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Valent Biosciences Corporation v. Kim-C1

June 1, 2011

VALENT BIOSCIENCES CORPORATION,
PLAINTIFF-APPELLANT,
v.
KIM-C1, LLC,
DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Cook County. No. 10 CH 11794 Honorable Richard J. Billik, Jr., Judge Presiding.

The opinion of the court was delivered by: Justice Steele

JUSTICE STEELE delivered the judgment of the court, with opinion. Justices Neville and Murphy concurred in the judgment and opinion.

OPINION

Plaintiff, Valent BioSciences Corporation (VBS), appeals an order entered by the circuit court granting the motion filed by defendant Kim-C1, LLC (KIM), pursuant to section 2-619 of the Illinois Code of Civil Procedure (Code) (735 ILCS 5/2-619(a)(1) (West 2008)) dismissing VBS's amended complaint. The circuit court concluded it lacked subject matter jurisdiction over VBS's action seeking to vacate an award issued following the parties' arbitration in California under the Illinois Uniform Arbitration Act (Act) (710 ILCS 5/1 et seq. (West 2008)).

On appeal, VBS contends: (1) justiciability was the actual issue before the circuit court, which possessed subject matter jurisdiction over the action; (2) KIM waived any objection to subject matter jurisdiction in the parties' agreement and in its answer to the amended complaint; and (3) the circuit court erred in dismissing the declaratory judgment count. For the reasons set forth herein, we affirm the circuit court's judgment dismissing VBS's amended complaint in its entirety.

BACKGROUND

VBS is an agricultural products company and an Illinois corporation with its principal place of business in Illinois. KIM is a California limited liability company and has registered offices in California. On July 9, 1999, VBS (by its predecessor in interest, Abbott Laboratories)*fn1 entered into an agreement, entitled "Revised Commercial License, Development and Supply Agreement" (License Agreement). The License Agreement involved VBS's use of and right to market a plant growth regulator commonly known as CPPU, which is applied to crops, including certain fruit, to yield a higher crop for consumer use.

Section 21.3 of the License Agreement provided: "Governing Law. This Agreement shall be construed, interpreted and governed in accordance with the laws of the United States of America and the State of Illinois, except for choice of law rules. Subject to the terms of Section 21.4, the Parties consent to the jurisdiction of the competent courts of the State of Illinois which shall have exclusive jurisdiction over all disputes that may arise under or in connection with this Agreement." (Emphasis added.)

Section 21.4 of the License Agreement,*fn2 entitled "Dispute Resolution," outlined theprocedures for the parties to resolve any disputes arising under the contract. The provision provided:

"Any dispute or claim arising out of or in connection with this Agreement shall be resolved as follows: (i) for a period of thirty (30) days after a dispute arises the respective appropriate officer of the Parties shall negotiate in good faith in an effort to resolve the dispute, and (ii) if the dispute has not been resolved at the close of such thirty (30) day[ ] period the matter shall be submitted by the Parties to arbitration in accordance with the rules of the CPR Institute for Dispute Resolution ('CPR') as identified in Exhibit 5.0." Additionally, the License Agreement provided "[t]he Parties hereby agree to be bound by and fully perform the terms *** contained in the Exhibits, attached hereto and made part hereof, as if the same were fully set forth in this Agreement."

Exhibit 5.0 provided in pertinent part: "The [alternative dispute resolution] proceeding shall take place at a location agreed upon by the parties. If the parties cannot agree, the neutral [arbitrator] shall designate a location other than the principle [sic] place of business of either party or any of their subsidiaries or affiliates."

The License Agreement did not identify a specific location where the dispute resolution proceedings would occur.

In 2007, a dispute under the License Agreement arose between VBS and KIM. Pursuant to the alternative dispute resolution clause in the License Agreement, the parties submitted the dispute to arbitration. The arbitration was held in California and resulted in a final arbitration award entered on March 28, 2008. Subsequent to the 2008 award, the parties had another dispute regarding the License Agreement and certain provisions of the 2008 award, which led to arbitration. The second arbitration was also held in California. An interim arbitration award was issued on January 29, 2010.

On March 22, 2010, VBS filed a two-count complaint in the circuit court of Cook County in Chicago, Illinois. Count I sought to vacate the interim arbitration award pursuant to section 12 of the Act (710 ILCS 5/12 (West 2008)). Specifically, VBS challenged four of the rulings (rulings 2, 3, 4 and 5) issued against VBS as exceeding the arbitrator's powers. VBS also asserted the parties consented to Illinois courts having exclusive jurisdiction over any disputes under the License Agreement. Count II requested a declaratory judgment regarding the parties' controversy about whether Illinois courts possessed exclusive jurisdiction to enforce or vacate the arbitration award.

On March 31, 2010, KIM filed an action in a California federal district court seeking to confirm the final 2010 arbitration award, which was issued on March 30, 2010. On March 31, 2010, VBS filed a motion for leave to file an "Amended Complaint to Vacate Arbitration Award and for Other Equitable Relief" instanter, which the circuit court granted in an order entered on April 8, 2010. The amended complaint contained the same two counts. On the same day, the circuit court entered and continued VBS's additional motion to vacate the arbitration award filed separately on March 31, 2010.

On April 27, 2010, KIM filed an answer to the amended complaint. While denying the License Agreement conferred exclusive jurisdiction to Illinois, KIM admitted the circuit court possessed subject matter jurisdiction. Additionally, KIM requested the circuit court to confirm the 2010 arbitration award in its prayer for relief. However, in KIM's written memorandum in opposition to VBS's motion to vacate filed on May 24, 2010, KIM noted that it was not waiving its objection to Illinois courts lacking jurisdiction under the Act. On June 14, 2010, the circuit court scheduled a hearing on VBS's motion to vacate the award for September 14, 2010.

On May 19, 2010, KIM filed a motion to dismiss VBS's amended complaint*fn3 pursuant tosection 2-619(a)(1) of the Code (735 ILCS 5/2-619(a)(1) (West 2008)) asserting the License Agreement's "silence" to the location of the arbitration failed to confer subject matter jurisdiction to the Illinois courts under the Act. VBS filed a response in opposition to KIM's motion claiming that certain provisions in the License Agreement provided for Illinois to have exclusive jurisdiction over any disputes, including whether to vacate the arbitration award. VBS also contended KIM waived its objection to subject matter jurisdiction under section 21.3 of the License Agreement and by admission in its answer and prayer for relief.

After briefing and a hearing, the circuit court entered a written ruling on June 24, 2010, granting KIM's motion to dismiss VBS's amended complaint for lack of subject matter jurisdiction. On July 19, 2010, ...


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