|
709 F.2d 190, 8 Collier Bankr.Cas.2d 678, 10 Bankr.Ct.Dec.
1129, Bankr. L. Rep. P 69,249 United States Court of Appeals, Third Circuit.
Appeal of WHEELABRATOR-FRYE, INC. and Tilghman
Wheelabrator Limited. No. 82-5391. SUBSEQUENT HISTORY: Cert. denied, 464 U.S. 938 (Oct 31, 1983) (No. 83-409) Disagreed With by: Chasser v. Achille Lauro Lines, 844
F.2d 50, 56 USLW 2591, 1988 A.M.C. 1603 (2nd Cir.(N.Y.) Apr 07, 1988) (No.
87-9081, 87-9083, 87-9085, 87-9087, 87-9089, 87-9091) Germain v. Connecticut Nat. Bank, 926
F.2d 191, 59 USLW 2530, 24 Collier Bankr.Cas.2d 1236, 21 Bankr.Ct.Dec. 661,
Bankr. L. Rep. P 73,824 (2nd Cir.(Conn.) Feb 15, 1991) (No. 90-8054)
(Additional History) Overruling Recognized by: Hays and Co. v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 885 F.2d 1149, 58 USLW 2191, Fed. Sec. L. Rep. P
94,568, 19 Bankr.Ct.Dec. 1344, Bankr. L. Rep. P 73,091 (3rd Cir.(Pa.) Sep 15,
1989) (NO. 88-1680) (Additional History) Disagreement Recognized by: Wieczenski v. Brake Shop, 1994 WL
111082 (D.N.J. Mar 28, 1994) (NO. CIV.A. 93-5673) Declined to Extend by: John Wyeth & Bro. Ltd. v. CIGNA
Intern. Corp., 119 F.3d 1070 (3rd Cir.(Pa.) Jul 23, 1997) (NO. 96-1653)
(Additional History) Distinguished by: Nascone v. Spudnuts, Inc., 735 F.2d
763, 1984-1 Trade Cases P 66,030 (3rd Cir.(Pa.) Jun 01, 1984) (NO.
83-5602) Riker, Danzig, Scherer & Hyland, Newark, N.J.,
for appellants; Douglas S. Eakeley (argued), Newark, N.J., of counsel. Before GIBBONS,
HUNTER and ROSENN, Circuit Judges. GIBBONS,
Circuit Judge. Wheelabrator-Frye, Inc. (Wheelabrator) and Tilghman
Wheelabrator Limited (Tilghman) seek appellate review of orders of the district
court in a proceeding under 28 U.S.C. § 1334(b) (Supp. V
1981), which is in effect during the transition period under the Bankruptcy
Code. Pub.L. No. 95-598, tit. IV, § 405, 92 Stat. 2686
(printed in note preceding 28 U.S.C. § 1471 (Supp. V 1981).
Wheelabrator seeks review of an order denying it leave to appeal from an order
of the bankruptcy court. Tilghman seeks review of an order affirming the order
of the bankruptcy court, which denied its motion to dismiss a civil proceeding
against it related to a case under Title 11. See 28 U.S.C.
§ 1471(b) (Supp. V 1981), which is in effect during the
transition period under the Bankruptcy Code. Pub.L. No. 95-598, tit. IV,
§ 405, 92 Stat. 2686 (printed in note preceding 28 U.S.C.
§ 1471 (Supp. V 1981) ). Tilghman’s motion asserted
(1) that the contract on which its liability, if any, is predicated contains a
forum selection clause which should be enforced, and (2) that the bankruptcy
court is an inconvenient forum. The plaintiff in the Section 1471(b) action is
the debtor, Coastal Steel Corporation (Coastal). It contends that we lack
jurisdiction to review either order, but should such jurisdiction exist, both
orders should be affirmed. Assuming we have jurisdiction to review either order
under any of the statutory provisions defining our reviewing authority, we must
also consider whether in light of the decision in Northern Pipeline
Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598
(1982), there is subject matter jurisdiction over the dispute in any federal
court. I.
One component
of the plant was a bar cleaning machine or blast unit. The contract did not
specify the supplier of the blast unit, but prior to the execution of the
agreement Coastal had suggested to Farmer Norton that it investigate such a
unit manufactured by a British firm called St. Georges Engineers, Ltd. (St.
Georges). In June of 1976 St. Georges submitted to Farmer Norton a quotation on
a blast unit. Shortly after St. Georges submitted the quotation, it was
acquired by Tilghman, a British corporation and a subsidiary of
Wheelabrator-Frye, Inc. On November 26, 1976, several weeks after the execution
of the Coastal-Farmer Norton contract, Tilghman informed Farmer Norton that St.
Georges had seriously miscalculated the cost of the blast unit on which it
quoted. Tilghman and Farmer Norton then contracted for a Tilghman blast unit at
a price of $176,000, which was higher than St. Georges’ original
quotation but lower than Tilghman’s revised cost estimate. The
Tilghman-Farmer Norton contract provided that the blast unit would be built in
England and delivered there to Farmer Norton. It also provided: [*193] 15. These
conditions shall be construed in accordance with English law. In the event of
any dispute arising the same shall be determined by the English Courts of Law. Although
delivery was made to Farmer Norton in England, Tilghman undertook to supervise
the commissioning of the blast unit after its installation in
Coastal’s New Jersey plant. Tilghman arranged for its American parent
company, Wheelabrator of Mishawaku, Indiana, to supervise the commissioning. In
late 1979 Tilghman also sent a representative to New Jersey to make
modifications on the blast unit. On April 11,
1980, Coastal filed a petition for reorganization under Chapter 11 of the Bankruptcy
Code. In July of 1980 the debtor filed in the bankruptcy court a complaint
against Farmer Norton, Tilghman, Wheelabrator, and Charterhouse Japhet Export
Finance Company (Charterhouse), an English firm which financed
Coastal’s purchase from Farmer Norton. Farmer Norton never appeared
and has gone bankrupt. Coastal settled with and dismissed its complaint against
Charterhouse. Against Tilghman and Wheelabrator its complaint seeks recovery of
over $4 million in consequential damages resulting from alleged defects in the
Tilghman supplied blast unit. Tilghman and Wheelabrator
appeared and filed answers denying the material allegations of the complaint.
They also moved to dismiss. The bankruptcy court denied the motion to dismiss
without prejudice to its renewal after further discovery. After fairly
extensive discovery, including depositions initiated by Coastal of various
witnesses in England, Tilghman again moved to dismiss, relying both on the
forum selection clause in the Tilghman-Farmer Norton contract and on the forum
non conveniens doctrine. Wheelabrator joined in the motion in a reply brief.
The bankruptcy court denied the Tilghman motion by an order dated November 9,
1981. Both Tilghman
and Wheelabrator applied to the district court, pursuant to 28 U.S.C.
§ 1334(b), for leave to appeal. The court granted such leave
on January 27, 1982, but only as to Tilghman. On May 27, 1982 the district
court granted Coastal’s motion to dismiss Wheelabrator as an appellant
and affirmed the order denying Tilghman’s motions, for reasons which
we address in Part IV.B infra. Tilghman and Wheelabrator moved the district
court to certify, pursuant to 28 U.S.C. § 1292(b) (1976),
that its order involved a controlling question of law as to which there is a
substantial ground for a difference of opinion and that an immediate appeal
might materially advance the ultimate termination of the litigation. The
district court denied that motion. Tilghman and Wheelabrator have both
appealed. II. Tilghman and
Wheelabrator originally relied for appellate jurisdiction, on 28 U.S.C.
§ 1291. The parties and this court recognized, however, that
the less than clear provisions of Pub.L. No. 95-598,
§§ 236-41, 405, 92 Stat. 2667-71, 2685 (1978),
respecting appealability of orders in civil proceedings related to cases under
Title 11, require this court to consider all possible sources of its authority
to review the orders in question. Coastal contends that they are entirely
unreviewable, while Tilghman and Wheelabrator urge that Congress could not have
intended to foreclose review of orders denying enforcement of forum selection
clauses or compelling litigation in inconvenient forums. The Northern Pipeline
decision presents a further complication, for it is now clear that the
bankruptcy court, the order of which the district court affirmed, does not have
jurisdiction over Coastal’s action against Tilghman and Wheelabrator.
If the district court has such jurisdiction, as Local Rule 47(C)(3) of the
District Court for the District of New Jersey appears to assume, we must
consider whether our jurisdiction under 28 U.S.C.
§§ 1651, 1291 or 1292 applies, or whether 28 U.S.C.
§ 1293 or 28 U.S.C. § 1471(d) governs. The
problem is not a simple one. A. If the case had
been before the district court as a section 1331 federal question or a [*194] section 1332 diversity case, we would
have jurisdiction under section 1292(a)(1). A motion to dismiss an action in
order to give effect to a forum selection clause is in practical effect an
application for specific performance of that contractual provision. It is
analytically indistinguishable from a motion to stay an action at law pending
arbitration. Grants or denials of such orders are reviewable under section
1292(a)(1). Shanferoke Coal & Supply Corp. v. Westchester Service Corp., 293 U.S. 449, 55 S.Ct. 313, 79 L.Ed.
583 (1935); Gavlik Construction Co. v. H.F. Campbell Co., 526 F.2d 777 (3d Cir.1975); Merritt-Chapman
& Scott Corp. v. Pennsylvania Turnpike Comm., 387 F.2d 768 (3d Cir.1967). Deferrals to
non-arbitral tribunals have been treated similarly. In re Unterweser
Reederei G.M.B.H., 428
F.2d 888 (5th Cir.1970), aff’d en banc, 446 F.2d 907 (5th Cir.1971),
vacated on other grounds sub nom. The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d
513 (1972); Alberto-Culver Company v. Scherk, 484 F.2d 611 (7th Cir.1973), rev’d on
other grounds, Scherk v. Alberto-Culver Co., 417 U.S. 506, 94 S.Ct. 2449, 41 L.Ed.2d 270
(1974). The Bremen and Scherk are the Supreme Court’s definitive
modern pronouncements on the enforceability of contractual forum selection
clauses. In each case the Supreme Court’s appellate jurisdiction was,
under 28 U.S.C. § 1254, derivative of the jurisdiction of the
court of appeals, and in each case that jurisdiction was predicated on section
1292(a)(1). Coastal
contends that because some of the relief requested was equitable rather than
legal, the Enelow-Ettelson [FN1] rule does not apply. We note that in The Bremen the underlying
suit was in admiralty and that in Scherk both legal and equitable relief was
requested. Thus it may well be that for purposes of reviewing interlocutory
decisions on enforceability of forum selection clauses pursuant to section
1292(a)(1), the Supreme Court no longer recognizes the artificial Enelow-Ettelson distinction. But see Cotler v. Inter-County Orthopaedic
Ass’n, 526
F.2d 537, 540-41 (3d Cir.1975); Rodgers v. United States Steel Corp., 508 F.2d 152, 160 (3d Cir.), cert.
denied, 423 U.S. 832, 96 S.Ct. 54, 46 L.Ed.2d 50 (1975). In any event, we have
examined the pleadings, and we conclude that whether on a contract or a tort
theory, what Coastal seeks is money damages for the alleged malfunctioning of a
machine. This is classic legal relief. Thus the appeal falls within the classic
Enelow-Ettelson formulation, assuming section 1292(a)(1) applies to proceedings
relating to bankruptcy. FN1. Enelow v. New York Life Ins. Co., 293 U.S. 379, 55 S.Ct. 310, 79 L.Ed.
440 (1935) (a stay of a legal action on a contract to hear and determine an
equitable fraud defense); Ettelson v. Metropolitan Life Ins. Co., 317 U.S. 188, 63 S.Ct. 163, 87 L.Ed.
176 (1942) (same). B. Tilghman and
Wheelabrator also urge that the orders are in any event appealable under
section 1291 as collaterally final. Appellate jurisdiction, even in a section
1331 or section 1332 case, is on this theory more problematical. Section 1291
permits review of “all final decisions of the district
courts,” and Fed.R.Civ.P. 54(b) provides that “any order or
other form of decision, however designated, which adjudicates fewer than all
the claims or the rights and liabilities of fewer than all the parties shall
not terminate the action … and … is subject to revision at
any time before the entry of judgment adjudicating all the claims and the
rights and liabilities of all the parties.” The orders here in
question fit literally within Rule 54(b). The Supreme Court has, however,
recognized that some orders which fall literally within Rule 54(b) are
nevertheless final for purposes of appellate review. The task of the lower
federal courts in identifying such orders has not been aided by the Court’s
propensity to treat as interchangeable cases arising from state courts under
section 1257 and from district courts under section 1291. [FN2] Its most recent
effort, [*195] on the federal side,
to instruct as to what orders are reviewable under section 1291 despite Rule
54(b) is Moses H. Cone Memorial Hospital v. Mercury Construction Corporation, 460 U.S. 1, 103 S.Ct. 927, 935, 74
L.Ed.2d 765 (1983), which reiterated the test for collateral finality announced
in Coopers & Lybrand v. Livesay>, 437 U.S. 463, 468, 98 S.Ct. 2454, 2457, 57
L.Ed.2d 351 (1978): FN2. See, e.g., Cox Broadcasting Corp. v. Cohn, 420 U.S. 469, 478- 82, 95 S.Ct. 1029,
1037-1039, 43 L.Ed.2d 328 (1975); North Dakota State Board of Pharmacy v.
Snyder’s Drug Stores, Inc., 414 U.S. 156, 159-62, 94 S.Ct. 407, 410-411, 38 L.Ed.2d 379 (1973);
Local 438, Construction & General Laborers’ Union v. Curry, 371 U.S. 542, 549, 83 S.Ct. 531, 536,
9 L.Ed.2d 514 (1963). To come within
the “small class” of decisions excepted from the final
judgment rule by Cohen [v. Beneficial Loan Corporation, 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed.
1528 (1949)], the order must conclusively determine the disputed question,
resolve an important issue completely separate from the merits of the action,
and be effectively unreviewable on appeal from a final judgment.
(1)
These are
considerations going to the merits of the case and requiring assessment of the
substantive issues in the litigation. Moreover, even when a trial court
misjudges a forum non conveniens claim, a reviewing court can, after final
judgment, ascertain the degree of prejudice and reverse. See United States v.
MacDonald, 435 U.S. 850, 859, 98 S.Ct. 1547, 1552, 56 L.Ed.2d 18 (1978)
(discussing post-trial review of speedy trial claim). Thus we do not believe
that the rejection of a forum non conveniens claim is reviewable as a
collaterally final order under section 1291. (2)
The more
difficult question is whether the third Coopers & Lybrand factor is
satisfied. In the Abney and Helstoski cases it was, because those cases
involved claims of absolute immunity from participation in the legal
proceedings in question, which could never be vindicated after final judgment.
See also Forsyth v. Kleindienst, 599 F.2d 1203 (3d Cir.1979), cert. denied, 453 U.S. 913, 101 S.Ct.
3147, 69 L.Ed.2d 997 (1981) (claim of absolute official immunity). The right to
specific performance of a forum selection clause is not absolute. Under the
Supreme Court’s formulation a court having subject matter jurisdiction
must weigh competing considerations in deciding on enforceability of such a
clause. If the party
asserting the applicability of the forum selection clause prevails on the
merits of the underlying dispute, however, an erroneous denial of its specific
performance will obviously escape review after final judgment. Moreover, if
that party should lose on the merits of the underlying dispute, it is not at
all clear that the forum selection clause would be an available ground for a
post-final judgment reversal. The trial would ordinarily have been held in a
court having jurisdiction, and a federal statute provides:
28 U.S.C.
§ 2105 (1976). This statute originated in section 22 of the
Judiciary Act of 1789 as a qualification to the appellate jurisdiction of both
the circuit courts and the Supreme Court over “final decrees and
judgments in civil actions … upon a writ of error….”
1 Stat. 73, 84. Thus it has never had any application to criminal cases, which
under the 1789 Act were not appealable after final judgment, [FN3] or in
appeals from state courts. [FN4] Moreover, since under the 1789 Act there was
no equivalent of section 1292(a) or (b), the qualification should have no
application to those subsequently enacted provisions. And since the 1789 Act in
section 14, 1 Stat. 73, 81, provided separately for the exercise of
discretionary review by common-law writs other than writs of error with no
similar qualification, section 2105 can have no application to the
discretionary interlocutory review provided for in the present equivalent of
section 14, 28 U.S.C. § 1651 (1976). Finally, when section
2105 was enacted there was no Cohen doctrine. Thus we think that the section
was originally intended to apply only to writs of error after a full trial, and
to prevent post-trial consideration of non-jurisdictional pleas in abatement.
Consistent with that purpose, it should not be held to be applicable to those
collateral matters not going to the merits of the underlying dispute which are
appealable to the courts of appeal by virtue of the Cohen? doctrine. The only
instance in which section 2105 can properly apply is in an appeal from a final
judgment after a trial on the merits. FN3. Roche v. Evaporated Milk Ass’n, 319 U.S. 21, 27 n. 3, 63 S.Ct. 938,
942 n. 3, 87 L.Ed. 1185 (1943). FN4. Buck Stove and Range Co. v. Vickers, 226 U.S. 205, 213, 33 S.Ct. 41, 42, 57
L.Ed. 189 (1912). In that context
the statute may well apply to an erroneous rejection of a claim that a forum
selection clause should have been enforced. Nineteenth century lawyers were
obviously better versed in the meaning of pleas in abatement than are we, since
Fed.R.Civ.P. 7(c) has abolished them in favor of motions. What is now included,
we suppose, are those non-jurisdictional motions which, if granted, would
result in the dismissal of an action without prejudice to its reconsideration when
refiled in another forum or in another pleading. See Bowles v. Wilke, 175 F.2d 35, 37-38 (7th Cir.), cert.
denied, 338 U.S. 861, 70 S.Ct. 104, 94 L.Ed. 528 (1949). A motion for specific
enforcement [*197]
of a forum
selection clause would seem to fit that mold. Such a motion is
non-jurisdictional and has no direct bearing on the merits of the underlying
dispute.
C. Sections 1291
and 1292(a)(1) afford appeals of right. In addition, 28 U.S.C.
§ 1651 (1976), vests in the courts of appeals authority to
issue writs in aid of their potential appellate jurisdiction. Unlike appeals
under sections 1291 and 1292(a)(1), however, the relief available under section
1651 is not a matter of right. It involves the exercise of discretion in the
appellate court in determining the appropriateness of interlocutory review of
the order in question. There is no time limit for the filing of a petition for
the relief available under section 1651, and thus there is no reason why this
court may not treat an attempted appeal as such a review. We have on occasion
done so. Cheney State College v. Hufstedler, 703 F.2d 732 (3d Cir.1983); Hackett v. General
Host Corp., 455 F.2d
618, 626 (3d Cir.), cert. denied, 407 U.S. 925, 92 S.Ct. 2460, 32 L.Ed.2d 812
(1972). See 9 Moore’s Federal Practice ¶ 110.28, at
316 (1982). Thus we clearly have the power under section 1651 to review both
the forum non conveniens ruling and the forum selection clause ruling, assuming
section 1651 applies to proceedings relating to bankruptcy. The question is
whether, under the discretionary rules which have been developed under that
section, that power should be exercised in given instances. 16 C.A. Wright,
A.R. Miller, E.H. Cooper & E. Gressman, Federal Practice and Procedure
§ 3932, at 206 (1977); see generally Berger, The Mandamus
Power of the United States Courts of Appeals: A Complex and Confused Means of
Appellate Control, 31 Buffalo L.Rev. 37 (1982). No authority has been called to
our attention which would preclude the exercise of discretion in favor of
pretrial review of either a forum non conveniens issue or a forum selection
clause issue. In a case where the trial court’s error is on either
issue egregious and the likely harm from delayed review serious we should
exercise such review. Obviously, then, the appropriateness of section 1651
interlocutory review to some extent involves consideration of the merits of the
challenged ruling. But we hold that if section 1651 applies to proceedings
relating to bankruptcy we have discretionary power under that section to review
both challenged rulings. III.
(a) The courts of appeals shall have jurisdiction
of appeals from all final decisions of panels designated under section 160(a)
of this title.
Because in this
circuit no panels have been designated under section 160(a), and in this case
the parties did not consent to a direct appeal to the court of appeals, only
the italicized language of section 1293(b) is relevant; “a court of
appeals shall have jurisdiction of an appeal from a final judgment, order, or
decree of … a District Court of the United States….”
That language must be read in conjunction with the section governing appeals
from bankruptcy courts to district courts: (a) The district courts for which panels have not
been ordered appointed under section 160 of this title shall have jurisdiction
of appeals from all final judgments, orders, and decrees of bankruptcy courts.
FN5. The provisions governing appeals to panels
designated pursuant to section 160(a) are essentially identical. 28 U.S.C.
§ 1482 (Supp. V 1981).
FN6. In re Bildisco, 682 F.2d 72 (3d Cir.1982), cert. granted sub nom.
NLRB v. Bildisco and Bildisco, 459 U.S. 1145, 103 S.Ct. 784, 74 L.Ed.2d 992 (1983), does not
discuss appellate jurisdiction, but appears to have involved an appeal from a
matter which was before the district court under section 1334(a). Local Rule
47(C)(3). Since the purpose of this provision is to meet the constitutional
deficiencies recognized in Northern Pipeline, it is plain that orders entered
in related proceedings must be considered orders of the district courts, not of
the bankruptcy courts. They will not fall within section 1334, and thus will
not be governed by section 1293. As orders of the district court they will be
governed by sections 1291, 1292 and 1651. Indeed in this case all future orders
must, under Local Rule 47(C)(3), be entered by the district court.
FN7. The
evolution of section 1293 is complex. The original bankruptcy code bill, H.R.
8200, which passed the House on February 1, 1981, 124 Cong.Rec. H. 478 (daily
ed. Feb. 1, 1978), made bankruptcy courts article III courts and provided for
appeals to the courts of appeals under sections 1291 and 1292. H.R. 8200, 95th
Cong., 1st Sess. §§ 237, 238 (1977). Under the
original version of the Senate bill, S. 2266, appeals were routed through the
district courts, and no reference was made to the jurisdiction of the courts of
appeals. The Report of the Senate Judiciary Committee on S. 2266 observed that
section 1291 governed such appeals. S.Rep. No. 989, 95th Cong., 2d Sess. 18
(1978), U.S.Code Cong. & Admin.News 1978, p. 5787. The Senate approved S.
2266 on September 7, 1978. 124 Cong.Rec. S14745 (daily ed. Sept. 7, 1978). As
enacted the Bankruptcy Code resulted from a compromise between the
Senate and House floor managers of the legislation, and it is in this bill
that what is now section 1293 first appears as section 236(a). In its original
version, section 236 merely addressed court of appeals jurisdiction over orders
of the bankruptcy courts and panels. The only discussion of the section is as
follows: An appeal from
a decision of a bankruptcy court will be taken to the district court of the
district within which the bankruptcy court is located, unless the circuit
council of the circuit in which the bankruptcy court is located orders appeals
to be taken to a panel of bankruptcy judges comprised of three bankruptcy
judges, or both parties by agreement agree to proceed directly to the circuit
court of appeals of the circuit in which the bankruptcy court is located. The
subject of appeals is dealt with in sections 201, 236, 237, 238, 240, and 241
of title II of the House amendments which in turn create provisions in sections
136, 1293, 1294, 1334, 1408, and 1482 of title 28 implementing the previously
described system of appeals. 124 Cong.Rec.
H11107 (daily ed. Sept. 28, 1978). The additional reference to review of
district court orders was made on the Senate floor without explanation or
discussion. 124 Cong.Rec. H11865-67 (daily ed. Oct. 6, 1978). Thus for all
practical purposes there is no legislative history for the section. One
commentator, describing the appeal provisions of the Bankruptcy Code as
“nearly incomprehensible,” suggests three alternative
readings of section 1293. 16 C.A. Wright, A.R. Miller, E.H. Cooper & E.
Gressman, Federal Practice and Procedure § 3926, at 38-43
(Supp.1983). Another commentator suggests that in the absence of a specific
reference courts should not attribute to Congress an intention to supercede
section 1292 in bankruptcy cases. Kennedy, The Bankruptcy Court Under the New
Bankruptcy Law, 11 St. Mary’s L.J. 251, 292-93 (1979). Nowhere in the
Congressional Record or in the bills which either house of Congress considered
is there any reference to section 1651. Given the
enormity of the change in law which would bar all court of appeals and Supreme
Court review of interlocutory orders in bankruptcy cases, and the complete
absence of discussion of such a change, we are not ready to assume without
critical analysis that those courts which have held such review to be barred
are correct. See In re Regency Woods Apartments, Ltd., 686 F.2d 899, 901 (11th Cir.1982); In
re Riddervold, 647 F.2d
342, 343 (2d Cir.1981); In re Continental Investment Corp., 637 F.2d 1, 3 (1st Cir.1980). Our holding
that orders entered in proceedings relating to bankruptcy are district court
orders reviewable pursuant to sections 1291, 1292 and 1651 is necessarily predicated
on the tacit assumption that despite Northern Pipeline the grant of district
court subject matter jurisdiction in section 1471(b) survives. We find nothing
in the Northern Pipeline opinions suggesting otherwise. Indeed the Northern
Pipeline holding that
article III judges must exercise the related proceedings jurisdiction rests on
the assumption that the jurisdictional grant is operative. Thus Local Rule
47(C)(3) which provides for the continued exercise of section 1471(b)
jurisdiction by the district courts is consistent with the Bankruptcy Code and
the Northern Pipeline decision. Subsection (b)
or (c) of this section does not prevent a district court or a bankruptcy court,
in the interest of justice, from abstaining from hearing a particular
proceeding arising under title 11 or arising in or related to a case under
title 11. Such abstention, or a decision not to abstain, is not reviewable by
appeal or otherwise. [6] Since we
clearly have jurisdiction under section 1292(a)(1) to review the order denying
the Tilghman-Wheelabrator motion to enforce the forum selection clause, since
that order is also reviewable as a collaterally final order under section 1291,
and since we can under section 1651 consider the propriety of the denial of a
motion to dismiss on forum non conveniens grounds, Coastal’s motion to
dismiss the appeal will be denied. IV.
A. The Forum
Selection Clause
(1) Policy of
the Forum
(2)
Unreasonableness Under the Circumstances The first
circumstance relied on by the district court in support of the conclusion that
enforcement of the forum selection clause is Coastal’s claimed status
as a third-party beneficiary with the Tilghman-Farmer Norton contract. The
court reasoned that in The Bremen the clause was enforced in order to leave the
parties to their bargain, whereas Coastal was not a participant in the
Tilghman-Farmer Norton bargain. Coastal Appendix, Exhibit J, at 9-10. The
Bremen Court did refer
to the policy of noninterference with a freely negotiated contract. 407 U.S. at
12, 14, 16, 17, 92 S.Ct. at 1914, 1915, 1916, 1917. The primary rationale of
that Court, however, and of others which have enforced forum selection [*203] clauses, is that those clauses promote
stable and dependable trade relations. Id. at 8-9, 13-14, 92 S.Ct. at 1912- 1913, 1914-1915.
Introducing into the common law of enforceability of forum selection clauses a
third-party beneficiary exception would be inconsistent with that rationale. It
would, moreover, be inconsistent with the law of contracts, which has long
recognized that third-party beneficiary status does not permit the avoidance of
contractual provisions otherwise enforceable. See, e.g., Trans-Bay Engineers
and Builders, Inc. v. Hills,
551 F.2d 370, 378 (D.C.Cir.1976); Process and Storage Vessels, Inc. v. Tank
Service, Inc., 541
F.Supp. 725, 733 (D.Del.1982). Coastal chose to do business with Farmer Norton,
an English firm, knowing that Farmer Norton would be acquiring components from
other English manufacturers. Thus it was perfectly foreseeable that Coastal
would be a third-party beneficiary of an English contract, and that such a
contract would provide for litigation in an English court. Reliance on
Coastal’s third-party beneficiary status as a reason for disregarding
such a clause was an error of law. The second
circumstance relied on by the district court for denying enforcement is that
Coastal has asserted tort claims as well as contract claims, and that the forum
selection clause is inapplicable to the former. The difficulty with this
reasoning is that it ignores the reality that the Tilghman-Farmer Norton
contract is the basic source of any duty to Coastal. There is no evidence
suggesting that the clause was not intended to apply to all claims growing out
of the contractual relationship. If forum selection clauses are to be enforced
as a matter of public policy, that same public policy requires that they not be
defeated by artful pleading of claims such as negligent design, breach of
implied warranty, or misrepresentation. Coastal’s claims ultimately
depend on the existence of a contractual relationship between Tilghman and
Farmer Norton, and those parties bargained for an English forum. We agree with
those courts which have held that where the relationship between the parties is
contractual, the pleading of alternative non-contractual theories of liability
should not prevent enforcement of such a bargain. See Bense v. Interstate
Battery System of America, Inc., 683 F.2d 718 (2d Cir.1982) (franchise agreement with forum selection
clause and antitrust claim); Gordonsville Industries, Inc. v. American Artos
Corp., 549 F.Supp. 200
(W.D.Va.1982) (contract for industrial installation with forum selection clause
and state law design defect, negligence, and warranty claims); Hoes of America,
Inc. v. Hoes, 493 F.Supp. 1205 (C.D.Ill.1979) (distributorship agreement with
forum selection clause and state law business tort claim). Reliance on the new
contract claims as a reason for disregarding the forum selection clause was on
this record improper. A third
circumstance relied on by the district court for denying enforcement is the
presence in the case of Wheelabrator, an American corporation. But while it
would be inconvenient for Coastal to have to proceed in two separate forums
against the separate defendants, in this instance Coastal does not face that
problem. Wheelabrator has agreed to submit to the jurisdiction of an English
court. Moreover Wheelabrator’s only significant status in the case is
as Tilghman’s parent. The pleadings suggest that Wheelabrator did some
work on the blast unit on Tilghman’s behalf, but they do not suggest
that this work, separately, caused for Coastal’s losses. Thus reliance
on Wheelabrator’s presence in the case as a ground for requiring that
Tilghman litigate in New Jersey was on this record improper. The district
court also alluded to the large amount of potential evidence in this country.
Neither court found expressly that an inspection of the plant would be
required, however, and the depositions on file show that Coastal has examined in
England a number of English witnesses. Under The Bremen formulation the party
objecting to enforcement of a forum selection clause has the burden of
establishing the unreasonableness of such enforcement. In this case
Coastal’s showing is in our view legally insufficient. The
availability of witnesses [*204] is a problem in either jurisdiction, but
an insurmountable problem in neither. That factor appears to us essentially in
equipoise. The only additional factor Coastal alludes to is the supposed difficulty
of obtaining counsel in England. Tilghman has the same problem here.
(3) Other
Contentions We conclude,
therefore, that none of the reasons relied on by either the bankruptcy court or
the district court for denying the motion for enforcement of the forum
selection clause is legally sufficient. Coastal advances two others. The first
is that Wheelabrator filed a proof of claim in the bankruptcy proceeding, and
in so doing, waived any objection it or Tilghman might have to the exercise of
jurisdiction under section 1471(b) in New Jersey. We know of no authority
supporting the proposition that the filing of a proof of claim is a waiver of
the provisions of a forum selection clause. The second is that by virtue of the
provisions of the confirmed Plan of Reorganization, which retained jurisdiction
over the Tilghman-Wheelabrator case, the defendants are barred by res judicata
from objecting to trial in the bankruptcy court. The confirmed Plan plainly did
not adjudicate anything respecting the instant dispute. Thus, both contentions
are entirely without merit. The Tilghman-Wheelabrator motions to dismiss the
complaint so as to enforce the forum selection clause should in this case have
been granted. V. Because we hold
that the forum selection clause should have been enforced, the forum non
conveniens ruling need not be addressed in detail. It suffices to note that
since there are inconveniences associated with the trial of the underlying
dispute in either forum, we probably could not hold that the bankruptcy court
committed an abuse of discretion in denying the motion to dismiss on that
ground. VI. Coastal’s
motion to dismiss the appeal will be denied. The order affirming the bankruptcy
court’s denial of the Tilghman-Wheelabrator motion will be reversed,
and the case remanded to the district court for the entry of an order, pursuant
to Local Rule 47(C)(3), dismissing Coastal’s complaint on appropriate
conditions with respect to Wheelabrator’s appearance in an English
court, and with respect to waiver of any statute of limitations problem. See MacLeod
v. MacLeod, 383 A.2d 39
(Me.1978) (forum non conveniens dismissal conditioned on consent to have action
in another court deemed commenced on date of original action). ROSENN, Circuit
Judge, concurring. Like the
majority, I believe that this case should be tried in the English courts in
accordance with the forum selection clause in the Tilghman-Farmer Norton
contract under which Coastal Steel claims third-party beneficiary status. I
therefore join in the majority’s discussion of the merits and
disposition of the case. I write separately, however, because I fear that the
majority, in struggling to find a basis for appellate jurisdiction in this
case, has employed an analysis that leaves in disarray doctrines of
appealability that are firmly established in the law of this circuit.
I.
The majority
finds that appellate jurisdiction is proper under sections 1291, 1292(a), and
1651. The most serious obstacle to this conclusion is Coastal’s
argument that, because this is an appeal from an action related to a bankruptcy
proceeding, none of these three sections applies, and that instead we must
determine whether we have jurisdiction solely in terms of the special
requirements of section 1293, which is in effect during the transition period
under the Bankruptcy Reform Act of 1978. Pub.L. No. 95-598, 95 Stat. 2549. The
majority disingenuously manages to avoid this problem. Moreover, even assuming
that it is appropriate to evaluate this case with reference to the standards
for appealability of ordinary (non-bankruptcy) civil matters, I am certain that
jurisdiction does not exist under section 1292, and I have grave doubts as to
the applicability of sections 1291 and 1651. A.
Coastal argues
that this section totally preempts sections 1291, 1292, and 1651, and that if
the order in this case is appealable, it must be in accordance with section
1293. Although sections 1292 and 1651 authorize interlocutory review in certain
types of civil cases, section 1293 by its terms limits appellate jurisdiction
to a “final judgment, order, or decree” of a district court
or a bankruptcy court. Therefore, if section 1293 is indeed the exclusive route
to the court of appeals in bankruptcy cases, Tilghman’s appeal cannot
be heard unless the decision below was “final.”
First, the
majority’s analysis involves a novel extension of the retroactive
effect of Northern Pipeline. To prevent the havoc that would have ensued if
actions taken by bankruptcy judges in good faith reliance on the statutory
scheme were suddenly invalidated, the Court declared that its holding of
unconstitutionality would not be retroactive. In the face of that recent
unequivocal holding, the majority asserts that there is no reason not to apply
the Northern Pipeline decision retroactively to this case, reasoning that since
Coastal’s claims have yet to be tried, there will be no hardship to
the parties in invalidating the actions taken by the bankruptcy court. But it
cannot be doubted that the Supreme Court, in deciding Northern Pipeline, must have contemplated the possibility
that in some cases a holding of retroactivity would cause little hardship or
injustice, but nevertheless believed that in a substantial number of cases
justice would not be served by making the decision retroactive. No legal basis
justifies the majority’s decision to embrace
“selective” retroactivity.
FN1. This problem demonstrates precisely why the
Supreme Court must have elected not to make its Northern Pipeline decision
retroactive. In the wake of that decision, it was relatively easy for the
federal district courts to adopt local rules for the processing of future
bankruptcy cases. But there was no way for the federal judiciary to validate
retroactively those bankruptcy court orders entered prior to Northern
Pipeline and appealed
to the district courts under 28 U.S.C. ¤ 1334(b). To prevent these orders from
being suddenly invalidated, the Court had no choice but to make its decision
nonretroactive. I have elected
not to make its Northern Pipeline decision retroactive. In the wake of that
decision, it was relatively easy for the federal district courts to adopt local
rules for the processing of future bankruptcy cases. But there was no way for
the federal judiciary to validate retroactively those bankruptcy court orders
entered prior to Northern Pipeline and appealed to the district courts under 28
U.S.C. § 1334(b). To prevent these orders from being suddenly
invalidated, the Court had no choice but to make its decision nonretroactive.
FN2. I recognize that, as the statute is written,
Congress apparently did not expect the district courts to exercise jurisdiction
under 1471(b), as section 1471(c) appears to require that bankruptcy-related
cases be brought first in a bankruptcy court. See Northern Pipeline, supra, 102 S.Ct. at 2862. Congress may have
expected that section 1293(b) would be used in conjunction with section 1334.
But I do not believe we can conclude that Congress intended section 1293 not to
apply in conjunction with section 1471. I fail to see
why Congress’ attitude toward interlocutory appellate review in
proceedings relating to bankruptcy would depend on whether the order originated
in the bankruptcy court or in the district court. If section 1293(b) is indeed
“a comprehensive and exclusive schema for jurisdiction of bankruptcy
appeals,” In re Marin Motor Oil, supra, 689 F.2d at 447-48, then our
review under the statute would be limited to final orders of the district
courts.
FN3. Technically, of course, section 1291 appellate
jurisdiction would also be unavailable. However, section 1291 itself contains a
finality requirement, and several courts, including our own, have grafted onto
section 1293(b) the qualifications on the finality rule that have been
developed by the courts under 28 U.S.C. § 1291. See In re
Marin Motor Oil, Inc., supra; In re Regency Woods Apartments, Ltd., 686 F.2d 899, 902 (11th Cir.1982); In re
Callister, 673 F.2d
305, 306 (10th Cir.1982). B. Having dealt
with the formidable obstacle presented by 28 U.S.C. § 1293(b)
in an unsatisfactory manner, the majority concludes that we have jurisdiction
over this appeal pursuant to both 28 U.S.C. § 1292 and 28
U.S.C. § 1651. Assuming that it is proper to look to these
two sections as authority for jurisdiction over interlocutory [*208] bankruptcy appeals, neither section
provides a basis for our review. The requirements of section 1292(a) cannot be
met, notwithstanding the strained analogies the majority employs. And I have
considerable doubts whether this is a proper case for review by mandamus. 1. Section
1292(a) and the Enelow-Ettelson Doctrine
Moore’s
Federal Practice, supra, at 240. But in numerous other seemingly similar
situations the rule has not been applied. For example, an order granting or
denying a stay of litigation pending administrative agency action is not
appealable under the Enelow-Ettelson rule. Allied Air Freight, Inc. v. Pan American
World Airways, Inc.,
340 F.2d 160, 161 (2d Cir.), cert. denied, 381 U.S. 924, 85 S.Ct. 1560, 14 L.Ed.2d
683 (1965). Moreover, when a district court stays an action pending before it
to await developments in another action previously commenced involving the same
issues, or to compel the parties to bring a separate court action, the Enelow-Ettelson rule is inapplicable. See 9
Moore’s Federal Practice, supra, at 251.
FN4. The majority suggests that appellate
jurisdiction in the instant case rests on the same basis as appellate
jurisdiction in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d
513 (1972), and Scherk v. Alberto-Culver Co., 417 U.S. 506, 94 S.Ct. 2449, 41 L.Ed.2d 270
(1974). This is not correct. Both Scherk and Bremen involved motions to stay
the proceedings pending the termination of ongoing proceedings elsewhere, and
in both of these cases the district courts had enjoined the defendants from
further participation in the proceedings in the other forum. Thus, these cases
were appealable under 28 U.S.C. § 1292(a) as orders granting
injunctions, totally apart from the Enelow- Ettelson rule. 2. Section 1651
and Mandamus The majority
also relies on 28 U.S.C. § 1651 as a basis for interlocutory
review in this case. This section gives the courts of appeals discretionary
power to issue writs in aid of their potential jurisdiction. I do not disagree
with the majority’s holding that we can sua sponte invoke our
discretionary power under section 1651. But I am not convinced that, under the
law of this circuit, this case is appropriate for mandamus.
Our circuit has
shown considerable unwillingness to use mandamus to review district court
decisions on motions to transfer venue. There is little doubt that mandamus is
available in cases where the district court was “patently in error
with respect to its power to transfer … or simply refused to consider
the merits of the transfer request.” 9 Moore’s Federal
Practice, supra, at 176. But where the district court does consider the merits
of the transfer motion, we have held that mandamus is not available to review
the contention that the district court abused its discretion. In All States
Freight, Inc. v. Modarelli,
196 F.2d 1010 (3d Cir.1952), we explained, Every litigant against whom the transfer issue is
decided naturally thinks the judge was wrong. It is likely that in some cases
an appellate court would think so, too. But the risk of a party being injured
either by the granting or refusal of a transfer order is, we think, much less
than the certainty of harm through delay and additional expense if these orders
are to be subjected to interlocutory review by mandamus. Id. at 1012. This restrictive view still
prevails. See Wood v. Zapata Corp., 482 F.2d 350, 357 (3d Cir.1973); Solomon v.
Continental American Life Insurance Co., 472 F.2d 1043 (3d Cir.1973). The Supreme Court
has also indicated that mandamus is not an appropriate way to review
allegations of abuse of discretion. See Will v. Calvert Fire Insurance Co., 437 U.S. 655, 98 S.Ct. 2552, 57
L.Ed.2d 504 (1978); Parr v. United States, 351 U.S. 513, 520, 76 S.Ct. 912,
917, 100 L.Ed. 1377 (1956). The instant
case falls squarely within the rationale of All States Freight. Both the bankruptcy court and the
district court examined the factors relevant to the decision whether to dismiss
the case on account of the forum selection clause, or on forum non conveniens
grounds. The issue on appeal is whether these courts made a correct assessment
of these factors. This is the kind of judgment that under our cases cannot be
reviewed by means of section 1651. C. Section 1291 of
Title 28 pertains to review of final decisions of the district courts. As noted
above, although this provision technically may not be applicable to proceedings
in bankruptcy, judicial interpretations of the finality requirement under
section 1291 have been applied to section 1293. The majority relies on the
so-called collateral order doctrine in finding that the district
court’s order is final and therefore reviewable under section 1291. I
am not convinced that this order possesses the necessary elements of collateral
finality to bring it within that doctrine of appealability.
To come within the “small class”
of decisions excepted from the final- judgment rule by Cohen, the order must
conclusively determine the disputed question, resolve an important issue
completely separate from the merits of the action, and be effectively
unreviewable on appeal from a final judgment.
The majority
acknowledges that, in determining whether to enforce a forum selection clause,
the court must refer to the merits of the underlying dispute. In order to rule
on Tilghman’s motion to dismiss, both the bankruptcy court and the
district court had to decide whether enforcement of the forum clause would be
unreasonable or unjust. This depended on whether trial in the contractual forum
would be “so gravely difficult and inconvenient” as
effectively to deny Coastal Steel its day in court. See The Bremen v. Zapata
Offshore Co., 407 U.S.
1, 18, 92 S.Ct. 1907, 1917, 32 L.Ed.2d 513 (1972). This inevitably required the
bankruptcy court and the district court to plunge into the merits in order to
determine what items of evidence would likely be probative in the case and
where that evidence was located, as well as to make judgments concerning the
potential hardship to each party of trial in the other’s preferred
forum. For example, the motion required the court to balance the materiality of
the testimony to be given by the witnesses located in England against the
materiality of the testimony of witnesses in the United States. [FN5] In this
regard, the question of whether the forum selection clause should be enforced
is identical to the forum non conveniens issue: both issues would require us to
consider the merits of the underlying dispute in order to identify the
practical problems facing the parties in each potential forum. FN5. Similarly, an inquiry into the merits was
essential in order to determine whether an inspection of the blast
equipment located in New Jersey would be such a central part of the evidence on
the underlying contract claim that it justified disregarding the forum clause
of the agreement.
FN6. In addition, it should be pointed out that the
majority has implicitly assumed that 28 U.S.C. § 2105 applies
only to writs of error after a full trial, not to appeals from collateral
orders issued prior to trial. There is nothing in the language of the statute,
nor in the scant authority on this section, that so limits its application. It
would seem to me that if this statute does limit our review of final orders, as
the majority suggests, it makes no difference whether the order was final
because the case had been fully disposed of or final because it fell
under the collateral order doctrine. II. I understand
fully the laudable reasons that motivate the majority in reaching the merits of
this appeal and I share them. We are constrained, however, as a court of law,
by statutory and judicial principles that regrettably do not permit us to apply
the narrow collateral order doctrine, section 1292(a), or section 1651. But we
can exercise appellate jurisdiction in this case on a straightforward basis
under the rule of Gillespie v. United States Steel Corp., 379 U.S. 148, 85 S.Ct. 308, 13
L.Ed.2d 199 (1964). Gillespie established that a court of appeals may review an order which is
within the “twilight zone of finality,” even though not
[*213] strictly within 28 U.S.C.
§ 1291, where the circumstances warrant appellate review.
Explaining that the finality requirement was to be given a “practical
rather than a technical construction,” id. at 152, 85 S.Ct. at 310 (quoting Cohen
v. Beneficial Industrial Loan Corp., supra, 337 U.S. at 546, 69 S.Ct. at 1225), the Court
said in Gillespie
that
379 U.S. at
152-54, 85 S.Ct. at 310-312. The rationale of Gillespie has been relied upon by the courts of
appeals to justify jurisdiction in appropriate cases. See, e.g., Ingalls
Shipbuilding Division v. White, 681 F.2d 275 (5th Cir.1982); United States v. Mississippi Power
& Light Co., 638 F.2d 899 (5th Cir.), cert. denied, 454 U.S. 892, 102 S.Ct.
387, 70 L.Ed.2d 206 (1981); Wescott v. Impresas Armadoras, S.A. Panama, 564 F.2d 875 (9th Cir.1977).
III. I join in parts
IV and V of the majority’s discussion of the merits of the appeal. I
also join in its disposition of the case as set forth in part VI.
|