1996 WL 33418796 (9th Cir.)

For opinion see 135 F.3d 1289, 121 F.3d 565

United States Court of Appeals, Ninth Circuit.

Alan RICHARDS, et al., Plaintiffs/Appellants, v.

LLOYD'S OF LONDON, an unincorporated association, et al., Defendants/Appellees.

John NORTON, III, et al., Plaintiffs/Appellants, v.

LLOYD'S OF LONDON, an unincorporated association, et al., Defendants/Appellees.

Nos. 95-55747 & 95-56467.

July 8, 1996.

Appeal from the United States District Court for the Southern District of California, Case Nos. 94-1211-IEG & 95-0952-IEG Irma E. Gonzalez, Judge

Appellees' Answering Brief

Dean Hansell (State Bar No. 93831), Aaron C. Gundzik (State Bar No. 132137), Allyson S. Taketa (State Bar No. 167331), LeBoeuf, Lamb, Greene & Mac Rae, L.L.P., 725 South Figueroa Street, 36th Floor, Los Angeles, California 90017-5436, Telephone: (213) 955-7300, Telecopier: (213) 955-7399.

Taylor R. Briggs, Sheila H. Marshall, Mary L.B. Betts, Stephen H. Orel, LeBoeuf, Lamb, Greene & MacRae, L.L.P., 125 West 55th Street, New York, NY 10019-5389, Telephone: (212) 424-8000, Telecopier: (212) 424-8500, Attorneys for Defendants/Appellees The Corporation of Lloyd's, The Society of Lloyd's, and The Council of Lloyd's.

CORPORATE DISCLOSURE STATEMENT

None of the Defendants/Appellees are publicly traded companies that have issued shares to the public, nor are there any parent companies, subsidiaries or affiliates of Defendants/Appellees that have issued shares to the public.

TABLE OF CONTENTS

CORPORATE DISCLOSURE STATEMENT ... i

TABLE OF CONTENTS ... ii

TABLE OF AUTHORITIES ... v

STATEMENT OF JURISDICTION ... 1

STATEMENT OF ISSUES ... 2

STATEMENT OF THE CASE ... 4

COUNTER STATEMENT OF FACTS ... 8

STANDARD OF REVIEW ... 15

SUMMARY OF ARGUMENT ... 17

ARGUMENT ... 19

I. THIS COURT SHOULD FOLLOW THE UNANIMOUS HOLDINGS OF FOUR SISTER CIRCUIT COURTS OF APPEALS THAT HAVE UPHELD THE SAME FORUM AGREEMENT AT ISSUE HERE ... 19

A. The Supreme Court Has Repeatedly Held That Forum Clauses in International Contracts are Presumptively Valid ... 20

B. Four Circuit Courts of Appeals Have Upheld the Same Contract at Issue Here ... 32

1. The Names' Contracts are "Truly International" ... 33

2. The Allegations Here Mirror the Allegations of the Earlier Cases ... 36

3. The Remedies Available to These Plaintiffs in England are Fair and Adequate ... 37

II. THE CHOICE CLAUSE IS NOT RENDERED UNENFORCEABLE BY PUBLIC POLICY CONSIDERATIONS ... 43

A. England has a Substantial Interest in Regulating the Lloyd's Insurance Market ... 47

B. The SEC's Position Contradicts its Own Statements in Other Cases ... 50

III. PLAINTIFFS' PURPORTED RICO AND SECTION 17(a) CLAIMS ADD NOTHING TO THEIR ARGUMENTS ... 52

IV. PLAINTIFFS HAVE NOT ALLEGED FRAUD SPECIFIC TO THE CHOICE CLAUSES WITHIN THE MEANING OF PRIMA PAINT ... 54

V. PLAINTIFFS' CASE SHOULD ALSO BE DISMISSED ON GROUNDS OF FORUM NON CONVENIENS ... 58

VI. THE COURT BELOW PROPERLY EXERCISED ITS DISCRETION TO DISMISS THE CLAIMS AGAINST THE FICTIONAL "ASSOCIATION." ... 59

CONCLUSION ... 62

STATEMENT OF RELATED CASES ... 63

CERTIFICATE OF COMPLIANCE ... 64

ADDEND UM A -- UNPUBLISHED OPINIONS

ADDEND UM B

Note: Table of Contents page numbers missing in original document

TABLE OF AUTHORITIES

CASES

Arbuthnott v. Fagan and Feltrim Underwriting Agencies, Ltd., 3 Re LR 145- 174 ... 38

Ashmore v. Corporation of Lloyd's, (1992) 2 Lloyd's Rep. 620 ... 11

AVC Nederland B.V. v. Atrium Inv. Partnership, 740 F.2d 148 (2d Cir. 1984) ... 25, 32

Backlund v. Barnhart, 778 F.2d 1386 (9th Cir. 1985) ... 16

Bonny v. Society of Lloyd's, 3 F.3d 156 (7th Cir. 1993), cert. denied, 114 S. Ct. 1057 (1994) ... passim

Bonny v. Society of Lloyd's, 784 F. Supp. 1350 (N.D. Ill. 1992) aff'd, 3 F.3d 156 (7th Cir. 1993), cert. denied, 114 S. Ct. 1057 (1994) ... 36

British Midland Airways Ltd. v. Intl. Travel, Inc., 497 F.2d 869 (9th Cir. 1974) ... 41

Carnival Cruise Lines v. Shute, 499 U.S. 585 (1991) ... 4

Ceramic Corp. of Am. v. Inka Maritime Corp., 1 F.3d 947 (9th Cir. 1993) ... 46

Cohen v. Wedbush, Noble, Cooke, Inc., 841 F.2d 282 (9th Cir. 1988) ... 54

Coleman v. Prudential Bache Sec., Inc., 802 F.2d 1350 (11th Cir. 1986) ... 56

Creative Technology, Ltd. v. Aztech System Pte, Ltd., 61 F.3d 696 (9th Cir. 1995) ... 45

Deeny v. Gooda Walker Ltd., Queen's Bench Division (Commercial Court), The Times 7 October 1994 ... 14, 38

Edinburgh Assur. Co. v. R.I. Burns Corp., 479 F. Supp. 138 (C.D. Cal. 1979), aff'd in relevant part, 669 F.2d 1259 (9th Cir. 1982) ... 8, 60

Ferreri v. Mainardi, 690 F. Supp. 411 (E.D. Pa. 1988) ... 43

First Pacific Bank v. Gilleran, 40 F.3d 1023 (9th Cir. 1994) ... 58

Gaskin v. Stumm Handel GmbH, 390 F. Supp. 361 (S.D.N.Y. 1975) ... 54

Good Samaritan Hosp. v. Shalala, 508 U.S. 402 (1993) ... 50

Gustafson v. Alloyd Co., 115 S. Ct. 1061 (1995) ... 41

Henderson v. Merrett Syndicates, Ltd., 1992 Folio 1496, High Court of Justice, Queen's Bench Division, Commercial Court ... 38, 40

Hirsch v. Oakeley Vaughan Underwriting Ltd., No. 89-2563 (5th Cir., May 31, 1990), cert. denied, 498 U.S. 981 (1990) ... 4, 8, 33, 58

Howe v. Goldcorp Inv., Ltd., 946 F.2d 944 (1st Cir. 1991), cert. denied, 112 S. Ct. 1172 (1992) ... 46, 47, 50, 51, 58

In re Ins. Antitrust Litig., 938 F.2d 919 (9th Cir. 1991), aff'd in part and rev'd in part sub nom. Hartford Fire Ins. Co. v. California, 113 S. Ct. 2891 (1993) ... 31

In re Lloyd's American Trust Fund Lit., 1996 U.S. Dist. LEXIS 7930, 96 Civ. 1262 (RWS) (S.D.N.Y. June 11, 1996) ... 35

In re Washington Public Power Supply Says. Sec. Lit., 823 F.2d 1349 (9th Cir. 1987) ... 53

Leslie v. Lloyd's, Civ. No. H-90-1907 (S.D. Texas 9-5-91) ... 33

Letizia v. Prudential Bache Sec., Inc., 802 F.2d 1185 (9th Cir. 1986) ... 57

Lockman Found. v. Evangelical Alliance Mission, 930 F.2d 764 (9th Cir. 1991) ... 46, 53

M/S The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972) ... passim

Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509 (9th Cir. 1988) ... 29

McAleer v. Smith, 791 F. Supp. 923 (D.R.I. 1992) ... 8

McMahan & Co. v. Wherehouse Entertainment, Inc., 65 F.3d 1044 (2d Cir. 1995), cert. denied, 116 S. Ct. 1678 (1996) ... 51, 52

Milanovich v. Costa Crociere, S.p.A., 954 F.2d 763 (D.C. Cir. 1992) ... 22

Mitsubishi v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) ... 4, 17, 28-32, 44

Moseley v. Elec. & Missile Facilities, Inc., 374 U.S. 167 (1963) ... 54

Munoz-Santana v. United States Immigration & Naturalization Serv., 742 F.2d 561 (9th Cir. 1984) ... 16

Owyhee Grazing Ass'n v. Field, 637 F.2d 694 (9th Cir. 1981) ... 60

Paracor Finance, Inc. v. GE Capital Corp., 79 F.3d 878 (9th Cir. 1996) ... 42

Pelleport Inv., Inc. v. Budco Quality Theaters, Inc., 741 F.2d 273 (9th Cir. 1984) ... 15

Pierson v. Dean, Witter, Reynolds, Inc., 742 F.2d 334 (7th Cir. 1984) ... 54

Piper Aircraft Co. v. Reyno, 454 U.S. 235 (1981) ... 44-46

Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967) ... 18, 54-56

Republic of Nicaragua v. Standard Fruit Co., 937 F.2d 469 (9th Cir. 1991) ... 55-56

Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953 (10th Cir. 1992), cert. denied, 113 S. Ct. 658 (1992) ... passim

Rio Tinto Zinc Corp. v. Westinghouse Elec. Corp. [1978] A.C. 547, 1 All E.R. 434 ... 30

Roby v. Corporation of Lloyd's, 796 F. Supp. 103 (S.D.N.Y. 1992) ... 7

Roby v. Corporation of Lloyd's, 824 F. Supp. 336 (S.D.N.Y. 1992) ... 49, 58

Roby v. Corporation of Lloyd's, 996 F.2d 1353 (2nd Cir. 1993), cert. denied, 114 S. Ct. 385 (1993) ... passim

Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974) ... passim

Shell v. R. W. Sturge, Ltd., 850 F.Supp. 620 (S.D. Ohio 1993), aff'd, 55 F.3d 1227 (6th Cir. 1995) ... 4, 33, 39

Sparling v. Hoffman Const. Co., 864 F.2d 635 (9th Cir. 1988) ... 56

Spradlin v. Lear Siegler Management Serv., 926 F.2d 865 (9th Cir. 1991) ... 15

Stewart Org., Inc. v. Ricoh, 487 U.S. 22 (1988) ... 29

Syndicate 420 at Lloyd's London v. Early American Ins. Co., 796 F. 2d 821 (5th Cir. 1986) ... 8

TAAG Linhas Aereas de Angola v. Transamerica Airlines, Inc., 915 F.2d 1351 (9th Cir. 1990) ... 15

Testa v. Janssen, 482 F. Supp. 1195 (W.D. Pa. 1980) ... 61

Three Valleys Mun. Water Dist. v. E.F. Hutton & Co., 925 F.2d 1136 (9th Cir. 1991) ... 55

Timberlane Lumber Co. v. Bank of America, N.A., 549 F.2d 597 (9th Cir. 1976), after remand, 749 F.2d 1378 (9th Cir. 1984), cert. denied, 472 U.S. 1032 (1985) ... 31

Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 115 S. Ct. 2322 (1995) ... 31, 32

Walker v. KFC Corp., 728 F.2d 1215 (9th Cir. 1984) ... 56

Whirlpool Fin. Corp. v. GN Holdings, Inc., 67 F.3d 605 (7th Cir. 1995) ... 54

Wilko v. Swan, 346 U.S. 427 (1953) ... 20, 23

STATUTES

15 U.S.C. Section 77 ... 42

15 U.S.C. Section 77v ... 1

15 U.S.C. Section 78aa ... 1

18 U.S.C. Section 1964(c) ... 1

28 U.S.C. Section 1291 ... 1

28 U.S.C. Section 1331 ... 1

28 U.S.C. Section 1332(a) ... 1

28 U.S.C. Section 1367(a) ... 1

46 U.S.C. Section 1312 ... 31

Federal Rules of Civil Procedure Rule 60(b) ... 16

OTHER AUTHORITIES

H.R. Sowards, A.A. Sommer, Jr., Business Organization -- Securities Regulation 2-56 (1992) ... 42

J. E. Martin, Hanbury and Maudesly: Modern Equity 107 (12th ed. 1985) ... 60

J. William Hicks, 7D Exempted Transactions Under the Securities Act of 1933 § 16.05(7) at 16-210 (1992) ... 42

Louis Loss, Fundamentals of Securities Regulation at 1023 (1st ed. 1983) ... 42

STATEMENT OF JURISDICTION

Defendants/Appellees take exception to plaintiffs' characterizations and descriptions of the nature of their claims and the orders of dismissal, which is not properly the subject of a Statement of Jurisdiction. Based on the allegations in plaintiffs' complaint, subject matter jurisdiction arises under the Securities Act of 1933, 15 U.S.C. §§ 77v, 78aa; the Securities Exchange Act of 1934, 18 U.S.C. § 1964(c); and the Racketeer Influenced and Corrupt Organizations chapter of the Organized Crime Control Act of 1990, 28 U.S.C. § 1331. Jurisdiction of plaintiffs' state law claims is based on supplemental and diversity jurisdiction under 28 U.S.C. §§ 1367(a), 1332(a). Appellate jurisdiction arises under 28 U.S.C. § 1291.

STATEMENT OF ISSUES

1. Whether the district court abused its discretion in dismissing the case for improper venue where:

(a) plaintiffs do not contest that they signed forum. selection and choice of law agreements requiring them and all other Members of the Society of Lloyd's to resolve their disputes with Lloyd's [FN1] exclusively in English courts under English law;

FN1. As used herein, the term "Lloyd's" includes the Society of Lloyd's and the Corporation of Lloyd's, incorporated pursuant to Lloyd's Act 1871, and the governing body of the Society and Corporation, the Council of Lloyd's.

(b) the record demonstrates that the Names' activities and involvement with Lloyd's are truly international;

(c) the record demonstrates that English law provides remedies that sufficiently protect plaintiffs and deter securities fraud by English persons;

(d) it is undisputed that the Society of Lloyd's is a quasi-governmental regulatory body charged with overseeing the operations of the Lloyd's insurance market;

(e) there is no evidence that Appellee, the Society of Lloyd's, had any involvement in the purported solicitation of plaintiffs.

2. Whether the District Court abused its discretion in finding insufficient evidence that plaintiffs were fraudulently induced to sign the forum agreements.

3. Whether the District Court abused its discretion in denying plaintiffs' eleventh hour request for discovery due to the absence of any evidence that they had been misled about the nature of the forum agreement.

4. Whether the district court abused its discretion in denying plaintiffs' motion for entry of a default judgment against "Lloyd's of London," which plaintiffs allege to be an "unincorporated association," but is in fact a fictional entity, especially where it concluded that if such an entity exists, the forum selection agreement would apply to it as well.

STATEMENT OF THE CASE

This appeal presents a simple issue for this Court to resolve: Whether plaintiffs must abide by their acknowledged agreements to litigate their disputes with Lloyd's in England. [FN2] The issue is simple because this Court can be guided by the decisions of four sister Circuit Courts, all of which found the identical forum agreements at issue here to be enforceable, [FN3] and by the precedent established in several U.S. Supreme Court cases, holding that forum agreements relating to international transactions, like the ones at issue here, are to be treated as binding. [FN4] In the face of this overwhelming precedent and the record below it was far from an abuse of discretion for the district court to grant Lloyd's motion to dismiss. Contrary to plaintiffs' argument below and in their Opening Brief, this appeal is not about the merits of plaintiffs' factually complex claims against Lloyd's.

FN2. The text of these clauses is set forth on p. 13.

FN3. See Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953 (10th Cir. 1992), cert. denied, 113 S. Ct. 658 (1992); Roby v. Corporation of Lloyd's, 996 F.2d 1353 (2nd Cir. 1993), cert. denied, 114 S. Ct. 385 (1993); Bonny v. Society of Lloyd's, 3 F.3d 156 (7th Cir. 1993), cert. denied, 114 S. Ct. 1057 (1994); Shell v. R. W. Sturge, Ltd., 850 F.Supp. 620 (S.D. Ohio 1993), aff'd, 55 F.3d 1227 (6th Cir. 1995) See also, Hirsch v. Oakeley Vaughan Underwriting Ltd., No. 89- 2563 (5th Cir., May 31, 1990), cert. denied, 498 U.S. 981 (1990) (affirming dismissal of a common law fraud case brought by a Name against Lloyd's on the ground of forum non conveniens) (Ex. 1 to Addendum A hereto).

FN4. See, e.g., M/S The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972); Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974); Mitsubishi v. Soler Chrysler-Plymouth. Inc., 473 U.S. 614 (1985); and Carnival Cruise Lines v. Shute, 499 U.S. 585 (1991).

The plaintiffs and the SEC, as amicus, argue that the presumptive validity of the plaintiffs' agreement in the General Undertaking to litigate their disputes in an English forum, under English law is overcome by (1) the anti-waiver provisions of the federal securities laws, even though the plaintiffs' transactions are indisputably international; [FN5] (2) the federal securities laws' goal of deterring fraud upon American investors even though similar fraud claims may be made in English courts; and (3) allegations and purported "evidence" of fraud, even though there was no evidence that plaintiffs' agreement to the forum selection and choice of law provisions was fraudulently induced.

FN5. Neither federal nor state securities laws apply to the Names' claims, since Names do not purchase a security pursuant to any aspect of their membership of or underwriting at Lloyd's. However, that issue is not before this Court on this appeal and this Court need not reach it in order to affirm the dismissal of the Complaint. See Scherk, 417 U.S. at 515 n.8. (affirming dismissal based on forum selection clause without deciding whether plaintiff stated claim under the federal securities laws).

By signing the General Undertaking, Names agreed to subject themselves to and abide by the regulatory authority exercised by Lloyd's, subject to a delegation of authority from the United Kingdom Parliament, over an international insurance marketplace in which the Names underwrite insurance. See Lloyd's Act 1982 (Lloyd's Excerpts of Record (hereinafter "Lloyd's ER") 8 at 2.1). The forum agreement is a necessary corollary to that agreement: all Names, no matter in which of approximately 80 countries they reside, must be subject to a uniform set of laws, rules and regulations in conducting their underwriting at Lloyd's.

As other courts have recognized, Lloyd's relationship to the insurance market it regulates is akin to the New York Stock Exchange's relationship to that stock market. Roby, 996 F.2d at 1357. Like Lloyd's, the NYSE is not liable for the conduct of the brokers it regulates. It does not profit from their activities. It can only make rules and discipline those who break them. It does not itself solicit anyone anywhere to purchase stock, and the conduct of the brokers it regulates in soliciting such purchases cannot be used to establish jurisdiction over the Exchange itself. [FN6]

FN6. The Names reject this analogy (Plaintiffs-Appellants' Brief (hereafter "Names' Br.") at 7), but courts have adopted it with approval:

Lloyd's of London is a venerable institution, dating back to the latter part of the seventeenth century, long known for its insurance business. Although Lloyd's is generally considered to be a unitary organization, it actually is not, and in fact bears little resemblance to the typical corporate insurer. It issues no insurance policies. Rather, it acts as a market for the buying and selling of insurance risks.

According to the syndicates, the closest American analogue to Lloyd's is the New York Stock Exchange. Lloyd's provides the premises, administrative staff and support services for the market; it also issues rules and regulations and monitors transactions that occur in the market. Like the New York Stock Exchange, Lloyd's does not participate in individual decisions made by its brokers, members or underwriters.

Roby v. Corporation of Lloyd's, 796 F. Supp. 103, 104 (S.D.N.Y. 1992).

While the Names strive to minimize their personal contacts with England--characterizing their ROTA interviews in London as mere formalities--in this case form mirrors substance: Names not only come to London physically in the process of becoming admitted as underwriting members of Lloyd's, the insurance transactions in which they participate occur in the Lloyd's marketplace in London. Indeed, Names from approximately 80 countries come to the Lloyd's market in London to underwrite insurance to policyholders all over the world.

Plaintiffs' argue that their memberships in Lloyd's constitute "securities" that should have been registered, and that federal securities law claims will be lost if they have to litigate in the English courts. However, even if there are any such securities law claims (which they do not) plaintiffs can seek redress in England. Moreover, in his proposed amicus brief to this Court the California Commissioner of Insurance demonstrates that the Names are insurers, not investors. Brief of California Commissioner of Insurance, Amicus Curiae, pp. 11-22. See also, Roby, 996 F.2d at 1365.

Plaintiffs persist in arguing the merits of their case against what they define as "Lloyd's," even though the record citations do not even arguably support the inferences of intent, motive and conspiracy at Lloyd's that plaintiffs present as fact. [FN7]

FN7. As the court below noted, it was not "required to accord any deference to the legal conclusions set forth in the plaintiffs' complaint." (Appellants' Excerpts of Record (hereafter "Names' ER") 102 at 10.)

Finally, the position advanced by the SEC would void forum selection agreements without regard for the importance of such clauses to international transactions. This view is in the Supreme Court's words, "parochial" ?? 407 U.S. at 9) and must be rejected to give effect to principles of international law as spelled out in The Bremen and its progeny.

COUNTER STATEMENT OF FACTS [FN8]

FN8. The facts set forth in this section are set out in detail in Roby and Bonny, among other cases. See generally, Roby, 996 F.2d at 1357-58; Bonny, 3 F.3d at 158. See also McAleer v. Smith, 791 F. Supp. 923, 931-32 (D.R.I. 1992); Edinburgh Assurance Co. v. R.L. Burns Corp., 479 F. Supp. 138 (C.D. Cal. 1979), aff'd, 669 F.2d 1259 (9th Cir. 1982); Syndicate 420 at Lloyd's London v. Early American Ins. Co., 796 F. 2d 821 (5th Cir. 1986); Hirsch, No. 89-2563 (Addendum A, Ex. 1). Moreover, the facts set forth here are not inconsistent with those set forth in the complaint, though others of plaintiffs' "facts" are incorrect and the conclusions they draw from selected facts are vigorously disputed.

Lloyd's is not an insurance company or an unincorporated association; it is a market in which individual Underwriters compete with each other for business. Each such Underwriter or "Name" is responsible only for his or her own share of losses, but liability for that share is unlimited. Names are grouped into syndicates for administrative convenience, each managed by an underwriting agency known as a Managing Agent. A Managing Agent may manage more than one syndicate. Each syndicate's underwriting of risks is done by an active (professional) Underwriter who is appointed by the Managing Agent. Names generally join more than one syndicate so as to spread their underwriting across different types of insurance or across different syndicate managements.

In addition to Managing Agents, there are also Members' Agents at Lloyd's whose function is to represent the Names in their interactions with Lloyd's and with Managing Agents. Except in rare instances not relevant here, no one may become a member of Lloyd's without the sponsorship of a Members' Agent. Communication between Lloyd's and the Names generally takes place through the Members' Agents. They "are obliged to act in the sole interest of their principal Names" to whom they owe fiduciary duties under English law. Roby, 996 F.2d at 1357. Members' Agents may or may not be associated with particular Managing Agents at Lloyd's.

The market at Lloyd's is regulated, pursuant to the Lloyd's Acts 1871- 1982 and bylaws made thereunder (which have the force of English law), [FN9] by defendants the Society of Lloyd's, the Corporation of Lloyd's and the Council of Lloyd's. The Society of Lloyd's is a body corporate composed of its members--the Names. The Corporation of Lloyd's is the administrative entity that provides the physical facilities and regulatory staff for the market and also provides services such as accounting, preparation of policies, and supervision of brokers. The Council of Lloyd's is the governing body of the Society and Corporation, responsible for governance of the market.

FN9. See Lloyd's Acts 1871-1982 attached as Lloyd's ER 8 at 2.1.

Like the New York Stock Exchange, Lloyd's does not itself conduct insurance business anywhere, does not share in the profits or losses made by the syndicates, and raises the funds necessary to carry out its regulatory duties by assessments upon its members and by membership fees. Capacity to earn profits or accrue losses rests entirely with the syndicates, managed by the Managing Agents in competition with each other. It is the Managing Agents who must attract and retain Names willing to pledge their assets as security for their underwriting obligations, in order to compete for business in the market at Lloyd's. It is the Members' Agents' function to explain Lloyd's to prospective Names, present them to the Society of Lloyd's for membership as a prerequisite for underwriting in the market, assist Names in selecting the Managing Agents whose syndicates they will join, and then manage their affairs for the duration of their membership in Lloyd's.

Lloyd's regulates the market as a whole, primarily to ensure the security of policyholders. Ashmore v. Corporation of Lloyd's, (1992) 2 Lloyd's Rep. 620 (Lloyd's ER 8 at 1.3). Member's Agents and Managing Agents, by contrast, work solely for the benefit of their Names, to whom they owe fiduciary and contractual duties of care, including the duty to make disclosures. See Roby , 996 F.2d at 1365-66.

Worldwide, there are approximately 30,000 Names. Nearly 80% of them are English citizens, and the remainder reside in some 80 other countries, including the United States. All prospective Names must meet defined financial criteria (commonly known as a "means" test), utilized by Lloyd's to ensure that they have substantial personal resources to cover their underwriting obligations and must post security, usually in the form of a Letter of Credit, against those obligations. The prospective Name must also sign acknowledgements of the risks he assumes upon becoming a member of Lloyd's and must travel to London to appear before a sub-committee of the Council of Lloyd's (known as the Rota Committee) to verify that the financial criteria have been met, the risks, including unlimited liability, are understood, and that the candidate is a suitable person to underwrite insurance.

In addition to this screening process, an individual formally joins the Society of Lloyd's by executing a series of contracts, deeds and undertakings. These include the General Undertaking, which is a contract between the Society of Lloyd's and the member or Name; [FN10] a Members' Agent's Agreement, which is a contract between the Name and his chosen Members' Agent; and one or more Managing Agent's agreements, which define the relationship between the Name and each Managing Agent whose syndicates the Name chooses to join. The forms of all of these agreements are established by Lloyd's bylaws and are the same for Names throughout the world. Each of the documents in this "web of standard agreements" (Roby, 996 F.2d at 1359) contains clauses designating the English courts as the exclusive forum for litigation of disputes and English law as the law governing the relationships among the parties.

FN10. The General Undertaking, as the primary document establishing membership in Lloyd's, is traditionally signed in London after the meeting with the Rota Committee. Names who were already members of the Society of Lloyd's were permitted to sign the 1986 General Undertaking, replacing their original Undertakings, at their places of residence.

The pertinent passage from the General Undertaking in issue in this case is in clause 2.2, which reads:

Each party hereto 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 [Name's] membership of, and/or underwriting of insurance business at, Lloyd's.

Names' ER 4, Ex. 1.

The choice of law provision in issue here is contained in clause 2.1 of the same General Undertaking and reads:

The rights and obligations of the parties arising out of or relating to the Member's membership of, and/or underwriting of insurance business at, Lloyd's and any other matter referred to in this Undertaking shall be governed by and construed in accordance with the laws of England.

Id.

Lloyd's, in its regulatory capacity, is charged with the obligation of seeing to it that all valid claims on policies issued by any Underwriter at Lloyd's are paid. If profits do not cover losses, Lloyd's has the power to make "cash calls" upon Names to pay claims owed by them and, if these calls are not funded, to draw down the Name's Letter of Credit or other funds at Lloyd's for that purpose. If Names who dispute their obligations to meet such cash calls could litigate their grievances in some 80 different jurisdictions worldwide and in 50 different states in the United States, Lloyd's efforts to regulate its market and see that policyholders are paid would be seriously disrupted.

In recent years, after many profitable years in the market at Lloyd's, many Names have sustained large losses arising out of European storms, the Piper Alpha and Exxon Valdez disasters, and American asbestos and pollution coverage judgments. Some of these Names, like the plaintiffs here, have questioned the management of their affairs that resulted in these losses. So many of these Names, including American Names, have instituted litigation against Lloyd's and/or their Managing and/or Members' Agents in the English courts that a single judge has been appointed to coordinate and hear all of the cases. [FN11] These Names have honored their contractual agreements to sue Lloyd's only in the English courts under English law, and plaintiffs here should be required to do the same.

FN11. See, e.g., Deeny v. Gooda Walker Ltd., [1994] (Lloyd's ER 8 at 1.4) in which Mr. Justice Phillips awarded very substantial sums to plaintiff Names after the House of Lords had determined that the defendant Agents owed their Names a duty of care that had been breached. In light of the awards, it is impossible for plaintiffs here to sustain their allegations that the English legal system cannot provide them with adequate remedies.

STANDARD OF REVIEW

Lloyd's agrees that this Court should review de novo whether the district court was correct to apply the legal standard set forth in The Bremen, 407 U.S. at 15, that forum agreements in international transactions are presumed valid and enforceable unless it is clear "that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching." This Court should review for abuse of discretion, whether the district court was right that plaintiffs did not make a sufficient factual showing under ?? to warrant rejection of the parties' forum agreement.

A district court's decision to enforce a forum selection agreement is reviewed for abuse of discretion. Spradlin v. Lear Siegler Management Serv., 926 F.2d 865, 867 (9th Cir. 1991); TAAG Linhas Aereas de Angola v. Transamerica Airlines, Inc., 915 F.2d 1351, 1353 (9th Cir. 1990); Pelleport Inv., Inc. v. Budco Quality Theaters, Inc., 741 F.2d 273, 280 n.4 (9th Cir. 1984). This Court has applied the abuse-of-discretion standard in cases involving allegations of fraud. Spradlin V. Lear Siegler Management Serv., 926 F.2d 865, 868 (9th Cir. 1991). Regardless, the district court's judgment withstands review under either abuse-of-discretion or a de novo standard.

The district court's refusal to enter default against the fictional association should be reviewed for abuse of discretion.

Plaintiffs' argument that the district court should have afforded them discovery before ruling on Lloyd's motion was waived when plaintiffs failed to raise it in their opposition to Lloyd's motion, in oral argument, or in their original Motion for Relief from Order. This argument was not made until plaintiffs' revised Motion for Relief from Order, treated by the district court as a F. R. Civ. P. 60(b) motion. Lack of discovery is not a listed ground for relief under Rule 60(b) and must therefore be construed as having been made under Rule 60(b)(6) ("any other reason justifying relief from the operation of the judgment"). Accordingly, plaintiffs must demonstrate "extraordinary circumstances" justifying relief. Backlund v. Barnhart, 778 F.2d 1386, 1388 (9th Cir. 1985). The district court's application of this standard should be reviewed for abuse of discretion. Abuse-of-discretion would apply in any case to the district court's ruling on the scope of discovery, especially when plaintiffs never made a timely request for such discovery. Munoz-Santana v. United States Immigration & Naturalization Serv., 742 F.2d 561, 562 (9th Cir. 1984).

SUMMARY OF ARGUMENT

Plaintiffs and the SEC offer no valid reason for this Court to reverse the well-reasoned opinion of the court below or to depart from the opinions of four Circuit Courts of Appeals. The district court did not abuse its discretion in finding that plaintiffs presented no evidence that the forum agreements had been fraudulently induced or were unreasonable and concluded that the important national interest in enforcement of forum selection and choice of law clauses in international contracts made them presumptively valid. The SEC in particular would make plaintiffs' interest absolutely controlling; but the Supreme Court has made clear its aversion to such a one-sided and parochial outlook.

The district court's decision is supported by controlling Supreme Court precedent in The Bremen, Scherk and Mitsubishi, in which the Court made clear the importance of forum selection and choice of law agreements to international relations. The district court's decision is likewise fully supported by the decisions of all four sister courts of appeal to have considered the very question presented here: Whether plaintiffs' forum and choice of law agreements render venue in this or any other U.S. court improper. The Second, Sixth, Seventh and Tenth Circuits answered this question in the affirmative, rejecting the same arguments raised here by plaintiffs and by the SEC. In three of these cases, the Supreme Court denied certiorari.

The court below correctly held that plaintiffs did not present evidence that they were defrauded specifically and to the forum choice of law agreements rather than with respect to other aspects of their business at Lloyd's. Plaintiffs plainly did not meet the standard of Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967), which is still the governing law.

Plaintiffs' reliance on case law from the antitrust and COGSA areas is misplaced. Although antitrust laws are critical in the United States, other nations often afford no remedy at all for alleged violations. Hence, in determining whether to uphold an antitrust arbitration clause or forum selection and choice of law clauses in an antitrust setting, the courts will look to whether the other nation might not afford a forum at all. COGSA is a statute designed exclusively for protection of shippers in international trade. Hence, allowing parties to choose their forum in this case is not inconsistent with COGSA since it is not applicable.

Plaintiffs' addition of RICO claims adds nothing. This court has dismissed American plaintiffs' RICO and other U.S. statutory claims on forum non conveniens grounds to a foreign country that would not recognize such claims, where there was no contractual choice of forum and law; perforce, it should uphold dismissal here. Indeed, forum non conveniens provides an alternative ground for this Court to affirm the judgment below.

The court below did not abuse its discretion in dismissing plaintiffs' claims against the fictional "association." Plaintiffs offered no evidence that such an entity is anything but fictional. Further, all of the members of the purported association are subject to the forum agreement.

ARGUMENT

I. THIS COURT SHOULD FOLLOW THE UNANIMOUS HOLDINGS OF FOUR SISTER CIRCUIT COURTS OF APPEALS, THAT HAVE UPHELD THE SAME FORUM AGREEMENT AT ISSUE HERE.

For a quarter of a century, an unbroken line of United States Supreme Court opinions, and many cases in this circuit, have held that forum agreements in international transactions are presumed valid and will be enforced unless the protesting party makes a "strong showing" that the clause was induced by fraud, duress or overreaching, or that enforcement would violate a domestic public policy so fundamental that it outweighs this country's interest in international comity.

This is so even where, as here, the federal securities laws are alleged to apply. As the Supreme Court recognized in Scherk, 417 U.S. 506, a suit alleging violations of Section 10(b) of the Exchange Act, the purpose of a forum selection clause in an international transaction is to eliminate "uncertainty... concerning the law applicable to the resolution of disputes arising out of the contract." Id. at 516 (emphasis added). Rejecting the applicability of the holding in Wilko v. Swan, 346 U.S. 427 (1953), in which the Court had, under a now superseded policy, held an arbitration clause as violative of the Securities Act's anti-waiver provisions, the Court held that

[a] contractual provision specifying in advance the forum in which disputes shall be litigated and the law to be applied is, therefore, an almost indispensable precondition to the achievement of the orderliness and predictability essential to any international business transaction.

Id. That the complaint alleged violations of the anti-fraud provisions of the Exchange Act, and that the application of that statute by the contractually chosen forum was uncertain, did not change the Court's analysis. Scherk, at 514 n.8, 516.

A. The Supreme Court Has Repeatedly Held That Forum Clauses in International Contracts are Presumptively Valid

In Scherk, the Supreme Court built on the principles established two years earlier in The Bremen, supra. In The Bremen, a Texas company (Zapata) hired a German company (Unterweser) to tow an oil rig from Louisiana to Italy. The contract between Zapata and Unterweser specified that all disputes would be resolved in England and contained a clause exculpating Unterweser from liability for the towed rig. The Court understood that such an exculpatory clause would be rejected as contrary to public policy by U.S. courts, but would be enforced in England. 407 U.S. at 8, n.8. Although there was no express choice of law agreement, the Court expected that English law would be applied if the forum agreement were honored. Id. at 13 n. 15. "It is therefore reasonable," the Supreme Court stated, "to conclude that the forum clause was also an attempt to obtain certainty as to the applicable substantive law." Id. at 14 n.15 (continued).

The Supreme Court squarely rejected Zapata's argument that the exculpatory clauses rendered the forum clause contrary to public policy, because, it held, considerations of domestic public policy (like prohibiting exculpatory clauses in maritime contracts) "are not controlling in an international commercial agreement." Id. at 16. The Court explained that it would be contrary to the United States' interests in international commerce 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 international waters exclusively on our terms, governed by our laws, and resolved in our courts." Id. at 9. In conclusion, the Court set forth the following principle: "In the light of present-day commercial realities and expanding international trade we conclude that the forum clause should control absent a strong showing that it should be set aside." Id. at 15.

The SEC incorrectly argues that in The Bremen, the Supreme Court did not understand "that the foreign tribunal would fail to apply United States law." SEC Br. at 16. In fact, choice of law was critical to The Bremen Court's analysis. The expectation that an English court would enforce the exculpatory provisions while an American court would not, persuaded 8 out of 14 judges on the Fifth Circuit to refuse to enforce the forum clause. The Supreme Court reversed precisely because the lower courts gave too much emphasis to the different laws of the competing forums and too little weight to the contract. 407 U.S. at 8. [FN12]

FN12. "The Bremen involved a choice-of-forum clause, but the Supreme Court recognized that enforcing the provision would have the effect of subjecting the contract to foreign law." Milanovich v. Costa Crociere, S.p.A., 954 F.2d 763, 767 n.7 (D.C. Cir. 1992); See The Bremen, 407 U.S. at 13-14.

Nor can The Bremen be distinguished as suggested by the SEC because it "merely" involved judge-made rather than legislatively ordained precepts of public policy. The Court expressly recognized the importance of both statutory and judicially recognized public policy: "(a) contractual choice-of-forum clause should be held unenforceable if enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision." 407 U.S. at 15 (emphasis added). After examining the policies, the Court concluded that rejection of exculpatory clauses in towage contracts in domestic waters "are not controlling in an international commercial agreement." Id. at 15-16. The Court adopted the view of the dissenters at the Fifth Circuit, who stated that "we should not invalidate the forum selection clause here unless we are firmly convinced that we would thereby significantly encourage negligent conduct within the boundaries of the United States." Id. at 16 (emphasis added). The Court's explicit adoption of this flexible balancing test for all cases in the international sphere directly controls this case.

The Scherk Court expanded The Bremen principles to encompass claims under U.S. securities laws, holding that then-current domestic public policy against arbitration of federal securities law claims [FN13] did not render unenforceable an agreement to arbitrate an international dispute before an international arbitral forum. [FN14] In so doing, the Court rejected the position advanced by both the Names and the SEC here: that the anti-waiver provisions require that the mere assertion of claims under federal securities laws automatically nullify an agreement to assert claims in a foreign forum or subject to a foreign law. Instead, the Court found that the goal of eliminating uncertainty about the applicable law and the uncertainty as to whether the federal securities laws should even be applied to the international transaction at issue -- was sufficient to render the anti-waiver provisions inapplicable:

FN13. See Wilko, 346 U.S. 427.

FN14. As plaintiffs agree, the Supreme Court treats arbitration clauses as a "specialized kind of forum-selection clause." Scherk, 417 U.S. at 519. See Names' Br. at 24 n.22.

In this case ... in the absence of the arbitration provision considerable uncertainty existed at the time of the agreement, and still exists, concerning the law applicable to the resolution of disputes arising out of the contract.

Scherk, 417 U.S. at 516.

Further, contrary to the SEC's argument (SEC Br. at 17) the Scherk Court did not express a view as to whether U.S. securities law applied to the dispute. [FN15] See also, AVC Nederland B.V. v. Atrium Inv. Partnership, 740 F.2d 148 (2d Cir. 1984) (enforcing choice of forum and choice of law provisions in international agreement between foreign investors in limited partnership organized under U.S. law, notwithstanding court's threshold determination that complaint's allegations that challenged transaction involved sale of securities were sufficient to sustain a motion to dismiss for lack of subject-matter jurisdiction; anti-waiver provisions found inapplicable even though chosen forum was unlikely to apply U.S. securities laws.)

15. Id. at 514 n.8 ("We do not reach, or imply any opinion as to, the question whether the acquisition of Scherk's business was a security transaction within the meaning of § 10(b) of the [Exchange Act] and Rule 10b-5."); id., at 516 n.9 (Scherk's contention that "the federal securities laws do not apply ... is not before this Court."); id., at 518 n.13 ("the scope of the substantive provisions of the federal securities laws ... is not presented in this case.").

The Court emphasized the importance of forum agreements in eliminating uncertainty with respect to applicable law and forums for international commercial matters, and rejected the post-contract forum shopping so vividly illustrated in this case:

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.

417 U.S. at 516-17.

The teaching of Scherk is clear, and controlling: Names cannot evade the enforcement of their agreement to resolve their disputes in England, under English law, simply by alleging that they purchased a security. Where, as here, the alleged purchase of securities is made in the context of an international commercial agreement, Scherk holds that the alleged applicability of the securities laws--including the alleged applicability of the anti-waiver provisions--does not invalidate the agreement to litigate outside the United States even if it is not certain that the chosen forum will apply U.S. securities laws.

Again contrary to the SEC's assertion that the Supreme Court has only enforced forum clauses where it is clear that U.S. law will apply (SEC Br. at 17-18), Scherk recognized the importance of allowing parties to international agreements to select the law to be used to resolve their disputes because

Uncertainty... concerning the law applicable to the resolution of disputes arising out of the contract ... will almost inevitably exist with respect to any contract touching two or more countries, each with its own substantive laws and conflict-of-laws rules.

417 U.S at 516. Accordingly, a contractual provision specifying:

... the forum in which disputes shall be litigated and the law to be applied is, therefore, an almost indispensable precondition to achievement of the orderliness and predictability essential to any international business transaction.

Id. Scherk found there was no basis to conclude "that only United States laws and United States courts should determine this controversy in the face of a solemn agreement between the parties that such controversies be resolved elsewhere." Id. at 517 n.11. To make its point so clear that no one could miss it, the Court concluded:

To determine that "American standards of fairness" must nonetheless govern the controversy [in the face of substantial contacts with other countries] demeans the standards of justice elsewhere in the world, and unnecessarily exalts the primacy of United States laws over the laws of other countries.

Id.

Relying upon the same principles set forth in The Bremen and Scherk, the Court in Mitsubishi ordered arbitration in Japan of a U.S. auto dealer's antitrust claims against its franchisor. 473 U.S. 614. In so holding, the Court understood that the Japanese forum might not correctly apply U.S. antitrust law. Nevertheless:

[C]oncerns of international comity, respect for the capacities of foreign and transnational tribunals, and sensitivity to the need of the international commercial system for predictability in the resolution of disputes require that we enforce the parties' agreement, even assuming that a contrary result would be forthcoming in a domestic context.

Id. at 629. Thus, the Court held that the longstanding policy against arbitration of antitrust claims in purely domestic cases did not apply where the transactions at issue were international in character, even where the proposed forum was not only arbitral in nature, but foreign. Id.

Both the Names and the SEC place great reliance on a footnote in Mitsubishi in which the Court indicates that if the forum selection and choice of law provisions in the agreement at issue were to operate "in tandem" to waive the parties' right to pursue statutory remedies for antitrust violations, it would have "little hesitation" in condemning the agreement as against public policy. 473 U.S. at 637 n. 19. From this they argue that the principles of the Bremen concerning international agreements are inapplicable here because alleged statutory rights, as opposed to common law or public policy issues, are involved. However, this argument misses several points. First in Mitsubishi, it was understood that U.S. antitrust statutes applied to the issues submitted for arbitration. Id. at 636, n. 15. Consequently the footnote upon which the Names and the SEC rest virtually their entire appellate case is dicta and does not overrule the direct and controlling precedent of Scherk, in which the presumed application of the federal securities laws in a U.S. court, and the possibility that these statutes would not be applied in the foreign arbitral forum, did not render the forum selection provision unenforceable under the anti-waiver provisions. [FN16]

FN16. Arguing that Stewart Org., Inc. v. Ricoh, 487 U.S. 22 (1988), mandates application of the antiwaiver statute (Names' Br. at 26-27), plaintiffs take that case out of context. In noting that if Congress has enacted a statute that controls the issue, "that is the end of the matter," the Stewart Court was analyzing only whether federal or state law controlled venue in a federal court sitting in diversity. 487 U.S. at 26. This Court has held that Stewart addresses only what standard to apply when a forum selection clause is made the basis of a motion to transfer under 28 U.S.C. § 1404(a)( i.e., when the chosen forum is another state), not a motion to dismiss when the chosen forum is another country. Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 512 n.2 (9th Cir. 1988).

Second, The Bremen itself holds that its principles are applicable regardless of whether alleged rights under statutory or judicially created law are at issue. 407 U.S. at 15. The Names' and the SEC's reliance on the Mitsubishi footnote are therefore unavailing.

Mitsubishi is also inapplicable because a foreign forum may not have analogous laws, allowing a party to seek relief equivalent to that available under U.S. antitrust laws. By contrast, England, the forum selected here, does provide plaintiffs the ability to sue for fraud. While some other countries have competition laws similar enough to our own such that a party could have antitrust claims adjudicated while many other countries have competition regimes so different that they might not provide a forum at all. As Judge Wilberforce of England's House of Lords stated in explaining that court's refusal to enforce a U.S. court's letter rogatory seeking evidence for use in a private antitrust case: "It is axiomatic that in anti-trust matters the policy of one state may be to defend what it is the policy of another state to attack." Rio Tinto Zinc Corp. v. Westinghouse Elec. Corp. [1978] A.C. 547, 617, 1 All E.R. 434, 498 (a copy of which is attached to Lloyd's Request for Judicial Notice (hereinafter "Lloyd's RJN"), Ex. 8). [FN17]

FN17. The friction generated by competing national antitrust regimes has touched this Court on more than one occasion. In 1979, this Court noted that particularly in the field of antitrust, other "nations have sometimes resented and protested, as excessive intrusions into their own sphere, broad assertions of authority by American courts." Timberlane Lumber Co. v. Bank of America, N.A., 549 F.2d 597 (9th Cir. 1976), after remand, 749 F.2d 1378 (9th Cir. 1984), cert. denied, 472 U.S. 1032 (1985). This Court developed a "jurisdictional rule of reason" in response. This Court applied that rule in In re Ins. Antitrust Litig., 938 F.2d 919 (9th Cir. 1991), aff'd in part and rev'd in part sub nom. Hartford Fire Ins. Co. v. California, 113 S. Ct. 2891 (1993). The Court acknowledged that application of the antitrust laws to the London reinsurance market, including Lloyd's, would lead to significant conflict with English law and policy; the Court found, however, that other factors counseled retention of jurisdiction here. In re Ins. Antitrust Litig., 938 F.2d at 933-34.

Vimar Seguros v Reaseguros, S.A. v. M/V Sky Reefer ("Sky Reefer "), 115 S. Ct. 2322, 2327 (1995), involving enforceability of forum selection and choice of law provisions under COGSA, is not to the contrary as suggested by plaintiffs and the SEC. Sky Reefer does not address the issue central to this case, from The Bremen, Scherk and Mitsubishi: The validity of forum selection clauses in international agreements even where similar agreements in purely domestic transactions might not be recognized. COGSA is a statute, exclusively directed at international transactions: The shipping of goods to or from United States and foreign ports. 46 U.S.C. § 1312. COGSA imposes specified liability on international carriers, and nullifies contrary provisions in bills of lading.

As the Second Circuit has recognized, it would be pointless to search for "international" exceptions to COGSA, or for exceptions specified in contract, because COGSA is directed specifically at bills of lading in international shipping. AVC Nederland B.V., 740 F.2d at 160. Such an exception "would swallow the whole." Id. Unlike COGSA, the securities laws under which plaintiffs sue were not designed exclusively for international transactions.

In Sky Reefer, the Supreme Court held that COGSA's prohibition of clauses limiting liability is not inconsistent with a clause requiring foreign arbitration; the Court was persuaded by the fact that no other nations that are parties to the Convention had interpreted their rules that way. 115 S. Ct. at 2328.

The court below properly followed the holdings of four Circuit Courts of Appeals that, applying the teachings of The Bremen, Scherk and Mitsubishi, have upheld the same contracts sued upon by the plaintiffs herein (and indeed, so ruled against many of the same plaintiffs).

B. Four Circuit Courts of Appeals Have Upheld the Same Contract at Issue Here

The trial court did not write on a blank slate. Four Circuit Courts of Appeals have, without dissent, upheld the same forum agreement against virtually the same allegations. Three times the Supreme Court has denied certiorari. [FN18] All these courts found, [FN19] as did the court below, that Names' contracts with Lloyd's are "truly international," and that Names have adequate remedies abroad and will not be deprived of their day in court. [FN20]

FN18. Riley, 969 F.2d 952; Roby, 996 F.2d 1353; Bonny, 3 F.3d 156; Shell, 55 F.3d 1227. Plaintiffs in Shell elected to plead only state law, failure-to-register securities claims; the issues and the Shell court's analysis, follows Riley, Roby and Bonny.

FN19. The district court in Leslie v. Lloyd's, Civ. No. H-90-1907 (S.D. Texas 9-5-91) reached a contrary result, concluding that all four Circuit Courts of Appeals as well as the district court here were mistaken. The district court has certified its opinion for appeal to the Fifth Circuit. The Leslie court accepted at face value Mr. Leslie's assertion that everyone at Lloyd's is everyone else's agent, and that it is "Lloyd's" that writes insurance and litigates coverage issues in U.S. courts. The court relied on a Texas statute not at issue here, and did not even begin to discuss the Choice Clauses until page 40 of its opinion.

FN20. In addition, the Fifth Circuit upheld dismissal to England of a Name's suit alleging fraud against Lloyd's on grounds of forum non conveniens without relying in any way on the Name's contract with Lloyd's. Hirsch, No. 89-2563, unpublished opinion (Addendum A, Ex. 1). Under Fifth Circuit Rule 47.5 (formerly Rule 47.4), this opinion is precedent and may be cited. Additionally, Lloyd's cites it here because Mr. Hirsch was a plaintiff in this case; he voluntarily dismissed his claims after Lloyd's filed its motion to dismiss.

1. The Names' Contracts are "Truly International"

The Second, Sixth, Seventh and Tenth Circuits all found the Names' relationships with Lloyd's are "truly international" under Scherk. The Seventh Circuit concluded in Bonny:

Plaintiffs initially attempt to characterize their agreement with Lloyd's as a domestic securities transaction. There is no question that the transaction involved here is truly international. The plaintiffs contracted with Lloyd's, a distinctively British entity, to become members of an insurance market that underwrites insurance worldwide. The Agreements were executed in London and the plaintiffs traveled to England for that purpose.

3 F.3d at 159 n.9. [FN21] Similarly, the Tenth Circuit held: "Given the international nature of the insurance underwriting transaction, the parties' forum selection and choice of law provisions contained in the agreement should be given effect." 969 F.2d at 958. [FN22] Accord, Roby, 996 F.2d at 1364 (Lloyd's "operations are clearly international in scope.").

FN21. All plaintiffs here, like those in Bonny, traveled to England for the purpose of becoming a Name. That a few plaintiffs claim to have signed all membership documents in the U.S. rather than in London does not change the international nature of the transaction.

FN22. See also In re Lloyd's American Trust Fund Lit., 1996 U.S. Dist. LEXIS 7930, 96 Civ. 1262 (RWS) (S.D.N.Y. June 11, 1996) (holding that suit by U.S. Names against trustee of Lloyd's American Trust Fund -- a fund into which all U.S. dollar premiums received by Underwriters at Lloyd's is placed -- involves "international" banking activities even though the trustee and trust corpus are in New York, the trust instrument was executed in New York and is expressly subject to New York law, and all parties to the lawsuit are American. The court found the case concerned "the responsibilities of a New York bank administering a fund under an international agreement as part of a worldwide system to settle the funds involved in underwriting insurance by Lloyd's" (id. at *26) (Addendum A, Ex. 2.)

Plaintiffs never argued below that their contracts with Lloyd's are not "truly international," but now ask this Court to make such a finding "as a matter of law" (Names' Br. at 31). The Court should not consider this late-raised contention; if it does, however, four Courts of Appeals answered it fully.

The SEC argues that the Choice Clauses do not serve the purpose of mitigating uncertainty in international transactions because the Lloyd's defendants should not be surprised to be subject to United States law since they sought United States Names in the United States. SEC Br. at 14 n.8. Putting aside the SEC's failure to distinguish Lloyd's from other entities in the Lloyd's market, the argument is contrary to the rationale underlying the long standing doctrine of enforcing forum selection clauses. The issue is not whether plaintiffs claim surprise; rather, the issue is whether there are extraordinary circumstances that would warrant disregarding a contractual provision that represents, as a matter of law, the parties' expectations. Plaintiffs and the SEC's position is also contrary to the considered judgment of every appellate court to date: "There can be no doubt that the contract clauses mitigate the uncertainty regarding choice of law and forum inherent in the multinational affairs of Lloyd's." Roby, 996 F.2d at 1364. [FN23] Indeed, the forum agreement merely confirms Lloyd's expectation that English law governs its relationship with Names.

FN23. See also Bonny v. Society of Lloyd's, 784 F. Supp. 1350, 1353 (N.D. Ill. 1992) ("Therefore, without the forum selection and choice of law clauses, there could have been substantial international choice of law questions"), aff'd, 3 F.3d 156 (7th Cir. 1993), cert. denied, 114 S. Ct. 1057 (1994).

2. The Allegations Here Mirror the Allegations of the Earlier Cases

The substantive allegations in Roby, Riley, and Bonny were nearly identical to those made here. All of the plaintiffs sustained losses arising from catastrophes, asbestos and/or pollution. All involved questions pertaining to what plaintiffs were told upon becoming Names or before joining particular syndicates about their liability for prior years of underwriting, reserving practices and unlimited liability.

For example, the plaintiff in Riley (also a plaintiff here) alleged that it was misrepresented to them that syndicates would limit their exposure through reinsurance, and that Lloyd's wrongfully failed to explain to him the "effect of changes in laws on syndicate exposure for claims (i.e., asbestos liability and other environmentally-related claims); [and] that due to the inability of Lloyd's syndicates to quantify total losses ... some years [of account] would not be able to be 'closed' and the possibility would exist that a Name would not ever be unable [sic] to withdraw from the syndicate for which they acted as a Name." (Emphasis in original) Lloyd's ER 8 at 3.2, ¶ 71.

Plaintiffs in Bonny (one of whom, Robert Flesvig, is a plaintiff here) alleged, as do plaintiffs here, that they were defrauded. into becoming Members of Lloyd's, as part of "an aggressive effort to solicit investment of capital by ... opening membership to foreigners." Lloyd's ER 8 at 3.1, ¶ 36. Similarly, the Roby plaintiffs devoted four pages of their complaint to alleged misrepresentations by Lloyd's and/or their Member's Agents. Lloyd's ER 8 at 3.3, ¶ 51.

3. The Remedies Available to These Plaintiffs in England are Fair and Adequate

Faced with essentially the same allegations, by many of the same plaintiffs, four other Courts of Appeal have found that the Names, including plaintiffs, have fair and adequate remedies in England, that English courts are fair and impartial, and that the remedies Names can achieve in those courts are sufficient to protect the policies behind the U.S. securities laws.

Names have remedies in England against their Members' and Managing Agents in both contract and tort, for breach of fiduciary duties, for fraud, deceit and/or negligent misrepresentation. The Lloyd's Act does not immunize those defendants. Roby, 996 F.2d at 1365-66 [FN24]; Bonny, 3 F.3d at 161. This point is amply demonstrated by the fact that English courts have rendered substantial judgments against Members' Agents, Managing Agents, and an auditor, in favor of dissatisfied Names, including some plaintiffs here. Arbuthnott v. Fagan and Feltrim Underwriting Agencies, Ltd., 3 Re LR 145-174; Deeny v. Gooda Walker Ltd., Queen's Bench Division (Commercial Court), The Times 7 October 1994; and Henderson v. Merrett Syndicates, Ltd., 1992 Folio 1496, High Court of Justice, Queen's Bench Division, Commercial Court. [FN25] Moreover, Names have not had to prove scienter in order to obtain these judgments.

FN24. This is a point that seems to have escaped the SEC. See SEC Br. at 20-21. Section 14 of the Lloyd's Act can be found at Lloyd's ER 8 at 2.1.

FN25. For example, fifty-five of the plaintiffs in this case were also plaintiffs in Henderson, a case against an auditor and a Members' Agent. See Addendum B. Copies of Arbuthnott and Deeny are attached at Lloyd's ER 8 at 1.1 and 1.4, respectively. Henderson is attached as Ex. 7 to Lloyd's RJN.

While Lloyd's is immune under the Lloyd's Act to certain claims for damages, the statute "does not preclude Names from obtaining injunctive, declaratory, rescissionary or restitutionary relief or preclude Names from damages where Lloyd's has acted in bad faith." Shell, 55 F.3d at 1231. Plaintiffs concede that this means that Lloyd's can be sued for fraud. At oral argument below, their counsel agreed that "bad faith is fraud." Lloyd's ER, Reporter's Transcript of Motions Hearing ("RT") at 27:2. See also Names' ER 72 at ¶ 13; Lloyd's ER 8 at 3.7, 3.8, 3.9; Riley, 969 F.2d at 958 (Lloyd's Act provides no immunity for fraud). Roby, 996 F.2d at 1365. The SEC's assertion that Lloyd's is immune from all liability under England's Financial Services Act, 1986 (SEC Br. at 21 and n.14) is obviously mistaken. [FN26]

FN26. The SEC appears to have overlooked the declaration of John Lewis Powell, Q.C., which demonstrated that the limited exemption for Lloyd's does not extend to, among other things, the criminal and civil liability provisions of Sec. 47 of the Act. (Lloyd's ER 8 at 3.7, ¶ 11). Mr. Powell is co-editor of leading English treatises on financial services law, including Encyclopedia of Financial Services Law and Palmer's Company Law. Lloyd's ER 8 at 3.7, Ex. "JPL1". Pertinent sections of the Financial Services Act 1986 can be found at Lloyd's RJN, Ex. 6.

Further, although the statutes of limitations in the United States and in England may have expired, the statutes of limitations in English courts are longer. Lloyd's ER 8 at 3.7, ¶¶ 18 and 20. And, in England plaintiffs have the ability to make claims against entities who may not be subject to U.S. jurisdiction, such as English auditors. See Henderson 1992 Folio 1496 (Lloyd's RJN, Ex. 7).

Contrary to plaintiffs' assertion, the fact that the remedies in England may not be identical (or even as favorable) as those in the United States is by no means dispositive:

[T]he fact that an international transaction may be subject to laws and remedies different or less favorable than those of the United States is not alone a valid basis to deny enforcement of forum selection, arbitration and choice of law clauses.

Bonny, 3 F.3d at 162. At their heart, plaintiffs' claims against Lloyd's, including their federal securities claims, are for fraud. they contend that the full extent of their potential liability was not disclosed when they became Names and as they continued to underwrite. Such claims can be and have been, asserted in English courts. The liability to couch these fraud claims in the form of securities law or violations, RICO does not render English fraud claims legally inadequate to plaintiffs. See discussion regarding "adequacy" of other forums, infra at pp. 44 - 48.

There is also no question that plaintiffs, although Americans, can expect to receive an impartial and fair resolution of their grievances in English Courts. "(O)ur courts have long recognized that the courts of England are fair and neutral forums." Riley, 969 F.2d at 958; accord, British Midland Airways Ltd. v. Intl. Travel, Inc., 497 F.2d 869, 871 (9th Cir. 1974) ("United States courts which have inherited major portions of their judicial traditions and procedure from the United Kingdom are hardly in a position to call the Queens' Bench a kangaroo court."). See also, The Bremen, 407 U.S. at 12.

In an attempt to prove that English remedies are inadequate, plaintiffs and the SEC rely on the fact that plaintiffs cannot assert their section 12 claims under English law 12(1) (SEC Br. at 20; Names' Br. at 22). This argument is inapposite because plaintiffs still have an adequate English remedy in the form of a fraud claim and because while the merits of plaintiffs' claims are not at issue here, plaintiffs' section 12 claims are unlikely to be successful. The SEC has acknowledged that if a Lloyd's Membership involves a "security" there is no public offering [FN27] and that the "issuer" would be the Members' Agents, not Lloyd's. [FN28] See Lloyd's ER 8 at 3.10; Lloyd's ER 8 at 3.11; Names' ER 83, Ex. A. Further, since even the SEC has stated that any "sale" took place when a Name signed a contract with the Member's Agent, plaintiffs' §12(1) claims, if any, would also be barred by the one year from sale statute of limitations. 15 U.S.C. § 77.

FN27. Section 4(2) of the 1933 Act exempts non-public offerings from registration requirements. Statements in non-public offering prospectuses are similarly not subject to 1933 Act regulation. Gustafson v. Alloyd Co., 115 S. Ct. 1061, 1072 (1995).

FN28. See, letter from Mary E.T. Beach, Senior Associate Director of the SEC's Division of Corporation Finance, to Congressman Don J. Pease of Ohio:

At the time of those prior discussions, it was determined that if the Members' Agents solicited participation in accordance with the procedures

proposed by Lloyd's counsel (an offering structure intended to comply with Regulation D), registration under the Securities Act would not be required.

Lloyd's ER 8 at 3.10.

Plaintiffs § 12(2) claims are "based on pure nondisclosure," (Lloyd's ER, RT at 27:11), but that section affords no remedy for pure omissions. Louis Loss, Fundamentals of Securities Regulation at 1023 (1st ed. 1983). [FN29] Under section 10(b) and Rule 10b-5, omissions are not actionable unless there is a duty disclose, Paracor Finance, Inc. v. GE Capital Corp., 79 F.3d 878, 884 (9th Cir. 1996). But plaintiffs' own expert admits that under English law (which will govern this issue regardless of the forum) Lloyd's owes no such duty. Names' ER 72 at ¶¶ 26-29.

FN29. The legislative history leaves no doubt that Congress did not intend § 12(2) to impose liability for mere omissions. An early draft of the House Bill would have done so; the conference report reflects the deliberate deletion of the provision. See H.R. Sowards, A.A. Sommer, Jr., Business Organizations -- Securities Regulation 2-56 (1992). Accord, J. William Hicks, 7D Exempted Transactions Under the Securities Act of 1933 § 16.05(7) at 16-210 and n.2 (1992).

Finally, Lloyd's is not a "control person" as plaintiffs assert. (Names' Br. at 21; SEC Br. at 21-22). Ferreri v. Mainardi, 690 F. Supp. 411, 414 (E.D. Pa. 1988) ("There is no private right of action against a stock exchange under section 20 [of the Securities Exchange Act of 1934]."); Roby, 996 F.2d at 136, ("we question whether the Lloyd's governing bodies have "control" in the sense intended under the securities laws.) (citations omitted).

In light of plaintiffs' ability to obtain fraud relief, if warranted, in English courts from Lloyd's and others, England is a more than adequate forum for this case.

II. THE CHOICE CLAUSE IS NOT RENDERED UNENFORCEABLE BY PUBLIC POLICY CONSIDERATIONS.

The court below followed the lead of the four Circuit Courts in holding that the public policies expressed in the anti-waiver provisions of the federal securities laws are not offended by requiring these plaintiffs to abide by their express commitment to litigate in England under English law. The district court, like the Second and Seventh Circuits in Roby and Bonny, found that remedies in England were adequate to deter fraud and serve the fundamental purposes of the securities laws.

The SEC argues that the anti-deterrent purpose of the securities laws compel the Choice Clauses to be disregarded but having refused to participate in these lawsuits for over five years, the SEC's argument is unpersuasive. The SEC advocates stretching dictum from a footnote in Mitsubishi into a dubious rule of law eclipsing Scherk and The Bremen. Further, the SEC's position contradicts statements it has made to other courts (Lloyd's RJN, Exs. 1 - 4 ), and its own conduct over two decades of dealings with Lloyd's. The SEC's position is contrary to law and its acceptance would result in an isolationist stance in the field of international commerce. [FN30]

FN30. As discussed previously (pp. 22 - 27), the SEC is incorrect in contending that The Bremen and Scherk did not address choice of law issues.

The proposition that no person can be sent abroad to litigate if it means the potential loss of rights under American law is inconsistent with the Supreme Court's teaching in Piper Aircraft Co. v. Reyno, 454 U.S. 235 (1981). Piper stands for the principle that the remedies available in the foreign forum need not be equal to those available here; rather the test is, whether there is an adequate remedy available to the plaintiffs in the foreign forum:

[I]f the remedy provided by the alternative forum is so clearly inadequate or unsatisfactory that it is no remedy at all, the unfavorable change in law may be given substantial weight; the district court may conclude that dismissal would not be in the interest of justice. In these cases, however, the remedies that would be provided by the Scottish courts do not fall within this category. Although the relatives of the decedents may not be able to rely on a strict liability theory, and although their potential damages award may be smaller, there is no danger that they will be deprived of any remedy or treated unfairly.

454 U.S. at 254-55. Under this standard, the fact that Section 12 (of the 1933 Act) gives the plaintiffs certain advantages over a common law fraud claim in an English court does not render the English forum inadequate.

This circuit has applied the Piper Court's teachings in numerous cases, none of which plaintiffs or the SEC cite. See, e.g., Creative ?? 61 F.3d 696, 702 (9th Cir. 1995) ("While the scope of relief available in the High Court of Singapore may not be what Creative envisioned when it filed its claim in the United State district court, the forum non conveniens doctrine does not require it to be so"); Lockman Found. v. Evangelical Alliance Mission, 930 F.2d 764, 769 (9th Cir. 1991) (even if a Japanese court were to reject the U.S. plaintiffs Lanham Act and RICO claims, "Lockman has not shown that possible recovery on the other tort and contract claims would be 'so clearly inadequate or unsatisfactory that it is no remedy at all"'(quoting Piper, supra)).

Under the Piper doctrine, a foreign forum will be deemed truly "inadequate" only in "rare instances." Ceramic Corp. of Am. v. Inka Maritime Corp., 1 F.3d 947 (9th Cir. 1993). In Ceramic Corp., this Court found that Japan was not an adequate forum because:

Ceramic will not be able to pursue any of its claims in Japan or obtain any relief in that forum. Because Japan will not 'permit litigation of the subject matter of the dispute,' we are confronted with one of those rare instances where the remedy provided by the alternative forum is "clearly unsatisfactory."

1 F.3d at 949-50, quoting Piper, supra. Here, by contrast, plaintiffs' remedies in the agreed upon English forum are not only "adequate," they are substantial.

Howe v. Goldcorp Inv., Ltd., 946 F.2d 944 (1st Cir. 1991), cert. denied, 112 S. Ct. 1172 (1992) is instructive. In that case, the First Circuit dismissed on forum non conveniens grounds, securities fraud, racketeering, and breach of fiduciary duty claims was advanced by an American shareholder in a Canadian company. [FN31] One-third of the company shares were owned by Americans, to whom the company directed corporate mailings. The court found Canada to be an acceptable forum even though American law might apply if the case remained in the U.S. court, but might not be applied by a Canadian court, because the Canadian would "apply Canadian laws that offer shareholders somewhat similar protections by forbidding misrepresentations and fraud and imposing fiduciary duties." Id. at 952. [FN32]

FN31. The SEC submitted an amicus brief in Howe, in which it took a position with respect to forum selection clauses in international agreements that is wholly opposite to its position here. (Lloyd's RJN, Ex. 1.)

FN32. Lloyd's does not owe a fiduciary duty to plaintiffs, as plaintiffs' expert, Mr. Rokison, concedes. (Names' ER 72 at ¶ 926-929.) However, plaintiffs' agents do owe such duties or their equivalent under English law. See, e.g., Roby, 996 F.2d at 1365.

A. England has a Substantial Interest in Regulating the Lloyd's Insurance Market

The SEC's position is also inconsistent with Section 187(2) of the Restatement (Second) of Conflict of Laws which sets forth the rigorous showing that must be made to avoid a contractual choice of forum. Under the Restatement a contractual choice of law will be respected unless (1) the chosen law has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the choice, or (2) application of the chosen law will violate a fundamental public policy of a state "which has a materially greater interest than the chosen state in the determination of the issue and which ... would be the state of the applicable law in the absence of an effective choice of law by the parties."

English law provides redress and deterrence for every concern reflected in plaintiffs' securities law claims and lacks a U.S. analogue only in the failure to register claim. See Bonny, 3 F.3d at 162; Roby, 996 F.2d at 1366; and Riley, 969 F.2d at 958. The registration requirement is administrative and does not represent a fundamental policy warranting the override of well-settled contractual and international commercial doctrine. Restatement (third) of the Foreign Relations Law of the United States § 416, comment a and Reporters' Notes (No. 2).

The interest of the United States in application of its laws to this matter is not "materially greater" than that of England. Both Names and insureds come to England to buy and sell insurance. Of 30,000 Lloyd's Names world-wide, the vast majority of them are English, with only 10% of Names residing in the U.S. Such facts led Judge Lasker, in Roby, to conclude that England's connection to the case was stronger than the United States':

(I)f anything, this case is closer to being entirely English than it is to being either international or a domestic American dispute.... The sole American elements are the nationality of the plaintiffs and their allegation that they were solicited in the United States. In light of the overwhelmingly British cast and subject matter, the location of some negotiations in the United States and the American nationality of plaintiffs does not qualify the agreements as domestic securities transactions.

824 F. Supp. at 346.

In sum, the position of both the plaintiffs and the SEC, is but a throwback to the now-rejected "parochial concept that all disputes must be resolved under our laws and in our courts." In the words of the Second Circuit:

It defies reason to suggest that a plaintiff may circumvent forum selection and arbitration clauses merely by stating claims under laws not recognized by the forum selected in the agreement. A plaintiff simply would have to allege violations of his country's tort law or his country's statutory law or his country's property law in order to render nugatory any forum selection clause that implicitly or explicitly required the application of the law of another jurisdiction. We refuse to allow a party's solemn promise to be defeated by artful pleading.

996 F.2d at 1360.

B. The SEC's Position Contradicts its Own Statements in Other Cases

The SEC's assertion that enforcement of the choice clauses would "seriously impair the ability of defrauded investors to obtain compensation for their losses, and would hamper the deterrent function of the federal securities laws" (SEC Br. at 5-6) contradicts positions taken in other cases. Such inconsistency is a basis for discounting the SEC's position here. Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 417 (1993) ("the consistency of an agency's position is a factor in assessing the weight that position is due.")

In Howe, a forum non conveniens case, for example, the SEC sought to distinguish a case "because in [such] case the parties were bound by a forum selection clause." Supplemental Brief of the Securities and Exchange Commission, Amicus Curiae in Howe v. Goldcorp at 26 n.27 (emphasis added). [FN33] The SEC also agreed with Lloyd's position here, that a district court could consider in an appropriate case, such as one raising the specter of conflicting regulation by a foreign sovereign, whether concerns of international comity militate in favor of dismissal. Id. at 28 n.28.

FN33. The SEC's supplemental brief in Howe is Ex. 2 to Lloyd's RJN.

More recently, in McMahan & Co. v. Wherehouse Entertainment, Inc., 65 F.3d 1044 (2d Cir. 1995), cert. denied, 116 S. Ct. 1678 (1996), the SEC filed an amicus brief, [FN34] relying on Roby, Riley, Bonny, and Scherk as its authority that the anti-waiver provision does not invalidate forum selection and choice of law agreements where there are policy issues related to international contracts:

FN34. The SEC's brief in McMahan & Co. is Ex. 3 to Lloyd's RJN.

Several courts of appeals have held that forum selection and choice of law provisions in international agreements are not rendered void as prospective waivers of remedies under the federal securities laws where the remedies available in the foreign forum under the designated choice of law would "vindicate plaintiffs' substantive rights while not subverting the United States' policies of insuring full and fair disclosure by issuers and deterring the exploitation of United States investors." Bonny v. Society of Lloyd's.... [internal citations and quotations from Roby, Riley and Scherk] These cases involved special policy concerns related to international agreements that are not present in the case at hand. See Bonny, 3 F.3d at 159-60; Riley, 969 F.2d at 957-59.

SEC Br. in McMahan at 22 and n.14 (underlining in original; italics added). Today the SEC argues that these cases were all wrongly decided even though nothing distinguishes Riley, Roby and Bonny and this case from these cases in which the SEC urged affirmation. [FN35]

FN35. In McMahan, the Second Circuit eventually ruled in the SEC's favor that the "no action clause" violated the antiwaiver rule. 65 at 1051. The court gave no hint that it saw any conflict with its own prior ruling in Roby which, as the SEC correctly stated, turned on the international nature of the contracts between Lloyd's and its Names.

III. PLAINTIFFS' PURPORTED RICO AND SECTION 17(a) CLAIMS ADD NOTHING TO THEIR ARGUMENTS

Plaintiffs argue that the forum agreements violate public policy because they have asserted RICO claims, and because the General Undertaking, which contains the forum agreement, is itself a violation of Section 17(a) of the Securities Act. The propriety of dismissing these claims here is supported by other decisions of this Court.

In Lockman, 930 F.2d at 768-69, this court held that the assertion of RICO claims by an American plaintiff does not prevent dismissal on forum non conveniens grounds in favor of a foreign jurisdiction that does not recognize RICO claims. For the same reasons, the district court properly dismissed plaintiffs' RICO claims here.

As to plaintiffs' Section 17(a) argument, this Court has unequivocally held that there is no private right of action under that statute. In re Washington Public Power Supply Says. Sec. Lit., 823 F.2d 1349, 1358 (9th Cir. 1987). Further, as the court below rightly found, plaintiffs' argument is circular. It assumes its conclusion (that the General Undertaking was itself an illegal security). Names' ER 102 at 15. That is a very unlikely scenario even if any "security" is involved which is denied by Lloyd's, since the SEC has acknowledged that the appropriate issuer for analytical purposes is the Members' Agent, not Lloyd's.

IV. PLAINTIFFS HAVE NOT ALLEGED FRAUD SPECIFIC TO THE CHOICE CLAUSES WITHIN THE MEANING OF PRIMA PAINT

Fraud was the focus of plaintiffs' case below; here, it is virtually the last argument. Plaintiffs claim Lloyd's defrauded them by not explaining all the ramifications of agreeing to litigate in English courts under English law. The court below correctly rejected this argument. See Bonny, 3 F.3d at 160 n. 10 ("Nothing excuses the plaintiffs for not being aware of the substantive provisions of English law that the forum selection clause incorporates into their agreement"). Accord, Cohen v. Wedbush, Noble, Cooke, Inc., 841 F.2d 282, 287 (9th Cir. 1988) (no duty to explain that agreeing to arbitration means waiving right to jury trial); Pierson v. Dean, Witter, Reynolds, Inc., 742 F.2d 334, 339 (7th Cir. 1984) (no duty to explain the chosen law); Gaskin v. Stumm Handel GmbH, 390 F. Supp. 361, 366-67 (S.D.N.Y. 1975) (same). See also Whirlpool Fin. Corp. v. GN Holdings, Inc., 67 F.3d 605, 609 (7th Cir. 1995) ("The nondisclosure of enacted or pending legislation... is not a basis for a securities fraud action").

Plaintiffs wrongly rely on Moseley v. Elec. & Missile Facilities, Inc., 374 U.S. 167 (1963) for the proposition that merely alleging fraud in the inducement is generally sufficient to overcome a forum selection clause. As the court below held, Moseley has been limited by succeeding Supreme Court opinions and opinions of this court which have uniformly held that "an arbitration or forum-selection clause in a contract is not enforceable [only] if the inclusion of that clause in the contract was the product of fraud or coercion." Scherk, 417 U.S. at 519 n.14. Scherk built upon the leading case of Prima Paint Corp., 388 U.S. 395. In Prima Paint, the plaintiff alleged that defendant fraudulently misrepresented that it was solvent and able to perform its contractual obligations, when in fact it was insolvent. The court held that such an allegation of fraud, which was not directed at inducement to enter into the arbitration clause specifically, was not sufficient to avoid the arbitration clause. 388 U.S. at 400, 403.

This principle applies equally to arbitration clauses and forum agreements. This Court has followed Prima Paint in holding that "a federal court may consider a defense of fraud in the inducement of a contract only if the fraud relates specifically to the arbitration clause itself and not to the contract generally" and that "the rationale of Prima Paint extends to attempts to rescind contracts on other grounds as well." Three Valleys Mun. Water Dist. v. E.F. Hutton & Co., 925 F.2d 1136 (9th Cir. 1991). Accord, Republic of Nicaragua v. Standard Fruit Co., 937 F.2d 469, 476-77 (9th Cir. 1991); Sparling v. Hoffman Const. Co., 864 F.2d 635, 638 (9th Cir. 1988). [FN36]

FN36. See also Coleman v. Prudential Bache Sec., Inc., 802 F.2d 1350, 1352 (11th Cir. 1986) (under Prima Paint, "(c)laims alleging unconscionability, coercion or confusion in signing the agreement generally should be determined by an arbitrator because those issues go to the formation of the entire contract rather than to the issue of misrepresentation in the signing of the arbitration agreement").

The district properly rejected plaintiffs' fraud defense to the forum agreements because it found that there was insufficient evidence that plaintiffs had been fraudulently induced to accede to the forum agreements themselves. The vast majority of the material plaintiffs submitted in opposition to Lloyd's motion to dismiss alleged fraud generally rather than being specific to the forum agreements, Names' ER, 102 at 13. Plaintiffs' counsel admitted as much at oral argument. Lloyd's ER, RT at 16. [FN37]

FN37. Plaintiffs' counsel said:

"Your honor made the comment that you have an abundance of evidence, most of which goes to the underlying merits of the actual claims. Admittedly, a good part of that is true."

Plaintiffs' reliance on Walker v. KFC Corp., 728 F.2d 1215 (9th Cir. 1984) is misplaced. First, plaintiffs have not established Lloyd's duty to describe to them the ramifications of the forum agreements.. Indeed, as discussed supra (at pp. 42-43), Lloyd's had no such duty. Second, plaintiffs have only alleged, and attempted to establish, that syndicates that their Members' Agents negligently placed them on damaged them. They have not shown, nor can they, that the English courts in which they agreed to litigate or the provisions of English law under which they agreed to have their disputes determined are harmful to their interests. The General Undertaking means the same thing today it meant when it was signed. The dramatic success of many Names' litigations in England conclusively rebuts any assertion that relegation to the contractually-designated forum was a "defect" in the agreement that should have been disclosed to plaintiffs.

Plaintiffs' argument that they should have been afforded discovery on their unsupported fraud claim was waived when they did not make such a claim below at any time before their revised Rule 60 motion. [FN38] The discovery plaintiffs seek is, moreover, irrelevant. Plaintiffs apparently want to try to demonstrate that when Lloyd's required all Names to sign the new form of General Undertaking in 1986 as a condition of continued membership, it did so with the fraudulent intent of introducing a forum clause for the first time in order not to be sued under American securities and racketeering laws. This would not establish fraudulent inducement as to the forum agreements even if it were true; all it would establish is that Lloyd's did not choose English law at random. What is more, the premise of plaintiffs' theory -- that until 1986, English law did not govern their relationship with Lloyd's -- is false. In Hirsch, (Addendum A, Ex. 1), the Fifth Circuit found that regardless of the forum or choice of law agreements, English law governs U.S. Name's suit against Lloyd's.

FN38. Plaintiffs' reliance on Letizia v. Prudential Bache Sec., Inc., 802 F.2d 1185 (9th Cir. 1986) (Names' Br. at 37-38) is misplaced. That case said nothing at all about discovery; it simply said the district court should have allowed the plaintiff to amend his complaint. Id. at 1190.

V. PLAINTIFFS' CASE SHOULD ALSO BE DISMISSED ON GROUNDS OF FORUM NON CONVENIENS

Lloyd's moved below in the alternative to dismiss on grounds of forum non conveniens; the court did not reach that argument. This court may affirm on any ground supported by the record. First Pacific Bank v. Gilleran, 40 F.3d 1023, 1024 (9th Cir. 1994). For the reasons set forth in Howe, Hirsch, and by Judge Lasker in Roby, [FN39] England is the most appropriate forum for litigation of these plaintiffs' claims. Plaintiffs have adequate remedies in England; indeed many of them have already sued successfully there. This Court therefore may affirm the judgment on the alternative ground of forum non conveniens.

FN39. "The overwhelmingly English nature of this dispute likely also would warrant dismissal of the action on forum non conveniens grounds." Roby v. Corporation of Lloyd's, 824 F. Supp. 336, 348 (S.D.N.Y. 1992).

VI. THE COURT BELOW PROPERLY EXERCISED ITS DISCRETION TO DISMISS THE CLAIMS AGAINST THE FICTIONAL "ASSOCIATION."

Plaintiffs admit that the district court's dismissal of the fictional "association" composed of the entire London market must be judged under the abuse of discretion standard. Contrary to plaintiffs' assertion, it would have been an abuse of discretion for the court below to have done anything other than dismiss.

Plaintiffs claim, in essence, that the entire Lloyd's market is a single "association," composed of the market's regulators, the providers of the market's physical facilities, and all the market's underwriters, Member's Agents, Managing Agents and brokers -- 766 entities in all. [FN40] Plaintiffs further claim that Lloyd's accepted service of process for this fictional non-entity. Lloyd's ER 76 at ¶ 3.

FN40. See Appendices A, B and C to the Amended Complaint (Names' ER 4.) In fact, the actual number of proposed defendants is much larger, since plaintiffs did not break down the syndicates they purport to sue by year of account.

In fact, the only entity plaintiffs served was Lloyd's; Lloyd's three times wrote to plaintiffs' English counsel saying that Lloyd's did not accept service on behalf of any alleged "association." Lloyd's ER 127. Mr. Nicholas Demery, an English solicitor employed by Lloyd's, also stated that there is no such "association," and that under English law such fictional agglomerations are not juridical persons capable of suing or being sued or even being served with process. Id. ¶¶ 5-7. Accord, J. E. Martin, Hanbury and Maudesly: Modern Equity 107 (12th ed. 1985) (Lloyd's ER 127, Ex. A.) Plaintiffs did not dispute these points below or here.

It is axiomatic that one cannot sue something that does not exist. Owyhee Grazing Ass'n v. Field, 637 F.2d 694, 697 (9th Cir. 1981). Whether the alleged "association" has legal existence must be determined under English law, notwithstanding plaintiffs' having asserted federal claims. Roby, 796 F. Supp. at 103, 106-107. In Roby, as here, plaintiffs (many of them the same as here) named "syndicates" as defendants. The district court dismissed the "syndicate" defendants, finding that their capacity to sue or be sued should be governed by English law. Accord, Edinburgh Assur. Co. v. R.I. Burns Corp., 479 F. Supp. 138, 151 (C.D. Cal. 1979), aff'd in relevant part, 669 F.2d 1259 (9th Cir. 1982) (whether Lloyd's broker was agent of assured or of underwriters should be determined by English law). Below, plaintiffs offer no evidence beyond a photograph of the Lloyd's building, that their fictional association exists. This lack of evidence supports the district court's refusal to recognize the existence of such an entity by entering a default judgment against it.

Dismissal of plaintiffs' claims against the fictional "association," was also appropriate in light of the Court's determination that the forum agreement should be enforced as to Lloyd's. Roby, 996 F.2d 1353; see also Testa v. Janssen, 482 F. Supp. 1195, 1200 (W.D. Pa. 1980)(dismissing claim against fictional association given existence of real defendant).

CONCLUSION

The judgment of the court below should be affirmed.

STATEMENT OF RELATED CASES

Defendants/Appellees are not aware of any related cases pending before this Court.

Appendix not available.