Baker v. LeBoeuf, Lamb, Leiby & Macrae, 94-3899

• Decision Date: 31 January 1997
• Docket Number: No. 94-3899,94-3899
• Citation: 105 F.3d 1102
• Parties: -1296, 65 USLW 2524 George R. BAKER, Christine Clawson Brandewie, David J., Kathleen S. and Louis N. Browning, Hunter W. Clawson, Michael L. Conaton, Paul C. Cramer, Burgess L. Doan, Burgess L. Doan, II, Verna Dohme, John H. Finn, III, John W., Robert W., Thomas R. and William T. Hayden, Joseph P. Hayden, Jr., Joseph P. Hayden, III, Fred Kahn, James P., William F. and William H. Plettner, Glenn E. Schembechler, George E. Thurner, Jr., and Allen and Ann Zaring, Plaintiffs-Appellees, v. LeBOEUF, LAMB, LEIBY & MACRAE, Donald J. Greene, Sheila H. Marshall, John C. Richardson, John W. Weber, and Jeffrey Mace, Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1102

105 F.3d 1102

79 A.F.T.R.2d 97-1296, 65 USLW 2524

George R. BAKER, Christine Clawson Brandewie, David J. Kathleen S. and Louis N. Browning, Hunter W. Clawson Michael L. Conaton, Paul C. Cramer, Burgess L. Doan, Burgess L. Doan, II, Verna Dohme, John H. Finn, III, John W., Robert W., Thomas R. and William T. Hayden, Joseph P. Hayden, Jr Joseph P. Hayden, III, Fred Kahn, James P., William F. and William H. Plettner, Glenn E. Schembechler, George E Thurner, Jr., and Allen and Ann Zaring, Plaintiffs-Appellees, v. LeBOEUF, LAMB, LEIBY & MACRAE, Donald J. Greene, Sheila H. Marshall, John C. Richardson, John W. Weber, and Jeffrey Mace, Defendants-Appellants.

No. 94-3899.

United States Court of Appeals, Sixth Circuit.

Argued July 30, 1996.

Decided Jan. 31, 1997.

Stanley M. Chesley (briefed), Paul M. De Marco (argued), Waite, Schneider, Bayless & Chesley, Cincinnati, OH, for Plaintiff-Appellee.

Robert G. Stachler (argued and briefed), Taft, Stettinius & Hollister, Cincinnati, OH, for Defendants-Appellants.

Before: GUY, BATCHELDER, and DAUGHTREY, Circuit Judges.

BATCHELDER, Circuit Judge.

The plaintiffs filed this action in the United States District Court for the Southern District of Ohio. The defendants moved to dismiss on grounds of improper venue. See FED.R.CIV.P. 12(b)(3). The magistrate judge recommended that the motion be denied, Baker v. LeBoeuf, No. C-1-92-718, 1993 WL 662352 (S.D.Ohio Oct. 7, 1993), and the district court denied the motion and certified the venue issue for immediate appeal. See 28 U.S.C. § 1292(b). Now before us, the defendants contend that the district court should have dismissed this action for improper venue. This appeal does not concern the merits of the plaintiffs' claims. We AFFIRM the order of the district court.

I. FACTS AND PROCEDURAL HISTORY

A. THE COMPLAINT

The plaintiffs, most of whom reside in Ohio, are underwriting members, or "names," of Lloyd's of London. See generally Allen v. Lloyd's of London, 94 F.3d 923, 926-27 (4th Cir.1996) (describing Lloyd's); Shell v. R.W. Sturge, Ltd., 55 F.3d 1227, 1228-29 (6th Cir.1995) (same); Certain Interested Underwriters at Lloyd's v. Layne, 26 F.3d 39, 41-42 (6th Cir.1994) (same); Bonny v. Society of Lloyd's, 3 F.3d 156, 158-59 (7th Cir.1993) (same); Hugel v. Corporation of Lloyd's, 999 F.2d 206, 207 (7th Cir.1993) (same); Roby v. Corporation of Lloyd's, 996 F.2d 1353, 1357-58 (2d Cir.1993) (same); Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953, 955-56 (10th Cir.) (same). They aver that defendant LeBeouf, Lamb, Leiby & Macrae ("LeBoeuf"), a New York City law firm, is United States counsel for Lloyd's, including its names residing in the United States ("U.S. Names") and those residing outside the United States, that the individual named defendants were members of the LeBoeuf law firm when this action was filed, and that all of them except John C. Richardson still are.

According to the complaint, LeBoeuf advised U.S. Names, including the plaintiffs, to contact LeBoeuf's New York City office regarding United States tax matters and other questions concerning Lloyd's. Lloyd's required that each plaintiff sign a limited power of attorney ("LPA") to LeBoeuf in a form that Lloyd's prescribed and LeBoeuf prepared. The individual defendants were LeBoeuf attorneys who the LPA named or who acted under the LPA. The plaintiffs say they executed the LPA, intending that it enable LeBoeuf, as a matter of administrative convenience, to perform ministerial acts with respect to United States tax matters. The plaintiffs claim they did not intend or imply that the LPA authorize LeBoeuf to negotiate or agree to any alteration of the tax treatment of the plaintiffs.

Upon becoming names, the plaintiffs accepted a 1980 "Closing Agreement" among Lloyd's, then-existing names, and the Commissioner of Internal Revenue ("Commissioner"). Although this Agreement established the tax treatment for the plaintiffs' earnings and losses, the plaintiffs allege that LeBoeuf, beginning in 1987 and without the plaintiffs' knowledge, negotiated with the Internal Revenue Service ("IRS") with the goal of formulating a Closing Agreement to replace the 1980 Agreement. See generally I.R.C. § 7121(a) (1989) ("The Secretary is authorized to enter into an Agreement in writing with any person relating to the liability of such person (or of the person or estate for whom he acts) in respect of any internal revenue tax for any taxable period."). The plaintiffs claim that LeBoeuf falsely or negligently represented to the IRS, or allowed the IRS to believe, that LeBoeuf had authority to negotiate and bind the plaintiffs to a 1990 Closing Agreement.

The complaint further avers that Price Waterhouse, an American accounting firm, conducted a study to assist Lloyd's and LeBoeuf in setting priorities for the new Closing Agreement. The financial information for the study was provided by LeBoeuf. Although, according to the plaintiffs, LeBoeuf received a draft of the study in February 1989, LeBoeuf knew of the contents of the study before 1989. The study concluded that the 1990 Agreement would substantially increase the tax burden on U.S. Names, and therefore reduce both the number of U.S. Names and Lloyd's capital base. The study also concluded that the names would suffer substantial losses for 1988, 1989, and 1990. The plaintiffs allege that although LeBoeuf knew of the Price Waterhouse study, LeBoeuf concealed its contents from the plaintiffs. Acting on their behalf without either actual or implied authority and without the plaintiffs' knowledge, LeBoeuf executed the new Agreement with the Commissioner in April 1990. ¹

Further, the plaintiffs complain that while Price Waterhouse was preparing the study, agents of Lloyd's were telling the plaintiffs they should expect profits in each of those years. The plaintiffs charge that by not conveying the information from the study to the plaintiffs, LeBoeuf prevented them from learning that the representations which agents of Lloyd's had made were false. As it turned out, Lloyd's did suffer losses in 1988 and 1989. Had the plaintiffs learned of the Price Waterhouse study, they could have resigned from Lloyd's in time to avoid some or all of these losses. ²

The plaintiffs say they learned of the 1990 Agreement in May 1990. Although the new Agreement allows the chairman or deputy chairman of Lloyd's, or the Commissioner, to withdraw the Agreement on 180 days' notice, the Agreement does not allow an individual name to refuse to be bound by it. The plaintiffs claim that they have demanded of the chairman that he withdraw the 1990 Agreement, but that Lloyd's, through LeBoeuf, has refused to do so. The plaintiffs allege that they have disavowed the 1990 Closing Agreement and have written to the Commissioner, saying that LeBoeuf had exceeded its authority as to them and that they were disavowing the 1990 Agreement.

The three-count complaint alleges fraud, breach of fiduciary duty, and negligent representation/legal malpractice. In Count I, the plaintiffs allege that LeBoeuf, while acting as their fiduciary, deliberately concealed from them and misrepresented to them the facts involving the Price Waterhouse study, the negotiations for the 1990 Agreement, and its impact on them, and, as a result, the plaintiffs were unable to protect their interests and have suffered losses. Count II alleges LeBoeuf breached its fiduciary duty to the plaintiffs by, inter alia, simultaneously representing the plaintiffs and parties with interests adverse to the plaintiffs'; by exceeding its authority under the LPA; by deliberately concealing material facts from the plaintiffs and not notifying them of the Price Waterhouse study or of the negotiations leading to the 1990 Agreement; and by disregarding the plaintiffs' instructions to withdraw the 1990 Agreement and instead, acceding to Lloyd's instruction not to withdraw the Agreement. Count III claims LeBoeuf committed legal malpractice in negligently breaching the duty it owed the plaintiffs to protect their interests by keeping them advised of matters that might affect them.

B. THE MOTION TO DISMISS

The defendants point out that to become a name, each of the plaintiffs was required to sign a contract with Lloyd's called the "General Undertaking." That contract contains a forum selection clause by whose terms each plaintiff "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 and that accordingly any suit, action or proceeding arising out of or relating to such matters shall be brought in such courts...." The defendants claim that this action must be dismissed under FED.R.CIV.P. 12(b)(3), because the forum selection clause prevents the plaintiffs from bringing suit anywhere except in England. They charge that this suit against the American lawyers of Lloyd's is simply an effort to circumvent the forum selection clause and the case law from many United States courts of appeal, including ours, holding that the forum selection clause in the General Undertaking prevents Lloyd's names from suing Lloyd's in American courts. See, e.g., Shell v. R.W. Sturge, Ltd., 55 F.3d 1227, 1229-32 (6th Cir.1995); Bonny v. Society of Lloyd's, 3 F.3d 156, 159-63 (7th Cir.1993); Hugel v. Corporation of Lloyd's, 999 F.2d 206, 207-11 (7th Cir.1993); Roby v. Corporation of Lloyd's, 996 F.2d 1353, 1358-66 (2d Cir.); Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953, 956-60 (10th Cir.1992); cf. Allen v. Lloyd's of London, 94 F.3d 923, 928-32 (4th Cir.1996). The defendants urge us to stop what they believe is, in effect, a sham, asserting that the damages the plaintiffs seek are the damages they would seek if they were suing Lloyd's directly in American courts.

The merits of the plaintiffs' claims are not...