SUING A PAYMENT BOND SURETY IN DIFFERENT VENUE THAN SET FORTH IN THE SUBCONTRACT

The venue to file a lawsuit can be an important issue for a variety of reasons, whether for convenience or the prospect of a more favorable outcome.  Oftentimes, there is a venue provision in a contract that provides where the exclusive venue for any dispute arising out of the contract must be brought.

In a recent case, Southeastern Concrete Constructors, LLC v. Western Surety Company, 2021 WL 2557297 (Fla. 2d DCA 2021), dealing with a Florida Department of Transportation (FDOT) project, a subcontractor filed suit against the general contractor’s FDOT payment bond issued under Florida Statute s. 337.18.   The subcontractor did not file suit against the general contractor.  The subcontractor filed suit in Hillsborough County, Florida.  However, the subcontract contained a venue provision requiring disputes under the subcontract to be brought in Levy County, Florida.  Based on this venue provision in the subcontract, the trial court granted a motion to transfer the venue of the dispute to Levy County.  This, however, was reversed on appeal.

The Second District Court of Appeal explained that the payment bond is a separate and distinct instrument –a separate agreement—than the subcontract.  The payment bond, unlike the subcontract, did NOT contain a venue provision. The subcontract also did NOT include any language that provided that the exclusive venue of Levy County applied to any claims brought by the subcontractor against the payment bond.  Finally, Florida Statute s. 337.18 (dealing with FDOT payment and performance bonds) permits a claimant, such as the subcontractor, to bring a claim against the general contractor or the surety.  This is customary as a claimant does not need to join the general contractor, or the principal of the payment bond, in order to assert a claim against the payment bond; it is common for a claimant to only sue the payment bond surety.

This leads to a worthy consideration.   A general contractor should include language in the subcontract that provides that its payment bond surety can enforce the venue provision as it pertains to any claims brought against the surety and any claims against the general contractor’s payment bond surety must be brought in the exclusive venue set forth in the subcontract–the venue provision shall be deemed incorporated into the bond for purposes of any claim asserted by the subcontractor against the bond.  The purpose of this is to maximize the argument that the surety is an intended beneficiary of the exclusive venue provision in the subcontract.  See Southeastern Concrete Constructors, supra, at *3 (“In the absence of any venue selection clause in the Bond or language otherwise incorporating the terms of the venue selection clause of the Subcontract into the Bond, in this action brought by [subcontractor] against [payment bond surety] pursuant to the Bond under section 337.18(1)(b), the trial court’s order granting the motion to transfer venue was error.”).

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.

 

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