Docket No. 89156–Agenda 18–May 2000.

NEIL SALSITZ et al., Appellants, v. FRITZ KREISS et al.,  								Appellees.

Opinion filed September 20, 2001.

	JUSTICE FREEMAN delivered the opinion of the court:

	At issue in this case is the arbitrability of certain disputes

between plaintiffs, Neil Salsitz, Biagio D’Ugo, and New Horizon

Productions, Ltd., and defendants, Fritz Kreiss and Alternative

Utility Services of IL, Inc.

BACKGROUND

	On March 9, 1994, Neil Salsitz and Biagio D’Ugo executed

letters of understanding, dated November 17, 1993, whereby each

agreed to invest $6,500 in Alternative Utility Services of IL, Inc.

(AUS). Fritz Kreiss executed the letters of understanding as

president of AUS. The letters of understanding do not contain an

arbitration clause. Also on March 9, 1994, Salsitz and D’Ugo each

executed a document denominated:

			“Addendum 1, Letter of Understanding dated

November 17, 1993

			INCENTIVE STOCK OPTION PROGRAM.”

These documents contained an arbitration clause providing in part:

			“In the event there are any claims or disputes between

PARTIES hereto, such claims or disputes shall be

submitted by the PARTIES for resolution and binding

arbitration within Lake County, IL, in accordance with the

rules of the American Arbitration Association as in effect

under IL law.”

	On June 17, 1994, Salsitz and D’Ugo requested the return of

their investment and reimbursement of certain expenses they had

incurred. On July 21, 1994, Kreiss returned Salsitz’s and D’Ugo’s

original investment. However, Kreiss did not reimburse Salsitz’s

and D’Ugo’s expenses. Salsitz and D’Ugo then filed suit in the

municipal division of the circuit court (municipal court) for breach

of contract and fraud, seeking $29,888.58 in unpaid expenses.

	Kreiss and AUS moved to dismiss the municipal court action

based upon the presence of the arbitration clauses in the stock

option agreements. Salsitz and D’Ugo filed a response denying that

they agreed to arbitrate the claims at issue, arguing that there was

no agreement to arbitrate since the arbitration clauses were in the

stock option agreements, not the letters of understanding. Salsitz

and D’Ugo also argued that the contracts had been rescinded.

	On February 15, 1995, the municipal court ordered the civil

action stayed and directed that an arbitrator determine whether

particular matters were arbitrable. Salsitz and D’Ugo did not

pursue arbitration. However, Kreiss and AUS filed their own

demand for arbitration on November 16, 1995. In their demand for

arbitration, Kreiss and AUS sought an injunction preventing

Salsitz, D’Ugo and New Horizon Productions, Ltd. (New

Horizon), from unfairly competing with AUS, and sought monetary

damages for violation of the Illinois Trade Secrets Act, for tortious

interference with defendants’ existing contracts and with

prospective business relations, for breach of contract, and for

breach of fiduciary duty. On November 17, 1995, Salsitz and

D’Ugo nonsuited the action in municipal court. At that point, all

that remained before the court was Kreiss and AUS’s demand for

arbitration.

	Several arbitration hearings were held in 1996 and 1997. On

August 8, 1997, Salsitz, D’Ugo and New Horizon filed a verified

complaint in chancery court for declaratory and injunctive relief,

seeking to stay and permanently enjoin the arbitration proceedings

on the grounds that no agreement to arbitrate existed. Plaintiffs

also sought a declaration that the arbitration clauses did not apply

to any dispute under the letters of understanding, and, in particular,

to the claims in the arbitration proceedings. In addition, on August

13, 1997, plaintiffs filed a motion for a stay of arbitration, and, on

August 15, 1997, plaintiffs filed a motion for a temporary

restraining order to enjoin the continuation of the arbitration

hearings. On August 19, 1997, the chancery court denied plaintiffs’

motion for a temporary restraining order. As explained by the court

at a later hearing:

		“This case first came to this Court during the pendency of

an arbitration hearing. At that time, on or about August 19, 1997, then Counsel for Plaintiffs Salsitz, D’Ugo and

the New Horizon Productions asked this Court to stay an

arbitration proceeding commencing between the parties.

The issue addressed during the emergency motion was a

determination as to the arbitrability of the issues. Although

this Court did not enter a stay of the arbitration

Proceedings at that time, the Court did leave it open for

parties to address the issue at a later date.”

	The arbitration continued. On September 23, 1997, plaintiffs

filed an amended motion for a stay of arbitration, asserting that no

agreement to arbitrate existed. On October 9, 1997, the chancery

court denied plaintiffs’ amended motion for a stay. Thereafter, the

arbitrator notified the parties that the final arbitration hearings

would be held on December 10, 1997. Plaintiffs did not appear for

those hearings. The arbitrator heard evidence from defendants

regarding damages that they sustained. On December 11, 1997, the

arbitrator declared the hearings closed, and issued a notice to

plaintiffs on December 24, 1997. The notice informed plaintiffs that

the arbitrator would issue an award within 30 days. Plaintiffs did

not file a motion to reopen the hearings. On January 10, 1998, the

arbitrator awarded defendants $3,761,174.40 in actual damages,

and $2.5 million in punitive damages.

	On January 21, 1998, defendants filed an application for

confirmation of the arbitration award and for entry of judgment on

the award. Plaintiffs opposed confirmation of the arbitration award;

asked that the chancery court review the arbitrator’s determination

of arbitrability; asked that the court vacate the arbitration award;

and asked for leave to file an amended complaint, requesting that

the court vacate the arbitration award. Subsequently, on June 12,

1998, Salsitz and New Horizon amended their complaint to add a

count seeking to vacate the arbitration award. D’Ugo also

amended his complaint to add a count seeking to vacate the

arbitration award. In the amended verified complaints, plaintiffs

alleged, inter alia, that the arbitration award was obtained through undue means, citing misleading communications between the

arbitrator and plaintiffs. Plaintiffs complained that the arbitrator

should not have conducted the hearing on December 10, 1997, in

plaintiffs’ absence, and should not have closed the hearings without giving plaintiffs an opportunity to present evidence. Plaintiffs

alleged that they did not know the law firm, which had represented

plaintiffs at the earlier hearings, had decided to cease representing

plaintiffs and, consequently, did not appear on plaintiffs’ behalf at

the hearing on December 10.

	Thereafter, defendants filed a motion to dismiss plaintiffs’

amended verified complaints. At a hearing on January 27, 1999, the

chancery court noted that the issue of arbitrability and defendants’

motion to dismiss plaintiffs’ amended complaints were intertwined.

The court stated that it would first “address whether or not there

could be arbitration of the agreement or agreements involved in the

business relationship that was entered into by the parties.” The

court believed, however, that it could not upset or invalidate the

arbitrator’s ruling as to the arbitrability of the issues because the

arbitrator’s ruling was entitled to deference. The court reasoned:

		“[T]he Court finds that it cannot upset or invalidate the

arbitrator’s rulings as to the arbitrability of the issues ***.

The Court and the parties are both aware that–this is in

parenthesis. Now I am quoting a case ‘Judicial review of

arbitration award is restricted. Courts encourage

settlement of disputes by arbitration; and accordingly,

judicial review of an arbitration award is more limited than

Appellate review of a Circuit Court’s decision. Courts

must construe an arbitration award whenever possible to

uphold their validity. Limited judicial review fosters the

long accepted and encouraged principles that arbitration

awards should be the end and not the beginning of

litigation.’ ”

 The court dismissed plaintiffs’ amended verified complaints,

affirmed the arbitrator’s award of actual damages, and vacated the

award of punitive damages.

	Within 30 days of this final ruling, plaintiffs appealed from the

order dismissing their amended verified complaints. Defendants

moved to dismiss the appeals as untimely under Supreme Court

Rule 307(a)(1) (188 Ill. 2d R. 307(a)(1)). Defendants argued, inter alia, that plaintiffs should have filed an interlocutory appeal from the denial of plaintiffs’ motion to stay the arbitration proceedings.

Since plaintiffs failed to file an interlocutory appeal, they forfeited their right to contest the arbitrability of the letters of

understanding. The appellate court granted the motion to dismiss

as to the issue of arbitrability, but denied the motion as to the

remaining issues. Having considered those issues on the merits, the

appellate court affirmed the chancery court’s order. 311 Ill. App.

3d 590. We allowed plaintiffs’ petition for leave to appeal.

ANALYSIS

A. Res Judicata

	Defendants maintain that, in its order of February 15, 1995,

the municipal court determined the issue of arbitrability in

defendants’ favor. Salsitz and D’Ugo did not appeal that order.

Defendants note that the amended verified complaints plaintiffs

subsequently filed in chancery court sought to stay and

permanently enjoin the arbitration proceedings on the grounds that

no agreement to arbitrate existed, and sought a declaration that the

arbitration clauses were invalid or nonbinding. Defendants

conclude the chancery court was correct in dismissing plaintiffs’

amended verified complaints because the doctrine of res judicata barred relitigation of the issue of arbitrability. We disagree.

	In Donaldson, Lufkin & Jenrette Futures, Inc. v. Barr, 124 Ill. 2d 435 (1988), this court explained when it is appropriate for the

circuit court to determine the issue of arbitrability in the first

instance:

		“Where the language of the arbitration agreement is clear,

and it is apparent that the dispute sought to be arbitrated

falls within the scope of the arbitration clause, the court

should decide the arbitrability issue and compel

arbitration. [Citations.] Similarly, if it is apparent that the

issue sought to be arbitrated is not within the ambit of the

arbitration clause, the court should decide the arbitrability

issue in favor of the opposing party, because there is no

agreement to arbitrate. [Citations.] ‘Thus, the arbitrability

issue emerges as essentially one of giving effect to the

parties’ expressed intention about the use of arbitration.’

[Citation.] The paramount factor in determining the parties’ intention is the scope of the arbitration clause in

the contract.” Donaldson, 124 Ill. 2d at 445.

This court noted, however, that a problem arises when the parties

broadly agree to arbitrate and it is still unclear whether the subject

matter of the dispute falls within the scope of the arbitration

agreement. When the issue of contractual intention is reasonably

debatable, should the determination of arbitrability be made by the

court or by the arbitrator in the first instance? Having examined

cases from other jurisdictions and reviewed the intent of the

drafters of the Uniform Arbitration Act (see 710 ILCS 5/1 et seq. (West 1996)), this court held that:

		“when the language of an arbitration clause is broad and

it is unclear whether the subject matter of the dispute falls

within the scope of arbitration agreement, the question of

substantive arbitrability should initially be decided by the

arbitrator.” Donaldson, 124 Ill. 2d at 447-48.

See also Comdisco, Inc. v. Dun & Bradstreet Corp., 306 Ill. App. 3d 197, 203-04 (1999). However, the arbitrator’s decision is

subject to an “ultimate determination of arbitrability by the court.”

Donaldson, 124 Ill. 2d at 451. A court may vacate an arbitration award if it determines there was no arbitration agreement. See 710

ILCS 5/12(a)(5) (West 1996).

	In the present case, each stock option agreement contained a

broad arbitration clause. Nonetheless, the parties disagreed as to

the scope of the clause. Defendants argued that Salsitz’s and

D’Ugo’s claims for breach of contract and fraud were subject to

arbitration and moved to dismiss the complaint. Salsitz and D’Ugo

argued their claims for breach of contract were based on an oral

agreement between the parties terminating their relationship and

providing for the return of Salsitz’s and D’Ugo’s investments in

AUS and were not subject to arbitration pursuant to the arbitration

clauses in the stock option agreements. Salsitz and D’Ugo also

argued their claims for fraud, although related to the parties’

original agreement to invest in AUS, fell outside the scope of the

agreement and were not subject to arbitration.

	The municipal court did not decide the issue of arbitrability.

Rather, the municipal court stayed Salsitz’s and D’Ugo’s action, and directed that an arbitrator determine whether their claims were

arbitrable. Salsitz and D’Ugo did not pursue arbitration. Instead,

on November 17, 1995, Salsitz and D’Ugo nonsuited the action in

municipal court. Meanwhile, on November 16, 1995, defendants

filed their demand for arbitration, seeking monetary damages for

violation of the Illinois Trade Secrets Act, for tortious interference

with defendants’ existing contracts and with prospective business

relations, for breach of contract, and for breach of fiduciary duty.

The arbitrator determined that defendants’ claims were arbitrable

and entered the arbitration award from which plaintiffs seek relief.

Under these circumstances, we reject defendants’ contentions that

the municipal court determined the issue of arbitrability in their

favor, and that plaintiffs’ amended verified complaints were an

effort to relitigate that issue.

B. Interlocutory Appeal

	Next, defendants renew their argument that in order to

preserve the issue of arbitrability, plaintiffs had to file an

interlocutory appeal from the chancery court’s order of August 19,

1997, denying plaintiffs’ motion to stay the arbitration proceedings.

Since plaintiffs failed to file an interlocutory appeal, they forfeited

their right to contest the arbitrability of disputes arising under the

letters of understanding. We reject this argument for two reasons.

	First, a party who decides not to file an appeal from an

interlocutory order of the circuit court denying a stay of arbitration

does not lose the opportunity to contest the arbitrability of the

dispute in a subsequent appeal from a final judgment of the court

confirming the arbitration award. Supreme Court Rule 307

regulates appeals from interlocutory orders of the circuit court. 188

Ill. 2d R. 307. The rule confers on parties the right to appeal

certain interlocutory orders before entry of final judgment by the

circuit court. An order of the circuit court to compel or stay

arbitration is injunctive in nature and subject to interlocutory

appeal under paragraph (a)(1) of the rule. Notaro v. Nor-Evan Corp., 98 Ill. 2d 268, 271 (1983). The rule, however, does not require that a party appeal from an interlocutory order of the

circuit court denying a stay of arbitration. Under the rule, the party

has the option of waiting until after final judgment has been entered to seek review of the circuit court’s interlocutory order. See

Anderson v. Financial Matters, Inc., 285 Ill. App. 3d 123, 135 (1996); Alpine Bank v. Yancy, 274 Ill. App. 3d 766, 768 (1995); Davis v. Bughdadi, 120 Ill. App. 3d 236, 241 (1983).

	The optional nature of Rule 307 is manifest from the language

it employs. Rule 307 plainly states that an appeal “may” be taken

to the appellate court from an interlocutory order of the circuit

court. Use of the word “may” is generally regarded as indicating

that action is permissive rather than mandatory. See People v. Reed, 177 Ill. 2d 389, 393 (1997). There is no basis for construing the term differently here.

	In the present case, plaintiffs could have filed an appeal from

the interlocutory order of the chancery court, denying their motion

for a stay of arbitration. They did not do so. However, it was not

mandatory that they appeal from the interlocutory order. Plaintiffs

could await the final judgment of the chancery court to seek review

of the interlocutory order. Thus, plaintiffs’ failure to file an appeal

from the interlocutory order did not result in a forfeiture of their

right to contest the arbitrability of disputes arising under the letters

of understanding.

	Second, in its order of August 19, 1997, the chancery court

did not determine the issue of arbitrability. Rather, the chancery

court denied plaintiffs’ motion for a temporary restraining order

and deferred its ruling on the issue of arbitrability. As noted above,

a court may determine that an arbitrator should decide the issue of

arbitrability in the first instance. However, the arbitrator’s decision

is subject to an “ultimate determination of arbitrability by the

court.” Donaldson, 124 Ill. 2d at 451.

	As late as January 1999, the chancery court believed that the

issue of arbitrability was subject to review. Indeed, the chancery

court ruled on the issue, and, because the court believed that the

arbitrator’s ruling on arbitrability was subject to deference, the

court determined not to upset that ruling. In light of the fact that

the chancery court did not rule on the issue of arbitrability until

January 1999, it would seem anomalous to rule that plaintiffs were

required to file an appeal on September 19, 1997, the cutoff date

for an interlocutory appeal from the August 19 order, and, having

failed to file such an appeal, plaintiffs forfeited their right to contest the arbitrability of claims arising under the letters of understanding.

We refuse to so hold.

C. Arbitration Agreement

	The Illinois Uniform Arbitration Act embodies a legislative

policy favoring enforcement of agreements to arbitrate future

disputes. Donaldson, 124 Ill. 2d at 443; Flood v. Country Mutual Insurance Co., 41 Ill. 2d 91, 93 (1968). Accordingly, the Act empowers the circuit court, upon application of a party to a

dispute, to compel or stay arbitration, or to stay court action

pending arbitration. United Cable Television Corp. v. Northwest Illinois Cable Corp., 128 Ill. 2d 301, 306 (1989); Donaldson, 124 Ill. 2d at 443.

	The courts of this state favor arbitration as well. Arbitration is

regarded as an effective, expeditious, and cost-efficient method of

dispute resolution. United Cable, 128 Ill. 2d at 306; Johnson v. Baumgardt, 216 Ill. App. 3d 550, 555-56 (1991). Thus, wherever possible, the courts construe arbitration awards so as to uphold

their validity. Rauh v. Rockford Products Corp., 143 Ill. 2d 377, 386 (1991); Christian Dior, Inc. v. Hart Schaffner & Marx, 265 Ill. App. 3d 427, 431 (1994).

	While arbitration is a favored method of dispute resolution,

this court has consistently cautioned that an agreement to arbitrate

is a matter of contract. United Cable, 128 Ill. 2d at 306; Flood, 41 Ill. 2d at 93. The parties to an agreement are bound to arbitrate

only those issues they have agreed to arbitrate, as shown by the

clear language of the agreement and their intentions expressed in

that language. Rauh, 143 Ill. 2d at 387; Flood, 41 Ill. 2d at 94. An arbitration agreement will not be extended by construction or

implication. Flood, 41 Ill. 2d at 94.

	It follows that, where the arbitrator decides the question of

arbitrability in the first instance, the circuit court must review the

arbitrator’s decision de novo. Donaldson, 124 Ill. 2d at 451; Amgen, Inc. v. Ortho Pharmaceutical Corp., 303 Ill. App. 3d 370, 378 (1999). See also Woonsocket Teachers’ Guild, Local 951 v. Woonsocket School Committee, 770 A.2d 834, 837 (R.I. 2001); DMS Properties-First, Inc. v. P.W. Scott Associates, Inc., 748 A.2d 389, 392 (Del. 2000) (and cases cited therein); Ex parte Stamey v. Easter, 776 So. 2d 85, 88 (Ala. 2000); In re Arbitration Between: Independent School District No. 88, New Ulm,

Minnesota v. School Service Employees Union Local 284, 503 N.W.2d 104, 105 (Minn. 1993); Grad v. Wetherholt Galleries, 660 A.2d 903, 908 (D.C. App. 1995); Oil, Chemical & Atomic Workers International Union v. Lone Star Producing Co., 332 S.W.2d 151, 154 (Tex. Civ. App. 1959). Were it not so, a party

would be bound by the arbitration of disputes he has not agreed to

arbitrate and would be left with only a court’s deferential review of

the arbitrator’s decision on the question of arbitrability. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 942, 131 L. Ed. 2d 985, 992, 115 S. Ct. 1920, 1923 (1995). We agree with the

court’s observation in Grad:

		“To require any degree of judicial deference to an

arbitrator’s decision regarding arbitrability where a proper

objection to the arbitrator’s authority has been lodged

would vitiate the consent basis of statutory arbitration by

permitting an arbitrator to clothe herself with actual

authority, based on the agreement of the one party

asserting the claim. *** [A]ny judicial determination of

arbitrability is necessarily de novo.” Grad, 660 A.2d at 908.

	There are, of course, instances where the parties agree to

submit the question of arbitrability itself to arbitration. In those

instances, the circuit court should review the question of

arbitrability deferentially, that is, the court’s standard for reviewing

the arbitrator’s decision on arbitrability should be the same

standard courts apply when they review any other matter that the

parties have agreed to arbitrate. First Options, 514 U.S. at 943, 131 L. Ed. 2d at 993, 115 S. Ct. at 1923; AT&T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 649, 89 L. Ed. 2d 648, 656, 106 S. Ct. 1415, 1418 (1986). But, as the Court

cautioned in First Options:

		“Courts should not assume that the parties agreed to

arbitrate arbitrability unless there is ‘clea[r] and

unmistakabl[e]’ evidence that they did so. [Citations.] In

this manner the law treats silence or ambiguity about the question ‘who (primarily) should decide arbitrability’ differently from the way it treats silence or ambiguity

about the question ‘whether a particular merits-related dispute is arbitrable because it is within the scope of a

valid arbitration agreement’–for in respect to this latter

question the law reverses the presumption. [Citations.]

			*** [G]iven the principle that a party can be forced to

arbitrate only those issues it specifically has agreed to

submit to arbitration, one can understand why courts

might hesitate to interpret silence or ambiguity on the

‘who should decide arbitrability’ point as giving the

arbitrators that power, for doing so might too often force

unwilling parties to arbitrate a matter they reasonably

would have thought a judge, not an arbitrator, would

decide.” (Emphases in original.) First Options, 514 U.S. at 944-45, 131 L. Ed. 2d at 994, 115 S. Ct. at 1924-25.

	In the present case, nothing in the stock option agreements

indicates that the parties intended to submit the question of

arbitrability to arbitration. It follows that the chancery court should

have reviewed the question of arbitrability de novo. Further, since the question of arbitrability is one of contract law, it also follows

that our review of the chancery court’s order confirming the

arbitration award and dismissing the amended verified complaints

is de novo. First Options, 514 U.S. at 948, 131 L. Ed. 2d at 996, 115 S. Ct. at 1926.

	The stock option agreements provided that defendants would

issue a stock option incentive bonus, consisting of an option to

purchase 35 shares of common stock, to the individual participant

for every kilowatt of wholesale electric contracted for and sold by

the participant, or for every kilowatt of wholesale electric projects

for which the participant provided or secured nonrecourse funding.

Each stock option agreement contained an arbitration clause

binding the individual participant and defendants to arbitrate

disputes arising under the stock option agreement. The stock

option agreements, however, were separate agreements from the

letters of understanding. And while each stock option agreement

contained an arbitration clause, the letters of understanding did not.

 	In their demand for arbitration, defendants sought an injunction preventing plaintiffs from unfairly competing with AUS,

and sought monetary damages for violation of the Illinois Trade

Secrets Act, for tortious interference with defendants’ existing

contracts and with prospective business relations, for breach of

contract, and for breach of fiduciary duty. Thus, the disputes

between the parties, as framed by the demand for arbitration, arose

from the letters of understanding, that is to say, from plaintiffs’

agreement to invest in AUS; plaintiffs’ participation in AUS

management; plaintiffs’ termination of their relationship with AUS;

and various actions detrimental to AUS that plaintiffs took once

the relationship ended. The disputes between the parties did not

arise from the stock option incentive bonus defendants committed

to give plaintiffs based upon plaintiffs’ performance with AUS. As

such, the disputes between the parties did not fall within the scope

of the arbitration clauses and were not subject to arbitration.

	The chancery court erred in confirming the award of the

arbitrator and dismissing plaintiffs’ amended verified complaints.

D. Waiver

	Citing Tri-City Jewish Center v. Blass Riddick Chilcote, 159 Ill. App. 3d 436 (1987), defendants maintain that plaintiffs waived

any objections to arbitrability by participating in the arbitration

hearings. We disagree.

	In Tri-City, the defendant made a demand for arbitration in December of 1983, and the arbitration hearings were held in

November of 1985. By letter dated April 24, 1984, the plaintiff

advised the American Arbitration Association that the dispute

might not be arbitrable and it might seek a court-ordered stay of

the proceedings. However, the plaintiff did not challenge the

jurisdiction of the arbitration panel prior to the hearings. In

February of 1986, the arbitrators rendered an award granting

$65,000 to the defendant in payment of its fees and $40,000 to the

plaintiff for damages. The plaintiff subsequently filed suit seeking

to vacate the arbitration award. The circuit court found that the

plaintiff had waived its objections to the arbitration by participating

in the proceedings, and dismissed the complaint.

	The appellate court affirmed the dismissal of the complaint.

The court noted that any issue regarding the arbitrability of a

dispute is waived by participation in the arbitration proceedings.

Although the plaintiff had notified the American Arbitration

Association that it might seek a court-ordered stay of the

proceedings, the plaintiff had not done so. The court deemed the

issue of arbitrability waived inasmuch as it was raised by the

plaintiff subsequent to the rendition of the arbitration award. Tri- City, 159 Ill. App. 3d at 439.

	Tri-City is inapposite. In the present case, plaintiffs objected to the arbitration proceedings in a timely manner. At the

introductory hearing with the arbitrator, Salsitz and D’Ugo

objected that no agreement to arbitrate existed. Thereafter, on

August 8, 1997, plaintiffs filed a verified complaint in chancery

court for declaratory and injunctive relief, seeking to stay and

permanently enjoin the arbitration proceedings on the grounds that

no agreement to arbitrate existed. Plaintiffs also sought a

declaration that the arbitration clauses did not apply to any dispute

under the letters of understanding and, in particular, to the claims

in the arbitration proceedings. In addition, on August 13, 1997,

plaintiffs filed a motion for a stay of arbitration, and, on August 15,

1997, plaintiffs filed a motion for a temporary restraining order to

enjoin the continuation of the arbitration hearings. The arbitrator

rendered the award on January 18, 1998. A timely objection

preserves the right to challenge an award, even where the parties

participate in the arbitration proceedings. Ure v. Wangler Construction Co., 232 Ill. App. 3d 492, 499 (1992); Bisluk v. Town Realty, Inc., 90 Ill. App. 3d 1039 (1980); 710 ILCS 5/12(a)(5) (West 1996).

	We hold that plaintiffs did not waive their objections to the

arbitrability of the disputes.

CONCLUSION

	We conclude that plaintiffs did not agree to arbitrate the

disputes defendants submitted for arbitration. The chancery court

should have vacated the arbitration award entered in defendants’s favor. In light of this holding, we need not address the other issues

raised on appeal.

	We reverse the judgments of the appellate court and circuit

court, and we vacate the arbitration award.

Appellate court judgment reversed;

circuit court judgment reversed;

award vacated.

Supplemental Opinion Upon Denial of Rehearing

	Upon denial of defendants’ petition for rehearing, we find it

appropriate to comment briefly upon one of the arguments raised

by defendants in the petition.

	This court filed an opinion in this matter on December 1,

2000. In that opinion, we noted that plaintiffs had failed to file an

interlocutory appeal from the chancery court’s order denying their

motion to stay arbitration. We held, inter alia, that plaintiffs could no longer contend that their dispute with defendants was not

subject to arbitration. On December 22, 2000, plaintiffs filed a

petition for rehearing in which they maintained that the language

of Supreme Court Rule 307(a)(1) is permissive and, consequently,

this court was mistaken in requiring that plaintiffs to have filed an

interlocutory appeal from the chancery court’s order denying their

motion for a stay of arbitration. We granted plaintiffs’ petition for

rehearing and ordered additional briefing on the matter to consider

the propriety of our construction of Rule 307.

	In their petition for rehearing, defendants maintain that, in

reversing the holding of our December 1, 2000, opinion, this court

has violated the principle of stare decisis. We disagree.

	In our view, defendants’ argument overlooks the role of

rehearing in appellate practice and its effect on the application of stare decisis. As observed by the special concurrence in Berg v. Allied Security, Inc., 193 Ill. 2d 186, 191-92 (2000) (Freeman, J., specially concurring):

			“Once this court issues an opinion, our rules of appellate

procedure provide the nonprevailing party with the

opportunity for rehearing in order to apprise the court of points the party believes were ‘overlooked or

misapprehended.’ 134 Ill. 2d R. 367(b). ‘The right to

apply for a rehearing is not given by the statute, but is a

matter of grace or favor, growing largely out of the

willingness of the court to correct any inadvertent error.’

Vickers v. Tyndall, 168 Ill. 616, 617 (1897). This rule exists so that the court can correct errors ‘into which the

court may have inadvertently fallen in deciding the case as

originally presented.’ Matthews v. Granger, 196 Ill. 164, 170 (1902). This court has previously noted that the filing

of a petition for rehearing does not alter the effective date

of the judgment unless the court allows the petition, in

which case the effective date of judgment is the date that

judgment is entered on rehearing. See PSL Realty Co. v. Granite Investment Co., 86 Ill. 2d 291 (1981); Glasser v. Essaness Theatres Corp., 346 Ill. App. 72 (1952) (noting that when a petition for rehearing is filed, the judgment of

the reviewing court does not become final until the

petition is denied).”

	In the present case, once plaintiffs filed their petition for

rehearing and this court determined that the petition should be

allowed, the original December 1, 2000, decision could not be

considered a final opinion. Given the importance of stare decisis, we believe that it was better to reconsider the matters raised by

plaintiffs on the petition for rehearing before our opinion became

final, rather than using a later case to limit or overrule our decision,

particularly since this case concerned the application of one of the

rules of this court. Granting plaintiffs’ petition for rehearing was

not an affront to the principle of stare decisis.

	Defendants have not cited any opinions in support of the

proposition that the principle of stare decisis applies to decisions which are not yet final. We note that defendants’ argument ignores

this court’s admonishment that opinions which are not yet final

may not be cited as legal precedent. Further, we note that applying

the principle of stare decisis to opinions which are not yet final means that a court could never grant a petition for rehearing,

correct errors in the opinion, and perhaps reconsider the

disposition of the case. Defendants’ argument is untenable.