Stawski Distributing v. Browary Zywiec S.A. ( 2003 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 03-2553
STAWSKI DISTRIBUTING CO., INC.,
Plaintiff-Appellee,
v.
BROWARY ZYWIEC S.A., doing business as
Zywiec Breweries, LLC,
Defendant-Appellant.
____________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 02 C 8708—Joan Humphrey Lefkow, Judge.
____________
ARGUED OCTOBER 29, 2003—DECIDED NOVEMBER 20, 2003
____________
Before FLAUM, Chief Judge, and EASTERBROOK and
KANNE, Circuit Judges.
EASTERBROOK, Circuit Judge. The contract between
Stawski, a distributor of beer, and Zywiec, a brewer, pro-
vides that any dispute will be arbitrated in Poland (where
Zywiec’s brewery is located) under Polish law. When Zywiec
notified Stawski that it would sell beer in Illinois through
someone else, Stawski filed this suit in federal court under
the diversity jurisdiction, see 28 U.S.C. §1332(a)(2), con-
tending that the termination would violate the Illinois Beer
Industry Fair Dealing Act, 815 ILCS 720/1 to 720/9.
Stawski asked the court for an injunction compelling Zywiec
to continue providing beer; Zywiec asked the court to stay
2 No. 03-2553
the litigation in favor of arbitration. The court granted
Stawski’s request and denied Zywiec’s. The judge wrote
that, even though the arbitration agreement is supported by
both federal law and international treaty (the New York
Convention, 21 U.S.T. 2517 (1970), implemented by 9
U.S.C. §§ 201-08), the Constitution’s twenty-first amend-
ment gives states the power to displace both national and
international law for the liquor business. Zywiec immedi-
ately appealed, as it is entitled to do under 9 U.S.C.
§16(a)(1).
Stawski concedes that the parties’ agreement to arbitrate
would be enforceable for any business other than liquor.
Illinois does not forbid arbitration between brewers and
distributors, but it does require arbitration to be offered as
a separate item on an a la carte menu, while Zywiec made
arbitration part of a standard-form contract. Federal law,
by contrast, disables states from subjecting arbitration to
rules that are not generally applicable to other contractual
choices, see Southland Corp. v. Keating, 465 U.S. 1 (1984),
and this means that take-it-or-leave-it offers are enforce-
able, see Metro East Center for Conditioning and Health v.
Qwest Communications International, Inc., 294 F.3d 924(7th Cir. 2002), for Illinois enforces the (other) terms of
form contracts. So national and international law—apart
from any considerations under the twenty-first amend-
ment—make enforceable Stawski’s agreement to arbitrate
in Poland.
Choice of law is another matter altogether. Neither the
Federal Arbitration Act nor the New York Convention pro-
vides any shelter for a choice-of-law agreement that oth-
erwise would violate state rules forbidding parties to opt
out of certain substantive norms. The Supreme Court made
this clear in Mitsubishi Motors Corp. v. Soler Chrys-
ler-Plymouth, Inc., 473 U.S. 614 (1985), and Scherk v.
Alberto-Culver Co., 417 U.S. 506 (1974), its leading deci-
No. 03-2553 3
sions on international arbitration of commercial disputes.
The federal securities laws (the subject of Scherk) contain
provisions forbidding the alteration of their rules by private
agreement. 15 U.S.C. §§ 77n, 78cc(a). This led to the
argument that arbitration could not be allowed, because
either a choice-of-law clause or lack of familiarity with U.S.
law might induce arbitrators hearing disputes in foreign
lands not to apply our securities laws. The Justices con-
cluded, however, that both domestic and international
arbitration affects venue but not substance, and that a risk
that arbitrators will not do their legal duty does not dis-
tinguish securities disputes from any others. The Court
took the same approach to antitrust issues in Mitsubishi,
holding that international arbitrators must apply U.S. law
to transactions that could stifle competition in the United
States, and that an opportunity to obtain judicial review
under the New York Convention ensures that the panel will
do so. (We added in Baxter International, Inc. v. Abbott
Laboratories, 315 F.3d 829 (7th Cir. 2003), that the point of
review is to ensure that the subject had been addressed and
resolved rather than evaded; this differs from independent
judicial review of the merits.)
Arbitration of statutory issues today is routine, even
when substantive rights are not subject to waiver. See, e.g.,
Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001);
Rodriguez de Quijas v. Shearson/American Express, Inc.,
490 U.S. 477 (1989); Shearson/American Express, Inc. v.
McMahon, 482 U.S. 220 (1987). The upshot is that the
choice-of-law clause in the Stawski-Zywiec contract is
invalid under Illinois law, which requires application of
Illinois substantive law to Illinois distributorships. 815
ILCS 720/9(6). (Zywiec does not contend that our Treaty of
Friendship, Commerce, and Navigation with Poland
authorizes it to insist that Polish rather than Illinois law be
applied to disputes of this kind.) But a need to apply
domestic substantive law does not foreclose international
4 No. 03-2553
arbitration between Stawski and Zywiec, any more than it
did in Mitsubishi—another controversy arising out of a
manufacturer’s effort to change its arrangements with a
dealership protected by state-law restrictions on unilateral
alterations.
Does the twenty-first amendment entitle states to trump
the parties’ contract to arbitrate, the Federal Arbitration
Act, and the nation’s treaty commitments to its trading
partners? As far as we can see, the district judge’s affirma-
tive answer is wholly novel. Twenty years or so ago, several
courts held that the twenty-first amendment allowed states
to foreclose the application of federal statutes to the liquor
business. That position was unanimously dispatched by the
Supreme Court in California Retail Liquor Dealers Ass’n v.
Midcal Aluminum, Inc., 445 U.S. 97 (1980), with respect to
the federal antitrust laws, and again in Capital Cities
Cable, Inc. v. Crisp, 467 U.S. 691 (1984), with respect to the
federal telecommunications laws. It had not resurfaced
since—until the district court’s opinion in this case. Counsel
candidly (and accurately) admitted at oral argument that,
since Crisp, no other federal court has held that the
twenty-first amendment allows any state to disregard any
federal statute or international treaty.
Section 2 of the twenty-first amendment provides: “The
transportation or importation into any State, Territory, or
possession of the United States for delivery or use therein
of intoxicating liquors, in violation of the laws thereof, is
hereby prohibited.” This language permits the states to
restrict imports without regard to the “dormant commerce
clause.” See Bridenbaugh v. Freeman-Wilson, 227 F.3d 848(7th Cir. 2000). It does not have any more sweeping effect.
In particular, as the Court held in Midcal and Crisp, and
has reiterated since, “the Twenty-first Amendment does not
in any way diminish the force of the Supremacy Clause”. 44
Liquormart, Inc. v. Rhode Island, 517 U.S. 484, 516 (1996).
No. 03-2553 5
Illinois has not set out to curtail beer imports from Poland;
Stawski argues, to the contrary, that Illinois law compels a
Polish brewer to continue providing it with supplies. That
is some distance from the language of §2, which does not
relieve Illinois of its obligation to respect federal statutes
and treaties, “the supreme Law of the Land” (U.S. Const.
Art. VI cl. 2). Suppose that Illinois had attempted to require
all disputes arising out of the Beer Industry Fair Dealing
Act to be litigated in state court. Could such a statute block
Zywiec from removing to federal court under 28 U.S.C.
§1441(a), given the complete diversity of citizenship? Surely
not. Cf. Breuer v. Jim’s Concrete of Brevard, Inc., 123 S. Ct.
1882 (2003). Yet a federal court would be a forum different
from the one specified by Illinois law, just as arbitration
occurs in a different forum. If removal under federal law is
proper, then arbitration under federal law must be
proper—in either event, it is the Supremacy Clause that
subordinates the state’s preference to the federal rule.
Thus the contract’s forum-selection clause is enforceable,
even though its choice-of-law clause is not. At oral argu-
ment, Zywiec’s counsel suggested that the two are so in-
tertwined that it would be pointless to arbitrate in Poland
if the panel could not apply Polish law. Counsel retreated
from this position later, however, and we hesitate to bind
him to what may have been a poor choice of words. We
leave to the parties, and the district court on remand,
consideration of the question whether choice of law may be
separated from choice of forum. The judgment of the district
court is vacated, and the matter is remanded for proceed-
ings consistent with this opinion.
6 No. 03-2553
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—11-20-03