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UNITED STATES STEEL CORP. v. TURNER CONSTR. CO.

April 13, 1983

UNITED STATES STEEL CORPORATION, Plaintiff,
v.
TURNER CONSTRUCTION COMPANY, Defendant



The opinion of the court was delivered by: BRIEANT

MEMORANDUM AND ORDER

 Brieant, J.

 Pursuant to Rule 12(b)(1)(3) and (6), F.R.Civ.P., defendant Turner Construction Company ("Turner") moves to dismiss the complaint of plaintiff United States Steel Corporation ("U.S. Steel") in this diversity case, on the ground that plaintiff is required by contract to litigate this claim only in the Supreme Court of the State of New York, County of New York.

 This litigation arises out of the construction of an office building for International Business Machines Corporation (the "IBM project") at 590 Madison Avenue, New York, New York. Pursuant to an agreement with IBM (the "prime contract"), Turner agreed to act as the general contractor for this construction project. On August 11, 1978, Turner and U.S. Steel, through its American Bridge Division, entered into a written sub-contract whereby U.S. Steel agreed to furnish, fabricate, deliver and erect structural steel for the IBM project.

 After commencing work on the IBM project, U.S. Steel encountered extensive work related delays and disruptions, allegedly caused by Turner, and suffered substantial cost overruns. Other subcontractors on the project experienced similar delays. Despite these difficulties, U.S. Steel completed performance under the subcontract with Turner, and the quality of this work is not in issue here.

 In April of 1981, U.S. Steel submitted a fully documented claim to Turner for the additional costs said to have been incurred as a result of the delays in construction. Over the next few months, despite the overtures of U.S. Steel, Turner refused to engage in discussions concerning this claim. Eventually, Turner informed U.S. Steel of its intent to include the claim of U.S. Steel in its own overall claim for extras to be submitted to IBM. Turner refused to permit U.S. Steel to participate in its subsequent negotiations with IBM. In March of 1982, despite the objections of U.S. Steel, Turner settled all outstanding claims on the project with IBM.

 In subsequent negotiations between Turner and U.S. Steel, Turner has refused to supply U.S. Steel with a copy of the settlement agreement with IBM or to identify the amount of the settlement proceeds, if any, apportioned to the outstanding claim of U.S. Steel against Turner. In addition, Turner also refused to pay U.S. Steel the balance of the contract price due and owing.

 As a result of these disputes, U.S. Steel commenced this lawsuit to recover the balance due under the subcontract as well as the additional costs incurred as a result of the defendant's alleged breach of the subcontract.

 In support of this motion, Turner contends that the terms of the prime contract with IBM, specifically the forum selection clause set forth in Article 11 of the "General Conditions for Construction and Fitting-Up of IBM's Office Building" ("IBM General Conditions"), are incorporated by reference into the U.S. Steel subcontract obligating U.S. Steel to litigate all claims arising out of the subcontract in the New York Supreme Court, New York County. Turner asserts that if the forum selection clause is not enforced, it may be faced with the burden of simultaneously defending various lawsuits involving the same or similar issues in two or more different state and federal courts.

 U.S. Steel asserts that it is not bound by the forum selection clause since it appears only in the prime contract and relates solely to disputes arising between IBM and Turner. U.S. Steel contends that only the prime contract terms which relate to the character and manner of the work to be performed by it as subcontractor are incorporated by reference into the subcontract. It argues that as a matter of New York contract law, all additional, unrelated provisions of the prime contract, such as the forum selection clause, are not incorporated into the subcontract and therefore not binding upon U.S. Steel.

 The forum selection clause is set forth in Article 11 of the IBM General Conditions entitled "Monetary Claims and Demands Upon IBM." Article 11 provides in full:

 
"ARTICLE 11 -- Monetary Claims and Demands Upon IBM
 
11.1 Monetary claims and demands upon IBM arising out of this Contract or in connection with the work, for any reason whatsoever, must be presented by the Contractor to IBM in writing, within 14 days from the date of first occurrence of the cause giving rise thereto.
 
11.2 All such monetary claims and demands presented by the Contractor must refer to this Article and shall be fully detailed and substantiated as to the nature and extent ...

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