Construction Law Insights

Joe Rainero Tile Co. v. Young & McQueen Grading Co., 2018 U.S. Dist. LEXIS 48968 (W.D. Va. Mar. 26, 2018)

In 2017, the North Carolina Department of Transportation (“NCDOT”) awarded Young and McQueen Grading Company, Inc. (“Y&M”) a contract for a bridge contract based on its bid, which included a quote by Joe Rainero Tile Co., Incorporated d/b/a Permatile Concrete Products Company (“Permatile”) for the design and manufacturing of precast concrete culvert sections. Y&M selected Permatile as its subcontractor and sent it a purchase order for $85,031.34, the amount of Permatile’s quote. NCDOT rejected the initial draft design prepared by Permatile but eventually accepted Permatile’s design and Permatile manufactured the materials in Virginia and delivered them to the project site in North Carolina. Permatile then invoiced Y&M for the purchase price, which Y&M revised to pay on the grounds that Permatile was late in furnishing an acceptable design to NCDOT, which resulted in Y&M incurring liquidated damages on the project. Permatile then filed a breach of contract cause of action.

Y&M was served with process pursuant to Virginia’s long-arm statue, which extends personal jurisdiction to the extent permitted by the Due Process Clause of the Constitution. Jurisdiction over a non-resident may be based upon the exercise of either specific or general jurisdiction. Specific jurisdiction is appropriate when a controversy is related to or arises out of a defendant’s contact with the forum. The Fourth Circuit adheres to a three-prong test for specific personal jurisdiction, which requires a court to consider: (1) the extent to which the defendant purposefully availed itself of the privileges of conducting activities in the State; (2) whether the plaintiff’s claim arises out of those activities directed at the State; and (3) whether the exercise of personal jurisdiction would be constitutionally reasonable. The court must take into account the qualitative nature of each of the defendant’s connections to the forum state. The court held that Y&M purposefully availed itself of the privilege of conducting activities in Virginia by choosing Permatile as its subcontractor, knowing that the performance of the subcontract by Permatile would be substantially performed in Virginia. The dispute between the parties resolves into whether Permatile properly designed the material in a timely fashion, which design took place in Virginia. Finally, the court held that personal jurisdiction in this case would be constitutionally permissible. In determining the question, a court may consider: (1) the burden on the defendant of litigating in the forum; (2) the interest of the forum state in adjudicating the dispute; (3) the plaintiff’s interest in obtaining convenient and effective relief; (4) the shared interest of the states in obtaining efficient resolution of disputes; and (5) the interests of the states in furthering substantive social policies. The court held that all of these factors supported personal jurisdiction over Y&M.

The court also rejected Y&M’s motion to transfer venue under 28 U.S.C. 1404(a), which provides for “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.” The movant bears a heavy burden of showing that the balance of interests weighs strongly in its favor in a motion to transfer. In deciding a motion to transfer, the court considers the plaintiff’s choice of venue, convenience of the witnesses, and the interest of justice. A plaintiff’s forum deserves substantial weight, except when: (1) the plaintiff chooses a foreign forum; and (2) the chosen venue has little connection to the cause of action. Unless the balance is strongly in favor of the defendant, a plaintiff’s choice of forum is rarely disturbed. After weighing the factors, the court denied Y&M’s motion to transfer the venue to North Carolina.

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

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