Indiana Court of Appeals holds that a forum selection

clause requiring litigation of a contract dispute in Florida

is void under Section 17 of Indiana’s mechanic’s lien statute

 

By Joshua W. Casselman, Partner

 

In Sullivan Corp. v. Rabco Enterprises, LLC, 160 N.E.3d 1124 (Ind. Ct. App. 2020), the Indiana Court of Appeals held that section 17 of Indiana’s mechanic’s lien statute (Indiana Code section 32-28-3-17) applies to all contracts for the improvement of real estate in Indiana, even if the dispute does not involve a mechanic’s lien foreclosure claim.

 

A general contractor of a commercial construction project sued a material supplier for breach of contract. The parties’ contract contained a forum selection clause providing that the exclusive venue for any litigation arising under the contract was in Florida (Forum Selection Clause). The general contractor argued the Forum Selection Clause was void under Indiana Code section 32-28-3-17, which provides that “[a] provision in a contract for the improvement of real estate in Indiana is void if the provision: (1) makes the contract subject to the laws of another state; or (2) requires litigation, arbitration, or other dispute resolution process on the contract occur in another state” (Section 17).

 

The material supplier argued the legislature did not intend for Section 17 to apply to the general contractor’s breach of contract claim because no mechanic’s lien rights or claims were at issue and the Forum Selection Clause was freely negotiated. It noted that Section 17 is located squarely within Indiana’s mechanic’s lien statute and thus argued Section 17 should be interpreted in that context, keeping in mind the purpose of Indiana’s mechanic’s lien statute and considering its companion code sections. The material supplier urged the Court to follow United States ex rel. Milestone Contractors, L.P. v. Toltest, Inc., No. 1:08–cv–1004–WTL–JMS, 2009 U.S. Dist. LEXIS 44382, at *5 (S.D. Ind. May 27, 2009), where the United States District Court for the Southern District of Indiana rejected the argument that Section 17 broadly applies to all contracts for improvements to Indiana real estate.

 

The Court of Appeals disagreed with the material supplier. It adopted the general contractor’s plain and ordinary meaning argument in holding that Section 17 applies broadly to all contracts for the improvement of real estate in Indiana. It found important that both Indiana Code section 32-28-3-16 and Indiana Code section 32-28-3-18 specifically reference liens, while Section 17 does not. Notwithstanding Section 17’s presence in Indiana’s mechanic’s lien statute, the Court determined that “one may reasonably infer that the General Assembly did not intend to limit application of Indiana Code section 32-28-3-17 to situations involving mechanics liens.”

 

In its opinion, the Court did not address the Southern District Court’s decision in Milestone. It found persuasive the United States District Court for the Northern District of Indiana’s unpublished decision in Pirson Contractors, Inc. v. Scheuerle Fahrzeugfabrik GmbH, No. 2:07-CV-123, 2008 WL 927645, at *7 (N.D. Ind. Apr. 3, 2008), where the court held Section 17 “speaks in broad terms that reach every contract for the improvement of real estate, regardless of whether the party to the contract has, or could, assert a mechanic’s lien.”

 

Because the Court held Section 17 applied, it found the Forum Selection Clause was void.