Can Surety Enforce Venue Selection Provision From Construction Contract

Can Surety Enforce Venue Selection Provision From Construction Contract

Can a surety on a public project enforce a venue selection provision from the construction contract?

No, in disputes over a payment bond, a surety cannot enforce a venue selection provision from a construction contract.  A viable forum selection clause is strongly controlling in all but exceptional circumstances. Dane Constr. & Co., Inc. v. Travelers Cas. & Sur. Co. of Am., 2016 WL 5724280, at *2 (S.D. Fla. Sept. 19, 2016).  Section 255.05(1)(a), Florida Statues, prohibits the inclusion of language in any bond seeking to restrict the venue of any proceeding thereupon.

In Dane Construction , Tutor Perini, the general contractor, entered into a subcontract with Dane Construction for a public construction project in Broward County, Florida.  Tutor Perini posted a payment bond for the project.  This bond contained no provisions governing venue for any action under the bond.  The subcontract between Tutor Perini and Dane Construction had a venue provision naming the State court of the 17th Judicial Circuit of Broward County, Florida as exclusive venue for all disputes.

The general contractor failed to remit payment and Dane filed a complaint in the United States District Court, Southern District of Florida against the surety for breach of payment bond.  The surety then filed a motion to dismiss on grounds of forum non conveniens, asserting that the venue  provisions contained in the Owner’s agreement and subcontract require venue in the Seventeenth Judicial Circuit Court in and for Broward County, Florida.  When moving for motion to dismiss on grounds of forum non conveniens, the moving party must demonstrate that (1) an adequate alternative forum is available, (2) the public and private factors weigh in favor of dismissal, and (3) the plaintiff can reinstate his suit in the alternative forum without undue inconvenience or prejudice.

The United States District Court denied the surety’s motion to dismiss.  The Court reasoned that this suit is a dispute between the Subcontractor and the surety for a claim against the bond — not a claim under the contracts that contained a venue selection provision.  The bond itself has no provisions regarding venue and only incorporated the Owner’s agreement, not the subcontract.

Even if the court was to incorporate the Owner’s agreement into the bond, §255.05(1)(a), Florida Statues, prohibits the inclusion of language in any bond restricting venue. Thus, no legally enforceable venue provision existed in the bond.  Accordingly, the court denied the motion to dismiss based on forum non conveniens.


Venue Selection Clauses in Construction Contracts

The Enforcement of Venue Selection Clauses in Construction Contracts

Parties to a construction contract may agree where any disputes are to be litigated.  However, there are certain situations where a court may not enforce this type of provision.  In the recent case of Love’s Window & Door Installation, Inc. v. Acousti Engineering Company, Florida’s Fifth District Court of Appeal illustrated one such scenario where it would not enforce the venue selection clause. 2014 WL 4471631 (Fla. 5th DCA Sept. 12, 2014).

This case involved a multi-party litigation that began in Osceola County regarding construction of the Artisan Club Condominium.  At the end of the project, the Association filed a construction defect action against the general contractor.  The general contractor sued Dunn Corporation for improper installation of the aluminum windows.  Dunn then sued Love’s – it’s subcontractor that performed the installation.  Love’s, based on a provision in its contract with Dunn, moved to sever Dunn’s claims from the multi-party litigation and transfer venue to Volusia County.  The contract between Love’s and Dunn called for all litigation to take place in Volusia County.

The trial court refused to transfer the case and the Fifth District affirmed.  The court held that there are compelling reasons not to enforce a forum selection clause – which include multiple lawsuits, minimizing judicial labor, reducing the expenses to the parties, nad avoiding inconsistent results.  The court required the Dunn/ Love’s dispute to stay with the multi-party litigation.

Therefore, parties to a construction contract must be aware that even though the contract specifies the venue for any disputes, it is possible that a court will not enforce that provision if there is a compelling reason.