Opinion
5-22-CV-00767-JKP-RBF
2022-12-14
AMERI-FAB, LLC, Plaintiff, v. VANGUARD ENERGY PARTNERS, LLC, Berkshire Hathaway Specialty Insurance Company, Defendants.
Ian M. McLin, Sara Murray, Thomas J. Lillibridge, William W. Sommers, Langley & Banack, Inc., San Antonio, TX, John M. Rogers, Rogers, LLP, Weatherford, TX, for Plaintiff. Greg Trif, Pro Hac Vice, Trif & Modugno LLC, Morristown, NJ, Gregory M. Weinstein, Weinstein Radcliff Pipkin LLP, Dallas, TX, for Defendants.
Ian M. McLin, Sara Murray, Thomas J. Lillibridge, William W. Sommers, Langley & Banack, Inc., San Antonio, TX, John M. Rogers, Rogers, LLP, Weatherford, TX, for Plaintiff. Greg Trif, Pro Hac Vice, Trif & Modugno LLC, Morristown, NJ, Gregory M. Weinstein, Weinstein Radcliff Pipkin LLP, Dallas, TX, for Defendants. ORDER RICHARD B. FARRER, UNITED STATES MAGISTRATE JUDGE
Before the Court is the Motion to Transfer filed by Defendant Vanguard Energy Partners, LLC, Dkt. No. 17, and the Motion to Stay filed by Defendant Berkshire Hathaway Specialty Insurance Company, Dkt. No. 19. This case has been referred for resolution of all non-dispositive pretrial matters, pursuant to Rules CV-72 and 1 of Appendix C to the Local Rules for the United States District Court for the Western District of Texas. See Dkt. No. 7. The Court held a hearing on these matters on October 13, 2022, and at that time informed the parties that a written order would be forthcoming.
For the reasons set forth below, Vanguard's Motion to Transfer, Dkt. No. 17, is GRANTED. In the interests of convenience and judicial economy, the Clerk shall TRANSFER this case and all claims brought by Plaintiff Ameri-Fab, LLC, against Vanguard and Berkshire to the District of New Jersey, Newark Vicinage, pursuant to the parties' bargained-for forum-selection clause. In light of this transfer, Berkshire's Motion to Stay, Dkt. No. 19, is MOOT.
Background
This dispute arises from a construction project concerning the installation of solar panels on buildings around Joint Base San Antonio. The prime contract for the project is between Ameresco, Inc., and the U.S. Defense Logistics Agency, the latter of which owns and operates the Joint Base. Ameresco subcontracted with Vanguard to complete a portion of the project. See Dkt. No. 17, Ex. A. Vanguard then engaged Berkshire to provide a performance bond and a payment bond. Both surety bonds incorporate by reference the terms of the subcontract between Vanguard and Ameresco. Dkt. No. 22, Ex. 1 at 2; Dkt. No. 22, Ex. 2 at 2. Both the surety bonds and the subcontract were signed in April of 2020.
On June 24, 2020, Vanguard sub-subcontracted with Ameri-Fab to supply labor and materials for the project. See Dkt. No. 17, Ex. C. The sub-subcontract between Vanguard and Ameri-Fab contains the following clauses:
26.1 Any dispute or claim between [Vanguard] and [Ameri-Fab] arising out of or relating to this Agreement shall, at [Vanguard]'s sole option, be resolved by litigation or binding arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then in effect. [Ameri-Fab] does not object to and consents to the joinder and participation of any person or entity in an arbitration involving [Vanguard] and [Ameri-Fab] that arises out of or relates to the Project, this Agreement or the Work . . . .Dkt. No. 17, Ex. C at 40. The sub-subcontract further states that it was "drafted, negotiated and entered into by each party with each having the opportunity to seek the advice of independent legal counsel." Dkt. No. 17, Ex. C at 42.
26.2 This Agreement shall be deemed to have been entered into and consummated in the State of New Jersey and shall be governed by and construed pursuant to the laws, without regard to the law of conflicts, of the State of New Jersey. The Federal Court of New Jersey, Newark Vicinage shall have exclusive jurisdiction and venue over any litigated dispute arising hereunder.
A dispute arose approximately two years into the work. On July 14, 2022, Vanguard alerted Ameri-Fab that Ameri-Fab's performance on the sub-subcontract was deficient, and Vanguard demanded that Ameri-Fab correct certain errors. See Dkt. No. 17, Ex. D at 4. The next day, Ameri-Fab responded with a demand letter to Vanguard and the surety Berkshire, alleging nonpayment by Vanguard for performed work and additional damages from unnecessary delays in construction. Ameri-Fab then unilaterally declared as void, pursuant to Chapter 272 of the Texas Business & Commerce Code, "any provisions contained in the subject construction contract . . . regarding the application of the law of a foreign state, a choice of venue in a foreign state, or arbitration in a foreign state." Dkt. No. 21, Ex. 1-A at 2. On July 19, Ameri-Fab initiated this lawsuit in the Western District of Texas, asserting claims against Vanguard and Berkshire. Ameri-Fab's complaint raises claims against Vanguard for breach of contract, violations of the Texas trust fund statute, see Tex. Prop. Code § 162.001 et seq., promissory estoppel, specific performance, declaratory judgment, and quantum meruit. See Dkt. No. 1. Against Berkshire, Ameri-Fab raises a claim for action on the payment bond. Id. Vanguard issued a formal notice of default to Ameri-Fab on July 25.
On August 9, Vanguard filed a motion seeking to transfer venue to the District of New Jersey pursuant to the sub-subcontract's terms and 28 U.S.C. § 1404(a). See Dkt. No. 17. That same day, Vanguard also initiated arbitration proceedings against Ameri-Fab in New Jersey. See Dkt. No. 17, Ex. E. Berkshire concurrently moved to stay in this Court any claims against it pending the results of an arbitration between Vanguard and Ameri-Fab. See Dkt. No. 19. The Court held a hearing on October 13, 2022, to address both pending motions.
Analysis
A. Defendants' Failure to Confer Doesn't Warrant Relief for Ameri-Fab.
Ameri-Fab begins by opposing the motion to transfer on the basis that Vanguard failed to confer prior to filing it. Ameri-Fab raises the same arguments against Berkshire's motion to stay. See Dkt. No. 22. But for the reasons stated further below, the Court does not reach the motion to stay and therefore addresses only Ameri-Fab's arguments on Vanguard's motion to transfer.
Local Rule CV-7(g) provides:
The court may refuse to hear or may deny a nondispositive motion unless the movant advises the court within the body of the motion that counsel for the parties have conferred in a good-faith attempt to resolve the matter by agreement and certifies the specific reason that no agreement could be made. If there is any ambiguity about whether a motion is dispositive or nondispositive, the parties should confer.The District Court's Standing Order additionally states that "[t]he Court will strike non-dispositive motions that do not include a Certificate of Conference," and that parties must additionally confer prior to filing certain motions to dismiss. Dkt. No. 5.
It is undisputed that Vanguard failed to confer. But the parties disagree about whether a § 1404(a) motion to transfer is dispositive or non-dispositive. Ameri-Fab cites an online dictionary definition and language from a prior version of Local Rule CV-7(c). Vanguard in turn cites several district court cases indicating that motions to transfer may be viewed as dispositive. Vanguard then points out that Ameri-Fab specifically objected to venue in New Jersey before filing suit, so the outcome of any conference was arguably preordained. See Dkt. No. 21, Ex. 1-A at 2.
But the parties both overlook the District Court's Referral Order. See Dkt. No. 7. Therein, the District Court clarifies that "all non-dispositive pretrial matters" in this case are referred to the Magistrate Judge. Dkt. No. 7 at 1. The Referral Order then lists 14 such "non-dispositive matters" that are specifically referred—that list includes every "motion to transfer venue" as well as any "motion to stay or abate." Dkt. No. 7 at 2. In other words, Vanguard's motion to transfer is specifically labeled non-dispositive under the controlling Referral Order.
Although Vanguard should have conferred with Ameri-Fab prior to filing its motion to transfer, the Court declines to strike Vanguard's motion. Doing so here would only waste time and resources. Even if the Court were to strike the present motion, Vanguard could simply refile it after conferring. A § 1404(a) motion to transfer may be raised at any point in the proceedings, and nothing in the present record reflects that striking the present motion under Local Rule CV-7 ought to be with prejudice. Accordingly, the Court will proceed to the merits of Vanguard's motion to transfer.
See, e.g., 15 Richard D. Freer, Fed. Prac. & Proc. Juris. § 3844 (4th ed. 2022) (noting that the statute sets no time limits and thus courts have granted motions to transfer "even after final judgment").
B. The Court Gives Effect to the Parties' Bargained-for Forum, Barring Any "Extraordinary Circumstances."
The Court's analysis begins with 28 U.S.C. § 1404(a), which states that "a district court may transfer any civil action . . . to any district or division to which all parties have consented," for the purposes of convenience and justice. See also In re Radmax, Ltd., 720 F.3d 285, 288 (5th Cir. 2013) (listing the private- and public-interest factors courts consider on motions to transfer). Where a § 1404(a) motion is premised on a contractual provision purporting to select an exclusive judicial forum, the calculus shifts from the § 1404(a) private- and public-interest factors typically considered. See Atl. Marine Const. Co. v. U.S. Dist. Ct. for W. Dist. of Texas, 571 U.S. 49, 63, 134 S.Ct. 568, 187 L.Ed.2d 487 (2013). Because such clauses in contracts generally represent the parties' bargained-for agreement as to the proper forum for a given dispute, "a district court should ordinarily transfer the case to the forum specified in that clause. Only under extraordinary circumstances unrelated to the convenience of the parties should a § 1404(a) motion be denied." Id. at 62, 134 S.Ct. 568 (footnote omitted).
More specifically, Atlantic Marine clarified that "[t]he presence of a valid forum-selection clause requires district courts to adjust their usual § 1404(a) analysis in three ways." Id. at 63, 134 S.Ct. 568. The modified test is as follows:
First, the plaintiff's choice of forum merits no weight. Rather, as the party defying the forum-selection clause, the plaintiff bears the burden of establishing that transfer to the forum for which the parties bargained is unwarranted . . . .Id. at 63-64, 134 S.Ct. 568. Accordingly, a valid forum-selection clause will be enforced "[i]n all but the most unusual cases," and the party seeking to avoid it bears a heavy burden. Id. at 66-67, 134 S.Ct. 568.
Second, a court evaluating a defendant's § 1404(a) motion to transfer based on a forum-selection clause should not consider arguments about the parties' private interests . . . .
As a consequence, a district court may consider arguments about public-interest factors only . . . .
Third, when a party bound by a forum-selection clause flouts its contractual obligation and files suit in a different forum, a § 1404(a) transfer of venue will not carry with it the original venue's choice-of-law rules—a factor that in some circumstances may affect public-interest considerations.
Because Vanguard brings its § 1404(a) motion to transfer pursuant to a bargained-for and presumptively valid forum-selection clause, the Court applies the modified Atlantic Marine test and disregards arguments based on the parties' private interests. The clause at issue here selects the federal court in New Jersey, Newark Vicinage, as the "exclusive jurisdiction and venue" for "any litigated dispute arising" under the sub-subcontract. Dkt. No. 17, Ex. C at 40. Ameri-Fab does not dispute that the claims at issue here fall within the clause's scope. As for the public-interest factors, Ameri-Fab cites court congestion in the District of New Jersey as its primary rationale for opposing transfer. See Dkt. No. 21 at 15-16. Ameri-Fab argues that the Western District of Texas has significantly fewer cases pending and a much shorter median time from filing to trial in 2022 when compared to the District of New Jersey. See Dkt. No. 21, Ex. 3. Ameri-Fab also asserts a generic local interest in resolving disputes over construction contracts in Texas, based on Chapter 272 of the Texas Business & Commerce Code, which disfavors forum-selection clauses in certain construction contracts. Ameri-Fab's remaining arguments also presuppose that Texas statutory law applies to this dispute and that the forum-selection clause has been voided. But Ameri-Fab does not identify any "extraordinary circumstances" in this run-of-the-mill contract dispute. As Atlantic Marine instructs, parties should normally be held to their bargains, and public-interest factors will rarely defeat a valid forum-selection clause. The Court is aware of no reason why this case should not be subject to that clear instruction.
The Court addresses Ameri-Fab's statutory and public policy arguments further below.
C. Texas Law Disfavoring Certain Forum-Selection Clauses Does Not Alter the Court's § 1404(a) Analysis Under Atlantic Marine.
The Court is unpersuaded by Ameri-Fab's primary contention that the forum-selection clause is not "valid" because Ameri-Fab invoked Texas law to "void" the clause prior to filing suit. Pursuant to the Texas law upon which this argument relies, such clauses are deemed "voidable" under certain circumstances:
If a construction contract or an agreement collateral to or affecting the construction contract contains a provision making the contract or agreement or any conflict arising under the contract or agreement subject to another state's law, litigation in the courts of another state, or arbitration in another state, that provision is voidable by a party obligated by the contract or agreement to perform the work that is the subject of the construction contract.Tex. Bus. & Com. Code § 272.001(b). Relying on that provision, Ameri-Fab elected to void the forum-selection clause in its demand letter to Vanguard shortly before commencing suit. See Dkt. No. 21, Ex. 1-A at 2. Ameri-Fab argues that because it voided the forum-selection clause and choice-of-law provision, there is no longer any "valid" forum-selection clause for this Court to apply, and Atlantic Marine is inapplicable. See Dkt. No. 21 at 7-8. Assuming for argument's sake that the Texas provision upon which this argument is premised is not itself a choice-of-law rule of Texas that Atlantic Marine instructs the Court to ignore, see 571 U.S. at 64-65, 134 S.Ct. 568, there are nonetheless several reasons why the Court finds this argument otherwise unpersuasive.
1. No binding precedent supports Ameri-Fab's argument. It is true that Atlantic Marine "presuppose[d] a contractually valid forum-selection clause" in its analysis without defining what "valid" in this context means. 571 U.S. at 62 n.5, 134 S.Ct. 568. The Fifth Circuit has acknowledged the ambiguity of this language but has not yet resolved, post-Atlantic Marine, whether state or federal law is applied to determine a forum-selection clause's "validity." See Barnett v. DynCorp Int'l, L.L.C., 831 F.3d 296, 301 (5th Cir. 2016) (identifying divergence between circuit courts in the context of forum non conveniens motions for dismissal, but not deciding the issue). Before Atlantic Marine, however, the Fifth Circuit held in Haynsworth v. The Corporation that "enforceability" of forum-selection clauses is determined under federal law. 121 F.3d 956, 962 (5th Cir. 1997).
Ameri-Fab does not assist its argument by relying on an Eighth Circuit opinion noting Atlantic Marine's lack of guidance on "when such clauses should be deemed invalid." In re Union Elec. Co., 787 F.3d 903, 907 (8th Cir. 2015). In that opinion, the Eighth Circuit affirmed a district court's decision to reconsider, in light of Atlantic Marine, its earlier finding that a forum-selection clause was invalid under Missouri public policy, and then to enforce the forum-selection clause pursuant to a § 1404(a) motion to transfer. Id. at 907-10; see also Union Elec. Co. v. Energy Ins. Mut. Ltd., No. 4:10-CV-1153 CEJ, 2014 WL 4450467, at *3 (E.D. Mo. Sept. 10, 2014) ("In this case, applying only Missouri's policy against enforcing forum-selection clauses . . . would defeat the multifaceted analysis intended by Congress as codified in § 1404(a)."). Without sufficient explanation, Ameri-Fab seeks the opposite result here.
Continuing to rely on decisions that are not binding on this Court, Ameri-Fab next cites two district court decisions purportedly addressing the "validity" inquiry. See Bustos v. Dennis, No. SA-17-CV-39-XR, 2017 WL 1049570 (W.D. Tex. Mar. 17, 2017); Suretec Ins. Co. v. C.R. Crawford Constr., LLC, No. 6:21-CV-00398-JDK, 2021 WL 6280376 (E.D. Tex. Dec. 15, 2021), report and recommendation adopted, No. 6:21-CV-398-JDK, 2022 WL 45056 (E.D. Tex. Jan. 4, 2022). But in Bustos, the parties never raised § 272.001, and the district court granted the § 1404(a) motion to transfer pursuant to a valid forum-selection clause. 2017 WL 1049570, at *4. Ameri-Fab finds the following more favorable language in Suretec: "Because the forum selection clause has been voided . . . under § 272.001 of the Texas Business and Commerce Code, there is no forum selection clause at issue to form the basis of an argument to dismiss or stay this action under the doctrine of forum non conveniens." 2021 WL 6280376, at *4. But Suretec also misses the mark, as the moving party there sought dismissal and never requested transfer. Id. As a result, the district court in Suretec never considered § 1404(a) or Atlantic Marine. Cf. 15 Richard D. Freer, Fed. Prac. & Proc. Juris. § 3847 (4th ed. 2022) (explaining that courts apply different standards to forum-selection clauses under motions to transfer as opposed to motions to dismiss for improper venue).
Simply put, Ameri-Fab cites no case binding on this Court that supports its view on the interplay of Texas Business and Commerce Code § 272.001 and 28 U.S.C. § 1404(a). As noted above, when faced with a presumptively valid forum-selection clause, Ameri-Fab bears the burden of defeating its own bargained-for provision under Atlantic Marine. Ameri-Fab simply has not carried that burden here.
2. There is no other compelling guidance that favors Ameri-Fab. Other federal courts struggling with determining what constitutes a "valid" forum-selection clause in this context have not found, as Ameri-Fab urges, that contrary state law is dispositive. The Court could locate no decisions squarely addressing the effect of Texas Business and Commerce Code § 272.001 in the context of a § 1404 transfer. One district court avoided the question by concluding that § 272.001 did not apply because the construction contract was within a federal enclave. See U.S. ex rel. JCrew Mgmt., Inc. v. Atl. Marine Const. Co., No. A-12-CV-228-LY, 2012 WL 8499879, at *2-3 (W.D. Tex. Aug. 6, 2012). The district court then declined to enforce the forum-selection clause due to the weight of the private-interest factors. Id. at *6-8. But the Supreme Court ultimately reversed that decision in Atlantic Marine. See 571 U.S. at 67-68, 134 S.Ct. 568. In another case, the District of New Mexico refused to invalidate a forum-selection clause under Texas law because the contract pointed to New Mexico law in its choice-of-law clause, which the plaintiff never elected to void, and § 272.001 only renders certain forum-selection clauses "voidable" as opposed to outright "prohibited." Dub-L-EE, LLC v. J. Carrizal Gen. Constr., Inc., No. 1:21-CV-00624-BRB-JHR, 2021 WL 4972430, at *2 (D.N.M. Oct. 26, 2021). The sub-subcontract here also contains a choice-of-law provision for New Jersey law, which Ameri-Fab also elected to void before filing suit. See Dkt. No. 21, Ex. 1-A at 2. But how Ameri-Fab chose, first, for all disputes arising under the contract to be governed by New Jersey law and yet was later entitled to invoke and rely upon a Texas law to void that same contractual choice is never adequately explained by Ameri-Fab.
Relying on J-Crew, Vanguard also belatedly argues in its reply that the federal-enclave doctrine precludes application of § 272.001. See Dkt. No. 24. But because the Court resolves this question under Atlantic Marine, there is no need to consider Vanguard's tardily raised federal-enclave arguments.
Nor is the Court moved by Ameri-Fab's contention that a majority of states have adopted laws similar to Texas's. See Dkt. No. 21 at 11 & n.8. While federal district courts in other districts applying similar state laws have reached varying conclusions, there is some consensus that the mere existence of a state law does not render a forum-selection clause invalid. See, e.g., CADS Constr., LLC v. Matrix Serv., Inc., No. 2:21-CV-00099, 2021 WL 4762406, at *4 (W.D. La. Oct. 12, 2021) (reasoning that "contractually valid" refers to contract-formation defenses and not state law disfavoring forum-selection clauses), aff'd, No. 2:21-CV-00099, 2021 WL 6327688 (W.D. La. Nov. 29, 2021); Blue Racer Midstream, LLC v. Kelchner, Inc., No. 3:16-CV-3296-K, 2018 WL 993781, at *3 (N.D. Tex. Feb. 21, 2018) (finding forum-selection clauses valid because argument based on Ohio law disfavoring them does not require courts to conduct contract interpretation); Corizon Health, Inc. v. CorrecTek Inc., No. 1:16-CV-00120-EJL-CWD, 2017 WL 3091456, at *5 (D. Idaho Feb. 3, 2017) (rejecting arguments that Idaho law rendering such clauses void and "against the public policy of Idaho" constitute "extraordinary circumstances" under Atlantic Marine). Indeed, courts in other circuits appear at most to consider the existence of a state statute purportedly rendering forum-selection clauses "voidable" as only one of many available factors in the § 1404(a) analysis. The Court does not attempt to extensively analyze the divergence of opinion on this question, because as noted above, Ameri-Fab cites no binding or sufficiently persuasive case supporting its position. But even if the Court were to take § 272.001 into consideration alongside Ameri-Fab's court-congestion data, there is simply not enough to make this one of the rare cases where public-interest factors outweigh a valid forum-selection clause.
The Court notes that in some circuits where state law governs the "validity" determination, state statutes rendering forum-selection clauses voidable may be applied. For example, in DePuy Synthes Sales, Inc. v. Howmedica Osteonics Corp., the Ninth Circuit held that state law governed the threshold question of whether a "contract contains a valid forum-selection clause," where a party purportedly elected to void a forum-selection clause pursuant to state law. 28 F.4th 956, 964 (9th Cir. 2022). Although this Court respectfully disagrees with the Ninth Circuit's analysis of controlling Supreme Court precedent, as explained further below, DePuy is factually distinguishable from the situation here. The Ninth Circuit based its analysis on the narrow scope of the California statute at issue, which "permits a party to unilaterally void a [forum-selection clause] agreed to without the assistance of counsel." Id. at 965; see also Cal. Lab. Code § 925 (rendering forum-selection clauses in employment contracts "voidable by the employee," but only when the employee was not "individually represented by legal counsel in negotiating the terms of [the] agreement"). As opposed to the broad language in § 272.001, the California law is limited to forum-selection clauses that were not the result of a fair bargaining process. This at least partially comports with M/S Bremen v. Zapata Off-Shore Co., which instructs courts to "give effect to the legitimate expectations of the parties, manifested in their freely negotiated agreement, by specifically enforcing the forum clause." 407 U.S. 1, 12, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972) (emphasis added). The California law therefore narrowly focused on contracts arguably not "unaffected by fraud, undue influence, or overweening bargaining power." Id. But cf. Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 593, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991) (rejecting the premise that forum-selection clauses may be unenforceable merely because they were not the result of negotiations). But that is not the case here. Ameri-Fab has made no allegations of fraud or overreaching, even explicitly disavowing any such arguments at the October 13, 2022, hearing. Even if DePuy were controlling precedent in this circuit, Texas law permits the invalidation of even freely negotiated forum-selection clauses without any showing or inference of fraud, contrary to Bremen.
3. Binding precedent precludes the application of state law that would prevent federal courts from conducting a multifaceted § 1404(a) analysis. Indeed, the Court suspects no weight should be attributed to § 272.001 or Ameri-Fab's election to "void" the forum-selection clause. Stewart Org. v. Ricoh Corp. involved a contract between parties from New Jersey and Alabama, which contained a forum-selection clause for the Southern District of New York. 487 U.S. 22, 24, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988). The question presented was how much weight to afford Alabama law that "looks unfavorably upon contractual" forum-selection clauses, which led the district court to deny a motion to transfer. Id.; see also Redwing Carriers, Inc. v. Foster, 382 So. 2d 554, 556 (Ala. 1980) ("We consider contract provisions which attempt to limit the jurisdiction of the courts of this state to be invalid and unenforceable as being contrary to public policy."), overruled by Pro. Ins. Corp. v. Sutherland, 700 So. 2d 347 (Ala. 1997). The Eleventh Circuit reversed, and the Supreme Court affirmed the reversal but under different reasoning. Stewart, 487 U.S. at 25, 108 S.Ct. 2239. The Stewart Court clarified that the first question a court must address is simply whether § 1404(a) applies. Id. at 29, 108 S.Ct. 2239. Once the court determines that § 1404(a) governs the venue dispute, the second step is to weigh the case-specific private- and public-interest factors. Id. at 29-31, 108 S.Ct. 2239. Because § 1404 is a valid exercise of Congress' powers, id. at 32, 108 S.Ct. 2239, where Alabama law disfavoring forum-selection clauses conflicted with the "[t]he flexible and individualized analysis Congress prescribed in § 1404(a)," the Court reasoned that "the instructions of Congress are supreme." Id. at 29-30, 108 S.Ct. 2239. Accordingly, Stewart held "that federal law," as opposed to contrary state law, "governs the District Court's decision whether to give effect to the parties' forum-selection clause." Id. at 32, 108 S.Ct. 2239 (emphasis added).
The Supreme Court reaffirmed Stewart's logic in Atlantic Marine. See 571 U.S. at 63-64, 134 S.Ct. 568. Because a forum-selection clause "may have figured centrally in the parties' negotiations and may have affected how they set monetary and other contractual terms," courts should enforce forum-selection clauses "[i]n all but the most unusual cases." Id. at 66, 134 S.Ct. 568. Moreover, to further discourage "forum shopping" and "gamesmanship," Atlantic Marine instructs courts to "not apply the law of the transferor venue to which the parties waived their right." Id.
The Court fails to see how the Texas law here is any different from the Alabama law given no weight in Stewart. And permitting Ameri-Fab to unilaterally void a bargained-for forum-selection clause after-the-fact would only encourage gamesmanship. The sub-subcontract before the Court clearly contains a forum-selection clause pointing to New Jersey. See Dkt. No. 17, Ex. C at 40. Ameri-Fab conceded at oral argument that the forum-selection clause here was the result of negotiation free from any fraud or overreaching. In other words, the forum-selection clause is ostensibly "valid" for purposes of Atlantic Marine. There is nothing unreasonable or unjust about holding the parties to their bargain. To conclude otherwise would require the Court to disregard the central holdings in Stewart and Atlantic Marine. Ameri-Fab has identified no extraordinary reason why the forum-selection clause should not be enforced.
Indeed, the sub-subcontract itself also confirms that it was "drafted, negotiated and entered into by each party with each having the opportunity to seek the advice of independent legal counsel." Dkt. No. 17, Ex. C at 42.
D. The Forum-Selection Clause Is Not "Unenforceable," and Ameri-Fab's Public Policy Arguments Are Misplaced.
Ameri-Fab lastly argues in the alternative that even if the forum-selection clause is "valid" and not "void" under Texas law, the clause is still "unenforceable." Contractual forum-selection clauses are presumptively "valid and should be enforced unless enforcement is shown by the resisting party to be 'unreasonable' under the circumstances." M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972); accord Stewart, 487 U.S. at 28, 108 S.Ct. 2239 (describing Bremen as "instructive" outside of admiralty context). In the Fifth Circuit, "unreasonableness" that might defeat an otherwise valid forum-selection clause requires "a clear showing" of certain conditions:
Unreasonableness potentially exists where (1) the incorporation of the forum selection clause into the agreement was the product of fraud or overreaching; (2) the party seeking to escape enforcement will for all practical purposes be deprived of his day in court because of the grave inconvenience or unfairness of the selected forum; (3) the fundamental unfairness of the chosen law will deprive the plaintiff of a remedy; or (4) enforcement of the forum selection clause would contravene a strong public policy of the forum state.Haynsworth, 121 F.3d at 963 (quotations omitted). Courts look to statutes and judicial decisions to determine the existence of any such public policy. See Bremen, 407 U.S. at 15, 92 S.Ct. 1907.
Ameri-Fab argues that § 272.001 constitutes a "strong public policy" in Texas against forum-selection clauses in certain construction contracts. Ameri-Fab explains that the Texas legislature first enacted this statute in 2007, and then expanded its scope in 2017 to include suppliers of labor and materials. See Dkt. No. 21 at 9. Ameri-Fab then quotes at length the 2017 sponsor's statement of intent. See Bill Analysis, Tex. S.B. 807, 85th Leg., R.S. (2017). Based on that legislative history and the plain language of § 272.001, Ameri-Fab concludes that Texas "law and public policy" requires that parties to construction contracts "be protected from the sorts of overreaching forum-selection, choice-of-law, and arbitration clauses Vanguard seeks to enforce in this case." Dkt. No. 21 at 10.
This history appears to be incorrect, as the 2007 law Ameri-Fab cites merely renumbered existing statutes. See Act of May 15, 2007, 80th Leg., R.S., ch. 885 (2007). Instead, § 272.001 was originally numbered as Tex. Bus. & Com. Code § 35.52 and was first enacted in 1993. Act of May 29, 1993, 73rd Leg., R.S., ch. 570, § 13 (1993). Contrary to any suggestion of a Texas-specific public policy, the 1993 law containing this provision was titled "Uniform Commercial Code—Leases," which may explain why so many states have similar statutes.
But once again, Ameri-Fab does not meet its burden to show that the parties' bargained-for forum-selection clause is unenforceable. As before, Ameri-Fab cites no case in support of its position that § 272.001 is a strong public policy such that enforcing any forum-selection clause counter to it would be per se "unreasonable." To the contrary, the Texas Supreme Court has reiterated that "Texas's strong public policy favoring freedom of contract" requires courts to "respect and enforce the terms of a contract the parties have freely and voluntarily entered." Philadelphia Indem. Ins. Co. v. White, 490 S.W.3d 468, 471 (Tex. 2016); accord Wood Motor Co. v. Nebel, 150 Tex. 86, 238 S.W.2d 181, 185 (1951) (describing "freedom of contract" as a "paramount public policy"). Weighed against the freedom of contract, the Texas Supreme Court has stated that "absent a Texas statute requiring suit to be brought in Texas, the existence of Texas statutory law in an area did not establish such Texas public policy as would negate a contractual forum-selection provision." In re Lyon Fin. Servs., Inc., 257 S.W.3d 228, 234 (Tex. 2008) (emphasis added); accord In re AutoNation, Inc., 228 S.W.3d 663, 669 (Tex. 2007). The Court could locate only two cases where Texas state courts interpreted § 272.001, and neither concluded that any such public policy exists. See In re MVP Terminalling, LLC, No. 14-21-00399-CV, 2022 WL 3592303, at *7 (Tex. App. Aug. 23, 2022) (per curiam) (reasoning that choice of language declaring construction-contract forum-selection clauses "voidable" as opposed to "void" or "against public policy" means parties may contractually waive their § 272.001 rights to challenge forum-selection clauses); Cleveland Const., Inc. v. Levco Const., Inc., 359 S.W.3d 843, 856 (Tex. App. 2012) (holding § 272.001 to be preempted by federal law as it pertains to arbitration clauses). And whereas § 272.001 renders certain forum-selection clauses "voidable," nowhere does it require suit to be brought in Texas. Quite simply, while § 272.001 may represent Texas public policy, Texas courts have set a much higher threshold for determining what policies may render an otherwise valid forum-selection clause "unenforceable." Cf. Al Copeland Invs., L.L.C. v. First Specialty Ins. Corp., 884 F.3d 540, 545 (5th Cir. 2018) (holding that Louisiana statute prohibiting clauses in insurance contracts that deprive state courts of "jurisdiction" did not amount to "strong public policy against" forum-selection clauses). Ameri-Fab supplies no argument to contend with Texas's countervailing "strong public policy" of enforcing the parties' freedom of contract.
Even assuming arguendo that the Texas legislative history Ameri-Fab quotes somehow qualifies as a "strong public policy," any such policy is of a very limited scope. The 2017 Texas legislature was apparently concerned with the fact that suppliers in construction contracts "often do not have the bargaining power to convince the owner or other parties to change the terms of the contract." Dkt. No. 21 at 10. Ameri-Fab thus argues that Texas public policy disfavors "overreaching" forum-selection clauses. But Ameri-Fab never argues that it lacked adequate bargaining power or that the contract was the result of an unequal playing field. And as noted above, Ameri-Fab explicitly disclaimed at the hearing any argument that the forum-selection clause was the result of "overreaching."
Conclusion
For the reasons discussed above, Vanguard's Motion to Transfer, Dkt. No. 17, is hereby GRANTED. Furthermore, the Court has discretion to sever or transfer related claims in the interests of convenience and judicial economy, see In re Rolls Royce Corp., 775 F.3d 671, 679-81 (5th Cir. 2014), and the Court will exercise that authority here. Berkshire has not sought transfer, although it has stated that it is unopposed to transferring any claims against it to the District of New Jersey as well. See Dkt. No. 19 at 4 n.1. Ameri-Fab has not stated whether it will consent to transfer of the claims against Berkshire, although in opposing the motion to stay, Ameri-Fab argues that Berkshire's surety bonds have incorporated by reference the sub-subcontract's arbitration clause. See Dkt. No. 22 at 4-6. Such logic arguably extends to the forum-selection clause as well. Accordingly, the parties appear to agree that the sub-subcontract's forum-selection clause also applies to Berkshire, and thus the private-interest factors affecting Berkshire and "the judicial economy considerations of having all claims determined in a single lawsuit," Rolls Royce, 775 F.3d at 681, both weigh in favor of a consolidated transfer.
Therefore, IT IS ORDERED that the Clerk shall TRANSFER this action and all claims asserted in Ameri-Fab's complaint, Dkt. No. 1, to the District of New Jersey, Newark Vicinage, pursuant to 28 U.S.C. § 1404(a), in the interests of convenience and judicial economy. Because the Court deems transfer of all claims advisable under these circumstances, Berkshire's Motion to Stay, Dkt. No. 19, is MOOT.
IT IS SO ORDERED.