The opinion of the court was delivered by: Hon. Joan H. Lefkow
Plaintiffs AT&T Capital Services, Inc. ("AT&T Capital") and SBC Global Services, Inc. ("SBC") (collectively, "plaintiffs") filed a seven-count complaint against Shore Financial Services, Inc. ("Shore Financial") to recover equipment and money under a finance lease arrangement in which plaintiffs provided a telecommunications system to Shore Financial. Count I alleges breach of contract. Count II seeks recovery under a theory of quantum meruit. Count III seeks an order of replevin. Counts IV and V seek a declaratory judgment and an injunction, respectively, requiring Shore Financial to return the equipment to plaintiffs. Count VI alleges conversion. Lastly, Count VII seeks specific performance of the provisions in the leasing agreements that require Shore Financial to return the equipment to plaintiffs upon default. Shore Financial moves to dismiss or transfer the case for improper venue or, in the alternative, to dismiss the complaint for failure to state a claim upon which relief may be granted. Shore Financial also moves for a change of venue. For the reasons set forth below, Shore Financial's motion to dismiss for improper venue [#31] is denied, its motion to dismiss for failure to state a claim [#31] is granted in part and denied in part, and its motion for change of venue [#28] is denied.
According to the complaint, AT&T Capital is a Delaware corporation with its principal place of business in Hoffman Estates, Illinois, and SBC is a Delaware corporation with its principal place of business in Chicago, Illinois. Shore Financial is a Michigan corporation with its principal place of business in Birmingham, Michigan. Plaintiffs seek recovery of at least $541,357.21 under agreements with Shore Financial. Thus, the court has diversity jurisdiction pursuant to 28 U.S.C. § 1332(a).
Starting in 2003, Shore Financial leased telecommunications equipment from plaintiffs. The amended complaint contains allegations arising out of two separate transactions comprised of multiple documents: (1) the first transaction ("the 2003 Lease Agreements") involves Complete Lease Agreement No. 3436800-001 and Complete Lease Agreement No. 3436800-002; and (2) the second transaction ("the 2006 Agreements") involves Acceptance of Offer of Lease for Cisco hardware and installation services and SmartNet maintenance ("the Proposal"), the AT&T Master Lease Agreement, Supplementary Schedules No. 001-3436800-003 and No. 001-3436800-005 to the AT&T Master Lease Agreement, Acceptance Certificates ("the AT&T Acceptance Certificates"), the SBC Master Agreement, an addendum to the SBC Master Agreement, and CSO/Implementation Acceptance Certificates ("the SBC Acceptance Certificates"). Plaintiffs allege that Shore Financial has breached the terms of the agreements by failing to pay for equipment and services in the amount of at least $541,357.21. Additionally, plaintiffs allege that Shore Financial is in wrongful possession of equipment covered under the 2006 Agreements and has failed to surrender the equipment upon demand.
I. The 2003 Lease Agreements
Under the 2003 Lease Agreements, Ameritech Credit Corporation, doing business as SBC Capital Services, leased telecommunications equipment to Shore Financial for thirty-six months and required monthly payments under the two agreements of $2,106.54 and $803.89, respectively, plus applicable taxes. The 2003 Lease Agreements describe the equipment and contain acknowledgment fields above the signature lines that read, "Lessee hereby certifies that he/she has read and agrees to all of the terms and conditions set forth on pages 1-3 of this Complete Lease Agreement." Def.'s Mot. to Dismiss Group Ex. B-1 & B-2. In the acknowledgment fields, Shore Financial is listed as the lessee and Donald J. McKeon, Chief Operating Officer, signed on the company's behalf. McKeon also signed "Acceptance Certificates" six months after executing the 2003 Lease Agreements that state, "The undersigned Lessee hereby certifies that all Equipment described in Complete Lease Agreement... has been delivered to Lessee and installed... and that the Equipment is accepted by Lessee for all purposes under the Lease. Lessee hereby directs Lessor to pay the vendor for the Equipment." Id. The terms of the 2003 Lease Agreements provide:
This lease shall be governed by the laws of the State of Illinois without regard to conflict of law principles. Any litigation arising out of or in relation to this Lease or any transaction contemplated hereby may be instituted in any federal or state court in Illinois, and Lessee waives any objection that it may now or hereafter have to venue in any such court and irrevocably submits to the jurisdiction of any federal or state court in Illinois in any such litigation.
On October 26, 2005, a regional manager for SBC sent a letter to Shore Financial proposing a lease of Cisco hardware and installation services and SmartNet maintenance. The letter detailed, inter alia, the equipment, the equipment cost, and the monthly lease payments. In addition, the letter set the lease commencement date as March 1, 2005 and the lease term as sixty-three months with monthly payments in advance. The letter also sought Shore Financial's permission to file U.C.C. financing statements as necessary to take a security interest in the equipment. The Proposal contained statements, however, that "[t]his proposal is subject to final investment committee approval" and "[s]ubject to final review by Jeffrey Ishbia as to terms agreed upon in previous meetings." Def.'s Mot. to Dismiss Ex. B-3. Furthermore, the Proposal states that "SBC and Cisco agree to have system fully installed by 2-1-06." Id. Shore Financial executed the letter on October 26, 2005 and thereby "agreed to and accepted" the Proposal.
In 2006, plaintiffs moved forward on the Proposal by setting up a finance lease arrangement with Shore Financial. These are the agreements primarily in dispute.
A. The AT&T Master Lease Agreement and Supplementary Schedules
On April 27, 2006, Shore Financial's Chairman of the Board, Jeffrey Ishbia, signed the AT&T Master Lease Agreement, which states, "The parties agree that this Lease is a Finance Lease as defined by Section 2A-103(1)(g) of the Uniform Commercial Code." Def.'s Mot. to Dismiss Ex. B-4.*fn2 The AT&T Master Lease Agreement contains only terms and conditions relating to the leasing arrangement but was "executed in conjunction with one or more written schedules (Supplementary Schedules)." Id. The relationship between the AT&T Master Lease Agreement and the Supplementary Schedules is that "[t]he terms and conditions contained [in the AT&T Master Lease Agreement]  apply to each Supplementary Schedule that is properly executed and made subject to such terms and conditions, as if a separate Lease were executed for each Supplementary Schedule." Id. Besides giving effect to the terms and conditions of the AT&T Master Lease Agreement, the Supplementary Schedules also describe the equipment covered by the lease. Thus, the applicability of the AT&T Master Lease Agreement with respect to the equipment is described as follows: "Lessor hereby leases to Lessee and Lessee hereby leases from Lessor the Equipment described on any Supplementary Schedules executed in conjunction herewith and declared to be and to constitute a part of the Equipment leased hereunder... on the terms and conditions set forth herein and in such Supplementary Schedules." Id. In addition, because the AT&T Master Lease Agreement was to operate as a Finance Lease, the agreement provided for Shore Financial's assignment of any supply contracts to AT&T Capital. Specifically, the agreement states that "[b]y its execution and delivery of each Supplementary Schedule, Lessee hereby... assigns and transfers to Lessor all Lessee's right, title and interest in and to any purchase order, license, contract or arrangement entered into by Lessee with any supplier for the Equipment." Id. This provision anticipated assignment of the SBC Master Agreement and addendum discussed in the next section. The rental payments for the equipment were to be determined by reference to the Supplementary Schedules. Like the 2003 agreement, Section 20 of the AT&T Master Lease Agreement provides:
This lease shall be governed by the internal laws of the State of Illinois. Any litigation arising out of or relating to this Lease or any transaction contemplated hereby may be instituted in any federal or state court in Illinois, and Lessee waives any objection that it may now or hereafter have to venue in any such court and irrevocably submits to the jurisdiction of any federal or state court in Illinois in any such litigation.
The two Supplementary Schedules referred to in the complaint are identical in format. Shore Financial is listed as the lessee, and AT&T Capital is listed as the lessor. The schedules contain, inter alia, a description of the equipment, the cost of the equipment, payment amounts, and the lease term. Above the signature lines for Shore Financial and AT&T Capital, the schedules read:
Lessor hereby leases to Lessee and Lessee hereby leases from Lessor the above-described equipment on the terms and conditions set forth herein and in Master Lease Agreement dated 04/27/06 between Lessor and Lessee. To the extent that any of the provisions of the Master Lease Agreement conflict with any of the terms contained in this Supplementary Schedule, the terms of this Supplementary Schedule shall control.
Def.'s Mot. to Dismiss Exs. B-6 & B-7. In addition, each Supplementary Schedule corresponded with one of the AT&T Acceptance Certificates in which Shore Financial was to certify that "all Equipment described in the Supplementary Schedule has been delivered to Lessee and installed... and that the Equipment is accepted on (date) by Lessee. Lessee hereby directs Lessor to pay the supplier for the Equipment and commence the Lease." Id. Neither the Supplementary Schedules nor the AT&T Acceptance Certificates were executed by Shore Financial.
B. The SBC Master Agreement (the Supply Agreement) and Addendum
On May 31, 2006, Jeffrey Ishbia, on behalf of Shore Financial, executed the SBC Master Agreement. The SBC Master Agreement contains warranties, payment and billing information, remedies for termination, and other terms and conditions applicable to any addenda executed by the parties, which are to be construed as "coterminous" with the SBC Master Agreement. Def.'s Mot. to Dismiss Ex. B-5. Section 3.12 of the SBC Master Agreement reads, "This Agreement will be governed by the laws of Texas, without regard to its conflicts of law rules." Id. The SBC Master Agreement does not contain a forum selection provision.
Shore Financial also executed an addendum under the SBC Master Agreement for the purchase, installation, and maintenance of Cisco AVVID and IPCC equipment. The section of the addendum titled "Scope" explains that "[t]his Addendum covers SBC's sale and [Shore Financial's] purchase of Equipment and Services described in this Addendum." Id. The terms of the addendum also state that "[i]f all lease documentation is not executed and received by SBC-CS as required... [Shore Financial] agrees to and will pay the Total Purchase Price upon receipt of an invoice." Id. In addition to the signed addendum, on June 22 and 23, 2006, Shore Financial's Director of IT signed the SBC Acceptance Certificates certifying that SBC installed the equipment and provided training under the terms and conditions of the agreements.
Before the court can address Shore Financial's motions, it must determine which states' laws apply to the agreements. The 2003 Lease Agreements and the AT&T Master Lease Agreement contain Illinois choice of law provisions. The SBC Master Agreement, on the other hand, contains a Texas choice of law provision. Shore Financial does not contest the validity of the Illinois choice of law provision in the 2003 Lease Agreements, but it argues that the 2006 Agreements are unenforceable because they were never accepted and that Michigan substantive law should apply instead. Plaintiffs respond by arguing that the 2006 Agreements were accepted and enforceable.
"Federal courts sitting in diversity apply the choice-of-law rules of the forum state to determine the applicable substantive law." Hinc v. Lime-O-Sol Co., 382 F.3d 716, 719 (7th Cir. 2004) (citing Jupiter Aluminum Corp. v. Home Ins. Co., 225 F.3d 868, 873 (7th Cir. 2000)). When an agreement contains a choice of law provision, Illinois courts apply Section 187 of the Restatement (Second) of Conflict of Laws. Hall v. Sprint Spectrum L.P., 876 N.E.2d 1036, 1041, 376 Ill. App. 3d 822, 315 Ill. Dec. 446 (Ill. App. Ct. 2007) (citing Maher & Assocs., Inc. v. Quality Cabinets, 640 N.E.2d 1000, 1006, 267 Ill. App. 3d 69, 203 Ill. Dec. 850 (Ill. App. Ct. 1994)). Under Section 187,
The law of the state chosen by the parties to govern their contractual rights and duties will be applied... unless either (a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or (b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, ...