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Illinois Federal Court Enforces Choice of Law Provision in Distributor Agreement
Posted in Choice of Law

A federal court in Illinois recently enforced a provision designating Illinois law for the interpretation of a distributor agreement between an Illinois manufacturer and a distributor in the Dominican Republic. Wahl Clipper Corp. v. Plaza Lama, 2022 WL 16744282 (N.D. Ill. Nov. 7, 2022). Wahl, an Illinois hair clipper manufacturer, entered into a distributor agreement that contained an Illinois choice of law provision with Plaza Lama, a department store chain in the Dominican Republic. By its terms, the agreement expired automatically after one year unless the parties renewed it in writing. The parties did not do so, and Wahl treated the distributor agreement as having expired. Plaza Lama argued to Wahl that, under Dominican Republic law, Wahl was required to renew unless it could demonstrate “just cause.” Illinois law imposes no such requirement. Wahl sued Plaza Lama seeking a declaration that Illinois law applied and that the agreement had expired according to its terms. Plaza Lama did not respond to the suit.

The court granted Wahl’s motion for default judgment, applying Illinois’ choice of law rules to determine that Illinois law was applicable to the distributor agreement. It held that (1) Illinois has a substantial relationship to the parties; (2) the parties had a reasonable basis for choosing Illinois law; (3) Illinois has an interest in protecting Wahl, an Illinois company, from being bound to an agreement of indefinite duration; (4) the Dominican Republic has no greater public interest in enforcing its law than does Illinois in enforcing its law; and (5) the Dominican Republic’s implementation of the Dominican Republic-Central America Free Trade Agreement demonstrates that the Dominican Republic does not hold its law requiring just cause for nonrenewal to be a fundamental principle of justice. The Court determined that Wahl acted within its rights under Illinois law to let the distributor agreement expire by its terms without renewing it.

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