Equistar Chemicals v. Hartford Steam Boiler Inspection & Insurance Co. of Connecticut

883 N.E.2d 740, 379 Ill. App. 3d 771, 318 Ill. Dec. 509, 2008 Ill. App. LEXIS 179
CourtAppellate Court of Illinois
DecidedMarch 3, 2008
Docket4-07-0478
StatusPublished
Cited by8 cases

This text of 883 N.E.2d 740 (Equistar Chemicals v. Hartford Steam Boiler Inspection & Insurance Co. of Connecticut) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Equistar Chemicals v. Hartford Steam Boiler Inspection & Insurance Co. of Connecticut, 883 N.E.2d 740, 379 Ill. App. 3d 771, 318 Ill. Dec. 509, 2008 Ill. App. LEXIS 179 (Ill. Ct. App. 2008).

Opinion

JUSTICE COOK

delivered the opinion of the court:

Appellant, Equistar Chemicals, LP (Equistar), appeals the trial court’s denial of its motion to stay arbitration (710 ILCS 5/2 (West 2006)) and raises two issues before this court on interlocutory appeal:

(1) Whether an initial determination of standing (i.e., whether a party agreed to submit to arbitration) is a predicate question to be resolved by the courts rather than the arbitrators, or whether standing itself is an arbitrable issue;
(2) Whether an insurer subrogee to a party to an arbitration agreement has standing to invoke that agreement to compel arbitration.

In denying Equistar’s motion to stay arbitration, the trial court found that, under the circumstances of this case, standing should be decided by the arbitrators rather than by the court. The trial court also found that even if it were the court’s role to determine standing, it would deny the motion to stay arbitration because the insurer subrogee had standing to invoke the agreement to arbitrate. We disagree with the trial court’s ruling that it is the arbitrators’ role to determine standing in this instance, but we affirm the trial court’s denial of the motion to stay arbitration.

I. BACKGROUND

This interlocutory appeal arises out of a negligence claim raised by appellee, the Hartford Steam Boiler Inspection and Insurance Company of Connecticut (Hartford), against Equistar for damage to a turbine generator in the amount of $950,000. Hartford’s insured, Trigen-Cinergy Solutions of Tuscola, L.L.A. (Trigen), owned the turbine generator, which was located at Equistar’s ethanol plant in Tuscola, Illinois. Allegedly, one of Equistar’s employees negligently “racked off’ circuit breakers, causing an arc of electricity that damaged Trigen’s turbine generator.

At all times relevant to this appeal, Trigen and Equistar were parties to a contract entitled, “Amended and Restated Energy, Water and Wastewater Services Agreement.” The agreement established a commercial relationship between Trigen and Equistar, requiring Trigen to provide steam-water processing, compressed air and electricity services, and water and waste treatment at Equistar’s plant. The agreement also contained an arbitration clause that required Trigen and Equistar to resolve any disputes arising out of or relating to the agreement through arbitration.

When Trigen’s turbine generator broke, Hartford paid Trigen $853,442 to repair the damages (the cost of the damages minus Trigen’s deductible), under a property-damage coverage. Hartford then filed a demand for arbitration with the American Arbitration Association (AAA), seeking to enter into arbitration with Equistar by virtue of its subrogee status in relation to Trigen and requested compensation in the amount of $853,442. Equistar in turn filed an objection to claimant’s standing, the arbitrators’ jurisdiction, and the arbitrability of claimant’s claim. Then, on April 23, 2007, Equistar filed a motion to stay arbitration. 710 ILCS 5/2(b) (West 2006). Equistar requested that arbitration be stayed until, in addition to other issues, the question of Hartford’s standing to invoke the agreement could be resolved.

On May 14, 2007, the trial court denied the motion to stay arbitration in a written order. The court identified the sole issue to be whether Hartford, as subrogee insurer to Trigen, had standing to invoke the arbitration clause of the agreement. The court identified the subissue to be whether standing is an “arbitrable” issue that should be decided by the arbitrators rather than by a court. A determination on the subissue was relevant because, if the court found standing to be an arbitrable issue, then the entire matter should be referred to arbitration and the motion to stay arbitration should be directly denied. The trial court found standing to be an arbitrable issue. However, the court proceeded to find that, even if standing were not an arbitrable issue but rather a predicate question of law to be resolved by the courts, Hartford had standing to compel arbitration by virtue of its subrogee status.

Equistar filed a notice of interlocutory appeal from the trial court’s written order under Supreme Court Rule 307(a), which states that a ruling on an injunction is subject to an interlocutory appeal as of right. 188 Ill. 2d R. 307(a). A motion to compel or stay arbitration is analogous to a motion for injunctive relief and therefore is subject to an interlocutory appeal. Royal Indemnity Co. v. Chicago Hospital Risk Pooling Program, 372 Ill. App. 3d 104, 107, 865 N.E.2d 317, 321 (2007). The two issues presented for review are as stated above.

II. ANALYSIS

A. Standing To Arbitrate Under Arbitration Clause Should Be Decided by Court, Not Arbitrators

Equistar argues, and we agree, that the court and not the arbitrators should resolve the issue of Hartford’s standing. The language of the statute governing whether the court should stay arbitration — section 2 of the Uniform Arbitration Act — supports that the court, and not the arbitrators, should determine the issue of standing, or whether the parties had an agreement to arbitrate:

“Proceedings to compel or stay arbitration, (a) On application of a party showing an agreement [to arbitrate], and the opposing party’s refusal to arbitrate, the court shall order the parties to proceed to arbitration, but if the opposing party denies the existence of the agreement to arbitrate, the court shall proceed summarily to the determination of the issue so raised and shall order arbitration if found for the moving party, otherwise, the application shall be denied.
(b) On application, the court may stay an arbitration proceeding commenced or threatened on a showing that there is no agreement to arbitrate. That issue, when in substantial and bona fide dispute, shall be forthwith and summarily tried and the stay ordered if found for the moving party. If found for the opposing party, the court shall order the parties to proceed to arbitration.” 710 ILCS 5/2(a), (b) (West 2006).

When a party to an arbitration agreement files a suit in circuit court to stay arbitration proceedings, one concern is the efficient and economical resolution of disputes. Accordingly, “[wjhere the language of the arbitration agreement is clear, and it is apparent that the dispute *** falls within the scope of the arbitration agreement, the court should decide the arbitrability issue and compel arbitration.” Donaldson, Lufkin & Jenrette Futures, Inc. v. Barr, 124 Ill. 2d 435, 445, 530 N.E.2d 439, 443 (1988). Likewise, where it is clear the dispute is outside the agreement, the court should rule against arbitration. The key here is the agreement, that is, what the parties have agreed to submit to arbitration. Donaldson, 124 Ill.

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Bluebook (online)
883 N.E.2d 740, 379 Ill. App. 3d 771, 318 Ill. Dec. 509, 2008 Ill. App. LEXIS 179, Counsel Stack Legal Research, https://law.counselstack.com/opinion/equistar-chemicals-v-hartford-steam-boiler-inspection-insurance-co-of-illappct-2008.