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IV. Holding:
Neither the substantive provisions of the Convention nor the inherent authority of the court permits Zapata to recover damages for its loss including attorney’s fees from breach of contract. Conclusively, the order awarding attorney’s fees to the supplier was reversed and the case was remanded.
V. Analysis of Judge Posner:
1. Whether Zapata can be reimbursed its attorney’s fee by Lenell based on the Convention
1) Both the U.S. and Mexico are signatories of the Convention. Therefore, there is no problem concerning the applicable substantive law. However, Article 74 of the Convention keeps silent about whether damage for breach of contract should include attorney’s fees.
2) Further, Article 7(2) provides that “questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law”. And there are no "principles" that can be drawn out of the provisions of the Convention for determining whether "loss" includes attorneys’ fees; so by the terms of the Convention itself the matter must be left to domestic law.
3) Turning back to US contract law, there is no such term in US contract law that the winner of a contract suit is entitled to be reimbursed by the loser.
To conclude, “loss” in Article 74 does not include attorneys’ fees.
2. Whether the court’s inherent authority can punish bad faith litigation permitted the attorney’s fees award
1) In Illinois, the attorney’ fees may be awarded by punitive damage in the breach of contract action on the condition that the plaintiff can show that the breach of contract involved tortious misconduct, such as duress or fraud or abuse of fiduciary duty. However, Zapata did not ask for punitive damages and so the judge had no authority to award attorneys’ fees in lieu of such damages.
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