PolyTech Appellate Brief

Poly Tech adopts and incorporates the arguments in the brief or briefs of Rieker Shoe Corporation and also the arguments contained in the brief of W&S Hubble, Inc. and William R. Hubble; Restaurant Graphics, Inc. and Thomas Stavrakis; J&W Cycles And Nancy Jones; and South Coast Dental Lab., Inc. and Richard L. Hale II, and Defendant-Appellee Main Street Mortgage Of Central Florida, Inc. and Linda Joy Shoup filed in this consolidated appeal 05-1310.

ADDITIONAL AND ALTERNATIVE ARGUMENTS
FOR AFFIRMANCE OF THE JUDGMENT OF THE TRIAL COURT

Poly Tech believes that the argument contained in the briefs cited above is persuasive and requires affirmance. However Poly Tech believes there are additional and alternative grounds which require affirmance of the trial court’s judgment as to Poly Tech even if this Court concludes that the arguments made in the incorporated briefs are unavailing.

There are Two Shifting Selection Clauses

In its brief IFC focuses exclusively on the shifting-forum selection clause. However there are two shifting selection clauses: one for the state where litigation must occur; and one for the state whose law must be applied in the construction of the alleged contract.

The Trial Court Construed
the Forum Selection Clause Exclusively Under Illinois Law

The trial court’s opinion[1] shows that it construed the enforceability of the forum selection clause under Illinois law. R 102-103. However If Illinois substantive law and New Jersey substantive law are the same on the issue of the enforceability of the shifting forum selection clause then it is not necessary for this Court to reach the choice-of-law issue. The Hartford v. Burns International Security Services, Inc., 172 Ill. App. 3d 184, 187 (1^st Dist., 1988).

The Trial Court Should
Have Applied New Jersey Law as the Substantive Law

A. Illinois Follows Restatement (Second) Conflict of Laws

While Poly Tech believes the trial court correctly decided the enforceability of the forum selection clause under Illinois law, it should have first determined under Illinois choice of law rules whether New Jersey or Illinois substantive law applied. Restatement (Second) Conflict of Law (hereinafter “Restatement”) §2, Illustration 4. Newell Company v. Allen B. Petersen et al., 325 Ill App. 3d 661, 686 (2^nd District, 2001).[2]

B. The Purpose of the Restatement is to Ensure Predictability of Results

The drafters of the Restatement make clear that one of the "prime objectives of contract law [is] to protect the justified expectations of the parties and to make it possible for them to foretell with accuracy what will be their rights and liabilities under the contract. These objectives may best be attained in multistate transactions by letting the parties choose the law to govern the validity of the contract and the rights created thereby. In this way, certainty and predictability of result are most likely to be secured." Restatement of Conflicts 2d, §187(e).

If this Court adopts IFC’s position that the shifting choice of law provision was effective to change the applicable law from New Jersey to Illinois then the result will be the opposite of that intended by the drafters of the Restatement: “certainty and predictability of result.” Under IFC’s theory the “contract and the rights created thereby” vary through the unilateral change of applicable law by the action of only one party to a contract — NorVergence in this case — made after the contract was signed. T-42 & R-67.

Section 187 of the Restatement provides in pertinent part as follows:

(1) The law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue.

(2) The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to the issue, unless either

(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or

(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of §188, would be the state of the applicable law in the absence of an effective choice of law by the parties. [Emphasis supplied].

D. The Alleged Contract Fails Both Branches of the Restatement Test

The facts applicable to a Restatement analysis are undisputed in the record:

1. At the time of the making of the alleged contract NorVergence was based in Newark, New Jersey [ R-7 ] and Poly Tech was based in Georgia [ R14-15 ]. Payment was to be made in New Jersey, all negotiations to the entry of the contract were conducted in Georgia, and no portion of the transaction was contemplated to be performed in Illinois [ R 14-15]; and

2. It is contrary to the public policy of the State of New Jersey to enforce shifting-forum selection clauses.[3]

Under subsection 2(a) of Section 187 of the Restatement and assuming that Illinois is the “chosen state,” the shifting choice of law provision may not be enforced because Illinois had no relationship with the parties, let alone a substantial one.[4]

Under subsection 2(b) the shifting choice of law provision may not be enforced because the shifting-forum selection clause is unenforceable under New Jersey law and New Jersey as the place of the making of the alleged contract has a much greater interest in the interpretation of contracts made in New Jersey than does Illinois. So both exceptions to the general principle of enforcement of the parties’ choice of law require the utilization of New Jersey law in this case.

E. The Choice of Law Provision is Not Specific

For the sake of argument Poly Tech has heretofor assumed that the parties “chose” Illinois[5] substantive law through the shifting choice-of-law clause in the contract and its alleged assignment to an Illinois company. But Poly Tech suggests that the same issue of lack of specificity that dooms the shifting-forum selection clause under New Jersey and Illinois law dooms the shifting choice of law provision. There was no basis at the time of execution of the alleged contract upon which the parties could base an expectation of what the applicable law (and therefore the meaning of the contract) might be, except that it might remain New Jersey law. Therefore under Whirlpool Corporation v. Certain Underwriters at Lloyd’s London, 278 Ill. App. 3d 175 (1^st Dist., 1996) and other authority in the incorporated briefs, the shifting portion of the choice of law clause is also unenforceable for lack of specificity.

F. Illinois Cases Require The Application Of New Jersey Law

As this Court said in analyzing relationship-to-the-forum issues:

A second recognized limitation to an express choice of law provision is the requirement that there be some relationship between the chosen forum and the parties or the transaction. [citations omitted] The purpose of this requirement is to preclude parties from arbitrarily selecting the laws of some jurisdiction which has no relation to the matter in controversy. [citations omitted] In Mell, the court applied the reasonable relationship test and found that the brokerage agreement involved had a sufficient relationship with the chosen forum to satisfy the reasonable relationship test. Pertinent to the present case is the court's statement that despite the numerous contacts with the chosen forum, there was also a very substantial relationship with Illinois. ( Mell v. Goodbody & Co. (1973), 10 Ill. App. 3d 809, 813, 295 N.E.2d 97.) Specifically, the stockbroker maintained three branch offices in Illinois, received payments on the pertinent accounts at those offices and the customer resided in Illinois. (10 Ill. App. 3d 809, 811, 295 N.E.2d 97.) Here, the record indicates that PLC's principal place of business was in Michigan, the contract was executed in Michigan, and PLC contacted the defendant from Michigan. In addition, payments due under the lease were to be sent to PLC's home office in Michigan. We find these contacts sufficient to establish a reasonable relationship between the chosen law and the transaction.

Potomac Leasing Company v. Chuck’s Pub, Inc., 156 Ill App. 3d 755, 759 (2^nd Dist., 1987). Cf. The Hartford v. Burns International Security Services, Inc., 172 Ill. App. 3d 184, 187 (1^st Dist. 1988),

In the case at bar the facts are the opposite of those in Potomac Leasing: neither party had any relationship to Illinois; NorVergence’s performance was to be in Georgia; and Poly Tech’s payment was to be in New Jersey. Under the test set out in Potomac Leasing, Illinois law should not have been applied by the trial court.

The 7^th Circuit in an opinion written by Judge Posner explains why the litigants’ contractual choice of Delaware law would not be enforced.

An Illinois court would not honor the parties' designation of Delaware law for a different reason: there is insufficient connection between the contract and the State of Delaware. *** Curtis's headquarters are in Georgia, and it has no offices or operations in Delaware. Suess of course has no contacts with Delaware. Curtis and Suess are operating in Illinois, so Illinois has an interest in applying its law to their relations. If the choice of law provision in the covenant not to compete had designated Georgia law we assume the Illinois courts would defer to that designation, recognizing that Georgia has as much interest in regulating the out of state operations of "its" firm as Illinois does in protecting its citizen, Mr. Suess. But that is not the case here.

Curtis 1000, Incorporated v. Roy H. Suess et al, 24 F. 3d 941, 948 (7^th Cir, 1994).

It is not the case here either: there was no connection between the contract and the State of Illinois at the time it allegedly was entered.

Shifting-Forum Selection Clauses
Are Unenforceable Under New Jersey Substantive Law

The highest New Jersey court to rule on the issue held unanimously that shifting-forum selection clauses are unenforceable under New Jersey law. In Copelco Capital, Inc. v. Alvin D. Shapiro et al., 750 A. 2d 773 (Super Ct N.J., App. Div., 2000), an assignor sought to force a Missouri lawyer to pay for a copier. The forum selection clause involved in that case reads as follows:

Choice of Law: This rental and each schedule shall be governed by the internal laws for the state in which our or our assignee's principal corporate offices are located. You consent to the jurisdiction of any local, state, or federal court located within our or our assignee's state, and waive any objection relating to improper venue.

Copelco Capital at page 774-775.

The New Jersey court held that the clause is invalid under New Jersey law for lack of notice and reasonableness.

The notice and reasonableness requirements have their source in this State's policies promoting fundamental fairness. In the circumstances presented here, they weigh against enforcement of the clause currently before us. From the "four corners of the instrument" a prospective lessee cannot identify the jurisdiction in which an action will be brought, as the contract states in the most general terms that the proper forum is contingent upon the location of an unnamed assignee's principal office.

Copelco Capital at page 775.

IFC cites the case of Danka Funding, L.L.C. v. Page Scrantom, Sprouse, Tucker & Ford, P.C., 21 F. Supp. 2d 465 (D. N. J., 1998) for the proposition that shifting-forum selection clauses are enforced in New Jersey. In Danka Funding a federal district court judge sitting in diversity attempted to anticipate how New Jersey courts would construe a shifting-forum selection clause. Copelco was decided after Danka Funding. Danka Funding was discussed in a Copelco opinion and not followed.

Lacking Personal Jurisdiction,
The Trial Court Properly Dismissed IFC’s Appeal

Personal jurisdiction over PolyTech was based on the shifting-forum selection clause. Regardless of whether it would be enforceable under Illinois substantive law, the shifting-forum selection clause is not enforceable in this particular case because New Jersey substantive law applies under Illinois’ choice of law rules, and New Jersey substantive law precludes enforcement. Accordingly the trial court’s decision to dismiss IFC’s case against PolyTech was correct on the additional and alternative ground of unenforceability of the clause under the applicable substantive law.

IFC Failed To Meet Its Burden Under 735 ILCS 5/2-301

Illinois law provides that a party may object to jurisdiction over its person by filing a motion under 735 ILCS 5/2-301. It reads in pertinent part as follows:

(a) Prior to the filing of any other pleading or motion other than a motion for an extension of time to answer or otherwise appear, a party may object to the court's jurisdiction over the party's person, either on the ground that the party is not amenable to process of a court of this State or on the ground of insufficiency of process or insufficiency of service of process, by filing a motion to dismiss the entire proceeding or any cause of action involved in the proceeding or by filing a motion to quash service of process. Such a motion may be made singly or included with others in a combined motion, but the parts of a combined motion must be identified in the manner described in Section 2‑619.1. Unless the facts that constitute the basis for the objection are apparent from papers already on file in the case, the motion must be supported by an affidavit setting forth those facts.

* * *

(b) In disposing of a motion objecting to the court's jurisdiction over the person of the objecting party, the court shall consider all matters apparent from the papers on file in the case, affidavits submitted by any party, and any evidence adduced upon contested issues of fact. The court shall enter an appropriate order sustaining or overruling the objection.

IFC chose to file an unverified complaint. It further chose not to file any affidavits [R41-62] in response to the affidavits filed by Poly Tech [R14-32][6], perhaps thinking that Section 2-615 of the Civil Practice Law applied and that everything in the complaint must be taken as true. However Poly Tech did not file a motion under Section 2-615, and Section 2-301 specifically provides for the use of evidence.

The unrebutted evidence of record at the time the trial judge ruled was that Poly Tech had no connections with Illinois that would confer jurisdiction and that there was no evidence either that Poly Tech signed the NorVergence contract or that NorVergence assigned it to IFC. T 24-25; R14-32 & R 41-62.

Accordingly the trial court’s decision to dismiss IFC’s case against PolyTech was correct on the additional and alternative ground that IFC failed to meet its burden once confronted with a motion under Section 2-301 of offering some evidence that Poly Tech had entered the alleged contract (and therefor agreed to the shifting-forum selection clause upon which IFC was relying) and also that IFC instead of NorVergence had rights in the NorVergence contract.

RELIEF SOUGHT

Wherefore Poly Tech requests that this Court affirm the judgment of the trial court dismissing IFC’s complaint against PolyTech.

_________________________

JOHN S. GRAETTINGER, JR.

Of Counsel

Gardiner Koch & Weisberg

Suite 950

53 West Jackson Boulevard

Chicago, Illinois 60604

Voice:(312) 362-0000

Fax: (312) 408-0321

Email:JSG@Pentwater.com

CERTIFICATE OF SERVICE

This is to certify that on this 16^th day of December, 2005, I served three true and correct copies of the above and forgoing brief by depositing same in the United States Mail at Chicago, Illinois by 5:00 p.m. with adequate postage thereon to ensure proper delivery, addressed to:

Vincent T. Borst, Esq.

303 E. Wacker, Suite 1000

Chicago, IL 60601

_________________________

JOHN S. GRAETTINGER, JR.

[1] References to the common law record are denominated “R- “; references to the transcript of proceedings are denominated “T- “.

[2] Poly Tech argued below that New Jersey law controls. T 32-39; R-38 & 67-68.

[3] See discussion of New Jersey substantive law below at page 12.

[4] IFC may assert that because the shifting-forum and shifting choice-of-law clauses are in the alleged contract NorVergence and Poly Tech contemplated that Illinois could have a substantial relationship with the contract in the future through an assignment. However such a position would require that the parties contemplate that every state could have a substantial relationship with the transaction in the future or that IFC has independent rights under the alleged contract even though its status is only as an alleged assignee. Either way, under such a construction the selections clauses pick every state — the exact opposite of selecting a forum by agreement — and ensure unpredictability of results.

[5] There is some uncertainty about this in the record. Some evidence suggests that an Oregon corporation, not IFC, is the assignee of the alleged contract. R- 15 & R 27-30.

[6] Poly Tech argued below that IFC failed to meet its burden under 2-301. R 63-64; T24-25.