Royal Bed and Spring Co., Inc. v. Famossul Industria e Comercio de Moveis Ltda.

• Decision Date: 06 March 1990
• Docket Number: No. 89-1875,89-1875
• Citation: 906 F.2d 45
• Parties: ROYAL BED AND SPRING CO., INC., Plaintiff, Appellant, v. FAMOSSUL INDUSTRIA E COMERCIO DE MOVEIS LTDA., Defendant, Appellee. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 45

906 F.2d 45

ROYAL BED AND SPRING CO., INC., Plaintiff, Appellant, v. FAMOSSUL INDUSTRIA E COMERCIO DE MOVEIS LTDA., Defendant, Appellee.

No. 89-1875.

United States Court of Appeals First Circuit.

Heard March 6, 1990.

Decided June 26, 1990.

Francisco M. Lopez Romo, San Juan, P.R., for plaintiff, appellant.

Nydia Maria Diaz-Buxo, Caguas, for defendant, appellee.

Before BREYER and SELYA, Circuit Judges, and RE, ^* Judge.

RE, Chief Judge.

In this diversity action, plaintiff-appellant, Royal Bed and Spring Co., Inc. (Royal Bed), sued defendant-appellee, Famossul Industria e Comercio de Moveis Ltda. (Famossul), in the United States District Court for the District of Puerto Rico for breach of contract in violation of the Puerto Rico Dealer's Contract Act. Royal Bed appeals from the judgment of the district court which granted Famossul's motion to dismiss on the grounds of forum non conveniens.

The question presented on this appeal is whether the district court erred in dismissing the case on the grounds of forum non conveniens, based on its conclusion that Brazil is the most convenient forum.

Since we hold that the district court's determination was reasonable, and not an abuse of discretion, the judgment of the district court is affirmed.

BACKGROUND

Royal Bed, a corporation organized and existing under the laws of Puerto Rico, distributes furniture products in Puerto Rico. Famossul, a Brazilian corporation, is a manufacturer of furniture products in Brazil. The business relationship between the parties commenced in 1983 with Royal Bed distributing in Puerto Rico the furniture products manufactured by Famossul in Brazil.

On January 26, 1984, Royal Bed and Famossul signed, in Brazil, an agreement entitled "Letter Of Exclusive Distributorship Appointment." This agreement, written in Portuguese, granted Royal Bed the exclusive distributorship of "products, both furniture and other products, which might be made or introduced into [Famossul's] manufacturing line, for the market in Puerto Rico and adjacent islands." The agreement contained a provision which designated "the judicial district of Curitiba, State of Parana, Brazil, as competent to settle any disputes or interpretations derived from this letter," and that the Brazilian Civil Code would apply "[i]n the case of any violation." The agreement also contained a provision for the adjustment of payments in the event of a devaluation of the cruzeiro against the dollar.

Royal Bed alleges that, during 1986, Famossul terminated the exclusive distributorship and suspended the shipment of goods without just cause. As a result, Royal Bed claims cancellations of orders amounting to $145,712.08, and also damages of $1,000,000 from the loss of goodwill, revenues, and benefits that it would Contending that it was Royal Bed that breached the agreement, Famossul states that "[t]he maxidevaluation of the cruzeiro, indeed happened and it was made known to [Royal Bed], who wanted an increase of 10% when the increase at Brazil was over $300%." Famossul adds that, based on the amount of payments it was owed, the conditions sought by Royal Bed were "contrary to the contract."

have received had its relationship with Famossul continued.

On December 21, 1986, Royal Bed sued in the Superior Court of Puerto Rico, and on August 14, 1987, based on diversity jurisdiction, filed a similar action in the United States District Court for the District of Puerto Rico.

On August 24, 1987, Royal Bed moved for dismissal, without prejudice, of its action in the Superior Court in order to litigate its claim in federal district court. The Superior Court authorized the voluntary dismissal, but imposed costs, expenses and attorney's fees against Royal Bed.

Claiming that the court lacked jurisdiction, based on the doctrines of forum non conveniens and res judicata, Famossul filed two motions to dismiss with the United States District Court. The motions were referred to a United States Magistrate who, on July 6, 1988, issued a Report and Recommendation suggesting denial of Famossul's motions to dismiss.

Although Famossul's objections to the Magistrate's Report were filed late, the district court, nonetheless, set the case for a general calendar call, and, on August 15, 1989, approved the Magistrate's Report and Recommendation in part, and denied Famossul's motion to dismiss on the basis of res judicata. The district court concluded that "[s]ince the voluntary dismissal in the [Superior Court of Puerto Rico] ... was 'without prejudice' it does not produce a preclusive effect, and thus, the present action is not barred by res judicata." Royal Bed & Spring Co. v. Famossul Industria e Comercio de Moveis Ltda., No. 87-1054 GG, slip op. at 9 (D.P.R. Aug. 15, 1989).

The district court acknowledged that, in adjudicating a motion for forum non conveniens, the court must conduct a case-by-case analysis of convenience and fairness. See id. at 3. The court also recognized that Royal Bed had specifically asserted "that Puerto Rico law refuses to enforce forum-selection clauses providing for out-of-state or foreign venues as a matter of public policy." Id. at 3; see P.R. Laws Ann. tit. 10, Sec. 278b-2 (Supp.1987) (Law 75). The court noted that, given Law 75, the forum-selection clause in the parties' agreement must be integrated into the balancing of considerations. See Royal Bed, No. 87-1054 GG at 3. The court noted that the forum-selection clause "should not receive dispositive consideration ... but should rather be considered a significant factor that will figure centrally in our balancing of factors." Id. at 4. The court concluded that "the convenience of a Brazil forum, given the parties' expressed preference for that venue, the fairness of transfer in light of the forum-selection clause and the parties' relative bargaining power, as well as their familiarity with the procedure and laws of that forum," made Brazil the most convenient forum. Id. at 7.

Accordingly, the district court set aside the Magistrate's recommendation to deny Famossul's motion to dismiss on the basis of forum non conveniens, and dismissed the present action.

STANDARD OF REVIEW

In Piper Aircraft Co. v. Reyno, 454 U.S. 235, 257, 102 S.Ct. 252, 266, 70 L.Ed.2d 419 (1981), the United States Supreme Court stated that:

[t]he forum non conveniens determination is committed to the sound discretion of the trial court. It may be reversed only when there has been a clear abuse of discretion; where the court has considered all relevant public and private interest factors, and where its balancing of these factors is reasonable, its decision deserves substantial deference.

It is important to determine whether the relevant factors have been considered since it has been said that "the [trial] court abuses

                its discretion when it fails to balance the relevant factors."    C.A. La Seguridad v. Transytur Line, 707 F.2d 1304, 1308 (11th Cir.1983)
                

DISCUSSION

In Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 507, 67 S.Ct. 839, 842, 91 L.Ed. 1055 (1947), the Supreme Court stated that the doctrine of forum non conveniens is based on the principle "that a court may resist imposition upon its jurisdiction even when jurisdiction is authorized by the letter of a general venue statute." The doctrine permits "a trial court to decline to exercise its jurisdiction ... where it appears that the convenience of the parties and the court, and the interests of justice indicate that the action should be tried in another forum." Sibaja v. Dow Chem. Co., 757 F.2d 1215, 1218 (11th Cir.), cert. denied, 474 U.S. 948, 106 S.Ct. 347, 88 L.Ed.2d 294 (1985).

Hence, as stated by the Supreme Court, since the doctrine "was designed as an 'instrument of justice,' " Williams v. Green Bay & W.R.R., 326 U.S. 549, 554, 66 S.Ct. 284, 287, 90 L.Ed. 311 (1946), the question to be answered is "whether the actions brought are vexatious or oppressive or whether the interests of justice require that the trial be had in a more appropriate forum." Koster v. Lumbermens Mut. Casualty Co., 330 U.S. 518, 530, 67 S.Ct. 828, 834-35, 91 L.Ed. 1067 (1947).

1. Applicability of the Forum-Selection Clause

In this circuit, we have stated that "[t]he doctrine of forum non conveniens presupposes at least two forums in which the defendant is amenable to process." Tramp Oil and Marine, Ltd. v. M/V Mermaid I, 743 F.2d 48, 50 (1st Cir.1984) (citing Gulf Oil, 330 U.S. at 506-07, 67 S.Ct. at 842). We have also noted that "[d]ismissal in one forum is only proper upon a supported finding that another adequate forum exists where the plaintiff can litigate essentially the same claim." Id.

In this case, a forum-selection clause in the exclusive distributorship agreement of the parties clearly indicates the existence of an alternate forum to that of Puerto Rico. The agreement expressly provides that the judicial district of Curitiba in Brazil is the proper forum "to settle any disputes or interpretations derived from this [agreement]...." A specific question in this case is the effect that this court should give to the forum-selection clause contained in the agreement of the parties.

According to Royal Bed, since Puerto Rico "has the most significant contacts relating to the ... alleged termination without just cause of [the] contract[,]" the case should be tried in Puerto Rico under Puerto Rican law. Royal Bed asserts that, under the law of Puerto Rico, its rights and obligations under the agreement were protected by the Distributor's Law (Law 75). Pursuant to section 278b-2 of this law, "[a]ny stipulation that obligates a dealer to ... litigate any controversy that comes up regarding his dealer's contract outside of Puerto Rico, or under foreign law or rule of law, shall be ... considered as violating ... public policy ... and is therefore null and void." P.R. Laws Ann. tit. 10, Sec. 278b-2 (Supp.1987). Hence, Royal Bed concludes that "any action that would imply mere intention of placing a...