Title: Salsitz v. Kreiss
Citation: N/A
Docket Number: 89156
State: Illinois
Issuer: Illinois Supreme Court
Date: December 3, 2001

Docket No. 89156-Agenda 18-May 2000.
NEIL SALSITZ et al., Appellants, v. FRITZ KREISS et al., 								Appellees.
Opinion filed September 20, 2001. - Supplemental Opinion upon
denial of rehearing December 3, 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rescinded.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 &amp; 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 &amp; 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 &amp; 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 &amp; 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&amp;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'
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 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.