Colmar, Ltd. v. FREMANTLEMEDIA N. AMERICA INC.

• Decision Date: 04 December 2003
• Docket Number: No. 1-02-3533.,1-02-3533.
• Citation: 344 Ill. App.3d 977,280 Ill.Dec. 72,801 N.E.2d 1017
• Parties: COLMAR, LTD., Plaintiff-Appellant, v. FREMANTLEMEDIA NORTH AMERICA, INC., Defendant-Appellee.
• Court: United States Appellate Court of Illinois

801 N.E.2d 1017

344 Ill. App.3d 977

280 Ill.Dec. 72

COLMAR, LTD., Plaintiff-Appellant, v. FREMANTLEMEDIA NORTH AMERICA, INC., Defendant-Appellee.

No. 1-02-3533.

Appellate Court of Illinois, First District, Fourth Division.

December 4, 2003.

Charles R. Trieschmann, Evanston, for Plaintiff-Appellant.

Jonathan S. Feld, BeLinda I., Mathie, Emily J. Henson of Katten, Muchin, Zavis & Rosenman, Chicago, for Defendant-Appellee.

Justice GREIMAN delivered the opinion of the court:

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 plaintiffs complaint, and failing to consider all of the arguments presented in plaintiffs 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 California, 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.¹ 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, 241 Ill.Dec. 451, 719 N.E.2d 312 (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, 269 Ill.Dec. 301, 780 N.E.2d 773 (2002).

A. Participation in Arbitration by Outof-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 nonattorney. 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, 248 Ill.Dec. 649, 734 N.E.2d 940 (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 representation has no effect on the arbitration award in this case.

The Attorney Act (the Act) provides that "[n]o person shall be permitted to practice as an attorney or counselor at law within this State without having previously obtained a license for that purpose from the Supreme Court of this State." 705 ILCS 205/1 (West 2002). The general rule in Illinois provides that judgments that result from legal proceedings brought in a court of record on a party's behalf by a person who is not licensed to practice law in this state are void. See Midwest Home Savings & Loan Ass'n v. Ridgewood, Inc., 123 Ill.App.3d 1001, 79 Ill.Dec. 355, 463 N.E.2d 909 (1984) (where proceedings in a suit are instituted by a person not entitled to practice law in Illinois, such proceedings are a nullity and the suit will be dismissed; if the cause has proceeded to judgment, the judgment is void and will be reversed); Blue v. People, 223 Ill.App.3d 594, 596, 165 Ill.Dec. 894, 585 N.E.2d 625 (1992) (if one is not duly authorized to practice law, he or she may not represent another in a court of law); People v. Dunson, 316 Ill.App.3d 760, 764, 250 Ill.Dec. 77, 737 N.E.2d 699 (2000) (the prosecution of a defendant by a prosecutor who was not licensed to practice law in Illinois is void). Colmar argues that this rule, when applied in this case, requires us to vacate the arbitration award. We find, however, that the cases applying the general voidance rule are distinguishable and do not lend support for our extension of the rule to the instant case.

We begin by noting that, while it is true that the courts have found that an attorney need not necessarily appear in court in order to engage in the...