The City of Chicago v. Chicago Loop Parking LLC

2014 IL App (1st) 133020, 23 N.E.3d 453
Appellate Court of Illinois·Decided November 26, 2014·No. 1-13-3020·Unpublished·Cited by 1 cases

Opinion

2014 IL App (1st) 133020

FOURTH DIVISION

November 26, 2014

No. 1-13-3020

THE CITY OF CHICAGO, a Municipal Corporation, ) Appeal from the ) Circuit Court of

Petitioner-Appellant, ) Cook County )

v. ) No. 13 CH 13381 )

CHICAGO LOOP PARKING LLC, ) Honorable ) Sophia H. Hall

Respondent-Appellee. ) Judge Presiding.

JUSTICE EPSTEIN delivered the judgment of the court, with opinion.

Presiding Justice Fitzgerald Smith and Justice Taylor concurred in the judgment and opinion.

OPINION

¶1 This case involves two sophisticated parties that willingly chose arbitration as their preferred method of resolving their disputes, thereby restricting the reach of the courts. Now, unhappy with the result of that choice – a final and binding arbitration award it wishes to avoid – one of the parties turns to the court for relief. This court finds, as did the trial court, that it has no authority to overturn the valid arbitration award.

¶2 A brief chronology of events follows. In November 2006, appellant City of Chicago (the City) and appellee Chicago Loop Parking LLC, now known as LMG2, LLC (CLP), entered into an agreement whereby CLP paid the City $563 million in exchange for the City granting CLP a 99-year lease and concession to operate the four underground garages in Grant and Millennium Parks (the Concession and Lease Agreement). Unfortunately for the City – and the taxpayers of Chicago – the City would not realize the full benefit of that bargain due to subsequent events,

which only can be characterized as a series of mistakes and unsuccessful strategic choices made by the City.

¶3 A dispute arose in 2009 that the parties were not able to resolve. The City eventually conceded liability but disputed the amount of damages it owed CLP. In 2011, as they had previously agreed in the Concession and Lease Agreement, the parties proceeded to binding arbitration for a determination of damages. In 2013, after an eight-day evidentiary hearing, the three-member arbitration panel issued its final and binding award (the Arbitration Award). Thus, the City found itself owing CLP nearly $58 million in damages as the result of the Arbitration Award, and the City conceded there were no grounds on which to vacate or modify the award. That did not stop the City from trying (belatedly) to mitigate the damages.

¶4 Five months after the Arbitration Award was entered, the City filed a "Verified Petition to Enter Judgment on Arbitration Award, To Stay The Judgment, and To Modify The Judgment" in the circuit court (the City's petition). CLP filed its own motion to confirm the Arbitration Award and also filed a motion to dismiss the City's petition pursuant to section 2-619.1 of the Illinois Code of Civil Procedure. 735 ILCS 5/2-619.1 (West 2012). There was no dispute that the Arbitration Award was final and binding and that no grounds existed under the Federal Arbitration Act (9 U.S.C. § 1 et seq. (2000)) (FAA) for vacating or modifying the award. There was no dispute that the circuit court had the authority, and was in fact required, to confirm and enter judgment on the Arbitration Award pursuant to section 9 of the FAA. 9 U.S.C. § 9 (2000). The City, however, sought to vacate or modify the judgment based on a contingent contract that the City entered into with a third party after the arbitration, which the City asserted would eliminate CLP's future damages. After full briefing and hearing argument from the parties, the circuit court confirmed the Arbitration Award but refused to vacate or modify its judgment and

dismissed the City's petition. The City filed the instant appeal. As will be explained below, there is no legal or equitable remedy available to the City to undo the Arbitration Award – the award it bargained for – even where taxpayer funds are involved. There are no grounds for vacating or modifying the court judgment confirming the Arbitration Award. For the following reasons, we affirm the judgment of the circuit court of Cook County.

¶5 BACKGROUND

¶6 The Parties' Arbitration Agreement

¶7 The Concession and Lease Agreement provides that any dispute between the parties "shall be exclusively and finally settled by arbitration in accordance with the Commercial Arbitration Rules of the [American Arbitration Association] then in effect." This arbitration provision expressly states: "The award shall be final and binding on the Parties. Judgment on the award may be entered by any court with competent jurisdiction." (Emphasis added.) The parties further agreed that "[t]he Federal Arbitration Act *** shall govern any arbitration conducted."

¶8 The Dispute

¶9 The Concession and Lease Agreement contained a noncompete provision by which CLP was entitled to compensation if the City authorized any new competition by allowing any new public parking facility to open in a defined area in the immediate vicinity of CLP's leased garages (competing parking action). Soon after the parties entered into the Concession and Lease Agreement, the City approved a site plan for a new building (the Aqua) developed by Magellan Development, which included a 1,273-space public parking garage. On May 1, 2009, after construction of the Aqua was substantially completed, the City issued a public garage license to Standard Parking Corporation, the garage operator for the Aqua. The garage was

located approximately one block from the CLP garages and within the competing parking area. CLP observed a decline in the number of its parkers. It is undisputed that the City's action entitled CLP to compensation. On August 20, 2009, CLP submitted a claim to the City for compensation.

¶ 10 Attempts at Informal Dispute Resolution

¶ 11 The City realized its mistake. On August 28, 2009, the City sent a letter to Standard Parking Corporation informing it that the Aqua's public garage license had been issued in error and was being rescinded. The City also offered to exchange the Aqua public garage license for an accessory garage license. Apparently, Magellan Development still owned the garage and chose to challenge the City's decision.

¶ 12 Standard Parking Corporation filed an administrative proceeding contesting the rescission of its license. In the administrative proceedings, the City took the position that if the license was changed to an accessory garage license, only residents, tenants, and guests of the Aqua would be permitted to use the garage. On February 10, 2010, the City settled its dispute with Standard Parking Corporation by replacing its license with an accessory garage license.

¶ 13 Unfortunately, the new license did not cure the City's competing parking action. It is undisputed that the Aqua garage continued to accept parkers from the general public. After pursuing informal dispute resolution procedures mandated by the Concession and Lease Agreement, the City and CLP were unable to resolve the dispute.

¶ 14 The Arbitration Proceedings

¶ 15 On March 1, 2011, CLP filed a statement of claim against the City with the American Arbitration Association, requesting "an amount to be determined at arbitration but in no event less than $200 million" to compensate it for past losses and losses projected over the balance of

the 99-year lease period. CLP later reduced its demand but still sought over $137 million. The City's position was that the amount of damages was approximately $13 million including interest.

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The City of Chicago v. Chicago Loop Parking LLC, 2014 IL App (1st) 133020, 23 N.E.3d 453 (Ill. Ct. App. 2014).

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