Rocky Mountain Builders Supply Inc. v. Marks ( 2017 )


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    2017 UT App 41
    THE UTAH COURT OF APPEALS
    ROCKY MOUNTAIN BUILDERS SUPPLY INC.,
    Appellant,
    v.
    STEVE MARKS,
    Appellee.
    Opinion
    No. 20150456-CA
    Filed March 2, 2017
    Fourth District Court, Provo Department
    The Honorable Samuel D. McVey
    No. 140400095
    George L. Chingas Jr., Attorney for Appellant
    Steven R. Sumsion and Kevin R. Worthy, Attorneys
    for Appellee
    JUDGE GREGORY K. ORME authored this Opinion, in which JUDGE
    STEPHEN L. ROTH and SENIOR JUDGE PAMELA T. GREENWOOD
    concurred. 1
    ORME, Judge:
    ¶1      Rocky Mountain Builders Supply Inc. (RMBS) appeals the
    district court’s decision that a forum selection clause in RMBS’s
    contract with Steve Marks was unenforceable and that the court
    lacked jurisdiction to hear the case. Because we conclude that the
    forum selection clause was enforceable and that the district court
    indeed had jurisdiction over Marks, we reverse and remand.
    1. Senior Judge Pamela T. Greenwood sat by special assignment
    as authorized by law. See generally Utah R. Jud. Admin. 11-
    201(6).
    Rocky Mountain Builders Supply v. Marks
    ¶2     This appeal arises out of a seemingly simple contract
    dispute between RMBS and Marks. RMBS, a Utah corporation, is
    a roofing contractor with its principal place of business in Utah.
    It has branch offices throughout the Intermountain West,
    including in Havre, Montana, and is licensed to do business in
    that state. Marks, a Montana resident, entered into a contract
    with RMBS on November 19, 2013, for the installation of new
    roofs on two gazebos and a shed at his Montana residence in
    exchange for payment of $14,000. Marks agreed to pay $2,800 up
    front and the remaining $11,200 upon completion. The form
    contract supplied by RMBS contained a forum selection clause
    designating Utah as the forum for resolution of any disputes
    between the parties arising from the contract. After installation
    was complete, a dispute arose between Marks and RMBS, and
    Marks refused to pay the balance due. In response, RMBS sued
    Marks in Utah’s Fourth District Court.
    ¶3     Marks filed a motion to dismiss RMBS’s complaint, which
    the district court granted on the ground that the forum selection
    clause was invalid and that, as a result, the court lacked personal
    jurisdiction over Marks. The district court concluded that
    because Marks was a private citizen rather than a business
    entity, because the contract was for work on a residential
    dwelling rather than a commercial property, and because the
    amount in issue was relatively small, it would be unreasonable
    to apply the forum selection clause to Marks. Citing Utah Code
    section 13-8-3, the court further noted that “Utah law would not
    enforce a forum selection clause selecting another state in a case
    involving Utah real estate” and suggested that it would
    therefore be “unjust to enforce such a clause in a contract
    involving real estate of another state.” Cf. Utah Code Ann. § 13-
    8-3(2)(a)–(b) (LexisNexis 2013) (“A provision in a construction
    agreement requiring a dispute . . . to be resolved in a forum
    outside of this state is void and unenforceable” if the “work to be
    done and the equipment and materials to be supplied . . .
    involves a construction project in this state.”). RMBS appealed.
    20150456-CA                     2                
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    Rocky Mountain Builders Supply v. Marks
    ¶4     “Where a pretrial jurisdictional decision has been made
    on documentary evidence only,” as was the case here, “an
    appeal from that decision presents only legal questions that are
    reviewed for correctness.” Arguello v. Industrial Woodworking
    Machine Co., 
    838 P.2d 1120
    , 1121 (Utah 1992). In reviewing such a
    decision, we grant no deference to the district court. See
    Falkenrath v. Candela Corp., 
    2016 UT App 76
    , ¶ 6, 
    374 P.3d 1028
    .
    ¶5     Because RMBS stated at oral argument that it does not
    challenge the district court’s conclusion that Utah law governs,
    and because Marks does not raise a cross-appeal on that basis or
    otherwise challenge the district court’s conclusion, we begin by
    assuming that the enforceability of the forum selection clause is
    to be interpreted according to Utah law. 2 In Prows v. Pinpoint
    Retail Systems, Inc., 
    868 P.2d 809
     (Utah 1993), the Utah Supreme
    Court adopted the standard of enforceability found in the
    Restatement. 
    Id.
     This test requires an “agreement as to the place
    2. The parties’ position is understandable. The contract contains
    a choice of laws provision specifying that Utah law controls any
    dispute between the parties. Absent such a contractual provision,
    Utah courts typically apply the “most significant relationship”
    test to determine which state’s laws should apply. See American
    Nat’l Fire Ins. Co. v. Farmers Ins. Exch., 
    927 P.2d 186
    , 190–91 (Utah
    1996). See also Restatement (Second) Conflict of Laws § 188(1)
    (Am. Law Inst. 1971) (“The rights and duties of the parties with
    respect to an issue in contract are determined by the local law of
    the state which, with respect to that issue, has the most
    significant relationship to the transaction and the parties[.]”).
    Given that the contract was formed in Montana between a
    Montana resident and a Montana-licensed contractor for work to
    be performed in Montana, which work was ultimately
    completed in Montana, it would seem that Montana had the
    “most significant relationship” to the transaction and that its law
    would apply, but for the contractual choice of laws provision.
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    Rocky Mountain Builders Supply v. Marks
    of [an] action . . . [to] be given effect unless it is unfair or
    unreasonable.” Restatement (Second) Conflict of Laws § 80 (Am.
    Law Inst. Supp. 1988). Here, the district court determined that,
    given the nature of the underlying dispute (i.e., one involving
    “someone who had work done on the roof of their . . . home”)
    and “the amount at issue,” “the burden of proceeding in Utah
    would impose a heavy financial and practical burden on
    [Marks].” Thus, the court held that Utah was “so seriously an
    inconvenient forum” that to require Marks to defend this lawsuit
    here would be unjust and that the forum selection clause was
    unenforceable, thus depriving the court of jurisdiction over
    Marks. We disagree. 3
    ¶6     First, while RMBS is a corporate entity and thus may
    possess some degree of sophistication that Marks lacks, neither
    party has suggested to this court a reason why Marks was
    unable to negotiate with RMBS over the terms of the agreement.
    And seeing none, we decline to conclude that it is unfair, much
    less unreasonable, to apply the forum selection clause to him. See
    John Call Eng’g, Inc. v. Manti City Corp., 
    743 P.2d 1205
    , 1208 (Utah
    1987) (“[E]ach party has the burden to read and understand
    the terms of a contract before he or she affixes his or her
    signature to it. A party may not sign a contract and thereafter
    assert ignorance or failure to read the contract as a defense.”).
    3. In disagreeing with the district court’s conclusion that it
    lacked jurisdiction, we do not mean to imply that its concern
    about Utah being a “seriously . . . inconvenient forum” is wholly
    irrelevant. Forum non conveniens is a well-established doctrine
    that allows a court with jurisdiction over a lawsuit to decline to
    exercise that jurisdiction, as a matter of discretion, “when the
    cause could better be tried in a more convenient court.” Summa
    Corp. v. Lancer Indus., Inc., 
    559 P.2d 544
    , 545–46 (Utah 1977).
    Accord Energy Claims Ltd. v. Catalyst Inv. Group Ltd., 
    2014 UT 13
    ,
    ¶¶ 19, 36, 44, 
    325 P.3d 70
    .
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    Rocky Mountain Builders Supply v. Marks
    Second, and more importantly, the considerations that the
    district court identified in its decision—the involvement of
    Marks’s home in the dispute; the relatively small sum at issue;
    and the fact that Marks is an individual, not a corporation—are
    not of the type that would cause the enforcement of a forum
    selection clause to be adjudged unfair or unjust. Cf. Prows, 868
    P.2d at 813 (recognizing that where the enforcement of a forum
    selection clause would force a party to litigate two separate cases
    in two distant forums against two distinct parties, “only one of
    whom is present at each trial,” and yet still “prov[e] a
    ‘conspiracy’ between [the] two,” to enforce the clause would be
    “unjust and for all practical purposes den[y] [the party] his day
    in court”). Thus, there being no other reason to provide special
    protection to Marks, 4 the district court erred in concluding that
    the forum selection clause in the contract Marks signed was
    unenforceable.
    ¶7     Having determined that the forum selection clause is
    enforceable, we consider the district court’s conclusion that it
    lacked personal jurisdiction over Marks and thus could not
    resolve the dispute between RMBS and Marks. Its jurisdictional
    4. Although it may be true, as Marks argues, that if Marks were
    to “hire Montana lawyers and expert witnesses [those lawyers
    and witnesses would] charge prohibitively large sums to travel
    to Utah for court appearances,” this clearly would not be the
    most prudent course. Thus, Marks engaged Utah counsel to
    handle his defense of the Utah action and this appeal. And it is
    far from obvious that “hiring Utah lawyers and expert witnesses
    to prepare for and attend trial” in Utah would be significantly
    more expensive to Marks than hiring Montana lawyers and
    expert witnesses to “prepare for and attend trial” in Montana—
    as Marks would do should the case proceed in his home state.
    Indeed, we were advised at oral argument that an action was
    brought in Montana, which is on hold pending our decision.
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    Rocky Mountain Builders Supply v. Marks
    decision was largely a function of its conclusion that the clause
    was unenforceable, but our contrary decision implicates an
    additional analytic step.
    ¶8     In the case of an otherwise enforceable forum selection
    clause, “jurisdiction may be properly exercised as long as there is
    a rational nexus between the litigation and the State of Utah.”
    Jacobsen Constr. Co. v. Teton Builders, 
    2005 UT 4
    , ¶ 7, 
    106 P.3d 719
    .
    Thus, the Utah Supreme Court has noted that
    under certain circumstances it may be reasonable
    for a resident of Colorado and a resident of
    Wyoming to bargain for a forum selection clause
    designating Utah as the appropriate forum for any
    dispute arising in relation to a contract to be
    performed in Nevada. A Utah court hearing a
    subsequent action brought pursuant to the contract
    could very well find that the forum selection clause
    was reasonable under the circumstances, but
    nevertheless decline to exercise jurisdiction over
    the matter due to the lack of a rational nexus to
    Utah.
    
    Id. ¶ 42
    . A rational nexus exists when at least one party to the
    contract is a Utah resident. See 
    id. ¶ 43
    . In this way, the rational
    nexus test “operates as a safety valve, providing a mechanism
    whereby Utah courts may decline to exercise jurisdiction when
    Utah has no real interest in the outcome of a given dispute.” 
    Id. ¶ 41
    . 5 Furthermore, the Supreme Court in Jacobsen Construction
    recognized that the Utah Legislature has clearly indicated that it
    5. It is important to note that under Jacobsen Construction v. Teton
    Builders, 
    2005 UT 4
    , 
    106 P.3d 719
    , Utah courts may decline to
    exercise the jurisdiction they have, see 
    id. ¶ 41,
     but the district
    court in this case erroneously concluded that it lacked
    jurisdiction and thus was required to dismiss the action.
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    Rocky Mountain Builders Supply v. Marks
    is in “Utah’s policy interest [to] provid[e] its residents with a
    forum in which they can pursue their legal claims.” 
    Id. ¶ 28
    ; see
    Utah Code Ann. § 78B-3-201(2) (LexisNexis 2012) (“It is declared,
    as a matter of legislative policy, that the public interest demands
    the state provide its citizens with an effective means of redress
    against nonresident persons, who, through certain significant
    minimal contacts with this state, incur obligations to citizens
    entitled to the state’s protection.”). And the Supreme Court
    noted that this policy was “best served by enforcing [a] forum
    selection clause . . . and allowing [the Utah resident] to litigate its
    claims in its home state.” Jacobsen Constr., 
    2005 UT 4
    , ¶ 28. 6
    ¶9     The only distinctions Marks draws between this case and
    Jacobsen Construction are that here a relatively small sum of
    money is in dispute and that one of the parties to the contract
    was an individual rather than a business. But courts have not
    viewed these distinctions as dispositive in this context. See, e.g.,
    Carnival Cruise Lines, Inc. v. Shute, 
    499 U.S. 585
    , 592–93, 595 (1991)
    (“Including a reasonable forum clause in a form contract . . . may
    be permissible for several reasons[.]”); Polzin v. Appleway Equip.
    Leasing, Inc., 
    2008 MT 300
    , ¶¶ 1–7, 24, 
    191 P.3d 476
     (upholding a
    forum selection clause contained in “a standard contract”
    between a corporate seller and an individual for the purchase of
    a truck).
    ¶10 Ultimately, a rational nexus exists in this case for the
    district court to exercise jurisdiction over Marks because RMBS
    is a Utah corporation and its principal place of business,
    6. Following this conclusion, the Supreme Court in Jacobsen
    Construction rejected the argument that section 13-8-3 “codifies a
    more general Utah public policy declaring that construction
    disputes should be litigated in the state in which the project is
    located,” 
    2005 UT 4
    , ¶ 27, an argument very similar to that
    advanced by Marks and embraced by the district court in this
    case.
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    Rocky Mountain Builders Supply v. Marks
    corporate officers, and legal counsel are all in Utah. And
    enforcement of the forum selection clause is not unfair or
    unreasonable. 7
    ¶11 The district court’s dismissal is reversed. The case is
    remanded for further proceedings consistent with this opinion.
    7. We do not mean to imply, however, that we would conclude
    that personal jurisdiction existed over Marks in the absence of
    the forum selection clause’s validity. Indeed, it is unlikely that
    jurisdiction could be established under Utah’s long-arm statute.
    See Utah Code Ann. § 78B-3-205 (LexisNexis 2012).
    20150456-CA                     8               
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