A well-drafted contract is one of the first steps to ensuring a successful and profitable job on a construction project. But there is a slew of things to consider when drafting a contract. One problem in the construction industry is that there are a number of other contracts that may be associated with one project — and figuring out how they all work together can be a tall task.
Take for example a recent case from the Florida District Court of Appeals, where it was held that a payment bond surety couldn’t enforce a subcontractor venue selection clause.
The importance of venue in litigation
The venue of a lawsuit is an often underappreciated aspect of litigation. Ensuring that your dispute is brought in a certain court can provide a number of different benefits. This includes familiarity, convenience, time, expenses, and a general sense of “home-field advantage.”
Furthermore, some courts may tend to award higher damages or decide certain issues in a manner that may be favorable or unfavorable depending on which side of the dispute you’re on.
This is why a venue selection clause is typically included in most construction contracts and subcontracts. But what if there is a payment bond on the project? Can a surety be bound by a venue selection clause in a subcontract?
This was the issue tackled by a recent case out of a Florida District Court of Appeals.
Florida court narrowly interprets a venue selection clause
The case in question is Southeastern Concrete Constructors, LLC v. Western Surety Company.
- Owner: FL Department of Transportation (FDOT)
- General Contractor: D.A.B. Constructors, Inc. (DAB)
- Surety: Western Surety Company (Western Surety)
- Subcontractor: Southeastern Concrete Constructors, LLC (Southeastern Concrete)
Subcontract venue selection clause
The facts of this case are relatively straightforward.
DAB was hired as a general contractor on an FDOT project located in Hillsborough County. As required by Fla. Stat. §337.18, DAB had posted a payment bond issued by Western Surety. Southeastern Concrete was then hired by DAB as a subcontractor on the job.
The subcontract executed between the parties included the following venue provision:
“The Subcontract shall be governed by the law of the State of Florida. Any suit relating to the Subcontract, or the performance of Prime or Subcontractor shall be commenced in the state of competent jurisdiction in Levy County, Florida, and shall remain there until its conclusion.”
As you may have guessed, a payment dispute arose between DAB and Southeastern Concrete which resulted in a claim against the payment bond. Southeastern Concrete subsequently filed an action to enforce the claim in Hillsborough County where the project was located. An important thing to note is that DAB was not named as a party, nor did Southeastern Concrete seek any other damages against DAB.
Transfer improper: Surety not bound by subcontract venue clause
At trial, Western Surety moved to dismiss and transfer the case to Levy County pursuant to the venue selection clause in the subcontract (the reasons for and motivations of which are unclear from the opinion). In any sense, the court granted the motion transferring the venue to Levy County which Southeastern Concrete appealed.
The court emphasized that the payment bond was a separate and distinct instrument guaranteeing payment for work performed. Furthermore, the lawsuit filed was a single-count complaint against the surety under the terms of the payment bond, and:
“Because Southeastern Concrete filed suit on the performance and payment bond, which contains no venue selection clause, the trial court erred in transferring venue based upon a venue selection clause contained in a separate, unincorporated subcontract. We reverse the order transferring the case to Levy County and remand for further proceedings in Hillsborough County.”
The case was subsequently transferred back to Hillborough County and remanded for further proceedings.
Always draft construction contracts provisions carefully
There are a number of factors that would have produced a different outcome here; such as if the subcontractor brought contract claims against the GC, if the subcontract venue provision mentioned the surety or the payment bond, or if the bond agreement incorporated the terms of the subcontract.
In the end, although this decision involves a very specific set of circumstances, there is a lesson to be drawn from it. Contracts must be drafted carefully to avoid any unintended consequences. Particularly construction contracts, as there are likely multiple agreements that are in play. So be sure to take the other agreements into consideration.
“A general contractor should include language in the subcontract that provides that its payment bond surety can enforce the venue provision as it pertains to any claims brought against the surety and any claims against the general contractor’s payment bond surety must be brought in the exclusive venue set forth in the subcontract – the venue provision shall be deemed incorporated into the bond for purposes of any claim asserted by the subcontractor against the bond.”