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IFC CREDIT CORPORATION v. BURTON INDUSTRIES

May 12, 2005.

IFC CREDIT CORPORATION, assignee of Norvergence, Inc., Plaintiff,
v.
BURTON INDUSTRIES, INC. and CLARK JOHNSON, Defendants.



The opinion of the court was delivered by: RONALD GUZMAN, District Judge

MEMORANDUM OPINION AND ORDER

IFC Credit Corporation has sued Burton Industries, Inc. ("Burton") and Clark Johnson for breach of an equipment lease and breach of a guaranty. Before the Court is defendants' motion to dismiss plaintiff's complaint pursuant to Federal Rules of Civil Procedure 12(b)(2), for lack of personal jurisdiction, and 12(b)(3), for improper venue. For the reasons set forth below, the Court denies the motion.

Facts

  On or about February 5, 2004, plaintiff's assignor, Norvergence, Inc. ("Norvergence"), a non-party, entered into Equipment Rental Agreement No. 22123801 (the "Agreement") with Burton for the lease of telecommunications equipment (the "Equipment"). (Compl. ¶ 6a).*fn1 Plaintiff is an Illinois corporation with its principal place of business in Morton Grove, Illinois. (Id. ¶ 1.) Defendant Burton is a Michigan corporation with its principal place of business in Goodrich, Michigan. (Id. ¶ 2.) Defendant Johnson, who is the president of Burton, is a citizen of Michigan who resides in Goodrich, Michigan. (Id. ¶ 3.)

  At all times prior to the execution of the Agreement, Burton negotiated solely with Norvergence to select the Equipment and establish the payment terms of the Agreement. (Id. ¶ 6b.) On May 14, 2004, Burton executed a Delivery and Acceptance Certification (the "D & A") in which it certified that it had received, inspected and accepted the Equipment leased under the Agreement and that it had read and understood all terms of the Agreement. (Id. ¶ 7.) At no time prior to the execution of the Agreement did Burton or any of its representatives have any contact with plaintiff. (Id. ¶ 8.)

  The Agreement requires Burton to make sixty monthly rental payments each in the amount of $1,304.83. (Id. ¶ 12.) The Agreement also contains a clause titled "Applicable Law" that states:
This agreement shall be governed by, construed and enforced in accordance with the laws of the State in which Rentor's principal offices are located or, if this Lease is assigned by Rentor, the State in which the assignee's principal offices are located, without regard to such State's choice of law considerations and all legal actions relating to this Lease shall be venued exclusively in a state or federal court located within that State, such court to be chosen at Rentor or Rentor's assignee's sole option.
(Id., Ex. 1, Agreement.)

  The Agreement also contains a guaranty, signed by defendant Johnson, in which he promised to pay all sums due under the lease, if Burton defaulted. (Id.) In capital letters, the guaranty states: "The same state law as the rental will govern guaranty. You agree to jurisdiction and venue as stated in the paragraph titled applicable law of the rental." (Id.) After the Agreement, the guaranty and the D & A were executed, Norvergence assigned all of its rights, title and interest in the Agreement and the Equipment to plaintiff. (Id. ¶ 9.) Prior to accepting assignment of the Agreement, plaintiff contacted Burton's representative, who confirmed that the Equipment had in fact been received. (Id. ¶ 10.) Based on Burton's representations, plaintiff accepted the assignment. (Id. ¶ 11.)

  Burton and Johnson have defaulted under the terms of the Agreement and the guaranty by failing to make the rental payments. (Id. ¶¶ 13, 21.) Plaintiff seeks to recover an amount equal to all past due payments and all payments to come due during the term of the agreement, as well as all late fees, interest and attorney's fees. (Id. ¶¶ 15, 22-23.)

  Discussion

  Defendants argue that the Court does not have personal jurisdiction over them and that it is not the proper venue for this suit. Plaintiff contends that defendants have waived their objections to personal jurisdiction and venue by virtue of the forum-selection clause in the Agreement. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n. 14 (1985) (noting that objections to personal jurisdiction are waivable and that "litigant[s] may give express or implied consent to the personal jurisdiction of the court" through forum-selection clauses) (internal quotation marks and citations omitted); Heller Fin., Inc. v. Midwhey Powder Co., Inc., 883 F.2d 1286, 1292 n. 4 (7th Cir. 1989) ("Obviously, a valid forum-selection clause, even standing alone, can confer personal jurisdiction.") To determine whether defendants have waived their objections, we must decide: (1) whether the clause in the agreement is, in fact, a forum-selection clause; and, if so (2) whether the clause is enforceable.*fn2

  The Clause is a Forum-Selection Clause

  Whether the clause in the Agreement and guaranty is indeed a forum-selection clause hinges on whether it contains mandatory or permissive language. Paper Express, Ltd., 972 F.2d 753, 757 (7th Cir. 1992); Calanca, 510 N.E.2d at 23. Mandatory language indicates that the parties have selected a particular forum, while permissive language simply indicates a preference for a certain forum. Paper Express, Ltd., 972 F.2d at 757. In the present case, the clause says: "[A]ll legal actions relating to this Agreement shall be venued exclusively in a state or federal court located within [the State in which the assignee's principal offices are located]." (Compl., Ex. 1, Agreement.) According to Paper Express and Calanca, the mandatory language of this clause indicates that the parties selected the courts of Illinois, plaintiff's home state, to resolve their disputes.

  Despite its mandatory language, defendants say the provision is not a valid forum-selection clause because it does not actually select a forum. The clause does not say that disputes will be litigated in Illinois. Rather, it says that they will be litigated in the state in which Norvergence, or its assignee, has its principal office. (See Compl., Ex 1, Agreement.) Because any assignee's home state was unknown at the time they signed the Agreement, defendants say that "selection" is too uncertain to be enforced.

  The Court disagrees. The clause may not identify a forum by name, but it does select one: the home state of Norvergence or its assignee. Obviously, the location of any assignee's primary place of business was not known to defendants at the time of contracting. Neither, however, was that of Norvergence. Though Norvergence was, apparently, based in New Jersey when the Agreement was signed, the contract does not require it to maintain that ...


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