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Lancelot Investors Fund, L.P. v. TSM Holdings

October 24, 2007


The opinion of the court was delivered by: Honorable David H. Coar


Plaintiff Lancelot Investors Fund, L.P. ("Lancelot" or "Plaintiff") brought this suit against TSM Holdings, Ltd. ("TSM"), Ranger Credit Company, LLC ("Ranger I"), Ranger Credit Partners II, Ltd. ("Ranger II"), Design Extended Service, Ltd. ("DES"), George C. McIngvale, Jr., and Debora McIngvale (collectively "Defendants"), based on an alleged breach of a loan agreement. Now before this Court is Defendants' motion to transfer this case to the Houston Division of the United States District Court for the Southern District of Texas pursuant to 28 U.S.C. § 1404(a) (Doc. No. 25). For the reasons stated below, Defendants' motion is DENIED.


On or about July 19, 2006, Plaintiff and certain Defendants ("Borrowers") entered into a Loan and Security Agreement ("Loan Agreement"). Under the terms of this Loan Agreement, Plaintiff made available a revolving credit facility worth up to $30 million, which the Borrowers could access through Requests for Advances and reports of eligible collateral assets. The Loan Agreement provided Lancelot, as the lender, with a security interest in the Borrowers' property as collateral. The Agreement also contained: general warranties related to the truthfulness of financial and other factual statements; an integration clause; language adopting Illinois law for the interpretation and enforcement of the contract; and a forum selection clause submitting the parties to "the exclusive jurisdiction of any federal court or Illinois state court sitting in Chicago, Illinois."

At the beginning of 2007, Plaintiff came to believe that the Borrowers had breached several material requirements of the Loan Agreement, and sought to accelerate indebtedness pursuant to its terms. Collateral for the loan was sold through a foreclosure sale on April 4, 2007, and Plaintiff took control of the Borrowers' property and attempted to collect on amounts owed. Plaintiff now seeks to recover the outstanding principal amount of approximately $10.5 million, plus interest, default interest, legal fees, and other related fees and expenses to which it is allegedly entitled under the Loan Agreement terms. Defendants deny many of the Complaint's allegations, and have brought counterclaims against Plaintiff premised on their own allegations of fraudulent inducement, breach of contract, and the commission of an invalid or commercially unreasonable foreclosure sale.

Now before this Court is the Defendants' motion to transfer the case, premised on the convenience of the Defendants, the material witnesses, and the interests of justice. Plaintiff generally responds that the Loan Agreement contains a choice of forum clause naming Illinois as the venue for all relevant disputes, and that the clause precludes transfer.


A motion to transfer venue is governed by 28 U.S.C. § 1404(a), which states: "For the convenience of the parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." A district court will engage in an "individualized, case-by-case consideration of convenience and fairness" when adjudicating a motion for transfer subject to its own considerable discretion. Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988) (citing Van Dusen v. Barrack, 376 U.S. 612, 622, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964)). The presence of a forum selection clause as but a single, albeit significant, factor among several in a district court's analysis. Id.

The party seeking transfer of venue must show that: (1) venue is proper in the transferor court; (2) venue is proper in the transferee court; (3) the transfer is for the convenience of the parties and witnesses; and (4) the transfer is in the interests of justice. Central States Southeast and Southwest Areas Pension Fund v. Brown, 587 F.Supp. 1067, 1069 (N.D. Ill. 1984). The party seeking to transfer venue also "has the burden of establishing, by reference to particular circumstances, that the [proposed] transfer forum is clearly more convenient" than the transferring court. Coffey v. Van Dorn Iron Works, 796 F.2d 217, 219-20 (7th Cir. 1986). In making a transfer determination, a court must consider both the private interests of the parties and the public interests involved. Factors for assessing the private interests include: (1) the plaintiff's choice of forum; (2) the site of the material events; (3) the availability of evidence in each forum; (4) the convenience of the parties; and (5) the convenience of the witnesses. Amoco Oil Co. v. Mobil Oil Corp., 90 F.Supp.2d 958, 960 (N.D. Ill. 2000). Public interest factors "relate to the court's familiarity with the applicable law, the speed at which the case will proceed to trial, and the desirability of resolving controversies in their locale." Von Holdt v. Husky Injecting Molding Sys., Ltd., 887 F.Supp. 185, 188 (N.D. Ill. 1995). This Court will address each factor below and then assess whether Defendants have met their burden of establishing that transfer would be "clearly more convenient." Coffey, 796 F.2d at 219-20.


Defendants correctly point out that a forum selection clause is not necessarily dispositive of the appropriate forum for a matter's resolution. Defs' Reply in Support of Transfer, at 2-3 (citing Stewart Org. v. Ricoh Corp., 487 U.S.22, 29-31, 108 S.Ct. 2239, 2244 (1988)). That said, the contractual clause nonetheless limits the scope of the analysis this Court must undertake. In signing the choice of forum clause -- the validity of which has not been challenged -- Defendants have waived arguments related to their own inconvenience. See Northwestern Nat. Ins. Co. v. Donovan, 916 F.2d 372, 378 (1990). This argument is waived with respect to the inconvenience of Defendants' employees as well, who for present purposes are subsumed into their employers as party defendants. See id. at 376 ("[T]he inconvenience to employees would have been taken into account when the clause was drafted."); see also Muzzarelli v. Landry's Restaurants, Inc., 2003 WL 1720065, *2 (N.D. Ill. 2003). Also, the convenience of parties' counsel is generally not to be considered as a factor. See, e.g., Blumenthal Management Assistance, Inc., 480 F.Supp. 470, 474 (N.D. Ill. 1979). Instead, where there is a controlling forum selection clause, analysis of witness convenience is to be centered on that of third party witnesses. See Northwestern Nat. Ins. Co. v. Donovan, 916 F.2d 372 (7th Cir. 1990).*fn1

Much of Defendants' briefing on the transfer issue centers on these inappropriate factors, which are not appropriately considered here. However, their remaining arguments must still be considered insofar as they relate to appropriate factors, including the convenience of genuine third parties and the general interests of justice. See Abbott Laboratories v. Takeda Pharm. Co. Ltd., 476 F.3d 421 (7th Cir. 2007) ("[O]rdinarily the parties' contractual choice of forum should be overridden only if that choice would impose significant costs on third parties or on the judicial system.") (collecting cases).

a. Choice of Illinois as the Forum is Entitled to Substantial Weight

Choice of forum clauses are presumptively enforceable. See Hugel v. Corp. of Lloyd's, 999 F.2d 206, 210 (7th Cir.1993) (citing M/S Bremen v. Zapata Off-Shore Company, 407 U.S. 1, 10, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). This presumption is bolstered by the fact that Plaintiff chose this forum for filing suit. See generally General Portland Cement Co. v. Perry, 204 F.2d 316 (7th Cir.1953), Vandeveld v. Christoph, 877 F.Supp. 1160, 1167 (N.D. Ill. 1995). Therefore Defendants must counter the ...

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