United States District Court, N.D. Illinois, Eastern Division
September 29, 2004.
STAWSKI DISTRIBUTING CO., INC., Plaintiff,
ZYWIEC BREWERIES PLC, Defendant.
The opinion of the court was delivered by: JOAN H. LEFKOW, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff, Stawski Distributing Co., Inc. ("Stawski"), filed
this action against Browary Zywiec SA ("Zywiec"),*fn1
seeking to enjoin Zywiec from wrongfully terminating a beer
distribution relationship under the Illinois Beer Industry Fair
Dealing Act, 815 ILCS 720 et seq. ("IBIFDA" or the "Act").
Stawski, an Illinois beer distributer, and Zywiec, a Polish
brewer, had executed an "Import and Wholesale Distribution
Agreement" on July 7, 1997 (the "Agreement"). The Agreement
contained a perpetual term that either party could terminate on
12-months' written notice. The Agreement also included an
arbitration clause that required the parties to arbitrate their
disputes in the Arbitration Court of the Polish Chamber of
Foreign Trade. The Agreement further provided that the
arbitrators would apply Polish Civil Law to resolve the disputes.
Zywiec attempted to terminate the Agreement by letter on July
10, 2002. Stawski, however, maintained that the letter did not
terminate the agreement because the IBIFDA governed the parties'
relationship and the letter did not comply with the IBIFDA's
termination and notice of cancellation requirements. In particular, the July 10, 2002 letter did not
state the reasons for the termination and did not provide Stawski
with an opportunity to cure in violation of the IBIFDA.*fn2
Zywiec then sent Stawski a termination letter dated October 1,
2003 that specified seven deficiencies in Stawski's performance
of the Agreement.
Stawski filed suit in this court, contending that the
termination of the Agreement would violate the IBIFDA. Zywiec
moved to stay the lawsuit and compel arbitration in Poland, while
Stawski cross-moved to stay the arbitration. This court granted
Stawski's motion to stay the arbitration and denied Zywiec's
motion to compel arbitration on May 22, 2003 [#19]. See 2003 WL
21209860, 2003 U.S. Dist. LEXIS 8778. On November 20, 2003, the
U.S. Court of Appeals for the Seventh Circuit vacated this
court's order staying the Polish arbitration. See Stawski
Distributing Co., Inc. v. Browary Zywiec S.A., 349 F.3d 1023
(7th Cir. 2003). The Seventh Circuit determined that the
Agreement's forum-selection clause was enforceable while its
choice-of-law clause was unenforceable under Illinois law. Id. at 1026. In accordance
with the Seventh Circuit's opinion, this court ordered the
parties to arbitrate their disputes in Poland and to request in
writing that the arbitrators apply the IBIFDA as the substantive
law for the dispute as it related to the distribution of products
within the State of Illinois [#62].
The arbitration hearing was held in the Arbitration Court of
the Polish Chamber of Foreign Trade in Warsaw, Poland on June 23,
2004. The arbitration panel consisted of three arbitrators,
including Professor Krsysztof Staniszewski, who was selected by
Stawski, and Professor Jozef Okolski, the President of the
Arbitration Court. Prior to the hearing, the parties submitted
relevant documents to the arbitrators, including Zywiec's claim,
Stawski's counterclaim, and the IBIFDA. At the hearing, both
parties were represented by counsel. Stawski was represented by
Polish and U.S. counsel. Zywiec was represented by Polish
counsel. The arbitration panel allowed oral arguments from both
parties. The parties requested that the arbitrators apply the
IBIFDA with regard to the Illinois-related dispute. Stawski
presented its financial officer, Robert Kociecki, as its witness.
Counsel for both parties examined and cross-examined Mr.
Kociecki. The arbitrators also examined Mr. Kociecki. No other
witnesses were presented. At the invitation of the arbitrators,
both parties submitted post-hearing briefs. Neither party
requested that the arbitrators allow additional evidence or
argument in their post-hearing submissions. On July 15, 2004, the
arbitrators issued the arbitration award entered in the Court of
Arbitration at the Polish Chamber of Commerce, Case No. S.A.
57/03 and SA 90/W/2004 ("the arbitration award"). In the
arbitration award, the arbitrators found that Zywiec's July 2002
termination letter was ineffective under Polish law but that the
October 2003 letter was effective in terminating the Agreement
under Polish law and the IBIFDA. The arbitrators also rejected Stawski's damage claim because
Zywiec had delivered beer to Stawski during the notice period.
This matter is now before the court on Zywiec's motion to
confirm and enter judgment upon the arbitration award. Stawski
opposes the motion on the grounds that enforcement of the
arbitration award would violate public policy because the
arbitrators improperly applied Polish law rather than Illinois
law. For the reasons stated below, the court grants Zywiec's
The Convention on the Recognition and Enforcement of Foreign
Arbitral Awards (the "New York Convention"), codified at
9 U.S.C. § 201 et seq., governs judicial confirmation of arbitration
decisions that arise out of agreements between a U.S. citizen,
e.g., Stawski, and a citizen of a foreign nation that signed the
convention, e.g., Zywiec. Publicis Communication v. True North
Communications, Inc., 206 F.3d 725 at 728 (7th Cir. 2000).
The New York Convention provides that "[w]ithin three years after
an arbitral award falling under the Convention is made, any party
to the arbitration may apply to any court having jurisdiction
. . . for an order confirming the award as against the other
party to the arbitration." 9 U.S.C. § 207.
Under the New York Convention, "the court shall confirm the
award unless it finds one of the grounds for refusal or deferral
of recognition or enforcement of the award" applies. One of the
grounds for refusal or deferral of recognition exists where "the
competent authority in the country where recognition and
enforcement is sought finds that the recognition and enforcement
of the award would be contrary to the public policy of that
country." Slaney v. Int'l Amateur Ath. Fed'n, 244 F.3d 580 at
593 (7th Cir. 2001); Article V(2)(b) of the New York
Convention. However, "the public policy defense is exceedingly
narrow." Id. at 593 (citing Fotochrome, Inc. v. Copal Co., 517 F.2d 512, 516 (2d Cir. 1975). It applies when a decision
violates the "most basic notions of morality and justice," id.,
and "enforcement would entail a violation of a paramount legal
principle that is `ascertained by reference to the laws and legal
precedents and from general considerations of supposed public
interests.'" Id. (quoting Industrial Risk Ins. v. M.A.N.
Gutehoffnungshutte Gmbh, 141 F.3d 1434, 1445 (11th Cir.
1998)). A court "may not refuse to enforce an arbitral award
solely on the ground that the arbitrator may have made a mistake
of law or fact." Karaha Bodas Co., L.L.C. v. Perusahaan
Pertambangan Minyak Dan Gas Bumi Negara, 364 F.3d 274 at 288
(5th Cir. 2004) (citing Europcar Italia, S.p.A. v.
Maiellano Tours, Inc., 156 F.3d 310, 315 (2d Cir. 1998); Nat'l
Wrecking Co. v. Int'l Bhd. of Teamsters, 990 F.2d 957, 960
(7th Cir. 1993)). The party opposing the enforcement of the
arbitral award has the burden of proof. Id. at 288 (citing
Europcar Italia, 156 F.3d at 315).
In its hyperbole-laden memorandum of law, Stawski asserts that
"[t]he panel was a sham, its procedures a hoax, its decision
nothing less then [sic] an outright fraud, and its bias clearly
un-American."*fn3 (Pl. Mem. of Law in Opp. to Def.'s Motion
to Confirm, P. 1). Stawski contends that the arbitrators
eliminated its rights under the IBIFDA by applying Polish law
rather than Illinois law to resolve the parties' dispute. In
support of this contention, Stawski points to the decision of the
arbitrator's finding the July 10, 2002 termination letter
ineffective under Polish law. Ironically, the arbitrators reached
this conclusion at Stawski's behest, as Stawski had requested
that the arbitrators find that "the termination of Agreement by
notice dated July 10th, 2002 violated the principles of joint
representation provided under the Articles of Association of the
Joint Stock Company, which renders ineffective this act in law pursuant to Art. 58 § 1 and
Art. 39 of the Polish Civil Code . . ." (Judgment of the Court of
Arbitration, attached as Ex. G to Def. Mot. to Confirm ("Ex. G"),
Stawski further contends that the arbitration panel paid mere
"lip-service" to the IBIFDA while applying Polish law to the
dispute. (Pl. Mem. of Law in Opp. to Def.'s Motion to Confirm, P.
2). Specifically, Stawski argues that the panel applied Polish
law when it found that the second termination letter was
effective in terminating the agreement because the panel also
determined that Stawski's actions led to a "loss of trust," which
Stawski asserts is a factor relevant under Polish law and not
under the IBIFDA.*fn4 (Pl. Mem. of Law in Opp. to Def.'s
Motion to Confirm, P. 3, 11).
Rather than sprinkling the relevant IBIFDA language into the
arbitration award as an afterthought, (Pl. Mem. of Law in Opp. to
Def.'s Motion to Confirm, P. 10), the arbitration award shows
that the arbitrators understood their obligation to apply the
IBIFDA to the parties' dispute and that they carried out that
obligation. First, the arbitrators recognized that whether the
termination of the Agreement "entered into by the Parties on July
7th, 1997, by written notice dated October 1st, 2003
given to Stawski Distributing Co., Inc. is in conformity with the
Illinois Beer Industry Fair Dealing Act" was at issue. (Ex. F, P.
1). The arbitration panel ultimately concluded that the October 1
notice was "in conformity with the Illinois Beer Industry Fair
Dealing Act . . ." (Ex. F, P. 2). Second, the arbitration award
noted that the parties requested that the arbitrators apply the
IBIFDA in the arbitration proceeding in order to be in conformity
with this court's order, which the arbitrators agreed to do. (Ex.
F, P. 8). Third, the arbitrators applied the IBIFDA requirements to the
October 2003 termination notice. In order to decide whether the
October 2003 termination notice was effective, the arbitrators
explained that they needed to resolve (1) whether the termination
notice was correct from the formal point of view, (2) whether the
termination was in conformity with the IBIFDA regulations, and
(3) whether the termination was in conformity with the agreement.
(Ex. F, P. 9). The arbitrators reached the following conclusions:
Ref. 1 The notice dated October 1st, 2003 was
signed by two authorized persons in accordance with
the Company Articles of Association.*fn5
Ref. 2 The provisions of § 3.2 of the BIFDA
regulations provide that notice of termination shall
be made in writing and sent to the Party concerned by
registered mail at least 90 days before the date the
Agreement is terminated, complete with the full
statement of reasons for such termination and all
The notice of termination dated October 1st, 2003
met these conditions.
(Ex. F, P. 9).
In reaching these conclusions, the arbitrators noted that two
of the reasons specified in the October 2003 termination letter
fully justified the termination of the agreement. The arbitrators
found Stawski's attempt to register the "Zywiec" trademark
without Zywiec's knowledge and Stawski's sales outside the
territory defined in the agreement violated the principles of
"Good Faith" as defined by Section 1.1 of the IBIFDA.*fn6
(Ex. F, P. 9). Essentially concluding that these two situations
demonstrated Stawski's lack of honesty in fact, it was not
unreasonable for the arbitrators to determine further that Stawski could not undertake "good
faith" efforts to resolve the disputes, hence the irrelevance of
Stawski's corrective measures. See Ex. G at P. 10 ("The
above-mentioned activities carried out by Stawski must have led
the Brewery's loss of trust in the distributor acting on the
important US market, and the fact that these activities have
ceased following the interventions by the Brewery was irrelevant
for this case."). Moreover, even if the arbitration panel
misapplied the IBIFDA or reached an incorrect conclusion, this
court may not refuse to confirm the award solely on the ground
that the arbitrators made a mistake of law or fact. See Karaha
Bodas, 364 F.3d at 288.
While the arbitration award may not be as cogent an application
of the IBIFDA as Stawski would like, it certainly does not show
that the arbitrators used Polish law to resolve the parties'
disputes while merely pretending to apply the IBIFDA to the
parties' Illinois-related dispute. The arbitration award instead
shows that the arbitration panel applied the IBIFDA to the
Illinois portion of the dispute; consequently, enforcement of the
arbitration award is not contrary to public policy.
CONCLUSION AND ORDER
For the reasons stated above, Zywiec's motion to confirm and
enter judgment upon the arbitration award [#64] is GRANTED. The
arbitration award is hereby CONFIRMED. The clerk is directed to
enter judgment in favor of Zywiec. The preliminary injunction
entered by this Court on November 26, 2003 [#52], shall be and
hereby is DISSOLVED effective October 15, 2004. This matter is
DISMISSED with prejudice.