A question of ethics

Question

Ronald Riley, a U.S. citizen, and Council of Lloyd's, a British insurance corporation with its principal place of business in London, entered into an agreement in 1980 that allowed Riley to underwrite insurance through Lloyd's. The agreement provided that if any dispute arose between Lloyd's and Riley, the courts of England would have exclusive jurisdiction, and the laws of England would apply. Over the next decade, some of the parties insured under policies that Riley underwrote experienced large losses, for which they filed claims. Instead of paying his share of the claims, Riley filed a lawsuit in a U.S. district court against Lloyd's and its managers and directors (all British citizens or entities), seeking, among other things, rescission of the 1980 agreement. Riley alleged that the defendants had violated the Securities Act of 1933, the Securities Exchange Act of 1934, and Rule 10b-5. The defendants asked the court to enforce the forum-selection clause in the agreement. Riley argued that if the clause was enforced, he would be deprived of his rights under the U.S. securities laws. The court held that the parties were to resolve their dispute in England.

Answer 1

A QUESTION OF ETHICS
1. The U.S. Court of Appeals for the Tenth Circuit stated that "[t]hree reasons per-suade us: (1) the parties' undertaking is truly international in character, (2) all parties other than Riley * * * are British, and (3) virtually all activities giving rise to the suggested claims occurred in England."
Against the court's decision, it might be argued that Riley would lose his rights under U.S. law. The court acknowledged that "a showing of inconvenience so serious as to foreclose a remedy, perhaps coupled with a showing of bad faith, overreaching or lack of notice, would be sufficient to defeat a contractual forum selection clause." But these elements did not exist in this case. In any event, the court said, "Riley will not be deprived of his day in court. He may, though, have to structure his case differently than if proceeding in [U.S.] federal district court."
2. As the appellate court stated, "The fact that an international transaction may be subject to laws and remedies different or less favorable than those of the United States is not a valid basis to deny enforcement, provided that the law of the chosen forum is not inherently unfair. * * * We have been shown nothing to suggest than an English court would not be fair, and in fact, our courts have long recognized that the courts of England are fair and neutral forums."
3. Yes, and in fact, as listed above, that was one of the factors that weighed in favor of the court's decision to require Riley to resolve his dispute abroad. It is always fair to make a person amenable to suit where he or she lives. The fact that a person lives where he or she does suggests that he or she has some continuing and permanent ties to the place and could foresee being sued there.