Opinion ID: 587006
Heading Depth: 2
Heading Rank: 1

Heading: Forum Selection and Choice of Law Provisions.

Text: 12 Riley concedes, as he must, that the enforcement of choice of forum and choice of law clauses is consistent with recent U.S. Supreme Court decisions. However, he relies on an isolated sentence in a footnote in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 n. 19, 105 S.Ct. 3346, 3359 n. 19, 87 L.Ed.2d 444 (1985), which stated that forum selection and choice of law provisions which operate as prospective waivers of statutory antitrust claims would not be enforced as against public policy. Riley suggests that he is being deprived of all substantive rights under the federal securities laws and therefore should be relieved of his agreements on public policy grounds. 4 On these facts, we do not read Mitsubishi as restrictively as Riley when Mitsubishi is viewed against the backdrop of Supreme Court decisions in the area. 13 When an agreement is truly international, as here, and reflects numerous contacts with the foreign forum, the Supreme Court has quite clearly held that the parties' choice of law and forum selection provisions will be given effect. See Carnival Cruise Lines, Inc. v. Shute, --- U.S. ----, ---- - ----, 111 S.Ct. 1522, 1527-28, 113 L.Ed.2d 622 (1991); Mitsubishi, 473 U.S. at 631, 105 S.Ct. at 3356; Scherk v. Alberto-Culver Co., 417 U.S. 506, 519-20, 94 S.Ct. 2449, 2457-58, 41 L.Ed.2d 270 (1974); M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 9, 92 S.Ct. 1907, 1912, 32 L.Ed.2d 513 (1972). We review these authorities briefly. 14 In M/S Bremen, the Court identified an important rationale for the rule that such provisions should be enforced. 15 The expansion of American business and industry will hardly be encouraged if, notwithstanding solemn contracts, we insist on a parochial concept that all disputes must be resolved under our laws and in our courts. .... We cannot have trade and commerce in world markets and international waters exclusively on our terms, governed by our laws, and resolved in our courts. 16 Id., 407 U.S. at 9, 92 S.Ct. at 1912. The Court concluded: 17 Thus, in the light of present day commercial realities and expanding international trade we conclude that the forum clause should control absent a strong showing that it should be set aside. 18 Id. at 15, 92 S.Ct. at 1916. Forum selection provisions are prima facie valid and a party resisting enforcement carries a heavy burden of showing that the provision itself is invalid due to fraud or overreaching or that enforcement would be unreasonable and unjust under the circumstances. See Id. at 10, 15, 92 S.Ct. at 1913, 1916; Seward v. Devine, 888 F.2d 957, 962 (2d Cir.1989). 19 The Court adhered to this position in Scherk, which dealt with the applicability of an arbitration provision requiring that any disputes be referred to arbitration before the International Chamber of Commerce in Paris, France, applying Illinois law. Although an arbitration provision was involved, the Court characterized it as a specialized kind of forum-selection clause that posits not only the situs of suit but also the procedure to be used in resolving the dispute. Scherk, 417 U.S. at 519, 94 S.Ct. at 2457. The Court characterized the agreement at issue as a truly international agreement and discussed why these types of provisions are so important in the context of international transactions. 20 A contractual provision specifying in advance the forum in which disputes shall be litigated and the law to be applied is, therefore, an almost indispensable precondition to achievement of the orderliness and predictability essential to any international business transaction. Furthermore, such a provision obviates the danger that a dispute under the agreement might be submitted to a forum hostile to the interests of one of the parties or unfamiliar with the problem area involved. 21 Scherk, 417 U.S. at 516, 94 S.Ct. at 2455-56. In passing, the Court noted that designating a particular place for arbitration might, under some circumstances, be viewed as an implicit choice of law selection. Id. at 519 n. 13, 94 S.Ct. at 2457 n. 13. 22 In Mitsubishi, the Court upheld a provision that would result in antitrust claims being subject to arbitration in Japan on the basis 23 that concerns of international comity, respect for the capacities of foreign and transnational tribunals, and sensitivity to the need of the international commercial system for predictability in the resolution of disputes require that we enforce the parties' agreement, even assuming that a contrary result would be forthcoming in a domestic context. 24 Mitsubishi, 473 U.S. at 629, 105 S.Ct. at 3355 (emphasis supplied). 25 Finally, in Carnival Cruise Lines, the Court relied on M/S Bremen in enforcing a domestic forum selection clause, despite inconvenience to the plaintiffs. Carnival Cruise Lines, 111 S.Ct. at 1528. Only a showing of inconvenience so serious as to foreclose a remedy, perhaps coupled with a showing of bad faith, overreaching or lack of notice, would be sufficient to defeat a contractual forum selection clause. Id. 26 Riley suggests that enforcement of the choice of forum and law provisions is unreasonable because he effectively will be deprived of his day in court. The basis underlying this contention is his perception that recovery will be more difficult under English law than under American law. Riley will not be deprived of his day in court. He may, though, have to structure his case differently than if proceeding in federal district court. The fact that an international transaction may be subject to laws and remedies different or less favorable than those of the United States is not a valid basis to deny enforcement, provided that the law of the chosen forum is not inherently unfair. See Carnival Cruise Lines, 111 S.Ct. at 1528; AVC Nederland B.V. v. Atrium Inv. Ptrshp., 740 F.2d 148, 158-59 (2d Cir.1984); Medoil Corp., 729 F.Supp. at 1460; Karlberg European Tanspa, Inc. v. Jk-Josef Kratz Vertriebsgesellschaft mbH, 618 F.Supp. 344, 348 (N.D.Ill.1985); Dukane Fabrics Int'l Inc. v. M.V. Hreljin, 600 F.Supp. 202, 203-04 (S.D.N.Y.1985). English law does not preclude Riley from pursuing an action for fraud and we agree with the Defendants that the Lloyd's Act does not grant statutory immunity for such claims. See Lloyd's Act, § 14(3), Aplt.App. at 286 & Aple.Add. at 307-08. We have been shown nothing to suggest than an English court would not be fair, and in fact, our courts have long recognized that the courts of England are fair and neutral forums. See M/S Bremen, 407 U.S. at 12, 92 S.Ct. at 1914; Syndicate 420 at Lloyd's London v. Early American Ins. Co., 796 F.2d 821, 829 (5th Cir.1986); Bonny v. Society of Lloyd's, 784 F.Supp. 1350, 1353 (N.D.Ill.1992). Given the international nature of the insurance underwriting transaction, the parties' forum selection and choice of law provisions contained in the agreements should be given effect. 27