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Rocky Mountain Builders Supply Inc. v. Marks

Court of Appeals of Utah

March 2, 2017

Rocky Mountain Builders Supply Inc., Appellant,
v.
Steve Marks, Appellee.

         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.

          ¶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.

         ¶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 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."). 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 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 ...

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