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Attorneys' fees as damages under CISG Article 74:
Brief in opposition to Petition for Writ of Certiorari

[A U.S. Federal District Court (Court of First Instance) upheld a loser-pays doctrine on two counts: (i) as damages under CISG Article 74; and (ii) under the otherwise applicable domestic law. The Federal Circuit Court of Appeals reversed on both counts. A Petition for Writ of Certiorari was filed with the U.S. Supreme Court. Presented below is an excerpt from the brief that was filed in opposition to that Petition (the portion that pertains to count (i)).]

No. 02-1318

IN THE SUPREME COURT OF THE UNITED STATES

Zapata Hermanos Sucesores.S.A.,
Petitioner

v.

Hearthside Baking Co. d/b/a Maurice Lenell Cooky Co.,
Respondent.

On Petition For A Writ Of Certiorari To The United
Sates Court Of Appeals For The Seventh Circuit

BRIEF OF RESPONDENT IN OPPOSITION



                                     
 
JEFFREY COLE
Counsel of Record
ANDREW STAES
STEPHEN SCALLAN
COLE & STAES LTD.
321 South Plymouth Court
Suite 1150
Chicago, Illinois 60604
312-697-0200

i

QUESTIONS PRESENTED

Respondent submits that the following questions more accurately reflect the issues presented in Zapata Hermanos Sucesores, S.A.'s Petition For A Writ of Certiorari.

1. Whether the court of appeals in a case of first impression in this country, erred in determining that attorneys' fee awards are not available under the Convention on the International Sale of Goods because: (1) the text and history of the Convention make clear it deals exclusively with substantive matters, while fee awards are a matter of procedural law throughout the world and thus governed by the forum's rules of civil procedure; (2) were never considered by the drafters of the Convention; and (3) their allowance to plaintiffs would produce unintended anomalies?

[...]

3. Whether there is a conflict among the circuits on either issue presented by the Petition For a Writ Of Certiorari?

[...]

iii

TABLE OF CONTENTS

Page
Questions Presented . . . . . . . . . . i
[...]
Table of Contents . . . . . . . . . . iii
Table of Authorities . . . . . . . . . . iv
Statement of the Case . . . . . . . . . . 1
Reasons for Denying the Writ . . . . . . . . . . 9
I. CISG Does Not Provide For an Award of Attorneys' Fees . . . . . . . . . . 9
[...]
Conclusion . . . . . . . . . . 30

iv

TABLE OF AUTHORITIES

Page
Adamson v. California, 332 U.S. 46 (1947) . . . . . . . . . . 17, 18
Air France v. Saks, 470 U.S. 392 (1986) . . . . . . . . . . 18
Alyeska Pipeline Service Co. v. The Wilderness Society, 421 U.S. 240 (1975) . . . . . . . . . . 11, 12
[...]
Bell v. City of Kellogg, 922 F.2d 541 (9th Cir. 1992) . . . . . . . . . . 12
Boyd Rosene & Assoc. v. Kansas Municipal Gas Agency, 174 F.3d 1115 10th Cir. 1999) . . . . . . . . . . 12
Chambers v. NASCO, Inc., 501 U.S. 32 (1991) . . . . . . . . . . passim
City of Buffalo v. J.W. Clement Co., 28 N.Y.2d 241, 269 N.E.2d 895 (1971) . . . . . . . . . . 13
Conte v. Flota Merchante Del Estotato, 277 F.2d 664 (2nd Cir. 1960) . . . . . . . . . . 11
Delchi v. Rotorex, 71 F.3d 1024 (2nd Cir. 1995) . . . . . . . . . . 3, 14
[...]

Fleischman v. MaierBrewing Co., 386 U.S. 714 (1967)

. . . . . . . . . . 11
[...]
Green v. Bock Laundry Machine Co., 490 U.S. 504 (1989) . . . . . . . . . . 14
[...]
In re Paoli R.R. Yard PCB Litigation, 221 F.3d 449 (3rd Cir. 2000) . . . . . . . . . . 11
[...]
McCray v. New York, 461 U.S. 961 (1983) . . . . . . . . . . 3, 19
MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova, 144 F.3d 1384 (11th Cir. 1998) . . . . . . . . . . 10
[...]
Midwest Grain Products v. Productization Inc., 228 F.3d 784 7th Cir. 2000) . . . . . . . . . . 12
[...]
Public Citizen v. United States Department of Justice, 491 U.S. 440 (1989) . . . . . . . . . . 14
Rice v. Sioux City Cemetery, 349 U.S. 70 (1955) . . . . . . . . . . 4
[...]
Statutes and Rules
UCC 2-715(2)(a) . . . . . . . . . . 14
28 U.S.C. 1331 . . . . . . . . . . 12
28 U.S.C. 1332(a) . . . . . . . . . . 12
[...]
CISG, Article 74 . . . . . . . . . . passim
CISG, Article 77 . . . . . . . . . . 13, 14
CISG, Articles 75-78 . . . . . . . . . . 1
[...]
Rule 54(d)(i), Federal Rules of Civil Procedure . . . . . . . . . . 11
[...]
Other Authorities
[...]
23 Moore's Federal Practice 510.21 . . . . . . . . . . 3
23 Moore's Federal Practice 510.22 . . . . . . . . . . 3
10 Wright, Kane & Miller, Federal Practice and Procedure 2665, at 199-200 (3d ed. 1998) . . . . . . . . . . 11
[...]
Alan Farnsworth, 27 American Journal of Comparative Law 259 (1979) . . . . . . . . . . 14
John Felemegas, An Interpretation of Article 74 CISG by the U.S. Circuit Court of Appeals, (December 2002), to be published in 15 Pace Int'l L. Rev. (Spring 2002) . . . . . . . . . . 19
Harry M. Flechtner, Recovering Attorneys' Fees as Damages under the U.N. Sales Convention: A Case Study on the New International Commercial Practice and the Role of Case Law in CISG Jurisprudence, with Comments on Zapata Hermanos Sucesores, S.A. v. Hearthside Baking Co., 22 Nw. J. Int'l L. & Bus. 121-159 (2002) . . . . . . . . . . passim
Harry M. Flechtner, The U.N. Sales Convention (CISG) and MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova D'Agostino, S.p.A.: The Eleventh Circuit Weighs in on Interpretation, Subjective Intent, Procedural Limits to the Convention's Scope, and the Parol Evidence Rule,, 18 J. L. & Com. 187-217 (1999) . . . . . . . . . . passim
Frankfurter and Hart, The Business of the Supreme Court at the October Term 1933, Harv. L. Rev. 238, 268 (1934) . . . . . . . . . . 3
Joseph M. Lookofsky, Consequential Damages in the Comparative Context 189 (1989) . . . . . . . . . . 10
Joseph Lookofsky, Zapata Hermanos v. Hearthside Baking, 6 Vindobona J. Int'l Com. Law 27-29 (2002) . . . . . . . . . . 10
Peter Schlechtriem, Attorneys' Fees as Part of Recoverable Damages, 14 Pace Int'l L. Rev. 205 (2002) . . . . . . . . . . 19
Eric Schneider, Consequential Damages in the International Sale of Goods: Analysis of Two Decisions, 16 University of Pennsylvania Journal of International Business 615 (1995) . . . . . . . . . . 10
[...]
Jeffrey Sutton, Measuring Damages Under the United Nations Convention on the International Sale of Goods, 50 Ohio State L.J. 742 (1989) . . . . . . . . . . 16
Jarno Vanto, Attorneys' Fees as Damages, 15 Pace Int'l L. Rev. (Spring 2003) . . . . . . . . . . 20
Restatement of Contracts 330 . . . . . . . . . . 14

STATEMENT OF THE CASE

A. A breach of contract claim governed by the Convention On Contracts For The International Sale of Goods ("CISG") was tried in the district court.[1] Plaintiff, Zapata Hermanos Sucesores ("Zapata" or "petitioner"), prevailed. The district court awarded the petitioner all of its legal fees, totaling $550,000, pursuant to Article 74 of CISG which provides:

"Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of the contract."[2]

The district court also concluded that the inherent uthority doctrine justified the blanket fee award.

Defendant, Hearthside Baking Co. Inc. d/b/a/ Maurice Lenell Cooky Co. ("Lenell"), appealed the fee award.[3] A Seventh Circuit panel, composed of Judges Posner, Wood and Evans, vacated the entire fee award, (313 F.3d 385), [page 1] and the court denied unanimously a petition for rehearing en banc. Writing for the unanimous panel, Judge Posner concluded that "the convention is about contracts not procedure," and thus because the recoverability of attorneys' fees is a procedural matter, it is governed by the forum's procedural rules. This is consistent with CISG explicit recognition that CISG deals exclusively with substantive provisions of law. See, Argument I, infra. In federal courts, the applicable procedural rule is the "American Rule" which does not allow for the recovery of attorneys' fees. 313 F.3d at 388.

Judge Posner rejected Zapata's interpretation of Article 74 for two additional reasons. First, constru9ing it to allow for the recovery of attorneys' fees incurred during litigation would produce "anomalies" not uniformity, as Zapata has claimed. (Petition at 9-19).

"The interpretation of 'loss' for which Zapata contends would produce anomalies, which is another reason to reject the interpretation. On Zapata's view the prevailing plaintiff in a suit under the Convention would (though presumably subject to the general contract duty to mitigate damages, to which we referred earlier) get his attorneys' fees reimbursed more or less automatically (the reason for the 'more or less' qualification will become evident in a moment). But what if the defendant won? Could he invoke the domestic law, if as is likely other than in the United States that law entitled either side that wins to reimbursement of his fees by the loser? Well, if so, could a winning plaintiff waive his right to attorneys' fees under the Convention in favor of domestic law, which might be more or less generous than article 74. ..." 313 F.3d at 388-389.

Second, he rejected it because "[t]o the vast majority of the signatories of the Convention, being nations in which the loser pays is the rule anyway, the question whether loss [page 2] includes attorneys' fees would have held little interest; there is no reason to suppose they thought about the question at all." 313 F.3d at 391.

This sound determination does not warrant review. First, there is no division among the circuits over whether Article 74 allows for the recovery of attorneys' fees. The Seventh Circuit is the first appellate court to address this issue. This alone warrants denial of the Petition. See McCray v. New York, 461 U.S. 961, 963 (1983) (Stevens, J.) (Certiorari denied where the issue requires further study in the lower courts before it is addressed by this Court). Conflict with a handful of international decisions (many of which were arbitration panels) does not warrant certiorari because "[t]he Court is only interested in conflicts which its decision in a particular case will remove." Frankfurter and Hart, The Business of the Supreme Court at the October Term, 1933 Harvard L. Rev. 238, 268 (1934). Accord 23 Moore's Federal Practice 510.21[3][a] (3d ed. 1991). Here, there is no such type of conflict because the Supreme Court has no authority over foreign tribunals. Cf. 23 Moore's Federal Practice, supra at 510.22[2] (the Court refuses to hear matters of state law where no federal issue is involved because of "its inability to compel states to follow its decision").

Second, Judge Posner's determination that attorneys' fees are not recoverable under Article 74 only effects the small number of CISG cases tried in the United States. Throughout the rest of the world, attorneys' fees can be recovered pursuant to the forum's procedural codes. See Argument I, infra. As there have been very view CISG cases of any kind in the United States[4] and none involving [page 3] attorneys' fee, debate over the availability of attorneys' fee awards does not warrant this Court's review. "[A]cademic or episodic debate" does not warrant the granting of certiorari. Rice v. Sioux City Cemetery, 349 U.S. 70, 74 (1955).

[...]

[page 4]

[...]

The Petition should be denied.

B. Maurice Lenell is a small, family owned, commercial wholesale baker, which since 1937 has been selling cookies to institutional buyers. By at least mid March 1998, there was a dispute concerning how much Lenell owed Zapata, [page 5] one of its suppliers. (TR. 69-70).[5] The parties had several meetings and phone calls to resolve their difficulties. They ould not agree on what was owed, (Tr. 149, 171-178, 184-200, 372, 539, 617), although Lenell's books showed several hundred thousand dollars were owed, and Lenell's CEO estimated Zapata was owed between $400,000 and $500,000). As so often happens in these kinds of cases, the parties had differing views of what occurred and of their rights and responsibilities. Zapata threatened to stop all shipments without payment in full; Lenell responded that former suppliers do not have the same priority as present ones. (Tr. 84, 315, 323, 539).

Zapata then sued under CISG. (R. 1). After a trial, the court awarded Zapata [6] judgment for $857,796.90, as a matter of law. (Tr. 863-866). The jury awarded Zapata interest in excess of $300,000, and denied any recovery on Lenell's counterclaim. (R. 65-67). After Zapata prevailed on its approximately $900,000 breach of contract claim, it sought an attorneys' fee award under Article 74 of CISG (R. 66). Lenell objected. (R. 92). In August 2001, the court concluded that Zapata was entitled under Article 74 to recover all its fees, totaling $550,000. This was the court's reasoning: (1) attorneys' fees are a "foreseeable" "consequence" of breaching a contract; (2) attorneys' fees are recoverable in most countries that have ratified CISG; and (3) several foreign decisions have awarded attorneys' fees under CISG. (R. 94); Appendix). The district court was apparently unaware that fee awards are everywhere a matter of procedural law. [page 6]

The alternative basis for the imposition of the massive, blanket fee award was the court's inherent authority ... [page 7]

[...]

REASONS FOR DENYING THE WRIT

I. CISG DOES NOT PROVIDE FOR AN AWARD OF ATTORNEYS' FEES

A. CISG's drafters did not intend to deviate from the world consensus that attorneys' fee awards are a procedural matter governed by the procedural rules of the forum or to abrogate its signatory nations' rules of civil procedure. CISG's Introduction stresses that CISG "sets out substantive provisions of law'" it " 'd[id] not [intend to] interfere with [procedural]domestic rules.' " (Introduction CISG, 15 U.S.C. App.)[7] [page 9]

"[P]rocedural matters ... remain within the province of national law, and procedural conceptions may still serve as covert limitations on CISG consequential damage awards." Eric Schneider, Consequential Damages in the International Sale of Goods: Analysis of Two Decisions, 16 University of Pennsylvania Journal of International Business, 615 (1995) (citing Joseph M. Lookofsky, Consequential Damages in the Comparative Context 198, 238 (1989)).

In MCC-Marble v. Ceramica Nuova D'Agostino, S.p.A., 144 F.3d 1384 (11th Cir. 1998) (Petition at 12), the court concluded that CISG's parole evidence rule governed the parties' dispute. MCC-Marble also stressed that the forum's procedural rules would govern the dispute. 144 F.3d at 1389, n.13.

Throughout the world, the availability of an attorneys' fee award is a procedural matter governed by the forum's code of civil procedure, not by its substantive laws. The European community has concluded that as a matter of policy a loser-pays rule is in society's best interest, and European states' codes of civil procedure contain fee shifting rules. For example, Section 91 of the German Code of Civil Procedure provides that "the losing party bears the costs of the lawsuit." The Swedish loser-pays [page 10] provisions are found in Chapter 18:1 and 18:8 of the Swedish Judicial Code of Civil Procedure. The French loser-pays provisions are found in the new Code of Civil Procedure, Articles 695 and 696. The Danish oloser-pays provisions are found at 312 of the Danish Code of Civil Procedure. The English loser-pays rules are fund in similar statutory and procedural enactments and are derived from the Statute of Gloucester. See Fleischman v. Maier Brewing Co., 386 U.S. 714, 717 (1967).

The United States has made a different policy judgment concerning the recoverability of attorneys' fees. Alyeska Pipeline Service Co. v. The Wilderness Society, 421 U.S. 240, 257 (1975). In the United States, however, like the rest of the world, attorneys' fees are considered a "cost," (not a component of damages) whose recovery is governed by procedural rules. See Rule 54(d)(1), Federal Rules of Civil Procedure ("costs, other than attorneys' fees shall be allowed as of course"); In re Paoli R.R. Yard PCB Litigation, 221 F.3d 449, 457-458 (3rd Cir. 2000); 10 Wright, Kane & Miller, Federal Practice and Procedure 2665, at 199-200 (3d ed. 1998).

Recognition of these principles does not mean that Judge Posner was construing CISG by using domestic law (Petition at 13). Unlike the Petition, the court below began with a question not with an answer.

In Conte v. Flota Mercante Del Estado, 277 F.2d 664, 671 (2nd Cir. 1960), Judge Friendly addressed the availability of an attorney fee award pursuant to the laws of another nation which governed the parties' dispute. Consistent with Judge Posner's conclusion, Judge Friendly held that attorneys' fees could not be recovered under the foreign nation's law because the availability of attorneys' fees is a matter of procedural not substantive law. Obviously, Conte amply supports the decision below. Although cited in the brief below, Zapata ignored Judge Friendly's decision and continues to do so here. [page 11]

Alyeska Pipeline Service v. Wilderness Society, 421 U.S. 240, 259, n.31 (1975) and Chambers, supra, 501 U.S. at 53 (Petititon at 17 n.7) are not at odds with all these authorities and the Rules. Alyeska Pipeline Service and Chambers held that the availability of attorneys' fees is substantive, but only for diversity purposes. This simply means that the determination as to whether or not the availability of attorneys' fees are procedural or substantive is determined by examining whether or not fee awards are procedural under the laws of the forum state when the federal court is sitting in diversity jurisdiction. "[E]ven though attorneys' fees are substantive for diversity purposes, they are not necessarily substantive under [the forum state's] choice of law rules." Midwest Grain Products v. Productization Inc, 228 F.3d 784, 791 (7th Cir. 2000). Accord Boyd Rosene & Assoc. v. Kansas Municipal Gas Agency, 174 F.3d 1115, 1118 (10th Cir. 1999).

Here, the district court had subject matter jurisdiction pursuant to 28 U.S.C. 1331 over Zapata's claims, and the applicable federal procedural rules do not allow for the recovery of attorneys' fees. Moreover, even if the claim had been predicated on diversity jurisdiction, 28 U.S.C. 1332, a fee award would still be unavailable, because under the forum's law (Illinois law), attorneys' fee awards are a matter of procedural not substantive law, and are barred by the American Rule. Midwest Grain Products v. Productization Inc., supra, 228 F.3d at 791.[8] [page 12]

B. Zapata's insistence that unless Article 74 is deemed to include attorneys' fees, the uniformity sought by the Convention will be lacking, bets the question to be decided. First, uniformity is a goal of CISG - but uniformity only as to the substantive rights and obligations of contracting parties. The text and history of CISG make clear that the drafters of CISG did not intend to interfere with procedural domestic rules. Whether CISG's substantive rights and obligations include the payment of attorneys' fees depends on whether they were intended to constitute "losses under Article 74. Question begging cannot answer that question.

Second, it is no answer to say that attorneys' fees are necessary to make a successful plaintiff "whole". This argument also begs the question to be decided. Since attorneys' fees are available everywhere under oes of civil procedure, except in the United States, it does not follow that CISG's drafters must have intended that Article 74 require an award of attorneys' fees as a component of "losses." Nor does it follow that absent a fee award under CISG a prevailing plaintiff cannot be made "whole." For example, the New York Court of Appeals has held that despite the constitutional requirement of just compensation, the takings clause does not require an award of attorneys' fees in order to make the plaintiff whole. City of Buffalo v. J.W. Clement Co., 28 N.Y.2d 241, 269 N.E.2d 895 (1971).

C. The structure, legislative history, and operative effects of CISG demonstrate that Article 74 was not intended to include attorneys' fees. Article 77 mandates that a plaintiff must "mitigate the loss ... resulting from the breach," and that the party in breach "may claim a reduction in the damages in the amount by which the loss should have [page 13] been mitigated." Obviously, the word "loss" does not have a different meaning in Article 77 than it does in Article 74. If attorneys' fees are a component of loss under Article 74, a defendant would be entitled to have a jury determine whether the plaintiff had mitigated the "loss" by conducting the litigation in the most cost effective way. Since that determination could not be made until after the case was over - for the fees would not be known until the - loss cannot encompass attorneys' fees.

Professor Farnsworth has observed that the Article 70 of the prior CISG, whose language is identical to the current Article 74, comes "close to blending the Restatement of Contracts 330, which allows recovery for 'injuries that the defendant had reason to foresee as a probable result of his breach when the contract was made,' and UCC 2-715(2)(a), which allows the buyer recovery for 'any loss resulting from general or particular requirements and needs of which the seller at the time of the contracting had reason to know.' " Allen Farnsworth, 27 American Journal of Comparative Law 259 (1979). Although the UCC is not per se applicable, "UCC may inform the court where the language of the relevant CISG provision tracks that of the UCC." Delchi Carrier S.p.A. v. Rotorex Corp. supra, 71 F.3d at 1028.

Neither the Restatement of Contracts 330 nor UCC 2-715(2)(a) allows for the recovery of attorneys' fees. It is idle to suggest that Article 74 requires an attorney fee award when the Restatement and the UCC, from which it is derived, do not allow for the recovery of attorneys' fees. A contrary conclusion would run afoul of the basic rule of statutory construction that "absurd" statutory constructions are to be avoided. Public Citizen v. United States Department of Justice, 491 U.S. 440 (1989); Green v. Bock Laundry Machine Co., 490 U.S. 504, 527 (Scalia, J., concurring). [page 14]

CISG's legislative history confirms that attorneys' fees are not available under Article 74:

"Referring to the travaux préparatoires of the CISG ... it appears that those who drafted and approved the final text of the Convention never indicated that Article 74 encompassed damages for the prevailing party's attorneys' costs - a significant omission given the lack of international consensus on the recovery of such costs. Indeed, from the formal records of the history of CISG it appears that the subject of recovering attorneys' fees never arose during the drafting and negotiation of the treaty. This strongly suggests that the United States and other countries that generally require litigants to bear their own attorneys' fees did not expect nor intend that that the CISG would change such a significant aspect of the litigation process." Flechtner, supra, 151.

Reading Article 74 to allow for attorney's fees would result in a dramatic disparity in treatment among litigants. Since recovery of "loss[es] is limited to those proving a contractual breach, only prevailing plaintiffs, but not prevailing defendants, could obtain a fee award. This approach not only abrogates the loser-pays rule prevalent throughout Europe. Such an approach would jettison the two systems prevailing throughout the world in favor of a new approach that only allows prevailing plaintiffs to recover fees.

There is nothing in the history of CISG to suggest that its drafters intended such nonuniform treatment of plaintiffs and defendants, and nothing to suggest that CISG's signatories would have adopted so disruptive and far reaching a rule without any mention in CISG's text or legislative history that they intended so profoundly to restructure the existing framework. Judge Posner put it this way:

"To the vast majority of the signatories of the [page 15]Convention, being nations in which the loser pays is the rule anyway, the question whether loss includes attorneys' fees would have held little interest; there is no reason to suppose they thought about the question at all." 313 F.3d at 391.

It would be equally absurd to suggest that Article 74 was intended to apply only as a matter of substantive law to prevailing plaintiffs, while relegating prevailing defendants to the forum's procedural law, with all its restrictions and local peculiarities. Such a forced construction would also result in a regime of unequal treatment, with the outcome dependent upon where the case was being litigated. Absent

proof of the most compelling sort, it cannot be concluded that Article 74's drafters intended to introduce into CISG these uncertainties, inequalities, and incentives for forum shopping. Statutory construction requires an assessment of the real world situation to which the language applies.

Finally, a footnote to the 1988 Commentary to Article 70, which mirrors the language of Article 74, states that the time for measuring "loss" should be at "an appropriate [one] such as the moment the goods were delivered, or the moment the buyer learned the non-conformity would not be remedied by the seller under other articles of the convention." Jeffrey Sutton, Measuring Damages Under the United Nations Convention on the International Sale of Goods, 50 Ohio State L.J. 742 (1989) (citing Commentary on the Draft Convention on Contracts for the International Sale of Goods, Prepared by the Secretariat, 70, n.2 U.N. Doc. A/CONF.97/5 (1979). Obviously, measuring the loss at either of these times results in the exclusion of attorneys' fees as a component of "loss".

D. All the Petition offers is a superficial, overly simplistic, and incorrect analysis of whether Article 74 allows plaintiffs to recover attorneys' fees. It adverts to the [page 16] existence of 275 foreign CISG cases - the inference - whether intentional or inadvertent - is that all hold that attorneys' fees are recoverable under Article 74. (Petition at 4, 11). However, only a handful of these cases have addressed the availability of attorneys' fees under Article 74, as demonstrated by the fat that Zapata only relied on a limited number of cases that ostensibly had held that attorneys' fees were recoverable under Article 74 in the court below.

Case No. 17 U 146/93 (OLG Dusseldorf 1/14/94) (Petition at 10) did not hold that post-lawsuit attorneys' fees are recoverable under Article 74. There, the plaintiff was only awarded its pre-lawsuit attorneys' fees under CISG. The remainder of its fees were awarded pursuant to the German Code of Civil Procedure's fee-shifting provisions. In imposing post-litigation fees as a procedural matter under local law, the court in Dusseldorf acted consistently with other German courts that have done the same thing. See also Flechtner at 129-131.

Zapata's two other authorities are similarly distinguishable. (R. 73 at 4, 5; R. 84) In the first (R. 73, Ex. 3),the court primarily relied on and" discussed at far greater length than the holding based on CISG Article n74 ... an interpretation of the parties' contract, as including an implied term requiring a breaching party to pay such compensation." Flechtner, supra at 129-131. The second decision (R. 73, ex. 5) was rendered by a German petty court, and its summary was less than a half page long. These two opinions hardly constitute a uniformity of decision in favor of awarding "fees under Article 74. Moreover, judicial opinions are not fungible; they "do not have equal intrinsic authority." Adamson v. California, 332 U.S. 46, 59 (1947). In the cases relied on by Zapata, there was not the careful [page 17] analysis required before any court should rely overmuch on them.[9]

Air France v. Saks, 470 U.S. 392, 400 (1985) (Petition at 9) held that foreign decisions should be consulted to assure that the "specific word" in a treaty is construed "consistent with the shared expectations of the parties." (Emphasis supplied). Here, as Judge Posner showed, there are no "shared expectations" of CISG's signatory nations. 313 F.3d at 389.

In Air France, particular attention was given to the French interpretation of the word "accident" because the treaty was drafted in French. The Court, however, stressed that the "negotiation history of the Convention, the conduct of the parties to the Convention ... and [the treaty's legislative history]," are "proper" sources to refer to when interpreting a treaty and that each supported the statutory construction adopted by the Court. This Court made clear that it was not bound by French courts' decisions just because they had spoken firs: We are not "forever chained to French law by the Convention." 470 U.S. 399-401. Rather, French decisions were interpretive tools. Here, all the sound interpretative tools lead to the [page 18] inescapable conclusion that Article 74 does not allow for the recovery of attorneys' fees.

The literature does not "strongly" support Zapata's position, either. (Petition at 11). Indeed, it does not support it at all. Professor Flechtner's article, supra, concluded that the district court's decision was "clearly incorrect," and a "misconstruction of Article 74." Professor Flechtner has authored at least 10 articles on the Convention. Professor Lookofsky has also concluded that the district court's determination that Article 74 allows for the recovery of attorneys' fees was not correct. Joseph Lookofsky, supra. Professor Lookofsky of the University of Copenhagen as recognized as on of the preeminent authorities on CISG and has authored over 25 articles and treatises on CISG. Both articles discuss at length the procedural nature of attorneys' fees awards, and their non-availability under CISG.

In contrast, the two main authors on whom the Petition relies (Petition at 11-12) do nothing more than parrot the district court's decision. Each fails to address the procedural nature of attorneys' fees, the "anomalies" that reversal of this case would create, and offers little more than a vote in favor of the district court's analysis. See Felemegas, An Interpretation of Article 74 CISG by the U.S. Circuit Court of Appeals, to be published in 15 Pace Int'l L. Rev. (Spring 2003); Schlechtriem, Attorneys' Fees as Part of Recoverable Damages, 14 Pace Int'l L. Rev. 205 (2002). Neither begins to rebut Judge Posner's careful exegesis of Article 74 which has yet to be addressed by foreign or domestic courts, and thus is not yet ripe for review. McCray v. New York, supra, 461 U.S. at 963.

Finally, a third article cited by the Petition purports to criticize Judge Posner's decision, but agrees that while "awarding attorneys' fees as damages is in conflict with the majority of the world's legal systems," "the Appellate [page 19] Court correctly states that the District Court's interpretation of loss in the context of Article 74 would produce anomalies," and agrees that Judge Posner's decision was correct! Jarno Vanto, Attorneys' Fees as Damages in International Commercial Litigation, 15 Pace Int'l L. Rev. (Spring 2003). This is scarcely "strong support" for Zapata. [page 20]

[...]

CONCLUSION

The Petition for Certiorari should be denied.[page 30]

[...]


FOOTNOTES

1. CISG a treaty to which the United States is a signatory, is set forth at 15 U.S.C. App.

2. Articles 75-78 provide the specific monetary damages that are available in certain instances and along with Article 74 are set forth in the Appendix, infra at 1, along with Judge Posner's decision which is reported at 313 F.3d 385 (7th Cir. 2002). (App. infra at 4).

3. Lenell's appellate counsel did not participate in the trial of the underlying case.

4. See Delchi Carrier S.p.A. v. Rotorex Corp., 71 F.3d 1024, 1028 (2nd Cir. 1995 ) (virtually no CISG "caselaw exists").

5. The citations are to the trial transcripts ("Tr.") and the record ("R.") below.

6. Plaintiff was not, as is claimed in the Petition, as small owned manufacturer. It is part of a huge international corporation.

7. Accord Harry Flechtner, Recovering Attorneys Fees as Damages under the U.N. Sales Convention: A Case Study on the New International Commercial Practice and the Role of Foreign Case Law in CISG Jurisprudence with a Post-Script on Zapata Hermanos Sucesores S.A. v. Hearthside Baking Co., 22 Northwestern Journal of International Law & Business 121 (2002); Joseph Lookofsky, Zapata v. Hearthside Baking, 6 Vindobona Journal of International Comm. Law 27-29 (2002); Harry Flechtner, The U.N. Sales Convention (CISG) and MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova D'Agostino, S.p.A.: The Eleventh Circuit Weights in on Interpretation, Subjective Intent, Procedural Limits to the Convention's Scope, and the Parole Evidence Rule, 18 Journal of Law and Commerce 259 n.136 (1999); Amy Kastely, The Right to Require Performance in International Sales, 63 Wash. L. Rev. 607 (1988).

8. Numerous other states also view attorneys' fee awards as a matter of procedural not substantive law. See e,g, Bell v. City of Kellogg, 922 F.2d 1418, 1425 (9th Cir. 1991) (Idaho).

9. Professor Flechtner discussed other authorities which held that fees are recoverable under Article 74. One involved a default judgment, which due to its one sided nature is not conducive to a comprehensive and informed consideration of the issues. Cf. Adamson v. California, 332 U.S. 46, 59 (1947) (Frankfurter, J., concurring). The decision also contained only a cursory analysis of the issue. Flechtner, supra, at 129-131. Another case is an arbitration panel decision, and "it is not entirely clear what is included in the damage award." Flechtner, supra, at 129-131. Tellingly, the Petition only cites two authorities that were not cited in the courts below for the proposition that Article 74 authorizes attorneys' fee awards. One is another arbitration panel decision (Petition at 11 n.5), the other is another laconic German decision pre-dating Judge Posner's decision, (Petition at 11).


Pace Law School Institute of International Commercial Law - Last updated June 13, 2003
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