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FOURTH DIVISION
December 4, 2003

No. 1-02-3533

JUSTICE GREIMAN delivered the opinion of the court:

Plaintiff, Colmar, Ltd. (Colmar), appeals from the trial court's order dismissing itscomplaint seeking to vacate an arbitration award entered in favor of defendant, FremantlemediaNorth America, Inc. (FMNA). Colmar argues on appeal that the trial court erred by affirming thearbitration award because (1) the arbitration award was void due to the fact that defendant wasrepresented during the arbitration by an attorney who was not licensed in Illinois; (2) thearbitrator exceeded his powers by refusing to hear material evidence, ruling on an issue notsubmitted in plaintiff's complaint, and failing to consider all of the arguments presented inplaintiff's complaint; and (3) public policy demands that the trial court vacate the award. Colmarfurther alleges that the trial court erred by dismissing the complaint for failure to state a claimupon 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 pictureentitled "Captive." FMNA, also a Delaware corporation, which is based in Califormia, is thewholly owned American subsidiary of a European media conglomerate that is engaged in theworldwide production and distribution of motion pictures and television programs.

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

In March 2000, Colmar filed its first arbitration demand against FMNA, alleging thatFMNA 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 courseof the arbitration, Anderson took the deposition of a Colmar witness and attended arbitrationproceedings in Chicago. The arbitration concluded after nearly one year, with the arbitratorfinding FMNA not liable. In an order dated February 22, 2001, the trial court confirmed thearbitration award and denied Colmar's request to vacate it.⁽¹⁾ Colmar did not appeal from the trialcourt's order.

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

"In the First Award, after providing a detailed and reasoned analysis for hisaward in favor of [FMNA], Arbitrator Marinello concluded: 'This Award is in fullsettlement of all claims submitted to this arbitration. All claims not expresslygranted herein are, herby [sic] denied.' On February 22, 2002 the Circuit Court ofCook County entered an Order confirming the First Award [Case No. 01 CH16369].

By its election to seek relief through the Termination Date, [Colmar] hasnegated what might have been its ability to assert further claims under theContract. Among the goals of arbitration are to provide a 'final and bindingdetermination' in a fair, prompt and economical manner. None of these goalswould be met by going forward with this case. As counsel for [Colmar] hasstated: 'This is not a complicated case. It can be decided without the expense anddelay 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 issuesrelating to the current dispute."

The arbitrator ordered that the contract be deemed terminated as of February 22, 2002; thatFMNA 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 notexpressly granted were denied.

On August 28, 2002, plaintiff filed a case in the circuit court of Cook County seeking tovacate the second arbitration award, claiming that because FMNA was represented during botharbitrations by an attorney not licensed to practice law in Illinois, the arbitration awards wereinvalid. 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 aclaim upon which relief could be granted. FMNA noted that the second arbitrator specificallyconsidered the effect of Anderson's status, which Anderson had fully disclosed, and found that hisrepresentation of FMNA created no controversy, in part, because the AAA rules permitted partiesto be represented by nonattorneys in arbitration. On November 7, 2002, the trial court grantedFMNA's countermotion to dismiss and affirmed the second arbitrator's award. Colmar timelyfiled 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 arbitrationaward for the following reasons. First, Colmar asserts that the award was void ab initio becauseFMNA was represented by an out-of-state attorney during arbitration. Next, Colmar asserts thatthe arbitrator exceeded his authority in several respects and, therefore, the award should havebeen vacated on statutory grounds. Finally, Colmar asserts that public policy mandates vacationof the award.

Colmar additionally argues that the trial court's granting of FMNA's motion to dismissColmar's complaint was improper because the complaint (1) raised the issue of breach of fiduciaryduty and (2) failed to decide the remaining issues regarding the materials to be returned toColmar. We are not persuaded by Colmar's arguments. Thus, we hold that the trial courtproperly 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 ofdiscretion (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 Illinoisrendered the resulting arbitration award void. FMNA maintains, however, that Anderson'snonlicensure in Illinois was of no consequence because his representation took place duringarbitration rather than a court proceeding. FMNA notes that the AAA rules, to which the partiescontractually agreed to be bound, permit a party to be represented by a nonattorney. Werecognize that, if the arbitration award were indeed void ab initio, the trial court's orderconfirming it would be void as well. See Eissman v. Pace Suburban Bus Division of the RegionalTransportation 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-stateattorney's representation of an out-of-state client during arbitration in Illinois has on an arbitrationaward. We find that, for the reasons that follow, Anderson's representation has no effect on thearbitration award in this case.

The Attorney Act (the Act) provides that "[n]o person shall be permitted to practice as anattorney or counselor at law within this State without having previously obtained a license for thatpurpose from the Supreme Court of this State." 705 ILCS 205/1 (West 2002). The general rulein Illinois provides that judgments that result from legal proceedings brought in a court of recordon a party's behalf by a person who is not licensed to practice law in this state are void. SeeMidwest Home Savings & Loan Ass'n v. Ridgewood, Inc., 123 Ill. App. 3d 1001 (1984) (whereproceedings in a suit are instituted by a person not entitled to practice law in Illinois, suchproceedings 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 (1992) (ifone 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 (2000) (the prosecution of a defendant by aprosecutor 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 thecases applying the general voidance rule are distinguishable and do not lend support for ourextension of the rule to the instant case.

We begin by noting that, while it is true that the courts have found that an attorney neednot necessarily appear in court in order to engage in the practice of law, and that acts such asgiving advice or rendering service that requires the use of any degree of legal knowledge or skillmay indeed implicate the rule against unauthorized practice (People ex rel. Chicago Bar Ass'n v.Tinkoff, 399 Ill. 282, 288 (1948); People ex rel. Chicago Bar Ass'n v. Barasch, 406 Ill. 253, 256(1950); Lozoff v. Shore Heights, Ltd., 35 Ill. App. 3d 697, 700 (1976), aff'd, 66 Ill. 2d 398(1977)), no Illinois court has specifically found that an out-of-state attorney's participation inarbitration proceedings constitutes the unauthorized practice of law in Illinois. This fact issignificant in this case because it distinguishes the situation before us - where the disputed actionis the participation in arbitration, and not court proceedings - from that considered by the courtsin the cases applying the general voidance rule.

No Illinois decision has considered whether the general voidance rule applies to caseswhere the representation occurred strictly during arbitration proceedings. After considering theapplicable Illinois cases, the modern trend in the jurisprudence of multijurisdictional practice, andthe public policy reasons promoting both the rule prohibiting unauthorized practice and thegeneral voidance rule, we find that the harsh general rule should not be applied in the instant case. As noted by FMNA, the AAA rules, to which the parties contractually agreed to bebound, do not require that the party's representative be an attorney. American ArbitrationAssociation, Commercial Dispute Resolution Procedure, Commercial Arbitration Rule R-26 (Jan.1, 2003) ("Any party may be represented by counsel or other authorized representative").Offering federal cases in support, FMNA further asserts that arbitration is not a judicialproceeding but, rather, an alternative to such a proceeding, given that judicial fact finding, courtprocedures, evidentiary rules, and other characteristics of the judicial process do not apply in thearbitration context. Alexander v. Gardner - Denver Co., 415 U.S. 36, 57-58, 39 L. Ed. 2d 147,163, 94 S. Ct. 1011, 1024 (1974) (the fact-finding process in arbitration usually is not equivalentto judicial fact finding; the record of arbitration proceedings is not as complete; the usual rules ofevidence do not apply; and rights and procedures common to civil trials, such as discovery,compulsory process, cross-examination, and testimony under oath, are often severely limited orunavailable); Connecticut General Life Insurance Co. v. Sun Life Assurance Co. of Canada, 210F.3d 771, 774 (7th Cir. 2000) ("The arbitration of contractual disputes pursuant to an arbitrationclause in the contract is not a stage in a judicial proceeding but an alternative to such aproceeding"). We agree with FMNA and note that the Illinois courts have recognized thesedifferences as well. For example, the supreme court has observed:

"[Arbitration] is different from the court system. It does not rely upon legalprecedent. Instead, it provides for all questions of law and fact to be determinedby the arbitrator. [Citation.] Although arbitrators are not foreclosed fromemploying the rules of procedure, evidence or discovery of legal proceedings, theyare required only to conduct the arbitration in a manner not inconsistent with theguidelines of the Uniform Arbitration Act [citation]. These differences aresanctioned because the parties willingly accept the absence of these safeguards inreturn for a final and speedy resolution of their conflict." Drinane v. State FarmMutual Automobile Insurance Co., 153 Ill. 2d 207, 212 (1992).

See also Hawrelak v. Marine Bank Springfield, 316 Ill. App. 3d 175, 181 (2000) (the arbitrationsystem is essentially structured without due process, rules of procedure, rules of evidence, or anyappellate procedure - thus, while certain acts might present a serious issue in trial courtproceedings, they may be of no consequence in arbitration proceedings); Tim Huey Corp. v.Global Boiler & Mechanical, Inc., 272 Ill. App. 3d 100, 111 (1995), quoting Stroh ContainerCorp. v. Delphi Industries, Inc., 783 F.2d 743, 751 n. 12 (8th Cir. 1986) (" 'Parties should beaware that they get what they bargain for and that arbitration is far different from adjudication' ");and Perez v. Leibowitz, 215 Ill. App. 3d 900, 902-03 (1991) (arbitration is a substitute for a courtproceeding and form of settlement for litigation, but not a trial; the purpose of arbitration is thedisposition of litigation in an easier, quicker, and more economical manner than by litigation; tohold that arbitration was equivalent to a trial or hearing would extend the meaning of those termsbeyond their intended meaning and would be contrary to the purpose of arbitration).

This distinction between arbitration and court proceedings is significant in this case. Wenote that if Anderson had sought to represent FMNA in court, he would have applied for, andmore than likely been granted, pro hac vice admission pursuant to Supreme Court Rule 707 andthe Attorney Act (145 Ill. 2d R. 707 ("[A]n attorney and counselor-at-law from any otherjurisdiction in the United States, or foreign country, may in the discretion of any court of thisState be permitted to participate before the court in the trial or argument of any particular causein which, for the time being, he or she is employed"); 705 ILCS 205/12 (West 2002) ("When anycounselor or attorney at law, residing in any other state or territory, may desire to practice law inthis state, such counselor or attorney shall be allowed to practice in the several courts in this stateupon the same terms and in the same manner that counselors and attorneys at law residing in thisstate now are or hereafter may be admitted to practice law in such other state or territory")), assuch admission is routinely granted. However, there is no corresponding procedure allowing forpro hac vice admission of an out-of-state attorney to represent a client in arbitration proceedingsin Illinois. This discrepancy can lead to problems for transactional and other attorneys whorepresent clients in matters out of court. See Restatement (Third) of Law Governing Lawyers