On Appeal from the District Court of the Virgin Islands Division of St. Croix D.C. Civil No. 84-0227
Before: HUNTER, GARTH, and BECKER, Circuit Judges
Martin Marietta Alumina, Inc., appeals an order of the District Court of the Virgin Islands denying its motion to enforce a forum selection clause in a contract action brought by General Engineering Corporation. This appeal requires us to decide two issues: whether the district court correctly chose the federal standard for enforcing a forum selection clause in a suit between two Virgin Islands corporations and whether the court applied the standard properly. We find that the district court should have used the state standard. After applying this standard to the facts found below we concluded that the district court should have granted Martin Marietta's motion, and we reverse.
In September 1981, Martin Marietta Alumina, a Virgin Islands corporation wholly owned by Martin Marietta Aluminum, a California corporation, let out for bid a construction contract for the installation of electrical equipment in its St. Croix aluminum plant. This work was to be completed in conjunction with Martin Marietta's planned conversion of its oil-fired burners to coal, a project supervised by Bechtel Corporation. Bechtel ran the project with staff from its Gaithersburg, Maryland office. Martin Marietta Aluminum's headquarters are located in Bethesda, Maryland.
Along with specifications for the conversion project, the bid package included a document labeled "General Terms and Conditions." At issue in this appeal is the enforceability of the forum selection clause contained in paragraph 29 of this document, which states:
This Contract shall be deemed to have been made, executed, delivered in, and shall be governed by and construed in accordance with the laws of the State of Maryland. The parties agree that any action or suit arising out of this Contract shall be instituted in the courts of the State of Maryland and the parties hereto consent to service, jurisdiction and venue of such courts for all purposes.
In a separate document entitled "Instructions to Bidders," also included in the bid package, bidders were admonished to examine the contract documents with care, and were informed that they assumed the risks associated with any failure to familiarize themselves "with respect to all conditions which might in any way affect the cost or the performance of any work." The instructions also requested the bidders to notify Bechtel regarding any reservations or questions concerning the Contract Documents.*fn1 General Engineering Corporation, a Virgin Islands corporation, submitted a bid, but did not note any exception to the forum selection clause in its submission.
Martin Marietta awarded the electrical installation contract to General Engineering. On December 11, 1981, representatives of General Engineering met with representatives of Martin Marietta and Bechtel to discuss the project's specifications and the contract's terms and conditions. Although General Engineering negotiated some of the substantive terms of the construction contract at this meeting, such as the quantities and prices of required materials, and minor engineering modifications, it did not attempt to negotiate a different forum selection clause. John McCallum, General Engineering's general manager, later testified that he failed to express reservations regarding the contract's general terms because he had been told that this section of the contract was non-negotiable when he had attempted modifications in the terms and conditions portion of previous Martin Marietta construction contracts.
On January 4, 1982, General Engineering and Martin Marietta executed a purchase order contract incorporating the bid package's "General Terms and Conditions." The parties subsequently modified the contract by executing a series of "change orders," which provided additional compensation to General Engineering for the difficulties it had experienced in coordinating its electrical work with the work performed by the other contractors at the worksite and in procuring the necessary equipment.
General Engineering completed the electrical installation in September 1982 and submitted a claim for $519,463 to cover additional costs allegedly incurred due to delays and project modifications. After Martin Marietta denied the claim, General Engineering filed suit for breach of contract in the District Court of the Virgin Islands in late August 1984. Martin Marietta responded by filing a motion for summary judgment, asserting that the district court lacked jurisdiction over the action because the contract's forum selection clause required the parties to initiate suit in the Maryland courts. ...