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Court-Annexed Mandatory Arbitration Annual Report Fiscal Year 2005

Cynthia Y. Cobbs, Director
Administrative Office of the Illinois Courts
222 North LaSalle Street, 13th Floor
Chicago, IL 60601

Introduction

The State Fiscal Year 2005 Annual Report summarizes the activity of court- annexed mandatory arbitration from July 1, 2004 through June 30, 2005. The report includes an overview of mandatory arbitration in Illinois and contains statistical data as reported by each arbitration program. Aggregate statewide statistics are provided as an overview of Illinois' fifteen court-annexed mandatory arbitration programs. The final section of the report is devoted to providing a brief narrative and data profile for each of the court-annexed mandatory arbitration programs. To view a history of mandatory arbitration, which began in 1987, please reference the  State Fiscal Year 2004 Court-Annexed Mandatory Arbitration Annual Report.

Overview of Court-Annexed Mandatory Arbitration

In Illinois, court-annexed arbitration is a mandatory, non-binding form of alternative dispute resolution. In the fifteen jurisdictions approved by the Supreme Court to operate such programs, all civil cases filed in which the amount of monetary damages being sought falls within the program’s jurisdictional limit are subject to the arbitration process. These modest sized claims are directed into the arbitration program because they are amenable to closer management and faster resolution by using a less formal alternative process than a typical trial court proceeding.

Supreme Court Rules Governing Mandatory Arbitration

In the exercise of its general administrative and supervisory authority over Illinois courts, the Supreme Court promulgates comprehensive rules ( Supreme Court Rule 86, et seq.) that prescribe actions subject to mandatory arbitration. Further, the rules address a range of operational procedures including: appointment, qualifications, and compensation of arbitrators; the scheduling of hearings; the discovery process; the conduct of hearings; absence of a party; award and judgment on an award; rejection of an award; and form of oath, award and notice of award.

Administration

The Alternative Dispute Resolution Coordinating Committee of the Illinois Judicial Conference and the Administrative Office of the Illinois Courts provide ongoing, statewide support to the mandatory arbitration programs in Illinois. A brief description of the roles and functions of these two entities is provided herein.

Alternative Dispute Resolution Coordinating Committee

The Alternative Dispute Resolution Coordinating Committee is one of seven standing committees of the Illinois Judicial Conference, whose membership is appointed by the Supreme Court. The charge of the Committee, as directed by the Supreme Court, is to monitor and assess court-annexed mandatory arbitration programs and make recommendations for proposed policy modifications to the full body of the Illinois Judicial Conference. The Committee also surveys and compiles information on existing court-supported dispute resolution programs, explores and examines innovative dispute resolution processing techniques, and studies the impact of proposed amendments to relevant Supreme Court rules. In addition, the Committee proposes rule amendments in response to suggestions and information received from program participants, supervising judges and arbitration administrators.

Administrative Office of the Illinois Courts

The Administrative Office of the Illinois Courts (AOIC) works with the circuit courts to coordinate the operations of the arbitration programs throughout the state. Administrative Office staff assists in establishing new arbitration programs that have been approved by the Supreme Court. Staff also provide other support services such as assisting in the drafting of local rules, recruiting personnel, acquiring facilities, training new arbitrators, purchasing equipment and developing judicial calendaring systems.

The AOIC assists existing programs by preparing budgets, processing vouchers, addressing personnel issues, compiling statistical data, negotiating contracts and leases and coordinating the collection of arbitration filing fees. In addition, AOIC staff serve as liaison to the Illinois Judicial Conference's Alternative Dispute Resolution Coordinating Committee.

During State Fiscal Year 2005, the AOIC implemented additional statistical reporting requirements for arbitration programs to permit expansion of analytical material to be included in State Fiscal Year 2006's report. The additional reporting requirements will include the collection of information on the various types of cases that proceed through arbitration (i.e. auto, contract, personal injury, collections, etc.), information on the monetary value of a case at the time of filing and the average award granted by arbitration panels in the various case types, as well as the length of time from case filing to final resolution.

Case Assignment

In most instances cases are assigned to mandatory arbitration programs either as initially filed or by court transfer. In an initial filing, litigants may file their case with the office of the clerk of the circuit court as an arbitration case. The clerk assigns the case an “AR” designation, which places the matter directly onto the calendar of the supervising judge for arbitration. However, in the Circuit Court of Cook County, cases are not initially filed as arbitration cases. All civil cases in which the money damages being sought are between $5,000 and $50,000 are filed in the Municipal Department and are given an "M" designation by the clerk. Cases in which the money damages being sought do not exceed $30,000 are considered “arbitration-eligible.” After all preliminary matters are heard, arbitration-eligible cases are transferred to the arbitration program.

The second means by which cases are assigned to a mandatory arbitration calendar is through transfer by the court. In all jurisdictions operating a court-annexed mandatory arbitration program, if it appears to the court that no claim in the action has a value in excess of the particular arbitration program’s jurisdictional amount, a case may be transferred to the arbitration calendar from another calendar. For example, if the court finds that an action originally filed as a law case (actions for damages in excess of $50,000) has a potential for damages within the jurisdictional amount for arbitration, the court may transfer the law case to the arbitration calendar.

Pre-Hearing Matters

The pre-hearing stage for cases subject to arbitration is similar to the pretrial stage for all cases. Summons are issued, motions are made and argued, and discovery is conducted. However, for cases subject to arbitration, discovery is limited pursuant to Illinois  Supreme Court Rules 89 and 222.

One of the most important features of the arbitration program is the court's control of the time elapsed between the date of filing or transfer of the case to the arbitration calendar and the arbitration hearing.  Supreme Court Rule 88 mandates speedy dispositions. Pursuant to Rule, and consistent with the practices of each program site, all cases set for arbitration must proceed to hearing within one year of the date of filing or transfer to the arbitration calendar unless continued by the court upon good cause shown.

Arbitration Hearing and Award

With some exceptions, the arbitration hearing resembles a traditional trial court proceeding. The Illinois Code of Civil Procedure and the rules of evidence apply. However,  Supreme Court Rule 90(c) makes certain documents presumptively admissible. These documents include bills, records, and reports of hospitals, doctors, dentists, repair persons and employers, as well as written statements from opinion witnesses. The streamlined mechanism for the presentation of evidence enables attorneys to present their cases without undue delay.

Unlike proceedings in the trial court, the arbitration hearing is conducted by a panel of three attorneys who serve as arbitrators and are trained pursuant to local rules. At the hearing, each party to the dispute makes a concise presentation of his/her case to the arbitrators. Immediately following the hearing, the arbitrators deliberate privately and decide the issues as presented. To find in favor of a party requires the concurrence of two arbitrators. In most instances, an arbitration hearing is completed in approximately two hours. Following the hearing and the arbitrators' disposition, the clerk of the court records the arbitration award and forwards notice to the parties. As a courtesy to the litigants, many arbitration centers post the arbitration award immediately following submission by the arbitrators, thereby notifying the parties of the outcome on the same day as the hearing.

Post-Hearing Calendar

The post-hearing arbitration calendar consists largely of cases which have been heard by an arbitration panel and are awaiting further action. Upon conclusion of an arbitration hearing, a case is removed from the pre-hearing arbitration calendar and added to the post-hearing calendar. Cases previously terminated following a hearing may also be subsequently reinstated (added) at this stage. However, this is a rare occurrence even in the larger arbitration programs.

Arbitration administrators report three types of post-hearing removals from the arbitration calendar: (1) entry of judgment on the arbitration award; (2) dismissal or settlement by order of the court; or (3) rejection of the arbitration award. While any of these actions will remove a case from the post-hearing calendar, only judgment on the award or dismissal and settlement result in termination of the case. These actions are considered dispositive removals. Post-hearing terminations, or dispositive removals, are typically the most common means by which cases are removed from the post-hearing arbitration calendar.

A rejection of an arbitration award is a non-dispositive removal of a case from the post-hearing arbitration calendar. A rejection removes the case from the post-hearing arbitration calendar and places it on the post-rejection arbitration calendar.

A commonly cited measure of performance for court-annexed arbitration programs is the extent to which awards are accepted by the litigants as the final resolution of the case. However, parties have many resolution options after the arbitration hearing is concluded. Therefore, tracking the various options by which post-hearing cases are removed from the arbitration inventory provides the most accurate measure.

A satisfied party may move the court to enter judgment on the arbitration award. Statewide numbers indicate 26% of parties in arbitration hearings motioned the court to enter a judgment on an award. If no party rejects the arbitration award, the court may enter judgment. Figures reported indicate that approximately 40% of the cases which progressed to a hearing were disposed after the arbitration hearing on terms other than those stated in the award. These cases were disposed either through settlement reached by the parties or by voluntary dismissals. The parties work toward settling the conflict prior to the deadline for rejecting the arbitration award. These statistics suggest that in a number of cases which progress to hearing, while the parties may agree with the arbitrator’s assessment of the worth of the case, they may not want a judgment entered against them.

The post-hearing statistics for arbitration programs consist of judgments entered on the arbitration award and settlements reached after the arbitration award and prior to the expiration for the filing of a rejection.

Rejection rates for arbitration awards vary from county to county. In State Fiscal Year 2005, the statewide average rejection rate was 47% and is fairly consistent with the five year average of 48% (State Fiscal Year 2001 through 2005). Although the rejection rate may seem high, it is best to assess the success of arbitration by the percentage of cases resolved before trial, rather than focusing on the rejection rate of arbitration awards alone. (See  Appendix 2 for Post-hearing Calendar Data).

Rejecting an Arbitration Award

A commonly cited measure of performance for court-annexed arbitration programs is the extent to which awards are accepted by the litigants as the final resolution of the case. However, parties have many resolution options after the arbitration hearing is concluded. Therefore, tracking the various options by which post-hearing cases are removed from the arbitration inventory provides the most accurate measure.

A satisfied party may move the court to enter judgment on the arbitration award. Statewide numbers indicate 26% of parties in arbitration hearings motioned the court to enter a judgment on an award. If no party rejects the arbitration award, the court may enter judgment. Figures reported indicate that approximately 40% of the cases which progressed to a hearing were disposed after the arbitration hearing on terms other than those stated in the award. These cases were disposed either through settlement reached by the parties or by voluntary dismissals. The parties work toward settling the conflict prior to the deadline for rejecting the arbitration award. These statistics suggest that in a number of cases which progress to hearing, while the parties may agree with the arbitrator’s assessment of the worth of the case, they may not want a judgment entered against them.

The post-hearing statistics for arbitration programs consist of judgments entered on the arbitration award and settlements reached after the arbitration award and prior to the expiration for the filing of a rejection.

Rejection rates for arbitration awards vary from county to county. In State Fiscal Year 2005, the statewide average rejection rate was 47% and is fairly consistent with the five year average of 48% (State Fiscal Year 2001 through 2005). Although the rejection rate may seem high, it is best to assess the success of arbitration by the percentage of cases resolved before trial, rather than focusing on the rejection rate of arbitration awards alone. (See  Appendix 2 for Post-hearing Calendar Data).

Supreme Court Rule 93 sets forth four conditions which a party must meet in order to reject an arbitration award. The rejecting party must: (1) have been present, personally or via counsel, at the arbitration hearing or that party's right to reject the award will be deemed waived; (2) have participated in the arbitration process in good faith and in a meaningful manner; (3) file a rejection notice within thirty days of the date the award was filed; and (4) unless indigent, pay a rejection fee. If these four conditions are not met, the party may be barred from rejecting the award and any other party to the action may petition the court to enter a judgment on the arbitration award. Once a party’s rejection of an arbitration award is filed, the supervising judge for arbitration must place the case on the trial call.

The rejection fee is intended to discourage frivolous rejections. All such fees are paid to the clerk of the court. For awards of $30,000 or less, the rejection fee is $200. For awards greater than $30,000, the rejection fee is $500.

Post-Rejection Calendar

The post-rejection calendar consists of arbitration cases in which one of the parties rejects the award of the arbitrators and seeks a trial before a judge or jury. In addition, cases which are occasionally reinstated at this stage of the arbitration process may be added to the inventory of cases pending post-rejection action. Removals from the post-rejection arbitration calendar are generally dispositive. When a case is removed by way of judgment before or after trial, dismissal or settlement, it is removed from the court's inventory of pending civil cases.

Although rejection rates are an important indicator of the success of an arbitration program, many resolution options remain available to parties having rejected an award. As noted, parties file a notice of rejection of the arbitration award for the same variety of tactical reasons that they file notices of appeal from trial court judgments. A factor more significant than the rejection rate is the frequency with which arbitration cases are settled subsequent to the rejection but prior to trial. Statistics demonstrate that less than 10% of arbitration cases proceed to trial even after the arbitration award is rejected. (See Appendix 3 for Post-rejection Calendar Data).

Program Summary

A review and analysis of the data and program descriptions supports the conclusion that the arbitration system in Illinois is operating consistent with policy makers’ initial expectations for the program. Parties to arbitration proceedings are working to settle their differences without significant court intervention. The aggressive scheduling of arbitration hearing dates induces early settlements by requiring the parties to carefully manage the case prior to an arbitration hearing. Because arbitration hearings are held within one year of the filing or transfer of the arbitration case, most jurisdictions can dispose of approximately 85% of the arbitration caseload within one year of case filing.

Arbitration encourages dispositions earlier in the life of cases, helping courts operate more efficiently. Statewide figures show that only a small number of the cases filed or transferred into arbitration proceed to an arbitration hearing, and an even smaller number of cases proceed to trial. Arbitration-eligible cases are resolved and disposed prior to hearing in ways that do not require a significant amount of court time. Court-ordered dismissals, voluntary dismissals, settlement orders and default judgments typically require very little court time to process.

Statewide statistics also show that a large number of cases that do proceed to the arbitration hearing are terminated in a post-hearing proceeding. In such cases, the parties either petition the court to enter judgment on the arbitration award or remove the case from the arbitration calendar via another form of post-hearing termination, including settlement.

Not only has mandatory arbitration proven to be an effective means of disposing cases swiftly for litigants, but the overall success of the program is best exemplified in the fact that a statewide average of only 1% of the cases filed in an arbitration program proceeded to trial in State Fiscal Year 2005.

Statewide Data Profile:  2001-2005

(Includes information from Illinois' fifteen Arbitration Programs)

Following are charts and diagrams which contain data from State Fiscal Year 2005.
 

State Fiscal Year 2005

State of Illinois
At A Glance Arbitration Caseload Information

Number of Cases Pending / Referred to Arbitration  59,560
Number of Cases Settled /Dismissed  50,857
Number of Cases Pending  10,033
Number of Arbitration Hearings  11,705
Number of Awards Accepted  3,036
Number of Awards Rejected  5,492
Number of Cases Filed in Arbitration which Proceeded to Trial  557



While cases referred to Illinois' arbitration programs vary annually, an average of 32,438 cases were referred to arbitration over the past five state fiscal years.

The chart above presents information regarding the total number of cases litigated in all fifteen arbitration programs which yielded either a disposition or, ultimately went to trial. Program data indicates that either a settlement or dismissal was reached in 84% (50,300 of 59,560 cases were disposed) of the cases filed in Illinois' arbitration programs for State Fiscal Year 2005. This disposition rate is slightly higher than the five year average of 81%.

A more significant performance indicator for arbitration, however, is measuring the number of cases which, having completed the arbitration process, proceed to trial. In State Fiscal Year 2005, statewide figures indicate that slightly less than 1% of the cases filed in Illinois' arbitration programs proceeded to trial. This rate tracks the five-year trend.