First Health Group Corp. v. Ruddick

911 N.E.2d 1201, 393 Ill. App. 3d 40, 331 Ill. Dec. 971, 2009 Ill. App. LEXIS 620
CourtAppellate Court of Illinois
DecidedJuly 6, 2009
Docket1-08-3236
StatusPublished
Cited by45 cases

This text of 911 N.E.2d 1201 (First Health Group Corp. v. Ruddick) 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
First Health Group Corp. v. Ruddick, 911 N.E.2d 1201, 393 Ill. App. 3d 40, 331 Ill. Dec. 971, 2009 Ill. App. LEXIS 620 (Ill. Ct. App. 2009).

Opinion

PRESIDING JUSTICE ROBERT E. GORDON

delivered the opinion of the court:

Defendant Richard E. Ruddick, a retired health insurance executive, provided consulting services to plaintiff First Health Group Corporation (First Health), a health benefits company located in Downers Grove, Illinois. After plaintiff sent him a termination letter, defendant filed a demand for arbitration with the American Arbitration Association, as required by their agreement for the settlement of disputes.

Defendant’s demand sought reformation of the parties’ written agreement claiming a mutual mistake or, alternatively, rescission of the written agreement and enforcement of the parties’ earlier oral agreement. After a two-day hearing on May 15 and 16, 2007, the arbitrator issued a detailed nine-page award on July 13, 2007, ruling in defendant’s favor. The arbitrator stated that he found “based on clear and convincing evidence that there was a mutual mistake of fact in the preparation and execution of the February 2004 [written] agreement and that the February 2004 agreement between Ruddick and First Health should therefore, be reformed, by deleting” the provisions permitting termination on 30 days’ notice, thereby leaving intact the provision terminating the contract on December 31, 2010.

Plaintiff moved to vacate the arbitration award in the circuit court of Cook County, and defendant moved to confirm the award. In an order dated June 23, 2008, the circuit court denied plaintiffs motion to vacate and granted defendant’s motion to confirm the award. On appeal, plaintiff makes two claims: (1) that the arbitrator exceeded his authority by reforming the contract; and (2) that, in reforming the contract, the arbitrator committed gross errors of fact and law that are apparent from the face of the award. For the following reasons, we affirm the award.

BACKGROUND

There is no dispute that, in December 2000, plaintiff sought defendant’s assistance in acquiring a new client, the Mail Handlers Benefit Plan (MHBP), which did, in fact, become a client of plaintiff in April 2002. There is also no dispute that, from 2000 through 2003, plaintiff paid defendant for his consulting services on the basis of a handshake and without a written agreement.

Defendant claims that, prompted by concerns about his health and protecting his wife in case of his death, he sought a written agreement. The written agreement was executed by the parties on February 16, 2004. Defendant claims that, as a result of a scrivener’s error, the 2004 written agreement mistakenly contained a termination provision that was not intended by the parties and that permitted termination of the 2004 agreement upon 30 days’ notice. The 2004 agreement contains two paragraphs, both numbered “7B.” The first 7B paragraph is entitled “Termination in the Event of Death” and provides that plaintiff will pay defendant’s spouse if defendant dies. The second 7B paragraph and a 7C paragraph, also entitled “Termination,” permit termination upon 30 days’ notice. There is no dispute between the parties concerning paragraph 7A, which provides that the 2004 written agreement automatically terminates on December 31, 2010.

Documents

The 2004 written agreement was seven pages long and contained seven sections. The seventh section is the section in dispute. It is entitled “Term/Termination,” and it states in full:

“7. TERM/TERMINATION
A. Term. This agreement will terminate on December 31, 2010.
B. Termination in the Event of Death. In the event of CONSULTANT’S death prior to termination of this Agreement, payments will be made to CONSULTANT’S spouse, Mary Francis, or, if CONSULTANT’S spouse predeceases CONSULTANT, then to CONSULTANT’S estate, in the same manner as provided herein, up to the date of termination.
B. Performance Default. If either Party materially fails to perform any of its duties or obligations under this Agreement (‘Default’) and the Default is not cured within (30) days after written notice is given to the Defaulting Party specifying the Default, the Party not in Default may terminate this Agreement by giving written notice to the Defaulting Party.
C. Termination. Either party may terminate this Agreement at any time upon (30) days prior written notice. Both Parties are obligated to perform during the notice period until the termination date.
D. Amounts Owing. Upon expiration or termination of this Agreement, First Health will promptly pay CONSULTANT all amounts due under this Agreement. First Health will be liable only for payment of Consulting Services that were properly rendered up to the expiration or termination date at the rate(s) set forth in Section 5.”

In a letter dated May 26, 2004, and addressed to Edward Wristen, the chief executive officer of First Health, defendant stated that he wanted to assign his “Consulting Contract, for estate purposes, to The Ruddick Family Trust.” It does not appear from the record that this assignment occurred.

After being acquired by Coventry Health Care, Inc., plaintiff sought to terminate the 2004 written agreement upon 30 days’ notice. In a letter dated January 31, 2005, and addressed to defendant, James E. McGarry, the chief operating officer, of First Health stated:

“Pursuant to Section 7(C) of the Consulting Services Agreement (‘Agreement’) dated February 1, 2004, by and between yourself and First Health Group, Corp. (‘FHGC’), this letter shall serve as formal notice of FHGC’s termination of your services under the Agreement. Termination will be effective thirty (30) days from the date of this letter.”

Arbitration Proceedings

Since the 2004 written agreement required any claims to be settled by arbitration, defendant filed an arbitration demand on April 27, 2006. The 2004 agreement contained a broad arbitration provision, requiring arbitration for any claim “relating to” the agreement:

“5S. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association *** >>

Defendant’s statement of claim had three counts. Count I sought reformation of the 2004 written agreement by eliminating paragraph 7C. Count II alleged breach of the 2004 written agreement, which provided that, even upon termination, plaintiff was liable for payment for consulting services that were already rendered. Count III alleged breach of the parties’ earlier, oral contract. On March 20, 2007, defendant amended his statement of claim, but the amended statement alleged the same three counts.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Guaranteed Rate Inc. v. Mott
2025 IL App (1st) 241574-U (Appellate Court of Illinois, 2025)
Morgan v. Silver Financial Capital, Inc.
2025 IL App (1st) 241488-U (Appellate Court of Illinois, 2025)
CW Pro Design, LLC v. Bratt Capital Partners, LLC
2024 IL App (1st) 231690-U (Appellate Court of Illinois, 2024)
KJ Win, Inc. v. KNB Motors, Inc.
2024 IL App (1st) 230783-U (Appellate Court of Illinois, 2024)
Hassan v. State Farm Mutual Automobile Insurance Co.
2024 IL App (1st) 231382-U (Appellate Court of Illinois, 2024)
Swartz v. Elser
2023 IL App (4th) 220534-U (Appellate Court of Illinois, 2023)
Berger v. Schiff Hardin, LLP
2020 IL App (1st) 192329-U (Appellate Court of Illinois, 2020)
Craveable Hospitality Group, LLC v. Tadros
2020 IL App (1st) 191460-U (Appellate Court of Illinois, 2020)
Garlock v. 3DS Properties
303 Neb. 521 (Nebraska Supreme Court, 2019)
Garlock v. 3DS Props., L. L.C.
303 Neb. 521 (Nebraska Supreme Court, 2019)
Lee v. Sheldon
427 P.3d 745 (Alaska Supreme Court, 2018)
In re Marriage of Haleas
2017 IL App (2d) 160799 (Appellate Court of Illinois, 2017)
Paige Electric Company v. Davis & Feder, P.A.
Court of Appeals of Mississippi, 2017
Weiss v. Fischl
2016 IL App (1st) 152446 (Appellate Court of Illinois, 2016)
GPS USA, Inc. v. Performance Powdercoating
2015 IL App (2d) 131190 (Appellate Court of Illinois, 2015)
Village of Posen, Illinois v. Illinois Fraternal Order of Police Labor Council
2014 IL App (1st) 133329 (Appellate Court of Illinois, 2014)
The Village of Posen, Illinois v. Illinois Fraternal Order of Police Labor Council
2014 IL App (1st) 133329 (Appellate Court of Illinois, 2014)
Advocate Financial Group v. Poulos
2014 IL App (2d) 130670 (Appellate Court of Illinois, 2014)

Cite This Page — Counsel Stack

Bluebook (online)
911 N.E.2d 1201, 393 Ill. App. 3d 40, 331 Ill. Dec. 971, 2009 Ill. App. LEXIS 620, Counsel Stack Legal Research, https://law.counselstack.com/opinion/first-health-group-corp-v-ruddick-illappct-2009.