Monday, September 28, 2015
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C.A. Rejects Forum Clause in Contract Between Architects
By KENNETH OFGANG, Staff Writer
A forum selection clause in an agreement between two architectural firms violated state law, the First District Court of Appeal ruled Friday.
Div. Five reversed a Marin Superior Court judge’s ruling that the dispute between Vita Planning and Landscape Architecture, Inc. and HKS Architects, Inc. had to be litigated in HKS’s home state of Texas. The panel said the clause requiring the case to be heard there is unenforceable under Code of Civil Procedure §410.42, which prohibits enforcement of construction contract provisions requiring disputes between contractors and California subcontractors to be litigated outside California.
The dispute centers on the firms’ role in the development of a luxury hotel in Mammoth Lakes. The developer hired HKS as its architect, pursuant to a contract requiring that all disputes regarding the project be litigated in Texas, and that the contract be interpreted according to Texas law.
HKS hired InSite, a California-based landscape design firm, which was acquired by California-based Vita around the same time. HKS sent Vita a contract to perform “[l]andscape architectural services” for the project; the agreement incorporated provisions in the prime agreement between HKS and the developer, including the choice-of-law and forum-selection clauses.
Neither HKS nor Vita signed that contract, but Vita performed work on the project in 2008 and sent invoices to HKS. The developer, however, ran into financial problems so work on the project—as well as payments—stopped.
HKS sued the developer in Texas in 2010 and won a $1.617 million judgment that it was unable to collect on. Vita sued HKS in Marin Superior Court in 2013, seeking more than $370,000.
Move to Enforce
After discovery and mediation, HKS moved to enforce the forum-selection clause. Vita raised a number of arguments in opposition, including that the clause contravened §410.42, that HKS waived any rights under the clause by its earlier participation in the litigation, and that the unsigned contract did not constitute and enforceable written contract between the parties.
Marin Superior Court Judge Lynn Duryee ruled that the forum-selection clause was part of the parties’ agreement and was enforceable. She rejected the waiver argument on the ground that HKS’s participation in the litigation was not “profound and extensive” and held that §410.42 did not apply because the suit was not “between a contractor and a subcontractor for construction, but a contract between design professionals.”
Presiding Justice Barbara J.R. Jones, writing for the Court of Appeal, said there was substantial evidence to support the trial judge’s ruling as to the existence of the contract. The jurist noted that Vita had pled its existence, and attached a “true and correct copy” of the unsigned document, describing this as a binding judicial admission.
She went on, however, to conclude that the contract was a “contractor-subcontractor” agreement within the meaning of §410.42.
Jones reasoned:
“Black’s Law Dictionary defines a contractor generally as ‘[a] party to a contract’ or more specifically as ‘one who contracts to do work or provide supplies for another.’…Here, HKS is a contractor, because it contracted with Owner to design the Project….We are not persuaded by HKS’s contention that section 410.42 does not apply because it is not a ‘general contractor,’…but rather a ‘design professional.’ In industry parlance, a ‘‘contractor’ may be “synonymous with ‘builder’…. But the term ‘contractor’ in section 410.42 is not limited to builders, nor does it exclude an architect or design professional.”
Both Black’s and the Civil Code similarly contain broad definitions of “subcontractor,” Jones wrote.
“Here, Vita is unquestionably a subcontractor because it was ‘awarded a portion’ of HKS’s contract with Owner and because it did ‘not have a direct contractual relationship’ with Owner,” Jones explained. “There is no dispute that Vita did not interact, communicate, or negotiate with Owner concerning Vita’s work for the Project.”
Legislative History
While other statutory provisions, such as those governing mechanics’ liens, specifically mention “design professionals,” the presiding justice added, “does not mean architects and design professionals cannot also be contractors or subcontractors.”
Citing legislative history and case law, she wrote:
“This case presents the very situation section 410.42 was designed to prevent: one where a California subcontractor performs work in California but is forced to litigate its dispute out of state, in a forum with laws unfavorable to the subcontractor.”
The case is Vita Planning and Landscape Architecture, Inc. v. HKS Architects, Inc., 15 S.O.S. 4516.
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