No. 1-97-0060

IN THE

APPELLATE COURT OF ILLINOIS

FIRST JUDICIAL DISTRICT

MACHINERY TRANSPORTS OF ILLINOIS, INC.

Plaintiff-Appellant,

ORIX CREDIT ALLIANCE, INC.

Defendant-Appellant

ORDER

Between August 1992 and January 1994 plaintiff entered into three conditional sales agreements for the purchase of certain vehicles from Trailer King Industries, the vendor. Promissory notes were executed by plaintiff with respect to each such transaction. These promissory notes each provided exclusive venue and jurisdiction with respect to any action arising thereunder in the State of New York. Each of these conditional sales agreements and accompanying promissory notes were assigned by the vendor to Orix Credit Alliance, Inc., the defendant.

On April 4, 1996 plaintiff filed suit in the circuit court of Cook County against Orix alleging that, without justification, Orix added the sum of $13,343.56 to the balances owed by plaintiff on each of those contracts which plaintiff paid to satisfy its indebtedness. Of that amount, $11,158.03 was added for pre-payment penalties and $2,185.50 for late payment penalties.

On September 23, 1993, defendant filed a motion to dismiss pursuant to Section 2-619 of the Code of Civil procedure (735 ILCS 5/2-619 (West 1992)) alleging that the forum selection clause in the contract requires that suit be maintained only in New York. In opposing the defendant's motion, plaintiff submitted the affidavit of its president, Dennis LaHood, which alleged as follows:

(1) that plaintiff executed all contracts with the vendor, Trail King Industries, in Illinois;

(2) that the trailers in which the vendor retained a security interest remain in Illinois;

(3) that no payments on the note in question were sent to New York;

(4) that after payment, all negotiations and communications took place with the Illinois-based office of the defendant;

(5) that all witnesses who will be called at trial reside in Illinois; and

(6) that plaintiff will not be able to afford to litigate in New York.

On December 31, 1995, the trial court granted defendant's motion to dismiss "without prejudice to plaintiff's filing the causes of action contained therein in a case in the State and County of New York." On appeal, plaintiff contends that the instant forum selection clause was unreasonable and unenforceable. We disagree.

There is no dispute that under ordinary circumstances, a forum selection clause in a contract should be enforced. See Restatement (Second) of Conflict of Laws §80 (1971) stating, "{T}here is good reason why a court should retrain from exercising the jurisdiction it admittedly has in order to give effect to a provision in a contract that any action thereon shall be brought only in some other state. Such a provision represents an attempt by the parties to insure that the action will be brought in a forum that is convenient to them. It is also a provision to which the parties have bound themselves by contract and from which the court will be reluctant to permit one of the parties to escape without the consent of the other. * * * The burden of persuading the court that stay or dismissal of the action would be unfair or unreasonable is upon the party who brought the action." Such clauses will be upheld unless it is shown that they were procured fraud or duress, that they violated a strong public policy, or that they were grossly inconvenient. See Dace International Inc. v. Apple Computer, Inc., 275 Ill. App. 3d 234, 655 N.E.2d 974 (1995); Norman Security Systems, Inc. v. Monitor, Dynamics Inc., 740 F. Supp. 1364 (N.D. Ill. 1990).

In Calanca v. D&S Manufacturing Co., 157 Ill. App. 3d 85, 510 N.E. 2d 21, ( 1987) , our court formulated six Factors to be considered in holding a forum selection clause unenforceable. Those factors are:

"'(1) which law governs the formation and construction of the contract; (2) the residency of the parties involved; (3) the place of execution and/or performance of the contract; ***(4) the location of the parties and witnesses participating in the litigation. [Citation] ***(5) the inconvenience to the parties of any particular location; and (6) whether the clause was equally bargained for. [Citation]'" Calanca, 157 Ill. App. 3d at 88, 510 N.E.2d at 23-24, citing Clinton V. Janger, 583 F. Supp. 284, 289 (N.D. Ill. 1984).

The court in Calanca further stated, "Thus, in order to hold a forum selection clause unenforceable, enforcement must contravene the strong public policy of the forum or the chosen forum must be 'seriously inconvenient for the trial of the action.' (Emphasis in original.) (The [sic] [M/S] Bremen v. Zapata Off Shore Co. (1972), 407 U.S. 1, 15-16, 32 L. Ed. 2d 513, 523-24, 92 S. Ct. 1907, 1916-17; [sic] See also Hoes of America, Inc. v. Hoes (C.D. III. 1979), 493 F. Supp. 1205, 1208-09.) However, even when one party claims inconvenience, if both parties freely entered the agreement contemplating such inconvenience should there be a dispute, one party cannot successfully argue inconvenience as a reason for rendering the forum clause unenforceable. (The [sic] [M/S] Bremen v. Zapata Off-Shore Co. (1972), 407 U.S. 1, 16, 17-18, 32 L. Ed. 2d 513, 523, 524-525, 92 S. Ct. 1907, 1916-1917, 1918; Friedman v. World Transportation, Inc. (N.D. 111. 1986), 636 F. Supp. 685,690.) A choice of forum, which is made during an arms's length negotiation between experienced and sophisticated businessmen, should be honored by the parties and enforced by the courts, absent some 'compelling and countervailing reason' why it should not be enforced. The [sic] [M/S] Bremen v. Zapata Off-Shore Co. (1972), 407 U.S. 1, 12, 32 L. Ed. 2d 513, 521-522, 92 S. Ct. 1907, 1914." Calanca, 157 Ill. App. 3d at 23.

The burden of persuasion to establish the unenforceability of the forum selection clause is upon the party bringing the action. Restatement (Second) of Conflict of Laws §80 (1971). Accord Dace, 275 Ill. App. 3d 234, 655 N.E.2d 974; Norman Security Systems, 740 F. Supp. 1364. Here, plaintiff attempts to argue that the six Calanca factors all favor its position. It contends that all of its witnesses are in Illinois. However that contention was specifically rejected in Calanca and in Norman Security Systems.

In Calanca, the court stated, "[P]laintiff is not without a remedy should they litigate in Wisconsin. Plaintiff can take depositions of his witnesses in Illinois, and although live testimony is preferred, he may read those depositions into evidence at trial in Wisconsin in lieu of the witnesses' live testimony. [Citations]. Thus, although it will be inconvenient for plaintiff to litigate in Wisconsin, it will not be so inconvenient that plaintiff will be deprived of his day in court." Calanca, 157 Ill. App. 3d at 89, 510 N.E. 2d at 24.

Moreover, based on the asserted theory of plaintiff's action challenging the late payment and prepayment penalties imposed by defendant, it is apparent that this is a "documents" case which can be substantially resolved from the documentation of the transaction rather than through eye witnesses.

Plaintiff also contends: (1) that Illinois was the place where the contract was executed and to be performed; (2) that the forum selection clause was not equally bargained for; (3) that it would be financially inconvenient to litigate this matter in New York; and (4) that Illinois law would otherwise govern. Each of these contentions is without sufficient factual support or legal merit. As pointed out above, the burden of persuasion to establish that a forum selection clause is unenforceable is upon the party bringing the action. Dace, 275 III. App. 3d 234, 655 N. E. 2d 974; Norman Security Systems, 740 F. Supp. 1364; Restatement (Second) of Conflict of Laws §80 (1971). The plaintiff's contention that Illinois was the state where the contracts were executed is not supported by the- record. While plaintiff made this contention in its response to defendant's motion to dismiss, the supporting affidavit of plaintiff's president avers only that plaintiff executed all contracts with Trail King, Inc. in Illinois. The affidavit does not purport to state where Trail King executed those contracts. Nor does it provide who was the last to sign, so as to designate the place where the contract took effect.

Plaintiff's bland contention that there was unequal bargaining power between the parties was also without any support in the record. Plaintiff's affidavit does not even attempt to transverse that issue. In its brief, plaintiff purports to state, "[I]n the instant case the plaintiff appellant's bargaining power was greatly reduced considering it had no influence in Trail King Industries' decision to assign the note to Defendant appellee." This assertion is simply a non sequitur. Trail King's subsequent unilateral assignment of its commercial paper acquired from a customer would have no bearing on the relative bargaining strength that led to the execution of that commercial paper in the first instance.

Plaintiff's assertion as to the law governing this action is again wholly unsupported by citation of authorities and rests upon the bland unsupported and obviously incorrect assertion that the place of residence of the party bringing the action controls the law to be applied. Lastly, plaintiff's contention concerning the amount involved is equally without merit. Plaintiff contends that since only $13,000 is in contention, the cost of litigating in New York would be prohibitive. There is no dispute that the value of the goods sold under these contracts exceeds $335,000.00. Clearly this transaction is large enough to warrant enforcement of a forum selection clause. Plaintiff has cited no authority which would hold that although the forum selection clause was reasonable when the contract was entered into, subsequent changes in circumstances should have retroactive impact on its enforceability. Here suit could have involved the total amount of the transaction. The fact that plaintiff chose to litigate over a lesser amount should not be dispositive. Such a result would defeat the purpose of the forum selection clause Plaintiff has cited no authority which would hold that although the forum selection clause was reasonable when the contract was entered into, subsequent changes in circumstances should have retroactive impact on its enforceability. Here, suit could have involved the total amount of the transaction. The fact that plaintiff chose to litigate over a lesser amount should not be dispositive. Such a result would defeat the purpose of the forum selection clause which is to eliminate uncertainties by agreeing in advance on a "forum acceptable to both parties." See M/S Bremen v. Zapata Off-Shore Co., 407 U-S. 1, 32 L.Ed. 2d 513, 92 S. Ct. 1907. Moreover, given the fact that this case is largely triable by documentation alone and given the nature of plaintiff's contention, plaintiff has failed to show that trial in New York, even for the relatively limited sum of $13,000, would be unfeasible through the retention of New York counsel.

Plaintiff's reliance on Martin-Trigona v. Roderick, 29 111. App. 3d 553, 331 N.E.2d 100 (1975) is inapposite. Without formulating a policy or developing a rationale, the court in Martin Trigona found that a provision in a residential lease waiving objections to venue in any circuit was against public policy. However, Martin Trigona has no application to this cause which does not involve a venue waiver provision but rather a forum selection clause. A venue waiver clause leaves the tenant wholly to the whim of the landlord who is free to choose any venue at any time. He is free to select the remotest county circuit court without any nexus to any of the parties in the litigation. A forum selection clause, on the other hand, pre-selects a single venue to which both parties are bound. Moreover, unlike the facts in Martin-Trigona involving a landlord and a residential lessee, two business entities for this case involved negotiations between two business entities for substantial stakes, neither of whom has been shown to be inexperienced or naïve. Dace, 275 Ill. App. 3d 234, 655 N.E. 2d 974; Williams v. Illinois State Scholarship Comm'n, 139 Ill. 2d 24, 563 N.E. 2d 465 (1990).

Similarly, plaintiff's reliance on Williams v. State Scholarship Comm'n, 139 Ill. 2d 24, 563 N.E. 2d 465 (1990), is misplaced. There the court found a provision establishing Cook County as the exclusive venue for all statewide defaults under the Illinois Guaranteed Student Loans program to be invalid. The facts in Williams, as those in Martin Trigona, are fully distinguishable. In Williams, the court found the contract between the governmental agency and the student borrowers to be contracts of adhesion stating, "These contracts were standard form agreements, prepared entirely by I.S.S.C. [Illinois State Scholarship Commission)" 139 Ill. 2d at 72, 563 N.E.2d at 487. The guaranteed student loan agreements amounted to adhesion contracts in that the class members were in disperate bargaining positions and, if they wanted the loan, were forced to "'take it or leave it.'" Williams, 139 Ill. 2d at 72, 563 N.E.2d at 487, quoting Star Finance Corp. V. McGee, 27 Ill. App. 3d 421, 426, 326 N.E. 2d 5E8 (1975). Here, as previously noted, two business entities negotiated a conditional sale of expensive trucking equipment. There is no showing of any superior bargaining power by the vendor. Moreover, in Williams, the Court found that enforcement of the venue selection provision would have effectively deprived the student borrower of his day in court. As already discussed, there is no such showing under the facts of this case. In this regard we adhere to the reasoning and analysis in Dace. In distinguishing the holdings in Williams and Martin-Trigona, the Dace court said, "Both Martin-Trigona and Williams were concerned with protecting Illinois defendants against 'being sued in a county arbitrarily selected by a plaintiff, wherein the defendant does not reside, or in which no part of the transaction occurred. [Marin-Trigona, 29 Ill. App. 3d at 555, 331 N.E. 2d 100.] However, Calanca and the instant appeal examine the validity of forum selection clauses, while Martin-Trigona involved a venue waiver clause. Venue waiver represents one party's consenting to be sued in a forum or forums of the other party's subsequent choosing. *** Dace argues that the Calanca factors point to Illinois as the more convenient and appropriate forum for the breach of contract action. Dace is correct in noting that four of the six factors favor Illinois. However, forum selection clauses are prima facie valid, and the party opposing enforcement is required to show that litigation in the contractual forum will be so burdensome that there will be no real opportunity to litigate the issues in a fair manner and that enforcement of the clause is tantamount to depriving the plaintiff access to the courts. (See Calanca, 157 Ill. App. 3d at 88, 109 Ill. Dec. 400, 510 N.E. 2d 21.) Thus, while Dace is clearly able to show that it would be inconvenienced by a California forum, relative inconvenience has been routinely rejected as a basis for voiding forum selection clauses." Dace, 275 Ill. App. 3d at 239, 655 N.E.2d at 977-78.

For the foregoing reasons the judgment of the trial court dismissing this cause of action is affirmed.

Affirmed.

GORDON, J. with CAHILL and LEAVITT, JJ., concurring.