Fifth District affirms Hylla on ruling over forum selection clause

By Bethany Krajelis | Feb 7, 2013

The Fifth District Appellate Court has affirmed the dismissal of a Madison County lawsuit based on a contract’s clause over forum selection.

In an unpublished order issued Wednesday, the appeals panel agreed with Circuit Judge Dave Hylla’s March 2012 decision to grant a motion to dismiss filed by the defendant in a breach of contract suit.

J.F. Electric, Inc. in October 2011 filed a one-count complaint against HD Supply, Inc., claiming a breach of contract stemming from its acceptance of defendant’s bid for steel utility poles to be used in a utility line installation project in Kansas.

As the project progressed, J.F. asserts that it became clear that HD Supply wouldn’t be able to meet certain specifications of the bid. Its failure to do so, according to the complaint, damaged J.F. in the amount of about $362,392, the cost to purchase steel poles from a different supplier.

The defendant in January 2012 filed a motion to dismiss the suit, along with a copy of the 10-page quote.

The last page of the quote included terms and conditions of the sales, which stated that “any legal action arising under or related to this Agreement shall be brought in Cobb County, Georgia,” the location of the HD Supply’s corporate headquarters.

In its motion to dismiss, HD Supply asserted that this language constituted a valid and enforceable forum selection clause showing the “parties contractually agreed to the exclusive forum and venue in Cobb County, Georgia.”

Hylla agreed, dismissed the complaint and denied J.F.’s motion to reconsider. On appeal, J.F. argued that Hylla erred in granting the motion to dismiss because the clause was unenforceable and invalid.

The plaintiff claimed that the clause is “procedurally unconscionable” because it “was neither negotiated nor agreed upon” and that it was not given “fair notice” of clause.

Both of these arguments, according to the appellate court order, were based on the affidavit of a J.F. employee who claimed he never read page 10 of the quote because he thought page 9 was the “the conclusion of the quote, with most of that page left blank following the indication of the total price."

J.F. in its briefs implied deception and “unfair surprise” on HD Supply’s part.

In an unpublished order delivered by Justice Stephen Spomer, the appeals panel didn’t buy that argument. Justices Melissa Chapman and James Wextten concurred.

“[T]he simple fact is that the record on appeal shows that a 10-page quote was transmitted to the plaintiff, that each page of the quote was clearly marked as being 1 of 10 pages, and that the plaintiff nevertheless failed to read the final page of the quote, which delineated the terms and conditions that would govern the parties' relationship if the quote were accepted.”

“Accordingly,” Spomer wrote for the court, “any ‘surprise’ visited upon the plaintiff resulted from a lack of diligence and attention to detail on the part of the plaintiff, not from deception on the part of the defendant.”

J.F. Electric also argued on appeal that the forum selection clause is unreasonable.

To analyze this argument, the appellate court looked to Calanca v. D&S Manufacturing Co. (1987), which Spomer wrote is “the seminal Illinois case discussing when a forum selection clause may be invalidated on the basis that it is unreasonable.”

The court in Calanca laid out six factors to look at when deciding whether a forum clause is unreasonable.

According to the order, these factors include: 1) which law governs the contract’s formation and construction, 2) the parties’ residences, 3) where the contract was executed or performed, 4) location of parties and witnesses, 5) inconvenience to the parties and 6) if the clause was equally bargained for.

“Applying these six factors to the case at bar, we conclude that the plaintiff has failed to meet its burden to prove that trial in Cobb County, Georgia, would be ‘so gravely difficult and inconvenient’ that the plaintiff would ‘for all practical purposes be deprived of’ the plaintiff's day in court,” Spomer wrote.

J.F. Electric also argued on appeal that the contract’s clause is contrary to public policy.

It asserts that section 10 of the Building and Construction Contract Act would “invalidate the clause is the construction project at issue was to be performed in Illinois,” according to the order.

Although it acknowledged that section 10 doesn’t directly invalidate the clause because the project was in Kansas, J.F. asserted that that this section highlights “the public policy of Illinois disfavoring forum selection clauses in construction contracts."

“We do not agree,” Spomer wrote. “Had the General Assembly wished to craft section 10 so that it invalidated forum selection clauses in construction contracts to be performed outside of Illinois, but nevertheless involving Illinois parties, it could have done so. It did not.”

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