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The Illinois Court of Appeals held that an arbitration panel exceeded its powers by ignoring the clear language of the parties' written agreement and instead relying on an alleged oral agreement as the basis for its award.
In First Merit Realty Services, Inc. v. Amberly Square Apartments, L.P., No. 1-05-3556, 2007 WL 942358 (Ill. App. Ct. Mar. 29, 2007), FMR managed property for Amberly pursuant to an agreement containing an arbitration clause. After Amberly terminated the agreement, FMR filed an arbitration claim. The arbitration panel issued a summary award in FMR's favor. Amberly filed a motion to vacate the award.
Although there is a presumption that an arbitration panel has not exceeded their authority, an arbitration award may be vacated if such an error in judgment is apparent on the face of the award. See Shearson Lehman Brothers, Inc. v. Hedrich, 639 N.E.2d 228 (Ill. App. Ct. 1994). In this case, the Court held that the panel exceeded its authority because it was apparent on the face of the award that the arbitrators ignored a provision in the agreement allowing Amberly to terminate the agreement by giving 30 days notice. It was undisputed that Amberly complied with this provision.
In support of the award, FMR argued that the arbitrators properly reformed the written agreement based on an oral agreement between the parties. In rejecting this argument, the Court noted that FMR had not cited any authority support an arbitrator's authority to reform a written contract. Having determined that the arbitrators exceeded their authority by ignoring the clear language of the written agreement in favor of an alleged oral agreement, the Court vacated the award.
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