Contractors Material, Inc. v. Halquist Stone Company, Inc.

Filing 18

MEMORANDUM Opinion and Order Signed by the Honorable Sharon Johnson Coleman on 8/24/2017:Mailed notice(rth, )

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS
CONTRACTORS MATERIAL, INC.,)
)
Plaintiff,
)
)
v.
)
)
)
HALQUIST STONE COMPANY, )
INC.,
)
)
Defendant.
)

Case No. 17 C 3931
Judge Sharon Johnson Coleman

MEMORANDUM OPINION AND ORDER
Plaintiff Contractors Material, Inc. (“CMI”) filed a two-count complaint alleging breach of
contract against defendant Halquist Stone Company, Inc. (“Halquist”). Halquist moves to dismiss
[14] the complaint for forum non conveniens and, alternatively, for failure to state a claim pursuant
to Federal Rule of Civil Procedure 12(b)(6).
Background
The following facts from the complaint are accepted as true for purposes of ruling on the
motion to dismiss. CMI originally filed the case in the Circuit Court of Cook County, Law Division.
Halquist removed the case to federal court and filed the motion now under consideration.
According to the complaint, CMI is an Illinois corporation that supplies building materials and
represents other material suppliers to provide material for construction projects. Halquist is a
Wisconsin corporation that quarries, fabricates, and supplies stone for use as building materials.
Sometime prior to 2011, Halquist contacted CMI at its office in Palatine, Illinois, to
negotiate with CMI about supplying Halquist stone to CMI’s customers. Around the same time,
CMI began tracking a job for a large construction project in Hinsdale, Illinois. The project involved
the construction of several townhomes and condominiums in a subdivision called Hamptons of
Hinsdale. In April 2011, CMI proposed to the general contractor on the Hamptons of Hinsdale
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project that it use stone from Halquist. The contractor agreed.
Traditionally, invoicing and paying contractors for construction projects (“Traditional
Method”) is a flow chart whereby material suppliers invoice supply house contractors, like CMI,
who invoice the subcontractors, who invoice the general contractor, who invoices the owner. Each
contractor builds in a profit for itself in the invoice. Payments are then made in the reverse order of
invoicing. The owner pays the general contractor, who pays the subcontractor, who pays the supply
house, who pays the material supplier. On large construction projects payments are usually paid
from escrow accounts set up by title insurance companies acting as intermediaries for investorowners, and/or lenders. The use of escrow accounts adds some steps to the invoicing and payment
process so there can be delays.
Count I of the complaint alleges that Halquist and CMI entered an oral agreement in April
2011 in which CMI agreed to buy and Halquist agreed to deliver rustic full veneer stone at the price
of $228.00/ton, thinstone flats at $6.75 or $7.25/square foot, and thinstone corners at $9.40/linear
foot. CMI would then deliver the stone to the Hamptons of Hinsdale project. Halquist and CMI
allegedly agreed to the traditional payment method and CMI warned Halquist that there could be
delays in payment of 60 to 90 days. CMI alleges that Halquist agreed to the terms of payment.
The complaint further alleges that Halquist began assessing finance charges on payments
over 60 days and used credit “people” to harass CMI, including calling CMI daily for money.
Halquist was also allegedly refusing to deliver stone for other projects unless CMI paid Halquist on
the Hamptons of Hinsdale project. The complaint alleges that Halquist sought to increase its control
and profits on the project and cut CMI out of the deal.
Count II of the complaint alleges that during work on the third building of the Hamptons of
Hinsdale project in October 2013, Halquist proposed to CMI that invoices and payments for the
project be handled by direct delivery, meaning Halquist delivers the stone to the mason, who then
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invoices the general contractor. Halquist proposed continuing to use CMI trucks and equipment for
delivery, paying CMI for the cost of delivery plus a commission, instead of CMI sharing in the
profits through the supply chain. The parties entered an oral agreement in October 2013 for
Halquist to deliver to the mason on the Hamptons project and Halquist would pay CMI a
commission of the difference in price between what Halquist charged CMI for the stone and what
CMI charged the mason for the stone for the first two buildings minus Halquist’s freight costs. The
project proceeded, but payments were not faster. CMI contends that Halquist refused to pay some
of the commissions owed to it and otherwise lost profits as a result of Halquist’s breach each of the
oral agreements.
Legal Standard
When a defendant moves to dismiss for forum non conveniens based on a forum selection
clause, the Court applies Rule 12(b)(3) analysis and it is the plaintiff’s burden to establish that venue
is proper. See Faur v. Sirius Int'l Ins. Corp., 391 F. Supp. 2d 650, 657 (N.D. Ill. 2005); see also Robrinzine
v. Big Lots Stores, Inc., No. 15-CV-7239, 2016 WL 3459733, at *4 (N.D. Ill. June 24, 2016). “Under
Rule 12(b)(3), which allows for dismissal for improper venue, the district court assumes the truth of
the allegations in the plaintiff’s complaint, unless contradicted by the defendant’s affidavits.” Deb v.
SIRVA, Inc., 832 F.3d 800, 809 (7th Cir. 2016).
A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not its
merits. Fed. R. Civ. P. 12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). When
considering the motion, the Court accepts as true all well pleaded facts in the plaintiff’s complaint
and draws all reasonable inferences from those facts in the plaintiff’s favor. AnchorBank, FSB v.
Hofer, 649 F.3d 610, 614 (7th Cir. 2011). To survive dismissal, the complaint must not only provide
the defendant with fair notice of a claim’s basis, but must also be facially plausible. Ashcroft v. Iqbal,
556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550
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U.S. 544, 555, 127 S.Ct. 1955, 167 L. Ed. 2d 929 (2007).
Discussion
Halquist moves to dismiss the complaint based on forum non conveniens due to a forum
selection clause in the parties’ written agreement. Alternatively, Halquist moves to dismiss for failure
to state a claim of breach of an oral agreement. The Court will first address the issue of forum.
Halquist attached to its motion an affidavit of Wade T. Balson, the Chief Financial Officer
and Comptroller of Halquist. Dkt. 14-6, Ex. F. Attached to Mr. Balson’s affidavit is a scanned copy
of a February 15, 2010, agreement signed by CMI’s President and Vice President, and a form
contract that Halquist uses that contain two forum selection clauses. Id.
A forum selection clause is “prima facie valid and should be enforced unless enforcement is
shown by the resisting party to be unreasonable under the circumstances.” Faur, 391 F. Supp. 2d at
657 (citing Bonny v. The Soc'y of Lloyd's, 3 F.3d 156, 159 (7th Cir. 1993)). The Supreme Court has
enumerated four situations when a forum selection clause will be unenforceable: (1) its formation
was induced by fraud or overreaching; (2) the plaintiff would be deprived of its day in court because
of inconvenience or unfairness; (3) the chosen law would deprive the plaintiff of a remedy; or (4)
enforcement of the clause would contravene public policy. See Bonny v. Soc'y of Lloyd's, 3 F.3d 156,
160 (7th Cir. 1993) (citing Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 591, 111 S.Ct. 1522, 1528,
113 L.Ed.2d 622 (1991), and M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12–18, 92 S.Ct. 1907, 32
L.Ed.2d 513 (1972)).
There are two forum selection clauses in the agreement that Halquist attached to its motion.
The agreement defines CMI as “Customer” and Halquist as “Creditor.” The first broadly covers all
dealings between the parties:
Customer agrees that any dealings between the parties shall be governed by the
laws of the State of Wisconsin, and Customer further agrees per Creditor’s option
to the jurisdiction of the courts of Waukesha County, state or federal, to
determine any controversy arising in their dealings.
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Dkt. 14-6, Ex. 1 to Balson Affidavit, February 2010 Contract, p. 1. The second is narrower in scope:
Customer agrees to jurisdiction, and venue, at the Circuit Court of Waukesha
County, Wisconsin, at the option of Halquist Stone, for any action to collect any
delinquent balance due.
Dkt. 14-6, Ex. 1 to Balson Affidavit, February 2010 Contract, p. 3. CMI makes several arguments
opposing enforcement of the forum selection clauses. First, CMI asserts that the clauses conflict
and, if reconciled, take the complaint at issue here outside the scope of the clauses. This Court finds
that the clauses do not conflict rather the first broadly provides for all disputes to be within the
jurisdiction of the courts of Waukesha County, and the second specifically places jurisdiction for
actions to collect delinquent balances in the Circuit Court of Waukesha County. The cause of action
at issue here is not for collection of delinquent balances and, thus, jurisdiction is not specifically
vested in the Circuit Court of Waukesha County. The issues in the complaint are controversies
arising from the parties’ dealings and, thus, jurisdiction is vested in the courts of Waukesha County
at the election of Halquist.
Next, CMI argues that the clause is not enforceable because it does not make venue
exclusive. CMI cites to Muzumdar v. Wellness Int’l Network, Ltd., 438 F.3d 759, 762 (7th Cir. 2006), and
Paper Express Ltd. v. Pfankuch Maschinen GmbH, 972 F.2d 753, 757 (7th Cir. 1992), to support this
proposition. Neither case contains a similar provision to the ones at issue here. The court in
Muzumdar found a provision that stated “SHALL BE PROPER ONLY” or “SHALL BE PROPER”
in Dallas County, Texas, was sufficiently mandatory to make venue exclusive in Dallas County,
Texas. Muzumdar, 438 F.3d at 762. In Paper Express, the court found the phrase “shall be filed,”
coupled with the phrase “all disputes,” sufficiently manifested intent to exclusivity. Paper Express,
Ltd., 972 F.2d at 756. “The law is clear: where venue is specified with mandatory or obligatory
language, the clause will be enforced; where only jurisdiction is specified, the clause will generally not
be enforced unless there is some further language indicating the parties’ intent to make venue
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exclusive.” Id. at 757. The clauses at issue here, however, provide for jurisdiction in Wisconsin, state
or federal at Halquist’s election, and further refer in all instances to Waukesha County as the venue.
Additionally, the first clause states “all disputes shall…”. This is language indicates the parties’ intent
to make venue in the courts of Waukesha County, state or federal, exclusive.
Compare the clauses at issue here with Freitsch v. Refco, Inc., where the Seventh Circuit Court
of Appeals enforced the following provision: “place of jurisdiction ... is the registered office of the
trustee [in Germany], to the extent permissible under the law.” 56 F.3d 825, 827 (7th Cir. 1995).
Moreover, in Stifel, Nicolaus & Co. v. Lac du Flambeau Band of Lake Superior Chippewa Indians, the
district court found that, “Neither Muzumdar nor Paper Express directs this court to ignore those
contractual provisions [placing venue in ‘Western District of Wisconsin, or failing that in state
court,’] simply because the clause makes jurisdiction here permissible, rather than mandating a single
court to the exclusion of all others, and defendants cite no cases suggesting that this is
unenforceable.” 980 F. Supp. 2d 1078, 1089 (W.D. Wis. 2013). This Court therefore finds that the
forum selection clause is not unenforceable on that basis.
CMI further argues that the February 2010 contract is unenforceable because it never signed
the agreement. CMI contends that because its officers, Gred Stys and Andy Stys, signed the
agreement it was in their personal capacity and not as officers of CMI. However, an agent of a
disclosed principal is generally not personally bound, but binds only the corporation unless he agrees
to be personally liable. See, e.g., Knightsbridge Realty Partners, Ltd.-75 v. Pace, 101 Ill. App. 3d 49, 53, 27
N.E.2d 815 (1st Dist. 1981) (finding dismissal was improper where the defendant signed his name,
followed by the word President, and a provision in the agreement stated that the defendant shall
execute a personal degree at closing, and thus a question remained about the defendant’s intent to be
bound by the purchase agreement).
Here, the February 2010 agreement defines CMI as “Creditor,” Greg Stys as “Owner,” and
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“Vice President,” and Andy Stys as “President.” The second page operates as a personal guarantee,
which both Greg Stys and Andy Stys signed. The signature block states that “All Partners or
Officers Of Customer Should Sign And Be Personally Bound.” The third page, titled Terms and
Conditions is signed by Greg Stys and contains a provision providing that,
In the event of any changes in the ownership of the Customer or the Customer’s business, the
Customer, and personal guarantor(s), if any, shall be jointly and severally liable with any successors
for all sales to such successors that originate and are charged to the Customer’s account before
Halquist Stone receives notice of such change in ownership in the manner set forth below; the terms
of this credit account, and personal or guaranty if any, apply to Customer and to any successor in
interest (corporate or non-corporate) to Customer’s business.
Thus, the intent is clear from the agreement read as a whole that CMI is bound as Customer by the
signatures of its officers and those officers, Greg and Andy Stys, are jointly and severally liable as
personal guarantors. Thus, this Court finds that CMI has not established that enforcement of the
February 2010 agreement with its forum selection clause is unreasonable. This Court further finds
that CMI has not demonstrated any of the scenarios set forth by the Supreme Court to overcome
the presumption that a forum selection clause is enforceable.
Conclusion
Because this Court finds that the parties agreed to a Waukesha County, Wisconsin, forum by
execution of the February 2010 agreement, this Court grants Halquist’s motion to dismiss. Having
found that this Court is not the appropriate forum, this Court need not consider the sufficiency of
the complaint under Federal Rule of Civil Procedure 12(b)(6). The complaint is dismissed without
prejudice for re-filing in the appropriate forum.
IT IS SO ORDERED.
ENTERED:

Dated: August 24, 2017

____________________________________
SHARON JOHNSON COLEMAN
United States District Judge
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