Opinion
CASE NUMBER 98 C 8316
February 17, 1999
ORDER
On-Line Financial Services, Inc. ("On-Line"), an information services provider, first filed suit in this Court to collect accounts receivables from its client, Ameribank. After voluntary dismissal without prejudice, Ameribank filed suit in Michigan state court against On-Line for breach of contract. After negotiations, the parties entered into an agreement (the "Forbearance Agreement") that limited their ability to resort to the courts.
Ameribank has moved to stay proceedings, compel arbitration, and transfer venue to the Western District of Michigan. Ameribank predicates its motion on the Forbearance Agreement, which contains a forum selection clause requiring the parties to file any eligible claim in the Western District of Michigan.
On-Line says that the Forbearance Agreement expired after a ninety-day term and was not in effect when On-Line filed this lawsuit in the Northern District of Illinois. Ameribank says that the plain language of the Forbearance Agreement prohibits either party from filing a lawsuit within ninety days. After that period it says that the Forbearance Agreement may allow either to file suit, but only in the Western District of Michigan. This interpretation appears unambiguously supported by the Forbearance Agreement's plain language.
I find that a plain reading of the Forbearance Agreement provides that if the parties do not settle within 90 days they can either (1) mutually agree to extend the negotiation period or (2) unilaterally elect to arbitrate any remaining claims. The Forbearance Agreement also provides that the parties must resort to binding arbitration before seeking relief under law. If a party seeks equitable relief, it does not have to arbitrate that claim. Finally, I read the Forbearance Agreement to allow for venue for suits within its scope only in the Western District of Michigan.
On-Line next says that Ameribank's alleged breach bars application of the forum selection clause in the Forbearance Agreement under Illinois law. Under diversity jurisdiction, federal law, not Illinois law, governs the validity of a forum selection clause. See Cotter Co. v. Crawbaugh True Value Hardware, Inc., 1996 WL 732514, at *3 (N.D. Ill. Dec. 11, 1996). Under federal law, such clauses should be enforced unless the resisting party shows them to be unreasonable under the circumstances. See Id. at *3-4 . On-Line makes no argument that transfer to the Western District of Michigan would be unreasonable. It does not, for example, allege that Ameribank obtained the clause by fraud or "overreaching." See Id.
The forum selection clause in the Forbearance Agreement is valid and enforceable. For that reason, I transfer this case to the Western District of Michigan. I do not reach Ameribank's request to stay or compel arbitration.