In Michels Corp. v. Rockies Express Pipeline, L.L.C., for example, Ohio’s law was relied on to allow a lawsuit to proceed in Ohio, while the construction contract required suit to be brought in Kansas. The appellant in Michels Corp. challenged the decision of an Ohio trial court that dismissed its complaint against the appellee pursuant to Kansas choice of law and forum selection clauses in the parties’ contract for the construction of an interstate gas pipeline. Furthermore, the venue provision stated that each party
irrevocably waives, to the fullest extent permitted by Applicable Law and the laws of the State of Kansas, any claim or any objection it may now or hereafter have, that venue or personal jurisdiction is not proper with respect to any such legal action, suit, or proceeding brought in such a court in Johnson County, Kansas, including any claim that such legal action, suit, or proceeding brought in such court has been brought in an inconvenient forum.
Although the contract clearly required application of Kansas law in a Kansas venue, the Ohio Court of Appeals held that section 4113.62(D) of the Ohio Revised Code, in plain and clear language, provides that a contract for the improvement of real estate in Ohio that requires any litigation, arbitration, or other dispute resolution process to be held in another state is void and unenforceable as against Ohio state public policy. “The words used clearly show the legislature’s intent to make a construction contract’s forum selection and choice of law clauses void and unenforceable as against public policy where the contract is for an improvement to land in Ohio, period.” The court also recognized that the state of Ohio has a material interest in construction projects and improvements within the jurisdictional boundaries of its borders. The ruling of the Ohio trial court dismissing the lawsuit pursuant to the forum selection clause was therefore reversed and the case was remanded to the Ohio trial court for further proceedings.
Other states have enacted statutes related to all construction projects within the state’s jurisdiction that invalidate forum selection clauses designating an alternative forum where one party to the dispute is a resident of that state. Florida’s statute reads, “Any venue provision in a contract for improvement to real property which requires legal action involving a resident contractor, subcontractor, sub-subcontractor, or materialman, . . . to be brought outside this state is void as a matter of public policy.” At least one Florida court has even applied this statute retrospectively to invalidate a forum selection clause.
In Kerr Construction, Inc. v. Peters Contracting, Inc., the court held that a subcontract’s forum selection clause designating Kentucky as the subcontract’s dispute resolution forum was unenforceable and that the proper forum was in Orange County, Florida, even though the statute was enacted two years after the subcontract was executed. “Having concluded that section 47.025 is procedural and that procedural statutes apply retroactively, we further conclude that retroactive application of the statute in this case is appropriate. Therefore, the forum selection clause in the subcontract is void, and venue must be determined in accordance with section 47.011, Florida Statutes.” Similar statutes requiring state residency of one of the parties have been enacted in Louisiana, Virginia, and California.
State statutes, such as the ones described herein, may, in some instances, position a party to bring its claims in the state where the project was performed, rather than in the jurisdiction demanded by the contract’s forum selection clause. While an owner and general contractor may be fine with such a forum selection clause, if the general contractor has flowed down a similar forum selection clause in its subcontracts, the general contractor must consider whether it may be stuck litigating piecemeal and in multiple forums.