Case Information
IN THE UNITED STATES DISTRICT COURT WESTERN DISTRICT OF ARKANSAS TEXARKANA DIVISION
FOREMAN ELECTRIC
SERVICES, INC. PLAINTIFF v. Case No. 4:19-cv-4157
HALIRON POWER, LLC DEFENDANT
ORDER
Before the Court is Plaintiff Foreman Electric Services, Inc.’s Motion to Transfer. (ECF No. 52). Defendant Hailron Power, LLC has responded. (ECF No. 55). Plaintiff has replied. (ECF No. 58). The Court finds the matter ripe for consideration.
I. BACKGROUND
This unusual case arises in the wake of devastating power-grid damage caused by two hurricanes in Fall 2017, when the United States Army Corps of Engineers awarded Fluor Daniel Caribbean, Inc. (“Fluor”) government construction contracts to perform electric utility repair in Puerto Rico. On January 8, 2018, Fluor hired Defendant to serve as a first-tier subcontractor on the project, pursuant to the terms of a written contract between the two entities (the “Prime Contract”). On January 11, 2018, Defendant hired Plaintiff to serve as a second-tier subcontractor on the project, pursuant to the terms of a separate written contract between the two entities (the “Subcontract”).
The Prime Contract between Fluor and Defendant contains a forum-selection clause providing as follows:
This Contract shall be exclusively governed by and construed in accordance with the laws of the State of South Carolina, exclusive of the State of South Carolina’s choice of law rules. Any claims or proceedings brought with respect to any dispute arising from the Contract shall be brought exclusively in the State or Federal Courts located in the County of Greenville, South Carolina, unless expressly designated otherwise within this Contract. The parties irrevocably agree to submit to the personal jurisdiction of the courts located within the County of Greenville, South Carolina for litigating all such claims or disputes.
(ECF No. 42-1, p. 66). The Prime Contract also sets out in detail various standards and requirements for the work to be performed by Defendant on the project. Id. at 33-80.
The separate Subcontract between Plaintiff and Defendant contains a few provisions that warrant mention. Section 1.1 of the Subcontract, governing the “scope of work,” provides:
The agreement between [Flour] and [Defendant] (the “Prime Contract”) . . . and all general, special, and supplemental conditions . . . referred to in, and made part of, the Prime Contract; all addenda and modifications to the Prime Contract; and all other documents forming a part of the Prime Contract (collectively, the “Contract Documents”) are incorporated into this Agreement to the extent they apply to the work of [Plaintiff].
(ECF No. 42-2, p. 1). The Subcontract also provides “any dispute arising between [Defendant] and [Plaintiff] shall be addressed using the same procedures outlined in the Contract Documents.” Id. at 12. The Subcontract provides further that it “shall be governed by the law in effect in Arkansas,” id. , and that “[i]n the event of conflicts or inconsistencies between provisions of this Agreement and the Contract Documents, the provision imposing the higher quality, greater quality, or greater duty or obligation on [Plaintiff] governs.” at 1.
On September 14, 2018, Defendant sued Fluor in South Carolina state court, alleging that Fluor breached the Prime Contract, inter alia , by failing to pay Defendant for invoiced work done on the project. That case was removed to federal court and remains pending before Judge Timothy Crain in the United States District Court for the District of South Carolina. See Haliron Power, LLC v. Fluor Daniel Caribbean, Inc. , No. 6:18-cv-2911-TMC.
On February 20, 2019, Plaintiff filed this case against Defendant in Texas state court, alleging that Defendant breached the Subcontract by failing to pay $7,979,670.16 for invoiced work that Plaintiff performed on the project. On March 25, 2019, this case was removed to the United States District Court for the Western District of Texas. On December 16, 2019, this case was transferred to this Court upon the parties’ agreed motion. On April 10, 2020, Defendant filed a motion seeking leave to file an amended answer that asserted counterclaims against Plaintiff.
On April 21, 2020, Plaintiff filed a separate lawsuit against Fluor in the United States District Court for the District of South Carolina, seeking, inter alia , $7,979,670.16 that was allegedly paid by Fluor to Defendant and then not paid by Defendant to Plaintiff for work done on the Puerto Rico project. That case also remains pending before Judge Crain. See Foreman Elec. Servs., Inc. v. Fluor Daniel Caribbean Inc. , No. 6:20-cv-1528-TMC.
On April 28, 2020, the Court granted Defendant’s motion for leave to file an amended answer in this case. That same day, Defendant filed its amended answer, which contains its counterclaims against Plaintiff. In short, Defendant counterclaims that Plaintiff breached the Prime Contract and the Subcontract in various ways, including its employees’ failure to protect materials and equipment, failure to work in accordance with rules and regulations, engagement in recreational drug use, failure to work in a safe and reasonable manner, failure to produce certified payroll and proper invoices, and failure to reduce personnel size and demobilize equipment when ordered. Defendant contends that Plaintiff’s conduct caused Fluor to prematurely remove Defendant from the project, costing it millions of dollars and reputational damage.
On June 4, 2020, Plaintiff filed the instant motion, arguing that the Court should transfer all claims asserted in this case to the District of South Carolina, where they will presumably be presided over by Judge Cain. Defendant opposes the motion.
II. DISCUSSION
Plaintiff argues that the Court must transfer Defendant’s counterclaims to the District of South Carolina pursuant to 28 U.S.C. § 1404(a) and the Prime Contract’s forum-selection clause. Plaintiff also asks for the transfer of its claims to the District of South Carolina pursuant to section 1404(a) for the convenience of parties and witnesses, and in the interest of justice. Defendant argues as a preliminary matter that the claims in this case should not be transferred because Plaintiff has waived the defense of improper venue. Defendant argues alternatively that the claims should not be transferred under section 1404(a).
As a threshold matter, the Court will address Defendant’s argument that Plaintiff has waived its defense of improper venue by not seasonably asserting it. If necessary, the Court will then decide whether the claims in this case should be transferred to South Carolina.
A. Waiver of Venue
Defendant argues that Plaintiff has waived its defense of improper venue by not seasonably asserting it. Plaintiff has not sought leave to file a reply addressing this argument. For the reasons that follow, the Court need not determine whether Plaintiff has waived its defense of improper venue because, even if so, that does not prevent Plaintiff from moving for a transfer of venue pursuant to 28 U.S.C. § 1404(a).
The defense of improper “venue, like jurisdiction over the person, may be waived. A
defendant, properly served with process by a court having subject matter jurisdiction, waives venue
by failing seasonably to assert it.”
Hoffman v. Blaski
,
However, “a motion to transfer the case pursuant to 28 U.S.C. § 1404(a) is not an objection
to improper venue, which under Federal Rule of Civil Procedure 12(b) would be required to be
made before answer.”
Wilson v. United States
, No. 4:05-cv-0562,
Importantly, Plaintiff does not move for dismissal under Rule 12(b)(3) on the ground that the Western District of Arkansas is an improper venue. Rather, both of Plaintiff’s requests for venue transfer are made under 28 U.S.C. § 1404(a). Thus, even if Plaintiff waived its defense of improper venue, it may still move for transfer under section 1404(a). ; Wilson , 2006 WL 3431895-GTE, at *2. Defendant filed its counterclaims on April 29, 2020, and Plaintiff moved for transfer of venue based on those newly raised counterclaims on June 4, 2020. The Court finds that the instant motion is seasonably asserted, and thus, the Court will now proceed to the merits of the motion.
B. Venue Transfer
Plaintiff asks the Court to transfer Defendant’s counterclaims to the District of South Carolina pursuant to 28 U.S.C. § 1404(a) and the Prime Contract’s forum-selection clause. Plaintiff also asks for the transfer of its own claims under 28 U.S.C. § 1404(a). Defendant opposes both requests.
The Court must begin by determining whether the Western District of Arkansas is a proper
venue for this case. This is because “[s]ection 1404(a) applies only if the initial federal forum is a
proper venue.” 14D Arthur R. Miller,
Federal Practice & Procedure: Jurisdiction
§ 3829 (4th ed.
2020). “Where no special venue statute is applicable, the general venue statute, 28 U.S.C. § 1391,
applies.”
Catholic Order of Foresters v. U.S. Bancorp Piper Jaffray, Inc.
,
Defendant states that the Western District of Arkansas is a proper venue because it is the judicial district where Defendant and its owners reside and, moreover, it is the venue the parties consented to earlier in this case. Plaintiff’s motion does not discuss whether the Western District of Arkansas is a proper venue, but the Court presumes that Plaintiff believes that venue is proper in this district because Plaintiff is moving for transfer of venue under 28 U.S.C.§ 1404(a), which allows for the transfer of a case from one proper venue to another proper venue. Accordingly, the Court finds that the Western District of Arkansas is a proper venue for this case.
Because Plaintiff contends that Defendant’s counterclaims are subject to a mandatory forum-selection clause, the Court will begin by addressing those claims. The Court will then determine whether Plaintiff’s claims should be transferred.
1. Forum-Selection Clause Defendant’s counterclaims allege that Plaintiff breached both the Prime Contract and the Subcontract. Plaintiff contends that Defendant’s counterclaims must be transferred to South Carolina because the counterclaims implicate the Prime Contract, which contains a mandatory forum-selection clause that selects South Carolina as the exclusive venue for any disputes arising from that contract.
“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.” 28
U.S.C. § 1404(a). In analyzing a motion to transfer under section 1404(a), the Court ordinarily
employs a three-factor balancing test, considering: “(1) the convenience of the parties, (2) the
convenience of the witnesses, and (3) the interests of justice.”
Terra Int’l., Inc. v. Miss. Chem.
Corp.
,
The Court’s analysis of a motion to transfer changes when the parties have entered into a
valid forum-selection clause, which “[should be] given controlling weight in all but the most
exceptional cases.”
Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Tex.
,
Defendant does not argue that the Prime Contract’s forum-selection clause is invalid or that it is permissive. However, Defendant contends that Plaintiff, who is not a party to the Prime Contract, cannot enforce that contract’s forum-selection clause as to Defendant’s counterclaims because the counterclaims arise only from the Subcontract, which does not contain a forum- selection clause of its own and does not explicitly incorporate the Prime Contract’s forum-selection clause.
It is undisputed that the Subcontract contains no forum-selection clause. It also appears undisputed that the Subcontract does not incorporate the Prime Contract’s forum-selection clause. The question before the Court becomes whether the Prime Contract’s forum-selection clause encompasses Defendant’s counterclaim against Plaintiff for breach of that contract.
For reference, the Prime Contract between Fluor and Defendant contains a forum-selection clause providing as follows:
This Contract shall be exclusively governed by and construed in accordance with the laws of the State of South Carolina, exclusive of the State of South Carolina’s choice of law rules. Any claims or proceedings brought with respect to any dispute arising from the Contract shall be brought exclusively in the State or Federal Courts located in the County of Greenville, South Carolina, unless expressly designated otherwise within this Contract. The parties irrevocably agree to submit to the personal jurisdiction of the courts located within the County of Greenville, South Carolina for litigating all such claims or disputes.
(ECF No. 42-1, p. 66). The Court is unpersuaded that Defendant’s breach-of-the-Prime-Contract counterclaim falls within the scope of this clause. After all, Plaintiff is not a party to the Prime Contract, and nothing indicates that Plaintiff was an intended third-party beneficiary of the contract.
A non-signatory to a contract containing a forum-selection clause can be bound by the
clause where the non-party is so “closely related” to the dispute that it becomes foreseeable that it
will be bound by that clause.
Marano Entrs. of Kan. v. Z-Teca Rests., L.P.
,
Plaintiff does not explicitly argue that it is so closely related to either Defendant or Flour that it was foreseeable that Plaintiff would be bound by the forum-selection clause. Instead, Plaintiff argues, without citing to supporting authority, that the Prime Contract’s forum-selection clause covers “any claims or disputes . . . arising from the [Prime] Contract,” and because Defendant’s counterclaims implicate the Prime Contract, those claims necessarily fall within the scope of the Prime Contract’s forum-selection clause. This is akin to an equitable estoppel argument, that Defendant cannot sue Plaintiff under the Prime Contract while simultaneously avoiding the burden of its forum-selection clause. Defendant largely ignores this argument, asserting that it and Plaintiff are parties to the Subcontract, which contains no forum-selection clause and did not incorporate the Prime Contract’s forum-selection clause.
The parties do not cite, and the Court is unaware of, any on-point authority squarely
mirroring the unusual facts underlying the present dispute. To aid in its analysis of the issue, the
Court looks partly to decisions regarding arbitration agreements because the Supreme Court has
characterized an arbitration clause as “a specialized kind of forum-selection clause.”
Scherk v.
Alberto-Culver Co.
,
South Carolina law carries a presumption that an individual who is not a party to a contract
lacks privity to enforce it.
See Touchberry v. City of Florence
,
That is the case here. Although Defendant’s briefing of the instant motion attempts to
underplay it, Defendant has asserted against Plaintiff a counterclaim for breach of the Prime
Contract. The Court has doubts regarding the viability of this counterclaim, given that Plaintiff
does not appear to be a party to, or a third-party beneficiary of, the Prime Contract.
See Trancik
v. USAA Ins. Co.
,
Because this counterclaim is covered by a valid forum-selection clause, the section 1404(a)
analysis is altered in three ways: (1) the plaintiff’s choice of forum holds no weight and the
plaintiff consequently bears the burden of establishing that a transfer pursuant to the forum-
selection clause is unwarranted; (2) the Court “must deem the private-interest factors to weigh
entirely in favor of the preselected forum,” and consider only the public-interest factors, which
defeat a forum-selection clause only in “unusual cases”; and (3) a transfer will not carry with it the
original forum’s choice-of-law rules, which could affect public-interest considerations.
Atl.
Marine Const.
,
Defendant’s counterclaim for breach of the Subcontract should also be transferred. Section
1404(a) provides that “a district court may transfer any
civil action
to any other district or division
where it might have been brought.” (emphasis added). Hence, section 1404(a) plainly authorizes
only the transfer of an entire lawsuit.
In re Flight Transp. Corp. Sec. Litig.
,
2. Transfer for Convenience and In the Interest of Justice Plaintiff argues that its claims in this case should also be transferred to the District of South Carolina under section 1404(a) for convenience’s sake and in the interest of justice. Defendant disagrees.
The federal transfer statute provides that “[f]or 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.” 28 U.S.C. § 1404(a). A transfer analysis pursuant to section
1404(a) includes a three-factor balancing test: “(1) the convenience of the parties, (2) the
convenience of the witnesses, and (3) the interests of justice.”
Terra
,
First, the Court must consider the conveniences of the parties and witnesses. When
balancing the conveniences, the Court may consider things such as: (1) the convenience of the
parties; (2) the convenience of the witnesses—including the willingness of the witnesses to appear;
(3) the accessibility of records and documents; (4) the location where the conduct complained of
occurred; and (5) the applicability of each forum state’s substantive law.
Terra
,
Upon consideration, the Court concludes that Plaintiff does not carry its “heavy burden” of
showing that a section 1404(a) transfer is warranted.
Austin
,
III. CONCLUSION
For the above-stated reasons, the Court finds that Plaintiff’s Motion to Transfer (ECF No.
52) should be and hereby is GRANTED IN PART AND DENIED IN PART .
Defendant’s counterclaims will be transferred pursuant to 28 U.S.C. § 1404(a) and the Prime Contract’s mandatory forum-selection clause. The Clerk of Court is DIRECTED to immediately transfer Defendant’s counterclaims (ECF No. 47) to the United States District Court for the District of South Carolina for all further proceedings. Plaintiff’s claims will remain with this Court.
IT IS SO ORDERED , this 4th day of September, 2020.
/s/ Susan O. Hickey Susan O. Hickey Chief United States District Judge
[1] Fluor is not a party to this case.
Notes
[2] The Prime Contract is eighty pages long and does not need to be fully recounted for purposes of this order. Suffice it to say that, among other things, the Prime Contract includes provisions regarding work-quality standards, the timing of work, the materials and equipment used, labor and work rules, indemnification and insurance requirements, rules governing work conditions, and procedures for handling any conflicts and disputes that might arise between Defendant and Fluor.
[3] If Plaintiff believed the Western District of Arkansas was an improper venue, it would have filed a motion for transfer under 28 U.S.C. § 1406(a), which allows the transfer of a case from an improper venue to a proper venue.
[4] “The Eighth Circuit has not definitively ruled on whether state or federal law controls when the applicability of a
forum selection clause is at issue.”
Kleiman v. Kings Point Capital Mgmt., LLC
, No. 4:17-cv-2278-HEA, 2018 WL
3328012, at *3 (E.D. Mo. July 6, 2018). The parties do not discuss whether state or federal law should be applied to
determine the applicability of the Prime Contract’s forum-selection clause to this case. However, both parties cite
almost exclusively to federal caselaw in their briefs. Thus, the Court will apply federal law to decide that issue.
See
Union Elec. Co. v. Energy Ins. Mut. Ltd.
,
[5] The Court applies South Carolina contract law here because the Prime Contract is governed exclusively by South Carolina law. (ECF No. 42-1, p. 66).
[6] In certain “rare circumstances,” it may be appropriate for a court to sever specific claims under Federal Rule of Civil
Procedure 21 to effectuate their separate transfer.
Chrysler Credit Corp. v. Country Chrysler, Inc.
,
[7] In Plaintiff’s reply brief, it argues for the first time that a transfer to South Carolina would promote the convenience
of witnesses and the accessibility of documents. Generally, the Court does not consider arguments raised for the first
time in a reply brief.
See
Fed. R. Civ. P. 7(b) (stating that a request for relief, and the particular grounds supporting
the request, must be made in a motion);
Akeyo v. O’Hanlon
,