Tag Archives: joinder

COMPELLING REASONS NOT TO ENFORCE SUBCONTRACT VENUE PROVISIONS IN MULTI-PARTY CONSTRUCTION DEFECT CASES

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Subcontracts oftentimes contain venue provisions as to the exclusive venue for lawsuits.  These venue provisions or forum selection clauses are consistent with the general contractor’s preferred venue; the venue, however, may be in a location unrelated to the project site. Sometimes the general contractor is sued by an owner (or association) for construction defects in a venue different than the venue included in the subcontracts.  The general contractor, as it should, will third-party into the lawsuit those subcontractors that are implicated by the owner’s complaint for breach of contract, indemnification, etc.

 

Certain subcontractors will move to transfer venue based on the venue provision in their subcontract.  Despite the venue provision, transferring venue is really in no one’s best interest since it is more efficient and economical to have multi-party construction defect cases tried and adjudicated in the same action versus many separate actions.  The recent case of Love’s Window & Door Installation, Inc. v. Acousti Engineering, Etc., 39 Fla. L. Weekly D1963a (Fla. 5th DCA 2014) supports this position.  In this multi-party construction defect case, a sub-subcontractor that was sued by the subcontractor that hired it moved to transfer venue.  The trial court denied the motion and the sub-subcontractor appealed.  The Fifth District Court of Appeal agreed with the trial court that there were compelling reasons not to enforce the venue provision (e.g., to prevent multiple lawsuits, minimize judicial labor, avoid inconsistent results, and reduce expenses).

 

Yes, venue provisions are important and routinely enforceable.  But, there are times where it is in the interests of justice and the parties NOT to enforce a venue provision, such as a multi-party construction defect case.

 

Notwithstanding, I always like to include a joinder provision in a construction contract that allows the hiring party (e.g., general contractor) to sue the hired party (e.g., subcontractor) in any forum and venue that the hiring party is sued.  For example, in a subcontract, I would want a provision that allows the general contractor to sue (or third-party / join) the subcontractor in any venue and forum the general contractor is sued by any third-party, association, or owner.  Such a provision ensures that even if the hired party (subcontractor) wants to rely on the venue provision, there is a joinder provision in the subcontract that negates the application of the venue provision in this context.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

DON’T INCLUDE AN ARBITRATION PROVISION IN YOUR CONTRACT IF YOU DON’T WANT TO ARBITRATE!

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Arbitration as the method of dispute resolution is based on your contract.  If you don’t want to arbitrate, do not (I repeat, do not) include an arbitration provision.  If you ultimately have no choice and need to agree to a contract that includes an arbitration provision, understand that this provision will be enforced unless the parties agree to waive it.

 

The recent case of Bari Builders, Inc. v. Hovstone Properties Florida, LLC, et al., 39 Fla. L. Weekly D1648a (Fla. 4th DCA 2014), exemplifies what happens if you include an arbitration provision.  In this case, a condominium association sued the developer for construction defects.  The developer (that may have also served as the general contractor / home builder) third-partied in its subcontractors.  However, there was a binding arbitration provision in the subcontract.  Subcontractors, therefore, moved to compel arbitration of the developer’s claims against them.  The developer, naturally, did not want to arbitrate its third-party claims against subcontractors when it was being sued by the condominium association.  It makes more sense to wrap up the disputes in one matter.  The developer tried to argue around arbitration by arguing that the arbitration provision in its contract was ambiguous because another place in the contract said, “In all actions the parties waive the right to jury and agree to determination of all facts by the court.”   The Fourth District Court of Appeal disagreed with the developer’s ambiguity argument and reconciled this language:

 

“[T]he jury waiver language in the subcontract does not render the arbitration provision ambiguous, as the two provisions can be reconciled in favor of arbitration.  Read together, the provisions provide that the parties agree to submit any ‘controversy or claim’ to arbitration and, thereafter, any award may be reduced to judgment in court without the right to a jury trial.  Additionally, in the event that the parties choose to waive their right to arbitration, the clause provides that any ‘action’ in court will be in the form of a bench trial.”

Bari Builders, supra.

 

As shown in this case, courts will favor arbitration when there is an arbitration provision in the contract.  If parties prefer arbitration, and specifically if arbitration is preferred by a general contractor, the contract should include language that in the event the general contractor is sued by the developer or association (or any third-party), the general contractor, at its sole discretion, can waive arbitration and the parties are bound to the forum governing the dispute against the general contractor.  In other words, the general contractor has the authority to join in the subcontractor to any dispute it is involved in irrespective of the arbitration provision.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.