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Affirming a circuit court’s finding of waiver in a commercial dispute, the Illinois Court of Appeals held that a party had waived its right to arbitrate by failing to even mention arbitration when it brought arbitrable claims in court.
In Glazer’s Distributors of Illinois, Inc. v. NWS-Illinois, LLC, No. 1-06-3274, 2007 WL 2579969 (Ill. Ct. App. Sept. 7, 2007), Glazer’s contracted to provide assistance, management, and consultation services for NWS, a wholesale distributor of alcoholic beverages. The contract contained an arbitration provision mandating arbitration of disputes arising from the parties’ agreement.
Glazer’s sued in court seeking a temporary restraining order preventing NWS from selling its distribution contracts and, alternatively, for breach of contract. The circuit court denied the request because the contract did not prohibit NWS from selling its distribution contracts. Glazer’s then filed an arbitration claim for the same claims. NWS responded by filing a motion to stay arbitration, asserting Glazer’s had waived its right to arbitrate by suing in court and that Glazer’s arbitration filing was an impermissible attempt at forum shopping. The circuit court denied Glazer’s motion and Glazer’s appealed.
Affirming the circuit court, the Court held that Illinois arbitration law, rather than the FAA, governed the transaction. Although ordinarily the FAA governs when a contract involves interstate commerce, parties may contractually waive that right. Here, the parties’ contract specifically provided for Illinois law to govern, thus rendering the FAA inapplicable.
Additionally, the Court rejected Glazer’s argument that the circuit court lacked authority to hear the waiver issue, as it had previously rejected identical arguments. Although the United States Supreme Court’s decision in Howsman v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) suggests the arbitrator should decide the waiver question, the Supreme Court did not hold that an arbitrator must decide waiver issues but rather that they were presumptively reserved for the arbitrator. Moreover, courts applying Howsman have reached differing conclusions.
Finally, the Court, employing an abuse of discretion standard, held that Glazer’s had waived its arbitration rights by seeking an injunction in court. Although Illinois law strongly disfavors a finding that a party had waived its arbitration rights, the Court concluded that Glazer’s conduct was inconsistent with its right to arbitrate. The fact Glazer’s made no mention of arbitration in its initial complaint and only sought arbitration after the circuit court had denied its injunction request suggested that Glazer’s was engaging in impermissible forum shopping.
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