High Court Hears Oral Arguments About Venue For Construction Contract Case

High Court Hears Oral Arguments About Venue For Construction Contract Case

WASHINGTON, D.C. — (Mealey’s) The U.S. Supreme Court on Oct. 9 heard arguments from attorneys involved in a construction contract dispute filed in a Texas federal court regarding the proper venue for the case (Atlantic Marine Construction Co. v. USDC WD TX, et al., No. 12-929, U.S. Sup. [lexis.com subscribers may access Supreme Court briefs for this case]).

In April 2009, the U.S. Army Corps of Engineers contracted with Atlantic Marine Construction Co. to build a child development center in Fort Hood, Texas.  Atlantic entered into a subcontract agreement with J-Crew Management Inc. to provide construction labor and materials. 

The subcontract included a forum selection clause, providing that disputes “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.”  It contained no choice-of-law provision. 

Texas Court 

J-Crew sued Atlantic in the U.S. District Court for the Western District of Texas, alleging that Atlantic failed to pay for work performed under the subcontract. 

Atlantic moved to dismiss J-Crew’s complaint, arguing that the forum selection clause obligated J-Crew to bring suit in Virginia.  Alternatively, Atlantic moved to transfer the case to the Eastern District of Virginia.  The trial court denied the motion to dismiss or transfer the case. 

Atlantic petitioned the Fifth U.S. Circuit Court of Appeals for a writ of mandamus directing the District Court to dismiss the case or transfer it to the Eastern District of Virginia.  The Fifth Circuit panel denied the petition, concluding that “allocation of matters among the federal district courts is not wholly controllable by private contract.” 

The Supreme Court granted Atlantic’s petition for a writ of certiorari on April 1. 

William S. Hastings of Locke Lord in Dallas argued for Atlantic that “[Federal] Rule [of Civil Procedure] 12(b)(3) in Section 1406 of the United States Code provide[s] appropriate and effective means for enforcing a contractual forum selection clause.” 

Clause Enforcement 

“Forum selection clauses have been frequently used in contracts of all types,” Hastings said.  “They should be enforced as written and the enforcement of a contractual forum selection clause should not just be left to convenience discretionary balancing tests.” 

William R. Allensworth of Allensworth & Porter in Austin, Texas, argued for J-Crew that the plaintiff “brought this $160,000 construction case in the Western District of Texas, which is where we performed our work, where the project’s located, where all the witnesses reside, and where virtually all of the evidence is located.” 

Allensworth said he felt like this was a unique case because it involves a construction project that was performed in the same district where the complaint was filed. 

“All of the witnesses are there,” he contended.  “Virtually all of the physical evidence is there.  It’s subject, if we stay in Texas, to Texas law.  And for those reasons, if the case is going to get sent to Virginia, the systemic integrity of the system I think is put in play.” 

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