Opinion ID: 702337
Heading Depth: 1
Heading Rank: 2

Heading: Whether the District Court Properly Determined Choice of Law

Text: 13 Gramercy advances two reasons for us to decide that the district court should have applied New Jersey law. First, Gramercy argues that under 28 U.S.C. Sec. 1404, the district court should have initially applied New Jersey choice of law principles because this case was transferred from a New Jersey federal court. However, Gramercy has forfeited this argument because it never made it to the district court. See Mastrobuono v. Shearson Lehman Hutton, Inc., 20 F.3d 713, 719 (7th Cir.1994), reversed on other grounds, --- U.S. ----, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995). 14 Gramercy's second argument is that the Illinois District Court erred in finding that, under Illinois choice of law, the court should apply Illinois law. A district court applies the choice of law rules of its forum state. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). We review choice of law de novo. Nucor v. Aceros Y Maquilas de Occidente, 28 F.3d 572, 581 n. 8 (7th Cir.1994). Illinois has adopted the Restatement (Second) of Conflicts for resolving choice of law issues. See Palmer v. Beverly Enters., 823 F.2d 1105, 1107 (7th Cir.1987). Section 188(2) of the Restatement (Second) provides five factors relevant in making choice of law determinations: (1) the place of contracting; (2) the place of negotiation; (3) the place of performance; (4) the location of the subject matter of the contract; and (5) the domicile, residence, place of incorporation, and place of business of the parties. Further, Sec. 188(3) states that where the place of negotiating a contract and the place of performance are the same state, that state's laws will generally apply. 15 The district court determined that Illinois, not New Jersey, had the most significant contacts to the case and that, therefore, Illinois law should apply. We agree with the district court. 16 It is not clear where the agreement was formed, but Wolens maintains in a supporting affidavit that the place of contracting was in Chicago. Gramercy disputes the place of negotiation and contracting only by arguing that there was no agreement with Wolens until Gramercy gave orders from its New Jersey headquarters to one of its manufacturing sites outside of New Jersey to ship the goods that one of Wolens' customers had ordered. Certainly, Wolens did not earn his commission for each sale until shipment, but that does not mean that each shipment was a separate contract for Wolens to be Gramercy's sales representative. On the contrary, that relationship, as Gramercy concedes, was established when Gramercy retained Wolens as an independent sales representative. The individual shipments were contracts with buyers, not Wolens. Gramercy's agreement to pay Wolens 5% of gross sales is the relevant agreement, and Gramercy does not dispute Wolens' claim that this agreement arose in Illinois. Similarly, the subject matter of the contract was Wolens' services, which he rendered in Illinois and the Midwest. Even if we were to suppose that the subject matter of the contract were the clothing sold to customers, this would not favor New Jersey because the clothing was manufactured in and shipped from states other than New Jersey. 17 Wolens' place of performance was predominantly Illinois. Even though Wolens solicited orders from business outside Illinois, Illinois was the center of his activities. Cf. Palmer, 823 F.2d 1105, 1110 (finding that part performance in eight western states, including California, favored application of California law when plaintiff worked mainly in California). Finally, as Wolens lives and maintains an office in Illinois and Gramercy is headquartered in New Jersey, domicile is equally split. 18 Gramercy contends that the place of nonperformance is most important, and, in this case, favors New Jersey law, citing McIntosh v. Magna Sys., Inc., 539 F.Supp. 1185, 1189 (N.D.Ill.1982). However, relying solely on the place from which one party would have mailed a check if it had chosen to do so would undermine the more circumspect inquiry the Restatement (Second) affords. It does not provide much information on the issue of which state has a greater interest in the litigation. If this proposition were applied in all cases, principals could merely determine which state's law were most favorable and argue that they nonperformed there. The place of breach lies in the eye of the beholder. In this case, for example, Wolens contends that Gramercy breached when he did not receive payment in Illinois, and thus the place of nonperformance is where Wolens did not receive his commissions. More reliable barometers of the site of performance include inquiring what performance formed the basis for the agreement and what action actually occurred in performance of the agreement. In this case, Wolens' work soliciting orders on behalf of Gramercy was the basis for the agreement and Wolens performed some of that work in Illinois. Based on Illinois' significant contacts with this dispute, we concur with the district court that Illinois law applies to this case. 19