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EX PARTE AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. (IN RE: Alabama Municipal Insurance Corporation, as subrogee of the City of Florala v. American Builders & Contractors Supply Co., Inc.)
PETITION DENIED. NO OPINION.
American Builders & Contractors Supply Co., Inc. (“ABC”), petitions for a writ of mandamus directing the Covington Circuit Court to enforce a forum-selection clause contained in a building-supplies contract.1 I dissent from the Court's denial of ABC's petition because I believe that all the claims brought by the respondent, Alabama Municipal Insurance Corporation (“AMIC”), were within the scope of the forum-selection clause.
ABC entered into an agreement to furnish and deliver roofing materials to a City of Florala middle-school building (“the Purchase Agreement”). According to AMIC, when ABC delivered the materials, ABC set them all in one location on the roof of the building, which caused the roof to collapse. AMIC, as subrogee of the City, sued ABC in the Covington Circuit Court, asserting claims of breach of contract, negligence, and wantonness. In the breach-of-contract claim, AMIC alleged that ABC had a duty “to deliver roofing supplies to the middle school building” and breached that duty by “caus[ing] the roof to collapse.” AMIC's tort claims were based on the same facts but a different duty: “ABC ․ had a duty not to damage the property of the City.”
The Purchase Agreement contained a forum-selection clause that gave ABC the right to choose the forum in “[a]ny action brought upon, or by reason of, th[e Purchase] Agreement.” (Emphasis added.) Accordingly, ABC filed a motion to dismiss or, alternatively, to enforce the forum-selection clause. ABC stated that it would only consent to venue in Escambia County, Florida, where ABC's branch that sold and delivered the materials was located. The circuit court denied the motion, stating, “[AMIC] has set forth facts alleging tortious misconduct on the part of [ABC] that are unrelated to the [P]urchase [A]greement.” (Emphasis omitted.) ABC then filed the present petition seeking review of that ruling.
An order denying enforcement of a forum-selection clause is subject to mandamus review; the petitioner must demonstrate that the trial court exceeded its discretion. Ex parte Leasecomm Corp., 886 So. 2d 58, 62 (Ala. 2003).
Contrary to the circuit court's ruling, AMIC's tort claims were within the scope of the forum-selection clause. The key language in the clause provided that it applied to claims “brought ․ by reason of” the Purchase Agreement. The claims of breach of contract, negligence, and wantonness were all based on the same factual allegation: ABC placed the materials on the roof in a way that caused the roof to collapse. Thus, assuming that the tort claims were legally permissible, they were necessarily based on a theory that, in addition to ABC's contractual duty, it owed a coexisting but separate, extra-contractual duty of care in delivering the materials. On that point, this Court has explained that, “when ․ [a] breach of [a] contract was also a negligent failure to perform a duty which the law imposes by reason of such contract, the injured [party] may sue either for the breach of the contract ․ or ․ in tort for the breach of the duty imposed by law.” Tennessee Coal, Iron & R.R. Co. v. Sizemore, 258 Ala. 344, 350, 62 So. 2d 459, 464 (1952) (emphasis added); see Paul v. Escambia Cnty. Hosp. Bd., 283 Ala. 488, 492, 218 So. 2d 817, 821 (1969) (same). In other words, although the separate duty of care does not arise directly out of the contract, it still arises “by reason of” the contract. Thus, under this Court's own language, AMIC's tort claims arose “by reason of” the Purchase Agreement.
Further, I am unpersuaded by AMIC's attempt to distance ABC's duty of care from the contractual relationship. The fact of the matter is that ABC was carrying out a contractual obligation by delivering the materials. The Purchase Agreement left it to ABC to decide the manner of delivery, and allegedly, ABC decided badly. But that is simply another way of saying that it carried out its contractual obligation in a negligent manner. This is not a case where, for example, a materials supplier performed its contractual duty of delivery and then negligently undertook to assist with moving the materials. No; here each of the duties that ABC allegedly breached existed “by reason of” the Purchase Agreement.
Accordingly, I would grant the petition and order enforcement of the forum-selection clause.
The background of this case is straightforward. American Builders & Contractors Supply Co., Inc. (“ABC Supply”), contracted with the City of Florala to deliver roofing materials for a building the City owned. ABC Supply delivered the materials to the roof of the building. The roof then collapsed. The City's insurer, Alabama Municipal Insurance Corporation (“AMIC”), sued ABC Supply, alleging that its placement of the materials on the roof caused the collapse. AMIC's complaint contains two counts, one styled as a tort claim for “negligence/wantonness,” the other styled as a “breach of contract” claim. Both counts are based on the very same conduct by ABC Supply. The question presented is whether the “negligence/wantonness” count is within the scope of the forum-selection clause in the contract between ABC Supply and the City.
Ex parte Bad Toys Holdings, Inc., 958 So. 2d 852 (Ala. 2006), is instructive in resolving this question. In Bad Toys, this Court held that a plaintiff could not circumvent a forum-selection clause covering any action under the parties' contract simply by pleading his claims in terms of various tort theories. Id. at 858-59. I see no reason why this case should come out differently.
The language of the forum-selection clause in ABC Supply's contract with the City -- which covers “[a]ny action brought upon, or by reason of, this Agreement” -- is at least as broad as the language at issue in Bad Toys,2 and it comfortably embraces AMIC's “negligence/wantonness” count. Even if we assume that the phrase “brought upon” covers only “pure” breach-of-contract claims, but see id. at 858 (holding that such an interpretation of the similar phrases “brought under” and “hereunder” “would be unduly crabbed and narrow” (cleaned up)), it's clear that the second phrase, “by reason of,” has a separate and broader sweep. See 11 Richard A. Lord, Williston on Contracts § 32:1, at 631 (4th ed. 2012) (explaining that, in contract interpretation, “all parts of the writing and every word of it, [should], if possible, be given effect”). Dictionaries define “by reason of” to mean “[b]ecause of” or “owing to.” Christine Ammer, American Heritage Dictionary of Idioms 95 (1997); see also Bryan A. Garner, Garner's Dictionary of Legal Usage 128 (3d ed. 2011) (stating that “by reason of is typically wordy for because of“); 13 Oxford English Dictionary 288 (2d ed., J.A. Simpson & E.S.C. Weiner, eds., 1989) (defining “by reason of” as “on account of”). That definition covers AMIC's putative tort claim. After all, the only reason ABC Supply placed the materials on the City's roof was because of its contract to deliver the materials. Cf. SCI Alabama Funeral Servs., Inc. v. Lanyon, 896 So. 2d 495, 498 (Ala. 2004) (holding that tort claims based on the “allegedly defective” performance of a contractual duty “ar[o]se out of the [parties'] Purchase Agreement” and were therefore within the scope of the agreement's arbitration clause). I conclude that AMIC's “negligence/wantonness” claim is “by reason of” ABC Supply's contract with the City and thus within the scope of the forum-selection clause.3
This conclusion draws further support from the basic practical realities of forum-selection clauses. Parties agree on forum-selection clauses at the outset of a contractual relationship, before they know precisely what sorts of disputes might arise between them or how the other party might choose to plead any claims down the line. In that forward-looking posture, we should generally presume that parties intend the selected forum to hear whatever disputes might arise from their contract, whether such disputes ultimately take the form of pure breach-of-contract claims or (as pleaded here) tort-styled claims that stem from the contractual relationship. See Bad Toys, 958 So. 2d at 860 (“Certainly, the intent of the forum-selection clause was that controversies arising under the purchase agreement would be settled in a single forum ․” (emphasis added)).
Courts nationwide have recognized this common-sense principle. See, e.g., Baker v. Economic Rsch. Servs., Inc., 242 So. 3d 450, 455 (Fla. Dist. Ct. App. 2018) (“When determining whether an agreement's forum-selection clause applies to non-contractual claims, [Florida] courts have considered whether there is a ‘significant and obvious nexus’ between the claims and the agreement.” (citation omitted)); Pinto Tech. Ventures, L.P. v. Sheldon, 526 S.W.3d 428, 437-42 (Tex. 2017) (discussing this subject at length and emphasizing that “[l]egal theories and causes of action are not controlling”); Forrest v. Verizon Commc'ns, Inc., 805 A.2d 1007, 1014 (D.C. 2002) (“We follow the number of courts that have held that non-contract claims that involve the same operative facts as a parallel breach of contract claim fall within the scope of a forum selection clause.”); Terra Int'l, Inc. v. Mississippi Chem. Corp., 922 F. Supp. 1334, 1378-81 (N.D. Iowa 1996) (collecting many federal cases holding that forum-selection clauses generally encompass tort claims that are “directly or indirectly related to the contractual relationship of the parties”), aff'd, 119 F.3d 688 (8th Cir. 1997).4
To disregard this principle means supposing that parties have contracted either for piecemeal litigation of related claims in separate forums -- with all the waste of resources that entails -- or, alternatively, for a toothless forum-selection clause that can easily be defeated by artful pleading. In this case, for example, to say that AMIC's “negligence/wantonness” claim is not within the scope of the clause leads inevitably to one of two implausible conclusions. The first is that ABC Supply could have enforced the clause against AMIC's breach-of-contract claim -- but not its “negligence/wantonness” claim based on exactly the same conduct -- and must therefore choose between the “serious inconvenience” of parallel litigation or waiving the forum-selection clause entirely. F.L. Crane & Sons, Inc. v. Malouf Constr. Corp., 953 So. 2d 366, 373 (Ala. 2006). The second is that the forum-selection clause ceased being enforceable at all -- even as to the breach-of-contract claim, though that claim is indisputably “brought upon” the contract -- as soon as AMIC pleaded one of its counts in terms of a tort theory.5 Either way, to hold that the clause does not cover the tort-styled claim deprives the clause of all practical utility. The parties very likely did not intend that result.
For these reasons, I respectfully dissent.
1. Forum-selection clauses are generally enforceable under Alabama law. F.L. Crane & Sons, Inc. v. Malouf Constr. Corp., 953 So. 2d 366, 373 (Ala. 2006). They are to be upheld unless enforcement would be unfair or unreasonable. Ex parte International Paper Co., 285 So. 3d 753, 757 (Ala. 2019).
2. The operative contract language in Bad Toys was: “This Agreement, and the application or interpretation thereof, shall be governed exclusively by its terms and by the laws of the State of Tennessee. Venue for any legal action which may be brought hereunder shall be deemed to lie in Sullivan County, Tennessee.” 958 So. 2d at 855 (emphasis added).
3. As Chief Justice Parker points out, this Court has previously used the phrase “by reason of” to describe the relationship between a tort-styled claim for negligent performance of a contractual duty and the contract itself. Tennessee Coal, Iron & R.R. Co. v. Sizemore, 258 Ala. 344, 350, 62 So. 2d 459, 464 (1952) (citing Mobile Ins. Co. v. Randall, 74 Ala. 170, 177 (1883)). Because the question here is not what “by reason of” means in some universal, abstract sense, but only what it means in the contract between the parties before us (a form contract governed by Florida, not Alabama, law), I do not believe this language from Tennessee Coal fully decides this case. Still, it's certainly evidence against an “unduly crabbed and narrow” understanding of the phrase in question that would limit it to “pure breach of contract claim[s].” Bad Toys, 958 So. 2d at 858 (cleaned up).
4. Of course, neither this principle nor the different verbal formulas in which courts have expressed it are anything more than an interpretive rule of thumb. Parties are free to contract for forum-selection clauses that are as broad or as narrow as they wish. My point is simply about how courts should calibrate their default assumptions: absent some clear reason to think otherwise, they should presume that a forum-selection clause provides for all disputes stemming from the parties' contractual relationship to be litigated in the chosen forum.
5. Because of the way this case has been litigated, we are not asked to decide which possibility is correct. The circuit court acknowledged that the forum-selection clause may well govern the breach-of-contract claim, but it denied ABC Supply's motion to dismiss in full after concluding that the clause did not cover the “negligence/wantonness” claim -- apparently assuming that as long as one claim was outside the scope of the clause, the clause need not be enforced at all. ABC Supply's petition does not draw attention to this gap in the circuit court's reasoning. Nor does it ask us to enforce the clause as to the contract claim if we disagree with its position that the tort-styled claim is within the scope of the clause.
Bolin, Wise, Bryan, Sellers, and Mendheim, JJ., concur. Parker, C.J., and Shaw and Mitchell, JJ., dissent.
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Docket No: 1200046
Decided: November 05, 2021
Court: Supreme Court of Alabama.
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