United States Court of Appeals
For the First Circuit
No. 04-1832
IN RE: GREGORY ANTHONY MERCURIO, JR.,
Debtor
PETER J. FURNESS, in his capacity as Trustee of
the Distribution Trust for the Bankruptcy Estate
of GREGORY A. MERCURIO, JR.,
Plaintiff, Appellee,
v.
WRIGHT MEDICAL TECHNOLOGY, INC.,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Ronald R. Lagueux, U.S. District Judge]
Before
Torruella, Circuit Judge,
Coffin, Senior Circuit Judge,
and Stahl, Senior Circuit Judge.
James L. Beausoleil, Jr., with whom Matthew A. Taylor, Duane
Morris LLP, George E. Lieberman, and Tillinghast Licht Perkin Smith
& Cohen, LLP were on brief, for appellant.
Barbara H. Kramer, with whom Mitchell A. Kramer and Kramer &
Kramer were on brief, for appellee.
March 23, 2005
TORRUELLA, Circuit Judge. Appellant Wright Medical
Technology, Inc. ("Wright Medical"), a Tennessee corporation,
appeals from the district court's refusal to enforce the forum
selection clause in an arbitration provision that was part of a
distribution agreement (the "Agreement") between Wright Medical and
Ocean State Orthopedics, Inc. ("OSO"), a Rhode Island corporation.
The district court affirmed a bankruptcy court's order that the
arbitration of an underlying dispute regarding the Agreement take
place in Rhode Island, contrary to the Agreement's plain language
that the arbitration take place in Tennessee.
Because appellees have failed to show that the
enforcement of the forum selection clause is unreasonable under the
circumstances, we reverse the district court's decision. See The
Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972) (a "forum
[selection] clause should control absent a strong showing that it
should be set aside"); Silva v. Encyclopedia Britannica Inc., 239
F.3d 385, 386 (1st Cir. 2001) ("The prevailing view towards
contractual forum-selection clauses is that 'such clauses are prima
facie valid and should be enforced unless enforcement is shown by
the resisting party to be "unreasonable" under the
circumstances.'") (quoting The Bremen, 407 U.S. at 10).1
1
Although we acknowledge the precedential validity of the
principle last presented in Young v. Levanthal, 389 F.3d 1 (1st
Cir. 2004) (the applicability of a forum selection clause in an
arbitration agreement is a matter of procedure to be decided by the
arbitrator), and its probable applicability to the present
-2-
I
Wright Medical manufactures and distributes medical
supplies from its principal place of business in Tennessee. In
September 1995, Wright Medical entered into the Agreement with OSO,
whereby OSO became the exclusive distributor for Wright Medical
products in Rhode Island.2 Appellee Gregory A. Mercurio, Jr.,
("Mercurio"), was the president of OSO and signed the Agreement on
its behalf.
Article 14 of the Agreement, entitled "Tennessee
Contract," provides that it "shall be governed by and interpreted
in accordance with the laws of the State of Tennessee." Article 16
of the Agreement, entitled "Arbitration of Disputes," is central to
this appeal. It provides, in relevant part:
All disputes arising in connection with this
Agreement, including the interpretation,
performance or non-performance of this
Agreement, shall be settled in Memphis,
Tennessee, USA, by arbitration in front of one
circumstances, this issue was not argued by the parties before
either the bankruptcy or district courts, nor briefed or argued
before us, and is thus deemed waived. See, e.g., García-Ayala v.
Lederle Parenterals, Inc., 212 F.3d 638, 645 (1st Cir. 2000)
(holding that failure to brief an argument constitutes waiver)
(internal citations omitted); Sprague v. Dir., Office of Workers'
Comp. Programs, U.S. Dept. of Labor, 688 F.2d 862, 869 (1st Cir.
1982) (declining to reach and decide an issue that was not briefed
or developed in oral argument by either party). See also Playboy
Enters. v. Public Serv. Comm'n, 906 F.2d 25, 40 (1st Cir.), cert.
denied, 498 U.S. 959 (1990) ("An appellant waives any issue which
it does not adequately raise in its initial brief.").
2
The Agreement excepted sales made to certain specified medical
entities.
-3-
Arbitrator. Such arbitrator shall be
appointed by agreement of each of the parties.
The arbitration procedures shall be held in
accordance with the rules and procedures of
The American Arbitration Association.
Any such arbitration shall be conducted in the
English language and shall be governed by laws
of the State of Tennessee. Judgment upon the
award may be entered in any court of competent
jurisdiction of the State of Tennessee.
(emphasis supplied).
In 1996, for reasons that are in dispute,3 Wright Medical
terminated the Agreement. Thereafter, Wright Medical proceeded to
appoint another distributor for its products in Rhode Island.
At some point not relevant to this appeal, Mercurio filed
a voluntary petition in bankruptcy under Chapter 11 of the
Bankruptcy Act, 11 U.S.C. §§ 1101 et seq., and Peter J. Furness
("Trustee") became the trustee in bankruptcy.
Five years after termination of the Agreement, the
Trustee, on behalf of Mercurio, commenced the present suit as an
adversary proceeding against Wright Medical in the U.S. Bankruptcy
Court for the District of Rhode Island. The substance of this
action concerns an alleged breach of contract by Wright Medical in
terminating the Agreement. Wright Medical moved the bankruptcy
3
Wright Medical claims that, because Mercurio suffered from
chronic immunodeficiency illness, he was impeded from being present
during surgical procedures, a situation which allegedly adversely
affected Wright Medical's performance of the contract. In turn,
Mercurio contended that his presence in the operating room was not
a requirement under the Agreement.
-4-
court to compel arbitration of that controversy pursuant to the
terms of the Agreement. The bankruptcy judge granted this request,
but ordered the arbitration to take place in Rhode Island rather
than in Tennessee as stipulated in the Agreement.
The record is fairly sparse as to the reasoning of the
bankruptcy court in bypassing the Agreement's unambiguous language
in this respect. The order itself merely states in conclusory
language that the "arbitration take place in Rhode Island." From
the transcript of the proceedings, however, it is apparent that the
bankruptcy judge felt that there was a need to resolve the case
with some celerity, and that sending the matter to Tennessee for
arbitration, where none of the witnesses or evidence was present,
would militate against this goal. Although we cannot fault the
judge's laudable purpose, arbitration is a contractual matter in
which, absent unusual circumstances not present in this case, the
parties are entitled to the measure that they bargained for.
The bankruptcy judge's order was appealed to the district
court, where the arguments followed suit to those made before the
bankruptcy court. Thus, the transcript of the proceedings shows
that the presence of witnesses in Rhode Island spurred the
Trustee's argument, and in turn, the district judge's oral
determination affirming the bankruptcy court's order. The district
judge found that the Trustee would be "serious[ly] inconvenienc[ed]
in litigating in Memphis, Tennessee," and "effectively deprived of
-5-
his day in court," and thus designated Rhode Island as the place of
arbitration. Cf. Arrow Plumbing & Heating, Inc. v. N. Am. Mech.
Servs. Corp., 810 F. Supp. 369, 372-73 (D.R.I. 1993).
II
The "'heavy burden of proof' . . . required to set aside
[a forum selection] clause on grounds of inconvenience," Carnival
Cruise Lines, Inc. v. Shute, 499 U.S. 585, 595 (1991), demands more
of a litigant, however, than simply showing that another location
would be more convenient. Were it otherwise, forum selection
clauses would almost never be enforceable, for inconvenience to at
least one of the parties is an almost forgone conclusion when
dealing with a provision that requires litigating away from one's
home turf. Yet these clauses are standard fare in today's multi-
jurisdictional and international contractual relationships. At the
time these contracts are entered into, the parties routinely,
voluntarily, and knowingly agree to litigate and/or be bound by the
decision of fora located in distant locations. Thus, something
considerably more than the mere inconvenience of traveling to
litigate in a different, even faraway foreign jurisdiction, is
required to overcome a contractual agreement to do so. Royal Bed
& Spring Co. v. Famossul Industria e Comercio de Moveis Ltda, 906
F.2d 45, 49 (1st Cir. 1990) ("[A] showing of inconvenience as to a
foreign forum would not be enough to hold a forum-selection clause
unenforceable, especially if that inconvenience was known or
-6-
contemplated by the parties at the time of their agreement."). The
cost of such litigation alone cannot be enough to meet the "heavy
burden" imposed upon the reneging party, who may now have second
thoughts. Cent. Contracting Co. v. Maryland Cas. Co., 367 F.2d
341, 344 (3d Cir. 1966) ("Mere inconvenience or additional expense
is not the test of unreasonableness since it may be assumed that
the plaintiff received under the contract consideration for these
things.").
The record in this case is bare of specific evidence
regarding the extraordinary additional costs involved in litigating
in Tennessee that were not foreseen by the contracting parties when
they entered into the Agreement. OSO accepted some costs
beforehand as a normal consequence of arbitrating in Tennessee.
See The Bremen, 407 U.S. at 17-18; Moses v. Business Card Exp.
Inc., 929 F.2d 1131, 1139 (6th Cir. 1991) (increased expenses are
"inherent in a forum selection clause"). With a distributorship in
Rhode Island, the likelihood existed that witnesses and evidence
would be located there rather than in Tennessee. OSO, however,
chose to commit to Tennessee as the forum for dispute resolutions.
The Trustee stands in the debtor's shoes and is not entitled to
avoid the forum selected by OSO on mere allegations of
inconvenience. See In re Díaz Contracting, Inc., 817 F.2d 1047,
1052 (3d Cir. 1987) ("[N]either the bankruptcy court's intimate
knowledge of nor [defendant's] concessions concerning [plaintiff-
-7-
debtor's] precarious financial condition operates to discharge its
burden of establishing grave inconvenience under The Bremen
[doctrine].").
The district judge's bare conclusion that the Trustee
would be "deprived of his day in court" is unsupported by any
evidence in the record. The Trustee was required to provide a
factual record establishing the basis for his challenge to the
forum selection clause. Fireman's Fund Am. Ins. Cos. v. Puerto
Rican Forwarding Co., 492 F.2d 1294, 1297 (1st Cir. 1974) (a party
must present evidence to establish that a forum selection clause is
unreasonable); Arrow Plumbing, 810 F. Supp. at 372-73 (enforcing a
forum selection clause where party failed to provide factual
support for the assertion that it would be unable to pursue the
matter in the selected forum). We find no evidence in the record
that would support the conclusion that requiring the parties to
arbitrate their dispute in Tennessee would deprive the Trustee of
his day in court.
We finish with language which should have a familiar ring
by now:
Courts must give effect to . . . freely
negotiated forum selection clauses . . . .
[The parties'] choice of arbitral forum should
have been honored by the district court.
Courts may not rewrite the parties' agreements
and compel arbitration of their dispute in a
forum which is not one of those enumerated in
an arbitration agreement's forum selection
clause.
-8-
KKW Enters., Inc. v. Gloria Jean's Gourmet Coffees Franchising
Corp., 184 F.3d 42, 52 (1st Cir. 1999) (internal citations
omitted).
The district court must order appellants to file their
arbitration in Tennessee. The decision of the district court is
reversed in part and the case is remanded for action consistent
with this opinion.
Reversed in part and Remanded.
-9-