RIVER FRONT RECYCLING & AGGREGATE, LLC v. KALLIDUS TECHNOLOGIES, INC., No. 1:2018cv09141 - Document 23 (D.N.J. 2019)
Court Description: OPINION. Signed by Judge Joseph H. Rodriguez on 5/13/2019. (tf, )
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RIVER FRONT RECYCLING & AGGREGATE, LLC v. KALLIDUS TECHNOLOGIES, INC. Doc. 23 U N ITED STATES D ISTRICT COU RT D ISTRICT OF N EW JERSEY _________________ ____ UNITED STATES ex rel. RIVER : FRONT RECYCLING AND : AGGREGATE, LLC, : : Plaintiff, : : v. : : KALLIDUS TECHNOLOGIES, : INC. and FIDELITY AND : DEPOSIT COMPANY OF : MARYLAND, : : Defendants. : _______________________ : H o n . Jo s e p h H . Ro d rigu e z Civil Action No. 18-9141 Op in io n This m atter com es before the Court on a m otion by Defendants Kallidus Technologies, Inc. (Kallidus) and Fidelity and Deposit Com pany of Maryland (Fidelity) to dism iss the present action or transfer it to the United States District Court for the District of Massachusetts, Boston Vicinage. Defendants’ m otion is based on a forum selection provision in the Standard Subcontract Agreem ent (hereinafter Subcontract) executed between Kallidus and Plaintiff River Front Recycling and Aggregate, LLC (River Front). The forum selection provision allows Kallidus to elect to arbitrate or judicially resolve all disputes related to the Subcontract, and places venue for all such disputes in Boston, Massachusetts. 1 Dockets.Justia.com Pursuant to the Subcontract, Kallidus argues this action m ust be dism issed for im proper venue or, in the alternative, transferred to Boston. Kallidus claim s the forum selection clause governs this dispute even though the suit was originally filed by River Front. Additionally, Kallidus argues the clause is valid because it was adequately supported by consideration and its term s are unam biguous. River Front responds that the forum selection clause does not apply because this dispute is governed by a different provision of the Subcontract. Furtherm ore, River Front argues the forum -selection clause is am biguous and invalid for lack of consideration. In the alternative, River Front argues the case m ust rem ain in this Court because of venue requirem ents within the state and federal law claim s brought by River Front. Having considered the parties’ subm issions, the Court decided this m otion without oral argum ent pursuant to Federal Rule of Civil Procedure 78(b). For the reasons stated below, Defendants’ m otion to transfer venue is granted. I. Backgro u n d River Front is a contractor in the civil construction and recycling business, with offices in Lum berton, NJ . [Dkt. No. 1, Ex. A, Com plaint, ¶ 2]. Kallidus is a foreign corporation that perform s general construction services, with offices in Lowell, Massachusetts. Id., ¶ 1. Kallidus obtained a 2 contract to build a m aintenance shop for the federal governm ent in Sea Girt, NJ , and hired River Front as a subcontractor for the project. Id., ¶ 5; Subcontract, at 1. Subsequently, Kallidus and River Front entered into the Subcontract, which contains the disputed forum selection provision. Com plaint, ¶ 5. The provision reads: 6 .4 . Notwithstanding the foregoing, and in consideration of $ 10 0 paid to the Subcontractor, the receipt whereof is acknowledged as part of the Subcontract Sum , at the sole option of the Contractor, any controversy, dispute or claim between the Contractor and the Subcontractor related in any way to this Agreem ent or the Project m ay be determ ined by a separate action in court or by a separate arbitration in accordance with the Construction Industry Arbitration Rules of the Am erican Arbitration Association then pertaining, whichever the Contractor m ay elect in its sole discretion. The parties expressly agree that the venue of any such court action or arbitration shall be Boston, Massachusetts. Any award rendered by the arbitrator or arbitrators shall be final and judgm ent m ay be entered upon it in accordance with the applicable law in any court having jurisdiction. Subcontract, ¶ 6.4 (em phasis added). The parties executed the agreem ent on or around April 12, 20 17. Com plaint, ¶ 5. As a construction contractor for the federal governm ent, Kallidus is also subject to the Miller Act provisions requiring bonds be posted for federal construction projects. 40 U.S.C. § 3131. To fulfill these requirem ents, Kallidus arranged for Fidelity to issue a Paym ent Bond and a Perform ance Bond for the project. [Dkt. No. 7, Am en. Com plaint, ¶ 7]. 3 Kallidus m ade two paym ents, totaling $ 92,822.10 , to River Front for work perform ed on the Subcontract, but failed to pay River Front the rem aining balance of $ 20 6, 977.90 . Com plaint, ¶ 9-11. In April of 20 18, River Front sued Kallidus in the Superior Court of New J ersey, Burlington County, claim ing breach of contract, unjust enrichm ent, quantum m eruit, book account, and claim s under the New J ersey Prom pt Paym ent Act. Kallidus rem oved the case to this Court and filed a Motion to Dism iss or Transfer Venue pursuant to the Subcontract forum selection clause. River Front filed an am ended com plaint with this Court, adding Fidelity as a defendant and raising claim s under the Miller Act. Am en. Com plaint, at 13. Defendants now m ove for dism issal or to transfer venue to the United States District Court for the District of Massachusetts, Boston Vicinage. II. Stan d ard o f Re vie w A. Transfer or Dism issal A Court determ ining whether to dism iss or transfer a case for purposes of venue applies either 28 U.S.C. § 140 4 or 28 U.S.C. § 140 6. The Court of a district “in which is filed a case laying venue in the wrong division or district” applies § 140 6 to dism iss the action or transfer it to a division or district in which it could have been brought. Only the application of § 140 6—which applies if the original venue is im proper—m ay 4 give rise to a dism issal under these circum stances. J um ara v. State Farm Ins., 55 F.3d 873, 878 (3d Cir. 1995). In contrast, § 140 4 is used to transfer a civil action to “any other district or division where it m ight have been brought or to any district or division to which all parties have consented.” Courts applying § 140 4 have authority to transfer an action even if the original venue is proper. J um ara, 55 F.3d at 878. B. Forum Selection Clauses The ability to transfer civil actions regardless of whether venue is proper allows parties to contract to litigate in a particular forum by using forum selection clauses. Courts evaluating a transfer pursuant to a forum selection clause m ust give the clause “controlling weight in all but the m ost exceptional cases.” Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. Of Tex., 571 U.S. 49, 59-60 (20 13) (quoting Stewart Org. Inc. v. Ricoh Corp., 487 U.S. 22, 33 (1988) (KENNEDY, J ., concurring)). Courts evaluating a transfer pursuant to a forum selection clause consider three factors. First, a plaintiff opposing a forum selection clause bears the burden of proving that transfer to the contractual forum is unwarranted. Atl. Marine, 571 U.S. at 63. This burden rests with the plaintiff since the plaintiff, by contractually accepting a forum selection 5 provision, has effectively exercised its ability to select a venue before a dispute arises. Id. Second, courts will not consider argum ents about the private interests of the parties, since the pre-selection of the forum presum es that these interests weigh in favor of the contracted venue. Id. at 64. A court m ay consider public-interest factors that weigh against a transfer m otion, but such factors will rarely defeat a m otion to transfer. Id. Third, a plaintiff subject to a forum selection clause who inappropriately files suit in a different forum is not entitled to the choiceof-law rules of the filing forum if the case is transferred under § 140 4(a). Id. This policy prevents plaintiffs from gam ing a forum selection provision by filing suit in an inappropriate forum in order to defeat state-law advantages built into a forum selection clause. Id. at 65. C. Interpretation of Forum Selection Clauses "The question of the scope of a forum selection clause is one of contract interpretation." In re McGraw-Hill Glob. Educ. Holdings LLC, 90 9 F.3d 48, 58 (3d Cir. 20 18) (quoting J ohn Wyeth & Brother Ltd. v. CIGNA Int'l Corp., 119 F.3d 10 70 , 10 73 (3d Cir. 1997)). Questions of contract interpretation are substantive rather than procedural, so courts 6 interpreting forum selection clauses apply state law except for very lim ited circum stances. Collins ex rel. herself v. Mary Kay, Inc., 874 F.3d 176, 182 (3d Cir. 20 17).1 Because New J ersey has the m ost dom inant and significant relationship to the parties and the issues in this case, New J ersey contract law governs this dispute. NL Indus. Inc. v. Com m ercial Union Ins. Co., 65 F.3d 314, 319 (3d Cir. 1995). In New J ersey, discerning the intent of the parties is the prim ary concern of contract interpretation. J acobs v. Great Pacific Century Corp, 10 4 N.J . 580 , 581 (1986). Courts discern intent using any num ber of interpretive devices, including consideration of the particular contractual provision, overview of all the term s, the circum stances leading up to the form ation of the contract, custom , usage, and the interpretation placed on the disputed provision by the parties’ conduct. Id. When evaluating intent, a court m ust consider the term s of the contract in the context in which it was written, and accord a rational m eaning to the contract language. Id. at 586.The term s of a contract objectively m anifest the intent of the parties; 1 The Collins Court stated that federal common law applies to issues of contract interpretation only in “restricted areas,” such as those in which there are uniquely federal interests at stake, or where Congress has delegated power to the federal courts to develop substantive law on a particular subject. Collins, at 182. Such federal interests include rules regarding the interaction of the judiciary and other members of the international community (Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964)) and contracts to which the United States is a party (Miree v. DeKalb County, Ga., 433 U.S. 25 (1977)), none of which at stake in this case. 7 therefore, with the exception of certain specialized or contextual contractual language, the term s in a contract are given their plain and ordinary m eaning. Kaufm an v. Provident Life and Cas. Ins. Co., 828 F. Supp. 275, 283 (D.N.J . 1992), aff’d, 993 F.2d 877 (3d. Cir. 1993). If a written contract is am biguous, however, a court will construe it m ore strongly against the party drafting the contract. Schor v. FMS Fin. Corp., 357 N.J . Super. 185, 193 (App. Div. 20 0 2). A contract is am biguous if its term s are susceptible to two or m ore reasonable alternative interpretations. Id. at 191. When determ ining whether the language in a contract is am biguous, courts look to the contract as a whole and m ust not torture the language of the contract in order to create an am biguity. Id. Additionally, a party cannot obtain relief from a contract term that is unam biguous by sim ply arguing the term had a secret, unexpressed m eaning contrary to its plain m eaning. Id. III. An alys is The Court begins by evaluating whether venue is proper in the District of New J ersey, an analysis over which a forum selection clause has no bearing. Atl. Marine, 571 U.S. at 56. Because a substantial part of the events or om issions giving rise to this lawsuit took place within the District of New J ersey, venue is proper in this Court. 26. U.S.C. § 1391(a)(2) & 8 (b)(2). Accordingly, the Court will not dism iss under § 140 6, but it will consider transferring the action under § 140 4(a). River Front brought this action in the State of New J ersey instead of the Subcontract venue of Boston, Massachusetts. As the plaintiff, it bears the burden of defeating Kallidus’ Motion to Transfer. River Front has advanced several argum ents against transfer, which the Court will exam ine. A. The Forum Selection Clause Applies to River Front River Front first argues that Section 6.4 of the Subcontract, which contains the forum selection clause, does not apply to this action. Instead, River Front asserts that Section 6.3 governs this action. Section 6.3 states: “Com pletion of the dispute resolution procedure in the [Subcontract] shall be a condition precedent to the right of the Subcontractor to com m ence or continue any legal action or other dispute resolution proceeding against the Subcontractor.” Subcontract, ¶ 6.3. River Front argues Section 6.3 governs because this action was brought by River Front (as opposed to Kallidus), and because neither party argues the dispute resolution procedures in the Subcontract were not m et. Section 6.3 does not contain a forum selection provision, so River Front concludes the forum selection clause does not apply to this case. The Court disagrees. 9 Section 6.4 of the Subcontract applies to “any controversy, dispute or claim between the Contractor and the Subcontractor.” Section 6.1, which River Front adm its applies to all disputes between Kallidus and River Front, uses alm ost identical language, referencing “any controversy or claim between the Contractor and the Subcontractor.” Opp. to Motion to Dism iss, at 5. The plain language of both provisions states that each provision applies to any dispute between River Front and Kallidus relating to the Subcontract. As this is a dispute between River Front and Kallidus relating to the Subcontract, Section 6.4 applies to this action. Furtherm ore, Section 6.4 applies “Notwithstanding the forgoing . . . at the sole option of Kallidus.” The phrase “notwithstanding the foregoing” m akes Section 6.4 controlling regardless of a preceding provision to the contrary, including Section 6.3.2 Additionally, Section 6.4 has no specific requirem ent that a particular party actually bring the action for the provision to apply, unlike Section 6.3 of the Subcontract.3 Section 6.4 gives The phrase “notwithstanding the foregoing” requires that a paragraph in which it appears “be given controlling significance over the preceding text.” Henkels & McCoy, Inc. v. Adochio, 138 F.3d 491, 506 (3d Cir. 1998) (STAPLETON, J., dissenting); see also Simonson v. Z. Cranbury Assocs. P’ship, 149 N.J. 536 (1997) (holding a mortgagee could exercise a contract option releasing a portion of mortgaged property from a mortgage “notwithstanding the foregoing” provision in the contract generally requiring payment of a fixed sum of money per acre to release the mortgage). 3 Section 6.3 of the Subcontract applies to “any legal action . . . [commenced or continued by River Front] against the Contractor.” Section 6.4 contains no such specific designations regarding legal proceedings commenced or continued by Kallidus. 2 10 Kallidus, as the Contractor, the privilege to avail itself of the forum selection clause in any dispute between it and River Front relating to the Subcontract. Kallidus properly invoked the forum selection clause in spite of the fact that it did not bring the suit. B. Kallidus Gave the Required Consideration River Front also argues the forum selection clause is void because Kallidus did not give the consideration the clause required. The clause required “consideration of $ 10 0 [to be] paid to the Subcontractor, the receipt whereof is acknowledged as part of the Subcontract Sum .” Subcontract ¶ 6.4. The Subcontract Sum is defined as $ 40 0 ,0 0 0 . Id. at 1. River Front claim s that, because it did not receive the entire Subcontract Sum , it did not receive the $ 10 0 consideration required by the forum selection clause; therefore, the clause is void for lack of consideration. The Subcontract forum selection provision states receipt of the $ 10 0 is acknowledged as “part of the Subcontract Sum .” Subcontract, ¶ 6.4 (em phasis added). Section 11.1 of the Subcontract anticipates that the Subcontract Sum will be satisfied by periodic paym ents from Kallidus to River Front, not one lum p sum of $ 40 0 ,0 0 0 . Id., ¶ 11.1. The paym ents of $ 92,922.10 from Kallidus to River Front were paid toward the satisfaction of the $ 40 0 ,0 0 0 Subcontract with River Front, see Cert. of Douglas Cook, ¶ 11 3-4, which m akes them “part of” the entire Subcontract Sum of $ 40 0 ,0 0 0 . The forum selection provision does not state that the $ 10 0 consideration is only deem ed paid when the Subcontract Sum is entirely paid. Alternatively, River Front argues the consideration was never paid because River Front never sent an invoice for the $ 10 0 paid by Kallidus. The Subcontract contains no requirem ent that the paym ent be separately invoiced or otherwise delineated from any other paym ent m ade in satisfaction of the Subcontract Sum in order to be valid. In fact, Section 6.8 of the Subcontract states that the Subcontract dispute resolution procedures are “deem ed incorporated into any paym ent . . . issued by or for [River Front] regarding the Project.” Subcontract, ¶ 6.8. These procedures, including the $ 10 0 consideration, were incorporated into the paym ents between Kallidus and River Front. The paym ents from Kallidus to River Front were part of the entire Subcontract Sum and exceeded $ 10 0 , m aking them valid consideration with no further notice required between River Front and Kallidus. C. The New J ersey Prom pt Paym ent Act Does Not Defeat Transfer River Front further argues that the forum selection clause is invalid because of the venue requirem ent in the New J ersey Prom pt Paym ent Act (NJ PPA). In relevant part, the NJ PPA states, “In any civil action brought to 12 collect paym ents pursuant to this section, the action shall be conducted inside of this State . . .” N.J .S.A. 2A:30 A-2(f). River Front argues its NJ PPA claim s m ust be litigated within New J ersey, which precludes the Court from transferring the case to Boston. The effect given to a contractual forum selection clause is determ ined by federal law, not state law. J um ara, 55 F.3d at 877; see also Tozer v. Charles A. Krause Milling Co, 189 F.2d 242, 245 (3d Cir, 1951) (“[State] law, of course, does not control in m atters of federal procedure.”). Because of the suprem acy of federal law, River Front cannot overcom e the forum selection clause sim ply by relying on a state-law venue provision. Instead, it m ust dem onstrate why the forum selection clause cannot be upheld in accordance with the factors outlined by the Third Circuit in Coastal Steel Corp. v. Tilghm an Weelabrator, Ltd., 70 9 F.2d 190 (3d Cir. 1983). The Coastal Steel court determ ined that forum selection clauses are presum ptively valid and will be enforced unless a party objecting to a forum selection clause establishes (1) that it is the product of fraud or overreaching, (2) enforcem ent violates a strong public policy of the forum , or (3) under the circum stances of the case, transfer would result in litigation in a jurisdiction so inconvenient as to be unreasonable. Id. at 20 2. River Front has not dem onstrated that this forum selection clause was a 13 product of fraud, or that, under the circum stances of this case, litigation in Boston would be so seriously inconvenient as to be unreasonable. New J ersey has a general policy of upholding the validity of forum selection clauses, see Cadapult Graphic Sys., Inc. v. Tektronix, Inc., 98 F. Supp. 2d 560 , 568 (D.N.J . 20 0 0 ), and River Front has not presented any countervailing concerns that overcom e this policy. Therefore, River Front’s invocation of the NJ PPA is insufficient to overcom e the forum selection clause. D. Divestiture of Federal J urisdiction over Miller Act Claim s Finally, River Front claim s that transfer will im properly divest the federal courts of jurisdiction over River Front’s Miller Act claim s. As a governm ent subcontractor, River Front is subject to the Miller Act, which requires civil suits filed pursuant to its provisions to be brought “in the United States District Court for any district in which the contract was to be perform ed and executed, regardless of the am ount in controversy.” 40 U.S.C. § 3133(b)(3)(B). The Subcontract work was perform ed in the District of New J ersey, which m akes this Court the proper venue for River Front’s Miller Act claim s. River Front further argues that the forum selection clause does not allow transfer to federal courts in Boston; therefore, a transfer would divest 14 the federal courts of the ability to hear River Front’s Miller Act claim s. River Front bases its argum ent on its conclusion that the geographical distinction in the forum selection clause is am biguous. River Front posits the clause can be interpreted two different ways: it refers to state and local courts in Boston, or it refers to state, local and federal courts in Boston. If a forum -selection clause is am biguous, it m ust be construed m ore strongly against the drafting party, which in this case was Kallidus. Interm etals Corp. v. Hanover Intern. Aktiengesellschaft Fur Industrieversicherungen, 188 F. Supp. 2d 454, 460 (D.N.J . 20 0 1). Under River Front’s preferred interpretation, the forum selection clause only perm its transfers to state and local courts in Boston, in which case River Front could not litigate its Miller Act claim s if the case were tran sferred. Therefore, River Front argues the am biguity m ust be resolved in its favor and that the case m ust rem ain in this Court. The Suprem e Court has labeled the Miller Act forum selection provision as “m erely a venue requirem ent.” F.D. Rich, Co., Inc. v. U.S. for Use of Indus. Lum ber Co., Inc., 417 U.S. 116, 125 (1974). Accordingly, several circuits have held this venue requirem ent can be waived by a valid forum selection clause. See FGS Constructors, Inc. v. Carlow, 64 F.3d 1230 , 1233 (8 th Cir. 1995) (holding applicable section of the Miller Act was a 15 venue provision enacted to benefit defendants and could be waived by valid forum selection clause); U.S. ex rel. Pittsburgh Tank and Tower, Inc. v. G&C Enter., Inc., 62 F.3d 35, 36 (1st Cir. 1995) (holding that the Miller Act requirem ent is “sim ply a venue statute” and that it is subject to waiver through a valid forum selection agreem ent). Furtherm ore, the Third Circuit has provided guidance for interpreting geographic designations within forum selection clauses. In New J ersey v. Merrill Lynch & Co., Inc., the Court reviewed a forum selection provision in a contract placing exclusive jurisdiction “in the appropriate courts of the State [of] New J ersey.” 640 F.3d 545, 546 (3d Cir. 20 11). The defendants rem oved the case to federal court, but the district Court rem anded the case back to New J ersey state court, concluding that the reference to courts “of a state” lim ited jurisdiction to state courts. Id. at 547. On appeal, the defendants argued that the provision allowed venue in both state and federal courts within New J ersey, but the Third Circuit disagreed. Id. at 548. In its decision, the Court adopted the interpretation principles used by the Fourth Circuit, holding the language “’of [a state]’ connot[es] sovereignty, lim iting jurisdiction . . . to the state courts of the nam ed state.” Id. at 549 (quoting FindWhere Holdings, Inc. v. Sys. Env’t Optim ization, LLC, 626 F.3d 752, 755 (4 th Cir. 20 10 )). In contrast, the 16 phrase “in a state” expresses “the parties’ intent as a m atter of geography” and allows jurisdiction in both state an d federal courts of the nam ed state. FindWhere, 626 F.3d at 755. The Court concluded that the plain m eaning of the word “of” in the forum -selection clause unam biguously referred to the courts of the State of New J ersey and excluded federal courts located within the state of New J ersey. Merrill Lynch, 640 F.3d at 548-50 ; see also Dixon v. TES Int’l Inc., 330 F.3d 396, 398 (5 th Cir. 20 0 3) (per curiam ) (“Federal district courts m ay be in [a state], but they are not of [that state]”). The forum selection clause in the Subcontract states that “venue . . . shall be Boston, Massachusetts.” It does not lim it venue to the courts “of the City of Boston” or the courts “of the State of Massachusetts.” Under the interpretation principles in Merrill Lynch, the Subcontract provision places venue in state and local courts in Boston or the federal court in Boston. Kallidus has requested a transfer to the federal court in Boston; therefore, River Front will still have the opportunity to litigate its Miller Act claim s in federal district court if the case is transferred. Furtherm ore, the Miller Act venue requirem ent was validly waived by the forum selection clause between Kallidus and River Front. While the Third Circuit has not specifically addressed this issue as it relates to the 17 Miller Act,4 the Court accepts as persuasive the authority of other circuits which have held the Miller Act venue requirem ent subject to waiver. See FGS Constructors, 64 F.3d at 1233; U.S. ex rel. Pittsburgh Tank and Tower, 62 F.3d at 36. Therefore, the venue requirem ents in the Miller Act will not overcom e the Subcontract forum selection clause. IV. Co n clu s io n For the reasons previously stated, Defendant’s m otion to transfer to the United States District Court for the District of Massachusetts is granted. An appropriate Order shall issue. Dated: May 13, 20 19 s/ J oseph H. Rodriguez_ _ _ _ _ _ _ _ _ _ Hon. J oseph H. Rodriguez, UNITED STATES DISTRICT J UDGE This issue has been litigated at the trial level in the Third Circuit. See Pride Enters. v. Lewes Steel Serv., No. 90-330, 2010 WL 1337683 at *5 (D. Del. March 31, 2010) (holding the Miller Act venue requirement was waivable by a valid forum selection clause). 4 18
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