VENUE FOR SUING PUBLIC PAYMENT BOND

shutterstock_96191135Public payment bonds (excluding FDOT payment bonds) are governed under Florida statute s. 255.05.  As it pertains to venue—the location to sue a public payment bond–the statute provides in relevant portion:

 

 

(5) In addition to the provisions of chapter 47, any action authorized under this section may be brought in the county in which the public building or public work is being construction or repaired.

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(1)(e) Any provision in a payment bond…which restricts venue of any proceeding relating to such bond…is unenforceable.

 

Now, what happens if a subcontractor sues only a payment bond but its subcontract with the general contractor contains a mandatory venue provision?  For example, what if the general contractor is located in Lee County and the subcontract contains a venue provision for Lee County, the project is located in Collier County, the subcontractor is located in Miami-Dade County, and the surety issues bonds in Miami-Dade County? Does venue have to be in Lee County per the mandatory venue provision?

 

According to the decision in Travelers Casualty and Insurance Co. of America v. Community Asphalt Corp., 42 Fla. L. Weekly D1318a (Fla. 3d DCA 2017), a claimant can sue a public payment bond anywhere where venue is permitted irrespective of a mandatory venue provision in a subcontract.  In this case, the project was in Collier County and the subcontract contained a mandatory venue provision for Lee County.  However, the subcontractor sued the public payment bond in Miami-Dade County.   The Third District held that the subcontract’s venue provision could not be read into the bond because it would be unenforceable since Florida Statute s. 255.05 renders such language that restricts venue unenforceable

 

The Third District, however, did importantly note that this ruling may likely have been different if the subcontractor also sued the general contractor in the lawsuit.  Because the subcontractor only sued the public payment bond, the venue provision in the subcontract did not apply.

 

Strategically, there are reasons why a payment bond claimant (e.g., subcontractor) does not want to sue the general contractor.  One such reason is venue, as in the instant case.  The subcontractor did not want to sue in Lee County and had a strong argument to sue the public payment bond in Miami-Dade County, a more preferable and convenient venue to it, and was able to do so notwithstanding the venue provision in the subcontract.

 

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.

SUBCONTRACTORS – READ AND UNDERSTAND THE IMPLICATIONS OF VENUE PROVISIONS

imagesCA7D565LSubcontracts often have venue provisions. However, these are often overlooked until a dispute arises. In many instances, the venue provision requires disputes to be brought in a court in a different venue than where the project is located. This could have the adverse effect of exposing a subcontractor, in particular, to disputes in multiple forums. The recent case of East Coast Metal Decks, Inc. v. Boran Craig Barber Engel Construction Co., Inc., 38 Fla. L. Weekly D1061a (Fla. 2d DCA 2013), explains the undesirable dynamics of venue provisions.
In East Coast Metal Decks, the general contractor hired the subcontractor on two public projects in Brevard County and Sarasota County. The general contractor, however, sued the subcontractor in Collier County due to a venue provision in the subcontract. The subcontractor brought the general contractor’s payment bond surety into the fold and then tried to transfer the venue to Brevard County because the subcontractor was being sued by material suppliers in that County. The trial court denied the transfer of venue because of the Collier County venue provision in the subcontract.

 

On appeal, the Second District affirmed the trial court’s ruling. The Second District found that (i) the parties were bound by the subcontract venue provision as there was not a compelling reason not to enforce the provision and (ii) because the payment bond was a public payment issued under Florida Statute s. 255.05, venue for a claim against the bond did not have to lie in Brevard County (where the project was located).

 
What does this case mean? Well, it means that the subcontractor needs to litigate with the suppliers in Brevard County and litigate with the general contractor in Collier County even though the disputes are related. Most likely, the suppliers sued the subcontractor because they were not paid and the general contractor did not pay the subcontractor due to the facts related to the general contractor’s claim against the subcontractor in Collier County.
Litigation in different counties over a related dispute can become expensive and undesirable. It is important to understand and consider the impact of venue provisions in contracts. Sometimes, it makes sense to argue the compelling reasons why the venue provision should not be enforced. However, courts do favor venue provisions because that is what parties negotiated and agreed to on the front-end. Other times, it makes sense to resolve the smaller lawsuits or lawsuits where the facts may not be in your favor (such as a subcontractor’s lawsuit with a supplier) to focus on the lawsuit with more upside (the subcontractor’s lawsuit with the general contractor or payment bond surety).

 

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.