Daniel Lund III | Phelps Dunbar
“Baking is as much of a science as it is an art. It’s important to take the time to understand what you’re doing and why. Skipping steps can make or break your cupcakes, and there are a lot of things that can go wrong when baking from scratch.”
And so it is with construction contract drafting.
Defendants on a Miller Act claim filed by a second-tier subcontractor in federal court in Pensacola, Florida, sought to have the case transferred to Virginia, based upon a forum selection clause in the first-tier subcontract.
Indeed, the first-tier, principal subcontract not only contained the Virginia forum selection, but also included a “flow-down” provision whereby contractual terms in the principal subcontract were required to be imposed by the principal subcontractor on its sub-subcontractors. In this case, however, the Virginia forum selection clause never made it into the sub-subcontract of the Miller Act claimant.
Undeterred, the defendants urged the court to transfer the case, anyway. Although no one debated that the sub-subcontract did “not specifically incorporate by reference any of the provisions” of the principal subcontract, the defendants urged that the terms of the upstream agreement applied because the sub-subcontract made abundant references to the principal subcontract. The court was not swayed, noting that it was not ignoring the fact that the principal subcontractor “breached the subcontract[] by not including the forum selection clause in its sub-subcontract….”
Alternative arguments that the forum selection clause should be deemed to be incorporated in the sub-subcontract because the “rights and obligations [of the subsubcontractor] flow from” the principal subcontract and the sub-subcontractor “had a sufficiently close relationship with the [principal subcontract] as to be bound by its terms” were also rejected by the court. Although the court noted that applicable Florida law in some circumstances might allow for the result promoted by the defendants, the court found that none of the sub-subcontractor’s claims “arise directly out of the performance or non-performance of the [principal subcontract] containing the forum selection clause,” but instead rose purely out of the plaintiff’s assertions of “equitable… obligations to pay [the sub-subcontractor for the work it performed on the project.”
The court denied the motion to transfer venue.
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