Haynsworth v. the Corporation

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_______________

No. 96-20769
_______________

STUART G. HAYNSWORTH, et al.,

Plaintiffs-Appellants,

VERSUS

THE CORPORATION, a/k/a Lloyd's of London,
a/k/a Lloyd's, a/k/a the Council of Lloyd's,
a/k/a the Society of Lloyd's,
a/k/a the Committee of Lloyd's,

Defendant-Appellee.

* * * * * * * * * * * * * * * * * * * * * * *

_______________

No. 96-20805
_______________

CHARLES ROBERT LESLIE,

Plaintiff-Appellee,

VERSUS
LLOYD’S OF LONDON, ETC., ET AL.,

Defendants,
LLOYD'S OF LONDON, a/k/a the Corporation of Lloyd's,
a/k/a Lloyd's, a/k/a the Society of Lloyd's,
a/k/a the Committee of Lloyd's,

Defendant-Appellant.

_________________________
 Appeals from the United States District Court
for the Southern District of Texas
_________________________
August 29, 1997

Before SMITH, BARKSDALE, and BENAVIDES, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

These are consolidated appeals in suits by individual

underwriters against the Corporation of Lloyd's (“Lloyd's”),1 the

central administrative body of the insurance market known as

Lloyd's of London. In No. 96-20769, Stuart Haynsworth and thirty-

three others appeal the dismissal of their suits based on a

contractual forum selection/choice-of-law clause and, in the

alternative, forum non conveniens (“f.n.c.”). In No. 96-20805,

Lloyd's appeals the refusal to dismiss on the same grounds.

Concluding that the parties are bound by the contracts they entered

into, we affirm the judgment of dismissal in No. 96-20769 and

reverse and render a judgment of dismissal in No. 96-20805.

I.

Some background as to the nature and structure of Lloyd's of

London is a necessary introduction to the issues. Lloyd's is a

1
We employ this shorthand with the recognition that, strictly speaking,
Lloyd's of London is simply a trademark referring to a market for insurance, and
the Corporation of Lloyd's the entity that governs that market. For convenience,
however, we use “Lloyd's” throughout this opinion to refer collectively to the
various defendants in both appeals, distinguishing between separate entities by
use of their specific names as necessary.

2
300-year-old market in which individual and corporate underwriters

known as “Names” underwrite insurance. The Corporation of Lloyd's,

which is also known as the Society of Lloyd's, provides the

building and personnel necessary to the market's administrative

operations. The Corporation is run by the Council of Lloyd's,

which promulgates “Byelaws,” regulates the market, and generally

controls Lloyd's administrative functions.

Lloyd's does not underwrite insurance; the Names do so by

forming groups known as syndicates. Within each syndicate,

participating Names underwrite for their own accounts and at their

own risk. That is, as a matter of English law, Names' liability is

several rather than joint, and individual Names are not responsible

for the unfulfilled obligations of others. Each syndicate is

managed and operated by a Managing Agent, who owes the Names a

contractual duty to conduct the syndicate's affairs with reasonable

care. Syndicates have no legal existence or identity apart from

the Names they comprise.

Names must become members of Lloyd's in order to participate

in the market. Prospective members are solicited and assisted in

the process of joining by Member's Agents, whose duties to the

Names are fiduciary in nature. Names must pass a means test to

ensure their ability to meet their underwriting obligations, post

security (typically, a letter of credit), and personally appear in

London before a representative of the Council of Lloyd's to

acknowledge their awareness of the various risks and requirements

3
of membership, and in particular the fact that underwriting in the

Lloyd's market subjects them to unlimited personal liability.

Participation in the market also requires the execution of a

number of contracts and agreements, the most important of which is

the General Undertaking, the standardized contract between Lloyd's

and the individual Names. Names additionally must enter into a

Member's Agent's agreement, the contract that defines the

relationship between the Name and his chosen Member's Agent, and

one or more Managing Agent's agreements, which define the

relationships between the Name and the Managing Agents of the

syndicates he wishes to join. Under the present version of Lloyd's

Byelaws, each of these agreements must contain clauses designating

England as the forum in which disputes are to be resolved and

choosing English law as the law governing such disputes.

Prior to 1986, the General Undertaking contained a provision

requiring that disputes with agents or other Names be submitted to

arbitration in London. Although this provision apparently did not

cover disputes between Names and Lloyd's itself, it did require

arbitration of claims against virtually any other entity, including

anyone “not a party to any agreement with [the Name] referring such

claims to arbitration.” Following Parliament's passage of the

Lloyd's Act of 1982, all Names, as a condition of continuing to be

Names, were required to sign a new General Undertaking (the “1986

General Undertaking”), clause 2 of which replaced the arbitration

provision with language that is the focus of this case:

4
 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 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 and that accordingly
any suit, action or proceeding (together in this
Clause 2 referred to 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.

2.3 The choice of law and jurisdiction referred to in
this Clause 2 shall continue in full force and
effect in respect of any dispute and/or controversy
of whatsoever nature arising out of or relating to
any of the matters referred to in this Undertaking
notwithstanding that the Member ceases, for any
reason, to be a Member of, or to underwrite
insurance business at, Lloyd's.

Each of the plaintiffs in the appeals before us signed the 1986

General Undertaking and agreed to these forum selection/choice of

law provisions, which we refer to as the “FS/COL clause.”

Although underwriting at Lloyd's appears generally to have

been a profitable endeavor up until the mid-1980's, at that time

massive liability for pollution and asbestos-related injuries began

5
to change the situation somewhat. According to the plaintiffs,

when Lloyd's full-time members or “insiders” became aware of these

risks, they concocted a sinister scheme to shift the liabilities

onto unsuspecting American investors such as the plaintiffs.

In order to escape these liabilities, they claim, the insiders

recruited new Names and steered them into syndicates, where they

unwittingly underwrote high-risk asbestos reinsurance and toxic

waste obligations, of which policies the insiders wanted no part.

As a consequence of being placed in these syndicates, the

plaintiffs allege, they have incurred large financial losses

already and remain liable for a great deal more.

The massive excess losses sustained by Names in the late

1980's and early 1990'sSSby Lloyd's estimate, something in the

neighborhood of $22 billionSShave spawned a series of lawsuits

throughout the United States. The instant appeals are but the

latest chapter in this litigation, a brief summary of which is

instructive to the issues before us. In Hirsch v. Oakeley Vaughan

Underwriting Ltd., No. 89-2563 (5th Cir. May 31, 1990)

(unpublished), an American Name sued Lloyd's and his agents,

claiming common law fraud. We dismissed on the basis of f.n.c.,

finding the suit “aim[ed] at the heart of the unique self-

regulatory mechanism within Lloyd's, which is a product of complex

English legislation.” Slip op. at 7.

Various Names next brought suit in the Second, Seventh, and

6
Tenth Circuits, claiming that Lloyd's' above-described alleged

conduct violated the federal securities laws. Lloyd's defended in

part on the ground that the 1986 General Undertaking's FS/COL

clauseSSthe clause at issue hereSSrequires all disputes to be

litigated in England, to which the Names responded that the FS/COL

clause constitutes an impermissible attempt to waive the pro-

tections of U.S. securities laws. The Second, Seventh, and Tenth

Circuits rejected the Names' arguments, concluding that the

securities laws' antiwaiver provisions did not bar dismissal of the

suits.2 A similar contention as to the antiwaiver provisions of

the Ohio securities laws was later rejected by the Sixth Circuit.3

More recently, the Fourth Circuit joined this chorus of authority

in rejecting the claim that the federal securities statutes render

the FS/COL clause void.4 A number of courts also have rejected

Names' attempts to avoid their contractual obligations by alleging

that their agreement to the 1986 General Undertaking was procured

by fraud, or that the FS/COL clause is unconscionable.5

2
See Roby v. Corporation of Lloyd's, 996 F.2d 1353, 1366 (2d Cir. 1993);
Bonny v. Society of Lloyd's, 3 F.3d 156, 162 (7th Cir. 1993); Riley v. Kingsley
Underwriting Agencies, Ltd., 969 F.2d 953, 958 (10th Cir. 1992).

3
See Shell v. R.W. Sturge, Ltd., 55 F.3d 1227, 1229-32 (6th Cir. 1995).

4
See Allen v. Lloyd's of London, 94 F.3d 923, 928 (4th Cir. 1996), mandamus
denied sub nom. In re Allen, 117 S. Ct. 2497 (1997).

5
See Bonny, 3 F.3d at 160 n.10; Riley, 969 F.2d at 960; Stamm v. Barclays
Bank, 960 F. Supp. 724, 730-33 (S.D.N.Y. 1997); Tufts v. Corporation of Lloyd's,
No. 95-CIV-3480(JFK), 1996 WL 533639, at *5-*7 (S.D.N.Y. Sept. 19, 1996); McDade v.
NationsBank of Tex., No. H-94-3714, slip op. at 4-5 (S.D. Tex. June 26, 1995)
(unpublished); see also Hugel v. Corporation of Lloyd's, 999 F.2d 206, 210-11 (7th
(continued...)

7
 Indeed, aside from one of the courts below in the instant

case, only one courtSSthe Ninth CircuitSShas refused to enforce the

FS/COL in a suit brought by Names against Lloyd's.6 Not sur-

prisingly, the plaintiffs rely heavily on Richards and urge us to

adopt its conclusion that the antiwaiver provisions of the federal

securities laws prevent the FS/COL clause from being enforced. See

id. at 1426. Following the arguments that have been rejected by

other courts, they also claim that Lloyd's procured their agreement

to the General Undertaking, and, in particular, the FS/COL clause,

by fraud and overreaching.

The first of the instant casesSSNo. 96-20769 (“Haynsworth”)SSis

thus a suit by seventy-seven Names against Lloyd's claiming fraud,

breach of fiduciary duty, violations of the Texas Deceptive Trade

Practice-Consumer Protection Act (the “DTPA”), TEX. BUS. & COM. CODE

ANN. § 17.41 et seq. (Vernon 1987 & Supp. 1997), and violations of

the Securities Act (the “Texas Securities Act”), TEX. REV. CIV. STAT.

ANN. art. 581-1 et seq. (Vernon 1964 & Supp. 1997). Shortly after

Haynsworth was filed, Lloyd's moved to dismiss based on the General

Undertaking's FS/COL clause, f.n.c., and, as to fifty-three of the

plaintiffs who already had litigated or were then actively

litigating their claims in the Second and Ninth Circuits,

(...continued)
Cir. 1993) (rejecting claim that the FS/COL clause should not be enforced because
litigation in England would be so “gravely difficult and inconvenient as to deprive
[plaintiffs] of their day in court.”).

6
See Richards v. Lloyd's of London, 107 F.3d 1422, 1424-30 (9th Cir. 1997).

8
collateral estoppel. On July 17, 1996, the district court

dismissed the case on the basis of the FS/COL clause and, in the

alternative, f.n.c., and thirty-four of the plaintiffs now appeal

that dismissal.7

The second caseSSNo. 96-20805 (“Leslie”)SSarises from Charles

Leslie's action against Lloyd's alleging violations of the federal

securities laws (specifically, 15 U.S.C. § 78j(b) and rule 10b-5,

17 C.F.R. 240.10b-5), fraud, breach of fiduciary duty, and

violations of the DTPA. As in Haynsworth, Lloyd's moved to dismiss

on the basis of the FS/COL clause and f.n.c. The district court

denied the motion but certified the questions presented by it for

interlocutory appeal under 28 U.S.C. § 1292(b).

II.

Although there previously was some uncertainty on this point,

we recently have held that the enforceability of a forum selection

clause is a question of law reviewable de novo. Mitsui & Co.

(USA), Inc. v. Mira M/V, 111 F.3d 33, 35 (5th Cir. 1997). As the

parties do not raise it, we therefore need not reach the

considerably more enigmatic question of whether motions to dismiss

on the basis of forum selection clauses are properly brought as

motions under FED. R. CIV. P. 12(b)(1), 12(b)(3), or 12(b)(6), or 28

7
Many of these plaintiffs-appellants were or still are litigants in suits
against Lloyd's in the Second and Ninth Circuits. Because we affirm the Haynsworth
judgment of dismissal on the merits of the forum selection clause, however, we need
not and do not reach any issues of collateral estoppel.

9
U.S.C. § 1406(a).8

Before considering the core issues, we must address whether

federal or Texas law applies to the FS/COL clause enforceability

determination. Federal jurisdiction in Haynsworth is based on

diversity; jurisdiction in Leslie is based both on diversity and on

the presence of a federal question. Both district courts relied on

a combination of federal and Texas authorities in reaching their

respective enforceability conclusions, although the Leslie court

expressly recognized that federal law governs the question. Other

courts that have considered the enforceability of the 1986 General

Undertaking's FS/COL clause in similar situations have either

pretermitted the choice of law issue or applied federal law without

discussion.9

The Leslie court's conclusion on this issue was correct:

Federal law applies to the FS/COL clause enforceability

determination. In The Bremen v. Zapata Off-Shore Co., 407 U.S. 1

8
Compare, e.g., AVC Nederland B.V. v. Atrium Inv. Partnership, 740 F.2d
148, 152-59 (2d Cir. 1984) (permitting rule 12(b)(1) motion) with Albany Ins. Co.
v. Almacenadora Somex, S.A., 5 F.3d 907, 909 & n.3 (5th Cir. 1993) (treating
motion as one under rule 12(b)(3)) and Commerce Consultants Int'l, Inc. v.
Vetrerie Riunite, S.p.A., 867 F.2d 697, 699-700 (D.C. Cir. 1989) (affirming
dismissal under rule 12(b)(3)) with Lambert v. Kysar, 983 F.2d 1110, 1112 n.1
(1st Cir. 1993) (stating that rule 12(b)(6) is the appropriate vehicle) with
International Software Sys. v. Amplicon, 77 F.3d 112, 114 (5th Cir. 1996)
(analyzing as motion to dismiss under 28 U.S.C. § 1406(a)). See also In re
Fireman's Fund Ins. Cos., 588 F.2d 93, 94 (5th Cir. 1979) (approving order
transferring venue pursuant to 28 U.S.C. § 1404(a)).
9
See Shell, 55 F.3d at 1229 (declining to decide the issue on the ground that
federal and Ohio law treat forum selection clauses similarly); Richards, 107 F.3d
at 1426-29 (applying federal law); Bonny, 3 F.3d at 159-61 (same); Hugel, 999 F.2d
at 209-11 (same); Riley, 969 F.2d at 956-58 (same); Stamm, 960 F. Supp. at 728-30
(same).

10
(1972), a decision we discuss in detail infra, the Court set forth

a framework of enforceability standards to be applied by federal

courts sitting in admiralty. Id. at 10-15. Just two years later,

the Court implicitly extended The Bremen's holding beyond the realm

of admiralty by applying it to a claim brought under the federal

securities laws. See Scherk v. Alberto-Culver Co., 417 U.S. 506,

518-21 (1974). Following that cue, this court and others have not

hesitated to apply these federal enforceability standards in non-

admiralty cases.10

Whether The Bremen's rules should be applied by federal courts

sitting in diversity is a more difficult question, but fortunately

one that this circuit recently has resolved. In International

Software Sys., 77 F.3d at 114-15, we held that The Bremen's rules

extend to dismissal determinations based on forum selection clauses

in diversity cases, a holding that governs the case at bar.

Because of this, the district courts a quo erred insofar as they

applied Texas rather than federal law in their respective

enforceability determinations. The proper law to apply to such

questions is federal, whether jurisdiction be based on diversity,

a federal question, or some combination of the two.11

10
See, e.g., Seattle-First Nat'l Bank v. Manges, 900 F.2d 795, 799 (5th Cir.
1990) (bankruptcy case); AVC Nederland B.V. v. Atrium Inv. Partnership, 740 F.2d
148, 156-60 (2d Cir. 1984) (federal securities fraud case); In re Fireman's Fund
Ins. Cos., 588 F.2d 93, 95 (5th Cir. 1979) (Miller Act).

11
Accord Jones v. Weibrecht, 901 F.2d 17, 18-19 (2d Cir. 1990) (applying
federal law to enforceability determination in diversity contract case); Manetti-
(continued...)

11
 III.

A.

In The Bremen, 407 U.S. at 9, the Court, rejecting as a

“parochial concept” the idea that “notwithstanding solemn contracts

. . . all disputes must be resolved under our laws and in our

courts,” held that federal courts presumptively must enforce forum

selection clauses in international transactions. Since The Bremen,

the Court has consistently followed this rule and, in fact, has

enforced every forum selection clause in an international contract

that has come before it.12

Public policy weighs strongly in favor of The Bremen's

presumption, because uncertainty as to the forum for disputes and

applicable law “will almost inevitably exist with respect to any

contract touching two or more countries.” Scherk, 417 U.S. at 516.

That is, “[t]he elimination of all such uncertainties by agreeing

in advance on a forum acceptable to both parties is an

indispensable element in international trade, commerce, and

contracting.” The Bremen, 407 U.S. at 13-14. As we recently

(...continued)
Farrow, Inc. v. Gucci Am., Inc., 858 F.2d 509, 512-13 (9th Cir. 1988) (same;
diversity tort case); Bryant Elec. Co. v. City of Fredericksburg, 762 F.2d 1192,
1196-97 (4th Cir. 1985) (same; diversity contract case).

12
See Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528,
, 115 S. Ct. 2322, 2330 (1995); Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585,
595 (1991); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614,
640 (1985); Scherk, 417 U.S. at 519-20.

12
stated in a case implicating these concerns, “[t]he Supreme Court

has therefore instructed American courts to enforce [forum

selection and choice of law] clauses in the interests of

international comity and out of deference to the integrity and

proficiency of foreign courts.” Mitsui, 111 F.3d at 35 (citing

Mitsubishi, 473 U.S. at 629).

The presumption of enforceability may be overcome, however, by

a clear showing that the clause is “'unreasonable' under the

circumstances.” The Bremen, 407 U.S. at 10. Unreasonableness

potentially exists where (1) the incorporation of the forum

selection clause into the agreement was the product of fraud or

overreaching; (2) the party seeking to escape enforcement “will for

all practical purposes be deprived of his day in court” because of

the grave inconvenience or unfairness of the selected forum;

(3) the fundamental unfairness of the chosen law will deprive the

plaintiff of a remedy; or (4) enforcement of the forum selection

clause would contravene a strong public policy of the forum state.

Carnival Cruise Lines, 499 U.S. at 595; The Bremen, 407 U.S. at 12-

13, 15, 18. The party resisting enforcement on these grounds bears

a “heavy burden of proof.” The Bremen, 407 U.S. at 17.

The plaintiffs rest their arguments on the first and fourth of

these exceptions. Specifically, they allege that the General

Undertaking's FS/COL clause is unenforceable because of fraud and

overreaching, and violates both federal and Texas public policy.

13
The Haynsworth district court rejected these arguments, enforced

the clause pursuant to The Bremen's presumption, and dismissed the

suit. The Leslie district court did the opposite, concluding that

Leslie had established he was induced into agreeing to the clause

through fraud and overreaching and that the clause violates both

United States and Texas public policy.

B.

Fraud and overreaching must be specific to a forum selection

clause in order to invalidate it. That is, The Bremen's exception

for unreasonable fraud or overreaching

does not mean that any time a dispute arising out of a
transaction is based upon an allegation of fraud . . .
the clause is unenforceable. Rather, it means that an
arbitration or forum-selection clause in a contract is
not enforceable 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 Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967)).

Thus, allegations of such conduct as to the contract as a wholeSSor

portions of it other than the FS/COL clauseSSare insufficient; the

claims of fraud or overreaching must be aimed straight at the

FS/COL clause in order to succeed.13

The plaintiffs protest that Prima Paint dealt exclusively with

13
See, e.g., Prima Paint, 388 U.S. at 403-04; Merrill Lynch, Pierce, Fenner
& Smith, Inc. v. Haydu, 637 F.2d 391, 398 & n.11 (5th Cir. Unit B Feb. 1981)
(holding that to render arbitration clause unenforceable, coercion and duress must
relate specifically to the clause rather than to the contract as a whole).

14
arbitration clauses under the United States Arbitration Act and

that there is no authority for the proposition that the above rule

applies to forum selection or choice-of-law clauses as well. This

flatly contradicts the language of Scherk, which at a minimum

extended the rule of Prima Paint to forum selection clauses in

general. See Scherk, 417 U.S. at 519 n.14. Moreover, Scherk and

later courts have noted that “foreign arbitration clauses are but

a subset of foreign forum selection clauses in general.” Vimar

Seguros, 115 S. Ct. at 2326 (citing Scherk, 417 U.S. at 519).

In Mitsui, we rebuffed a similar attempt to distinguish

between arbitration and forum selection/choice-of-law clauses for

enforceability purposes, noting that even on the Vimar Seguros's

dissent's view, “in relevant aspects, there is little difference

between the two.” Mitsui, 111 F.3d at 36 (quoting Vimar Seguros,

515 U.S. at n.7, 115 S. Ct. at 2333 n.7 (Stevens, J.,

dissenting)). The proposed distinction contradicts both Supreme

Court and Fifth Circuit precedent and consequently must be

rejected.

It follows that, to the extent the plaintiffs claim fraud and

overreaching in aspects of the General Undertaking other than the

FS/COL clause, their allegations are irrelevant to enforceability.

As Lloyd's points out, many of the plaintiffs' claims of fraud and

overreaching fall squarely into this category. Though we need not

detail them all, by way of example these include the contention

15
that Lloyd's failed adequately to disclose the effect of the

Lloyd's Act of 1982, the assertion that Lloyd's disclosed critical

risks only after the plaintiffs had been induced into signing the

General Undertaking, and the claim that Lloyd's conditioned the

Names' continued membership on signing the version of the General

Undertaking that contained the FS/COL clause. While these

allegations, if proved, might very well be relevant to the merits

of the claims in the absence of a forum selection clause, they are

wholly inapposite to our enforceability determination, which must

of course precede any analysis of the merits. See Smith Barney

Shearson, Inc. v. Boone, 47 F.3d 750, 752 (5th Cir. 1995).

The plaintiffs argue that, because the FS/COL clause was the

primary difference between the 1986 General Undertaking and

previous agreements, their evidence of fraud regarding the General

Undertaking as a whole is actually evidence as to the FS/COL clause

specifically. We note initially that the FS/COL clause is not the

only difference between the 1986 and pre-1986 General Undertakings;

the 1986 version added a provision by which the Names agreed to

abide by the dictates of, and Byelaws promulgated under, the

Lloyd's Act of 1982, which substantially altered the regulatory

regime in which Lloyd's operates. The 1986 General Undertaking

also, for the first time, required Names to obey “any direction

given or provision or requirement made or imposed by the Council,”

which at the time was a relatively new entity created by the

16
Lloyd's Act of 1982.

Moreover, the inclusion of the FS/COL clause was not the

radical change that plaintiffs claim it to be, as the previous

version of the General Undertaking had contained an arbitration

clause requiring that disputes with other Names or agents be

arbitrated in London. Although the FS/COL clause in the 1986

General Undertaking is greater in scope, we have already noted that

such arbitration clauses are merely a specialized subset of the

larger group of forum selection clauses. In short, the pre- and

post-1986 General Undertakings are sufficiently different that the

1986 version cannot be said merely to have added the FS/COL clause.

The allegations that go to fraud or overreaching in the General

Undertaking as a whole are just that: allegations that go to the

General Undertaking as a whole. Scherk and Prima Paint render them

inapposite.

Precious little remains of the plaintiffs' contentions after

they run the gamut of this requirement. If any argument as to

fraud plausibly survives, it is that Lloyd's failed adequately to

disclose the effects of the FS/COL clause when it presented the

plaintiffs with the version of the General Undertaking that

included it. According to the plaintiffs, they were fraudulently

induced to sign the 1986 General Undertaking in reliance on

assurances by Lloyd's14 that the new agreement contained “few

14
In fact, the assurances were by various Member's Agents allegedly acting
(continued...)

17
variations of substance” from the old.15 This, they claim, was a

fraudulent omission specifically as to the FS/COL, because nothing

in Lloyd's description of these changes mentioned it.

We find this argument unpersuasive. In Bhatia v. Johnston,

818 F.2d 418 (5th Cir. 1987), a plaintiff attempted to avoid an

arbitration clause in a brokerage agreement by claiming he had been

told the clause was “the same as” that in his previous contract.

Id. at 422 n.5. Applying Prima Paint, we held that whatever

misrepresentations might have been made were “related to the

entirety” of the new agreement and therefore were insufficient to

block enforcement of the clause. Id. at 422. The plaintiffs'

argument is at best no different from Bhatia's, and is more likely

quite a bit weaker insofar as they were at least alerted to the

existence of some “variations.” Our holding in Bhatia compels the

conclusion that their claims go to the 1986 General Undertaking as

a whole and that they therefore cannot bar enforcement of the

FS/COL clause.

Alternatively, the fraud claim fails, even if plaintiffs'

contentions somehow survive Prima Paint. The FS/COL clause was

(...continued)
at Lloyd's direction.

15
Lloyd's claims that, to the extent these assurances were made, they
referred to the agreements between the Names and their respective Members' Agents
rather than to the 1986 General Undertaking. Although the record appears to
support Lloyd's on this point, we need not resolve this highly fact-specific
dispute, for, as discussed infra, the FS/COL clause is enforceable in any case.
For the limited purposes of this discussion, we therefore adopt arguendo the
Leslie district court's finding that the statements referred to the 1986 General
Undertaking.

18
straightforward and was a prominent part of the one-and-one-half-

page General Undertaking, and the plaintiffs are presumed to have

known what it said.16 The plaintiffs were sophisticated parties

contracting voluntarily; it is not for us to impose a duty upon one

party to counsel the other as to the risks and benefits of a

contract. Indeed, as Lloyd's points out, there was nothing to

explain. The duty was the plaintiffs' to read the plain terms of

the agreement, not Lloyd's to lecture them about it.

These conclusions effectively dispose of the plaintiffs'

claims of overreaching, as well. In essence, they argue that

Lloyd's engaged in overreaching by forcing the Names to choose

between signing a contract with the FS/COL clause and terminating

their membership as Names. The Leslie district court agreed,

reasoning that Lloyd's “take-it-or-leave-it offer” unfairly

deprived Leslie of “the option of rejecting with impunity.”

We emphatically disagree. Although there is some ambiguity as

to the precise boundaries of what constitutes “overreaching,” a

nebulous concept at best,17 we can state with certainty that none

occurred here. As Lloyd's points out, the argument that the 1986

16
E.g., In re Cajun Elec. Power Coop., 791 F.2d 353, 359 (“'A person who
signs a written instrument is presumed to know its contents and cannot avoid its
obligations by contending that he did not read it, or that it was not explained or
that he did not understand it.'”) (quoting Smith v. Leger, 439 So. 2d 1203, 1206
(La. App. 1st Cir. 1983)); Bonny, 3 F.3d at 160 n.10; St. Petersburg Bank & Trust
Co. v. Boutin, 445 F.2d 1028, 1032 (5th Cir. 1971).

17
“Overreaching” is “that which results from an inequality of bargaining
power or other circumstances in which there is an absence of meaningful choice
on the part of one of the parties.” BLACK'S LAW DICTIONARY 1104 (6th ed. 1990).

19
General Undertaking constituted a “take-it-or-leave-it offer” goes

to the contract as a whole and therefore cannot overcome the FS/COL

clause under Prima Paint. As we recently stated in the context of

an arbitration clause in an employment contract, the claim that an

agreement “is an unconscionable contract of adhesion is an attack

on the formation of the contract generally, not an attack on the

arbitration clause itself.” Rojas v. TK Communications, Inc.,

87 F.3d 745, 749 (5th Cir. 1996).

Even were we not to apply Prima Paint, Carnival Cruise Lines

would compel us to reject this argument on the merits. There, the

Court enforced a forum selection clause against an unsophisticated

cruise ship passenger, notwithstanding the disparity in the

parties' bargaining power and the fact that the contract had not

been subject to negotiation. 499 U.S. at 593-95. Aside from the

fact that Haynsworth, Leslie, and the other plaintiffs are

considerably more sophisticated than was the passenger in Carnival

Cruise Lines, we find nothing of substance to distinguish that case

from the case at bar. Indeed, a careful examination of the

evidence underlying the plaintiffs' claims reveals that the 1986

General Undertaking was an agreement considerably more equitable

than the one at issue there. Carnival Cruise Lines thus compels us

to hold the plaintiffs to their respective contracts, including the

20
FS/COL clause to which they duly agreed.18

C.

The plaintiffs also contend that the General Undertaking's

FS/COL clause is “unreasonable” because it contravenes public

policy as embodied in the antiwaiver provisions of federal

securities law, Texas securities law, and the Texas DTPA. The

Leslie district court agreed with this argument; the Haynsworth

district court did not. Although we are unable to identify any

decision specifically addressing the FS/COL clause as regards the

antiwaiver provisions of the Texas laws, five of our sister

circuits have previously rejected this argument as to the federal

statutes.19 Besides the district court in Leslie, the only court

that has ever refused to enforce the General Undertaking's FS/COL

clause on these grounds is the Ninth Circuit. See Richards, 107

F.3d at 1426-28.

The antiwaiver provisions are straightforward. Section 14 of

the Securities Act of 1933 provides: “Any condition, stipulation,

or provision binding any person acquiring any security to waive

18
Accord Kevlin Serv., Inc. v. Lexington State Bank, 46 F.3d 13, 15 (5th Cir.
1995) (holding that The Bremen's presumption of enforceability applies to forum
selection clauses in form contracts); Dillard v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 961 F.2d 1148, 1154-55 (5th Cir. 1992) (holding that adhesion contracts
requiring arbitration of securities disputes are not unconscionable as a matter of
law).

19
See Allen, 94 F.3d at 928-30; Shell, 55 F.3d at 1229-32; Bonny, 3 F.3d at
160-62; Roby, 996 F.2d at 1363-66; Riley, 969 F.2d at 957-58.

21
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, 15 U.S.C.

§ 78cc(a), and the antiwaiver provision of the Texas Securities

Act, TEX. REV. CIV. STAT. ANN. art. 581-33L (Vernon Supp. 1997), are

substantively identical for purposes of the issue before us.

Similarly, the antiwaiver provision of the DTPA provides generally

that “[a]ny waiver by a consumer of the provisions of this

subchapter is contrary to public policy and is unenforceable and

void.” DTPA § 17.42(a), TEX. BUS. & COM. CODE ANN. § 17.42(a) (Vernon

Supp. 1997).

As a threshold matter, Lloyd's argues that nothing Names

acquire in the course of their relationship with Lloyd's

constitutes a “security” within the meaning of federal and Texas

securities laws and that the plaintiffs are not “consumers” who

have acquired “services” within the meaning of the DTPA. See DTPA

§ 17.45, TEX. BUS. & COM. CODE ANN. § 17.45 (Vernon 1987) (defining

“consumer” and “services”). The Supreme Court confronted similar

arguments in Scherk, ultimately affirming a dismissal without

addressing the question of whether the plaintiffs had acquired

securities. Scherk, 417 U.S. at 514 n.8. Because, as the Supreme

Court did in Scherk, we ultimately find the forum selection clause

enforceable, we follow the same route here and express no view on

the merits of these arguments.

22
 As with the fraud and overreaching claims, the basic framework

for analyzing the plaintiffs' Texas and federal public policy

arguments is the strong presumption of enforceability established

by The Bremen and Scherk, and the highest hurdle they must overcome

to demonstrate “unreasonableness” is Scherk. There, the plaintiff

alleged violations of § 10(b) of the Exchange Act and attempted to

resist enforcement of an arbitration clause on the basis of the

act's antiwaiver provision, one of the statutes invoked here.

Applying The Bremen, the Court rejected this argument and along

with it the view 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. . . . To determine that “American
standards of fairness” . . . must nonetheless 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.

Scherk, 417 U.S. at 517 n.11. The Court went on to reiterate The

Bremen's rejection of the “parochial” notion that all disputes in

international business transactions “must be resolved under our

laws and in our courts,” reasoning that “[w]e cannot have trade and

commerce in world markets . . . exclusively on our terms, governed

by our laws and resolved in our courts.” Id. at 519 (quoting The

Bremen, 407 U.S. at 9).

More generally, we must tread cautiously before expanding the

operation of U.S. securities law in the international arena. The

regulatory regime Congress has constructed is “designed to protect

23
American investors and markets,” not to stamp out “any fraud that

somehow touches the United States.” Robinson v. TCI/US West

Communications Inc., 117 F.3d 900, 906 (5th Cir. 1997). To insist

on the application of American securities law where the laws of the

parties' agreed-upon forum meet this concern would be the very

height of the parochialism that The Bremen condemned. See The

Bremen, 407 U.S. at 9.

This is particularly so in the case of England, a forum that

American courts repeatedly have recognized to be fair and

impartial.20 We have not hesitated to force plaintiffs to litigate

their claims of securities fraud in that nation, differences

between English and American remedies notwithstanding.21

Beginning with the presumption that the FS/COL clause is

binding, and recognizing the plaintiffs' “heavy burden of proof” to

overcome this, The Bremen, 407 U.S. at 17, we thus proceed to

consider the plaintiffs' arguments against enforcement of the

clause. They initially attempt to distinguish Scherk on the ground

that the Names' transactions with Lloyd's were not “international

business transactions.”

The most charitable adjective with which to describe this

argument is “disingenuous.” Each of the American plaintiffs signed

20
See, e.g., id. at 12; Riley, 969 F.2d at 958; Syndicate 420 at Lloyd's
London v. Early Am. Ins. Co., 796 F.2d 821, 829 (5th Cir. 1986).

21
See Robinson, 117 F.3d at 907-09 (affirming referral of securities fraud
claims to England on ground of f.n.c.).

24
a series of agreements with English entities and traveled to

England as part of the process of becoming a Name. We need not

dwell on this contention any further, it being 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 all the while explicitly agreeing to be bound by

English law.

The plaintiffs also aver that Scherk and the Supreme Court's

other forum selection cases are distinguishable in that they dealt

with forum selection clauses unaccompanied by choice-of-law

clauses. The claimed significance of this is that a forum

selection clause, in isolation, acts only to deprive the aggrieved

party of a “procedural right” to a particular forum, whereas a

forum selection clause in combination with a choice-of-law clause

impermissibly extinguishes both a “procedural right” and a more

important “substantive right” to the remedies afforded by a

particular statute or common-law cause of action. The Ninth

Circuit placed substantial weight on this distinction, ultimately

concluding that the FS/COL clause “require[s] the waiver of

substantive provisions of the 1933 and 1934 Acts and [is]

consequently void.” Richards, 107 F.3d at 1428.

Plaintiffs are at least partially wrong in their premise, for

Scherk involved a foreign forum selection clause accompanied by a

25
choice-of-law clause selecting the law of Illinois. Scherk,

417 U.S. at 508. Presumably, this meant that the parties could

rely on the protections of the federal securities laws as well, but

the decision did not rest on this assumption. Instead, the Court

roundly rejected the notion that a forum selection clause can be

circumvented by a party's asserting the unavailability of American

remedies. See id. at 517-19.

The Scherk Court's failure to draw the distinction the

plaintiffs urge seems eminently sensible to us, for surely it is

obvious that, even in the absence of a choice-of-law clause,

enforcement of a foreign forum selection clause frequently will

result in the application of foreign law to the dispute. See

Scherk, 417 U.S. at 519 n.13. Choice of law is often one of the

reasons for obtaining a forum selection clause. The Bremen,

407 U.S. at 13-14 n.15.

It cannot be the case that, by virtue of a foreign forum

selection clause standing alone, the domestic party to an

international business agreement retains a “substantive right” to

assert the remedies and protections of American statutes in the

contractually agreed-upon forum. The sophisticated individuals

entering into these agreements are hardly so naïve as to believe

that by choosing only a foreign forum and not the law to be applied

therein, they thereby retain some inalienable privilege of

litigating their disputes under American law.

26
 It is unrealistic to expect a foreign tribunal even to

entertain this notion, when faced with parties that have selected

the tribunal as their forum. There is nothing talismanic about

American law, and certainly nothing that compels foreign courts to

“exalt [its] primacy” merely because it provides remedies that

their laws do not. Scherk, 417 U.S. at 517 n.11.

The plaintiffs protest that Mitsubishi and Vimar Seguros

support their theory about combination forum selection/choice-of-

law clauses extinguishing substantive rights. It is a strained

reading of these decisions that they urge on us, however.

In Mitsubishi, 473 U.S. at 640, the Court ordered Japanese

arbitration of an American automobile dealer's antitrust claims

against its franchisor, notwithstanding that the foreign arbitrator

might misapply U.S. law. The key to the decision was the same

driving force that was behind The Bremen and Scherk: “concerns of

international comity, respect for the capacities of foreign and

transnational tribunals, and sensitivity to the need of the

international commercial system for predictability in the

resolution of disputes . . . .” Id. at 629 (citing Scherk,

417 U.S. 506). Nonetheless, in dictum, the Court 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.”

27
Id. at 637 n.19. Pointing to this statement, the plaintiffs urge

the same conclusion the Ninth Circuit reached in Richards, 107 F.3d

at 1427, i.e., that the General Undertaking's FS/COL clause should

be condemned here.

We do not read Mitsubishi so broadly. Setting aside the fact

that it is dictum, the quoted statement, by its own terms, is

limited to the antitrust context, as is Mitsubishi more generally.

This circuit expressly has recognized that “'the antitrust

laws of the United States embody a specific congressional purpose

to encourage the bringing of private claims in the American courts

in order that the national policy against monopoly may be

vindicated.'”22 Indeed, it is precisely this “crucial point of

difference” between antitrust suits and other types of actions,

Baumgart v. Fairchild Aircraft Corp., 981 F.2d 824, 829-30 (5th

Cir. 1993), that led us to prohibit f.n.c. dismissals in antitrust

cases while allowing them in others.23 Properly read in conjunction

with ScherkSSa case in which the antiwaiver provisions of the

federal securities laws were directly before the CourtSSthis single

sentence from Mitsubishi cannot be given the sweeping implications

22
Kempe v. Ocean Drilling & Exploration Co., 876 F.2d 1138, 1142-43 (5th Cir.
1989) (quoting Laker Airways Ltd. v. Pan American World Airways, 568 F. Supp. 811,
818 (D.D.C. 1983)).

23
See Industrial Inv. Dev. Corp. v. Mitsui & Co., 671 F.2d 876, 890-91 (5th
Cir. 1982), vacated on other grounds, 460 U.S. 1007 (1983).

28
that the plaintiffs and the Ninth Circuit attribute to it.24

Vimar Seguros, a case involving the enforceability of forum

selection and choice of law clauses under the Carriage of Goods by

Sea Act (“COGSA”), 46 U.S.C. app. § 1300 et seq., is similarly

inapposite. Quoting Mitsubishi, the Court there expressed concern

that the combination of a forum selection clause and a choice of

law clause might deprive the parties of their rights under COGSA,

a uniform system of international rules governing carrier and

shipper liability. Vimar Seguros, 515 U.S. at , 115 S. Ct.

at 2330 (quoting Mitsubishi, 473 U.S. at 637 n.19).

But COGSA, unlike the American securities statutes or the

Texas laws, is “the culmination of a multilateral effort” to

establish such rules, an international scheme the very nature of

which would be frustrated by permitting parties to opt out of it.

Id., 515 U.S. at , 115 S. Ct. at 2328. Because the

enforceability doctrine of The Bremen and Scherk is grounded in the

special needs of parties contracting in international commerce, it

would make little sense to apply it against a statute specifically

designed to foster uniformity in international shipping agreements.

Id. As the Second Circuit has recognized, application of the usual

enforceability rules to COGSA would create an exception that “would

24
Accord Shell, 55 F.3d at 1230-31; Bonny, 3 F.3d at 159-61; Roby,
996 F.2d at 1364 & n.3; Riley, 969 F.2d at 956-57.

29
swallow the whole.” AVC Nederland, 740 F.2d at 160.25

Our judgment is also informed by the fact that the Supreme

Court has never overruled, or indeed even expressly limited, either

The Bremen or Scherk. Quite simply, Scherk rejected the idea that

the antiwaiver provisions of U.S. securities laws bar enforcement

of forum selection clauses in international transactions. As

Scherk is directly on point, we are bound to follow it, regardless

of whether we believe (or, as the case may be, do not believe) that

later decisions have undermined its rationale.26

Haynsworth and Leslie's remaining objections to the

enforcement of the FS/COL clause essentially echo the Ninth

Circuit's view: “The available English remedies are not adequate

substitutes for the firm shields and finely honed swords provided

by American securities law.” Richards, 107 F.3d at 1430. The

American system of securities regulation may be the broadest, most

comprehensive of all. We refuse to accept the notion, however,

that the sheer scope of U.S. securities law automatically renders

that of other countries inferior or should provide American

investors a means to escape their contractual obligations when they

begin to prove too costly.

The view that every foreign forum's remedies must duplicate

25
Accord Mitsui, 111 F.3d at 34 (enforcing combination forum selection
clause/choice of law clause choosing COGSA as the applicable law).

26
See Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477,
484 (1989).

30
those available under American law would render all forum selection

clauses worthless and would severely hinder Americans' ability to

participate in international commerce. We wholeheartedly adopt the

Second Circuit's response to the plaintiffs' contention:

It defies reason to suggest that a plaintiff may
circumvent forum selection and arbitration clauses merely
by stating claims under laws not recognized by the forum
selected in the agreement. A plaintiff simply would 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.

Roby, 996 F.2d at 1360 (emphasis in original).27

Careful weighing of these considerations leads us to join the

majority of courts that have considered this issue in concluding

that the antiwaiver provisions of U.S. securities laws do not bar

enforcement of the FS/COL clause. The same reasoning compels an

identical conclusion as to the antiwaiver provisions of the Texas

Securities Act and the DTPA.

As other courts have observed, English law provides a variety

of protections for fraud and misrepresentations in securities

transactions.28 As the Allen court recognized, for example, English

law permits Names to bring “claims based on the tort of deceit,

27
See also Robinson, 117 F.3d at 909 (holding that the substantially greater
scope of discovery under American law does not bar transfer to England on ground of
f.n.c.).

28
See Allen, 94 F.3d at 929; Shell, 55 F.3d at 1231; Bonny, 3 F.3d at 161;
Roby, 996 F.2d at 1365; Riley, 969 F.2d at 958.

31
breach of contract, negligence, and breach of fiduciary duty,” with

possible “injunctive, declaratory, recissionary, and restitutionary

relief.” 94 F.3d at 929 (citing Shell, 55 F.2d at 1230-31).

Indeed, in some respects English law appears to provide even

greater protections than does U.S. law. See Roby, 996 F.2d at 1365

(noting the “low scienter requirements” of English

misrepresentation law). The plaintiffs' remedies in England are

adequate to protect their interests and the policies behind the

statutes at issue.

Having previously enjoyed the benefits of Lloyd's contractual

obligations to them, the plaintiffs must now live up to theirs as

well. The FS/COL must be enforced, and the plaintiffs as “'rep-

resentative[s] of the American business community'” required to

“'honor [their] bargains.'" Mitsubishi, 473 U.S. at 640 (quoting

Alberto-Culver Co. v. Scherk, 484 F.2d 611, 620 (7th Cir. 1973)

(Stevens, J., dissenting), rev'd, 417 U.S. 506 (1974)). Because

the Leslie district court found otherwise, its judgment is reversed

and remanded with instructions to dismiss. The Haynsworth district

court's judgment of enforceability is affirmed.

IV.

Finally, the Haynsworth plaintiffs claim that the district

court erred in dismissing their claims without permitting

additional discovery and conducting an evidentiary hearing on the

32
issue of whether the FS/COL clause had been procured by fraud. We

find little merit in the discovery claim, particularly given their

halfhearted response to the district court's invitation to submit

“anything they wanted the court to consider.” In large part, the

Haynsworth plaintiffs appear to have relied on the record in

Leslie, a great deal of which has no direct relevance to their

claims.

A party seeking a continuance to conduct discovery must

demonstrate “both why it is currently unable to present evidence

creating a genuine issue of fact and how a continuance would enable

the party to present such evidence.” Liquid Drill, Inc. v. U.S.

Turnkey Exploration, Inc., 48 F.3d 927, 930 (5th Cir. 1995). A

refusal to grant such a continuance is reviewable for abuse of

discretion only. Id. A careful review of the record persuades us

that this standard has not been met, so we find no error.

The plaintiffs fare no better on their claim that Moseley v.

Electronic & Missile Facilities, 374 U.S. 167 (1963), required the

district court to conduct an evidentiary hearing. In Moseley, the

party resisting enforcement of an arbitration clause attacked not

only the overall agreement but also the arbitration clause

specifically, claiming that it had been procured by fraud. Id. at

169. The Court, noting that the allegation of fraud went straight

to the arbitration clause itself, held that that issue must first

be adjudicated at “trial” before the clause could be enforced. Id.

33
at 171. This is entirely consistent, of course, with Prima Paint

and Scherk's requirement that fraud must go specifically to a forum

selection or arbitration clause in order to bar enforcement.

Here, as in Moseley, the plaintiffs claim fraud in the

inducement of the FS/COL clause. As we have explained, however,

nothing in their more specific allegations supports this claim. At

best, what fraud they allege goes only to the 1986 General

Undertaking as a whole. Even reading Moseley literally, to require

a “trial” rather than simply a summary judgment or other proceeding

in which the parties are permitted to submit evidenceSSan

interpretation the validity of which we need not and do not

reachSSthe plaintiffs have not met the threshold requirement that

their claims go specifically to the clause. The district court

properly declined to hold an evidentiary hearing.

V.

Because we find the FS/COL clause of the 1986 General

Undertaking enforceable, we need not consider whether the suits

should also be dismissed on the ground of f.n.c. For the reasons

stated above, we AFFIRM the judgment of dismissal in No. 96-20769

and REVERSE and RENDER a judgment of dismissal in No. 96-20805.

34