999 F.2d 206 (7th Cir. 1993), 92-2240, Hugel v. Corporation of Lloyd's

Docket Nº:92-2240.
Citation:999 F.2d 206
Party Name:Dieter M. HUGEL, Gulf Coast Marine, Incorporated, and Ocean Marine Indemnity Company, Plaintiffs-Appellants, v. The CORPORATION OF LLOYD'S, a United Kingdom Corporation, Defendant-Appellee.
Case Date:July 08, 1993
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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999 F.2d 206 (7th Cir. 1993)

Dieter M. HUGEL, Gulf Coast Marine, Incorporated, and Ocean

Marine Indemnity Company, Plaintiffs-Appellants,


The CORPORATION OF LLOYD'S, a United Kingdom Corporation,


No. 92-2240.

United States Court of Appeals, Seventh Circuit

July 8, 1993

Argued Dec. 4, 1992.

Jean Marie R. Pechette, Gordon & Glickson, Chicago, IL, William Edelman (argued), New Orleans, LA, for plaintiffs-appellants.

Timothy M. Maggio, Joseph E. Coughlin (argued), Lord, Bissell & Brook, Chicago, IL, for defendant-appellee.

Before CUMMINGS and CUDAHY, Circuit Judges, and LAY, Senior Circuit Judge. [*]

LAY, Senior Circuit Judge.

Dieter Hugel, Gulf Coast Marine, Inc., and Ocean Marine and Indemnity Company appeal the dismissals of their diversity suit

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against the Corporation of Lloyd's. The district court dismissed the suit under Fed.R.Civ.P. 12(b)(3) on the ground that plaintiffs' claims are governed by a forum selection clause designating England as the proper forum. We affirm.


Dieter Hugel is an individual domiciled in New Orleans. He is the President and Chairman of Gulf Coast Marine, Incorporated (GCM) and Ocean Marine Indemnity Company (OMI). 1 GCM is an insurance brokerage firm with principal office in New Orleans. OMI is a subsidiary of GCM.

In 1978, Hugel became a member of the Corporation of Lloyd's, operator of one of the oldest and largest insurance markets in the world. As an individual underwriting investor in Lloyd's, Hugel invested in insurance syndicates that operate at Lloyd's and underwrite Lloyd's of London insurance policies. 2 In order to be considered for membership, an individual must be financially solvent and must enter into a General Undertaking for Membership. Upon renewing his membership in 1987, Hugel signed a General Undertaking that included both forum selection and choice of law clauses in which the parties "irrevocably" agreed that the law and the courts of England will govern "any dispute or controversy of whatsoever nature arising out of or relating to the Member membership...."

In February 1988, based on suspicions that Hugel and GCM were involved in criminal misconduct, Lloyd's initiated an internal disciplinary proceeding against Hugel. 3 Hugel cooperated with the investigation by providing testimony and documents to Lloyd's relating to GCM and OMI. Plaintiffs allege that Lloyd's made certain assurances that the existence and subject matter of the investigation and all information obtained would be held in absolute confidence. At the close of the investigation, the Lloyd's investigators concluded that there was "no evidence" of misconduct.

Plaintiffs claim they lost business as the result of Lloyd's breach of confidentiality relating to the investigation. They filed suit in the United States District Court for the Northern District of Illinois, Western Division, seeking damages from Lloyd's alleged breach of contract, breach of fiduciary duty, invasion of privacy and tortious interference with business relationships, all arising from disclosures Lloyd's allegedly made despite "assurances of confidentiality" given during the investigation. Upon the findings of recommendation of the magistrate, the district court, the Honorable Stanley K. Roszkowski, refused to exercise jurisdiction over the suit, holding the scope of an enforceable forum selection clause required the courts of England to hear the subject matter of the dispute.


Our review of the applicability and enforceability of the forum selection clause is de novo. See, e.g., Northwestern Nat'l Ins. Co. v. Donovan, 916 F.2d 372, 375 (7th Cir.1990); Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953, 956 (10th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 658, 121 L.Ed.2d 584 (1992). 4

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The forum selection clause which the parties executed in the General Undertaking for Membership states 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...." (Emphasis added.) Thus, the material issue is whether the plaintiffs' claims relate to Hugel's membership in Lloyd's.

The plaintiffs' claims concern Lloyd's disclosure of confidential information during and after its investigation of certain business transactions of Mr. Hugel. They urge that this disclosure was not related in any way to their membership in Lloyd's. Plaintiffs contend that the dispute does not arise out of any underwriting of the insurance business and does not require an interpretation of the General Undertaking Agreement. In becoming a member of the Society of Lloyd's, Hugel agreed to abide by the comprehensive scheme of regulations concerning membership. In exchange for being allowed to underwrite insurance, Hugel, in executing the General Undertaking, agreed to "comply with the provisions of Lloyd's Acts 1871-1982, any subordinate legislation made or to be made thereunder and any ... requirement made or imposed by the Council [of Lloyd's] or any person(s) or body acting on its behalf...." The General Undertaking specifically requires compliance with membership Bylaw No. 9 of 1984, which prescribes certain requirements as "a continuing condition of membership of, and underwriting insurance business at, Lloyd's."

Lloyd's Bylaw No. 3 of 1983 authorizes the Council to direct inquiries "concerning the suitability, conduct or affairs of any member of the Society...." It expressly mentions "frauds, crimes, malpractices or misconduct as defined in these byelaws ... in connection with the business of insurance at Lloyd's or in any way related thereto." Lloyd's Bylaw No. 5 of 1983 provides that a member is guilty of misconduct if he:

(d) conducts himself ... in a manner which is detrimental to the interests of Lloyd's policyholders, [or] the Society ...;

(e) conducts any insurance business in a discreditable manner or with a lack of good faith, or

(f) conducts himself ... in any manner whatever which is dishonorable or disgraceful or improper.

If a verdict of misconduct is returned against a member, the Society may exclude or suspend him from membership or require the member to cease underwriting at Lloyd's in part or in total, either permanently or temporarily. Bylaw No. 5(2)(a).

Plaintiff claims that the investigation was unrelated to his membership because it was an investigation of private commercial conduct, wholly unrelated to any act undertaken by Hugel in his capacity as, by reason of, or under color of his Lloyd's membership. He claims to be a "passive investor" who did not expect scrutiny of his personal or business transactions unrelated to his Lloyd's business. Hugel likens his relationship with Lloyd's to that of a stockholder of Sears Roebuck, whose sole criteria for investment is financial.

We find this argument unpersuasive. Becoming a member of Lloyd's is not the same as investing in a mutual fund or buying stock in a publicly held corporation. The Society of Lloyd's members are selected according to certain prescribed criteria, including whether an individual is a "suitable person to be a member of the Society." Bylaw 9 of 1984, sec. 5. Lloyd's bylaws clearly indicate that the Society is concerned about the moral fitness of its members. Nothing in the bylaws limits this criteria to conduct directly involving a Lloyd's insurance underwriting transaction.

The district court found that Lloyd's had the authority to investigate Hugel because,

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as a member, Hugel had agreed to abide by Lloyd's rules. We agree with the district court that if Hugel were not a member of Lloyd's, there would not have been an investigation. Indeed the plaintiffs offer no other explanation for why Lloyd's would have conducted the investigation if not to determine Hugel's eligibility for continuing membership. 5 Thus, we believe it follows like the night following the day that any dispute that arose from this investigation must be considered related to Hugel's membership and thereby within the scope of the forum selection clause.


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