The Subrogation Strategist

Many courts enforce forum selection clauses in contracts between parties. In W. Bay Plaza Condo. Ass’n v. Sika Corp., No. 3D21-1834, 2022 Fla. App. LEXIS 1637 (W. Bay Plaza), the Court of Appeal of Florida, Third District (Court of Appeal) answered the question of whether a mandatory forum selection clause in a manufacturer’s warranty was enforceable as to a condominium association, who was a non-signatory. The trial court enforced the forum selection clause – calling for litigation in New Jersey rather than Florida – and the Court of Appeal affirmed the ruling.

As stated in W. Bay Plaza, in late 2013 and early 2014, West Bay Plaza Condominium Association (W.B. Plaza Condo. Ass’n) contracted with Built Right Installers International Corporation, R.J. Miranda Consultants, Inc. and UCI Engineering Inc. (collectively, the Construction Defendants) to have repairs done to the exterior of the property. In 2016, Sika Corporation (Sika), a New Jersey corporation, gave a five-year warranty to W.B. Plaza Condo. Ass’n for three sealant products used to repair the garage at the property. In 2019, W.B. Plaza Condo. Ass’n sued the Construction Defendants for breach of contract and professional negligence. Subsequently, W.B. Plaza Condo. Ass’n amended its complaint and filed a claim against Sika, alleging that Sika breached its warranty because its products failed to provide a watertight barrier. Sika filed a motion to dismiss the action, alleging that Florida was an improper venue because its’ warranty contained a mandatory forum selection clause. W.B. Plaza Condo. Ass’n argued that it was not bound by the forum selection clause because it was a non-signatory to the warranty and, even if it was bound by the clause, there were compelling reasons not to enforce it.

Under Florida law, forum selection clauses are presumptively enforceable and a party seeking to avoid enforcement of such a clause must establish that enforcing the clause would be unjust or unreasonable. To do that, someone seeking to avoid the enforcement of a mandatory forum selection clause “must demonstrate that the contractually designated forum essentially amounts to ‘no forum at all,’ thereby depriving the party of its day in court.”

Although W.B. Plaza Condo. Ass’n argued that the clause did not apply, the Court of Appeal found that a mandatory forum selection clause applies equally to non-signatory defendants when the claims at issue arise directly from the agreement and because of the commercial relationship of the parties. In addition, the court stated that where the resolution of the plaintiff’s claims requires reference to the agreement and the claims brought specifically reference that agreement, there is a clear nexus between the agreement and the claims and, thus, the forum selection clause applies.

Because W.B. Plaza Condo. Ass’n raised only a breach of express warranty claim against Sika and the resolution of that claim required reference to the warranty, there was a clear nexus to the warranty. Thus, the Court of Appeal held that the forum selection clause applied. In addition, the Court of Appeal held that the clause was enforceable because the warranty cause of action was unrelated to the other contracts involved and parties have the right to control their litigation destinies. As noted by the Court of Appeal, Sika’s warranty explicitly selected New Jersey as the forum and enforcing the clause was not unreasonable or unjust. Requiring W.B. Plaza Condo. Ass’n to litigate in New Jersey rather than Florida did not, essentially, amount to the condominium association having no forum at all, thereby depriving the association of its day in court. Thus, the Court of Appeal affirmed the decision of the trial court.

W. Bay Plaza provides a reminder to subrogation professionals practicing in Florida that, even though claims against local construction defendants may, absent an enforceable forum selection clause, be litigated in Florida, claims against manufacturers that arise from the same occurrence may have to be litigated in a different forum. Because proceeding in two forums will increase the cost of pursuing the target defendants, subrogating insurers should consider whether there is an enforceable forum selection clause and, if so, whether pursuing litigation in two forums is a worthwhile endeavor.