Opinion
Case Number 01 C 1026
November 13, 2001
I granted plaintiffs motion to reconsider and reinstated Count 1 of the complaint after finding that the reasonableness of the parties' choice of New York law had not been sufficiently shown. Defendant has submitted a renewed motion to dismiss Count 1 on the basis that because the choice of New York was reasonable, my previous dismissal was proper.
In my order granting plaintiffs motion to reconsider, I identified two limitations to an express choice of law provision: (1) public policy considerations and (2) the necessity of some "relationship between the chosen forum and the parties or the transaction." Restatement (Second) of Conflicts § 187(2). After eliminating the first exception as a non-issue in this case, I stated that "an Illinois court would defer to the parties' decision concerning the choice of law if there was a reasonable basis for the choice," but that such reasonable basis had yet to be established.
Defendant attempts to show a reasonable basis for choosing New York law on two grounds, First, defendant asserts that the choice of law was made by two sophisticated parties who expressly opted for a highly developed body of law. However, when this argument was previously made, I stated that it must be supported by some factual basis, which defendant still does not provide. To support this argument, defendant cites to a few cases outside the Seventh Circuit that briefly refer to New York law as highly developed (only one of which refers specifically to commercial law) and to a sentence in the declaration of defendant's own Vice-President and CFO. Without a stronger factual basis, I cannot conclude that the choice of New York law is reasonable on this ground.
More persuasive is defendant's argument that choosing New York law was reasonable because both parties and the transaction had substantial contacts with New York. Although plaintiff argues that defendant mischaracterizes § 187(2)(a) as requiring merely a showing that the choice of law was for a "serious purpose," defendant's arguments do not indicate such an understanding. Rather, defendant points to contacts such as: retention by both parties of New York-based investment banks for advice regarding the transaction: plaintiffs designation of a New York-based investment bank as its exclusive agent for the transaction that plaintiffs parent company has plants in New York; and that a New York bank underwrote the transaction and provided the bulk of the financing (none of which appear to be in dispute): While there is no single definition of substantial contact with respect to § 187(2)(a) under Illinois law. I am convinced that New York has a sufficiently close relationship to the parties and the contract to render the choice reasonable.
Plaintiff does not dispute defendant's assertions but instead makes the general allegation that showing substantial contacts with New York will require extensive discovery. However, plaintiff does not specify what additional discovery will be needed, and defendant has provided adequate evidence that there is substantial contact with New York. Hence, the choice of New York law was reasonable.
In Venture Associates v. Zenith Data Systems, 987 F.2d 429, 431 (7th Cir. 1993), the Seventh Circuit held that documents attached to a motion to dismiss are considered part of the pleadings if the plaintiffs complaint refers to those documents, and they are central to his claim. Count I of plaintiff's complaint makes no reference to the correspondence with New York investment banks nor to Plaintiffs website attached to defendant's motion, documents on which I have relied in making this determination. Further, these documents are not central to Count 1, for the formation and execution of the transaction itself is not at issue in this claim. And as previously stated, no further discovery is necessary to determine the reasonableness of choosing New York law. Consequently, I am converting defendant's motion to dismiss into a summary judgment motion, and the motion is granted.