Components for Indus. v. Auto Kabel N. Am., Inc.

COMPONENTS FOR INDUSTRY, AND OTHERS, INC., Plaintiff, v. AUTO KABEL NORTH AMERICA, INC., Defendant.

Case No. 19-cv-7152

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

August 5, 2020

Judge Robert M. Dow, Jr.

MEMORANDUM OPINION AND ORDER

For the reasons set forth below, Defendant's motion to dismiss [10] is denied, and Plaintiff's motion to strike [19] is denied as moot. The parties are directed to file a joint status report no later than August 21, 2020, in which they (a) set out a proposed discovery plan and (b) indicate whether they have mutual interest at this time in a referral to the Magistrate Judge for an early settlement conference.

I. Background

For the purpose of resolving this motion to dismiss, the details of the underlying dispute are not all that important. At some point Plaintiff Components for Industry, and Others, Inc. ("Plaintiff") and Defendant Auto Kabel North America, Inc. ("Defendant") entered into a contract. Defendant agreed to purchase specified quantities of various items for negotiated bulk prices per item. These terms were memorialized in Purchase Orders that Defendant sent to Plaintiff. Plaintiff claims that Defendant then tried to reduce the quantity, breaching the contract.

With the exception of when, exactly the contract was formed, these details are neither here nor there at the moment, and even that temporal issue need not be resolved on this motion. Defendant argues that its Purchase Orders pertaining to these sales, which both parties agree "memorialize" the contract terms, incorporate a separate document which in turn provides for exclusive venue in Europe and in any event requires arbitration in Germany. The relevant language in the Purchase Order is as follows, with the second two lines set in a typewriter-style serif font:

We order acc. to the last version of our purchasing conditions, see:

TT AUTOKABEL CO E KO TAKT E KAU T L

TT AUTOKABEL CO E CO T[illegible]CT U C AS T L

We order acc. to the last version of our purchasing conditions, see:

TT AUTOKABEL CO E KO TAKT E KAU T L

TT AUTOKABEL CO E CO TCT U C AS T L

Defendant claims that this language incorporates their General Purchasing Conditions ("GPCs").¹ The GPCs define "AK" to be one of several European Auto Kabel companies that are not parties to the contract or this litigation, and explains that the "GPC shall apply in any business relationship * * * between the Supplier [here, Plaintiff] * * * and all AK affiliated companies." [11-1 at 21.] The venue and arbitration provisions respectively provide:

Exclusive venue shall be at the District Court competent for the residence of AK. AK shall be entitled to open litigations at each Court competent fort he [sic] Supplier. The contractual language is German. The place of performance shall be the location determined by AK or the affiliated company of AK.

On request of AK the supplier shall agree to an arbitration agreement according to the rules of the Deutschen Institution fur Schiedsgerichtsbarkeit e.V. (DIS) excluding any other recourse to the courts if AK believes that the arbitration and the execution of awards of a foreign arbitration court seems to be more appropriate or effective or easier compared to the rules of a foreign court. The number of arbitrators shall be three. [URL omitted] In the arbitration the material German Law shall apply exclusively.

Defendant has moved pursuant to Rule 12(b)(3) to dismiss for improper venue, arguing that this dispute must be arbitrated in Germany or litigated in a European District Court. Plaintiff has also moved to strike Defendant's reply brief.

II. Legal Standard

The present dispute must be resolved using federal procedural rules and state contract law. Federal Rule of Civil Procedure 12(b)(3) allows a defendant to seek dismissal for "improper venue." The plaintiff bears the burden of establishing that the chosen venue is proper. See Int'l Travelers Cheque Co. v. BankAmerica Corp., 660 F.2d 215, 222 (7th Cir. 1981) (citing Grantham v. Challenge-Cook Bros., Inc., 420 F.2d 1182, 1184 (7th Cir. 1970)). A court deciding a Rule 12(b)(3) motion must take the allegations in the complaint as true, unless contradicted by the defendant's affidavits. Nagel v. ADM Investor Servs., Inc., 995 F. Supp. 837, 843 (N.D. Ill. 1998) see also Jackson v. Payday Financial, LLC, 764 F.3d 765, 773 (7th Cir. 2014). The court also may examine facts outside the complaint to determine if venue is proper. Faulkenberg v. CB Tax Franchise Sys., LP, 637 F.3d 801, 810 (7th Cir. 2011) ("when ruling on a motion to dismiss for improper venue, [a] district court is not obligated to limit its consideration to the pleadings [or to] convert the motion to one for summary judgment if the parties submit evidence outside the pleadings."). Under Illinois law, "[t]he party seeking to enforce the terms of an allegedly incorporated document 'must show ... an intention to incorporate the document and make it a part of the contract.'" 188 LLC v. Trinity Indus., Inc., 300 F.3d 730, 736-37 (7th Cir. 2002) (quoting Arneson v. Board of Trustees, McKendree College, 210 Ill.App.3d 844, 849-50 (5th Dist. 1991)).

III. Analysis

Plaintiff claims that the Purchase Order language that supposedly references the GPCs is too vague to incorporate an external document under Illinois law. In the alternative, Plaintiff argues that (a) the purchase orders were not actually part of the contract and were instead a counteroffer that triggered the battle-of-the-forms provision of the Uniform Commercial Code, 810 ILCS 5/2-207, which, in turn would require throwing out the forum selection clause; (b) the GPCs do notapply to this contract because they only apply to Europe-based "AK" entities and not Defendant; and (c) it would be against public policy to force these American-based companies to schlep all the way to Germany to arbitrate a contract entered into in the United States by two American companies against the backdrop of the Uniform Commercial Code. Defendant counters that the incorporation language regarding the GPC was clear; the battle-of-the-forms provision does not apply because purchase orders were offers (not counteroffers); the GPCs apply to AK affiliates such as Defendant; and courts routinely enforce arbitration provisions that require international travel or teleconferencing. Because Plaintiff's first argument about incorporation carries the day, the Court need not address these alternatives.²

Preliminarily, both parties seemingly agree that Illinois law should apply to the questions of contract formation and interpretation. See, e.g., [17 at 7 (citing a federal court's application of Illinois law as controlling in this case)]; [18 at 3 (same)]; see also Desimone v. Danaher Corporation, 2018 WL 4181483, at *4 n.3 (applying Illinois law regarding contract formation to determine whether Michigan choice-of-law provision was enforceable). In any event, the Court applies Illinois law in the absence of an actual dispute over the substantive law. See NAR Business Park, LLC v. Ozark Automotive Distributors, LLC, 430 F. Supp. 3d 443, 451 n.8 (N.D. Ill. 2019) (citing Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496, (1941); Bridgeview Health Care Center, Ltd. v. State Farm Fire & Cas. Co., 381 Ill. Dec. 493, 10 N.E.3d 902, 909 (2014)).

In Illinois, "[t]he primary objective in construing a contract is to give effect to the intent of the parties." Gallagher v. Lenart, 226 Ill.2d 208, 232 (2007). The language of a contract provides the best indication of that intent. Id. (citation omitted); see also Right Field Rooftops, LLC v. Chi.Cubs Baseball Club, LLC, 870 F.3d 682, 690 (7th Cir. 2017) (applying Illinois contract law) ("A court must initially look to the language of a contract alone, as the language, given its plain and ordinary meaning, is the best indication of the parties' intent."). If the contract's language is facially unambiguous, its words "must be given their plain, ordinary, and popular meaning." Central Illinois Light Co. v. Home Ins. Co., 213 Ill.2d 141, 154 (2004). If the contract's language is susceptible of more than one meaning, it is ambiguous and the court can consider extrinsic evidence to determine the parties' intent. Right Field Rooftops, 870 F.3d at 690.

Relatedly, "a document is incorporated by reference into the parties' contract only if the parties intended its incorporation." 188 LLC v. Trinity Indus., Inc., 300 F.3d 730, 736 (7th Cir. 2002). "Such intent to incorporate must 'be clear and specific.'" Dochak v. Polskie Linie Lotnicze LOT S.A., 189 F. Supp. 3d 798, 802 (N.D. Ill. 2016) (quoting 188 LLC, 300 F.3d at 736). Accordingly, courts applying Illinois law have concluded that the "[m]ere reference to another contract or document is not sufficient to incorporate its terms into a contract." Rosenblum v. Travelbyus.com Ltd., 299 F.3d 657, 666 (7th Cir. 2002) (holding that references to an Employment Agreement and clause stating, "This Agreement together with the other agreements and documents to be delivered pursuant to this Agreement constitute the entire agreement between the Parties" did not evince an intent to incorporate the "other agreements and documents"); see also Leszanczuk v. Carrington Mortgage Services, LLC, 2020 WL 1445612, at *4 (N.D. Ill. Mar. 25, 2020) (multiple vague allusions to U.S. Department of Housing and Urban Development ("HUD") regulations and one specific reference to one regulation do not collectively evince intent to incorporate all HUD regulations); Dochak, 189 F. Supp. 3d at 803 (holding that contractual language providing that "passengers are entitled to rights provided for in the Regulation (EC) No 261/2004 of the European Parliament" was akin to a notice provision, and did not evince an intentto incorporate those regulations); Mandel Metals, Inc. v. Walker Group Holdings, 2015 WL 3962005, at *4-5 (N.D. Ill. June 26, 2015) (holding that "provision stating that each Purchase Order 'must be...