Court Opinion

ID: 6946949
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:26:44.282268+00
Date Added: 2024-06-11T16:07:56.066052
License: Public Domain

GOODWIN, Circuit Judge,
dissenting:
I would affirm the dismissal of the ease for lack of subject matter jurisdiction. The parties chose Jersey law to govern their relationship. Jersey law does not recognize a RICO cause of action and therefore no subject matter jurisdiction lies in the federal courts.
I. Scope of the Clause
The choice-of-law provision agreed to by the parties states that: “This Agreement shall be governed by and construed in accordance with the laws of Jersey and the parties hereto submit to the non-exclusive jurisdiction of the Royal Court of Jersey.” The majority completely fails to analyze the scope of this clause and assumes that it cannot encompass the claims American Endeavor Fund Limited (“American Endeavor”) alleges. This failure leads the majority to an incorrect conclusion.
Clearly, “the clause refers to more than construction of the agreement,” Moses v. Business Card Express, Inc., 929 F.2d 1131, 1139-40 (6th Cir.1991), or “governed by” would be surplusage. I agree with the California Supreme Court that “[t]he phrase ‘governed b/ is a broad one,” Nedlloyd Lines B.V. v. Superior Court, 3 Cal.4th 459, 11 Cal.Rptr.2d 330, 336, 834 P.2d 1148, 1154 (1992), and that “[wjhen ... sophisticated, commercial entities agree to a choice-of-law clause like the one in this case, the most reasonable interpretation of their actions is *1023that they intended for the clause to apply to all causes of action arising from or related to their contract,” id. at 335, 834 P.2d at 1153, “including tortious breaches of duties emanating from the agreement or the legal relationships it creates.” Id. at 337, 834 P.2d at 1155.
American Endeavor’s RICO cause of action arises from and relates to its contracts with the defendants. The RICO cause of action is predicated on alleged acts of securities and wire fraud that, if proved, would also constitute breaches of the various contracts defendants entered into with American Endeavor. See Northeast Data Sys., Inc. v. McDonnell Douglas Computer Sys. Co., 986 F.2d 607, 609-10 (1st Cir.1993) (holding that contract related claims fall within the scope of a choice-of-law clause); Lambert v. Kysar, 983 F.2d 1110, 1121-22 (1st Cir.1993) (holding that “contract-related tort claims involving the same operative facts as a parallel claim for breach of contract” fall within the scope of a forum selection clause). Further, the defendants would not have been in a position to defraud American Endeavor but for these contracts. The defendants undertook to recommend investments to American Endeavor only because they had contractual obligations to do so.
American Endeavor’s RICO claim arises from and relates to the contracts because the defendants’ alleged acts constitute both a breach of contract and the predicate fraud for a RICO action, and because the contracts prescribed the relationship between the parties. Therefore, the acts upon which the RICO claim is predicated are covered by the choice-of-law clause. See Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 514 (9th Cir.1988) (holding that claims that “relate[ ] in some way to rights and duties enumerated in” a contract are within the scope of a ehoiee-of-forum clause).
American Endeavor agreed that this action which arises from and relates to its contracts with the defendants would be governed by Jersey law. As Jersey law does not recognize a cause of action under RICO, no basis for federal jurisdiction exists.
II. Enforcement of the Choice-of-Law Clause
In certain situations we do not enforce agreements entered into by the parties. Though American Endeavor contractually agreed that its current dispute with the defendants would be governed by Jersey law, it now argues that we should not enforce this agreement.
As the district court and this court’s purported jurisdiction is premised on the existence of a federal question, federal common law controls the choice-of-law determination. See Chuidian v. Philippine Nat’l Bank, 976 F.2d 561, 564 (9th Cir.1992). Federal common law follows the Restatement (Second) of Conflict of Laws. See Schoenberg v. Exportadora de Sal, S.A. de C.V., 930 F.2d 777, 782 (9th Cir.1991). The Restatement states:
The law of the state chosen by the parties ... will be applied ... unless ... application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.
Restatement (Second) Conflict of Laws § 187(2) (1971).
This private law action involves alleged fraud upon a foreign plaintiff by U.S. and foreign defendants. Certainly the United States has an interest in preventing its citizens from defrauding foreigners. This interest, however, is not materially greater than the interests of Jersey in preventing foreigners from defrauding its citizens. Jersey’s interest in providing a remedy for its defrauded citizens is just as strong as the United States’ interest in preventing wrong by its citizens, and thus under the Restatement, there is no reason to disturb the parties freely negotiated choice of Jersey law.
Further, enforcing the parties’ agreement does not grant the defendants’ immunity from our criminal laws. Nothing in the contracts prevents the United States Attorney from prosecuting the defendants under RICO or any other criminal statute. Finally, *1024simply because civil RICO and the federal courts are not available to American Endeav- or, it is not without redress for any alleged wrongs done by the defendants. Jersey provides remedies for fraud, breach of contract, breach of fiduciary duty, and conspiracy, and American Endeavor can pursue these causes of action in state court or in the courts of Jersey. This is the bargain that American Endeavor made and I see no reason to allow it to avoid this contractual obligation.