No. 1-99-3543

PRESIDING JUSTICE CAMPBELL delivered the opinion of the court:

Defendant J. Donald Reiff appeals an order of the circuit court of CookCounty vacating an arbitration award on the motion of plaintiffsRosenthal-Collins Group, L.P., Lehigh Valley Futures, Inc., and Gregory Deutch.

The record on appeal discloses the following facts. In June 1996, Reiff filedan arbitration claim with the National Futures Association (NFA) against theplaintiffs and Quantum Financial Services. Rieff alleged that unauthorizedtrades were made on a futures trading account he had opened with Lehigh ValleyFutures, Inc.

The record contains a letter dated October 1, 1996, from Susan D. Wehrle, aNFA Case Administrator, to counsel for the parties. Wehrle wrote in part thatthe NFA had considered information provided by the parties about the location ofthe hearing. The letter also stated that the NFA had yet to select a panel, butdid not intend to honor the forum selection clause and planned to selectarbitrators from the New York City area.

An arbitration hearing was held in New York City before a three-member panelon August 12 and 13, 1997.

The panel issued an award in favor of Reiff against Rosenthal-Collins Group,L.P. in the amount of $88,581, against Lehigh Valley Futures, Inc. in the amountof $66,898, and against Deutch in the amount of $88,581. The record containsthree copies of the award. The copy signed by Gerald Asken was dated August 15,1997. The copy signed by Theodore Kadin was dated August 16, 1997. The copysigned by William McCormick was dated August 19, 1997. The service date for theaward was August 25, 1997.

The record contains a letter dated August 28, 1997, from Reiff's counsel toWehrle at the NFA. This letter purported to memorialize a telephone conversationbetween Reiff's counsel and Wehrle, in which counsel told Wehrle that he hadjust learned that Reiff had sent two envelopes to Gerald Asken. Reiff's counselwrote that the envelopes contained materials intended to rebut a claim made atthe hearing that Reiff was a convicted drug dealer. Reiff's counsel wrote thathe understood that Asken was out of the country and that Wehrle had instructedAsken's law firm to return the envelopes unopened.

The record contains a letter dated August 29, 1997, from Wehrle to Reiff'scounsel stating that she had contacted Asken's firm and that the materials wouldbe returned. Wehrle also wrote that Asken was out of the country and had noknowledge of the situation. Wehrle further wrote that "although the NFA hadnot served the Award, the Panel had already made its decision before Mr. Reiffsent the packages." Wehrle wrote that the panel had not been prejudiced byReiff's action.

The August 28 and 29 letters contain notations that copies were to be sent toplaintiffs' counsel. Plaintiffs' brief states that copies were sent to them.

On September 9, 1997, the Rosenthal-Collins Group filed a petition to vacatethe award, alleging that the arbitrators exceeded their authority and that theaward was procured by undue means through ex parte contact, i.e.,the materials sent to Asken by Rieff. On September 11, 1997, Lehigh ValleyFutures and Gregory Deutch moved to intervene, making the same allegations. OnDecember 5, 1997, plaintiffs filed an amended consolidated complaint to vacatethe award.

On February 17, 1998, the trial court entered an order stating that thematter would be heard as a motion, but permitting limited discovery in thematter. The record contains an affidavit by Cynthia Cain, the NFA's Director ofArbitration. Cain's duties included maintenance of the NFA's arbitration recordsand files. In the affidavit, Cain states that she is familiar with the Rieffcase. The Cain affidavit states that the panel in this matter rendered itsdecision on August 13, 1997, and asked the NFA to prepare the award form. TheCain affidavit states that the NFA received the award form signed by Asken onAugust 19, 1997. The NFA received the other two copies on August 25, 1997.The Cain affidavit also states that Asken's office told the NFA that Rieff'sletters were received on August 21, 1997, when Asken was out of town.

The record also contains Rieff's affidavit. Rieff stated that he sent twoletters to Asken: one on August 19, 1997 by certified mail, the other by regularmail a few days later. Rieff denied sending any letters to the otherarbitrators. Rieff also denied having any verbal communication with thearbitrators after the hearing.

The record contains a copy of a letter dated August 24, 1996, from Rieff to"Atty Asken and Ari." This letter appears to address allegations madeagainst Rieff by counsel for the Rosenthal-Collins Group. Rieff wrote that he"still consider[ed] [himself] under oath."

The record contains a copy of a Domestic Return Receipt for certified mailaddressed to Asken, showing a delivery date of August 21, 1997. The recordcontains a copy of a letter dated August 25, 1997, from Rieff to "AttyAsken and Committee." The letter purports to address allegations madeagainst Rieff and concludes with the phrase "Thanking you in advance."This letter is stamped as received on August 21, 1997 and contains the phrase"Please return" in what appears to be different handwriting in themargin of the letter.

On January 6, 1999, the trial court granted plaintiffs' motion to vacate. Thetranscript of proceedings shows that the trial court based its decision on the exparte communications, following a review of the documents provided by theparties. The trial court referred to the "Thanking you in advance"salutation as "very curious." The trial court later stated that it wasimpossible or difficult for the trial court "to really know thetiming," but noting there were items in the record that contradicted theRieff affidavit.

On September 7, 1999, the trial court denied Rieff's motion to reconsider.Rieff now appeals.

Rieff contends that the trial court erred in granting plaintiffs' motion tovacate the arbitration award based on ex parte communications. Theparties disagree as to the standard of review applicable to this case. Citing Garverv. Ferguson, 76 Ill. 2d 1, 389 N.E.2d 1181 (1979), Rieff argues that thestandard of review under section 12(a) of the Act is de novo. However, Garnerdoes not expressly state a standard of review. Moreover, to the extent that Garnermight be read as a de novo review, it must be noted that the claim inthat case was that the arbitrators exceeded their powers, which only required areview of the arbitration agreement.

The plaintiffs argue that the trial court's findings of fact, weighing ofevidence and determinations of credibility are to be given great deference.However, none of the cases plaintiffs cite involve review of an arbitrationaward.

The proper standard of review depends on the nature of the claim at issue andthe nature of the evidence produced in support of and in opposition to thatclaim. Section 12(a) of the Illinois Uniform Arbitration Act (Act) enumeratesvarious grounds on which an arbitration award is to be vacated. 710 ILCS 5/12(a)(West 1998). The trial court's ruling relies on section 12(a)(1) of the Act,which provides in pertinent part that an arbitration award can be vacated wherethe award "was procured by corruption, fraud[,] or other undue means."710 ILCS 5/12(a)(1) (West 1998).

"Ex parte contact involving disputed issues raises a presumptionthat the arbitration award was procured by fraud, corruption, or other unduemeans." Hahn v. A.G. Becker Paribas, Inc., 164 Ill. App. 3d 660,667, 518 N.E.2d 218, 222 (1987). A claim based on ex parte communicationswill almost inevitably involve a consideration of evidence outside the record ofthe arbitration proceedings. Accordingly, the deferential standard of reviewapplicable to arbitration proceedings is not controlling.

Moreover, the record in this case shows that the trial court's decision wasbased upon its review of documentary evidence. Generally, the manifest weight ofthe evidence standard of review applies if the trial court heard courtroomtestimony, but a de novo standard applies when the trial court heard notestimony and ruled solely on the basis of documentary evidence. See, e.g.,Gaidar v. Tippecanoe Distribution Service, Inc., 299 Ill. App. 3d 1034,1039-40, 702 N.E.2d 316, 319 (1998). Although Gaidar involved thedetermination of a jurisdictional question, the underlying principle may befound in many other areas of Illinois law. See, e.g., Stojkovich v.Monadnock Bldg., 281 Ill. App. 3d 733, 743, 666 N.E.2d 704, 711(1996)(determination of whether negligence case may warrant punitive damages); Ambrosev. Thornton Township School Trustees, 274 Ill. App. 3d 676, 680-81, 654N.E.2d 545, 548 (1995)(administrative review); In re Estate of Offerman,153 Ill. App .3d 299, 302, 505 N.E.2d 413, 415 (1987)(will contest). Given thenature of the claim and the evidence presented in this case, a de novoreview is appropriate.

Beyond the standard of review, this case presents questions regarding theallocation of evidentiary burdens. Judicial review of an arbitrator's award ismore limited than a review of a trial court's decision. E.g., Garver,76 Ill. 2d at 8, 389 N.E.2d at 1183. It is up to the moving party to presentcompetent evidence to support an assertion that an award should be invalidated. Drinanev. State Farm Mutual Automobile Ins. Co., 153 Ill. 2d 207, 211, 606 N.E.2d1181, 1183 (1992). As noted above, ex parte contact involving disputedissues raises a presumption that the award was procured by undue means. Hahn,164 Ill. App. 3d at 667, 518 N.E.2d at 223. However, where sufficient evidenceexists that a presumption is unwarranted, no reliance should be placed on thefact presumed. Drinane, 153 Ill. 2d at 216, 606 N.E.2d at 1185.

For example, in Drinane, a presumption of bias was created by anarbitrator's negotiating in another matter with the very parties he wasarbitrating. The Drinane court compared the situation to that of animproper ex parte communication between a judge and a party appearingbefore him. Drinane, 153 Ill. 2d at 217, 606 N.E.2d at 1185. Although theDrinane court declined to equate the role of arbitrator with that ofjudge in all respects, it concluded that an arbitration panel not only must beunbiased but also must avoid even the appearance of bias. Drinane, 153Ill. 2d at 214, 606 N.E.2d at 1184. Thus, arbitrators are required to discloseto the parties any dealings that might create even an impression of possiblebias. See Drinane, 153 Ill. 2d at 214, 606 N.E.2d at 1184. The presumedbias in Drinane was overcome by sworn affidavits and deposition testimonyof the people involved, including the arbitrator, the defendant's personnel andthe personnel of its law firm, that the disputed issues in the arbitration werenot discussed. Drinane, 153 Ill. 2d at 216, 606 N.E.2d at 1185.

Given our supreme court's analogy to improper ex parte communicationsbetween a judge and a party, it is also instructive to compare this case to Inre Marriage of Wheatley, 297 Ill. App. 3d 854, 697 N.E.2d 938 (1998). In Marriageof Wheatley, the trial judge received an ex parte communication froma third party. The trial judge maintained that he had not read the letter, wasunaware of its contents, and that it did not influence his decision of the case.Marriage of Wheatley, 297 Ill. App. 3d at 858, 697 N.E.2d at 941. Thiscourt concluded that the mere receipt of the letter containing an impropercommunication did not create an appearance of impropriety. Marriage ofWheatley, 297 Ill. App. 3d at 858, 697 N.E.2d at 941. However, the trialjudge's failure to disclose the letter to the parties as soon as practicablecreated an appearance of impropriety requiring that the judgment be vacated. Marriageof Wheatley, 297 Ill. App. 3d at 858-59, 697 N.E.2d at 941.

Drinane and Marriage of Wheatley are useful not only in theirspecifics, but also in establishing the general context in which cases such asthis appeal should be considered. Both Drinane and Marriage ofWheatley establish that the appearance of bias or prejudice can be asdamaging to public confidence in the administration of justice as would be theactual presence of bias or prejudice. The standard is no lower in the context ofalleged ex parte communications, based on our supreme court'slong-standing and continuous recognition of the practical difficulty ofestablishing the improper effects which can occur when arbitrators come intocontact with evidence outside the arbitration proceedings. See Drinane,153 Ill. 2d at 216, 606 N.E.2d at 1185; Moshier v. Shear, 102 Ill. 169,174 (1881). Thus, the presumption arising from ex parte contact involvingdisputed issues will require that an arbitration award be vacated, unless theopposing party or parties rebut that presumption with evidence of the sort foundsufficient in Drinane, but which was absent from Marriage of Wheatley.

In this case, the record shows that Rieff admits sending letters regardingthe issues in the arbitration proceeding to Gerald Asken's office. The recordalso shows that the letter dated August 25, 1997, was stamped as received byAsken's firm on August 21, 1997. Following Drinane, evidence that Asken'sfirm came into contact with material regarding Rieff's dispute outside thearbitration proceedings creates the presumption that the arbitration was taintedby ex parte contact.

Accordingly, the issue becomes whether Rieff introduced evidence sufficientto overcome that presumption. Reiff argues that the presumption is overcome byevidence showing that the arbitrators had rendered their decision and signed theaward forms prior to August 21, 1997. Reiff's brief cites Kalish v. IllinoisEducation Association, 166 Ill. App. 3d 406, 519 N.E.2d 1031 (1988), for theproposition that "[a]n award is deemed issued when the panel makes itsdecision." However, in Kalish, this court actually concluded that anaward is final when issued. Kalish, 166 Ill. App. 3d at 410, 519 N.E.2dat 1034. The record in this case shows that the award was not issued as ofAugust 21, 1997. Thus, the award was subject to change when Rieff's letter wasreceived by Asken's office.

Rieff argues in passing that none of the arbitrators saw either of his exparte submissions. In particular, Rieff asserts that Asken was out of thecountry on August 21, 1997. Rieff appears to rely on the letters dated August 28and 29, 1997, between Wehrle and Reiff's counsel stating that Asken was out ofthe country. Rieff also appears to rely on the Cain affidavit, which states thatAsken's office told the NFA that Rieff's letters were received on August 21,1997, when Asken was out of town.

However, as the plaintiffs noted in the trial court, these statements are notbased on the personal knowledge of the people making them. The plaintiffs alsocorrectly noted that these statements are hearsay. Indeed, the Cain affidavitmay contain double hearsay. The record contains no sworn statement or testimonyfrom Asken or any of his employees that he was out of town during the relevantperiod and that he was never informed of any of the contents of Rieff's letters.In addition, we note that the disclosure of Rieff's letters was initiated byRieff's counsel, rather than Asken's office.

In sum, the record shows that Rieff sent Asken letters regarding his dispute.The record shows the letters were received in Asken's office and not disclosedfor some period of time. Yet Rieff offered no admissible evidence to rebut thepresumption that arises from this record. Following the principles embodied in Drinaneand Marriage of Wheatley, we conclude that the trial court did not err invacating the arbitration award.

For all of the aforementioned reasons, the judgment of the circuit court ofCook County is affirmed.

Affirmed.

O'BRIEN, J., and GALLAGHER, J., concur.