In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 06-1835

ABBOTT LABORATORIES,

Plaintiff-Appellant,

v.

TAKEDA PHARMACEUTICAL COMPANY LIMITED, et al.,

Defendants-Appellees.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 05 C 3758—Ronald A. Guzmán, Judge.

____________

ARGUED OCTOBER 16, 2006—DECIDED FEBRUARY 2, 2007

____________

Before POSNER, RIPPLE, and WOOD, Circuit Judges.

POSNER, Circuit Judge. In 1977, Abbott Laboratories

and the Japanese pharmaceuticals manufacturer Takeda

formed a 50-50 joint venture, Takeda-Abbott Products, to

engage in pharmaceutical research and development. In

1985 the parties converted it into a Delaware corporation, TAP Pharmaceuticals, which they continued to own

equally; each of the joint venturers was therefore entitled to choose half the members of TAP’s board of

directors. The 1985 agreement also expanded the scope of

the joint venture to include the distribution of pharmaceu-
2 No. 06-1835

ticals. In that regard the agreement provided that both

Abbott and Takeda could contract with TAP to furnish

it with bulk product for it to distribute. TAP was to

select bulk suppliers “on the basis of the economic advantage to TAP,” but was to give the original supplier

of the bulk product “the first opportunity to quote on”

resupplying it. The parties further agreed “to utilize their

voting power in [TAP] in such a manner as to effectuate

the intent of” both the 1977 and 1985 agreements.

In 1995 Takeda made a contract to supply TAP for ten

years with bulk lansoprazole, a drug for treating symptoms of heartburn and acid reflux, which TAP marketed

under the name Prevacid. In 2004, shortly before the

contract expired, TAP’s board of directors voted to

renew it. Six months later Abbott filed this suit against

Takeda. The complaint charges that the defendant, in

breach of a fiduciary duty to Abbott imposed by Delaware law (remember that TAP is a Delaware corporation), had coerced Abbott to instruct its directors on

TAP’s board to vote to renew the contract, even though the

contract price was excessive. Takeda had been able to

coerce Abbott, the complaint explains, by threatening to

stop supplying lansoprazole to TAP. How such a threat

could be credible is unclear; and one might also wonder

how Takeda could benefit from forcing TAP, of which

it was half owner, to pay an exorbitant price for a

critical input. Wouldn’t that be cutting off one’s nose to

spite one’s face? Abbott’s answer is that by forcing renewal at an exorbitant price and thus increasing Takeda’s

profits but TAP’s costs (and so reducing TAP’s profits),

Takeda would come out ahead because half of TAP’s

profits go to Abbott but all of Takeda’s profits go to

Takeda.
No. 06-1835 3

Abbott filed its suit in the federal district court in Chicago, basing federal jurisdiction on diversity of citizenship.

The choice of forum was a surprise. The 1985 agreement

between Abbott and Takeda that created TAP states that

“in the event of a dispute between [Abbott and Takeda]

arising from, concerning or in any way related to this

Agreement,” suit shall be brought in Japan if Abbott is the

plaintiff and in Illinois if Takeda is the plaintiff. The

purpose of specifying two forums in this way is to discourage either side from instituting litigation, because

whoever sues must litigate on the other party’s turf.

Compare Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585,

595 (1991). The downside is that if a dispute arises, each

party may try to maneuver the other into suing first, and

such maneuvers could make litigation more likely. But

the parties, being commercially sophisticated entities,

must have thought this effect of such a forum selection

clause less likely than its effect in discouraging litigation.

The district court held the clause valid and applicable, and

so dismissed the suit, precipitating this appeal.

The 1985 agreement states that it “shall be governed by

the laws of the State of Illinois.” But there is a question

whether this provision bound the district court, and binds

us, with respect to forum selection. We left open the

question whether federal or state law governs the validity

and interpretation of such clauses in diversity suits in IFC

Credit Corp. v. Aliano Brothers General Contractors, Inc., 437

F.3d 606, 609 (7th Cir. 2006). We noted that if federal law

applies there may be an invitation to forum shopping

because the state law may be different, but that if state law

applies the determination of the forum for the litigation

is withdrawn from the federal courts even though they

have an independent interest in determining whether
4 No. 06-1835

the suit is litigated in a federal district court and if so in

which one. Neither consideration figures in this case. There

is no risk of forum shopping, because if Abbott had filed

its suit in a state court Takeda could have removed it to a

federal court in the same state. And it is a matter of indifference to the federal judiciary whether the forum selection clause in this case is enforced—it is no skin off the

federal courts’ back if this suit is litigated in Japan, but at

the same time there is nothing about the litigation that

would make it abnormally burdensome to the federal

district court in Chicago, as might be a concern if that

court somehow lacked the procedural or other resources

that are required for resolving an international commercial dispute.

Simplicity argues for determining the validity and

meaning of a forum selection clause, in a case in which

interests other than those of the parties will not be significantly affected by the choice of which law is to control,

by reference to the law of the jurisdiction whose law

governs the rest of the contract in which the clause appears, Northwestern National Ins. Co. v. Donovan, 916 F.2d

372, 375-76 (7th Cir. 1990); Yavuz v. 66 MM, Ltd., 465 F.3d

418, 428 (10th Cir. 2006); Gleich v. Tastefully Simple, Inc.,

No. 05 C 1415, 2005 WL 3299187, at *5 (N.D. Ill. Dec. 2,

2005), rather than making the court apply two different

bodies of law in the same case. This implies that Illinois

law governs the validity of the forum selection clause in

this case.

But while as we noted in IFC Credit Corp. v. Aliano

Brothers General Contractors, Inc., supra, 437 F.3d at 611-13,

there are differences of nuance between the federal and the

Illinois standards for determining the validity of a forum

selection clause, there is agreement between the jurisdic-
No. 06-1835 5

tions that ordinarily the parties’ contractual choice of

forum should be overridden only if that choice would

impose significant costs on third parties or on the judicial

system. Compare id. at 613; AAR Int’l, Inc. v. Nimelias

Enterprises S.A., 250 F.3d 510, 525 n. 9 (7th Cir. 2001), and

Northwestern National Ins. Co. v. Donovan, supra, 916 F.2d at

376, with Aon Corp. v. Utley, No. 1-05-2824, 2006 Ill. App.

LEXIS 1021, at *19-21 (Ill. App. Nov. 9, 2006); Yamada Corp.

v. Yasuda Fire & Marine Ins. Co., 712 N.E.2d 926, 934 (Ill.

App. 1999), and Calanca v. D & S Mfg. Co., 510 N.E.2d 21,

23-24 (Ill. App. 1987) (citing M/S Bremen v. Zapata Off-Shore

Co., 407 U.S. 1 (1972)). Neither basis for a finding of

invalidity is present in this case, and there is no contention that Abbott was coerced or deceived into agreeing

to the clause—Abbott proposed it to Takeda. The clause

is valid, and so we turn to the question of its meaning,

where again no difference between federal and Illinois

principles of interpretation (if there is a difference, which

we doubt) would affect the outcome.

The clause is about as broadly worded as could be

imagined, and at least as a semantic matter it certainly

embraces Abbott’s suit. The breach of fiduciary obligation of its co-venturer about which Abbott complains

arose out of the corporate structure created by the agreement, out of the provision of the agreement relating to

contracts with bulk suppliers, out of the deadlock potential

that the contractual provision for a 50-50 division of shares

and directors created, and out of the contractual duty of

the parties to vote their shares in a manner that would

achieve the purpose of the agreement, which was to

share profits equally—an intent that Takeda’s conduct, if

Abbott can be believed, flouted. So the wrong of which

Abbott’s suit complains arises from the 1985 agreement
6 No. 06-1835

and even more clearly is related to it—the first thing

a court asked to adjudicate the suit would want to look

at would be the agreement.

Abbott argues, however, that under Illinois principles for

the interpretation of forum selection clauses, a dispute

“relates to” an agreement only if resolution of the dispute

requires interpretation of the agreement. This would

mean that if Takeda acknowledged breaking the contract,

Abbott wouldn’t have to sue in Japan because there

would be no interpretive issue. That makes no sense; and

the case that Abbott cites in support, Boatwright v. Delott,

642 N.E.2d 875, 877 (Ill. App. 1994), is inapposite. It does

say that “forum selection clauses apply to tort claims

which require interpretation of the contract.” (Emphasis

added.) But the clause in Boatwright was much narrower

than the one in this case. It said nothing about arising

from or concerning or related to. Instead it said: “This

Contract shall be governed by and construed in accordance

with the law of the state of Texas applicable to contracts.”

(Emphasis added.)

Abbott repeats its argument in different words when it

says that since its suit is a tort suit—a suit for breach of a

fiduciary duty to a partner in a joint venture—it arises out

of Delaware tort law rather than out of the 1985 agreement.

But the forum selection clause does not apply just to the

litigation of claims that arise out of, concern, etc., the

contract; it applies to the litigation of disputes that arise out

of, concern, etc., the contract. American Patriot Ins. Agency,

Inc. v. Mutual Risk Management, Ltd., 364 F.3d 884, 889 (7th

Cir. 2004); Marinechance Shipping, Ltd. v. Sebastian, 143

F.3d 216, 222-23 (5th Cir. 1998); John Wyeth & Brother Ltd. v.

CIGNA Int’l Corp., 119 F.3d 1070, 1074 (3d Cir. 1997). The

dispute is the parties’ disagreement over the validity and
No. 06-1835 7

interpretation of the clause; the law of Delaware is (the

parties agree—though perhaps they shouldn’t, as we’ll

see in a moment) merely the body of law that will be used

to resolve the dispute. Even if the clause said “claim”

rather than “dispute,” Abbott’s argument would fail. A

claim of breach of contract arises from the contract and

from the parties’ conduct relating to the alleged breach.

Abbott cites Parfi Holding AB v. Mirror Image Internet, Inc.,

817 A.2d 149 (Del. 2002), for the proposition that a claim

of breach of fiduciary duty (in that case of a majority

stockholder to the minority stockholders) is not “related to”

(or, in the words of Parfi, “in connection with”) the agreement creating the contractual relationship between the

parties; in that case it was the agreement by which the

plaintiffs acquired their minority interest in the corporation. Just as in its handling of the Boatwright case, Abbott

overlooks a critical distinction between Parfi (which,

incidentally, is not an Illinois case) and the present case.

Parfi involved the interpretation not of a forum selection

clause but of an arbitration clause, and the competence

of arbitrators, who are not professional judges and often

aren’t even lawyers, is usually (though not always, see

Pearce v. E.F. Hutton Group, Inc., 828 F.2d 826, 829 (D.C. Cir.

1987)) limited to contractual interpretation, rather than

extending to the determination of tort claims, such as

breach of fiduciary duty. Armada Coal Export, Inc. v.

Interbulk, Ltd., 726 F.2d 1566, 1567-68 (11th Cir. 1984); see

Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 452-53

(2003) (plurality opinion); Hudson v. Chicago Teachers

Union, 743 F.2d 1187, 1195-96 (7th Cir. 1984); Old Dutch

Farms, Inc. v. Milk Drivers & Dairy Employees Local Union,

359 F.2d 598, 602-03 (2d Cir. 1966). Japanese courts are

staffed by professional judges competent to adjudicate
8 No. 06-1835

tort claims, including claims of fiduciary duty arising

under Delaware law, which the parties assume Japanese

courts would apply by virtue of the choice of law provision in the 1985 agreement; the provision requires disputes to be resolved by the application of Illinois law.

Illinois conflicts of law principles do suggest that Delaware law governs Abbott’s claim of breach of fiduciary

duty. Spillyards v. Abboud, 662 N.E.2d 1358, 1361 (Ill. App.

1996); Libco Corp. v. Roland, 426 N.E.2d 309, 312 (Ill. App.

1981); Panter v. Marshall Field & Co., 646 F.2d 271, 285 (7th

Cir. 1981) (Illinois law). But we doubt that the choice of

law provision in the agreement was meant to incorporate

the entire law of Illinois, including its conflicts of law

principles. The usual assumption is that such a provision designates the law that will be applied to any dispute

that arises out of the contract in which the provision is

found. No matter; whether Illinois or Delaware law

governs the issue of fiduciary duty, Japanese courts are

competent to resolve the issue.

It was natural for parties in the position Abbott and

Takeda were in when they negotiated the 1985 agreement to want a dispute arising from an alleged abuse of

voting power to be encompassed by the forum selection

clause. That was probably the likeliest dispute to arise, and

one they would be particularly desirous of resolving

amicably, the goal of the clause. Were Abbott’s interpretation of the clause correct, moreover, we would be at a loss

to know how the clause could have been drafted to bring

this dispute within its scope. At argument Abbott’s

lawyer suggested that “the parties’ relationship” could

have been substituted for “this Agreement.” But that

would have invited Abbott to argue that the dispute in this

case arose not from the parties’ relationship but from
No. 06-1835 9

Takeda’s unilateral misconduct and Delaware fiduciary

law.

Abbott has one good interpretive argument, which is

that a “but for” test of “arising out of” or “related to”

would be unsound. For then if Abbott and Takeda had a

dispute over an unrelated agreement made 20 years later,

Takeda could argue that it arose from the 1985 agreement

because if it hadn’t been for what the parties learned

about each other in operating under the agreement they

would not have included in the later agreement the clause

giving rise to the dispute. Takeda’s lawyer at argument

readily conceded that the forum selection clause should

not be stretched that far, that is, to its literal limits. “Butfor causation is an unsatisfactory understanding of language referring to ‘disputes arising out of’ an agreement.

Let us suppose that while inspecting Omron’s facilities,

a manager of Maclaren stepped on a baby rattle and fell.

Would the ensuing tort litigation go to the High Court of

Justice in the United Kingdom just because, but for the

distribution agreement, none of Maclaren’s employees

would have been on Omron’s premises?” Omron Healthcare,

Inc. v. MacLaren Exports Ltd., 28 F.3d 600, 602 (7th Cir.

1994); see also Carris v. Marriott Int’l, Inc., 466 F.3d 558, 559-

60 (7th Cir. 2006); Gavin v. AT & T Corp., 464 F.3d 634, 639-

40 (7th Cir. 2006); Movitz v. First Nat’l Bank of Chicago, 148

F.3d 760, 762-63 (7th Cir. 1998). The fact that a clause is

broadly worded to stop up loopholes doesn’t justify a

literal interpretation that carries far beyond any purpose

that can reasonably be imputed to the drafter. “When a

statute is broadly worded in order to prevent loopholes

from being drilled in it by ingenious lawyers, there is a

danger of its being applied to situations absurdly remote

from the concerns of the statute’s framers.” Fitzgerald v.
10 No. 06-1835

Chrysler Corp., 116 F.3d 225, 226 (7th Cir. 1997); see also

Tyson v. International Brotherhood of Teamsters, Local 710

Pension Fund, 811 F.2d 1145, 1149 (7th Cir. 1987). And so it

is with a forum selection clause. But this cannot carry the

day for Abbott. Its dispute with Takeda is not remote

from the purpose of the forum selection clause, but at its

heart.

All that is left for Abbott to argue is that it would be

“unreasonable” to force it to litigate its suit in Japan. If so,

Illinois law would not require compliance with the forum

selection clause. Yamada Corp. v. Yasuda Fire & Marine Ins.

Co., supra, 712 N.E.2d at 932; Calanca v. D & S Mfg. Co.,

supra, 510 N.E.2d at 23; cf. M/S Bremen v. Zapata Off-Shore

Co., supra, 407 U.S. at 10. But what Abbott means by

“unreasonable” is simply that Japan is a less convenient

forum than Illinois for the litigation of this dispute. Maybe

so. And maybe therefore if the choice of forum were

governed by the doctrine of forum non conveniens Abbott

would be permitted to remain in Illinois, since balance

of convenience is the standard for application of the

doctrine. But a forum selection clause is a substitute for

the doctrine, not another name for it, and so the test of

reasonableness must be different from a test of convenience. When it signed the 1985 agreement, Abbott (which,

remember, proposed the clause) could and no doubt did

consider the potential inconvenience of litigating in Japan,

but decided to risk it. It is bound by its choice. Id. at 16-17;

IFC Credit Corp. v. Aliano Brothers General Contractors,

Inc., supra, 437 F.3d at 613.

AFFIRMED.
No. 06-1835 11

A true Copy:

Teste:

 _____________________________

Clerk of the United States Court of 

Appeals for the Seventh Circuit 

USCA-02-C-0072—2-2-07