International Electric, Inc. v. Anthony & Gordon Construction Co. (In re International Electric, Inc.)
International Electric, Inc. v. Anthony & Gordon Construction Co. (In re International Electric, Inc.)
Opinion of the Court
MEMORANDUM OPINION AND ORDER TRANSFERRING ADVERSARY PROCEEDING TO THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF VIRGINIA
Plaintiff-Debtor International Electric, Inc., commenced this adversary proceeding against Anthony & Gordon Construction Co., Inc., and Great American Insurance Company for breach of contract and recovery of money for services rendered.
JURISDICTION
This Court has jurisdiction over the parties pursuant to 28 U.S.C. §§ 157(a) and 1334(a) and (b) and the Amended Standing Order of Reference of the United States District Court for the District of Kansas that exercised authority conferred by 28 U.S.C. § 157(a) to refer to the District's bankruptcy judges all matters under the Bankruptcy Code and all proceedings arising under the Code or arising in or related to a case under the Code, effective June 24, 2013.
BACKGROUND
In 2011, Anthony & Gordon Construction Co., Inc. (A&G), an industrial building construction company incorporated in Oak Ridge, Tennessee,
On March 4, 2015, Plaintiff-Debtor filed for Chapter 11 relief
On August 7, 2015, GAIC filed an answer denying the majority of Plaintiff-Debtor’s allegations.
On September 8, 2015, A&G Filed a motion to dismiss under Fed. R. Civ. P. 12(b)
On January 12, 2016, GAIC filed a motion for summary judgment asserting that “no genuine issue of material fact exists to preclude entry of summary judgment in favor of GAIC _’,
Originally, A&G argued that the Court lacks authority to transfer the adversary proceeding to the Western District of Virginia under 28 U.S.C. § 1406.
ANALYSIS
I. GAIC’s Amended Answer Is Untimely
GAIC filed its initial answer
II. Personal Jurisdiction
Bankruptcy courts have nationwide personal jurisdiction because Bankruptcy Rule 7004(d) provides for nationwide service of process.
III. The Court Lacks Authority To Enter A Final Judgment Under Article III
A&G and GAIC allege this Court lacks authority to enter a final judgment on: (Count I) breach of contract; (Count II) unjust enrichment; and (Count III) recovery upon payment bond pursuant to the Miller Act because they are non-core proceedings.
Here, Plaintiff-Debtor’s assertions against A&G and GAIC for breach of contract, unjust enrichment, and for recovery upon a payment bond under the Miller Act are all non-core claims under 28 U.S.C. § 157. Thus, the Court lacks authority to enter a final judgment under Article III of the United States Constitution. Generally, when this Court lacks Constitutional authority to enter a final judgment it would submit proposed findings of facts and conclusions of law to the Kansas District Court to enter a final judgment. When a bankruptcy court is presented with a non-core claim, “the proper course is to issue proposed findings of fact and conclusions of law. The district court will then review the claim de novo and enter judgment.”
IV. Proper Venue Is In The Western District of Virginia
A&G and GAIC maintain that venue is proper in the United States District Court for the Western District of Virginia. Venue of an adversary proceedings is governed by 28 U.S.C. § 1409(a) which provides, in pertinent part that “a proceeding arising under title 11 or arising in or related to a case under title 11 may be commenced in the district court in which such [bankruptcy] case is pending.” Thus, as a general rule, the district court in which the bankruptcy ease is pending is the proper venue. However, the Miller Act contains competing language stating that “[a] civil action brought under [the Miller Act] ... must be brought ... in the United States District Court for any district in which the contract was to be performed and executed, regardless of the amount in controversy.”
It is a well established “statutory construction that the specific governs the general.”
The Miller Act represents a congressional effort to protect persons supplying labor and material for the construction of federal public buildings in lieu of the protection they might receive under state statutes with respect to the construction of nonfederal buildings. The essence of its policy is to provide a surety who, by force of the Act, must make good the obligations of a defaulting contractor to his suppliers of labor and material.59
“[T]he Miller Act was designed to provide an alternative remedy to the mechanics’ liens ordinarily available on private construction projects.”
V. The Alleged Forum Selection Clause Is Invalid
While 40 U.S.C. § 3133(b)(3) sets venue in the United States District Court for the Western District of Virginia, case law establishes that the statutory venue requirement may be modified by a valid forum selection clause, provided the selected forum is not a state court.
9.9 OTHER DISPUTE PROCESSES If neither direct discussions nor mediation successfully resolve the dispute, the parties agree that the following shall be used to resolve the dispute.
-Arbitration: Arbitration shall be pursuant to the construction industry rules of the American arbitration association, unless the parties mutually agree otherwise. A written demand for arbitration shall be filed with the American arbitration association and the other party to the agreement within a reasonable time after the dispute or claim has arisen, but in no event after the applicable statute of limitations for a legal or equitable proceeding has run. The arbitration award shall be final [sic] this agreement .to .arbitrate shall be governed by the federal arbitration act, and judgment upon the award may be confirmed in a court having jurisdiction.
-Litigation Action may be filed in the appropriate state or federal court.64
A&G and GAIC contend that the foregoing does not constitute a valid forum selection clause since it does not specify a specific forum in which the action must or may be brought. Thus, the Court must determine whether the alleged forum selection clause is valid.
To interpret a contract, the Court “must give a written agreement that interpretation which was intended by the
Here, the Court finds that the forum selection clause is impermissibly vague and overbroad and insufficient to supersede the Miller Act’s specific venue provision. The alleged forum selection clause at issue does not even specify a forum. It lacks specificity because it provides no indication of the forum contemplated other than that of the United States as a whole. This does little to eliminate the uncertainties of where litigation may occur. If valid, the agreement’s forum selection clause would permit litigation in any federal court in the country — even Puerto Rico. Enforcement of such a provision would be unreasonable and unjust. Instead of being a clause to select venue, the clause merely acknowledges that disputes may be resolved by litigation — in addition to arbitration. For claims under the Miller Act, the Act provides that the appropriate court is the federal district court in the district where the project which is the subject of the contract is located — the Western District of Virginia. This Court is therefore an improper venue under the Miller Act.
VI. Transfer of The Adversary Proceeding To The United States District Court For The Western District of Virginia Is Proper
In its motion to dismiss, A&G asserts this Court “lacks the power to transfer the case to the federal district court for the Western District of Virginia under 28 U.S.C. § 1406.”
Here, transferring venue of a non-core claim under the Miller Act would not substantially interfere with Plaintiff-Debtor’s ability to reorganize. Plaintiff-Debtor argues that the cost of litigation would frustrate its efforts to collect. However, a bankruptcy court may not retain an improperly venued case for the convenience of a party.
CONCLUSION
Counts I, II, and III of Plaintiff-Debt- or’s Complaint are transferred to the United States District Court for the Western District of Virginia because this Court lacks authority to enter a final judgment under Article III of the United States Constitution and venue is proper in the Western District of Virginia under the Miller Act. The Court abstains from adjudication of the parties’ motions for summary judgment pursuant to this decision transferring the matter to the United States District Court for the Western District of Virginia.
IT IS ORDERED that Anthony & Gordon Construction Co., Inc., and Great American Insurance Company’s motions to dismiss International Electric, Inc.’s Complaint are overruled.
IT IS FURTHER ORDERED that the instant adversary proceeding shall be and is hereby transferred to the United States District Court for the Western District of Virginia effective as of the date hereof.
IT IS SO ORDERED.
. Doc. 1. Unless otherwise noted, references to Doc. numbers are to pleadings filed in the instant adversary proceeding. All future statutory references are to the Bankruptcy Code (Code), as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), 11 U.S.C. §§ 101-1532, unless otherwise specifically noted.
. Plaintiffs, International Electric Inc., United States of America, For The Use of International Electric, Inc., appear by their attorney, Colin N. Gotham, Shawnee, KS. Defendant, Anthony & Gordon Construction Co., Inc., appears by its attorneys, Caroline A. Bader and Megan J. Redmond, Overland Park, KS. Defendant, Great American Insurance Company, appears by its attorney, Michael M. Tamburini, Kansas City, MO.
. D. Kan. Standing Order No. 13-1, printed in D. Kan. Rules of Practice and Procedure at 168 (March 2016).
. Doc. 16-2, at 2 ¶ 3.
. Doc. 1, at 4 ¶ 6.
. 40 U.S.C. § 3131 et seq. The Miller Act requires that prime contractors for the construction, alteration, or repair of Federal buildings furnish a payment bond for contracts in excess of $100,000. The payment bond is required as security for the protection of those supplying labor or materials in the construction of public buildings.
. Doc. 1, at 4 ¶ 7.
. Doc. 1-4, at 4.
. Doc. 1. Case No. 15-20388.
. Id. at 21.
. Doc. 1-5.
. Doc. 1.
. Doc. 8.
. Id. at 2 ¶ 8 (“GAIC admits the allegations contained in paragraph 4 of Debtor’s Complaint (Count III)”). Paragraph 4 of Count III of Plaintiff-Debtor’s complaint states that "[t]his action arises, and the court has jurisdiction, under the Miller Act, United States Code Annotated, Title 40, Sections 3131 to 3134 (40 U.S.C.A. §§ 3131 to 3134). Venue is proper in this district.” Doc. 1, at 3 ¶ 4.
. Doc, 11, at 2 ¶ 8 (“GAIC denies the allegations contained in paragraph 4 of [Plaintiff-Debtor’s] Complaint (Count III).”).
. Fed. R. Civ. P. 15 is applicable to adversary proceedings pursuant to Fed. R. Bankr. P. 7015.
. Fed. R. Civ. P. 12 is applicable to adversary proceedings pursuant to Fed. R. Bankr. P. 7012(b).
. Doc. 16.
. Doc. 19.
. Id. at 2. See 40 U.S.C. § 3133(b)(4) (“An action ... must be brought no later than one year after the day on which the last of the labor was performed or material was supplied by the person bringing the action.”).
. Doc. 20, at 2.
. Id.
. id. at 2-3.
. Id. at 4-6.
. Doc. 16-2, at 14 ¶ 9.9.
. Doc. 22, at 2,
. Doc. 20, at 5.
. Doc. 26.
. Doc. 27, at 2 ¶ 3.
. Id. at 4-5. See 40 U.S.C. § 3133(b)(4).
. Doc. 29, at 2 ¶ 2.
. Id. at 3-6,
. Doc. 16-1, at 8.
. Doc. 19.
. Doc. 8.
. Doc, 11. The Certificate of Service indicates that "the foregoing was served by electronic service upon the parties receiving elec
. Importantly, A&G objects to both venue and jurisdiction. See Doc. 16.
. The summons and complaint and all other process except a subpoena may be served anywhere in the United States.
. See Am. Freight Sys., Inc, v. Temperature Sys., Inc. et al. (In re Am. Freight Sys., Inc.), 173 B.R. .739, 741-42 (Bankr.D.Kan. 1994) (affirming that "minimum contacts with the United States are all that is required when federal law authorizes nationwide service of process, as Federal Rule of Bankruptcy Procedure 7004(d) does in adversary proceedings (except subpoenas).”). :
. Republic of Panama v. BCCI Holdings (Luxembourg) S.A., 119 F.3d 935, 948 (11th Cir. 1997).
. Donald G. Atteberry, DVM, P.A. v. Barclays Bank PLC (In re Donald G. Atteberry, DVM, P.A.), 159 B.R. 1, 5 (D.Kan. 1993) (finding that when Bankruptcy Rule 7004(d) applies, the focus is “on the defendant’s contacts with the United States rather than Kansas.”).
. Doc, 16-1, at 3.
. Doc. 1-6, at 2; Doc. 8, at 3 ¶ 10.
. Doc. 16-1, at 4. GAIC joined A&G’s Motion to Dismiss. Doc. 19, at 1.
. 564 U.S. 462, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011).
. 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982).
. Loveridge v. Hall et al. (In re Renewable Energy Dev. Corp.), 792 F.3d 1274, 1282 (10th Cir. 2015), as amended on denial of reh'g (July 28, 2015).
. Doc. 16-1, at 5.
. Doc. 20, at 2 (citations omitted).
. Exec. Benefits Ins. Agency v. Arkison, - U.S.-, 134 S.Ct. 2165, 2170, 189 L.Ed.2d 83 (2014).
. Doc. 16-1, at 2; Doc. 19.
. Niemi v. Lasshofer, 770 F.3d 1331, 1348 (10th Cir. 2014) (citing Trujillo v. Williams, 465 F.3d 1210, 1217 (10th Cir. 2006)).
. See also Limerick v. T.F. Scholes, Inc., 292 F.2d 195, 196 (10th Cir. 1961) ("The Miller Act provides that every suit instituted thereunder shall be brought in the United States District Court for any district in which the contract was to be performed and executed
. 40 U.S.C. § 3133 (emphasis added).
. Morton v. Mancan, 417 U.S. 535, 551, 94 S.Ct. 2474, 41 L.Ed.2d 290 (1974).
. Negonsott v. Samuels, 507 U.S. 99, 104, 113 S.Ct. 1119, 122 L.Ed.2d 457 (1993) (quoting Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 570, 102 S.Ct. 3245, 73 L.Ed.2d 973 (1982)).
. Morales v. Trans World Airlines, Inc., 504 U.S. 374, 384, 112 S.Ct. 2031, 119 L.Ed.2d 157 (1992). See also Morton v. Mancari, 417 U.S. at 550-51, 94 S.Ct. 2474 ("a specific statute will not be controlled or nullified by a general one”).
. Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 445, 107 S.Ct. 2494, 96 L.Ed.2d 385 (1987) ("where there is no clear intention otherwise, a specific statute will not be controlled or nullified by a general one”) (quoting Radzanower v. Touche Ross & Co., 426 U.S. 148, 153, 96 S.Ct. 1989, 48 L.Ed.2d 540 (1976)).
. United States ex rel. Sherman v. Carter, 353 U.S. 210, 216-17, 77 S.Ct. 793, 1 L.Ed.2d 776 (1957).
. J.W. Bateson Co., Inc. v. United States ex rel. Board of Trustees of the Nat’l Automatic
.United States ex rel. Capolino Sons, Inc. v. Elec, & Missile Facilities, Inc., 364 F.2d 705, 708 (2nd Cir. 1966) (cited with favor by F.D. Rich Co., Inc. v. United States ex rel. Indus. Lumber Co., Inc., 417 U.S. 116, 125, 94 S.Ct, 2157, 40 L.Ed.2d 703 (1974)).
. United States ex rel. Sherman v. Carter, 353 U.S. 210, 216, 77 S.Ct. 793, 1 L.Ed.2d 776 (1957).
. United States ex rel. B&D Mech. Contractors, Inc. v. St. Paul Mercury Ins. Co., 70 F.3d 1115, 1117 (10th Cir. 1995) (“a valid forum selection clause supersedes the Miller Act’s venue provision”); Deborah F. Buckman, Construction and Application of Venue Provisions of Miller Act (40 U.S.C.A. § 270(b)), 140 A.L.R. Fed. 615 (1997).
.Doc. 16-2, at 14 ¶ 9.9.
. Ader v. Hughes, 570 F.2d 303, 309 (10th Cir. 1978) (citations omitted).
. Conopco, Inc. v. PARS Ice Cream Co., Inc., 2013 WL 5549614, at *5 (S.D.N.Y. Sept. 26, 2013) (citing Cent. Ohio Graphics, Inc. v. Alco Capital Res., Inc. 221 Ga.App. 434, 472 S.E.2d 2 (Ga.Ct.App. 1996), and A.I. Credit Corp. v. Liebman, 791 F.Supp. 427, 429 (S.D.N.Y. 1992)).
. SBKC Serv. Corp. v. 1111 Prospect Partners, L.P., 105 F.3d 578, 580-82 (10th Cir. 1997) (emphasis in original).
. Doc. 16-1, at 8,
. Id.
. Doc. 19.
. Doc. 20, ató.
. Fed. R. Bankr. P. 7087.
. U.S. Trustee v. Sorrells {In re Sorrells), 218 B.R. 580, 587 (10th Cir. BAP 1998) ("Since there is no bankruptcy-specific statute applicable to improperly venued' cases, section 1406(a) must apply in bankruptcy, requiring such a case to be dismissed or, if it be in the interest of justice, transferred to a court in which venue is proper.”).
. 28 U.S.C. § 1406(a).
. Id. at 586.
Reference
- Full Case Name
- IN RE: INTERNATIONAL ELECTRIC, INC., Debtor. International Electric, Inc., United States of American, ex rel. International Electric, Inc. v. Anthony & Gordon Construction Co., Inc., Great American Insurance Company
- Status
- Published