In Johnson and Bell, Ltd., v. Scherer, 2024 IL App (1st) 230709-U, the law firm sued a former client to collect an unpaid fee bill. However, the engagement letter signed by the client and the law firm required that all disputes between the parties be submitted to binding arbitration. Because the firm failed to pursue this remedy, the defendant sought Rule 137 sanctions. The trial court denied the motion for sanctions. The Appellate Court reversed and held that the denial of sanctions was an abuse of discretion.

The reasoning:

¶28 We conclude that the instant case warrants a finding that the trial court abused its discretion in denying defendants’ motion for Rule 137 sanctions against plaintiff….First, although plaintiff filed the original complaint without any reference to the parties’ engagement agreements, plaintiff does not deny, nor can it, that it was aware of the existence of these agreements when it filed the original complaint. Plaintiff is a law firm and drafted the engagement agreements that contain the unambiguous and broad mandatory arbitration provision for disputes involving any dispute under the agreement, including disputes regarding the amount of fees or the quality of plaintiff’s services. Consequently, even the most basic level of “reasonable investigation” as mandated by Rule 137 would have required plaintiff to examine the engagement agreements and their provisions before plaintiff signed and filed the original complaint.

¶ 30 Furthermore, plaintiff’s argument that it properly filed the original and amended complaints because the parties could waive the contractual provision for mandatory, binding arbitration lacks merit. Based upon the objective standard used to measure the circumstances at the time plaintiff filed its pleadings, it is irrelevant that plaintiff believed waiver of the arbitration provision was a possibility. Furthermore, plaintiff’s response to defendants’ motion to dismiss and compel arbitration—i.e., that defendants had waived their right to arbitration by moving to dismiss plaintiff’s original complaint based on plaintiff’s failure to abide by pleading requirements and attach the engagement agreements—is clearly contrary to precedent. Illinois courts clearly favor the easier, more expeditious, and less expensive contractual right of arbitration for dispute resolution and will not lightly infer the waiver of that contractual right. All American Roofing, Inc. v. Zurich American Insurance Co., 404 Ill. App. 3d 438, 441 (2010)….

¶33 …[E]ven a cursory examination by plaintiff of the engagement agreements here would have indicated that the challenged complaints were barred by the arbitration provision and, therefore, should not have been filed before obtaining a waiver fro defendants. Furthermore, instead of promptly dismissing the lawsuit that clearly was subject to mandatory arbitration ….plaintiff doubled down by filing the amended complaint and responding to defendants’ motion to dismiss and compel arbitration with the baseless argument that defendants had waived their right to mandatory arbitration by moving to dismiss the original complaint….

The court reversed the denial of the motion for Rule 137 sanctions and remanded the case for further proceedings.

Comment: the opinion is well-reasoned and appropriate. Arbitration can be inconvenient to those familiar with courtrooms and court proceedings. However, the firm agreed to arbitration and was required to arbitrate. The opinion states that the firm obtained a fee award in the arbitration.

http://www.clintonlaw.net