UNITED STATES OF AMERICA For the Use of TECHNO COATINGS, INC., a California corporation, Plaintiff,
AMEC ENVIRONMENT AND INFRASTRUCTURE, INC.; a Nevada corporation formerly known as AMEC EARTH & ENVIRONMENTAL, INC.; FIDELITY AND DEPOSIT COMPANY OF MARYLAND, a Maryland corporation; and THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA, a Pennsylvania corporation, Defendants. AMEC ENVIRONMENTAL AND INFRASTRUCTURE, INC., a Nevada corporation, Counterclaimant,
TECHNO COATINGS, INC., a California corporation, Counter defendant. AMEC ENVIRONMENT AND INFRASTRUCTURE, INC., a Nevada corporation, Third Party Plaintiff,
NCM CONTRACTING GROUP, LP, a Delaware limited partnership, Third Party, Defendant.
ORDER GRANTING THIRD PARTY DEFENDANT NCM CONTRACTING GROUP'S MOTION TO DISMISS [Re: Docket No. 38]
HOWARD R. LLOYD, Magistrate Judge.
Plaintiff Techno Coatings, Inc. (TCI) sues under the Miller Act, 40 U.S.C. §§ 3131-3134 for alleged breaches of a subcontract in connection with a construction project at Moffett Field, Hangar 1. Among other things, TCI alleges that defendant AMEC Environment and Infrastructure, Inc. (AMEC), the general contractor on the project, failed to provide proper scaffolding. AMEC filed a counterclaim, asserting that TCI breached the subcontract and owes AMEC money.
Pursuant to a stipulation with TCI, and with leave of court, AMEC filed a third-party complaint against NCM Contracting Group, L.P. (NCM), a subcontractor who reportedly was responsible for providing scaffolding for the Hangar 1 project. If TCI prevails on its claim that AMEC failed to provide proper scaffolding, then AMEC says that the fault lies with NCM. AMEC's third-party complaint against NCM asserts claims for indemnity, declaratory relief, and breach of contract.
NCM now moves to dismiss AMEC's complaint on the ground that a forum selection clause in its contract with AMEC requires this case to be litigated in Pennsylvania. AMEC opposes the motion. Upon consideration of the moving and responding papers, as well as the arguments of counsel, the court grants the motion.
A motion to enforce a forum selection clause is treated as a Fed.R.Civ.P. 12(b)(3) motion to dismiss for improper venue. Argueta v. Banco Mexicano, S.A. , 87 F.3d 320, 324 (9th Cir. 1996). In such motions, the pleadings need not be accepted as true, and the court may consider facts outside the pleadings. Id . Where there are contested facts bearing on the impact of a forum selection clause, "the trial court is obligated to draw all reasonable inferences in favor of the non-moving party and resolve all factual conflicts in favor of the non-moving party." Murphy v. Schneider Nat'l, Inc. , 362 F.3d 1133, 1138 (9th Cir. 2004).
The AMEC-NCM contract, which was drafted by AMEC, provides, in relevant part:
39. Governing Law, Venue, and Severability
This Agreement is to be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. Any action instituted for the enforcement of this Agreement shall be resolved only in the federal or state courts of Pennsylvania.
(Dkt. No. 38-1, Jinkins Decl., Ex. A at 16).
"Forum selection clauses are prima facie valid, and are enforceable absent a strong showing by the party opposing the clause that enforcement would be unreasonable or unjust, or that the clause [is] invalid for such reasons as fraud or overreaching.'" Manetti-Farrow, Inc. v. Gucci America, Inc. , 858 F.2d 509, 514 (9th Cir. 1988) (quoting The Bremen v. Zapata Off-Shore Co. , 407 U.S. 1, 15, 92 S.Ct. 1907, 1916, 32 L.Ed.2d 513 (1972)). There are three reasons that would make enforcement of a forum selection clause unreasonable: "(1) if the inclusion of the clause in the agreement was the product of fraud or overreaching'; (2) if the party wishing to repudiate the clause would effectively be deprived of his day in court were the clause enforced'; and (3) if enforcement would contravene a strong public policy of the forum in which suit is brought.'" Murphy , 362 F.3d at 1140 (quoting Richards v. Lloyd's of London , 135 F.3d 1289, 1294 (9th Cir. 1998)). The party challenging the clause bears a heavy burden of proof. Id . (citing The Bremen , 407 U.S. at 15, 92 S.Ct. 1907).
As the drafter of both the TCI and NCM agreements, AMEC does not claim that the inclusion of the forum selection clause in question was the product of fraud or overreaching. Nor has it made a showing under the other The Bremen factors. Pointing out that its contract with TCI requires disputes to be litigated in California, AMEC instead argues that the forum selection clause in the NCM contract should not be enforced in view of third-party practice under Fed.R.Civ.P. 14 and the ancillary venue doctrine. That doctrine essentially provides that if venue is proper for the original action, then there is no need for an independent basis of venue for third-party claims. In its papers, AMEC cited several cases concerning the ancillary venue doctrine, none of which involved a forum selection clause. And, courts have frequently enforced third-party defendants' motions to enforce such clauses, notwithstanding the ancillary venue doctrine or Fed.R.Civ.P. 14 third party practice. See, e.g. Zurich Ins. Co. v. Prime, Inc. , 419 F.Supp.2d 384 (S.D.N.Y. 2005); Kennebec Tel. Co., Inc. v. Sprint Communications Co. Ltd. Partnership , 477 F.Supp.2d 1058 (D. S.D. 2007); Laserdynamics, Inc. v. Acer America Corp. , 209 F.R.D. 388 (S.D. Tex. 2002).
At oral argument, AMEC argued that the existence of a forum selection clause is but one factor to be considered in deciding the instant motion, citing Stewart Organization, Inc. v. Ricoh Corp. , 487 U.S. 22, 108 S.Ct. 2239 (1988). Stewart holds that federal law, not state law, governs a district court's decision to grant a motion to transfer a case to a venue provided in a forum selection clause. Id. at 32. And, while it is true that a forum selection clause in and of itself is not dispositive of a motion to transfer venue, "[t]he presence of a forum-selection clause such as the parties entered into in this case will be a significant factor that figures centrally in the district court's calculus." Id. at 29. Of particular significance here is that AMEC drafted the contract containing the forum selection clause at issue; and, the AMEC-NCM agreement was entered into freely, and without coercion, by two sophisticated commercial entities, which presumably were represented by counsel. See Laserdynamics, Inc. , 209 F.R.D. at 391 (concluding that fairness mandated enforcement of the forum selection clause at issue where the contract was entered into freely by sophisticated global business entities).
AMEC nevertheless contends that litigating here will be more convenient and efficient than litigating in Pennsylvania because the construction work was performed here, and various witnesses, companies, and records are also located here. But, the sheer number of witnesses who may be located here is not dispositive. AMEC does not say what documents or witnesses will be required to prove its claims against NCM. Nor does it say what the identified witnesses' testimony will be and why that testimony is relevant and necessary. NCM believes that witnesses pertinent to any litigation brought by AMEC will not be California laborers, but project mangers and expert witnesses charged with proving delays and liability through analysis of project records and schedules that are not physically stored on site. Additionally, NCM asserts (and AMEC does not deny) that both companies are national and multinational companies with personnel that regularly travel around the country and the world. In any event, "[t]he Supreme Court has distinguished the inconvenience necessary to establish unreasonableness of a forum selection clause and the balancing of convenience test appropriate in a change of venue ...