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06/22/94 CHRISTIAN DIOR v. HART SCHAFFNER & MARX

June 22, 1994

CHRISTIAN DIOR, INC., PLAINTIFF-APPELLEE,
v.
HART SCHAFFNER & MARX, DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Cook County. Honorable Thomas J. O'Brien, Judge Presiding.

Petition for Leave to Appeal Denied October 6, 1994.

Greiman, Tully, Rizzi

The opinion of the court was delivered by: Greiman

JUSTICE GREIMAN delivered the opinion of the court:

Defendant Hart Schaffner & Marx (HSM) appeals the trial court's confirmation of the unanimous arbitration award in favor of plaintiff, Christian Dior, Inc. (Dior), totalling $1,215,000. On appeal, HSM asserts that the arbitrators exceeded their authority beyond the terms of the arbitration agreement and the Uniform Arbitration Act (710 ILCS 5/1 et seq. (West 1993)) (Arbitration Act), and committed gross mistakes of law and fact.

We affirm.

HSM and Dior entered a licensing agreement wherein Dior granted HSM the exclusive license in the United States to manufacture men's clothing bearing the "Christian Dior" and "Dior" trademarks until the year 2000 (License). When serious differences arose between the parties during the late 1980's, they entered into a settlement agreement (Agreement) which provided HSM's License would terminate on September 1, 1992 although the parties would announce the termination on March 1, 1992, after which time HSM would no longer be authorized to manufacture Dior goods.

The Agreement preserved certain provisions of the original License and also placed new obligations upon HSM. For example, HSM agreed to make royalty and advertising payments to Dior and allow Dior to conduct audits of its premises for distribution or other violations of the Agreement. Any dispute arising under the Agreement would be resolved according to the rules of the American Arbitration Association using party-selected arbitrators.

In February 1992 Dior's president, Philippe Vindry, prematurely announced HSM's license termination to the media. HSM responded by informing Dior and the media that it was no longer bound to the Agreement and filed a lawsuit against Vindry and Dior's new licensee, which was dismissed.

Dior then filed a demand for arbitration as provided in the Agreement, requesting a declaration that the Agreement remained in effect with regard to HSM's royalty and advertising payments and audit obligations. Dior also sought damages for violations of the Agreement resulting from HSM's misconduct in seeking to avoid arbitration by bringing suit against Vindry instead of the company. Finally, Dior asked for a specific finding that it was not responsible for cancellations and returned goods from retailers arising from the premature license termination announcement.

HSM contested arbitration on grounds that no dispute existed between the parties. When the arbitration panel reached the opposite Conclusion, HSM sought from the trial court an emergency temporary restraining order to enjoin arbitration, which was denied.

HSM then requested postponement of the hearings originally scheduled for mid-October 1992 to accommodate the relocation of its attorney's office. HSM asked for, and was granted, a continuance until early November. A few days before the hearing, HSM requested another postponement. The panel again complied, postponing the hearing by one week to begin Sunday, November 8, 1992. HSM immediately demanded another postponement to accommodate its attorney who would begin a jury trial shortly after arbitration; the panel refused.

The panel directed the parties to exchange witness and exhibit lists in preparation for the hearing. Dior alleged that HSM failed to produce documents during discovery and obstructed its efforts to obtain documents from third-parties, and that HSM improperly withheld its lists until immediately before arbitration.

Four days before arbitration, Dior amended its "Demand for Arbitration" as a result of newly discovered distribution violations by HSM. HSM challenged the panel's decision to allow the amendment on grounds that it lacked sufficient time to respond to Dior's allegations.

During the morning of the first day of arbitration, HSM demanded that the panel issue a subpoena for Vindry even though HSM had failed to list him as a witness or previously require his presence. The panel refused this demand since Vindry lived in France and, with the time difference, it was almost midnight Friday there and too late to contact Vindry before the start of the weekend much less arrange for his appearance in the next two days.

On December 2, 1992, the arbitrators issued a unanimous award which declared the Agreement in "full force and effect" to bar HSM from continuing to manufacture Dior clothing, and granted Dior $1.2 million in damages as well as $15,000 for attorney fees for Vindry's defense in the original lawsuit. The panel failed to hold Dior responsible for HSM's cancelled orders and returned goods allegedly caused by the premature announcement except in one circumstance for which the panel issued HSM a royalty adjustment. The panel also rejected Dior's request for $2.5 million in ...


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