Eleanor Snyder, of the Estate of Leroy Liljedahl v. Bruton Smith, 736 F.2d 409

Eleanor Snyder, of the Estate of Leroy Liljedahl v. Bruton Smith

736 F.2d 409

7th Cir.

1984

Check Treatment

*1 proving the burden of its bore United failed to introduce United defense. SNYDER, Eleanor Executrix of the during necessary evidence the trial Leroy Liljedahl, Estate of appeal, may that it do so on claims

now Plaintiff-Appellee, argu- during the first time citing oral for Corp. decision in ment our Sundstrand (7th Corp., 553 F.2d 1033 Sun Chemical SMITH, Defendant-Appellant. Bruton support Cir.1977). Sundstrand does not No. 83-2151. face, that a unique on proposition, its may proof intro- the burden of party with Appeals, United States Court of necessary for first evidence duce the Seventh Circuit. appeal. In a footnote in Sundst- time on considered evidence introduced at rand we Argued Jan. 1984. part as evidence mаde as trial well Decided June 1984. appeal reject theory a ad- on record Rehearing July Denied the first time on appeal. This is vanced for relying solely from cry a far on such none- party enter a JNOV for a

vidence to assert-

ing an defense. did not affirmative United claim

support its that Gorman retired April pursuant

prior to bona plan may

fide retirement not now recti-

fy its inaction.

Finally, even if United was entitled

rely deposition, on Gorman’s that document fide, prove plan

does not that the was bona

nor does it counter Gorman’s evidence company policy removing had of not

employees payroll from the until accumu-

lated time was sick used. United did not

prove defense, the elements of its and the granting

district court erred in for JNOV

United on this issue. The Gorman

however, along is remanded for retrial plaintiffs. cases the other

CONCLUSION

We hold that the district court erroneous-

ly instructed the jury regarding United’s

BFOQ defense pretext and the role of

evaluating United’s is enti- claims. United

tled to a new trial. 18 shall Circuit Rule

apply. Judgment plaintiffs is Reversed injunction granted is voided.

eases are Remanded proceed- for further

ings consistent with opinion. *3 Smith, appellant together a third Hitt, part-

individual named Robert were Viking (Vi- Associates ners Investment Viking king). partnership is limited to ownership property of certain located Texas, County, any proper- in Harris and to ty purchased by partnership one within Poe, Parker, Grier, Gage, H. Gaston property. of that mile Preston, Bernstein, Gage & Thompson, partnership agreement was executed Charlotte, N.C., defendant-appellant. for September time, 1971. At that all three Green, Whitcher, & Holmstrom D. John part- partners were Illinois residents.1 The Ill., P.C., Rockford, plaintiff-appellee. ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍Rockford, nership mailing address was time, period Illinois. con- For *4 FLAUM, Circuit BAUER and Before partnership’s ducted the business from SWYGERT, Senior Circuit Judges, and partnership The office Rockford.2 bor- Judge. money from and rowed maintained a check- FLAUM, ing account a Judge. with bank Rockford. Circuit or- appeal partnership agreement provides from the district court’s The that This confirming an award chal- partner der arbitration the death of a does not terminate grounds. surviving of lenges partnership that order on number but vests the parties partners right purchase The district court had ordered with the Rockford, In that partner. to arbitration in Illinois. interest the deceased The order, the court held that it had further that if the sur- Bruton jurisdiction appellant viving partners partner op- over Smith. exercise the attempt that the purchase, parties The court further held tion to are to purchase price; in a “contract evi- if the agree parties clаuse was contained on a dencing involving agree price, price a transaction commerce” shall fail to on be Act by partner- and thus the Federal Arbitration arbitration. The determined §§ (1982), (FAA), appli- pertinent part: 1-14 was ship agreement 9 U.S.C. states Finally, the dispute. court cable arising Any controversy or claim out take held that it could arbitration to relating agreement, of or to this or to the place Northern District of Illinois in the interpretation, breach or enforcement speci- though even the arbitration clause thereof, shall be submitted to three arbi- any place that to take fied was by arbitration in the trators and settled Houstоn, arbitration, Texas. After Houston, Texas, provided, City of ... award, court confirmed the arbitration however, ... if the matter submitted to appealed. For the stated Smith reasons [dispute] as to arbitration shall involve below, agree we with the district court’s deceased, [purchase price] of a ... holdings regarding personal Interest, Partnership Entire Partner’s FAA, applicability of the but we such arbitration shall be held before holding reverse the court’s it could arbitrators, three one of whom shall be a Northern District public certified accountant and other of Illinois. of whom shall real estate two be licensed maintaining appraisers doing offices and

I County, in Harris business Texas.... Any Appellee Snyder by any majority Eleanor is the executrix award made final, Leroy Liljedahl. Liljedahl binding, and of the estate of Arbitrators shall be office, however, Smith’s, part- 2. not the 1. Smith is now a resident of North Carolina by nership’s. Magistrate’s Report was served with a federal marshal in Recommen- North Carolina. dation at 7. parties 15, 1982, all conclusive on all hereto for On October pan- the arbitration Snyder $549,755.00 el awarded judgment may be en- the sum of purposes, and a plus Snyder applied administrative fees. any having juris- court forced thereon the district court in Illinois for an order diction thereof. confirming award; the arbitration Smith Agreement, Viking Partnershiр Article moved to modify vacate or the award. The VII. court confirmed the arbitration award and Liljedahl on December died On entered judgment against Smith. Smith by notified January Smith appealed. purchase Lilje- letter that he elected appeal, On Smith raises four issues. time, At that Smith dahl’s entire interest.3 First, argues district court resident of Illinois and the letter was a personal jurisdiction lacked over him. He Rockford, a return address in Illinois. bore contends that his sporadic casual and activ- January At some time after Smith ities in Illinois are insufficient to meet the a resident of North Carolina. became “transaction of business test” of the Illi- long-arm nois agree were unable to on a statute and that the cause of action did not “arise price. from” purchase Smith returned to Illinois transaction Second, business his in Illinois. negotiate he price. several times to On argues that the FAA applicable is not be- July Snyder served Smith with partnership agreement cause the was not a July written demand for arbitration. On *5 “contract evidencing a transaction involv- notified Smith the American Arbitration § ing required commerce” as by 9 U.S.C. 2 participate Association that he refused to (1982). Smith maintains that agree- the date, in the arbitration. On that Smith also ment itself must evidence interstate com- court, in requesting filed suit a Texas state merce, “involving that cоmmerce” is a purchase price the court to establish much narrower “affecting test than com- partnership the alleging interest and merce,” any and that casual sporadic and cause of action for breach of contract. interstate in partner- activities which the Snyder removed the case to federal district ship engaged are not sufficient to meet the 4, 1980, in August court Texas. On Snyder statutory application standard for of the petition filed a to arbitration the Third, FAA. argues Smith that the district district court for the Northern District of power court lacked to compel the arbitra- FAA, Illinois under section 4 of the tion in the Northern District of Illinois bе- § (1982). U.S.C. 4 Smith moved to dismiss agreement provided cause the the Illinois action for improper service of place that to take arbitration was in Hous- process jurisdiction. lack of ton, Texas; 4 of Section the FAA The matter magistrate, was referred to a that parties the court shall order the to who deny recommended that the court the arbitrate “in accordance with the terms of 3, 1981, motion to dismiss. On March the agreement.” Finally, argues the court denied the motion. Smith subse- judg- that the order of confirmation and quently submitted to the court a memoran- ment article III the Constitution. violates dum arguing that arbitration under the Snyder argues that the district court cor- agrеement place could not take Illinois. rectly compelled arbitration and confirmed Texas, pursuant district court in to First, Snyder the award. contends that the parties, of the entered an order personal jurisdic- district court’s exercise of staying its proceedings pending resolution tion require- over Smith satisfies both the September 1, Illinois action. On of due and the ments standards of 1981, the district court in Illinois ordered long-arm the Illinois argues statute. She the Rockford, to arbitrate in Illi- “arising requirement that from” is nois. Smith appeal did not construed, such, that order. broadly and as this cause Hitt, partner, 3. The other elected option purchase. not to exercise his case, the district court com transaction arises from Smith’s of action arbitration, pelled proceeding Second, in a where argues she in Illinois. business only judicial remedy sought was because applicable is that the FAA arbitrate, jurisdic order to it retained must be “involving commerce” any to enforce arbitration award. sup- the facts broadly that construed compelling it is clear that the order commerce finding that interstate port a appealable when was final and Third, Snyder asserts involved. according entered to this court’s decision compel arbitration could district court University That Insurance. Illinois because District of the Northern Life however, 1983; January was decided in that the statutory requirement is order to this case jurisdic- matter subject court have district conclude, September issued in 1981. We it had controversy, which tion over below, apply for the reasons tht we will not ob- any valid According Snyder, here. in University decision Insurance as to would be could have jection Smith Life retroactively. any venue, venue has waived and Smith comply objection through failure apply Whether to a decision retroac (h) Rules of the Federal 12(g) rule & tively depends on a number of factors: argues Finally, Procedure. Civil is, prior history question, of the rule constitutional raise his that Smith did not past prece whether the new rule overrules and that in event objections below impression; dent or decides an issue of first violate article district court’s order did not retroactivity further retard whether will III. inequity im operation; the rule’s posed by application. retroactive Chevron II Huson, 97, 106-07, 92 Oil Co. we must determine whether We first (1971); 30 L.Ed.2d 296 S.Ct. cf. — the merits of have to examine Stumes, U.S. —, Solem argument, oral coun the issues raised. At 79 L.Ed.2d 579 Prior Uni Snyder requested sel for this court to dis Insurance, this court had not versity Life *6 appeal miss the on the basis of the decision squarely held that such an order was final University Insurance Co. Amer Indeed, this court had appealable. and Life of Ltd., (7th ica v. Unimarc 699 F.2d 846 strong policy аgainst encourag stressed a Cir.1983), compel which held that an order See, piecemeal appeals. e.g., ing such ling appealable arbitration is final and un Consulting Group Inter Whyte v. THinc though der section 1291 even the district (7th national, 817, 2 F.2d 818 n. Cir. 659 jurisdiction solely pur court retains for the 1981). court ordered ar When the district poses resolving disputes of further over 1981, bitration, September responsible arbitrability enforcing any and order have believed that the counsel would appeal award. Id. at 849. Smith did not interlocutory. appealabili The area of was from the compelling order arbitration. “medieval ty orders is one of of arbitration appeal argues that the time for pecularities,” Byzantine Eng if not New expired, from that order has see Fed.R. v. Asiatic Petroleum land Power Co. 4(a), 183, (1st Cir.1972), App.P. juris thus this court lacks Corp., 456 F.2d 189 and issues decided diction review a “source of understandable confusion to bar,” Oppenheimer v. Educa order. See Northcross Board Timberlake v. & of 624, (6th Cir.1979), Co., 515, (7th Cir.1984), tion, F.2d where 611 F.2d 635 cert. 729 517 denied, constantly changing.4 In such 447 U.S. 100 S.Ct. 64 the law is (1980). law, expected area cannot be L.Ed.2d 862 of counsel stay appealable) Compare, e.g., Oppenheimer granting der of arbitration Timberlake v. & with Co., (7th Cir.1984) (order Securities, Inc., refusing F.2d 515 v. 661 F.2d Dickinson Heinold stay appealable (7th Cir.1981) (denial of not ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍under stay pending of arbi- 1292(a)(1)) Whytе Consulting v. THinc § 1292(a)(1)). appealable tration under § Intern., (or- (7th Cir.1981) Group 659 F.2d 817 jurisdiction. and turns that the such anticipate the twists Deluxe Ice Cream Co. v. applying The of may take. effect (7th law Corp., R.C.H. Tool 726 F.2d Insurance ret University decision Cir.1984). Illinois, party nonresident Life deprive the roactively here would be to performs can be sued if it one of the acts present his appellant any opportunity enumerated in long-arm the Illinois statute obvi to this court for review. This claims doing Illinois, or if it long business as to conclude ously unfair result leads us process as due “minimum contacts” appeal for lack that we will not dismiss the Id.; is met. see Internation Ingvold jurisdiction. Mouy v. See de al Wаshington, Shoe Co. v. 326 U.S. (2d Cir.1981) stad, F.2d n. 2 154, 158, 66 S.Ct. 90 L.Ed. 95 J., (Adams, (“[i]n a situa concurring) such There is no claim doing that Smith is busi tion, inequitable appel for an it would be Illinois, ness in and thus we limit our in appeal”). late court to decline to hear quiry to long-arm statute. (3d Keve, 721 F.2d 91 also West v. See Cir.1983). The constitutional due re Court, Supreme Firestone Tire & quirement by is satisfied by “some act 368, 379, Risjord, v. 449 U.S. Rubber Co. which the defendant purposefully avails it 669, 676, (1981), 66 L.Ed.2d 571 S.Ct. self of the privilege of conducting activities held, “A court lacks discretion to consider State, within the forum invoking thus the merits of a case over which it is with- protection benefits and of its laws.” Han thus, definition, jurisdiction, by out Denckla, 235, 253, son v. 78 S.Ct. jurisdictional ruling may never be made 1228, 1239, 2 L.Ed.2d 1283 In cases prospeсtive only.” In that the court this, such as where the claim is that a appeals held that an denying order controversy “arises from” the defendant’s disqualify motion to ap- counsel was not “ forum, contacts with the ‘relationship pealable but, prior judgment to final be- among defendant, the forum and the holding contrary cause its prece- litigation’ is the essential foundation” of dent, it determined the merits of the order. personal jurisdiction. Helicopteros Nacio Supreme ap- Court held that when an — Columbia, Hall, nales de S.A. v. U.S. pellate interlocutory court finds an order —, —, 1868, 1872, 80 L.Ed.2d nonappealable, the court must dismiss (1984)(quoting Heitner, Shaffer appeal. The Court did not address the 186, 204, U.S. appellate issue of whether an court must (1977)).5 L.Ed.2d 683 Recent cases have appeal dismiss the party where a who relies emphasized the subject reasonableness of is, jurisdictional ruling on a under a subse- ing a defendant to suit. Deluxe Ice Cream decision, quent foreclosed from ever rais- 1213; Corp., Co. R.C.H. Tool 726 F.2d at *7 ing Thus, his issues in the appellate court. Honeywell, Apparatewerk, Inc. v. Metz Firestone does require not this court to (7th Cir.1975). 509 F.2d 1137 Several fac appeal. dismiss this

tors are relevant to an assessment of rea Ill physical sonableness: the pres defendant’s ence in the forum state while transacting We turn to the issue of whether business, Deluxe Ice Cream the district Co. v. R.C.H. personal jurisdiction court had Corp., 1214; Tool 726 F.2d over A at Smith. federal district court has personal jurisdiction foreseeability that party over a in a diver the defendant would be sity subject forum, suit if a court of the state in to suit in the id. at 1212 n. the 4; which district court sits would have see World-Wide Volkswagen Corp. v. Columbia, Helicopteros Nacionales de S.A. to” the defendant’s contacts with the forum. —Hall, U.S. —, 1868, 80 L.Ed.2d The Court did not discuss the minimum con (1984), Supreme Court addressed the where, here, necessary tacts as the suit "arises necessary personal juris minimum contacts out of” the defendant’s contacts with the forum. "arising diction in suits not out of’ or "related 1275, 518, 522, 559, 431 N.E.2d 286, 297, Ill.Dec.

Woodsen, 444 U.S. 567, 62 L.Ed.2d Turning we to the facts of this imposed additional has Illinois in Illinois are that Smith’s activities hold through requirements jurisdiction personal qualify as a transaction of to sufficient This statute long-arm statute. its jurisdiction under that establishes business jurisdic itself person that a submits statute. While he was long-arm “engages in the if it Illinois courts tion of resident, letter to Smith mailed a Illinois Illinois within of business” transaction exercis notifying her that he was Snyder, from” action “arises if the cause of Liljedahl’s share ing option purchase to his question of this transaction.6 also came to partnership. Smith sep the Illinois statute

jurisdiction under negotiated with over Illinois and require question of arate from the partnership in purchase price for the process. Deluxe Ice Cream ments of due constitute terest. These activities 1213; at Corp., 726 F.2d Tool Co. v. R.C.H. Snyder’s claim for transaction of business. Associates, Lexington United Inc. Cook purchase price arises arbitration over Ill.Dec. Ill.2d Corp., 87 negotiations; from the letter and the failed (1981)(boundaries 733, 429 N.E.2d claim of Smith’s “lies wake” equated be statute are not to of Illinois hold actions while Illinois. we clause). process the due with the test under jurisdiction the district court had over that, qualify as a cases establish Illinois long-arm under the Illinois statute. Smith jur that establishes transaction of business statute, further hold that the exercise long-arm an act We under the isdiction compоrts the “min give jurisdiction here defendant must 'by the ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍nonresident action; the due in imum contacts” plaintiffs cause of rise to the letter, sending words, clause. Smith’s plaintiffs claim must other Illinois, Illi resident of to another commercial activi while a in the wake of the “lie[ ] resident, option pur exercising an nois by ties which defendant submitted [the] chase, returning negotiate to Illinois to Log courts.” of Illinois it for an Illi Center, price, makes reasonable Community 113 the gans v. Jewish By 549, 557, 484, 490, jurisdiction. to exercise tak 447 nois court Ill.App.3d 69 Ill.Dec. Illinois, Smith chose to (1983); ing these actions N.E.2d Deluxe Ice see also Illi protections invoke benefits Corp., v. R.C.H. Tool 726 F.2d Cream Co. Illinois, law. His connections with 1215; Associаtes, Lexing nois at Cook Inc. v. transacting 198-99, particularly business while Corp., ton United 87 Ill.2d at state, present within the are such that he Ill.Dec. at 429 N.E.2d at 851. anticipated that he could be should have “transaction of does business” standard physical presence in Illi sued there. His require defendant not that the nonresident gives taking these actions Illi regularly nois while conduct business within Illinois adjudicating dispute. nois an interest in single may be suf systematically; act Any conducting ficient, arises inconvenience long as as the cause of action Illinois, although perhaps the suit in not Presby from that act. v. United Johnston minimal, seriously greater than it Church, is not Ill.App.3d terian 6. The statute Acts through resident of this reрresentative, after from the (a) Any person, of this State as to son, and, submitting enumerated, an doing if an agent individual, of whether or not does State, any jurisdiction any such acts: thereby submits such in cause of action any pertinent who in his or her of the —Process. of part: a citizen or acts herein- person or arising courts per- Ill.Rev.Stat. (formerly codified at Ill.Rev.Stat. ch. this over him is based enumerated (c) *8 (1) defendant Only causes of action The transaction of State; ^[*] ch. in an action herein ^[*****] 110, upon this Section. may § 2-209(a)(1), in which any be asserted arising business within jurisdiction 110, (c) (1983) from acts against § 17).

417 941; if the suit were conducted in at Securities, would be Dickinson v. Heinold Inc., Thus, 638, relationship (7th Cir.1981). 661 F.2d Texas. between this 643 Simi- defendant, forum, larly, of litigation strong because policy favoring this this is arbitration, requirement requirements pro- of “evidencing such that the the due of transaction involving are met. commerce” must cess clause be broadly. construed See Societe Generale Surveillance, de S.A. Raytheon Europe- IV v. Management Co., and Systems 643 question We turn next to the of F.2d at 867. Act,

whether the Federal Arbitration §§ (1982), applicable 1-14 is U.S.C. to this interpretation A broad of “involving dispute. The FAA makes enforceable requirement commerce” supported by agreements those arbitration “in mari several decisions. In Corp. Prima Paint time evidencing transaction or a contraсt a v. Flood & Conklin Co., Manufacturing involving transaction 395, commerce.” 9 U.S.C. 7, 1801, 1805 U.S. n. 87 S.Ct. n. § There is no maritime transac 7, (1967), 18 L.Ed.2d 1270 the Court refus here, tion involved and thus we must decide limit ed to the applicability of the FAA to partnership agreement whether evi contracts for the shipment interstate involving dences a transaction commerce. goods. The quoted Court from the House “ requirement that transactions involv Report accompanying ‘[tjhe the FAA: ing by” interstate commerce “evidenced be control over interstate commerce [one the contract does not limit a court to con the bases for the legislation] reaches not sidering only expressly thosе transactions only the actual physical shipment interstate authorized on the face of the contract goods but also contracts relating to ” determining applies. whether the FAA interstate (quoting commerce.’ Id. H.R. Corp. Prima Paint v. Flood & Conklin 96, Rep. No. 68th Cong., (1924) 1st Sess. Co., 395, 6, Manufacturing 388 U.S. 401 n. (emphasis supplied)). In Bernhardt v. 1801, 87 S.Ct. 1804 n. 18 L.Ed.2d 1270 Co., Polygraphic 200-01, (1967), Supreme Court relied on an affi 273, 274-75, (1956), S.Ct. 100 L.Ed. 199 davit submitted to the district court in con Court stated that the contract did not in cluding that interstate commerce was in volve commerce because there was no volved. may we look to petitioner showing that the working partnership agreement and affidavits commerce, producing gоods commerce, to determine whether there is a transaction engaging activity that affected com involving interstate commerce. merce. See also ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍Grand Bahama Petrole Petroleum, um Co. Asiatic 550 F.2d The Supreme Court has stated (2d Cir.1977). “[sjection congressional is a declara Supreme recently Court has tion of a dis- liberal policy favoring federal purpose cussed the “involving agreements.” com- Moses H. Cone merce” in deciding Hospital Memorial whether v. Mercury Construc applies the FAA Corp., state U.S. courts. The Court stated: 74 L.Ed.2d 765 For that reason, courts have strong poli declared a expect We would Congress, if cy favoring the arbitration of dis enacting Act, contract the Arbitration was creat- See, putes. id.; e.g., ing thought Societe Generate de what it procedural to be a Surveillance, Raytheon European S.A. v. applicable only rule courts, in federal it Management Co., Systems 643 F.2d would not so limit the Act to transactions (1st Cir.1981). example, any For involving hand, commerce. On the other questions as to whether an issue is arbitra Congress would need to call on the Com- ble are to be resolved in favor of arbitra merce Clause if it intended the Act to tion. H. Moses Cone Hospital apply Memorial in state courts. Yet at the same Mercury Corp., time, Construction its reаch would be limited to trans- *9 V commerce. involving interstate

actions “involving com- the therefore view We question of finally to the We turn § 2, in not as requirement merce” FAA, whether, the section 4 of the under power of the on inexplicable limitation District of district court for the Northern necessary qualifi- courts, but as federal to take compel arbitration Illinois could in apply to intended cation on a statute partnership the place in that district when and federal courts. state is to agreement provides that arbitration — Houston, place in Texas. Section take U.S. Keating, Corp. v. Southland part: pertinent 79 L.Ed.2d —, —, equated the Thus, the Court alleged party aggrieved by A the fail- the “involving commerce” breadth ure, to neglect, or refusal of another regulate un Congress’s power extent agreement for under a written arbitrate the com clause. Under the commerce der may petition United activi clause, Congress may reach merce which, for such States district court save See, commerce. “affecting” interstate ties agreement, have under would Mining & Virginia Hodel v. e.g., admiralty in a or in Title civil action Surface 264, 276-77, Ass’n, 452 U.S. Reclamation subject arising out of the matter of a suit 69 L.Ed.2d parties, controversy between the that an arbitration That the directing that for an order such arbitra- is not a limi agreement involve commerce providеd proceed in the manner suggests that qualification tation but shall agreement____ in such court [T]he apply to all the FAA to Congress intended directing parties the make an order constitutionally reg could that it contracts arbitration in accordance with proceed to ulate. hearing agreement. terms of the The agreement, such proceedings, under Thus, “involving the it is clear that shall be within the district which language commerce” must be construed directing such arbi- petition for an order today not decide very broadly. We need tration is filed. ap the FAA to Congress intended whether statute, affecting interstate no ply to all contracts a district court has Under commerce, partner place that the to take power for it is clear to order arbitration ship agreement presented in this case falls of its own district. Econo-Car In outside Rentals, ternational, limits. well within constitutional Inc. v. Antilles Car Texas; Cir.1974); Inc., (3d real estate at issue was located F.2d 1391 see also in, partnership partners lived Couleur International Ltd. Saint-Tro from, (S.D.N.Y.1982). partner West, managed F.Supp. Illinois. The pez statute, ship money from and maintained the court must order borrowed Yet under the “in checking with a in Illinois. to arbitrate accordance with account bank one term of partnership agreement agreement”; involved the tеrms of the appli parties’ FAA is the forum selec commerce and the is interstate tion clause.7 cable. stay its the district court in Puerto Rico could have considered this di

7. Several other circuits lemma, although proceedings pending it in the none has considered arbitration in Connecticut presented procedural posture agreement. here. In pursuant parties’ that was Russell, & However, Co. v. Dant Continental Grain stay a motion that case involved (9th Cir.1941), the court held that a F.2d 967 compel petition and not a arbitra Oregon compel arbitra could district court International, In Econo-Car Inc. v. Antilles tion. despite the that the arbi tion in its district faсt Cir.1974), Rentals, Inc., (3rd 499 F.2d 1391 Car agreement provided arbitration was tration the court held that the district court However, place in that to take case, in New York. Virgin arbitration in Islands could not party challenging the district court’s agree City though parties’ New York even brought action to order had itself City. provided York ment for arbitration New Hilti, Oldach, Oregon. Inc. the district court decide whether did not (1st Cir.1968), the court held that 392 F.2d 368 *10 419 FAA purpose is to make determine wheth first must We agreements enforce to raise arbitration valid and specifically failure er Smith’s improper Corp. Keating, venue 104 clause as able. Southland v. selection forum 12(b) means right duty to dismiss at 858-60. The and rule motion S.Ct. in his 12(g) Rule disputes purely waived the defense. arbitrate is a matter of that he motion makes a party agreement parties. if a provides that contractual between improper 12(b) raise fails to emphasized “voluntary rule and court has under This courts venue, the defense. Some he waives nature” of commercial arbitration. Merit clauses to selection forum have considered Leatherby Insurance v. Insurance Co. See, e.g., provision. type Co., 673, (7th Cir.), be a of venue 714 678 de F.2d cert. — 683 Battery System, v. Interstate nied, —, 529, Bense 104 U.S. S.Ct. Cir.1982); 718, (2d In re Fire F.2d 720-22 agree An L.Ed.2d 711 arbitration Co., F.2d 93 Fund Insurance ment, clause, man’s including its forum selection Transport v. (5th Cir.1979); Auto Aaacon freely-negotiatеd is a contract between the Insur Mutual Automobile Farm State parties. (2d Cir.1976), Co., F.2d 648 cert. ance give Courts must effect to such 1042, 742, denied, 97 S.Ct. 429 U.S. freely-negotiated forum selection clauses. (1977); Tree, Plum Inc. v. L.Ed.2d 754 Co., Zapata Bremen v. M/S Off-Shore 754, (3d Cir.1973). Stockment, 488 F.2d 1, 15-19, 1907, 1916-18, U.S. 92 S.Ct. a selec not decide whether forum We need L.Ed.2d 513 “The choice of fo [] “venue” within the tion clause constitutes arms-length negotia in an rum was made 12, meaning of rule for we find that Smith by experienced sophisticated busi sufficiently his defense based on the raised nessmen, compelling and absent some rule 12 motion. In that mo clause his countervailing it reason should be honored tion, grounds to dismiss labelled his Smith by by and enforced the courts.” proper service of as lack of Id. at 92 S.Ct. at 1914. also See Scherk personal jurisdiction. In his discus lack of Co., v. Alberto-Culver 417 U.S. 519- clearly personal jurisdiction, Smith sion of 2449, 2457, 41 L.Ed.2d 270 argument any out his arbitration laid (1974) (holding enforceable forum selection place in only take Texas because could agreements); clauses in arbitration Sam clause. This was suffi the forum selection Eteco, Import & Son Co. v. S.A. Reisfeld cient to alert the district court that Smith (5th Cir.1976). F.2d 680-81 arguing that a district court argued Snyder could not enter has not that there Northern District of Illinois compel any “compelling countervailing” The fact rea an order to arbitration. as one son that the forum clause here that Smith did not label his defense selection enforced, matter. The Federal should not be other than that she of venue does not District of Illinois liberally Rules are to be construed so that filed suit the Northern compel erroneous in motion does and that court could nomenclature party peril. v. in its own district. We do not find not bind at his Sacks Securities, Inc., this reason to be sufficient to override the Reynolds 593 F.2d (D.C.Cir.1978); parties’ freely-negotiated agreement. Lodge Monte Vista America, Moreover, here, if prevail were to Insurance Co. Guardian Life (9th Cir.1967), denied, any party to an 384 F.2d 126 cert. 1041, 19 agreed-to L.Ed.2d 1142 could avoid the effect of the fo (1965). Thus, filing merely by did not waivе ob rum suit in a different grounds jections improper on venue. district. This turn could lead to ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍the Virgin provided court could order arbitration in the Is forum other than the one for in the contract, DuPuy-Busching Agency party lands. General the other had to file its motion Co., (5th Ambassador Insurance 524 F.2d 1275 in that forum and that district court Cir.1975), party the court held that where could arbitration. seeking brought to avoid suit *11 jurisdiction to would have under Title 28.” 9 racing to different courthouses parties § (1982) added). (emphasis each thinks is the most conve- U.S.C. 4 what obtain it, disregard' in its con- phrase agreement” appar nient forum “save for such disregard is not obligations. This “in ently tractual means the absence of the arbitra it еnacted Congress intended when Interna what See Couleur agreement.” tion agreements en- make West, to arbitration Saint-Tropez statute tional Ltd. v. 547 in this district court the forceable. (S.D.N.Y.1982); Warren F.Supp. to power under the statute had no case Community Building Brothers Co. v. in contraven- district its order arbitration Atlanta, Inc., Corp. F.Supp. Neth- See parties’ agreement. the tion of (M.D.N.C.1974). Here, diversity the Corp., Kenton Co. v. erlands Curacao citizenship parties the between (S.D.N.Y.1973) (party 745-46 F.Supp. controversy amount in would vest the dis compel court to arbi- move district cannot subject jurisdiction trict court with matter not place for arbitration tration where parties’ аgreement in the absence of the to Franklin, district); Lawn within arbitrate. Because the district court also (S.D.N.Y.1971) (proper dis- F.Supp. had over the defend compel filing motion to is district trict for ant, give the Section seems to the court provides proceedings are to contract where power compel to arbitration here. The ma place). take jority, however, finds a conflict between Section that the 4’s district case, court in this un The district compel only court arbitration its own FAA, der the could not order arbitration district, and the that Section’s mandate The dis the Northern District of Illinois. parties according arbitrate “the terms of FAA, court, trict undеr the also could not agreement.” agreement Because the Houston, order arbitration in Texas. In a specified here that arbitration must oc this, petition as case such where Houston, Texas, majority cur in holds only was the relief arbitration that the district court could arbitra sought, the district court should dismiss neither its own district nor or, motion, petition upon stay proc its other district. eedings.8 provisions of Section are inconsist- VI parties’ ent if the forum selection improperly Because district court agreement.” clause is a “term of the Un- compelled arbitration in the Northern Dis- der the majority’s interpretation, the broad Illinois, trict of we reverse its оrder com- power conferred on the courts in district pelling arbitration and the further order Section 4 is completely negated whenever confirming the award with directions to the an arbitration includes such a judg- district court to vacate its orders and forum selection frustrating clause. The ment and dismiss the case. interpretation results of apparent are .this in the majority instant where the con- BAUER, Judge, dissenting Circuit that powerless cludes district court is part. compel arbitration, though the even Although agree major I with most of the court meets jurisdictional the Section 4 re- ity’s opinion, quirement. I generally give well-written am convinced effect Courts clauses, properly compelled the district court forum provi- selection but such in the Northern Illi District of sions need not be honored face of power countervailing nois. Section 4 extends the to com “some compelling and rea- to “any Zapata pel son.” M/S Bremen v. United States dis Off-Shore Co., which, agreement, trict court save for such question 8. We do not reach the of whether a clause where all waive the benefit of the may court district order in its own clause. district in contravention of the forum selection (1972). The interest in honor- L.Ed.2d 513 outweighed

ing choice of forum here is give full effect both to the

by the need to under Section 4 and

jurisdiction conferred favoring policy arbitration that un- Act. Al- the Federal Arbitration

derlies

though appreciate majority’s I concern interpretation might lead to forum

shopping, important it is to remember that may

a district court act under Section if it would have

absence of the arbitration proper. Accordingly, I

venue would be affirm

would the district court’s order its

entirety. America,

UNITED STATES of

Plaintiff-Appellee, WEISMAN, Jr.,

Richard A.

Defendant-Appellant.

No. 82-1712. Appeals,

United States Court of

Seventh Circuit.

Argued Jan. 1984.

Decided June 1984.

Rehearing Rehearing In Banc July

Denied