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IFC Credit Corp. v. Sun State Capital Corp.

March 18, 2010

IFC CREDIT CORPORATION, PLAINTIFF,
v.
SUN STATE CAPITAL CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Joan B. Gottschall United States District Judge

Judge Joan B. Gottschall

MEMORANDUM OPINION & ORDER

Plaintiff IFC Credit Corporation brought this action for breach of a broker/lessor agreement against defendant Sun State Capital Corporation. Twelve days before IFC filed this suit, Sun State filed its own suit against IFC and IFC's subsidiary in Texas state court. In response to IFC's complaint in this case, Sun State has filed three motions: (1) to dismiss for lack of personal jurisdiction or improper venue; (2) to stay this action pending resolution of the Texas lawsuit; and (3) to abstain from trying this action in light of the Texas suit. IFC responded to the jurisdictional and venue motion but not to the motions regarding stay and abstention.

One issue requires attention before disposing of these motions. On August 20, 2009, Sun State filed a Notice of Filing for Bankruptcy Protection, indicating that in the previous month IFC filed a voluntary chapter 7 petition for liquidation. The Bankruptcy Code imposes an automatic stay against efforts outside of bankruptcy to collect debts from the debtor. See Aiello v. Providian Fin. Corp., 239 F.3d 876, 878 (7th Cir. 2001) (citing 11 U.S.C. § 362). However, the debtor in this case is the plaintiff, and the statute's automatic stay does not operate against actions brought by the debtor. See 11 U.S.C. § 362(a). Sun State does not urge the application of such a rule here, instead just giving notice to the court of the pending bankruptcy case. Therefore, a stay of this action solely on the ground of IFC's pending bankruptcy is unwarranted, and resolution of Sun State's motion is proper.

I. ANALYSIS

A. Motion to Dismiss

Sun State initially urges that this case should be dismissed for lack of jurisdiction or for improper venue. Subject matter jurisdiction in this case is predicated on diversity, meaning that the court applies the personal jurisdiction law of Illinois as long as such law falls within the bounds of federal constitutional due process. Dehmlow v. Austin Fireworks, 963 F.2d 941, 945 (7th Cir. 1992). According to Sun State, it has never conducted any business, advertised, or operated an office in Illinois. IFC disputes none of this, and instead points to the following clause in the agreement forming the basis of the parties' dispute:

Choices of law and venue: This agreement shall be considered to have been made in the State of Illinois and shall be interpreted with the laws and regulations of the state of Illinois. [Sun State] agrees to Illinois jurisdiction in any action, suit or proceeding arising out of this agreement and concedes that it, and each of each of them transacted business in the state of Illinois by entering into this agreement. Furthermore, [Sun State] agrees that venue is in Cook County, Illinois. (Pl.'s Resp. Ex A, at 2.) A forum-selection clause such as the one at issue here operates as a waiver of objections to personal jurisdiction. See IFC Credit Corp. v. Aliano Bros. Gen. Contractors, Inc., 437 F.3d 606, 609-10 (7th Cir. 2006). Sun State cites no authority to the contrary, and at no point argues that the above-quoted clause does not act as a waiver of its objections to personal jurisdiction. Nor could it: in addition to agreeing to venue in Illinois, Sun State specifically agreed to jurisdiction here.

Instead, Sun State cites numerous inapplicable Texas state cases, a curious tactic that pales in comparison to Sun State's even more curious choice of headings. See Mem. 4 ("This Case Should Not be Dismissed Because the Forum Selection Clause is Only Permissive and Not Mandatory") (emphasis in original); id. 7 ("Alternatively, This Cause Should Not be Dismissed Because . . .") (same); id. 8 ("This Case Should Not Be Dismissed Because . . .") (same); id. 7 ("The venue clause in the Broker Agreement is thus not a proper basis for dismissal."). Sun State, which has moved for dismissal, here argues that the case should not be dismissed. The only sequence of events that the court can conceive of that would lead to such a bizarre result is that (1) IFC previously moved for dismissal of the Texas state case based on the same contractual clause at issue here, arguing that the clause compels dismissal of that case in favor of re-filing here, and (2) Sun State's counsel simply cut and pasted its arguments from its opposition to dismissal in that case into its motion here. Whatever the cause, such sloppy advocacy is at minimum a disservice to Sun State and a waste of judicial resources. Sun State's motion to dismiss should be denied on that ground alone.

Even on its remaining merits, though, Sun State's motion to dismiss fails. All of Sun State's cited cases involve a defendant invoking a forum-selection clause to obtain dismissal; presumably, IFC was such a defendant, urging dismissal on forum-selection grounds in the Texas case. But this case is the mirror image, with defendant Sun State seeking to explain away a venue-selection and jurisdictional-waiver clause, not to invoke it. While the operative clause is likely permissive, see Paper Express, Ltd. v. Pfankuch Machinen GmbH, 972 F.2d 753, 756 (7th Cir. 1992) (discussing case in which clause mandating that venue "is" somewhere found to be permissive), permission to file here and haul Sun State into court here is all IFC needs. Because the contract at issue grants IFC permission to sue in this venue*fn1 and subjects Sun State to personal jurisdiction here, IFC was entitled to do so. Sun State's motion to dismiss is denied.*fn2

B. First-to-File Rule

Sun State next argues that because it filed suit first in Texas, this court should either stay or dismiss this case pursuant to the "first-to-file" rule. Again, Sun State does not cite relevant precedent, relying instead on a smattering of cases from other federal courts. The Seventh Circuit has repeatedly noted that it "does not rigidly adhere to a 'first-to-file' rule . . . ." Trippe Mfg. Co. v. Am. Power Conversion Corp., 46 F.3d 624, 629 (7th Cir. 1995); see also Newell Operating Co. v. Int'l Union of United Auto., Aerospace, & Agric. Implement Workers of Am., U.A..W., 532 F.3d 583, 588 (7th Cir. 2008). The appellate court has also recognized that a district court in its discretion can defer to another federal proceeding in dismissing duplicative litigation. Trippe Mfg. Co., 46 F.3d at 629.

Here, Sun State asks for a stay of this case pending state litigation but cites numerous cases that, like the cases above, authorize the stay of a later-filed case only where both actions are pending in federal court. See Thomas & Betts Corp. v. Hayes, 222 F. Supp. 2d 9994, 995-96 (W.D. Tenn. 2002); see also Smith v. S.E.C., 129 F.3d 356, 361 (6th Cir. 1997); Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d 599, 603-04 (5th Cir. 1999); Pacesetter Sys., Inc. v. Medtronic, Inc., 678 F.2d 93, 94-95 (9th Cir. 1982). Because the earlier-filed Texas ...


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