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Sears Contract, Inc. v. Sauer Inc.

United States District Court, E.D. North Carolina, Eastern Division

April 25, 2019

SEARS CONTRACT, INC. United States of America, for the use and benefit of the foregoing, Plaintiff,
v.
SAUER INCORPORATED and FEDERAL INSURANCE COMPANY, Defendants.

          ORDER

          LOUISE W. FLANAGAN UNITED STATES DISTRICT JUDGE.

         This matter is before the court on defendants' motion to dismiss for improper venue, pursuant to Federal Rule of Civil Procedure 12(b)(3), or, in the alternative, to transfer venue to the United States District Court for the Middle District of Florida. (DE 17). Plaintiff responded in opposition, and the time for reply has passed. In this posture, the issues raised are ripe for ruling. For the following reasons, the court denies the motion.

         STATEMENT OF THE CASE

         Plaintiff commenced this action pursuant to the Miller Act, 40 U.S.C. §§ 3131 et seq., to recover unpaid amounts for labor and materials it furnished as a subcontractor in connection with the construction of an elementary school at Fort Bragg, North Carolina (the “project”). In amended complaint filed September 6, 2018, plaintiff asserts a claim of breach of contract against defendant Sauer Incorporated (“Sauer”), based on the terms of a subcontract between plaintiff and Sauer, which is the general contr actor for the project. Plaintiff also asserts a quantum meruit claim against defendant Sauer, as well as a payment bond claim against defendant Federal Insurance Company (“FIC”), as surety on behalf of defendant Sauer, under the Miller Act, 40 U.S.C. § 3133(b).

         Defendants answered on November 9, 2018, including in their answer the instant motion to dismiss, or in the alternative to transfer venue, on the basis that a forum-selection clause in the subcontract requires plaintiff to litigate its claims against them in the Middle District of Florida. Defendants rely upon the subcontract. In opposition, plaintiff contends the forum-selection clause is invalid and that venue is proper in this district.

         The court entered case management order on January 7, 2019, under which discovery and mediation shall be completed by September 10, 2019, and dispositive motions shall be filed by October 10, 2019.

         STATEMENT OF FACTS

         Plaintiff is a North Carolina corporation in the business of providing commercial drywall and exterior finish construction services, with principal office and place of business in Raleigh, North Carolina. Defendant Sauer is a Florida corporation with its principal office and place of business in Jacksonville, Florida, engaged generally in the construction industry as a general contractor, and a licensed general contractor in North Carolina. Defendant FIC is an Indiana surety company that issued a payment bond on behalf of its principal, Sauer, allegedly binding itself for the payment of any unpaid amounts for labor and materials furnished in connection with the project.

         The project is a multi-million-dollar undertaking for the construction and replacement of the Pope-Holbrook Elementary School at Fort Bragg military base. Prior to April 13, 2015, defendant Sauer and the United States Army Corps of Engineers - Savannah District entered into a prime contract (Owner Contract # W91278-12-D-0039-CV01) for the construction of the project. According to the complaint, [1] as required by the Miller Act, 40 U.S.C. § 3131(b)(2), FIC, as surety on behalf of its principal Sauer, duly made, executed and issued Payment Bond No. 8237-94-27 (the “payment bond”) to secure payment to those firms performing work and supplying labor and materials to the project, including plaintiff.

         On February 20, 2015, defendant Sauer entered into the subcontract with Sears. The initial subcontract sum, subject to adjustment for changes in the scope of work, was $1, 945, 559.00. The scope of work included: “Gypsum assemblies, metal framing, building insulation, glass fiber reinforced gypsum, and exterior insulation and finish system.” (Compl. ¶ 10). According to the complaint, during the course of the project, the scope of work was amended, resulting in an increase of the subcontract price of $91, 563.48, from $1, 945, 559.00 to $2, 037, 122.48. Plaintiff began work on February 9, 2016 and completed its work on December 18, 2017. To date, Plaintiff has been paid $1, 768, 744.80.

         According to the complaint, plaintiff and Sauer agreed to at least four change orders over the course of the project, and defendant Sauer agreed and was obligated to pay plaintiff for its work under the subcontract. Despite plaintiff's allegedly proper performance of its work on the project, defendant Sauer failed and/or refused to pay plaintiff for the balance due and owing. Plaintiff made repeated demands for payment upon defendant Sauer and, to date, no payment has been made to plaintiff for the balance allegedly due and owing for its work under the subcontract. On January 11, 2018, plaintiff gave notice of its claim on the payment bond to defendant Sauer, defendant FIC, and the U.S. Army Corps of Engineers.

         As pertinent herein, the subcontract includes the following provision regarding the venue for claims and dispute resolution: “Any claim by Subcontractor filed in state or federal court against Sauer and/or Sauer's surety shall only be filed and or resolved in any court within the exclusive venue of Sauer's office address written above.” (Subcontract (DE 18-1) at 11).[2] Sauer's office is referenced within the paragraph as “Sauer's Jacksonville, Florida office” (id.), and it is referenced at the start of the subcontract as “11223 Phillips Parkway Drive East[, ] Jacksonville, Florida 32256.” (id. at 2).

         COURT'S DISCUSSION

         A. Standard of Review

         Federal Rule of Civil Procedure 12(b)(3) allows a party to move to dismiss a complaint for “improper venue” before pleading an answer. “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 or to any district or division to which all parties have consented.” 28 U.S.C. § 1404(a). A transfer of venue under § 1404(a) is ...


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