J3 Eng'g Grp., LLC v. Mack Indus. of Kalamazoo, LLC

• Decision Date: 01 July 2019
• Docket Number: Case No. 18-C-1240
• Citation: 390 F.Supp.3d 946
• Parties: J3 ENGINEERING GROUP, LLC, Plaintiff, v. MACK INDUSTRIES OF KALAMAZOO, LLC, f/k/a Stress-Con Industries, Inc., and Mack Industries, Inc., Defendants.
• Court: U.S. District Court — Eastern District of Wisconsin

390 F.Supp.3d 946

J3 ENGINEERING GROUP, LLC, Plaintiff,

v.MACK INDUSTRIES OF KALAMAZOO, LLC, f/k/a Stress-Con Industries, Inc., and Mack Industries, Inc., Defendants.

Case No. 18-C-1240

United States District Court, E.D. Wisconsin.

Signed July 1, 2019

Patrick M. Harvey, Husch Blackwell LLP, Milwaukee, WI, for Plaintiff.

Mark W. Hancock, James A. Friedman, Godfrey & Kahn SC, Madison, WI, for Defendants.

DECISION

LYNN ADELMAN, District Judge On August 13, 2018, Defendants ("Mack") filed a motion to transfer this case to the U.S. District Court for the Northern District of Ohio, citing 28 U.S.C. §§ 1404 and 1406 and Mack's status as the "true plaintiffs" in the dispute. On August 31, 2018, Plaintiff ("J3") filed a motion to remand, citing 28 U.S.C. §§ 1447, to the state circuit court in Ozaukee County on the basis of forum selection clauses that require dispute resolution there. Mack claims that these forum selection and choice of law clauses are void under applicable state law, and that Ohio law mandates the resolution of the parties' Ohio-based project dispute be resolved there.

I. BACKGROUND

The case at hand is a dispute regarding four contracts between the parties for various projects across the Midwest; one project in Ohio, one project in Illinois, one project in Wisconsin, and one project in Indiana. J3 Engineering claims that Mack owes it "at least $120,449.07" for breaching these agreements. ECF No. 1-1 at 7. Mack claims that J3 Engineering owes it "at least $247,815.35" for errors and omissions with respect to these contracts. ECF No. 6 at 4.

A. Illinois Tollway project

In December 2013, the parties entered into an agreement for J3 to provide engineering and structural design for soundwall segments on the Illinois Tollway. ECF No. 8-2. J3 claims that Mack owes J3 "at least $76,777.50 related to this project," a project that ultimately ended prematurely upon Mack's failure to obtain proper certification in the state of Illinois to perform this work. ECF No. 10 at 5-6. Mack claims that it informed J3 of these issues regarding certification and instructed J3 to abstain from performing work on the project until certification was resolved, but that J3 ignored this instruction and allegedly performed work anyway. ECF No. 8 at 12-13. Therefore, Mack argues, J3's expenses on this project were at J3's own risk and Mack owes J3 nothing with respect to this agreement. Id . The agreement for the Illinois project contains no forum selection or choice of law clause. See ECF No. 8-2 at 10.

B. Wisconsin project

In January 2014, the parties entered into an agreement for J3 to provide engineering and drafting services related to a Wisconsin Department Transportation project on the Hoan Bridge in Milwaukee that Mack was involved in. ECF No. 12-2. J3 claims that it performed work for Mack until July 2014, when it stopped work because Mack had not yet paid J3 for the Illinois Tollway project that was stopped in February 2014 and that Mack was not current on the amounts that it owed J3 Engineering for its work on the Hoan Bridge project up to that point. ECF No. 1-1; ECF No. 10 at 6. J3 claims that Mack still owes them at least $12,610.07 related to this project. ECF No. 10 at 6. Mack claims that it performed all of its obligations under the agreement and that it was J3 which breached the agreement in providing an erroneous design. ECF No. 8 at 14. That erroneous design was rejected by the project owner, the state of Wisconsin, and its project engineer, resulting in a back charge applied to Mack for non-conforming work. Id. As a result, Mack claims that J3 owes Mack $223,955.35, the amount that was back charged. Id. The agreement for the Wisconsin project contains no forum selection or choice of law clause. See ECF No. 12-2 at 10.

C. Ohio project

In May 2017, the parties entered into an agreement for engineering services related to an apartment project in the Little Italy neighborhood in Cleveland. ECF No. 12-1. J3 claims that Mack owes J3 "at least $3,687.50" for work done on this project. ECF No. 10 at 7. Mack, in return, argues that it fulfilled its own obligations and that the agreement required J3 to maintain certain minimum insurance coverage for the duration of the project, coverage which lapsed midway through and thus constituted a breach of the agreement on J3's part. ECF No. 8 at 13. Mack alleges an unspecified amount¹ in monetary damages to be determined at trial. Id.

The Ohio project agreement includes the following forum selection clause:

Dispute Resolution: With the exception of invoiced amounts due to Consultant, any claims or disputes between the Customer and Consultant arising out of the services to be provided by Consultant or out of this Agreement shall be submitted to nonbinding mediation. The Customer and Consultant agree to include a similar mediation agreement with all contractors, subconsultants, subcontractors, suppliers, and fabricators, providing for mediation as the primary method for dispute resolution among all parties. Any dispute that cannot be successfully negotiated as contemplated in this agreement, including the failure of either party to respond to a request for mediation within 7 days, shall be resolved by initiation of formal judicial proceedings brought before a court of competent jurisdiction in Ozaukee County, Wisconsin .

ECF No. 12-1 at 5 (emphasis added). The Ohio agreement also contains a choice of law clause. ECF 12-1 at 6 ("This contract is governed by the laws of the State of Wisconsin.").

D. Indiana project

In August 2017, the parties entered an agreement for J3 to provide engineering and drafting services for pre-cast concrete walls at the Gallops Travel Center in Kendallville, Indiana. ECF No. 8-1. J3 claims that Mack owes J3 "at least $27,194" for J3's work on this project. ECF No. 10 at 7. Mack claims that J3 delivered unusable work product. ECF No. 8 at 13. Mack claims that this delivery of "erroneous and incorrect" work product constituted a breach of the agreement and Mack was therefore entitled to an unspecified amount of damages to be calculated at trial. Id . The Indiana project agreement includes both a choice of law clause and a forum selection clause that are identical to the clauses (listed above) that are found in the Ohio contract. See ECF No. 8-1 at 5-6.

E. Procedural history

On July 20, 2018, J3 filed its complaint in state court in Ozaukee County, Wisconsin. See ECF No.1-1. On August 7, 2018 Mack filed a complaint on these same issues in the US District Court for the Northern District of Ohio. ECF No. 6-1. On August 10, 2018, Mack removed the Ozaukee County action to this court and three days later moved this court to transfer the case to the Northern District of Ohio. J3 then filed its own motion in this court to remand the case to the Ozaukee County court. On November 11, Magistrate Judge Kathleen B. Burke, finding J3's Ozaukee County complaint to be "first filed," ordered the Northern District of Ohio case stayed pending resolution of the case removed to this court. Mack Indus. of Kalamazoo, LLC v. J3 Eng'g Grp., LLC , No. 1:18CV1806, 2018 WL 5994968 (N.D. Ohio Nov. 15, 2018).

II. DISCUSSION

A. First-filed complaint

As an initial matter, I address Mack's contention that J3 acted in bad faith in filing a complaint in state court on July 20, 2018 and how this entitles Mack to its choice of forum in the Northern District of Ohio.

In supporting its motion to remand, Mack argues that it is the "true plaintiff in this dispute." ECF No. 6 at 1. J3's action in filing a "preemptive complaint" constituted "gamesmanship and surreptitious behavior, exploiting Mack's good faith attempts to resolve these disputes without resort to litigation." Id. at 7. This, according to Mack, means that I should find that Mack's complaint is the "true first-filed complaint" and thus grant Mack's choice of venue preference, i.e., the Northern District of Ohio.

Mack presented these same arguments to Judge Burke in federal court in Ohio. Judge Burke, determining that the parties and claims were identical and that the complaints filed were mirror images of each other, found that no equitable reasons or special circumstances warranted non-application of the first-to-file rule and stayed the case. J3 Eng'g Grp., LLC , No. 1:18CV1806, 2018 WL 5994968, at *4 ("Mack's Complaint, which requests declaratory relief, is not a special circumstance that would warrant not applying the first-to-file rule."). Judge Burke also observed that Mack could not reasonably claim to have been caught completely off guard by the complaint filed in Wisconsin. Engaging in mediation was a prerequisite to filing lawsuit, therefore "it should not have surprised Mack that J3 filed a lawsuit after an unsuccessful mediation." Id. at *5. Likewise, given the presence of forum selection clauses pointing to Ozaukee County, Wisconsin as the forum for litigation, it should not have surprised Mack that J3 filed its lawsuit there. Id.

I agree with Judge Burke. While the Seventh Circuit has "never laid down an inflexible rule that the prior filing controls," Research Automation, Inc. v. Schrader-Bridgeport Int'l, Inc. , 626 F.3d 973, 980 (7th Cir. 2010) (citing Warshawsky & Co. v. Arcata National Corp. , 552 F.2d 1257, 1265 (7th Cir.1977) ), I see no good reason to initially assume that the Northern District of Ohio is a more appropriate forum where two of the four projects include forum selection clauses pointing towards a Wisconsin state court, a third claim is based on activities in the State of Wisconsin, and the fourth and final claim is based on a project next-door in Illinois, not in Ohio.

Further, behavior may count against a plaintiff's choice of forum, such as evidence of forum-shopping or bad faith by a litigant. Id. at 979 n. 2 (citing IFC Credit Corp. v. Aliano Brothers General Contractors, Inc. , 437 F.3d 606, 609–10 (7th Cir.2006) ). I fail to see any such behavior here. Lawsuits are filed when mediation is unsuccessful, something...