MEMORANDUM OPINION AND ORDER
This cause is before the court on the motion of defendant Kansas City Southern
In 2010, KCSR contracted with the City of Vicksburg, Mississippi, to construct a bridge and related suрport infrastructure. In turn, KCSR, as general contractor, executed a subcontract agreement with Kanza (the Master Agreement) by which Kanza was to perform the majority of the work required by KCSR’s contract with the City for the total lump sum price of $6,796,000. Under the terms of the Master Agreement, Kanza was required to provide a performance bond in the amount of $6,796,000. As required, Kanza obtained from Hanover a performance bond (the Bond) naming Kanza as principal and KCSR as obligee in the amount of $6,796,000 for the purpose of securing the performance of the Master Agreement between Kanza and KCSR. The bond provided, inter alia, that
The contractor [Kanza] and the surety [Hanover], jointly and severally, bind themselves, their heirs, executors, administrators, successors and assigns to the owner for the performance of the construction contract, which is incorporated herein by reference.
KCSR filed the present action against Hаnover, as surety, in the Circuit Court of Warren County, Mississippi on February 13, 2015, alleging that Kanza (and Hanover, by virtue of its obligations under the bond, and in particular, the above-quoted provision) had breached the Master Agreement by its nonperformance and/or deficient performance of the requirements of that agreement. KCSR demanded recovery from Hanover of expenses totaling $3,576,431.16 which KCSR alleged it incurred in performing work that was Kan-za’s responsibility under the Master Agreement and in correcting deficiencies in the work that Kanza performed. In addition, KCSR sought punitive damages and attorney’s fees for bad faith breach of the performance bond based on Hanover’s alleged unreasonable delay in responding to KCSR’s claim for costs incurred to fix Kanza’s defective work, for its failure to adequately and timely investigate the claim and for its-ultimate denial of KCSR’s claim on the bond.
Hanover removed the case to this сourt pursuant to 28 U.S.C. § 1441 on the basis of diversity jurisdiction under 28 U.S.C. § 1332, following which KCSR timely moved to remand. In its motion, KCSR does not deny that the requirements for diversity jurisdiction are satisfied but rather claims that remand is in order as Hanover has waived its right to remove. KCSR points out that Section 17 of the Master Agreement states that “the rights and obligations of the parties are governed by the laws of the state of Mississippi, without regard to any conflict of laws principles,” and further provides:
Except as neсessary to enforce indemnity or defense obligations, the parties must bring court proceedings in Mississippi state court located in Warren County, Mississippi.
KCSR argues that since the Bond issued by Hanover incorporates the terms of the Master Agreement, including the Master Agreement’s mandatory forum selection clause, then it follows that Hanover has contractually waived its right to remove the case to federal court and the case must be remanded.
While a dеfendant has a statutory right to remove a case that falls within the federal courts’ diversity jurisdiction, see 28 U.S.C. § 1441, 1446, “a party may waive its removal rights by contract-even without use of “explicit words, such as ‘waiver of right of removal.’ ” Collin Cnty., Tex. v. Siemens Bus. Servs., Inc.,
Regarding the third of these potential bases for waiver of removal rights — which is the only basis relevant in this case — the parties to a contract may include a provision that establishes venue in a particular forum in the event of a contract dispute. In order for a forum selection clause to waive a defendant’s right to remove, the clause must be “mandatory” rather than “permissive.” See Collin Cnty.,
The forum selection clause in the Master Agreement in this case states that the parties “must” bring all court proceedings, except as necessary to enforce defense or indemnity obligations, in the “Mississippi state court located in Warren County, Mississippi.” Hanover acknowledges that “[t]ypically, words such as ‘must’, ‘only’, or ‘shall’ are indicators of mandatory clauses”, Stanley Smith Drywall, Inc. v. Munlake Contractors, Inc.,
In the case at bar, the forum selection clause in the Master Agreement is unquestionably mandatory as to claims that come within its scope. Indeed, in prior litigation brought by Kanza against KCSR in federal court in Missouri, the court found that Section 17 of the Master Agreement, which unequivocally specifies Warren County Court as the only venue available for all “ ‘court proceedings’ (subject to insurance-related exceptions)” is an unambiguous mandatory forum-selection clause. Kanza Const., Inc. v. Kansas City Southern Ry. Co.,
Hanover argues that the claims herein fall within the “indemnity” exception in the forum selection clause, making the clause inapplicable. In support of this position, Hanover first notes that “indemnity” has been variously defined as “ ‘the obligation or duty resting on one person to make good any loss or damage another has incurred by acting at his request or for his benefit.’ ” PIC Group, Inc. v. LandCoast Insulation, Inc.,
KANZA EXPRESSLY AGREES TO INDEMNIFY, DEFEND AND SAVE HARMLESS THE CITY OF VICKSBURG, AND THE COMPANY (KCSR), ITS OFFICERS, AGENTS, SERVANTS AND ' EMPLOYEES (COLLECTIVELY, THE “INDEMNI-TEES”) FROM AND AGAINST ANY AND ALL CLAIMS, JUDGMENTS AND RECOVERIES FOR ANY LOSS OR DAMAGE TO ANY PROPERTY AND INJURY TO OR DEATH OF ANY PERSONS, HOWSOEVER THE SAME MAY BE CAUSED (WHETHER ARISING OUT OF OR BASED UPON CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE) DIRECTLY OR INDIRECTLY RESULTING FROM OR HAPPENING IN CONNECTION WITH THE WORK COVERED BY THIS AGREEMENT. KANZA ALSO AGREES TO INDEMNIFY, DEFEND AND SAVE HARMLESS THE COMPANY INDEMNI-TEES FROM ANY LOSS, COSTS AND EXPENSES THAT MAY BE SUFFERED BY IT ON ACCOUNT OF KANZA’S FAILURE TO COMPLY WITH ANY OF THE TERMS AND PROVISIONS OF THIS AGREEMENT.
Focusing on the last sentence of this paragraph, Hanover submits that this suit by KCSR is clearly an action for indemnity as KCSR seeks reimbursement of loss, costs and expenses which it allegedly incurrеd as a result of Kanza’s alleged failure to comply with the terms and provisions of the Master Agreement. Hanover concludes that consequently, this lawsuit falls within the “indemnity” exception to the forum selection clause.
For its part, KCSR contends that Hanover’s assertion that the complaint in this case is for indemnity derives from an “overly broad definition of indemnity” as encompassing first-party claims instead of the typical third-party claims. KCSR asserts that the focus of the indemnifiсation provision in the Master Agreement, when considered in toto, is on third-party claims, as evidenced both by the use of the term “defense” each time the term “indemnity” is used and by the inclusion of two additional paragraphs that address, in detail, Kanza’s rights to settle or defend third-party claims and KCSR’s rights to do so should Kanza fail to take action.
Having considered the parties’ arguments, the court is not persuaded that the indemnification provision of the Master Agreement is clearly and unambiguously limited to third-party claims. Cf. Wal-Mart Stores, Inc. v. Qore, Inc.,
The effect of Hanover’s interpretation is to except from the reach of the forum selection clause any claim in which KCSR seeks to recover money damages for a breach of the terms of the Master Agreement. As KCSR notes, under this interpretation, the exception would swallow the rule: Most claims for breach of the construction contract would include a request for damages, and all first-party claims for damages would also be indemnity claims. Read in this manner, the exception to the forum selection clause is far more encom
Furthermore, and as KCSR aptly points out, the exception, by its terms, applies only “as necessary to enforce indemnity or defense obligations.” (Emphasis added). In Armer v. OpenMarket, Inc., No. C08-1731RSL,
Hanover argues that regardless of whether the forum selection clause in the Master Agreement is mandatory, and regardless of whether the claims herein would fall within the scope of that clause, the Master Agreement’s forum selection clause is not binding on Hanover. According to Hanover, while its Performance Bond expressly incorporated the Master Agreement, it was not Hanover’s intent to incorporate the Master Agreement’s forum selection clause. Rather, the Performance Bond’s incorporation of the Master Agreement was for the sole purpose of recognizing the contractual scope of work which Hanover might be bound to complete. In support of its position in this regard, Hanover relies on Jefferson Parish Consolidated Garbage District No. 1 v. Waste Management of Louisiana, L.L.C., Civil Action No. 09-6270,
The performance bond issued by Travelers, which guarantees the underlying Collection Contract in the event that Waste Management fails to perform, states that “[the Collection Contraсt] is made a part hereof and incorporated herein by reference, except that nothing said therein shall alter, enlarge, expand or otherwise modify the term of the bond as set out below.” (emphasis added). As such, although the Collection Contract is incorporated by reference in Travelers’ performance bond, the performance bond operates as a guarantee of the underlying collection contract. The Collection Contract obligated Waste Management to collect trash, but if Waste Management failed to perform, Travelers would not then have the same obligation to collect trash; rather, Travelers would have the option of performing Waste Management’s duties, paying the “amount of the bond penalty,” or paying the amount necessary to cure Waste Managements nonperformance. Any waiver of removal rights that Waste Management mаy have agreed to in the Collection Contract does not attach to Travelers, and Travelers’ removal of this action was therefore proper.
Id. at *2. In contrast to the bond provision in Jefferson Parish, Hanover’s performance bond incorporated the underlying Master Agreement without any language of limitation.
In Employers’ Mutual, the court held that a mandatory forum selection clause in the underlying construction contract did not apply to a surety that was not a party to the underlying cоntract.
The court in Employers’ Mutual did find that the “more expansive and permissive jurisdictional terms” set forth in the bonds demonstrated the surety’s intent not to be bound by the forum-selection clauses found in the underlying contracts. Id. at *4. However, unlike the present case, there is nothing to indicate that the bonds issued by EMC incorporated the terms of the underlying construction contracts. On the contrary, the court observed that the surety “never agreed” to be bound by the terms of the construction contract. Id. Moreover, while the Takeover Agreement was expressly subject to the original construction contracts, that agreement, like
“The Obligee acknowledges that the Surety, by its execution of this Agreement, is acting in its capacity as the surety for the Former General Contractor in making arrangements for the performance and completion of the Contract, and that the Surety is not assuming any obligations or liabilities beyond those set forth in the Bond.” That paragraph continues: “As to completion of the Contract, except as otherwise provided in this Agreement, the Surety is bound to all obligations of and entitled to all rights, title and interest of the Former General Contractor in and to the Contract on all respects as if the Surety were the original party to the Contract.”
Id. The court concluded:
It is clear from the plain reading of this line that this portion of the contract refers to the completion of the work that is the subject of the underlying contract by the introductory phrase, “[a]s to the completion of the Contract, ...” It does not clearly and unequivocally signal a waiver of EMC’s removal rights.
Id.
In the case at bar, Hanover’s Bond does not limit, explicitly or implicitly, the terms of the Master Agreement which were incorporated. Moreover, while the Performance Bond does include its own forum selection clause which provides that suit may be brought “in the location in which the work or part of the work is located,” contrary to Hanover’s suggestion, that provision is not inconsistent with the forum selection clause in the Master Agreement and does not create ambiguity. “When interpreting a contract, a court should examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meаningless.” In re Velazquez,
Based on all of the foregoing, the court concludes that the mandatory forum selection clause in the Master Agreement, to which Hanover is bound and which covers the claims asserted herein, controls venue for this litigation and therefore, it is ordered that KCSR’s motion to remand is granted.
SO ORDERED this 24th day of July, 2015.
Notes
. On July 16, 2014, prior to the date KCSR filed its stаte court complaint in this cause, Hanover filed a complaint against KCSR for declaratory judgment and relief quia timet. See Hanover v. Kansas City Southern Rwy., Civ. Action No. 3:14cv558HTW-LRA
. Even Hanover seems to recognize that under its interpretation, most claims that would be brought for breach of the agreement would fit within the exception rather than the rule. Hanover notes in response to KCSR's motion that "exceptions (to the exception) that would require suit to be brought only in Warren County” would include "such things as lien enforcement, injunctive relief and the like.”