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Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

---

1

The Honorable George Howard, Jr., United States District Judge for the

Eastern District of Arkansas. 

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 05-1548

___________

Servewell Plumbing, LLC, *

*

Plaintiff - Appellant, *

* Appeal from the United States

v. * District Court for the Eastern

* District of Arkansas.

Federal Insurance Company, *

*

Defendant - Appellee. *

___________

Submitted: October 13, 2005

Filed: March 2, 2006

___________

Before RILEY, JOHN R. GIBSON, and COLLOTON, Circuit Judges.

___________

JOHN R. GIBSON, Circuit Judge.

Servewell Plumbing, LLC appeals the dismissal of its claim against Federal

Insurance Company as surety on a labor and material payment bond issued to Summit

Contractors, Inc. The district court1

 dismissed the claim for improper venue based on

a forum selection clause in the contract between Summit and Servewell, which

required any claim against Summit or Federal, as Summit's bonding company, to be

brought in Duval County, Florida. On appeal, Servewell argues that the dimissal of

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The forum-selection clause in the subcontract between Servewell and Summit

provides as follows:

ARTICLE 23: CHOICE OF LAW AND VENUE

This Subcontract shall be construed in accordance with the Laws of the

State of Florida. [Servewell] expressly agrees to be subject to personal

jurisdiction in the State of Florida and further waives any right to venue

in any action brought under this Subcontract Agreement or against any

bond posted by [Summit]. [Servewell] acknowledges that [Summit's]

bonding company is an intended third-party beneficiary of this

jurisdiction and venue provision. [Summit] has the sole option to select

venue in Duval County, Florida, or the site of this project, for any action

it brings under the Subcontract Agreement. In any action brought

against [Summit] or its bonding company under this Subcontract

Agreement, jurisdiction and venue shall be in Duval County, Florida,

unless and until [Summit] stipulates to jurisdiction and venue at the site

of the project.

Jt. App. 38.

2

its claim was error because the forum selection clause was unenforceable. For the

foregoing reasons, we affirm. 

This case arises out of a contract dispute between the plaintiff Servewell, a

Tennessee corporation, and Summit, a Florida corporation, relating to the construction

of an apartment complex in Pulaski County, Arkansas. In January 2002, Summit, the

general contractor on the project, entered into a subcontract with Servewell, for

Servewell to perform plumbing work at the apartment complex. Servewell alleges

that during the course of construction Summit breached its agreement and as result it

owed $123,342.37 for labor and materials Servewell had furnished for the project.

The subcontract between Servewell and Summit contained a forum selection clause,

which provided that the exclusive venue and jurisdiction for any claim against Summit

or its bonding company would be in Duval County, Florida.2

 Notwithstanding this

provision, in February 2003, Servewell filed suit against Summit and the owner of the

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The forum-selection clause in the payment bond between Federal and Summit

provides:

3. No suit or action shall be commenced hereunder by any claimant: 

. . . 

c) Other than in a state court of competent jurisdiction in and for the

county or other political subdivision of the state in which the Project, or

any part thereof, is situated, or in the United States District Court for the

district in which the Project, or any part thereof, is situated, and not

elsewhere. 

Jt. App. 28-29. 

3

project in Pulaski County Circuit Court, Arkansas. In December 2003, the Arkansas

circuit court dismissed Servewell's claim against Summit for improper venue, relying

on the forum selection clause in the contract between Summit and Servewell.

Servewell appealed the dismissal, which the Arkansas Supreme Court later affirmed.

Servewell Plumbing, LLC v. Summit Contractors, Inc., No. 04-1306, --- S.W.3d ---,

2005 WL1406336 (Ark. June 16, 2005). 

On July 27, 2004, while its appeal was still pending, Servewell filed a second

action in Pulaski County, this time naming Federal as the sole defendant. Acting as

Summit's surety on the project, Federal had issued a labor and material payment bond

in the amount of $5,847,000. Servewell's action sought a monetary judgment against

Federal as surety on Summit's bond for the $123,342.37 Summit allegedly owed to

Servewell. Although like the subcontract, the bond document contained a forum

selection clause, this forum selection clause provided for venue and jurisdiction in the

county where the project was located, i.e., Pulaski County, Arkansas.3

 However, on

June 16, 2003, during the course of the Pulaski County litigation between Servewell

and Summit, Federal and Summit agreed for valuable consideration to waive the

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The document, entitled Partial Waiver, states in relevant part:

Summit Contractors, Inc. ("Summit"), as Principal, and Federal

Insurance Company, as surety, are parties to a certain Labor and Material

Payment bond . . . Under paragraph 3(c) of the Bond, the parties agreed

that no suit or action shall be commenced by any claimant other than in

a state court of competent jurisdiction in and for the county or other

political subdivision of the state in which the Project, or any part thereof,

is situated, or in the United States District Court for the district in which

the Project, or any part thereof, is situated, and not elsewhere.

Servewell Plumbing, LLC ("Servewell") was a subcontractor to

Summit on the Project though Servewell's contract was terminated prior

to completion of the Project. Summit is presently a defendant in an

action brought by Servewell pending in the Circuit Court of Pulaski

County, Arkansas . . .. However, under the terms of their subcontractor

agreement, Summit and Servewell agreed that venue and jurisdiction for

any claim brought against Summit or against the Bond would be in

Duval County, Florida. For good and valuable consideration, Summit

and Federal Insurance Company hereby agree to waive the venue and

jurisdictional requirements of paragraph 3(c) of the Bond to the extent

necessary to allow Summit to enforce the venue and jurisdictional

requirement of the subcontract between Summit and Servewell. 

Jt. App. 48.

4

venue and jurisdictional requirement of the bond to the extent necessary to permit

Summit to enforce the forum selection clause in its subcontract with Servewell.4

 

After removing the matter to the United States District Court for the Eastern

District of Arkansas, Federal moved to dismiss for improper venue, relying on the

forum selection clause in the subcontract between Servewell and Summit. The district

court granted Federal's motion, rejecting Servewell's arguments that the forum

selection clause in the subcontract was unenforceable. In doing so, the court reasoned

that the clause was fair and reasonable since "Servewell freely entered into a contract

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In Sun World Lines, 801 F.2d at 1069, we held that the question of the

enforceability of a forum selection clause is procedural for Erie purposes and applied

federal law. Shortly thereafter, in Farmland Indus., Inc. v. Frazier-Parrott

Commodities Inc., 806 F.2d 848, 852 (8th Cir. 1986), abrogated on other grounds,

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with Summit providing that any dispute would be litigated in Duval County, Florida,

despite the fact that the Project was in Arkansas. Servewell, thus, could anticipate

having to litigate in Florida." Following the district court's dismissal of its claim

without prejudice, Servewell filed a timely notice of appeal. 

The parties do not dispute the meaning, scope, or applicability of the forum

selection clause in the subcontract, all of which would be questions of contract

interpretation that we would review de novo. See e.g., Rainforest Café, Inc. v.

EklecCo, LLC, 340 F.3d 544, 546 (8th Cir. 2003); Dunne v. Libbra, 330 F.3d 1062,

1063 (8th Cir. 2003). Instead, the parties' disagreement centers on whether the district

court should have enforced the agreed-to clause, a decision we review for an abuse of

discretion. See, e.g., Marano Enter. of Kan. v. Z-Teca Restaurants, L.P., 254 F.3d

753, 757 (8th Cir. 2001); M.B. Restaurants, Inc. v. CKE Restaurants, Inc., 183 F.3d

750, 753 (8th Cir. 1999); see also Terra Int'l, Inc. v. Miss. Chem. Corp., 119 F.3d 688,

691-92 (8th Cir. 1997) (applying de novo standard to district court's construction of

forum selection clause, but recognizing abuse of discretion standard for question of

whether to enforce the clause).

Initially we must address the question of whether to apply state or federal law

in determining the enforceability of the clause. Because "the enforceability of a forum

selection clause concerns both the substantive law of contracts and the procedural law

of venue," Sun World Lines, Ltd. v. March Shipping Corp., 801 F.2d 1066, 1068-69

(8th Cir. 1986), there is some disagreement among the circuits over whether state or

federal law applies, see M.B. Restaurants, 183 F.3d at 752 n.4 (collecting cases), and

we have yet to adopt a definitive position on the issue. Id.; Rainforest Café, 340 F.3d

at 546.5

 Nor must we do so here, since both Arkansas and Florida follow the federal

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Lauro Lines S.R.L. v. Chasser, 490 U.S. 495 (1989), a different panel of this court

considered Missouri public policy in determining enforceability, but ultimately

reserved the "difficult question" of "[w]hether a contractual forum-selection clause is

substantive or procedural."

6

standard announced by the Supreme Court in M/S Bremen v. Zapata Off-Shore Co.,

407 U.S. 1 (1972), see, e.g., Nelms v. Morgan Portable Bldg. Corp., 808 S.W.2d 314,

316-17 (Ark. 1991); Manrique v. Fabbri, 493 So.2d 437, 440 (Fla. 1986), and neither

party argues that the application of one or another body of law would materially affect

the outcome. See M.B. Restaurants, 183 F.3d at 752 (avoiding Erie question and

applying federal law to determine enforceability of forum selection clause where

parties did not argue federal and state standards differed). Thus, for purposes of this

appeal, we apply the standard announced in Bremen and adopted by the highest courts

of Florida and Arkansas, while considering state substantive law when called for

under that standard. See Farmland Indus., 806 F.2d at 852.

Under Bremen, "[f]orum selection clauses are prima facie valid and are

enforced unless they are unjust or unreasonable or invalid." M.B. Restaurants, 183

F.3d at 752 (citing Bremen, 407 U.S. at 15); Nelms, 808 S.W.2d at 316-17; Manrique,

493 So.2d at 440. Where, as here, the forum selection clause is the fruit of an arm'slength negotiation, the party challenging the clause bears an especially "heavy burden

of proof" to avoid its bargain. Bremen, 407 U.S. at 17. Only "some compelling and

countervailing reason" will excuse enforcement of a bargained-for forum selection

clause. Id. at 12; accord Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 593-94

(1991). 

Servewell does not suggest that the forum selection clause in the subcontract

was the product of fraud or overreaching; instead, it focuses on the supposed

unreasonableness and injustice of requiring it to litigate its claim against Federal in

Florida. Servewell first argues that the forum selection clause is unreasonable and

unjust because Servewell lacks "minimum contacts" with Florida, and therefore

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Indeed, Bremen explicitly rejected mere inconvenience as a reason for

avoiding enforcement of a bargained-for forum selection clause, reasoning that the

parties contemplated such inconvenience when they entered into their agreement. 407

U.S. at 17-18.

7

Florida lacks personal jurisdiction over it. This argument is wholly without merit. "In

judging minimum contacts" the focus is "on 'the relationship among the defendant, the

forum, and the litigation,'" Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 775

(1984) (quoting Shaffer v. Heitner, 433 U.S. 186, 204 (1977)) (emphasis added).

Servewell, the party objecting to Florida's exercise of personal jurisdiction, is the

plaintiff in this case, not the defendant. The Supreme Court does not require a

plaintiff, like Servewell, to have minimum contacts with the forum State before

permitting that State to assert personal jurisdiction over a nonresident defendant and

has "upheld the assertion of jurisdiction where such contacts were entirely lacking."

Id. at 779. Because Servewell's contacts with Florida do not dictate whether Florida

may exercise personal jurisdiction over Federal, Servewell's personal jurisdiction

argument cannot render the agreed-to forum selection clause unenforceable. 

Next, Servewell argues that the forum selection clause is unreasonable and

unjust because litigation in Florida would be inconvenient. Following Bremen, we

have held that mere "inconvenience to a party is an insufficient basis to defeat an

otherwise enforceable forum selection clause." M.B. Restaurants, 183 F.3d at 753.6

Instead, a party seeking to avoid his promise must demonstrate that proceeding in "the

contractual forum will be so gravely difficult and inconvenient that he will for all

practical purposes be deprived of his day in court." Dominium Austin Partners., LLC

v. Emerson, 248 F.3d 720, 727 (8th Cir. 2001) (quoting Bremen, 407 U.S. at 18). The

"great expense" Servewell claims it will incur if forced to secure witnesses located in

Arkansas for litigation in Florida, falls well short of depriving it of its day in court.

Compare McDonnell Douglas Corp. v. Islamic Republic of Iran, 758 F.2d 341, 345-46

(8th Cir. 1985) (holding chaotic post-revolutionary conditions in Iran, including its

ongoing war with Iraq, excused enforcement of clause requiring litigation there) with

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M.B. Restaurants, 183 F.3d at 753 (enforcing forum selection clause requiring

litigation in Utah over plaintiff's objection that he could not afford to litigate there);

Afram Carriers, Inc. v. Moeykens, 145 F.3d 298, 303-04 (5th Cir. 1998) (enforcing

Peruvian forum selection clause against financially destitute family of deceased

security guard); Sun World Lines, 801 F.2d at 1068 (reasoning that the "alternative

of using depositions of key witnesses provides adequate opportunity for [plaintiffs]

to have their fair day in court" in enforcing forum selection clause requiring Missouri

company to litigate in Germany). Thus, there is no basis for concluding that any

inconvenience to Servewell would make it unfair, unjust, or unreasonable to hold it

to its bargain.

Finally, Servewell argues that the forum selection clause is unreasonable and

unjust because it is contrary to Arkansas public policy. Under Bremen, a forum

selection clause may be set aside if "enforcement would contravene a strong public

policy of the forum in which suit is brought, whether declared by statute or by judicial

decision." Id. at 15. Servewell points to two areas of Arkansas law that it contends

embody the state's "strong public policies." We address each argument in turn. 

First, Servewell argues that the forum selection clause is contrary to Arkansas

law requiring that an in rem action to enforce a materialmen's lien be brought in the

county where the construction project is located. In support of this argument,

Servewell quotes extensively from a recent case of the Arkansas Supreme Court

invalidating a forum selection clause that purported to fix venue outside of Arkansas

for a subcontractor's in rem action foreclosing on its materialmen's lien. RMP Rentals

v. Metroplex, Inc., 146 S.W.3d 861, 866 (Ark. 2004). Metroplex concluded that the

Arkansas materialmen's lien statute embodied the public policy that "[o]nly an

Arkansas court has subject matter jurisdiction to enforce the liens and to order

foreclosure on real property located within [Arkansas'] borders." 146 S.W.3d at 864.

Relying on Bremen, the court held that this public policy was strong enough to trump

an otherwise enforceable forum selection clause. Id. at 866. Servewell's reliance on

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Because we conclude that the general venue provision is inapplicable to

Servewell's claim, we express no opinion as to whether it or any other provision of the

Arkansas Insurance Code could qualify as a "strong public policy" under Bremen.

See, e.g., Interamerican Trade Corp. v. Companhia Fabricadora De Pecas, 973 F.2d

487, 490 (6th Cir. 1992) (enforcing forum selection clause notwithstanding Ohio

policy of protecting local businesses from victimization by nonresident businesses for

failure to pay commissions); Lien Ho Hsing Steel Enter. Co. v. Weihtag, 738 F.2d

1455, 1460 (9th Cir. 1984) (holding that "statute defining the limits of Hawaiian

courts' jurisdiction does not, in itself, express a 'strong policy' that insurance cases

must be tried locally despite a clause in the insurance contract to the contrary").

9

Metroplex is misplaced. Unlike the subcontractor's in rem action at issue in

Metroplex, Servewell does not seek to foreclose on a real property lien. Instead,

Servewell's action seeks an in personam judgment against Federal as surety for

amounts owed by Summit. Thus, any public policy, strong or otherwise, applicable

to an in rem action like that at issue in Metroplex is inapplicable to Servewell's in

personam action against Federal.

Servewell's second public policy argument centers on the provision of the

Arkansas Insurance Code mandating that an action under an insurance policy "shall

be brought in . . . the county in which the loss occurred." Ark. Code Ann. § 23-79-

204(a)(1). Even if, as Servewell contends, the mandatory language of this provision

demonstrates that it embodies a "strong public policy" of the State of Arkansas, the

provision does not apply to Servewell's claim against Federal. Rather, Ark. Code

Ann. § 16-60-115, which specifically addresses proper venue for an action against a

surety on a contractor's payment or performance bond, trumps the general venue

provision of the Arkansas Insurance Code fixing venue for any action against any type

of insurer. See, e.g., Bd. of Trustees for City of Little Rock Police Dep't. Pension and

Relief Fund v. Stodola, 942 S.W.2d 255, 258 (Ark. 1997) (applying rule of statutory

construction that the specific controls over the general).7

 

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Although Federal asks us to modify the dismissal from one without prejudice

to one with prejudice, it cites no authority in support of its request. We therefore will

not indulge its request.

10

Unlike the mandatory language of the Arkansas Insurance Code's venue statute,

the specific venue statute applicable to Servewell's action against Federal is

permissive. Compare Ark. Code Ann. § 16-60-115 ("may be brought") with Ark.

Code Ann. § 23-79-204(a)(1) ("shall be brought"). We are unconvinced that such a

permissive venue statute constitutes the kind of "strong public policy" sufficient to

invalidate a forum selection clause under Bremen, since the primary purpose of a

forum selection clause is to opt out of the default venue set by such statutes.

Moreover, invalidating a forum selection clause because it conflicts with a statutory

venue provision ignores the strong countervailing public policy in favor of holding

parties to their agreements, which a court in similar circumstances has described as

the "dominant policy in contract cases . . . the better to promote commerce." Omron

Healthcare, Inc. v. Maclaren Exports Ltd., 28 F.3d 600, 603 (7th Cir. 1994) (enforcing

forum selection clause over plaintiff's objection that the clause offended strong public

policy of federal securities laws); cf. Modern Computer Sys., Inc. v. Modern Banking

Sys., Inc., 871 F.2d 734, 740 (8th Cir. 1989) (en banc) (holding that Minnesota policy

in favor of enforcing parties' agreements outweighed Minnesota policy of offering

franchisees remedies greater than those available at common law) superseded in

statute as stated in Commercial Prop. Inv., Inc. v. Quality Inns Int'l, 938 F.2d 870,

874 (8th Cir. 1991). Because Servewell's reliance on Arkansas public policy fails to

overcome the strong presumption of enforceability that attaches to an agreed-to forum

selection clause, we decline its invitation to excuse it from its bargain. 

The judgment of the district court is affirmed.8

______________________________

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