Court Opinion

ID: 2998126
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:41:12.093226+00
Date Added: 2024-06-11T11:45:35.524973
License: Public Domain

In the
 United States Court of Appeals
              For the Seventh Circuit
                         ____________

No. 04-3819
TRUSERV CORPORATION,
                                               Plaintiff-Appellee,
                                v.

FLEGLES, INC. and
ALICE MAE FLEGLE,
                                         Defendants-Appellants.
                         ____________
         Appeal from the United States District Court for
        the Northern District of Illinois, Eastern Division.
        No. 03 C 3284—Samuel Der-Yeghiayan, Judge.
                         ____________
    ARGUED APRIL 14, 2005—DECIDED AUGUST 12, 2005
                     ____________

  Before COFFEY, RIPPLE, and KANNE, Circuit Judges.
  KANNE, Circuit Judge. This case arises out of a twenty-
year relationship between the owners of a hardware store
and the wholesaler with which they worked. Flegles, Inc.
(“Flegles”), owned and operated a True Value hardware and
lumber store in Bardwell, Kentucky. By becoming a member
of the TruServ cooperative, Flegles was able to use the True
Value trademark and to benefit from group buying power
and group billing procedures. On January 20, 2000, Flegles
and TruServ executed an updated written agreement (“the
2                                              No. 04-3819

member agreement”), in which Flegles agreed “to pay on the
date due all invoices on accounts receivable statements,”
and to immediately pay all amounts due upon termination
as a member. During the next three years, Flegles pur-
chased merchandise and services from TruServ pursuant to
the member agreement. TruServ also advanced cash to
Flegles for the purpose of making improvements to the
store. Additional contracts were executed to secure these
advances in which Flegles agreed to maintain an acceptable
credit history and to remain a member in good standing of
TruServ. If Flegles ceased to be a member in good standing,
the debt would be considered defaulted and Flegles would
be required to repay the advances immediately.
  In addition to the contracts between Flegles and TruServ,
Alice Mae Flegle signed three personal guaranty agree-
ments. By the terms of these agreements—signed March 25,
1976, May 4, 1976, and December 13, 1982— Alice Mae
Flegle personally guaranteed the payment of any debt owed
to TruServ by Flegles. In 1991, TruServ requested that
these personal guaranties be replaced with a new guaranty,
but the President of Flegles, Mark Flegle, denied the
request.
  Although Flegles did accept equipment and services from
TruServ, and TruServ sent monthly invoices and a written
demand for payment in November 2002, Flegles did not
repay its debt. Instead, on February 12, 2003, Flegles filed
a lawsuit against TruServ in Kentucky state court. A few
days later, TruServ terminated Flegles’s membership for
nonpayment. At that point, repayment of the money
TruServ had advanced to Flegles became immediately due.
  In the Kentucky action, Flegles alleged that TruServ
made fraudulent misrepresentations in order to induce
Flegles to continue as a member and to encourage Flegles
to go into substantial debt to expand and make improve-
ments to the store between 1997 and 2000. Flegles also
alleged that the January 2000 execution of the member
agreement was fraudulently induced. Flegles asked the
No. 04-3819                                                  3

court to issue a declaratory judgment and to find that the
agreements between the parties are null and void because
of fraud and breach of contract. TruServ filed a motion to
dismiss based on the forum selection clause in the member
agreement which stated that any disputes should be liti-
gated in or near Cook County, Illinois. The Kentucky court
denied the motion, stating that litigating in Chicago would
be inconvenient for Flegles and noting a disparity in bar-
gaining power between the parties. The case went to trial
and, on July 30, 2004, the jury returned a verdict in favor
of Flegles, finding that TruServ was liable for $1.3 million
in damages.
  On May 16, 2003, after the commencement of the Ken-
tucky litigation, TruServ filed a diversity action in the
Northern District of Illinois. Through the lawsuit, TruServ
attempted to collect the debt it was owed either from
Flegles (the corporation), or from Alice Mae Flegle person-
ally. Over objections from Flegles, the district court found
that it could exercise its jurisdiction in spite of the
Kentucky lawsuit, and that abstention was not necessary or
proper in this case. The court also found that Alice Mae
Flegle had submitted to personal jurisdiction in Illinois.
After a grant of summary judgment in favor of TruServ and
additional briefing on damages, the court ordered Flegles to
pay $143,546.77 in damages, fees, and costs to TruServ.1
Flegles and Alice Mae Flegle appeal. We affirm.

       I. Alice Mae Flegle’s Personal Guaranty
  We begin with a discussion of whether Alice Mae Flegle
has submitted to personal jurisdiction in Illinois. We review
de novo the district court’s decision regarding personal

1
  The breakdown of the total award is as follows: $77,149.27 in
damages; $5,143.28 in prejudgment interest; $50,374.50 in
attorneys’ fees; and $10,879.72 in costs.
4                                                No. 04-3819

jurisdiction. RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272,
1275 (7th Cir. 1997). Ms. Flegle argues that the court below
should have granted her motion to dismiss because TruServ
could not prove that she had the requisite “minimum
contacts” with Illinois, and thus haling her into an Illinois
court would offend traditional notions of fair play and
substantial justice. See Int’l Shoe Co. v. Washington, 326
U.S. 310, 316 (1945).
  It is true that Ms. Flegle had limited contact with Illinois
during her dealings with TruServ. It is also true that
simply contracting with a party based in Illinois is not
enough to establish the required minimum contacts. See
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478 (1985).
However, another very important consideration in this
analysis is that “personal jurisdiction is waivable and that
parties can, through forum selection clauses and the like,
easily contract around any rule we promulgate.” RAR, 107
F.3d at 1280 (citing Burger King, 471 U.S. at 472 n.14).
   Ms. Flegle signed a personal guaranty agreement prom-
ising to “guarantee absolutely and unconditionally, at all
times, the payment unto you of any indebtedness or balance
of any past, present or future indebtedness, from [Flegles].”
The guaranty goes on to state that “[t]his guaranty is made
under the laws of the State of Illinois and shall be con-
trolled by and interpreted according to the laws of said
state. If suit becomes necessary [TruServ is] authorized to
file suit against [Alice Mae Flegle] in any court of compe-
tent jurisdiction in the State of Illinois.”
  Ms. Flegle argues that there is no “court of competent
jurisdiction” in Illinois because she does not have sufficient
minimum contacts with the state. We find this argument to
be meritless. Ms. Flegle signed a valid forum selection
clause, and “[o]bviously, a valid forum-selection clause, even
standing alone, can confer personal jurisdiction.” Heller
Fin., Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1292 n.4
No. 04-3819                                                  5

(7th Cir. 1989). Ms. Flegle is deemed to have waived her
objection to personal jurisdiction. See Northwestern Nat’l
Ins. Co. v. Donovan, 916 F.2d 372, 375 (7th Cir. 1990).
  Next, Ms. Flegle claims that there is a material issue of
fact as to whether the guaranty agreement covered the en-
tire debt owed by Flegles. The agreement mentions “goods,
wares and merchandise” and discusses “credits.” Loans, Ms.
Flegle argues, are not included in the agreement and thus
are not personally secured.
   The personal guaranty agreement as a whole, however,
makes it very clear that Ms. Flegle is personally liable for
“any indebtedness or balance of any past, present or future
indebtedness.” The agreement specifically states that “[i]t
is the intention of this guaranty to assure [TruServ] of pay-
ment, in full, for any amount due” from Flegles.
  The fact that Mark Flegle refused to execute a new
personal guaranty in 1991 does nothing to change this
analysis. The guaranty signed by Ms. Flegle “may only be
revoked upon written notice.” In fact, the personal guaranty
continues in effect even upon the death of Ms. Flegle.
Neither party alleges that the guaranty was revoked by
written notice. Therefore, the guaranty is still in effect and
Ms. Flegle is personally liable for the entire debt owed by
Flegles to TruServ.
  We briefly address the claim raised by Flegles that be-
cause TruServ refused to exercise certain setoff rights, it
failed to mitigate its damages. Flegles owned TruServ stock
at the time its membership was terminated, and it argues
that TruServ should have set off the value of the stock
against Flegles’s account as it was contractually permitted
to do. Flegles claims that there is a material issue of fact as
to whether TruServ breached its duty of good faith and fair
dealing with respect to this issue and that granting sum-
mary judgment was therefore improper. We find that
although TruServ had a right to set off, it was not obligated
6                                                No. 04-3819

to do so. A contract between the parties explicitly stated:
“In addition to all rights of TruServ under such membership
agreement, [Flegles] agrees that TruServ may, but is not
required to, set off any obligations hereunder against any
stock or notes issued or to be issued to [Flegles] by
TruServ.” There is no material issue of fact here.

           II. The Rooker-Feldman Doctrine
  Flegles contends that the district court did not have
subject matter jurisdiction to hear this case. The Rooker-
Feldman doctrine precludes jurisdiction here, it is argued,
because federal district courts are not permitted to review
the decisions of state courts. See Kamilewicz v. Bank of
Boston Corp., 92 F.3d 506, 509 (7th Cir. 1996); see also D.C.
Ct. of App. v. Feldman, 460 U.S. 462 (1983); Rooker v.
Fidelity Trust Co., 263 U.S. 413 (1923). Flegles claims that
because the Kentucky court found the forum selection
clause to be invalid, and jurisdiction in Illinois is based on
the clause, TruServ’s federal claim impermissibly seeks to
have the district court set aside the state court judgment.
Even if TruServ is not seeking outright reversal of the state
court’s ruling, Flegles argues, the federal claims are at least
“inextricably intertwined” with the Kentucky ruling. See
Taylor v. Fed. Nat’l Mortgage Ass’n, 374 F.3d 529, 533 (7th
Cir. 2004). Whether a claim is inextricably intertwined
“hinges on whether the federal claim alleges that the injury
was caused by the state court judgment, or, alternatively,
whether the federal claim alleges an independent prior
injury that the state court failed to remedy.” Id.
  Flegles hopes for a broad reading of the Rooker-Feldman
doctrine which would allow the Kentucky court’s ruling on
the forum selection clause to control the federal case. How-
ever, a recent Supreme Court opinion discussed the scope
of the doctrine and held that it has an extremely limited
applicability: it applies only to “cases brought by state-court
No. 04-3819                                                7

losers complaining of injuries caused by state-court judg-
ments rendered before the district court proceedings
commenced and inviting district court review and rejection
of those judgments.” Exxon Mobil Corp. v. Saudi Basic
Indus. Corp., 125 S. Ct. 1517, 1521-22 (2005). The district
court retains subject matter jurisdiction even if the claims
brought in both cases are the same. See id. at 1526-27.
“This Court has repeatedly held that the pendency of an ac-
tion in the state court is no bar to proceedings concerning
the same matter in the Federal court having jurisdiction.”
Id. (quotations and citations omitted).
   TruServ filed its complaint in the district court about
three months after Flegles filed its Kentucky claim. The
state court judgment was rendered more than 14 months
after the district court action began. Therefore, under the
Supreme Court’s recent ruling, the Rooker-Feldman
doctrine is not applicable to this lawsuit because the
Kentucky court’s judgment was not rendered before the
district court proceedings commenced. See id. at 1521-22.
The doctrine only applies to cases like Rooker and Feldman
where “the losing party in state court filed suit in federal
court after the state proceedings ended”; therefore, an
interlocutory ruling does not evoke the doctrine or preclude
federal jurisdiction. Id. at 1526 (emphasis added). Even
though the Kentucky court had denied TruServ’s motion to
dismiss based on the forum selection clause before TruServ
filed its federal suit, the district court may still properly
hear the case as long as TruServ “present[s] some independ-
ent claim, albeit one that denies a legal conclusion that a
state court has reached in a case to which he was a
party . . . .” Id. at 1527 (citing GASH Assocs. v. Vill. of
Rosemont, 995 F.2d 726, 728 (7th Cir. 1993)). We find that
the collection claim TruServ filed in federal court alleging
breach of the member agreement is independent of the tort
claims brought by Flegles in Kentucky. The injury TruServ
attempted to remedy in its district court action was the
8                                                No. 04-3819

result of Flegles’s failure to pay for goods and services for
which TruServ had demanded payment before Flegles
initiated the Kentucky lawsuit; the injury did not arise from
the Kentucky lawsuit. The district court did not need to set
aside a state judgment in order to rule on TruServ’s claims.
Thus, the Rooker-Feldman doctrine does not preclude
federal jurisdiction in this case.
  This determination does not end the matter, however. It
is still possible that “[c]omity or abstention doctrines, may,
in various circumstances, permit or require the federal
court to stay or dismiss the federal action in favor of the
state-court litigation.” Id. This leads us to our discussion of
the Colorado River doctrine.

           III. The Colorado River Doctrine
  Flegles argues that the district court should have ab-
stained from hearing the case and “await[ed] the outcome
of parallel proceedings as a matter of ‘wise judicial adminis-
tration, giving regard to the conservation of judicial re-
sources and comprehensive disposition of litigation.’ ”
Finova Capital Corp. v. Ryan Helicopters U.S.A., Inc., 180
F.3d 896, 898 (7th Cir. 1999) (quoting Colorado River Water
Conservation Dist. v. United States, 424 U.S. 800, 817
(1976)). The Supreme Court, however, “has cautioned that
abstention is appropriate only in ‘exceptional circum-
stances,’ and has also emphasized that federal courts have
a ‘virtually unflagging obligation . . . to exercise the juris-
diction given them.’ ” AXA Corporate Solutions v. Under-
writers Reinsurance Corp., 347 F.3d 272, 278 (7th Cir. 2003)
(internal citations omitted). So, in determining whether
abstention is appropriate, our task is “not to find some
substantial reason for the exercise of federal jurisdiction by
the district court; rather, the task is to ascertain whether
there exist ‘exceptional’ circumstances, the ‘clearest of
justifications,’ that can suffice under Colorado River to
No. 04-3819                                                      9

justify the surrender of that jurisdiction.” Moses H. Cone
Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25-26
(1983) (emphasis in original).
  In order to decide whether the Colorado River doctrine
applies to a particular case, we must first determine
whether the concurrent state and federal lawsuits are par-
allel. See Caminiti & Iatarola, Ltd. v. Behnke Warehousing,
Inc., 962 F.2d 698, 700 (7th Cir. 1992). If the cases are
found to be parallel, the next task is “to balance the con-
siderations that weigh in favor of, and against, abstention,
bearing in mind the exceptional nature of the measure.”2
Finova, 180 F.3d at 898. However, if the two cases are not
parallel, the Colorado River doctrine does not apply. See
AAR Int’l, Inc. v. Nimelias Enters. S.A., 250 F.3d 510, 518
(7th Cir. 2001). The lawsuits need not be identical to be
considered parallel; “[s]uits are parallel if substantially the
same parties are litigating substantially the same issues
simultaneously in two fora.” Id. (internal quotations
omitted). “The question is not whether the suits are for-
mally symmetrical, but whether there is a substantial
likelihood that the [state court] litigation will dispose of
all claims presented in the federal case.” Id. (internal quo-

2
  Ten factors may be considered in deciding whether the circum-
stances are exceptional enough to support a stay:
    1) whether the state has assumed jurisdiction over property;
    2) the inconvenience of the federal forum; 3) the desirability
    of avoiding piecemeal litigation; 4) the order in which juris-
    diction was obtained by the concurrent forums; 5) the source
    of governing law, state or federal; 6) the adequacy of state-
    court action to protect the federal plaintiff ’s rights; 7) the
    relative progress of state and federal proceedings; 8) the
    presence or absence of concurrent jurisdiction; 9) the avail-
    ability of removal; and 10) the vexatious or contrived nature
    of the federal claim.
Caminiti & Iatarola, 962 F.2d at 701.
10                                                No. 04-3819

tations omitted). “[A]ny doubt regarding the parallel nature
of the [state court] suit should be resolved in favor of
exercising jurisdiction . . . .” Id. at 520. Whether the cases
are parallel is a legal issue that we review de novo. Id. at
518.
  The district court did not devote much discussion to
whether the actions were parallel. In finding that the cases
are “sufficiently related to be considered parallel,” the court
relied on the fact that the cases arise out of the same
relationship and that TruServ’s claims in the federal law-
suit could be considered compulsory counterclaims in the
Kentucky action. The court did not address whether there
is a substantial likelihood that the Kentucky litigation will
dispose of all of the claims TruServ raised in the district
court.
  The jury in the Kentucky case found that TruServ made
material representations to Flegles which caused Flegles to
expand its store, and also that Flegles would not have
signed the 2000 membership agreement had it not been
fraudulently induced to do so by TruServ. The jury awarded
$1.3 million to compensate Flegles for profits it lost because
of the misrepresentation. But, because TruServ did not
raise its collection claims in the state court, the jury did not
decide whether the amount Flegles owed for the goods and
services it received from TruServ should be subtracted—in
part or in full—from the compensatory damages award.
Also, the state court did not consider the enforceability of
Alice Mae Flegle’s personal guaranty because Ms. Flegle
was not a party to the state court lawsuit.
  Flegles insists that because TruServ’s federal claims were
compulsory counterclaims in the Kentucky action, these
claims should have been “disposed of” already and therefore
cannot lead to the conclusion that the cases are not parallel.
See AAR, 250 F.3d at 522 (explaining and rejecting the
argument that a compulsory counterclaim would be “ ‘dis-
No. 04-3819                                                 11

posed of’ one way or another . . . [because] it would either
be asserted as a counterclaim in the foreign action and
decided there, or lost if not asserted before the conclusion of
the foreign action. Either way, conclusion of the foreign
action would leave nothing left for the federal court to
decide.”). However, “no authority . . . suggest[s] that a
federal action is parallel to a state or foreign action for
Colorado River abstention purposes when the claim upon
which the federal action is based is pleadable as a compul-
sory counterclaim in the other action.” Id.
  “In the end, this case turns on how seriously we take the
admonition from the Supreme Court not to stay or dismiss
actions without strong justification to do so.” AXA, 347 F.3d
at 279. We again emphasize the remarkably difficult
standard that must be met before we can refuse our “vir-
tually unflagging obligation” to exercise jurisdiction. See
Colorado River, 424 U.S. at 817; AAR, 250 F.3d at 520
(noting that “any doubt regarding the parallel nature of the
[state court] suit should be resolved in favor of exercising
jurisdiction”). “If there is any substantial doubt that the
parallel litigation will be an adequate vehicle for the
complete and prompt resolution of the issues between the
parties, it would be a serious abuse of discretion for the
district court to stay or dismiss a case in deference to the
parallel litigation.” AAR, 250 F.3d at 518 (internal quota-
tions omitted).
  Taking into consideration the foregoing, we find that
TruServ’s collection claims were not resolved in the Ken-
tucky lawsuit. While it is true that TruServ chose not to
raise the claims in the state court, that is not dispositive.
The fact is that the state court litigation did not dispose of
all the claims presented in the federal case; therefore, we
must find that the two cases are not parallel. Because the
cases are not parallel, we need not balance the Colorado
River factors. Id.
12                                               No. 04-3819

                   IV. Attorneys’ Fees
   The member agreement between the parties states that
“[i]n the event that [TruServ] initiates proceedings to re-
cover amounts due it by [Flegles] or for any breach of this
Agreement or to seek equitable or injunctive relief against
[Flegles], [TruServ] shall be entitled to the recovery of all
associated costs, interest and reasonable attorney’s fees.”
According to the terms of this clause, the district court
awarded $5,143.28 in prejudgment interest, $50,374.50 in
attorneys’ fees, and $10,879.72 in costs to TruServ. We
review a district court’s award of fees and costs for abuse of
discretion. See Harter v. Iowa Grain Co., 220 F.3d 544, 561
(7th Cir. 2000).
  Flegles argues that the fees and costs awarded were
excessive and that TruServ took additional risks and drove
up its expenses because Flegles was contractually obligated
to pay the fees and costs. See Medcom Holding Co. v. Baxter
Travenol Labs., Inc., 200 F.3d 518, 521 (7th Cir. 1999).
However, TruServ properly provided detailed billing
records, and whether fees are to be deemed “excessive is a
matter of opinion, and . . . it is the district court’s opinion
that matters.” Harter, 220 F.3d at 562. We also note that
“[c]ourts award fees at the market rate, and the best evi-
dence of the market value of legal services is what people
pay for it. Indeed, this is not ‘evidence’ about market value;
it is market value.” Balcor Real Estate Holdings v.
Walentas-Phoenix Corp., 73 F.3d 150, 153 (7th Cir. 1996)
(emphasis in original). The district court did not abuse its
discretion in awarding fees and costs to TruServ.

                      V. Conclusion
  For the reasons set forth in this opinion, we AFFIRM the
district court’s decision to reject abstention, although we
find that the appropriate rationale for this decision is that
the two cases are not parallel. We also AFFIRM the district
No. 04-3819                                              13

court’s award of attorneys’ fees and costs. We further
REMAND for a determination, consistent with this opinion,
of the amount of fees and costs expended in this appeal that
are properly owed to TruServ.

A true Copy:
      Teste:

                        ________________________________
                        Clerk of the United States Court of
                          Appeals for the Seventh Circuit

                   USCA-02-C-0072—8-12-05