When is Forum Selection in a Construction Contract Enforceable?

Christopher G. Hill | Construction Law Musings

If there is one mantra that is repeated often here at Construction Law Musings, it is that your construction contract will be strictly construed and Virginia Courts will enforce the provisions as written.  This rule includes forum selection clauses.  For those that aren’t attorneys, this means that absent a statute to the contrary, the parties can pick the location of any litigation or arbitration by contract.  However, the timing of signing that contract makes a difference as a relatively recent Eastern District of Virginia case points out.

Marathon Res. Mgmt Grp v. C. Cornell, Inc. examined what happens when work is performed by one party to the contract prior to the execution of the written contract that contains the forum selection provision.  In this case, the defendant C. Cornell, Inc. obtained a default judgment in Texas for non-payment by Marathon for painting and cleaning of rooms at Texas A & M University for work invoiced on August 22, 2017, and September 11, 2017.  Upon receipt of the garnishment from the Texas Court, Marathon sued C. Cornell in Virginia state court and the defendant removed the case to federal court.  Marathon alleged two separate breaches of contract, the first was that C. Cornell violated the forum selection clause of a Master Services Agreement (“MSA”) executed on September 23, 2017.  The second was a violation of another clause of the MSA that barred direct communication with any of Marathon’s customers.  The second breach was alleged to be by virtue of the garnishment summons to one of Marathon’s customers.

In response, C. Cornell filed a motion to dismiss the Complaint and argued that the MSA was not applicable to the invoices and work performed prior to its execution and that therefore the forum selection clause did not apply.  The Court agreed, concluding that the MSA was only applicable to future work and not the work performed prior to its execution.  The Court summarized its reasoning as follows:

The plain language of the MSA unambiguously demonstrates that the Parties did not intend its terms to cover past work or contractual dealings between them. Marathon relies heavily on the language of the MSA to support its claim that Certa Pro breached the MSA’s forum selection clause when it filed the Texas Lawsuit to collect on the Painting and Cleaning Contracts. But a plain reading of the contractual terms shows that the MSA applies only to future work. The Court rests this finding on three observations. First, the MSA’s repeated use of the word “shall” (and not the past tense “shall have”) demonstrates the Parties’ intention for the MSA to apply to future work. Second, the Court observes that the MSA, although it explicitly incorporated other outside documents, did not incorporate the then extant Painting and Cleaning Contracts, leading to the reasonable inference that the MSA did not supersede or alter the Painting and Cleaning Contracts. Third, the wording and structure of the insurance provision in the MSA also evinces the Parties’ intention that the MSA apply to future, not past, work.

Because the terms of the MSA did not apply to past work, neither the non-communication nor the forum selection clause applied to the work underlying the Texas judgment so the Court dismissed the Complaint.

This is yet another case that shows that timing can be key.  The Court showed it was ready, willing, and able to enforce these provisions had the language of the MSA been different.  However, it could not apply the advantageous clauses retroactively because other provisions of the MSA precluded such an application.  The Court did what Virginia courts always do and enforced the terms of the contract as written.  So, in this case, the answer to the title of this post is after the applicable written contract is executed.

Cases such as this one that turn on small variations in language emphasize the need to obtain the counsel of an experienced construction attorney when drafting your construction contracts and determining what actions to take once those contracts are in place.  As always I both encourage you to read the case for yourself and let me know if you have other insights from it in the comments.

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