Rice Contracting Corporation v. Callas Contractors, Inc. et al, No. 1:2008cv01163 - Document 15 (E.D. Va. 2009)
Court Description: MEMORANDUM OPINION Re: MOTION to Dismiss for Lack of Jurisdiction by Callas Contractors, Inc., Hartford Fire Insurance Company. Signed by District Judge Leonie M. Brinkema on 1/2/2009. (stas)
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IN THE UNITED STATES DISTRICT EASTERN DISTRICT OF COURT FOR THE VIRGINIA [~ Alexandria Division RICE CONTRACTING ~ ~-._ j ' » I L E CORPORATION, Plaintiff, v. ) CALLAS CONTRACTORS, CALLAS COMPANY, INC. l:08cvll63 (LMB/TRJ) a/k/a INC., and HARTFORD FIRE INSURANCE COMPANY, Defendants. ) MEMORANDUM OPINION X. Background. Plaintiff Rice Contracting Company subcontractor, ("Callas"), Company has sued the defendants, a general ("Hartford"), contractor, Callas' and claims under Virginia's 2.2-4337 et sea. ("Rice"), Callas a Contractors, and Hartford Fire Insurance surety, alleging breach of contract "Little Miller Act," Va. organized and based in Virginia and Callas based on a Rice is in Maryland. In Rice and Callas entered into two contracts in which to perform site development and other subcontract work for Callas on two school construction projects: Liberty Elementary School in Loudoun County and Greenville Elementary School § issue. Rice and Callas are both construction companies; Rice was Code Ann. The defendants have moved to dismiss forum selection clause in the contracts at August 2004, Inc. in Fauquier County. Hartford, a Connecticut company, executed two payment bonds, one for each project, In this breach of contract action, committed several breaches, as a surety. Rice alleges that Callas including failure to pay, properly administer the contracts, failure to and improper backcharges. Rice seeks $921,967.57 for the Loudoun County project and $470,114.90 for the Fauquier County project. to pay the amounts, bonds. U.S.C. and has been sued for the amount Because the parties are diverse and more than $75,000 is at issue, under 28 Rice pursued recovery on the two payment Hartford refused to pay, of the bonds. When Callas failed § the Court has subject matter jurisdiction 1332. The defendants have moved to dismiss under Fed. 12(b)(3) R. Civ. P. on the ground that forum selection clauses in both contracts require all claims with respect to the contracts to be litigated in Virginia state court in Loudoun and Fauquier County, respectively. Except for the specific state court location, each contract contains identical forum selection language: 11.9 . . . [E]ach of the parties to this Agreement submits to the jurisdiction of any state court sitting in [Loudoun or Fauquier]1 County, Virginia in any action or proceeding arising out of or relating to this Agreement and agrees that all claims in respect of the action or proceeding may be heard and determined in any such court. Subcontractor and Contractor each also agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Each of the parties waives any defense of 'The Liberty contract states "Loudoun," and the Greenville contract states "Fauquier." -2- inconvenient forum to the maintenance of any action or proceeding so brought . . . We dispense with oral argument because the facts and legal contentions are adequately presented in the materials before us and argument would not aid the decisional process. Based on the clear language of the contracts and the governing law, defendants' motion to dismiss will be granted. IX. Discussion A motion to dismiss for improper venue under Fed. R. 12 (b)(3) P. is the proper vehicle for bringing a motion to dismiss based on a forum selection clause. Astellas Pharma. Inc.. venue is challenged, 471 F.3d 544, Chiropractors Ass'n. Sucampo Pharms., 550 (4th Cir. v. 2006). Inc.. See Bartholomew v. 612 F.2d 812, overruled on other grounds by Rating v. F.2d 1260 (4th Cir. Inc. Once the plaintiff bears the burden of establishing that venue is proper. A. Civ. 816 Med. (4th Cir. Serv. Va. 1979), of D.C.. 718 1983). Permissive or Mandatory Venue. Rice first argues that the clauses at issue are only a permissive establishment of venue in Virginia state courts. support, Rice focuses on the first part of the respective clauses, In which provides that "each of the parties to this Agreement submits in to the jurisdiction of any state court sitting [Loudoun or Fauquier] County, Virginia in any action or proceeding arising out of or relating to this Agreement and -3- agrees that all claims in respect of the action or proceeding may be heard and determined in any such court" (emphasis added). Although Rice correctly points out that the first sentence, using the word "may," mandatory, by can be characterized as permissive and not it incorrectly ignores the next sentence, which clarifies the mandatory nature of the exclusive venue selection clause: "Subcontractor and Contractor each also agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court." "When only jurisdiction is specified [a forum selection] clause will generally not be enforced without some further language indicating the parties' intent to make jurisdiction exclusive." Wines & Spirits, John Boutari & Son, Importers and Distributors 1994), 762, quoting Docksider, 764 sentence, {9th Cir. Inc., Ltd. 1989). which states 22 v. Thus, F.3d 51, S.A. 52-53 Sea Technology. standing alone, v. Attiki (2d Cir. Ltd., 875 F.2d the first that particular Virginia state courts, "may" hear claims under the contract and that each party "submits to the jurisdiction" However, parties' of those courts, could be deemed permissive. the second sentence unambiguously "indicate[s] the intent to make jurisdiction exclusive" by stating that neither party may bring any claims related to the contracts any other court." Rice has failed to provide any case holding that such a clause is permissive. -4- Rather, "in law every case the Court has reviewed that addressed similar language has language mandatory. No. l:08CV1301, See, e.g., Bliss v. 2008 WL 5082436, (holding that the phrase at *4 found the Architron Systems. (N.D. Ohio Dec. 1, Inc.. 2008) "Each party hereto also agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court" made the court specified in the contract Friedman. Sept. not 4, [sic] "the exclusive and mandatory venue"); No. 2007) 2006-1495NC, 2007 WL 3012958, (holding that the phrase be brought in any small claims small claims court). More tellingly, O'Connell v. at *1 "no such legal court" here, "[p]laintiffs "provide[d] . . acknowledgeed] that of that Inc. 2538285, (E.D. *1 Finally, v. Regan, Pa. Rice argues Nov. No. 9, action may the parties the clause. the In a the contracts [clause] for exclusive jurisdiction and venue." Entertainment. at . language to App. Term barred venue in in other cases, have not even contested the mandatory nature of case involving nearly identical (N.Y. Civ.A.04-CV-4179, iGames 2004 WL 2004).2 that even if the clauses are mandatory, this Court is a proper venue "because the United States District 2The language irl ifeiines was, "Each party submits to the jurisdiction of any s<a- ¬e or federal court sitting in the State of Delaware, New Castle County in any action or Proceeding arising out of or related to this Agreement; agrees that all claims in respect of the action or Proceeding may be heard and determined in any such court; and agrees not to bring any action or Proceeding arising out of or relating to other court." -5- this Agreement in any Court for the Eastern District of Virginia has throughout both Loudoun and Fauquier County." This argument ignores court sitting in the contracts' Virginia is a federal, proper venue under merit if for not a state, the contractual the word "state" is PL's reference to [Loudoun or Fauquier] The United States District Court jurisdiction County" Opp. 7. "any state (emphasis added). the Eastern District of court and is terms. Rice's therefore not a position has no to be given any significance, and Rice does not explain why the word should be ignored. B. Enforcement Alternatively, of the Forum Selection Clauses. Rice argues clauses are mandatory, reasons that of expense and judicial some discretion exists not in enforcing a to enforce 1. the Court Federal even if should not economy. the forum selection enforce them for Although courts forum selection clause, no have reason the clauses here. and State Law Standards for Enforceability of Forum Selection Clauses. The parties dispute whether federal or state law governs enforcement of a forum selection clause in federal court in a diversity case. The defendants the asserts that federal Although it whether a federal is cite to Virginia law, while Rice law controls. an unresolved question in the Fourth Circuit court should apply deciding whether to enforce a federal or state law when forum selection clause in a -6- diversity case,3 it is irrelevant here because the federal and Virginia standards are substantially the same, prevail under either standard. follow the "modern view" that and the defendants Both federal and Virginia law forum selection clauses are presumptively valid absent certain extenuating circumstances. Under Virginia law, forum selection clauses valid and should be enforced" unreasonable, power." or are unless (1990). clause is prima enforcement is Under "unfair or Inc. federal v. law, bargaining Canon U.S.A., "[a] Inc., 397 forum-selection facie valid and should be enforced unless ... unreasonable under clause is unreasonable if overreaching; they are affected by fraud or unequal Paul Business Systems, S.E.2d 804 "are prima facie (2) trial (1) it was the circumstances. the result of in the contractual gravely difficult and inconvenient A fraud or forum would be so for the complaining party that 3See Gita Sports Ltd. v. SG Sensortechnik GMBH & Co. KG, F. Supp. 2d 432, 437 (W.D.N.C. 2008) (noting that no definitive word from the Fourth Circuit" 560 "there has been on this issue). Although the Fourth Circuit indicated in an unpublished opinion that state law applies, see Nutter v. New Rents, Inc.. No. 90-2493, 1991 WL 193490 (4th Cir. Oct. 1, 1991), it has also favorably cited a concurrence by Justice Kennedy supporting the use of federal standards governing the enforceability of forum selection clauses in diversity cases. See Vulcan Chemical Technologies. Inc. v. Barker. 297 F.3d 332, 339 {4th Cir. 2002), citing Stewart Pro., (Kennedy, J., Inc. concurring). v. Ricoh Corp., In addition, 487 U.S. 22, 33, (1988) a number of courts within the circuit have not followed Nutter and have adopted the view of most federal appellate courts that federal law governs. See Gita Sports, 560 F. Supp. 2d at 438 (applying federal law and observing that this represents the majority view of the circuits). -7- he would for all practical purposes be deprived of his day in court; or (3) enforcement would contravene a strong public policy of the forum in which suit is brought." P.A. v. Sanford. Bremen v. 509 F.3d 204, 213-14 Zapata Off-Shore Co.. Pee Dee Health Care. (4th Cir. 407 U.S. 1, 10, 2007), 15-18 citing M/S (1972) (internal quotation marks and citations omitted).4 2. Application of the standards. The facts of this case compel the enforcement of the forum selection clauses under either federal or Virginia law. Although Callas, the general contractor, contracts and used boilerplate language, may have drafted the both parties are corporations and there is no evidence of unequal bargaining power. There are no allegations of unfairness, overreaching, or that enforcement of the clauses would violate a public policy of Virginia. in court; indeed, Instead, fraud or Rice will not be deprived of its day if the litigation proceeds, it will have two. Rice argues that the forum selection clauses should 4Rice argues that Bremen and Pee Dee are not applicable because they were not diversity cases. PL's Opp. 4-6. There is indeed some confusion whether federal or state law regarding the enforceability of a forum selection clause applies in diversity cases. See supra n. argument that (1) 3. However, Rice presents federal law applies, but (2) the confusing Bremen does not apply. Rice does not articulate what it believes the standard for enforcing a forum selection clause in diversity cases is,; it only argues what the standard is not. Rice also cites a single case from the Eastern District of Virginia, Fixture Specialists, that it asserts is "federal common law." However, as demonstrated infra, that case is distinguishable. -8- not be enforced because "if the defendant's granted [Rice] [sic] motion were would be forced to bring suit in two separate state courts." Pl.'s Opp. 2. However, mere inconvenience and expense are insufficient to render enforcement of a forum selection clause unreasonable. at 439 (holding that See Gita Sports, . . . 2d "expense of litigation is insufficient to invalidate a forum-selection clause, case 560 F.Supp. especially in a diversity because the parties presumably included that burden when they calculated the proper consideration to be paid under the contract"); LLC. No. 2006) Bassett Seamless Guttering. l:05CV00184, 2006 WL 156874, at Inc. *4 v. GutterGuard, (M.D.N.C. Jan. 20, ("It is established in the Fourth Circuit that the presumption of enforceability that applies to choice of forum (and choice of law) inconvenience, case, provisions will not be overcome by mere added expense, or regret."). Furthermore, in this even if litigation in two courts will result in greater expenses, the expenses will be borne by both parties, who were aware of this potential when they signed the contracts.5 Rice cites a single case, Global Constr. Co.. (E.D. 14, Va. Nov. LLC. 2007), Fixture Specialists. No. No. 3:07-CV-570, Inc. v. 2007 WL 3468997 for the principle that "a forum 5It is not even clear how much would be saved by litigating the two breaches in the same action . The Complaint alleges breaches of two separate contracts, each of which involves its own facts and would likely require its own discovery. -9- selection clause does not prohibit a Court sitting in diversity- jurisdiction from ruling based on judicial economy and plaintiff preference." PL's Opp. 6. Fixture Specialists, however, is distinguishable because nearly all of the events giving rise to the claim in that case occurred in a venue different from the one specified in the contract. As the court observed, the mere existence of a forum selection clause "does not affect [c]ourt's analysis of whether venue is proper." (emphasis added). Here, id. [a] at *2 unlike in Fixture Specialists, the venues provided in the contracts are directly related to the claims and are therefore proper. In sum, Rice's concerns of judicial economy and added expense do not rise to the level of unreasonableness that both Virginia and federal law require to void a forum selection clause. Ill. For the reasons Conclusion stated above, Dismiss will be granted, the defendants' Motion to by an Order to be issued with this opinion. Entered this oL Alexandria, day of January, 2009 Virginia Leonie M. Biinkema United States District Judge -10-
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