Is This a Forum Selection Clause, or Not?

Forum selection clauses have become commonplace in construction contracts. Most general contractors take steps to ensure that they can bring their subs into the same forum as the owner, should there be an owner dispute that involves the sub’s work. One contractor has just been reminded that its subcontract has a joinder clause, which is not the same as a forum selection clause.

A forum selection clause will read something like this:

Contractor and Subcontractor agree that all disputes arising under this Subcontract shall be decided by litigation brought in the Suffolk Superior Court in Massachusetts or in the federal District Court serving Suffolk County.

Forum selection clauses are routinely enforced, except when a court finds that one party has a compelling interest (usually based on a particular state law) that can only be addressed in another forum.

A federal court in Pennsylvania has just reminded a general contractor, though, that it does not have a forum selection clause in its subcontract. The clause at issue read, in part:

Subcontractor agrees . . . Contractor shall have the exclusive right to join Subcontractor in any dispute resolution procedure (including without limitation ADR procedures, binding arbitration or other judicial or non-judicial proceeding) in which Contractor may be involved arising out of or in connection with the Project.

When the sub filed suit against the general, and the general was later sued by the project owner, the general sought to dismiss the sub’s lawsuit and compel the sub to join in the owner-filed lawsuit. But the court denied the general’s motion. It held that the second joinder clause noted above “does not ‘mandate litigation in any particular forum’ nor dies it ‘restrict [the sub’s] right to bring its own claims’ in any jurisdiction.”

The subcontract clause was not a forum selection clause. The contractor may be able to bring the sub into the owner lawsuit, but will not be able to halt, or shift, the sub’s lawsuit. So the general will be faced with fighting on two fronts, with potential inconsistent outcomes. The case is Madison Constr. Co. v. Turner Constr. Co., 2019 U.S. Dist. LEXIS 191602 (Nov. 5, 2019) (subscription required).