1992 WL 12013119 (7th Cir.)

For opinion see 999 F.2d 206

Briefs and Other Related Documents

United States Court of Appeals,

Seventh Circuit.

Dieter HUGEL, Gulf Coast Marine, Inc., and Ocean Marine and Indemnity Company,

Plaintiffs-Appellants,

v.

THE CORPORATION OF LLOYD'S, a United Kingdom Corporation, Defendant-Appellee.

No. 92-2240.

August 10, 1992.

Appeal from the United States District Court for the Northern District of Illinois, Western Division, No. 90 C 20105, The Honorable Stanley J. Roszkowski, District Judge

Brief for Appellee the Corporation of Lloyd's

Joseph E. Coughlin, Timothy M. Maggio, Lord, Bissell & Brook, 115 South LaSalle Street, Chicago, Illinois 60603, Telephone No. (312) 443-0343, Attorneys for Defendant-Appellee.

ORAL ARGUMENT REQUESTED

*iii TABLE OF CONTENTS

CERTIFICATE OF INTEREST ... i

TABLE OF CONTENTS ... iii

TABLE OF AUTHORITIES ... iv

JURISDICTIONAL STATEMENT ... vii

INTRODUCTION ... 1

BACKGROUND ... 3

A. The General Undertaking ... 7

B. The Underlying Lawsuit ... 8

ARGUMENT ... 17

I. THE UNDERLYING LITIGATION FALLS SQUARELY WITHIN THE TERMS OF THE PARTIES' FULLY ENFORCEABLE FORUM SELECTION AGREEMENT ... 17

A. The Forum Selection Clause Is Fully Enforceable And Covers An Extremely Wide Range Of Disputes Between Members And The Corporation Of Lloyd's ... 17

B. The Underlying Lawsuit Plainly Falls Within The Terms Of The Parties' Freely Negotiated Forum Selection Clause ... 22

1. The Standard Of Review ... 24

2. The Dispute At Issue In This Case Arises Out Of And Relates To Mr. Hugel's Membership And, Therefore, Falls Squarely Within The Parties' Forum Selection Clause ... 25

C. The Appellants Have Uncovered No Decisions Which Conflict With The District Court's Judgment ... 29

II. THE FORUM SELECTION CLAUSE IS BINDING ON THE CORPORATE APPELLANTS AS WELL AS MR. HUGEL ... 35

III. THE FORUM SELECTION CLAUSE IS FULLY ENFORCEABLE UNDER LAW ... 41

A. The Appellants' Contention That Section 14 Operates As A Monolithic Bar To Suit Is Incorrect ... 41

B. Federal Law Requires Enforcement Of A Forum Selection Clause Even If The Chosen Forum Would Bar Recovery ... 42

CONCLUSION ... 45

*iv TABLE OF AUTHORITIES

CASES

Artis v. Hitachi Zosen Clearing, Inc., Nos. 90-3281, 90-3282, 90-3369 (7th Cir. July 9, 1992) ... 25

Berrett v. Life Insurance Company of the Southwest, 623 F. Supp. 946 (D. Utah 1985) ... 31

Bonny v. Society of Lloyd's, 784 F. Supp. 1350 (N.D. Ill. 1992) ... 35

Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 111 S. Ct. 1522 (1991) ... 1, 18, 42

Clinton v. Janger, 583 F. Supp. 284 (N.D. Ill. 1984) ... 36, 38, 39

Coastal Steel Corporation v. Tilghman Wheelabrator Ltd., 709 F.2d 190 (3d Cir. 1983) ... 21, 36, 37

Copperweld Steel Co. v. Damage-Mannesmann-Bohler, 578 F.2d 953 (3d Cir. 1978) ... 25

Crown Beverage Co. v. Cerveceria Moctezunia, 663 F.2d 886 (9th Cir. 1981) ... 43

Farmland Industries, Inc. v. Frazier-Parrott Commodities, Inc., 806 F.2d 848 (8th Cir. 1986) ... 25

Furbee v. Vantage Press, Inc., 464 F.2d 835 (D.C. Cir. 1972) ... 25

General Engineering Corp. v. Martin Marietta Alumina, Inc., 783 F.2d 352 (3d Cir. 1986) ... 25

Hoes Of America, Inc. v. Hoes, 493 F. Supp. 1205 (C.D. Ill. 1979) ... 38, 40

International Medical Prosthetics Research Associates, Inc. v. Gore Enterprise Holdings, Inc., 787 F.2d 572 (Fed. Cir. 1986) ... 16

Karlberg European Tanspa, Inc. v. JK-Joseph Kratz Vertriebsgesellschaft mbH, 618 F. Supp. 344 (N.D. Ill. 1985) ... 45

Lovejoy Electronics, Inc. v. O'Berto, 873 F.2d 1001 ... 5

*v Management Computer Services, Inc. v. Hawkins, Ash, Baptie & Co., 883 F.2d 48 (7th Cir. 1989) ... ??

Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509 (9th Cir. 1988) ... 19, 21, 36, 40

Milk 'n' More, Inc. v. Beavert, 963 F.2d 1342 (10th Cir. 1991) ... 25

Northwestern National Insurance Co. v. Donovan, 916 F.2d 372 (7th Cir. 1990) ... 18, 19, 43

Pelleport Investors, Inc. v. Budco Quality Theaters, Inc., 741 F.2d 273 (9th Cir. 1984) ... 24

Phoenix Mutual Life Insurance Co. v. Northern American Company For Life And Health Insurance, 661 F. Supp. 751 (N.D. Ill. 1987) ... 32, 33

Riley v. Kingsley Underwriting Agencies, Ltd., ____ F.2d ____ (10th Cir. 1992) ... 35

Rush-Presbyterian v. The Hellenic Republic, 877 F.2d 574 (7th Cir. 1989) ... 44

Spradlin v. Lear Siegler Management Services Co., 926 F.2d 865 (9th Cir. 1991) ... 2, 24

Stephens v. Entre Computer Centers, Inc., 696 F. Supp. 636 (N.D. Ga. 1988) ... 38

Stewart Organization, Inc. v. Ricoh Corporation, 810 F.2d 1066 (11th Cir. 1987) ... 21

Sun World Lines, Ltd. v. March Shipping Corp, 801 F.2d 1066 (8th Cir. 1986) ... 24

Taag Linhas Aereas de Angola v. Transamerica Airlines, Inc., 915 F.2d 1351 (9th Cir. 1990) ... 24

The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 ... 17, 42, 43, 44, 45

United States v. Gimbel, 782 F.2d 89 (7th Cir. 1986) ... 16

Vijuk Equipment Inc. v. Otto Hohner KG, No. 89 C 5769 (N.D. Ill. Oct. 25, 1990) ... 36

*vi Washburn v. Societe Commerciale de Reassurance, 831 F.2d 149 (7th Cir. 1987) ... 29, 30

MISCELLANEOUS

15A Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice And Procedure § 3914.12 (2d ed. 1992) ... 24

*vii JURISDICTIONAL STATEMENT

The Appellants' Jurisdictional Statement is complete and correct, with the two following exceptions: First, the Corporation Of Lloyd's denies that it is doing business in the State of Illinois and, indeed, the Corporation has filed a motion to dismiss based on the lack of personal jurisdiction over the Corporation in Illinois. Second, Appellants state that this "appeal is from a final judgment of the District Court, entered on April 30, 1992." This statement is correct, but incorrectly represents the Appellants' notice of appeal. The Appellants' notice of appeal states that they are appealing from the April 28, 1992 Judgment of the District Court dismissing this action. Although the Appellants' notice did not correctly identify the date of the final judgment at issue on appeal, that error does not destroy this Court's jurisdiction. Management Computer Services, Inc. v. Hawkins, Ash, Baptie & Co., 883 F.2d 48, 49 n.1 (7th Cir. 1989).

*1 INTRODUCTION

Lost in the brief of Appellant Dieter Hugel and his two controlled corporations -- amid what unfortunately appears to be an effort to save this case from the wrecker's ball through a purposeful "recharacterization" of the complaint that they actually filed in the District Court -- are two salient and simple points that dispose of this litigation.

First, this case, in its present procedural posture, [FN1] turns on the application and enforceability of a freely-agreed-upon forum selection clause which both the Magistrate Judge and the District Judge found to be "very broad in scope" and "anything but ambiguous." (R&R at 8.) [FN2] Under the express terms of that clause, Appellant Dieter Hugel -- who at all relevant times was a member of the Society Of Lloyd's -- agreed:

FN1. The Corporation of Lloyd's offered four grounds in support of its motion to dismiss. Following the approach set forth in Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 111 S. Ct. 1522, 1525 (1991), the Magistrate Judge based his Recommendation on the forum selection clause, which clearly mandated dismissal. The Magistrate Judge did not reach the Corporation's arguments based on lack of personal jurisdiction, improper service of process, and the doctrine of forum non conveniens.

FN2. Citations to "R&R" refer to the Magistrate Judge's Report And Recommendation, included as Ex. B of the Appellants' Appendix and found in the record on appeal at R. 88-89. Citations to "R." refer to documents in the record on appeal.

irrevocably . . . that the courts of England shall have exclusive jurisdiction to settle any dispute and/or controversy of whatsoever nature arising out of or relating to the Member's membership of, and/or underwriting of insurance business at, Lloyd's. . ..

*2 (Emphasis added.) In other words, all disputes arising out of or relating to Mr. Hugel's membership in Lloyd's must be resolved in the courts of England.

Second, the heart of this lawsuit -- as found by the Magistrate Judge and the District Judge, and as conceded by Appellants -- focuses on allegedly improper disclosures of information made by the Corporation Of Lloyd's in the course of its disciplinary investigation of Mr. Hugel as a Member Of Lloyd's. (R&R at 3-4, 9; Cmplt. ¶¶ 10, 16, 18; Tr. 60-61; Applts. Brief at 1.) [FN3] Indeed, the District Court found undisputed that Lloyd's had authority to investigate Mr. Hugel because he was a member of Lloyd's and had agreed to abide by the rules of Lloyd's. (R&R at 8.) Therefore, as the Magistrate Judge and District Judge both concluded, the Appellants' lawsuit was plainly a dispute arising out of and relating to Mr. Hugel's membership in Lloyd's.

FN3. Citations to "Tr." refer to the transcript of the deposition given by the Appellants, found in the record at R. 76 (Exhibit A) and R. 105 (Exhibit A). Appellant Hugel appeared for this deposition not only on his own behalf but also as to Rule 30(b)(6) designee of Gulf Coast Marine, Inc.

and Ocean Marine And Indemnity Co.

As will be explained more fully in the following sections, the District Court's decision to enforce the forum selection clause -- that is, the conclusion that the present lawsuit arises out of and relates to Mr. Hugel's membership in the Society Of Lloyd's -- was not an abuse of discretion and, therefore, must be upheld. See *3Spradlin v. Lear Siegler Management Services Co., 926 F.2d 865, 867 (9th Cir. 1991) ("The district court's order enforcing the contractual forum selection provision and dismissing the case for improper venue is subject to review for abuse of discretion.") Accordingly, the District Court's judgment, which compels the Appellants to bring this litigation in the forum to which they agreed (England), should be affirmed.

BACKGROUND

At the outset, it is unfortunately necessary to address the Appellants' decision to prosecute this appeal through a campaign of unsubstantiated allegations (Applts. Brief at 4, 6, 18), [FN4] the introduction of -- and reliance upon -- "evidentiary" material which was never placed in the record in this case (Applts. Brief at 17), [FN5] and the blatant use of statements which are contrary to their sworn deposition testimony. (See, infra, at pp. 10- 13.) *4 Indeed, the Appellants' subterfuge begins early in their brief when, as set forth in the following paragraphs, they start their presentation to this Court by misrepresenting the Complaint they filed in the District Court.

FN4. Circuit Rule 28(d)(2) provides that "[n]o fact shall be stated in the statement of facts unless it is supported by a reference to the page or pages of the record or appendix where the fact appears."

FN5. An example of this conduct is found on page 17 of the Appellants' brief. There, the Appellants' quote extensively (almost a full page) from a book entitled Lloyd's, A View Of The Room as support for their argument that Mr. Hugel was a passive investor in Lloyd's (another nonsensical argument). That book is simply not in the record in this case. Moreover, this is not simply an oversight on the part of the Appellants. In the District Court, the Appellants attempted to rely on other portions of that book to support other contentions relating to personal jurisdiction. At that time, the Corporation Of Lloyd's put them on notice that the book was not a part of the record and that any reliance on that text was objectionable. See Corporation Of Lloyd's Reply Memorandum In Support Of Motion To Dismiss, R. 75 at page 33 n.12. The Appellants apparently have decided that they need not abide by these evidentiary requirements.

The initial volley in the Appellants' factual presentation to this Court is a section entitled: "SUMMARY OF COMPLAINT." (Applts' Brief at 3-5). That title would suggest, of course, that the information-to-follow was drawn either from the Appellants' Complaint or from their Amendment to that Complaint -- the actual pleadings filed with the Court. The title also would suggest, of course, that the statements contained in that section were the core allegations set forth in those documents. Both assumptions would, however, be wrong.

In fact, apart from background allegations concerning the identities of the parties (many of which are themselves incorrect), the Appellants cite their own Complaint as support for only three simple allegations: 1) that the Corporation Of Lloyd's conducted an investigation of Mr. Hugel (Applts. Brief at 3; Cmplt. ¶ 10); 2) that the Corporation gave assurances that information received in that investigation would be kept confidential (Applts. Brief at 5; Cmplt. ¶ 11); and 3) that the Corporation on one occasion breached those assurances of confidentiality (Applts. Brief at 5; Cmplt. ¶ 16). Except for these relatively plain allegations, the remaining material in Appellants' "SUMMARY OF COMPLAINT" -- and, indeed, the rest of the material contained in Appellants' "Statement Of The Case" -- *5 either is left unsupported or is drawn mainly from Mr. Hugel's second affidavit in this case (an affidavit filed along with Appellants' Amended Objections to the Magistrate's Report and Recommendation in an effort to create an entirely new record for the District Court to consider). [FN6] So that there is no mistake, the Corporation Of Lloyd's has appended hereto as Exhibit A the Appellants' Complaint and their Amendment to that Complaint. The allegations contained in those documents bear very little similarity to the allegations set forth in Appellants' "SUMMARY OF COMPLAINT."

FN6. The "evidentiary quality" of such an affidavit -- especially when it is rife with unsupported conclusions, and, perhaps most importantly, when it is drafted and submitted after the affiant has given his sworn deposition -- is highly suspect. See, e.g., Lovejoy Electronics, Inc. v. O'Berto, 873 F.2d 1001, 1005. (7th Cir. 1989) ("'a party cannot create a genuine issue of fact by submitting an affidavit containing conclusory allegations which contradict plain admissions in prior deposition or otherwise sworn testimony."'). This affidavit is located at R 98, Ex. 2 and will hereafter be referred to as "Hugel Aff."

Lest there be any mistake, the Appellants' approach is neither a merely technical breach nor a mere matter of theoretical import. Rather, this revisionist account unfortunately appears to be a key element of their strategy on appeal. Through the introduction of Mr. Hugel's guesswork about the Corporation's motives in conducting its investigation (Applts. Brief at 9-10), through the introduction of Mr. Hugel's unsupported speculation that the Corporation's investigation led to a series of reviews by United States regulatory officials (Applts. Brief at 3-4, 7), and through the introduction of *6 Mr. Hugel's conjecture that certain rumors were in the marketplace (the source and content of which he does not identify) and that those rumors may have somehow damaged his companies (Applts. Brief at 4-5, 6-7), the Appellants apparently hope to engage the sympathies of this Court and thereby transform this appeal into some ill-defined, boundless referendum on the propriety of the Corporation's investigation. This ploy cannot be rewarded by an American court's determination of the propriety of the Corporation of Lloyd's investigation of its member. If such a determination is to be made, it must be by a court in England, as the parties have agreed.

The grievance which the Appellants pleaded is a narrow one: did the Corporation of Lloyd's improperly disclose confidential information in the course of its disciplinary investigation of its Member, Mr. Hugel. In their sworn deposition, the Appellants testified that the alleged assurances of confidentiality that they received were those conferred by the Lloyd's membership byelaws. (Tr. 66.) In their sworn deposition, the Appellants testified that the only disclosures of allegedly confidential information were the two English disclosures alleged in their Complaint (Tr. 98-99) -- communications which, as the Corporation will later explain, were expressly authorized by the Lloyd's byelaws. (See, infra, at pp. 27-28.) The Appellants have now offered their broad-based tale of woes in the hope of distracting attention from the unassailable conclusion reached by the Magistrate Judge and the District Judge, namely, that the *7 aforementioned grievance is one which plainly relates to and arises out of Mr. Hugel's membership in Lloyd's.

In fact, by trying to transform this litigation into an inquiry into the propriety of Lloyd's disciplinary investigation of one of its Members, the Appellants have unwittingly conceded the key fact that disposes of this case: the Appellants' grievance arises from, and is inextricably related to, a Lloyd's membership dispute -- a grievance which both parties agreed to bring only in the courts of England.

Because of the inherently unreliable nature of the Appellants' "factual presentation," appellee Corporation Of Lloyd's submits its own statement of the case and record facts in this matter.

A. The General Undertaking

The logical starting point for this discussion is the General Undertaking, a copy of which is appended hereto as Exhibit B. Mr. Hugel voluntarily executed the General Undertaking in 1987. (Tr. 59.)

The General Undertaking has three operative provisions, each set forth in separately numbered paragraphs. [FN7] In the first, Mr. Hugel promised to "comply with the provisions of Lloyd's Acts 1871-1982, any subordinate legislation made or to be made *8 thereunder and any direction given or provision or requirement made or imposed by the Council [of Lloyd's] or any person(s) or body acting on its behalf." [FN8]

FN7. The General Undertaking was executed by the Society Of Lloyd's. The Society of Lloyd's and the Corporation of Lloyd's are simply two different names which refer to the same legal entity -- the corporation created by Parliament in the Lloyd's Act of 1871. Affidavit Of Anthony Paul Barber (hereinafter "Barber Aff.") R. 18, Ex. 1 at ¶5.

FN8. The Council Of Lloyd's is a body set-up under the Lloyd's Act Of 1982 which has management and superintendence authority over the affairs of the Society Of Lloyd's. The Council is empowered to make such Byelaws as from time to time seem requisite or expedient for the proper execution of the Lloyd's Acts and for the furtherance of the objects of the Society. See Barber Aff., supra n. 7, ¶8

In the second, Mr. Hugel agreed that "the rights and obligations of the parties arising out of or relating to [his] membership . . . shall be governed by and construed in accordance with the laws of England."

Finally, in Section 2.2, Mr. Hugel executed a broad forum selection clause in which he agreed:

irrevocably . . . that the courts of England shall have exclusive jurisdiction to settle any dispute and/or controversy of whatsoever nature arising out of or relating to the Member's membership of, and/or underwriting of insurance business at, Lloyd's. . . .

(Emphasis added.) In the same section, Mr. Hugel agreed to "irrevocably waive []. . .any claim that any such Proceedings [i.e., English proceedings] have been brought in an inconvenient forum . . .." This General Undertaking is the foundational document through which Mr. Hugel was able to be a Member Of Lloyd's. (Tr. 59.)

B. The Underlying Lawsuit

In April of 1990, Appellants filed a two-count Complaint in the District Court. In the first Count, Appellants alleged that the Corporation Of Lloyd's breached a fiduciary duty arising out *9 of certain alleged "assurances of confidentiality" given in the course of an investigation of Mr. Hugel. (Cmplt. ¶23.) According to the Complaint, the Corporation breached its duty "not to disclose to third parties confidential information relating to the Investigation." (Cmplt. ¶¶22-23.) In the second Count, the Appellants contended that the same "assurances of confidentiality" constituted a contract which was breached through the aforementioned alleged disclosures. (Cmplt. ¶¶ 26, 28). Both Counts of Appellants' Complaint were based upon -- and expressly incorporated -- one common core of allegations.

The Appellants charge that in March of 1988 an agent of the Corporation Of Lloyd's commenced an investigation of Mr. Hugel (a Member of the Society Of Lloyd's), one of the Appellants' brokers, and Mr. Roger Mills (allegedly an employee of that broker) regarding alleged misconduct. (Cmplt. ¶ 10.) [FN9] In the *10 course of that investigation, the Appellants allege, the Corporation gave them certain assurances of confidentiality in order to entice them to provide information to the investigation. (Cmplt. ¶¶ 11-12).

FN9. The propriety and subject matter of the Corporation's investigation of Mr. Hugel is not germane to the issues on appeal. A disciplinary investigation of a Member of Lloyd's -- including the manner in which that investigation is conducted -- is a matter "relating to the Member's membership," regardless of the subject matter giving rise to the inquiry. Nevertheless, because the Appellants have attempted to raise some question about the propriety of that investigation, the Corporation believes that it is prudent to allay any doubts which may have been created.

The record in this case reflects that, in the period covered by the Corporation's investigation (that is, from 1980 through to 1988 -- the period after Mr. Hugel became a Member), reinsurance on certain risks was placed in the Lloyd's market initially through Hinton Gulf Coast Marine and then through Delta Marine and Aviation Insurance Brokers Limited ("Delta").

Mr. Hugel was the co-founder of Delta and originally held 50% of the equity; he presently holds 100% of the equity in the corporation, and has "been involved in all major decisions regarding the company." (Tr. 21-23.) The individual at Delta primarily concerned with placing that reinsurance on the London market was Mr. Roger Mills (who is referenced in the Appellants' complaint).

In connection with the aforementioned reinsurance, Gulf Coast remitted to Delta an amount substantially in excess of what was needed to meet the premiums payable in the London market. During the years from 1980 through to 1982, Delta sent these excess monies -- at Mr. Hugel's direction -- to an account in the name of Mrs. Anna Hugel in Stuttgart, Germany. Thereafter, checks in the name of Mrs. Anna Hugel were then sent to Mr. Hugel in London or New Orleans. Mrs. Anna Hugel is Mr. Hugel's mother and, in 1980, was eighty-four (84) years old. These transactions were recorded on Delta's books through an account named "Mrs. A. Hugel - Commission Account" even though Mrs. Hugel had no connection to the insurance industry. These monies were then used by Mr. Hugel to make payments on a yacht under construction in Hong Kong. The total amount transmitted to Hong Kong via this mechanism from 1980 through 1984 amounted to $994,412.21.

These circumstances gave rise to the Corporation's Disciplinary proceedings in respect of Mr. Hugel. See Memorandum Of The Corporation Of Lloyd's In

Opposition To Plaintiffs' Objections (R. 104) at 3-5; Affidavit Of Ms. Caroline Margaret Mayne (hereinafter "Mayne Aff.") (R. 105) Ex. I, ¶2. Ms. Mayne's affidavit attests to the accuracy of all of the aforementioned facts.

The Assurances Of Confidentiality. The alleged assurances of confidentiality are a key element of the Appellants' arguments in this Court -- indeed, so essential that Appellants insist that the source of those assurances is in some sense "independent" of Mr. Hugel's Lloyd's membership. (Applts. Brief at 8, 14.) The alleged import of this latter point is quite incorrect. It simply does not matter from where these alleged assurances came. *11 That they were allegedly made in the context of a Lloyd's membership investigation is enough to confirm that this lawsuit relates to Mr. Hugel's membership.

Nevertheless, the source of these assurances is apparently so pivotal to Appellants' case that they have chosen to boldly make misrepresentations to this Court regarding that issue. The fact of the matter -- as conceded by the Appellants in their sworn deposition testimony and as expressly found by the Magistrate Judge and the District Judge -- is that the written assurances of confidentiality received by the Appellants, to the extent Appellants can identify them, made reference to the Lloyd's Byelaws. (R&R at 9; Tr. 60-62, 64- 66). In fact, in response to questions regarding Paragraph 11 of Appellants' Complaint (i.e., the paragraph alleging the receipt of written assurances), Mr. Hugel testified that he received an "initial letter" from Lloyd's which "made reference to confidentiality." (Tr. 62.) That letter, which was marked: "[S]trictly Confidential. To be opened by the addressee only", made "reference to an investigation being conducted under certain sections of the bylaws, and the bylaws were cited." (Id.) Upon receipt of that letter, according to Mr. Hugel (speaking on behalf of himself and his corporations):

I . . . obtained a copy of the bylaws, and Mr. Edelman [his attorney] . . . advised me that certainly everything should be held in confidence according to the bylaws.

(Tr. 66.) In other words, Appellants admit that this "written assurance" of confidentiality was, in fact, a recognition of the *12 confidentiality provision contained in the Lloyd's Byelaws. Additionally, the Appellants concede that the Corporation Of Lloyd's consistently refused to enter into any independent written confidentiality agreement. (Applts. Brief at 8-9: Appellants "initiated several unsuccessful attempts to have the Defendant enter into a written confidentiality agreement.") The Appellants' contentions to the contrary (in which they contend that these assurances were somehow "independent") -- which never even refer to their own testimony or the District Court's findings -- are a mystery.

Moreover, at page 20 of their brief, Appellants contend:

Nowhere has Lloyd's denied the Plaintiffs' allegation that Plaintiffs sought and obtained independent assurances of confidentiality.

This is nothing other than bad-faith, sharp practice. There is no such allegation in Appellants' complaint and, therefore, there is nothing to deny. Moreover, the only reason there have been no technical denials in this case in that the Corporation has yet to file an answer -- since one was not required unless the motion to dismiss was denied. Indeed, the import of this statement by the Appellants is to affirmatively state to this Court that the Corporation has agreed to the proposition that the assurances are "independent." This is simply not true. What is more important is that the Appellants have themselves admitted that the alleged assurances were contained in the Lloyd's Byelaws. (Tr. 60-62, 64-66.) For them now to insinuate to this Court not only that the assurances were "independent" but also that the Corporation *13 of Lloyd's has acceded to that point is but an example of the Appellants' approach to this appeal. [FN10]

FN10. Appellants also stated that:

Nowhere in their Complaint, as amended, do Plaintiffs cite or rely upon Hugel's membership at Lloyd's, or any contract or provision related to that membership, as the basis for their claims.

(Applts. Brief at 20.) This is but another example of the Appellants'

attempt to create "facts" for which no record citation is given and which contradict their own sworn testimony. Although Appellants failed to specifically plead the source of those assurances, they nevertheless admitted in sworn testimony that those assurances were born from the Lloyd's Byelaws.

The Appellants alleged that, in reliance upon these assurances, they -- that is, Mr. Hugel, Gulf Coast Marine, Inc. ("Gulf Coast") and Ocean Marine And Indemnity Company ("Ocean Marine") -- supplied allegedly confidential information to the Corporation. (Cmplt. ¶ 13.) These entities did not, however, make independent decisions to cooperate in the investigation of Mr. Hugel. Rather, Mr. Hugel decided to supply information belonging to those entities. (Tr. 76-77.) Mr. Hugel alone also supplied all the information to the Corporation. (Tr. 74-75.)

The Allegedly Unlawful Disclosure. The Appellants' Complaint charges the Corporation with two allegedly unlawful disclosures. The first supposedly occurred in March of 1989 when the Lloyd's Suspension Committee issued an "undertaking" (which is tantamount to an Order) prohibiting Mr. Roger Mills from doing business with Mr. Hugel or any of his affiliated Companies. (Cmplt. ¶ 16.) As the Court will recall, Mr. Mills was allegedly *14 one of the subjects of the Lloyd's investigation (Cmplt. ¶ 10), was allegedly the employee of a broker used by Mr. Hugel and his two companies (Id.), and was associated with a brokerage founded and owned by Mr. Hugel. (R. 104 at 3-5; Mayne Aff., supra n. 9, ¶2; Tr. 21-23.) The second allegedly improper disclosure of information occurred sometime later when the "Suspension Committee also required Mr. Mills' new employers, the English brokerage firm Colburn French and Kneen Insurance Services Ltd. . . . to execute an undertaking containing similar prohibitions against doing business with Mr. Hugel or his affiliated companies. . . ." (Cmplt. ¶ 18.)

Apart from these two functions of the Suspension Committee, Appellants have no personal knowledge of any other disclosure of allegedly confidential information. As the Appellants admitted in their sworn deposition:

Q: So then[,] apart from the two specific instances alleged in your complaint, do you have personal knowledge of any other allegedly improper disclosure by the Corporation of Lloyd's?

A: No, not at this moment.

(Tr. 98-99.) Notably absent from this sworn testimony is any reference to the Louisiana Commissioner of Insurance or the Internal Revenue Service -- the two entities that figure so prominently in the Appellants' current version of this case.

*15 In response to the Appellants' Complaint, [FN11] the Corporation filed a motion to dismiss, arguing not only that the forum selection clause warranted dismissal but also: 1) that the district court lacked personal jurisdiction over the Corporation, 2) that service of process on the Corporation was improper, and 3) that the action should be dismissed based on the doctrine of forum non conveniens. The motion was referred to a Magistrate Judge.

FN11. On July 12, 1991, at the exact same time as they filed their "Supplemented And Restated Memorandum In Opposition To Defendant's Motion To Dismiss," the Appellants also filed an Amendment to their Complaint. That amendment is of no value to Appellants, however. The sole paragraph of the Amendment begins with the following disclaimer:

Upon information and belief, Plaintiffs believe that acts similar to those described above [that is, in the initial Complaint] occurred in the United States, that these acts will be disclosed through discovery and that when such evidence is disclosed, it will provide the basis for a recovery. . . .

(R. 65, emphasis added.) This amendment was apparently filed to give the Complaint a United States flavor for purposes of the forum non conveniens analysis.

Magistrate Judge's Report & Recommendation. In a thorough, eighteen-page Report And Recommendation, Magistrate Judge Mahoney needed to reach only the forum selection issue, and concluded that Mr. Hugel, "a sophisticated businessman" who became a Member Of Lloyd's to enhance his personal prestige and financial position, must bring his disputes in the courts of England. [FN12] *16 (R&R at 17.) A more detailed exposition of the Magistrate Judge's analysis on this point will be contained in the following sections.

FN12. It is plainly within the power of this Court to "affirm the judgment of the district court on any ground that the record supports and that was raised, but not passed on, in the court below." United States v. Gimbel, 782 F.2d 89, 91 n.3 (7th Cir. 1986). However, a court of appeals may decide not to affirm on an alternative ground when such affirmance depends on fact-finding. International Medical Prosthetics Research Associates, Inc. v. Gore Enterprise Holdings, Inc., 787 F.2d 572, 573 n.2 (Fed. Cir. 1986). The Corporation of Lloyd's has not raised on appeal its defenses based on lack of personal jurisdiction, improper service of process, and the doctrine of forum non conveniens because this case was properly dismissed upon the basis of the forum selection clause and because of the relatively fact-specific nature of the inquiry required for resolution of the alternative grounds of the motion to dismiss. The Corporation of Lloyd's is not waiving any of these defenses, however.

The Magistrate Judge also concluded that the two corporate plaintiffs are equally bound by the forum selection clause, though they were not signatories. Relying on uncontested evidence, the Magistrate Judge found that Mr. Hugel owns and controls those corporations, and Mr. Hugel "alone decided that his corporations would participate in the [aforementioned] investigation." (R&R at 10-11.) Those corporations therefore satisfied the two-prong test developed by the federal courts for determining when non-parties should be held to a forum selection clause (that is, "close relationship" to the signatory plus "foreseeability" of being bound).

District Court's Judgment. On review in the District Court, having received the Appellants' extensive objections, Judge Roszkowski agreed with the Magistrate Judge's Report And Recommendation, and adopted that opinion as his own. (R. 108.)

*17 ARGUMENT

I. THE UNDERLYING LITIGATION FALLS SQUARELY WITHIN THE TERMS OF THE PARTIES' FULLY ENFORCEABLE FORUM SELECTION AGREEMENT.

Having spent so much effort in the initial sections of their brief trying to redefine the Complaint they actually filed in the District Court, it is not surprising that the Appellants' first argument on appeal is that the underlying lawsuit does not fall within the forum selection clause to which Mr. Hugel freely agreed. This argument is flatly incorrect, and was rejected by both the Magistrate Judge and the District Judge. Accordingly, the Corporation of Lloyd's respectfully requests that the District Court's Judgment enforcing the forum selection clause be affirmed.

A. The Forum Selection Clause Is Fully Enforceable And Covers An Extremely Wide Range Of Disputes Between Members And The Corporation Of Lloyd's.

The Supreme Court has held that the type of broad forum selection provision at issue in this case is "prima facie valid." The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 1972). Indeed, the Court has held that a "heavy burden" falls upon the party opposing enforcement to "clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching." Id. at 15, 19. Today, as twenty years ago when the Bremen opinion was rendered, a forum selection clause contained in "a freely negotiated private international agreement . . . should be given full effect" and "should control absent a strong showing" to the *18 contrary. Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 111 S. Ct. 1522, 1526 (1991) (quoting The Bremen, 407 U.S. at 12-13, 15). The Appellants do not even mention (much less contest) these fundamental precepts of forum-selection analysis. [FN13]

FN13. The Seventh Circuit has noted that, in light of recent Supreme Court decisions, the validity of a forum selection clause is "probably" a question of federal law. Northwestern National Insurance Co. v. Donovan,

916 F.2d 372, 374 (7th Cir. 1990). The District Court did not need to resolve this issue because it held that Illinois has adopted federal law on this issue. (R&R at 5.) The Appellants have not contested this finding.

Rather, the Appellants start their attack by first arguing that the forum selection clause should be read narrowly. (Applts. Brief at 12-13.) Indeed, they essentially invite this Court to read the clause itself so narrowly that it applies only to claims which are contractual in nature. They then invite the Court to read the contract containing the forum selection clause (that is, the General Undertaking) so narrowly that it pertains to only a small range of insurance transactions, and not the type of membership disciplinary action at issue in the Appellants' Complaint. Through this telescoping, the Appellants attempt to convince this Court that Mr. Hugel's freely-executed forum selection clause is a virtual nullity -- applying only to a shrunken and contorted range of garden-variety contractual disputes.

The reality of this case is, however, quite different. Under its express terms, the forum selection clause applies broadly to all disputes of any nature arising out of or relating to Mr. Hugel's membership in Lloyd's. The Appellants' arguments *19 to the contrary, which they make only nominally in this Court, were flatly rejected by the District Court and, indeed, are simply preposterous. Moreover, the General Undertaking which contains the forum selection clause is a broad, foundational document through which Mr. Hugel retained his membership in the Society Of Lloyd's. It therefore provides ample support for the breadth of that clause. Indeed, as will be shown in the following paragraphs, the parties' forum selection clause -- as well as the contract in which it is seated -- encompasses the present litigation.

The forum selection clause at issue in this case expressly provides that England shall be the exclusive forum for any dispute "arising out of or relating to the Member's membership of, and/or underwriting of insurance business at, Lloyd's." (Ex. B.) It applies to a broad range of disputes "of whatsoever nature arising out of or relating to the Member's membership." (Id.) It is -- by its express terms -- already much broader than clauses of the type which pertain only to "any controversy regarding interpretation or fulfillment of the . . . contract." See e.g., Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 511 (9th Cir. 1988). It pertains -- by its express terms -- to all disputes in any way relating to Membership, regardless of whether those claims sound in contract or tort and regardless of whether those claims involve any interpretation of the General Undertaking itself. The Appellants have failed to cite even a *20 single decision holding that the express terms of such a clause can be ignored.

The reason for this expansive language is both justifiable and easily understood. The General Undertaking is the document through which Mr. Hugel maintained his membership in the Society Of Lloyd's, a 26,000 member international organization which is governed by not only statute but also Byelaws. (Ex. B at ¶D; Tr. 59; R&R at 14; Barber Aff., supra n. 7, ¶8.) It is not simply a license for him to underwrite insurance. Rather, in exchange for being allowed to underwrite insurance, Mr. Hugel promised to "comply with the provisions of Lloyd's Acts 1871-1982, any subordinate legislation made or to be made thereunder and any direction given or provision or requirement made or imposed by the Council [of Lloyd's] or any person(s) or body acting on its behalf." (Ex. B at ¶1).

In other words, Mr. Hugel agreed to abide by the comprehensive scheme of regulation governing the conduct of Lloyd's members. That comprehensive scheme includes rules governing, inter alia, membership (see, e.g., Byelaw No. 9 of 1984, entitled "Membership"), member conduct (see, e.g., Byelaw No. 5 of 1983, entitled "Misconduct, Penalties and Sanctions), disciplinary proceedings (see, e.g., Byelaw Nos. 6-8 of 1983, respectively entitled "Disciplinary Committees," "Appeal Tribunal," and "Counsel Stage Of Disciplinary Proceedings"), investigations (see, e.g., Byelaw No. 3 of 1983, entitled "Inquires and Investigations"), and confidentiality (see, e.g., *21 Byelaw No. 4 of 1983, entitled "Information and Confidentiality"). (Copies of these Byelaws, without amendment, are found at R. 105, Ex. C1-C3). It is only proper, therefore, that all disputes arising out of that membership should be governed by the forum selection clause.

Moreover, it is well-settled (and Appellants no longer seem to seriously contest) that this type of broad-based forum selection clause can apply to both contract and tort claims which fall within its terms. Forum selection clauses of this breadth are construed to apply to "all causes of action arising directly or indirectly from the business relationship evidenced by the contract," regardless of whether those claims sound in contract or tort. Stewart Organization, Inc. v. Ricoh Corporation, 810 F.2d 1066, 1070 (11th Cir. 1987) (emphasis added). Indeed, federal courts warn that "public policy requires that [forum selection clauses] not be defeated by artful pleading of claims." Coastal Steel Corporation v. Tilghman Wheelabrator Ltd., 709 F.2d 190, 203 (3d Cir. 1983) ("the pleading of alternative non-contractual theories of liability should not prevent enforcement of . . . [the] bargain"). See also Manetti-Farrow, 858 F.2d 509 (applying forum selection clause to claims of tortious interference and deceptive trade practices). As a result, as long as the disputes in this lawsuit "aris[e] out of or relat[e] to" Mr. Hugel's membership, those disputes must be brought in the courts of England.

*22 Simply put, therefore, Mr. Hugel freely chose to become a Member Of Lloyd's. In order to accomplish that goal, he executed the General Undertaking, in which he promised to be bound by the Society Of Lloyd's membership regulations. Those regulations cover a variety of topics, including the conduct of disciplinary hearings and the use of allegedly confidential information. He cannot now avoid the forum selection agreement -- which expressly provides that disputes concerning all of the aforementioned matters shall be brought in the courts of England -- by now arguing, without the citation of a single decision to support him, that the forum selection clause should somehow be mysteriously limited to apply to nothing more than disputes over insurance underwriting. The clause expressly applies to disputes relating to "the Member's membership of, and/or underwriting of insurance business at, Lloyd's." Thus, as both the Magistrate Judge and the District Judge both held, "[t]he clause itself contemplates that it will apply to disputes other than those relating to underwriting." (R&R at 8.) The Appellants have offered absolutely no reason -- either in law or in the text of the General Undertaking -- to limit this breadth.

B. The Underlying Lawsuit Plainly Falls Within The Terms Of The Parties' Freely Negotiated Forum Selection Clause.

Given the express language of the forum selection clause, neither the Magistrate Judge nor the District Judge had any difficultly concluding that the Complaint alleged by the Appellants fell within that provision. Contrary to the *23 unsupported rhetoric of the Appellants, however, the District Court's decision did not consist of a simplistic "but for" analysis. Rather, the District Court's reasoning was much more thorough and detailed. As both the Magistrate Judge and the District Judge expressly held:

If Plaintiff Hugel were not a member, there would not have been an investigation.

* * *

It is undisputed that Defendant had authority to investigate Plaintiff Hugel because he was a member of Lloyd's and had agreed to abide the rules of the Corporation of Lloyd's, including the Lloyd's Acts 1871-1982.

* * *

Plaintiff Hugel himself believed that the Defendant's alleged assurances regarding confidentiality were related to the General Undertaking. The duties and responsibilities of the parties regarding internal disciplinary investigations conducted by Defendant are defined by the General Undertaking. Whether the Defendant has a right to handle confidential information as alleged is a substantive question which would require the interpretation, construction and effect of certain provisions of both the General Undertaking and the incorporated Lloyd's Acts 1871-1982. Therefore, Plaintiffs' claims are within the scope of the forum selection clause within the General Undertaking for Membership.

(R&R 8-10, emphasis added.) The District Court did not abuse its discretion in this regard and, accordingly, that Court's decision to enforce the forum selection clause should be upheld.

*24 1. The Standard Of Review.

Noticeably absent from the Appellants' brief is any mention of the appropriate standard of review to be applied in this situation. [FN14]

FN14. The Appellants' failure to set forth the standard of review in their brief is a violation of Circuit Rule 28(k), Local Rules of the United States Court Of Appeals for the Seventh Circuit.

"The district court's order enforcing the contractual forum selection provision and dismissing the case for improper venue is subject to review for abuse of discretion." [FN15] Spradlin v. Lear Siegler Management Services Co., 926 F.2d 865, 867 (9th Cir. 1991). See Taag Linhas Aereas de Angola v. Transamerica Airlines, Inc., 915 F.2d 1351, 1353 (9th Cir. 1990) ("We review a district court's enforcement of a forum selection clause for an abuse of discretion."); Sun World Lines, Ltd. v. March Shipping Corp, 801 F.2d 1066, 1068 n.3 (8th Cir. 1986); *25Pelleport Investors, Inc. v. Budco Quality Theaters, Inc., 741 F.2d 273, 280 n.4 (9th Cir. 1984). See also Farmland Industries, Inc. v. Frazier-Parrott Commodities, Inc., 806 F.2d 848, 852 (8th Cir. 1986); Copperweld Steel Co. v. Damage-Mannesmann-Bohler, 578 F.2d 953, 966 (3d Cir. 1978); Furbee v. Vantage Press, Inc., 464 F.2d 835, 837 (D.C. Cir. 1972). But see Milk 'n' More, Inc. v. Beavert, 963 F.2d 1342 (10th Cir. 1991) (using de novo review); General Engineering Corp. v. Martin Marietta Alumina, Inc., 783 F.2d 352, 359 (3d Cir. 1986) (applying combined clearly erroneous/de novo review).

FN15. Use of the "abuse of discretion" standard is particularly appropriate in this case. Here, the language of the forum selection clause "is anything but ambiguous." (R&R at 8.) Thus, the majority of the District Court's analysis was spent in deciding whether the Complaint could appropriately be characterized as one which arose out of or related to Mr. Hugel's membership. As evidenced by the Report & Recommendation, this conclusion was based not only on the terms of the General Undertaking and the allegations in Appellants' Complaint, but also on the Appellants' admissions and characterizations contained in Appellants' sworn deposition. Given the factual nature of this inquiry, as well as the need to characterize the nature of the lawsuit being brought, an abuse of discretion standard is quite fitting.

Additionally, one commentator has noted that "[i]t is to be hoped that substantial discretion will be confided to the district courts in determining whether such clauses are valid and to be given effect." 15A Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice And Procedure § 3914.12 (2d ed. 1992).

Under this abuse of discretion standard, the district court's decision should be upheld unless it should "'strike [the appellate court] as wrong with the force of a five-week old unrefrigerated dead fish."' Artis v. Hitachi Zosen Clearing, Inc., Nos. 90-3281, 90-3282, 90-3369, slip. op. at 13-14 (7th Cir. July 9, 1992). The District Court's decision plainly does not run afoul of this standard; in fact, that decision is so well-grounded in both fact and law that it would withstand any standard of review. Accordingly, the District Court's conclusion should be affirmed.

2. The Dispute At Issue In This Case Arises Out Of And Relates To Mr. Hugel's Membership And, Therefore, Falls Squarely Within The Parties' Forum Selection Clause.

As previously set forth, the Complaint in this action -- as actually pleaded by the Appellants -- focuses solely on two alleged breaches of confidentiality which occurred as part of the Corporation's disciplinary investigation of Mr. Hugel. (Cmplt. *26 ¶¶ 10, 16, 18.) Mr. Hugel concedes that disputes concerning disciplinary proceedings -- like those present in this case -- are disputes relating to Membership. (Tr. 80) As he explained in his deposition:

Q. I am just trying to find a common ground that we can move from and just see if we could agree that disciplinary proceedings, as a general matter, would be an issue relating to a member's membership. That's what I am trying to uncover, whether or not that's a common ground we can work from.

A. I am sorry. Was that a question?

Q. It was.

A. If you put it that way, then the answer would probably be yes.

Mr. Hugel also concedes that the complaint in this action centers around his displeasure with how the disciplinary proceedings were conducted:

MR. HUGEL: I will say this much: That the complaint that I have with Lloyd's is not only the disclosure that you are referring to, but also the general way that Lloyd's appears to have handled this entire case, and disseminated the information regarding this case to people that operate in the market. . . .

* * *

Q. And so I can understand a bit more, when you refer to "in this case," are you referring to the investigation and then the subsequent disciplinary proceedings brought by the Corporation of Lloyd's?

A. That is correct.

(Tr. 60-61.) Given these admissions, the Appellants' arguments to the contrary before this Court (that is, that the underlying lawsuit does not arise out of or relate to Mr. Hugel's membership) ring very hollow. Indeed, these admissions -- especially when coupled with the Appellants' Complaint -- are *27 alone sufficient to terminate this Court's inquiry. Mr. Hugel was investigated by the Corporation Of Lloyd's because he was a Member. Even if Mr. Hugel had received assurances of confidentiality (regardless of their source) in the course of this member disciplinary investigation, the underlying dispute with the Corporation Of Lloyd's -- which focuses on alleged breaches of these assurances -- remains one arising out of or relating to Mr. Hugel's membership.

There is, however, additional evidentiary support for this conclusion (if more support were required). The Complaint in this action revolves exclusively around the allegedly improper use of confidential information. Mr. Hugel was asked to provide that information; and he alone provided his own personal information and that of his corporations in order to participate in the Corporation's investigation of him as a Member. (Tr. 74-75.) As the District Court found, "[i]t is undisputed that [the Corporation of Lloyd's] had authority to investigate Plaintiff Hugel because he was a member of Lloyd's and had agreed [through the General Undertaking] to abide the rules of the Corporation of Lloyd's, including the Lloyd's Acts 1871-1982." (R&R at 8-9, emphasis added.) Mr. Hugel claims that he participated in the investigation, at least in part, upon assurances of confidentiality that he and his attorney believed to be contained within the Lloyd's byelaws -- byelaws that he agreed to follow when he executed the General Undertaking. (Tr. 66) The complaint alleges that the Corporation Of Lloyd's committed its *28 alleged violations when its Suspension Committee took action that it was expressly empowered to take under those same Lloyd's Byelaws. (Cmplt. ¶¶ 10, 16, 18; Administrative Suspension Byelaw, R. 105, Ex. C2, without amendment.) In light of these admissions, it is beyond doubt that the Appellants' claims are inextricably intertwined with the rights and duties created by the General Undertaking. If Mr. Hugel were not a Member, there would have been no investigation and, accordingly, no dispute. The dispute in this case not only relates to Mr. Hugel's membership but also, in fact, arises out of the "business relationship" created by the General Undertaking. Accordingly, the dispute in this case is subject to the forum selection clause contained in the General Undertaking.

Notably, the forum selection clause would still apply even if the Appellants were successful in transforming this litigation into an analysis of the propriety of the Corporation's investigation (a transformation the Corporation strongly contests). Lloyd's Byelaw No. 5 of 1983, to which Mr. Hugel agreed to be bound when he executed the General Undertaking, provides that a Member is guilty of misconduct if, inter alia, he:

(d) conducts himself . . . in a manner which is detrimental to the interests of Lloyd's policyholders, [or] the Society . . .;

(e) conducts any insurance business in a discreditable manner or with a lack of good faith, or

*29 (f) conducts himself . . . in any manner whatever which is dishonorable or disgraceful or improper.

(Lloyd's Byelaw No. 5 of 1983, R. 105, Ex. C1, emphasis added.) Whether the Corporation's investigation of Mr. Hugel was a proper exercise of that authority clearly calls for an interpretation of the rights conferred by the General Undertaking and, quite plainly, is a dispute relating to his membership. The forum selection clause would therefore cover that dispute as well.

C. The Appellants Have Uncovered No Decisions Which Conflict With The District Court's Judgment

The Appellants have offered only three decisions which they claim as support for their position. However, far from supporting Appellants' position, those decisions in fact bolster the conclusion reached by the District Court.

For example, the Appellants' reliance on Washburn v. Societe Commerciale de Reassurance, 831 F.2d 149 (7th Cir. 1987), is misplaced for two reasons. First, the Appellants' entire discussion of Washburn is premised on the contention that the District Court used a "but for" analysis in reaching its conclusion to apply the clause. This assertion has already been exposed as incorrect. (See, supra, at p. 23.) Second, and much more importantly, the Washburn decision is simply not relevant to this action -- no matter what analysis the District Court employed.

In Washburn, the Illinois Director of Insurance brought a RICO action alleging that a number of insurance companies had *30 conspired with each other to loot one of the companies and thereby defraud certain of its investors and creditors. 831 F.2d at 151. That conspiracy, which allegedly resulted in the transfer of large sums of money from the insolvent company, was accomplished through a variety of reinsurance, retrocession and guaranty agreements. Id. at 150-51. One of those reinsurance agreements contained a provision stating that "any differences of opinion . . . with respect to the interpretation of this Agreement or the performance of the parties under the Agreement . . . shall be submitted to arbitration." Id. at 150.

The Court held that the arbitration provision did not affect the RICO litigation because that litigation failed to implicate "any dispute 'with respect to the interpretation of [the] agreement."' Id. at 151. As explained by the Court, the underlying litigation did "not involve a controversy arising under the agreement itself, but rather a conspiracy in which the conspirators used the reinsurance agreement . . . and several other devices . . . [to] defraud entities and individuals. . . ." Id. (emphasis added). In other words, there was "no evidence or allegation that either party did not perform its duties or obligations under the reinsurance agreement" and, therefore, the express terms of the arbitration clause did not apply to the case. The Washburn case, therefore, has no application in the present action. Here, the express terms of the forum selection clause plainly encompass the underlying litigation. Here as well, the underlying litigation requires the interpretation of *31 the rights and duties conferred by the General Undertaking. Washburn is simply inapposite.

The Appellants' reliance on Berrett v. Life Insurance Company of the Southwest, 623 F. Supp. 946 (D. Utah 1985) is similarly misplaced. In Berrett, the contract containing the forum selection clause was much more limited than the one in the present case. There, the clause arose in a simple agency contract whereby an insurance company agreed to allow the plaintiff merely "to write insurance policies." Id. at 947. Moreover, the forum selection clause in that agreement was limited as well, providing for the resolution only of "any action at law or in equity hereunder." Id.

In Berrett, the court refused to apply the forum selection clause to certain tort claims because it concluded that those claims did not "arise 'hereunder."' Id. at 949. Specifically, the court held that claims for defamation and intentional interference with existing business relationships were not disputes which could be characterized as falling "under" the simple agency agreement because it was "highly unlikely that in entering into the agency agreement the parties contemplated that tort claims [like those] would be governed by the forum selection clause." Id. at 947, 949. Perhaps more importantly, in reaching that conclusion the court recognized that resolution of this type of issue "depends upon the intention of the parties reflected in the wording of particular clauses and the facts of each case." Id. at 948-49 (emphasis added).

*32 In the present case, unlike in Berrett, the forum selection clause is contained in a broad foundational document through which Mr. Hugel was able to become a Member Of Lloyd's. In signing that document, Mr. Hugel expressly agreed to abide by the Society's comprehensive system of membership regulation, and he expressly agreed to Lloyd's right to conduct disciplinary investigations into any alleged misconduct. Thus, consistent with the admonition in Berrett that the breadth and application of forum selection clauses "depends upon the intention of the parties reflected in the wording of particular clauses and the facts of each case," it should come as no surprise to the Appellants that the forum selection clause in this litigation captures a much broader range of disputes than that in Berrett.

The Appellants' reliance upon Phoenix Mutual Life Insurance Co. v. Northern American Company For Life And Health Insurance, 661 F. Supp. 751 (N.D. Ill. 1987), suffers from the same defect as their reliance on Berrett. In Phoenix Mutual, the parties had entered into a several treaties regarding reinsurance. Each of those treaties contained a provision calling for the arbitration of "[a]ll disputes and differences upon which an amicable understanding cannot be reached. . . ." Id. at 752. Pursuant to these provisions, one of the parties sought to compel arbitration of a dispute having nothing to do with reinsurance, that is, a dispute concerning the disqualification of a third-party law firm from representing the other party due to a conflict of interest. Id. at 751-52.

*33 In granting a motion to strike the arbitration demand, District Judge Shadur held that the arbitration provision had to be read as if the words "arising hereunder" were incorporated in that clause. Id. at 753 In other words, he would compel arbitration of only those disputes which arose under the reinsurance treaties. The Court then concluded that the conflict-of-interest dispute did not fit within that category.

In the present case, unlike Phoenix Mutual, the underlying dispute goes to the very core of the parties' contractual relationship: namely, membership. Moreover, Lloyd's right to conduct the disciplinary investigation of Mr. Hugel which gave rise to this case is a right which is born in the General Undertaking. The alleged assurances of confidentiality upon which the Appellants' Complaint is based are contained in the Byelaws which are a subject of the General Undertaking. Lloyd's right to engage in the conduct which allegedly disseminated confidential information in a wrongful way is a right which is born in the General Undertaking. In other words, in dismissing the underlying litigation, the District Court was simply recognizing that disputes over the rights and obligations of membership must be litigated in the forum expressly set forth in that contract. The Appellants' reliance on Phoenix Mutual -- which unremarkably refused to compel arbitration of a dispute totally unrelated to the reinsurance contract -- is simply irrelevant.

*34 Indeed, the common fault running through all of the Appellants' case citations is their mistaken assumption that all forum selection clauses must be construed identically -- regardless of the express terms of the clause and regardless of the nature of the contract in which that clause sits. In this case, the clause is "very broad in scope" (R&R at 8) and applies to "any dispute and/or controversy of whatsoever nature." In this case, the contract containing that clause is a broad, foundational document through which an individual became a member of an international society. The Appellants' limited and fact-specific decisions simply have no application in this situation. The District Court's Judgment should therefore be affirmed.

Finally, a word needs to be said about the Appellants' reliance on Leslie v. Lloyd's Of London, an unreported decision out of the Southern District of Texas. As the Court will see from the copy of that decision included in Appellants' brief, the Leslie case is one of several cases now pending in the federal courts in which a Member of Lloyd's has alleged federal and state securities laws violations in connection with that Member's initial decision to join the Society. As such, the Leslie case presents facts which are far different from those in the present case. In addition, the opinion in the Leslie case reflects an attitude toward forum selection clauses in international transactions that is totally inconsistent with the teachings of The Bremen.

*35 Nevertheless, if the Appellants are correct in their insistence that these securities cases are relevant, this Court should know that the unreported Leslie decision stands alone in its conclusion. On July 17, 1992, in a reported decision, the United States Court of Appeals for the Tenth Circuit held that the very same forum selection clause at issue in this case is fully enforceable and requires the dismissal of actions in favor of an English forum. Riley v. Kingsley Underwriting Agencies, Ltd., ____ F.2d ____ (10th Cir. 1992), a copy of which is appended hereto as Ex. E. The United States District Court for the Northern District of Illinois has reached the same conclusion. Bonny v. Society of Lloyd's, 784 F. Supp. 1350 (N.D. Ill. 1992). It is also worth noting that the Leslie court has itself suspended all proceedings in that case pending the resolution of motions to reconsider. (See July 20, 1992 Order appended hereto as Exhibit C.) In other words, the majority of federal courts that have considered this question have decided that the forum selection clause should be enforced.

II. THE FORUM SELECTION CLAUSE IS BINDING ON THE CORPORATE APPELLANTS AS WELL AS MR. HUGEL

The Appellants next argue that if the forum selection clause is enforceable, it should be binding on Mr. Hugel alone. That is, however, not the law. Moreover, as is their want on this appeal, the Appellants have made this argument without ever attempting to respond to the legal conclusions and factual finding of the District Court.

*36 "[T]he cases hold that a range of transaction participants, parties and non-parties, should benefit from and be subject to forum selection clauses." Clinton v. Janger, 583 F. Supp. 284, 290 (N.D. Ill. 1984). See Manetti-Farrow, 858 F.2d at 514 n.5; Coastal Steel, 709 F.2d at 203; Vijuk Equipment Inc. v. Otto Hohner KG, No. 89 C 5769 (N.D. Ill. Oct. 25, 1990) (Rovner, J.) ("A forum selection agreement may be applied not only to disputes between the nominal parties of the agreement but also to related disputes involving other participants to the relevant transactions"), a copy of which is appended hereto as Ex. D. In order to hold a non-party bound, he must be "closely related" to the dispute such that it becomes "foreseeable" that he will be bound. Manetti-Farrow, 858 F.2d at 514 n.5; Coastal Steel, 709 F.2d at 203. Indeed, this was the conclusion reached by the District Court. (R&R at 10.)

This rule of law is well-grounded in common sense. For example, in situations like the present where one individual acts on his own behalf as well as on behalf of his wholly controlled corporations, it would be improper for the individual plaintiff to invoke the presence of the non-signatory corporations as a means of himself escaping the forum selection clause. Indeed, the availability of such an "escape hatch" would quickly destroy the effectiveness of forum selection clauses by allowing the presence of non-signatory transaction participants to defeat the "benefit of the bargain" of at least one of the signatories. Moreover, in cases like the present, the identity between the *37 signatory and his corporations makes clear that those corporations were fully aware of the forum selection clause and should have reasonably expected to be bound by its terms. Indeed, in this case, the District Court found (based on uncontested evidence) that the written and oral assurances of confidentiality upon which all Appellants base their complaint were allegedly received by Mr. Hugel alone. (R&R at 11.) It is therefore perfectly foreseeable that corporations which are owned and controlled by Mr. Hugel, and which are attempting to sue on alleged breaches of confidentiality which were received by Mr. Hugel alone in the course of a membership investigation, would be required to sue in the same court in which Mr. Hugel agreed to sue.

On appeal, the corporate Appellants (that is, Gulf Coast and Ocean Marine) allege that the District Court used an incorrect legal standard in assessing this argument. They contend that before being bound to the forum selection clause, the District Court first had to find that they were third-party beneficiaries of the General Undertaking. That is not the law, however. Indeed, no case -- including the cases cited by the Appellants -- has ever held that third-party beneficiary status was a requirement before a non-party could be bound.

While it may certainly be true that third party beneficiaries of a contract would, by definition, satisfy the "closely related" and "foreseeability" requirements, see, e.g. Coastal Steel, 709 F.2d at 203 (refusing to absolve a third-party *38 beneficiary from the strictures of a forum selection clause which was foreseeable) and Clinton, 583 F. Supp. at 290 (noting that the rule holding both parties and non-parties bound by a forum selection clause is "especially true where the non-party is a third party beneficiary"), no court has ever imposed third-party beneficiary status as a requirement. In fact, in Manetti-Farrow, Vijuk Equipment, and Hoes Of America, Inc. v. Hoes, 493 F. Supp. 1205 (C.D. Ill. 1979), courts held non-parties to a forum selection clause without ever even raising the third party beneficiary issue. In each of those cases, the courts simply sought to determine whether the non-party was so closely related to the signatory that justice and equity required that he be bound.

Convincing proof of this position is found in Stephens v. Entre Computer Centers, Inc., 696 F. Supp. 636 (N.D. Ga. 1988), where the court has expressly addressed and dismissed the Appellants' arguments in favor of a "third party beneficiary" requirement. In Stephens, the plaintiffs had argued that Coastal Steel (the case relied upon by Appellants in this case) suggested that a forum selection clause "is enforceable against a non-signatory only if that party is a third-party beneficiary of the contract." Id. at 639 n.2. The Stephens court dismissed the argument, holding:

A careful reading of the opinion indicates the court rejected a rigid "third-party beneficiary rule" and focused instead on the foreseeability of the clause: Coastal's third-party beneficiary status supported the conclusion that the clause was foreseeable. *39 See Clinton v. Janger, 583 F. Supp. 284, 290 (N.D. Ill. 1984) (Coastal Steel held the clause enforceable because it existence was foreseeable to the party, particularly because the party was a third-party beneficiary).

(Id., emphasis added). In other words, absolutely no federal court has yet to endorse Appellants' theory, and one federal court has expressly rejected it. Thus, the law remains that a non-party to a forum selection clause can be bound by the clause as long as he is so "closely related" to the signatory that it becomes "foreseeable" that he will be bound.

In applying this standard, the District Court held that the facts of this case more than adequately support binding Gulf Coast and Ocean Marine to the forum selection clause. As explained by the District Court:

Plaintiff Hugel is President and Chairman of the Board of both Plaintiffs' Corporate. Appendix of Exhibits Supporting Corporation of Lloyd's Reply Memorandum in Support of Motion to Dismiss, Exhibit D, Hugel, et al. v. Corporation of Lloyd's, No. 90 C 20105 (N.D. Ill. 1991). In addition, Plaintiff Hugel holds over 99% of the stock of Plaintiff Gulf Coast Marine which, in turn, owns 100% of the stock of Plaintiff Ocean Marine and Indemnity. All of the alleged written and oral assurances made by Defendant to Plaintiffs, were made to Plaintiff Hugel. Id. Exhibit A at 62, 64, 65, 67-74. Plaintiff Hugel alone decided that his corporations would participate in the Defendant's investigation. Plaintiff Hugel alone provided all of the relevant information to the Defendant. Id. Exhibit A at 74-77.

(R&R at 10-11, emphasis added.) These findings have not been challenged on appeal.

*40 Indeed, this case presents as compelling a situation for binding non-parties as any of the cases in which the doctrine has already been applied. For example, in Hoes Of America, the court dismissed the claims of the plaintiff corporation based on a forum selection clause executed individually by its majority stockholder -- who also served as president and director of the corporation. The court held that the record "indicates sufficient identity" between the individual and the corporation to bind the corporation to the contract terms. 493 F. Supp. at 1206-07. Similarly, in Vijuk Equipment, Judge Rovner extended a forum selection clause to a non-party which was a subsidiary of the signatory and which shared certain officers and directors with that corporation. As explained by Judge Rovner, extending the clause's reach was appropriate because the same individuals allegedly acted on behalf of both corporations. See also, Manetti-Farrow, 858 F.2d at 510-11, 514 n.5 (holding that a forum selection clause bound the parent of the signatory corporation as well as certain of its officers and directors).

Here, as in those cases, the Corporation Of Lloyd's simply wants the benefit of its bargain. It contracted with Mr. Hugel to settle all of their disputes in the courts of England. In the course of one of those disputes, Mr. Hugel alone involved his two controlled corporations, and alone supplied information allegedly belonging to those corporations. As the District Court concluded, Mr. Hugel "should not now be allowed to invoke the *41 presence of those controlled corporations in this suit as a basis for defeating the forum selection clause." (R&R at 11.)

III. THE FORUM SELECTION CLAUSE IS FULLY ENFORCEABLE UNDER LAW

The Appellants finally argue that, even if they all fall within the scope of the forum selection clause, the District Court should have exercised its equitable power and held the clause unenforceable. In this regard, the Appellants contend that enforcement of the forum selection clause may deprive Mr. Hugel of a remedy because English courts would accord the Corporation immunity from certain types of suits under Section 14 of Lloyd's Act 1982. The District Court's rejection of this argument was not an abuse of discretion.

A. The Appellants' Contention That Section 14 Operates As A Monolithic Bar To Suit Is Incorrect.

As an initial matter, and as the District Court found, it is unclear whether Section 14 of the Lloyd's Act of 1982 (attached as Ex. D to Appellants' Appendix) would immunize the Corporation against any of the Appellants' claims. Section 14 on its face negates immunity as to any acts or omissions "done or omitted to be done in bad faith." Section 14(3)(e)(i). In this case, Appellants allege that the Corporation made improper disclosures "for the purpose of recklessly, intentionally and/or negligently and unlawfully injuring Plaintiffs." (R. 68 at 3; see R. 98 at 5 and Ex. 2 ¶15.) If those charges were to be construed to fall within the above-quoted bad faith exclusion, the Corporation *42 would not enjoy immunity. Thus, Section 14 is not necessarily the monolithic bar suggested by the Appellants.

B. Federal Law Requires Enforcement Of A Forum Selection Clause Even If The Chosen Forum Would Bar Recovery.

However, even if Section 14 were to act as a complete bar to the Appellants' claims, the Supreme Court has already held that such a forum selection clause must be enforced. The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972). Indeed, this was the conclusion reached by the District Court. (R&R at 15-16.)

In The Bremen, the Court held that a forum selection clause could be deemed "unreasonable" under its standard if the selected forum was "seriously inconvenient." 407 U.S. at 16 (emphasis in original). In order to prove this serious inconvenience, the Court held that "it should be incumbent on the party seeking to escape his contract to show that trial in the contractual forum will be so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court." Id. at 18.

This "gravely difficult and inconvenient" standard has nothing to do with the availability of a particular remedy, however. Rather, it is a standard that focuses on the logistics of trial. As explained in Carnival Cruise, it is a standard which arose, "in evaluating a hypothetical 'agreement between two Americans to resolve their essentially local disputes in a remote alien forum."' 111 S. Ct. at 1528. It is not, therefore, applicable to the international agreement at issue in this case. *43 Indeed, as The Bremen Court noted in language conveniently omitted from the Appellants' memorandum:

[W]here it can be said with reasonable assurance that at the time they entered the contract, the parties to a freely negotiated private international commercial agreement contemplated the claimed inconvenience, it is difficult to see why any such claim of inconvenience should be heard to render the forum clause unenforceable.

The Bremen, 407 U.S. at 16 (emphasis added). In fact, it is now well-settled that the "inconvenience of litigating a dispute over a freely negotiated international contract in the country where one of the parties is located and is to perform is not sufficient to override the clause." Crown Beverage Co. v. Cerveceria Moctezunia, 663 F.2d 886, 888 (9th Cir. 1981); see also Northwestern National, 916 F.2d at 378. Additionally, Mr. Hugel has already expressly agreed that England is not an inconvenient forum. (See General Undertaking, Ex. B § 2.2.) Therefore, Appellants have not been able to show inconvenience sufficient to deny enforcement of the forum selection clause.

Moreover, lest there be any doubt, The Bremen does not support denying enforcement of a clause if the selected forum would deny relief. In fact, the case supports exactly the opposite contention.

In The Bremen, the contract containing the forum selection clause also contained exculpatory clauses absolving the defendant from any liability on the claims brought. 407 U.S. at 3. If the lawsuit were sent to England (the location required under the forum selection clause), the courts of that country would have enforced the exculpatory provisions and denied all relief. (Id. at 8 & n.8, 15.) If the lawsuit remained in the United States, *44 the exculpatory provisions would not have been enforced. (Id. at 8, 15.) As a result, the plaintiff strenuously argued against enforcement of the forum selection clause.

The Supreme Court rejected that argument. (Id. at 15-16.) As the Court explained, United States domestic policy -- even if it would have afforded a remedy to the plaintiff -- is "not controlling in an international commercial agreement." Id. at 15-16. In other words, if the parties to an international agreement select the courts of England to adjudicate their disputes, the United States courts will not intervene to consider the propriety or substance of the law that the English courts will follow. That the English courts would apply their own laws to deny relief is not a basis for refusing to enforce a forum selection clause.

Indeed, the Seventh Circuit recently made the same point in Rush-Presbyterian v. The Hellenic Republic, 877 F.2d 574 (7th Cir. 1989). In that case, Greece argued that the court's interpretation of the Foreign Sovereign Immunities Act would grant the plaintiffs more rights against Greece than its own citizens would have under Greek law. In answering this argument, the Seventh Circuit said:

[W]e would respond to Greece's concerns over the applicable law and appropriate forum by noting that the Greek government could have specified in its contract . . . that Greek law would apply to any dispute arising out of the agreement, and that the parties could only resort to a Greek administrative or judicial forum in order to assert rights founded on the contract.

877 F.2d at 583. In other words, if the parties to an international agreement choose a forum which will provide limited *45 rights to recovery on particular claims, they must abide by their choice.

In sum, Section 14 of the Lloyd's Acts -- on its face -- would appear to not bar any action like the present to the extent it alleges bad faith conduct on the part of the Corporation Of Lloyd's. However, even if Section 14 were to operate as the bar that the Appellants suggest, the Supreme Court has already held that the forum selection clause still must be enforced. See The Bremen. The Appellants' interjection of Section 14 into this case is therefore nothing more than a red-herring.

CONCLUSION

The federal courts have cautioned that the "'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' strongly favor enforcement of forum selection clauses in international contracts." Karlberg European Tanspa, Inc. v. JK-Joseph Kratz Vertriebsgesellschaft mbH, 618 F. Supp. 344, 347 (N.D. Ill. 1985) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 629 (1985)). "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." The Bremen, 407 U.S. at 9. In keeping with the need for international comity and economic expansion, the freely-executed forum selection clause should be enforced in this case.

*46 Faced with this inexorable conclusion, Appellants: 1) have misrepresented the actual documents filed with the Court, 2) have misrepresented or ignored their own sworn deposition testimony, 3) have ignored the findings of the District Court, and 4) have attempted to rely on information which is not in the record of this case. This unabashed disregard of the rules of this Court, and this unwillingness to litigate the appeal based on the information in the record, cannot be rewarded. Accordingly, the District Court's Judgment should be affirmed.

Hugel v. Corp. of Lloyd's

1992 WL 12013119