John's Insulation, Inc. v. Siska Const. Co., Inc.

• Decision Date: 09 October 1987
• Docket Number: No. 87 Civ. 566 (WCC).,87 Civ. 566 (WCC).
• Citation: 671 F. Supp. 289
• Parties: JOHN'S INSULATION, INC., Plaintiff, v. SISKA CONSTRUCTION COMPANY, INC., a/k/a Siska Construction Co., Inc., a/k/a Siska Construction, Inc., Defendant.
• Court: U.S. District Court — Southern District of New York

671 F. Supp. 289

JOHN'S INSULATION, INC., Plaintiff, v. SISKA CONSTRUCTION COMPANY, INC., a/k/a Siska Construction Co., Inc., a/k/a Siska Construction, Inc., Defendant.

No. 87 Civ. 566 (WCC).

United States District Court, S.D. New York.

October 9, 1987.

COPYRIGHT MATERIAL OMITTED

Sitomer & Odesser, P.C., New York City, for plaintiff; Gary J. Langer, of counsel.

Henry J. Steinglass, New York City, for defendant.

OPINION AND ORDER

WILLIAM C. CONNER, District Judge.

This action is before the Court on the motion of plaintiff John's Insulation, Inc. ("John's"), to remand to New York State Supreme Court, New York County, pursuant to 28 U.S.C. § 1447. Defendant Siska Construction Company, Inc. ("Siska") has cross-moved in the alternative for transfer of this action to the Federal District Court of Massachusetts pursuant to 28 U.S.C. § 1404(a), or for a stay of this action pending resolution of a related action in Massachusetts District Court (United States Use of Siska Construction Company, Inc. v. John's Insulation, Inc., 87-0179-WF). For the reasons set forth below both parties' motions are denied.

I. FACTS

The underlying action involves a contractual dispute. John's, a New York corporation, is the prime contractor on a construction job at Fort Devens Military Base in Ayer, Massachusetts. John's entered into a written subcontract agreement with Siska, a New Hampshire corporation, in which Siska agreed to perform construction work at the Fort Devens site. The subcontract contained a forum selection and choice of law provision which provided:

This contract shall be interpreted according to the laws of the State of New York, and any action hereunder shall be commenced in the Supreme Court of the State of New York.

On August 15, 1985, Siska executed the contract and returned it to John's with a covering letter. The letter contained the following objection to the forum selection clause:

Also, since yours is a New York firm, and ours is from New Hampshire, the clause about actions should really be the state in which the project is done, Massachusetts. Because of the negative connotations, and the belief that we will not encounter such problems, we won't dwell on the wording.

Despite these objections, Siska left the forum selection clause intact on the executed contract.

John's did not respond to Siska's letter and Siska began performance. John's made some initial payments for the work done, but a dispute arose concerning Siska's performance. In April of 1986 John's terminated the contract.

Siska brought an action in New Hampshire State Court in November of 1986 against John's and Hartford Accident and Indemnity Co., the surety on John's payment bond. Siska discontinued that action on December 16, 1986, prior to any response to the summons and complaint.

Shortly thereafter, John's commenced this action in the Supreme Court of the State of New York, New York County, by means of a summons with notice dated December 16, 1986. Siska served a notice of appearance and demand for complaint on January 28, 1987. On January 29, 1987 Siska removed the action to this Court on the basis of diversity of citizenship.

At some point after John's commenced this action, Siska brought suit under the Miller Act, 40 U.S.C. §§ 270a-270d (1982), against John's and Hartford Accident and Indemnity Company in the United States District Court for the District of Massachusetts. The Massachusetts action is for John's failure of payment on the Fort Devens construction contract.

II. DISCUSSION

Plaintiff's motion to remand is based on the forum selection clause. Plaintiff asserts that despite the objections raised in defendant's covering letter, defendant agreed to the forum selection clause as it stands in the contract. Accordingly, plaintiff contends that defendant waived its right to remove the action to federal court.

Defendant makes three arguments in opposition to plaintiff's motion and in support of defendant's cross-motion. First, defendant asserts that the August 15, 1987 cover letter constituted a counteroffer which John's accepted by performance, and therefore the forum actually selected was Massachusetts. Second, defendant contends that even if the parties agreed on New York as the forum, the choice of a New York forum is void because it violates the Miller Act. Third, defendant argues that, even assuming the validity and applicability of the New York forum selection clause, the clause by its terms does not require remand of this action to state court.

A. Siska's Cover Letter

New York follows the traditional common law view, which holds that an acceptance that is conditioned on terms at variance with those in the offer operates as a counteroffer and terminates the original offer. See Gram v. Mutual Life Ins. Co., 300 N.Y. 375, 382, 91 N.E.2d 307, 310 (1950); Poel v. Brunswick-Balke-Collender Co., 216 N.Y. 310, 318-19, 110 N.E. 619, 621-22 (1915); Roer v. Cross County Med. Center Corp., 83 A.D.2d 861, 863, 441 N.Y.S.2d 844, 845 (2d Dep't 1981); Arnold v. Gramercy Co., 30 Misc.2d 852, 854, 218 N.Y.S.2d 23, 25 (Sup.Ct.N.Y.County 1961), aff'd, 15 A.D.2d 762, 224 N.Y.S.2d 613, aff'd, 12 N.Y.2d 687, 233 N.Y.S.2d 475, 185 N.E.2d 911 (1962); J. Calamari & J. Perillo, Contracts, § 2-21(a) (3d ed. 1987). If the original offeror assents to the terms of the counteroffer, then a contract is formed on those terms. See 1 Corbin on Contracts, § 89 (1963). If the original offeror does not respond to the counteroffer, but proceeds with performance of the contract, his conduct may be considered an expression of assent to the terms of the counteroffer. Id. Consequently, if Siska's cover letter constitutes a counteroffer, then John's initial payments to Siska constitute an acceptance of Massachusetts as the proper forum.

Siska's cover letter, however, was not a counteroffer, but rather a "suggestion, request or overture." Valashinas v. Koniuto, 308 N.Y. 233, 239, 124 N.E.2d 300, 302 (1954); Arnold v. Gramercy Co., 30 Misc.2d at 854, 218 N.Y.S.2d at 25. The language that Siska employed in its cover letter simply was too equivocal to condition acceptance of the contract upon John's agreement to accept Massachusetts as the forum for the resolution of disputes. Although Siska's statement that "the clause about actions should really be ... Massachusetts" is arguably an imperative statement that would ordinarily constitute a counteroffer, Siska negated the effect of that language by concluding the paragraph with the phrase, "but we won't dwell on the wording."

Under the objective theory of contracts followed in New York, a party's manifestations of intent are viewed from the vantage point of a reasonable man in the position of the other party. Ricketts v. Pennsylvania R.R. Co., 153 F.2d 757, 760-61 (2d Cir.1946) (Frank, J., concurring); see also Horwitz v. Sprague, 440 F.Supp. 1346, 1350 (S.D.N.Y. 1977); Brown Bros. Elec. Contractors, Inc., v. Beam Constr. Corp., 41 N.Y.2d 397, 399-400, 393 N.Y.S.2d 350, 351-52, 361 N.E.2d 999, 1001 (1977); Wright v. Ford Motor Co., 111 A.D.2d 810, 811, 490 N.Y. S.2d 556, 557 (2d Dep't 1985); P.J. Carlin Constr. Co. v. Whiffen Elec. Co., 66 A.D.2d 684, 686, 411 N.Y.S.2d 27, 28-29 (1st Dep't 1978). Certainly a reasonable man in John's position, upon reading the phrase "we won't dwell on the wording," would conclude that although Siska was not happy about the forum selection clause, it was willing to accept the wording. Therefore, Siska's cover letter did not act as a counteroffer and consequently, under the terms of the contract, New York was the appropriate forum for commencement of this action.

B. The Miller Act

Defendant contends that, even if the parties agreed on New York as the forum, the forum selection clause is void because it violates the Miller Act, 40 U.S.C. §§ 270a-270d (1982).

Section 270a of the Miller Act requires that the prime contractor on any public works project of the United States post two bonds: (1) a performance bond for the protection of the United States, and (2) a payment bond for the protection of all persons supplying labor or material. Section 270b(a) provides that every person who is not paid for labor or material supplied on such a project has the right to sue on the payment bond. Every such suit, however, must be brought in the United States District Court for the district in which the contract is to be performed. 40 U.S.C. § 270b(b).

Siska relies on the exclusive venue provision of section 270b(b) to oppose the remand and assert the propriety of a transfer to the United States District Court in Massachusetts. Siska's reliance on the Miller Act, however, is misplaced. By its terms, the Miller Act only applies to suits by suppliers of labor or material whom the contractor has refused to pay. See 40 U.S.C. § 270b(b). The instant action, by contrast, is a suit by the contractor against the subcontractor. Since the Miller Act does not apply to such suits, the exclusive venue provision of section 270b(b) does not prohibit this Court from remanding this action to New York State Supreme Court.

Moreover, even assuming the Miller Act applies, it has long been recognized that the Act's exclusive venue provision may be altered by contract. See United States v. Electronic & Missile Facilities, Inc., 364 F.2d 705, 707-08 (2d Cir.) (prior agreement between contractor and subcontractor to arbitrate disputes given effect even though Miller Act applied), cert dismissed, 385 U.S. 924, 87 S.Ct. 239, 17 L.Ed.2d 148 (1966). In In re Fireman's Fund Ins. Cos., Inc., 588 F.2d 93 (5th Cir. 1979), the Court of Appeals for the Fifth Circuit addressed the relationship between forum selection clauses and the Miller Act. The court noted that section 270b(b) of the Miller Act exists for the convenience of the parties, and therefore it is subject to variation by agreement. Id. at 95. Consequently, the court enforced the forum selection clause even though it required a venue different from that provided...