MATTER OF UNTERWESER REEDEREI

• Decision Date: 28 June 1971
• Docket Number: No. 27497.,27497.
• Citation: MATTER OF UNTERWESER REEDEREI, 446 F.2d 907 (5th Cir. 1971)
• Parties: In the Matter of the Complaint of UNTERWESER REEDEREI, GmBH. ZAPATA OFF-SHORE COMPANY, Plaintiff-Appellee, v. M/S BREMEN and Unterweser Reederei, GmBH, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

446 F.2d 907 (1971)

In the Matter of the Complaint of UNTERWESER REEDEREI, GmBH ZAPATA OFF-SHORE COMPANY, Plaintiff-Appellee, v. M/S BREMEN and Unterweser Reederei, GmBH, Defendants-Appellants.

No. 27497.

United States Court of Appeals, Fifth Circuit.

June 28, 1971.

David C. G. Kerr, of MacFarlane, Ferguson, Allison & Kelly, Jack C. Rinard, Tampa, Fla., Warren M. Faris, of Faris, Ellis, Cutrone, Gilmore & Lautenschlaeger, J. Y. Gilmore, Jr., New Orleans, La., for appellants.

Dewey R. Villareal, Jr., of Fowler, White, Collins, Gillen, Humkey & Trenam, Tampa, Fla., James K. Nance, of

Baker, Botts, Shepherd & Coates, Houston, Tex., for appellee.

Before JOHN R. BROWN, Chief Judge, WISDOM, GEWIN, BELL,^* THORNBERRY, COLEMAN, GOLDBERG, AINSWORTH, GODBOLD, DYER, SIMPSON, MORGAN, CLARK, INGRAHAM and RONEY, Circuit Judges.

ON PETITION FOR REHEARING EN BANC

PER CURIAM:

Upon consideration of this cause en banc the Court adopts the majority opinion and judgment of the panel, 428 F.2d 888 (5th Cir. 1970).

WISDOM, Circuit Judge, dissenting, joined by Judges Thornberry, Goldberg, Godbold, Simpson and Clark:

Again I feel impelled to dissent in this case. It is incredible that a court should fail to honor an agreement between a foreign corporation and a domestic corporation to settle their contractual disputes in a neutral forum according to the law of a neutral country long used to its courts' settling admiralty disputes.

The issue as stated in the majority opinion is as follows:

The question we must decide is whether the district court was obliged to decline to exercise admitted jurisdiction under the facts of the admitted case. 428 F.2d 893 (Emphasis added.)

In support of its position, the Court quoted the following statement from Carbon Black Export, Inc. v. The S.S. Monrosa, 5 Cir. 1958, 254 F.2d 297, 300, cert. dismissed, 1959, 359 U.S. 180, 79 S.Ct. 710, 3 L.Ed.2d 723, rehearing denied 359 U.S. 999, 79 S.Ct. 1115, 3 L.Ed. 2d 986:

In essence, the motion to decline jurisdiction was based upon Clause 27 as buttressed by the doctrine of forum non conveniens. Any consideration of such a question starts with the universally accepted rule that agreements in advance of controversy whose object is to oust the jurisdiction of the courts are contrary to public policy and will not be enforced. (Emphasis added.)

The issue here is not whether the Court is "obliged" to decline to exercise jurisdiction. It is not whether parties can "oust the jurisdiction of the courts". In this case and similar cases the parties assume that the local court has jurisdiction but agree that in the absence of unreasonable circumstances the court should exercise its jurisdiction only to the extent of giving effect to the choice of forum clause just as courts give effect to any clause expressing the intention of the contracting parties. The issue is whether in the circumstances of this case it is unreasonable for the court to enforce the bargain struck on an international transaction by two companies of diverse nationalities well able to take care of themselves in negotiating a contract.

The contract was not between some indigent American seaman and Greek shipowner to try disputes in Piraeus, Greece.¹ It was not a towing contract in inland American waterways with the towage company having superior bargaining leverage.² The contract in this case required the towage company to tow a six million dollar drilling rig from Venice, Louisiana, near the mouth of the Mississippi, through the Gulf of Mexico, across the Mediterranean, and up the Adriatic to Ravenna, Italy. Zapata, owner of the rig, solicited bids from several towing companies. The low bidder, Unterweser, a German company, generally inserts in its contract a provision for trial of disputes in German courts according to German law. The choice of forum provision was an essential element in the final contract, undoubtedly because of the validity of exculpatory clauses in English law and the possibility of the invalidity of exculpatory clauses in towage contracts in American law.³

The Court makes a half-hearted attempt to argue that it "was within the sound discretion of the district court to decline jurisdiction on the basis of forum non conveniens". This doctrine puts the burden on the party asserting it to justify its application. The forum non conveniens theory should have no bearing on this case — at least in terms of the burden of proof. Here the parties have agreed on the forum and the applicable law. In these circumstances Zapata, represented by experienced counsel, should not be allowed to welch on its bargain.

The contention that Unterweser should be treated as having assented to the jurisdiction of the local court by filing the limitation action is a red herring. In the first place, Unterweser (more accurately, the tug Bremen) left international waters to enter the district court's jurisdiction upon the instructions of Zapata. Conveniently, Zapata had a United States marshal waiting to arrest the Bremen when the tug entered Tampa Bay with the disabled Chaparral (the drilling rig). And when Unterweser proceeded to move the district court to dismiss the suit, the district court failed to rule on its motion until after the statutory period for filing a limitation action had elapsed. Unterweser had already sued in London for breach of contract. Prior to the limitation action, the High Court of Justice had ruled that Zapata had been properly served and that the action should proceed in the English courts.⁴ Thus, the limitation action, filed one week before the expiration of the applicable statute of limitations, was a protective measure. When Zapata moved the district court to restrain further litigation in England, Unterweser moved to stay its own limitation proceeding until the English suit was determined. The majority admits that Unterweser invoked American jurisdiction only reluctantly. The district court may have had the power to order Unterweser to cease its English litigation. But see 39 U.Cin.L.Rev. 819 (1970).⁵ The question remains, however, even in terms of the majority's analysis, "whether the district court properly refused to stay the limitation proceeding." (Emphasis supplied.)

I close with a quotation from a law review comment, Application of the Forum Clause to Commercial Contracts, 8 Houston L.Rev. 739, 752 (1971), that appeared after the Court had held its en banc conference on this case:

VII. Summary

Forum clauses were once "taboo" in American courts. Since 1949, however, courts have been more conciliatory toward these contractual provisions. The "ouster" rationale — used in most pre-Krenger⁶ decisions as a basis for rejecting forum clauses — has been discarded in large measure. The "reasonableness" test, developed in Muller,⁷ gives prima facie validity to forum clauses and places the onus on the plaintiff to show that the clause is unreasonable. This test has been accepted by the latest revision of the Restatement, the majority of the courts which recently have considered forum clauses, and most of the legal scholars who have written on the problem. Acceptance of the prima facie validity of forum clauses has these advantages: (1) it vitiates the legal fiction of ouster; (2) it reinforces the principle of party autonomy; and (3) it gives discretion to the trial judge who may weigh all the equities. Since the Muller test is basically one of discretion, there is always the danger of abuse, especially from jurists who wish to assure to parties who reside within their jurisdiction an open court. On balance, however, the Muller test is sound, and it is difficult to imagine any court long rejecting a criterion which is universally referred to as the "reasonableness" test.

The decision of the majority is a backward step by a forward-looking court. It has no place in a shrinking world where international commercial transactions are becoming increasingly commonplace. The safeguard against abuse of the forum clause is the local court's power to determine the reasonableness of enforcing the clause. But the burden of proving unreasonableness should fall on the party seeking to escape from the obligation he contracted to undertake. Zapata has failed to show any good reason for backing out of its bargain.

SIMPSON, Circuit Judge (dissenting):

I respectfully dissent, for the reasons set forth in Judge Wisdom's dissent from the panel decision In Matter of Complaint of Unterweser Reederei, GmBH, Zapata Off-Shore...