The opinion of the court was delivered by: SHADUR
Lake Forest Academy ("Lake Forest" in this opinion, though the parties' agreements refer to it as "The School") filed a Complaint (the "Complaint") against American Language Academy ("American" in this opinion, though the parties' agreements and the Complaint refer to it as "ALA") in the Circuit Court of the Nineteenth Judicial Circuit, Lake County, Illinois, seeking a declaratory judgment as to the validity of a renewal clause (the "Renewal Clause") in Paragraph 9
of an agreement ("Second Agreement") between the two Academies. In relevant part the Complaint alleges:
9. That LFA contends that [Second Agreement para. 9] does not provide ALA with the unilateral right to perpetually renew the Agreement for successive terms of three (3) years upon the same terms and conditions of [the Second] Agreement [ ].
10. That LFA contends that [Second Agreement para. 9] is unconscionable and thus has no force and effect or in the alternative, the entire Agreement has no force and effect.
11. That LFA contends and ALA by its own actions admits that the [Second Agreement] is without definite duration and is therefore terminable at the will of either of the parties or in the alternative, will continue for a reasonable time under the circumstances which AFA contends has [sic] already occurred.
American properly removed this case to this Court on February 21, 1991 under 28 U.S.C. §§ 1441 and 1446.
Both Lake Forest and American now move for summary judgment under Fed. R. Civ. P. ("Rule") 56.
For the reasons stated in this memorandum opinion andorder, Lake Forest's motion for summary judgement is denied and American's is granted.
ALA shall have an option to renew this agreement for successive terms of three (3) years each, commencing with the expiration of the original agreement term. All provisions in effect under the original agreement term shall govern any such renewal terms. In the event that ALA elects to exercise its option to renew this agreement following the original or any succeeding term, ALA shall give to The School, notless than six (6) months prior to the expiration of the then-current term, written notice of its intent to exercise such option.
First Agreement para. 11 also contained a provision as to its potential early termination:
(a) In the event that either party is found in material breach of any provision of this agreement, the party in breach shall have thirty (30) days to correct such breach, commencing with the receipt of notice of breach from the other party. If, upon the expiration of the thirty (30) days, the breach of provision continue [sic] uncorrected, the party giving notice of breach may elect to give notice of termination to be effective not less than thirty (30) days from the date of such notice.
(b) Except as provided in the preceding Paragraph 11(a), this agreement shall operate as a notice of termination, and both parties waive all other notices of termination.
(c) Nothing in this paragraph shall entitle either party to notice of termination upon expiration of this agreement.
(d) For any breach other than a material breach, neither party shall have any right to terminate or cancel this agreement, but shall be limited to money damages.
Finally, Agreement para. 13 contained anti-oral-waiver and integration clauses:
(a) This agreement constitutes the entire agreement and understanding of the parties and no other prior oral or written communications will be of any further force and effect.
(b) The School and ALA may, by mutual agreement, amend or waive provisions in this agreement, but, except for any overriding statute or constitution, nothing other than a written amendment or waiver clearly denominated as such and duly executed by the parties hereto, their successors and permitted assigns, shall operate to amend or waive any of these provisions.
Before the First Agreement expired, Lake Forest asked for certain modifications to provide additional revenue guaranties to Lake Forest and to provide for greater integration of American students into Lake Forest's curricular and extracurricular activities. Lake Forest and American entered into negotiations that culminated in the Second Agreement (dated November 21, 1983), which implemented those changes and repeated verbatim the same clauses already quoted from the First Agreement.
Second Agreement para. 2(b)(1) introduced a new provision expressly linking the fees payable to Lake Forest by American to Lake Forest's tuition charges to its own full-time students from time to time:
(b) For the foregoing facilities, services, accommodations, and room and board, ALA shall pay to The School a fee per full-time ALA student enrolled per ALA academic term, according to the following schedule:
And like the First Agreement, Second Agreement para. 2(d) also contained the following allowance for price changes:
Future increases or decreases in the fees payable under this Agreement shall be effected to ensure that such fees payable continue always to bear the same proportion that fees herein specifically defined bear to the sum of The School's 1979-80 boarding student tuition and comprehensive fee.
Even though the Second Agreement was entered into in late 1983, it was to take effect on expiration of the First Agreement: It ran for a period of 60 months beginning ...