The New Jersey Appellate Division recently declined to enforce a forum selection clause on the basis that such enforcement would violate the strong public policy of New Jersey, and that disputes related to payments on New Jersey construction projects be brought in New Jersey.

In the case of ERCO Interior Sys., Inc. v. Nat’l Commercial Builders, Inc., 2019 N.J. Super. Unpub. LEXIS 1037, 2019 WL 2004367 (App. Div. 2019), the contractor entered into a contract to construct movie screens in a theater at the Rio Mall in Rio Grande, NJ. Thereafter, the contractor entered into a subcontract with a subcontractor to install acoustical tiling in the theater. Despite the fact that the work was performed in New Jersey, the subcontract between the parties included a forum selection clause mandating that any litigation be brought in Kansas. After a dispute arose between the contractor and subcontractor regarding payment, the subcontractor filed suit in New Jersey alleging a violation of New Jersey’s Prompt Payment Act, N.J.S.A. 2A:30A-1, et seq. (“PPA”), among other claims. Relying upon the forum selection clause, the contractor moved to dismiss the lawsuit. The Appellate Division, in reversing the trial court’s decision, concluded that the “PPA embodies New Jersey’s strong public policy to ensure that contractors performing construction work in New Jersey are paid promptly. And, the requirement in N.J.S.A. 2A:30A-2(f) that all “civil actions brought to collect payments pursuant to” the PPA “shall be conducted inside of this State” is an essential element of that policy.” Accordingly, the Appellate Division ordered that the case remains in New Jersey.

While forum selection clauses are generally presumed to be valid and enforceable, New Jersey courts may decline to do so where the claims allege a violation of the PPA, and therefore, enforcement would violate the strong public policy of New Jersey.

If you have any questions on this topic or any other construction law topics, please contact  Kathryn Pettit at kpettit@offitkurman.com or 484.531.1706

ABOUT KATHRYN PETTIT

kpettit@offitkurman.com | 484.531.1706

Kathryn E. Pettit, an associate in the firm’s suburban Philadelphia office, focuses her practice on construction law. Before becoming an attorney, Ms. Pettit received her Bachelors of Science in Civil Engineering from Syracuse University. She brings her technical background and perspective to the representation of her clients.

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