Friday, December 13, 2013

Significant Amendments to the Rule Governing Subpoenas in Federal Court

On December 1, 2013, significant amendments to Federal Rule of Civil Procedure 45 took effect. Tony Lathrop of the Litigation Blog has posted a detailed summary of the revisions. They include, among other things:

  • Changing the issuing court for subpoenas to the court where the action is pending (previously, the issuing court had varied depending on the purpose of the subpoena);
  • Clarifying that the limit on compelling a person to travel more than 100 miles to attend trial applies to parties and party officers;
  • Explicitly authorizing the enforcement court (where the witness is located) to transfer subpoena-related motions to the issuing court (where the action is pending).
A redlined version of the amendments is available in Appendix C to the September 2012 Summary of the Report of the Judicial Conference Committee on Rules of Practice and Procedure (starting at page 119 of the Adobe file).

Monday, December 9, 2013

U.S. Supreme Court Enforces Forum-Selection Clause in Construction Subcontract

On the Best Practices Construction Law blog, Matt DeVries posted an interesting summary of the U.S. Supreme Court's recent opinion concerning enforcement of forum-selection clauses in construction contracts in Atl. Marine Const. Co., Inc. v. U.S. Dist. Ct. for the W. Dist. of Tex., 2013 U.S. LEXIS 8775, 2013 WL 6231157 (Dec. 3, 2013), reversing 701 F. 3d 736 (5th Cir. 2012). Matt's article analyzes the Court's reasoning and some of the practical implications of the ruling.

In the case, the Supreme Court held that forum-selection clauses requiring litigation in federal courts in other districts should be enforced by motions to transfer under 28 U.S.C. § 1404(a), which governs transfers "[f]or the convenience of the parties and witnesses," rather than through motions to dismiss under 28 U.S.C. § 1406(a) or Federal Rule of Civil Procedure 12(b)(3) for improper venue. (Forum-selection clauses requiring litigation in state courts can be enforced through the common-law "residual doctrine of forum non conveniens," as the statute permits only transfers and not dismissals.)

The case involved a Texas subcontractor that filed suit for nonpayment on a construction project located at Fort Hood in Texas. The general contractor was located in Virginia, and the parties' subcontract included a forum-selection clause requiring the parties to litigate their disputes in state or federal court in Virginia. The subcontractor filed suit in the U.S. District Court for the Western District of Texas, which denied the general contractor's motions to dismiss or transfer venue based on the forum-selection clause. The U.S. Supreme Court reversed, pointing out that forum-selection provisions should be granted deference absent "extraordinary circumstances" not present in the case.

Early reactions to the opinion have been mixed. Tom Ichniowski at Engineering News-Record interviewed Atlantic Marine’s attorney Michael Sterling (Vandeventer Black, LLP), who believes the ruling supports the enforceability of forum-selection provisions in construction contracts. The article presents an opposing view from attorney Eric Travers (Kegler Brown Hill + Ritter), who filed an amicus brief on behalf of the American Subcontractors Association. He pointed out that the Supreme Court remanded the case for consideration of public-policy interests, and that 24 states have found similar forum-selection clauses invalid.

As a Texas-based construction attorney, I'll add a public-policy wrinkle: Texas has a statute which gives a subcontractor performing construction or repair work on a project in Texas the option to void any contractual provision making disputes "subject to another state's law, [or] litigation in the courts of another state." Tex. Bus. & Comm. Code § 272.001. On remand, the subcontractor might raise this statute (if it hasn't already) as support for its argument that the case should not be transferred to federal court in Virginia.

Wednesday, December 4, 2013

Default Terminations: A Death Penalty?

This file is licensed under the Creative Commons
 Attribution-Share Alike 3.0 Unported license.
In this linked article distributed by Advise & Consult, Inc., Smith, Currie & Hancock's Gene Heady discusses default-termination clauses in subcontracts and their impact on the parties.  

In particular, the article provides some ideas as to what should constitute an "event of default" for the subcontractor, including failing to pursue its work diligently, failing to prosecute the work in a workmanlike and skillful manner, failing to pay sub-subcontractors and suppliers, or failing to correct defective work, among others. One very important point that may be ignored by some general contractors is the requirement to follow the contractual provisions allowing subcontractors to cure their defaults.

The article is a good summary of what types of clauses should be incorporated into subcontracts to protect both the subcontractor and the contractor.  More saliently for us as a dispute-resolution group, it helps to remind us of possible defenses to a termination for default claim.