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Himco Systems v. Marquette Electronics

OPINION FILED JUNE 30, 1980.

HIMCO SYSTEMS, INC., PLAINTIFF-APPELLANT AND CROSS-APPELLEE,

v.

MARQUETTE ELECTRONICS, INC., DEFENDANT-APPELLEE AND CROSS-APPELLANT.



APPEAL from the Circuit Court of Cook County; the Hon. RICHARD L. CURRY and the Hon. NATHAN COHEN, Judges, presiding.

MR. JUSTICE RIZZI DELIVERED THE OPINION OF THE COURT:

Plaintiff, Himco Systems, Inc., brought an action for declaratory relief and damages resulting from the alleged breach and wrongful termination of an exclusive distributorship agreement by defendant Marquette Electronics, Inc. (Marquette). In this action and in an emergency motion filed the next day, Himco also sought a stay of arbitration proceedings which had been demanded by Marquette. The trial court denied Himco's motion for a stay. The matter proceeded to arbitration, and the arbitrator awarded $8,173.55 to Marquette.

Himco then filed a second complaint seeking to vacate the arbitration award. Pursuant to Marquette's motions, the second complaint was dismissed, and the arbitration award was confirmed. At a later date, the first complaint was dismissed with prejudice. The trial court denied Marquette's motion for attorney's fees under section 41 of the Civil Practice Act (Ill. Rev. Stat. 1977, ch. 110, par. 41); this ruling is the subject of a cross-appeal by Marquette. We affirm the dismissal of both complaints and the denial of the section 41 motion.

On June 20, 1977, Himco filed a complaint which alleged that it had executed an exclusive distributorship agreement with Marquette pursuant to which Himco, as Marquette's exclusive distributor in Eastern Canada, was to sell and service Marquette's products for a term of two years. The agreement was to be renewable for a term of two years. According to the complaint, Marquette cancelled a contract with Laval Hospital which was negotiated by Himco and accepted by Marquette, thereby causing Himco to lose commissions. Slightly more than a year after the distributorship agreement was executed, Marquette notified Himco of its intention to terminate the agreement. As a result of Marquette's cancellation of the Laval Hospital contract and Marquette's allegedly wrongful termination of the agreement, Himco claimed damages for unpaid commissions from the Laval Hospital contract, damage to its trade reputation, loss of specific sales and customers, loss of profits comprised of the lost commissions for the second year of the agreement and the two-year renewal period, and expenses incurred during the first year of the contract in developing a market for future sales.

In the same complaint, Himco also requested a stay of arbitration pursuant to section 2 of the Uniform Arbitration Act (Ill. Rev. Stat. 1977, ch. 10, par. 102). Himco had received a demand for arbitration from Marquette. The distributorship agreement contained the following arbitration clause:

"Any and all disputes arising from or in connection with this Agreement or a transaction conducted under this Agreement, shall be settled by mutual consultation between the parties in good faith as promptly as possible, but failing an amiable settlement, shall be settled in accordance with the rules of the American Arbitration Association. The award of the arbitration shall be final and binding upon the parties."

Himco alleged that some or all of the claims were outside the scope of the arbitration clause. It also alleged that the arbitrability of the issues was in substantial and bona fide dispute.

On June 21, 1977, Himco filed an emergency motion to stay the arbitration proceedings based on the same grounds that were stated in its complaint. The trial court denied Himco's motion.

The arbitration proceeded as scheduled on August 25, 1977. Marquette claimed that it had credited Himco with a partial commission for the Laval order. When the transaction could not be completed, Marquette debited Himco for the partial commission, but that amount was never repaid. In addition to recovery of the partial commission, Marquette also sought to recover for products sold to Himco for resale and for which it had never been paid. In the arbitration proceeding, Himco counterclaimed for the same damages it had requested in the first complaint. The arbitrator awarded $8,173.55 to Marquette on its claim and denied Himco's counterclaim.

On February 21, 1978, Himco filed a second complaint seeking to vacate the arbitration award pursuant to sections 12(a)(3) and 12(a)(5) of the Uniform Arbitration Act. (Ill. Rev. Stat. 1977, ch. 10, pars. 112(a)(3), (5).) Himco alleged that there was no agreement to arbitrate because Marquette was not a party to the distributorship agreement which contained the arbitration clause. According to the second complaint, Himco had signed a distributorship agreement with Marquette International Corporation (International), a wholly owned subsidiary of Marquette Electronics, Inc. Himco also alleged that the arbitrator exceeded his powers in entering the award.

The trial court dismissed the second complaint and confirmed the arbitration award. At a later date, the first complaint was dismissed with prejudice.

Himco first argues that the trial court erred in dismissing its application to vacate the award. Section 12 of the Uniform Arbitration Act sets forth the grounds on which an award may be vacated. (Ill. Rev. Stat. 1977, ch. 10, par. 112.) One of the bases on which Himco relied was section 12(a)(5) of the Act which provides:

"(a) Upon application of a party, the court shall vacate an award where:

(5) There was no arbitration agreement and the issue was not adversely determined in proceedings under Section 2 and the party did not participate in the arbitration hearing without raising the objection; but the fact that the relief was such that it could not or would not be granted by the ...


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