## I L L I N O I S 

## O F F I C I A L 

## R E P O R T S Appellate Court

Klehr v. Illi nois F

arm ers Insur ance Co. , 2013 IL App (1st) 121843

Appellate Court Caption MEGAN KL EHR, Plaintiff-Appellant, v. I L L I NOI S FARMERS I NSURANCE COMPANY, Defe ndant-Appe llant.

District & N o. First District, Second D ivision Docke t No. 1-12-1843

Filed J anuar y 22, 2013

Held (Note : Thi s syl lab us

con s t it ute s no par t of the opi nio n of the cour t but has bee n pre

par ed b y the Repo rt er of D e c i s i o n s f

o r t h e

c o n v e n i e n c e o

f t h e

rea der

. ) Alt h o ug h the trial court had subject-matter jurisdiction to enter tain plaintiff’s complaint seeking a decla ratory judgme nt challeng ing a discovery order enter ed in the arbitration of an uninsured motorist claim
p laintiff filed, plaintiff’s action seeking interlocutory revie w of t h e arbitrators’ discovery order was s t i l l unripe for action by the trial court until a final awa

rd was issued by the arbitra tors, sinc e t he Uniform Arbitration Act clea

rly intends to prec lude intervention by the courts until the ar bitration proce ss is concluded.

Dec ision Under
Review Appea l from the Circuit Court of Cook County
, No. 11-CH-34842; the Hon. Rita M. Novak, Judge, pr esiding

.

J udg ment Affir med.Counsel on

Appea l Br ian J . Wiehe and MatthewJ . Be lcher
, both of Be lcher L aw Of fice , of Chicag o, for a

ppellant.

Danny L

. Worker, L eena Soni, and L isa M. Taylor, all of L ewis Br isbois Bisg aar d & Smith L L P, of Chicag o, for a ppellee.

Panel J USTI CE CONNORS delivere d the judgme nt of the court, with opinion. Presiding J ustice Har

ris and J ustice Quinn concur red in the judgme nt and opinion.

OP INION

¶ 1 I f a valid arbitration ag ree ment exis ts a nd the parties have beg un but not completed the arbitration proce ss, can one of the parties obtain judicial revie w of the arbitra tors’ interlocutory ruling on a discovery issue by filing a decla ratory judgme nt action in the circ uit court? This question is at the hear t of this c ase a

nd appea rs to be one of

first impression in I llinois and, so far as we can tell, nationally

. The circ uit court decide d that it lacke d subjectmatter jurisdiction in such a situation and dismiss ed the complaint. We aff irm, though on a differ ent g round. ¶ 2 This ap p ea l i s t h e sequel to Klehr v. Illinois Farmers Insurance Co.
, No. 1-10-2459 (2011) ( Klehr I ) (unpublished order under Supreme Court Rule 23), a nd this case picks up wher e that one left off. As we rela ted in Klehr I
, i n 2007, plaintiff Meg an Klehr was a passeng er in a ca r t h at was involved in a hit-and-r un acc ident, and she filed an uninsured motorist claim with the driver’ s insurance car rier. The insurer settled plaintiff’s claim afte r plaintiff filed a decla

ratory judgme nt action ag ainst it, but the settlement was insufficient to completely cover her injuries and so she filed an additional cl ai m wi t h her own insurance

car rier, defe ndant I llinois Fa rmers I nsuranc e Company

. Not l ong afte r filing that claim, plaintiff demande d arbitration under the arbitration provision in her insurance policy and the
matter wa s ref

err ed to the Amer ican Ar

bitration Association (AAA ) for resolution. ¶ 3 T h i s i s wher e the problem underly ing this case started. After the arbitration pr o ce s s beg an, defe ndant serve d sever al discovery reque sts o n p l aint iff, which included interrog atories, document reque sts, a nd a reque st to appea

r for a sworn statement. Plaintiff ref u s ed to comply
, contending that discovery of the ty pe soug ht by defe ndant is not permissible under the terms of the arbitration clause and appli ca b l e I l l inois law or, alternatively
, that any

discovery

must be conducte d within 180 day s of the initiation of the claim. Plaintiff did not bring the dispute to the arbitrators for a ruling, b u t i n s t ea d filed a decla ratory judgme n t ac tion in the circuit court, in which she soug ht a declara tion that the discovery period was closed and that plaintiff was there fore not require d to answe r defe ndant’s discovery reque sts. The circ uit court dismiss ed the complaint for failure to state

-2-a cla im (see 735 I L CS 5/ 2-615 (West 2010)).

¶ 4 We aff

irmed on appea l in K

l eh r I
, fi n d i n g t h at plaintiff had not alleg ed an ac tual
controve rsy

. We rea soned that plaintiff’s complaint was prema ture beca use plaintiff did not alleg e that she had ref

err ed the issue to the arbitrators, who h ad au thority over discovery issues pursuant to the applica ble rules of

the AAA. See Klehr I

, slip op. at 4-9. ¶ 5 Shortly afte r we issued our order in Klehr I
, plaintiff filed a motion with the ar bitrators asking for the same relief that she had soug ht from the circ uit c ourt. The arbitrators denied the m otion and ordered plaintiff to respond to defe ndant’s dis cover y reque sts. Rather than

c o mp ly in g w it h the arbitrators’ order
, howeve r, plaintiff filed the instant lawsuit, which a g a in seeks a decla

ratory judgme nt that discovery is not allowed in this situation or, alternatively
, that the discovery period is limit ed to the 180 day s afte r the cl ai m was filed. Def endant moved to dismiss the complaint on a number of bases, including for failure to state a claim under section 2-615 of the Code of C ivil Procedur e (735 I L CS 5/2-615 (West 2010)). The circ uit court, howeve r, sua sponte raised the issue of subject- matter jurisdiction and found that it had no jurisdiction to revie w the arbitrators’ interlocutory discovery order beca use the arbitration proce ss had not been completed. The circ uit court acc ording ly dismiss ed the complaint for lack of subject-matter jurisdiction (see 735 I L CS 5/2-619(a) (1) (West 2010)), and plaintiff a

ppeale d. ¶ 6 The initial question in this case is whether the circ uit court has subject-matter jurisdiction

o v er plaintiff’s claim, which is an is sue t hat we revie w de novo

. See In re Luis R.
, 239 I ll. 2d 295, 300 (2010). The subject-matter jurisdiction of the circ uit court is broad and

en compasses “all justiciable matters except when the Supreme Court has orig i n al an d exclusive jurisdiction rela ting to r edistricting of the Gene ral Assembly and to the ability of the Gover

nor to serve or resume office

. Circuit Courts shall have such power to revie w administrative ac tion as provided by law.” I ll. Const . 1970, art. VI , § 9. Whether an a ction constitutes a “justiciable” matter is the critica l inquiry in this context, and the supreme court provided the pr oper a

naly sis in Luis R. : “Ge nera lly speaking
, a ‘justiciable matter’ is ‘a controver sy appropr iate for revie w by the court, in that it is definite and concr ete, as opposed to hy pothetical or moot, touching upon the leg al rela tions of parties having adver se leg al interests.’ [C itation.] To invoke a circ uit court’s subject matter jurisdiction, a petition or compl aint need only ‘alleg [e] the exis tence of a justiciable matter.’ [C itation.] I ndeed, even a defe ctively stated claim is sufficie nt to invoke t he court’s subject m atter j u ri sdiction, as ‘[ s]ubj ect matter jurisdiction does not depend upon the leg al sufficie ncy of the pleading s.’ [C itation.] I n other words, the only consideration is whether the alleg ed claim falls

w i thin the general class of cases that the court has the inherent power to h ea r a n d determine

. I f it does, then subject matter jurisdiction is present.” (E mphasis in origina l and adde d.) Luis R. , 239 I ll. 2d at 301. ¶ 7 I n this c ase, pla intiff’s complaint see ks a dec lara tory judgme nt, which is a ty

pe of c ase that is within the power of t he cir cuit court to hear

. See 735 I L CS 5/2-701 (West 2010). I t is understanda

ble that the circ uit court was conce rned about whether this is the kind of case that is appropr iate for judicial revie w at this time, but the circ uit court does have jurisdiction

-3-over plaintiff’s complaint beca use plaintiff see ks decla

ratory relief , which the c ircuit court is empower ed to provide. The circ uit court was there fore incorre ct to dismiss the complaint for lac k of subject- matter jurisdiction. ¶ 8 Yet mere ly beca use the circ uit court h as j u ri s d i ct i o n o v er plaintiff’s claim does not

nece ssarily mean that the claim is valid. The circ uit court raised t h e i s s u e of jurisdiction beca use i t co u l d see no leg al basis for judicial revie w of interlocutory decisions by an arbitration panel prior to a final arbitration awa rd

. T h e au t h ority of the courts to revie w arbitration awa

rds is controlled by sections 10 throug h 13 of the Uniform Arbitration Act (710 I L CS 5/10 to 13 (West 2010)), but the Act does not provide a mec h an i sm for review of interlocutory order s by the arbitrato rs. I ndeed, aside from confirming
, modify ing, or

vacating a final arbitration awa rd, the role of the courts in the arbitration proce ss is g ener ally limit ed to deter

mining the exis tence of a valid arbitration ag ree ment. See Donaldson, Lufkin & Jenre tte Futures, Inc. v. Barr
, 124 I ll. 2d 435, 449-50 (1988) (“[T]he sole question for the
court to deter

mine is whether there was an ag ree ment to arbitra te. [C itation.] I f it is obvious that there was an ag ree ment to arbitrate the dispute in question, that is, if the dispute clea rly falls within the scope of the arbitra tion ag ree ment, the court should order arbitration. I f it is clea r that it does not, arbitration should be ref used. [C itation.] *** [I ]n unclea r case s and in the fac e of an omnibus arbitration clause *** the court should initially defe r the arbitra bility question to the arbitra tor ***.”). ¶ 9 What makes this case difficult is that plaintiff did not bring this action under the Uniform Arbitration Act, instead fra ming her claim as an action for a decla ratory judgme nt. To state

a claim for a decla

ratory judgme nt, plaintiff need only alleg e that she h as a t an gible leg al interest, t h at d ef

endant has an opposing interest, and that there is an actua l controve rsy betwee n the parties conce rning those interests. See Beahringer v. Page
, 204 I ll. 2d 363, 372 (2003). An a ctual contr oversy “does not mea

n that a wrong must have bee n committed and injury inflicted. Rather , it require s a showing that the underly ing fac ts and issues of the case ar e n o t moot or prema ture, so as to r equire the cour t to pass judgment on mer e abstra ct propositions of law, rende r an advisory opinion, or g ive leg al advice as to future events” (Emph as i s omitted.) (I nterna l quotation marks omitted.) Id. at 374-75. ¶ 10 I n Klehr I

, we found that plaintiff’s claim was prema ture beca use the arbitrator had not made a ruling on the discovery issue, which would make any opinion by a court on the subject mere ly advisory

. See Klehr I
, slip op. at 4-9. Plaintiff’s new lawsuit has corr ecte d that problem by including an alleg ation that the arbitrators ruled ag ainst her on the discovery i ssue. As with her previous lawsuit, what plaintiff seeks in this case is i n es s en ce interlocutory judicial revie w of the arbitrators’ discovery order in the g uise of a decla ratory judgme nt. Unlike Klehr I
, howeve r, plaintiff now appea rs to state a cause of action, at least based on the alleg ations of the complaint. Plaintiff alleg es that defe n d ant has demande d discovery and that the arbitrators have order ed her to comply

. She also alleg es that she does
not want to comply with the order
, and she has provided us with leg al rea sons supporting her position. Take n toge ther, this is enoug h to alleg e the exis tence of an actua l controve rsy betwee n opposing leg al interests, which is ordinarily sufficie nt to state a claim for a decla ratory judgme nt. See Beahringer , 204 I ll. 2d at 372.

-4-¶ 11 But mere ly alleg ing the exis tence of an actua l controve rsy is not enoug h: the claim must

also be ripe for judicial decision. The supreme court has stated that deter mining ripene ss in the context of a decla

ratory judgme nt action require s considerin g whether the issue prese nted is “fit for judicial decision” and whether “any hardship to the parties *** would result from withholding judicial consideration.” Morr-Fitz, Inc. v. Blagojevich
, 231 I ll. 2d 474, 490 (2008). The conce pt behind the ripene ss doctrine is “to preve nt the courts, throug h avoidanc e of prema ture adjudication, from enta n gl ing themselves in abstrac t disag ree ments over admi n i s t ra t ive pol icies, and also to protec t the age ncies from judicial interfe renc e unti l an administrative decision has been formalized and its eff ects felt in a concr ete way by the challeng ing parties.” (I

nterna l quotation marks omitted.) Id. We found that plaintiff’s claims in Klehr I wer e unripe larg ely beca use “base d on the alleg ations in the complaint, we cannot know what discovery proce dures, if any , the arbitra tor *** may impose in this particula r

case .” Klehr I

, sli p o p. at 9. That has now chang ed beca use the arbitrators have order ed plaintiff to comply

with defe ndant’s discove ry reque sts. ¶ 12 Given that plaintiff’s new complaint seeks only a leg al interpre t at i o n of the interplay betwee n the discovery rules of the AAA and the I llinois I nsuranc e Code (215 I L CS 5/143a (West 2008)), we have no doubt that this issue is fit for judicial decision. See Morr-Fitz
, 231 I ll. 2d at 492 (“ ‘F itness for judicial decision means, most often, that the issue is leg al rathe r than fac tua l. ’ ” ( quoting Minnesota Citi zens Concerned

for Life v. Fede ral Election Comm’n
, 1 13 F.3d 129, 132 (8th Cir. 1997)))

. Moreove r, we now know that the arbitrators h av e alleg edly order ed discove ry , which wa s an alleg ation that was not pre sent in Klehr I

. ¶ 13 The harde r question is whether the issue is fit for judicial decision now , that is, w hether there will be a signific ant hardship i m p o s ed b y declining to revie w the arbitrators’ interl o cu t o ry order

. Plaintiff claims two hardships. First, she contends that, absent a decla ratory judgme nt action, the arbitrators’ discovery order is unrevie wable beca use of the limit ed role of the courts in review i n g fi nal arbitration awa rds. This is simply not corr ect, g iven that the Uniform Arbitration Act require s courts to vacate awa rds when the arbitrators exceed their power s. See 710 I L CS 5/12(a)( 3) (West 2010). Plaintiff’s content ion in this decla ratory judgme nt action is that the discovery that defe ndant seeks is not leg ally authorized. I f t rue, then the arbitrators h ave exceede d their powers by order ing plaintiff to comply with the discovery reque st, and that order can be revie wed by the circ uit court as part of an a pplication to vaca

te the aw ard at the conclusion of the a rbitration proc ess. ¶ 14 Second, plaintiff contends that she will be forc ed to incur expenses and suffe r delay s in her case by

complying w ith the discovery order

. This is not an ins ignif icant consideration, but we must view this potential hardship in light of the intent behind the Uniform Arbitration Act. The dispos i t i v e q uestion is whether allowing judicial revie w of the arbitrators’ interlocutory discovery ruling in order to mitigate the potential hardship of comply ing with such ruling runs counter to the i ntent of t he Act’s draf ters. The Act it self is silent as to the
extent to which courts should int erve ne in the ar bitration proce ss prior to a fina l awa rd, so

we look to its leg islative history

. Cf. Daley v. Lakevie w Billiard Café, Inc.
, 373 I ll. App. 3d 377, 382 (2007) (“[T]he sta tute is silent *** and w e thus e x amine the leg islative history to deter mine leg islative intent ***.”); see a l so Donaldson
, 124 I ll. 2d at 449 (“B eca use t here is no leg islative history on the I llinois Arbitration Act, it is proper to consider the rec ords of

-5-the National Confere nce of Commi ssioners on Uniform L aws, and particula rly the writing s of the chair

man of the subcommittee that undertook the draf ting of the Act in construing the I llinois act.” (I nterna l quotation marks omitted.)). ¶ 15 I n a situation wher e an arbitration clause require s “that d i s p u t es o v er the meaning
, interpre tation and application of the contra ct shall be submitt ed to arbitration” (May nard E. Pirsig, Some Comme nts on Arbitrat ion Legislat ion and the Uniform Act , 10 Vand. L

. Rev. 685, 694 (1957)) , the comments state:
“I t is the purpose of the unif orm ac t to defe r consideration of [t his] question until after the award has been rendere d

. *** The awa rd is now befor e the court with such explanation as the arbitrator may have g iven. I t is the duty of the court under subdivision (3) [ i.e.
, 710 I L CS 5/12(a)( 3) (West 2010)] to measure the awa rd ag ainst the power s of the arbitrator confe rre d by the ag ree ment. The issue then become s whether the arbitrator exceede d his authority

in rende ring the awa

rd.” ( Emphasis added.) Id. at 706. ¶ 16 The meaning of this passag e could not be clea rer : if there is a dispute about an issue that is subject to the arbitration a g ree ment, then the courts cannot r eview the arbitrator’s ruling on that issue until after the a rbitration proc ess is complete. ¶ 17 Plaintiff alleg es in her complaint that the basis for arbitration in this case is section 143a of the I llinois I nsuranc e Code (215 I L CS 5/143a (West 2008)), which states that “any dispute with respe ct to the cover ag e and the amount of damag es shall be submitt ed for arbitration to the Americ an Arbi tration Association and be subject to its rules for the conduct of the arbitrati on hearings as to all matters exc ept medical opinions. ” (Emphasis added.) And, as

we noted in Klehr I
, Rule 6 o f t he Americ an Arbitration Association’s Uninsured/Unde rinsured Motorist Arbitration and Mediation Rules (ef f. J an. 1, 2002) states: “The arbitrator(s) shall have discretion to order pre- hear ing exchang e of information by the parties including, but not limit ed to, the production of reque sted d o cu m en t s , repor ts and rec ords, as well as the attendanc e of any party for the purpose of conducting
any independe nt medical examination(s) and swor n statement(s).
*** Unless otherwise l imited by order of the court, parties shall complete all discovery no later than 180 day s from the dat e the AAA forwa rds notification to the responde nt advising tha t a claim has be en initiated.” ¶ 18 So the arbitra

tors may order discovery i f t h ey so choose, which they have done in this

case

. Plaintiff argued to the arbitra tors that they could not order discovery pursuant to Rule 6 beca use the 180-day discovery period had alre ady lapsed, but the arbitrators disag ree d with plaintiff’s interpre tation of the rule, which they are also allowed to do. Americ an Arbitration Association ’ s U n in s u

r e d /U n d e r in s u r e d M otorist Arbitration and Mediation Rule 37 (ef f. J an. 1, 2002) empower s the arbitrators to “interpr et and apply these rules insofar as they rela te to the arbitrator’s power s and duties. *** All other rules shall be interpre ted and applied by the AAA.” ¶ 19 I n short, what is happening in this case is this: the I llinois I nsuranc e Code mandates that the rules of the AAA apply to the arbitration of plaintiff’s claim, Rule 6 g rants the arbitrators authority over discovery
, Rule 37 vests the arbitrators with the authority to interpre t and apply the rules, and plaintiff disag ree s with the arbitrators’ interpre tation of Rule 6. Bu t

-6-rathe r than complete the arbitration proce ss and then seek revie w i n t h e courts, plaintiff

wants the courts to intervene now and overr ule the arbitra

tors by means of a decla

ratory judgme nt. ¶ 20 Ba s ed o n t h e comments to the Uniform Arbitration Act, this is prec isely the t y p e o f dispute that the draf

ters intended to be rev i ew ed b y the courts only at the conclusion of arbitration as part of a motion to vacate the awa rd, and for the courts to step into this dispute befor e the end of the arbitration proce ss is contra ry to the clea

r intent of the Act. Moreove r, allowing plaintiff to obtain interlocutory revie w of the arbitrators’ ruling would undermine the entire point of arbitration. I llinois public policy favor s arbitration as a dispute-re solution mecha nism beca

use it “promotes the economica l and eff icient resolution of disputes.” Phoenix Insurance Co. v . Rosen , 242 I ll. 2d 48, 59 (2011). I f a decla ratory judgme nt c ould be used to c ircumvent the limited r ole of the courts in a rbitration, then any party ag g rieve d by an interlocutory order of the arbitrators could obtain judicial revie w prior to c ompletion of the arbitration p ro cess, which would reduc e the eff iciency and cost eff

ectivene ss of arbitration as a dispute-re solution mecha nism. The history of this case is a g ood example of how prolong ed the arbitration proce ss could b ec o m e i f interlocutory judicial revie w wer e available

. This case h as i n v olved three separ ate decla ratory judgme nt actions and two separ ate appea ls ove r a span of more tha n five y ear s, and the delay s in r esolving plaintiff’s insurance claim are all but entirely due to plaintiff’s repe ated attempts to i n j ec t the courts into the arbitration proc ess. ¶ 21 So the parties’ dispute over the discovery order rema ins unripe for adjudication, and it will rema in unripe until the ar b i t ra t o rs issue their final awa rd. Plaintiff there fore has not stated a claim for a decl ar at o ry j udg ment and her complaint must be dismiss ed. See 735 I L CS 5/2-615 (West 20 1 0 ). Of course , we take no position on the substantive merits of plaintiff’s contentions reg arding the arbitrators’ discovery rul in g a n d s h e is fre e to pursue that issue as part of a m o t ion to vacate the arbitration awa rd (see 710 I L CS 5/12(a)( 3) (West 2010)), but not befor e arbitration is complete and not in the g uise of a decla ratory judgme nt action.

¶ 22 Affir

med.

-7-