Roberts & Schaefer Co. v. Merit Contracting, Inc., 95-3573

• Citation: 99 F.3d 248
• Decision Date: 21 November 1996
• Docket Number: No. 95-3573,95-3573
• Parties: ROBERTS & SCHAEFER COMPANY, a Delaware Corporation, Plaintiff-Appellant, v. MERIT CONTRACTING, INCORPORATED, a Pennsylvania Corporation, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 248

99 F.3d 248

ROBERTS & SCHAEFER COMPANY, a Delaware Corporation, Plaintiff-Appellant, v. MERIT CONTRACTING, INCORPORATED, a Pennsylvania Corporation,

Defendant-Appellee.

No. 95-3573.

United States Court of Appeals, Seventh Circuit.

Argued April 17, 1996.

Decided Oct. 30, 1996.

Rehearing Denied Nov. 21, 1996.

Robert J. Franco, II, Linda Urbanik Johnson (argued), Bollinger, Ruberry & Garvey, Chicago, IL, for Plaintiff-Appellant.

Stephen R. Swofford, Lawrence L. Moelmann (argued), Hinshaw & Culbertson, Chicago, IL, for Defendant-Appellee.

Before POSNER, Chief Judge, and CUMMINGS and COFFEY, Circuit Judges.

COFFEY, Circuit Judge.

Plaintiff-appellant Roberts & Schaefer Company ("R & S") sued defendant-appellee Merit Contracting, Inc. ("Merit") in the Circuit Court of Cook County, Illinois, claiming that Merit had breached its construction subcontract with R & S. Merit removed the case to federal district court on the basis of diversity of citizenship. 28 U.S.C. §§ 1332, 1441. Merit then filed a motion to dismiss or, in the alternative, to transfer the case to the United States District Court for the Western District of Pennsylvania or stay the proceedings pending resolution of a case between the parties in Pennsylvania state court. R & S responded with a motion to remand to state court, arguing that its contract with Merit contained a forum selection clause according to which the parties agreed that (1) Illinois law would govern any contractual dispute between them, and (2) the Illinois Circuit Courts would have exclusive jurisdiction to adjudicate any such dispute. The district court rejected Merit's contention that the parties' agreement contained the forum selection clause and entered an order dismissing R & S's suit for lack of personal jurisdiction. R & S appeals. We reverse and remand.

I. BACKGROUND

R & S, a Delaware corporation with its principal place of business in Chicago, Illinois, is a design/build contractor. Merit, a Pennsylvania corporation with its principal place of business in Monongahela, Pennsylvania, engages in general construction work. R & S bid on and was awarded the contract to design and build a raw coal storage and handling facility in Washington County, Pennsylvania, for the 84 Mining Company. R & S subcontracted with Merit to perform demolition, excavation, and construction work in connection with this project, described as the "84 Mining Project".

The subcontract between R & S and Merit came about as follows. On May 25, 1993, R & S asked Merit to submit a bid to perform the previously mentioned construction services on the 84 Mining Project. To assist Merit in making its bid, R & S passed along to Merit a "bid package" prepared by 84 Mining Company. Although the bid package was never submitted to the district court, we understand from Merit's attorney's representations at oral argument that this bid package contained details of the demolition and construction work that Merit proposed to perform. Based on the bid package, Merit submitted a bid of $1.775 million, and, on August 27, 1993, R & S accepted the bid verbally. R & S told Merit to proceed with the work, and Merit commenced work on September 1, 1993.

On September 7, 1993, R & S sent a letter to Merit confirming their Purchase Order No. 9331-711 for the demolition and construction work to be performed by Merit on the 84 Mining Project. The letter briefly described the nature of the work (demolition, excavation etc.) and listed a price of $1.775 million. The letter further stated that the confirming purchase order documents would be forwarded to Merit as soon as they were complete. At the end of September, Merit invoiced R & S for work done during that month in the amount of $154,620.00, and, in late October, R & S paid the invoice by check.

On November 1, 1993, R & S sent Merit Purchase Order No. 9331-711 and several accompanying documents (collectively, the "Purchase Order Documents"). The purchase order consisted of seven pages. The first page provided a brief description of the work, while the remaining pages provided a more detailed breakdown of the work to be performed, the work completion schedule, the contract price and payment terms. ¹ Accompanying Purchase Order No. 9331-711 was a document titled "Roberts and Schaefer Company Construction General Notes and Conditions" ("General Notes and Conditions"). The General Notes and Conditions contained terms relating to a wide variety of issues, including scheduling, payments, risk of loss, inspections, changes, warranties, force majeure (e.g., Acts of God), indemnification and insurance, and liens. The General Notes and Conditions also included Paragraph 6.14 titled "Law Governing." This provision stated:

This purchase order and all disputes between the parties hereto shall be governed by and construed according to the laws of Illinois whose Circuit Courts shall have exclusive jurisdiction to determine all such issues.

In addition to the General Notes and Conditions, the purchase order was accompanied by a document entitled "Sub-Contract Agreement." The Sub-Contract Agreement identified the work to be done by Merit on the 84 Mining Project as that "specified" by Purchase Order No. 9331711; it also identified the price as $1.775 million. A representative of R & S signed the Sub-Contract Agreement, but no representative of Merit ever signed the document.

On November 11, 1993, R & S sent Merit revised pages 2, 5, and 6 of the purchase order. According to the cover letter, these pages were revised to reflect certain points regarding concrete volume and liquidated damages discussed on November 4, 1993.

As work progressed on the 84 Mine Project, Merit notified R & S on several occasions that its work was being delayed for various reasons and thus it could not fulfill the completion date. For example, in a letter dated February 4, 1994, Merit notified R & S that "[b]ecause of the continued fabrication mistakes and late deliveries, the coal run date of March 18, 1994, the finish date of April 1994 and the final completion on April 30, 1994 are in severe jeopardy. Any further delays will make it impossible to meet this schedule."

Prior to their collaboration on the 84 Mine Project, R & S and Merit had worked jointly on another construction project, the Emerald Mine Project. For that project, Merit signed a Sub-Contract Agreement dated October 22, 1992, which incorporated the identical General Notes and Conditions, including the forum selection clause.

On December 28, 1994, R & S filed suit against Merit in the Circuit Court of Cook County, alleging that it and Merit entered into a contract defined by the terms of the Purchase Order Documents. R & S further alleged that, during the course of Merit's work on the 84 Mining Project, disputes arose between the parties stemming from delays in the construction and increased costs on the Project. According to R & S, Merit (1) failed to meet certain completion dates as specified in the purchase order, (2) incurred additional costs in excess of those provided for in the contract, (3) failed to submit waivers of lien to R & S, as provided within the terms of the contract as a condition for payment, and (4) contacted the owner stating its intention to file a lien against the owner and the property for work it claims to have performed and not been paid for.

Merit removed the case to federal court pursuant to 28 U.S.C. § 1441. Thereafter, Merit filed a motion seeking the dismissal of the suit for lack of personal jurisdiction. Fed.R.Civ.P. 12(b)(2). According to Merit, it did not have the requisite "minimum contacts" with Illinois to subject it to the jurisdiction of the Illinois state courts (or a federal court in Illinois sitting in diversity).

R & S responded with a motion to remand the case back to the Circuit Court of Cook County. R & S argued that the forum selection clause contained in the General Notes and Conditions vested exclusive jurisdiction in the Illinois state Circuit Courts. To establish the validity of the forum selection clause, R & S submitted to the district court a Schedule of Exhibits, which included Purchase Order No. 9331-711, the General Notes and Conditions, and the SubContract Agreement. Also included in the Schedule of Exhibits was much of the correspondence between Merit and R & S, as well as the previously referred to agreement between the parties concerning the Emerald Mine Project.

The district court issued a Memorandum Opinion and Order resolving these motions. The court first considered whether the action was properly removed from state court. In reaching the conclusion that the action was properly removed from state court, the court determined that whether the forum selection clause was part of the parties' agreement was the central issue. The court found the parties entered in a contract when R & S accepted Merit's bid to perform the work. The court further found that Merit's continued performance of the work after receiving the Purchase Order Documents in November did not constitute an acceptance of the terms of the Purchase Order Documents because Merit's continued performance was entirely consistent with the agreement formed upon R & S's acceptance of Merit's bid. Therefore, the court reasoned, the forum selection clause never became part of the parties' agreement and hence remand to the Cook County Circuit Court based on the forum selection clause was not warranted. The judge then considered Merit's motion to dismiss for lack of personal jurisdiction. The court concluded that Merit lacked sufficient minimum contacts with Illinois to justify haling Merit into the Illinois state court system under the state's long-arm statute. Accordingly, the district judge granted Merit's motion to dismiss for lack of personal jurisdiction. R & S filed a timely notice of appeal.

II. ANALYSIS

R & S claims that the district court erred in denying R & S's motion to remand to the Cook County...