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Forum Selection Clause Dooms Subcontractor Suit

Posted on: May 28th, 2021

By: Ben Dunlap

The First Circuit Court of Appeals recently affirmed the dismissal of a subcontractor’s suit against a construction contractor, holding that the trial court correctly enforced the terms of the parties’ agreement as to where a lawsuit could be filed. The case focuses attention on an often-overlooked area of construction law contracting: the forum selection clause.

Atlas Glass & Mirror, Inc. v. Tri-North Builders, Inc., arose out of a hotel renovation project in Framingham, Massachusetts. The defendant Tri-North Builders, Inc., was the general contractor. After preliminary discussions, the plaintiff Atlas Glass & Mirror, Inc. submitted a one-page proposal to supply and install windows on the project. The proposal identified the window types, estimated prices, and specified the work, which called for the supply and installation of over 250 windows. It contained very few other terms. Tri-North neither signed nor returned the contract proposal. Instead, it requested that Atlas supply and install a sample window, and sent along an eight-page contract (the “Subcontract”), governing the installation of the sample window. The Subcontract identified the window to be installed, the work to be done, and the price. It also included additional “Terms and Conditions,” one of which specified Wisconsin as the forum and venue for any litigation or arbitration. Atlas signed and returned the Subcontract to Tri-North. After Atlas installed the sample Lockheed window, it supplied and installed another sample window at Tri-North’s request. Atlas then sent two invoices to Tri-North corresponding to the two sample-window installations. Each invoice specified “Terms” as “Per Contract” and identified the Subcontract as the pertinent contract.

Thereafter, Tri-North notified Atlas that it would send “a contract your way with the anticipated cost for all windows.” The parties never exchanged any new contract proposals. Instead, Atlas proceeded to supply and install additional windows, using the window specifications in its proposal, and invoicing Tri-North with reference to the Subcontract. 

The parties eventually disagreed over the amount and timing of payments due to Atlas. After efforts to settle failed, Atlas sued in Massachusetts Superior Court for amounts due, again referring to the Subcontract.

Tri-North moved to dismiss, arguing that the forum selection clause in the Subcontract barred Atlas’s Massachusetts suit.

The forum selection clause provided that in the event of any dispute arising from the Subcontract, Tri-North could choose whether the parties would resolve the dispute through (1) litigation, (2) the dispute resolution clause of the agreement between Tri-North and the project owner, or (3) binding arbitration in accordance with (at Tri-North’s option) either Wisconsin Statutes Chapter 788 or the Construction Industry Arbitration Rules of the American Arbitration Association then currently in effect. The provision then stated that “[f]orum and venue for any arbitration or litigation shall be Dane County, Wisconsin,” and that Atlas “consents to the jurisdiction of the courts of Wisconsin.” Finally, the provision stated that the Subcontract and “any dispute arising under” it “shall be governed and interpreted with the Laws of the State of Wisconsin.”

Atlas opposed the motion by arguing that the forum selection clause in the Subcontract was not applicable because the Subcontract had “no relationship to the work performed by Atlas . . . for which it is seeking to be paid.” The Trial Court disagreed and dismissed Atlas’s complaint.

On appeal, the First Circuit concluded that the forum selection clause was binding and therefore the suit was properly dismissed. The Court reasoned that although the Subcontract may not have contained all terms governing Atlas’s supply and installation for windows on the project (as it identified only the sample window), the terms and conditions of the Subcontract, including the forum selection clause, were clearly a part of the agreement between Atlas and Tri-North.

Atlas argued additionally that the forum selection clause should not be enforced because of the unequal bargaining positions of the parties. The Court considered but rejected this argument, noting that even though Atlas was a small 10-person company and Tri-North was a large contractor with revenues estimated in the hundreds of millions, that inequality alone does not make the forum selection clause unenforceable.

As a result, Atlas’s remedy lay not in Massachusetts where it is based and the project was located, but in Wisconsin, the home turf of Tri-North.

For more information, please contact Ben Dunlap at [email protected].

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