Yamada Corp. v. YASUDA FIRE & MARINE INS.

• Citation: 238 Ill.Dec. 822,305 Ill. App.3d 362,712 N.E.2d 926
• Decision Date: 04 June 1999
• Docket Number: No. 2-98-1073.,2-98-1073.
• Parties: YAMADA CORPORATION et al., Plaintiffs-Appellees, v. YASUDA FIRE AND MARINE INSURANCE COMPANY, LTD., et al., Defendants-Appellants.
• Court: United States Appellate Court of Illinois

712 N.E.2d 926

305 Ill. App.3d 362

238 Ill.Dec. 822

YAMADA CORPORATION et al., Plaintiffs-Appellees, v. YASUDA FIRE AND MARINE INSURANCE COMPANY, LTD., et al., Defendants-Appellants.

No. 2-98-1073.

Appellate Court of Illinois, Second District.

June 4, 1999.

John P. McGahey, David M. Holmes, Wilson, Elser, Moskowitz, Edelman & Dicker, Chicago, for The Yasuda Claims Service, Inc. and Yasuda Fire & Marine Ins. Co., Ltd.

Gerald L. Morel, Anthony J. Brouzas, Masuda, Funai, Eifert & Mitchell, Ltd., Chicago, for Yamada America, Inc. and Yamada Corp.

Justice COLWELL delivered the opinion of the court:

Defendants, Yasuda Fire & Marine Insurance Company, Ltd. (Yasuda Fire), and The Yasuda Claims Service, Inc. (Yasuda Claims) (collectively, defendants), appeal from an order of the circuit court of Kane County granting summary judgment in favor of plaintiffs, Yamada Corporation (Yamada) and Yamada America, Inc. (Yamada America) (collectively, plaintiffs), on count I of plaintiffs' first amended complaint. On appeal, defendants contend that the trial court erroneously refused to enforce a forum-selection clause, a choice-of-law clause, and a pollution exclusion clause and erroneously struck portions of two of defendants' affidavits. We reverse and remand with directions based on the forum-selection clause.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

On October 25, 1994, an air-operated diaphragm pump, manufactured by Yamada and purchased by CWC Fluids, Inc., d/b/a Culligan Water Conditioning (CWC), to pump acid and caustic solutions from two separate tanks to regenerate spent water purification systems, failed. The pump's failure resulted in the release of acid and caustic solutions that destroyed the metallic parts of the regeneration system enclosed within a concrete retention wall. In addition, the release produced an acid vapor that traveled through the interior of CWC's building, damaging electrical, mechanical, metallic, and other structures. When the retention wall developed a crack, the acid also spilled onto the main plant floor and into the drain to the city sewer system.

On October 1, 1996, CWC filed a complaint in the circuit court of Cook County against plaintiffs, among others, alleging strict product liability, breach of the implied warranty of merchantability, and negligence. CWC sought damages for property damage and business interruption.

Plaintiffs tendered their defense to Yasuda Fire pursuant to a general liability claims-made policy covering the period from January 5, 1995, to January 5, 1996, issued by Yasuda Fire to Yamada. Yasuda Fire rejected the tender.

Yamada was the named insured under the policy, and Yamada America, a distributor of Yamada's pumps, was listed as an additional insured. In addition, the policy included more than 200 other distributors as additional insureds, including distributors in 38 of the states in the United States, Puerto Rico, Canada, Mexico, Central America, South America, Europe, Australia, New Zealand, Asia, and the Pacific Rim.

An endorsement to the policy specifically covered the pump at issue in addition to 11 other air-operated diaphragm pumps. In addition, endorsement No. 10 to the policy contained a forum-selection clause, entitled "Jurisdiction Clause," that provided: "It is agreed that coverage disputes arising out of this insurance shall be subject to Japanese law and forum." The print size on endorsement No. 10 was the same size as the print size in the rest of the endorsements.

The policy was negotiated, underwritten, executed, and delivered in Japan, and Yamada made premium payments in yen to Yasuda Fire in Japan. Yamada America's president admitted in his deposition that he had never purchased any general liability or products liability insurance on behalf of Yamada America, although he had purchased other types of insurance on Yamada America's behalf. Instead, Yamada purchased general liability and products liability insurance for Yamada America.

Yamada was a Japanese corporation with its principal place of business in Tokyo, Japan. Yamada America was a subsidiary of Yamada and an Illinois corporation with its principal place of business in Elgin, Illinois. Yasuda Fire was a Japanese insurance company with its principal place of business in Tokyo, Japan. Yasuda Claims was Yasuda Fire's wholly owned subsidiary incorporated in California, and its principal place of business was in Los Angeles, California. Yasuda Claims handled claims for Yasuda Fire in the United States.

On December 12, 1996, plaintiffs filed a complaint for declaratory judgment and other relief against defendants, and defendants filed a section 2-619 (735 ILCS 5/2-619 (West 1996)) motion to dismiss, relying primarily on the forum-selection clause. Defendants also subsequently filed a declaratory judgment action against plaintiffs in the Tokyo District Court in Japan. The Tokyo District Court accepted jurisdiction over the parties and the subject matter of the suit.

Plaintiffs then filed a motion to enjoin defendants from proceeding further in Japan, and Judge Melvin Dunn granted the motion, stating that defendants were "enjoined temporarily from proceeding in Tokyo, Japan with their declaratory judgment action pending further order and proceedings" in the circuit court of Kane County. Defendants later filed an interlocutory appeal (see 166 Ill.2d R. 307(a)(1)). We affirmed the trial court's grant of a preliminary injunction. See Yamada Corp. v. Yasuda Fire & Marine Insurance, Ltd., No. 2-97-0506 (1997) (unpublished order under Supreme Court Rule 23).

While the preliminary injunction was pending on appeal, Judge Dunn granted defendants' section 2-619 motion to dismiss pursuant to the forum-selection clause. In response, plaintiffs filed a motion to reconsider. On June 25, 1997, Judge Dunn granted plaintiffs' motion to reconsider.

Defendants subsequently filed a motion to clarify the trial court's order. On July 21, 1997, Judge Dunn entered an order stating the basis for his ruling:

"2. Enforcement of the forum selection clause would require the plaintiffs to proceed in Japan and under Japanese law which would thereby create enormous inconvenience and expense for the plaintiffs.

3. Illinois public policy requires that forum selection clause [sic] be deemed unenforceable in that persons and entities living and doing business in Illinois would be required to proceed in Japan and under Japanese law where costs and attorney fees incurred would not be compensable.

4. Illinois is an appropriate forum for resolving all disputes between the parties regarding coverage under the Policy of Insurance."

The trial court also granted plaintiffs leave to file a first amended complaint. In their first amended complaint, plaintiffs sought a determination regarding defendants' duty to defend and duty to indemnify in counts I and II. Plaintiffs also brought causes of action for breach of contract in counts III and IV and causes of action under section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West 1996)) and the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) (815 ILCS 505/1 et seq. (West 1996)) in counts V and VI. Thereafter, defendants filed a motion to reconsider the trial court's June 25, 1997, and July 21, 1997, orders and alternatively sought certification to appeal. Judge Dunn denied the motion.

Defendants then filed their answers and affirmative defenses to plaintiffs' first amended complaint. Plaintiffs later filed a motion for summary judgment on count I of their first amended complaint, and defendants sought summary judgment on all counts of the first amended complaint.

On March 4, 1998, Judge Dixon requested that the parties further brief the forum-selection clause issue. After the parties briefed the issue, this court denied a petition for leave to appeal the forum-selection clause issue, and Judge Dixon indicated that he would consider the issue as part of the motions for summary judgment. Judge Dixon then granted plaintiffs' motion. Regarding the forum-selection clause, Judge Dixon stated that Judge Dunn had previously ruled that the clause was unenforceable and that this court had declined to review the issue on an interlocutory basis. Defendants appealed.

STANDARD OF REVIEW

The disposition of a summary judgment motion is not discretionary and the standard of review is de novo. Flint v. Court Appointed Special Advocates of Du Page County, Inc., 285 Ill.App.3d 152, 162,

221 Ill.Dec. 38, 674 N.E.2d 831 (1996). In addition, an appeal from a final judgment draws into issue all prior nonfinal orders that produced the final judgment. United States Fire Insurance Co. v. Aetna Life & Casualty, 291 Ill.App.3d 991, 996, 225 Ill.Dec. 965, 684 N.E.2d 956 (1997).

ANALYSIS

A forum-selection clause in a contract is prima facie valid and should be enforced unless the opposing party shows that enforcement would contravene the strong public policy of the state in which the case is brought (Maher & Associates, Inc. v. Quality Cabinets, 267 Ill.App.3d 69, 74, 203 Ill.Dec. 850, 640 N.E.2d 1000 (1994)), or that the chosen forum would be so seriously inconvenient for trial that the opposing party would be deprived of his or her day in court. The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 15, 18, 92 S.Ct. 1907, 1913, 1916, 1917, 32 L.Ed.2d 513, 520, 523, 525 (1972); Calanca v. D & S Manufacturing Co., 157 Ill.App.3d 85, 87-88, 109 Ill.Dec. 400, 510 N.E.2d 21 (1987).

I. MANDATORY FORUM-SELECTION CLAUSE

The first issue is whether the clause is mandatory or permissive. The clause at issue provides that "coverage disputes arising out of this insurance shall be subject to Japanese law and forum." The word "shall" indicates that Japan is the exclusive forum. See Calanca, 157 Ill.App.3d at 85, 109 Ill. Dec. 400, 510 N.E.2d 21 (stating that word "shall" in forum-selection clause means the stated forum is exclusive).

II. INCONVENIENCE

A party to the...