Opinion ID: 1427054
Heading Depth: 1
Heading Rank: 5

Heading: Impact of Choice of Law Clause

Text: In the absence of an applicable choice of law provision, it is well established in this Circuit that the rule set out in M/S Bremen applies to the question of enforceability of an apparently governing forum selection clause, irrespective of whether a claim arises under federal or state law. AVC Nederland B.V. v. Atrium Inv. P'ship, 740 F.2d 148, 156 (2d Cir.1984) (applying M/S Bremen in federal question case); Bense, 683 F.2d at 720-21 (same); Jones v. Weibrecht, 901 F.2d 17, 18-19 (2d Cir.1990) (reaffirming Second Circuit rule that Bremen standard applies to diversity cases). Here, where the parties have agreed that the validity, construction and effect of the recording contract is to be governed by English law, we confront a different legal issue. In analyzing a forum selection clause, what effect should we give to a choice of law provision contained in the same contract? Largely for the reasons we hold parties to their contractual promises to litigate in a specified forum, federal courts give substantial weight to choice of law provisions. See Roby, 996 F.2d at 1362-63 (discussing presumptive validity of choice of law clauses in international transactions); State Trading Corp. of India, Ltd. v. Assuranceforeningen Skuld, 921 F.2d 409, 417 (2d Cir.1990) ([A] contractual choice of law clause generally takes precedence over choice of law rules. . . .); Richards v. Lloyd's of London, 135 F.3d 1289, 1292-93 (9th Cir.1998) (extending Bremen standard to evaluation of choice of law clauses). But see Advani Enters., Inc. v. Underwriters at Lloyds, 140 F.3d 157, 162 (2d Cir.1998) (incorporating choice of law provision into multi-factor test to determine points of contact between transaction and potential fora in admiralty case). Despite the presumptive validity of choice of law clauses, our precedent indicates that federal law should be used to determine whether an otherwise mandatory and applicable forum clause is enforceable under Bremen, i.e., step four in our analysis. This is because enforcement of forum clauses is an essentially procedural issue, Jones, 901 F.2d at 19, while choice of law provisions generally implicate only the substantive law of the selected jurisdiction. See Siegelman v. Cunard White Star, 221 F.2d 189, 194 (2d Cir.1955); cf. Woodling v. Garrett Corp., 813 F.2d 543, 551-52 (2d Cir.1987) (explaining New York rule honoring parties' choice of law to govern substantive but not procedural issues). Were it otherwise, choice of law provisions selecting jurisdictions that disfavor forum clauses would put a district court to the awkward choice of either ignoring the parties' choice of law or invalidating their choice of forum. See, e.g., Bense, 683 F.2d at 722 (declining to apply law specified in contract where such application would render the forum selection clause meaningless). We find less to recommend the invocation of federal common law to interpret the meaning and scope of a forum clause, as required by parts two and three of our analysis. Little discussion of the issue can be found in federal court decisions. See Yavuz v. 61 MM, Ltd., 465 F.3d 418, 427 (10th Cir.2006). For example, we have turned to federal precedent to interpret forum clauses, but the underlying choice of law question has been left unaddressed. See, e.g., Boutari, 22 F.3d at 52-53 (applying federal precedent to ascertain meaning of forum clause where parties had elected Greek law); Roby, 996 F.2d at 1361 (applying federal precedent to assess scope of clause where parties had chosen English law); see also Manetti-Farrow Inc. v. Gucci Am., Inc., 858 F.2d 509, 513 (9th Cir.1988) ([B]ecause enforcement of a forum clause necessarily entails interpretation of the clause before it can be enforced, federal law also applies to interpretation of forum selection clauses.). But see AVC Nederland, 740 F.2d at 155 (noting that interpretation of Dutch-language forum selection clause in contract among predominantly Dutch principals executed in the Netherlands required application of Dutch law). See generally Jacob Webb Yackee, Choice of Law Considerations in the Validity & Enforcement of International Forum Selection Agreements: Whose Law Applies?, 9 UCLA J. Int'l L. & Foreign Aff. 43, 67 (2004) (describing practice of federal courts reflexively to disregard choice of law provisions when assessing forum selection clauses); Yavuz, 465 F.3d at 427 (same). The Tenth Circuit recently discussed the novel question posed by contracts containing choice of law and forum provisions. Yavuz, 465 F.3d at 427-31. Reviewing a clause reading, [t]his convention is governed by the Swiss law. . . . Place of courts is Fribourg, id. at 427, the court noted that before deciding whether to enforce the clause, it had to resolve several subsidiary questions: whether the clause was mandatory or permissive, and whether it governed all of plaintiff's claims. Id. Yavuz observed that the Supreme Court's guidance on forum clauses did not extend to the choice of law question before it (and now before us) because the meaning of each forum or arbitration provision before the Supreme Court in M/S Bremen and its progeny has never been in question. Id. at 430. In light of the Supreme Court's invocation of compelling reasons to uphold contractual choice of law  like choice of forum  provisions, Yavuz held that under federal law the courts should ordinarily honor an international commercial agreement's forum-selection provision as construed under the law specified in the agreement's choice of law provision, id. at 428-30; see also Abbott Labs. v. Takeda Pharm. Co., 476 F.3d 421, 423 (7th Cir. 2007) (Simplicity argues for determining the validity and meaning of a forum selection clause . . . by reference to the law of the jurisdiction whose law governs the rest of the contract in which the clause appears.). Without the benefit of briefing by the parties on this issue, we cannot understand why the interpretation of a forum selection clause should be singled out for application of any law other than that chosen to govern the interpretation of the contract as a whole. See Yavuz, 465 F.3d at 428. However, the parties neither objected to the district court's citation to federal precedent in its interpretation of the clause before us, nor construed the clause under English law in their briefs. We will assume from the parties' briefing that they do not rely on any distinctive features of English law and apply general contract law principles and federal precedent to discern the meaning and scope of the forum clause. See Motorola Credit Corp. v. Uzan, 388 F.3d 39, 61 (2d Cir.2004) ([T]he parties' briefs assume that New York law controls this issue, and such implied consent . . . is sufficient to establish choice of law.); John Wyeth & Brother Ltd. v. CIGNA Int'l Corp., 119 F.3d 1070, 1074 (3d Cir.1997) (Alito, J.) (applying general contract law principles to interpret forum clause where parties made little reference to English law).