Use of the Word “in” Indicates Geography; Use of the Word “of” Indicates Sovereignty: Federal District Court in Maryland Holds That Venue Is Proper in Federal Court in Maryland Where Forum Selection Clause Requires Action to be Brought “In the District or County” Where the Prime Contractor Is Located

Pritchett Controls, Inc. v. Hartford Accident & Indemnity Co., 2017 U.S. Dist. LEXIS 192182, 2017 WL 5591872 (D. Md. Nov. 21, 2017)

James W. Ancel, Inc. (“JWA”) was the prime contractor on a project for the Maryland Transit Authority in Baltimore.  JWA subcontracted a portion of the work to Pritchett Controls, Inc. (“Pritchett”).  The subcontract contained a forum selection clause requiring any disputes to be “brought in the District or County where Contractor’s  principal office is located….”  JWA’s principal office is located in Towson, Maryland, which sits in Baltimore County.

As required by Maryland’s Little Miller Act, JWA, as principal, executed a payment bond with Hartford Accident & Indemnity Co. (“Hartford”), as surety.  This case involves Pritchett’s claim against Hartford for payment under the bond.

While performing its work on the project, Pritchett submitted twelve (12) payment applications to JWA totaling $744,799.  It completed its work on March 16, 2017 but never received any payment for its work.  On May 11, 2017, Pritchett submitted a notice of claim to Hartford.  When that claim remained unpaid by July 25, 2017, Pritchett filed this action against Hartford in the United States District Court for the District of Maryland.

Hartford moved to dismiss on forum non conveniens grounds.  It argued that the subcontract’s forum selection clause required Pritchett to bring its action only in Baltimore County and that, because there is no federal courthouse in Baltimore County, the only proper forum was the Circuit Court for Baltimore County.  Consequently, it argued that Pritchett’s suit must be dismissed.  The District Court denied the motion.  It assumed, without deciding, that the subcontract’s forum selection clause applied to suits brought under the bond.  Even assuming the forum selection clause applied, however, the Court held that venue in the District Court for the District of Maryland was proper.

According to the Court, the subcontract’s use of the word “in” rather than “of” was dispositive.  Citing to FindWhere Holdings, Inc. v. Systems Environment Optimization, LLC, 625 F.3d 752 (4th Cir. 2010), the Court reasoned that forum selection clauses limiting venue to the courts “in [a location]” are merely geographic restrictions, while clauses using the phrase “of [a location]” indicate a jurisdictional restriction to the state court of the named state.  Because the subcontract provided for venue “in the District or County” where JWA’s office is located, venue was proper within the geographic limits of that “District or County” and was not jurisdictionally limited to the state courts of Maryland.

Hartford also argued that the phrase “District or County” was intended to restrict venue within “state-level geographic boundaries,” thus requiring that any lawsuit to be filed in a courthouse located within Baltimore County.  Put differently, Hartford argued that “District” was meant as the functional equivalent of “County.”  Pritchett countered that “District” in this context was intended to refer to federal district courts, while “County” was intended to refer to state courts.  The District Court agreed with Pritchett that the subcontract contemplated proper venue in either federal or state courts.

The Court agreed with Pritchett and held that venue was proper in federal district court.  According to the Court, if Hartford’s proffered interpretation had been intended, the subcontract would also have used other state-level geographic restrictions, “such as borough or parish” or other terms referring to “whatever geographic demarcation term is used by the principal contractor’s state.”  Moreover, in the context of forum selection clauses, the word “District” is commonly understood to mean federal judicial districts.  Therefore, the District Court held that the plain meaning of the phrase ‘District or County” in this context “unambiguously provides for an appropriate venue in the District of Maryland” and that dismissal pursuant to forum non conveniens would be improper.

To view the full text of the court’s decision, courtesy of Lexis®, click here.

Kristopher Berr

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