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In the Matter of the Complaint of Unterweser Reederei, Gmbh.zapata Off-shore Company, Plaintiff-appellee, v. M/s Bremen and Unterweser Reederei Gmbh, Defendants-appellants, 428 F.2d 888 (5th Cir. 1970) :: Justia
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In the Matter of the Complaint of Unterweser Reederei, Gmbh.zapata Off-shore Company, Plaintiff-appellee, v. M/s Bremen and Unterweser Reederei Gmbh, Defendants-appellants, 428 F.2d 888 (5th Cir. 1970)
US Court of Appeals for the Fifth Circuit - 428 F.2d 888 (5th Cir. 1970) June 19, 1970
Prior to the decision below there has been scant judicial discussion of the power of an admiralty court to enjoin a party bringing a limitation action from contemporaneous litigation in foreign courts. Our research has added little of significance to the authority cited by the district court. The principal decision on the question was rendered by the Second Circuit in The Salvore.8 In that case, the owners of cargo damaged while on board the Salvore brought a libel in the district court. The Salvore's owner sued the cargo claimants in an Italian court for abuse of process, and subsequently brought a limitation proceeding in the district court. On a motion by the cargo claimants, the district court held that it was without power to stay the limitation proceeding or to compel the shipowner to discontinue its Italian suit. In reversing, the Second Circuit relied on the Supreme Court's description of a limitation proceeding as "the administration of equity in an admiralty court; look [ing] to a complete and just resolution of a many cornered controversy."9 It stated:
" [N]o compulsion could be exerted on foreign claimants to file claims" and * * * "an injunction against suits being filed in foreign jurisdictions would be ineffective unless comity required its recognition."18
If Carbon Black Export, Inc. v. The SS Monrosa, 5 Cir. 1958, 254 F.2d 297, cert. dismissed, 1959, 359 U.S. 180, 79 S. Ct. 710, 3 L. Ed. 2d 723, requires the result the Court reaches here, then I believe that case is outmoded. The Carbon Black Court2 believed "the universally accepted rule" to be that forum agreements are unenforceable. I cannot tell whether the majority here reads Carbon Black at its broadest, that forum agreements are necessarily "contrary to public policy and will not be enforced", 254 F.2d at 301, or at its narrowest, "that a choice of forum clause will not be enforced unless the selected state would provide a more convenient forum than the state in which suit is brought". Reese at 192 (emphasis supplied).3 Believing as I do that Carbon Black's rule is erroneous both historically and analytically, however, I must reject both the broad and the narrow formulations as unsatisfactory.4
I think the rule should be "outright recognition of the parties' autonomy * * * if tempered by the court's continuing power to refuse effect to `unreasonable' prorogation [choice of forum] agreements, and subject to specific legislation limiting access to the courts of the forum". A. Ehrenzweig, Conflict of Laws § 41, at 153 (1962). Or, as the Restatement puts it, " [t]he parties' agreement as to the place of the action cannot oust a state of judicial jurisdiction, but such an agreement will be given effect unless it is unfair or unreasonable". Restatement (Second) of Conflict of Laws § 80 (Proposed Off. Draft, 1967).5
The strength of this misconception, however, seems to have contributed to American courts' generally negative attitude toward forum clauses. Home Insurance Company of New York v. Morse, 1874, 20 Wall. (87 U.S.) 445, 22 L. Ed. 365, 368, concluded that the authorities showed "agreements in advance to oust the courts of jurisdiction conferred by law [to be] illegal and void". The Court quoted at length from Scott v. Avery and from Mr. Justice Story's Commentaries on Equity Jurisprudence (§ 670) that
In truth, however, courts had not uniformly disfavored forum clauses. Decisions enforcing the parties' designation of a forum date back to 1796. Gienar v. Meyer, 126 Eng.Rep. 728 (C.P. 1796) (Dutch seaman suing Dutch seamaster for wages in English court; held, ship's articles specifying the code of Rotterdam and the courts of Holland were enforceable). They continue through the nineteenth century despite the fear of "ouster". Indeed, the example of arbitration influenced the English courts to deal kindly with forum clauses. Law v. Garrett, 8 Ch.D. 26 (C.A.1878), for example, spoke in terms of arbitration in a case involving the stipulation of a Russian court in St. Petersburg. Lord Justice Baggallay observed that the court entirely agreed with Willesford v. Watson, L.R. 8 Ch. 473 (1870), that where "parties choose to determine for themselves that they will have a forum of their own selection instead of resorting to the ordinary Courts, a prima facie duty is cast upon the Courts to act upon such arrangement". 8 Ch.D. 26, 37. The agreement did not "oust" the court of jurisdiction, but did give it discretion to stay the proceedings. The English courts have continued to follow the principle of Law v. Garrett.11 Today their rule appears to be enforcement of a forum clause unless the particular case militates against it. The Vestris, 43 Lloyd's List L.R. 86 (Adm.Div.1932). " [A] forum selection agreement will, prima facie, be respected; the burden of proof lies upon the party resisting the application for a stay, and he must convince the court that a stay should be granted." Cowen & Mendes da Costa, The Contractual Forum: Situation in England & the British Commonwealth, 13 Am.J.Comp. L. 179, 186 (1964).
Krenger v. Pennsylvania Railroad, 2 Cir. 1949, 174 F.2d 556, 561 (concurring opinion). In 1951, the Second Circuit enforced a forum clause specifying Norwegian courts. Cerro De Pasco Copper Corporation v. Knut Knutsen, 2 Cir. 1951, 187 F.2d 990.13 And in 1955 it went one step farther in destroying the hostility, holding in Wm. H. Muller & Company v. Swedish American Lines Ltd., 2 Cir. 1955, 224 F.2d 806, cert. denied, 1955, 350 U.S. 903, 76 S. Ct. 182, 100 L. Ed. 793, that courts should enforce a forum clause in an international contract unless it was unreasonable or prohibited by statute.14 I must disagree with the majority's conclusion that Indussa Corporation v. S.S. Ranborg, 2 Cir. 1967, 377 F.2d 200,15 overrules this part of Muller. Indussa's decision not to enforce a forum clause derived from its view that the Carriage of Goods by Sea Act, 46 U.S.C. §§ 1300-1315, where applicable, prohibited such clauses. COGSA did apply to Muller (as it did to Carbon Black) and for that reason Muller was overruled. " [T]he Muller court leaned too heavily on general principles of contract law and gave insufficient effect to the enactments of Congress governing bills of lading. * * *" 377 F.2d at 202. Where COGSA does not apply as in this case, I believe Muller's "general principles of contract law" still lead to Muller's result.16
This Court was no more successful in marshalling arguments to support its conclusion in Carbon Black. We simply relied on authority as characterized by Corpus Juris Secundum and American Jurisprudence to opine that forum agreements are "contrary to public policy". That of course "is the conclusion to be proved rather than proof for the conclusion". Ehrenzweig, § 41, at 149. Our apparent concern that such agreements attempted to "oust" us of jurisdiction was ill-considered. The majority here correctly points out that jurisdiction is not an issue. The question is whether a court possessing jurisdiction should for good and sufficient reasons decline to exercise it. But since the bogey of jurisdictional ouster infuses so much of the opposition to forum clauses and since it infuses the Carbon Black rule to which the Court pays obeisance today, it is necessary to lay it to rest. There are various ways to do so. For example, " [i]f the agreement is enforced, it cannot truly be said that jurisdiction has been conferred or ousted by the parties. Jurisdiction is exercised or withheld only by force of the law that gives effect to the parties' agreement". Perillo, Selection Forum Agreements in Western Europe, 13 Am. J.Comp.L. 162 (1964); accord, In re New York, Lackawanna & Western Railroad Company, 1885, 98 N.Y. 449, 453. If that formulation does not persuade the fearful we can follow the example of the Netherlands. There "the courts recognize that the parties have no power to modify the rules of jurisdiction. Nevertheless, the courts refuse to participate in a breach of contract. Consequently, they refuse to take cognizance of a case in violation of the parties' agreement". Perillo at 165; accord, Racecourse Betting Control Board v. Secretary for Air, [1944] 1 Ch. 114, 126 (C.A.1943).
With th [e] proposition [that the parties cannot oust a court of jurisdiction] there can be no quarrel. However, the very fact that it is so well established tends to reduce its value, since parties to an exclusive forum arrangement are unlikely to intend a purpose which they must realize cannot be achieved. Therefore, in drafting their agreement they would normally mean not to deprive some courts of jurisdiction but to express their desire that these courts relinquish jurisdiction in deference to what was at least originally the belief that suits could be better or more conveniently tried someplace else.
Geiger v. Keilani, E.D. Mich. 1967, 270 F. Supp. 761, 765 (Freeman, C. J.)21
I cannot believe that jurisdictional ouster is a real issue. We are willing to dismiss a suit of which we have jurisdiction if it is between aliens.22 And federal courts have not been chary of "losing jurisdiction" in other areas. In habeas corpus cases from state courts, federal courts decline to exercise jurisdiction until a prisoner has exhausted state remedies. The exhaustion doctrine, now codified, 28 U.S.C. § 2254 (b), was characterized not as a jurisdictional bar, but as an argument of comity — to decline, in favor of state courts, jurisdiction that we possessed. Fay v. Noia, 1963, 372 U.S. 391, 418, 83 S. Ct. 822, 9 L. Ed. 2d 837, 856-857. The absention doctrine is similar. "Abstention allows a federal court whose jurisdiction has been properly invoked to postpone decision, pending trial in a state court, when the result might turn on issues of state law." Note, Federal — Question Abstention: Justice Frankfurter's Doctrine in an Activist Era, 80 Harv. L. Rev. 604 (1967) (emphasis supplied).23 The doctrine of forum non conveniens has also allowed a court with jurisdiction of a suit to refuse to hear the controversy where a more convenient forum is available. Gulf Oil Corporation v. Gilbert, 1947, 330 U.S. 501, 67 S. Ct. 839, 91 L. Ed. 1055. If in all these cases we can recognize that other policies militate against the formal notion that once we have jurisdiction we must exercise it, surely we can undertake the task which Carbon Black neglected, of weighing the arguments against forum clauses. It is time to lose our fixation with the ancient notion of physical power — that because a tort occurs with in this Court's "mare nostrum" we would be derelict not to decide the case.24
What does emerge from the history, the cases, and the commentary is a legitimate concern for the bargaining conditions in which the forum agreement was made and the quality of the remedy available to the parties if the agreement is enforced. These two concerns encompass several relevant factors that have been isolated. (1) Did the parties freely and intelligently enter their agreement? In contracts of adhesion, where one party possessed overweening bargaining power or where there was no opportunity to negotiate the terms, and of course where fraud has occurred, courts are unwilling to deny a plaintiff his forum on the basis of the contractual stipulation.25 (2) Would the stipulated forum in rendering its decision transgress an important public policy of the present forum? In cases of bankruptcy, divorce, successions, real rights, and regulation of public authorities, for example, courts cannot remit the dispute to a foreign forum lest a foreign court render a decree conflicting with our ordering of these affairs.26 And in cases where objectionable activity within our jurisdiction would be encouraged by the foreign court's decree, we would reach a similar result. Cf. The Kensington, 1902, 183 U.S. 263, 22 S. Ct. 102, 46 L. Ed. 190. (3) Will the designated forum adjudicate the parties' dispute? A court may postpone declining jurisdiction until it is sure the foreign court will hear the dispute and provide a remedy. See, e. g., Swift & Company Packers v. Compania Colombiana, 1950, 339 U.S. 684, 697-698, 70 S. Ct. 861, 94 L. Ed. 1206, 1215. (4) Is the designated forum seriously inconvenient for the trial of the action? Since we recognize in the doctrine of forum non conveniens that a jurisdictionally selected forum should sometimes give way to another in the face of strong arguments of convenience, it would be anomalous to ignore those considerations where the parties have selected a forum without the benefit of hindsight.
The majority has intimated that the forum clause at issue here would fail to qualify even under this more charitable approach, and holds that the factors in this case justify the district court's discretionary refusal to disturb the plaintiff's choice of forum. If the test I advocate is the correct one, however, there was no proper exercise of discretion by the district court. That court's memorandum order demonstrates that it invalidated the forum clause under Carbon Black and then, ignoring the forum clause, declined to dismiss on a forum non conveniens theory.28 The district court's conclusion, apart from the authority of Carbon Black, was that " [t]he balance of conveniences here is not strongly in favor of Defendant and Plaintiff's choice of Forum should not be disturbed". A proper approach to a forum clause should reverse that burden. It is a truism that we do not observe an exercise of discretion that was misled by an erroneous view of the law. And to dispel any notion that this forum clause was unreasonable as a matter of law, I canvass the factors I have suggested.
Of course if Zapata had chosen to abide by the contractual stipulation of forum the case would have proceeded in England and we would have had no opportunity to enforce this public policy. But beyond that, we should be careful not to over-emphasize the strength of the policy. According to Bisso v. Inland Waterways Corporation, 1955, 349 U.S. 85, 91, 75 S. Ct. 629, 99 L. Ed. 911, 918,29 two concerns underlie the rejection of exculpatory agreements: that they may be produced by overweening bargaining power; and that they do not sufficiently discourage negligence. Bisso applied these concerns to towage contracts in admiralty jurisdiction. Yet when we sit in diversity we will enforce an exculpatory clause in favor of a railroad. Seaboard Coast Line Railroad Company v. Tennessee Corporation, 5 Cir. 1970, 421 F.2d 970. Neither there nor in the case of insurance contracts do the dangers strike us as so serious that federal courts cannot enforce the state law. The question here is whether the fact that a towage contract is involved and the fact that we are sitting in admiralty require us to outlaw a forum that might enforce exculpatory clauses. I believe the policy is not so strong. Bisso depends less on the questions of public policy involved than on the long line of authority which it believed established a federal rule barring enforcement of such contracts.30 Although the question has been settled by the Supreme Court for federal courts, we would unduly extend its scope in refusing to enforce a forum clause simply because a foreign forum may enforce an exculpatory clause. Here the conduct in question is that of a foreign party occurring in international waters outside our jurisdiction. The evidence disputes any notion of overreaching in the contractual agreement. And for all we know, the uncertainties and dangers in the new field of transoceanic towage of oil rigs were so great that the tower was unwilling to take financial responsibility for the risks, and the parties thus allocated responsibility for the voyage to the tow.31 It is equally possible that the contract price took this factor into account. I conclude that we should not invalidate the forum selection clause here unless we are firmly convinced that we would thereby significantly encourage negligent conduct within the boundaries of the United States.32 At the very least, before excluding the forum clause, we should remand to the district court for compilation of a record dealing with the economic relationships in this industry and the consequences of enforcing forum clauses in this international context.
Zapata's American citizenship may very well be an argument in some cases for refusing to decline jurisdiction on the basis of forum non conveniens.33 Swift & Company Packers v. Compania Colombiana, 1950, 339 U.S. 684, 70 S. Ct. 861, 94 L. Ed. 1206, decided on forum non conveniens principles (no forum clause was mentioned) that it would not deny an American citizen his American forum primarily because there was no assurance that the defendant would appear with adequate security in the foreign court. Here, of course, Unterweser and Zapata have already joined argument in the English courts, the English courts have ruled that they have jurisdiction, and Unterweser has offered to post the same security that is available to Zapata here. The Supreme Court in Swift, moreover, expressly declined to decide the "abstract question whether United States admiralty courts may decline jurisdiction over libels brought by United States citizens". 339 U.S. at 697, 70 S. Ct. at 869, 94 L. Ed. at 1215. In this case we deal with a situation where Zapata voluntarily and specifically surrendered in the contract its right to proceed in American courts. See Cerro De Pasco Copper Corp. v. Knut Knutsen, 2 Cir. 1951, 187 F.2d 990, 991 (Swift "inapposite" in context of a forum clause). A proper solicitation for the interests of American citizens may militate in favor of enforcing these clauses. Otherwise, Americans who wish to contract with foreign nationals and who are willing to accept a forum clause will have difficulty in convincing the foreign party that he can rely on the agreement.34
(4) The majority concludes that factors of convenience do not justify dismissing the action. But the majority treats the question under the doctrine of forum non conveniens the standard for which is that the plaintiff's choice of forum "should rarely be disturbed" unless "the balance is strongly in favor" of the defendant. Gulf Oil Corporation v. Gilbert, 1947, 330 U.S. 501, 67 S. Ct. 839, 91 L. Ed. 1055. I submit that when a forum clause is involved our standard should be not to disturb the contractual choice of forum unless "the forum chosen by the parties would be a seriously inconvenient one for the trial of the particular action". Restatement (Second) of Conflict of Laws § 80, Comment, supra note 5. From this perspective I conclude that factors of convenience do not justify refusing the motion to decline jurisdiction.
In re Unterweser Reederei, GMBH, 296 F. Supp. 733 (M.D. Fla .1969)
Id. at 713, quoting Hartford Acci. & Indemn. Co. v. Southern P. Co., 273 U.S. 207, 216, 47 S. Ct. 357, 71 L. Ed. 612 (1927)
268 F. Supp. 682 (S.D.N.Y. 1967). The complex litigation involved in this case arose from a collision off the coast of France. Many of the claims were being litigated in England, and cargo claimants were proceeding with actions against both vessels in French courts. As the court below properly observed, the Mowinckels case was influenced by the fact that no one court could obtain control of the entire litigation arising from the collision.
354 U.S. 129, 142, 77 S. Ct. 1103, 1 L. Ed. 2d 1234 (1957)
268 F. Supp. at 690. Also see In re Bloomfield S. S. Co., 227 F. Supp. 615 (E.D. La. 1964), aff'd sub nom., Bloomfield S. S. Co. v. Haight, 363 F.2d 872 (5th Cir. 1966). cert. denied, 386 U.S. 913, 87 S. Ct. 864, 17 L. Ed. 2d 785 (1967)
Steelman v. All Continent Corp., 301 U.S. 278, 57 S. Ct. 705, 81 L. Ed. 1085 (1937); 7 J. Moore,supra note 4.
Petition of A/S J. Ludwig Mowinckels Rederi, 268 F. Supp. 682, 689-690 (S.D. N.Y.1967)See British Transp. Comm'n v. United States, 354 U.S. 129, 77 S. Ct. 1103 (1957).
See 6A A. Corbin, Contracts § 1445 (1962). Also see note 35 infra.
254 F.2d 297 (5th Cir. 1958), cert. dismissed, 359 U.S. 180, 79 S. Ct. 710, 3 L. Ed. 2d 723 rehearing denied 359 U.S. 999, 79 S. Ct. 1115, 3 L. Ed. 2d 986 (1959)
224 F.2d 806 (2d Cir. 1955). In a cargo consignee's libel against the carrier, the Second Circuit held that a forum clause contained in the bill of lading should be respected unless shown to be unreasonable. See note 29 infra.
The forum clause in Carbon Black provided:
254 F.2d at 300-301. The position of this court in Carbon Black reflects what is apparently the majority view regarding forum selection clauses. Annot., 56 A.L.R.2d 300 (1957); 1 E. Benedict, Admiralty § 22a (6th ed. 1940, Supp. 1968).
358 U.S. 809, 79 S. Ct. 43, 3 L. Ed. 2d 54 (1958)
359 U.S. 180, 79 S. Ct. 710 (1959)
377 F.2d 200 (2d Cir. 1967). The Indussa Court held that Muller was inconsistent with the Carriage of Goods by Sea Act, 46 U.S.C. §§ 1300-1315. COSGA also applied to the shipment in Carbon Black, but we are unable to read that case as applying only to such shipments.
201 F. Supp. 76 (E.D. La. 1961)
201 F. Supp. at 78
Swift & Co. Packers v. Compania Colombiana Del Caribe, S. A., 339 U.S. 684, 70 S. Ct. 861, 94 L. Ed. 1206 (1950)See Canada Malting Co. v. Paterson S. S., Ltd., 285 U.S. 413, 52 S. Ct. 413, 76 L. Ed. 837 (1932).
Swift & Co. Packers v. Compania Colombiana Del Caribe, S. A., 339 U.S. 684, 70 S. Ct. 861 (1950); Burt v. Isthmus Dev. Co., 218 F.2d 353 (5th Cir.), cert. denied, 349 U.S. 922, 75 S. Ct. 661, 99 L. Ed. 1254 (1955). Annot., 90 A.L.R.2d 1109 § 9 at 1125 (1963)
Dixilyn Drilling Corp. v. Crescent Towing & Salvage Co., 372 U.S. 697, 83 S. Ct. 967, 10 L. Ed. 2d 78 (1963); Bisso v. Inland Waterways Corp., 349 U.S. 85, 75 S. Ct. 629, 99 L. Ed. 911 (1955)
Central Contracting Co. v. Maryland Cas. Co., 367 F.2d 341 (3d Cir. 1966); General Motors Overseas Operation Div. v. S. S. Goettingen, 225 F. Supp. 902 (S.D.N.Y. 1964); Chemical Carriers, Inc. v. L. Smit & Co.'s Internationale Sleepdienst, 154 F. Supp. 886 (S.D.N.Y. 1957)
Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 67 S. Ct. 839, 91 L. Ed. 1055 (1947)
Hartford Accident & Indem. Co. v. Southern P. Co., 273 U.S. 207, 215, 47 S. Ct. 357, 359, 71 L. Ed. 612 (1927)
268 F. Supp. 682 (S.D.N.Y. 1967), see note 13 supra.
See Nadelmann, The Hague Conference on Private International Law & the Validity of Forum Selecting Clause, 13 Am. J.Comp.L. 157 (1964); Lenhoff, The Parties' Choice of a Forum: "Prorogation Agreements", 15 Rutgers L. Rev. 414 (1961)
In Carbon Black, an American exporter sued both the vessel and the vessel's owner, an Italian corporation, for damage to and nondelivery of a cargo of carbon black placed on board the S.S. Monrosa in the United States for shipment to Italy. The defendant moved for dismissal because of a provision in the contract that any action for loss or damage to the goods should be brought in Genoa. This Court reversed the district court's decision to grant the motion, holding that the in rem action did not come within the language of the forum clause. With respect to the action in personam we stated that "the universally accepted rule [is] that agreements in advance of controversy * * * to oust the jurisdiction of the courts are contrary to public policy and will not be enforced". The Supreme Court at first granted certiorari to resolve an apparent conflict with Wm. H. Muller & Co. v. Swedish American Line, Ltd., 2 Cir. 1955, 224 F.2d 806, cert. denied, 1955, 350 U.S. 903, 76 S. Ct. 182, 100 L. Ed. 793 then dismissed certiorari as improvidently granted, finding that the clause in Carbon Black did not include an in rem action and refusing to rule on the clause's validity with regard to the in personam action. 359 U.S. 180, 79 S. Ct. 710, 3 L. Ed. 2d 723, Muller had said that courts should enforce a forum clause unless it was unreasonable or prohibited by statute.
Perhaps the original Carbon Black opinion is largely responsible for that ambiguity. After presenting its universal rule, Carbon Black stated that it neither espoused nor rejected the Second Circuit's position in Muller. Carbon Black referred to factual distinctions from Muller which tended to show that the operation of the Carbon Black forum clause was less reasonable than Muller's, then concluded that the doctrine of forum non conveniens did not justify declining jurisdiction because the balance was not strongly in favor of the defendant. Thus, it is unclear whether the factual distinctions buttress the conclusion that forum non conveniens did not apply, or whether Carbon Black was somehow retreating from the universality of its principle. I believe the same ambiguity is reflected in Insurance Company of North America v. N.V. Stoomvaart-Maatschappij "Oostzee", E.D. La. 1961, 201 F. Supp. 76. There the district court concluded that Carbon Black required forum clauses to "be stricken herewith as being contrary to public policy and unenforceable", 201 F. Supp. at 78, but proceeded to analyze the reasonableness of the particular clause in the circumstances presented.
There are other indications that this Court has not taken such a harsh view of forum clauses as Carbon Black proposes. In Anastasiadis v. S.S. Little John, 5 Cir. 1965, 346 F.2d 281, cert. denied, 1966, 384 U.S. 920, 86 S. Ct. 1368, 16 L. Ed. 2d 440 for example, we affirmed the district court's decision to decline jurisdiction of an in rem suit. There, a Greek seaman had contracted in Greece for employment on a vessel of Liberian registry. Although a Liberian corporation owned the vessel, that corporation was in turn wholly owned and controlled by an American corporation, in turn wholly owned and controlled by a United States citizen. The contract, written in Greek, provided that the seaman would join the vessel at Houston, Texas. But it stated that Greek law would govern disputes and designated the Greek courts at Piraeus as the forum. When the seaman joined the ship at Houston, he found conditions unsatisfactory and sued in a Texas district court for breach of contract and tort. Depositions of witnesses were taken in the United States. This Court concluded that even though the district court undoubtedly had jurisdiction, it also had discretion to decline jurisdiction of a controversy between foreigners. Although a nominal foreign registry is often pierce] where American laws are to be enforced against a ship beneficially owned by Americans, the Court declined to do so. It said:
Perhaps Carbon Black could be distinguished or limited to its facts. The Carriage of Goods by Sea Act, 46 U.S.C. §§ 1300-1315, applied there, and the Second Circuit has recently found that § 3(8) of that Act makes forum clauses unenforceable where it applies. Indussa Corp. v. S. S. Ranborg, 2 Cir. 1967, 377 F.2d 200; accord, G. Gilmore & C. Black, The Law of Admiralty § 3-25, at 125 n. 23 (1957); 40 U.Col.L.Rev. 159 (1967); 8 Va.J.Int. L. 161 (1967); Note, Enforcement & Effect of the Jurisdiction Clause in Admiralty, 34 St. John's L.Rev. 72, 76-79 (1959). But see 9 Harv.Int.L.J. 333, 339-40 (1968); 14 Wayne L.Rev. 609, 614-16 (1968); 45 Corn.L.Q. 364, 372 (1960). Carbon Black, moreover, specifically stated that it neither espoused nor rejected Muller, a case that enforced a forum clause where there was no evidence of undue bargaining pressure and the clause was not unreasonable. Finally, Carbon Black dealt with the specification of an Italian forum for a contract printed in English adopting American law (COGSA) and executed in the United States. But I tend to agree with the majority that Carbon Black's language and reasoning, even at their narrowest, are broad enough to cover this case, and I feel that it must be overruled.
Common Law Procedure Act of 1954, 17 & 18 Vict., c. 125, § 11 (permitting use of the courts' discretion); Arbitration Act of 1889, 52 & 53 Vict. c. 49; Georgia Arbitration Act, Ga.Laws 1855-1856, 222-224. Action in the United States did not become significant until after Judge Hough's sardonic opinion in United States Asphalt Ref'g Co. v. Trinidad Lake Petroleum Co., S.D.N.Y. 1915, 222 F. 1006 See Sayre at 612. But that opinion prompted enactment of arbitration statutes. See e.g., Gilbert v. Burnstine, 1931, 255 N.Y. 348, 174 N.E. 706, 707: "Settlements of disputes by arbitration are no longer deemed contrary to our public policy. Indeed, our statute encourages them."
The heart of Morse was the constitutional issue of the line between state and federal jurisdiction. A Wisconsin statute required that before doing business in the state, all foreign corporations must sign agreements not to remove a suit from state to federal court. The Home Insurance Company filed the agreement, but when sued, attempted to remove the case to federal court. The Wisconsin courts refused to allow removal. The United States Supreme Court reversed on the ground that a state had no constitutional power to compel a surrender of the right of removal to federal court. The observation that even without the statute such an agreement was void appears to be surplusage. The more compelling argument against enforcing the clause was the fact that an unconstitutional condition was being imposed. Since the alternative was prohibition against doing business in Wisconsin, the contract could also be characterized as one of adhesion. We do not face the Morse constitutional argument in this case.
For a discussion of the law on forum clauses in the British Commonwealth see Cowen and Mendes da Costa, The Contractual Forum: A Comparative Study, 43 Can.Bar Rev. 453 (1965). For other countries, see generally The Validity of Forum Selecting Clauses: Proceedings of the 1964 Annual Meeting of the American Foreign Law Association, 13 Am.J.Comp. L. 157 (1964); Lenhoff, The Parties' Choice of a Forum: "Prorogation Agreements", 15 Rutgers L. Rev. 414 (1961).
Although Cerro De Pasco was a New York corporation, the district court found that it was "like an assignee" of a Belgian corporation and that the controversy was therefore really between aliens. S.D.N.Y. 1950, 94 F. Supp. 60, 61. The Second Circuit, however, did not refer to this argument. It dealt specifically with the issue whether an American court could decline jurisdiction of an American plaintiff and held that the forum clause made Swift & Co. Packers v. Compania Colombiana, 1950, 339 U.S. 684, 70 S. Ct. 861, 94 L. Ed. 1206 (see discussion in section III, infra), inapposite.
In Muller a New York corporation sued in a New York federal court to recover the value of a cargo of cocoa beans lost in transit between Sweden and Philadelphia. The district court dismissed the suit because a clause in the bill of lading provided that any claims against the vessel's owner, a Swedish corporation, should be decided according to Swedish law and in the Swedish courts. The Second Circuit affirmed, holding first that the forum clause was not contrary to COGSA because its application would not result in a "lessening" of the "liability" imposed upon the defendant by the Act; second, that a forum clause should be enforced unless unreasonable or contrary to statute. The clause in question was not unreasonable because "most of the evidence as to unseaworthiness will be more readily available in a Swedish court"; all members of the crew resided in Sweden and the vessel had been built in that country; and, "for aught that appears", the parties' consent to inclusion of the clause in the bill of lading was "freely given".
In Indussa a New York corporation sued the vessel because a cargo of nails and barbed wire arrived in San Francisco, from Antwerp, Belgium, rusted and depreciated in value. The district court dismissed the suit on the basis of a clause specifying the carrier's principal place of business (Norway) as the forum.
The Supreme Court may have expressed approval of forum clauses in an interstate context in National Equipment Rental, Limited v. Szukhent, 1964, 375 U.S. 311, 315-316, 84 S. Ct. 411, 11 L. Ed. 2d 354, 357-358. In dealing with a contract clause designating an agent for service of process, the Court said:
Szukhent is not significant authority, however, because the Court there was faced with the question whether New York courts had jurisdiction, not whether other courts should decline jurisdiction. Justice Black, dissenting, reads Szukhent more broadly: "Here this contract as effectively ousts the Michigan courts of jurisdiction as if it had said so. Today's holding disregards Michigan's interest in supervising the protection of rights of its citizens who never leave the State but are sued by foreign companies with which they have done business". 375 U.S. at 327, 84 S. Ct. at 420, 11 L. Ed. 2d at 364-365.
Earlier cases foreshadowed these results. Gilbert v. Burnstine, 1931, 255 N.Y. 348, 174 N.E. 706, hold that a New York citizen's agreement to arbitrate in England should be enforced. The New York court concluded that these agreements were not contrary to public policy, and " [c]ontracts made by mature men who are not wards of the court should, in the absence of potent objection, be enforced. 174 N.E. at 707. Mittenthal v. Mascagni, 1903, 183 Mass. 19, 66 N.E. 425, enforced a forum clause designating Italian courts. Although the plaintiffs were New York citizens, the contract conferred Italian domicile upon them. Therefore, the court spoke of the contract as "between citizens of foreign states" and found no public policy to prevent enforcing it. For a collection of recent cases enforcing forum clauses see Annot.,supra note 12.
Compare Judge Frank's statement in Knut Knutsen: "It might be said that the court took jurisdiction and granted specific performance. * * * 187 F.2d at 991 n. 1.
SeeAnastasiadis, supra note 3; Burt v. Isthmus Dev't Co., 5 Cir. 1955, 218 F.2d 353, 356, cert. denied, 1955, 349 U.S. 922, 75 S. Ct. 661, 99 L. Ed. 1254.
See Reetz v. Bozanich, 1970, 397 U.S. 82, 90 S. Ct. 788, 25 L. Ed. 2d 68.
Other attempts to justify the broad rule against forum clauses have been no more successful. Attempts to distinguish arbitration by observing that arbitration "was not a limitation on the forum, but rather was an agreement to eliminate the need for any forum whatever", Bergman, Contractual Restrictions on the Forum, 48 Calif.L.Rec. 438, 439 (1960), are simply not convincing. The argument that a party's choice of forum is a substantial right not to be bartered away,id. at 328-329; Morse, supra, 22 L. Ed. at 368, is conclusory like the Carbon Black statement that forum clauses are against public policy. Neither position gives reasons why it should be accepted.
This may be a better rationale for cases that refuse to enforce forum clauses in passenger and baggage tickets See, e.g., Muoio v. Italian Line, E.D. Pa. 1964, 228 F. Supp. 290; Note, Validity of Contractual Stipulation Giving Exclusive Jurisdiction to the Courts of One State, 45 Yale L.J. 1150 (1936).
The district court cited Muller, but its analysis clearly placed the burden on the defendant to justify the transfer, as is proper under a forum non conveniens approach. The court relied on Mobil Tankers Co. v. Mene Grande Oil Co., 3 Cir. 1966, 363 F.2d 611, cert. denied 1966, 385 U.S. 945, 87 S. Ct. 318, 17 L. Ed. 2d 225, for its criteria, that " [u]nless `the balance is strongly in favor of the [Respondent], [the libellant's] choice of forum should rarely be disturbed.'"
Dixilyn Drilling Corp. v. Crescent Towing & Salvage Co., 1963, 372 U.S. 697, 83 S. Ct. 967, 10 L. Ed. 2d 78, reversed per curiam our enforcement of a towage clause assigning all liability to a barge owner solely on the authority of two earlier companion cases,Bisso, and Boston Metals Co. v. S/S "Winding Gulf", 1955, 349 U.S. 122, 75 S. Ct. 649, 99 L. Ed. 933. Since Winding Gulf was also decided on the authority of Bisso, Bisso appears to be the determining authority.
Bisso was only a four-Justice opinion. The fifth, Justice Douglas, concurred only because he professed ignorance of the "economics and organization of this business". He admitted that the Court's rule might be "outmoded" and in need of change, that the tugboat industry might be "less able to carry the risks of * * * losses than its customers, and that it might be "fairer in the long run" to allow the tugboat operator to transfer liability. But in the absence of a record that threw light on those "large questions of policy", he was unwilling to change what he considered an already established rule in the federal courts. Justice Frankfurter, joined by Justices Reed and Burton, wrote a telling dissent seriously questioning the Court's use of its authorities and reaching the conclusion that the courts should not intervene to upset the arrangements of private parties where there was no evidence of inequality of bargaining power or of concentrated ownership or of unavailability of services by other tugs who would not require exculpatory clauses. In Frankfurter's words, the argument that irresponsibility would be stimulated "has little force, unless we are prepared also to forbid the tug to insure against such losses or liabilities". 349 U.S. at 119, 75 S. Ct. at 647, 99 L. Ed. at 932.
Compare our argument in Seaboard Coast Line R.R. v. Tennessee Corp., 5 Cir. 1970, 421 F.2d 970, 974: An exculpatory clause "merely means that if such an injury occurs the parties need not undertake to go to battle to determine whose negligent act, if in fact there was negligence at all, produced the injury. * * * In effect, it seems to us, that in light of the relation of the parties here, the railroad company was simply not willing to permit conjunctive use of railroad equipment by an industrial concern which may well be presumed not to have the same skill in operation of railroad equipment as the railroad company itself without requiring of the industry that it assume absolute liability with respect to any injuries resulting therefrom"
It is true that The Kensington, 1902, 183 U.S. 263, 22 S. Ct. 102, 46 L. Ed. 190, holds that federal courts are not to enforce a foreign law against our public policy where part of a contract is executed in the United States. But in The Kensington the defendant was a New Jersey corporation and thus a logical object of regulation by American courts. Here we deal with a foreign national operating at the time of the mishap outside our jurisdiction. In this context, I believe it is not a semantic argument to contend that enforcement of a forum clause is sufficiently attenuated from enforcement of substantive law contrary to our public policy that we do not run afoul of The Kensington.
Burt v. Isthmus Dev. Co., 5 Cir. 1955, 218 F.2d 353, cert. denied, 1955, 349 U.S. 922, 75 S. Ct. 661, cited by the majority at fn. 37, can be distinguished on several grounds. First, although the factual statement mentions that under the contract the parties submitted to Mexican jurisdiction and waived the jurisdiction of other courts, that element played no part in the decision because the Court found that the basic issue of dispute was whether "negotiations ever matured into a contract"Id. at 358. Second, Burt, a diversity case, specifically recognized that " [i]n admiralty, courts have often refused to entertain actions * * * between citizens and aliens where foreign law would govern the issue, and have relegated the litigants to the foreign court". Id. at 356. Finally, Burt followed Swift's example and expressly declined to hold that an American citizen's suit could not be dismissed even in nonadmiralty cases. If Burt requires "positive evidence of unusually extreme circumstances" and a conviction "that material injustice is manifest", Id. at 357, before enforcing a forum clause, it is subject to the same criticisms as Carbon Black.