Silo Point II LLC v. Suffolk Const. Co., Inc., Case No. 1:08-cv-999.

• Decision Date: 25 September 2008
• Docket Number: Case No. 1:08-cv-999.
• Citation: 578 F.Supp.2d 807
• Parties: SILO POINT II LLC, Plaintiff, v. SUFFOLK CONSTRUCTION CO., INC., Defendant.
• Court: U.S. District Court — District of Maryland

578 F.Supp.2d 807

SILO POINT II LLC, Plaintiff, v. SUFFOLK CONSTRUCTION CO., INC., Defendant.

Case No. 1:08-cv-999.

United States District Court, D. Maryland.

September 25, 2008.

Richard O. Wolf, C. Kelly Skrabak, Charlie C.H. Lee, Robert Milton Moore, Moore and Lee LLP, McLean, VA, for Plaintiff.

Michael Evan Jaffe, Thelen Reid Brown Raysman and Steiner LLP, Washington, DC, for Defendant.

MEMORANDUM OPINION

RICHARD D. BENNETT, District Judge.

Plaintiff Silo Point II, LLC, ("Silo Point"), a Maryland Limited Liability Company engaged in the business of real estate development, has filed a two-count Complaint in this Court against Defendant Suffolk Construction Company, Inc. ("Suffolk"), a general contractor incorporated in Massachusetts. At issue is the Guaranteed Maximum Price contract (the "Contract") the parties entered into that sets forth the terms and risks attendant to the construction of a condominium project in Baltimore City (the "Project"). The crux of the dispute relates to the calculation of the Guaranteed Maximum Price ("GMP"), which largely determines liability for cost overruns on the Project. After the parties failed to negotiate a resolution, Silo Point brought this action seeking declaratory relief and specific performance.

Now pending before this Court is Defendant Suffolk's Motion to Dismiss (Paper No. 4). Suffolk argues that the forum selection clause governing the Contract requires all disputes to be filed in a Maryland state court. This matter has been briefed fully and no hearing is necessary. See Local Rule 105.6 (D.Md.2008). For the reasons set forth below, Suffolk's Motion to Dismiss is GRANTED.

BACKGROUND

This action arises out of a dispute related to the construction of an approximately $100 million condominium project along Baltimore's Inner Harbor. (Compl. ¶ 5.) On November 8, 2005, Silo Point issued its intent to award a prime contract to Suffolk for the construction of the Project that involved the conversion of a 1920s-era grain elevator and silo into a high end condominium building. (Id. ¶¶ 5, 8.) In late 2005 and early 2006, the parties engaged in Pre-Construction, wherein they identified the scope and intent of the work, determined construction feasibility, developed a construction schedule, and calculated a GMP. (Id. ¶ 9.) At the close of Pre-Construction, on April 20, 2006, the parties entered into the Contract that specified a GMP of $92,690,000 and a substantial completion date within twenty months from the commencement of construction. (Id. ¶¶ 10, 11; Def.'s Ex. 1A, Art. 4, § 4.3) The Contract provided that any costs exceeding the GMP would be borne by Suffolk without reimbursement by Silo Point. (Def.'s Ex. 1A, Art. 4 § 4.3) Finally, the Contract contains a forum selection clause which reads:

§ 4.4.3 Governing Law and Venue The substantive and procedural laws of Maryland shall apply in all respects to any and all disputes arising from or relating to interpretation of performance of this Contract, except as otherwise specifically provided herein. Any dispute between the parties shall be exclusively brought in the courts of the State of Maryland.

(Def.'s Ex. 1B, Art. 4, § 4.4.3.)

During the construction process, several unforeseen conditions and difficulties developed. As a result, Suffolk began to incur costs well above the GMP and the Project's projected completion date was extended. Suffolk thereupon petitioned Silo Point for both an upward adjustment to the GMP to compensate for its cost overruns and for a time extension on the Project's completion date. (Compl. ¶ 19.) A protracted dispute arose between the parties over the scope and nature of any adjustments to the Contract and the determination of the GMP and construction schedule.

In March of 2008, Suffolk indicated that it would file for a mechanic's lien against the property and would sue for breach of contract in the Circuit Court for Baltimore City.¹ (Id. ¶ 28.) On April 21, 2008, after the failure of the parties' subsequent attempts to resolve their dispute, Silo Point filed this action. Silo Point seeks a declaratory judgment that determines "the GMP based on the respective rights, risks, and obligations each party undertook pursuant to their negotiated Contract, including the appropriate contract completion date, and a declaration regarding Suffolk's claims that have been submitted and rejected, as contrary to the terms of the Contract." (Id. ¶ 50.) In addition, Silo Point seeks a grant of specific performance requiring Suffolk to produce certain books and records previously sought by Silo Point. (Id. ¶¶ 52-55.) Suffolk has moved to dismiss, claiming, inter alia, that the forum selection clause in the Contract forecloses either party from filing suit in this Court.²

STANDARD OF REVIEW

The United States Court of Appeals for the Fourth Circuit has recently ruled that Fed.R.Civ.P. 12(b)(3) is the proper procedural vehicle for bringing a motion to dismiss based on improper venue when the issue turns on a forum selection clause.³ Sucampo Pharms., Inc. v. Astellas Pharma, Inc., 471 F.3d 544, 550 (4th Cir.2006). Under Rule 12(b)(3) the court is allowed to freely consider evidence outside the pleadings, unlike under a 12(b)(6) motion. Id. In addition, when resolving a motion to dismiss under Rule 12(b)(3), "`the pleadings are not accepted as true, as would be required under a Rule 12(b)(6) analysis.'" Id. at 549 (quoting Argueta v. Banco Mexicano, 87 F.3d 320, 324 (9th Cir.1996)). Nevertheless, "[i]n deciding a motion to dismiss, all inferences must be drawn in favor of the plaintiff, and `the facts must be viewed as the plaintiff most strongly can plead them.'" Sun Dun, Inc. of Washington v. Coca-Cola Co., 740 F.Supp. 381, 385 (D.Md.1990) (quoting Coakley & Williams, Inc. v. Shatterproof Glass Corp., 706 F.2d 456, 457 (4th Cir. 1983)).

ANALYSIS

Because this is a diversity action, the substantive law of Maryland is applied in analyzing the forum selection clause. See Eisaman, et al. v. Cinema Grill Systems, Inc., et al., 87 F.Supp.2d 446, 448 (D.Md.1999) ("[I]n diversity cases ... the Fourth Circuit applies state law to determine enforceability" of forum selection clauses.). Maryland has adopted the federal standards for evaluating forum selection clauses. Gilman v. Wheat, First Securities, Inc., 345 Md. 361, 692 A.2d 454, 459-63 (1997). In M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), the Supreme Court of the United States held that a forum selection clause is deemed to be enforceable if it is both mandatory and reasonable. Because the validity of the forum selection clause in the present case is not contested, and there is no showing that it is unreasonable, it will be enforced. See Eisaman, et al. v. Cinema Grill Systems, Inc., et al., 87 F.Supp.2d 446, 449 (D.Md.1999) ("[F]orum selection clauses `are prima facie valid and should be enforced unless enforcement is shown by the resisting party to be `unreasonable' under the circumstances.'" (quoting Bremen, 407 U.S. at 10, 92 S.Ct. 1907)). As a result, the only question that remains to be decided on this motion is the interpretation of the forum selection clause and whether it permits Silo Point to institute suit in federal court.⁴

The forum selection clause contained in the Contract provides that "[a]ny dispute between the parties shall be exclusively brought in the courts of the State of Maryland." (Def.'s Ex. 1B, Art. 4, § 4.43.) (emphasis added). Suffolk submits that the clause clearly identifies the state courts of Maryland as the exclusive fora selected by the parties. Suffolk contends that this interpretation is supported by a plain reading of the clause and by the weight of authority interpreting identical or similar phrases. (Def.'s Mem. Supp. Mot. to Dismiss 14-15.) Silo Point counters by emphasizing the fact that in the clause "the parties agreed to submit to jurisdiction in the `courts' of Maryland—not just one court—but multiple `courts' of Maryland." (Pl.'s Mem. Opp'n Mot. to Dismiss 24.) Silo Point argues that because only one state court, the Circuit Court for Baltimore City, could serve as an appropriate venue for state actions between the parties, the plural use of "courts" must also refer to the United States District Court for the District of Maryland. (Id.)

In analyzing forum selection clauses, courts begin by determining whether the limitation provided in the clause is one of sovereignty or geography. See, e.g., American Soda, LLP v. U.S. Filter Wastewater Group, Inc., 428 F.3d 921, 925 (10th Cir.2005); LFC Lessors, Inc. v. Pac. Sewer Maint. Corp., 739 F.2d 4, 6 (1st Cir.1984); City of New York v. Pullman Inc., 477 F.Supp. 438, 442 (S.D.N.Y.1979); Ferri Contracting Co. v. Town of Masontown, No. 03-1303, ___ Fed.Appx. ___, ___ _ ___, 2003 WL 22244905, at *1-2, 2003 U.S.App. LEXIS 19992, at *2-4 (4th Cir. Sept. 29, 2003) (per curiam) (unpublished). Clauses that are expressed in terms of sovereignty mandate that suit be brought in the courts of the state sovereign. Ferri Contracting Co., ___ Fed.Appx. at ___ _ ___, 2003 WL 22244905, at *1-2, 2003 U.S.App. LEXIS 19992, at *3-4 (citing Pullman, 477 F.Supp. at 442). On the other hand, clauses that are expressed in terms of geography permit suit to be brought in a state or federal court located within a specified geographic boundary. American Soda, 428 F.3d at 925 (citing LFC Lessors, 739 F.2d at 6).

The forum selection clause in this case is unambiguously expressed in terms of sovereignty and therefore excludes federal courts. The term "of" is commonly used in clauses to refer to sovereignty and has been defined as "denoting that from which anything proceeds; indicating origin, source, descent." Dixon v. TSE Int'l Inc., 330 F.3d 396, 398 (5th Cir.2003) (per curiam) (citing Black's Law Dictionary 1232 (4th ed. 1968)); American Soda, 428 F.3d at 926 n. 1 (citing Black's Law Dictionary 1080 (6th ed. 1991)). It follows that this Court is...