No IN THE APPELLATE COURT OF ILLINOIS FIRST JUDICIAL DISTRICT

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1 NOTICE The text of this order may be changed or corrected prior t~ the time for filing of a Petition for Rehearing or the disposition of the same. FIFTH DIVISION July 24, 2009 No. IN THE APPELLATE COURT OF ILLINOIS FIRST JUDICIAL DISTRICT JOHN PODMAJERSKY, ) Appeal from the ) Circuit Court of Plaintiff-Appellant, ) Cook County ) v. ) No. 07 CH ) CHICAGO YACHT CLUB and ROBERT CHRISTIE, ) Honorable ) Kathleen Pantle, Defendants-Appellees. ) Judge Presiding. ORDER Plaintiff John Podmajersky filed a complaint for specific performance and other relief against defendants, the Chicago Yacht Club (CYC) and Robert Christie, alleging breach of contract, misrepresentation and fraud. Pursuant to defendants' motion, the circuit court dismissed plaintiffs cause of action. Plaintiff appealed, and we affirm the judgment of the circuit court. BACKGROUND In July 2002, plaintiff owned the Illusion sailboat and participated in the race from Chicago to Mackinac Island. Defendant CYC was the organizing authority for the race, and defendant Christie was the rear commodore of the CYC.

2 Prior to the race, Robert Brandenburg, a regular member of plaintiffs crew completed the required race entry form and listed himself as the owner/charterer of the Illusion. The race notice and entry form stated that the race was governed by the International Sailing Federation Racing Rules of Sailing (RRS). The RRS provided, in pertinent part, that race participants agreed: "( a) to be governed by the rules; (b) to accept the penalties imposed and other action taken under the rules, subject to the appeal and review procedures provided in them, as the final determination of any matter arising under the rules; and ( c) with respect to such determination, not to resort to any court or other tribunal not provided by the rules." (Emphasis in original.) RRS, Part 1 - Fundamental Rules, Rule 3 at 3. Rule was defined to include, in relevant part, the rules and definitions in the RRS, the prescriptions of the national authority, the notice of race, the sailing instructions, and any other documents that governed the event. RRS, Definitions at 150. The RRS provided a procedure and mechanism to initiate protests or complaints and to appeal decisions of the organizing authority. For the race at issue here, the protest committee under the RRS was called the Mac Jury, and it had the authority to hear protests and requests for redress, and to resolve questions of eligibility and compliance with entry requirements. Notice of Race, ~ Rules. The Mac Jury's decisions were appealable to the local authority, the Lake Michigan Sail Racing Federation (LMSRF). LMSRF decisions were appealable to the national authority, i.e., the United States Sailing Association (US Sailing), first to its review board and 2

3 then to its board of directors. See RRS, Part 5 - Protests, Redress, Hearings, Misconduct and Appeals, Rules at 22-31; RRS, Appendix F - Appeals Procedures at 69-70; US Sailing Bylaws, Article 14 at The decision of the national authority was final, and the parties were bound by the decision. RRS, Part 5, Rule 71.4 at 31; US Sailing Bylaws at 16. The question of damages arising from a breach of any rule was governed by the prescriptions, if any, of the national authority. RRS, Part 5, Rule 68 at 28. A protest committee was empowered to make findings of fact and decisions in compliance with rules; however, neither a protest committee nor a US Sailing appeal authority could adjudicate any claim for damages. Such a claim was subject to the jurisdiction of the courts. RRS supplement, Rule 68 at 2 (February 20, 2003). The Illusion was named the winner of the July 2002 Mackinac race, and Brandenburg was recognized as its winning owner/charterer. Plaintiffs name was not included on the trophy. After the race, plaintiff and Brandenburg informally asked the eye to correct the error on the Illusion's entry form and list plaintiff, who had skippered the Illusion during the race, as the winning owner/charterer. In August 2002, Brandenburg sent a letter to the Mackinac committee, asking it to direct the eye to change its records to replace Brandenburg's name with plaintiffs name as the owner and person-in-charge of the Illusion during the race. The committee addressed the matter at its monthly meeting in August 2002, interviewed plaintiff and Brandenburg separately, and reviewed the relevant documents. The committee then voted to deny the request to officially recognize plaintiff as the owner/charterer and person-in-charge of the Illusion. Plaintiffs requests to the committee in September and October 2002 to reconsider its decision were denied as no new facts were presented. 3

4 In October 2002, plaintiff filed an emergency motion for a temporary restraining order and a complaint in the Circuit Court of Cook County against the CYC and Brandenburg. In response, the CYC filed a motion to dismiss in the circuit court, asserting that plaintiff was obligated to arbitrate his dispute with the CYe. The circuit court denied plaintiffs emergency motion, and in March 2003, plaintiff voluntarily dismissed his lawsuit without prejudice against the CYC based on defendant Christie's assurances that plaintiff would receive a hearing on the merits of his claim before the Mac Jury. Meanwhile, the CYC had filed a report with the Mac Jury because plaintiffs resort to the court system was a violation of the RRS. As a result, the Mac Jury determined that plaintiff had violated the rules and penalized him with a warning. In April 2003, plaintiff filed a request for redress with the Mac Jury, asking it to direct the CYC to change its records to recognize him as the owner/charterer of the Illusion for the 2002 race. In July 2003, the Mac Jury deemed the request untimely and denied it without reaching the merits of plaintiffs claims. Plaintiff appealed to the LMSRF and then to US Sailing, which both affirmed the Mac Jury's decision. About July 2004, plaintiff went back to the Mac Jury and asked it to reconsider its July 2003 decision, but the Mac Jury denied that request. When plaintiff appealed, the LMSRF affirmed the Mac Jury, and then US Sailing dismissed plaintiffs appeal in May Back in the fall of 2002, plaintiff had filed a notice of grievance against US Sailing, alleging that it failed to fulfill its obligations as the national governing body for the sport of sailing because the Illusion did not receive a fair hearing of its dispute regarding the 2002 Mackinac race. The review board of US Sailing appointed a hearing panel to hear the case but stayed the matter 4

5 until all other avenues available for relief within US Sailing or the CYC were exhausted. After the voluntary dismissal of plaintiffs civil lawsuits against the CYC and Brandenburg, the failure of a mediation attempt, and the exhaustion of any possible resolution through hearings with the organizing authority or the race jury, the US Sailing panel held an evidentiary hearing over two days in April Six witnesses testified, the parties were represented by counsel, and 120 exhibits were entered into evidence. Meanwhile, in July 2007, plaintiff filed in the Circuit Court of Cook County a four-count complaint against defendants CYC and Christie for specific performance and other relief. He alleged that: (1) the CYC breached the entry form agreement by failing to award him prizes as the winner of the race; (2) the CYC breached its bylaws by failing to follow the rules that afforded plaintiff due process rights; (3) defendants breached an oral agreement to give plaintiff a Mac Jury hearing on the merits of his request to correct the race record; and (4) plaintiff relied on defendant Christie's misrepresentation that plaintiff would receive a Mac Jury hearing. According to the complaint, plaintiff sought specific performance of his agreements with defendants so that all the official records and permanent trophies would reflect that he was the owner of the Illusion and winner of the 2002 Mackinac race. He requested compensatory damages of$100,000 against each defendant, punitive damages, attorney fees and costs. He alleged that he suffered at least $30,000 in damages for the time and expense he incurred in order to satisfy the conditions required to participate in the race, and at least $100,000 in additional damages, including attorney fees and other costs, related to his attempts to remedy the breach of the agreements and pursue a hearing on the merits. 5

6 In August 2007, the US Sailing panel issued an opinion, noting that it had considered the case under its bylaws as having the elements of an administrative, grievance, and disciplinary proceeding. The panel found that race sign-in requirements were material and race authorities were justified in requiring compliance. The panel stated that Brandenburg's testimony was more credible than plaintiffs concerning the entry of the Illusion in the race. The panel further noted plaintiffs failure prior to the race to make any request or take any action to correct the entry form, and plaintiffs and Brandenburg's post-race actions to correct the form. The panel concluded that Brandenburg, plaintiff, and the rest of the Illusion's crew knowingly sailed under a false/incorrect entry and took no action prior to the race to correct that entry or advise the race organizing authority of the error. Based upon that violation of the rules, the panel would have disqualified the Illusion if the panel had the authority to do so. Furthermore, the panel found that the race committee and CYC failed to exercise proper diligence regarding the entry applications and compliance with entry requirements. Concerning plaintiffs arguments about the violation of his due process rights, the panel noted that he did not file a formal action with the Mac Jury until April 2003, more than nine months after the race and about six months after he had sued the CYC and Brandenburg in state court. The panel also noted that plaintiffs filing delay was a tactical maneuver to avoid the Mac Jury's authority to either disqualify the Illusion for submitting a false application or penalize the Illusion by three race positions in accordance with the RRS. Furthermore, the panel found that the matter raised in Brandenburg's 2002 letter to the Mackinac committee, which did not request a hearing, was timely investigated by the Mackinac committee and the CYC's and Mac Jury's 6

7 treatment of that letter was fully appealed through LMSRF and US Sailing. The panel described plaintiffs testimony concerning his knowledge of the rules and procedures governing disputes and penalties as evasive and inconsistent. The panel found that, where numerous advisors assisted plaintiff and he had ample time to file an action with the Mac Jury before initiating his state court action, plaintiff knowingly and strategically chose to pursue his claims in state court and not before the Mac Jury. Nevertheless, the panel found that plaintiff did not waive or forfeit the Illusion's right to a hearing because he had relied on Brandenburg's assurances to take care of the matter. Moreover, even the CYC acknowledged that the Illusion was entitled to a hearing because the Mackinac committee investigated the dispute at a monthly meeting in August The panel found, however, that the August 2002 investigation failed to meet the standards established by US Sailing for a fair hearing because plaintiff and Brandenburg were not permitted to be present simultaneously to hear each other's testimony. Furthermore, despite Christie's assurance that plaintiff would receive a Mac Jury hearing on the merits if he dismissed his circuit court case, the Mac Jury subsequently denied plaintiffs hearing request as untimely and refused to hear the matter on the merits. Consequently, the panel determined that it became the ultimate authority as to whose name should appear on the 2002 Mackinac race trophy. The panel concluded that both Brandenburg and plaintiff knowingly sailed under a false entry form in violation of the race notice, sail instructions, RRS, and the standards of the bylaws and regulations of US Sailing. The panel recognized, however, that it did not have the authority to disqualify the Illusion as the winner of the 2002 Mackinac race. Accordingly, the panel 7

8 directed that the names of Brandenburg and plaintiff be excluded from the race results and directed that only the name of the boat, the Illusion, appear on the trophy. Both parties appealed the panel's decision to the US Sailing board of directors. In November 2007, defendants filed a motion in the circuit court to dismiss plaintiffs complaint with prejudice in favor of arbitration, pursuant to section of the Code of Civil Procedure (Code) (735 ILCS 5/2-619 (West 2006)). Defendants argued that plaintiff, by participating in the Mackinac race, had agreed to be governed by the rules of that race, which provided for mandatory arbitration. Furthermore, plaintiff had already submitted his dispute to that arbitral forum, and both parties currently were awaiting the disposition of their appeals of the forum's decision. In the alternative, defendants asked the circuit court to stay plaintiffs action pending the final disposition of the matter in the arbitral forum. On February 8, 2008, the US Sailing board of directors affirmed the August 2007 decision of the review board hearing panel. Specifically, the board of directors affirmed the panel's findings that plaintiffs testimony was not credible and he knowingly sailed under a false race entry. The board of directors rejected plaintiffs argument that the panel improperly converted the hearing into a disciplinary hearing and noted that the panel took no disciplinary action against him. Concerning CYC's arguments on appeal, the board of directors found that the panel's determination of jurisdiction was appropriate and timely under the circumstances, the parties received a fair hearing, and the panel correctly applied the applicable rules to the facts. The board of directors stated that the record established that plaintiff and Brandenburg knew before the race that the Illusion was not properly entered and the CYC race committee failed to properly review 8

9 the entry forms before the race. In April 2008, the circuit court granted defendant's motion to dismiss. The circuit court found that plaintiffs dispute was governed by the rules governing the race, that the rules clearly indicated that the decision rendered by the national authority would be final, and that plaintiff was bound by that final decision. The trial court rejected plaintiffs contention that portions of his complaint were non-arbitrable and found that the race notice, RRS, and other documents constituted a contract which clearly provided that any disputes relating to the race had to be handled internally. Plaintiff timely appealed. ANALYSIS On appeal, plaintiff argues that the circuit court dismissed his complaint based on an erroneous interpretation that Rules 3 and 71.4 of the RRS constituted an arbitration clause. According to plaintiff, the RRS and US Sailing prescriptions constituted merely an obligation to exhaust administrative remedies through sailing's internal grievance procedures prior to resorting to filing a lawsuit in court. Furthermore, plaintiff argues that his claims before the circuit court did not fall within the scope of any putative arbitration clause. Defendants respond that the circuit court correctly ruled that the parties agreed to resolve this dispute internally pursuant to the terms of the race entry form and the documents incorporated therein. Defendants also contend that the circuit court correctly held that plaintiff received a full and fair hearing on his claims. A motion to dismiss pursuant to section of the Code admits the legal sufficiency of the plaintiff's complaint, but asserts an affirmative defense or other matter that avoids or defeats 9

10 the plaintiff's claim. DeLuna v. Burciaga, 223 Ill. 2d 49, 59 (2006). "Section motions present a question of law, and we review rulings thereon de novo." DeLuna, 223 Ill. 2d at 59. A reviewing court may affirm a correct dismissal for any reason appearing in the record. Bunting v. Progressive Corp., 348 Ill. App. 3d 575, 580 (2004). Plaintiff's assertion that he was merely exhausting his administrative remedies prior to resorting to the courts is not persuasive. Clearly, plaintiff filed in the circuit court a complaint for specific performance and damages with allegations of breach of contract, misrepresentation and fraud; he did not file a complaint for administrative review. Furthermore, he filed the complaint at issue here before the US Sailing review board hearing panel had even issued its opinion. Moreover, plaintiff's arguments challenging the existence of a compulsory arbitration agreement or the propriety of a court compelling arbitration are moot. The record establishes that after plaintiff filed a complaint in the circuit court in 2002 against the CYC and Brandenburg, the CYC filed a motion to dismiss, asserting that plaintiff was obligated to arbitrate his dispute with the Cye. Instead of challenging at that time the issue of the existence of an arbitration agreement, plaintiff voluntarily dismissed his circuit court lawsuit against the CYC and filed a request for redress with the Mac Jury in The circuit court never ruled on whether it should compel plaintiff to arbitrate because plaintiff opted to pursue the resolution of his dispute through the hearing and appeal mechanisms and procedures established by the Mackinac race notice, RRS, and other relevant rules and provisions incorporated therein. Furthermore, plaintiff did not raise any objections to arbitrability within the sailing forum. Where plaintiff has already voluntarily submitted his dispute to that forum and participated in those proceedings without objecting to the 10

11 lack of any arbitration agreement, his argument now that he could not have been compelled to arbitrate the matter is waived. Tri-City Jewish Center v. Blass Riddick Chilcote, 159 Ill. App. 3d 436, 439 (1987). Furthermore, plaintiffs attempts to characterize the dispute resolution agreement between the parties as merely an agreement to follow the RRS is not persuasive. The parties do not dispute the fact that the 2002 race entry form constituted a contract between them. The dispute resolution provisions contained within that contract essentially constitute an arbitration clause, and any waiver of an individual's right to seek redress in court must be clear and unambiguous. DeGroot v. Farmers Mutual Hail Insurance Co. ofiowa, 267 Ill. App. 3d 723, (1994). Courts must construe arbitration agreements according to the language of the agreement and " 'may not rewrite a contract to suit one of the parties but must enforce the terms as written.' " Mayflower Insurance Co., Ltd. v. Mahan, 180 Ill. App. 3d 213,217 (1988), quoting Schroud v. Van C. Argiris & Co., 78 Ill. App. 3d 1092, 1096 (1979). Here, the plain language of that contract clearly provided that the race was governed by the rules in the race notice, sailing instructions, RRS, and US Sailing prescriptions. Furthermore, those rules clearly provided that the Mac Jury had, in addition to its authority to hear protests and requests for redress, the authority to resolve questions of eligibility and compliance with entry requirements. The Mac Jury's decisions were appealable to the LMSRF and then to US Sailing. The decision of US Sailing-the national authority-was final, and the parties were bound by its decision. 11

12 Accordingly, plaintiff is estopped from attempting to relitigate here the same issues already adjudicated by US Sailing pursuant to plaintiff's voluntarily filed grievance claim. Although the theoretical causes of action in plaintiff's complaint may read differently from the issues raised before US Sailing, the factual issues forming the basis for plaintiff's current causes of action were actually and necessarily decided by US Sailing. Specifically, the four counts of plaintiff's complaint rely on allegations that he was entitled to be recognized as the winner of the 2002 Mackinac race and defendants improperly denied his requests for a hearing on the merits. Collateral estoppel, however, precludes relitigation of the same core of operative facts, and US Sailing has already found that plaintiff was not entitled to recognition as the winner of the race and was not denied due process where he received a full and fair hearing after a delay that was caused in large part by his resort to state court. Collateral estoppel precludes relitigation of an issue that has been fairly, completely, and necessarily resolved in a prior proceeding. In re Nau, 153 Ill. 2d 406,424 (1992). The doctrine of collateral estoppel applies when (1) the issue decided in the prior adjudication is identical to that presented in the instant suit; (2) the party against whom the estoppel is asserted was a party or in privity with a party to the prior litigation; and (3) the prior suit resulted in a final judgment on the merits. Nau, 153 Ill. 2d at 424. Arbitration awards generally have the same collateral estoppel effect as court judgments; however, exceptions exist where it appears that the arbitration proceeding was unfair or the result unreliable, or where giving the award preclusive effect would be incompatible with other legal or contractual policies. Lo Russo v. Industrial Commission, 258 Ill. App. 3d 59,70 (1994); Herriford v. Boyles, 193 Ill. App. 3d 947,953 (1990). 12

13 In order to prevail on his count I breach of contract claim against the eye, plaintiff would need to establish that he was entitled to be awarded the prizes as the winner of the race. See Werner v. Botti, Marinaccio & DeSalvo, 205 Ill. App. 3d 673,680 (1990). This he cannot do. Plaintiff was denied recognition as the winning owner/charterer based upon a valid arbitration decision that he violated race entry requirements. US Sailing found that plaintiff knowingly sailed the race under a false/incorrect entry form and, thus, was not entitled to recognition as the winning owner/charterer of the race. US Sailing specifically rejected plaintiffs testimony to the contrary as evasive, inconsistent, and less credible than Brandenburg's testimony. Furthermore, US Sailing found that the eye's race sign-in requirements were material and the club was justified in requiring compliance. Those findings were sufficient to preclude plaintiffs count I breach of contract claim against the eye. Furthermore, plaintiffs claims in counts II through IV regarding defendants' alleged breach of bylaws or agreements, misrepresentation, and fraud to deny plaintiff due process were contingent upon proof that defendants improperly denied or delayed plaintiffs hearing on the merits. See Werner, 205 Ill. App. 3d at 680. US Sailing, however, found that plaintiff failed to file a formal action with the Mac Jury until more than nine months after the race and about six months after he had sued the eye and Brandenburg in state court. US Sailing rejected plaintiffs testimony disavowing knowledge of the rules governing disputes and penalties as evasive and inconsistent, particularly given the numerous advisors assisting plaintiff and the ample time he had to file an action with the Mac Jury before initiating his state court action. US Sailing noted that plaintiffs filing delay was a tactical maneuver to avoid the Mac Jury's authority to either disqualify 13

14 his boat or penalize it out of winning position. US Sailing rejected plaintiff's assertions that defendants violated plaintiff's due process rights and found that he knowingly and strategically chose to pursue his claims in state court and not before the Mac Jury. Nevertheless, US Sailing found that plaintiff did not forfeit the Illusion's right to a hearing and acknowledged that the Mackinac committee's August 2002 investigation did not meet US Sailing's standards for a fair hearing. Accordingly, US Sailing conducted a two-day hearing on the merits of plaintiff's dispute, and the record establishes that plaintiff was largely responsible for the delay of that hearing until Specifically, plaintiff's resort to state court and failure to timely submit a formal hearing request to the Mac Jury-in violation of the rules contained within the parties' contract-caused US Sailing to stay its proceeding on plaintiff's grievance claim until he had dismissed his state court actions, the mediation attempts were exhausted, and the hearing and appeal proceedings before the Mac Jury and LMSRF had run their course. Finally, plaintiff's breach of contract, misrepresentation, and fraud claims against defendants would require proof that plaintiff was damaged by the alleged acts. See Werner, 205 Ill. App. 3d at 681. The determinations that plaintiff was not entitled to recognition as the winning charterer/owner and that he purposely avoided a hearing before the Mac Jury until it lost the authority to adversely affect the Illusion's race standing would preclude findings that defendants' alleged conduct caused plaintiff to incur damages. Furthermore, plaintiff cites no relevant authority in the RRS or US Sailing by-laws and prescriptions to support any argument that he is entitled to recover costs incurred in his unsuccessful pursuit of recognition as the winning owner/charterer of the Illusion. The factual issues forming the basis for the claims in 14

15 plaintiff's complaint were actually and necessarily decided by US Sailing in the prior proceeding. Because US Sailing found that plaintiff was not the winner and avoided a timely hearing before the Mac Jury, collateral estoppel precludes relitigation of the same core of operative facts here. We note that even if the threshold elements of collateral estoppel are satisfied, it will not be applied unless it appears that the party against whom it is asserted had a full and fair opportunity to litigate the issue in the prior proceeding and that the application of the doctrine will not result in an injustice to that party. Taylor v. Peoples Gas Light & Coke Co., 275 Ill. App. 3d 655,663 (1995). The full and fair opportunity requirement is satisfied even if only a slight amount of evidence was presented on the disputed matter actually decided in the first suit. Schratzmeier v. Mahoney, 246 Ill. App. 3d 871, 875 (1993). According to the record, US Sailing held an evidentiary hearing over two days and the proceeding was transcribed. At the hearing, the parties were represented by counsel and had the opportunity to present and challenge the evidence. Six witnesses testified, and 120 exhibits were entered into evidence. Clearly, plaintiff had a full and fair opportunity and incentive to litigate his claims in the US Sailing proceeding. Consequently, the claims raised in plaintiff's complaint are barred by collateral estoppel, and the trial court properly granted defendants' motion to dismiss plaintiff's complaint. CONCLUSION F or the reasons explained above, the order of the trial court dismissing plaintiff's complaint is affirmed. Affirmed. o 'MARA FROSSARD, 1., with TULLY and TOOMIN, J1., concurring. 15

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