Rocky Mountain Builders Supply Inc. v. Marks

2017 UT App 41THE UTAH COURT OF APPEALS
ROCKY MOUNTAIN BUILDERS SUPPLY INC.,
Appellant,
v.
STEVE MARKS,
Appellee.
Opinion
No. 20150456-CA
Filed March 2, 2017
Fourth District Court, Provo Department
The Honorable Samuel D. McVey
No. 140400095
George L. Chingas Jr., Attorney for Appellant
Steven R. Sumsion and Kevin R. Worthy, Attorneys
for Appellee
JUDGE GREGORY K. ORME authored this Opinion, in which JUDGE
STEPHEN L. ROTH and SENIOR JUDGE PAMELA T. GREENWOOD
concurred. 1
ORME, Judge:
¶1 Rocky Mountain Builders Supply Inc. (RMBS) appeals the
district court’s decision that a forum selection clause in RMBS’s
contract with Steve Marks was unenforceable and that the court
lacked jurisdiction to hear the case. Because we conclude that the
forum selection clause was enforceable and that the district court
indeed had jurisdiction over Marks, we reverse and remand.
1. Senior Judge Pamela T. Greenwood sat by special assignment
as authorized by law. See generally Utah R. Jud. Admin. 11-
201(6).
Rocky Mountain Builders Supply v. Marks
¶2 This appeal arises out of a seemingly simple contract
dispute between RMBS and Marks. RMBS, a Utah corporation, is
a roofing contractor with its principal place of business in Utah.
It has branch offices throughout the Intermountain West,
including in Havre, Montana, and is licensed to do business in
that state. Marks, a Montana resident, entered into a contract
with RMBS on November 19, 2013, for the installation of new
roofs on two gazebos and a shed at his Montana residence in
exchange for payment of $14,000. Marks agreed to pay $2,800 up
front and the remaining $11,200 upon completion. The form
contract supplied by RMBS contained a forum selection clause
designating Utah as the forum for resolution of any disputes
between the parties arising from the contract. After installation
was complete, a dispute arose between Marks and RMBS, and
Marks refused to pay the balance due. In response, RMBS sued
Marks in Utah’s Fourth District Court.
¶3 Marks filed a motion to dismiss RMBS’s complaint, which
the district court granted on the ground that the forum selection
clause was invalid and that, as a result, the court lacked personal
jurisdiction over Marks. The district court concluded that
because Marks was a private citizen rather than a business
entity, because the contract was for work on a residential
dwelling rather than a commercial property, and because the
amount in issue was relatively small, it would be unreasonable
to apply the forum selection clause to Marks. Citing Utah Code
section 13-8-3, the court further noted that “Utah law would not
enforce a forum selection clause selecting another state in a case
involving Utah real estate” and suggested that it would
therefore be “unjust to enforce such a clause in a contract
involving real estate of another state.” Cf. Utah Code Ann. § 13-
8-3(2)(a)–(b) (LexisNexis 2013) (“A provision in a construction
agreement requiring a dispute . . . to be resolved in a forum
outside of this state is void and unenforceable” if the “work to be
done and the equipment and materials to be supplied . . .
involves a construction project in this state.”). RMBS appealed.
20150456-CA 2 2017 UT App 41Rocky Mountain Builders Supply v. Marks
¶4 “Where a pretrial jurisdictional decision has been made
on documentary evidence only,” as was the case here, “an
appeal from that decision presents only legal questions that are
reviewed for correctness.” Arguello v. Industrial Woodworking
Machine Co., 838 P.2d 1120, 1121 (Utah 1992). In reviewing such a
decision, we grant no deference to the district court. See
Falkenrath v. Candela Corp., 2016 UT App 76, ¶ 6, 374 P.3d 1028.
¶5 Because RMBS stated at oral argument that it does not
challenge the district court’s conclusion that Utah law governs,
and because Marks does not raise a cross-appeal on that basis or
otherwise challenge the district court’s conclusion, we begin by
assuming that the enforceability of the forum selection clause is
to be interpreted according to Utah law. 2 In Prows v. Pinpoint
Retail Systems, Inc., 868 P.2d 809 (Utah 1993), the Utah Supreme
Court adopted the standard of enforceability found in the
Restatement. Id. This test requires an “agreement as to the place
2. The parties’ position is understandable. The contract contains
a choice of laws provision specifying that Utah law controls any
dispute between the parties. Absent such a contractual provision,
Utah courts typically apply the “most significant relationship”
test to determine which state’s laws should apply. See American
Nat’l Fire Ins. Co. v. Farmers Ins. Exch., 927 P.2d 186, 190–91 (Utah
1996). See also Restatement (Second) Conflict of Laws § 188(1)
(Am. Law Inst. 1971) (“The rights and duties of the parties with
respect to an issue in contract are determined by the local law of
the state which, with respect to that issue, has the most
significant relationship to the transaction and the parties[.]”).
Given that the contract was formed in Montana between a
Montana resident and a Montana-licensed contractor for work to
be performed in Montana, which work was ultimately
completed in Montana, it would seem that Montana had the
“most significant relationship” to the transaction and that its law
would apply, but for the contractual choice of laws provision.
20150456-CA 3 2017 UT App 41Rocky Mountain Builders Supply v. Marks
of [an] action . . . [to] be given effect unless it is unfair or
unreasonable.” Restatement (Second) Conflict of Laws § 80 (Am.
Law Inst. Supp. 1988). Here, the district court determined that,
given the nature of the underlying dispute (i.e., one involving
“someone who had work done on the roof of their . . . home”)
and “the amount at issue,” “the burden of proceeding in Utah
would impose a heavy financial and practical burden on
[Marks].” Thus, the court held that Utah was “so seriously an
inconvenient forum” that to require Marks to defend this lawsuit
here would be unjust and that the forum selection clause was
unenforceable, thus depriving the court of jurisdiction over
Marks. We disagree. 3
¶6 First, while RMBS is a corporate entity and thus may
possess some degree of sophistication that Marks lacks, neither
party has suggested to this court a reason why Marks was
unable to negotiate with RMBS over the terms of the agreement.
And seeing none, we decline to conclude that it is unfair, much
less unreasonable, to apply the forum selection clause to him. See
John Call Eng’g, Inc. v. Manti City Corp., 743 P.2d 1205, 1208 (Utah
1987) (“[E]ach party has the burden to read and understand
the terms of a contract before he or she affixes his or her
signature to it. A party may not sign a contract and thereafter
assert ignorance or failure to read the contract as a defense.”).
3. In disagreeing with the district court’s conclusion that it
lacked jurisdiction, we do not mean to imply that its concern
about Utah being a “seriously . . . inconvenient forum” is wholly
irrelevant. Forum non conveniens is a well-established doctrine
that allows a court with jurisdiction over a lawsuit to decline to
exercise that jurisdiction, as a matter of discretion, “when the
cause could better be tried in a more convenient court.” Summa
Corp. v. Lancer Indus., Inc., 559 P.2d 544, 545–46 (Utah 1977).
Accord Energy Claims Ltd. v. Catalyst Inv. Group Ltd., 2014 UT 13,
¶¶ 19, 36, 44, 325 P.3d 70.
20150456-CA 4 2017 UT App 41Rocky Mountain Builders Supply v. Marks
Second, and more importantly, the considerations that the
district court identified in its decision—the involvement of
Marks’s home in the dispute; the relatively small sum at issue;
and the fact that Marks is an individual, not a corporation—are
not of the type that would cause the enforcement of a forum
selection clause to be adjudged unfair or unjust. Cf. Prows, 868
P.2d at 813 (recognizing that where the enforcement of a forum
selection clause would force a party to litigate two separate cases
in two distant forums against two distinct parties, “only one of
whom is present at each trial,” and yet still “prov[e] a
‘conspiracy’ between [the] two,” to enforce the clause would be
“unjust and for all practical purposes den[y] [the party] his day
in court”). Thus, there being no other reason to provide special
protection to Marks, 4 the district court erred in concluding that
the forum selection clause in the contract Marks signed was
unenforceable.
¶7 Having determined that the forum selection clause is
enforceable, we consider the district court’s conclusion that it
lacked personal jurisdiction over Marks and thus could not
resolve the dispute between RMBS and Marks. Its jurisdictional
4. Although it may be true, as Marks argues, that if Marks were
to “hire Montana lawyers and expert witnesses [those lawyers
and witnesses would] charge prohibitively large sums to travel
to Utah for court appearances,” this clearly would not be the
most prudent course. Thus, Marks engaged Utah counsel to
handle his defense of the Utah action and this appeal. And it is
far from obvious that “hiring Utah lawyers and expert witnesses
to prepare for and attend trial” in Utah would be significantly
more expensive to Marks than hiring Montana lawyers and
expert witnesses to “prepare for and attend trial” in Montana—
as Marks would do should the case proceed in his home state.
Indeed, we were advised at oral argument that an action was
brought in Montana, which is on hold pending our decision.
20150456-CA 5 2017 UT App 41Rocky Mountain Builders Supply v. Marks
decision was largely a function of its conclusion that the clause
was unenforceable, but our contrary decision implicates an
additional analytic step.
¶8 In the case of an otherwise enforceable forum selection
clause, “jurisdiction may be properly exercised as long as there is
a rational nexus between the litigation and the State of Utah.”
Jacobsen Constr. Co. v. Teton Builders, 2005 UT 4, ¶ 7, 106 P.3d 719.
Thus, the Utah Supreme Court has noted that
under certain circumstances it may be reasonable
for a resident of Colorado and a resident of
Wyoming to bargain for a forum selection clause
designating Utah as the appropriate forum for any
dispute arising in relation to a contract to be
performed in Nevada. A Utah court hearing a
subsequent action brought pursuant to the contract
could very well find that the forum selection clause
was reasonable under the circumstances, but
nevertheless decline to exercise jurisdiction over
the matter due to the lack of a rational nexus to
Utah.
Id. ¶ 42. A rational nexus exists when at least one party to the
contract is a Utah resident. See id. ¶ 43. In this way, the rational
nexus test “operates as a safety valve, providing a mechanism
whereby Utah courts may decline to exercise jurisdiction when
Utah has no real interest in the outcome of a given dispute.” Id.
¶ 41. 5 Furthermore, the Supreme Court in Jacobsen Construction
recognized that the Utah Legislature has clearly indicated that it
5. It is important to note that under Jacobsen Construction v. Teton
Builders, 2005 UT 4, 106 P.3d 719, Utah courts may decline to
exercise the jurisdiction they have, see id. ¶ 41, but the district
court in this case erroneously concluded that it lacked
jurisdiction and thus was required to dismiss the action.
20150456-CA 6 2017 UT App 41Rocky Mountain Builders Supply v. Marks
is in “Utah’s policy interest [to] provid[e] its residents with a
forum in which they can pursue their legal claims.” Id. ¶ 28; see
Utah Code Ann. § 78B-3-201(2) (LexisNexis 2012) (“It is declared,
as a matter of legislative policy, that the public interest demands
the state provide its citizens with an effective means of redress
against nonresident persons, who, through certain significant
minimal contacts with this state, incur obligations to citizens
entitled to the state’s protection.”). And the Supreme Court
noted that this policy was “best served by enforcing [a] forum
selection clause . . . and allowing [the Utah resident] to litigate its
claims in its home state.” Jacobsen Constr., 2005 UT 4, ¶ 28. 6
¶9 The only distinctions Marks draws between this case and
Jacobsen Construction are that here a relatively small sum of
money is in dispute and that one of the parties to the contract
was an individual rather than a business. But courts have not
viewed these distinctions as dispositive in this context. See, e.g.,
Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 592–93, 595 (1991)
(“Including a reasonable forum clause in a form contract . . . may
be permissible for several reasons[.]”); Polzin v. Appleway Equip.
Leasing, Inc., 2008 MT 300, ¶¶ 1–7, 24, 191 P.3d 476 (upholding a
forum selection clause contained in “a standard contract”
between a corporate seller and an individual for the purchase of
a truck).
¶10 Ultimately, a rational nexus exists in this case for the
district court to exercise jurisdiction over Marks because RMBS
is a Utah corporation and its principal place of business,
6. Following this conclusion, the Supreme Court in Jacobsen
Construction rejected the argument that section 13-8-3 “codifies a
more general Utah public policy declaring that construction
disputes should be litigated in the state in which the project is
located,” 2005 UT 4, ¶ 27, an argument very similar to that
advanced by Marks and embraced by the district court in this
case.
20150456-CA 7 2017 UT App 41Rocky Mountain Builders Supply v. Marks
corporate officers, and legal counsel are all in Utah. And
enforcement of the forum selection clause is not unfair or
unreasonable. 7
¶11 The district court’s dismissal is reversed. The case is
remanded for further proceedings consistent with this opinion.
7. We do not mean to imply, however, that we would conclude
that personal jurisdiction existed over Marks in the absence of
the forum selection clause’s validity. Indeed, it is unlikely that
jurisdiction could be established under Utah’s long-arm statute.
See Utah Code Ann. § 78B-3-205 (LexisNexis 2012).
20150456-CA 8 2017 UT App 41