting this court to modify or vac ate the award a s it relat

es to wha t the par ties ag reed to a rbitrate under the SPA and as i

t was orig inally understood by Kenny

Industries. The awar

d was not challenged within the 90-day period because Kenny

Industries originally

interpreted the award as being within the scope of what the parties agreed to arbitrate unde r the SPA. It is only

after Kenny

Industries learned that Ge rard was interpreting the arbitration awar d as going bey

ond the scope of the SPA and determining the rights and responsibilities of the individual siblings under the CA, a matter that was being litigated separately

in the contribution action, that Kenny I ndustries objected to the confirmation of the award. Kenny

Industries clearly

maintains that the award exceeds the bounds of the arbitrator’s authority

only to the extent that it purports to interpret the CA bey ond what the parties agreed to arbitrate unde r the SPA. Under this court’s holding in Shultz , the 90-day r ule does not apply to issues that the parties did not agree to arbitrate and tha t were not submitted to arbitration. Shultz , 367 Ill. App. 3d at 16. Thus, it does not apply to the issue of whethe r the award interpreted the CA bey ond what the parties agreed to ar bitrate under the SPA. We reject the Trust’s argument that Ke nny Industries agre ed to arbitrate the interpretation of the CA ge nerally by seeking to offset the $7.6 million loss incurred by KCC. The offset provision under the SPA provided that Kenny1-10-0439

12

Industries could offset the amount of a ny indebtedness to any

member of the Kenny

Group, which included KCC. That is all Kenny I ndustries sought to do in arbitration, and the arbitrator determined that Kenny

Industries was not entitled to an offset bec ause there was no evidence of indebtedness to KCC. The fact that Kenny Industries sought to offset an a mount that it claimed was due to KCC under the terms of the CA does not mean that it agre ed to arbitrate the interpre tation of t he CA ge nerally with resp ect to an

y ot her enti ty or individual. We agree that some of the langua ge in the arbitration award that ref erences the CA is not entirely clea

r. However, under the principles of limited review, the pr esumption that the arbitra tor did not

exceed hi s authori

ty, and the c ourt’s ob ligation to constr ue the award to uphold its validity whenever possible, we cannot say that the tr

ial court erred in confirming the awa rd. The trial court held that the arbitrator properly rejected the offset of $7.6 million against the share purchase price where it determined tha t the Kenny siblings we

re not individually part of the Kenny Group. G erard’s argument that the issue of indebte dness under the CA was fully litigated in the arbitration action is without merit. In construing the a ward as a whole, it is clear that the arbitrator was not making a determination as to whethe r KCC actually suffe

red a $7.6 million loss or whe

ther the Kenny siblings could re cover that loss fr om Gerar d under the terms of

the CA in a separate action. The arbitrator mer ely stated that there

was no evidence in KCC’s balance sheets of an account receivable or note payable

from Gerard. There was also no e vidence of a claim by KCC ag ainst Gerard for the $7.6 million loss. The offset provision of the SPA required a showing of indebtedness to any member of the Kenny

Group, which included KCC but did not in cl ud e t he in di vi du al si bl in gs . In th e a bs en ce of an y ev id en ce of

in de bt ed ne ss to KC C d ir ec tl y,1-10-0439

13

the arbitrator could not approve an offset under the SPA; thus, the trial court correctly confirmed the award and entered judgme nt thereon. The second component of the summary judgment order was the trial court’s denial of Kenny I ndustries’ request for a stay . The trial court may stay proce edings as part of its inherent authority to contro l the dispo sition of c ases bef ore it an d may consider factor s such as t

he order ly administration of justice and judicial economy

. Philips Ele ctronics , N.V. v. Ne

w Hampshir

e Insurance Co. , 2 95 Ill . A pp . 3 d 8 95 , 9 01 -0 2 ( 19 98 ). We re vi ew a t ri al co ur t’ s d ec is io n t o d en y a request to stay the pr

oceedings for an abuse of discr etion. Philips Electronics , 295 Ill. App. 3d at 902. An ab

use of dis cretion

occurs only

where “ ‘the tria

l court’s ruling i s arbitra

ry , fancif ul,

unreasonable, or

where n o reasonable person would t ake the v iew adop ted by

the trial court’ [Citation.]” Blum v. Koster , 235 Ill. 2d 21, 36 (2009). The party seeking the stay

bears the burden of proving adequate justification for it. Kaden v. Pucinski , 263 Ill. App. 3d 611, 615-16 (1994). Kenny

Indu stries contends tha

t the tria l court ig nored cl ear evi dence that the fa ilure to enter a stay

would work an injustice. Kenny Industries argue s that the failure to enter a stay allows Ge rard to u se the jus tice sy

stem as a sword to ob tain mone y f or himself

and a shie ld to avoid paying

parties who are nearly

identical to the party that owe s him money. Moreover, Kenny I ndustries contends that because Gerard is involved in sever al other actions in which he already faces or could face millions of dollars in liability , he is unlikely to be able to meet a ll of his lega l obliga tions. Kenny Indu stries is not a part

y to the contr ibution action, and i

t is a sepa rate legal entity1-10-0439

14

that cannot be considered to be “nearly identical” to the individual siblings. We further take judicial n otice of the fact that the t

rial cou rt enter ed an ord er in the contribu tion action on Aug

ust 12, 2010, in which it rejected Gerard’s collatera l estoppel argument. Thus, the concern that Gerard will be able to use the justice system as both a sword and a shield is now moot. Moreover, the speculation regar ding Gerard’s potential liabilities stemming from unrelated litigation has no relevance to this proceeding

. In deny ing the stay, the

trial court noted that Kenny Industries was not a cre ditor of Gerard’s, and that even if the individual siblings should be determined to be creditors in the contribution action, they ca nnot assert attachment in the arbitration action because the individual siblings are not p arties to

the arbi tration a ction. We a

gree t hat Kenn y I ndustrie s did not me et its burden of proving justification for the stay, and we cannot say that the trial court’s ruling was arbitrary or that no reasonable person would take the view adopte d by the court.. CONCLUSIO

N We hold that the trial court did not err in granting summary judgment in favor of the Trust. Although the 90-day rule does not apply to issues that wer e not submitted to arbitration and therefore Kenny

Industries’ arg

ument is not waived, we hold that the arbitrator did not in fact exceed the scope of his authority because the arbitration award did not interpre t the rights and responsibilities of the individual siblings under the CA. Finally, we conclude that the trial court did not abu se its discretion in d eny ing Ken ny I ndustrie s’ reque st to stay

the proc eeding s. Affirmed. HOFFMAN and L

AVIN, JJ., concur.1-10-0439

15 REPORTER OF

DECI SION S - IL

LI NOI S APPELLATE

COURT (Front Sheet to be Attached to Each case )

_____________________________________________________________________________ GERARD M. KENNY, as Trustee of the TRUST OF GERARD M. KENNY,

Petitioner-Appellee,

v. KENNY INDUSTRI

ES, INC., Responde nt-Appe llant.

_____________________________________________________________________________ No. 1-10-0439 Appellat e Court of

Illinois First District, Fourth Division December 9, 2010

_____________________________________________________________________________

PRESID ING

JUSTICE

GALL AGHER de livered

the opinion of the c ourt. HOFFMAN and L

AVIN, JJ., concur.

_____________________________________________________________________________ Ap pe al fr om th e C ir cu it Co ur t o f C oo k C ou nt y. Honor able W illi am O. M aki, J udge Pr esidi ng.

_________________________________________________________________________ For AP PE LLANT , De wey & Le Boe uf LLP , C hi cag o, IL (Alan N. Salpeter , Vincen t P. Schmelt

z II I, of counsel)

For APPELL

EE, Novack and Macey

LL P, Chicago, IL

(Eric N. Macey , Courtney D. Tedr owe, of counsel)