Opinion
CIVIL NO. 1:03CV00222
December 2, 2003
MEMORANDUM OPINION
This Miller Act suit is before the court on Defendants' Motion to Dismiss, or in the Alternative Stay, Plaintiff's Complaint. Another pending matter in this case is The Clark Construction Group, Inc.'s Motion to Intervene under Federal Rule of Civil Procedure 24. The contract at the center of this dispute contains a forum selection clause granting exclusive jurisdiction to the "Courts of Maryland." Because the forum selection clause is enforceable and a transfer conforms with the requirements of 28 U.S.C. § 1404(a), the court will transfer this action to the United States District Court for the District of Maryland for further disposition.
FACTS
Plaintiff Coken Company, Inc. ("Coken") is the electrical subcontractor for a federal construction project in Research Triangle Park, North Carolina. The Clark Construction Group, Inc. ("Clark") is the general contractor. As required by the Miller Act, 40 U.S.C. § 3131et seq., Clark provided a payment bond "for the protection of all persons supplying labor and material in carrying out the work." 40 U.S.C. § 3131(b)(2). The Defendants are the sureties ("Sureties") on Clark's Miller Act bond. Unfortunately, the project was not built according to plan, and Coken incurred substantial costs in excess of the original subcontract amount. This dispute concerns the Sureties' obligation to pay Coken for its extra work on the project.
DISCUSSION
Defendants have moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(3), contending that venue in North Carolina is improper due to a forum selection clause in Coken's subcontract with Clark. A motion to dismiss for improper venue is governed by 28 U.S.C. § 1406(a), which provides that the district court shall dismiss a case filed in the wrong division or district unless it is in the interest of justice to transfer it. However, "the presence of a forum selection clause does not in and of itself make venue improper." S. Distrib. Co., Inc., v. E. J. Gallo Winery, 718 F. Supp. 1264, 1267 (W.D.N.C. 1989). Instead, the United States Supreme Court has suggested that Section 1406(a) may not apply when the forum court meets applicable venue requirements, even if a valid forum selection clause exists.See Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 28 n. 8 (1988) (analyzing enforcement of forum selection clause under Section 1404(a) where parties did not dispute that district court properly denied defendant's motion to dismiss under Section 1406(a));Scotland Mem'l Hosp. v. Integrated Informatics, Inc., 2003 WL 151852, at *1 (M.D.N.C. Jan. 8, 2003) (collecting cases supporting view that a forum selection clause specifying a forum other than plaintiff's choice does not render venue improper); 17 James Wm. Moore et al., Moore's Federal Practice, § 111.04 [4] [c] (3d ed. 2003) ("Based onStewart, the applicable venue statute, and not a forum selection clause, should control whether venue is proper or not. Thus, a motion to dismiss for improper venue is not the appropriate vehicle by which to give effect to the clause. . . .").Coken has brought a claim under the Miller Act, which contains its own venue provision. The Act allows plaintiffs to bring suit in "the United States District Court for any district in which the contract [is] to be performed or executed, regardless of the amount in controversy." 40 U.S.C. § 3133 (b)(3)(B). Consequently, because the project site is located within the Middle District of North Carolina, venue is proper in this court, and Defendants' motion to dismiss under 28 U.S.C. § 1406(a) will be denied.
However, although the language of the Miller Act suggests that a plaintiff may pursue his action only in the jurisdiction where the project is located, courts applying the Act after the Supreme Court's decision in P.P. Rich Co., Inc. v. United States for the Use of Industrial Lumber Co., Inc., 417 U.S. 116 (1974), have held that the statute's venue provision may be trumped by a forum selection clause in a contract. See In re Fireman's Fund Ins. Co., 588 F.2d 93, 95 (5th Cir. 1979) ("The Miller Act venue provision exists for the convenience of the parties. Such a provision is subject to variation by their agreement. . . ."); see also United States for Use and Benefit of BD Mech. Contractors, Inc. v. St. Paul Mercury Ins. Co., 70 F.3d 1115, 1117 (10th Cir. 1995); FGS Constructors. Inc. v. Carlow, 64 F.3d 1230, 1233 (8th Cir. 1995);United States on Behalf of Pittsburgh Tank Tower. Inc. v. GC Enters. Inc., 62 F.3d 35, 36 (1st Cir. 1995). Thus, though venue is not "wrong" in North Carolina under Section 1406(a), the court may effectuate the forum selection clause in Coken's contract by transferring the case to the District of Maryland pursuant to 28 U.S.C. § 1404(a). See Stewart, 487 U.S. at 29 (stating that "[t]he presence of a forum selection clause . . . will be a significant factor that figures centrally in the court's calculus" in deciding whether to transfer a case under Section 1404(a)); Brock v. Entre Computer Ctrs., Inc., 933 F.2d 1253, 1258 (4th Cir. 1991) (affirming district court's enforcement of forum selection clause under Section 1404(a) analysis); United States for Use and Benefit of Giannola Masonry Co. v. P.J. Dick Inc., 79 F. Supp.2d 803, 806-08 (E.D. Mich. 2000) (granting Section 1404(a) motion to transfer subcontractor's Miller Act claims to venue designated by forum selection clause); United States for Use and Benefit of Fireman's Fund Ins. Co. v. Frank Briscoe Co., Inc., 462 F. Supp. 114, 116, n. 1 (E.D. La. 1978) (finding in Miller Act case that venue was not "wrong" under Section 1406(a) but that transfer was appropriate under Section 1404(a) to give effect to valid forum selection clause).
A court may transfer a case sua sponte when the defendant asks only that the action be dismissed. See Ferens v. John Deere Co., 494 U.S. 516, 530 (1990); Feller v. Brock, 802 F.2d 722, 729 n. 7 (4th Cir. 1986).
Section 1404(a) allows the court to transfer an action if three requirements are met: (1) the action originally could have been brought in the transferee court; (2) a transfer serves the convenience of the witnesses and parties; and (3) a transfer serves the interests of justice. See 28 U.S.C. § 1404(a). The first requirement of Section 1404(a) is met if the transferee court has subject matter jurisdiction, proper venue, and personal jurisdiction over the parties. See Hoffman v. Blaski, 363 U.S. 335, 343-44 (1960);Scotland Mem'l Hosp., 2003 WL 151852, at *3. Because this lawsuit is based upon a federal cause of action (the Miller Act), subject matter jurisdiction is just as proper in the District of Maryland as it is in the Middle District of North Carolina. Personal jurisdiction and venue also are appropriate in Maryland if the forum selection clause in Coken's contract is enforceable. See United States Fire Ins. Co. v. Jesco Constr. Corp., 2003 WL 21689654, at *3 (S.D.N.Y. July 16, 2003); Klockner-Pentaplast of Am., Inc. v. Roth Display Corp., 860 F. Supp. 1119, 1122-23 (W.D. Va. 1994).
In determining whether a case is suitable for transfer under Section 1404(a), courts have expanded the statute's three requirements to consider a broad range of public and private interest factors. See, e.g., Jumara v. State Farm Ins. Co., 55 F.3d 873, 879 (3d Cir. 1995); Nutter v. New Rents, Inc., 945 F.2d 398 (Table), 1991 WL 193490 (4th Cir. 1991); Coffey v. Van Porn Iron Works, 796 F.2d 217, 219 (7th Cir. 1986). In this case, however, neither party objects to transferring this action to Maryland, and a lengthy analysis is unnecessary to demonstrate that transfer is appropriate.
In general, forum selection clauses are presumed valid. See The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972) (according presumption of enforceability to forum selection clause in admiralty case); Alien v. Lloyd's of London, 94 F.3d 923, 928 (4th Cir. 1996) (citing Supreme Court cases supporting validity of forum selection clauses). However, this presumption is overcome if: (1) the clause was induced by fraud or overreaching; (2) the complaining party will be deprived of his day in court because of the grave inconvenience or unfairness of the selected forum; (3) the fundamental unfairness of the chosen law may leave the plaintiff without a remedy; (4) enforcement of the clause would contravene a strong public policy of the forum state.Alien, 94 F.3d at 928 (citing Carnival Cruise Lines. Inc. v. Shute, 499 U.S. 585, 595 (1991), and The Bremen, 407 U.S. at 12-13). This case implicates none of these concerns. In fact, in its brief opposing Defendants' motion to dismiss, Coken states that it "does not object to the Sureties' request to transfer venue to the District of Maryland." (Pl.'s Mem. Opp'n Defs.' Mot. Dismiss or Stay Pl.'s Compl. at 2.) Consequently, the forum selection clause is enforceable without opposition by either party, and the first part of the Section 1404(a) inquiry is met.
This case also is suitable for transfer under the remaining two requirements of Section 1404(a): the convenience of the parties and witnesses, and the interests of justice. Coken, a Rhode Island corporation, suffers no more inconvenience from litigating this matter in Maryland than it would in North Carolina. Further, neither party opposes the transfer, and there is nothing to suggest that either side would encounter difficulty with marshaling evidence or witnesses for trial in the new forum. Finally, transfer favors the interest of justice by ensuring that any disputes are resolved in the forum selected by the contracting parties. Thus, pursuant to 28 U.S.C. § 1404(a), the court will transfer this action to the United States District Court for the District of Maryland. Any other issues raised by the parties may be presented to the Maryland court for its consideration.
The forum selection clause at issue grants the "Courts of Maryland" exclusive jurisdiction over conflicts between Coken and Clark that do not involve the Project Owner or Contract Documents. (Aff. of Randall A. Grubb, Ex. A, Article 11b.-c.) The parties dispute whether Coken's claims involve the Owner or Contract Documents and whether Coken can file suit before the completion of administrative dispute resolution proceedings relating to Coken's claims. The District of Maryland is the most appropriate forum in which to decide these issues. If the Maryland court determines that Coken's Miller Act suit involves the Owner or Project Documents and is subject to dispute resolution procedures, it may stay the case until administrative proceedings are completed and then resolve any remaining matters. Alternatively, if the court decides that Coken's claims are not subject to the administrative proceedings, it still may effectuate Defendants' desire to pursue the case in the forum designated by the contract because the claims arise from a dispute between Coken and Clark that does not involve the Owner or Contract Documents.
CONCLUSION
The Defendants' motion to dismiss for improper venue will be denied. However, the court will transfer this case, including all pending motions, to the District of Maryland for further disposition pursuant to 28 U.S.C. § 1404(a). The Clerk shall forward the record to the United States District Court for the District of Maryland.
An order in accordance with this memorandum opinion shall be entered contemporaneously herewith.
ORDER
For the reasons set forth in the memorandum opinion filed contemporaneously herewith,
IT IS ORDERED that Defendants' motion [Doc. #6-1] to dismiss for improper venue is DENIED.
IT IS FURTHER ORDERED that this action is TRANSFERRED to the United States District Court for the District of Maryland pursuant to 28 U.S.C. § 1404(a). The Clerk shall forward the record in this case to the United States District Court for the District of Maryland.