Truserv Corp. v. Flegles, Inc.

• Decision Date: 12 August 2005
• Docket Number: No. 04-3819.,04-3819.
• Parties: TRUSERV CORPORATION, Plaintiff-Appellee, v. FLEGLES, INC. and Alice Mae Flegle, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

419 F.3d 584

TRUSERV CORPORATION, Plaintiff-Appellee, v. FLEGLES, INC. and Alice Mae Flegle, Defendants-Appellants.

No. 04-3819.

United States Court of Appeals, Seventh Circuit.

Argued April 14, 2005.

Decided August 12, 2005.

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David J. Chizewer (argued), Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Chicago, IL, for Plaintiff-Appellee.

Jim L. Flegle (argued), Loewinsohn & Flegle, Dallas, TX, for Defendants-Appellants.

Before COFFEY, RIPPLE, and KANNE, Circuit Judges.

KANNE, Circuit Judge.

This case arises out of a twenty-year relationship between the owners of a hardware store and the wholesaler with which they worked. Flegles, Inc. ("Flegles"), owned and operated a True Value hardware and lumber store in Bardwell, Kentucky. By becoming a member of the TruServ cooperative, Flegles was able to use the True Value trademark and to benefit from group buying power and group billing procedures. On January 20, 2000, Flegles and TruServ executed an updated written agreement ("the member agreement") in which Flegles agreed "to pay on the date due all invoices on accounts receivable statements," and to immediately pay all amounts due upon termination as a member. During the next three years, Flegles purchased merchandise and services from TruServ pursuant to the member agreement. TruServ also advanced cash to Flegles for the purpose of making improvements to the store. Additional contracts were executed to secure these advances in which Flegles agreed to maintain an acceptable credit history and to remain a member in good standing of TruServ. If Flegles ceased to be a member in good standing, the debt would be considered defaulted and Flegles would be required to repay the advances immediately.

In addition to the contracts between Flegles and TruServ, Alice Mae Flegle signed three personal guaranty agreements. By the terms of these agreements—signed March 25, 1976, May 4, 1976, and December 13, 1982— Alice Mae Flegle personally guaranteed the payment of any debt owed to TruServ by Flegles. In 1991, TruServ requested that these personal guaranties be replaced with a new guaranty, but the President of Flegles, Mark Flegle, denied the request.

Although Flegles did accept equipment and services from TruServ, and TruServ sent monthly invoices and a written demand for payment in November 2002, Flegles did not repay its debt. Instead, on February 12, 2003, Flegles filed a lawsuit against TruServ in Kentucky state court. A few days later, TruServ terminated Flegles's membership for nonpayment. At that point, repayment of the money TruServ had advanced to Flegles became immediately due.

In the Kentucky action, Flegles alleged that TruServ made fraudulent misrepresentations in order to induce Flegles to continue as a member and to encourage Flegles to go into substantial debt to expand and make improvements to the store between 1997 and 2000. Flegles also alleged that the January 2000 execution of the member agreement was fraudulently induced. Flegles asked the court to issue a declaratory judgment and to find that the agreements between the parties are null and void because of fraud and breach of contract. TruServ filed a motion to dismiss based on the forum selection clause in the member agreement which stated that any disputes should be litigated in or near Cook County, Illinois. The Kentucky court denied the motion, stating that litigating in Chicago would be inconvenient for Flegles and noting a disparity in bargaining power between the parties. The case went to trial and, on July 30, 2004, the jury returned a verdict in favor of Flegles, finding that TruServ was liable for $1.3 million in damages.

On May 16, 2003, after the commencement of the Kentucky litigation, TruServ filed a diversity action in the Northern District of Illinois. Through the lawsuit, TruServ attempted to collect the debt it was owed either from Flegles (the corporation), or from Alice Mae Flegle personally. Over objections from Flegles, the district court found that it could exercise its jurisdiction in spite of the Kentucky lawsuit, and that abstention was not necessary or proper in this case. The court also found that Alice Mae Flegle had submitted to personal jurisdiction in Illinois. After a grant of summary judgment in favor of TruServ and additional briefing on damages, the court ordered Flegles to pay $143,546.77 in damages, fees, and costs to TruServ.¹ Flegles and Alice Mae Flegle appeal. We affirm.

I. Alice Mae Flegle's Personal Guaranty

We begin with a discussion of whether Alice Mae Flegle has submitted to personal jurisdiction in Illinois. We review de novo the district court's decision regarding personal jurisdiction. RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1275 (7th Cir.1997). Ms. Flegle argues that the court below should have granted her motion to dismiss because TruServ could not prove that she had the requisite "minimum contacts" with Illinois, and thus haling her into an Illinois court would offend traditional notions of fair play and substantial justice. See Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945).

It is true that Ms. Flegle had limited contact with Illinois during her dealings with TruServ. It is also true that simply contracting with a party based in Illinois is not enough to establish the required minimum contacts. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). However, another very important consideration in this analysis is that "personal jurisdiction is waivable and that parties can, through forum selection clauses and the like, easily contract around any rule we promulgate." RAR, 107 F.3d at 1280 (citing Burger King, 471 U.S. at 472 n. 14, 105 S.Ct. 2174).

Ms. Flegle signed a personal guaranty agreement promising to "guarantee absolutely and unconditionally, at all times, the payment unto you of any indebtedness or balance of any past, present or future indebtedness, from [Flegles]." The guaranty goes on to state that "[t]his guaranty is made under the laws of the State of Illinois and shall be controlled by and interpreted according to the laws of said state. If suit becomes necessary [TruServ is] authorized to file suit against [Alice Mae Flegle] in any court of competent jurisdiction in the State of Illinois."

Ms. Flegle argues that there is no "court of competent jurisdiction" in Illinois because she does not have sufficient minimum contacts with the state. We find this argument to be meritless. Ms. Flegle signed a valid forum selection clause, and "[o]bviously, a valid forum-selection clause, even standing alone, can confer personal jurisdiction." Heller Fin., Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1292 n. 4 (7th Cir.1989). Ms. Flegle is deemed to have waived her objection to personal jurisdiction. See Northwestern Nat'l Ins. Co. v. Donovan, 916 F.2d 372, 375 (7th Cir.1990).

Next, Ms. Flegle claims that there is a material issue of fact as to whether the guaranty agreement covered the entire debt owed by Flegles. The agreement mentions "goods, wares and merchandise" and discusses "credits." Loans, Ms. Flegle argues, are not included in the agreement and thus are not personally secured.

The personal guaranty agreement as a whole, however, makes it very clear that Ms. Flegle is personally liable for "any indebtedness or balance of any past, present or future indebtedness." The agreement specifically states that "[i]t is the intention of this guaranty to assure [TruServ] of payment, in full, for any amount due" from Flegles.

The fact that Mark Flegle refused to execute a new personal guaranty in 1991 does nothing to change this analysis. The guaranty signed by Ms. Flegle "may only be revoked upon written notice." In fact, the personal guaranty continues in effect even upon the death of Ms. Flegle. Neither party alleges that the guaranty was revoked by written notice. Therefore, the guaranty is still in effect and Ms. Flegle is personally liable for the entire debt owed by Flegles to TruServ.

We briefly address the claim raised by Flegles that because TruServ refused to exercise certain setoff rights, it failed to mitigate its damages. Flegles owned TruServ stock at the time its membership was terminated, and it argues that TruServ should have set off the value of the stock against Flegles's account as it was contractually permitted to do. Flegles claims that there is a material issue of fact as to whether TruServ breached its duty of good faith and fair dealing with respect to this issue and that granting summary judgment was therefore improper. We find that although TruServ had a right to set off, it was not obligated to do so. A contract between the parties explicitly stated: "In addition to all rights of TruServ under such membership agreement, [Flegles] agrees that TruServ may, but is not required to, set off any obligations hereunder against any stock or notes issued or to be issued to [Flegles] by TruServ." There is no material issue of fact here.

II. The Rooker-Feldman Doctrine

Flegles contends that the district court did not have subject matter jurisdiction to hear this case. The Rooker-Feldman doctrine precludes jurisdiction here, it is argued, because federal district courts are not permitted to review the decisions of state courts. See Kamilewicz v. Bank of Boston Corp., 92 F.3d 506, 509 (7th Cir.1996); see also D.C. Ct. of App. v. Feldman, 460 U.S. 462, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983); Rooker v. Fidelity Trust Co., 263 U.S. 413, 44 S.Ct. 149, 68 L.Ed. 362 (1923). Flegles claims that because the Kentucky court found the forum selection clause to be invalid, and jurisdiction in Illinois is based on the clause, TruServ's federal claim impermissibly seeks to have the district court set aside the state court judgment. Even if TruServ is not seeking outright reversal of the state court's ruling, Flegles argues, the federal claims...