SHELL v. R.W. STURGE, LTD. United States Court of Appeals for the Sixth Circuit 55 F.3d 1227 1195 19

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SHELL v. R.W. STURGE, LTD.United States Court of
Appeals for the Sixth Circuit55 F.3d 1227
(1195) 1995 FED App. 0176P (6th Cir.) Decided
and Filed on June 8, 1995

• Ron Mesia

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III. FACTS

• Plaintiffs, investors in the Society of Lloyd's,
  brought this diversity action against defendants
  R. W. Sturge, Ltd., the Society of Lloyd's, the
  Council of Lloyd's and the Corporation of Lloyd's
  
• Plaintiffs Andrew Hauck and West Shell are
  representatives of a putative class of
  Cincinnati-area individuals who invested in
  Lloyd's as Names
• They are seeking to rescind their investment
  contracts under Ohio securities law
• Defendants, filed a motion to dismiss for
  improper venue under Rule 12(b)(3) of the Federal
  Rules of Civil Procedure
• It is based on the grounds that forum selection
  clauses in the investment contracts gave
  exclusive jurisdiction to the English courts
• The District Court granted the motion to dismiss
• Plaintiffs appeal arguing that the forum
  selection clauses deprive them of their
  substantive rights under the Ohio securities laws
  and that Ohio public policy

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IV. ISSUES

• The Society of Lloyd's, or Lloyd's of London, is
  not an insurance company, it is an insurance
  marketplace in which individual Underwriting
  Members, or Names, join together in syndicates to
  underwrite a particular type of business
• The Corporation of Lloyd's does not underwrite
  any insurance, but provides facilities and
  services to assist underwriters
• On November 1, 1993, plaintiffs filed this action
  in the Court of Common Pleas in Hamilton County,
  Ohio, alleging that defendants Sturge, Lloyd's,
  the Corporation, and the Council violated Ohio
  securities law by selling unregistered and
  non-exempt securities in violation of chapter
  1707 of the OHIO REVISED CODE
• In most years, plaintiffs received profits, but
  in recent years they suffered losses. Plaintiffs
  believe that their total losses will far exceed
  their profits
• Plaintiffs sought to rescind the contracts and be
  returned to their original positions, offering to
  return any benefits which they had received from
  their investments with Lloyd's
• Defendants have stipulated for purposes of their
  motion to dismiss that this action involves a
  security under Ohio securities law. A magistrate
  judge, following a hearing, recommended that the
  motion to dismiss for improper venue be granted.
  The District Court adopted this recommendation on
  December 22, 1993. Plaintiffs now appeal.

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V. DECISION

• Accordingly, the District Court's order granting
  defendants' motion to dismiss is AFFIRMED because
  this action involves a security under Ohio
  securities law. Defendant won

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VI. RATIONAL

• The plaintiffs have remedies which they can
  pursue in England. Plaintiffs seek rescission of
  their contracts under OHIO REV. CODE 1707.43
• Plaintiffs argue that the underlying contracts
  are voidable under OHIO REV. CODE 1707.43 and
  that if the District Court had found them to be
  void, the forum selection clauses would be void
  as well
• The uncontroverted affidavit of Barrister John
  Lewis Powell shows that "one of the remedies
  under English law for misrepresentation is
  rescission" and that a plaintiff may also be
  entitled to an indemnity against liabilities
  incurred
• Plaintiffs contend that the District Court erred
  in enforcing the forum selection clauses in the
  contracts without first determining whether these
  contracts are void
• A forum selection clause is a international
  agreement. The correct approach is to enforce the
  forum clause specifically unless plaintiffs can
  clearly show that enforcement would be
  unreasonable and unjust, or that the clause was
  invalid for such reasons as fraud

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VII. RELEVANCY

• The expansion of American business and industry
  will hardly be encouraged if, notwithstanding
  solemn contracts, we insist on a narrow concept
  that all disputes must be resolved under our laws
  and in our courts
• A parochial refusal by the courts of one country
  to enforce an international arbitration agreement
  would not only frustrate these purposes, but
  would invite unseemly and mutually destructive
  jockeying by the parties to secure tactical
  litigation advantages