Riley v. Kingsley Underwriting Agencies, Ltd., 91-1311

CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)
Citation969 F.2d 953
Docket NumberNo. 91-1311,91-1311
PartiesFed. Sec. L. Rep. P 96,878, 23 Fed.R.Serv.3d 266 Ronald H. RILEY, Individually, Plaintiff-Appellant, v. KINGSLEY UNDERWRITING AGENCIES, LTD., a British corporation, Lime Street Underwriting Agencies, Ltd., a British corporation, Bankside Syndicate Limited, a British corporation, FirstBank of Vail, N.A., Robin C. Kingsley, Robert Hallam, Society and Council of Lloyd's and John Does I Through X, Defendants-Appellees.
Decision Date17 July 1992

Richard G. Sander (George G. Ventura, with him on the brief), both of Popham, Haik, Schnobrich & Kaufman, Ltd., Denver, Colo., for plaintiff-appellant.

Neil Peck (and Thomas S. Nichols & Linda Wackwitz, all of Davis, Graham & Stubbs, Denver, Colo., and Taylor R. Briggs, Sheila H. Marshall & Mary L.B. Betts, of LeBoeuf, Lamb, Leiby & MacRae, New York City, with him on the brief), for defendants-appellees.

Before McKAY, Chief Judge, LOGAN and KELLY, Circuit Judges.

PAUL KELLY, Jr., Circuit Judge.

Plaintiff-Appellant, Ronald H. Riley (Riley) filed suit in federal district court asserting claims under federal and state securities laws, as well as state tort law. Named defendants were Society and Council of Lloyd's, a British entity (Lloyd's); Kingsley Underwriting Agencies, Ltd. (Kingsley Underwriting), Lime Street Underwriting Agencies, Ltd. (Lime Street Underwriting), and Bankside Syndicate, all British corporations (Underwriting Defendants); Robin C. Kingsley (Kingsley) and Robert Hallam (Hallam), both British citizens, and FirstBank of Vail, N.A. (FirstBank). Defendants, other than FirstBank, purported to enter a special appearance to raise the following questions: (1) whether choice of forum and law provisions in Riley's contract with Lloyd's were valid and enforceable, and (2) whether arbitration and choice of law provisions in Riley's contract with the Underwriters, requiring arbitration in England and application of English law, were valid and enforceable. The district court held that the arbitration and choice of forum and law provisions in the contracts were valid and enforceable. After concluding it lacked further jurisdiction, the district court dismissed all of Riley's claims, without prejudice.

After filing his appeal, Riley moved for an injunction pending appeal to prohibit Lloyd's from drawing on certain letters of credit. Three days later, we issued an order granting the motion, denying an immediate hearing and accelerating oral argument. For the reasons discussed below, the district court's judgment dismissing Riley's claims is affirmed and our injunction pending appeal is dissolved.


In order to understand the operative facts, a brief description of the parties is necessary. All parties, save Riley and FirstBank, are British citizens or entities. Kingsley Underwriting is a predecessor in interest to Lime Street Underwriting. Both are registered underwriting agencies with Lloyd's. Bankside Syndicate, Ltd. is a registered managing agent with Lloyd's and conducts the day-to-day business of Lime Street. Kingsley was the chairman of Lime Street at one time and formerly the chairman of the Kingsley Underwriting. Hallam is the current Director of Lime Street and past Director of Kingsley Underwriting. Lloyd's is a British corporation with its principal place of business in London. Lloyd's was incorporated in 1891, but it has functioned as a market for writing insurance policies for some 300 years.

Riley was interested in becoming a member of Lloyd's and travelled to England on several occasions to pursue this quest. While there, Riley visited with various persons, including Hallam and Kingsley. In January 1980, Riley entered into a General Undertaking with Lloyd's and a Members' Agent's Agreement with the Underwriters. Both of these agreements provided that the courts of England would have exclusive jurisdiction over any dispute and that the laws of England would apply. 1 , 2 Additionally, the Members' Agent's Agreement provided for arbitration in the event of any dispute. 3

Riley's underwriting began in January 1980 with a premium income limit of 150,000 pounds. He remained a member of Lloyd's through 1990, and each year increased the amount of premium income underwritten. By 1989, Riley was underwriting premium income in excess of a million pounds.

In connection with his underwriting, Riley was required to meet Lloyd's deposit requirements. Riley obtained letters of credit from FirstBank. FirstBank in turn issued letters of credit to First National Bank of Boston (Guernsey) Ltd. as security for a letter of credit to be issued by the London branch of the Guernsey Bank in favor of Lloyd's. Lloyd's holds these letters of credit as trustee of a trust for the benefit of Riley's insured policy holders. In the event a member fails or refuses to cover his pro rata share of underwriting liability, then Lloyd's may draw on the letter of credit to cover the obligation. In the event the letter of credit is insufficient, Lloyd's will look to a member's assets to satisfy any remaining underwriting liability.

The syndicates in which Riley participated have experienced large losses, resulting in calls in excess of 300,000 pounds. Riley has been notified that, if he does not satisfy the calls, Lloyd's will draw against the letter of credit issued by Guernsey Bank. Guernsey Bank would then draw on the FirstBank letters of credit.

Proceeding apparently on the theory that the best defense is a good offense, Riley filed this action seeking declaratory judgment, rescission and damages against Defendants other than FirstBank. Riley claimed that these Defendants engaged in the offer and sale of unregistered securities and made untrue statements of material fact and material omissions in connection with the sale of securities, violating the Securities Act of 1933 (1933 Act), §§ 12(1) & 12(2), 15 U.S.C. §§ 771(1) & 771(2), the Securities Exchange Act of 1934 (1934 Act), § 10, 15 U.S.C. § 78j(b) and Rule 10b-5, 17 C.F.R. 240.10b-5. Additionally, Riley made similar allegations under state securities law, see Colo.Rev.Stat. §§ 11-51-107 & 11-51-125 (1987), and alleged common law fraud. Riley sought a writ of attachment against Lloyd's and an injunction to prevent Defendants from drawing on the letters of credit.

Riley obtained a temporary restraining order from the district court ex parte. Prior to a preliminary injunction hearing, Riley, Lloyd's, the Underwriting Defendants, Kingsley and Hallam entered into a court-approved stipulation that the hearing would be limited to the threshold issues of the applicability and effect of the forum selection clause and the arbitration clause discussed above. Defendants specifically reserved their lack of in personam jurisdiction defense.


A motion to dismiss based on a forum selection clause frequently is analyzed as a motion to dismiss for improper venue under Fed.R.Civ.P. 12(b)(3). Spradlin v. Lear Siegler Mgmt. Servs., 926 F.2d 865, 866 (9th Cir.1991); Commerce Consultants Int'l, Inc. v. Vetrerie Riunite, S.p.A., 867 F.2d 697, 698 (D.C. Cir.1989); Medoil Corp. v. Citicorp, 729 F.Supp. 1456, 1457 n. 1 (S.D.N.Y.1990). But see David L. Threlkeld & Co. v. Metallgesellschaft Ltd., 923 F.2d 245, 253 n. 2 (2d Cir.) (arbitration provision; motion to dismiss for lack of subject matter jurisdiction), cert. dismissed, --- U.S. ----, 112 S.Ct. 17, 115 L.Ed.2d 1094 (1991). The enforceability of forum selection, choice of law and arbitration provisions are questions of law which we review de novo. See Milk 'N' More v. Beavert, 963 F.2d 1342, 1345 (10th Cir.1992). We hold that the parties must abide by their agreement and resolve their disputes in England, either before an English court or arbitrator, as the case may be. Three reasons persuade us: (1) the parties' undertaking is truly international in character, (2) all parties other than Riley and FirstBank are British, and (3) virtually all activities giving rise to the suggested claims occurred in England.

A. Forum Selection and Choice of Law Provisions.

Riley concedes, as he must, that "the enforcement of choice of forum and choice of law clauses is consistent with recent U.S. Supreme Court decisions." However, he relies on an isolated sentence in a footnote in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 n. 19, 105 S.Ct. 3346, 3359 n. 19, 87 L.Ed.2d 444 (1985), which stated that forum selection and choice of law provisions which operate as prospective waivers of statutory antitrust claims would not be enforced as against public policy. Riley suggests that he is being deprived of all substantive rights under the federal securities laws and therefore should be relieved of his agreements on public policy grounds. 4 On these facts, we do not read Mitsubishi as restrictively as Riley when Mitsubishi is viewed against the backdrop of Supreme Court decisions in the area.

When an agreement is truly international, as here, and reflects numerous contacts with the foreign forum, the Supreme Court has quite clearly held that the parties' choice of law and forum selection provisions will be given effect. See Carnival Cruise Lines, Inc. v. Shute, --- U.S. ----, ---- - ----, 111 S.Ct. 1522, 1527-28, 113 L.Ed.2d 622 (1991); Mitsubishi, 473 U.S. at 631, 105 S.Ct. at 3356; Scherk v. Alberto-Culver Co., 417 U.S. 506, 519-20, 94 S.Ct. 2449, 2457-58, 41 L.Ed.2d 270 (1974); M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 9, 92 S.Ct. 1907, 1912, 32 L.Ed.2d 513 (1972). We review these authorities briefly.

In M/S Bremen, the Court identified an important rationale for the rule that such provisions should be enforced.

The expansion of American business and industry will hardly be encouraged if, notwithstanding solemn contracts, we insist on a parochial concept that all disputes must be resolved under our laws and in our courts. .... We cannot have trade and commerce in world markets and...

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