April 15, 2015 Practice Points

Post-Judgment Relief Procedures Cannot Be Used to Alter Arbitration Awards

By Christopher S. Moore

In City of Chicago v. Chicago Loop Parking LLC, 2014 IL App (1st) 133020, the appellate court rejected an attempt by the City of Chicago to modify a judgment that confirmed a multimillion dollar arbitration award against the city.

In Loop Parking, the city had granted Chicago Loop Parking LLC (CLP) the right to operate four public parking garages in downtown Chicago for a 99-year term. In return, CLP paid the city approximately $563 million. Id. at ¶ 2. The parties’ agreement stated that the city would not license any public parking garages within a designated area surrounding those garages. If it did, CLP would be entitled to the immediate recovery of damages from the date of the breach to the end of the term. Id. at ¶ 9.

Shortly after the agreement was made, the city issued a license to a large public garage in the designated area. Id. CLP submitted a claim for compensation to the city under the agreement. The parties’ efforts to resolve the situation were unsuccessful. Id. at ¶¶ 9, 10. CLP initiated an arbitration proceeding in accordance with the dispute resolution provisions of the agreement. Id. at ¶ 15.

Initially, the city disputed liability, but it eventually decided to dispute only the amount of damages. Id. at ¶ 16. A three-member arbitration panel heard damages evidence over eight days. In January 2013, the panel unanimously awarded nearly $58 million to CLP. Id. at ¶ 19.

In May 2013, the city filed a petition in Illinois state court. The petition sought to enter judgment on the award, but also sought a stay and modification of that judgment pursuant to Illinois rules governing post-judgment relief. Id. at ¶ 25. The city argued that although a judgment confirming the award should be entered, the amount of the judgment should be reduced because, after the award was issued, the city had obtained the agreement of the competing parking facility to abandon its public parking license in return for a monetary payment. Id. at ¶¶ 22-23. The city argued that such an agreement (if finalized) would eliminate CLP’s future damages and thereby justify a large reduction in the award. Id. at ¶¶ 25, 76. The city stood to save a considerable sum if the award was so modified.

The city conceded that no grounds existed under the Federal Arbitration Act for vacating or modifying the award. Id. at ¶ 25. However, it argued that it could seek modification of a judgment confirming the award. Because Section 13 of the Federal Arbitration Act (FAA) treats judgments confirming awards like all other judgments, the city argued, they are thus “subject to post-judgment relief including vacatur or modification.” Id. at ¶¶ 25, 45.

The trial court rejected the city’s argument:

Accepting [the city’s] interpretation . . . would accomplish just what Congress intended the FAA to avoid. It would authorize a court, after the judgment on a concededly legal award, to reconsider it, thereby . . . plunging the parties into further litigation.

Id. at ¶ 28. The city pressed the argument on appeal. The appellate court also was not convinced:

Under the City’s interpretation, [S]ection 13 would permit a broader challenge to an award after it has been converted to a judgment than would have been allowed under [the FAA] prior to the conversion of the award into a judgment . . . .

Id. at ¶ 48. The appellate court acknowledged some contrary authority existed. However, the appellate court followed what it perceived to be the “majority” rule, namely, that “litigants cannot circumvent” the limited bases for vacating or modifying awards under the FAA “through the use of a ‘post-judgment’ motion.” Id. at ¶¶ 63, 71.

During the course of the court proceedings, the city invoked the “equities,” arguing that the taxpayers would lose if the award stood. Id. at ¶ 73. The courts were not swayed. As the appellate court put it:

We realize the effect the [] Award will have on blameless taxpayers …. However, the City and CLP agreed to arbitrate any disputes arising out of the [] Agreement, which strictly limits the court's power to address the merits of this matter. The City also chose to gamble that it would succeed at arbitration and lost that gamble.

Id. at ¶ 75. Indeed, the appellate court implied that the equities favored CLP, not the city. It remarked that “[t]here is nothing ‘fair’ about reversing the outcome of a years-long arbitration process . . . because one party does not like the result, even where significant public funds are at stake.” Id. at ¶ 75.

Loop Parking stands as a stark reminder that courts will not permit parties to use inventive procedural arguments in an attempt to avoid unfavorable awards.

Keywords: alternative dispute resolution, litigation, confirmation awards, modifying awards, vacating awards, post-judgment review

Christopher S. Moore is with Novack and Macey LLP in Chicago, Illinois.

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