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

No. 05-1720
IFC CREDIT CORPORATION
                                                  Plaintiff-Appellant,
                                  v.

ALIANO BROTHERS GENERAL CONTRACTORS, INC., et al.,
                                               Defendants-Appellees.
                          ____________
             Appeal from the United States District Court
        for the Northern District of Illinois, Eastern Division.
                No. 04 C 6504—John W. Darrah, Judge.
                          ____________
    ARGUED JANUARY 4, 2006—DECIDED FEBRUARY 1, 2006
                          ____________


  Before POSNER, EVANS, and WILLIAMS, Circuit Judges.
  POSNER, Circuit Judge. We are asked to decide the validity
of a forum selection clause that appears in the follow-
ing provision of a contract between NorVergence, Inc.
and Aliano (our collective name for the two defendants—
a corporation and one of its co-owners, who personally
guaranteed the corporation’s debts):
    This agreement shall be governed by, construed and
    enforced in accordance with the laws of the State in
    which Rentor’s principal offices are located or, if this
    Lease is assigned by Rentor, the State in which the
2                                                  No. 05-1720

    assignee’s principal offices are located, without re-
    gard to such State’s choice of law considerations and all
    legal actions relating to this Lease shall be venued
    exclusively in a state or federal court located within that
    State, such court to be chosen at Rentor or Rentor’s
    assignee’s sole option. You hereby waive right to a
    trial by jury in any lawsuit in any way relating to this
    rental.
  The contract is for the lease of telecommunications
equipment by NorVergence to Aliano, a construction
company, for five years at an annual rental of about $20,000.
The contract authorizes NorVergence to assign the con-
tract—and note that in the provision quoted above, Aliano
consents to be sued in state or federal court either in the
state in which NorVergence had its headquarters (New
Jersey, which is also Aliano’s state), or, if NorVergence
assigns the contract, in a state or federal court in the state in
which the assignee is headquartered.
  As soon as Aliano signed the contract, NorVergence
assigned it to IFC, the plaintiff, which is headquartered
in Illinois. Aliano defaulted on its lease payments, and
IFC brought this diversity suit in a federal district court
in Illinois to collect them. Aliano moved to dismiss the
suit for lack of personal jurisdiction, as Aliano has no
presence in Illinois or other contacts with the state. The
judge granted the motion on the ground that the forum
selection clause is invalid and so is not an effective
waiver of Aliano’s objection to personal jurisdiction. IFC
appeals the dismissal of its suit. The assignee of many
of NorVergence’s leases, IFC has been involved in a number
of lawsuits in different state and federal courts in which the
validity of the same forum selection clause has been chal-
lenged. The courts have divided over its validity, but with
No. 05-1720                                                    3

the tide running against. Compare IFC Credit Corp. v. Burton
Industries, Inc., No. 04 C 5906, 2005 WL 1243404, at *2-3
(N.D. Ill. May 12, 2005), upholding its validity, with IFC
Credit Corp. v. Warner Robbins Supply Co., No. 04 C 6093,
2005 U.S. Dist. LEXIS 26450, at *9-11 (N.D. Ill. Oct. 26, 2005);
IFC Credit Corp. v. Century Realty Funds, Inc., No. 04 C 5908,
slip op. at 7-8 (N.D. Ill. Mar. 4, 2005); IFC v. South Coast
Dental Labs, No. 04 M3 2646, slip op. at 15-21 (Ill. Cook Cty.
Cir. Ct. June 21, 2005); IFC v. Main Street Mortgage, No. 04
M3 2649, slip op. at 15-19 (Ill. Cook Cty. Cir. Ct. Mar. 30,
2005), and IFC v. Thomas Printing, Inc., No. 04 M3 2654, slip
op. at 2-4 (Ill. Cook Cty. Cir. Ct. Mar. 17, 2005), all holding
it invalid, and with IFC Credit Corp. v. Kay Automotive
Distributors, Inc., No. 04-5907, slip op. at 1-2 (N.D. Ill. June
13, 2005); IFC Credit Corp. v. Austin Automotive Warehouse
Corp., No. 04-8030, slip op. at 2-4 (N.D. Ill. Apr. 6, 2005), and
IFC Credit Corp. v. Eastcom, Inc., 2005 WL 43159, at *1-3 (N.D.
Ill. Jan. 7, 2005), expressing skepticism about its validity.
The decisions that hold the clause invalid or express
skepticism about its validity invariably do so on the ground
that the clause is not specific; that is incorrect, as we shall
see.
  A threshold question is whether federal or state law
governs the issue of validity. Had the district judge been
asked to transfer the case to the federal district court in New
Jersey, where IFC could obtain personal jurisdiction over
Aliano without having to rely on the forum selection clause,
the validity of the clause would plainly be governed by
federal law. For in Stewart Organization, Inc. v. Ricoh Corp.,
487 U.S. 22 (1988), the Supreme Court held that even in a
diversity case the federal forum non conveniens statute, 28
U.S.C. § 1404(a), in providing that “for the convenience of
parties and witnesses, in the interest of justice, a district
court may transfer any civil action to any other district or
4                                                   No. 05-1720

division where it might have been brought,” allows the
federal district court to give weight to a forum selection
clause whether or not the clause would be deemed valid by
the state in which the suit was brought. Stewart tells the
district court to consider the policy behind the state’s
judgment of validity or invalidity because that policy would
bear on whether transferring the case would be “in the
interest of justice,” but to make an independent judgment
whether to enforce the clause and therefore refuse to
transfer. 487 U.S. at 30-31; Northwestern National Ins. Co. v.
Donovan, 916 F.2d 372, 373-74 (7th Cir. 1990); Jumara v. State
Farm Ins. Co., 55 F.3d 873, 877-78 (3d Cir. 1995).
  But in this case there was no transfer order, hence no
occasion to apply section 1404(a). Should that change the
result? If the dismissal of the suit stands, IFC will refile it in
New Jersey, just as if a transfer order had been issued. If the
suit belongs in Illinois, in the sense that had a motion to
transfer been filed it should have been denied, the
suit belongs in this state, one might think, whether or not
such a motion is filed.
  A court system has an independent interest in deciding
which court in the system shall hear which cases, to mini-
mize imbalances in workload. Stewart Organization, Inc. v.
Ricoh Corp., supra, 487 U.S. at 30-31. Shall it be a federal
district court in Illinois or the one in New Jersey? As Justice
Kennedy emphasized in his concurrence in Stewart, 487 U.S.
at 33, and later cases confirm as we are about to see, federal
courts are friendly to the use of forum selection clauses to
determine which federal district court shall host a case. That
policy might well seem as applicable to the present case as
to one in which a motion to transfer is filed, though dis-
missal and transfer do not have identical effects. Dismissal
is appealable, transfer not; the choice of law rules are
No. 05-1720                                                    5

different; and of particular relevance to the present discus-
sion, if the dismissal of IFC’s suit stands, IFC might decide
to refile the suit in a New Jersey state court rather than in
the federal court in New Jersey.
  Several of the federal circuits have concluded that fed-
eral law indeed governs the validity of forum selection
clauses (even) in diversity suits not involving a motion
under section 1404(a). E.g., Jumara v. State Farm Ins. Co.,
supra, 55 F.3d at 877-78; Jones v. Weibrecht, 901 F.2d 17, 19 (2d
Cir. 1991); Manetti-Farrow, Inc. v. Gucci America, Inc., 858
F.2d 509, 513 (9th Cir. 1988). But none of them has consid-
ered whether their conclusion should hold when the
clause is invoked, as in this case, in an attempt to obtain
personal jurisdiction that would otherwise be unobtainable.
Other courts, including our own, have reserved the question
whether federal law governs other than in the specific
context exemplified by the Stewart case, that is, other than in
cases in which the determination of validity is incidental to
the application of the forum non conveniens statute. E.g.,
Northwestern National Ins. Co. v. Donovan, supra, 916 F.2d at
373-74; Rainforest Café, Inc. v. EklecCo, L.L.C., 340 F.3d 544,
546 (8th Cir. 2003).
   When as in the present case the issue is not the conve-
nience of the forum selected by the plaintiff but whether the
forum has personal jurisdiction over the defendant by virtue
of a forum selection clause, application of federal law would
collide with the countless decisions that hold that in a
diversity case a federal court has personal jurisdiction over
a defendant “only if a court of the state in which [the federal
court] sits would have jurisdiction.” Purdue Research Founda-
tion v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 779 (7th Cir.
2003); to the same effect, see, e.g., Hyatt Int’l Corp. v. Coco,
302 F.3d 707, 713 (7th Cir. 2002); Michael J. Neuman &
6                                                   No. 05-1720

Associates v. Florabelle Flowers, 15 F.3d 721, 724 (7th Cir.
1994); Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 96 (3d Cir.
2004); Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 99 (2d
Cir. 2000); compare ISI Int’l, Inc. v. Borden Ladner Gervais
LLP, 256 F.3d 548, 550-51 (7th Cir. 2001) (different rule in
federal-question cases). If federal law governs the validity
of the clause, this is an invitation to forum shopping, as the
state courts might dismiss a case, holding the clause invalid
and having no other basis (“minimum contacts”) for
asserting personal jurisdiction, while a federal district court
in the same state would hold the clause valid and so retain
the case. See Alexander Proudfoot Co. World Headquarters L.P.
v. Thayer, 877 F.2d 912, 918-19 (11th Cir. 1989). Of course, as
Justice Scalia argued in his vigorous dissent in Stewart, 487
U.S. at 39-40, Stewart too is an invitation to forum shop, but
an invitation tendered, so at least the majority held, by
section 1404(a), which is not in play in a case such as this.
  It seems that either position is arbitrary. If federal law
governs, an arbitrary difference between a federal and a
state litigation is created. If state law governs, an arbitrary
difference between a dismissal (followed by a refiling) and a
transfer is created. Prudence in this situation counsels us to
reserve decision and instead consider how the appeal would
be decided under either view and hope that the result will
be the same.
  If the issue of the validity of the forum selection clause
is governed by federal law, Aliano hasn’t a chance. The
attitude of this circuit toward the validity issue was
made clear in Northwestern National Ins. Co. v. Donovan,
supra, where, citing the Supreme Court’s decision in M/S
Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), and an
earlier decision by this court, we said that “those deci-
sions bury the outmoded judicial hostility to forum selection
No. 05-1720                                                  7

clauses. They make clear that since a defendant is deemed
to waive (that is, he forfeits) objections to per-
sonal jurisdiction or venue simply by not making them in
timely fashion, a potential defendant can waive such
objections in advance of suit by signing a forum selec-
tion clause. Their approach is to treat a forum selection
clause basically like any other contractual provision and
hence to enforce it unless it is subject to any of the sorts
of infirmity, such as fraud and mistake, that justify a court’s
refusing to enforce a contract.” 916 F.2d at 375. Freedom of
contract requires no less. Potential defendants would not
agree to the inclusion of such a clause in their contracts if
they thought it would put them at a disadvantage should
the parties have a dispute that resulted in litigation, unless
they were compensated for assuming that risk. If as seemed
apparent in Northwestern as in the present case the clause
did favor the other party to the contract, then probably “the
defendants were compensated in advance,” in other terms
of the contract such as the price, “for bearing the burden of
which they now complain,” and if so they would “reap a
windfall if they are permitted to repudiate the forum
selection clause.” Id. at 378.
  In Bremen, the party complaining about the forum selec-
tion clause had been a business firm; in Northwestern the
complainers were tax-shelter investors. Any doubt
that federal law accords such clauses the same presumption
of validity as attends the price, quantity, and other terms
normally found in contracts—that federal law doesn’t look
on them with a fisheye—was dispelled the year after our
decision in Northwestern by the Supreme Court. In Carnival
Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991), the forum
selection clause appeared on the passenger tickets issued by
a cruise line. The complainers were neither business firms
nor sophisticated investors, but merely consumers. The
8                                                   No. 05-1720

clause was boilerplate in a classic “contract of adhesion”
(the fancy, and pejorative, expression for a nonnegotiated,
that is, take-it-or-leave-it, consumer contract). Neverthe-
less the Supreme Court held that the forum selection
clause was valid. Such clauses, the Court said, could be
invalidated only if they flunked the test of “fundamental
fairness. In this case, there is no indication that petitioner set
Florida as the forum in which disputes were to be resolved
as a means of discouraging cruise passengers from pursuing
legitimate claims. Any suggestion of such a bad-faith motive
is belied by two facts: Petitioner has its principal place of
business in Florida, and many of its cruises depart from and
return to Florida ports. Similarly, there is no evidence that
petitioner obtained respondents’ accession to the forum
clause by fraud or overreaching. Finally, respondents have
conceded that they were given notice of the forum provision
and, therefore, presumably retained the option of rejecting
the contract with impunity.” Id. at 595. We take this to mean
that even in a contract between a business firm and a
consumer, but a fortiori in a contract between two business
firms, a forum selection clause is enforceable to the same
extent as the usual terms of a contract, which mainly means
unless it was procured by fraud or related misconduct. See
also AAR Int’l, Inc. v. Nimelias Enterprises S.A., 250 F.3d 510,
525-26 (7th Cir. 2001); Heller Financial, Inc. v. Midwhey
Powder Co., 883 F.2d 1286, 1290-91 (7th Cir. 1989).
  Aliano is a business firm, not a hapless consumer. Its brief
tells us that it is a small firm, but there is no evidence in the
record to support that characterization. Nor any to suggest
that NorVergence was a large firm when it signed the
contract with Aliano (it may now be defunct). All we know
about Aliano is that it is a corporation, that it is in the
construction business, that few if any construction projects
are undertaken without a written contract, that Aliano has
No. 05-1720                                                     9

been in the construction business for a quarter of a century,
and that it works mainly for public schools and other public
institutions—which are notorious for insisting on detailed
contracts designed to tie contractors in knots.
   The forum selection clause is not confusing; it makes clear
that the venue of any suit on the lease is the principal offices
(i.e., the headquarters) of either the lessor or, if the lease has
been assigned, of the assignee. Aliano points out that the
Federal Trade Commission sued NorVergence (which is in
bankruptcy), charging that its leases of telecommunications
equipment were fraudulent and in passing challenging the
forum selection clause as part of the fraudulent scheme. But
no evidence has been presented in this case that would
support such a challenge; nor have there been any find-
ings in the FTC’s suit. Aliano’s co-owner did submit an
affidavit attesting that NorVergence did not tell him that the
contract contained a forum selection clause and was assign-
able. Anyone reading the contract would know both things,
however; and it is not fraud to fail to tell a person orally
what is in the written contract that he is being asked to sign.
A default judgment has been entered in the FTC’s suit but
Aliano does not cite the judgment as bearing on the forum
selection issue in the present case.
  To summarize the discussion to this point, if the issue
of validity is governed by federal law, the validity of the
forum selection clause in this case is plain, at least so far as
the present record discloses (the significance of this qualifi-
cation will become apparent shortly). Aliano contends that
the validity of the clause is actually governed by Illinois
law. Suppose this is right—for remember that we’re taking
no position on whether federal or state law governs the
issue of validity when there is no transfer order. At the
black-letter level, Illinois law concerning the validity of
10                                                No. 05-1720

forum selection clauses is materially the same as federal
law. Calanca v. D & S Mfg. Co., 510 N.E.2d 21, 23 (Ill. App.
1987), for example, in an approving discussion of Bremen,
states the Illinois rule to be the following: “A forum selec-
tion clause in a contract is prima facie valid and should be
enforced unless the opposing party shows that enforcement
would be unreasonable under the circumstances.” But in
application as distinct from general statement (and one
must always be wary about generalities in judicial opin-
ions), the Illinois law on validity is more lenient toward the
defendant than the federal law when there is a significant
inequality of size or commercial sophistication between the
parties, especially if the transaction is so small that the
unsophisticated party might not be expected to be careful
about reading boilerplate provisions that would come into
play only in the event of a lawsuit, normally a remote
possibility. Mellon First United Leasing v. Hansen, 705 N.E.2d
121, 125-26 (Ill. App. 1998), so teaches—but in dramatically
different circumstances from those of our case: the defen-
dant was a solo accountant who had just started her own
tiny business rather than, as here, a 25-year-old corporation
that negotiates and signs government contracts all the
time. Our case is more like Dace Int’l, Inc. v. Apple Computer,
Inc., 655 N.E.2d 974, 977-78 (Ill. App. 1995), where both
parties were corporations, and “although of vastly different
size,” their corporate nature and the fact that they
were experienced in negotiation and business practice
defeated the smaller corporation’s challenge to the valid-
ity of the forum selection clause. See also Yamada Corp.
v. Yasuda Fire & Marine Ins. Co., 712 N.E.2d 926 (Ill. App.
1999).
 Aliano places most of its marbles in a basket labeled
Whirlpool Corp. v. Certain Underwriters at Lloyd’s London, 662
N.E.2d 467 (Ill. App. 1996), but that case actually has no
No. 05-1720                                                11

bearing on this one. It involved an insurance contract that
authorized Whirlpool, the insured, to sue the insurers in
“any Court of competent jurisdiction within the United
States,” and specified that the law administered in that court
would govern the parties’ dispute. Id. at 470. The Illinois
Appellate Court held only that this language did not bar the
insurers from arguing that the particular forum chosen by
the insured was inconvenient. The insurers were foreign
entities; and all the clause may have meant was that they
would not object to being sued in an American court—not
necessarily any American court, which would be pretty
absurd; it would mean that Whirlpool, the headquarters of
which were in Michigan, could have sued the English
insurers in New Mexico, and New Mexico law would have
applied.
  Aliano fastens on one sentence in the Whirlpool opinion:
“Good policy dictates that a true forum selection clause
should be clear and specific.” Id. at 471. Fair enough. The
clause in Whirlpool was not “clear and specific,” because it
could as we just noted be interpreted to mean just that the
insurers were waiving their right to argue that they could
not be sued in the United States because they were
foreign entities with perhaps few or no contacts in the
United States other than the insurance contracts. Interpreted
as a forum selection clause, the provision could have pro-
duced an extremely goofy result (the suit in New Mexico
under New Mexico law), which is a good reason for reading
a contract one way rather than another.
  Aliano argues that to be “clear and specific” the forum
selection clause must name the state in which the suit
must be brought. The district judge agreed, as have the
other first-instance judges who have held the clause invalid.
But the argument ignores the fact that naming names is not
12                                                No. 05-1720

the only method of dispelling ambiguity. Aliano’s lawyer
acknowledged at argument that if the contract had said that
suit could be brought in New York or Vermont, or in a
federal district court in the First Circuit, or in a federal
district court in either the First or Second Circuit, or in any
state that George W. Bush carried in the 2004 presidential
election, the forum selection clause would be valid because
it would be clear and specific. Yet in none of those hypothet-
ical cases would Aliano have known when it signed the
contract with NorVergence where suit would be brought
against it. The purpose of requiring that a forum selection
clause be “clear and specific” is to head off disputes over
where the forum selection clause directs that the suit be
brought. There was no possibility of such a dispute here,
because the forum selection clause designates the state of
suit unequivocally: it is the headquarters state of either
NorVergence or, if the contract has been assigned, of the
assignee.
  If Aliano’s name-the-forum position (minus its lawyer’s
concession, which guts it) were accepted, the assignment
of contracts would be impeded because the assignee
would have to litigate in a state specified in the contract,
and that state might be inconvenient for it. Parties to
contracts are not benefited by rules that make assignment
burdensome. If assignors have to compensate their assign-
ees for having to litigate in an inconvenient forum, they will
have to charge a higher price to their customers, such as
Aliano.
  So the dismissal of the suit was error if Illinois law applies
(and a fortiori if federal law applies), though on remand it
will be open to Aliano to try to prove, if it can, that the
forum selection clause is invalid because it was procured by
fraud, or for some other recognized reason for invalidating
No. 05-1720                                                 13

a contractual provision. Northwestern National Ins. Co. v.
Donovan, supra, 916 F.2d at 377. Aliano can even, if it wishes,
move for transfer under 28 U.S.C. § 1404(a). Of course if it
does that, there will be no shadow of a doubt that the
federal standard applies; the case will be indistinguishable
from Stewart. And since the forum selection clause is
(barring its invalidation on fraud or some cognate ground)
valid, there is a strong presumption against transfer. The
presumption can be overcome, as we explained in North-
western, only “if there is inconvenience to some third
party . . . or to the judicial system itself,” as distinct from
inconvenience to the party seeking transfer. That party’s
inconvenience has no weight if the clause is valid, 916 F.2d
at 378, because the party waived any objection based on
inconvenience to it by agreeing to the clause. But it could
not waive rights of third parties, or the interest of the
federal judiciary in the orderly allocation of judicial busi-
ness, which is why a transfer motion can be granted even if
there is a valid forum selection clause. See also Heller
Financial, Inc. v. Midwhey Powder Co., supra, 883 F.2d at 1293.
  The dismissal of IFC’s suit is
                                                   REVERSED.

A true Copy:
        Teste:

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



                     USCA-02-C-0072—2-1-06
