Albemarle Corp. v. AstraZeneca UK Ltd.

• Decision Date: 08 December 2010
• Docket Number: No. 10-1000,10-1000
• Citation: 628 F.3d 643
• Parties: ALBEMARLE CORPORATION; Albemarle International Corporation, Plaintiffs-Appellants, v. ASTRAZENECA UK LTD, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

628 F.3d 643

ALBEMARLE CORPORATION; Albemarle International Corporation, Plaintiffs-Appellants,

v.ASTRAZENECA UK LTD, Defendant-Appellee.

No. 10-1000.

United States Court of Appeals, Fourth Circuit.

Argued: Sept. 21, 2010.

Decided: Dec. 8, 2010.

ARGUED: Charles Mitchell Brown, Nelson Mullins Riley & Scarborough, Columbia, South Carolina, for Appellants. Raymond A. Cardozo, Reed Smith LLP, San Francisco, California, for Appellee. ON BRIEF: William C. Wood, Jr., Elizabeth H. Campbell, Nelson Mullins Riley & Scarborough, Columbia, South Carolina, for Appellants. S. Miles Dumville, Travis A. Sabalewski, Reed Smith LLP, Richmond, Virginia; Jacquelyn D. Austin, Keith D. Munson, Womble Carlyle Sandridge & Rice, Greenville, South Carolina, for Appellee.

Before NIEMEYER and KING, Circuit Judges, and ROBERT J. CONRAD, Jr., Chief United States District Judge for the Western District of North Carolina, sitting by designation.

Affirmed by published opinion. Judge NIEMEYER wrote the opinion, in which Judge KING and Judge CONRAD joined.

OPINION

NIEMEYER, Circuit Judge:

In this case, we address how to interpret a forum selection clause that makes an international contract "subject to jurisdiction" in the United Kingdom.

AstraZeneca UK Ltd., a United Kingdom corporation, agreed in a 2005 contract to purchase a substantial portion of its needs for di-isopropyl-phenol ("DIP") from Albemarle International Corporation, a Virginia corporation. Albemarle International Corporation was the global marketing arm of Albemarle Corporation, a Virginia corporation (both corporations, collectively "Albemarle"), and Albemarle Corporation manufactured DIP in its plant in South Carolina. AstraZeneca used DIP to manufacture the drug Diprivan, a fast-acting anesthetic, at its plant in England. In the 2005 contract, AstraZeneca also agreed that if it ceased using DIP in favor of propofol, a derivative of DIP, it would give Albemarle the right of first refusal to supply AstraZeneca with propofol. When AstraZeneca did elect a year later to use propofol in lieu of DIP, Albemarle contends that AstraZeneca breached its duty to give Albemarle the right of first refusal, and Albemarle commenced this action in South Carolina, alleging that AstraZeneca breached the 2005 contract.

Based on a forum selection clause in the 2005 contract, which provided that the contract was "subject to" the jurisdiction of the English High Court, AstraZeneca filed a motion to dismiss this action for improper venue. The district court granted the motion and dismissed the complaint, applying English law, which the contract specified was applicable, to hold that the forum selection clause was mandatory and exclusive, even though such a clause would likely be construed under federal case law to be permissive.

We affirm. Resting on the traditional proposition that we should give effect to parties' expectations as manifested in their legitimate agreements, we apply English law to construe the forum selection clause and conclude that under English law, the clause requires that this litigation be pursued in the designated English court. We also conclude that enforcing the forum selection clause in this manner is not unreasonable, as unreasonableness is detailed in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15-18, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972).

I

In the contract, which is dated April 11, 2005, AstraZeneca agreed to purchase at least 80% of its requirements for DIP from Albemarle. To manufacture Diprivan, AstraZeneca distilled the DIP to obtain propofol, the active ingredient in Diprivan. In the 2005 contract AstraZeneca agreed that if it decided to bypass its own distilling process and purchase propofol directly for its manufacturing of Diprivan, it would give Albemarle the right of first refusal to sell AstraZeneca propofol "under mutually acceptable terms and conditions."

About a year later, in June 2006, AstraZeneca notified Albemarle that it intended to cease purchasing DIP and instead to purchase propofol directly from a third party. After AstraZeneca provided Albemarle with a copy of its purchase agreement with the third party and Albemarle made a competing offer to sell propofol to AstraZeneca, AstraZeneca refused to purchase propofol from Albemarle.

Albemarle commenced this breach of contract action against AstraZeneca in the Court of Common Pleas in Orangeburg, South Carolina, and AstraZeneca, invoking diversity jurisdiction, removed the case to federal court. AstraZeneca then filed a motion to dismiss for improper venue, relying on Federal Rules of Civil Procedure 12(b)(3) and 12(b)(6), along with 28 U.S.C. § 1406(a). In support of its motion, AstraZeneca pointed to the choice of law and forum selection clauses which provided simply that the contract "shall be subject to English Law and the jurisdiction of the English High Court." In response to the motion, Albemarle argued that the forum selection clause was only permissive and did not exclude a South Carolina court as an appropriate forum. It also filed a motion seeking to enjoin AstraZeneca from pursuing litigation concerning the contract in England.

While this litigation was pending, AstraZeneca and Albemarle entered into a new contract dated June 23, 2008, under which AstraZeneca agreed to a one-time purchase of DIP from Albemarle. In this contract, the parties agreed to apply South Carolina law and to litigate disputes exclusively in a South Carolina court. Based on an integration clause in the 2008 contract, as well as its forum selection clause, Albemarle argued to the district court that the 2008 contract superseded the 2005 contract, including the 2005 contract's choice of law and forum selection clauses.

In an opinion dated March 31, 2009, the district court agreed with Albemarle and denied AstraZeneca's motion to dismiss,finding that federal law applied in construing the forum selection clause in the 2005 contract and that, under federal law, this form of forum selection clause was only permissive and not exclusive. The court also entered an injunction barring AstraZeneca from pursuing claims on the 2005 contract in England. Because it determined that the forum selection clause of the 2005 contract was permissive, the court concluded that it need not "determine whether the [2008] Contract supersede[d] the [2005] contract."

Six months later, however, the district court granted AstraZeneca's motion for reconsideration and then granted its motion to dismiss. The court also vacated its injunction and denied all remaining motions as moot. The court stated that earlier it had "not address[ed] Defendant's argument regarding the application of English law in ruling on the motion to dismiss." The court concluded that its prior order "should be vacated and Defendant's motion to dismiss granted." It reasoned that English law applied and that under English law "the forum selection clause is mandatory." It also concluded that enforcing the forum selection clause would not violate any "strong public policy" of South Carolina. By a later order on Albemarle's motion for reconsideration, the court ruled that the 2008 contract did not supersede the 2005 contract.

From the district court's order of dismissal, dated September 9, 2009, Albemarle took this appeal.

II

Albemarle contends first that the 2008 contract displaced and nullified the 2005 contract and, in doing so, replaced the 2005 contract's forum selection clause with the forum selection clause in the 2008 contract, which designated any state or federal court in or near Orangeburg, South Carolina as having "exclusive jurisdiction and venue." To make this argument, Albemarle relies on both the integration clause and the forum selection clause contained in the 2008 contract.

The subject of the 2008 contract was AstraZeneca's one-time purchase of 9,253 kilograms of DIP, to be delivered "on or before June 27, 2008 provided it is after execution of the contract by the parties and payment received by Albemarle." There were no other substantive terms in the 2008 contract other than to clarify that the contract "shall commence on June 10, 2008, and terminate on June 30, 2008." The "General Conditions of Sale," incorporated into the 2008 contract, included the integration and forum selection clauses, on which Albemarle relies. The integration clause provided:

This Agreement constitutes the entire contract of sale and purchase of the product(s) named herein. All prior agreements between the parties relating to this product, if any are currently in force or effect, shall have no further force or effect, except to the extent relied upon by Seller (or any subsidiary of Seller) as forming the basis of relief sought by Seller (or any subsidiary of Seller) against Buyer in current or future litigation between Buyer and Seller (or any subsidiary of Seller). The terms of this Agreement shall not, in the absence of prior express written consent of the parties, be amended, supplemented or superseded by any terms or provisions of any purchase order, invoice or other document of any kind.

(Emphasis added). And the forum selection clause, which also included a choice of law provision, provided:

This Agreement shall be interpreted in accordance with the laws of South Carolina, without giving effect to provisions as to the conflicts of laws. Any disputesrelating in any way to this agreement will be resolved in the state or federal court located in (or if none is located in, then the nearest to) Orangeburg, South Carolina, which court will have exclusive jurisdiction and venue over such dispute.

(Emphasis added). Albemarle argues that this language in the 2008 contract "terminated any and all rights then being asserted under the 2005 Contract by AstraZeneca or by Albemarle, including rights under the choice of law and venue provision of the 2005 contract."

We find this argument inconsistent with Albemarle's litigating posture and, in any event, not supported by the contractual language of the ...