Court Opinion

ID: 6963272
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:49:16.217949+00
Date Added: 2024-06-11T16:08:22.907731
License: Public Domain

THOMAS, Circuit Judge,
with whom Judge PREGERSON and Judge HAWKINS join,
dissenting.
The majority espouses a reasonable foreign policy, but one which emanates from the wrong branch of government. Congress has already explicitly resolved the question at hand. In the Securities Act of 1933 and the Securities Exchange Act of 1934 (the “Acts”), Congress expressly provided that investors cannot contractually agree to disregard United States securities law. Thus, in applying the “reasonableness” policy-weighing approach of M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), the majority displaces Congress’ specific statutory directive. Furthermore, even assuming that the Bremen analysis applies here, the circumstances surrounding this dispute compel the conclusion that enforcement of the choice clauses would be unreasonable. Accordingly, I respectfully dissent.
I.
Unlike the conflict the Bremen Court envisioned between statutes and forum selection clauses, the Acts do not merely declare “a strong public policy” against the waiver of compliance with United States securities laws. Rather, the Acts explicitly and unconditionally prohibit such a waiver. The language of the Securites Act of 1933 is clear and unambiguous:
Any condition, stipulation, or provision binding any person acquiring any security *1298to waive compliance with any provision of this subchapter or of the rules and regulations of the Commission shall be void.
15 U.S.C. § 77n. The Securities Exchange Act of 1934 contains a similar restriction. See 15 U.S.C. § 78cc(a).
Absent these antiwaiver provisions, courts could appropriately examine choice-of-forum clauses in investment contracts under a Bremen analysis to determine whether they violated the strong public policy of the United States as embodied in our securities law. However, the Acts’ antiwaiver provisions decisively alter this inquiry. With adoption of those sections, Congress announced a per se rule that American laws cannot be ignored in this context. Courts should not employ amorphous public policy to emasculate plain statutory language. “Under our constitutional framework, federal courts do not sit as councils of revision, empowered to rewrite legislation in accord with their own conceptions of prudent public policy.” United States v. Rutherford, 442 U.S. 544, 555, 99 S.Ct. 2470, 2477, 61 L.Ed.2d 68 (1979). Rather, “[o]nly when a literal construction of a statute yields results so manifestly unreasonable that they could not fairly be attributed to congressional design will an exception to statutory language be judicially implied.” Id. Because Congress quite reasonably intended that our securities laws be enforced even when a salesperson managed to obtain an investor’s waiver, we “have no license to depart from the plain language” of the Acts. Id.
The majority turns this analysis inside out, by holding that underlying antiwaiver public policy eviscerates specific antiwaiver statutory provisions. Disregarding this express prohibition to assess whether enforcement of the choice clauses contravenes the underlying policy against waiver is akin to overlooking the plain language of a statute to consider its legislative history, a clearly disfavored method of statutory interpretation. See Connecticut Nat’l Bank v. Germain, 503 U.S. 249, 253-54, 112 S.Ct. 1146, 1149-50, 117 L.Ed.2d 391 (1992) (“We have stated time and again that courts must presume that a legislature says in a statute what it means and means in a statute what it says there.... When the words of a statute are unambiguous, then, this first canon is also the last: judicial inquiry is complete.... It would be dangerous in the extreme to infer ... that a case for which the words of an instrument expressly provide, shall be exempted from its operation.”) (citations and internal quotation marks omitted). As the majority concedes, the explicit language of the Acts bars the waiver that the choice clauses would effectuate here. Thus, the “unadorned words” of the Acts’ antiwaiver provisions should not be limited by the anti-waiver public policy they impliedly express, see Germain, 503 U.S. at 254, 112 S.Ct. at 1149-50.
The majority’s fears notwithstanding, it is unnecessary to displace Congress’ reasoned judgment in order to contract the “boundless” reach of United States securities laws. First, because plaintiffs alleging securities fraud will at some point have to establish that the disputed transactions involved “securities,” as defined under United States law, plaintiffs cannot gain unfettered access to the protection of the securities laws simply by alleging that they have purchased securities. Second, the plaintiffs here do not seek to invoke the Acts’ substantive remedies in the context of transactions that enjoy only an incidental nexus with the United States. Lloyd’s recruited the plaintiffs, residents of the United States, in the United States, often using United States brokerage firms and recruiters, and availed itself of the United States mails to disseminate information about becoming a Name. In short, Lloyd’s purposefully devoted considerable time and resources to recruiting American investors through specifically American media. To penalize the plaintiffs in this case based upon a hypothetical scenario that differs dramatically from the circumstances at issue here would work an unjust deprivation of the plaintiffs’ rights under the Acts.
The majority argues that the Supreme Court’s reliance on Bremen in Scherk v. Alberto-Culver Co., 417 U.S. 506, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974), should control here. However, the majority overlooks the crucial differences between the instant dispute and the facts underlying Scherk. Scherk involved a contract that contained an agreement to arbitrate any disputes arising out of the contract in Paris, France. This contract specified that “[t]he laws of the State of Illinois, *1299U.S.A. shall apply to and govern this agreement, its interpretation and performance.” Scherk, 417 U.S. at 508, 94 S.Ct. at 2451-52. In contrast, the choice clauses here not only select the forum — the courts of England— but mandate that English law shall govern any controversy. Thus, the reasoning and conclusions of Scherk should not extend to this case. To the extent that the Scherk Court approved a hypothetical choice-of-law clause that prescribed the application of foreign law, such approval was dicta and cannot bind the parties here.
Furthermore, the Lloyd’s underwriting agreements had substantial connections with the United States, in contrast with the sparse contacts between the United States and the contract in Scherk. In Scherk, an American company made an initial contact with Scherk, a German citizen, in Germany, pursued negotiations with Scherk in both Europe and the United States, and finally executed a contract in Vienna, Austria, providing for the transfer of the ownership of Seherk’s enterprises. The closing of this transaction occurred in Geneva, Switzerland. In comparison, the sole component of Lloyd’s campaign to recruit American Names that took place in England was the committee meeting that new Names attended in London. Otherwise, every aspect of the solicitation occurred in the United States. To characterize this extensive and multifaceted recruitment campaign as the mere receipt of “solicitations,” as does the majority, is to understate the impact of Lloyd’s activities in the United States.
The Scherk majority itself recognized that a contract with “insignificant or attenuated” contacts with foreign countries might well prompt a refusal to enforce a forum selection clause, let alone a clause choosing foreign law. Scherk, 417 U.S. at 517 n. 11, 94 S.Ct. at 2456 n. 11. The Court observed: “Judicial response to such situations can and should await future litigation in concrete cases.” Id. The instant case offers just such a concrete opportunity to assess the enforceability of the choice clauses independently of the Scherk methodology and holding — an opportunity this court should use to effectuate Congress’ explicit statutory directive.
Unfortunately, the majority has chosen to contravene an unequivocal Congressional mandate, founded on an interpretation of underlying public policy. However reasonable that policy, it cannot supplant clear, unambiguous statutory language.
II.
In addition to violating the Acts’ express antiwaiver provisions, the choice clauses are unenforceable because they are “ ‘unreasonable’ under the circumstances.” Bremen, 407 U.S. at 10, 92 S.Ct. at 1913. Initially, the Supreme Court has twice stated that the type of clauses at issue here are invalid when they prospectively disable parties from pursuing statutory remedies. See 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), quoted in Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 540,115 S.Ct. 2322, 2329-30, 132 L.Ed.2d 462 (1995). Indeed, in Vimar, the Court went so far as to declare that “[t]he relevant question” was “whether the substantive law to be applied [would] reduce the carrier’s obligations to the cargo owner below what [the Carriage of Goods by Sea Act] requires.” Vimar, 515 U.S. at 539, 115 S.Ct. at 2329. In other words, the Court implicitly rejected the argument that a forum selection clause must be enforced even if some of the claims that could have been brought in the forum of the lawsuit must be forfeited.
As applied here, the logic of Mitsubishi and Vimar militates against enforcing the choice clauses. Not only do the choice clauses preclude the plaintiffs from seeking the substantive remedies the Acts offer, but the protections they provide under English law are markedly inferior to the Acts’. For instance, English law recognizes no remedy for the failure to register securities as required by section 12(1) of the Securities Act of 1933. Nor is there any English remedy against Lloyd’s for negligent misrepresentation as provided by section 12(2) of the Securities Act of 1933, because the 1982 Lloyd’s Act expressly immunizes Lloyd’s from any claim for “negligence or other tort” unless bad faith was involved.1 Third, no “controlling *1300person” liability exists in England, whereas section 15 of the Securities Act of 1933 and section 20(a) of the 1934 Securities Exchange Act impose such liability. Thus, the choice clauses should not be enforced, because they afford a level of protection far lower than the remedies the Acts provide.
The stark differences between American and English securities laws in turn reveal additional public policy reasons for invalidating the choice clauses. Enforcing the choice clauses gravely disadvantages American businesses, because foreign businesses, like Lloyd’s, can recruit investors without expending the time and money involved in fulfilling the requirements of the Acts — a burden that American businesses cannot legally evade. Invalidating the choice clauses therefore eliminates any artificial advantage that Lloyd’s may have enjoyed in competing in the American insurance market. In addition, the Acts furnish a necessary regulatory cheek upon an otherwise virtually autonomous organization. As the British government itself concedes, Lloyd’s is a self-governing body charged with regulatory functions. Hence, a refusal to enforce the choice clauses would not reflect a lack of deference to English law and courts, but would simply arise from the realization that externally imposed restraints may sometimes be appropriate to control the behavior of a self-regulating organization.
The majority rejects the applicability of Mitsubishi and Vimar to the choice clauses on two bases. First, the majority assails footnote 19 in Mitsubishi as mere dictum which cannot “outweig[h] the extended discussion and holding in Scherk on the validity of clauses specifying the forum and applicable law.” Second, the majority objects to the extension of Vimar to the instant case, because Vimar involved the Carriage of Goods by Sea Act (“COGSA”), a statute attempting to ensure uniformity in international transactions.
This reasoning stands on tenuous ground. Initially, while footnote 19 in Mitsubishi was not incorporated into the Court’s actual holding, the Court left no doubt about its position on this issue by reiterating it in the entirely different setting of Vimar. Hence, the Court implicitly indicated that its concerns about a potential deprivation of plaintiffs’ access to statutory remedies were limited to neither the antitrust nor the COGSA context. Moreover, as explained above, to the extent that the Scherk Court speculated about the enforceability of a contractual provision selecting foreign law, such a discussion was dictum. As such, it warrants no greater deference than footnote 19 of Mitsubishi.
Finally, the majority errs in characterizing the Acts as purely domestic, as opposed to the internationally-oriented COGSA Congress intended the Securities Act of 1933 to bring the United States into line with the protections other nations gave the security-buying public, by protecting American investors against fraud and misrepresentation in the sale of securities in interstate and foreign commerce alike. In fact, Congress observed that the necessity for such legislation arose from “the fact that billions of dollars [had] been invested in practically worthless securities, both foreign and domestic, including those of foreign governments, by the American public through incomplete, careless, or false representations,” The consequence, Congress concluded, was “dire national distress.” S.Rep. No. 47, at 2 (1933). Not only does this legislative history establish the international, as well as domestic, perspective of the Securities Act of 1933, but it drives home the necessity for invalidating the choice clauses here. Allegations of Lloyd’s “incomplete, careless, or false representations” about the plaintiffs’ participation in the English insurance market are precisely the issue in this case. Most importantly, given the hundreds of millions of dollars that American Names have invested in Lloyd’s underwriting agreements, the “dire national distress” that originally prompted Congress to adopt securities regulation legislation may well make an unwanted reappearance.
*1301III.
Increasing access to international capital markets is a laudable goal, but one need not trample on United States securities laws to achieve it. Indeed, securitization of insurance risk is increasing, with some public offerings involving Lloyd’s exposures. However, these insurance risk-backed securitized investments are marketed in conformance with securities law, with full disclosure to the investor. Indeed, the facts alleged in this ease make a powerful argument for vigorous application of American securities laws. A company, whether foreign or domestic, should not be able to mislead American investors with impunity into assuming unlimited liability for known losses with no possibility of financial gain.
When Congress voided waiver clauses, it meant what it said. The antiwaiver provisions of the Acts, whether as clear statutory directives or as embodiments of public policy, render the choice clauses unenforceable. The district court’s dismissal of the plaintiffs’ claims under the Acts should be reversed. Henee, I respectfully dissent.

. While the plaintiffs may sue Members’ and Managing Agents, who are not exempt from the *13001982 Lloyd's Act, the Members’ and Managing Agents are insolvent. The majority regards this insolvency, if true, as "truly unfortunate,” but deems it irrelevant to the "analysis of the adequacy of English law.” See supra note 6. However, it is equally reasonable to find English law all the more inadequate to address the plaintiffs’ grievances, because the insolvency of one class of potential defendants so materially damages the plaintiffs’ chances for recovery.