Source: http://cisgw3.law.pace.edu/cisg/biblio/zopposition.html
Timestamp: 2019-04-23 14:03:08+00:00

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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?
"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."
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. 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[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 (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 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).
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). 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).
"[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.
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).
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.
"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.
"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.
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.
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.
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).

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