David A. Harris and Abigail e. Lighthart | Haight Brown & Bonesteel LLP | September 30, 2015
In Vita Planning and Landscape Architecture, Inc. v. HKS Architects, Inc. (“Vita Planning”), the First Appellate District held California’s Code of Civil Procedure section 410.42 (“Section 410.42”) which prohibits an out-of-state contractor from requiring a California subcontractor to litigate disputes in a state other than California, applies not only to traditional “contractors” and “subcontractors” but also to design professionals and architects.
In Vita Planning, a dispute arose when HKS, a Texas based architectural firm, refused to pay Vita Planning and Architecture (“Vita”), a landscape design firm, for work on a luxury hotel in Mammoth Lakes, California (“Project”). HKS contended it was not required to pay Vita until it was paid by the owner of the Project, and any claims regarding the work needed to be filed in Texas pursuant to a forum selection clause contained in a Prime Contract between HKS and the Owner. The forum clause was “incorporated by reference” into an unsigned “standard form” agreement between HKS and Vita. Despite the forum clause, Vita filed a Complaint against HKS in Marin County Superior Court.
Seven months after HKS answered the Complaint, it filed a motion to enforce the Texas forum selection clause. Vita opposed HKS’s motion, arguing among other things, that Section 410.42, which invalidated forum selection clauses in construction contracts applied to the parties’ contract. The trial court rejected Vita’s contentions and found that neither HKS nor Vita were covered by the section. The trial court held Section 410.42 only applied to “construction contractors and subcontractors.” Since the parties did not actually build any portion of the Project and were classified as “design professionals” the court held Section 410.42 did not apply.
On appeal, Vita argued: 1) the standard form contract with HKS was unenforceable since it was unsigned; 2) HKS’s motion to enforce the forum selection clause was untimely, and; 3) if the contract was enforceable, Section 410.42 nonetheless invalidated the forum selection clause.
The Court of Appeal overruled the trial court. The Court dismissed Vita’s first argument regarding the existence of a valid contract because Vita alleged a breach of contract cause of action in its Complaint: “Vita’s judicial admissions regarding the existence of the Contract are binding.” The Court also held the lack of signatures on the contract did not render it unenforceable because Vita performed under the terms and conditions of the contract and HKS accepted Vita’s performance. (Cal. Civil Code §§1589, 1584).
Although the Court found the parties’ unsigned contract was enforceable, it rejected the trial court’s finding that Section 410.42 did not cover “design professionals” such as HKS and Vita. As such, it held the forum selection clause was unenforceable.
The Court noted Section 410.42 did not define the terms “Contractor” and “Subcontractor.” As such, the terms “should be construed in their statutory context.” The Court reasoned the statutory intent of the section was to broadly protect California companies from being forced to litigate their claims out of state. If the section only covered “traditional builders” the intent of the statute would be defeated.
The Court concluded the terms “Contractor” and “Subcontractor” included parties who “contracted to perform work” on the Project. Under this definition, the Court found…