Construction Law Insights

WCC Cable, Inc. v. G4S Tech., LLC, 2017 U.S. Dist. LEXIS 208728 (W.D. Va. Dec. 15, 2017)

Defendants G4S Technology LLC (“G4S”) and Liberty Mutual Insurance Company (“Liberty Mutual,” and collectively with G4S, “Defendants”) had each filed a Motion to Stay, or in the Alternative, Dismiss or Transfer, Based Upon the First-to-File Rule and a Motion to Transfer Venue Pursuant to 28 U.S.C. § 1404(a). Additionally, Defendants had each filed a Motion to Dismiss for Failure to State a Claim, each of which sought dismissal of plaintiff WCC Cable, Inc.’s (“WCC”) Complaint.

G4S had entered into a contract with the Virginia Department of Transportation (“VDOT”) for the design and construction of a traffic and safety management system for parts of Interstate 64. G4S subcontracted with WCC, and the subcontract contained a Nebraska choice-of-law clause and forum-selection clause pointing to state or federal courts in Douglas County, Nebraska. Further, G4S, as principal, and Liberty Mutual, as surety, entered into a Contract Payment Bond and Contract Performance Bond for the benefit of VDOT and all parties providing labor and materials for the project. The Payment Bond did not contain a forum-selection clause. WCC as principal and Ironshore Indemnity, Inc. (“Ironshore”) as surety entered into a Performance and Payment Bond for the benefit of G4S, and also lacked a forum-selection clause.

The relationship between WCC and G4S soured, each side claiming the other side breached the subcontract. WCC claimed G4S improperly sent a Notice to Cure, despite WCC performing all work as expeditiously as G4S’s mandated working parameters would allow. Although initially agreeing to meet to avoid litigation in January 2017, and then asking to reschedule for March, G4S filed an action of Default and Bond Claim against WCC in Nebraska, but did not reveal its preemptive filing at the settlement meeting two days later. It only disclosed the lawsuit in May 2017. Several weeks later, WCC filed its own Complaint in the Western District of Virginia, arguing that venue was not proper in Nebraska under 28 U.S.C. § 1391(b), since no defendants were headquartered there and all relevant events occurred in Virginia. Citing the absence of a venue waiver clause, the District of Nebraska held that the presence of the forum-selection clause had no bearing on the propriety of venue and transferred the action to the District of Virginia.

The Virginia court sua sponte consolidated the Nebraska and the Virginia actions under Rule 42, with WCC as plaintiff and its Complaint as the lead complaint in the consolidated action and with G4S’s Complaint as a counterclaim. Regarding venue, the court concluded that in the absence of the forum-selection clause, it was proper for the consolidated action to be heard in Virginia. However, the court found that the forum-selection clause was valid. In the Fourth Circuit, a federal court interpreting a forum-selection clause must apply federal law in doing so. Thus, federal law overrides any state statutes that might propose a strong state public policy necessary to find forum-selection clauses unreasonable.

The court further held that a party seeking to recover against a surety, who stands in the shoes of the principal and whose liability is contingent upon a subcontract that contains a forum-selection clause, may enforce that forum selection clause against the surety. The only time this is not the case is when the payment bond at issue has its own forum-selection cause. The court noted that the payment bond in this case did not contain a forum-selection clause, and, therefore, Liberty Mutual may invoke the forum-selectin clause contained in the subcontract between G4S and WCC.

Citing to Atlantic Marine Construction Company v. United States District Court for the Western District of Texas, 571 U.S. 49 (2013), the court concluded that when parties have agreed to a valid forum-selection clause, a district court should ordinarily transfer the case to the forum specified in that clause, and, only under extraordinary circumstances unrelated to the convenience of the parties, should a § 1404(a) motion be denied. Furthermore, the presence of a valid forum-selection clause requires district courts to adjust their usual § 1404(a) analysis in three ways: (1) a court must give the plaintiff’s choice of forum no weight; (2) the court may not consider arguments about the parties’ private interests; and (3) when a party bound by a forum-selection clause flouts its contractual obligation and files suit in a different forum, a § 1404(a) transfer of venue will not carry with it the original venue’s choice-of-law rules.

In this case, WCC had failed to show that extraordinary circumstance unrelated to the convenience of the parties clearly disfavored a transfer. Further, the District of Nebraska possessed personal jurisdiction over WCC by virtue of the Nebraska Choice of Forum Act and based on previous decisions offered by the Supreme Court of Nebraska. Therefore, while venue was proper in Virginia apart from the contract, the party’s contractual obligation to litigate in Nebraska was upheld by the court and it granted the motions to transfer under § 1404(a).

PLDR Law Mark Burgin 1 PLDR Law Scott Kowalski 1 Wolf Tom v2 Stout Kenneth 2016

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