Leon's Autosales Inc. d/b/a The Autowarehouse v. Leedom and Associates, LLC et al

Filing 33

MEMORANDUM OPINION AND ORDER signed by the Honorable Matthew F. Kennelly on 8/19/2015: For the reasons stated in the accompanying Memorandum Opinion and Order, the Court concludes that this case was filed in an improper venue. Thus the Court need n ot deal with the other arguments defendants make for dismissal. The Court may, rather than dismissing the case, transfer it to an appropriate district, which in this case would be the Middle District of Florida. See 28 U.S.C. §§ 1406(a) ( permitting transfer to a district where venue is proper), 85(a) (describing geographic coverage of the Middle District of Florida). The Court will transfer the case if Leon's prefers transfer to dismissal; the two alternatives have different consequences regarding appealability. The case is set for a status hearing on August 27, 2015 at 9:30 a.m. so that Leon's can advise the Court regarding its preference in this regard. (mk)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
LEON'S AUTO SALES, INC. d/b/a
THE AUTO WAREHOUSE,
Plaintiff,
vs.
LEEDOM AND ASSOCIATES, LLC,
LEEDOM MANAGEMENT GROUP, INC.,
AUTOLAW GROUP, PA, and DEBRA
DAWN,
Defendants.

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Case No. 15 C 3069

MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:
Leon's Auto Sales, Inc. filed suit in Illinois state court against Leedom and
Associates, LLC, Leedom Management Group, Inc., Autolaw Group, and Debra Dawn
in the Circuit Court of Cook County. Leon's asserts claims for unauthorized practice of
law, conspiracy to engage in unauthorized practice of law, violation of the Illinois
Consumer Fraud and Deceptive Business Practices Act (ICFDBPA), conspiracy to
violate the ICFDBPA, negligence, and breach of contract. Defendants removed the
case to federal court based on diversity of citizenship.
Defendants have moved to dismiss for lack of personal jurisdiction, lack of proper
venue, and failure to state a claim. The Court concludes that venue is improper and
thus need not address the other grounds for dismissal.
Background
The Court takes the following allegations from the complaint filed by Leon's. In

June 2013, Leon's, an automobile dealer, sent two of its representatives to attend a twoday presentation in San Francisco, California hosted by Leedom's Twenty Groups – The
Finance Masters, an entity related to Leedom and Associates. At the presentation,
representatives of Leon's attended a two hour presentation put on by Debra Dawn, an
attorney who is affiliated with Autolaw (a law firm) and Leedom. During the
presentation, Dawn discussed compliance with various consumer regulatory agencies'
rules and regulations. She urged those in attendance to have a compliance audit
performed by professionals with expertise in regulatory compliance and informed the
attendees that she specialized in such reviews. After the presentation, the
representatives of Leon's asked Dawn to perform a compliance audit.
Later in June 2013, Dawn contacted Leon's about performing the requested
compliance audit in late September 2013. Dawn sent Leon's a draft contract entitled
"Compliance Audit Contract" and asked for a payment of $5,000. The draft contract
contained a choice of law and forum selection clause stating that "[t]his Contract, and
any arbitration or litigation arising therefrom, shall be governed by the law of the State of
Florida. Proper venue shall, and Client agrees to be subject to, a court of competent
jurisdiction for Sarasota County, Florida." Def.'s Jt. Mot. to Dismiss, Ex. B.
Leon's says that it did not sign the draft contract. In its complaint, however,
Leon's alleges that in late September 2013, Leedom sent Dawn to Leon's office in
Chicago to perform the compliance audit Leon's had requested. After the audit,
Leedom sent Leon's an invoice in the amount of $6,338.82 for the audit and related
travel expenses, the amount called for by the contract. Leon's says that it paid Leedom
in full.

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In November 2013, a customer named Marquita Purnell purchased a car from
Leon's. Leon's says that it documented the purchase with a form contract that Dawn
had reviewed during the compliance audit. Purnell later sued Leon's on the ground that
the form contract violated the Federal Truth in Lending Act. After these events,
attorneys for Leon's reviewed the form contract that Dawn had reviewed and discovered
the contract did not comply with several state and federal laws. Leon's subsequently
filed this suit.
Leon's alleges that Leedom, Leedom Management Group (LMG), Autolaw, and
Dawn engaged in and conspired to engage in the unauthorized practice of law because
they knew Dawn was not authorized to practice law in Illinois, but nonetheless sent her
to perform legal services for Leon's in this state. Leon's further contends that Leedom,
LMG, Autolaw, and Dawn violated and conspired to violate the ICFDBPA because their
failure to inform Leon's, among other things, that they were not licensed to provide legal
services in Illinois constituted a deceptive business practice. Leon's also contends that
Autolaw and Dawn committed legal malpractice when they provided Leon's with a form
contract that violated federal and state law. Leon's contends that Leedom and LMG are
vicariously liable for Dawn's negligence. Finally, Leon's contends that Leedom and
LMG are liable for breach of contract because they failed to provide a proper
compliance audit as required by the contract.
In their motion to dismiss, defendants argue that the Court should dismiss all of
Leon's claims because the contract's forum selection clause provides that the proper
venue for suit is a court of competent jurisdiction for Sarasota County, Florida. Leon's
responds that the forum selection clause is not enforceable because the contract was

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never signed. Leon's also argues that the forum selection clause is permissive rather
than mandatory and thus does not require dismissal of this case despite its filing in
Illinois.
Discussion
A motion to dismiss based on a forum selection clause is treated as a Rule
12(b)(3) motion to dismiss for improper venue. Auto. Mechanics Local 701 Welfare &
Pension Funds v. Vanguard Car Rental USA, Inc., 502 F.3d 740, 746 (7th Cir. 2007).
The plaintiff bears the burden of establishing that venue is proper. Interlease Aviation
Invs. II (Aloha) LLC v. Vanguard Airlines, Inc., 262 F. Supp. 2d 898, 913 (N.D. Ill. 2012).
When evaluating a Rule 12(b)(3) motion, a court may consider facts beyond the
complaint but accepts the plaintiff's allegations as true and resolves any factual conflicts
in the plaintiff's favor. Moore v. AT&T Latin Am. Corp., 177 F. Supp. 2d 785, 788 (N.D.
Ill. 2001).
1.

The unsigned contract
As indicated earlier, Leon's contends that the contractual forum selection

provision is unenforceable because it never executed the contract. But a written
contract does not necessarily have to be signed in order to be binding on the contract's
parties. Whether an unsigned writing constitutes a binding contract depends on the
parties' intention, and a party's assent to an unsigned writing's terms can be shown in
other ways, including by the party's conduct. See Hedlund & Hanley, LLC v. Bd. of Trs.
of Cmty. Coll. Dist. No. 508, 376 Ill. App. 3d 200, 206, 876 N.E.2d 1, 6 (2007). "[A]
party named in a contract may, by his acts and conduct, indicate his assent to its terms
and become bound by its provisions even though he has not signed it." Landmark

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Props., Inc. v. Architects Int'l–Chicago, 172 Ill. App. 3d 379, 383, 523 N.E.2d 603, 606
(1988) (parties were bound by conduct to the terms of an unsigned contract because
correspondence indicated that all services were performed and payment would be
forthcoming). Similarly, under Florida law, unsigned contracts and their terms are
binding where both parties have performed under the contract. Sosa v. Shearform Mfg.,
784 So. 2d 609, 610 (Fla. Dist. Ct. App. 2001); Gateway Cable T.V., Inc. v. Vikoa
Constr. Corp., 253 So. 2d 461, 463 (Fla. Dist. Ct. App. 1971).
In this case, Leon's concedes that it received the contract. See Compl. ¶¶ 31-33
& Ex. 2; Defs.' Ex. B. Leon's also concedes that Dawn performed the compliance audit
contemplated by the unsigned contract and that it paid the specified fee in full. Compl.
¶ 35. In short, all concerned acted as if the contract was in effect and performed their
obligations, even if incompetently, as Leon's alleges. The Court concludes for purposes
of the motion to dismiss that the contract's terms are binding under both Illinois and
Florida law.
2.

Choice of law
The next question is which state's law governs the question of whether the claims

Leon's asserts must be litigated in a court in Florida. The contract contains a Florida
choice of law clause. Thus the real question is whether that clause is enforceable.
Both Florida and Illinois law generally presume a contractual choice of law clause is
enforceable if the underlying contract is valid. See Belleville Toyota, Inc. v. Toyota
Motor Sales, U.S.A., Inc., 199 Ill. 2d 325, 351, 770 N.E.2d 177, 194 (2002) ("Generally,
choice of law provisions will be honored"); Mazzoni Farms, Inc. v. E.I. DuPont De
Nemours and Co., 761 So. 2d 306, 311 (Fla. 2000) ("the choice of law provision is

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presumptively valid"). Because the law of the two states is effectively the same, the
Court need not concern itself with which state's law governs the enforceability of the
choice of law provision. See Midwest Grain Prods. of Ill., Inc. v. Productization,
Inc., 228 F.3d 784, 787 (7th Cir. 2000) (federal court sitting in diversity applies choice of
law rules of forum state); Kramer v. Weedhopper of Utah, Inc., 204 Ill. App. 3d 469, 474,
562 N.E.2d 271, 274 (1990) (Illinois law requires a choice of law determination only
when the choice will make a difference in the outcome)
Leon's has offered no reason why the Court should not enforce the contract's
choice of law provision. The Court concludes that the provision is enforceable and
therefore will apply Florida law in assessing the validity of, and interpreting, the
contract's forum selection clause.
3.

The forum selection clause
Under Florida law, a forum selection clause "should be enforced in the absence

of a showing that enforcement would be unreasonable or unjust." Manrique v. Fabbri,
493 So. 2d 437, 440 (Fla. 1986). Florida courts follow the Supreme Court's test for
determining unreasonableness of forum selection clauses developed in The Bremen v.
Zapata Off-Shore Co., 407 U.S. 1 (1972). "[T]he test of unreasonableness is not mere
inconvenience or additional expense . . . as noted by the [Supreme] Court in Zapata."
Manrique, 493 So. 2d at 440. Under Zapata, it is
incumbent on the party seeking to escape his contract to show that trial in
the contractual forum will be so gravely difficult and inconvenient that he
will for all practical purposes be deprived of his day in court. Absent that,
there is no basis for concluding that it would be unfair, unjust, or
unreasonable to hold that party to his bargain.
Zapata, 407 U.S. at 18.

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Leon's makes no argument that requiring it to pursue its claims in Florida will
effectively deprive it of its day in court. For this reason, the presumption favoring the
enforceability of the contract's forum selection clause carries the day.
The final question is whether the forum selection clause applies to the claims
Leon's has asserted in this case. Florida law draws a distinction between mandatory
and permissive forum selection clauses. See Celistics, LLC v. Gonzalez, 22 So. 3d
824, 825 (Fla. Dist. Ct. App. 2009) ("[M]andatory forum selection clauses provide 'for a
mandatory and exclusive place for future litigation, whereas permissive forum selection
clauses 'constitute nothing more than a consent to jurisdiction and venue in the named
forum and do not exclude jurisdiction or venue in any other forum.'") (quoting Garcia
Granados Quinones v. Swiss Bank Corp. (Overseas), S.A., 509 So. 2d 273, 274-75
(Fla. 1987). The word "shall" is a word of exclusivity that causes a forum selection
clause to "most reasonably interpreted to mandate venue." See Slater v. Energy Servs.
Grp. Int'l, Inc., 634 F.3d 1326, 1330 (11th Cir. 2011); Global Satellite Commc'n Co. v.
Starmill U.K. Ltd., 378 F.3d 1269, 1272 (11th Cir. 2004). The forum selection clause in
the parties' contract says that "proper venue shall, and Client agrees to be subject to, a
court of competent jurisdiction for Sarasota County, Florida." Defs.' Jt. Mot. to Dismiss,
Ex. B. Because the forum selection clause contains the imperative "shall," it is "most
reasonably interpreted to mandate venue." Slater, 634 F.3d at 1330.
The forum selection clause applies to "any arbitration or litigation arising" from
the contract. Defs.' Jt. Mot. to Dismiss, Ex. B. The contract provided for a compliance
audit, and all of the claims that Leon's asserts involve the conduct of the compliance
audit or deception by defendants relating to the contract or the audit. Thus it is rather

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apparent that all the claims Leon's asserts arise from the contract. Indeed, Leon's does
not argue otherwise. The contract therefore requires the claims to be litigated in a court
(federal or state) of competent jurisdiction for Sarasota County, Florida.
Conclusion
For the reasons stated above, the Court concludes that this case was filed in an
improper venue. Thus the Court need not deal with the other arguments defendants
make for dismissal. The Court may, rather than dismissing the case, transfer it to an
appropriate district, which in this case would be the Middle District of Florida. See 28
U.S.C. §§ 1406(a) (permitting transfer to a district where venue is proper), 85(a)
(describing geographic coverage of the Middle District of Florida). The Court will
transfer the case if Leon's prefers transfer to dismissal; the two alternatives have
different consequences regarding appealability. The case is set for a status hearing on
August 27, 2015 at 9:30 a.m. so that Leon's can advise the Court regarding its
preference in this regard.
Date: August 19, 2015
_______________________________
MATTHEW F. KENNELLY
United States District Judge

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