Forum Selection Clause Dismissal Not ‘On the Merits’ – Plaintiff Can Refile in Another State


A forum selection clause is a contract term that specifies where (as in what state) a lawsuit must be filed if there is a future dispute.

In Fabian v. BCG Holdings, 2014 IL App (1st) 141576, Plaintiff sued his ex-employer (a spin-off of the Cantor Fitzgerald security firm whose NYC office was decimated in the 9.11 terror attacks) for breach of contract and under the Illinois Wage Payment and Collection Act (IWPCA) claiming unpaid trading commissions and owed stock shares plaintiff under a written partnership agreement.

The partnership agreement contained a Delaware forum-selection provision that fixed exclusive jurisdiction over any partnership dispute in Delaware courts.

The trial court dismissed the IWPCA claim with prejudice and the other complaint counts without prejudice to a future filing in Delaware court.  The plaintiff voluntarily dismissed or “non-suited” the remaining claims.  Plaintiff appealed the “with prejudice” dismissal of his IWPCA claim.

Held: Reversed.


The plaintiff argued that the Delaware forum-selection clause was void because it was forced upon him. He claimed he was given less than 24 hours to sign the partnership agreement in an adhesive take-it-or-leave-it manner.

Under Illinois law, a forum selection clause is generally valid and should be enforced unless (1) the opposing party shows that it would violate a strong public policy of the state in which the case is filed or (2) enforcing the clause would be unreasonable in that it is so inconvenient that it basically deprives the party of its day in court.

Illinois public policy favors enforcement of forum-selection clauses.  Commercially versed parties should be able to freely define the parameters of their private agreement without court interference.  And the fact a court of another state would have to interpret and apply an Illinois statute isn’t enough to void a forum clause on public policy grounds.

When a case is dismissed on forum-selection grounds, it’s not a dismissal on the merits.  That’s because it only resolves the issue of where a plaintiff can litigate his claim.  It doesn’t decide any underlying facts or apply them to the substantive legal issues involved in a given case.

Where a plaintiff non-suits claims after his other claims are (involuntarily) dismissed, he has one year to refile the non-suited claims. See 735 ILCS 5/13-217.  If he does refile, it is treated as a new case; not a continuation of the old case.  This rule is important for appeal purposes: once the plaintiff non-suits his remaining claims, an order previously dismissing another claim becomes final and appealable.


The Court here agreed with the trial court that there was nothing repugnant to Illinois law in enforcing the Delaware forum provision.  But the court still reversed the trial court’s with prejudice dismissal of the plaintiff’s IWPCA claim.

Since the dismissal of that claim (the IWPCA count) was based on the Delaware forum-selection clause, there was no determination of the merits of the claim.  That is, the court never determined whether the plaintiff was in fact owed money or stocks from his ex-employer. The forum-selection provision only addressed the proper location for plaintiff to sue.  As a result, the trial court’s “with prejudice” dismissal of the plaintiff’s IWPCA claim was improper.  The plaintiff should be allowed to file his IWPCA count in Delaware.


– A forum selection clause will be upheld unless it violates a recognized policy of the state where suit is filed;

– A dismissal with prejudice is normally improper where merits of case aren’t reached;

– Just because a state has to apply the law of a foreign state isn’t enough to void a forum selection provision.


The Attorneys’ Retaining Lien: Dealing With Client Property Amid Unpaid Fees


When a lawyer-client relationship implodes, the lawyer is usually left with unpaid fees.  And since Rule 1.16 of the Illinois Rules of Professional Conduct requires a fired (or firing) lawyer to return all client papers and property, the lawyer owed fees often has no leverage to secure payments due him.

Enter the common law retaining lien.  This lien allows the lawyer to hold or “retain” his client’s papers until the client pays up. It’s a possessory or “passive lien”; meaning that the lawyer perfects the lien by keeping the client’s papers in his possession. He’s not required to file a lawsuit to foreclose the lien or to request a judge to adjudicate the lien.

Cronin & Company v. Richie Capital Management, LLC, 2014 IL App(1st) 131892-U filters the retaining lien question through the lens of a third-party electronic discovery company (the “Vendor”) holding client documents where both the attorney (who hired the Vendor) and the client are claiming superior rights to the documents.  The critical question is whether a law firm that gives client documents to the Vendor for litigation support and computer scanning relinquishes possession of the documents so that its retaining lien is lost. The answer: no.

The plaintiff law firm was hired by the defendant to assist in the collection of a $180M judgment it got against a Ponzi scheme organizer. As part of the plaintiff’s work on the case, they retained the Vendor to help with document storage and to create a website that the plaintiff and its client could equally access during the litigation. The relationship went bad and plaintiff law firm was fired by its client. Plaintiff and the client then both demanded that the Vendor return the documents. The plaintiff wanted the documents back so it could impress a lien on them while the client sought access to the site and documents so it could continue with the lawsuit.

The trial court granted injunctive relief for the plaintiff law firm and ordered the Vendor to return all documents to the plaintiff and the defendant Client appealed.

Ruling: Reversing the injunction, the First District sketched the elements of a lawyer’s retaining lien. (Note – the injunction was reversed for reasons unrelated to the retaining lien issue.)


A retaining lien gives the attorney the right to retain possession of the client’s documents and files that come into the attorney’s possession during the course of employment until the balance due the attorney is paid;

Possession of the client property that the lien is impressed against is essential to the existence and creation of the retaining lien;

The retaining lien requires an attorney’s continued possession of the client property for the lien to stick;

Once the attorney releases possession of the property, he loses the lien.

(¶¶ 21-22).

Here, the plaintiff law firm hired the Vendor to develop a Web hosting program to assist with the litigation. In doing so, the plaintiff supplied client documents to the Vendor so it could scan them into the the program. The defendant claimed that the plaintiff lost its retaining lien by giving defendant’s property to the Vendor.

The court disagreed. It held that while the Vendor was nominally (and ultimately) working for the defendant, it took its orders from the plaintiff.  Because of this, the Vendor’s possession of the client documents was imputed to the plaintiff.

The court equated the fact situation to one where an attorney deposits a check payable to the client with the clerk of court in order to resolve a fee dispute. In that scenario, the law is clear that tendering possession of the check does not equal releasing possession of the check for purposes of a retaining lien.

Afterwords: The case is post-worthy in view of the proliferation of third-party litigation support providers like electronic discovery companies. The salient holding of the case is that a retaining lien can apply to client property in the possession of a third party where the attorney hired or supervises that third party.


Mechanics’ Lien Claim Defeated Where Contractor Fails to Provide Proper Contractor Affidavit

Pyramid Development, LLC v. DuKane Precast, 2014 IL App (2d) 131131, vividly illustrates the importance of diligent record-keeping practices on construction projects and the dire financial consequences that can flow from a failure to do so.  It emphasizes how crucial it is for a contractor to comply with Section 5 of the mechanic’s lien act – 770 ILCS 60/5 (the “Act”) – the section that requires a contractor to give the owner a sworn statement that lists all persons providing labor and materials on a project.

The plaintiff contractor sued to foreclose a mechanics lien on several townhomes it was hired to build and also sued a subcontractor for defective concrete work supplied to the project.  After a bench trial, the court nullified the lien because it was negated by damage to the property.  Plaintiff appealed.

Result: Plaintiff’s lien is defeated because it didn’t comply with Section  5.


The purpose of the Section 5 affidavit is to put the owner on notice of subcontractor claims;

– An owner has the right to rely and act upon a contractor’s section 5 affidavit unless the owner has reason to suspect the notice is false or knows that it’s false;

– An owner is protected from subcontractor claims where they’re not listed on the contractor’s affidavit unless the owner knows of the subcontractor omissions or has colluded with the contractor to exclude the subcontractors;

– Section 5 provides that it’s the owner’s duty to ask for and the contractor’s obligation to supply a sworn statement listing all parties furnishing lienable work on the property and the amounts owed to them;

– Where an owner doesn’t request a Section 5 affidavit, the contractor isn’t required to provide one;

– An owner’s previous acceptance of a flawed Section 5 affidavit doesn’t waive the contractor’s compliance with that section. (i.e., Just because an owner has accepted deficient affidavits in the past, doesn’t mean the contractor doesn’t have to comply with Section 5, e.g.)

(¶¶ 26-29).

Here, the property owner had a pattern of accepting faulty Section 5 affidavits. The plaintiff’s principal admitted that the names and amounts on the affidavits were often wrong and the amounts inflated.  Plaintiff also conceded that it routinely named itself as a subcontractor when it didn’t actually do any of the work on the townhomes.

The court held that since the plaintiff’s section 5 affidavits were facially erroneous, the lien claim was properly defeated.

The court also affirmed judgment against the plaintiff on its breach of contract claim. In a breach of contract suit involving construction services, a contractor is held to the “substantial performance” standard: he must perform in a workmanlike manner and a failure to do so is a breach of contract. (¶ 35).

A breach of contract plaintiff must also prove money damages.  And while he doesn’t have to do so with mathematical certainty, he still must offer some basis from which the court can compute the damage with reasonable probability. (¶ 37).

Here, the plaintiff didn’t meet his burden of proving damages.  Its record-keeping was scatter-shot and rife with discrepancies.  The plaintiff’s numbers didn’t match up and it couldn’t explain myriad invoice errors at trial.  This failure to carry its burden of proving damages doomed the plaintiff’s breach of contract claim.


Accurate record-keeping is essential; especially on high dollar projects with multiple contractors;

Where an owner requests a section 5 affidavit, the contractor must supply one;

An Owner’s past acceptance of a faulty affidavit won’t excuse contractors duty to strictly adhere to section 5.