HAGEN CONSTRUCTION, INC. v. THE WHITING-TURNER CONTRACTING COMPANY

Filing 31

OPINION. Signed by Judge Noel L. Hillman on 4/24/18. (dd, )

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

HAGEN CONSTRUCTION, INC.,
Plaintiff,

No. 1:17-cv-6969 (NLH/KMW)
OPINION

v.
THE WHITING-TURNER
CONTRACTING COMPANY,
Defendant.

APPEARANCES:
ZACHARY DAVID SANDERS
COHEN SEGLIAS PALLAS GREENHALL & FURMAN PC
30 SOUTH 17TH STREET
19TH FLOOR
PHILADELPHIA, PA 19103
On behalf of Plaintiff
MICHAEL CHARLES ZISA
CHARLES FRANCIS KENNY, JR.
PECKAR & ABRAMSON, P.C.
2055 L STREET, NW
SUITE 750
WASHINGTON, DC 20036
On behalf of Defendant

HILLMAN, District Judge
This is a breach of contract action arising from two
subcontracting agreements.

Before the Court is Defendant

Whiting-Turner Contracting Company’s Motion to Transfer Venue.
For the reasons that follow, the Court will grant Defendant’s
Motion and will transfer this case to the United States District
Court for the District of Maryland, Baltimore Division.

I.
The Court takes the following facts from Plaintiff’s August
2, 2017 Complaint.

Defendant, a Maryland corporation with its

principal place of business in Maryland, entered into a contract
with the Nemours Foundation for a construction project (the
“Project”) located in Deptford, New Jersey.
On July 29, 2015, Plaintiff Hagen Construction, Inc. and
Defendant entered into a written subcontract under which
Plaintiff agreed to provide drywall materials and rough
carpentry work (the “Drywall Subcontract”) for the Project.

The

original value of the Drywall Subcontract was $2.4 million.

On

January 28, 2016, the parties entered into a second written
subcontract under which Plaintiff agreed to furnish certain
materials for millwork and casework (the “Millwork Subcontract”)
for the Project.
was $130,720.

The original value of the Millwork Subcontract

The Subcontracts included detailed schedules for

the work to be completed.
Plaintiff alleges it “experience[d] substantial disruptions
on the Project and incurred additional and unexpected costs in
completing its work.”

Plaintiff alleges this resulted in it

incurring $650,000 in excess costs.

Plaintiff argues this

“increased the total value of the Subcontracts to
$2,952,166.96.”

Plaintiff’s Complaint pleads that Defendant has

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only paid $2,844,442.77, leaving an unpaid balance of
$107,724.19.
Plaintiff filed suit in the Superior Court of New Jersey,
Law Division on August 2, 2017 claiming breach of contract
(Count I), violation of the New Jersey Prompt Payment Act
(NJPPA), N.J.S.A. 2A:30A–1 to –2, (Count II), and unjust
enrichment (Count III).

On September 11, 2017, Defendant

removed this case to the United States District Court for the
District of New Jersey.

Defendant filed a September 18, 2017

Motion to Transfer Venue to the United States District Court for
the District of Maryland, Baltimore Division.
II.
This Court has diversity jurisdiction pursuant to 28 U.S.C.
§ 1332.

Plaintiff is a citizen of Pennsylvania, which is its

state of incorporation and the location of its principal place
of business.

Defendant is a citizen of Maryland, which is its

state of incorporation and the location of its principal place
of business.

The Complaint further pleads an amount in

controversy in excess of $75,000, exclusive of interest and
costs.
III.
The issue before the Court on the pending motion is the
validity of a forum selection clause contained in the
Subcontracts.

Article 9, section (r) of both Subcontracts
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identically states, in relevant part: “Any action or suit
arising hereunder shall be brought in the jurisdiction where
Contractor’s principal office is located without regard to
principles of conflict of laws or forum non conveniens.”
This Court applies federal law rather than state law in
determining whether this forum selection clause is valid.

The

Third Circuit has held that federal law applies when determining
the validity of a forum selection clause in diversity cases.
Jumara v. State Farm Ins. Co., 55 F.3d 873, 877–78 (3d Cir.
1995).

Federal law controls in such cases because “[q]uestions

of venue and the enforcement of forum selection clauses are
essentially procedural, rather than substantive, in nature.”
Id. at 877 (quoting Jones v. Weibrecht, 901 F.2d 17, 19 (2d Cir.
1991)). 1

1

Defendant incorrectly asserts in its moving brief that
Maryland law controls, citing to the language set forth in the
Subcontracts. Federal law applies to this analysis even where a
contract contains a choice of law provision. Dentsply Int’l v.
Benton, 965 F. Supp. 574, 578 (M.D. Pa. 1997) (“[T]he validity
of the forum selection clause is a matter of federal law, not
state law. The employment agreement’s choice-of-law provision
does not control this issue.” (citation omitted) (first citing
Jumara, 55 F.3d at 879); and then citing Instrumentation
Assocs., Inc. v. Madsen Elecs. (Can.) Ltd., 859 F.2d 4, 6 (3d
Cir. 1988))); see also Weichert Real Estate Affiliates, Inc. v.
CKM16, Inc., No. 17-4824, 2018 WL 652331 (D.N.J. Jan. 31, 2018)
(applying federal law despite choice of law provision); Tessler
& Weiss/Premesco, Inc. v. Sears Holding Mgmt. Corp., No. 091243, 2009 WL 3335570 (D.N.J. Oct. 15, 2009) (same).
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In federal court, if both the original and requested venue
are proper, the court looks to 28 U.S.C § 1404(a) to determine
if a transfer of venue is appropriate.

Id. at 878.

28 U.S.C.

§ 1404(a) provides that, “[f]or the convenience of parties and
witnesses, in the interest of justice, a district court may
transfer any civil action to any other district or division
where it might have been brought or to any district or division
to which all parties have consented.”
A. Whether the forum selection clause is valid.
A forum selection clause is presumed valid and enforceable
unless the non-moving party establishes “(1) that it is the
result of fraud or overreaching; (2) that enforcement would
violate strong public policy of the forum; or (3) that
enforcement would in the particular circumstances of the case
result in jurisdiction so seriously inconvenient as to be
unreasonable.”

Moneygram Payment Sys., Inc. v. Consorcio

Oriental, S.A., 65 F. App’x 844, 846 (3d Cir. 2003) (quoting
Coastal Steel Corp. v. Tilghman Wheelabrator, Ltd., 709 F.2d
190, 202 (3d Cir. 1983)).
The Supreme Court has held that “a valid forum-selection
clause [should be] given controlling weight in all but the most
exceptional cases.”

Atl. Marine Constr. Co. v. U.S. Dist. Court

for the W. Dist. of Tex., 134 S. Ct. 568, 581 (2013) (citing
Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 33 (1988)
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(Kennedy, J., concurring)).

The Court stated that “[w]hen the

parties have agreed to a valid forum-selection clause, a
district court should ordinarily transfer the case to the forum
specified in that clause.

Only under extraordinary

circumstances unrelated to the convenience of the parties should
a § 1404(a) motion be denied.”

Id.

A valid forum selection

clause is presumed to be enforceable because it is in “the
interest of the justice system” and it “protects [the]
legitimate expectations” of the parties who bargained for the
contract.

Id.

Defendant is seeking the enforcement of the forum selection
clause requiring any lawsuits arising out of the Subcontracts to
be brought in the State of Maryland.

Defendant asserts the

forum selection clause is valid and enforceable.

Plaintiff

claims the forum selection clause is invalid and unenforceable
because it violates the NJPPA and is therefore contrary to
strong public policy in New Jersey.

The NJPPA states, in

pertinent part:
If a subcontractor or subsubcontractor has performed in
accordance with the provisions of its contract with the
prime contractor or subcontractor and the work has been
accepted by the owner, the owner’s authorized approving
agent, or the prime contractor, as applicable, and the
parties have not otherwise agreed in writing, the prime
contractor shall pay to its subcontractor and the
subcontractor shall pay to its subsubcontractor within
10 calendar days of the receipt of each periodic payment,
final payment or receipt of retainage monies, the full
amount received for the work of the subcontractor or
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subsubcontractor based on the work completed or the
services rendered under the applicable contract.
N.J.S.A. 2A:30A-2(b).

The NJPPA further provides that “[i]n any

civil action brought to collect payments pursuant to this
section, the action shall be conducted inside of this State.”
Plaintiff asserts that because Defendant did not pay Plaintiff
in full for its work on a construction project located in New
Jersey, the suit must be litigated in New Jersey.
Defendant refutes Plaintiff’s argument under the NJPPA and
argues the parties’ Subcontracts are not subject to the Act.
Defendant asserts that “there is nothing in the Prompt Payment
Act which expressly overrides an otherwise clear venue selection
clause, and Plaintiff cites to no New Jersey precedent which has
applied the Prompt Payment Act as Plaintiff asserts.”
Additionally, Defendant argues that because Plaintiff agreed in
writing to a specific payment schedule, the NJPPA does not apply
in this case.

Defendant cites to Article V of the Subcontracts,

which governs payment.

It provides, in pertinent part:

The Contractor shall[] pay to the Subcontractor an
amount equal to ninety percent (90%) or such higher
percentage as required by applicable law of the value of
the work performed by the Subcontractor as determined by
the Architect and approved by the Contractor during any
calendar month within fifteen (15) days after payment
therefor has been received by the Contractor from the
Owner.
Defendant argues that because the provisions of the Subcontracts
differ from the provisions of the NJPPA, the Act does not apply
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and is “irrelevant to the enforceability of the Parties’ forum
selection clause.”
In support of the application of the NJPPA, Plaintiff
relies on the case Business Store, Inc. v. Mail Boxes Etc., No.
11-3662, 2012 WL 525966 (D.N.J. Feb. 16, 2012), where the court
denied the defendant’s motion to transfer venue on the grounds
that the forum selection clause would violate public policy
under the New Jersey Franchise Practices Act (NJFPA).
*9.

Id. at

The NJFPA governs the relationship between franchisors and

franchisees and provides protection to the franchisees in an
effort to balance the bargaining power between franchisors and
franchisees.

N.J.S.A. 56:10-2.

Plaintiff asserts that because

the Court in Business Store found that the forum selection
clause violated New Jersey’s strong public policy expressed in
the NJFPA, the same conclusion should be reached with regard to
the NJPPA.
The court in Business Store found that “in cases related to
the NJFPA, the forum selection clauses are ‘presumptively
invalid because they fundamentally conflict with the basic
legislative objectives of protecting franchisees from the
superior bargaining power of franchisors and providing swift and
effective judicial relief against franchisors that violate the
Act.’”

Business Store, 2012 WL 525966, at *5 (citing Kubis &

Persyzky Assocs. Inc. v. Sun Microsystems, Inc., 680 A.2d 618,
8

626 (N.J. 1996)).

The New Jersey Legislature set forth in its

legislative findings that it is “necessary in the public
interest to define the relationship and responsibilities of
franchisors and franchisees in connection with franchise
agreements and to protect franchisees from unreasonable
termination by franchisors that may result from a disparity of
bargaining power between national and regional franchisors and
small franchisees.”

N.J.S.A. 56:10-2.

Other than citing the Act itself, Plaintiff provides no
other evidence of a public policy in New Jersey that would
override the parties’ forum selection clause. 2

While Plaintiff

asserts that the public policy interests under the NJPPA are
comparable to that of the NJFPA, Plaintiff does not provide any
similar statements from the courts or the Legislature.
Plaintiff has failed to establish that enforcement of the forum
selection clause would violate a strong public policy interest,
and thus render the forum selection clause invalid.

The Court

finds the forum selection clause valid.
Further, the NJPPA provides for payment within ten calendar
days only where “the parties have not otherwise agreed in

2

Plaintiff has also not pleaded that the contract resulted
from fraud or overreaching, or that “enforcement would in the
particular circumstances of the case result in jurisdiction so
seriously inconvenient as to be unreasonable.” See Moneygram
Payment, 65 F. App’x at 846.
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writing.”

This is further evidence to this Court that there is

no strong public policy evident in this matter sufficient to
prohibit transfer.

In passing the NJPPA, the New Jersey

Legislature: (1) allowed parties to contract around the
provisions of the NJPPA and (2) did not set even a minimum
standard for payment in the event parties contracted around the
statute.

Thus, the NJPPA appears to be a form of gap-filling

legislation that contemplates that sophisticated parties in
large segments of the economy will enter into enforceable armslength agreements that contain terms far different than the ones
the statute provides in the absence of such agreements.

This is

vastly different from a statute like the NJFPA that purports to
regulate an entire class of business relationships and sets
limits on those contractual relationships.

The Court finds

that, unlike the NJFPA, the NJPPA does not evidence such a
strong public policy in New Jersey that the Court should
invalidate an otherwise enforceable forum selection clause. 3
B. Whether the public interest factors weigh in favor of the
preselected forum.
Under a § 1404(a) transfer of venue analysis, courts weigh
both the public and private interests if the forum selection
clause is invalid.

However, where there is a valid forum

3

The Court leaves it to the transferee court to determine
whether Plaintiff’s claim under the NJPPA can be sustained.
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selection clause, a court must alter its § 1404(a) analysis by
only considering the public interest factors when determining
whether a transfer of venue is appropriate.
Ct. at 581–82.

Atl. Marine, 134 S.

The court “must deem the private-interest

factors to weigh entirely in favor of the preselected forum.”
Id. at 582. 4

This Court finds that the forum selection clause is

valid, and therefore the Court will only consider the public
interest factors.
The public interest factors include:
(1) the enforceability of the judgment, (2) practical
considerations
that could
make
the
trial
easy,
expeditious,
or
inexpensive,
(3)
the
relative
administrative difficulty in the two fora resulting from
court congestion, (4) the local interest in deciding
local controversies at home, (5) the public policies of
the fora, and (6) the familiarity of the trial judge
with the applicable state law in diversity cases.
Tektronix, 98 F. Supp. 2d at 564.

4

The private interest factors include:
(1)
the
plaintiff’s
forum
preference,
(2)
the
defendant’s preference, (3) whether the claim arose
elsewhere, (4) the convenience of the parties as
indicated by their relative physical and financial
condition, (5) the convenience of the witnesses — but
only to the extent that the witnesses may actually be
unavailable for trial in one of the fora, and (6) the
location of books and records (similarly limited to the
extent that the files could not be produced in the
alternative form.

Cadapult Graphic Sys., Inc. v. Tektronix, Inc., 98 F. Supp. 2d
560, 564 (D.N.J. 2000) (citing Jumara, 55 F.3d at 879–80).
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The Court finds the first two public interest factors to be
neutral and non-determinative.

As to the third factor of court

congestion, the Court notes that in 2017, district judges in the
District of New Jersey had 1040 pending cases per judge,
compared to 503 in Maryland, which weighs in favor of transfer.
See U.S. Courts, Federal Court Management Statistics 15 (2017).
As to factor four, the Court concludes that both states have a
local interest, as the Project was completed in New Jersey, but
Defendant is a citizen of Maryland.

As to the fifth factor,

neither party has pointed to a public policy that is
determinative in either state, although the Court notes New
Jersey’s “general policy of upholding the validity [of] forumselection clauses.”

Tektronix, 98 F. Supp. 2d at 568.

The

sixth factor further weighs in favor of transfer, as the
Subcontracts provide that Maryland law will govern.
The Court finds the public interest factors weigh in favor
of the pre-selected forum.

Accordingly, the Court will transfer

this matter to the District of Maryland.

An appropriate Order

will be entered.

Date: April 24, 2018
At Camden, New Jersey

s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.

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