P C L Civil Constructors, Inc. v. Arch Insurance C ( 2020 )

Case: 20-30187 Document: 00515629401 Page: 1 Date Filed: 11/06/2020
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
No. 20-30187
Summary Calendar
FILED
November 6, 2020
Lyle W. Cayce
PCL Civil Constructors, Incorporated, Clerk
Plaintiff—Appellant,
versus
Arch Insurance Company,
Defendant—Appellee.
Appeal from the United States District Court
for the Western District of Louisiana
USDC No. 5:19-CV-491
Before CLEMENT, HIGGINSON, and ENGELHARDT, Circuit
Judges.
STEPHEN A. HIGGINSON, Circuit Judge:
PCL Civil Constructors, Inc. (“PCL”) appeals a judgment of
dismissal without prejudice based on forum non conveniens. The district court
enforced a disputed forum selection clause requiring litigation in the 19th
Judicial District Court in and for the Parish of East Baton Rouge, Louisiana.
Because the forum selection clause is mandatory and enforceable, and
because the appellant has waived any argument that public interest requires
retention of this lawsuit in the federal court system, we AFFIRM.
Case: 20-30187 Document: 00515629401 Page: 2 Date Filed: 11/06/2020
No. 20-30187
I.
The disputed forum selection clause applies to the parties before the
court by way of three contracts that incorporate each other’s terms: (1) the
“Prime Contract”—a contract between PCL, a general contractor, and its
client, the Louisiana Department of Transportation and Development
(“DOTD”); (2) the “Subcontract”—a contract between PCL and a
subcontractor, Command Construction Industries, LLC (“Command”);
and (3) the “Bond”—a contract detailing the terms of a performance bond
between Command and a surety company, Arch Insurance Company
(“Arch”).
First, PCL entered into a contract with the Louisiana DOTD to
perform work on a public works project (the “Prime Contract”). The Prime
Contract enumerates a list of “Contract Documents” that are incorporated
into the Prime Contract, including the Louisiana Standard Specifications for
Roads and Bridges, 2006 Edition (the “2006 Standard Specifications”).
Section 107.01 of the 2006 Standard Specifications provides the disputed
forum selection clause: that “any litigation arising under or related to the
contract or the bidding or award thereof shall be instituted in the 19th Judicial
District Court in and for the Parish of East Baton Rouge, State of Louisiana.”
In turn, PCL, as general contractor, entered into a contract with
subcontractor Command to perform certain work on the DOTD project (the
“Subcontract”). The Subcontract incorporates the Uniform Special
Conditions to Subcontract, and Article 1.1 of Uniform Special Conditions to
Subcontract provides that all provisions of the Prime Contract are
incorporated into the Subcontract: “The Prime Contract is incorporated
herein by reference and made an integral part of the Subcontract.”
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Finally, in connection with its work on the DOTD project, Command
provided a performance bond (the “Bond”) for $2,223,144.00 issued by
Arch. The Bond names PCL as obligee and incorporates the Subcontract,
providing that the “Subcontract is by reference made a part hereof.”
In short, the Bond incorporates the Subcontract in its entirety, which
incorporates the Prime Contract in its entirety.
The instant dispute arose when, resting on diversity jurisdiction, PCL
sued Arch in the United States District Court for the Western District of
Louisiana, alleging that Command had defaulted under the Subcontract and
seeking payment under the Bond from Arch. Arch filed a motion to dismiss
on the ground of forum non conveniens, arguing that any dispute must be
brought in the 19th Judicial District Court in and for the Parish of East Baton
Rouge, as provided in the Prime Contract. The district court granted Arch’s
motion, and PCL appealed.
II.
Forum non conveniens is a doctrine under which a court may decline to
exercise its jurisdiction and dismiss a case that is otherwise properly before it
so that the case can be adjudicated in another forum. Forum non conveniens is
“the appropriate way to enforce a forum-selection clause pointing to a state
or foreign forum.” Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of
Texas, 571 U.S. 49, 60 (2013).
When reviewing forum non conveniens rulings involving forum
selection clauses, “[w]e review de novo the district court’s conclusions that
the [forum selection clause] was mandatory and enforceable.” Weber v.
PACT XPP Techs., AG, 811 F.3d 758, 766 (5th Cir. 2016). Then, “[w]e
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review for abuse of discretion the district court’s use of Atlantic Marine’s
balancing test” of public-interest factors. Id.A.
We first consider, de novo, whether the forum selection clause is
mandatory or permissive. Id. at 768. A forum selection clause is mandatory
if it “affirmatively requires that litigation arising from the contract be carried
out in a given forum.” Id.
Here, the forum selection clause provides that “any litigation arising
under or related to the contract or the bidding or award thereof shall be
instituted in the 19th Judicial District Court in and for the Parish of East
Baton Rouge, State of Louisiana” (emphasis added). Under Louisiana law, 1
the word “shall” is routinely construed as mandatory. See, e.g., Bateman v.
Louisiana Pub. Emps. Council No. 17 of Am. Fed’n of State, Cty. & Mun. Emps.,
AFL-CIO, 94-1951 (La. App. 4 Cir. 7/26/95); 660 So. 2d 80, 82 (affirming a
trial court’s interpretation of the word “shall” as “mandatory” in a contract
provision); cf. LA. STAT. ANN. § 1:3 (“The word ‘shall’ is mandatory and the
word ‘may’ is permissive.”); LA. CODE CIV. PROC. ANN. art. 5053 (same);
LA. CODE CRIM. PROC. ANN. art. 5 (same). Accordingly, we find that the
district court correctly held that the forum selection clause is mandatory.
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When interpreting the words in a forum selection clause, “[a] federal court sitting
in diversity applies the forum state’s choice-of-law rules to determine which substantive
law will apply.” Weber, 811 F.3d at 770. Here, we do not undertake a choice-of-law analysis
because the parties do not appear to dispute that Louisiana law governs the interpretation
of the contracts in this case.
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B.
We next consider, de novo, whether the forum selection clause is
enforceable. Weber, 811 F.3d at 766. Federal law applies to determine the
enforceability of forum selection clauses in diversity cases. All. Health Grp.,
LLC v. Bridging Health Options, LLC, 553 F.3d 397, 399 (5th Cir. 2008).
Under federal law, the party resisting enforcement of a forum selection clause
bears a “heavy burden of proof,” Ginter ex rel. Ballard v. Belcher, Prendergast
& Laporte, 536 F.3d 439, 441 (5th Cir. 2008) (quoting Haynsworth v.
Corporation, 121 F.3d 956, 963 (5th Cir. 1997)), and this court “applies a
strong presumption in favor of the enforcement of mandatory [forum
selection clauses],” Weber, 811 F.3d at 773. When “a litigant in federal court
attempts to have a case dismissed based on a contractual provision requiring
suit to be filed in state court, the forum-selection clause should be upheld
unless the party opposing its enforcement can show that the clause is
unreasonable.” Ginter, 536 F.3d at 441. A party may show the disputed
clause is unreasonable if
(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 (citing Carnival Cruise Lines, Inc. v. Shute, 499
U.S. 585, 595 (1991); M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12–13,
15, 18 (1972)). Here, PCL has not presented any argument that supports a
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finding that the forum selection clause is unreasonable. The district court
correctly held that the forum selection clause is enforceable.
C.
Finally, in a typical case involving a mandatory, enforceable forum
selection clause, we would “review for abuse of discretion the district court’s
use of Atlantic Marine’s balancing test” of public-interest factors. Weber, 811
F.3d at 766. However, PCL does not challenge the district court’s balancing
of the public-interest factors and thus waives this argument on appeal. United
States v. Young, 872 F.3d 742, 747 (5th Cir. 2017).
III.
PCL’s primary argument in the district court and on appeal is that the
forum selection clause in Section 107.01 of the 2006 Standard Specifications
simply does not govern the instant suit. Specifically, PCL argues that the
Bond does not incorporate the portion of the Prime Contract that contains
the forum selection clause (Section 107.01 of the 2006 Standard
Specifications), so the clause cannot govern the dispute between PCL and
Arch. In response to this argument, the district court held that it is
“unambiguously clear from the governing documents at issue that the Bond
incorporates Section 107.01 through Plaintiff’s underlying Subcontract with
Command, which thereby incorporates the Prime Contract itself.” Whether
a contract is ambiguous, as well as the interpretation of an unambiguous
contract, are questions of law that are reviewed de novo. Texas v. Am. Tobacco
Co., 463 F.3d 399, 406 (5th Cir. 2006) (citing Stinnett v. Colorado Interstate
Gas. Co., 227 F.3d 247, 254 (5th Cir.2000)).
It is a well established rule of contract law that “separate documents
may be incorporated into a contract by attachment or reference thereto.”
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Russellville Steel Co. v. A & R Excavating, Inc., 624 So. 2d 11, 13 (La. Ct. App.
1993) (citing Action Fin. Corp. v. Nichols, 180 So. 2d 81, 83 (La. Ct. App.
1965)). Here, the Bond specifically incorporates the Subcontract
(“Subcontract is by reference made a part hereof”), which in turn
specifically incorporates the Prime Contract (“The Prime Contract is
incorporated herein by reference and made an integral part of the
Subcontract.”). Indeed, as this court has previously recognized, “where a
contract expressly refers to and incorporates another instrument in specific
terms which show a clear intent to incorporate that instrument into the
contract, both instruments are to be construed together.” One Beacon Ins.
Co. v. Crowley Marine Servs., Inc., 648 F.3d 258, 267 (5th Cir. 2011). We find
that the district court correctly held that the Bond incorporates the forum
selection clause in Section 107.01 of the 2006 Standard Specifications.
Nevertheless, PCL argues that a forum selection clause in a different
provision, Article 12.9.5 of the Uniform Special Conditions to Subcontract
(incorporated in the Subcontract), should govern this dispute rather than
Section 107.01. Article 12.9.5 provides that “[a]ny mediation, arbitration or
legal proceeding permitted hereunder shall be commenced and proceed in
the county in which the Project is located, unless the parties agree in writing
to a different location.” The district court rejected this argument, explaining
that Article 12.9.5 “expressly states that it will not apply if the parties agree
in writing to a different location, which the parties have plainly done as pro-
vided in Section 107.01.”
Under Louisiana contract law, “[e]ach provision in a contract must be
interpreted in light of the other provisions so that each is given the meaning
suggested by the contract as a whole.” LA. CIV. CODE ANN. art. 2050. As we
determined above, the Bond fully incorporates the Subcontract, which fully
incorporates the Prime Contract. Thus, we must read Section 107.01 to-
gether with Article 12.9.5. In doing so we agree with the district court’s
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interpretation that, as contemplated by Article 12.9.5, the parties before the
court, and as incorporated in the relevant governing documents, have
“agreed in writing to a different location” for litigation: the 19th Judicial
District Court in and for the Parish of East Baton Rouge, as provided in Sec-
tion 107.01.
IV.
The forum selection clause contained in Section 107.01 of the 2006
Standard Specifications governs the dispute at issue, is mandatory, and is en-
forceable. Appellant has waived any argument that public-interest factors re-
quire retention of this suit in the federal court system. The district court’s
dismissal without prejudice on the ground of forum non conveniens is AF-
FIRMED.
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