Business and Legal Insights

On federal construction projects, the parties may contract where they would like to litigate potential disputes, but care should be given as to what venue is selected based on various factors.

The Federal Statutes known as the “Miller Act” give certain entities working on federal construction projects the ability to bring a lawsuit based on the federal bond for the project. The Miller Act contains a venue provision, which provides that  “[a] civil action brought under this subsection must be brought . . . (B) in the United States District Court for any district in which the contract was to be performed and executed, regardless of the amount in controversy.” 40 U.S.C.A. § 3133(b)(3)(B).

Parties Can Decide Where to Litigate if there is a Valid Mandatory Forum Selection Clause in a Contract

Notwithstanding the Miller Act’s venue provision, however, parties to a contract may still decide where they would like to litigate potential disputes. Glob. Satellite Commc'n Co. v. Starmill U.K. Ltd., 378 F.3d 1269 (11th Cir. 2004). Courts have held that the Miller Act’s venue provision may be waived or superseded by a valid mandatory forum selection clause in a contract. U.S. for Use of B & D Mech. Contractors, Inc. v. St. Paul Mercury Ins. Co., 70 F.3d 1115 (10th Cir. 1995).

For example, if a subcontractor sues a contractor and its surety under the Miller Act, a valid mandatory venue provision in the subcontract will supersede the Miller Act venue provision, and the case will be transferred to the jurisdiction specified in the subcontract. Harold E Nutter & Son Inc. v. Tetra Tech Tesoro Inc, 14-CV-02060-JCS, 2014 WL 4922525, at *3 (N.D. Cal. 2014).

The Court Still Determines Validity of Forum Selection Based on Certain Factors

Of course, the court must still determine whether the forum-selection clause is mandatory and binding on the parties to the litigation. The court will then analyze the forum-selection clause under 28 U.S.C. § 1404(a), the federal transfer statute (instead of entertaining dismissal). Atl. Marine Constr. Co., Inc. v. U.S. District Court for the Western District of Texas, 134 S.Ct. 568, 187 L.Ed.2d 487 (2013).

The court will examine the parties private interests, as well as public interests weighing for or against transfer, such as: relative ease of access to sources of proof, availability of compulsory process for attendance of unwilling witnesses, cost of obtaining attendance of willing witnesses, possibility of view of premises, if appropriate, relative advantages and obstacles to a fair trial and all other practical problems that make the trial of a case easy, expeditious and inexpensive, as well as the enforceability of any judgment obtained. Van Dusen v. Barrack, 376 U.S. 612, 615 (1964).

Consistency is Key in Venue Provisions

Too often, these considerations are overlooked until litigation is pending. To ensure that a party is not forced to litigate claims in two separate forums, parties should consider these factors when drafting contracts before a project begins, and should ensure that all upstream and downstream contracts have consistent venue provisions.