Court Rules Illinois Courts Should Hear Contract Dispute Despite Case in New York


Our Chicago business attorneys were interested to note a ruling establishing that an Illinois venue is correct in a case of dueling lawsuits between companies working in Illinois and New York. In Whittmanhart, Inc. v. CA, Inc. and Niku LLC, No. 1-09-3136 (Ill. 1st June 22, 2010), Whittmanhart bought software from CA and its wholly owned subsidiary, Niku, in 2006 and entered into an end-user license agreement. They later entered into a statement of work saying CA employees would help Whittmanhart implement and develop the software, in exchange for an hourly fee and expenses. CA invoiced Whittmanhart several times during the project, but claims no invoices were ever paid. Whittmanhart claims CA and Niku breached their own contract by failing to deliver a fully functioning software system by a specified date and failing to invoice monthly, as specified.

CA and Niku sued Whittmanhart in New York federal court Nov. 12, 2008 for breach of contract and account stated. They sought payment of the invoices, plus attorney fees and court costs. In December of that year, Whittmanhart told the court it would move to dismiss for lack of federal diversity jurisdiction, as all three companies are Delaware citizens. On the same day, CA and Niku filed a claim in New York state court. Two hours later, they voluntarily dismissed the federal case. About 40 minutes later, but in a different time zone, Whittmanhart filed a lawsuit against CA and Niku in Cook County trial court, creating dueling lawsuits. That claim asks for financial damages, attorney fees and court costs and a declaratory judgment that it did not owe further money to CA and Niku.

Whittmanhart did not answer the New York state complaint and CA moved for default judgment. Whittmanhart then argued that it had not been properly served and successfully moved to dismiss. CA then filed an identical claim in New York state court, which Whittmanhart moved to dismiss on the grounds that the Illinois action was pending and on forum non conveniens. This was denied. CA later moved to dismiss the Illinois action on the grounds that New York was considering the same claim, and this motion was granted. Whittmanhart appealed to the First District Court of Appeal.

In its analysis, the First started by dismissing arguments made by CA and Niku based on things that happened after the trial court made its decision. The court then acknowledged that the lawsuits in both states had identical parties and were based on the same contracts — the statement of work and end-user license agreement. Those contracts were written with reference to other states’ laws. But this by itself was not enough to dismiss the claim, the court said; courts may still allow parallel claims to go forward according to their judgment. “Illinois is clearly the more logical forum for this dispute,” the First wrote, noting that much of the disputed work took place in Cook County and that the Illinois action was the first properly filed claim.

Furthermore, Whittmanhart’s Illinois action has a claim for monetary damages that was not made in New York, the court noted, meaning there was a better chance of complete resolution in Illinois. And if Whittmanhart were to file a counterclaim in New York, it could proceed independently of a decision in favor of CA. That means res judicata would not completely bar the Illinois action. For those reasons, the First found that the trial court had abused its discretion. It reversed the decision and remanded the case to Cook County trial court.

At Lubin Austermuehle, our Illinois breach of contract lawyers represent companies embroiled in litigation vital to their futures. As this case shows, even contracts that specify another state to hear disputes aren’t necessarily binding. Illinois courts will resolve venue disputes according to the public policy of Illinois. Even if you believe your claim is not well supported by your contract, let our experienced Wheaton business lawyers consider caselaw, history and other factors that might change the game. We represent clients throughout Illinois, Indiana and Wisconsin, including businesses of all sizes and types as well as individuals. To learn more about how Lubin Austermuehle’s Chicago business lawyers can help, contact us through our website or call 630-333-0333 for a free consultation.

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