Unambiguous Language Governs Contract Interpretation Under French Law
BODUM USA v. LA CAFETIERE, INC. (September 2, 2010)
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In 1991, Bodum Holding purchased the stock of a French company whose principal product was a french-press coffeemaker sold under the name “Chambord.” One of the principal investors in the French company also owned Household, a British company that sold a very similar looking French-press coffeemaker under the “La Cafetiere” name. The parties negotiated over Household's ability to continue selling its coffeemaker after the sale. An early draft of the sales agreement allowed it to sell the La Cafetiere only in England. The later, signed version allowed it to sell the La Cafetiere anywhere in the world except France. In 2006, Household began distributing the La Cafetiere in the United States. Bodum filed suit under state and federal law. Judge Kennelly (N.D. Ill.) granted summary judgment to Household. Bodum appeals.
In their opinion, Chief Judge Easterbrook and Judges Posner (concurring) and Wood (concurring) affirmed. The only issue the Court addressed was the meaning of the contract, which was governed by French law. Although FRCP 44.1 allows the use of expert testimony as an aid to the interpretation of foreign law, the Court criticized the practice. Instead, it noted its preference for treatises. Here, the Court relied on the plain language of the contract and its "straightforward" negotiation history in concluding that Household was within its rights to sell its product in the United States. It rejected Bodum's argument that a provision in the French Civil Code required a trial to determine the actual intent of the parties.
Judge Posner agreed with the disposition on the merits but wrote a separate concurrence even more critical than Chief Judge Easterbrook of the practice of using experts to aid the court in foreign law interpretation. In his judgment, courts should rarely rely on expert testimony for the meaning of foreign law. Judge Posner has expressed this view in the past, as well (see his opinion in Sunstar, Inc. v. Alberto-Culver Co. - and my post).
Judge Wood also agreed with the disposition of the case on the merits and also wrote separately on the subject of Rule 44.1. Judge Wood, however, disagreed with the harsh criticism from her colleagues. In her judgment, experts are frequently necessary to ensure that a district court judge completely understands the nuances of foreign law.
Alberto-Culver is a significant domestic producer of hair and skin-care products. In 1980, it transferred Japanese trademark registrations to Sunstar, a Japanese manufacturer of similar products. The deal required Sunstar to transfer the trademarks to Bank One Corporation in trust for 99 years. Bank One, in turn, licensed them back to Sunstar and was obligated to return the marks to Sunstar after the term of years. As trustee, Bank One could stop the use of the mark if it had reasonable grounds to think that Sunstar committed an act that created a danger to the value or validity of the marks. Alberto-Culver and Sunstar referred to the rights granted as a senyoshiyoken, the Japanese legal term describing a license under which the licensee has the exclusive right to use the marks in its geographic area and can sue infringers in its own name. Sunstar paid $10 million for the license. In 1989, Sunstar asked for permission to use a variant of one of the marks. Alberto-Culver refused. Sunstar ended up paying another $10 million for the rights to use the variant. In 1999, Sunstar again asked for permission to use a variation of one of the marks. This time, when Alberto-Culver refused, Sunstar filed suit. The suit sought a declaration that the requested variation was permitted by the license agreement. At trial, the district court refused to instruct the jury on the legal meaning of the term senyoshiyoken, concluding that it was irrelevant. The jury returned a verdict for Alberto-Culver but awarded no damages. The judge enjoined Sunstar from using the variation of the mark, terminated the agreement as a result of Sunstar's breach and ordered the marks returned to Alberto-Culver. Sunstar appeals.