Opinion ID: 2238845
Heading Depth: 2
Heading Rank: 2

Heading: Arbitrator's Interpretation of the Agreement

Text: Rockford Products next contends that the appellate court erred in finding that the arbitrator's award was not based upon a proper interpretation of the employment agreement. Rockford Products contends that, in reaching its result, the appellate court misapplied the standard in Garver v. Ferguson (1979), 76 Ill.2d 1, 27 Ill.Dec. 773, 389 N.E.2d 1181, regarding application of section 12(a)(3) of the Act (Ill.Rev.Stat. 1987, ch. 10, par. 112(a)(3)). In addition, Rockford Products contends that the arbitrator's specific findings regarding Rauh's failure to perform his duties under the employment contract were sufficient to support her decision that Rauh was discharged for cause. Both sections 8.0 and 8.1 of the agreement provide that failure to perform under the terms of the agreement is cause for discharge. Rauh responds that the arbitrator's interpretation did not draw its essence from the parties' agreement. Rauh asserts that the arbitrator disregarded the actual terms of the agreement, and therefore the award should be vacated. Rauh cites Roadmaster Corp. v. Production & Maintenance Employees' Local 504 (7th Cir.1988), 851 F.2d 886, Hill v. Norfolk & Western Ry. Co. (7th Cir.1987), 814 F.2d 1192, and Zeigler Coal Co. v. District 12, United Mine Workers (C.D.Ill.1980), 484 F.Supp. 445. Further, Rauh asserts that the arbitrator refused to hear material evidence regarding section 8.0 of the parties' agreement, and therefore the award should be vacated pursuant to section 12(a)(4) of the Act (Ill. Rev.Stat.1987, ch. 10, par. 112(a)(4)). First, since Rauh has not cross-appealed, we need not address his argument regarding the arbitrator's refusal to hear evidence. However, even assuming arguendo that this issue is properly before us, we find no merit in the argument, since the record fails to show that the arbitrator excluded any material evidence offered by the parties. Second, we do not accept Rauh's assertion that the analysis in the instant case is whether the arbitrator's interpretation drew its essence from the contract. The cases cited by Rauh involve the interpretation of the Federal Arbitration Act (9 U.S.C. § 1 et seq. (1988)) and other Federal labor statutes, and the standard for reviewing an award based upon a collective-bargaining agreement. (See also United Steelworkers of America v. Enterprise Wheel & Car Corp. (1960), 363 U.S. 593, 597, 80 S.Ct. 1358, 1361, 4 L.Ed.2d 1424, 1428; Miller Brewing Co. v. Brewery Workers Local Union No. 9 (7th Cir.1984), 739 F.2d 1159.) Under the circumstances of the instant case, we decline to follow that line of cases. Rather, we look to the language of the Illinois Act, which sets forth the grounds for vacating an award (Ill.Rev.Stat.1987, ch. 10, pars. 112(a), (e)). Further, as we held above, the question of whether the termination violated section 8.0 of the parties' agreement was properly before the arbitrator. We agree with Rockford Products that the appellate court misapplied the standard set forth in Garver. In Garver, this court looked to section 12(a)(3) of the Act (Ill.Rev.Stat.1975, ch. 10, par. 112(a)(3)), and held that an arbitrator's award will not be set aside for errors in judgment or mistakes of law or fact. ( Garver, 76 Ill.2d at 7-8, 27 Ill.Dec. 773, 389 N.E.2d 1181.) This holding accords with long-established case law regarding arbitration agreements. Burchell v. Marsh (1855), 58 U.S. (17 How.) 344, 349, 15 L.Ed. 96, 99; Ross v. Watt (1854), 16 Ill. 99, 102; White Star Mining Co. v. Hultberg (1906), 220 Ill. 578, 609, 77 N.E. 327; Podolsky v. Raskin (1920), 294 Ill. 443, 450, 128 N.E. 534. Illinois adopted the Uniform Arbitration Act in 1961. The Uniform Act was promulgated by the National Conference of Commissioners on Uniform State Laws in 1955. In determining the proper standard to be applied in construing section 12(a)(3) of the Act, we have looked to the explanation of the chairman of the committee which drafted the Uniform Act: [T]he question for the court is whether the construction of the contract made by the arbitrator is a reasonably possible one that can seriously be made in the context in which the contract was made. Stated affirmatively, if all fair and reasonable minds would agree that the construction of the contract made by the arbitrator was not possible under a fair interpretation of the contract, then the court would be bound to vacate or refuse to confirm the award. Pirsig, Some Comments on Arbitration Legislation and the Uniform Act, 10 Vand.L.Rev. 685, 706 (1957). See Garver, 76 Ill.2d at 9-10, 27 Ill.Dec. 773, 389 N.E.2d 1181. After setting forth the  all fair and reasonable minds (emphasis added) standard, the appellate court in the instant case held that [f]air and reasonable minds would not agree that the [arbitrator's] decision is a valid interpretation of section 8.0 (201 Ill.App.3d at 366, 147 Ill.Dec. 73, 559 N.E.2d 73). Even if the appellate court's holding can somehow be construed as applying the correct standard, nevertheless we disagree with the outcome. After reviewing the record, we find that the arbitrator's interpretation of the parties' contract is a reasonably possible one that can seriously be made within the context in which Rauh and Rockford Products entered the contract. Further, we do not find that all fair and reasonable minds would agree that the construction of the contract was not possible under a fair interpretation of the contract. The arbitrator heard the testimony of a number of witnesses that Rauh had failed, during a critical financial period, to instill confidence in the company or to take sufficient action to attempt to resolve the company's financial condition. The arbitrator noted that the employment agreement required Rauh to perform duties of the same character as those ordinarily performed by a chief executive officer, including the duty of showing leadership. The arbitrator found that Rauh lacked the leadership necessary to his position, as demonstrated by his poor handling of the lender crisis. Further, the contract required that Rauh devote his full time to the company; however, Rauh was absent for several days during a critical financial period. Sections 8.0 and 8.1 of the agreement are the only sections which provide the methods for termination upon proper grounds. The arbitrator determined that Rauh had failed to perform properly under the contract, and looked to sections 8.0 and 8.1 to determine whether the grounds and method of termination were in accord with the parties' agreement. Even if, as Rauh asserts, the arbitrator misinterpreted the meaning of the notice provisions of sections 8.0 or 8.1 or the provisions regarding which matters were beyond the employee's control, nevertheless, we believe that the arbitrator's interpretation was a reasonably proper one and fails to meet the test in Garver for vacating an award. Gross errors of judgment in law or a gross mistake of fact are not grounds for vacating an award unless the mistakes or errors are apparent upon the face of the award. ( White Star Mining Co. v. Hultberg (1906), 220 Ill. 578, 77 N.E. 327; Garver, 76 Ill.2d at 7-8, 27 Ill. Dec. 773, 389 N.E.2d 1181.) Since we do not find any gross errors of judgment in law or gross mistakes of fact on the face of the award, and for the other reasons stated above, we find no grounds for vacating the arbitrator's award.