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Mellon First United Leasing v. Hansen

December 30, 1998


Appeal from the Circuit Court of Lake County. No. 97--SC--3900 Honorable E. Thomas Lang, Judge, Presiding.

The opinion of the court was delivered by: Justice Inglis

Plaintiff, Mellon First United Leasing (Mellon), timely appeals the circuit court's order of February 26, 1998, granting the section 2--619 motion of defendant, Eleanor S. Hansen, d/b/a Eleanor Hansen, C.P.A., to dismiss this small claims action for lack of personal jurisdiction. See 735 ILCS 5/2--619 (West 1996). We affirm.

On October 30, 1997, plaintiff, an Illinois division of Mellon Leasing Corporation, the successor in interest to FUL, Inc., filed a small claims complaint alleging that defendant, a resident of California, entered into a mailing equipment lease agreement in October 1993. The complaint alleged that, under the terms of the lease, defendant consented to jurisdiction in Lake County, Illinois, and that the lease was to be interpreted in accordance with Illinois law. Under the lease agreement, defendant was to pay defendant $135.30 per month for 60 months. The complaint alleged that defendant failed to make her monthly payments, was indebted to plaintiff in the amount of $3,810.91, and owed certain amounts for attorney fees and interest.

Defendant filed a special and limited appearance. She moved to quash and dismiss the action, arguing that, as a California resident, she did not have sufficient contacts with the State of Illinois to satisfy the due process requirements for the exercise of jurisdiction. She asserted she would suffer extreme inconvenience if she were forced to litigate this matter in Illinois and would effectively be denied her day in court. Defendant averred that she had not been present in Illinois in 17 years. The negotiations took place in California between her and a sales representative of plaintiff. The only contacts with Illinois were that the lease documents were sent to an Illinois office for approval and defendant sent the payments to Illinois. She further argued that the forum selection clause in the lease was not a negotiated or agreed-upon term of the lease and was not discussed.

In her motion, defendant stated that it was only after the essentials of the agreement were agreed upon (such as the type of equipment, terms of the lease, and the amount of the payments) that she went to the San Francisco office of the sales company to sign the document. No mention was ever made of the forum selection clause, and she was not given a copy of the lease until years later. The forum selection clause is located on the back page of a preprinted form in small typeface. She argued that the agreement was an adhesion contract. She was not aware of the forum selection clause and was not in a position to bargain regarding the printed lease terms even if she had been made aware of the clause. She concluded that the clause does not supply the necessary contacts with Illinois to establish jurisdiction in this forum.

In her supporting affidavit, defendant states she is a resident of California and has never been in Lake County, Illinois. In August or September 1993, she began to investigate the purchase or lease of a postage meter machine for her newly formed business-- rendering services as a certified public accountant. She became aware of a company known as Better Office Systems, Inc. (BOS), that engaged in the sale and leasing of office machinery. To the best of her knowledge, BOS only did business out of its office in the San Francisco Bay area.

In September 1993, defendant negotiated the lease agreement for the postage meter with Patrick O'Keefe, an employee of BOS. The only terms discussed or agreed upon were the brand of machinery, the length of the lease, the payments, and the Disposition of the machinery upon the Conclusion of the lease. She did not negotiate with Ascom Hasler Leasing, FUL, Inc., Mellon First United Leasing, or Mellon Leasing Corporation. On September 14, 1993, defendant went to the San Francisco office of BOS and executed the lease agreement. She did not read or was not made aware of the forum clause in small print on the back page which provided that litigation pursuant to the lease shall occur in Lake County, Illinois. She was not provided with a copy of the lease until February 1996. She stated it would be an extreme hardship for her to be required to travel to Lake County, Illinois, to defend against the claim.

Perry Schwartz, president of Mellon, stated in his affidavit, that Mellon, the successor in interest to FUL, Inc., had its principal place of business in Bannockburn, Lake County, Illinois. On September 21, 1993, FUL received the credit application of defendant which was approved by Heather Zimmer, the assistant credit manager. The lease agreement was signed in Illinois by Marcia Brey, who was authorized to enter into the lease on behalf of the company. The money used to purchase the leased equipment was drawn from an Illinois bank. From November 1993 through June 1997, defendant made monthly lease payments to FUL in Lake County, Illinois.

The hearing on defendant's motion to quash and dismiss was held on February 26, 1998. In granting defendant's motion, the court stated several factors key to its decision. Defendant was at all relevant times a resident of California and was not within Illinois for any portion of the transaction. The case involved a relatively small amount of money. The underlying transaction was initially between defendant and a corporation located in San Francisco, California. Prior to signing the lease agreement, defendant did nothing to knowingly transact business with any person or entity having a connection with Illinois. The terms of the lease were fully negotiated and agreed upon between defendant and the San Francisco vendor. Prior to signing the agreement, the documentation provided to defendant did not give any indication whatsoever that defendant would be dealing with an Illinois corporation. The credit application did not contain an Illinois address or even a telephone number with an Illinois area code. After all the terms of the lease were agreed upon, defendant went to the San Francisco office of the vendor to sign the agreement. This was the first time that defendant was presented with a document indicating that an Illinois corporation was involved in the underlying transaction. It was a preprinted form, and the forum selection clause was on the back page of the lease agreement and was not in large type. Defendant's affidavit stated she did not read or was not made aware of the provision prior to signing the agreement.

Plaintiff did not present any contradictory evidence. The court concluded that the forum selection clause was not a term that was negotiated and agreed upon by the parties. The court determined that Illinois courts lacked in personam jurisdiction over defendant; that there were insufficient contacts with the State of Illinois to satisfy traditional notions of fair play and substantial Justice; and that it would be unfair to force defendant to litigate this matter in Illinois-- particularly where the small amount at issue would likely make it cost prohibitive for defendant to assert her defenses here. The court ruled that proper jurisdiction would obtain in California where plaintiff transacts business and defendant would have a fair opportunity to defend.

We agree generally with the court's determinations. We review a section 2--619 dismissal or a summary judgment ruling de novo. English Co. v. Northwest Envirocon, Inc., 278 Ill. App. 3d 406, 410 (1996). We conclude that it would be unreasonable under the particular circumstances to enforce the forum selection clause. "A forum selection clause in a contract is prima facie valid and should be enforced unless the opposing party shows that enforcement would be unreasonable under the circumstances." Calanca v. D&S Manufacturing Co., 157 Ill. App. 3d 85, 87 (1987). It has been stated that, "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.) Calanca, 157 Ill. App. 3d at 88, quoting The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15-16, 32 L. Ed. 2d 513, 523-24, 92 S. Ct. 1907, 1916- 17 (1972).

If both parties freely enter into an agreement contemplating such inconvenience should there be a dispute, one party cannot successfully argue inconvenience as the reason for voiding the forum clause. Maher & Associates, Inc. v. Quality Cabinets, 267 Ill. App. 3d 69, 74-75 (1994). A forum selection agreement reached through arm's-length negotiation between experienced and sophisticated businessmen should be honored by them and enforced by the courts, absent some compelling and countervailing reason for not enforcing it. Calanca, 157 Ill. App. 3d at 88. A forum selection clause contained in "boilerplate" language indicates unequal bargaining power, and the significance of the provision is greatly reduced. See Williams v. Illinois State Scholarship Comm'n, 139 Ill. 2d 24, 72 (1990).

Factors that the courts have considered in determining whether to enforce such clauses include (1) which law governs the formation and construction of the contract; (2) the residency of the parties; (3) the place of execution and/or performance of the contract; (4) the location of the parties and the witnesses participating in the litigation; (5) the inconvenience to the parties of any particular location; and (6) whether the clause was equally bargained for. Dace International, Inc. v. Apple Computer, Inc., 275 Ill. App. 3d 234, 238 (1995). Another factor that may be considered is whether the contract involves an unsophisticated consumer in a small transaction in the marketplace. Dace, 275 Ill. App. 3d at 241.

We decline to disturb the decision of the trial court. The record before us is limited. Based on the pleadings, the exhibits, the affidavits, and the findings of the court, we conclude that the facts available from this record militate against enforcing the forum selection clause. First, it does not appear that the clause was reached through arm's length negotiation between experienced businesspersons of the same stature. Rather, it was part of boilerplate language in small print on the back of a preprinted form used by plaintiff in its lease agreements. The agreement is more like an adhesion contract. Plaintiff presented no contradictory evidence that this term was bargained for or that there was any direct negotiation of the terms with the Illinois plaintiff. From the facts gleaned in this record, it appears that defendant is more akin to an ordinary consumer involved in a small transaction than a sophisticated businessperson of stature equal to the leasing company. Defendant apparently had a newly organized proprietary ...

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