MDI Services, LLC v. Federal Insurance Company et al

Filing 30

MEMORANDUM OPINION. Signed by Judge Abdul K Kallon on 4/17/2014. (PSM)

FILED
2014 Apr-17 AM 08:29
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
NORTHEASTERN DIVISION
UNITED STATES for the use
and benefit of MDI SERVICES,
LLC, and MDI SERVICES, LLC,
Plaintiffs,
vs.
FEDERAL INSURANCE
COMPANY, and SAUER
INCORPORATED,
Defendants.

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Civil Action Number
5:13-cv-2355-AKK

MEMORANDUM OPINION
The United States and MDI Services, LLC (“MDI”) (collectively,
“Plaintiffs”), filed this action against Sauer Incorporated (“Sauer”) and the Federal
Insurance Company (“FIC”) (collectively, “Defendants”), seeking enforcement of
a payment bond under the Miller Act, 40 U.S.C. § 3131, et seq. (Count I), and
alleging state law claims for breach of contract (Count II), work and labor done
(Count III), and a violation of the Prompt Pay Act, Ala. Code § 8-29-1, et seq.
(Count IV). Doc. 1. Before the court is Defendants’ motion to transfer this case to
the Middle District of Florida pursuant to 28 U.S.C. § 1404. Doc. 14. The motion
is fully briefed. See docs. 14, 24, and 29. For the reasons outlined below,

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Defendants’ motion is due to be GRANTED.
I. BACKGROUND
Sauer entered into a contract with the United States to construct the Central
Steam Facility Construction and Steam Infrastructure Repairs Project (the
“Project”) located at the Marshall Space Flight Center in Huntsville, Alabama.
Doc. 1 ¶ 11. FIC, as surety, issued a payment bond on behalf of Sauer pursuant to
the Miller Act, 40 U.S.C. § 3131(b)(2). Id. ¶ 12. Thereafter, MDI entered into a
Subcontract Agreement (the “Subcontract”) with Sauer to provide labor, services,
and materials for the Project. Id. ¶ 14.
MDI timely fabricated and delivered the necessary materials to the Project
site and was ready to commence work pursuant to Sauer’s construction schedule.
Id. ¶¶ 15–18. However, Sauer caused several delays by failing to perform its own
work in accordance with its construction schedule, causing MDI to demobilize
from the Project after sending written notice and giving Sauer a chance to respond.
Id. ¶¶ 19–22. After several months, Sauer requested that MDI remobilize to the
Project because Sauer had performed some of its work and was on schedule to
perform its remaining work under a revised construction schedule. Id. ¶¶ 24–25.
As a result, MDI remobilized, but discovered that Sauer failed to properly perform
some of its work, requiring MDI to perform substantial corrective work. Id. ¶ 26.
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Additionally, Sauer failed to timely perform its remaining work under the revised
construction schedule, causing more delays. Id. ¶ 27. One year later, Sauer
terminated MDI. Id. ¶ 30. At the time, MDI’s subcontract work was approximately
90% complete and Sauer had not compensated MDI for its provided materials that
Sauer incorporated into the Project. Id. ¶¶ 30–31.
II. DISCUSSION
Defendants ask the court to transfer this action to the Middle District of
Florida based on a contractual forum-selection clause. Doc. 14. Specifically, the
clause in the Subcontract states that “either party may seek to have the dispute
resolved in any court having jurisdiction over Sauer’s office address written
above.” Doc. 1-3 at 10. The Subcontract lists Sauer’s address in Jacksonville
Florida, which is in the Middle District of Florida. Id. at 2. Based on this language,
Defendants contend that transfer is the proper action in this case.
A district court may transfer a civil action to any other district in which the
plaintiff may have filed the action “for the convenience of the parties and
witnesses, in the interest of justice.” 28 U.S.C. § 1404(a). In addressing a motion
under § 1404(a), the court must first establish that the plaintiff could have
originally filed the case in the venue to which a movant seeks to transfer the case,
and, second, determine if transfer is justified. Stiefel Labs., Inc. v. Galderma
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Labs., Inc., 588 F. Supp. 2d 1336, 1338 (S.D. Fla. 2008). Ordinarily, the burden is
on the movant to show that the suggested forum is more convenient or that
litigation there would be in the interest of justice. In re Ricoh Corp., 870 F.2d 570,
573 (11th Cir. 1989). Ultimately, “[t]he decision to transfer a case to another
district is left to the sound discretion of the trial court.” Brown v. Conn. Gen. Life
Ins. Co., 934 F.2d 1193, 1197 (11th Cir. 1991).
A.

Venue would be Proper in The Middle District of Florida
Although the Miller Act provides that Plaintiffs must bring this civil action

“in the United States District Court for any district in which the contract was to be
performed and executed,” 40 U.S.C. § 3133(b)(3), this provision is “merely a
venue requirement” and not jurisdictional. See F.D. Rich Co. v. U.S. for Use of
Indus. Lumber Co., 417 U.S. 116, 125 (1974). As a result, a valid forum-selection
clause can trump the Miller Act’s venue provision. In re Fireman’s Fund Ins.
Cos., 588 F.2d 93, 95 (5th Cir. 1979); Texas Const. Co. v. U.S. for Use of Caldwell
Foundry & Mach. Co., 236 F.2d 138, 143 (5th Cir. 1956). Consequently, in light
of the forum-selection clause in the Subcontract here, see doc. 1-3 at 10, the court
finds that Plaintiffs could have originally filed this case in the Middle District of
Florida.

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B.

Transfer is Justified
Because venue would be proper in the transfer forum, the court must now

determine whether transfer is justified in this case. Normally, the court would
utilize and weigh the following factors:
(1) the convenience of the witnesses; (2) the location of relevant
documents and the relative ease of access to sources of proof; (3) the
convenience of the parties; (4) the locus of operative fact; (5) the
availability of process to compel the attendance of unwilling witnesses;
(6) the relative means of the parties; (7) a forum’s familiarity with the
governing law; (8) the weight accorded a plaintiff’s choice of forum;
and (9) trial efficiency and the interests of justice, based on the totality
of the circumstances.
Manuel v. Convergys Corp., 430 F.3d 1132, 1135 n.1 (11th Cir. 2005). However, a
valid forum-selection clause alters the court’s § 1404(a) analysis. See Atlantic
Marine Constr. Co., Inc. v. U.S. Dist. Court for the W. Dist. of Tex., 134 S. Ct.
568, 579 (2013). In such cases, the plaintiff bears the burden of establishing that
transfer is unwarranted, and the plaintiff’s choice of forum and the parties’ private
interests merit no weight, effectively limiting the court’s consideration to
arguments about public-interest factors. Id. at 581–82. “Public-interest factors may
include ‘the administrative difficulties flowing from court congestion; the local
interest in having localized controversies decided at home; [and] the interest in
having the trial of a diversity case in a forum that is at home with the law.’” Id. at
581 n.6 (quoting Piper Aircraft Co. v. Reyno, 454 U.S. 235, 241 (1981)).
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Plaintiffs argue that the court should deny the transfer because, unlike the
“mandatory” forum-selection clause at issue in Atlantic Marine, the forumselection clause in the Subcontract is “permissive.” Doc. 24 at 7. Indeed, the
forum-selection clause in Atlantic Marine “stated that all disputes between the
parties ‘shall be litigated in the Circuit Court for the City of Norfolk, Virginia, or
the United States District Court for the Eastern District of Virginia, Norfolk
Division.’” 134 S. Ct. at 575 (emphasis added) (quoting In re Atlantic Marine
Constr. Co., 701 F.3d 736, 737-38 (5th Cir. 2012)). The use of the imperative
“shall” indicates that the Supreme Court had before it a mandatory forum-selection
clause that dictated an exclusive forum for litigation under the contract. See
Global Satellite Communication Co. v. Starmill U.K. Ltd., 378 F.3d 1269, 1272
(11th Cir. 2004). This fact is significant because the Supreme Court reasoned that
the mandatory forum-selection clause at issue in Atlantic Marine “represented the
parties’ agreement as to the most proper forum,” and “enforcement of [the clause],
bargained for by the parties, protects their legitimate expectations and furthers
vital interests of the justice system.” Atlantic Marine, 134 S. Ct. at 581 (quotation
marks omitted).
A permissive forum-selection clause, on the other hand, only “authorizes
jurisdiction in a designated forum but does not prohibit litigation elsewhere.”
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Global Satellite, 378 F.3d at 1272. Thus, the parties to a permissive forumselection clause only bargain for what may constitute a proper forum, rather than
what constitutes the exclusive forum for litigating disputes. In that respect,
keeping a case in the plaintiff’s chosen forum despite a permissive forum-selection
clause would not “unnecessarily disrupt the parties settled expectations.” Id. at
583. Accordingly, the considerations relevant to altering the § 1404(a) analysis for
mandatory forum-selection clauses would not apply in this case if Plaintiffs are
correct that the Subcontract’s forum-selection clause is permissive.
To support their contention that the Subcontract’s forum-selection clause is
permissive, Plaintiffs point to the clause’s use of the term “may.” See Lane v.
Cent. Bank of Alabama, N.A., 756 F.2d 814, 817 (11th Cir. 1985) (interpreting
jurisdictional provision of the Bank Holding Company Act). In doing so, Plaintiffs
ignore that in interpreting a contract, “the court must examine more than an
isolated sentence or term; [rather,] it must read each phrase in the context of all
other provisions.” Royal Ins. Co. of Am. v. Thomas, 879 So. 2d 1144, 1154 (Ala.
2003) (citations and internal quotations marks omitted).1 In that regard, the court
notes that the Subcontract provides a progressive, mandatory dispute resolution

1

Alabama’s rules of contractual interpretation apply because the Subcontract provides that
it “shall be construed with the laws of the state in which the Project is located.” Doc. 1-3 at
11–12.
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process in the event of a dispute arising under the Subcontract.2 Only after several
attempts to settle the dispute with Sauer does the forum-selection clause come into
play. Specifically, the Subcontract provides that “[i]f [MDI] is dissatisfied with
such decision, either party may seek to have the dispute resolved in any court
having jurisdiction over Sauer’s office address written above.”3 Id. It is clear, in
the context of the dispute resolution process, that the term “may” only applies to
whether MDI decides to pursue the dispute in court. In other words, Sauer is not
giving MDI permission to pursue the action in a specific forum; rather, it is finally
giving MDI permission to bring suit after unsuccessful attempting to resolve the
dispute with Sauer. Accordingly, the court finds that the Subcontract’s forumselection clause is mandatory.
Turning to the modified § 1404(a) analysis, Plaintiffs have presented no
evidence that the transfer forum is congested, and there is no local interest that

2

First, MDI “agrees to give Sauer notice within ten (10) days of when the dispute first
arises, or else [MDI] waives all rights to claim additional compensation or a time extension for
it.” Doc. 1-3 at 10. Thereafter, MDI “will attempt to settle the dispute in the first instance with
Sauer’s Project Manager.” Id. If that does not resolve the dispute, MDI “may, within the next ten
(10) days, appeal to the next level of Sauer’s management at Sauer’s Jacksonville, Florida office
for a decision.” Id.
3

Plaintiffs’ argument that venue in this court is proper under the forum-selection clause is
unavailing. See doc. 24 at 7–8. Although the court has jurisdiction over Sauer pursuant to the
Miller Act, the forum-selection clause clearly states that the dispute is to be brought “in any court
having jurisdiction over Sauer’s office address listed above.” Doc. 1-3 at 10. This is obviously a
territorial limitation.
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militates in favor of deciding in Alabama a controversy primarily between a
Florida corporation and a Pennsylvania Corporation with an office in Florida.
Moreover, by agreeing in the Subcontract that Alabama law would govern, the
parties knew that Alabama law would apply at the time they decided to litigate in
Florida any dispute arising out of the Subcontract. Consequently, this is not an
“unusual case[;] therefore, ‘the interest of justice’ is served by holding [MDI] to
their bargain.” Atlantic Marine, 134 S. Ct. at 583.
III. CONCLUSION
The court finds, in its discretion and based on the totality of the
circumstances, that the balance of factors weighs heavily in favor of transferring
this case to the Middle District of Florida. Accordingly, Defendants’ motion to
transfer, doc. 14, is due to be GRANTED. The court will issue an order consistent
with this opinion contemporaneously.
DONE this 17th day of April, 2014.
________________________________
ABDUL K. KALLON
UNITED STATES DISTRICT JUDGE

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