Originally from Dispute Resolution Journal

COMMERCIAL

Multijurisdictional ADR Practice

The Illinois Court of Appeals ruled that an award in an Illinois arbitration was not voidable because one party’s attorney was not admitted to practice law in the state.

In 1994, Colmar, a Delaware media corporation, licensed the movie “Captive” to the California-based distributor Fremantlemedia N.A. The license agreement provided that all disputes arising from the contract would be submitted to arbitration. In March 2000, Colmar filed an arbitration demand, alleging that Freemantle breached the contract by failing to actively market the film. The arbitrator ruled in Freemantle’s favor. The trial court denied Colmar’s request to vacate the award and confirmed it instead. In a second arbitration Colmar initiated in August 2001, the arbitrator denied Colmar’s claims, holding that the first award “addressed and decided” all issues. Both arbitrations took place in Chicago, and in both cases Freemantle was represented by California attorney, Peter J. Anderson.

In August 2002, Colmar filed a lawsuit in Illinois state court, alleging that both awards were invalid because Anderson was not licensed to practice law in Illinois. Freemantle moved to dismiss the complaint for failure to state a claim and the court granted the motion. It also confirmed the second award. On appeal, Colmar made the same argument about Freemantle’s attorney. It relied on the Illinois rule that in legal proceedings where representation is by a non-admitted attorney, judgments are void. The Illinois Court of Appeals dismissed Colmar’s complaint and affirmed the trial court’s order, finding the rule inapplicable to arbitration. After considering the public policy grounds for the rule prohibiting the unauthorized practice of law, the court held that the “harsh” general voidance rule should not apply to bar the arbitrator’s decision.” It also noted judicially-created exceptions to this rule, which appears to “punish the litigant rather than the offending attorney.” Since Colmar did not allege any harm due to Anderson’s conduct, there was no reason to implicate the rule barring the unauthorized practice of law.

Further, the court noted that the applicable arbitration rules did not require parties to be represented by an attorney. Furthermore, no Illinois court has found that an out-of-state attorney’s participation in an arbitration constitutes the unauthorized practice of law. The court also cited other recognized differences between arbitration and litigation, including the lack of availability of a pro hac vice procedure for arbitration.

Finally, the court emphasized that Anderson’s presence in Illinois related to his regular representation of the company in California and that the disputed issues were not specific to Illinois law. In this connection the court cited Model Rule 5.5 prepared by the American Bar Association’s Commission on Multijurisdictional Practice, which allows out-of-state attorneys with an ongoing relationship with a client to act as the client’s representative in arbitration.

Colmar, Ltd. v. Fremantlemedia North America, Inc., 801 N.E.2d 1017 (Ill. App. Ct. 2003). —Liz Carson