Venue considerations in construction disputes.
Venue in General
Before discussing venue considerations in a construction setting, one must first consider the fundamental principles of venue. Most Florida actions are governed by F.S. [section]47.011, the general venue statute. Florida's general venue statute controls actions brought under common law, as well as matters brought pursuant to statutes that do not contain specific venue provisions. (2)
In addition to the general venue statute, Ch. 47 also contains several specific venue statutes. If there is a specific venue statute, the next step is to determine whether there is a conflict between the specific statute and the general statute. All conflicts between the general statute and a specific venue statute will be resolved in favor of applying the specific statute. (3)
Absent some statutory venue exception, parties are generally free to establish venue by agreement or stipulation. (4) Many construction contracts contain venue provisions that have pre-determined the location and forum for bringing and maintaining disputes regarding the contract. (5)
Absent a negotiated contract, parties must look to the Florida Statutes for guidance to determine proper venue. The Florida Legislature has provided a roadmap to aid construction attorneys in navigating this issue by enacting a specific venue statute that voids contractual venue provisions requiring resident contractors, subcontractors, sub-subcontractors, or materialmen to litigate claims outside of the state of Florida for disputes involving improvements to real property in this state. For this reason, the initial consideration for a practitioner handling a construction action is to determine whether the action must be litigated in Florida.
The Scope of F.S. [section]47.025
In Florida, contractual provisions for the improvement of real property that require the action be brought outside of the state are void as a matter of public policy pursuant to F.S. [section]47.025. Section 47.025, entitled "Actions against contractors," provides as follows:
Any venue provision in a contract for improvement to real property which requires legal action involving a resident contractor, subcontractor, sub-subcontractor, or materialman, as defined in part I of chapter 713, to be brought outside this state is void as a matter of public policy. To the extent that the venue provision in the contract is void under this section, any legal action arising out of that contract shall be brought only in this state in the county where the defendant resides, where the cause of action accrued, or where the property in litigation is located, unless, after the dispute arises, the parties stipulate to another venue. (6)
Before litigants can employ the protections of this construction venue statute, a preliminary determination must be made regarding whether or not the statute even applies. Having a construction dispute is not in itself dispositive of whether [section]47.025 applies. The statute protects resident "contractors," "subcontractors," "subsubcontractors," and "materialmen," (7) as defined by F.S. [section]713.01, et seq. (8)
If the litigants at issue do not fall within one of the above defined categories, then [section]47.025 does not apply. When the lawsuit does not involve a "contractor," "subcontractor," "subsubcontractor," or "materialmen," an out-of-state venue provision may be enforceable unless void for some other reason. If, on the other hand, the affected party is identified as being in one of the above defined categories, then [section]47.025 would likely apply, and the venue will lie in Florida unless the parties stipulate to a non-Florida venue after the dispute arises.
Interpreting F.S. [section]47.025
The seminal case interpreting [section]47.025 is Kerr Construction, Inc. v. Peters Contracting, Inc., 767 So. 2d 610 (Fla. 5th DCA 2000). In Kerr, a Florida subcontractor filed suit against a contractor in Orlando for damages stemming from breach of a subcontract. (9) The subcontract at issue contained a venue selection clause, which stated: "This agreement shall be construed in accordance with the laws of the Commonwealth of Kentucky and shall be enforced only in the courts of the Commonwealth of Kentucky." (10) The contractor moved to dismiss the complaint for improper venue based upon the subcontract's forum selection clause. (11)
On appeal, the Fifth District reviewed the legislative intent of [section]47.025 and ruled that the subcontract's venue selection clause was void. (12) According to the court, venue needed to be determined in accordance with Florida's general venue statute (i.e., F.S. [section]47.011). (13) In rendering its decision, the court was careful to avoid choice-of-law issues so as not to create an overly broad ruling. Specifically, the Fifth District noted that [section]47.025 did not address choice-of-law clauses, and, thus, they would remain valid and applicable despite the venue selection clauses being void. (14) Hence, contracts could still require application of out-of-state law, even though the venue would lie in Florida.
Who Is Considered a "Resident" Under [section]47.025?
The above scenario seems to pave a comprehensive path for practitioners. However, the issue of who qualifies as a "resident" could arise, since [section]47.025 specifically references and applies only to "resident" contractors, subcontractors, sub-subcontractors, or materialmen. (15) Suppose that you represent a Florida-licensed contractor who resides in Mississippi but has offices in Mississippi and Florida. Your client is served with a complaint or arbitration demand from a homeowner who is bringing an action for alleged damages to an unfinished home-construction project located in Pensacola. The homeowners currently reside in Mississippi and have filed the action in Mississippi insomuch as the construction contract's venue provision identifies Mississippi as the location to resolve all disputes. Moreover, the parties executed the contract in Mississippi. Can your client employ [section]47.025 as a basis to argue that venue lies in Florida? While [section]47.025 is clear regarding venue provisions against contractors, subcontractors, sub-subcontractors, or materialmen who reside within the state, it is less obvious when considering contractors, subcontractors, sub-subcontractors, or materialmen who perform services in Florida, but who in fact reside outside of the state. (16)
The crux of the argument may come down to whether the contractor is considered to be a "resident" contractor within the meaning of [section]47.025. There is no apparent case law interpreting this issue. Moreover, there does not appear to be any legislative history from which to garner an answer. From one perspective, it would seem that the protections of [section]47.025 would not apply under this scenario since the section is arguably designed to protect Florida residents who work on Florida-based projects from being dragged across the country due to onerous, multi-party contractual provisions. The protections of [section]47.025 would seem to have little to no significance if a contractor actually resides in the out-of-state locale where the action has been brought. Thus, if seeking to have the matter resolved in Florida, the contractor may be forced to forego a [section]47.025 argument and instead may fashion another broader venue argument (i.e., forum non conveniens, etc.).
Once it has been determined that an out-of-state venue provision is unenforceable, general venue principles can be considered to determine where venue lies within the state. Suppose, however, the contract does not contain an impermissible out-of-state venue provision, but the parties have contractually agreed to venue of disputes within the state. Below is a discussion of the numerous factors for parties to consider once it is determined that Florida is the proper venue (i.e., issues of contractual interpretation and transfer of venue within the state).
Permissive Versus Mandatory Contractual Venue Provisions
Contractual venue provisions are generally valid and enforceable in Florida. (17) Furthermore, by operation of a "flow-down clause," which incorporates the terms and conditions of an upper-tier contract or prime contract, a venue provision may also be enforced against a subcontractor, sub-subcontractor, or material supplier. (18) Only by examining the actual language of the venue provision can the construction practitioner be guided to the appropriate forum. Mandatory venue provisions generally contain words such as "shall," "must," and "only," which express a clear intention that all claims and disputes will be maintained in the specifically selected venue, (19) and which specifically identify the forum in which the action must be brought. For example, if the contract provides, "All actions, claims, or disputes arising or relating to this contract shall only be brought and maintained in the Circuit Court of Duval County," the fact that another venue may be appropriate for the action will not weigh in the court's enforcement of the mandatory venue provision. (20)
Any ambiguity contained in the contractual venue provision may result in an interpretation of the venue provision as permissive. Permissive venue provisions typically do not contain the express mandates for a particular forum; rather, permissive venue provisions indicate that one forum is favored over the other. The general venue considerations under F.S. Ch. 47 would apply to permissive venue provisions. (21) Permissive venue provisions allow the party bringing a claim to choose the venue, as long as the selected venue has some connection with the contractual provision or the general venue statute. Permissive venue provisions are, therefore, rather weak and may only provide the filing party with forum options in which to bring the action.
The choice of mandatory or permissive language can be significant if the party filing the claim intends to maintain some type of "home field advantage." However, the issue becomes more complex when the action involves the foreclosure of a construction lien to obtain payment for labor, materials, and services under the contract.
Venue for Construction Lien Foreclosures
Construction liens must be recorded in the public records in the county where the labor, services, and materials were provided, (22) regardless of any contractual venue provision and [section]47.011. Actions brought to foreclose a construction lien on real property should be brought in the county in which the property is located. (23) In VL Orlando Building Corp. v. A.G.D. Hospitality, 762 So. 2d 956 (Fla. 4th DCA 2000), the Fourth District affirmed the transfer of the construction lien foreclosure action to the county where the real property was located and held that circuit courts in other counties may have subject matter jurisdiction over construction lien foreclosure, but they do not have in rem jurisdiction. Therefore, the action to foreclose the construction lien was properly transferred to the county in which the property was located.
Even though a venue provision calls for venue in a different county, a court will be permitted to utilize its discretion and maintain a lien foreclosure action in the county where property is located. Keep in mind that a lien foreclosure action is asserted against the owner of real property, and, thus, the action to foreclose the claim of lien directly affects the property improved. The construction practitioner should conduct an analysis of the claims and related contractual provisions to conclude which county is appropriate for venue. Transferring a contractual claim to another forum in accordance with a venue provision may result in two separate actions in two separate counties regarding the same labor, service, and materials. The equation becomes even more unsettled when the contractor asserting the claim is in contractual privity with the owner of the real property. If the direct contract requires venue in a completely unrelated county, a court may still be within its discretion to maintain the action in the county where the real property improved is located, and, thus, give no weight to a valid venue provision. Of course, not all construction disputes involve construction liens. Sometimes the owner will transfer a construction lien from the real property to a bond. The owner of a construction project may also require the contractor to provide (through a surety) a payment bond for the labor, services, and materials in order to exempt the real property from construction liens. In these situations, the lienor may not have lien rights on the owner's real property, but can assert its claim against the bond instead.
Venue with F.S. [section]713.23 Payment Bonds and [section]713.24 Transfer Bonds
Section 713.24(3) provides that proper venue for a claim on a transfer bond is the county where the security was deposited. (24) In Miller & Solomon General Contractors, Inc. v. Brennan's Glass Company, Inc., 837 So. 2d 1182 (Fla. 4th DCA 2003), the Fourth District affirmed the denial of a motion to transfer venue based upon the statutory venue provision in [section]713.24. There, the contractor had secured a payment bond on a project in Broward County. A subcontractor filed suit against the contractor for breach of contract and to foreclose a construction lien. The lien was transferred to the bond. Dade County was the venue selected in the parties' contract. The surety was not made a party to the subcontract. The court held the Dade County venue provision did not apply to the claim on the bond, nor would it be appropriate to sever the bond claim and breach of contract claim in separate counties.
The court recognized that taken alone, the contract claim should be filed in Dade County, pursuant to the contractual venue provision, but that the statutory venue in [section]713.24 prohibited the determination of the bond claim in Dade County and ultimately prohibited the severability of the action into two separate lawsuits. The court enforced the statutory venue over the contractual venue by utilizing its discretion to consider the appropriate venue to avoid multiple suits in different forums, which could result in two different outcomes.
In Morganti South, Inc. v. Hardy Contractors, Inc., 397 So. 2d 378 (Fla. 4th DCA 1981), a material supplier to a subcontractor recorded a construction lien in Palm Beach County. The contractor transferred the construction lien to the payment bond under [section]713.24. The material supplier brought its action on the bond in Broward County. In reversing the trial court's denial of transfer of venue requested by the contractor, the appellate court held that proper venue of the action was in Palm Beach County, since the security for the bond was posted in Palm Beach County. (25) There is no indication in the appellate court's opinion as to whether a contractual venue provision prompted the material supplier to file its action in Broward County when the construction project, construction lien, and bond were all located in Palm Beach County. Regardless, assuming the surety was neither named or identified in the venue provision, the assumption can be made that, even in the presence of a venue provision, the action would have been transferred to the county where the security for the bond was located pursuant to the statutory venue mandated in [section]713.24.
The assumption above is further confirmed by the case of Miller & Solomon. In Miller & Solomon, a subcontractor on a construction project located in Broward County brought an action in Broward County to foreclose a construction lien and for breach of contract. The lien was transferred to a bond under [section]713.23(2), but the contractor filed a motion to enforce a venue provision in the subcontract by transferring the action to Dade County. The trial court denied the motion to transfer and refused to enforce the venue provision. (26) In upholding the trial court's ruling, the appellate court noted that 1) the surety was not a party to the venue provision; 2) the claim on the bond is independent from the contract claims; 3) splitting the action into two separate cases in two different counties may result in two separate outcomes; and 4) the statutory venue of [section]713.23 controlled. (27) The trial court applied its discretion and refused to sever the action. Furthermore, [section]713.23(1)(f) provides that a payment bond "must not contain any provisions restricting the venue of any proceeding." (28)
Conversely, in Walbridge Aldinger Company v. Robert's Plumbing Contractors, Inc., 800 So. 2d 285 (Fla. 3d DCA 2001), the Third District reversed the trial court's denial of a contractor's motion to change venue. A plumbing subcontractor filed a construction lien in Monroe County for amounts due, and the contractor transferred the construction lien to a bond under F.S. [section]713.24(1). When the subcontractor filed suit, the contractor moved to change venue to Broward County based upon a contractual venue provision in the subcontract.
In reversing the trial court's denial of the change of venue, the appellate court held that a mandatory venue selection clause in a contract should be enforced when there is no contention that the venue clause was somehow unreasonable, unjust, or procured through fraud. In addition, the venue provision contained an express reference to claims against the surety, (29) and the court deemed that contractual venue provision to control over the statutory provision in [section]713.24.
If the party filing a complaint desires to avoid the venue provision in the subcontract, it may file the action only against the surety since claims against the payment bond may be independently maintained. (30) In American Insurance Company v. Joiner Electric, Inc., 618 So. 2d 799 (Fla. 1st DCA 1993), a subcontractor on a prison facility located in Columbia County filed suit against the surety under [section]255.05. The action was brought in Leon County, but the surety sought an order requiring the transfer of the action to Lake County, pursuant to the venue provision contained in the subcontract between the contractor and subcontractor.
The trial court refused to transfer the venue. The First District upheld the decision and found that the surety had ignored the language contained in its labor and material bond issued to the prime contractor requiring that an action against the surety or contractor may be brought in the county in which the public building or public work is being constructed or in any other place authorized by the provisions of F.S. Ch. 47. (31) The court also applied the reasoning in Carlson Southeast Corp. v. Geolithic, Inc., 530 So. 2d 1069 (Fla. 1st DCA 1998), that when the performance required under a contract is a payment of money and no place for payment is specified in the contract, payment is due where the creditor resides because in such instance the debtor must seek the creditor. For purposes of this analysis, the contract is a surety bond which adopts the venue provisions of Ch. 47 and contains its own venue provision. The venue selected by the surety in its bond was Leon County, and the court refused to transfer venue.
Procedure to Transfer Venue
The party complaining about venue must raise the issue in its first responsive pleading, either by motion or affirmative defense, (32) and failure to raise the venue issue at the outset will result in a waiver of any contractual venue provision. (33) A motion to dismiss is not the favored procedural mechanism to enforce the venue provision. (34) Instead, a motion to transfer action for improper venue should be filed, asserting the existence of the contractual venue provision. Filing the motion to transfer under Fla. R. Civ. P. 1.140(b)(3) (2009) will not only protect against the waiver of the venue defense, but it will also serve as the responsive motion to the complaint, thus, preventing the claimant from seeking a default. The actual provision, with reference to the page and provision designation, should be included verbatim into the motion to transfer, since some complex construction contracts may be lengthy and complex.
If the motion to transfer is granted, careful attention should be paid to drafting the transfer order. Under Fla. R. Civ. P. 1.060 (2009), the party who commenced the action will likely be ordered to effectuate the transfer. The transfer of the case to the appropriate venue is accomplished when the transferring party contacts the clerk of the court of the appropriate venue and pays the clerk's service charge in the court to which the action is being transferred. The case file, along with a certified copy of the order transferring the case will be sent to the new venue. (35) If the transfer is not made within 30 days, the court ordering the transfer shall dismiss the action without prejudice. (36) The party requesting the transfer should take care to include a specific reference to this provision of the rule in the order as the dismissal of the action may affect applicable statute of limitations for construction lien foreclosures and actions against payment bonds.
Venue in construction disputes can involve a myriad of statutory schemes coupled with multifaceted contractual provisions. As a starting point, parties need to address [section]47.025 to ascertain whether their respective actions must be brought in Florida. If venue lies within Florida, parties should then address the specific principles that pertain to Florida venue--i.e., permissive versus mandatory contractual provisions, as well as statutory provisions, case law and procedural rules regarding construction liens, payment bonds, and transfer of venue. Due consideration must be given to the choice of venue and the specific facts so that a venue provision is not waived or rendered void or unenforceable, resulting in the loss of the benefit of the bargain related to the venue of construction disputes.
(1) See In re Fireman's Fund Ins. Co., 588 F.2d 93 (5th Cir. 1979) (wherein the Fifth Circuit transferred an action away from the location where the contract was to be performed. The court held that the Miller Act's venue provision is not jurisdictional, and, thus, can be waived or varied via a contract's negotiated forum selection clause) (note that this case cites to 40 U.S.C. [section]270, which is the former section for the Miller Act. The current section for the Miller Act is 40 U.S.C. [section]3131, et seq.).
(2) See PHILIP J. PADOVANO, FLORIDA CIVIL PRACTICE [section]2.1 (2003 ed.), citing Barr v. Florida Bd. of Regents, 644 So. 2d 333 (Fla. 1st D.C.A. 1994).
(3) See id., citing Mingione v. Mingione, 756 So. 2d 197 (Fla. 4th D.C.A. 2000).
(4) See, e.g., Four Star Resorts Bahamas Ltd. v. Allegro Resorts Mgt. Servs. Ltd., 734 So. 2d 576 (Fla. 3d D.C.A. 1999) (discussing the premise that parties are free to establish venue by agreement or stipulation); but see Florida Dep't of Children and Families v. Sun-Sentinel, Inc., 865 So. 2d 1278 (Fla. 2004) (addressing the "home venue privilege." The "home venue privilege" is the statutory requirement, which provides that actions brought against the state, or an agency or subdivision of the state, is only proper in the county in which the state, or the agency, or subdivision of the state, maintains its principal headquarters.).
(5) See American Institute of Architects A201, General Conditions of the Construction Contract (2007), Art. 15.3.3, requiring dispute resolution to be maintained in the county where the project is located.
(6) See FLA. STAT. [section]47.025 (2009).
(7) See id.
(8) "Contractor" is defined as "a person other than a materialman or laborer who enters into a contract with the owner of real property for improving it, or who takes over from a contractor as so defined the entire remaining work under such contract. The term 'contractor' includes an architect, landscape architect, or engineer who improves real property pursuant to a design-build contract authorized by [section 489.103(16)]." FLA. STAT. [section]713.01(8) (2009). "Subcontractor" is defined as "a person other than a materialman or laborer who enters into a contract with a contractor for the performance of any part of such contractor's contract, including the removal of solid waste from the real property. The term includes a temporary help firm as defined in [[section]443.101]." FLA. STAT. [section]713.01(28) (2009). "Sub-subcontractor" is defined as "a person other than a materialman or laborer who enters into a contract with a subcontractor for the performance of any part of such subcontractor's contract, including the removal of solid waste from the real property. The term includes a temporary help firm as defined in [[section]443.101]." FLA. STAT. [section]713.01(29) (2009). "Materialman" is defined as "any person who furnishes materials under contract to the owner, contractor, subcontractor, or sub-subcontractor on the site of the improvement or for direct delivery to the site of the improvement or, for specially fabricated materials, off the site of the improvement for the particular improvement, and who performs no labor in the installation thereof." FLA. STAT. [section]713.01(20) (2009).
(9) See Kerr Construction, Inc. v. Peters Contracting, Inc., 767 So. 2d 610, 611-12 (Fla. 5th D.C.A. 2000).
(10) Id. at 612.
(11) See id.
(12) See id. at 613.
(13) See id. at 613.
(14) See id.
(15) See, e.g., FLA. STAT. [section]47.025 (2009).
(16) As a practical note, an initial inquiry must be made when dealing with an out-of-state contractor, namely, determining whether the contractor is even properly licensed to perform its scope of services in Florida. See FLA. STAT. [section]489.128 (2009).
(17) Quality Concrete and Rental, Inc. v. K.A. Lumber Company, Inc., 895 So. 2d 1230 (Fla. 4th D.C.A. 2005).
(18) Druhill Construction., Inc. v. RSH Constructors, Inc., 518 So. 2d 951 (Fla. 1st D.C.A. 1988).
(19) See LARRY R. LEIBY, FLORIDA CONSTRUCTION LAW MANUAL, Contract Terms [section]7:28 (2008-2009 ed.).
(20) Travel Country RV Center, Inc. v. Baxter, 932 So. 2d 547 (Fla. 1st D.C.A. 2006).
(21) Place of payment, location of defendants, and location where the cause of action or transaction accrues.
(22) FLA. STAT. [section]713.08(5) (2009).
(23) Tietig Company v. Riccio, 551 So. 2d 1016 Fla. (Fla. 3d D.C.A. 1984).
(24) Any party having an interest in such security or the property from which the lien was transferred may at any time, and any number of times, file a complaint in chancery in the circuit court of the county where such security is deposited, or file a motion in a pending action to enforce a lien, for an order to require additional security, reduction of security, change, or substitution of sureties, payment of discharge thereof, or any other matter affecting said security. FLA. STAT. [section]713.24(3) (2009).
(25) See Morganti South, 397 So. 2d at 379.
(26) The court did recognize that standing alone, the contract claim was subject to the venue provision.
(27) Miller & Solomon, 837 So. 2d at 1184.
(28) Any lienor has a direct right of action on the bond against the surety. A bond must not contain any provisions restricting the classes of persons protected thereby or the venue of any proceeding. FLA. STAT. [section]713.23(1)(f) (2009).
(29) The venue provision in Walbridge read as follows: "In the event of a suit by Walbridge, or its surety, against Subcontractor, or its surety, or those with whom it deals on behalf of this Subcontract Agreement, or suit by Subcontractor, or its surety, or those with whom it deals on behalf of this Subcontract Agreement against Walbridge or its surety, the venue of such suit shall only be in the state court of Hillsborough County, Florida." Walbridge and its subcontractor subsequently executed a change order which changes Hillsborough County to Broward County.
(30) Any lienor has a direct right of action on the bond against the surety. A bond must not contain any provisions restricting the classes of persons protected thereby or the venue of any proceeding. FLA. STAT. [section]713.23(f) (2009).
(31) American Insurance Co., 618 So. 2d at 799.
(32) Gross v. Franklin, 387 So. 2d 1046 (Fla. 3d D.C.A. 1980).
(33) Marine Environmental Partners, Inc. v. Johnson, 863 So. 2d 423 (Fla. 4th D.C.A. 2003).
(34) Gross, 387 So. 2d at 1048.
(35) FLA. R. CIV. P. 1.170(j) (2009).
36 See FLA. R. CIV. P. 1.060(c) (2009).
Christopher M. Cobb is a board certified construction attorney and shareholder with the Jacksonville law firm of Tritt/Henderson, where he practices in the areas of construction lien and payment bond litigation, construction defect litigation, business litigation, and commercial collections.
Bryan R. Rendzio is an attorney with the Jacksonville law firm of Tritt/ Henderson, where he practices in the areas of construction lien and payment bond litigation, construction defect litigation, business litigation, and appellate law.
This column is submitted on behalf of the Real Property, Probate and Trust Law Section, John B. Neukamm, chair, and William P. Sklar and Richard R. Gans, editors.
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|Author:||Cobb, Christopher M.; Rendzio, Bryan R.|
|Publication:||Florida Bar Journal|
|Date:||May 1, 2010|
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