By Beau Bourgeois

The United States District Court for the Western District of Louisiana recently relied on Louisiana Revised Statutes 9:2779 in holding unenforceable a mandatory forum selection clause in a construction contract.[1] Pittsburg Tank & Tower Maintenance Co., Inc. (“Pittsburg”) contracted with the Town of Jonesboro (the “Town”) to perform maintenance and repair work on an elevated water tower in the Town. Pittsburg issued to the Town its standard form contract, which contained a provision stating, “This contract is governed by the laws of the Commonwealth of Kentucky and any claim should be filed with the Commonwealth of Kentucky.”

After becoming dissatisfied with the work, the Town filed suit in Louisiana state court. After having the case removed to federal court, Pittsburg moved to have the Court transfer the case to the Western District of Kentucky based on the contract’s forum selection clause, quoted above. Although acknowledging that forum selection clauses are generally enforceable, the Court found that extraordinary circumstances prevented its enforceability here.

The Court relied on R.S. 9:2779 for its holding, which provides in pertinent part:

The legislature finds that, with respect to construction contracts . . . for public and private works projects, when one of the parties is domiciled in Louisiana, and the work to be done and the equipment and materials to be supplied involve construction projects in this state, provisions in such agreements requiring disputes arising thereunder to be resolved in a forum outside of this state or requiring their interpretation to be governed by the laws of another jurisdiction are inequitable and against the public policy of this state.

In summary, R.S. 9:2779 generally provides that for “construction contracts” where the work is in Louisiana and one of the parties to the contract is “domiciled” in Louisiana, a forum selection clause that selects a forum outside of Louisiana or a choice of law provision that selects the law of another state is against public policy and will not be enforceable.

In the Pittsburg Tank case, there was no doubt that one of the parties, the Town of Jonesboro, was a Louisiana domiciliary and that the work was performed in Louisiana. Thus, after finding that the contract was, in fact, a “construction” contract,[2] the Court determined that the case should not be transferred because the clause was unenforceable as against Louisiana’s public policy.

Although under Louisiana law, parties may generally agree that actions involving a contract be brought in another state or be subject to the law of another state, for contracts related to a construction project in Louisiana, R.S. 9:2779 may make their agreement unenforceable. Any contractor or owner wishing to perform construction work in Louisiana must be aware of R.S. 9:2779’s implications in order to appropriately set its expectations for the proper forum and applicable law in the undesirable event of a dispute.

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[1] Town of Jonesboro v. Pittsburg Tank & Tower Maintenance Co., Inc., No. 17-1589, 2018 WL 3199476 (W.D. La. Feb. 12, 2018).

[2] The Court spends a substantial portion of the opinion addressing whether Pittsburg’s scope of work should be considered a “construction” or “maintenance” contract. The Court used the “principal value” test to determine that the contract was a “construction” contract such that R.S. 9:2779 applies.