Opposition Brief — Richards v. Lloyd's of London

Supreme Court, Us. |

No. 97-1779 FILED

JUN 2 1998

IN THE | OFFICE OF THE CLERK

Suprene Court of the nited States

OCTOBER TERM, 1997

>

ALAN RICHARDS, et al.,

Petitioners,

—vV a ed

LLOYD’S OF LONDON, et ai.,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE NINTH CIRCUIT

BRIEF OF RESPONDENT LLOYD’S

IN OPPOSITION

Dean Hansell Harvey L. Pitt*

LEBOEUF, LAMB, GREENE Michael H. Rauch

& MACRAE, L.L.P. Debra M. Torres

725 S. Figueroa Street FRIED, FRANK, HARRIS,

Los Angeles, California 90017 SHRIVER & JACOBSON

(213) 955-7300 One New York Plaza

New York, New York 10004

(212) 859-8000

Attorneys for Respondent Lloyd's

* Counsel of Record

PARTIES TO THE PROCEEDING

Respondent Lloyd’s, sued herein as Lloyd’s of London,

an unincorporated association, and The Corporation of Lloyd’s,

a/k/a The Society of Lloyd’s, a/k/a The Society and Council of

Lloyd's, is not a publicly held corporation, has no parent

corporation, and has no subsidiaries that are not wholly owned.

TABLE OF CONTENTS

Page

PARTIES TO THE PROC EBIOIINGS oon... s.ccccccccccscicsenscese cscs: i

py A ge, SE: emer eae eee ul

TABLE OF AUTHORITIES .............. id asa ata ee

OPPOSITION TO PETITION FOR

A WRIT OF CERTIORARI... Seabee

STATEMENT OF THE CASE ......... bite MOSER

Procedural History..................... eRe e 6

REASONS FOR DENYING THE PETITION ae

| THE NINTH CIRCUIT PROPERLY

HELD THAT PLAINTIFFS COULD

NOT AVOID THE CHOICE CLAUSE

MERELY BY ALLEGING CLAIMS

UNDER THE FEDERAL SECURITIES LAWS... i2

A. The Choice Clause Is Presumptively

Enforceable Under Bremen And Scherk ................. 12

il

Page

B. Scherk Is Controlling And Requires

Enforcement Of The Choice Clause... 14

1. The Anti-Waiver Provisions Do Not

Bar Enforcement Of An International

PUI ore 14

2. The Choice Clause Is A “Truly

International” Agreement..................0.0..0......... 17

3. Scherk Does Not Require That The

Chosen Forum Will Enforce The

Federal Securities Laws .............. Pac Rae 19

C. Petitioners Have Adequate Remedies

For Their Claims In The English Courts ........... ee

{1 THE NINTH CIRCUIT PROPERLY

HELD THAT THE CHOICE CLAUSE

WAS NOT PROCURED BY FRAUD... 24

A. The Ninth Circuit Properly

Applied Prima Paint And Scherk 24

B. The Ninth Circuit’s Application

Of Prima Paint Is Consistent

With Moseley ... .25

ie EET EIST Gt Re ecg ee a 28

oe on. See IEEE SE aor eects CSE OE oe Stat Se Rl

TABLE OF AUTHORITIES

Cases Page(s)

Alberto-Culver Co. v. Scherk,

484 F.2d 611 (7th Cir. 1973),

Be, WEF Ee FARTS ci desss cccstinsovsncnensonsisies 15, 18

Allen v. Lloyd’s of London,

94 F.3d 923 (4th Cir. 1996),

mandamus denied, US. __,

CS oe eet ee a 1 nl, 23

Bonny v. Society of Lloyd’s,

3 F.3d 156 (7th Cir. 1993), cert. denied,

PEO Se. SORE (eich iano niuaienes passim

C iell Ltd. v. iti Italia S.p.A.,

BET We te Oe Gs BOE aici ccisseticcsensticscccseceseanens 26

B.S. Employees Fed. Credit Union v.

Donaldson, Lufkin & Jenrette,

DIZ F208 1563 GO Cir, FOG insane cscsscccsoesny 26

121 F.3d 956 (Sth Cir. 1997),

cont. demied, US.

fog es Re a | a eer er _ passim

Hi v. Vv iting Ltd...

No. 89-2563 (Sth Cir. May 31, 1990),

cert. denied, 498 U.S. 981 (1990)... 13

Cases Page(s)

Alliance Missi

oe Cae Perce Ge. S991) oo ee 0)

itsubishi M v.

ler Ch r-P} Inc.,

Wid Ue DIC 11, 21

Moseley v. El issil

Facilities, Inc.,

PPO te. FO Coin a ee eS 25, 26

kab EE | ; Papen aRORn Oe Meta PERE meN eee passim

Pri _V % oR

es a Se

Reidel’s Inc. v. General Elec. Co.,

498 F.2d 95 (Sth Cir. 1974).............................. 22 n.16

Vv. ,

135 F.3d 1289 (9th Cir. 1998)

(en banc) (cited herein as “Pet. App.

pe a iat: passim

>

107 F.3d 1422 (9th Cir. 1997),

withdrawn, 135 F.3d 1289 (9th Cir. 1998)

(en banc) (cited herein as “Pet. App.

WO NS se 4,7n.7, 8, 10n.10

Cases Page(s)

No. 94-1211-IEG (POR),

1995 WL 465687 (S.D. Cal. May 1, 1995),

aff'd, 135 F.3d 1289 (9th Cir. 1998)

(en banc) (cited herein as “Pet. App.

ey loss sas ondtc elite vese untae cenroe 26n.17

eee ay ioe Lid

969 F.2d 953 (10th Cir.),

cert. denied, 506 U.S. 1021 (1992)... passim

Roby v. Corporation of Lloyd's,

996 F.2d 1353 (2d Cir.),

cert. demied, 510 U.S. 945 (1993)... passim

Rodriguez de Quijas v. Shearson/Am.

Express, Inc., 490 U.S. 477 (1989) ......... 11, 15n.12, 20

kv. Al ,

Ee SE, TE wai sales cidtinveiientdube osesxiacaoicctanins passim

TL Bg. Rn a 11, 20

Shell y_R.W. Sturge, Ltd.,

os F.36 1227 (Gh Cir. 1995)..................... 70.2, 22, 2

1ety of "SV.

[1995] LRLR 307 (C.A. Nov. 10, 1994)

(LEXIS, Enggen Library, Cases File)......00..............13

vil

Cases Page(s)

810 F.2d 1066 (I Ith Cir. 1987) (en banc),

eS ian eee aimee 16

487 US. 22 (1988)... Bee eek 11, 16

128 F.3d 793 (2d Cir. 1997),

aff'g per curiam 981 F. Supp 808

EOE RE Ola aaa 33, 12, 25

ae rk iiss) Par 11, 22

Wilko v. Swan,

nase 15

Statutes

a es 7

a es 7

WOE Citas oo 6

BUC Ce. Sie Conn nee oe 16

Rules

medsdee\

an

Wd

Wi

0X,

a iy A

Sree an Wig gare

ea Pr he Sas a ew

OPPOSITION TO PETITION

FOR A WRIT OF CERTIORARI

Lloyd's respectfully submits this opposition to the

petition for a writ of certiorari (the “Petition,” cited herein as

“Pet.”) seeking review of a judgment of the United States Court of

Appeals for the Ninth Circuit that requires Petitioners to

adjudicate their claims against Lloyd's in the English courts,

pursuant to English law, as they contractually committed to do.

STATEMENT OF THE CASE

Petitioners are individual underwriting members

(“Names”) of the international insurance market regulated by

Respondent Lloyd’s pursuant to Acts of the British Parliament.

Petitioners have asserted claims against Lloyd’s under, inter alia,

the registration and anti-fraud provisions of the federal securities

laws. There has been no determination — and Lloyd's vigorously

disputes — that Petitioners’ membership of, or underwriting in,

the Lloyd’s market involves the purchase or sale of a “security”

within the meaning of the federal securities statutes

Nevertheless, Petitioners argue that the anti-waiver provisions of

those statutes automatically void their contractual agreement to

litigate disputes relating to their participation in the Lloyd's

market in the English courts, pursuant to English law (the

“Choice Clause”).

Less than two months ago, this Court declined. for the

fifth time, to review a decision of a United States Court of

Appeals enforcing the Choice Clause to dismiss claims under the

federal securities laws. Haynsworth v. Corporation of Lloyd's.

121 F.3d 956 (Sth Cir. 1997), cert denied, US 1185S.

Ct. 1513 (1998).' The petition in Haynsworth. like its

The Court previously declined review in Allen v_ Llovd’s of

London, 94 F.3d 923 (4th Cir. 1996), mandamus denicd, __

US. __. 117 §. Ct. 2497 (1997), Bonny v._ Society of

Footnote continued

2

predecessors, made the same argument advanced by Petitioners

here: that parties to an international forum selection agreement

may avoid their contractual obligation to ‘tigate in the chosen

forum by the simple expedient of asserting claims under the

federal securities laws.

This Court rejected that argument long ago in Scherk v.

Alberto-Culver Co., 417 U.S. 506 (1974). Following its earlier

decision in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. |

(1972), this Court in Scherk enforced an agreement requiring

arbitration of the parties’ dispute in Paris, even though there was

no assurance that the arbitrators would apply the federal

securities laws to the plaintiff's claim of fraud, and even though

plaintiff contended that the anti-waiver provisions contained in the

federal securities laws precluded enforcement.

Following Bremen and Scherk, the Ninth Circuit, on

rehearing en banc in this case, enforced the Choice Clause and

affirmed the district court’s dismissal of the case for improper

venue. Six other Courts of Appeals have done the same.’ Like

the Ninth Circuit, each of the appellate courts that has enforced

the Choice Clause has found that Names can obtain substantial

and meaningful redress for their alleged injuries from the English

courts.

Footnote continued from previous page

Lioyd’s, 3 F.3d 156 (7th Cir. 1993), cert. denied, 510 U.S.

1113 (1994); Roby v. Corporation of Lloyd’s, 996 F.2d 1353

(2d Cir.), cert. denied, 510 U.S. 945 (1993); Riley v. Kingsley

Underwriting Agencies, Lid., 969 F.2d 953 (10th Cir), cert.

denied, 506 U.S. 1021 (1992).

In addition to the cases cited supra at note 1, the Sixth Circuit

affirmed a district court’s dismissai of state securities claims

pursuant to the Choice Clause in Shell v. R.W. Sturge, Ltd,

55 F.3d 1227 (6th Cir. 1995).

3

Supreme Court review is also unnecessary with respect to

the Ninth Circuit’s ruling that Petitioners had failed to

demonstrate that the Choice Clause was unenforceable as the

product of fraud. This Court’s decisions in Scherk and Prima

_vV. FI in Mfg. Co., 388 U.S. 395 (1967),

clearly establish that generalized allegations of fraud in the

inducement of the underlying agreements between the Petitioners

and Lloyd’s are insufficient, as a matter of law, to invalidate the

Choice Clause. Four other Courts of Appeals, including the Fifth

Circuit in Haynsworth, have rejected virtually identical claims

that the Choice Clause was unenforceable as the product of

fraud.*

Factual Background

Respondent Lloyd’s is an English entity incorporated by,

and granted regulatory powers pursuant to, Acts of the British

Parliament. See Appendix for Petitioners (‘“Pet. App.”) 3a.

Specifically, pursuant to Lloyd’s Act 1982. Lloyd’s, through its

governing body the Council of Lloyd’s, is charged with the

authority to regulate an English insurance market, and the

participants in that market (including Petitioners), who reside in

over seventy nations. Lloyd’s regulatory functions must be

exercised in accordance with the Lloyd’s Act 1982 and the

Insurance Companies Act 1982, both English statutes. Lloyd’s is

further subject to direct supervision by Her Majesty’s Treasury.‘

Lloyd’s is not an insurer, and does not underwrite or insure risks,

3

Haynsworth, 121 F.3d at 963-65; Bonny, 3 F.3d at 159-60:

Tufts v. Corporation of Lloyd’s, 128 F.3d 793 (2d Cir. 1997).

aff'g per curiam 981 F. Supp. 808 (S.D.N.Y. 1996): Riley,

969 F.2d at 960.

Lloyd’s was subject to the supervision of the British

Department of Trade and Industry (the “DTI”) until January

5, 1998, when these supervisory functions were transferred to

Her Majesty’s Treasury.

4

accept premiums, or share in the profits or losses of those who

underwrite risks in the Lloyd’s market. Pet. App. 3a, 28a.

Petitioners are Names resident in the U.S., each of whom

acts as an individual insurer in the Lloyd’s market. They, and not

Lloyd’s, are paid premiums by policyholders, are contractually

liable to policyholders for the imsurance risks they have

underwritten, and earn profits or incur losses on their

underwriting. As required by English law, individual Names,

such as Petitioners, are personally liabie to policyholders on the

risks they insure to the full extent of their personal wealth. Pet.

App. 3a-4a. However, under English law (see Lloyd’s Act 1982

§ 8(1)), a Name’s liability is several, not joint; a Name bears no

responsibility for the underwriting obligations of other Names,

and has no right to share in the underwriting profits of other

Names. Id.; see also Pet. App. 4a.

English statutes require that for an individual to

underwrite insurance in the United Kingdom he must become a

member of Lloyd’s. Insurance Companies Act 1982 §§ 2(1)-(2).

Lloyd’s establishes regulatory requirements, financial and

otherwise, that prospective Names must meet to qualify for

underwriting membership in the Lloyd’s market. Before

admission to the market, Names must travel to London to meet

with a representative of the Council of Lloyd’s to acknowledge,

among other things, their awareness of the risks of underwriting,

including the unlimited nature of their personal liability. Pet.

App. 3a.

5

Names are resident in over seventy countries worldwide.

In order to become or remain an underwriting member of the

Lloyd’s market, each Name, wherever resident, must enter into a

simple two-page agreement with Lloyd’s called the “General

Undertaking.” Pet. App. 3a. Each of the Petitioners has executed

the General Undertaking. In so doing, Petitioners expressly

agreed to comply with all English statutes relating to their

underwriting in the Lloyd’s market and with all regulations

promulgated by the Council of Lloyd’s pursuant to the regulatory

authority granted by Parliament. Respondent’s Appendix (“Resp.

App.”) Rl (General Undertaking executed by Petitioner Alan

Richards) € 1.

Consistent with their agreement to comply with English

insurance statutes and to subject themselves to Lloyd’s regulatory

authority, Petitioners agreed in the General Undertaking to

adjudicate any disputes they might have relating to their

membership of or underwriting in the Lloyd’s market in English

courts pursuant to English law. Specifically, paragraph 2.1 of the

General Undertaking states:

The nights 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 governed by and construed

in accordance with the laws of England.

Resp. App. R2. Paragraph 2.2 (id.) states:

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 and that accordingly any suit, action or

proceeding (together in this Clause 2 referred to

6

as “Proceedings”) arising out of or relating to

such matters shall be brought in such courts and,

to this end, each party hereto irrevocably agrees

to submit to the jurisdiction of the courts of

England and irrevocably waives any objection

which it may have now or hereafter to (a) any

Proceedings being brought in any such court as is

referred to in this Clause 2 and (b) any claim that

any such Proceedings have been brought in an

inconvenient forum and further irrevocably

agrees that a judgment in any Proceedings

brought in the English courts shall be conclusive

and binding upon each party and may be

enforced in the courts of any other jurisdiction.

Petitioners do not contend that the Choice Clause is _

unclear or inconspicuous, nor do they dispute that it covers the

claims asserted in this action.

Procedural History

District Court Proceedings. Petitioners commenced the

Richards action in the Southern District of California on

August 1, 1994, asserting federal and state statutory claims and

state common-law claims against Lloyd’s. The statutory claims

included four causes of action under the registration and anti-

fraud provisions of the Securities Act of 1933 (the “*33 Act”) and

the Securities Exchange Act of 1934 (the “‘34 Act”). Petitioners

also asserted claims under RICO, 18 U.S.C. § 1961 et seq.

While Petitioners acknowledged that they acted as individual

insurers in the Lloyd’s market, they also claimed that their

membership of and underwriting in the Lloyd’s market in London

involved the purchase or sale of a security, thereby entitling them

to the remedies provided by federal and state securities laws.

_ Lioyd’s vigorously disputes that any aspect of a Name's

participation in the Lloyd’s market constitutes a security.

7

Lloyd’s moved to dismiss the complaint,’ pursuant to

Fed. R. Civ. P. 12(b)(3), on the ground that the Choice Clause

made venue in the U.S. courts improper, and on the alternative

ground of forum non conveniens.© In response, Petitioners

contended that enforcement of the Choice Clause would be

unreasonable (i) because the Choice Clause had been procured by

fraud or overreaching, and (ii) in light of the anti-waiver

provisions of the federal securities laws, 15 USC.

§§ 77n, 78cc(a). The district court rejected these contentions and

held that the Choice Clause made venue in the U.S. courts

improper. Petitioners appealed the dismissal of the action.’

Ninth Circuit. A panel of the Ninth Circuit unanimously

affirmed the district court’s ruling that the Choice Clause had not

The Norton case was filed after Lloyd’s moved to dismiss the

complaint in Richards. The two actions were consolidated by

order dated November 24, 1995.

Approximately half of the Petitioners have since accepted

Lloyd’s offer of settlement under its Reconstruction &

Renewal Plan, pursuant to which they released Lloyd’s and

certain other parties from all claims relating to their

participation in the Lloyd’s market. Two hundred eighty-

nine of the Petitioners have filed stipulations dismissing their

claims against Lloyd’s with prejudice, as the settlement

agreement requires. Approximately ninety of the Petitioners

have not yet done so.

The Securities and Exchange Commission (the “SEC”) filed a

brief in the Ninth Circuit as amicus curiae supporting

Petitioners’ contention that the Choice Clause should not be

enforced in light of the anti-waiver provisions. The SEC took

no position, however, as to the merits of Petitioners’ claims,

including their allegation that their participation in the

Lloyd’s market involved the purchase or sale of a security.

Pet. App. 40a.

8

been fraudulently procured, and that the Choice Clause required

the dismissal of plaintiffs’ state law claims. See Pet. App. 42a.

However, the panel divided as to whether the Choice Clause was

enforceable with respect to federal securities law claims.

The panel majority (Noonan, J., with Wiggins, J.) reversed

the district court’s dismissal of the federal securities law claims.

Although the majority merely assumed, without deciding, that

some aspect of a Name’s involvement in the Lloyd’s market fell

within the definition of a “security” under the ‘33 Act or the °34

Act, it concluded that the anti-waiver provisions of those statutes

pose an automatic bar to enforcement of an otherwise-valid

international forum agreement. Pet. App. 32a-33a. In the

alternative, the panel held that even if the anti-waiver provisions

did not pose an absolute bar to enforcement of the Choice Clause,

enforcement would violate U.S. public policy because English

remedies were inadequate. Id. at 40a.

The dissent (Goodwin, J.) would have affirmed the

district court's ruling that the Choice Clause was enforceable to

dismiss the complaints in their entirety. Specifically, the dissent

recognized that this Court’s decision in Scherk controlled the

outcome because in Scherk an international forum agreement was

enforced, based on Bremen, over the plaintiff's contention that the

agreement was void under the anti-waiver provisions of the ‘34

Act.

Lloyd’s_ petitioned the panel for rehearing and

alternatively suggested that the Ninth Circuit grant rehearing en

banc.* The Ninth Circuit granted rehearing en banc and heard

oral argument en banc on October 24, 1997.

: The DTI, on behalf of the Government of the United

Kingdom of Great Britain and Northern Ireland (the “British

Government”) made an amicus curiae submission in support

of Lloyd’s petition. Resp. App. R4. The British Government

Footnote continued

9

On February 3, 1998, the Ninth Circuit en banc withdrew

the panel opinion and affirmed the district court’s dismissal of the

action by a vote of eight to three. The en banc majority

(Goodwin, J.) held that:

We follow our six sister circuits that have ruled

to enforce the choice clauses .. . because we

apply Scherk and because English law provides

the Names with sufficient protection.

Pet. App. 9a (citations omitted). In so holding, the majority

rejected the contention that the anti-waiver provisions

automatically prohibit enforcement of a forum clause in an

international commercial agreement simply because the federal

securities laws are alleged to apply. Id. at 7a. The majority

likewise rejected the contention that the Choice Clause violated

public policy because the remedies available in the English courts

are not identical to those provided by the federal securities laws.

Id. at 1la-13a. In addition, the en banc majority followed Roby,

as well as existing Ninth Circuit precedent, to affirm dismissal of

the RICO claims. Id. (citing Roby v. Corporation of Llovd’s, 996

F.2d 1353, 1366 (2d Cir.), cert. denied, 510 U.S. 945 (1993), and

Lockman Found. v. Evangelical Alliance Mission, 930 F.2d 764.

768-79 (9th Cir. 1991)).°

Footnote continued from previous page

explained that the panel majority’s decision was “detrimental

to [the] regulatory regime approved by Parliament... .” Id.

at RS.

Although Petitioners mention the dismissal of the RICO

claims in their statement of the questions presented, Pet. i, the

Petition does not otherwise discuss the Ninth Circuit’s

affirmance of the dismissal of the RICO claims, or present

any reasons why that ruling was incorrect.

10

The dissent (Thomas, J., with Pregerson and Hawkins,

JJ.) agreed with the view of the withdrawn panel opinion that the

anti-waiver provisions constituted a “per se rule” against

enforcement of international forum selection clauses when the

federa! securities laws are alleged to apply. Pet. App. 16a.

The en banc Ninth Circuit unanimously affirmed the

district court’s rejection of Petitioners’ assertion that the Choice

Clause was void as the product of fraud.'® Pet. App. 14a.

Finding Prima Paint controlling on the question of when a forum

selection clause may be avoided on grounds of fraud, the en banc

Ninth Circuit held that Petitioners’ allegations did not relate

specifically to the inclusion of the Choice Clause in the General

Undertaking, but instead related to the underlying contract as a

whole. Id.

On May 4, 1998, Petitioners submitted the Petition to this

Court.

REASONS FOR DENYING THE PETITION

There is no compelling reason for this Court to grant

review of the Ninth Circuit’s en banc decision. The issues

presented by the Petition have already definitively been resolved

by this Court in Scherk and Pmma Paint. The appellate courts

have censistently applied Scherk and Prima Paint to reject the

same arguments advanced here by Petitioners.

In Scherk, this Court rejected the contention that a

commitment contained in an international agreement to adjudicate

claims relating to the agreement in a foreign tribunal may be

vitiated simply by alleging that the federal securities laws apply to

= The panel had unanimously affirmed this aspect of the district

court’s opinion. Pet. App. 32a. The dissent from the en banc

opinion does not address this issue.

Le aT ah ee ee Fe

1]

such claims. The Ninth Circuit properly found that Scherk

“resolve[d] the question whether public policy reasons allow the

Names to escape their ‘solemn agreement’ to adjudicate their

claims in England under English law.” Pet. App. lla. Six other

appellate courts have reached the same result, and this Court has

declined to review five of these decisions, most recently in

Haynsworth."’

Nor is the Ninth Circuit’s ruling inconsistent with other

decisions of this Court, as Petitioners contend. Sce Pet. 16-21

(citing Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer,

515 U.S. 528 (1995), Rodriguez de Quijas_v. Shearson/Am.

Express, Inc., 490 U.S. 477 (1989), Stewart Org.. Inc. v. Ricoh

Corp., 487 U.S. 22 (1988), Shearson/Am. Express. Inc. v.

McMahon, 482 U.S. 220 (1987), and Mitsubishi Motors Corp. v.

Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985)). In none of

these cases was there any uncertainty or dispute as to whether, in

the absence of a forum agreement, the federal statutes invoked by

the plaintiff would have applied to claims arising from an

international agreement. Only in Scherk did this Court confront

such uncertainty. The cases relied upon by Petitioners are thus

inapposite and in no way modify or limit Scherk’s holding that, in

the international context, the anti-waiver provisions do not bar

enforcement of the parties’ agreement to litigate in a foreign

forum simply because the purchase of a “security” is alleged.

There is also no compelling basis for this Court to review

the Ninth Circuit’s rejection of Petitioners’ claim that their assent

to the Choice Clause was procured by fraud. Scherk and Prima

Paint make clear that Petitioners’ allegations of fraud are

insufficient, as a matter of law, to invalidate the Choice Clause.

The Ninth Circuit’s decision on this issue is consistent with that

of the four other courts of appeals that have addressed, and

" The plaintiffs in Shell did not petition this Court for review of

the Sixth Circuit’s ruling enforcing the Choice Clause.

12

rejected, identical allegations of fraud in the procurement of the

Choice Clause. See supra note 3. This Court recently declined to

review the Fifth Circuit's rejection of identical allegations in

Haynsworth.

1. THE NINTH CIRCUIT PROPERLY HELD THAT

PLAINTIFFS COULD NOT AVOID THE CHOICE

CLAUSE MERELY BY ALLEGING CLAIMS

UNDER THE FEDERAL SECURITIES LAWS

A. The Choice Clause Is Presumptively

Enforceable Under Bremen And Scherk

In M/S Bremen vy. Zapata Off-Shore Co, 407 US. |

(1972), this Court firmly established that forum selection clauses

contained in international agreements merit a strong presumption

of enforceability. Accordingly, such clauses must be “specifically

[enforced] unless the party resisting enforcement could clearly

show that enforcement would be unreasonable and unjust, or that

the clause was invalid for such reasons as fraud or overreaching.”

Id. at 15. Just two years after deciding Bremen, this Court held in

Scherk_ v. Alberto-Culver Co., 417 U.S. 506 (1974), that the

principles set forth in Bremen also governed the enforceability of

a “truly international” forum agreement in a case in which the

plaintiff alleged that the federal securities laws applied to the

dispute. 417 U.S. at 509, 514-15.

The strong presumption of enforceability derives not only

from a general respect for contract but from the specific needs of

international commerce. As the Court stated in Bremen:

We cannot have trade and commerce in world

markets and international waters exclusively on

our terms, governed by our laws, and resolved in

our courts.

407 U.S. at 9. In Scherk, the Court further recognized that

13

[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.

417 US. at 516.

The presumption of enforceability accorded to an

international forum agreement applies with even greater force in

this case, because the General Undertaking is not just a

commercial agreement. By executing the General Undertaking,

Petitioners agreed to comply with both the English statutes, and

the rules and regulations promulgated by Lloyd’s, that govern

their ability to conduct underwriting business in an international

insurance market located and operating in England. The Choice

Clause is critical to Lloyd’s ability to regulate the marketplace —

which includes Names from over seventy different countries —

effectively and consistently. As an English court has explained

The clear and simple purpose of this agreement,

aptly called an undertaking, was to ensure that on

his becoming a Name [defendant] became subject

to the regulatory regime of Lloyd’s. The clauses

governing choice of law and venue were ancillary

to that object.

Society of Lloyd’s v. Clementson, [1995] LRLR 307 (C.A. Nov.

10, 1994) (LEXIS, Enggen Library, Cases File). See also Resp

App. R4.

Claims by Names arising from their underwriting or

membership in Lloyd’s “aim{] at the heart of the unique self-

regulatory mechanism within Lloyd’s, which is a product of

complex English legislation.” Hirsch _v. Oakeley Vaughan

Underwriting Ltd., No. 89-2563, slip op. at 7 (Sth Cir. May 31,

1990), cert. denied, 498 U.S. 981 (1990). It would be completely

14

anomalous to allow U.S. courts applying U.S. law to adjudicate

disputes between U.S. Names and Lloyd’s when the regulatory

relationship at the heart of the dispute was created by, and is

governed by, English law.

B. Scherk Is Controlling And Requires

Enforcement Of The Choice Clause

Petitioners claim that the “anti-waiver” provisions make

the Bremen presumption of enforceability inapplicable to the

Choice Clause because these provisions represent a “legislative

command[]” that international forum selection agreements may

not be enforced in cases alleging securities transactions. Pet. 16-

18. That argument, however, was precisely the one considered

and rejected by this Court in Scherk, which held that anti-waiver

provisions did not preclude dismissal of claims asserted under

section 10(b) of the “34 Act in favor of the contractually chosen

forum in Paris. 417 U.S. at 509, 514-15. The Ninth Circuit thus

properly decided to “enforce the choice clause[] ... . because we

apply Scherk....” Pet. App. 9a. Accord Haynsworth, 121 F.3d

at 969 (stating that Scherk is “directly on point’).

Petitioners advance several arguments in an attempt to

distinguish Scherk. None of these arguments has any merit.

:. The Anti-Waiver Provisions

Do Not Bar Enforcement Of An

International Forum Agreement

Petitioners argue that the courts must view the anti-

waiver provisions as an absolute statutory bar to enforcement of

the Choice Clause because the courts must assume the truth of

their contention that the securities laws apply to their membership

of and/or underwriting in the Lloyd's market. In Scherk,

however, this Court emphatically rejected this reasoning.

The Court expressly declined in Scherk to “reach, or

imply any opinion as to, the question whether the acquisition of

15

Scherk’s business was a security transaction,” 417 U.S. at 514

n.8, even though it left undisturbed the Seventh Circuit’s denial of

a motion to dismiss for failure to state a claim under section 10(b)

of the “34 Act. See Alberto-Culver Co. v. Scherk, 484 F.2d 611,

615 (7th Cir. 1973), rev'd, 417 U.S. 506 (1974). Although the

Court had previously held that the anti-waiver provisions barred

enforcement of an arbitration clause in a purely domestic

securities cas¢, Wilko v. Swan, 346 U.S. 427 (1953), it found

that the international nature of the agreement in Scherk

“involve[d] considerations and policies significantly different than

those found controlling in Wilko.” 417 US. at 515. In

particular, the Court noted that:

In Wilko . . . there was no question but that the

laws of the United States generally, and the

federal securities laws in particular, would

govern disputes arising out of the stock-purchase

agreement. The parties, the negotiations and the

subject matter of the contract were all situated in

this country, and no credible claim could have

been entertained that any international conflict-

of-laws problems-would arise. In this case, by

contrast, in rbitration

provision considerable uncertainty existed at the

time of the agreement, and still exists, concerning

the law applicable to the resolution of disputes

Id. at 515-16 (emphasis supplied).'* Because of this uncertainty,

inherent in any transaction that “touch{es] two or more

countnies,” id, at 516, the reasoning underlying Wilko’s holding

that the anti-waiver provisions barred enforcement of a forum

agreement in a domestic securities case was “sitnply inapposite.”

12

Wilko has since been overruled. Rodriguez de Quijas v

Shearson/Am. Express, inc., 490 U.S. 477, 485 (1989)

16

Id. at 517. The Court thus held that the anti-waiver provisions

did not pose a statutory bar to enforcement of the forum clause.

As the Ninth Circuit properly recognized, the Court’s

reasoning in Scherk applies with equal force here. There is

considerable uncertainty in this case, as there was in Scherk,

regarding the application of the federal securities laws to

Petitioners’ participation in the Lloyd’s market. Pet. App. 7a n.2.

Consequently, as in Scherk, the anti-waiver provisions do not

pose a statutory bar to enforcement of the Choice Clause.

Petitioners contend that Stewart Org.. Inc. v. Ricoh

Corp., 487 U.S. 22 (1988), is controlling here because Bremen

and Scherk do not apply “when a statute governs ‘the immediate

issue before the Court.”” Pet. 16 (citing Stewart, 487 U.S. at 28).

Stewart, however, has no relevance to this case. In Stewart,

defendants had moved to transfer a diversity case, pursuant to 28

U.S.C. § 1404, to a New York federal court, the exclusive forum

for dispute resolution designated by the parties. The Eleventh

Circuit had held that the motion should be granted in light of the

enforceability of the forum agreement under Bremen. Stewart

Org.. Inc. v. Ricoh Corp., 810 F.2d 1066, 1070-71 (11th Cir.

1987) (en banc), aff'd, 487 U.S. 22 (1988). This Court affirmed,

but for different reasons. Since the motion to transfer was made

pursuant to section 1404, the Court held that all the criteria set

forth in that statute must be considered in deciding whether to

order transfer. 487 U.S. at 23. While the Court held that the

existence of an otherwise enforceable forum selection agreement

should “figure centrally” in that analysis, it was not dispositive.

Id.

In Stewart, there was no question that 28 U.S.C. § 1404

“govern[ed] the immediate issue before the Court”: whether to

grant a motion to transfer a purely domestic case from one federal

court to another. By contrast, there is considerable uncertainty

here about whether the federal securities laws apply — even in

the absence of the Choice Clause — to the international

agreements between the Names and Lloyd’s. Stewart therefore

17

cannot be read, as Petitioners contend, to make the anti-waiver

provisions “govern” the enforceability of the Choice Clause."

2. The Choice Clause Is A

“Truly International” Agreement

In a further effort to avoid the application of Bremen and

Scherk, Petitioners attempt to characterize their relationship with

Lloyd’s as “predominately domestic” rather than “truly

international.” Pet. 21. The Ninth Circuit properly found,

however, that “[e]ntering into the Lloyd’s market . __ is plainly an

international transaction,” because:

[t]he 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 alter these facts.

Pet. App. 8a. '*

" The other cases cited by Petitioners for the proposition that

the “clear language” of the anti-waiver provisions precludes

“judge-made exceptions,” Pet. 16-17, are equally inapposite.

Each of these cases involved a question of statutory

interpretation in which there was no dispute that the relevant

statute applied

The Fifth Circuit, presented with the same argument by

Names, characterized it as “disingenuous,” because it is:

sufficiently obvious that an agreement is

“international” when it involves an

American Name’s underwriting

international insurance policies in an

English market pooling resources with

other Names from over eighty countries and

Footnote continued

18

Petitioners’ claim that their agreement with Lloyd’s is not

“truly international” flies in the face of both Bremen and Scherk.

In Bremen, this Court reversed a lower court decision holding that

a forum selection agreement requiring litigation in England should

not be enforced because U.S. contacts predominated over any

English contacts. 407 U.S. at 7-8. Likewise, in Scherk, the

Court found the agreement to be “truly international” even though

the foreign defendant had come to the United States to negotiate

the essential terms of the agreement with the American plaintiff.

See Alberto-Culver Co., 484 F.2d at 613-14. The relevant

inquiry is not which country has the most contacts, but whether

the transaction “touch[es] two or more countries, each with its

own set of substantive laws and conflicts of laws rules.” Scherk.

417 US. at 516.

Thus, Petitioners’ effort to obscure the international

nature of their participation in the Lloyd's market by

characterizing their ROTA interviews in London as a “trivial”

foreign contact (Pet. 8, 21) completely misses the point. It defies

reason to suggest that an agreement between the regulator of an

English msurance market and those who underwrite insurance in

that market — and subject themselves to a regulatory regime

Footnote continued from previous page

all the while explicitly agreeing to be bound

by English law.

ey pny re 121 F.3d 956, 967

(Sth Cir. 1997), cert. denied, __ , 118 S. Ct. 1513

(1998). Pritt chang cht to 3 F.3d 156, 159

n.9 (7th Cir. 1993) (“There is no question that the transaction

involved here is truly international.”), cert. denied, 510 U_S.

1113 (1994), Roby v. Corporation of Lloyd's, 996 F.2d 1353,

1362-63 (2d Cir.) cert. denied, 510 U.S. 945 (1993); Riley v.

Kingsley Underwriting Agencies. Lid, 969 F.2d 953, 957

(10th Cir.) (“[The] agreement is truly international.”), cert.

denied, 506 U.S. 1021 (1992).

19

established by English insurance statutes in doing so — has only

an “insignificant and attenuated” relationship with England. See

Pet. 21 (citing Pet. App. 19a).

3. Scherk Does Not Require That The

Chosen Forum Will Enforce

The Federal Securities Laws

Petitioners assert that this Court’s holding in Scherk was

predicated on a ~ © clusion that the federal securities laws would

be applied by the arbitrators in Paris. Pet. 18-19. Based on this

reading of Scherk, they argue that the anti-waiver prcvisions

preclude enforcement of any forum selection agreement that

chooses foreign law or does not otherwise assure the application

of the federal securities laws in the chosen forum. Id. at 19

Petitioners’ argument, however, misreads Scherk. The

choice of law clause requiring the Parisian arbitrators to apply

Illinois law to any disputes, 417 U.S. at 508, did not assure that

the arbitrators would apply the federal securities laws. or even

consider the “34 Act claims, as the dissent pointedly noted. Id. at

532-33 & n.11 (“Even if the arbitration court reads this clause to

require application of Rule 10b-5’s standards, [the] victory would

be Pyrrhic.”) (Douglas, J., dissenting). The majority clearly

contemplated the possibility that the arbitrators would not apply

the federal securities laws:

Thi _. . Drovi is for a ju ent

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.

20

Id. at 517 n.11 (emphasis supplied).'° Petitioners’ argument

would place on defendants the burden to litigate the question of

whether a “security” was offered or sold before they could

enforce a forum agreement — defeating the very purpose of the

agreement, which is to confine litigation on merits issues to the

chosen forum.

Petitioners also misread Shearson/Am. Express. Inc.

McMahon, 482 U.S. 220 (1987), and Ser em UIE

Shearson Am. Express, Inc., 490 U.S. 477 (1989), as limiting the

application of Scherk to cases in which it is clear that the chosen

forum will apply the federal securities laws. Pet. 18-20.

McMahon and Rodriguez, unlike Scherk, did not involve an

international agreement in which there was uncertainty concerning

the applicable law in the absence of a forum selection and/or

choice of law agreement. Rather, these cases, like Wilko,

involved purely domestic transactions to which the federal

securities laws concededly applied. In McMahon, the question

before the Court was whether to extend Wilko’s ban on

arbitration of ‘33 Act claims to ‘34 Act claims; in Rodriguez, the

Court overruled Wilko altogether. The Court’s consideration of

the extent to which Wilko should apply in the domestic context

had no bearing or impact on this Court’s prior decision, in

o Likewise, in Bremen, this Court rejected the “parochial” view

that U.S. law must govern all disputes arising out of

international agreements. 407 U.S. at 9. The contract at

issue in Bremen did not contain an express choice of law

provision, but this Court recognized that the choice of an

English forum was essentially a choice of English law as

well, as it was “reasonate to conclude that the forum clause

was also an effort to obtain certainty as to the applicable

substantive law.” Id. at 13 n15. Although this Court

explicitly recognized that application of English law would be

outcome determinative and yield results different from those

that would obtain under U.S. law (id. at 8 & r.8), it

nonetheless enforced the forum agreement.

21

Scherk, that Wilko simply did not apply in the international

context.

Petitioners’ reliance on dicta in Mitsubishi Motors Corp.

v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985), is equally

misplaced. Pet. 22-23. Mitsubishi enforced an international

arbitration clause in a case involving anti-trust counterclaims,

overruling a line of lower court decisions holding antitrust claims

to be non-arbitrable. 473 U.S. at 640. The parties had agreed

that, despite a provision requiring the Japanese arbitrators to

apply Swiss law, counterclaims alleging violations of the

Sherman Act would also be submitted for arbitration. The

following footnote was therefore pure dictum:

[I]n 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 anti-trust violations we would have

little hesitation in condemning the agreement as

against public policy.

Id. at 637 n.19.

By its terms, the Mitsubishi dictum is limited to the

antitrust context, and even if read broadly does not outweigh

Scherk, as the Ninth Circuit recognized. Pet. App. lla-12a.

Because there is no common law analogue for antitrust claims, an

agreement that chc se both a foreign forum and foreign law could.

like a release, deprive a plaintiff of any remedy for anti-

competitive conduct. See Haynsworth, 121 F.3d at 968. By

executing the Choice Clause, however, Petitioners have not been

left without remedies for alleged fraud by Lloyd’s.'° Like the

is The Court’s concern that causes of action providing redress

for anti-competitive conduct might be unavailable in foreign

jurisdictions is reflected by the cases cited in the Mitsubishi

footnote to support the “prospective waiver” dictum. These

Footnote continued

22

Ninth Circuit, the five other courts of appeal that have considered

whether the Mitsubishi dictum precludes enforcement of the

Choice Clause have held that it does not. Haynsworth, 121 F.3d

at 968: Shell, 55 F.3d at 1230-31; Bonny, 3 F.3d at 160; Roby,

996 F.2d at 1364-65; Riley, 969 F.2d at 959-60.

Petitioners fare no better in their reliance on Vimar

Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528

(1995), to support their contention that the federal courts will not

enforce forum agreements which have the effect of “waiving”

statutory claims. Pet. 22-23. In Vimar, this Court overruled a

long line of lower court precedents that had voided forum

agreements under the Carriage of Goods by Sea Act (“COGSA”),

and enforced forum selection and choice of law provisions

requiring arbitration in Japan. COGSA is the implementation of

an international treaty intended to eliminate uncertainty regarding

the law applicable to disputes arising from international bills of

lading by creating uniform nghts and obligations amongst the

signatory nations. Vimar therefore neither displaces nor modifies

Bremen and Scherk, which recognize the needs of parties to

international transactions to eliminate in advance any uncertainty

as to the applicable law. Pet. App. 12a n.5 (“Vimar. however,

does not extend to the instant case as Vimar involved COGSA, a

statute designed to address international transactions.”). See also

Haynsworth, 121 F.3d at 968-69 (“COGSA __ . [embodies] an

international scheme the very nature of which would be frustrated

by permitting parties to opt out of it.”).

Footno‘e continued from previous page

cases do not involve forum selection or choice of law clauses

but instead involve general releases of future claims that

permitted the released party to engage in anti-competitive

conduct with impunity. See, eg., Reidel’s Inc. v. General

Elec. Co., 498 F.2d 95 (Sth Cir. 1974).

23

In sum, United States public policy does not preclude

parties to an international transaction from choosing to resolve

their disputes in foreign courts and/or pursuant to foreign law.

As the Fifth Circuit aptly noted:

It defies reason to suggest that a plaintiff may

circumvent forum selection . . . clauses merely by

Stating claims under laws not recognized by the

forum selected in the agreement. A plaintiff would

simply have to allege violations of his country’s tort

law or his country’s statutory law or his country’s

property law in order to render nugatory any forum

selection clause that implicitly or explicitly required

the application of the law of another jurisdiction. We

refuse to allow a party’s solemn promise to be

defeated by artful pleading.

Haynsworth, 121 F.3d at 969 (quoting Roby, 996 F.2d at 1360)

(emphasis in original).

ee Petitioners Have Adequate Remedies For

Their Claims In The English Courts

The Ninth Circuit correctly determined that the Names

have adequate recourse against Lloyd’s — and other participants

in the Lloyd’s market — in England. Pet. App. 12a-13a. The six

other appellate courts that have enforced the Choice Clause

reached the same conclusion, recognizing that Names have

significant remedies against Lloyd’s for fraud in the English

courts. Haynsworth, 121 F.3d at 969: Allen, 94 F.3d at 929:

Shell, 55 F.3d at 1231; Bonny, 3 F.3d at 161; Roby, 996 F.2d

at 1365-66; Riley, 969 F.2d at 958.

The Ninth Circuit properly rejected the contention that

any specific differences between the remedies available to Names

in England and the remedies that the federal securities statutes

might provide prevent enforcement of the Choice Clause Pet.

24

App. 13a. See also Haynsworth, 121 F.3d at 969-70. Any other

conclusion would be inconsistent with both Bremen and Scherk,

as it would “reflect a ‘parochial concept that all disputes must be

resolved under our laws and in our courts... .” Scherk, 417

U.S. at 519 (citing Bremen, 407 U.S. at 9). As the Fifth Circuit

aptly noted:

The view that every foreign forum’s remedies must

duplicate those available under American law would

render all forum selection clauses worthless and

would severely hinder Americans’ ability to

participate in international commerce.

Haynsworth, 121 F.3d at 969.

Il. THE NINTH CIRCUIT PROPERLY

HELD THAT THE CHOICE CLAUSE

WAS NOT PROCURED BY FRAUD

A. The Ninth Circuit Properly Applied

Prima Paint And Scherk

Petitioners also attack the Choice Clause as the product

of fraud. In Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388

U.S. 395 (1967), and Scherk, this Court held that forum

agreements are unenforceable on grounds of “fraud and

overreaching” only “if the inclusion of that clause in the contract

was the product of fraud or coercion.” Scherk, 417 U.S. at 519

n.14 (emphasis in original) (citing Prima Paint, 388 U.S. at 404

&n.11). As this Court recognized in Scherk, this “does not mean

that anytime a dispute arising out of a transaction is based upon

an allegation of fraud, as im this case, the clause is

unenforceable.” Scherk, 417 U.S. at 519 n.14.

The Ninth Circuit correctly held that “simply alleging

that one was duped into signing the contract is not enough.” Pet.

App. 14a. That is all Petitioners alleged here:

25

The Names never allege . . . 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 going to the inclusion of the

choice clauses themselves.

Id.

Like the Ninth Circuit, the Second, Fifth, Seventh, and

Tenth Circuits have rejected identical claims of fraud in the

inducement of the Choice Clause. See Tufts v. Corporation of

Lloyd’s, 128 F.3d 793 (2d Cir. 1997), aff'g per curiam 981 F.

Supp. 808, 813 (S.D.N-Y. 1996); Haynsworth, 121 F.3d at 963:

Bonny, 3 F.3d at 160 n.10; Riley, 969 F.2d at 960.

B. The Ninth Circuit’s Application Of

Prima Paint Is Consistent With Moseley

Contrary to Petitioners’ contention, the Ninth Circuit’s

application of Prima Paint is fully consistent with this Court’s

earlier decision in Moseley v. Electronic & Missile Facilities.

Inc., 374 US. 167 (1963). Moseley does not hold that

generalized assertions that a forum selection agreement was part

of a broader fraud concerning the underlying contract suffice to

invalidate the forum agreement. To the contrary, Moseley simply

holds that allegations of fraud in the inducement of a forum

agreement must be assessed by the court in which the suit is

brought prior to deciding whether to enforce the agreement.

In Moseley, the petitioner was party to several contracts

with the respondent that contained clauses requiring arbitration in

New York. After the respondent commenced arbitration,

petitioner sued in a Georgia federal court seeking to enjoin the

arbitration, asserting that, among other things, both the contracts

and the arbitration provisions themselves had been procured by

26

fraud. The district court found arbitration improper on statutory

grounds, but stated, without making any assessment of the

allegations of fraud, that an additional reason for enjoining the

arbitration was that the arbitration clause “if induced by

fraud . . . would be vitiated. . . .” Id. at 169 (emphasis supplied).

Declining to reach the statutory issue, the Court, after

twice noting that “no request had been made [in the federal

action] for the enforcement of the arbitration agreement,” id. at

170, remanded the case to the district court to decide whether the

arbitration clause had been procured by fraud before addressing

any other issues. Ic. at 171. Moseley thus provides no support

for Petitioners’ assertion that a forum selection clause may —

properly be voided without “allegations or evidence of deception

as to the existence or legal effect of the clause.” Pet. 26.

Unlike the district court in Moseley, the district court in

this case has already properly determined, before enforcing the

parties’ agreement to litigate in England, that Petitioners’

allegations and “evidence” concerning fraud in the procurement of

the Choice Clause did not meet the standard set by this Court in

Prima Paint.'’ See iello Im Ltd. v. riti Italia

S.p.A., 117 F.3d 655, 668 (2d Cir. 1997) (holding that Prima

Paint and Moseley require party seeking to avoid a forum

selection clause to do more than allege that the “clause was a part

of the overall scheme to defraud”; a party must also prove “some

nexus between the alleged fraud or misrepresentation and the

arbitration clause in particular”).

Petitioners erroneously assert that C.B.S. Employees Fed.

Credit Union v. Donaldson, Lufkin & Jenrette, 912 F.2d 1563

The district court reviewed voluminous documents submitted

by Petitioners in support of their assertion that the Choice

Clause was the product of fraud and found that they had “no

relevance” to that assertion. Pet. App. 64a, 68a n.20.

27

(6th Cir. 1990), creates a split of appella:: authority as to the

proper application of Prima Paint. Pet. 26. [he Sixth Circuit in

C.B.S. Employees did not hold that allegations that a forum

clause was part of a fraudulent scheme sufficed, by themselves, to

invalidate the clause. Rather, the Sixth Circuit merely remanded

the case to the district court to determine whether, when plaintiffs

had alleged fraud in the procurement of both the underlying

contract and the arbitration clause, plaintiffs could substantiate

any claims of fraud specific to the arbitration clause.

28

CONCLUSION

For all the foregoing reasons, this Court should deny the

Petition for a writ of certiorari.

Dated: June 3, 1998

Dean Hansell

LEBOEUF, LAMB, GREENE

& MACRAE, L.L.P.

725 S. Figueroa Street

Los Angeles, California 90017

(213) 955-7300

Respectfully submitted,

Harvey L. Pitt*

Michael H. Rauch

Debra M. Torres

FRIED, FRANK, HARRIS,

SHRIVER & JACOBSON

One New York Plaza

New York, New York 10004

(212) 859-8000

Attorneys for Respondent

*Counsel of Record

‘

ned

Wi

ae a

as