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Colmar, Ltd. v. Fremantlemedia North America

December 04, 2003


Appeal from the Circuit Court of Cook County No. 02 CH 15805 The Honorable Lester D. Foreman, Judge Presiding.

The opinion of the court was delivered by: Justice Greiman


Plaintiff, Colmar, Ltd. (Colmar), appeals from the trial court's order dismissing its complaint seeking to vacate an arbitration award entered in favor of defendant, Fremantlemedia North America, Inc. (FMNA). Colmar argues on appeal that the trial court erred by affirming the arbitration award because (1) the arbitration award was void due to the fact that defendant was represented during the arbitration by an attorney who was not licensed in Illinois; (2) the arbitrator exceeded his powers by refusing to hear material evidence, ruling on an issue not submitted in plaintiff's complaint, and failing to consider all of the arguments presented in plaintiff's complaint; and (3) public policy demands that the trial court vacate the award. Colmar further alleges that the trial court erred by dismissing the complaint for failure to state a claim upon which relief could be granted. We affirm the order of the court below.

Colmar is a Delaware corporation that produced and owns a feature motion picture entitled "Captive." FMNA, also a Delaware corporation, which is based in Califormia, is the wholly owned American subsidiary of a European media conglomerate that is engaged in the worldwide production and distribution of motion pictures and television programs.

In 1994, Colmar and FMNA entered into a license agreement (contract) whereby Colmar licensed its film to FMNA. The contract provided that FMNA would market the film through December 31, 2003. The contract contained an arbitration clause that provided that the parties would submit any disputes arising from the contract to arbitration, pursuant to the rules of the American Arbitration Association (AAA).

In March 2000, Colmar filed its first arbitration demand against FMNA, alleging that FMNA had breached the contract by failing to "actively and aggressively" market the film. FMNA was represented during this arbitration by its California attorney, Peter J. Anderson (Anderson) - an attorney licensed to practice in California, but not in Illinois. During the course of the arbitration, Anderson took the deposition of a Colmar witness and attended arbitration proceedings in Chicago. The arbitration concluded after nearly one year, with the arbitrator finding FMNA not liable. In an order dated February 22, 2001, the trial court confirmed the arbitration award and denied Colmar's request to vacate it. *fn1 Colmar did not appeal from the trial court's order.

On August 11, 2001, Colmar filed a second arbitration complaint against FMNA. FMNA sought to dismiss the complaint, arguing that the claims it raised were the same as those previously considered in the first arbitration. Colmar argued that all evidence from the inception of the contract - or at least evidence indicating breach subsequent to the conclusion of the first arbitration - should be considered. Again, this second arbitration took place in Chicago and FMNA was represented by Anderson. On August 5, 2002, the second arbitrator denied Colmar's claims, finding as follows:

"In the First Award, after providing a detailed and reasoned analysis for his award in favor of [FMNA], Arbitrator Marinello concluded: 'This Award is in full settlement of all claims submitted to this arbitration. All claims not expressly granted herein are, herby [sic] denied.' On February 22, 2002 the Circuit Court of Cook County entered an Order confirming the First Award [Case No. 01 CH 16369].

By its election to seek relief through the Termination Date, [Colmar] has negated what might have been its ability to assert further claims under the Contract. Among the goals of arbitration are to provide a 'final and binding determination' in a fair, prompt and economical manner. None of these goals would be met by going forward with this case. As counsel for [Colmar] has stated: 'This is not a complicated case. It can be decided without the expense and delay of a hearing, solely on written briefs and evidence submitted by the parties.' The First Arbitration and First Award have addressed and decided all of the issues relating to the current dispute."

The arbitrator ordered that the contract be deemed terminated as of February 22, 2002; that FMNA return all materials to Colmar within 45 days, as set forth in the parties' contract; that the award fully settled all claims submitted in the second arbitration; and that all claims not expressly granted were denied.

On August 28, 2002, plaintiff filed a case in the circuit court of Cook County seeking to vacate the second arbitration award, claiming that because FMNA was represented during both arbitrations by an attorney not licensed to practice law in Illinois, the arbitration awards were invalid. FMNA filed a countermotion, pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 2002)), seeking to dismiss Colmar's complaint for failure to state a claim upon which relief could be granted. FMNA noted that the second arbitrator specifically considered the effect of Anderson's status, which Anderson had fully disclosed, and found that his representation of FMNA created no controversy, in part, because the AAA rules permitted parties to be represented by non-attorneys in arbitration. On November 7, 2002, the trial court granted FMNA's countermotion to dismiss and affirmed the second arbitrator's award. Colmar timely filed its notice of appeal of this order on December 2, 2002.

Colmar argues on appeal that the trial court erred by not vacating the second arbitration award for the following reasons. First, Colmar asserts that the award was void ab initio because FMNA was represented by an out-of-state attorney during arbitration. Next, Colmar asserts that the arbitrator exceeded his authority in several respects and, therefore, the award should have been vacated on statutory grounds. Finally, Colmar asserts that public policy mandates vacation of the award.

Colmar additionally argues that the trial court's granting of FMNA's motion to dismiss Colmar's complaint was improper because the complaint (1) raised the issue of breach of fiduciary duty and (2) failed to decide the remaining issues regarding the materials to be returned to Colmar. We are not persuaded by Colmar's arguments. Thus, we hold that the trial court properly confirmed the second arbitration award and dismissed Colmar's complaint.

We review the trial court's decision to affirm the arbitrator's award for an abuse of discretion (Everen Securities, Inc. v. A.G. Edwards & Sons, Inc., 308 Ill. App. 3d 268, 276 (1999)), while we review its section 2-615 dismissal of the complaint de novo. 735 ILCS 5/2-615 (West 2002); Raintree Homes, Inc. v. Village of Long Grove, 335 Ill. App. 3d 317, 319 (2002).

A. Participation in Arbitration by Out-of-State Attorney

Colmar argues that Anderson's representation of FMNA during arbitration in Illinois rendered the resulting arbitration award void. FMNA maintains, however, that Anderson's nonlicensure in Illinois was of no consequence because his representation took place during arbitration rather than a court proceeding. FMNA notes that the AAA rules, to which the parties contractually agreed to be bound, permit a party to be represented by a non-attorney. We recognize that, if the arbitration award were indeed void ab initio, the trial court's order confirming it would be void as well. See Eissman v. Pace Suburban Bus Division of the Regional Transportation Authority, 315 Ill. App. 3d 574, 578 (2000).

We are called upon to determine for the first time what effect, if any, an out-of-state attorney's representation of an out-of-state client during arbitration in Illinois has on an arbitration award. We find that, for the reasons that follow, Anderson's ...

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