“unless the plaintiff's allegations clearly indicate that the action is untimely.” Schacht. Baccala
& Shoop Ins. Serv., No. 91 C 2228, 1993 WL 469909, at *4-*5 (N.D. IIL. Noy. 12, 1993).

B. Effect of the Choice-of-Law Provision on the Statute of Limitations

McLauchlan argues that the New York statute of limitations applies because the contract
contains a choice-of-law provision in which the parties agreed that New York law would govern
the contract. ABF Capital responds that the Illinois statute of limitations applies because the
choice-of-law clause does not include statutes of limitations and other procedural matters. The
court agrees with ABF Capital.

A federal court exercising diversity jurisdiction must apply the choice-of-law rules of the
state in which it sits. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941).
Therefore, the court, sitting in Illinois, will apply Illinois choice-of-law rules to this case. Under
those Illinois rules, statutes of limitation are considered procedural in nature. Humanes v. Gen.
Elec. Transp. Serv., 99 C 4528, 2000 WL 1029127, at *2 (N.D. Ill. July 24, 2000) (citing
Kalmich y. Bruno, 553 F.2d 549, 553 (7th Cir. 1977). Illinois courts apply their own statutes of
limitation, even when the parties to a contract have included a choice-of-law provision in the
contract to govern their substantive contractual rights. See Colonial Penn Life Ins. Co. v.
Assured Enter., Ltd, 151 F.R.D. 91, 95 (N.D. Ill. 1993) (applying the Illinois statute of
limitations in a contract case despite the parties’ choice-of-law provision that Pennsylvania law
applies to the contract). Because Illinois choice-of-law rules dictate the application of the

Illinois statute of limitations, the court will apply that law.


IL DISCUSSION

A. Standard for Deciding a Motion to Dismiss under Rule 12(b)(6)

In ruling on a motion to dismiss under Rule 12(b)(6), the court must accept all factual

allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff.
Midwest Grinding Co. v. Spitz, 976 F.2d 1016, 1019 (7th Cir. 1992). If, when viewed in the light
most favorable to the plaintiff, the complaint fails to state a claim upon which relief can be
granted, the court must dismiss the case. See FED. R. Civ. P. 12(b)(6); Gomez v. IIL. State Ba.
of Educ., 811 F.2d 1030, 1039 (7th Cir. 1987). The court may dismiss the complaint only if it
appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim that
would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957).

Also, according to Federal Rule of Civil Procedure 10(c), “A copy of any written
instrument which is an exhibit to a pleading is part thereof for all purposes.” The Seventh
Circuit has interpreted “written instrument” as including contracts. N. Ind. Gun & Outdoor
Shows v. City of South Bend, 163 F.3d 449, 453 (7th Cir. 1998). Itis appropriate, therefore, for
this court to consider the copy of the agreement that ABF Capital attached to its complaint as
Exhibit A. See Acevedo v. Bally Total Fitness Corp., No. 99 C 1289, 1999 WL 1045035 (N.D.
Ill. Nov. 12, 1999) (considering, under Rule 10(c), a contract attached to the complaint in
determining a 12(b)(6) motion to dismiss).

A motion to dismiss is appropriate for determining whether a complaint, on its face, is
barred by a statute of limitations. Tregenza v, Great Am. Communications, 12 F.3d71 7,719 (7th

Cir. 1993). A motion to dismiss based upon an expired statute of limitations must be denied


The applicable Illinois statute of limitations states that “actions on written contracts ...

shall be commenced within 10 years next after the cause of action accrued.” 735 ILL. Comp.
STAT. 5/13-206. Under Illinois law, an action for a breach of a written agreement accrues when
the breach of contractual duty occurs. Ind. Ins. Co. y. Machon & Machon, Inc.,753N. B. 2d 422, :
445 (Ill. App. Ct. 2001). Therefore, ABF Capital’s case accrued when McLauchlan allegedly
failed to pay on December 31, 1994. ABF Capital filed this lawsuit on May 24, 2001. Because
ABF Capital filed its lawsuit within ten years of when its action accrued, the court concludes that
ABF Capital filed this case within the period allowed by the Illinois statute of limitations and
that the case is, therefore, timely. Accordingly, the court denies McLauchlan’s motion to dismiss
on this point.
Cc. Application of the Minois Borrowing Statute

McLauchlan argues that, even if the choice-of-law provision in the contract does not
require the court to apply the New York statute of limitations, the Illinois borrowing statute
directs the court to that result. McLauchlan bases his argument on his assertion that this case
arose outside of Illinois and that the statute of limitations of the state where the case arose, New
York, bars ABF Capital’s claims. ABF Capital, however, contends that the Illinois borrowing
statute does not apply to this case because the borrowing statute does not apply to cases in which
either party is an Illinois resident and that, in this case, McLauchlan is an Illinois resident.
Again, the court agrees with ABF Capital.

The Hlinois borrowing statute states: “When a cause of action has arisen in a state or

territory out of this State ... and, by the laws thereof, an action thereon cannot be maintained by



we eect lm

198 neem cpus sagem

Minute Order Form (06/97)

United States District Court, Northern District of Illinois

Name of Assigned Judge i Sitting Judge if Other
or Magistrate Judge James H. Alesia than Assigned Judge

CASE NUMBER 01 C 3850 DATE October 9, 2001

CASE ABF Capital Corp. vs. David C. Mcl.auchlan

TITLE

{in the following box (a) indicate the perty filing the motion, c.g., plaintiff, defendant, 3rd party plaintiff, and (by state briefly the nature

MOTION: of the motion being presented.]
DOCKET ENTRY:
(1) oO Filed motion of [ use listing in “Motion” box above.} |

date mailed notice

(2) Oo Brief in support of motion due
(3) oO Answer brief to motion due____. Reply to answer brief due
(4) og Ruling/Hearing on set for at
(5) o Status hearing[held/continued to] [set for/re-set for] on __ ____ set for __at
(6) QO Pretrial conference(held/continued to] [set for/re-set for] on _ set for _ at .
7) Oo Trialfset for/re-set for]on___—_at
(8) QO [Bench/Jury trial] [Hearing] held/contimued to at
(9) i) ‘This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OFRCP4(m) O General Rule 21 OFRCP41(a\(1) O FRCP41(a)(2).
(0) xf [Other docket entry] | Enter Memorandum Opinion and Order. The court denies defendant’s
motion to dismiss [8-1].
(11) t | (For further detail see order attached to the original minute order.]
No notices required, advised in open court.
No notices required. number of notices
Notices mailed by judge’s staff. ) ya O\
Notified counsel by tefephone. 4 \ becketed
vo Docketing to mail notices. gq
Mail AO 450 form. scketing deputy inkials
Copy to judge/magistrate judge.

courtroom
cw deputy’s we cg mi ES
initials pep ag i ot eb

" “Date/time received in

central Clerk’s Office. nailing deputy initials



reason of the lapse of time, an action thereon shall not be maintained in this State.” 735 Il.
Comp. Stat. 5/13-210. The Illinois Supreme Court has held that the borrowing statute applies
only to cases in which all parties are Illinois residents. Employers Ins. of Wasau v. Elcho
Liquidating Trust, 723 N.E.2d 687, 693 (Ill. App. Ct. 1999) (citing Miller v. Lockett, 457 N.B.2d
14, 16-17 (Ill. 1983). McLaughlan is a citizen of Illinois, which means that the court cannot
apply the Illinois borrowing statute to this case.

Consequently, the court will apply the Illinois statute of limitations. As discussed supra
Sect. ILB, because ABF Capital brought this case within the ten years allowed under the Illinois
statute, this case is not time-barred. Therefore, the court cannot conclude that ABF Capital’s
allegations clearly indicate that the action is untimely. Accordingly, the court denies
McLauchlan’s motion to dismiss on this point.

HI. CONCLUSION

For the foregoing reasons, the court denies defendant’s motion to dismiss.

OCT 09 2001

Date:

James H. Alesia
United States District Judge



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
ABF CAPITAL CORP., )
)
Plaintiff, )
)
v. ) Case No: 01 C 3850 Y
) Q, “Gee.
DAVID C. McLAUCHLAN, ) Judge James H. Alesia Ca eZ
“2,
Defendant. )

MEMORANDUM OPINION AND ORDER

Currently before the court is defendant’s motion to dismiss plaintiff's complaint pursuant
to Federal Rule of Civil Procedure 12(b)(6) (“Rule 12(b)(6)”). For the following reasons, the
court denies defendant’s motion.

I. BACKGROUND

Defendant David C. McLauchlan (“McLauchlan”) is a citizen of Illinois. In December,
1982, Regent Energy Partners (“the Partnership”), of which McLauchlan was a member, and
plaintiff ABF Capital Corporation (“ABF Capital”) entered into a sublease. Under the terms of
the sublease, the Partnership acquired land from ABF Capital to be used for drilling and
developing oil and gas wells in Texas and Louisiana. As part of the sublease, ABF Capital
deferred its rights to royalty payments in exchange for each of the Partnership’s limited partners
executing an Assumption of Liabilities Agreement (“the Agreement”), McLauchlan thus became
personally liable to ABF Capital for his pro rata share of the deferred royalties, up to $81,000.

His liability was deferred until December 31, 1994. The parties included a choice-of-law

(


provision in the Agreement, which states: “This Agreement is governed by and construed under
the laws of the State of New York.” (Compl., Ex. A at 5.) Additionally, under the Agreement,
McLauchlan agreed that ABF Capital would have the rightto enforce the Agreement and recover
costs, expenses, and reasonable attorneys’ fees incurred by enforcing the Agreement.

On or about December 31, 1994, McLauchlan became liable to ABF Capital for the
$81,000. All conditions precedent to that liability have been fulfilled. In a letter dated
December 12, 1994, ABF Capital notified McLauchlan of his liability and that interest would
begin accruing upon unpaid amounts if he did not pay as required on December 31. McLauchlan
has not yet paid ABF Capital any of the $81,000 or the accrued interest,

On May 24, 2001, over six years after the contract was breached, ABF Capital filed this
lawsuit. McLauchlan has filed this motion to dismiss, claiming that this case is time-barred by
a six-year New York statute of limitations. ABF Capital argues that the ten-year Illinois statute
of limitations, not the New York statute, applies to this case and that its case was timely-filed.
The critical issue to this motion is whether the New York statute of limitations or the Illinois
statute of limitations applies to this case. If the New York statute applies, this case is time-
barred. If, however, the Illinois statute applies, the case is timely. McLauchlan argues that the
New York statute applies because: (1) the choice-of-law clause in the Agreement, specifying
that New York law governs the contract, requires the court to apply the New York statute of
limitations and (2) the IHinois borrowing statute requires the court to apply the New York statute

of limitations. The court will address each argument in turn.