Law and Venue Provisions May Offer More Protection Than Mere Convenience

“Law and Venue” provisions are a common staple of commercial contracts. Typically, these provisions express the consent of the contracting parties to the personal jurisdiction of a particular state’s courts in the event of a contractual dispute. The contracting party with most bargaining power will often place this clause in a contract as a matter of convenience. It prevents the party’s lawyer in State A from having to file suit against contracting party in State B and incurring unnecessary litigation expenses and travel costs. However, a decision just decided by the Indiana Court of Appeals may suggest that the exclusion of a provision conferring jurisdiction on the parties can cost you more than your convenience.

In Ferrand Laser Screeding, Inc., Reliable Equipment Rental Inc., Reliable Screeding Inc., Kenny Ferrand, and Billy Ferrand v. Concrete Management Solutions, LLC, decided June 11, 2020, the Indiana Court of Appeals held that an Ohio court did not have personal jurisdiction over an Indiana business under Ohio’s long-arm statute. As a result, the plaintiff could not domesticate and enforce a judgment in the amount of $155,121.54 from the defendants.

The contract between the parties arose in 2010 when an Ohio business, Concrete Management Solutions, LLC (CMS), was hired by Subway Restaurants to build a parking lot in Connecticut. CMS then hired the defendants, Ferrand Laser Screeding, Inc. (FLS), to do the concrete leveling work for the parking lot. In 2012, Subway sued CMS under their contract, and CMS brought a third-party claim against FLS for its allegedly unsatisfactory concrete leveling. FLS never answered the complaint, and CMS was awarded a default judgment in 2012. After receiving no payments on the judgment, CMS brought another suit against FLS, its operators, and related businesses in 2015 to domesticate the judgment in Indiana and collect. The Putnam County, Indiana, trial court ruled in favor of CMS on the domestication, but the appellate court reversed and remanded to the trial court for entry of a revised judgment denying the existence of a valid money judgment due to the Ohio court’s lack of personal jurisdiction. The appellate court held that an Indiana business did not “transact business within [Ohio]” by contracting with an Ohio business to build a parking lot in Connecticut.

The appellate court’s opinion highlights two issues businesses and individuals should consider when drafting commercial contracts. First, do not assume that the fact that someone entered into a contract with you creates personal jurisdiction in your home court. The substance of your contract may be more important than the identity and residence of the parties. Second, and most importantly, the inclusion of a provision establishing personal jurisdiction over the parties can help you potentially expedite collection if a deal goes bad. While these provisions are often used to conveniently hail a defendant to your home court and lower costs, the absence of one could cost you your action if you fail to file suit in the correct jurisdiction.