The United States of America for the use and benefit of Galvin Bros., Inc. v. Fidelity and Deposit Company of Maryland
Filing
22
MEMORANDUM & ORDER granting 7 Motion to Dismiss; For the foregoing reasons, Defendants' motion to transfer venue (Docket Entry 7) is GRANTED and this case is DISMISSED WITHOUT PREJUDICE. The Clerk of the Court is directed to mark this case CLOSED. So Ordered by Judge Joanna Seybert on 9/30/2015. C/ECF (Valle, Christine)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
---------------------------------------X
THE UNITED STATES OF AMERICA FOR THE
USE AND BENEFIT OF GALVIN BROS., INC.,
Plaintiff,
-against-
MEMORANDUM & ORDER
14-CV-6051(JS)(SIL)
FIDELITY AND DEPOSIT COMPANY OF
MARYLAND,
Defendants.
---------------------------------------X
APPEARANCES
For Plaintiff:
David Westerman, Jr., Esq.
Robert J. Fryman, Esq.
Westerman Sheehy Keenan
Samaan & Aydelott LLP
The Omni Building
333 Earle Ovington Boulevard
Uniondale, NY 11553
For Defendants:
Timothy B. Froessel, Esq.
Holland & Knight LLP
31 West 52nd Street, 12th Floor
New York, New York 10019
SEYBERT, District Judge:
Pending
before
the
Court
is
defendant
Fidelity
and
Deposit Company of Maryland’s (“Fidelity”) motion to dismiss the
Complaint for improper venue, pursuant to Federal Rule of Civil
Procedure 12(b)(3), or in the alternative, to transfer this case
to
the
United
States
District
Court
Massachusetts pursuant to 28 U.S.C. § 1404.
for
District
of
(Docket Entry 7.)
As
discussed below, Fidelity’s motion is GRANTED.
the
BACKGROUND1
This construction dispute concerns work completed on the
Renovation of Rogers Hall, a public improvement project undertaken
at the United States Merchant Marine Academy in Kings Point, New
York (the “Project”).
9, at 1.)
(Compl. ¶ 6; Def.’s Opp. Br., Docket Entry
Non-party Kallidus Technologies (“Kallidus”) entered
into a contract with the United States of America to perform work
associated with the Project.
(Compl. ¶ 6.)
Kallidus then entered
into a subcontract (the “Contract”) with plaintiff Galvin Bros.
Inc. (“Galvin”) to provide labor and equipment for lighting and
fire alarm system work on the Project.
(Compl. ¶ 8.)
The Contract between Galvin and Kallidus includes the
following forum selection clause:
6.4 Notwithstanding the foregoing, and in
consideration
of
$100
paid
to
the
Subcontractor,
the
receipt
whereof
is
acknowledged as part of the Subcontract Sum,
at the sole option of the Contractor, any
controversy, dispute or claim between the
Contractor and the Subcontractor related in
any way to this Agreement or the Project may
be determined by a separate action in court or
by a separate arbitration in accordance with
the Construction Industry Arbitration Rules of
the American Arbitration Association then
pertaining, whichever the Contractor may elect
in its sole discretion. The parties expressly
agree that the venue of any such court action
or arbitration shall be Boston, Massachusetts.
Any award rendered by the arbitrator or
The following facts are primarily taken from Plaintiff’s
Complaint and are presumed to be true for the purposes of this
Memorandum and Order.
1
2
arbitrators shall be final and judgment may be
entered upon it in accordance with the
applicable
law
in
any
court
having
jurisdiction.
6.8 The Subcontractor, on behalf of itself and
its assignees, sureties and agents, if any,
agrees that the dispute resolution procedure
in this Article shall inure to the benefit of,
and be enforceable by, the Contractor and its
sureties or assignees, and that such terms
shall be deemed incorporated into any payment,
labor and material or other similar bond
issued by or for the Subcontractor regarding
the Project.
(Def.’s Br., Docket Entry 8, Ex. 2.)
Kallidus
secured
a
payment
bond
from
Fidelity,
as
required by the Miller Act, for the protection of persons supplying
labor and materials for the Project.
(Compl. ¶ 7.)
Galvin claims
that it performed all of its obligations under the Contract, but
that Kallidus only paid it $1,558,500 out of the $1,765,000
Contract price, leaving $191,653.75 due. (Compl. ¶¶ 8-10.) Galvin
commenced this action on October 15, 2014 seeking payment from
Fidelity, Kallidus’s surety.
On December 2, 2014 Fidelity filed a motion seeking to
dismiss this case for improper venue, or in the alternative, to
transfer the case to the United States District Court for the
District of Massachusetts.
(Docket Entry 7.)
Fidelity relies on
the plain language of the forum selection clause placing venue in
Boston, Massachusetts.
(Def.’s Br. at 1-2.)
Galvin argues in
opposition that: (1) the forum selection clause does not apply to
3
Fidelity, (2) it would be difficult and inconvenient for Galvin to
litigate in Boston, and (3) New York public policy should override
the forum selection clause.
(See Pl.’s Opp. Br., Docket Entry 11,
at 6-21.)
DISCUSSION
Under the Miller Act (the “Act”), a contractor who
performs
“construction,
alteration,
or
repair
of
any
public
building or public work of the Federal Government” must provide
two types of bonds: a “performance bond . . . for the protection
of the Government” against defaults by the contractor, and a
“payment bond . . . for the protection of all persons supplying
labor and material.”
40 U.S.C. § 3131; U.S. ex rel. Maris Equip.
Co. v. Morganti, Inc., 163 F. Supp. 2d 174, 179 (E.D.N.Y. 2001).
The
Act
gives
those
who
“furnished
labor
or
material”
to
a
federally-funded project the right to bring an action compelling
the surety to pay any unpaid balance for labor or materials
furnished.
40 U.S.C. § 3133(b)(1); See Dep’t of Army v. Blue Fox,
Inc., 525 U.S. 255, 257, 119 S. Ct. 687, 689, 142 L. Ed. 2d 718
(1999).
The
act
also
states
that
the
action
“must
be
brought . . . in the United States District Court for any district
in which the contract was to be performed and executed, regardless
of the amount in controversy.”
40 U.S.C. § 3133(b)(3)(B).
But
courts interpreting the venue provision have uniformly held that
it does not create a jurisdictional requirement and can be modified
4
by contract.
See, e.g., U.S. for Use & Benefit of Capolino Sons,
Inc. v. Elec. & Missile Facilities, Inc., 364 F.2d 705, 707-08 (2d
Cir. 1966) (holding that the Miller Act’s venue requirement did
not prevent two parties from arbitrating their dispute, as their
contract required); John’s Insulation, Inc. v. Siska Constr. Co.,
671 F. Supp. 289, 293, 1987 (S.D.N.Y. 1987) (“it has long been
recognized that the Act’s exclusive venue provision may be altered
by contract”); U.S. ex rel. B&D Mech. Contractors, Inc. v. St.
Paul
Mercury
Ins.
Co.,
70
F.3d
1115,
1117
(10th
Cir.
1995)
(explaining that “a valid forum selection clause supersedes the
Miller Act’s venue provision”).
I.
Whether the Forum Selection Clause Can be Enforced by Fidelity
Galvin
does
not
dispute
that
the
venue
requirement
within the Miller Act can be modified by contract. Instead, Galvin
claims the forum selection clause within the parties’ Contract
does not apply to disputes between Galvin and Fidelity, it only
applies to disputes between Galvin and Kallidus.
(Pl.’s Opp. Br.
at 7.)
Courts in this circuit use a four part analysis to
determine whether a case should be dismissed based upon a forum
selection clause.
We must first ask:
(1)
whether
the
clause
was
reasonably
communicated
to
the
party
resisting
enforcement; (2) whether the clause is
mandatory or permissive, i.e., . . . whether
the parties are required to bring any [ ]
5
dispute to the designated forum or simply
permitted to do so; and (3) whether the claims
and parties involved in the suit are subject
to the forum selection clause. If the forum
clause was communicated to the resisting
party, has mandatory force and covers the
claims and parties involved in the dispute, it
is presumptively enforceable. A party can
overcome this presumption only by (4) making
a sufficiently strong showing that enforcement
would be unreasonable or unjust, or that the
clause was invalid for such reasons as fraud
or overreaching.
Martinez
v.
Bloomberg
LP,
740
F.3d
211,
217
(2d
Cir.
2014)
(internal quotation marks and citation omitted); S.K.I. Beer Corp.
v. Baltika Brewery, 612 F.3d 705, 708 (2d Cir. 2010).
If the forum
selection clause is deemed to valid, the “burden [is] on the
plaintiff,
who
brought
suit
in
a
forum
other
than
the
one
designated by the forum selection clause, to make a ‘strong
showing’ in order to overcome the presumption of enforceability.”
New Moon Shipping Co., Ltd. v. MAN B & W Diesel AG, 121 F.3d 24,
29 (2d Cir. 1997).
Here, Galvin does not contest that the forum
selection clause was communicated to it; that it is a mandatory
clause; and that it covers the claims at issue.
Instead,
contract
Galvin
interpretation,
first
claims
Fidelity
that,
cannot
as
a
enforce
matter
the
of
forum
selection clause, and thus the Miller Act’s venue provision should
control.
However,
the
Contract
is
explicit
that
the
forum
selection clause can be enforced by either Kallidus or it surety,
6
Fidelity. The forum selection clause within the dispute resolution
article of the Contract states that:
6.4 . . . [a]ny controversy, dispute or claim
between [Kallidus] and [Galvin] related in any
way to this Agreement or the Project may be
determined by a separate action in court
. . . . The parties expressly agree that the
venue of any such court action or arbitration
shall be Boston, Massachusetts.
(Def.’s Br. Ex. 2 (emphasis added).)
Section 6.8 of the dispute
resolution article goes on to state that:
[Galvin], on behalf of itself and its
assignees, sureties and agents, if any, agrees
that the dispute resolution procedure in this
Article shall inure to the benefit of, and be
enforceable by, [Kallidus] and its sureties or
assignees, and that such terms shall be deemed
incorporated into any payment, labor and
material or other similar bond issued by or
for [Galvin] regarding the Project.
(Def.’s Br. Ex. 2 (emphasis added).)
Section 6.8 makes clear that
the dispute resolution procedure, including the forum selection
clause, can be enforced by both Kallidus and its sureties, and
that it is incorporated into the payment bond issued for Galvin’s
benefit. The Court therefore finds that the forum selection clause
can
be
enforced
by
Fidelity
and
rejects
Galvin’s
contract
interpretation argument.
II.
Is the Forum Selection Clause Unreasonable or Unjust
Galvin argues that the difficulty and inconvenience of
litigating this dispute in Massachusetts would make it “unfair,
unjust or unreasonable” to transfer the lawsuit there.
7
(Pl.’s
Opp. Br. at 16-17 n.10.)
When a valid forum selection clause
exists, a party seeking to escape the contract forum on the ground
that it would be inconvenient to litigate there must show that
“the
contractual
forum
will
be
so
gravely
difficult
and
inconvenient that he will for all practical purposes be deprived
of his day in court.”
M/S Bremen v. Zapata Off-Shore Co., 407
U.S. 1, 18, 92 S. Ct. 1907, 1917, 32 L. Ed. 2d 513 (1972).
is unable to meet this high burden.
Galvin
Galvin claims that all of the
witnesses with personal knowledge of the Project reside in New
York, and that litigating in Massachusetts would pose “financial,
logistical and even legal obstacles.”
(Pl.’s Opp. Br. at 19-20.)
Galvin specifically points to the difficulty it may have compelling
non-party witnesses to respond to discovery and to appear at trial.
(Pl.’s Opp. Br. at 20.)
difficult
to
litigate
However, evidence that it would be more
in
the
contract
forum
is
not
enough.
TradeComet.com LLC v. Google, Inc., 693 F. Supp. 2d 370, 380-81
(S.D.N.Y. 2010) aff’d in part, 647 F.3d 472 (2d Cir. 2011), aff’d
in part, 435 F. App’x 31 (2d Cir. 2011) (finding that “although
litigating . . . in California rather than New York likely will be
more burdensome for [the plaintiff], which has its principal place
of business in New York, there is no suggestion that it would be
so difficult as to deprive [the plaintiff] of a fair opportunity
to litigate its claims.”); Phillips v. Audio Active Ltd., 494 F.3d
378, 392-93 (2d Cir. 2007) (rejecting the plaintiff’s argument
8
that
litigating
in
England--the
contract
forum--would
be
impossible; “litigation in England may be more costly or difficult,
but not that it is impossible.”); Exp.-Imp. Bank of U.S. v. HiFilms S.A. de C.V., No. 09-CV-3573, 2010 WL 3743826, at *9-10
(S.D.N.Y. Sept. 24, 2010) (rejecting the argument that it would be
overly burdensome to litigate in New York when the defendant
resided in Mexico). Galvin has not demonstrated that for practical
purposes it would be deprived of its day in court in Massachusetts,
the forum the parties chose in their freely negotiated agreement.
III. New York Public Policy
Calvin also argues that the Court should disregard the
forum selection clause in the contract because there is a New York
State
public
policy
favoring
the
resolution
disputes in New York. (Pl.’s Opp. Br. at 15.)
of
construction
Galvin contends
that the policy is codified in New York’s Prompt Payment Act, New
York General Business law, Article 35-e.
16.)
(Pl.’s Opp. Br. at 15-
Galvin specifically points to New York General Business law
Section 757, which voids any “provision, covenant, clause or
understanding in . . . a construction contract. . . that makes the
contract subject to the laws of another state or that requires any
litigation, arbitration or other dispute resolution proceeding
arising from the contract to be conducted in another state.”
GEN. BUS. LAW § 757.
Business
Law
N.Y.
However, Article 35-e of the New York General
expressly
only
applies
9
to
private
construction
projects, not public projects.
See N.Y. GEN. BUS. LAW § 756.
Moreover, federally-funded construction projects are governed by
the Miller Act and controlled by federal, not state law.
See 40
U.S.C. § 3131; F. D. Rich Co. v. U. S. for Use of Indus. Lumber
Co., 417 U.S. 116, 127, 94 S. Ct. 2157, 2164, 40 L. Ed. 2d 703
(1974) “(The Miller Act provides a federal cause of action, and
the scope of the remedy as well as the substance of the rights
created thereby is a matter of federal not state law.”); See also
Technica LLC ex rel. U.S. v. Carolina Cas. Ins. Co., 749 F.3d 1149,
1152 (9th Cir. 2014).
Galvin’s public policy argument therefore
must be rejected.
IV. Dismissal or Transfer
Since this Court has found the forum selection clause
enforceable, the next issue to be addressed is whether to dismiss
this case for improper venue pursuant to Federal Rule of Civil
Procedure 12(b)(3), or to transfer the case to the appropriate
venue pursuant to 28 U.S.C. § 1404.
“Determining whether to
dismiss or transfer depends upon which remedy is most consistent
with the forum selection clause at issue.” GMAC Commercial Credit,
LLC v. Dillard Dep’t Stores, Inc., 198 F.R.D. 402, 409 (S.D.N.Y.
2001). Here, the forum selection clause was mandatory and required
suit in “Boston, Massachusetts.”
However, the forum selection
clause does not require the parties to resolve their dispute in
federal court.
In fact, the clause expressly contemplates the
10
possibility that disputes concerning the Project may be resolved
through arbitration.
It would therefore be presumptuous to assume
that the only available venue for this action is the United States
District Court for the District of Massachusetts.
Therefore, this
case is DISMISSED WITHOUT PREJUDICE pursuant to Federal Rule of
Civil Procedure 12(b)(3).
Galvin may refile this case in the
United States District Court for the District of Massachusetts, or
an alternative form in Boston, Massachusetts.
CONCLUSION
For
the
foregoing
reasons,
Defendants’
motion
to
transfer venue (Docket Entry 7) is GRANTED and this case is
DISMISSED WITHOUT PREJUDICE.
The Clerk of the Court is directed
to mark this case CLOSED.
SO ORDERED.
/s/ JOANNA SEYBERT______
Joanna Seybert, U.S.D.J.
Dated:
September
30 , 2015
Central Islip, New York
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