# Petition for Writ of Certiorari — Richards v. Lloyd's of London > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386006_1480%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1998 - **Citation:** 525 U.S. 943 ## Text ps Supreme Court, vg fi} FILED = € 3 9ZLZ79 mys 1998 No. 97- OFFICE OF THE CLERK IN THE Supreme Court of the United States OCTOBER TERM, 1997 ALAN RICHARDS, ET AL., JOHN R. NORTON, III, ET AL., y Petitioners, LLOYD’S OF LONDON, AN UNINCORPORATED ASSOCIATION, ET AL., Respondents. On Petition for a Writ of Certiorari to the United States Court of Appeals for the Ninth Circuit PETITION FOR WRIT OF CERTIORARI Stephen A. Kroft Eugene I. Goldman Counsel of Record Robert E. Kohn McDermott, Will & Emery McDermott, Will & Emery 2049 Century Park East 600 13th Street, N.W. Los Angeles, CA 90067-3208 Washington, DC 20005-3096 (310) 277-4110 (202) 756-8000 Counsel for Petitioners i QUESTIONS PRESENTED FOR REVIEW 1. Whether courts may create a judge-made exception to the unambiguous anti-waiver provisions of the federal securities statutes in order to enforce contractual forum-selection and choice-of-foreign-law clauses that, in tandem, operate to waive compliance with the federal securities laws by foreign enterprises in connection with their offer and sale of securities in the United States? 2. Whether, quite apart from the securities anti-waiver statutes, public policy permits a foreign party to enforce contractual forum-selection and choice-of-law clauses that prospectively waive the statutory remedies of United States residents for federal securities law and RICO violations committed by the foreign party in the United States? 3. Whether a district court may enforce contractual forum-selection and choice-of-law clauses that a defendant inserted in the contract for the purpose of insulating itself from claims under United States law for its fraud in obtaining millions of dollars of plaintiffs’ investment capital? ‘3 LISTING OF PARTIES I. Parties on Petition for Certiorari A. Petitioners from Richards, et al. v. Lloyd’s of London, et al., No. 95-55747 (9th Cir.) Alan Richards Emil R. Borgers John Hillel Abeles Daniel E. Boyle, Jr. Carl H. Almond Patricia A. Boyle Kirk A. Anderson Charles M. Brady Edith Anthoine Frank J. Brinkman V. Snowden Armstrong _ Walter T. Bross C.L.G. Ashby Bernard M. Brown Howard Asher Charles B. Brown Drew N. Bagot Marilyn E. Brown Joseph Edward Baird James Edgar Broyhill Alan L. Baker Irvin L. Burke A. Verne Ballard Garrett Steven Butler Norman Clifford Barnhart John David Butler Joseph Barth Raymond Thompson Butler Hope Bassett Thomas J. Butler Lynn Hope Bassett Grant R. Caldwell Sterling Bassett John T. Calvello Elizabeth S. Bencsics Alexandra E. Carter Wallace Reed Bennett John A. Carter Alfred J. Berger, Jr. Julie M. Carter : Christy S. Berkos Stephen E. Carter James E. Bertelsmeyer Thomas George Chase, Jr. Charles W. Bila John J. Cirigliano Hal Oscar Binyon, III Harry Jackson Clark John E. Binyon William J. Cleary, Jr. Albert Rolfe Black Boris Cohen Dorothy Jean Wade Black Thomas H. Collins Maureen A. Black Elizabeth Simonds Cook Robert C. Blackwell Shirley M. Cook Gregory P.B. Boardman Paul Russell Cory siti Daniel F. Coughlin John M. Courtney Dale W. Cox John C. Danloe Patricia A. Danloe Charles C. De Bruler Donald D. Decenso James R. Dickson, Jr. L.I.M. L. Dilaurenti David Dolgenos Robert H. Duenner, Jr. Albert W. Dugan Lydia Ann Pate Dugan C. Edward Dunn Thomas N. Durdin Minna J. Edelman Albert T. Ehringer Ann Graham Ehringer L. James Ellsworth Austin Harold Evans Arlene J. Fisher Mary O. Floyd Vaun T. Floyd Janet Voth Foote Robert S. Forman T. Lewis Fowler, Jr. H.G. Frost, Jr. Robert W. Fuerst Calvin P. Gaddis Joseph Melvin Gagliardi Charles M. Gaitz J.P. Garlington, Jr. Thomas D. Gettler David L. Gillette Patrick G. Gleeson Leonard A. Goodman, Jr. Marvin Goodson iii Katherine B. Goodwin Harry W. Gorst Carolyn M. Grace Lorraine G. Grace Oliver R. Grace, Jr. Fred G. Graeber Francis William Seafield Grant J. Allen Gray Jack D. Gray Michael Green Milton Jere Green Robert K. Greenfield Jack P. Gross Kenneth Gross Todd Gross Sterling N. Hamill John W. Handy Wells P. Hardesty Hord Hardin, II Clay Daulton Hatch Thomas J. Hawkin Elizabeth Drane Haynsworth Stuart G. Haynsworth William Guy Heckman Robert M. Heidenrich John Robert Hertel Robert F. Hetzel James Milton Higbee Morris Himmel Barth Hoogstraten Roger W. House James M. Huebner Page Hufty a.k.a. M.R. Page Hufty or M.R.P. Hufty Page Lee Hufty Richard F. Hull Carey Lee Hyatt, personal representative for Estate of William C. Snyder, Jr. Lloyd E. Innerarity George Jackson Howard Johnson H. Gilbert Jones Maxwell Kaufer Patrick J. Kearney Daniel G. Keating Charles James Keenley Stephen F. Keller George Kemble Dennis J. K.snny Judith P. Kenny William Dobson Kilduff Frederick L. Kitchens Walter A Klein Roger A. Kozberg Ronald E. Krebs James R. Kruse E. Michael Lallinger Jane E. Lamb Clifford P. Lane Stewart F Lane Albert W. Lawrence James C. Lawson Richard B. Leavitt Raymond C. Lee Francis Hufty Leidy Elizabeth M. Levy Mark I. Levy Frank FS. Lin Thomas O. Lind Donn H. Lipton Edwin Robert Loder Jeanne Long Robert Kramer Lowry Ann S. Lucas Herbert Lester Lucas, Jr. John Clark Lucas William Boughton Lucas Richard D. Lueker Lloyd Lynd, Jr. Barbara Lyons Janis L. Macmillan Thomas E. Malone Lawrence R. Marlborough Donald D. Martin Willa H. Martin Steven A. Marx Meade M. McCain, Jr. William E. McCaleb William Joseph McClendon Patricia McFate-Johnson Martin E. McGonagle James A. McKellar James A. McKellar, Jr. Richard Donnel McKenzie Timothy R. McLaughlin Paul Wilson McMullan John W. McMurray Allison R. Mercer Koppel Miller James R. Modrall, II Glenna Sue Killiam Moore Joe Farnham Moore John Jude Moran Robert H. Morgan Charles Edward Morris Robert M. Morton Edward Wallace Muir J. Edmond Mullin Patricia B. Murray Richard W. Neu Cynthia K. Norris John Phelps Norton Bettye Cypert Nowlin Wade Taylor Nowlin John E. O’Donnell Lawrence W. O'Neill Charles W. Ott Scott Patten Kent B. Petersen Henry Jack Pfleger, Jr. James Robert Phillips John B. Piphorn John Poley James N. Price Nelda A. Price Royce Neil Price Peter C. Reeves William N. Reib Richard A. Reinhart Harold Gene Richardson Ronald H. Riley Richard Rinella Robert J. Riordan Robert Risher Harry C. Roach Eric W. Roberts Raymond Rosenberg Richard D. Rosenblatt Bess Rubin Jacqueline Rubin Corrina Rucka N. Michael Rucka Charles C. Rush Gregory J. Salko Arthur Schechner Barbara L. Schornack John J. Schornack Donald Schupak lan A. Shapiro John J. Shea Lynda M. Shea John F. Shettle, Sr. Gillian Siemon-Netto Uwe Siemon-Netto Stephen H. Sills Joseph H. Silversmith, Jr. G. Gregory Smith Margaret V. Smith Philip C. Smith William D. Sosby Jared Walter Sparks Harmon S. Spolan Philip M. Sprinkle Forney B. Stafford Harry Christopher Starkey Charles D. Statton Gilchrist B. Stockton, Jr. Christopher Edmund Visurs Stockwell John Herbert Sullivan Robert B. Sumerel Warren Martin Swanson Robert Lynn Swisher Mary Jacqueline Taylor Sharon V.F. Taylor Naomi Thomas Robert Thomas, III Terence W. Thomas Ruthann Tilsley Thomas W. Tilsley Cynthia J. Todorovich vi Michael B. Todorovich E. Pomeroy Williams Linda K. Treitel George Joseph Williams Percy R. Turner Jean Trudgeon Williams John P. Van DenBurgh Stephen J. Wilsey H.S. John Webb, III Aubrey Linn Wilson Eugene S. Wetmore Joan Burch Wilson Richard James Whiteside Mary M. Wohlford Earl D. Whittemore Theodore F. Wolff John H. Wiggins James F. Young Grant Wilkins Wilson M. Zildjian David Samuel Williams Kenneth J. Zimmerman B. Petitioners from Norton, et al. v. Lloyd’s of London, et al., No. 95-56467 (9th Cir.) John R. Norton, III James H. Kayian Delmar A. Brady Joanne S. Kayian-Olooney Samme Jo Brady Suzanne Kayian Robert Flesvig Francis J. Milc~ Michael C. Hirsh Doris S. Norton Harold Franz Ilg Ray Morse Sanderson R. William Johnston Warren G. Vander Voort C. Respondents Liloyd’s of London, an unincorporated association; Corporation of Lloyd’s, a.k.a. Society of Lloyd’s, a.k.a. Society and Council of Lloyd’s. Il. Additional Parties in the Proceedings Below A. Parties from Richards, et al. v. Lloyd’s of London, et al., Mo. 95-55747 (9th Cir.) S. Acquafredda Frank A. Baer, II Herbert Allen Ian S. Baker Laurance Hearne James W. Bayless Armour, Jr. Angela Brooke Beauchamp Michael John Beauchamp Ralph Bendhem Helen G. Bennett Herbert Berkeley Eileen Bidwell Roy W. Bidwell Mads B. Bjerre William E. Blackaby Allan S. Blank Andrew D. Blank Charlotte S. Blank Debbie Jo Blank John L. Blaustein Julian Blaustein (Dec’d) Max Blumberg Jarold W. Boettcher Andrew C. Bossom Gordon D. Boyd Llewellyn Boyd John C. Bray (Dec’d) Thomas Mitchell Broyles James Ewers Burden John J. Burke, Jr. Richard Alan Cahill Edwin J. Calabrese Emily N. Carey Richard D. Castle Gasper C. Celauro Kenneth R. Chiate William R. Clardy George Bomer Clark Jesse Coates, Jr. Peter James Cook Thornton Cooke William P. Cowgill Daniel M. Crawford Harry Arthur Crawford Vii Cyril Richard Deane James S. Deely John R. Dougery Richard Dranitzke James Duffus Thomas Henry Edwards Francine Ehrlich Lee Ross Ellenburg, Jr. Frederick J. England, Jr. Jules I. Epstein Roy Edwin Erickson Richard M. Fairbanks, III Victor R. Fernitz Elliot J. Fishman Martha H. Fogelman Robert F. Fogelman Walter G. Franz, Jr. Arthur James Gallagher, Jr. Phil C. Gallagher Diane R. Garesche Edmond A.B. Garesche, III Vere E. Gaynor A. Edward Gianelli Paul G. Giddings Karole E. Glaser Gary D. Green Bette Lou Griffith Daniel Gross Steven I. Gross Glen Owen Grossman Jacob Grossman Richard J. Guggenhime Margot L. Gumport Rc!f McMillan Gunnar George Leon Hagen Gerald Hamburg Marvin R. Hamburg John David Cameron Hardie Richard L. Harrington Charles M. Hart David Eugene Hart Michael C. Hartley Penelope B. Hatch Olivia Pollard Hayes Charles Donald Hebard James Taylor Henderson Luther Andrews Henderson Stanley M. Herzog Robert H. Hilb G. F Steedman Hinckley Jay D. Hirsch Carolyn Estelle Hoffman Parker M. Holt William S. Huff Elise Heckman Hughes Alan J. Hunken Clifford J. Hunt S.R. Hurwitz Donald E. Jeffers Susan M. Jennings Verner C. Jordan, Jr. Alfred Kahn, III Stanley F. Kaisel Byron C. Karzas Kathryn S. Keating John G. Keleher Donald K. Kelly Maxine Rudolph Kemble Kenneth L. Kerr, Jr. John Henry Klein Paul G. Knouse Clarence D. Knutsen Lisa W. Larson viii Raymond H. Laub Jean Fox Lee Robert A. Leef Amneris G. Levy Douglas Brian Lloyd Eugene C.J. Lohman Godfrey M. Long, Jr. David Lubetsky Stewart Emig Lucas Frank E. Luellen, Jr. Weymun I. Lundquist Barbara Lunnen Carol J. Lupke Duane E. Lupke James Arnold Maggetti Jack Lee Mandeville J.S. Marks Mary Lynn Marks Donald E. Martin J. Douglas Martin Virginia W. Martin David Maubry (Dec’d) W. Richard Maudsley David W. Mayne James L. McCormick William Thomas McCormick, Jr. Sam E. McDonald, Jr. | William Stokes , McIntyre, [V | Henry E. McLaughlin Robert P. McNeill Donald Homer Mehlig James R. Meier Ralph N. Mendelson Alexander Franz Metherall Norman Nelson Mintz ee Se James Thomas Mitchell Thomas Edward Moore Marilyn Morgan Willa June Morgan William Robert Morgan Dwight H. Murray, Jr. Thomas J. Murtagh James Arthur Myers John L. Neu Douglas B. Nichols George William Nordhaus Katherine C. Nordhaus Bertraim Spagat Nusbaum, Jr. Eugene Oberdorfer, II Jerry Odell William C, O’Donnell Martin T. Orne Mary Claire Pollard Parker Rosemary H. Pasek Alexander Evans Patterson, Jr. Mary McPherson Patterson George Pavloff David L. Payne Willliam L. Pearson Judith N. Perrin John Franklin Peterson Milton E. Pick John H. Pietri, Jr. Henry P. Plenk Otis Miles Pollard, Jr. Otis Miles Pollard, III Donald Porter Neil R. Pouppirt Ben Olyn Price M. Charles Price ix Laurie E. Price-Hittesdorf Audrey Nelson Quast Maurice Leo Quinn Clifford Walker Rackley Julia O. Rackley Fred H. Ramseur, Jr. Cecil Y. Ray, Jr. Albert Reider Victor Albert Rice Leon Michael Rodger Lois S. Rosenblatt Lioyd A. Rowland Angela Rubin Philip D. Rupert, Jr. George V. Rusu Thomas J. Ryan Elsie Cory Sadler Nicolas Miklos Salgo James Clements Sanders Charles Sapp Edwin A. Sawin, Jr. (Dec’d) Leroy J. Schaetzel Victoria Jean Scott Richard T. Scully Robert W. Selig, Jr. Robert S. Seltzer Nancy B. Severance Raymond Shaheen Antonio J.L. Simoes Alan Paul Smith Bernard Smith Edward J. Smith Frederic M. Smith Gerard C. Smith Dale H. Sore on Walter T. Sorokolit Robert E. Spivak Hugo John Standing Stephen C.S. Stephano (Dec’d) Jeffrey Alexander Stevens Ronald Stevens David E. Stokes Richard P. Stovroff Allen Howard Stowe Lloyd N. Strosnider ' Michael Bryant Stubbs Philip Glen Studarus Herman Getzie Sturman George Ellis Summers H. Meade Summers, Jr. Robert F. Sykes Kenneth M. Taylor Thomas A. Taylor Paul Tessel Richard D. Teubner James Parker Thrasher Patricia M. Thurber James A.Torrey John Poindexter Tottenhoff Ronald K. Travis T.L. Treadwell, III Alvin S. Trenk Stephen Douglas Tuck Maria de Montague Ulvestad Glenn Sam Utt, Jr. Kirsten Alida Vanden Brul Dennis Douglas Van Der Meer David R. Walker Catherine S. Walsh | Jessica W. Warren ; David Keith Watkiss (Dec’d) i Carlton D. Weaver Charles J. Webb, II Marsha M. Wedell Julia M.W. Weil Charles Wellborn George H. Wells William H. Wenzel Bradford K. Werner Burton K. Werner Cynthia C. Werner Johanna H. Werner Robert Wertheim Najja Hassen White Thomas R. Wiener John Richard Windebank Charles M. Wood Charles T. Yarington, Jr. John Nicholas Zefkeles Robert Zildjian Daniel E. Ziskin xi B. Parties from Norton, et al. v. Lloyd’s of London, et al., No. 95-56467 (9th Cir.) Claude W. Bailey (Dec’d) Richard C. Henry Peter Beck Theodore Kosloff Charles G. Bentzin Lowell Conrad Lundell Frederick M. Binkley Glen R. Mogan George Manning Close Melanie M. Norton Russell M. Collins, Jr. Judith M. Ott Peter L. Dwares H.E. Rainbolt Donald P. Gallop David L. Rosenblatt Charles A. Gerlach, Jr. Claire M. Tillman Robert William Gerwig Joseph F. Weller John C. Griffin xii CONTENTS Page QUESTIONS FRUBSNSD oc csc deans eis i LEST aes Ol MODs 66 6 ook kic basse ake shares ii I. Parties on Petition for Certiorari .............. il A. Petitioners from Richards, et al. v. Lloyd’s of London, et al., No. 95-55747 (9th Cir.) ...... ii B. Petitioners from Norton, et al. v. Lloyd’s of London, et al., No. 95-56467 (9th Cir.) ...... vi CPN soos ska eee Ve es oes eens vi II. Additional Parties in the Proceedings Below...... vi A. Parties from Richards, et al. v. Lloyd’s of London, et al., No. 95-55747 (9th Cir.) ...... vi B. Parties from Norton, et al. v. Lloyd’s of London, et al., No. 95-56467 (9th Cir.) ...... xi TA Cr Cts 8 en ak as ba ds CRO Es xii TABLE OF AUTHORITIES CITED. .............. xv OPINIONS AND ORDERS ENTERED BELOW .... 1 STATUTORY PROVISIONS INVOLVED .......... 1 FE 5 CEE V eo RRS eee i EOS 2 STATEREGNT OF THE CASE o.oo kc cececccees 2 I. Lloyd’s Fraudulent Offers and Sales of Securities eg SEI es Pee eee 3 II. The Forum-Selection and Choice-of-Law Clauses. . 5 Sak. TUDOOME TO ica sok be aes ner cecees 5 xiii REASONS FOR GRANTING THE WRIT.......... I. The Court Has Not Settled the Questions Presented, and Should Address Those Questions A. The Court’s Precedent Leaves Critical Issues Un. ns ss B. Resolving The Questions Presented Will Bring Certainty and Predictability to Federal Court Proceedings Far Beyond the Parties and Transactions Involved Here ............... The Ninth Circuit’s Refusal to Apply the Anti- Waiver Statutes Conflicts with This Court’s EE a Ore en ae A. This Court’s Decisions Preclude A Judge- Made Exception to the Anti-Waiver Statutes. . B. The Ninth Circuit’s Refusal to Enforce the Anti-Waiver Statutes Conflicts with This Court’s Decisions in McMahon and Rodriguez, eee The Lower Courts Misunderstand This Court’s Public Policy Standards for Enforcing Forum- Selection Clauses under Bremen, As Explained By ESE EE The Ninth Circuit’s Fraud Holding Conflicts With This Court’s Moseley Decision, And With The Application of Moseley By the Sixth Circuit ...... Bd a ie oS o's vil als M6 Sas oe A. Opinion, Richards v. Lloyd’s of London, 135 F.3d izep Oem Cir. 1998) (em banc) ................ Be a, ig Order Staying Mandate Pending Petition for Certiorari, Richards v. Lloyd’s of London, Nos. 95-55747, 95-56467, slip op. (9th Cir. Feb. 25, | GAO PEP SERGE GRE PEG te en are 24a Opinion, Richards v. Lloyd’s of London, 107 F.3d 1422 (9th Cir. 1997), withdrawn 135 F.3d 1289 (9th Ce. Fe TU MS wo 5 ck ees Wao oes AN vee 26a Order Granting Defendants’ Motion to Dismiss and Dismissing Plaintiffs’ Motion to Disqualify Defense Counsel as Moot, Richards v. Lloyd’s of London, No. 94-1211-IEG (POR), slip op. (S.D. Cal. WEES Smee os es Fa is cea ass 54a Order Denying Plaintiffs’ Motion for Relief from Order; Reconsidering and Denying Plaintiffs’ Motion to Disqualify Defendants’ Counsel; Denying as Moot Plaintiffs’ Motion for Entry of Default, Richards v. Lloyd’s of London, No. 94-1211-IEG (POR), slip op. (S.D. Cal. Aug. 4, INS) sie EA A eS 76a Stipulation and Order, Norton v. Lloyd’s of London, No. 95-0952-IEG (AJB), slip op. (S.D. Col. Seat: 25; 2999) ss etic gs eas eas 84a Disclosure and Anti-fraud Provisions Securities Act OR FD Sask ee Ne ee a 87a Anti-fraud Provisions . 2curities Act of 1934...... 9la Controlling Person Liability Provisions Securities Act of 1933 Securities Exchange Act of 1934 ..... 93a Definition of Terms Securities Act of 1933 Securities Exchange Act of 1934............... 94a RICO Civil Remedies Provision 97a Brief of the Securities and Exchange Commission, Amicus Curiae, Richards v. Lloyd’s of London, Nos. 95-55747, 95-56467 (9th Cir. May 5, 1996) ....... 98a Page(s) CASES Alberto-Culver Co. v. Scherk, 484 F.2d 611 (7th Cir. 1973), rev’d, 417 U.S. 506 (1974) ............ 19 Allen v. Lloyd’s of London, 94 F.3d 923 (4th Cir. 1996), mandamus denied sub nom. In re Allen, 138 L. Ed. 2d 1004 (Go 18, 24 Ashmore v. Corporation of Lloyd’s OS i a Oe 5 Bonny v. Society of Lloyd’s, 3 F.3d 156 (7th Cir. 1993), cert. denied, 606 Gee a passim Brogan v. United States, 118 S. Ct. 805 CU ees eb eV Ps aes CR es eves s bAee SS 17 Carnival Cruise Lines, Inc. v. Shute, Mr ee, PONE es eee sk sce h ees tyes tenses 16 CBS Employees Fed. Credit Union v. Donaldson, Lufkin & Jenrette Sec. Corp., Pie Bee cree (eek Ce: 1980) oo be eek es 13, 24-27 Connecticut Nat’l Bank v. Germain, A ED nn ny bcs vac e canker es 17 Haynsworth v. Corporation, 121 F.3d 956 (Sth Cir. 1997), cert. denied, US. ERME £5 ba eae ice eek 12, 18, 22, 24 Herman & MacLean v. Huddleston, 459 She IO CEE co Gah cae ACh ee cedwncoteeus 25 xvi Itoba Ltd. v. Lep Group PLC, 54 F.3d 118 (2d Cir. 1995), cert. denied, 116 S. Ct. 702 ; ROT 8 5s. 05 8 Ca eRe ee hE ha ees ee SK Kotam Elecs., Inc. v. JBL Consumer Prods., Inc.,93 F.3d 724 (11th Cir. 1996) (en banc), cert. denied, 117 S. Ct. 946 (1997). .............. Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 118 S. Ct. 956 (1998) ............444. M/S Bremen v. Zapata Off-Shore Co., an fH et EE A EE eA rr ees oe ee passim Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 Go) ee ey Pee rae TM Ge ty es I Ree! te ar passim Moseley v. Electronic & Missile Facilities, SUS WIM ee a es passim Nghiem v. NEC Elec., Inc., 25 F.3d 1437 (9th Cir.), cert. denied, 513 U.S. 1044 CON gic ek oa ae Rk Rs ek sd cic ieee Oubre v. Entergy Operations, Inc., LEB Ge Be Cee 8 oo ca 0 5 65 Ash ek ae eR Prima Paint Corp. v. Flood & Conklin Mfg. ee gt eB. os eee ero reer 13, 24, Richards v. Lloyd’s of London, [1995] Fed. Sec. L. Rep. (CCH) 4 98,801; [1995] RICO Bus. Disp. Guide 7 8839 ................ Richards v. Lloyd’s of London, 107 F.3d 1422 (9th Cir. 1997), withdrawn 135 F3d S709 OG GE. Bore Oe ooo oo i hee Se Riley v. Kingsley Underwriting Agencies, Ltd.,969 F.2d 953 (10th Cir.), cert. denied, SOG UTS. TR Ss ha a os rs oe RS ees xvii Page(s) Roby v. Corporation of Lloyd’s, 996 F.2d 1353 (2d Cir.), cert. denied, 510 U.S. 945 Syke ei ss ay we w aca 0% a we Ok passim Rodriguez de Quijas v. Shearson/American BE, SE Ee EE CEP soos Sk oe ek eae es passim Scherk vy. Alberto-Culver Co., I RE bo ais oh dew hanes passim SEC v. Chinese Consol. Benev. Ass’n, 120 F2d 738 (2d Cir.), cert. denied, eis WOM CE 8s ig oe 9 0 0 6 Bb es sv es cece 20 SEC v. WJ. Howey Co., 328 U.S. 293 RU oe is 0a ek Niels ONG LAG hoes s kp sewsees 4 Shearson/American Express v. McMahon, ee Ne OEE is a Ce eck Coc en ev stnes passim Stewart Org., Inc. v. Ricoh Corp., IU Oe RR 6 ee Vk Wc ans oc des ak ou we 8, 12, 16, 18 United Hous. Found. v. Forman, 421 U.S. RE So hay koa, Vere A ees coev en veh s 3-4 United States v. Rutherford, 442 U.S. 544 CN eS eo Wg bee ok a 4 ois As win ka ba to 17 Vimar Seguros y Reaseguros, S.A. v. BEET Se PG DAD Woes DSO CATO) cw ceca csese passim cin STATUTES Securities Act of 1933 1930 Act $ 2, IS VSR ET 6 i GES ES aS 1935 Act $5, 35 USL. SD TiO oi se oe eS passim 1933 Act § 718), 15 USL. § Tie) oe Nee es passim 1933 Act § 12(a), 15 U.S.C. § 77l(a) ....... 2, 5, 19-20 1933 Act § 14, 15 US.C.§ 77m... ce cee ccnes 1, 6 1958 Akt 4 OS TS GS FO ai ho ea 83 2, 20 1933 Ast § TM), 19 USCS TMA) ee eee 6 Securities Exchange Act of 1934 1934 Act § 3a), 15 USC. § Técfa)............-.. ao 1934 Act § 100b), 15 OSC. § 76D)... . es. y He 1934 Act § 20(a), 15 U.S.C. § 78t(a) ............ 2, 20 $5008 Pte Sr, Ae Wis © PR ee ba cee es bcawen 6 1934 Act § 29(a), 15 U.S.C. § 78cc(a) ......... 1, 6, 20 Sad an CAME 6 ae les he te esas ba eee 2, 6 Be Us © OE be he che ee ee ee 2 A Whi Rk kw ka 5 oho ee 6 Be Mim © PUD 6A a nab BER Cec ies vos ua eh ese es 6 Te Se TOTES 5 8 hk a os a ce oe eae bas eee 6 RULES AND REGULATIONS Py Wie a Be a a eRe Ks os Caen was 10 PO ee a Se i es es ce ees 7 OR Ue MR Gyan cbea sie te ho eee wae e sé 2, 6 LEGISLATIVE MATERIAL United States Investors in Lloyd’s of London Deserve Their Day in United States Court, 143 Cong. Rec. E1607 (daily ed. Aug. 1, 1997) CES GC A. TINGS a a 5 oo es Eh ere ce eas vee 11 a MISCELLANEOUS Paul D. Carrington & Paul H. Haagen, Contract and Jurisdiction, 1996 Sup. Ct. Rev. REE CATO eg EOS E RUT REO EN EER seve ce eor ee 14 John C. Coffee, Brave New World? The Impact(s) of the Internet on Modern Securities Regulation, 52 Bus. Law. 1195 (1997) ............... 15 Jennifer M. Eck, Tiurning Back the Clock: A Judicial Return to Caveat Emptor for U.S. Investors in Foreign Markets, 19 NC. 3. intl L. & Com. Keg. 313 (1994)... ......... 14 David A. Fitzgerald, Note & Comment, Allen v. Lloyd’s of London: A Comment on Forum Selection, 30 Conn. L. Rev. 257 (1997) ........ 14 Darrell Hall, Note, No Way Out: An Argument Against Permitting Parties to Opt Out of U.S. Securities Laws in International Transactions, BF I Ge I, PF RET hc rise re duce sacks: 14 G. Richard Shell, Res Judicata and Collateral Estoppel Effects of Commercial Arbitration, Tet ABklis Be ST. AE LAPMOE: croc cco ce viv wees ess 15 Chief Justice Fred M. VINSON, Work of the Federal Courts, Address Before the American Bar Association (September 7, 1949) in 69 S. Oe a oe Cee te ee eke We Weekes 13 : : 1 Petitioners respectfully petition fo. a writ of certiorari to review the judgment of the United State: Court of Appeals for the Ninth Circuit affirming dismissal of these actions based on contractual forum-selection clauses that, in tandem with choice- of-law clauses, waive Petitioners’ remedies under the federal securities laws and RICO. OPINIONS AND ORDERS ENTERED BELOW The Ninth Circuit’s 8-3 en banc opinion (App. A, 1a-23a) is reported at 135 F.3d 1289. The order staying the appellate mandate (App. B, 24a-25a) is unreported. The Ninth Circuit’s divided panel opinion (App. C, 26a-53a), withdrawn by the en banc court, is reported at 107 F.3d 1422. The district court’s decision in Richards v. Lloyd’s of London (App. D, 54a-75a) is reported at [1995] Fed. Sec. L. Rep. (CCH) 1 98,801; [1995] RICO Bus. Disp. Guide 9 8839. That court’s post-judgment order in Richards (App. E, 76a-83a) and its order in Norton v. Lloyd’s of London (App. F, 84a-86a) are unreported. STATUTORY PROVISIONS INVOLVED Section 14 of the Securities Act of 1933 (the “1933 Act’) provides: Any condition, stipulation, or provision binding any person acquiring any security to waive compliance with any provision of this subchapter or of the rules and regulations of the Commission shall be void. 15 U.S.C. § 77n. Section 29(a) of the Securities Exchange Act of 1934 (the “1934 Act”) provides: Any condition, stipulation, or provision binding any person to waive compliance with any provision of this chapter or of any rule or regulation thereunder, or of any rule of an exchange required thereby shall be void. 15 U.S.C. § 78cc(a). Sections 5, 7(a), and 12(a) of the 1933 Act are reproduced in Appeudix G, 87a-90a. Section 10(b) of the 1934 Act and Rule 10b-5 thereunder are reproduced in Appendix H, 91a-92a. Section 15 of the 1933 Act and § 20(a) of the 1934 Act are reproduced in Appendix I, 93a. Section 2(1), (7) of the 1933 Act and Section 3(a)(10), (17) of the 1934 Act are reproduced in Appendix J, 94a-96a. The civil remedies section of RICO,! 18 U.S.C. § 1964(c), is reproduced in Appendix K, 97a. JURISDICTION The en banc judgment of the United States Court of Appeals for the Ninth Circuit, affirming the district court’s dismissal of this case, was entered February 3, 1998. This Court has jurisdiction under 28 U.S.C. § 1254(1). STATEMENT OF THE CASE These consolidated cases come to the Court on an undisputed evidentiary record. Petitioners are individual residents of the United States who were solicited — in the United States — to buy passive membership interests in Lloyd’s of London, an insurance enterprise based in England.? Upon becoming members, Petitioners (called “Names” by Lloyd’s) were further solicited in the United States to invest in insurance syndicates run by Lloyd’s “Managing Agents,” placing at risk Petitioners’ entire net worth to back any syndicate losses. 1 The Racketeer Influenced and Corrupt Organizations chapter of the Organized Crime Control Act of 1970 (“RICO”). ? Petitioners sued two defendants: the Corporation of Lloyd’s, also known variously as the Society of Lloyd’s and as the Society and Council of Lloyd’s (the “Society”); and Lieyd’s of London, an unincorporated association consisting of the Lloyd’s entities that manage the Lloyd’s insurance enterprise (the “Unincorporated Association”). Together these defendants are referred to herein as “Lloyd's.” 3 Lioyd’s did not tell the Names that Lioyd’s recruited them in a fraudulent scheme to shift billions of dollars of expected syndicate losses from Lloyd’s “insiders” to outside investors like Petitioners. When those losses became imminent in 1986, Lloyd’s induced Names to sign “General Undertaking” agreements containing forum-selection and choice-of-law clauses (“Choice Clauses”). See App. A, 3a-4a. Those clauses require Petitioners to sue only in English courts, which would not enforce any of Petitioners’ rights under United States law. I. Lloyd’s Fraudulent Offers and Sales of Securities In thi: » United States : Lloyd’s solicited Petitioners in the United States to join Lloyd’s and its syndicates.’ See App. A, 8a. ‘Members’ Agents” within Lloyd’s, acting at the direction and control of the Society, hosted sales presentations and organized face-to-face meetings in the homes and offices of potential Names —- all in the United States. Members’ Agents paid commissions and referral fees to United States securities brokerage firms and hired other recruiters in the United States to solicit new Names. Members’ Agents also annually travelled throughout the United States encouraging Names to increase their underwriting in syndicates. In short, “Lloyd’s purposefully devoted considerable time and resources to recruiting American investors through specifically American media.” En bane dissent, App. A, 18a. Lloyd's disputed none of those facts. Petitioners alleged, and the undisputed evidence showed, that their participations in Lloyd’s constitute the purchase of “investment contract” “securities” withia the meaning of the securities laws.‘ Petitioners invested capital in the Lloyd's 3 See evidence cited in Plaintiffs’/Appellants’ Opening Brief (“Names’ Br.”) 10 and Plaintiffs’/Appellants’ Reply Brief (“Names’ Reply Br.”) 15, 23. 4 Section 2(1) of the 1933 Act defines the term “security” to include “any . . . investment contract. . ..” 15 U.S.C. § 77b(1). Section 3(a)(10) of the 1934 Act contains the same definition. 15 U.S.C. § 78c(a)(10). See, e.g, United Hous. (footnote continues) 4 enterprise by posting letters of credit and other assets upon joining Lloyd’s. Lloyd’s assessed levies upon Petitioners for a Central Fund administered by Lloyd’s to cover the losses of any Name that failed to satisfy his or her syndicate obligations. Petitioners also invested in the Lloyd’s syndicates by pledging to pay any syndicate losses. Lloyd’s Managing Agents managed every aspect of the syndicates’ business; Lloyd’s prohibited Names from participating in the operation of the syndicates. Lloyd’s did not challenge the Petitioners’ securities allegations and evidentiary showing in the district court; on appeal, Lloyd’s conceded that the “security” issue was not before the court;® and the en banc majority “assume[d] without deciding” that Petitioners in fact did invest in “securities.” App. A, 7a n.2. Uncontzoverted evidence also shows that Lloyd’s committed fraud in connection with the offering and sale of its securities in the United States. Lloyd’s knowingly failed to disclose to Petitioners that Lloyd’s syndicates had reinsured billions of dollars of risks — especially risks of liability for asbestos injury and pollution clean-up — under occurrence- basis liability policies with no aggregate coverage limits.’ Nevertheless, Lloyd’s induced Petitioners to invest in those syndicates, and Petitioners suffered huge losses. The district court acknowledged that “numerous documents” show Lloyd’s had advance knowledge of — but did not disclose to Petitioners — the “massive liabilities” that Petitioners faced before Lloyd’s required Names to sign the Choice Clauses. App. D, 68a n.20. Il. The Forum-Selection and Choice-of-Law Clauses In 1986, when Lloyd’s had reason to fear that its syndicates would soon have to disclose very substantial losses — thereby (footnote continued) Found. v. Forman, 421 U.S. 837, 851-52 (1975); SEC v. WJ. Howey Co., 328 US. 293, 299-301 (1946). > See evidence cited in Names’ Br. 9. © See Appellees’ Answering Brief 5 n.5. 7 See evidence cited in Names’ Br. 5-6, i1-13. 5 exposing Lloyd’s fraud — Lloyd’s required Names to execute General Undertakings containing the Choice Clauses. The Society imposed that requirement as a condition of any new participation in Lloyd’s syndicates by existing Names, and as a condition of membership for all new Names. The Choice Clauses purport to require Names to sue only in English courts under English law. Petitioners executed those General Undertakings in the United States. The effect of the Choice Clauses, if enforced, is certain: in English courts, Petitioners cannot assert any claim under the federal securities statutes, RICO or other United States law — even claims that arose before Lloyd’s required the Choice Clauses.? Moreover, unlike United States courts — which impose liability for intentional and negligent non-disclosure of material facts — English courts will not hold Lloyd’s liable for knowingly failing to disclose material facts, on the rationale that Lloyd’s owed Names no legal “duty” to speak. See Ashmore v. Corporation of Lloyd’s [1992] 2 Lloyd’s Rep. 620." Ill. Proceedings Below Petitioners filed two separate suits (Richards and Norton) in the district court for the Southern District of California. Petitioners demonstrated that Lloyd’s violated 1933 Act §§ 5, 7(a) by selling its securities without either (a) registering the offerings and making detailed financial disclosure, or (b) complying with an applicable exemption from registration. Petitioners also showed that Lloyd’s violated the anti-fraud provisions contained in § 12(a)(2) of the 1933 Act, § 10(b) of the 1934 Act and SEC Rule 10b-5, and state Blue Sky securities laws. 8 See evidence cited in Names’ Br. 10, 14 and Names’ Reply Br. 7. 9 See SEC Br., App. L, 104a. 10 See also expert legal opinions cited in Names’ Reply Br. 30-31. 11 See evidence cited in Names’ Br. 22 and Names’ Reply Br. 31-32. 6 In addition, Petitioners alleged that the Society’s pattern of securities violations in connection with its control of the Unincorporated Association violated RICO. Petitioners also alleged that Lloyd’s committed common law fraud and breach of fiduciary duty. Lloyd’s never challenged the RICO and fraud allegations; Lloyd’s also concedes that Members’ Agents owed Names a fiduciary duty of disclosure.!* Without answering the complaints, Lloyd’s moved to dismiss in reliance on the Choice Clauses. The district court granted the motion, despite Petitioners’ unrebutted evidence in opposition to the motion. App. D, 60a-74a; App. E, 79a-83a. Petitioners, supported by the Securities and Exchange Commission (“SEC”) as amicus curiae, appealed. App. L, 98a. A divided three-judge Ninth Circuit panel reversed the district court’s dismissal of Petitioner’s federal securities and RICO claims. App. C, 26a (Noonan, J., with Wiggins, J.). The majority first concluded that the unambiguous federal securities anti-waiver provisions, 1933 Act § 14 and 1934 Act § 29(a), render the Choice Clauses void as to the federal securities claims. The Choice Clauses operate to effect such waivers. Accordingly, under the precise terms of these two statutes, the Choice Clauses are void. Id. 33a. The panel further held that, quite apart from the anti- waiver statutes, the Choice Clauses are “unreasonable” in their impact on Lloyd’s securities law obligations, and hence are unenforceable under the standards of M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972).8 App C, 40a-41a. 12 The district court had subject matter jurisdiction over Petitioners’ federal law claims under 1933 Act § 22(a) and 1934 Act § 27, 15 U.S.C. §§ 77v(a), 78aa; RICO, 18 U.S.C. § 1964(c); and 28 U.S.C. § 1331. The court had jurisdiction over the state law claims under 28 U.S.C. §§ 1332(a), 1367/a). ‘3 Bremen held that admiralty courts must not enforce private forum-selection agreements that are ““unreasonable’ under the circumstances,” 407 U.S. at 10, (footnote continues) 7 The panel majority also reversed the dismissal of Petitioners’ RICO claims. It remanded those claims to the district court with instructions to determine whether the Choice Clauses are “reasonable” in their impact on Lloyd’s obligations under RICO. App. C, 41a. The panel unanimously rejected Petitioners’ assertion that Lloyd’s fraud renders the Choice Clauses unenforceable. App. C, 32a. In so holding, the panel deferred to a purported “factual finding” by the district court that Petitioners’ unrebutted evidence was not “sufficient” to demonstrate fraud in the procurement of the Choice Clauses. Jd.’ On rehearing, the en banc Ninth Circuit acknowledged that the anti-waiver statutes “are worded broadly enough to reach this case”, but nevertheless withdrew the panel opinion and affirmed the district court ruling, by 8-3 vote. App. A, 6a (Goodwin, J.).!5 Relying on Bremen and Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974), the court held that forum-selection and choice-of-law clauses in private “international” agreements between United States residents and foreign companies override the congressional mandate unambiguously set forth in the anti-waiver statutes. The majority deemed Lloyd’s securities offerings “international” in character — and thus exempt from the anti-waiver statutes under the majority’s reading of Scherk — because the Names travelled to England for an otherwise (footnote continued) such as when “enforcement would contravene a strong public policy of the forum in which suit is brought,” or when the clause is “invalid for such reasons as fraud or overreaching,” id. at 15. 14 The district court’s ruling that Petitioners’ evidence was “not sufficient” (App. D, 69a) was—like any ruling on sufficiency of evidence—a conclusion of law. 15 Judge Goodwin, who dissented from the initial panel decision, see App. C, 43a-53a, authored the en banc majority opinion. Judges Noonan and Wiggins, the original panel majority, were not selected in the random draw to participate in the Ninth Circuit's limited en banc rehearing. See Ninth Cir. R. 35-3. 8 trivial meeting as a condition of joining Lloyd’s.’° The majority speculated that “Lloyd’s likely requires this precisely so that those who choose to be the Names understand that English law governs the transaction.” Arp. A, 8a. The court concluded that, even though the Choice Clauses operate to waive Petitioners’ rights and remedies under the United States securities laws, enforcement of those clauses was reasonable. This is so, said the court, because the remedies available to Petitioners in English courts are “sufficient” substitutes for the remedies and protections of the 1933 and 1934 Acts. App. A, 9a.2’ The majority enforced the Choice Clauses under Bremen despite the holding in Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988), that Bremen does not control when a statute “itself controls [defendant’s] request to give effect to the parties’ contractual choice of venue.” See App. A, 7a n.3. Even though such statutes (the anti-waiver provisions) apply here, the majority declined to follow the reasoning of Stewart. According to the court, Stewart is inapplicable because Stewart “involved a federal court sitting in diversity confronted with a purely domestic transaction,” id., rather than the type of international transaction involved here. Having concluded that Bremen, rather than Stewart, governed its decision, the Ninth Circuit confronted the statement in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985), that in the event the choice-of-forum and choice-of-law clauses operated in tandem as a prospective waiver of a party’s right to pursue statutory remedies for 16 See Roby v. Corporation of Lioyd’s, 996 F.2d 1353, 1357 (2d Cir.) (“a brief meeting in London—a mandatory formality”), cert. denied, 510 U.S. 945 (1993). 17 Likewise, the court held that “the loss of RiCO claims does not suffice to bar dismissal” on the basis of the Choice Clauses. Enforcing the Choice Clauses is reasonable, the court believed, because the loss of RICO remedies would not have precluded dismissal under the doctrine of forum non conveniens (a theory the district court did nci address). App. A, 13a. 9 antitrust violations, we would have little hesitation in condemning the agreement as against public policy. Id. at 637 n.19. The majority said “[w]ithout question this case would be easier to decide if this footnote in Mitsubishi had not been inserted.” App. A, 11a. Nevertheless, the court declined to apply Mitsubishi to Petitioners’ securities claims, saying that Mitsubishi’s language was “dictum” that did “not... outweigh| }” the Court’s discussion and purported holding in Scherk, 417 USS. at 516, 517 n.11, 519 n.13. The Ninth Circuit also stated that Mitsubishi's rationale was limited to the context of antitrust claims. See App. A, 11a-12a." Finally, the en banc majority rejected Petitioners’ assertion that Lloyd’s fraud renders the Choice Clauses unenforceable. Even though Petitioners alleged — and showed — that “Llioyd’s knew that the Names were effectively sacrificing valid claims under U.S. law by signing the choice clauses,” see App. A, 14a, Lloyd’s fraud did not vitiate the Choice Clauses because, in the majority’s view, Petitioners’ fraud claims “go[ ] only to the contract as a whole, with no allegations [of fraud] as to the inclusion of the choice clauses themselves.” App. A, 14a. In so holding, the Ninth Circuit acknowledged the Court's statement in Moseley v. Electronic & Missile Facilities, 374 U.S. 167 (1963), that “the issue of fraud should first be adjudicated [by the federal district court] before the rights of the parties under [contracts] can be determined.” Id. at 171, quoted in App. A, 14a-15a. “{T]his statement”, the Ninth Circuit agreed, “wou'd seem to support the Names’ position.” App. A, 15a. Nevertheless, the Ninth Circuit said that, when viewed in procedural “context,” Moseley did not apply to Petitioners’ i8 The Ninth Circuit recognized that the Court quoted the Mitsubishi rationale with approval in a non-antitrust case. App. A, 12a n.5 (citing Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 540 (1995)). The Ninth Circuit distinguished Vimar on the ground that that case involved liabilities under the Carriage of Goods by Sea Act (“COGSA’), “a statute designed to address international transactions” (App. A, 12a n.5), rather than the federal securities statutes. 10 fraud assertion because Lloyd’s seeks to enforce the Choice Clauses in this case, whereas the defendant in Moseley sought to enforce the arbitration clause in a separate action. App. A, 14a-15a. The three dissenting en banc judges, agreeing with the two judges in the Ninth Circuit panel majority, would have ruled the Choice Clauses unenforceable for two separate reasons. First, the anti-waiver statutes’ plain language permits no international exception. App. A, 15a-19a (Thomas, J., dissenting). “The majority espouses a reasonable foreign policy, but one which emanates from the wrong branch of government.” Jd. 15a. Second, quite apart from the anti-waiver statutes, the Choice Clauses are unenforceable under the standards of Bremen, Mitsubishi, and Vimar. “Not only do the choice clauses preclude the plaintiffs from seeking the substantive remedies the Acts offer, but the protections they provide under English law are markedly inferior to the Acts’.” Id. 20a. The dissent did not discuss whether fraud precludes enforcement of the Choice Clauses. Recognizing that the five Ninth Circuit judges who voted to reverse the dismissal raised substantial grounds for disagreement, Judge Goodwin stayed the appellate mandate pending the Court’s ruling on this petition. App. B, 24a-25a. See Fed. R. App. P. 41(b). 11 REASONS FOR GRANTING THE WRIT I. The Court Has Not Settled the Questions Presented, and Should Address Those Questions Now A. The Court’s Precedent Leaves Critical Issues Unresolved The Ninth Circuit’s decision presents three integrally related issues that prior decisions of the Court have anticipated but not decided. First, the Court has said — but never held — that the anti- waiver statutes preclude enforcement of forum clauses that, like the Choice Clauses here, effectively waive the substantive rights and remedies guaranteed by the federal securities laws. See Shearson/American Express v. McMahon, 482 U.S. 220, 229-32 (1987); see also Rodriguez de Quijas v. Shearson/American Express, 490 U.S. 477, 482-83 (1989) (enforcing clause that preserved substantive securities rights); Scherk, 417 US. at 519 n.13 (same). Nevertheless, the en banc Ninth Circuit inter- preted the Court’s 5-4 decision in Scherk — which enforced a clause that did not effect such a waiver — as permitting enforce- ment of clauses that do effect waivers. App. A, 7a-8a. Signifi- cantly, the SEC strongly disagrees with that view. App. L, 105a-108a. The Chairman of the House Committee on the Judiciary also disagrees with that view: When foreign promoters come into Illinois and other States to raise capital, they cannot effectuate waivers of substantive rights under the securities laws.... Con- gress has said no and that should be the end of the story. United States Investors in Lloyd’s of London Deserve Their Day in United States Court, 143 CONG. REC. E1607, E1608 (daily ed. Aug. 1, 1997) (Remarks of Rep. Hyde) (approving the panel decision of Judges Noonan and Wiggins in this case). 12 Courts have no business applying Bremen in place of a clear statute. See Stewart, 487 U.S. at 29, and discussion infra, II. The Court should accept this opportunity to rule directly on the applicability and effect of the securities law anti-waiver provi- sions, and to complete the line of analysis commenced in Scherk and last visited nearly a decade ago in Rodriguez. Second, the Court has said — but never held — that a court should not enforce forum-selection clauses when they operate in tandem with choice-of-law clauses to waive federal statutory remedies in non-securities cases. See Mitsubishi, 473 U.S. at 637 n.19 (Clayton Antitrust Act); Vimar, 515 U.S. at 540-41 (COGSA); id. at 541-42 (O°CONNOR, J., concurring in the judgment); id. at 548 n.8 (STEVENS, J., dissenting). The SEC believes that these statements absolutely preclude enforce- ment of choice clauses that, in tandem, waive the remedies and protections of the federal securities statutes. SEC Br., App. L, 117a-118a, 121a-122a. The Court has never said, however, whether Mitsubishi and Vimar apply to claims under the securi- ties laws. There is considerable confusion, moreover, in the lower courts as to the meaning and applicability of the Court’s state- ments in Mitsubishi and Vimar. The Ninth Circuit and the Fifth Circuit say, in contrast with the SEC’s view, that the statements in Mitsubishi and Vimar only govern choice clauses that waive remedies under the antitrust statutes and COGSA — not secu- rities law remedies.!? The Second and Seventh Circuits, unlike the Ninth and Fifth, recognize that Mitsubishi does apply to securities claims.”° Those courts, however, have not interpreted Mitsubishi — as the SEC does (App. L, 117a-118a, 121a-122a) — to prohibit all waivers of statutory remedies. Rather, those courts say that Mitsubishi permits a court to enforce choice clauses that effectuate such waivers if the court concludes that 19 See App. A, 1la-12a & n.5; Haynsworth v. Corporation, 121 F.3d 956, 968-69 (Sth Cir. 1997), cert. denied, _. U.S. ___ (1998). 20 See Roby, 996 F. 2d at 1364 & n.3; Bonny v. Society of Lloyd’s, 3 F.3d 156, 160 (7th Cir. 1993), cert. denied, $10 U.S. 1113 (1994). 13 the remedies available in the chosen foreign forum are “ade- quate” substitutes for United States statutory remedies.”! (See discussion infra, III). The Court should resolve the confusion among the circuits and make clear that the reasoning of Mitsub- ishi and Vimar precludes enforcement of choice clauses that waive any substantive federal statutory remedies. Third, the Court held 35 years ago that a party may avoid a forum-selection clause by showing that inclusion of the clause itself was the product of fraud; a plaintiff can make such a showing by demonstrating that the defendant intended the clause to effect a fraudulent scheme. See Moseley, 374 U.S. at 170-71, followed, Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n.12 (1967); see also Scherk, 417 US. at 519 n.14. The lower courts have not, however, applied Moseley consistently. The Sixth Circuit, following Moseley, has held that a forum-selection clause is unenforceable if the defendant included the clause for the purpose of getting away with an over-arching scheme to defraud.” In contrast, the Ninth Circuit here refused to follow Moseley solely because of a procedural nuance in Moseley that the Sixth Circuit did not mention. (See discussion infra, 1V). The Court should accept review in this case to resolve the circuit split concerning the scope of Moseley. B. Resolving The Questions Presented Will Bring Cer- tainty and Predictability to Federal Court Proceedings Far Beyond the Parties and Transactions Involved Here The foregoing issues “have immediate importance far beyond the particular facts and parties involved” here. Con- tracts regularly include forum-selection clauses, often in tan- dem with choice-of-law clauses. Such clauses affect “many 21 See Roby, 996 F.2d at 1356-66; Bonny, 3 F.3d at 160. 22 See CBS Employees Fed. Credit Union v. Donaldson, Lufkin & Jenrette Sec. Corp., 912 F.2d 1563, 1568 (6th Cir. 1990). 23 Chief Justice Fred M. VINSON, Work of the Federal Courts, Address Before the American Bar Association (September 7, 1949) in 69 S. Ct. v, vi. 14 American consumers, patients, workers, investors, shopkeepers, shippers, and passengers”.** The lower courts’ repeated enforcement of Lloyd’s Choice Clauses, and this Court’s repeated denial of review (see discussion infra, II.A), allows foreign parties to evade liability under United States securities law resulting from transactions with United States residents conducted within United States territory. That is a previously- unprecedented result,* and it has drawn much academic atten- tion and criticism.”° The SEC observes, moreover, that foreign forum-selection clauses — like Lloyd’s clauses — have serious ramifications for enforcement of the securities laws. The Ninth Circuit’s holding that such clauses are valid would allow foreign promoters of securities undertak- ing large scale selling efforts in the United States to avoid private liability...even if the remedies available under the foreign law were far less effective than those available under United States law. Such a holding would seriously impair the ability of defrauded inves- tors to obtain compensation for their losses, and would hamper the deterrent function of the federal securities laws by discouraging private actions. App. L, 108a. Indeed, under such a holding, 24 Paul D. Carrington & Paul H. Haagen, Contract and Jurisdiction, 1996 Sup. Cr. REV. 331, 333 (1997). 25 Cf, Bremen, 407 U.S. at 16 (enforcing clause despite apparent conflict with United States policy because ““[hJere the conduct in question is that of a foreign party occurring in international waters outside our jurisdiction.””) (quot- ing lower court dissent) (emphasis added). 26 See Darrell Hall, Note, No Way Out: An Argument Against Permitting Parties to Opt Out of U.S. Securities Laws in International Transactions, 97 CoLum. L. REV. 57 (1997); David A. Fitzgerald, Note & Comment, Allen v. Lioyd’s of London: A Comment on Forum Selection, 30 CONN. L. REV. 257 (1997); Jennifer M. Eck, Turning Back the Clock: A Judicial Return to Caveat Emptor for U.S. Investors in Foreign Markets, 19 N.C. J. Int’L L. & Com. REG. 313 (1994). 15 a clever entrepreneur might even add a conspicuous provision on its Web page that persons placing orders [for securities] with it thereby accept a forum selection provision that makes the courts of the host country the exclusive forum in which a private action may be maintained against it. John C. Coffee, Brave New World? The Impact(s) of the Internet on Modem Securities Regulation, 52 Bus. LAw. 1195, 1228 & n.120 (1997) (citations omitted). The distinction drawn by the Ninth Circuit between wholly domestic transactions, on the one hand, and transnational transactions of the kind at issue here, also has far reaching effect. The large volume and varied forms of modern transna- tional dealing have blurred distinctions that may have existed in the early 1970’s — when Bremen and Scherk were decided — between wholly domestic contracts and predominantly interna- tional contracts. Indeed, some lower courts and commentators interpret McMahon as having abandoned any such distinction. See 482 U.S. at 229 (applying, in a purely domestic case, the standard adopted in Scherk, a “truly international” case).”” The en banc Ninth Circuit’s resurrection of that distinction not only injures United States investors and consumers, but also gives sophisticated foreign parties a marked advantage over their United States competitors. Enforcing the choice clauses gravely disadvantages American businesses, because foreign businesses, like Lioyd’s, can recruit investors without expending the 27 See Kotam Elecs., Inc. v. JBL Consumer Prods., Inc., 93 F.3d 724, 727 & n.5 (11th Cir. 1996) (en banc) (“In McMahon, the Supreme Court...discarded the distinction between domestic and international transactions...”), cert. denied, 117 S. Ct. 946 (1997); G. Richard Shell, Res Judicata and Collateral Estoppel Effects of Commercial Arbitration, 35 U.C.L.A. L. REv. 623, 624 n.7 (1988) (“The McMahon Court made no distinction between the international and domestic arbitral forums...”), quoted with approval, Nghiem v. NEC Elec., Inc., 25 F3d 1437, 1442 (9th Cir.) (panel decision), cert. denied, 513 U.S. 1044 (1994). 16 time and money involved in fulfilling the requirements of the Acts — a burden that American businesses cannot legally evade. En banc dissent App. A, 20a-21a. Il. The Ninth Circuit’s Failure to Apply the Anti-Waiver Stat- utes Conflicts With This Court’s Precedent A. This Court’s Decisions Preclude A Judge-Made Excep- tion to the Anti-Waiver Statutes The Ninth Circuit’s creation of a judge-made exception to the anti-waiver statutes for international forum-selection clauses clashes directly with the holdings of this Court, as conveyed in opinions authored or joined by every current Justice. Stewart shows that Bremen does not control when a statute itself governs “the immediate issue before the court.” Stewart, 487 U.S. at 28. See also id. at 33 (KENNEDY, J., joined by O’CONNOR, J., concurring “‘in full’’); id. (SCALIA, J., dissent- ing). The Court has consistently followed Stewart’s rationale. When faced with an anti-waiver statute in Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991), the Court analyzed the effect of that statute upon the enforceability of a forum-selection clause separately from its analysis under -Bremen. Compare Carnival, 499 U.S, at 595-97 with id. at 590-95; see also id. at 598-605 (STEVENS, J., dissenting’ Similarly, in Vimar the Court said “[t}he relevant question’ _. whether a forum-selec- tion clause would subject the plaintiff to substantive foreign law that, by reducing the defendant’s obligations to the plaintiff, thereby violates a relevant anti-waiver statute. 515 U.S. at 539; accord id. at 548 n.8 (STEVENS, J., dissenting). The Ninth Circuit erred in disregarding the statutory analysis required by Stewart, Carnival and Vimar. See panel majority, App. C, 38a-39a. The Ninth Circuit’s holding that policy considerations under Bremen trump the clear language of the anti-waiver 17 statutes also conflicts with this Court’s decisions refusing to create judicial exceptions to clear legislation in other statutory contexts. Speaking through Justice SCALIA, the Court recently explained, “{clourts may not create their own limitations on legislation, no matter how alluring the policy arguments for doing so...” Brogan v. United States, 118 S. Ct. 805, 811-812 (1998). Rather, “we are bound to take Congress at its word” when a statute “implements Congress’ policy via a strict, unqualified statutory stricture on waivers.” Oubre v. Entergy Operations, Inc., 118 S. Ct. 838, 841 (1998) (maj. op. of KEN- NEDY, J.). When Congress has enacted clear legislation, “we...give effect to this plain command, even if doing that will reverse the longstanding practice under the statute...” Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 118 S. Ct. 956, 962 (1998) (maj. op. of SOUTER, J.) (citations omitted); see also Connecticut Nat'l Bank v. Germain, 503 U.S. 249, 253-54 (1992) (maj. op. of THOMAS, J.) (quoted by en banc dissent, App. A, 17a); United States v. Rutherford, 442 U.S. 544, 555 (1979) (unanimous op.) (quoted in en banc dissent, App. A, 16a-17a). The en banc dissent recognized the constraint that these hold- ings impose on the construction of statutes by lower courts. App. A, 16a-18a. The en banc majority disregarded that con- straint entirely. The Ninth Circuit’s judge-made exception to the anti- waiver statutes is, moreover, ripe for this Court’s review. The Court has previously denied review of several lower court di |- sions that enforced the Choice Clauses without addressing whether the clear text of the securities anti-waiver provisions voids those clauses. Unlike the en banc majority’s decision here, however, those decisions either failed to mention the anti- waiver statutes, or treated those statutes as mere expressions of public policy rather than as legislative commands.™ Those deci- sions therefore did not address whether Bremen and Scherk 28 See Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953 (10th Cir.) (enforcing Choice Clauses without mentioning anti-waiver statutes), cert. (footnote continues) 18 trump the anti-waiver statutes for transactions involving an international party — or whether, instead, the reasoning of Stewart controls. Earlier this Term, the Court denied certiorari in another such case. See Haynsworth, 121 F.3d at 965-66 (con- cluding that the Choice Clauses do not “contravene[ ] public policy as embodied in the anti-waiver provisions”) (emphasis added). The Haynsworth decision, however, did not even men- tion Stewart. The Court should review now the Ninth Circuit’s judge-made exception to the anti-waiver statutes for interna- tional transactions. B. The Ninth Circuit’s Refusal to Enforce the Anti-Waiver Statutes Conflicts with This Court’s Decisions in McMahon and Rodriguez, and Misapplies Scherk In refusing to hold Lloyd’s Choice Clauses void under the anti-waiver statutes, the Ninth Circuit said that Bremen “con- templated” that, in international transactions, “a forum selec- tion clause may conflict with relevant statutes”. App. A, 7a. Further, according to the Ninth Circuit, Scherk left “little doubt” that Bremen, rather than the anti-waiver statutes, gov- erns enforceability of forum-selection clauses in international transactions. Jd. 7a. The Ninth Circuit’s holding conflicts squarely with McMahon and Rodriguez, and misapplies Scherk. The Ninth Circuit’s reliance on Scherk conflicts with McMahon and Rodriguez in two critical ways. First, the Ninth Circuit’s interpretation of Scherk is completely at odds with McMahon’s explanation of Scherk’s holding, and with the (footnote continued) denied, 506 U.S. 1021 (1992); Roby, 996 F.2d at 1364 (“By including antiwaiver provisions in the securities laws, Congress made clear its intention that the public policies incorporated into those laws should not be thwarted.”) (empha- sis added), cert. denied, 510 U.S. 945; see also Bonny, 3 F.3d at 160-61 (substantially the same), cert. denied, 510 U.S. 1113; Allen v. Lioyd’s of London, 94 F.3d 923, 929 (4th Cir. 1996) (“We do not believe that enforcing [the Choice Clauses] in this case will subvert the United States securities laws’ policy...”) (emphasis added), mandamus denied sub nom. In re Allen, 138 L. Ed. 2d 1004 (1997). 19 Court’s subsequent interpretation of the anti-waiver statutes in Rodriguez. In McMahon, Justice O'CONNOR explained for the Court that Scherk upheld an arbitration clause in an interna- tional transaction because — and only because — the foreign arbitral forum provided an adequate means of enforcing the parties’ substantive rights under the 1934 Act: The decision in Scherk thus turned on the Court's judgment that under the circumstances of that case, arbitration was an adequate substitute for adjudica- tion as a means of enforcing the parties’ statutory rights. McMahon, 482 U.S. at 229 (emphasis added).”” Based on that explanation of Scherk, the Court construed the 1934 Act anti- waiver provision to permit arbitration clauses in domestic trans- actions because (and only because) such clauses preserve sub- stantive statutory rights. McMahon, 482 U.S. at 229-32. Rodri- guez further explained that the anti-waiver provisions preclude contractual waivers of “substantive” securities provisions, “such as the provision [in 1933 Act § 12(a)(2)] placing on the seller the burden of proving lack of scienter when a buyer alleges fraud.” Rodriguez, 490 U.S. at 481. McMahon and Rodriguez preclude enforcement of Lloyd’s Choice Clauses precisely because those clauses do not preserve Petitioners’ substantive rights under the securities laws, includ- ing Petitioners’ rights under § 12(a)(2). The SEC as amicus curiae in the court below agreed. App. L, 112a-114a. The Ninth Circuit did not even mention McMahon, or the SEC’s assertion that McMahon’s construction of the anti-waiver statutes con- trols here. In direct conflict with McMahon and the SEC’s 29 See also Alberto-Culver Co. v. Scherk, 484 F.2d 611, 618-19 (7th Cir. 1973) (“The text of the 1933 Act, like the text of the 1934 Act, renders void any waiver by a plaintiff of a defendant’s obligation to comply with the statute.”) (Stevens, J., dissenting), rev'd, 417 U.S. 506 (1974), and cited in McMahon, 482 US. at 268 n.2 (STEVENS, J., dissenting in part) and Mitsubishi, 473 U.S. at 646 (STEVENS, J., dissenting). 20 clearly expressed views, the Ninth Circuit’s decision to enforce the Choice Clauses wipes out Petitioners’ claims.” Second, the Ninth Circuit’s reliance on the Names’ travel to England — which supposedly demonstrates “under- stand[ing]” by the Names that English law would control (App. A, 8a) — conflicts with McMahon’s unequivocal statement that the anti-waiver provisions preclude all waivers, regardless of how voluntary the waivers might be: [t]he voluntariness of the agreement is irrelevant to this inquiry: if a stipulation waives compliance with a statutory duty, it is void under [1934 Act § 29(a)], whether voluntary or not. 482 U.S. at 230; see also Rodriguez, 490 U.S. at 482. Under McMahon and Rodriguez, the Names’ purported voluntary “understand[ing}” that the Choice Clauses required English law is irrelevant. See SEC Br., App. L, 113a.*! 3° In contrast to the burden of proof that 12(a)(2) places upon defendants, an English court would impose a burden of proof on Petitioners to show Lloyd's bad faith. English courts also would not grant any remedy like the remedy enacted in § 12(a)(1) for Lloyd's failure to register its securities offerings and make disclosure under 1933 Act §§ 5, 7(a). Neither would English courts require Lloyd's to show that it exercised due care in the control of Members’ Agents and Managing Agents who violated the securities laws, pursuant to 1933 Act § 15 and 1934 Act § 20(a). 31 The majority also believed that applying the anti-waiver statutes to forum- selection clauses in contracts between United States residents and a foreign party would “expand[ } the reach of federal securities law to any and all such transactions, no matter how remote from the United States.” App. A, 7a-8a. That concern wrongly conflicts with the text, legislative history, and settled judicial interpretation of the Acts. See en banc dissent, App. A, 21a-22a; SEC Br., App. L, 115a n.8 (“Lioyd’s defendants can hardly claim surprise that they would be subject to United States law when they came to the United States seeking investmer: by Americans”); SEC v. Chinese Consol. Benev. Ass'n, 120 F.2d 738, 741 (2d Cir.) (A. Hand, J.), cert. denied, 314 U.S. 618 (1941); Itoba Lid. v. LEP Group PLC, 54 F.3d 118, 121-24 (2d Cir. 1995), cert. denied, 116 S. Ct. 702, 703 (1996). 21 Not only did the Ninth Circuit wrongly ignore McMahon, but it impermissibly extended the rationale of Scherk — which only applies to “truly international” agreements, 417 U.S. at 515 — to predominantly domestic transactions with foreign parties. The “truly international” transaction in Scherk involved an American corporation that expanded its overseas operations by (1) seeking out the seller of a business in Germany, (2) engaging foreign counsel and consultants to represent it in purchasing that business, and (3) negotiating in several differ- ent countries before signing a deal in Austria and closing in Switzerland. See 417 U.S. at 508-09, 515. This case is different. Indeed, the Scherk majority itself recognized that a contract with “insignificant or attenuated” contacts with for- eign countries might well prompt a refusal to enforce a forum selection clause, let alone « clause choosing foreign law. Scherk, 417 U.S. at 517 n.11. The Court observed: “Judicial response to such situations can and should await future litigation in concrete cases.” Id. En banc dissent, App. A, 19a. Because this case involves only a trivial overseas meeting, “[t]he instant case offers just such a concrete opportunity...” App. A, 19a. The Lloyd’s securities offerings were no more international in character than any other United States securities transaction involving a foreign seller with global operations. 32 See Roby, 996 F.2d at 1357 (“a brief meeting in London—a mandatory formality”). 22 Ill. The Lower Courts Misunderstand This Court’s Public Pol- icy Standards for Enforcing Forum-Selection Clauses under Bremen, As Explained By Mitsubishi and Vimar The Ninth Circuit held that public policy permits enforce- ment of choice clauses that waive federal statutory remedies, so long as the remedies afforded by the foreign court are deemed “sufficient.” App. A, 9a. This approach conflicts with Bremen, as explained by Mitsubishi, 473 U.S. at 637 n.19 (stating that Court would “condemn[ ]}” choice clauses that, in tandem, waive statutory remedies), quoted with approval, Vimar, 515 U.S. at 540. The Ninth Circuit’s refusal to follow Mitsubishi — together with decisions from other circuits — demonstrates, moreover, that the lower courts completely misunderstand how to apply Bremen’s policy analysis. The en banc majority declined to apply Mitsubishi's ratio- nale — which the majority believed was “dictum...regarding antitrust law” — to the securities claims in this case, because the majority wrongly believed that Scherk compels enforcement of the Choice Clauses notwithstanding Mitsubishi. App. A, lla-12a. According to the Ninth Circuit, Scherk’s enforcement of a clause requiring foreign arbitration of a 1934 Act claim, based on Bremen, means that the anti-waiver statutes do not apply to forum-selection clauses, even if the foreign forum would not enforce the United States securities laws — for example, due to a foreign choice-of-law clause. This is so, said the Ninth Circuit, because Scherk “never suggested” that a foreign choice-of-law clause affects the validity of a forum- selection clause. App. A, 12a.*° By relying on Scherk’s failure to address foreign choice-of- law clauses, the Ninth Circuit extended Scherk’s holding far beyond the issue decided in that case. Scherk’s failure to 33 The Fifth Circuit reached the same conclusion in Haynsworth, 121 F3d at 968. 23 address foreign choice-of-law clauses stems not from any opin- ion that such clauses are irrelevant under tine anti-waiver stat- utes, but rather from the fact that the contract in Scherk selected United States law, specifically the law of “Illinois, US.A.” 417 US. at 508 n.1, 519 n.13. See en banc dissent, App. A, 18a. Thus, nothing in Scherk precludes applying Mitsubishi's rationale to statutory federal securities remedies. The Second and Seventh Circuits, moreover, disagree with the Ninth Circuit’s conclusion that Scherk limits Mitsubishi. The Second and Seventh Circuits have both held that the Mitsubishi rationale does apply to securities law remedies — notwithstand- ing Scherk. “Scherk, decided eleven years before Mitsubishi, is not to the contrary.” Roby, 996 F. 2d at 1364 n.3; see also Bonny, 3 F.3d at 160 (applying Mitsubishi). Even though the Second and Seventh Circuits recognize that Mitsubishi applies to securities remedies, those courts nev- ertheless improperly interpret Mitsubishi. Mitsubishi and Vimar straightforwardly preclude enforcing choice clauses that waive statutory remedies. Both the Second and Seventh Circuits believe, however, that Mitsubishi permits enforcement of a forum-selection clause that waives statutory remedies if the court concludes that available foreign remedies are “adequate” to implement the policies that underlie the United States stat- ute. See Roby, 996 F.2d at 1364-66; Bonny, 3 F.2d at 160-61. That is the same comparative iaw balancing that the Ninth Circuit incorrectly employed in attempting to apply Bremen and Scherk in this case. By undertaking that difficult endeavor,” the lower courts appropriated more judicial policy-making authority than Mitsubishi and Vimar permit, “in essence supplant{ing} their policy views of what laws are sufficient to protect United States investors for the determination made by Congress.” SEC Br., App. L, 122a. The courts’ ill-equipped attempts at such a quasi- 4 See pane! majority, App. C, 40a (task undertaken by Roby and Bonny is “not easy”); id. 50a-Sla (Goodwin, J., dissenting) (confronting “a difficult question”); Roby, 996 F.2d at 1363 (confronting “a serious question”), Bonny, 3 F.3d at 160 (expressing “serious concerns”). 24 legislative comparative balancing has, moreover, led the courts into faulty reasoning and erroneous results.* IV. The Ninth Circuit’s Fraud Holding Conflicts With This Court’s Moseley Decision, And With The Application of Moseley By the Sixth Circuit The Ninth Circuit incorrectly enforced the Choice Clauses despite the undisputed evidence of Lloyd’s fraud. In doing so, the court erroneously refused to follow Moseley — in direct conflict with the Sixth Circuit’s adherence to Moseley in CBS Employees, 912 F.2d at 1568. To invalidate a forum-selection clause based on fraud, a plaintiff must show fraud in the inducement of the clause itself, not merely fraud in connection with the contract generally. App. A, 14a (citing Prima Paint, 388 U.S. at 403-04; Scherk, 417 U.S. at 519 n.14).*° Moseley held that fraud “goes to the arbitra- tion clause itself” when, as in this case, “the insertion in the subcontracts of an arbitration clause” was “[o]ne of the means used to effect [the fraudulent] scheme”. 374 U.S. at 171, cited in Prima Paint, 388 U.S. at 404 n.12 (construing the Federal Arbitration Act in a manner “consistent...with the decision in Moseley...”’). 35 For example, the Ninth Circuit held that English law provides “sufficient” protection to Names. App. A, 9a. But, as the SEC explains, that determina- tion was wrong. See App. L, 119a-123a; en banc dissent, App. A, 19a-23a; panel majority, App. C, 40a-41a. Roby’s policy balancing relied heavily on the SEC’s “apparent judgment” that Lloyd’s qualified its offerings for a regula- tory exemption from registration and disclosure under 1933 Act 5. See 996 F.2d at 1365-66. But the SEC explains that it has never made any judgment that Lloyd’s is exempt from registration and disclosure. App. L, 123a-125a. The other circuits that have addressed the Choice Clauses since Roby have all relied on Roby’s policy analysis, without acknowledging that critical error in Roby’s rationale. See Bonny, 3 F.3d at 161-62 (citing Roby); Allen, 94 F.3d at 929 (citing Roby and Bonny), Haynsworth, 121 F.3d at 969 n.28 (citing Roby, Bonny and Allen), App. A, 9a (citing Roby, Bonny, Allen and Haynsworth). 36 Moseley, Prima Paint and Scherk involved arbitration clauses, which are merely specialized forum-selection clauses. E.g., Rodriguez, 490 U.S. at 483; Scherk, 417 U.S. at 519. 25 Petitioners’ unrebutted evidence demonstrates the type of fraud that voids forum-selection clauses under Moseley. Lloyd’s knew its conduct violated United States law before it required Names to sign the Choice Clauses. App. A, 14a. Lloyd’s knew that it had concealed the fact that it had saddled United States investors with billions of dollars of losses from asbestos and pollution liability risks*” — in violation of the federal and state securities laws and state common law — and that losses from those risks would soon become known.* Lioyd’s therefore had reason to fear that American Names would seek relief against Lloyd’s under United States law in United States courts when the Names began to realize these asbestos and pollution liability losses. Lloyd’s induced Names to accept the Choice Clauses knowing that — because English courts will not enforce the Names’ claims against Lloyd’s under American law — the clauses would strip Names of all their United States law reme- dies. (See discussion supra, 5). That circumstantial evidence establishes that Lloyd’s adopted the Choice Clauses to further a fraudulent scheme.” The Ninth Circuit did not hold that Petitioners failed to show fraud of the type alleged in Moseley. Instead, the court incorrectly held that such a showing is insufficient as a matter of law. The Ninth Circuit first held that Lloyd’s fraud is legally insufficient to defeat the Choice Clauses because that fraud “gofes] only to the contract as a whole,” rather than to the Choice Clauses themselves. App. A, 14a. This is so, said the Ninth Circuit, because “[t]he Names never allege...that Lloyd's misled them as to the legal effect of the choice clauses [or that] Lloyd’s fraudulently inserted the clauses without their knowl- edge.” App. A, 14a. But Moseley held that evidence showing that a forum-selection clause was intended to effectuate a. 37 See evidence cited in Names’ Br. 5-6, 11-13. 38 See evidence cited in Names’ Br. 38. 39 See evidence cited in Names’ Reply Br. 41. 40 “(C}ircumstantial evidence can be more than sufficient” to show fraud. Herman & MacLean v. Huddleston, 459 U.S. 375, 390 n.30 (1983). 26 fraudulent scheme — like Petitioners’ unrebutted evidence here — does go to the validity of the clause itself, as a matter of law. 374 US. at 170-71. And, Moseley did not require allegations or evidence of deception as to the existence or legal effect of the clause. Second, the Ninth Circuit attempted to distinguish Moseley on the basis of differences between the procedural posture in Moseley and the procedural posture here. App. A, 14a-15a. According to the Ninth Circuit, Moseley does not apply when a plaintiff seeks to invalidate a forum-selection clause in the same action where the defendant seeks to enforce the clause. App. A, 15a. Moseley is distinguishable, said the Ninth Circuit, because “{hjere Lloyd’s has clearly and vigorously called for the enforce- ment of the choice clauses,” id., whereas the defendant in Moseley sought to enforce the clause in a separate action from the plaintiff’s action challenging the clause. 374 U.S. at 170. But Moseley placed no reliance on that procedural posture. As the Court later explained in a slightly different procedural context, “it is inconceivable that Congress intended the rule to differ depending upon which party to the arbitration agreement first invokes the assistance of a federal court.” Prima Paint, 388 U.S. at 404. The Ninth Circuit’s holding also conflicts with the Sixth Circuit’s holding in CBS Employees. Following Moseley, the Sixth Circuit held: Where, as here, the plaintiff affirmatively pleads that the contract and the arbitration agreement...were procured through fraud, the court should determine whether the arbitration clause was used to further the fraudulent scheme. 912 F.2d at 1568 (citing Moseley and Prima Paint). Unlike the Ninth Circuit, CBS Employees did not require allegations or evidence of deception as to the existence or legal effect of the clause. And the Sixth Circuit applied Moseley’s central holding even though the CBS Employees plaintiff raised its challenge to 27 the clause in the same proceeding where the defendant tried to enforce that clause. See 912 F.2d at 1565. CONCLUSION The Petition for Writ of Certiorari should be granted. Respectfully submitted, STEPHEN A. KROFT Counsel of Record for Petitioners EUGENE I. GOLDMAN ROBERT E. KOHN la APPENDIX A FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT ALAN RICHARDS, et al., ) Plaintiffs-Appellants, ) No. 95-55747 ) v. ) D.C. No. ) CV-94-01211- ) IEG LLOYD’S OF LONDON, an ) unincorporated association, et al., ) Defendants-Appellees. ) ) ) JOHN R. NORTON, III; Doris S. ) NORTON; DIANE B. ALLISON; ) CHARLES G. BENTZIN; F.M. BINKLEY; ) DELMAR A. BRADY; SAMME JO BRADY; ) GEORGE MANING CLOSE; RUSSELL M. ) COLLINS; PETER DWARES; ROBERT ) FLESVIG; DONALD P. GALLOP; ) CHARLES A. GERLACH, JR.; ROBERT W. ) GERWIG; RICHARD C. HENRY; ) MICHAEL C. HIRSH; R. WILLIAM ) No. 95-56467 JOHNSTON; JAMES H. KAYIAN; ) JOANNE S. KAYIAN-OLOONEY; SUZANNE ) D.C. No. KAYIAN; LOWELL CONRAD LUNDELL; ) CV-95-00952- JUDITH M. OTT; H.E. RAINBOLT; ) IEG DAVID L. ROSENBLATT; RAY MORSE ) SANDERSON; CLAIRE TILLMAN; ) OPINION ) WARREN G. VANDER VOORT; PETER 2a BECK; HAROLD FRANZ ILG; JOHN C. GRIFFIN; TED KOSLOFF; FRANCIS J. MILON; GLEN R. MOGAN; MELANIE M. NORTON; JOSEPH F. WELLER, Plaintiffs-Appellants, We LLOYD’S OF LONDOW, an unincorporated association; CORPORATION OF LLOYD’S, aka Society of Lloyd’s, aka The Society and Council of Lloyd’s, Defendants-Appellees. Appeals from the United States District Court for the Southern District of California Irma E. Gonzalez, District Judge, Presiding Argued and Submitted October 23, 1997—San Francisco, California Filed February 3, 1998 Before: Procter Hug, Jr., Chief Judge, Alfred T. Goodwin, Harry Pregerson, Alex Kozinski, Stephen S. Trott, Ferdinand F Fernandez, Pamela Ann Rymer, Andrew J. Kleinfeld, Michael Daly Hawkins, A. Wallace Tashima, and Sidney R. Thomas, Circuit Judges. Opinion by Judge Goodwin; Dissent by Judge Thomas GOODWIN, Circuit Judge: The primary question this case presents is whether the antiwaiver provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 void choice of law and choice of forum clauses in an international transaction. The district court found that they do not. The appeal has been argued twice. Upon reconsideration en banc, the opinion published at 107 3a F.3d 1422 (9th Cir. 1997) is withdrawn and we affirm the district court. Background Appellants, all citizens or residents of the United States, are more than 600 “Names” who entered into underwriting agreements. The Names sued four defendants: the Corporation of Lloyd’s, the Society of Lloyd’s, the Council of Lloyd’s, (collectively, ‘“Lloyd’s”) and Lloyd’s of London, (the “unincorporated association”). Lioyd’s is a market in which more than three hundred Underwriting Agencies compete for underwriting business. Pursuant to the Lloyd’s Act of 1871-1982, Lloyd’s oversees and regulates the competition for underwriting business in the Lioyd’s market. The market does not accept premiums or insure risks. Rather, Underwriting Agencies, or syndicates, compete for the insurance business. Each Underwriting Agency is controlled by a Managing Agent who is responsible for the financial status of its agency. The Managing Agent must attract not only underwriting business from brokers but also the capital with which to insure the risks underwritten. The Names provide the underwriting capital. The Names become Members of the Society of Lloyd’s through a series of agreements, proof of financial means, and the deposit of an irrevocable letter of credit in favor of Lloyd’s. To become a Name, oné must travel to England to acknowledge the attendant risks of participating in a syndicate and sign a General Undertaking. The General Undertaking is a two page document containing choice of forum and choice of law clauses (collectively the “choice clauses”), which form the basis for this dispute. The choice clauses read: 2.1 The rights and obligations of the parties arising out of or relating to the Member’s membership of, and/or underwriting of insurance business at, Lloyd’s and any other matter referred to in this Undertaking shall be da governed by and construed in accordance with the laws of England. 2.2 Each party hereto irrevocably agrees 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.... By becoming a Member, the Names obtain the right to participate in the Lloyd’s Underwriting Agencies. The Names, however, do not deal directly with Lloyd’s or with the Managing Agents. Instead, the Names are represented by Members’ Agents who, pursuant to agreement, stand in a fiduciary relationship with their Names. Upon becoming a Name, an individual selects the syndicates in which he wishes to participate. In making this decision, the individual must rely to a great extent on the advice of his Members’ Agent. The Names generally join more than one underwriting agency in order to spread their risks across different types of insurance. When a Name undertakes an underwriting obligation, that Name is responsible only for his share of an agency’s losses; however, his liability is unlimited for that share. In this case, the risk of heavy losses has materialized and the Names now seek shelter under United States securities laws and the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq. The Names claim that Lloyd’s actively sought the investment of United States residents to fill an urgent need to build up capital. According to the Names, Lloyd’s concealed information regarding the possible consequences of the risks undertaken and deliberately and disproportionately exposed the Names to massive liabilities for which sufficient underwriting capital or reinsurance was unavailable. This appeal does not address the merits of the underlying claims. It addresses only the Names’ contention that their Sa disputes with Lloyd’s should be litigated in the United States despite contract clauses binding the parties to proceed in England under English law. It also addresses whether default should have been entered against the unincorporated association. Standard of Review We review the district court’s decision to enforce the choice clauses for abuse of discretion. Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 323 (9th Cir. 1996). As we are reviewing a Rule 12(b)(3) motion decision, we need not accept the pleadings as true. Jd. at 324. Whether the securities laws void the choice clauses is a question of law that we review de novo. Pinal Creek Group v. Newmont Mining Corp., 118 F.3d 1298, 1300 (9th Cir. 1997). Discussion The Names make three arguments for repudiating the choice clauses. They contend (1) that the antiwaiver provisions of the federal securities laws void such clauses, (2) that the choice clauses are invalid because they offend the strong public policy of preserving an investor’s remedies under federal and state securities law and RICO and (3) that the choice clauses were obtained by fraud. We will address each of these in turn. We analyze the validity of the choice clause under The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), where the Supreme Court stated that courts should enforce choice of law 6a and choice of forum clauses in cases of “freely negotiated private international agreement{s].” Bremen, 407 U.S. at 12-13. A The Names dispute the application of Bremen to this case. They contend that Bremen does not apply to cases where Congress has spoken directly to the immediate issue — as they claim the antiwaiver provisions do here. The Securities Act of 1933 (the “’33 Act”) provides that: Any condition, stipulation, or provision binding any person acquiring any security to waive compliance with any provision of this subchapter or of the rules and regulations of the Commission shall be void. 15 U.S.C. § 77n. The 1934 Securities Exchange Act (the “’34 Act”) contains a substantially similar provision. 15 U.S.C. § 78cc(a). The Names seize on these provisions and claim that they void the choice clauses in their agreement with Lloyd’s. Certainly the antiwaiver provisions are worded broadly enough to reach this case. They cover “any condition, stipulation, or provision binding amy person acquiring any security to waive compliance with any provision of this subchapter....” Indeed, this language is broad enough to reach any offer or sale of anything that could be alleged to be a security, no matter where the transaction occurs. ! While the contract in Bremen did not contain a choice of law clause, the Supreme Court explicitly recognized that the forum selection clause also acted as a choice of law clause. Jd. at 13 n.15 (“[Wyhile the contract here did not specifically provide that the substantive law of England should be applied, it is the general rule in English courts that the parties are assumed, absent a contrary indication, to have designated the forum with the view that it should apply its own law.... It is therefore reasonable to conclude that the forum clause was also an effort to obtain certainty as to the applicable substantive law.””). LEN TIRE OR RT re Be iad Si a a ab can en et, 6 sii ae ihe Fu Le : ey Te “ bt : e +P ‘ s dt i ae we a fs ? Ja Nevertheless, this attempt to distinguish Bremen fails. In Bremen itself, the Supreme Court contemplated that a forum selection clause may conflict with relevant statutes. Bremen, 407 US. at 15 (“A contractual choice-of-forum clause should be held unenforceable if enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision.”) (emphasis added). Moreover, in Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974), the Supreme Court explicitly relied on Bremen in a case involving a securities transaction.’ Echoing the language of Bremen, the Court found that “[a] contractual provision specifying in advance the forum in which disputes shall be litigated and the law to be applied is ... an almost indispensable precondition to achievement of the orderliness and predictability essential to any international business transaction.” Id. at 516. See Bremen, 407 U.S. at 13-14 (“{A]greeing in advance on a forum acceptable to both parties is an indispensable element in international trade, commerce, and contracting.”). This passage should leave little doubt as to the applicability of Bremen to the case at hand.? Indeed, were we to find that Bremen did not apply, the reach of United States securities laws would be unbounded. The Names simply prove too much when they assert that “Bremen’s judicially-created policy analysis under federal common law is not controlling when Congress has expressed its will in a statute.” This assertion, if true, expands the reach of 2 In Scherk the Supreme Court assumed without so ruling that the transaction involved securities. Scherk, 417 U.S. at 514 n.8. Because it is not altogether clear whether the investments here were securities, we too assume without deciding that the Names invested in securities. 3 The Names also cite Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22 (1988) in support of their position. Stewart does not aid the Names. It is true that Stewart held that before engaging in a Bremen analysis, “the first question {is} whether [28 U.S.C.] § 1404(a) itself controls respondent's request to give effect to the parties’ contractual choice of venue.” Stewart, 487 U.S. at 29. That case, however, involved a federal court sitting in diversity confronted with a purely domestic transaction. Thus it does not address this situation. 8a federal securities law to any and all such transactions, no matter how remote from the United States. We agree with the Fifth Circuit that “we must tread cautiously before expanding the operation of U.S. securities law in the international arena.” Haynsworth v. The Corporation, 121 F.3d 956, 966 (Sth Cir. 1997). B Having determined that Bremen governs international contracts specifying forum and applicable law, we turn to the question whether the contract between Lloyd’s and the Names is international. Not surprisingly, the Names contend that these were purely domestic securities sales. They claim that Lloyd’s solicited the Names in the United States and that the trip the Names made to England was a mere ritual without legal significance. We disagree. The Names signed a contract with English entities to participate in an English insurance market and flew to England to consummate the transaction. That the Names received solicitations in the United States does not somehow erase these facts. Moreover, Lloyd’s insistence that individuals travel to England to become a Name does not strike us as mere ritual. Lloyd’s likely requires this precisely so that those who choose to be the Names understand that English law governs the transaction. Entering into the Lloyd’s market in the manner described is plainly an international transaction. II We now apply Bremen to this case. Bremen emphasized that “in the light of present-day commercial realities and expanding international trade we conclude that the forum clause should control absent a strong showing that it should be set aside.” Bremen, 407 U.S. at 15. The Court reasoned that “[t]he elimination of all [ ] uncertainties [regarding the forum] by agreeing in advance ... is an indispensable element in 9a international trade, commerce, and contracting.” Jd. at 13-14. Thus, “absent some compelling and countervailing reason {a forum selection clause} should be honored by the parties and enforced by the courts.” Jd. at 12. The party seeking to avoid the forum selection clause bears “a heavy burden of proof.” Jd. at 17. The Supreme Court has identified three grounds for repudiating a forum selection clause: first, if ihe inclusion of the clause in the agreement was the product of fraud or overreaching; second, if the party wishing to repudiate the clause would effectively be deprived of his day in court were the clause enforced; and third, “if enforcement would contravene a strong public policy of the forum in which suit is brought.” /d. at 12-13, 15, 18. The Names contend that the first and third grounds apply in this case. A The Names’ strongest argument for escaping their agreement to litigate their claims in England is that the choice clauses contravene a strong public policy embodied in federal and state securities law and RICO. See Bonny v. Society of Lloyd’s, 3 F.3d 156, 160-61 (7th Cir. 1993) (expressing “serious concerns” that the choice clauses offend public policy but ultimately ruling in Lloyd’s favor), cert. denied, 510 U.S. 1113 (1994); Roby v. Corporation of Lloyd’s, 996 F.2d 1353, 1364-66 (2nd Cir.) (substantially the same), cert. denied, 510 U.S. 945 (1993). We follow our six sister circuits that have ruled to enforce the choice clauses. See Haynsworth, 121 F3d 956; Allen v. Lloyd’s of London, 94 F.3d 923 (4th Cir. 1996); Shell v. R. W Sturge, Ltd., 55 F.3d 1227 (6th Cir. 1995); Bonny, 3 F3d 156; Roby, 996 F.2d 1353; and Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953 (10th Cir.), cert. denied, 506 U.S. 1021 (1992). We do so because we apply Scherk and because English law provides the Names with sufficient protection. 10a In Scherk, the Supreme Court was confronted with a contract that specified that all disputes would be resolved in arbitration before the International Chamber of Commerce in Paris, France. Scherk, 417 U.S. at 508. The arbitrator was to apply the law of the state of Illinois. Jd. The Court enforced the forum selection clause despite then hostile precedent. * Jd. at 520-21. See Wilko v. Swan, 346 U.S. 427 (1953), overruled by Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 485 (1989). The Court’s treatment of Wilko leaves little doubt that the choice clauses in this case are enforceable. In Wilko, the Supreme Court ruled that “the right to select the judicial forum is the kind of ‘provision’ that cannot be waived under § 14 of the Securities Act.” Wilko, 346 U.S. at 435. In Scherk, the Court had before it a case where both the District Court and the Seventh Circuit found a forum selection clause invalid on the strength of Wilko. Scherk, 417 US. at 510. In distinguishing Wilko, the Supreme Court stated that there were “significant and, we find, crucial differences between the agreement involved in Wilko and the one signed by the parties here.” Scherk, 417 U.S. at 515. The first and primary difference that the Court relied upon was that “Alberto-Culver’s contract ... was a truly international agreement.” Jd. The Court reasoned that such a contract needs, as “an almost indispensable precondition,” a “provision specifying in advance the forum in which disputes shall be litigated and the law to be applied.” Id. at 516 (emphasis added). Moreover, the Supreme Court has explained that, in the context of an international agreement, there is “no basis for a judgment that only United States laws and United States courts should determine this controversy in the face of a solemn agreement between the parties that such controversies be resolved elsewhere.” Jd. at 517 n.11. To require that ““American “The Court recognized that an agreement to arbitrate “is, in effect, a specialized kind of forum-selection clause.” Scherk, 417 U.S. at 519. lla standards of fairness’ must ... govern the controversy demeans the standards of justice elsewhere in the world, and unnecessarily exalts the primacy of United States law over the laws of other countries.” Jd. These passages from Scherk, we think, resolve the question whether public policy reasons allow the Names to escape their “solemn agreement” to adjudicate their claims in England under English law. Scherk involved a securities transaction. Jd. at 514 n.8. The Court rejected Wilko’s holding that the antiwaiver provision of the '34 Act prohibited choice clauses. /d. at 515-16. It also recognized that enforcing the forum selection clause would, in some cases, have the same effect as choosing foreign law to apply. Jd. at 516, 517 n.11. Yet the Court did not hesitate to enforce the forum selection clauses. It believed that to rule otherwise would “reflect a ‘parochial concept that all disputes must be resolved under our laws and in our courts.” Id. at 519 (quoting Bremen, 407 U.S. at 9). As the Supreme Court has explained, ““[w]e cannot have trade and commerce in world markets and international waters exclusively on our terms, governed by our laws, and resolved in our courts.” Jd. (quoting Bremen, 407 U.S. at 9). Relying on Mitsubishi Motors Corp. v. Soler Chrysler Plymouth, Inc., 473 U.S. 614, 634 (1985), the Names argue that federal and state securities laws are of “fundamental importance to American democratic capitalism.” They claim that enforcement of the choice clauses will deprive them of important remedies provided by our securities laws. The Supreme Court disapproved of such an outcome, the Names contend, when it stated that “in the event the choice-of-forum and choice-of-law clauses operated in tandem as a prospective waiver of a party’s right to pursue statutory remedies for antitrust violations, we would have little hesitation in condemning the agreement as against public policy.” Jd. at 637 n.19. Without question this case would be easier to decide if this footnote in Mitsubishi had not been inserted. Nevertheless, we 12a do not believe dictum in a footnote regarding antitrust law outweighs the extended discussion and holding in Scherk on the validity of clauses specifying the forum and applicable law. The Supreme Court repeatedly recognized in Scherk that parties to an international securities transaction may choose law other than that of the United States, Scherk, 417 at 516, 517 n.11, 519 n.13, yet it never suggested that this affected the validity of a forum selection clause. See also Bremen, 407 U.S. at 13 n. 15 (recognizing that a forum selection clause also acts to select applicable law); Milanovich v. Costa Crociere, S.pA., 954 F.2d 763, 767 n.7 (D.C. Cir. 1992) (“The Bremen involved a choice- of-forum clause, but the Supreme Court recognized that enforcing the provision would have the effect of subjecting the contract to foreign law.”). ° Of course, were English law so deficient that the Names would be deprived of any reasonable recourse, we would have to subject the choice clauses to another level of scrutiny. See Camival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 595 (1991) (“It bears emphasis that forum-selection clauses contained in form passage contracts are subject to judicial scrutiny for fundamental fairness.”). In this case, however, there is no such danger. See Haynsworth, 121 F.3d at 969 (“English law provides a variety of protections for fraud and misrepresentations in securities transactions.”). Cf British Midland Airways Ltd. v. 5 The Names also point to Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528 (1995), as support for their position. In Vimar, the Supreme Court expressed concern that a forum selection clause combined with a choice of law clause would deprive a party of remedies under the Carriage of Goods by Sea Act (“COGSA’), 46 U.S.C. § 1300 et seq. Jd. at 539. The Court’s reasoning in Vimar, however, does not extend to the instant case as Virnar involved COGSA, a statute designed to address international transactions. Id. at 537 (“COGSA is the culmination of a multilateral effort to establish uniform ocean bills of lading to govern the rights and liabilities of carriers and shippers inter se in international trade.”) (internal quotations and citation omitted). 13a International Travel, Inc., 497 F.2d 869, 871 (9th Cir. 1974) (This court is “hardly in a position to call the Queen’s Bench a kangaroo court.”). We disagree with the dramatic assertion that “[t}he available English remedies are not adequate substitutes for the firm shields and finely honed swords provided by American securities law.” Richards v. Lloyd’s of London, 107 F.3d 1422, 1430 (9th Cir. 1997). The Names have recourse against both the Member and Managing Agents for fraud, breach of fiduciary duty, or negligent misrepresentation. Indeed, English courts have already awarded substantial judgments to some of the other Names. See Arubuthnott v. Fagan and Feltrim Underwriting Agencies Ltd., 3 Re LR 145 (H.L. 1994); Deeny v. Gooda Walker Ltd., Queen’s Bench Division (Commercial Court), The Times 7 October 1994. ° While it is true that the Lloyd’s Act immunizes Lloyd’s from many actions possible under our securities laws, Lloyd’s is not immune from the consequences of actions committed in bad faith, including fraud. Lloyd’s Act of 1982, Ch. 14(3)(e)(i). The Names contend that entities using the Lloyd’s trade name willfully and fraudulently concealed massive long tail liabilities in order to induce them to join syndicates. If so, we have been cited to no authority that Lloyd’s partial immunity would bar recovery. Cc The addition of RICO claims does not alter our conclusion. This court has already held that the loss of RICO claims does not suffice to bar dismissal for forum non conveniens. Lockman Found. v. Evangelical Alliance Mission, 930 F.2d 764, 768-79 (9th Cir. 1991). We agree with our sister circuit that has considered this issue and extend the logic of Lockman to this case. Roby, 996 F.2d at 1366. 6 The Names complain that the Member and Managing Agents are insolvent. If so, this is truly unfortunate. It does not, however, affect our analysis of the adequacy of English law. 14a D The Names also argue that the choice clauses were the product of fraud. They claim that at the time of signing the General Undertaking, Lloyd’s knew that the Names were effectively sacrificing valid claims under U.S. law by signing the choice clauses and concealed this fact from the Names. Had the Names known this fact, they contend, they never would have agreed to the choice clauses. The Names never allege, however, that Lloyd’s misled them as to the legal effect of the choice clauses. Nor do they allege that Lloyd’s fraudulently inserted the clauses without their knowledge. Accordingly, we view the allegations made by the Names as going only to the contract as a whole, with no allegations as to the inclusion of the choice clauses themselves. Absent such allegations, these claims of fraud fail. The Supreme Court has noted that simply alleging that one was duped into signing the contract is not enough. Scherk, 417 U.S. at 519 n.14 (The fraud exception in Bremen “does not mean that any time a dispute arising out of a transaction is based upon an allegation of fraud ... the clause is unenforceable.”). For a party to escape a forum selection clause on the grounds of fraud, it must show that “the inclusion of that clause in the contract was the product of fraud or coercion.” Jd. (citing Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967)) (emphasis in original). See also Prima Paint, 388 U.S. at 404 (“[T]he statutory language [of the United States Arbitration Act] does not permit the federal court to consider claims of fraud in the inducement of the contract generally.”). E The Names object that Moseley v. Electronic & Missile Facilities, Inc., 374 U.S. 167 (1963), requires the district court to adjudicate the claims of fraud before dismissal. In Moseley, the Supreme Court found that “it seems clear that the issue of fraud should first be adjudicated before the rights of the parties 15a under the [contracts] can be determined.” Jd. at 171. Taken out of context, this statement would seem to support the Names’ position. When viewed in context, however, it becomes clear that this statement in fact provides no aid to the Names. The Supreme Court required an initial adjudication of the fraud claim after noting that “no request has been made here for the enforcement of the arbitration agreement included within the [contracts.]” Jd. at 170. It was only “[w]ith the pleadings in this posture” that the Supreme Court required a trial on the fraud claims. Jd. at 171. Here Lloyd’s has clearly and vigorously called for the enforcement of the choice clauses. Accordingly, Moseley does not apply to the instant case and the Names are not entitled to a trial on their claims of fraud. iil Because we decide that the district court correctly ruled to enforce the choice clauses, the request to enter default against the unincorporated association is moot. THOMAS, Circuit Judge, with whom Judge Pregerson and Judge Hawkins join, dissenting. The majority espouses a reasonable foreign policy, but one which emanates from the wrong branch of government. Congress has already explicitly resolved the question at hand. In the Securities Act of 1933 and the Securities Exchange Act of 1934 (the “Acts”), Congress expressly provided that investors cannot contractually agree to disregard United States securities law. Thus, in applying the “reasonableness” policy weighing approach of M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), the majority displaces Congress’ specific statutory directive. Furthermore, even assuming that the Bremen analysis applies here, the circumstances surrounding this dispute compel l6a the conclusion that enforcement of the choice clauses would be unreasonable. Accordingly, I respectfully dissent. I. Unlike the conflict the Bremen Court envisioned between statutes and forum selection clauses, the Acts do not merely declare “a strong public policy” against the waiver of compliance with United States securities laws. Rather, the Acts explicitly and unconditionally prohibit such a waiver. The language of the Securities Act of 1933 is clear and unambiguous: Any condition, stipulation, or provision binding any person acquiring any security to waive compliance with any provision of this subchapter or of the rules and regulations of the Commission shall be void. 15 U.S.C. § 77n. The Securities Exchange Act of 1934 contains a similar restriction. See 15 U.S.C. § 78cc(a). Absent these antiwaiver provisions, courts could appropriately examine choice-of-forum clauses in investment contracts under a Bremen analysis to determine whether they violated the strong public policy of the United States as embodied in our securities law. However, the Acts’ antiwaiver provisions decisively alter this inquiry. With adoption of those sections, Congress announced a per se rule that American laws cannot be ignored in this context. Courts should not employ amorphous public policy to emasculate plain statutory language. “Under our constitutional framework, federal courts do not sit as councils of revision, empowered to rewrite legislation in accord with their own conceptions of prudent public policy.” United States v. Rutherford, 442 U.S. 544, 555 (1979). Rather, “[o]nly when a literal construction of a statute yields results so manifestly unreasonable that they could not fairly be attributed to congressional design will an exception to statutory language be judicially implied.” Id. Because Congress quite reasonably intended that our securities laws be enforced 17a even when a salesperson managed to obtain an investor's waiver, we “have no license to depart from the plain language” of the Acts. Id. The majority turns this analysis inside out, by holding that underlying antiwaiver public policy eviscerates specific anti- waiver statutory provisions. Disregarding this express prohibition to assess whether enforcement of the choice clauses contravenes the underlying policy against waiver is akin to overlooking the plain language of a statute to consider its legislative history, a clearly disfavored method of statutory interpretation. See Connecticut Nat'l Bank v. Germain, 503 U.S. 249, 253-54 (1992) (“We have stated time and again that courts must presume that a legislature says in a statute what it means and means in a statute what it says there.... When the words of a statute are unambiguous, then, this first canon is also the last: judicial inquiry is complete.... It would be dangerous in the extreme to infer ... that a case for which the words of an instrument expressly provide, shall be exempted from its operation.”) (citations and internal quotation marks omitted). As the majority concedes, the explicit language of the Acts bars the waiver that the choice clauses would effectuate here. Thus, the “unadorned words” of the Acts’ antiwaiver provisions should not be limited by the antiwaiver public policy they impliedly express, see Germain, 503 U.S. at 254. The majority’s fears notwithstanding, it is unnecessary to displace Congress’ reasoned judgment in order to contract the “boundless” reach of United States securities laws. First, because plaintiffs alleging securities fraud will at some point have to establish that the disputed transactions involved “securities,” as defined under United States law, plaintiffs cannot gain unfettered access to the protection of the securities laws simply by alleging that they have purchased securities. Second, the plaintiffs here do not seek to invoke the Acts’ substantive remedies in the context of transactions that enjoy only an incidental nexus with the United States. Lloyd’s recruited the plaintiffs, residents of the United States, in the vee 18a United States, often using United States brokerage firms and recruiters, and availed itself of the United States mails to disseminate information about becoming a Name. In short, Lioyd’s purposefully devoted considerable time and resources to recruiting American investors through specifically American media. To penalize the plaintiffs in this case based upon a hypothetical scenario that differs dramatically from the circumstances at issue here would work an unjust deprivation of the plaintiffs’ rights under the Acts. The majority argues that the Supreme Court’s reliance on Bremen in Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974), should control here. However, the majority overlooks the crucial differences between the instant dispute and the facts underlying Scherk. Scherk involved a contract that contained an agreement to arbitrate any disputes arising out of the contract in Paris, France. This contract specified that “[t]he laws of the State of Illinois, U.S.A. shall apply to and govern this agreement, its interpretation and performance.” Scherk, 417 U.S. at 508. In contrast, the choice clauses here not only select the forum — the courts of England — but mandate that English law shall govern any controversy. Thus, the reasoning and conclusions of Scherk should not extend to this case. To the extent that the Scherk Court approved a hypothetical choice-of- law clause that prescribed the application of foreign law, such approval was dicta and cannot bind the parties here. Furthermore, the Lloyd’s underwriting agreements had substantial connections with the United States, in contrast with the sparse contacts between the United States and the contract in Scherk. In Scherk, an American company made an initial contact with Scherk, a German citizen, in Germany, pursued negotiations with Scherk in both Europe and the United States, and finally executed a contract in Vienna, Austria, providing for the transfer of the ownership of Scherk’s enterprises. The closing of this transaction occurred in Geneva, Switzerland. In comparison, the sole component of Lloyd’s campaign to recruit American Names that took place in England was the committee ae 3 19a meeting that new Names attended in London. Otherwise, every aspect of the solicitation occurred in the United States. To characterize this extensive and multifaceted recruitment campaign as the mere receipt of “solicitations,” as does the majority, is to understate the impact of Lloyd’s activities in the United States. The Scherk majority itself recognized that a contract with “insignificant or attenuated” contacts with foreign countries might well prompt a refusal to enforce a forum selection clause, let alone a clause choosing foreign law. Scherk, 417 U.S. at 517 n.11. The Court observed: “Judicial response to such situations can and should await future litigation in concrete cases.” Id. The instant case offers just such a concrete opportunity to assess the enforceability of the choice clauses independently of the Scherk methodology and holding — an opportunity this court should use to effectuate Congress’ explicit statutory directive. Unfortunately, the majority has chosen to contravene an unequivocal Congressional mandate, founded on an interpretation of underlying public policy. However reasonable that policy, it cannot supplant clear, unambiguous statutory language. il In addition to violating the Acts’ express antiwaiver provisions, the choice clauses are unenforceable because they are ““unreasonable’ under the circumstances.” Bremen, 407 U.S. at 10. Initially, the Supreme Court has twice stated that the type of clauses at issue here are invalid when they prospectively disable parties from pursuing statutory remedies. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 n.19 (1985), quoted in Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 540 (1995). Indeed, in Virnar, the Court went so far as to declare that “[t]he relevant question” was “whether the substantive law to be applied [would] reduce the 20a carrier’s obligations to the cargo owner below what [the Carriage of Goods by Sea Act] requires.” Virnar, 515 U.S. at 539. In other words, the Court implicitly rejected the argument that a forum selection clause must be enforced even if some of the claims that could have been brought in the forum of the lawsuit must be forfeited. As applied here, the logic of Mitsubishi and Vimar militates against enforcing the choice clauses. Not only do the choice clauses preclude the plaintiffs from seeking the substantive remedies the Acts offer, but the protections they provide under English law are markedly inferior to the Acts’. For instance, English law recognizes no remedy for the failure to register securities as required by section 12(1) of the Securities Act of 1933. Nor is there any English remedy against Lloyd’s for negligent misrepresentation as provided by section 12(2) of the Securities Act of 1933, because the 1982 Lloyd’s Act expressly immunizes Lloyd’s from any claim for “negligence or other tort” unless bad faith was involved. ' Third, no “controlling person” liability exists in England, whereas section 15 of the Securities Act of 1933 and section 20(a) of the 1934 Securities Exchange Act impose such liability. Thus, the choice clauses should not be enforced, because they afford a level of securities laws in turn reveal additional public policy reasons for invalidating the choice clauses. Enforcing the choice clauses gravely disadvantages American businesses, because foreign businesses, like Lloyd’s, can recruit investors without expending ! While the plaintiffs may sue Members’ and Managing Agents, who are not exempt from the 1982 Lloyd’s Act, the Members’ and Managing Agents are insolvent. The majority regards this insolvency, if true, as “truly unfortunate,” but deems it irrelevant to the “analysis of the adequacy of English law.” See supra note 6. However, it is equally reasonable to find English law all the more inadequate to address the plaintiffs’ grievances, because the insolvency of one class of potential defendants so materially damages the plaintiffs’ chances for recovery. tae Age Jae Kop NE a agit Sa ea tis Sete 2la the time and money involved in fulfilling the requirements of the Acts — a burden that American businesses cannot legally evade. Invalidating the choice clauses therefore eliminates any artificial advantage that Lloyd’s may have enjoyed in competing in the American insurance market. In addition, the Acts furnish a necessary regulatory check upon an otherwise virtually autonomous organization. As the British government itself concedes, Llioyd’s is a self-governing body charged with regulatory functions. Hence, a refusal to enforce the choice clauses would not reflect a lack of deference to English law and courts, but would simply arise from the realization that externally imposed restraints may sometimes be appropriate to control the behavior of a self-regulating organization. The majority rejects the applicability of Mitsubishi and Vimar to the choice clauses on two bases. First, the majority assails footnote 19 in Mitsubishi as mere dictum which cannot “outweig{h] the extended discussion and holding in Scherk on the validity of clauses specifying the forum and applicable law.” Second, the majority objects to the extension of Vimar to the instant case, because Virnar involved the Carriage of Goods by Sea Act (“COGSA’), a statute attempting to ensure uniformity in international transactions. This reasoning stands on tenuous ground. Initially, while footnote 19 in Mitsubishi was not incorporated into the Court’s actual holding, the Court left no doubt about its position on this issue by reiterating it in the entirely different setting of Vimar. Hence, the Court implicitly indicated that its concerns about a potential deprivation of plaintiffs’ access to statutory remedies were limited to neither the antitrust nor the COGSA context. Moreover, as explained above, to the extent that the Scherk Court speculated about the enforceability of a contractual provision selecting foreign law, such a discussion was dictum. As such, it warrants no greater deference than footnote 19 of Mitsubishi. Finally, the majority errs in characterizing the Acts as purely domestic, as opposed to the internationally-oriented 22a COGSA. Congress intended the Securities Act of 1933 to bring the United States into line with the protections other nations gave the security-buying public, by protecting American investors against fraud and misrepresentation in the sale of securities in interstate and foreign commerce alike. In fact, Congress observed that the necessity for such legislation arose from “the fact that billions of dollars [had] been invested in practically worthless securities, both foreign and domestic, including those of foreign governments, by the American public through incomplete, careless, or false representations.” The consequence, Congress concluded, was “dire national distress.” S. Rep. No. 47, at 2 (1933). Not only does this legislative history establish the international, as well as domestic, perspective of the Securities Act of 1933, but it drives home the necessity for invalidating the choice clauses here. Allegations of Lloyd’s “incomplete, careless, or false representations” about the plaintiffs’ participation in the English insurance market are precisely the issue in this case. Most importantly, given the hundreds of millions of dollars that American Names have invested in Lloyd’s underwriting agreements, the “dire national distress” that originally prompted Congress to adopt securities regulation legislation may well make an unwanted reappearance. Ii. Increasing access to international capital markets is a laudable goal, but one need not trample on United States securities laws to achieve it. Indeed, securitization of insurance risk is increasing, with some public offerings involving Lloyd’s exposures. However, these insurance risk-backed securitized investments are marketed in conformance with securities law, with full disclosure to the investor. Indeed, the facts alleged in this case make a powerful argument for vigorous application of American securities laws. A company, whether foreign or domestic, should not be able to mislead American investors 23a with impunity into assuming unlimited liability for known losses with no possibility of financial gain. When Congress voided waiver clauses, it meant what it said. The antiwaiver provisions of the Acts, whether as clear statutory directives or as embodiments of public policy, render the choice clauses unenforceable. The district court’s dismissal of the plaintiffs’ claims under the Acts should be reversed. Hence, I respectfully dissent. LLOYD’S OF LONDON, an unincorporated association, et al., Defendants-Appellees. No. 95-55747 D.C. No. CV-94-01211- IEG de de de de de ee ee ee JOHN R. NorTON, III; Doris S. NORTON; DIANE B. ALLISON; CHARLES G. BENTZIN; F.M. BINKLEY; DELMAR A. BRADY; SAMME JO BRADY; GEORGE MANING CLOSE; RUSSELL M. COLLINS; PETER DWARES; ROBERT FLESVIG; DONALD P. GALLOP; CHARLES A. GERLACH, JR.; ROBERT W. GERWIG; RICHARD C. HENRY; ee ee Z 2 ‘ ~ MICHAEL C. HIRSH; R. WILLIAM JOHNSTON; JAMES H. KAYIAN; JOANNE S. KAYIAN- OLOONEY; SUZANNE KAYIAN; LOWELL CONRAD LUNDELL; JUDITH M. OTT; H.E. RAINBOLT; DAVID L. ROSENBLATT; RAY MORSE SANDERSON; CLAIRE TILLMAN; WARREN G. VANDER VOORT; PETER BECK; HAROLD FRANZ ILG; JOHN C. GRIFFIN; TED KOSLOFF; FRANCIS J. MILON; GLEN R. MOGAN; MELANIE M. NORTON; JOSEPH F. WELLER, Plaintiffs-Appellants, Vz. LLOYD’s OF LONDON, an unincorporated association; CORPORATION OF LLOYD’s, aka Society of Lloyd’s, aka The Society and Council of Lloyd’s, Defendants-Appellees. BEFORE: GOODWIN, Circuit Judge. Appeliant’s Motion to stay the mandate pending petition for certiorari is GRANTED. Ne Ne Ne re ee Sree See” See” Sree” See” Sree” See” Seen” See” Se” See” Sea” Sere” See” See” See” See” See” See” “eee” See” See” 26a APPENDIX C FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT ) ALAN RICHARDS, et al., Plaintiffs-Appellants, No. 95-55747 v. ) D.C. No. ) CV-94-01211-IEG LLOYD’S OF LONDON, an unincorporated association, et al., Defendants-Appellees. JOHN R. NORTON, III; Doris S. NORTON; DIANE B. ALLISON; CHARLES G. BENTZIN; F.M. BINKLEY; DELMAR A. BRADY; SAMME JO BRADY; GEORGE MANING CLOSE; RUSSELL M. COLLINS; PETER DWARES; ROBERT FLESVIG; DONALD P. GALLOP; CHARLES A. GERLACH, JR.; ROBERT W. GERWIG; RICHARD C. HENRY; MICHAEL C. HIRSH; R. WILLIAM JOHNSTON; JAMES H. KAYIAN; JOANNE S. KAYIAN-OLOONEY; SUZANNE KAYIAN; LOWELL CONRAD LUNDELL; JUDITH M. OTT; H.E. RAINBOLT; DAVID L. ROSENBLATT; RAY MORSE SANDERSON; CLAIRE TILLMAN; WARREN G. VANDE [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386006_1480%3A1. Public record. Not legal advice.