Counties race to the courthouse to subvert contractor-backed venue law

 

Tymon Berger, Ahlers & Cressman

Any contractor that bids on public-works projects knows all too well that the terms of the awarded contract are nonnegotiable and that the contractor’s bargaining power is virtually nonexistent. In short, public-works contracts are offered on a take-it-or-leave-it basis.

Washington has a scant few statutes that impliedly recognize this unequal bargaining power and make efforts to balance this power. One such statute allows contractors to sue counties in a neighboring county.

The statute acknowledges that a judge and jury sitting in the county being sued may be less objective than a judge and jury in the neighboring county with no skin in the game. This statute had been a part of Washington law for fifty years when, in 2015, proposed legislation supported by the AGC of Washington sought to close a loophole that Washington counties had been exploiting for nearly as long.

Washington counties routinely contract around the statute, inserting provisions that specifically require any legal actions by or against the county to be decided in that county’s home court.

Even though these contract provisions circumvent the legislature’s intent to provide contractors with an impartial court to resolve their disputes with counties, the statute did not prohibit these one¬ sided contract provisions. They were entirely enforceable. So the effort began in 2013 to close this loophole and make these contract provisions unenforceable.

By 2015, the effort paid off. With the help of the AGC of Washington’s lobbying efforts, the state legislature passed a law amending the statute to state that any contract provisions requiring lawsuits to be commenced in a county’s home court were against public policy, void, and unenforceable. By all appearances, this legislative fix promised Washington’s public works contractors an impartial venue to resolve their legal disputes with counties. Unfortunately, that has not proven to be true.

In recent litigation between a member contractor and King County—ironically arising from a project that was performed almost entirely in Snohomish County—a King County court ruled that the dispute will be decided in King County. King County and its home court had successfully thwarted the contractor’s efforts to move the dispute to Snohomish County, ignoring the legislature’s intent to avoid the perception of partiality by a judge hearing a matter involving the judge’s own county.

The court’s decision was based on King County filing the lawsuit first and winning the proverbial race to the courthouse. Absent from the court’s decision was a recognition that the contractor had no power to change dispute resolution procedures within the contract that prevented the contractor from being the first to file suit. King County, by contrast, was not bound to these same procedures and could sue at any time.

King County did just that, filing its lawsuit in the midst of the contractor following the very dispute resolution procedures that prevented the contractor from going to court. Because King County was the first to file a lawsuit, the court ruled that the County was entitled to have the dispute heard in the forum the County had chosen. Not surprisingly, the County chose the home court advantage by suing the contractor in King County—something Washington’s legislature had made very specific efforts to prevent.

The problem with the court’s decision is that counties will almost always win the race to the courthouse. So if the forum for the lawsuit is decided by who files a lawsuit first, a county will inevitably be able to decide the forum by virtue of being able to file suit when the contractor cannot. This directly contradicts what the statute intends by allowing the dispute to be heard in a neighboring county.

The contractor is currently asking the Washington Court of Appeals to review the trial court’s decision. Legal Affairs Committee chair Lindsay Taft and member John Ahlers are spearheading the AGC of Washington’s efforts to support the contractor, briefing the Court of Appeals on the importance of upholding the legislature’s intent to prevent counties from gaining an unfair home-court advantage that contractors lack the bargaining power to avoid. Should these efforts in the courts fail, further revisions to the statute will be necessary to finally achieve what the legislature has intended all along: to provide contractors an impartial forum for resolving disputes with counties.

----------------------------------------------------------

Tymon Berger is a member of AGC’s Legal Affairs Committee.