Court Opinion

ID: 15115
Source: CourtListenerOpinion
Date Created: 2010-04-25 06:41:53+00
Date Added: 2024-06-11T16:46:37.935264
License: Public Domain

REVISED, July 14, 1998

              IN THE UNITED STATES COURT OF APPEALS

                      FOR THE FIFTH CIRCUIT
                         _______________

                           No. 97-21048
                         _______________

                  AFRAM CARRIERS, INC., et al.,

                                                Plaintiffs,

                      AFRAM CARRIERS, INC.,

                                                Plaintiff-Appellee,

                             VERSUS

                     BRUCE MOEYKENS, et al.,

                                                Defendants,

                   ADELE NAJAR VDA. DE PANTA,
         Individually and as Personal Representative of
              the Estate of Augustin Pantin Pazos;

                       EDGAR PANTA NAJAR,

                  ROSA DEL CARMEN PANTA NAJAR,

                                 and

                   ELVIS ANDERSON PANTA NAJAR,

                                                Movants-Appellants.

                    _________________________

          Appeal from the United States District Court
               for the Southern District of Texas
                    _________________________
                          June 26, 1998

Before KING, SMITH, and STEWART, Circuit Judges.

JERRY E. SMITH, Circuit Judge:
     This appeal addresses the propriety of a choice of forum

clause in a settlement agreement related to a Limitation Act

proceeding, 46 U.S.C. § 181 et seq.                 Finding no reversible error,

we affirm.

                                            I.

     The    S/S    TAMPA   BAY,    a   ship       owned    and    operated   by     Afram

Carriers, arrived in the Peruvian port of El Callao, and four

employees of the contractual security service, Servipro, hired to

guard the ship boarded.        Among the four was the deceased, Augustin

Panta.

     Peruvian port authorities ordered Afram to fumigate the ship.

Afram evacuated all crew members except the captain, the chief

engineer, and the four Servipro employees.                        The ship's captain

assigned the security personnel to quarters on the ship during the

fumigation.       While there, Panta, the chief engineer, and several

others still aboard were overcome by fumes from the chemical,

methyl bromide,       used   for     fumigation.           Panta    later    died   from

inhalation of this toxic substance.

     Afram and Panta's wife and children entered into a settlement

agreement     providing      that,     in       exchange    for    a   sum   of     about

U.S. $2000, the Pantas release all existing claims against Afram in

both the Peruvian and American courts.                      The agreement further

provides Peruvian choice of law and forum-selection clauses.1

     1
         Specifically, the settlement agreement states:

                                                                       (continued...)

                                            2
     At about the time that Afram was settling the Panta heirs'

wrongful death claim, it instituted a limitation of liability

proceeding under the Limitation Act, 46 U.S.C. § 181 et seq., in

federal court and included all personal injury and property damage

claimants in its complaint.          The district court ordered that

monitions be served against all potential claimants in order to

give them notice that they needed to present, or forever waive,

their rights.

     Because of the settlement agreement, Afram did not serve the

Panta claimants with a monition.         Eighteen months later, however,

when they found out about the limitation proceeding, the Pantas

moved to intervene and attempted to assert their wrongful death

claim against Afram and the TAMPA BAY.

     Afram   resisted   the   intervention    on    the   ground    that   the

settlement agreement provided that any disputes arising over the

release would be litigated in Peruvian, rather than American,

courts.    The district court tentatively agreed to enforce the

forum-selection clause but allowed the parties to submit additional

briefing   on   the   “possible   effects    that   enforcing      the   forum

selection provision would have on the Panta claimants.”

     After reviewing the additional briefing, the court denied the

motion to intervene and dismissed the claims without prejudice if

the claimants filed an appropriate action in the Peruvian courts

(...continued)
     This Agreement shall be interpreted, governed by, and construed in
     accordance with the laws of the Republic of Peru and any issue
     arising out of this Agreement will be subject to the exclusive
     jurisdiction of the Peruvian courts applying Peruvian law.

                                     3
within thirty days.       The Pantas appeal the denial of their motion

to intervene.2

                                         II.

      “[T]he enforceability of a forum-selection or arbitration

clause is a question of law which is reviewed de novo.”                 Mitsui &

Co. (USA), Inc. v. MIRA M/V, 111 F.3d 33, 35 (5th Cir. 1997) (per

curiam)    (citations      omitted).           Forum-selection     clauses      are

presumptively valid:       “[A] freely negotiated private international

agreement, unaffected by fraud, undue influence, or overweening

bargaining power . . . should be given full effect.”              M/S BREMAN v.

Zapata Off-Shore Co., 407 U.S. 1, 12-13 (1972).                  “The burden of

proving unreasonableness is a heavy one, carried only by a showing

that the     clause   results     from    fraud   or   overreaching,     that    it

violates a strong public policy, or that enforcement of the clause

deprives the plaintiff of his day in court.”              Mitsui, 111 F.3d at

35 (emphasis added) (citing THE BREMAN, 407 U.S. at 12-13, 15, 18).

Allegations that the entire contract was procured as the result of

fraud or overreaching are “inapposite to our [forum-selection

clause] enforceability determination, which must . . . precede any

      2
        The Pantas' motion to intervene sought an “intervention of right” under
FED. R. CIV. P. 24(a) because (1) the claim related to the res at issue in the
Limitation Act proceeding and because the intervenors had an interest in the res;
(2) a denial of intervention would impede their claim to the res; and (3) their
rights would not be adequately represented by the other parties in the proceeding
(who would be competing for their own shares of the res at the intervenors'
expense). See 6 JAMES W. MOORE, ET AL., MOORE'S FEDERAL PRACTICE § 24.03[1] (3d ed.
1998) (outlining the three requirements to satisfy rule 24(a)).        Denials of
motions to intervene of right are final orders under 28 U.S.C. § 1291.
Accordingly, we have appellate jurisdiction. See Brotherhood of R.R. Trainmen
v. Baltimore & Ohio R.R., 331 U.S. 519, 524-25 (1947).

                                          4
analysis of the merits [of the contract's validity].”              Haynsworth

v. The Corporation, 121 F.3d 956, 964 (5th Cir. 1997) (citation

omitted), cert. denied, 118 S. Ct. 1513 (1998).

     The intervenors attempt to overcome the presumption of the

forum-selection    clause's     validity   by   arguing    that    (1)   Afram

procured the clause through fraud and overreaching (including

mistake); (2) the clause violates a strong public policy of the

United States; (3) Afram should be estopped from asserting its

rights   under   the   clause   because    it   took   other,    inconsistent

positions in this litigation; (4) enforcement of the clause would

prevent the intervenors from having their day in court; and (5) the

release does not cover the dispute at issue.

                                    A.

     The Pantas primarily argue that Afram procured the forum-

selection clause through fraud and overreaching.                The facts, at

least as the Pantas tell the story, are certainly dire.                    The

deceased was the primary breadwinner for his family.                He had no

life insurance and, by all accounts, his family was financially and

emotionally devastated by his death.

     In the weeks after the death, the family was offered (although

from the record it is unclear who first solicited the offer), and

accepted, a cash settlement from Afram.         In exchange for about one

year's salary, U.S. $2000, the family agreed to waive all claims

against Afram in both the Peruvian and U.S. courts.                The Pantas

further agreed to litigate all disputes concerning the release

                                     5
under Peruvian law and in Peruvian courts.

     The Pantas use the facts to facilitate the natural inference

that the settlement was procured through fraud or duress or was

otherwise unconscionable. From there, we naturally are inclined to

make a second inference:       The forum-selection clause, as part of

the illegally obtained contract, must also have been illegally

procured.

     This chain of inferences, however, is foreclosed not only by

binding circuit precedent, see, e.g., Haynsworth, 121 F.3d at 964;

Mitsui, 111 F.3d at 35, but also by the policies underlying the

presumption in favor of enforcing such clauses. “The Supreme Court

has . . . instructed American courts to enforce [forum-selection]

clauses in   the   interests    of   international   comity   and   out   of

deference to the integrity and proficiency of foreign courts.”

Mitsui, 111 F.3d at 35 (citing Mitsubishi Motors Corp. v. Soler

Chrysler-Plymouth, Inc., 473 U.S. 614, 629 (1985)).           Were we to

judge the soundness of the forum-selection clause by what we

believe to be the merits of the underlying contract, we would

subvert the aforementioned comity concerns by making a merits

inquiry that the Supreme Court has determined is best left to the

forum selected by the parties.

     Only when we can discern that the clause itself was obtained

in contravention of the law will the federal courts disregard it

and proceed to judge the merits.         Because, in this case, we can

draw an inference of an illegally obtained forum-selection clause

only if we judge the merits of the contractSSthat is, the movants

                                     6
have offered no evidence3 that the clause itself was obtained as a

result of fraud or overreachingSSwe cannot disregard it on that

ground.4

                                       B.

      The Pantas also argue that enforcing the forum-selection

clause     would   thwart   the   “equitable     resolution”     goal    of   the

Limitation Act.      That is, “[t]he purpose of limitation proceedings

is . . ., in an equitable fashion, to provide a marshalling of

assetsSSthe distribution pro rata of an inadequate fund among

claimants, none of whom can be paid in full.”               Petition of Tex.

Co., 213 F.2d 479, 482 (2d Cir. 1954) (internal quotation and

citation omitted).

      A forum-selection clause is potentially unreasonable when it

would undermine a “strong public policy” of the forum.                   Mitsui,
111 F.3d at 35.      Initially, we must determine, therefore, whether

the equitable resolution afforded by the Limitation Act is a

“strong”    public    policy   that    justifies    overcoming     the   forum-

     3
       The Pantas argue that they have offered evidence that the forum-selection
clause was obtained through fraud: (1) Afram told the Pantas that they could not
sue the ship because the shipowner was American; (2) Afram failed to notify the
Pantas of this proceeding; and (3) the Pantas would have filed claims in this
limitation proceeding, but for the misrepresentations and failures to disclose.
This evidence, however, logically goes to the validity of whole settlement
agreement rather than to the forum-selection clause: It explains why the Pantas
would not have wanted to settle their claims at all, not why they would not have
agreed to the presence of a forum-selection clause. Therefore, although “the
plaintiffs claim fraud in the inducement of the [forum-selection] clause[,] . . .
nothing in their more specific allegations supports this claim.” Haynsworth,
121 F.3d at 970.
      4
        For the same reasons, the Pantas' claim of mistake falters: They fail
to offer any evidence that the clause itself, rather than the entire settlement
agreement, was the result of some contract-excusing mistake.

                                       7
selection clause.

      The answer is not simple. Admittedly, equitable resolution of

claims from a limited fund is one of the policies behind Limitation

Act proceedings.               See Texas Co., 213 F.2d at 482.             Another

consideration, however, is promoting settlement and subsidizing

shipbuilders.5        In fact, most courts have held that the main force

driving Congress to enact the Limitation Act was to put American

shipbuilders       on      a    competitive   footing   with    their     European

counterparts by limiting their liability to the value of the ship

and her cargo.6         Because of this fundamental consideration, courts

generally      have     construed    ambiguities   in   the    Act   in   favor   of

shipowners.        See, e.g., Coryell v. Phipps, 317 U.S. 406, 411

(1943).

      In this case, the two policies of the statute would appear at

loggerheads.       On the one hand, the goal of subsidizing shipowners

and promoting settlement supports shipowners' ability to use and

disregard the Limitation Act proceedings as best suits their

interests in settling the claims against them promptly.                     At the

outset, the shipowner was not obliged to invoke the proceeding

against all claimants.            Had it decided not to invoke the shield,

      5
        See, e.g., British Transp. Comm'n v. United States, 354 U.S. 129, 133
(1957) (“The real object of the act . . . was to limit the liability of vessel
owners to their interest in the adventure, and thus to encourage ship-building
and to induce capitalists to invest money in this branch of industry.”) (internal
quotations and citations omitted).
      6
          See, e.g., id.

                                          8
the owner would remain subject to the full extent of liability.7

Now that it has elected to invoke the shield, the shipowner should

not be hampered, before those proceedings get underway, from making

a last-minute settlement with one of the claimants, if such a

settlement would (1) obtain for it better terms than it could get

in the Limitation Act proceeding and (2) not otherwise prejudice

the remaining claimants.

      On the other hand, the goal of equitable resolution argues

against enforcing the forum-selection clause.                     Once the shipowner

invokes the protection of a Limitation Act proceeding, all claims

subject to the shield should be resolved at one time and by one

court.    Arguably, if the shipowner is going to get the benefit of

limited liability against the PantasSSeven if it is at some later

date (such as if and when the Peruvian courts find this agreement

unconscionable     and    thus    grant     rescission)SSthen         all   claimants

deserve   an   equal     shot    at   the       limited   fund.      Otherwise,   the

shipowner can do indirectly what it could not do directlySSfavor

some settlement creditors at the expense of others.8

      Given these two competing policy concerns, it is hard to say

that equitable resolution is a “strong” public policy that the

enforcement of the forum-selection clause would contravene.                       The

      7
        Underlying the Pantas' “fraud in the inducement” and “contrary to public
policy” challenges to the forum-selection clause is their claim of lack of notice
of the Limitation Act proceedings.     Their alleged lack of notice, however,
relates more to Afram's ability to invoke the Limitation Act shield against the
Pantas, when and if they are successful in a Peruvian court at overcoming the
settlement.
     8
       Some creditors may be favored over the Pantas because they will have the
first chance at the Limitation Act fund while the Pantas are litigating their
claim in Peru.

                                            9
more fundamental policy underlying the Limitation Act, that is,

that of providing subsidization to the shipping industry, seems to

diminish the strength of the equitable resolution principle and, as

a result, to prevent it from overcoming the presumption in favor of

the forum-selection clause's enforceability.9

                                       C.

      The Pantas also claim that Afram should be judicially and

equitably estopped from asserting any rights it may have under the

forum-selection      clause    because      Afram   has   taken   inconsistent

positions on the forum-selection clause matter throughout the

Limitation Act proceeding.        We disagree.

                                       1.

      Judicial estoppel applies to protect the integrity of the

courtsSSpreventing a litigant from contradicting its previous,

inconsistent position when a court has adopted and relied on it.

See United States ex rel. Am. Bank v. C.I.T. Constr. Inc., 944 F.2d
9
        But cf. THE QUARRINGTON COURT, 102 F.2d 916, 919 (2d Cir. 1939) (“[A]fter
the limitation proceeding has begun steps outside of that proceeding which would
affect the fund should not be allowed [to be carried out through an arbitration
clause] for they would involve a negation of one of the important purposes of
such proceedings and a well established practice.”). THE QUARRINGTON COURT was
decided in an era in which forum-selection and arbitration clauses were
disfavored by the courts because they were thought to “oust their jurisdiction.”
In those days, nearly any public policy could undo such a clause. See RICHMAN &
REYNOLDS, UNDERSTANDING CONFLICT OF LAWS § 30, at 77-78 (2d ed. 1993).
      By 1972, the Supreme Court had rejected the “ouster of jurisdiction” notion
as parochial. See THE BREMAN, 407 U.S. at 9. Now, there is a heavy presumption
in favor of such clauses; these days, the barrier has been raised: A strong
public policy, not just any public policy, is needed to justify overcoming the
presumption in favor of such clauses. See id.; Mitsui, 111 F.3d at 35.

                                       10
253, 258-59 (5th Cir. 1991).10        “The doctrine of judicial estoppel

'applies in cases where a party attempts to contradict his own

sworn statements in the prior litigation.'”              Id. at 258 (quoting

Brandon v. Interfirst Corp., 858 F.2d 266, 268 (5th Cir. 1988)).

“To achieve this purpose, many courts inquire whether the party

'successfully maintained' its contrary position” previously.                Id.

at 258 (citation omitted).11

      The   Pantas   argue   that    when   it   filed   its   Limitation   Act

complaint, Afram misrepresented to the district court that there

were no other “legal proceedings” underway.                The Pantas contend

that the subsequent settlement was a “legal proceeding” and that it

was in violation of the representations in the complaint.12

      Assuming    arguendo    that   the    Pantas   are   correct   that   the

subsequent settlement is a “legal proceeding,” they still have

failed to make an additional showing needed to obtain judicial

estoppel:    They have not demonstrated the court's acceptance and

reliance on Afram's misrepresentation.           “[W]e find no evidence in

      10
          See also McNamara v. City of Chicago, 138 F.2d 1219, 1225 (7th Cir.
1998) (“The doctrine provides that a party who prevails on one ground in a
lawsuit cannot turn around and in another lawsuit repudiate the ground. If
repudiation were permitted, the incentive to commit perjury and engage in other
litigation fraud would be greater.”).
     11
        There appears to be some tension in the doctrine about whether judicial
estoppel can bar a litigant from raising an inconsistent position in the same
court proceeding, or whether the bar can arise only in a subsequent proceeding.
Compare id. (two proceedings assumed) with, e.g., Ergo Science, Inc. v. Martin,
73 F.3d 595, 598 (5th Cir. 1996) (applying the doctrine to a FED. R. CIV. P. 60
motion for relief from judgment). Because, in the instant case, the conduct does
not, in any event, appear to meet the other criteria needed to invoke the bar,
we will assume arguendo that a single court proceeding is sufficient.
      12
         We assume arguendo that the representations that a plaintiff makes in
its complaint are subject to the doctrine of judicial estoppel.

                                      11
the record that demonstrates [the court's] acceptance of the

position taken [by Afram in its complaint].”              American Bank,
944 F.2d at 258.13

                                    2.

     The Pantas' equitable estoppel claim also fails; it appears to

be nothing more than a renamed fraudulent inducement claim.             The

Pantas base their equitable estoppel argument on Afram's failure to

disclose to them, when entering into the settlement agreement, that

the Limitation Act proceeding was underway.        The same conduct also

forms the basis for the Pantas fraudulent inducement attack on the

entire settlement that we discuss above.        See supra part II.A.     We

rejected that claim because it attacked the entire contract as

fraudulently induced, rather than focusing on the forum-selection

clause by itself.     See id.

     Estopping Afram from asserting the forum-selection clause,

based on the same conduct underlying the fraudulent inducement

claim, would contravene our holding in Haynsworth that allegations

that the entire contract was fraudulently induced are “inapposite

to [a forum-selection clause] enforceability determination, which

must . . . precede any analysis of the merits.”               Haynsworth,
121 F.3d at 964.      Our conclusion is based on the reality that,

under a contrary holding, a plaintiff claiming that an entire

       13
          See also id. (“The 'judicial acceptance' requirement minimizes the
danger of a party contradicting a court's determination based on the party's
prior position and, thus, mitigates the corresponding threat to judicial
integrity.”) (citation omitted).

                                    12
contract was fraudulently induced could simply restyle, as a claim

of   equitable    estoppel,          his   insufficient       fraudulent   inducement

attack on the contract as a whole.

                                             D.

       The Pantas maintain that they will be prevented from having

their day in court if forced to return to a Peruvian forum, because

they cannot obtain contingency-fee counsel in the Peruvian courts

and cannot afford to pay a Peruvian lawyer in advance.                     Therefore,

they will be barred from litigating their claim in those courts.

       The record contains no information about the Pantas' inability

to   obtain   counsel      to    represent        them   in   the   Peruvian    courts.

Accordingly, we will not consider that matter.14

                                             E.

       The Pantas aver that the release does not apply to tort suits

that they file outside Peru.                  The idea apparently is that the

release applies only if the Pantas include as part of their cause

of action a claim that requires construction of the settlement

agreement.       If   the       settlement        agreement     arises   only    as   an

affirmative      defense        to    a    tort   claim,      however,   the    release

provisions do not apply.

       There is no error here because the argument relies on our

construction of the release to determine whether the release

     14
       See, e.g., United States v. Gerald, 624 F.2d 1291, 1296 n.1 (5th Cir. 1980)
(“It is appellant's responsibility to insure the inclusion in the record of all
matters he intends to rely upon on appeal.”).

                                             13
applies only to “cause of action” claims or to all claims in which

it might arise. The forum-selection clause, however, dictates that

any disagreements about the release must be brought in a Peruvian

courts.   In short, to address this argument would force us to

overlook the forum-selection clause and to construe the underlying

agreement when we are foreclosed from doing so.

     AFFIRMED.

                               14