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Foster Wheeler Energy Corp. v. LSP Equipment

February 25, 2004

[5] FOSTER WHEELER ENERGY CORPORATION, PLAINTIFF,
v.
LSP EQUIPMENT, LLC; LSP-KENDALL ENERGY, LLC; DICK CORPORATION AND HITACHI ZOSEN CORPORATION, DEFENDANTS (DICK CORPORATION, CROSSPLAINTIFF-APPELLANT; LSP-KENDALL ENERGY, LLC, AND LSP EQUIPMENT, LLC, CROSSDEFENDANTS-APPELLEES).



[6] Appeal from the Circuit Court of Kendall County. No. 02--L--25 Honorable Leonard J. Wojtecki Judge, Presiding.

[7] The opinion of the court was delivered by: Justice Byrne

[8]  This appeal arose from two contracts for the construction of a power plant located in Minooka, Illinois. The construction contracts contain forum-selection and choice-of-law provisions, which purport to require that disputes between the parties to the contracts be litigated in New York. Plaintiff, Foster Wheeler Energy Corporation, which is not a party to this appeal, initiated the underlying Illinois action, alleging a mechanic's lien foreclosure against defendants, LSP-Kendall Energy and LSP Equipment (collectively, LSP defendants), Dick Corporation, and Hitachi Zosen Corporation, which also is not a party to this appeal. Dick crossclaimed against LSP defendants to foreclose on Dick's own mechanic's lien claim. Pursuant to the forum-selection and choice-of-law provisions of the construction contracts, LSP defendants filed a complaint in New York federal court against Dick for breach of contract and then moved to stay Dick's mechanic's lien foreclosure cross-claim in the Illinois litigation, pending resolution of the New York claim. LSP defendants argued that the forum-selection and choice-of-law provisions in the construction contracts required that the disputes between the parties, including the claim underlying Dick's mechanic's lien foreclosure cross-claim, be litigated in New York. Dick argued that section 10 of the Building and Construction Contract Act (Act) (815 ILCS 665/10 (West 2002)), although enacted in July 2002 after the parties entered into the construction contracts, invalidated any Illinois construction contract provision that purported to choose the law or forum of another state for purposes of resolving disputes under the contracts. Dick also argued that because this is a procedural statute, it should be applied retroactively to void the parties' contractual forum-selection and choice-of-law provisions. The trial court disagreed and granted the motion to stay. Dick appeals the trial court's order. We affirm.

[9]  The following facts are not disputed. Kendall owns the Minooka property upon which a power plant was to be constructed, and it served as the project's owner. LSP Equipment served as Kendall's captive retailer. On or about November 11, 1999, Kendall contracted individually with both the National Energy Production Company (NEPCO) and Dick to provide engineering, procurement, and construction for the project (EPC Agreement). In the EPC Agreement, Dick and Kendall agreed to litigate all disputes in New York. The EPC Agreement's forum-selection clause provides:

[10]  
"The Parties hereby submit themselves to the exclusive jurisdiction of the state and federal courts located in the state of New York for the purpose of litigating a Dispute under this Section 18.2 for the purpose of obtaining any preliminary relief related thereto."

[11]   Dick, together with LSP defendants and NEPCO, also entered into an interfacing agreement on or about November 12, 1999. The interfacing agreement sets forth certain understandings related to the interfacing among the parties in the exercise of their rights and performance of their obligations under the EPC Agreement with respect to the procurement of equipment for the project. In this agreement, Dick and LSP defendants agreed to submit to the jurisdiction of the New York state courts or the United States District Court for the Southern District of New York and also agreed to be governed by New York law. Section 3.2(b) of the interfacing agreement provides:

[12]  
"Any legal action or proceeding with respect to this Agreement and any action for enforcement of any judgment in respect thereof may be brought in the courts of the State of New York, in and for the County of New York, or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, the Contracting Party hereby accepts for itself and in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts and appellate courts from any appeal thereof."

[13]   On or about March 20, 2000, LSP Equipment and Foster Wheeler entered into a purchase order agreement in which Foster Wheeler agreed to provide four heat recovery steam boilers for the construction of the project. Foster Wheeler initiated this lawsuit against defendants, seeking payment for the heat recovery boilers and other relief. In particular, Foster Wheeler alleged a mechanic's lien foreclosure action against Kendall; a breach of contract action against LSP Equipment for alleged failure to pay Foster Wheeler under the terms of the purchase order agreement; a breach of contract action against its subcontractor, Hitachi Zosen; an action against Dick for tortious interference with the Foster Wheeler-Hitachi subcontract; a declaratory judgment action concerning its warranty obligations to LSP Equipment; and a declaratory judgment action against LSP Equipment concerning backcharge procedures under the Foster Wheeler purchase order agreement.

[14]   Dick filed to foreclose its mechanic's lien on the real estate. This foreclosure action came in the form of a cross-claim as a response to the allegations made in the foreclosure action filed by Foster Wheeler. Dick alleged that Kendall failed to pay Dick for work allegedly performed pursuant to the EPC Agreement. Dick alleged that it had performed under the EPC Agreement but that Kendall had breached the EPC Agreement and the interfacing agreement by failing to fully pay Dick and that, as a consequence, it was entitled to foreclose its mechanic's lien.

[15]   On April 21, 2003, pursuant to the forum-selection and choice-of-law provisions of the EPC Agreement and the interfacing agreement, LSP defendants filed a complaint against Dick in the United States District Court for the Southern District of New York, seeking resolution of the contract disputes and other claims alleged to be underlying Dick's foreclosure action. On the same date, LSP defendants filed a motion to stay Dick's mechanic's lien foreclosure action in the Illinois trial court, pending resolution of the New York federal district court's proceeding. LSP defendants based their motion to stay on their belief that the resolution of the disputes between the parties, including all claims underlying Dick's mechanic's lien foreclosure action, must be litigated in a New York forum pursuant to the forum-selection provisions of their contracts.

[16]   In response, Dick argued that section 10 of the Act (815 ILCS 665/10 (West 2002)) voided the forum-selection clauses in the parties' agreements and, therefore, the motion to stay should be denied. Section 10 voids any Illinois construction contract provision that purports to choose the law or forum of another state for purposes of resolving disputes under the contract.

[17]   On July 31, 2003, the trial court held that section 10, enacted on July 16, 2002, was not the law at the time the parties entered into the agreements, in 1999, and it could not be applied retroactively to invalidate the parties' agreements to litigate all disputes in New York. Accordingly, the trial court granted the motion to stay. Dick timely filed its notice of interlocutory appeal of the trial court's ruling staying its cross-claim.

[18]   The question of first impression before this court on appeal is whether section 10 of the Act is retroactive or merely prospective. Section 10 provides:

[19]  
"A provision contained in or executed in connection with a building and construction contract to be performed in Illinois that makes the contract subject to the laws of another state or that requires any litigation, arbitration, or dispute resolution to take place in another state is against public policy. Such a provision is void and unenforceable." 815 ILCS 665/10 (West 2002).

[20]   Because this presents a question of statutory interpretation, our review is de novo. See Weatherman v. Gary-Wheaton Bank of Fox ...


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