Afram Carriers, Inc. v. Moeykens

• Decision Date: 26 June 1998
• Docket Number: No. 97-21048,97-21048
• Citation: 145 F.3d 298
• Parties: AFRAM CARRIERS, INC., et al., Plaintiffs, Afram Carriers, Inc., Plaintiff-Appellee, v. Bruce MOEYKENS, et al., Defendants, v. ADELE NAJAR VDA. DE PANTA, Individually and as Personal Representative of the Estate of Augustin Pantin Pazos; Edgar Panta Najar, Rosa Del Carmen Panta Najar, and Elvis Anderson Panta Najar, Movants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 298

145 F.3d 298

1998 A.M.C. 2567

AFRAM CARRIERS, INC., et al., Plaintiffs, Afram Carriers, Inc., Plaintiff-Appellee, v. Bruce MOEYKENS, et al., Defendants, v. ADELE NAJAR VDA. DE PANTA, Individually and as Personal

Representative of the Estate of Augustin Pantin Pazos;

Edgar Panta Najar, Rosa Del Carmen Panta Najar, and Elvis

Anderson Panta Najar, Movants-Appellants.

No. 97-21048.

United States Court of Appeals, Fifth Circuit.

June 26, 1998.

Kenneth D. Kuykendall, Chester Joseph Malowski, Royston, Rayzor, Vickery & Williams, Houston, TX, for Plaintiff-Appellee.

Juan Enrique Mejia, Corpus Christi, TX, Rose R. Vela, Barger & Moss, Corpus Christi, TX, for Movants-Appellants.

Appeal from the United States District Court for the Southern District of Texas.

Before KING, SMITH and STEWART, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

This appeal addresses the propriety of a choice of forum clause in a settlement agreement related to a Limitation Act proceeding, 46 U.S.C.App. § 181 et seq. Finding no reversible error, we affirm.

I.

The S/S TAMPA BAY, a ship owned and operated by Afram Carriers, arrived in the Peruvian port of El Callao, and four employees of the contractual security service prehired to guard the ship boarded. Among the four was the deceased, Augustin Panta.

Peruvian port authorities ordered Afram to fumigate the ship. Afram evacuated all crew members except the captain, the chief engineer, and the four Servipro employees. The ship's captain assigned the security personnel to quarters on the ship during the fumigation. While there, Panta, the chief engineer, and several others still aboard were overcome by fumes from the chemical, methyl bromide, used for fumigation. Panta later died from inhalation of this toxic substance.

Afram and Panta's wife and children entered into a settlement agreement providing that, in exchange for a sum of about U.S. $2000, the Pantas release all existing claims against Afram in both the Peruvian and American courts. The agreement further provides Peruvian choice of law and forum-selection clauses. ¹

At about the time that Afram was settling the Panta heirs' wrongful death claim, it instituted a limitation of liability proceeding under the Limitation Act, 46 U.S.C.App. § 181 et seq., in federal court and included all personal injury and property damage claimants in its complaint. The district court ordered that monitions be served against all potential claimants in order to give them notice that they needed to present, or forever waive, their rights.

Because of the settlement agreement, Afram did not serve the Panta claimants with a monition. Eighteen months later, however, when they found out about the limitation proceeding, the Pantas moved to intervene and attempted to assert their wrongful death claim against Afram and the TAMPA BAY.

Afram resisted the intervention on the ground that the settlement agreement provided that any disputes arising over the release would be litigated in Peruvian, rather than American, courts. The district court tentatively agreed to enforce the forum-selection clause but allowed the parties to submit additional briefing on the "possible effects that enforcing the forum selection provision would have on the Panta claimants."

After reviewing the additional briefing, the court denied the motion to intervene and dismissed the claims without prejudice if the claimants filed an appropriate action in the Peruvian courts within thirty days. The Pantas appeal the denial of their motion to intervene. ²

II.

"[T]he enforceability of a forum-selection or arbitration clause is a question of law which is reviewed de novo." Mitsui & Co. (USA), Inc. v. MIRA M/V, 111 F.3d 33, 35 (5th Cir.1997) (per curiam) (citations omitted). Forum-selection clauses are presumptively valid: "[A] freely negotiated private international agreement, unaffected by fraud, undue influence, or overweening bargaining power ... should be given full effect." M/S BREMEN v. Zapata Off-Shore Co., 407 U.S. 1, 12-13, 92 S.Ct. 1907, 1914-15, 32 L.Ed.2d 513 (1972). "The burden of proving unreasonableness is a heavy one, carried only by a showing that the clause results from fraud or overreaching, that it violates a strong public policy, or that enforcement of the clause deprives the plaintiff of his day in court." Mitsui, 111 F.3d at 35 (emphasis added) (citing THE BREMEN, 407 U.S. at 12-13, 15, 18, 92 S.Ct. at 1914-17). Allegations that the entire contract was procured as the result of fraud or overreaching are "inapposite to our [forum-selection clause] enforceability determination, which must ... precede any analysis of the merits [of the contract's validity]." Haynsworth v. The Corporation, 121 F.3d 956, 964 (5th Cir.1997) (citation omitted), cert. denied, --- U.S. ----, 118 S.Ct. 1513, 140 L.Ed.2d 666 (1998).

The intervenors attempt to overcome the presumption of the forum-selection clause's validity by arguing that (1) Afram procured the clause through fraud and overreaching (including mistake); (2) the clause violates a strong public policy of the United States; (3) Afram should be estopped from asserting its rights under the clause because it took other, inconsistent positions in this litigation; (4) enforcement of the clause would prevent the intervenors from having their day in court; and (5) the release does not cover the dispute at issue.

A.

The Pantas primarily argue that Afram procured the forum-selection clause through fraud and overreaching. The facts, at least as the Pantas tell the story, are certainly dire. The deceased was the primary breadwinner for his family. He had no life insurance and, by all accounts, his family was financially and emotionally devastated by his death.

In the weeks after the death, the family was offered (although from the record it is unclear who first solicited the offer), and accepted, a cash settlement from Afram. In exchange for about one year's salary, U.S. $2000, the family agreed to waive all claims against Afram in both the Peruvian and U.S. courts. The Pantas further agreed to litigate all disputes concerning the release under Peruvian law and in Peruvian courts.

The Pantas use the facts to facilitate the natural inference that the settlement was procured through fraud or duress or was otherwise unconscionable. From there, we naturally are inclined to make a second inference: The forum-selection clause, as part of the illegally obtained contract, must also have been illegally procured.

This chain of inferences, however, is foreclosed not only by binding circuit precedent, see, e.g., Haynsworth, 121 F.3d at 964; Mitsui, 111 F.3d at 35, but also by the policies underlying the presumption in favor of enforcing such clauses. "The Supreme Court has ... instructed American courts to enforce [forum-selection] clauses in the interests of international comity and out of deference to the integrity and proficiency of foreign courts." Mitsui, 111 F.3d at 35 (citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 629, 105 S.Ct. 3346, 3355, 87 L.Ed.2d 444 (1985)). Were we to judge the soundness of the forum-selection clause by what we believe to be the merits of the underlying contract, we would subvert the aforementioned comity concerns by making a merits inquiry that the Supreme Court has determined is best left to the forum selected by the parties.

Only when we can discern that the clause itself was obtained in contravention of the law will the federal courts disregard it and proceed to judge the merits. Because, in this case, we can draw an inference of an illegally obtained forum-selection clause only if we judge the merits of the contract--that is, the movants have offered no evidence ³ that the clause itself was obtained as a result of fraud or overreaching--we cannot disregard it on that ground. ⁴

B.

The Pantas also argue that enforcing the forum-selection clause would thwart the "equitable resolution" goal of the Limitation Act. That is, "[t]he purpose of limitation proceedings is ..., in an equitable fashion, to provide a marshalling of assets--the distribution pro rata of an inadequate fund among claimants, none of whom can be paid in full." Petition of Tex. Co., 213 F.2d 479, 482 (2d Cir.1954) (internal quotation and citation omitted).

A forum-selection clause is potentially unreasonable when it would undermine a "strong public policy" of the forum. Mitsui, 111 F.3d at 35. Initially, we must determine, therefore, whether the equitable resolution afforded by the Limitation Act is a "strong" public policy that justifies overcoming the forum-selection clause.

The answer is not simple. Admittedly, equitable resolution of claims from a limited fund is one of the policies behind Limitation Act proceedings. See Texas Co., 213 F.2d at 482. Another consideration, however, is promoting settlement and subsidizing shipbuilders. ⁵ In fact, most courts have held that the main force driving Congress to enact the Limitation Act was to put American shipbuilders on a competitive footing with their European counterparts by limiting their liability to the value of the ship and her cargo. ⁶ Because of this fundamental consideration, courts generally have construed ambiguities in the Act in favor of shipowners. See, e.g., Coryell v. Phipps, 317 U.S. 406, 411, 63 S.Ct. 291, 293-94, 87 L.Ed. 363 (1943).

In this case, the two policies of the statute would appear at loggerheads. On the one hand, the goal of subsidizing shipowners and promoting settlement supports shipowners' ability to use and disregard the Limitation Act proceedings as best suits their interests in settling the claims against them promptly. At the outset, the shipowner was not obliged to invoke the proceeding against all claimants. Had it decided not to invoke the shield, the owner would remain subject to the full extent of liability. ⁷ Now that it has elected to invoke the shield, the shipowner should not be hampered, before those...