LOUISE W. FLANAGAN, United States District Judge.
This matter is before the court on defendants' motion to dismiss for improper venue, pursuant to Federal Rule of Civil Procedure 12(b)(3), or, in the alternative, to transfer venue to the United States District Court for the Middle District of Florida. (DE 17). Plaintiff responded in opposition, and the time for reply has passed. In this posture, the issues raised are ripe for ruling. For the following reasons, the court denies the motion.
Plaintiff commenced this action pursuant to the Miller Act, 40 U.S.C. §§ 3131 et seq., to recover unpaid amounts for labor and materials it furnished as a subcontractor in connection with the construction of an elementary school at Fort Bragg, North Carolina (the "project"). In amended complaint filed September 6, 2018, plaintiff asserts a claim of breach of contract against defendant Sauer Incorporated ("Sauer"), based on the terms of a subcontract
Defendants answered on November 9, 2018, including in their answer the instant motion to dismiss, or in the alternative to transfer venue, on the basis that a forum-selection clause in the subcontract requires plaintiff to litigate its claims against them in the Middle District of Florida. Defendants rely upon the subcontract. In opposition, plaintiff contends the forum-selection clause is invalid and that venue is proper in this district.
The court entered case management order on January 7, 2019, under which discovery and mediation shall be completed by September 10, 2019, and dispositive motions shall be filed by October 10, 2019.
Plaintiff is a North Carolina corporation in the business of providing commercial drywall and exterior finish construction services, with principal office and place of business in Raleigh, North Carolina. Defendant Sauer is a Florida corporation with its principal office and place of business in Jacksonville, Florida, engaged generally in the construction industry as a general contractor, and a licensed general contractor in North Carolina. Defendant FIC is an Indiana surety company that issued a payment bond on behalf of its principal, Sauer, allegedly binding itself for the payment of any unpaid amounts for labor and materials furnished in connection with the project.
The project is a multi-million-dollar undertaking for the construction and replacement of the Pope-Holbrook Elementary School at Fort Bragg military base. Prior to April 13, 2015, defendant Sauer and the United States Army Corps of Engineers — Savannah District entered into a prime contract (Owner Contract # W91278-12-D-0039-CV01) for the construction of the project. According to the complaint,
On February 20, 2015, defendant Sauer entered into the subcontract with Sears. The initial subcontract sum, subject to adjustment for changes in the scope of work, was $1,945,559.00. The scope of work included: "Gypsum assemblies, metal framing, building insulation, glass fiber reinforced gypsum, and exterior insulation and finish system." (Compl. ¶ 10). According to the complaint, during the course of the project, the scope of work was amended, resulting in an increase of the subcontract price of $91,563.48, from $1,945,559.00 to $2,037,122.48. Plaintiff began work on February 9, 2016 and completed its work on December 18, 2017. To date, Plaintiff has been paid $1,768,744.80.
According to the complaint, plaintiff and Sauer agreed to at least four change orders over the course of the project, and defendant Sauer agreed and was obligated to pay plaintiff for its work under the subcontract. Despite plaintiff's allegedly proper performance of its work on the
As pertinent herein, the subcontract includes the following provision regarding the venue for claims and dispute resolution: "Any claim by Subcontractor filed in state or federal court against Sauer and/or Sauer's surety shall only be filed and or resolved in any court within the exclusive venue of Sauer's office address written above." (Subcontract (DE 18-1) at 11).
Federal Rule of Civil Procedure 12(b)(3) allows a party to move to dismiss a complaint for "improper venue" before pleading an answer. "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 division where it might have been brought or to any district or division to which all parties have consented." 28 U.S.C. § 1404(a). A transfer of venue under § 1404(a) is "a matter resting in the sound discretion of the District Judge."
Defendants move to dismiss under Rule 12(b)(3) on the basis that a forum-selection clause in the subcontract requires plaintiff to litigate its claims against them in the Middle District of Florida. Although defendants rely upon an opinion by the United States Court of Appeals for the Fourth Circuit, in
In
The Fourth Circuit has since recognized the applicability of
As noted above, "a district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all parties have consented." 28 U.S.C. § 1404(a). Under the federal venue statute generally, venue is proper in "a judicial district in which ... a substantial part of property that is the subject of the action is situated." 28 U.S.C. § 1391(b). Similarly, under the venue provisions of the Miller Act, venue is proper in the "district in which the contract was to be performed and executed." 40 U.S.C. § 3133(b)(3)(B). Based upon these statutory venue provisions, a proper venue for this action is the Eastern District of North Carolina, because it is the location of contract performance and the project.
Nevertheless, "it is settled that parties to a contract may agree in advance to submit to the jurisdiction of a given court."
Two critical issues thus are raised by the instant motion. The first issue is whether the parties here waived the Miller Act venue rules through a "clear and express" forum-selection clause in favor of the Middle District of Florida.
Defendants contend that the forum-selection clause in the subcontract provides that venue exclusively shall be in the Middle District of Florida. The clause, however, is not so clear as defendants contend, and it is lacking in key terms normally found in forum-selection provisions enforced in this circuit.
Generally, "forum-selection clauses using geographical limitations permit the case to be filed with any court, whether state or federal, that is located
Comparison to other geographically limited clauses is instructive. For example, in
In sum, the instant forum-selection clause is missing key language resulting in its ambiguity. For example, to be enforceable to transfer the case to the Middle District of Florida, it could specify that the sole venue shall be in
Independently, and in the alternative to the foregoing, the forum-selection clause is not valid. "[A] valid forum-selection clause should be given controlling weight in all but the most exceptional cases."
While forum-selection clauses generally are accorded "presumptive validity," this presumption "is not absolute and, therefore, may be overcome by a clear showing that they are unreasonable under the circumstances."
In determining the validity of a forum-selection clause, inconvenience and public policy are not to be considered categorically, but rather as part of a multi-factor analysis familiar in the § 1404(a) context.
The court begins with consideration of North Carolina's strong public policy against forum-selection clauses, further emphasized in the context of real property improvement contracts, as here. In particular, North Carolina law provides that "any provision in a contract entered into in North Carolina that requires the prosecution of any action or the arbitration of any dispute that arises from the contract to be instituted or heard in another state
While this North Carolina public policy is not dispositive of the analysis, it is nonetheless a clear factor weighing against enforcement of the forum-selection clause in this case.
Further weighing against enforcement of the forum-selection clause in this case is the status of the third claim by plaintiff against defendant FIC under the payment bond. Although the subcontract references FIC in the forum-selection provision, there is no mention of the payment bond containing any forum-selection provision, either as represented in the complaint or the instant motion. (
Additional factors weighing against enforcement of the clause are centered around the location of the project in North Carolina and plaintiff's presence in North Carolina. Any examination of the premises will take place in North Carolina. Defendant Sauer came into North Carolina to bid and work on the project. Plaintiff is based in North Carolina and chose this logical forum to litigate the instant dispute. Defendants do not dispute any of these factors weighing against enforcement of the clause, where they filed no reply in response to plaintiff's assertion thereof.
Under the circumstances here, the court also takes into account the ambiguous language of the forum-selection clause, even if that ambiguity is not fatal to its enforcement as set forth in the court's analysis in section B.2.a., herein. Where it is not clear that the parties unequivocally and expressly sought to require venue for all claims in the Middle District of Florida, to the exclusion of all other locations in Florida or the United States, the court finds additional reason to forego enforcement of the clause.
In contrast to the foregoing factors weighing against enforcement of the clause, the court recognizes factors favoring its enforcement. Defendant Sauer's office is located in Jacksonville, Florida, as noted on the face of the subcontract. The subcontract provides that pre-suit claims must be directed to defendant Sauer's office at that address. The parties are sophisticated business entities who are capable of freely entering into a contract at arms length. However, other than the forum-selection clause and the fact that Sauer has an office in Florida, this action bears no connection to Florida.
In sum, the factors in favor of enforcement of the forum-selection clause are heavily outweighed by the factors against its enforcement. Plaintiff has made "a clear showing," unrebutted by defendants, that the forum-selection clause is "unreasonable under the circumstances."
Cases cited by defendants in support of enforcement of the forum-selection clause are inapposite and unpersuasive under the circumstances presented. For example, defendants cite an unpublished district court decision from the Middle District of North Carolina transferring a Miller Act case pursuant to a forum-selection clause. There, however, the plaintiff stated in opposition to motion to dismiss that it "does not object to the Sureties' request to transfer venue to the District of Maryland" in accordance with a forum-selection clause, which clearly granted exclusive jurisdiction to the "Courts of Maryland."
Defendants also cite to an unpublished decision by this court, adopting on clear error review a memorandum and recommendation of a magistrate judge to enforce a forum-selection clause to transfer an action to North Carolina county court. There, however, as in
In sum, the purported forum-selection clause in the subcontract is both unenforceable and invalid in light of the totality of the circumstances. Therefore, the court declines to transfer venue to the Middle District of Florida, and defendants' alternative motion to transfer venue is denied.
Based on the foregoing, defendants' motion to dismiss for improper venue, or, in the alternative, to transfer venue (DE 17) is DENIED. Management of this case shall continue in accordance with the court's January 7, 2019, case management order.
SO ORDERED, this the 25th day of April, 2019.