55 F.3d 1227 (6th Cir. 1995), 94-3119, Shell v. R.W. Sturge, Ltd.

Docket Nº:94-3119.
Citation:55 F.3d 1227
Party Name:West SHELL, Jr.; and Andrew C. Hauck, III, Plaintiffs-Appellants, Herbert A. Middendorff, Plaintiff, v. R.W. STURGE, LTD.; the Council of Lloyd's; the Society of Lloyd's; and the Corporation of Lloyd's, Defendants-Appellees.
Case Date:June 08, 1995
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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Page 1227

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

West SHELL, Jr.; and Andrew C. Hauck, III, Plaintiffs-Appellants,

Herbert A. Middendorff, Plaintiff,

v.

R.W. STURGE, LTD.; the Council of Lloyd's; the Society of

Lloyd's; and the Corporation of Lloyd's,

Defendants-Appellees.

No. 94-3119.

United States Court of Appeals, Sixth Circuit

June 8, 1995

Argued May 1, 1995.

Page 1228

John L. Campbell (argued and briefed), Kohnen, Patton & Hunt and Virginia C. Whitman, White, Getgey & Meyer, Cincinnati, OH, for plaintiffs-appellants.

Charles J. Faruki (argued and briefed), Faruki, Gilliam & Ireland, Dayton, OH, for defendants-appellants.

Before: KENNEDY and SUHRHEINRICH, Circuit Judges; HILLMAN, District Judge. [*]

KENNEDY, Circuit Judge.

Plaintiffs, investors in the Society of Lloyd's, brought this diversity action against defendants R.W. Sturge, Ltd., the Society of Lloyd's, the Council of Lloyd's and the Corporation of Lloyd's seeking to rescind their investment contracts under Ohio securities law. Defendants filed a motion to dismiss for improper venue under Rule 12(b)(3) of the Federal Rules of Civil Procedure on the grounds that forum selection clauses in the investment contracts gave exclusive jurisdiction to the English courts. The District Court granted the motion to dismiss and plaintiffs now appeal, arguing that the forum selection clauses deprive them of their substantive rights under the Ohio securities laws and that Ohio public policy outweighs the policies served by enforcing the forum selection clauses. For the following reasons, we affirm.

I.

The Society of Lloyd's, or Lloyd's of London ("Lloyd's"), is not an insurance company, but rather is an insurance marketplace in which individual Underwriting Members, or Names, join together in syndicates to underwrite a particular type of business. The Corporation of Lloyd's ("Corporation"), which was created by an Act of Parliament, regulates the Lloyd's insurance market. The Corporation itself does not underwrite any insurance, but provides facilities and services to assist underwriters. The Corporation is managed by the Council of Lloyd's ("Council") which controls the admission and discipline of Names, sets the Names' reserve requirements and establishes standards for Lloyd's policies.

To become a Name, one must apply and be sponsored by an existing member. Applicants must pass a means test to determine that they possess sufficient assets to satisfy claims. Those accepted as Names are required to obtain a letter of credit in favor of Lloyd's to serve as a security. The amount of the letter of credit, as well as a Name's means, determines the premium limit for each Name.

A Name cannot conduct insurance business directly, but instead enters into an Agency Agreement with a Members' Agent who acts on the Name's behalf. Names typically belong to several syndicates in order to spread their risks and the Members' Agents assist the Names in selecting the syndicates to join. Each Name is responsible for his or her proportionate share of a syndicate's losses up to his or her entire net worth.

Plaintiffs Andrew Hauck and West Shell are representatives of a putative class of Cincinnati-area individuals who invested in Lloyd's as Names. Each plaintiff executed a General Undertaking Agreement ("General Agreement") with Lloyd's to become a Name. These General Agreements contain both a forum selection and a choice of law clause. The forum selection clause provides:

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....

The choice of law clause states:

The rights and obligations of the parties arising out of or relating to the Member's membership of, and/or underwriting of insurance

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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.

Each plaintiff also executed an Agency Agreement with R.W. Sturge, Ltd. ("Sturge") appointing Sturge as his Members' Agent. The Agency Agreements contain choice of law and forum selection clauses: 1

  1. ENGLISH LAW:

    This Agreement shall be read and construed and take effect in all respects in accordance with English Law.

  2. ENGLISH JURISDICTION:

    Subject to Clause 22 hereof [permitting arbitration in London] the parties hereto irrevocably and unconditionally submit for all purposes of and in connection with this Agreement to the exclusive jurisdiction of the English Courts.

    In most years, plaintiffs received profits, but in recent years they suffered losses. Although the outcome of their investments with Lloyd's is as yet undetermined, plaintiffs believe that their total losses will far...

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