Before it was modified by statute, the common law allowed revocation of arbitration agreements. But the traditional doctrine was changed only for written arbitration agreements.

The question for the Illinois Appellate Court was whether the old rule on revocation applied in a case where (1) attorneys told a judge that their clients had agreed to arbitrate a personal injury dispute; and (2) the judge issued an order saying that the lawsuit was stayed pending arbitration.

Because the Illinois Uniform Arbitration Act only applies to written arbitration agreement – and the order merely stayed litigation – the common law rule applied, and the defendant was entitled to revoke the oral arbitration agreement. Heider v. Knautz, No. 2-09-0808 (2d Dist., Dec. 4, 2009).

Arlie Heider sued Carl Knautz in Jo Davies County for allegedly causing an auto accident.

At a status hearing on Sept. 11, 2008, the attorneys told the judge that there was an agreement to arbitrate the dispute. The resulting order said the case was "stayed pending binding arbitration between the parties."

During discovery, defense counsel found out that Heider – who claimed a knee injury from the accident – also reported that the same knee was injured in a subsequent auto accident.

Knautz's attorney wanted more time to conduct discovery, but Heider's lawyer reportedly declined to postpone the arbitration hearing.

When Knautz attempted to revoke the arbitration agreement, another trial judge concluded that the September 2008 stay-order amounted to a written agreement for arbitration.

Disagreeing, the 2nd District reversed. Here are highlights of Justice Kathryn E. Zenoff's opinion (with omissions not noted in the text):

The defendant contends that the trial court erred in finding that the Act applies to the parties' agreement to submit their dispute to arbitration and in entering an order compelling defendant to proceed with arbitration.

The Act, enacted in 1961, was an adoption of the Uniform Arbitration Act, with only minor changes. The Act provides in relevant part: "A written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable and irrevocable save upon such grounds as exist for the revocation of any contract." 710 ILCS 5/1.

The only issue before a reviewing court in an appeal from an interlocutory order granting or denying a motion to compel arbitration is whether there was a showing sufficient to sustain the order.

The plain language of the Act makes apparent that the Act applies only to written agreements. See 710 ILCS 5/1 (referring only to "a written agreement to submit any existing controversy to arbitration." Neither the plaintiff nor the defendant contends otherwise.

We also observe that many states that have patterned their arbitration statutes after the Uniform Arbitration Act have interpreted them as applying only to written agreements to arbitrate. For example, in Anderson v. Federated Mutual Insurance Co., 481 N.W.2d 48 (Minn.1992), the Minnesota Supreme Court considered whether an oral agreement to submit a dispute to arbitration was enforceable under its statute patterned after the Uniform Arbitration Act.

The Minnesota statute provides-in language nearly identical to the Act – that "a written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable, and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract." Minn.Stat. § 572.08.

The Minnesota Supreme Court concluded that an agreement to arbitrate must be in writing to be enforceable under the statute and, thus, an oral agreement to arbitrate was not enforceable under the statute and was subject to the common-law rules governing arbitration agreements. Anderson, 481 N.W.2d at 49-50.

Other jurisdictions have interpreted their arbitration statutes in a similar manner. See Fischer v. MBNA America Bank, N.A., 248 S.W.3d 567, (Ky.App.2007) (setting aside the arbitration award and remanding the matter to the trial court for a determination of whether there existed a written agreement between the parties to arbitrate their dispute, stating "if there exists no written agreement, arbitration shall not be permitted in the dispute"); Abrams v. Four Seasons Lakesites/Chase Resorts, Inc., 925 S.W.2d 932 (Mo.1996) (trial court's denial of the motion to compel arbitration affirmed on the basis that there was no written agreement between the parties to arbitrate, as required by the statute); Maine State Employees Association, SEIU Local 1989 v. Bureau of Employee Relations, 652 A.2d 654 (Me.1995) ("The trial court could not compel arbitration of the present dispute for the simple reason that the Uniform Arbitration Act requires the existence of a written arbitration agreement"); Eugene W. Kelsey & Son, Inc. v. Architectural Openings, Inc., 484 So.2d 610 (Fla.App.1986) (concluding that because the statute required arbitration agreements to be in writing, the oral agreement between the parties was not subject to arbitration and the arbitration award attributable to the oral agreement was reversed); In re Matter of Riverdale Fabrics Corp., 306 N.Y. 288 (1954) ("The rule is that a party is not to be compelled to surrender his right to resort to the courts, with all of their safeguards, unless he has agreed in writing to do so").

In the present case, it is undisputed by either party that at some point prior to Sept. 11, 2008, they entered into an oral agreement to submit their dispute to arbitration. According to defendant, the parties never entered into a written agreement to arbitrate, and the trial court erred in concluding that the Sept. 11, 2008, order entered by the trial judge was a written agreement to arbitrate made irrevocable under the Act.

We agree with the defendant.

Although the transcript from the Sept. 11, 2008, hearing does reflect that the parties entered into an oral agreement to arbitrate, nothing in the transcript indicates that the parties intended to enter into a written agreement to arbitrate, thereby subjecting themselves to the provisions of the Act.

Likewise, the language of the Sept. 11, 2008, order does not in any way reflect an intent on the part of the parties to enter into a written agreement to submit their dispute to arbitration. The order simply stays the trial court proceedings pending binding arbitration between the parties.

As the transcript reflects, this order was based on the parties' representation that they had entered into an oral agreement to submit their dispute to arbitration.

As we will discuss, an oral agreement to arbitrate, under the common law, may be revoked by either party at any time before an arbitration award is entered. In contrast, a written agreement to arbitrate, which is subject to the Act, is irrevocable. 710 ILCS 5/1.

Thus, parties to an arbitration agreement may choose to enter into only an oral agreement and forgo a written agreement in order to allow themselves to revoke their agreement should they so choose.

Were we to hold that the Sept. 11, 2008, order constituted a written agreement subject to the Act, parties who choose to enter into only an oral agreement could never obtain an order staying trial court proceedings pending arbitration, for fear that such an order would be viewed as a written agreement subjecting them to the Act and thereby destroying the purpose of entering into only an oral agreement for arbitration.

Having concluded that the Sept. 11, 2008, order was not a written agreement to arbitrate made irrevocable under the Act, the question remains whether defendant was otherwise entitled to revoke his oral agreement to submit the parties' dispute to arbitration.

Under the common law, an oral agreement to submit a dispute to arbitration is revocable by either party at any time prior to the entry of an award. Cocalis v. Nazlides, 308 Ill. 152 (1923); White Eagle Laundry Co. v. Slawek, 296 Ill. 240 (1921).

Whether the defendant was entitled to revoke his oral agreement to submit to arbitration depends upon whether the Act abrogated this common-law rule.

We conclude that the Act did not do so and, thus, we determine that the trial court erred in denying defendant's request to revoke his agreement to arbitrate and in compelling defendant to proceed with arbitration.

"A court cannot construe a statute in derogation of the common law beyond what the words of the statute expresses or beyond what is necessarily implied from what is expressed." Adams v. Northern Illinois Gas Co., 211 Ill.2d 32 (2004). Any legislative intent to abrogate the common law must be clearly and plainly expressed, and we will not presume from ambiguous language an intent to abrogate the common law. Tomczak v. Planetsphere, Inc., 315 Ill.App.3d 1033 (2000). The repeal or preemption of a common-law remedy by implication is not favored and a statute that appears to be in derogation of the common law will be strictly construed in favor of the person sought to be subjected to the statute's operation.

The Act does not contain any language that reflects an intent on the part of the legislature to abrogate the common-law rule regarding revocability of oral arbitration agreements. By its own terms, the Act makes only written arbitration agreements "valid, enforceable and irrevocable save upon such grounds as exist for the revocation of any contract." 710 ILCS 5/1.

Accordingly, given the Act's silence regarding the revocability of oral arbitration agreements, we cannot construe the Act as eliminating the common-law rule allowing a party to revoke his or her oral arbitration agreement at any time prior to the entry of an award.

As the enactment of the Act did not abrogate the common-law rule allowing parties to revoke their oral arbitration agreements prior to the entry of an award, the trial court erred in denying defendant's request to revoke his agreement and in compelling defendant to proceed with arbitration.