doctrines of abstention and comity in light of the prior proceedings in Kentucky state court.

LEGAL STANDARD
For a 12(b)(1) motion to dismiss a court must accept as true all “well-pleaded
factual allegations in the complaint.” Transit Exp., inc. v. Ettinger, 246 F.3d 1018, 1023 (7° Cir.
2001). The court must also draw all reasonable inferences in the favor of the movant. Jd. When
a 12(b)(1) motion is based upon the existence of a parallel state court action and the movant
seeks abstention, in deciding the motion to dismiss the court can look beyond the pleadings and
examine the proceedings in the state court. Beres v. Village of Huntley, 824 F.Supp. 763, 766

(N.D. Il. 1992).

DISCUSSION

Flegles argues that this court should grant the motion to dismiss or stay the
proceedings in this action based on the doctrine of abstention. A federal court has a “virtually
unflagging obligation” to exercise the jurisdiction provided to it by Congress. AAR Intern., Inc.
vy. Nimelias Enterprises S.A., 250 F.3d 510, 517 (7" Cir. 2001). However, in “exceptional
circumstances” a federal court may abstain from hearing a case under the Colorado River
doctrine and “await the outcome of parallel proceedings as a matter of ‘wise judicial
administration giving regard to the conservation of judicial resource and comprehensive
disposition of litigation.” Jd. (quoting Finova Capital Corp. v. Ryan Helicopters U.S.A., Inc.,
180 F.3d 896, 898 (7" Cir. 1999) and Colorado River Water Conservation Dist v. United States,

424 U.S. 800 (1976)). A federal court can only abstain from hearing a case if there is the


CONCLUSION
Based on the foregoing analysis we deny Flegles’ motions to dismiss and the

motion to stay.

SaL Lh y—

“Samuel Der-Yeghiayar’ " *
United States District Court Judge

Dated: L[- A 7- 23



brought the instant action based on alleged breaches of the guarantees signed by Alice Mae
Flegle. Flegles acknowledges that the claims in both suits are not identical but argues that the
claims in the instant case arise out of the same relationship between Flegles and Truserv and that
Truserv’s claims in the instant action are compulsory counterclaims in the Kentucky state court

action. We find that the cases are sufficiently related to be considered parallel.

IL. Abstention Factors

The first factor to consider under the Colorado River abstention doctrine is whether the
first court assumed jurisdiction over the property. Jacobson v. City of Chicago, 233 F.Supp.2d
1001, 1007 (N.D. Ill. 2002). This factor is not pertinent in this case because the claims mainly
seek damages and there is no property directly at issue. The second factor to consider is the
inconvenience of the federal forum. Truserv argues that it would be unduly burdensome to force
it to come from Kentucky to Illinois to litigate this issue. However, Flegles signed the
agreements that contained the forum selection clause. The forum selection clauses were part of
the bargained agreement and were included for Truserv’s benefit. It would be unfair to allow
Flelges to enjoy the benefits of the contract and then allow Flegles to circumvent the provisions,
such as the forum selection clauses, which were included for Truserv’s benefit. We find that
Flegles waived any argument that Illinois is an inconvenient forum by signing the agreements
with the forum selection clauses.

The third factor to consider is the desirability of avoiding piecemeal litigation. While we
acknowledge that Truserv’s claims in the instant action could be considered compulsory

counterclaims in the Kentucky state court action, the issues in the cases are not identical or



“clearest of justifications” warranting dismissal and if the parallel litigation will be “an adequate
vehicle for the complete and prompt resolution of the issues between the parties.” /d. at 518.
The first requirement for abstention under the Colorado River doctrine is that the federal
suit and the suit in the other forum be parallel suits. Finova Capital Corp., 180 F.3d at 898. If
the suits are parallel the court must consider the following ten factors: “1) whether the first court
assumed jurisdiction over [the] property; (2) the inconvenience of the federal forum; (3) the
desirability of avoiding piecemeal litigation; . . (4) the order in which jurisdiction was obtained
by the concurrent forum[;] . . (5) whether state or federal law provides the rule of decision; . . .
(6) whether the state court proceeding adequately protects the federal plaintiff's rights; (7) the
relative progress of the state and federal proceedings; (8) the presence or absence of concurrent
jurisdiction; (9) the availability of removal; [and] (10) the vexatious or contrived nature of the

federal claim. Jacobson v. City of Chicago, 233 F.Supp.2d 1001, 1007 (N.D. Ill. 2002).

IL. Whether the Actions Are Parallel

Actions are considered parallel for the purposes of the Colorado River
abstention doctrine if “substantially the same parties are litigating substantially the same issues
simultaneously in two fora.” Finova Capital Corp. v. Ryan Helicopters U.S.A., Inc., 180 F.3d
896, 898 (7" Cir. 1999)(quoting Schneider Nat'l Carriers, Inc. v. Carr, 903 F.2d 1154, 1156 (7"
Cir. 1990)). Cases are parallel only if “there is a substantial likelihood that the state litigation
will dispose of all claims presented in the federal case.” Fofi Hotel Co., Inc. v. Davfra Corp.,
846 F.Supp. 1345, 1352 (N.D. Ill. 1994). In the Kentucky action Flegles is seeking to have the

court declare that the agreements between Truserv and Flegles are null and void. Truserv


filed its action in Illinois as provided for in the agreements signed by Flegles. The mere fact that
Flegles filed suit in the Kentucky state court first does not diminish Truserv’s right to sue in
Illinois and does not render Truserv’s subsequent filing in Illinois vexatious. After considering
the above factors we find that it would be improper for us to abstain from hearing this case.
Flelges has not shown that exceptional circumstances exist that would warrant us refusing to
exercise our jurisdiction or staying proceedings in our court to await the results of the case in the
Kentucky state court. We have a heavy obligation to exercise our jurisdiction and we shall honor
that obligation.

Flegles also seeks to dismiss all claims against Alice Mae Flegle for lack for personal
jurisdiction. Alice Mae Flegle signed several personal guarantees and dealt with Truserv which
has its principal place of business in Illinois. Flegles has dealt with Truserv, an Illinois based
corporation for over twenty years and has entered into several agreements with Truserv. For
these and other reasons we find that there are sufficient contacts with Illinois to support personal
jurisdiction. Flegles also argues that venue is improper in this court because no defendant resides

in this judicial district. We find that venue is proper.


< +, United States District Court, Northern District of linois

Name of Assigned i i Sitting Judge if
Judge or Magistrate Samuel Det-Yeghiayan Other than
Judge Assigned Judge
CASE NUMBER 03 C 3284 DATE 11/24/2003
CASE Truserv vs. Flegles
TITLE
[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly
MOTION: the nature of the motion being presented.]
DOCKET ENTRY:
qd) oO Filed motion of [ use listing in “Motion” box above.]
(2) oOo Brief in support of motion due
GB) Oo Answer brief to motion due. . Reply to answer brief due.
(4) a Ruling/Hearing on set for at
(5) ia} Status hearing[held/continued to] [set for/re-set for] on set for at
(6) a Pretrial conference[held/continued to] [set for/re-set for] on set for at .
(7) im Trial[set for/re-set for] on at
(8) a [Bench/Jury trial] [Hearing] held/continued to at
(9) o This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
(10) WE [Otherdocket entry] Status hearing held and continued to 03/08/04 at 9:00 a.m. For the reasons stated
onthe attached memorandum opinion, the Court hereby denies defendant’s motions to dismiss pursuant to
FRCP 12(b)(1), orin the alternative to stay. The Court further denies defendant’ s motions to dismiss claims
against Alice Mae Flegle for lack of personal jurisdiction and to dismiss for lack of venue. All discovery is to be
noticed in time to be completed by 02/23/04. All dispositive motions with supporting memoranda, by any party,
are to be filed by 03/23/04. All responses to the dispositive motions, ifany, are to be filed by 04/06/04. All
replies, if any, are to be filed by 04/13/03. Enter Memorandum Opinion.
(1) \ For further detail see memorandum opinion attached to the original minute order.
No notices required, advised in open court.
No notices required. umber of notices
Notices mailed by judge’s staff.
ve Woy
lotified counsel by telephone. io
v | Docketing to mail notices. The Court
handed out copies of the Memorandum ce AIMEE AITO
Opinion to the parties in open Court. ‘ docketing deputy initals } 7
Mail AO 450 form.
VY | Copy to Magistrate Judge Schenkier. aa ~
oe ate mailed notice
courtroom vi “
MW deputy’s
initials -
Date/time received in
central Clerk’s Office roaling deputy initials



overlapping. Although the issues of both cases could be resolved in one court, the reason that the
cases have developed in separate venues is Flegles disregard of the forum selection clause and its
race to the courthouse. We will not allow the concern of piecemeal litigation to override the
principles of fairness and equity. Were it otherwise, any party seeking to avoid the effect of a
forum selection clause could simply files suit first in a venue of its choice and argue that the
venue of its choice should hear all claims in order to avoid piecemeal litigation.

The fourth factor to consider is the order in which jurisdiction was obtained by the
concurrent forum. The Kentucky state court found that the forum selection clause was null and
void and thus exercised jurisdiction prior to this court, however, as indicated above we are not
convinced that this factor alone justifies a dismissal or stay of the instant action. The fifth factor
to consider is whether state or federal law provides the rule of decision. In the instant case the
agreements are governed by Illinois state law and this court, being more familiar with Hlinois
law, is in a better position to address the Illinois state law issues than the Kentucky state court.
The sixth factor to consider is whether the state court proceeding adequately protects the federal
plaintiff's rights. The instant case is a diversity action and is based on state law claims and there
is no indication that the Kentucky court will not protect any of Truserv’s federal rights. The
seventh factor to consider is the relative progress of the state and federal proceedings. Flegles
acknowledges that the Kentucky state court case is in its initial stages and that discovery has not
yet been exchanged. As for the next two factors, there is concurrent jurisdiction and the action
cannot be removed to federal court in the Kentucky action due to the joinder of an Illinois
plaintiff in the Kentucky action. The tenth factor we must consider is the vexatious or contrived

nature of the federal claim. We find no indication that the instant action is vexatious. Truserv


seeks to recover for a breach of loan agreements between Truserv and Flegles and seeks to
enforce personal guarantees signed by Flegles.

Truserv claims that it provided loans to Flegles and that in “The Application and
Agreement for Retail Store Development Fund,” which Flegles signed, the agreement provides
that it shall be enforced “only in Cook County or any Illinois county contiguous to Cook County,
Illinois, and only be interpreted in accordance with the laws of Illinois.” Truserv also claims that
Flegles signed three separate personal guaranties since 1976 which states that “[i]f suit becomes
necessary [Truserv is] authorized to file suit against [Flegles] in any court of competent
jurisdiction in the State of Illinois.”

Truserv filed the complaint in the instant action alleging claims for breach of contract
and account and a breach of personal guarantees claim. Flegles acknowledges that the claims in
the instant case are not the same claims brought in the Kentucky case, but Flegles contends that
the claims in the instant case are considered compulsory counterclaims in the Kentucky case.
The instant case and the Kentucky case both involve the member agreement between Truserv and
Flegles. However, in the instant case Truserv also bases its claims on the above mentioned
guaranties. Truserv is also bringing suit in the instant case against the guarantor, Alice Mae
Flegle, who is not a party in the Kentucky case. In addition Truserv argues that the Kentucky
case will not resolve the issues in the instant case because even if the Kentucky court found that
Truserv made fraudulent misrepresentations, Flegles would not be entitled to keep the goods and
services provided by Truserv without paying for them and the guarantor would still be liable to
Truserv. Flegles has filed a motion to dismiss or in the alternative to stay proceedings in this

case and Flegles argues that this court should decline to exercise its jurisdiction based on the



Bardwell, Kentucky. Flegles was a member of Truserv for over twenty years. However, on
February 12, 2003, Flegles filed suit against Truserv in Carlisle Circuit Court in Kentucky.
Flegles claims that Truserv made fraudulent misrepresentations to Flegles to induce Flegles to
continue as a member. Specifically, Flegles alleges that from 1997 to 2000 Flegles relied on
misrepresentations made by Truserv in making the decision to greatly expand Flegles’ store.
Flegles claims that Truserv fraudulently concealed losses of over $131 million, Flegles also
claims that Truserv made misrepresentations in order to induce Flegles to forego redemption
payments on its member shares. In the Kentucky state court action Flegles is seeking a
declaratory judgment, declaring agreements between Truserv and itself null and void thus
relieving Flegles of its obligation to pay its debts. Flegles also brought claims of fraud and
breach of contract.

After Flegles filed the lawsuit in Kentucky, Truserv terminated Flegles’ membership in
Truserv. Truserv contends that it provided Flegles with merchandise and services and Flegles
has refused to pay for them. Truserv accuses Flegles of manufacturing the misrepresentation
claims in order to file the action in Kentucky state court despite the fact that the parties agreed
pursuant to a forum selection clause to proceed in Illinois, Truserv also accuses Flegles of
adding an additional plaintiff to the Kentucky case that serves no purpose other than to destroy
diversity jurisdiction and prevent Truserv from removing the Kentucky case to federal court.

In the Kentucky state court case Truserv moved to dismiss based on a forum selection
clause in agreements between Truserv and Flegles. On March 20, 2003, the state court judge
denied the motion to dismiss, finding that the forum selection clause is unreasonable and that it

should not be enforced. On May 16, 2003, Truserv filed the instant action in which Truserv


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

TRUSERV CORPORATION
f/k/a COTTER & COMPANY,

Plaintiff,
v. No. 03 C 3284
FLEGLES INC, d/b/a FLEGLES TRUE

VALUE HOME CENTER and
ALICE MAE FLEGLE,

werenerverwrerververwere eS

Defendants.

MEMORANDUM OPINION
SAMUEL DER-YEGHIAYAN, District Judge

This matter is before the court on Defendants’ motion to dismiss pursuant to
Federal Rule of Civil Procedure 12(b)(1) or in the alternative to stay and on Defendants’ motion
to dismiss claims against Alice Mae Flegle for lack of personal jurisdiction and on Defendants’

motion to dismiss for lack of venue.. For the reasons stated below we deny all the motions.

BACKGROUND
Plaintiff Truserv Corporation (“Truserv”) is a nationwide hardware store
cooperative which supplies goods and services to True Value hardware stores. Truserv’s
principal place of business is Chicago, Illinois. Defendants Flegles Inc. and Alice Mae Flegle

(collectively referred to as “Flegles”) operate a True Value hardware and lumber store in

/7