M.L.R. Painting and Wallcovering, Inc. v. Hartford Fire Insurance Company

Filing 13

MEMORANDUM OPINION AND ORDER denying 7 Motion to dismiss for reasons set out in the opinion. Signed by Honorable William Keith Watkins on 2/17/2010. (Attachments: # 1 Civil Appeals Checklist)(br, )

IN THE UNITED STATES DISTRICT COURT F O R THE MIDDLE DISTRICT OF ALABAMA E A S T E R N DIVISION M .L .R . PAINTING AND WALLCOVERING, INC., P la in tif f , v. H A R T F O R D FIRE INSURANCE CO., D e f e n d a n t.

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C A S E NO. 3:09-CV-979-WKW [WO]

M E M O R A N D U M OPINION AND ORDER T h is is a case between a subcontractor and the issuer of a performance bond on a c o n s tru c tio n project. Before the court is Defendant Hartford Fire Insurance Co.'s

(" H a rtf o rd " ) motion to dismiss (Doc. # 7), which is based on a venue selection clause in the c o n tra c t between Plaintiff M.L.R. Painting and Wallcovering, Inc., ("M.L.R.") and the g e n e ra l contractor. Upon consideration, the motion is due to be denied. I . FACTS A s relevant to the present motion, and taking the allegations in the Complaint (Doc. # 1) as true, the facts are as follows. M.L.R. entered into a subcontract with White-Spunner C o n s tru c tio n , Inc., which is not a party to this suit, to perform painting work associated with th e construction of a housing project at Auburn University. (Doc. # 1, ¶ 6.) Hartford issued a $45,327,000 payment bond on the project, guaranteeing White-Spunner's contracts with its subcontractors. (Doc. # 1, Ex. A.) M.L.R. performed on its subcontract with WhiteS p u n n e r, and also performed on additional agreements concluded between White-Spunner

and M.L.R., but it was not paid $224,559.24 it was owed for work performed. (Doc. # 1, ¶¶ 9 -1 4 .) M.L.R. notified Hartford of its claim against White-Spunner, then waited the statutory 4 5 -d a y period before bringing this suit. (Doc. # 1, ¶ 16); see Ala. Code § 39-1-1. Hartford attaches to its motion to dismiss the original subcontract between WhiteS p u n n e r and M.L.R., signed by the final party on May 8, 2008. (Doc. # 7, Ex. A.) Section 1 2 .3 .6 of the contract states as follows: C h o ic e of Law and Venue. This Subcontract shall be deemed to have been e n te re d into in Mobile County, Alabama; and it shall be interpreted in a c c o r d a n c e with the laws of the State of Alabama. The forum for any l i t i g a tio n between the parties shall be the Circuit Court of Mobile County, A la b a m a . H a rtf o rd was not a party to this subcontract. A tta c h e d to the Complaint is the Payment Bond executed with respect to the project o n which M.L.R. performed work pursuant to its contract with White-Spunner. (Doc. # 1, E x . A.) In the terms of the Payment Bond, White-Spunner is the principal, Hartford is the s u re ty, and Auburn University is the owner. The Payment Bond benefits "[a]ny person that h a s furnished labor, materials or supplies for" the project. (Doc. # 1, Ex. A, at 2.) That d o c u m e n t has a provision that provides that "[t]he claimant may bring a civil action in the c la im a n t's part on the Bond against the Contractor and the Surety, or either of them, in the c o u n ty in which the Work is to be or has been performed or in any other county where venue is otherwise allowed by law." (Doc. # 1, Ex. A, ¶ 4.)

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II. JURISDICTION AND VENUE In this diversity jurisdiction case, the court concludes that adequate allegations have b e e n made as to the citizenship of the parties and the amount in controversy; therefore, it c o n s id e rs subject matter jurisdiction to have been established. (Doc. # 1, ¶¶ 1-4.) Aside f ro m the issue concerning the forum selection clause, venue has been adequately established u n d e r federal law. (Doc. # 1, ¶ 5.) I I I . STANDARD OF REVIEW H a rtf o rd 's motion to dismiss is based on Federal Rule of Civil Procedure 12(b)(3), w h ic h provides for dismissal for "improper venue." Such a motion is the proper way to in v o k e a forum selection clause. Hollis v. Fla. State Univ., 259 F.3d 1295, 1300 n.5 (11th C ir. 2001). When a Rule 12(b)(3) motion is based on a forum selection clause, it presents a pure question of law, to be evaluated by principles of contract interpretation. Lipcon v. U n d e r w r ite r s at Lloyd's, London, 148 F.3d 1284, 1290-91 (11th Cir. 1998). In this diversity case, the parties do not contest that Alabama law governs the in te rp re ta tio n and substantive applicability of the contract, including the forum selection c la u s e .1
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The court recognizes that federal procedural law governs, even in diversity cases, when the question is the suitability of venue based on the enforceability of a forum selection clause through the means of the federal venue transfer statutes or the doctrine of forum non conveniens. See Stewart Org. v. Ricoh Corp., 810 F.2d 1066, 1068 (11th Cir. 1987) (en banc), aff'd, 487 U.S. 22 (1988). But here, M.L.R. does not argue that this court should not enforce an otherwise valid clause, but rather that the clause is not, as a matter of state contract law, applicable to this dispute. M.L.R. also does not appear to dispute that, as a general matter, Alabama law permits forum selection clauses, so the court will not devote itself to analyzing the cases Hartford cites for that

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III. DISCUSSION H a rtf o rd argues that, despite it not being a party to the subcontract, it is entitled to the d e f e n s e of the forum selection clause, because as a surety it is entitled to all the non-personal d e f e n s e s of its principal. See Ala. Surface Mining Reclamation Comm'n v. Commercial S ta n d a r d Ins. Co., 469 So. 2d 619 (Ala. Civ. App. 1985) ("ASMRC") (citing Comm. S ta n d a r d Ins. Co. v. Ala. Surface Mining Reclamation Comm'n, 443 So. 2d 1245 (Ala. Civ. A p p . 1983)). M .L .R . claims that the Payment Bond contains its own forum selection clause, the p a r a g r a p h quoted above. Since M.L.R. is suing on the Payment Bond and not the

S u b c o n tra c t (or so it says; Hartford disputes that the two may be separated in this way), the P a ym e n t Bond's provision controls. M.L.R. correctly observes that ASMRC is less than e n tire ly on point, as it did not concern competing contractual provisions in two separate d o c u m e n ts between parties who are not the same. Rather, it concerned whether a surety c o u ld be held liable even though the statute of limitations had run against its principal; the c o u rt said no, rejecting a theory the plaintiff, a state commission, had of its own authority. ASMRC, 469 So. 2d at 620. M.L.R. goes on to cite a number of cases from other jurisdictions to the effect that w h e n a suit is brought only against the surety that issued a payment bond, and there are c o n f lic tin g forum selection clauses in the underlying contract and the bond, the clause in the

proposition. E.g., Ex parte Bad Toys Holdings, Inc., 958 So. 2d 852, 856-57 (Ala. 2006).

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bond governs. See R.W. Granger & Sons, Inc. v. Rojac Co., 885 F. Supp. 319 (D. Mass. 1 9 9 5 ); St. Paul Fire & Marine Ins. Co. v. Travelers Indem. Co., 401 F. Supp. 927, 930 (D. M a s s . 1975); Johnson Acoustics, Inc. v. P.J. Carlin Constr. Co., 292 A.2d 273, 276 (Conn. 1 9 7 1 ); Omega N.Y. Prods. Co. v. Parisi Bros. Inc., 293 N.Y.S.2d 878, 879 (N.Y. Sup. Ct. 1 9 6 8 ). Hartford responds that these cases are not binding on this court, and quibbles about th e ir facts. This quibbling is counterproductive to Hartford: Hartford points out that the b o n d in St. Paul Fire & Marine Ins. and the other two cases "called for venue exclusively at th e location of construction per state statute," and so "[n]aturally" it was enforced. (Doc. # 1 2 at 3.) Rather than making those venue provisions "wholly different" from the one here, a s Hartford claims, that makes them quite similar, since the provision in the Payment Bond h e re itself parrots the Alabama Code. The court does not perceive the relevance of the fact th a t Section 39-1-1(c)'s venue provision is somewhat broader than those in other states' s ta tu te s . T h e court agrees with the general thrust of these out-of-state cases that there is a d is tin c tio n between an action on a payment bond and an action directly on the underlying c o n tra c t, but it need not adopt any of them wholesale in order to conclude that the Payment B o n d ' s venue clause is the one that should prevail here. The principle in ASMRC ­ that s u re tie s are entitled to the defenses of their principals ­ is no doubt correct, but nothing s u g g e s ts that it trumps the fairly basic legal concept that parties may generally abridge the s c o p e of their rights by contract. If the Payment Bond forum selection provision appeared

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only in the pages of the Alabama Code, Hartford might have a better case that the specific f o ru m selection clause in the Subcontract trumped it. But the forum selection language is w ritte n into paragraph three of the Payment Bond, a contract to which Hartford is bound d ire c tly; it explicitly permits a suit to be brought "in the county in which the Work is to be o r has been performed." (Doc. # 1-2, ¶ 3.) Hartford's view would make that contractual la n g u a g e a nullity, a result disfavored under Alabama law. See Black Diamond Dev., Inc. v . Thompson, 979 So. 2d 47, 51 (Ala. 2007). Assuming Hartford is correct that it would o th e rw is e be entitled to assert the defense of the Subcontract's venue selection clause, in this c a s e , it waived that ability by specifically agreeing to broader language in its own contract, th e Payment Bond. An analogy to the facts in ASMRC further illustrates why Hartford's position is u n te n a b le . In that case, the issue was whether the statute of limitations that would apply to c la im s against the principal also applied to claims against the surety; the court held that it did. But imagine that the payment bond, signed by the surety, had specifically provided that the s u re ty could be sued on the bond for a longer period of time than the ordinary statute of lim ita tio n s provided. Under Hartford's theory of the law, such a provision would be void, a n d the surety could still assert the statute of limitations defense available to its principal, d e s p ite having purported to specifically waive it in advance. Nothing indicates that such is th e law in Alabama, or anywhere else. That parties can waive their otherwise-valid rights

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by contract is an unremarkable legal principle, and that is what Hartford did here in the P a ym e n t Bond. I V . CONCLUSION F o r the foregoing reasons, it is ORDERED that the motion to dismiss (Doc. # 7) is D E N IE D . D O N E this 17th day of February, 2010. /s/ W. Keith Watkins UNITED STATES DISTRICT JUDGE

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