Harold E. Nutter and Son Inc. v. Tetra Tech Tesoro Inc et al

Filing 20

ORDER by Judge Joseph C. Spero granting 12 Motion to Transfer; Denying Motion to Dismiss without Prejudice (jcslc2, COURT STAFF) (Filed on 7/28/2014)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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HAROLD E NUTTER AND SON INC.,

Case No. 14-cv-02060-JCS

Plaintiff,
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v.

ORDER GRANTING MOTION TO
TRANSFER VENUE

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TETRA TECH TESORO INC, et al.,

Dkt. No. 1

Defendants.

United States District Court
Northern District of California

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I.

INTRODUCTION

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Plaintiff Harold E. Nutter & Son, Inc., (hereafter, “HEN”), filed this action against Tetra

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Tech Tesoro, Inc. (“Tesoro”) and its surety, Safeco Insurance Company of America (“Safeco”),

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(collectively, “Defendants”), asserting a claim under the Miller Act, 40 U.S.C. § 3131 et seq., as

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well as state law claims for breach of contract, open book account and quantum meruit. Defendant

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has filed a Motion to Dismiss or Alternatively Transfer Venue (“Motion”), in which they contend

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that HEN fails to state a plausible claim for relief, and that the governing subcontract has a forum-

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selection clause selecting the Eastern District of Virginia as the proper forum for this dispute. The

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Court finds the Motion suitable for determination without oral argument, and vacates the hearing

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and case management conference scheduled for August 1, 2014. See Civil L.R. 7-1(b). For the

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reasons stated below, the Court GRANTS the motion to transfer venue to the Eastern District of

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Virginia, and DENIES WITHOUT PREJUDICE the motion to dismiss so that Defendants may re-

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file the motion in the Eastern District of Virginia.1

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//

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The parties have consented to the jurisdiction of the undersigned magistrate judge
pursuant to 28 U.S.C. § 636(c).

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II.

BACKGROUND
The Complaint alleges that Tesoro was awarded a prime contract by the United States

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Department of Homeland Security, United States Coast Guard (“Owner”) for the construction of

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the D/B New Off Cycle Crew Support Building, located on Coast Guard Island, Alameda,

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California (hereafter, “Project”). Compl. ¶¶ 2, 7. Tesoro obtained a payment bond with Safeco in

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compliance with the Miller Act’s mandate that contractors in federal projects obtain a payment

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bond “for the protection of all persons supplying labor and material in carrying out the work

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provided for in the contract for the use of each person.” 40 U.S.C. § 3131(b)(2); Compl. ¶ 8. The

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payment bond makes Tesoro and Safeco jointly liable to persons supplying material and labor for

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United States District Court
Northern District of California

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the Project. See id.
On July 1, 2011, Tesoro and HEN entered into a subcontract in which HEN agreed to

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supply the labor, equipment and materials to complete the electrical work on the Project for the

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agreed upon price of $1,108,431.00 (hereafter, “Subcontract”). Compl. ¶ 11, Exh. A. HEN

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alleges that it has complied with the Subcontract, and that it also performed extra work for the

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Project that was directed by Tesoro. Id. ¶¶ 13-14. HEN alleges that Tesoro has breached the

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contract and that Tesoro is indebted to HEN in the amount of $139,236.32. Id. ¶ 14.

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In their Motion, Defendants note that Article 15.3 of the Subcontract contains an express
forum-selection clause:

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Subcontractor agrees that all other claims against TESORO by the
SUBCONTRACTOR related in any way or manner to the
Subcontract Work or this Subcontract not included in subparagraph
15.1 or 15.2 above shall be litigated in the Circuit Court of the City
of Virginia Beach, Virginia or the United States District Court for
the Eastern District of Virginia, Norfolk Division.

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Subcontract at 6, § 15.3. Defendants contend that this forum-selection clause is binding and

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constitutes grounds to either dismiss this case or transfer the case to the Eastern District of

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Virginia.

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In the opposition brief to the Motion, HEN argues that venue is proper in this court under

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the Miller Act’s venue provision, which provides that “[a] civil action brought under this

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subsection must be brought … in the United States District Court for any district in which the
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contract was to be performed and executed, regardless of the amount in controversy.” 40 U.S.C. §

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3133(b)(3). Defendants contend the forum-selection clause overrides the Miller Act’s venue

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provision.

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III.

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DISCUSSION
Defendants move to transfer without citing any specific rule or statute. The Court

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construes Defendants’ Motion as a motion to transfer venue under 28 U.S.C. § 1404(a). See

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Atlantic Marine Const. Co., Inc. v. U.S. Dist. Court for the Western District of Texas, 134 S.Ct.

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568, 187 L.Ed.2d 487 (2013).

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Section 1404(a) authorizes district courts to transfer a case “to any district or division to
which all parties have consented,” and instructs courts to consider “the convenience of the parties

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United States District Court
Northern District of California

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and witnesses” and the “interest of justice.” 28 U.S.C. § 1404 (a). “The calculus changes,

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however, when the parties’ contract contains a valid forum-selection clause….” Atlantic Marine,

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134 S.Ct. at *581. Because a forum-selection clause protects the parties’ “legitimate

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expectations,” and because “the overarching consideration under § 1404(a) is whether a transfer

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would promote the ‘interest of justice,’ a valid forum-selection clause should be given controlling

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weight in all but the most exceptional cases.” Id. (citations and alterations omitted).

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When there is a valid forum-selection clause, courts need not consider the plaintiff’s choice

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of forum, as “the plaintiff bears the burden of establishing that transfer to the forum for which the

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parties bargained is unwarranted.” Id. at *581. Nor should courts consider “arguments about the

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parties’ private interests” because by agreeing to a forum-selection clause, parties “waive the right

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to challenge the preselected forum as inconvenient or less convenient for themselves or their

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witnesses….” Id. at *582. Nevertheless, a court may still consider “public-interest factors” when

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deciding whether to transfer the case to the forum designated in the clause. Id.

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HEN contends the motion to transfer should be denied because the Miller Act requires

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HEN to assert its claims “in the United States District Court for any district in which the contract

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was to be performed and executed….” 40 U.S.C. § 3133(b)(3). The Court notes that Plaintiff

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raises a “public-interest” factor which may be considered in a § 1404(a) motion despite the

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presence of the forum-selection clause. Atlantic Marine, 134 S.Ct. at *582. If Miller Act claims
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are required to be brought in the district where the contract is to be performed, “every

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subcontractor, no matter how small is guaranteed local forum and the opportunity to bid on federal

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projects, and every general contractor, no matter how small is protected against harassment in

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distant forums by powerful subcontractors.” United States ex rel. Vermont Marbel Co. v. Roscoe-

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Ajax Const. Co., Inc., 245 F.Supp. 439 (1965) (Wollenberg, J.). Accordingly, the issue is whether

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the forum-selection clause is outweighed by the public-interest in having local forums available to

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suppliers of labor and material in federal works projects.

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While the Ninth Circuit has not addressed this issue, at least four other circuit courts have
held that a valid forum-selection clause in a subcontract supersedes the Miller Act’s venue
provision. See United States ex rel. B & D Mech.Contractors, Inc. v. St. Paul Mercury Ins. Co.,

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United States District Court
Northern District of California

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70 F.3d 1115, 1117 (10th Cir. 1995), cert. denied, 517 U.S. 1167, 116 S.Ct. 1568, 134 L.Ed.2d

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667 (1996) (“We are persuaded by our sister circuits and agree that a valid forum-selection clause

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supersedes the Miller Act’s venue provision”); United States ex rel. Pittsburgh Tank & Tower v. G

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& C Enter s., 62 F.3d 35, 36–37 (1st Cir. 1995) (per curiam) (affirming dismissal of Miller Act

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claim filed in district court in Maine where forum-selection clause required litigation in New

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Jersey, even though the project that was the subject of a subcontract was located in Maine); FGS

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Constructors, Inc. v. Carlow, 64 F.3d 1230, 1233 (8th Cir. 1995) (recognizing that a forum-

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selection clause overrides the Miller Act’s venue requirements); In re Fireman’s Fund Ins. Cos.,

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588 F.2d 93 (5th Cir. 1979) (affirming district court’s order to transfer case from district court in

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Louisiana to district court in New Jersey, as stipulated in the forum-selection clause, even though

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project was located in Louisiana).

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Influencing these courts’ decisions is dicta from the Supreme Court which states that §

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3133(b)(3) “is merely a venue requirement.” F. D. Rich Co., Inc. v. U. S. for Use of Indus.

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Lumber Co., Inc., 417 U.S. 116, 124-26 (1974). “Under conventional venue statutes, venue

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provisions have long been subject to contractual waiver through a valid forum selection

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agreement.” Pittsburgh Tank, 62 F.3d at 36. While two of these decisions that “the Supreme

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Court in Rich was not focusing on anything quite like the problem in this case and Rich’s venue

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reference was something of an aside,” they also wrote that Supreme Court’s “designation is
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exp
plicit (‘merely a venue re
equirement’) and very h
hard for a low court to ignore.” Pit
wer
ttsburg

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Tan 62 F.3d at 36; see als B & D Mech. Contrac
nk,
a
so
M
ctors, 70 F.3 at 1117.
3d

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HEN co
ontends this Court shoul ignore the Supreme C
ld
e
Court’s dicta because a co in this
ourt

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Dis
strict addressed this issu in 1965, an held that a forum-selection clause cannot sup
ue
nd
persede the

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Mi
iller Act’s mandatory ven provisio
m
nue
ons. See Ver
rmont Marbe 245 F.Sup at 441. T Court
el,
pp.
The

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dec
clines to do so. Vermont Marbel wa not decide with the b
s
t
as
ed
beneficial pre
ecedent discussed above
e.

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Mo
oreover, at th time Verm
he
mont Marbel was decide d, the langua of § 313
l
age
33(b)(3) included the

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phr
rase “and no elsewhere” at the end of the statuto text. See id. at 440. The court in Vermont
ot
”
o
ory
e
n

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Ma
arbel focused on this phr
d
rase, writing that it “emb
g
bodies a diff
ferent and str
ronger publi policy
ic
tha normally inheres in th usual statu
an
i
he
utory venue privilege cre
eated for the benefit of th
e
he

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United States District Court
Northern District of California

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def
fendant.” Id at 442. Be
d.
ecause Congress has now stricken th phrase fro Miller Act’s venue
w
his
om

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pro
ovision, HEN finds little support in Vermont Ma
N
V
arbel.

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Accord
dingly, the Court holds th the forum
hat
m-selection c
clause contro in this ca
ols
ase. This is

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not one of the “most unusu cases” in which the “ interest of ju
t
“
ual
ustice” is best served by overriding

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the parties’ agr
e
reement. Atl
lantic Marin 134 S.Ct. at *583. Th parties ha agreed p
ne,
he
ave
previously to

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litigate HEN’s claims in th Eastern Di
he
istrict of Vir
rginia, and th Court dec
he
clines to disr
rupt the

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par
rties’ settled expectation
ns.

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V.

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CONCLUSION
eason, the Motion to Tra
M
ansfer Venue is GRANT
e
TED and the Motion to
For the foregoing re

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Dis
smiss is DEN
NIED WITH
HOUT PREJ
JUDICE. The Clerk of C
e
Court shall tr
ransfer this c
case to the

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Eas
stern Distric of Virginia Norfolk Division.
ct
a,
D

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IT IS SO ORDER
S
RED.
Da
ated: July 28, 2014
,
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__________
___________
__________
________
JO
OSEPH C. SP
PERO
Un
nited States M
Magistrate Ju
udge

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