1997 WL 33560315 (Cal.App. 2 Dist.)
For opinion see 1997 WL 1114662
Court of Appeal, Second District, Division 7, California.
David WEST, Deborah West and Susan West, Petitioners,
LLOYD'S, also known as the Society of Lloyd's, also known as Lloyd's of London,
a corporation, also known as the Corporation of Lloyd's, also known as the
Society and Council of Lloyd's; Ernst & Young, a partnership and an
unincorporated association, Respondent.
January 15, 1997.
Superior Court No. BC111313
(L.A. Superior Court Judge Dzintra Janavs)
Dean Hansell State Bar No. 93831, Aaron C. Gundzik State Bar No. 132137, Allyson S. Taketa State Bar No. 167331, Leboeuf, Lamb, Greene & Macrae L.L.P., 725 S. Figueroa Street, 36th Floor, Los Angeles, California 90017-5436, Telephone: (213) 955-7300
Taylor R. Briggs, Sheila H.marshall, Stephen Orel, 125 West 155 Street, New York, NY10019-5389, Telephone: (212) 424-8000
FN Attorneys for Defendants and Respondents The Corporation of Lloyd's, The Society of Lloyd's and The Council of Lloyd's
*i TABLE OF CONTENTS
TABLE OF AUTHORITIES ... iii
SUMMARY OF ARGUMENT ... 1
STATEMENT OF FACTS ... 3
STANDARD OF REVIEW ... 8
ARGUMENT ... 8
I. PLAINTIFFS HAVE THE BURDEN OF PROVING THAT THE FORUM AGREEMENTS ARE UNENFORCEABLE ... 8
II. THE "ANTI-WAIVER" PROVISIONS OF CERTAIN CALIFORNIA STATUTES DO NOT INVALIDATE THE FORUM SELECTION CLAUSES IN PLAINTIFFS' CONTRACTS WITH LLOYD'S ... 10
A. California Follows Federal Cases Which Hold That Forum Selection Clauses In International Contracts Are To Be Treated With Great Deference ... 11
B. Five Federal Appellate Courts and Numerous Lower Courts Have Upheld the Choice Clauses in Lloyd's Contracts With Names in the Face of "Anti-Waiver" Provisions in Federal Laws Indistinguishable From the California Provisions On Which Plaintiffs Rely ... 17
C. Hall and Wimsatt Do Not Compel A Different Result Under California "Anti-Waiver" Provisions ... 22
*ii D. Fundamental Public Policy Would Be Served, Not Offended, by Enforcement of the Forum Agreements ... 26
III. FRAUD IS NOT A BASIS FOR REFUSING TO ENFORCE THE FORUM AGREEMENTS ... 30
A. Lloyd's Did Not Have A Duty To Disclose The Effect Of The One and One-Half Page Forum Agreement To Plaintiffs ... 30
B. Lloyd's Made No Misrepresentations To Plaintiffs That Could Render The Forum Agreement Unenforceable ... 32
1. Plaintiffs Are Not Excused from Their Unreasonable Refusal to Read the Forum Agreement ... 32
2. Lloyd's Made No Misrepresentations That Render The Forum Agreement Unenforceable ... 34
IV. THE FORUM AGREEMENTS ARE NOT UNENFORCEABLE CONTRACTS OF ADHESION ... 40
V. THIS ACTION SHOULD ALSO BE DISMISSED UNDER THE DOCTRINE OF FORUM NON CONVENIENS ... 43
A. England Is A Suitable Forum ... 44
B. Private Interest Factors Favor England ... 45
C. Public Interest Factors Favor England ... 46
CONCLUSION ... 48
*iii TABLE OF AUTHORITIES
Allan v. Snow Summit, Inc., 96 Daily Journal D.A.R. 9, 14 (December 30, 1996) ... 40
Bancomer, S.A. v. Superior Court, 44 Cal. App.4th 1450 (2d Dist. 1996) ... 8, 9, 34
Benefit Association International v. Superior Court, 46 Cal. App.4th 827 (1996) ... 9, 11, 13
COL Original Products, Inc. v. National Hockey League Players Association, 39 Cal. App.4th 1347 ... 34
Cabrera v. Plager, 195 Cal. App.3d 606 (2nd Dist. 1987) ... 9
Cal-State Business Products & Services, Inc. v. Ricoh, 12 Cal. App. 4th 1666 (1993) ... passim
Committee on Childrens Television Inc. v. General Foods Corp., 35 Cal.3d 197 (1983) ... 31
Crown Homes Inc. v. Landes, 22 Cal. App.4th 1273 (2d Dist. 1994) ... 16
Ericksen Arbuthnot McCarthy Kearney & Walsh Inc. v. 100 Oak Street, 35 Cal. 3d 312 (1983) ... 34
Ford v. Shearson Lehman American Express, Inc., 180 Cal. App.3d 1011(1986) ... 38
Furda v. Superior Court, 161 Cal. App.3d 418 (1984) ... 11
Graham v. Scissor-Tail Inc., 28 Cal.3d 807 (1981) ... 40
Hall v. Superior Court, 150 Cal. App. 3d 411 (1983) ... 11, 23, 27
Hambrecht & Quist Venture Partners v. American Medical International.Inc., 38 Cal. App.4th 1532 (2d Dist. 1995) ... 28
Hayes Children Leasing Co. v. NCR Corp., 37 Cal. App. 4th 775 (1995) ... 39
*iv Hulsey v. Elsinore Parachute Center, 168 Cal. App. 3d 333 (1985) ... 40, 41
Keating v. Superior Court, 31 Cal. 3d 584 (1982), revd in part on other grounds, Southland Corp. v. Keating, 465 U.S. 1 (1984) ... 15
Lu v. Dry Clean-U.S.A. of California, Inc., 11 Cal. App.4th 1490 (1992) ... 8, 9, 13
Lynch v. Cruttendon & Co., 18 Cal. App. 4th 802 (1990), cert. denied, 115 S. Ct. 52 1994) ... 33
Main v. Merrill Lynch, 67 Cal. App.3d 19 (1977) ... 38
In Re Marriage of Reuling, 23 Cal. App.4th 1428 (1994) ... 31
Morgan v. Community Redevelopment Agency of the City of Loss Angeles, 231 Cal. App.3d 243 (2d Dist. 1991), cert. denied, 503 U.S. 937 (1992) ... 39
Nedlloyd Lines B. v. v. Superior Court, 3 Cal. 4th 459 (1992) ... passim
North Coast Bus Park v. Neilsen Construction Co., 17 Cal. App.4th 22 (1993) ... 9
Olsen v. Breeze Inc., 48 Cal. App.4th 608 (1996) ... 41
Rice v. Dean Witter Reynolds, Inc., 235 Cal. App. 3d 1016 (1991) ... 38
Rosenthal v. Great Western Finance Security Corp., 14 Cal. 4th 394 (1996) ... passim
Rowland v. Paine Webber Inc., 4 Cal. App.4th 279 (1992) ... 34, 38
In re Ruth H., 26 Cal. App.3d 77 (2nd Dist. 1972) ... 10
San Francisco Newspaper Printing Co. v. Superior Court, 170 Cal. App.3d 438 (1985) ... 41, 42
Smith Valentino & Smith v. Superior Court, 17 Cal.3d 491 (1976) ... 9, 11
Stangvik v. Shiley, 54 Cal.3d 744 (1991) ... 44, 45, 46
Strotz v. Dean Witter Reynolds Inc., 223 Cal. App. 3d 208 (1990), cert. denied, 499 U.S. 948 (1991) ... 33
*v Wimsatt v. Beverly Hills Weight Etc. Internat., Inc., 32 Cal. App. 4th 1511 (1995) ... passim
Wong v. Tenneco. Inc., 39 Cal.3d 126 (1985) ... 22, 28
Allen v. Lloyd's of London, 94 F.3d 923 (4th Cir. 1996) ... passim
Ashenden v. Lloyd's of London, 1996 U.S. Dist. LEXIS 18336 (N.D. Ill. Dec. 9, 1996) ... 19, 21, 23
Bonny v. Society of Lloyd's, 3 F.3d 156 (7th Cir. 1993), cert. denied, 510 U.S. 1113 (1994) ... passim
British Midland Airwyas Ltd. v. International Travel, Inc., 497 F.2d 869 (9th Cir. 1974) ... 44, 45
Gau Shan Co. v. Bankers Trust Co., 956 F.2d 1349 (6th Cir. 1992) ... 22
General Signal Corp. v. MCI Telecommunications Corp., 66 F.3d 1500 (9th Cir. 1995), cert. denied, 116 S. Ct. 1017 (1996) ... 28
Gulf Oil Corp. v. Gilbert, 330 U.S. 501 (1947)] ... 47
Haisten v. Grass Valley Medical Reimbursement Fund Ltd., 784 F.2d 1392 (9th Cir. 1986) ... 24
Haynsworth v. Lloyd's of London, 933 F. Supp. 1315 (S.D. Tex. 1996) ... passim
Hirsch v. Oakeley Vaughn Underwriting Ltd., No. 89-2563 (5th Cir. May 31, 1990), cert. denied, 498 U.S. 981 (1990) ... passim
Howe v. Goldcorp Investments, Ltd., 946 F.2d 944 (1st Cir. 1991), cert. denied, 112 S. Ct. 1172 (1992) ... 47
Hugel v. The Corporation of Lloyd's, 999 F.2d 206 (7th Cir. 1993) ... 17
Kempe v. Ocean Drilling & Exploration Co., 876 F.2d 1138 (5th Cir.), cert. denied, 493 U.S. 918 (1989) ... 47
Leslie v. Lloyd's of London, 1995 WL661090 (S.D. Tex) ... 19
*vi M/S The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972) ... passim
McDade v. Lloyd's of London, Civil Action No. H-94-3714 (S.D. Tex. June 26, 1995) ... 19, 20
Milanovich v. Costa Crociere, S.p.A., 954 F.2d 763 (D.C. Cir. 1992) ... 25
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614 (1985) ... 15, 16
Moseley v. Electronic & Missile Facilities, 374 U.S. 167 (1963) ... 38
Pelleport Investors v. Budco Quality Theatres, 741 F.2d 273 (9th Cir. 1984) ... 37
Piper Aircraft Co. v. Reyno, U.S. 235 (1981) ... 39, 47
Prima Paint v. Flood & Conklin, 388 U.S. 395 (1967) ... 39
Richards v. Lloyd's of London, Fed. Sec. L. Rep. (CCH) ¶98,801, 1995 U.S. Dist. LEXIS 6888 (S.D. Cal. May 1, 1995) ... passim
Riley v. Kingsley Underwriting Agencies Ltd., 969 F.2d 953 (10th Cir. 1992), cert. denied, 506 U.S. 1021 (1992) ... 17, 18
Roby v. Corporation of Lloyd's, 824 F. Supp. 336 (S.D.N.Y. 1992) ... 43, 44, 45
Roby v. Corporation of Lloyd's, 996 F.2d 1353 (2nd Cir. 1993), cert. denied, 510 U.S. 945 (1993) ... passim
Rodriguez de Ouijas v. Shearson/American Express, Inc., 490 U.S. 477 (1989) ... 14, 15, 23
Sarlot-Kantarjian v. First Pennsylvania Mortgage Trust, 599 F.2d 915 (9th Cir. 1979) ... 28
Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974) ... 13, 14, 15
Shell v. R.W. Sturge Ltd., 55 F.3d 1227 (6th Cir. 1995) ... passim
Shell v. R.W. Sturge Ltd., 850 F. Supp. 620 (S.D.Oh. 1993), affd, 55 F.3d 1227 (6th Cir. 1995) ... 22, 45
*vii 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) ... 16
Transunion Corp. v. PepsiCo, Inc.,811 F.2d 127 (2d Cir. 1987) ... 47
Tufts v. Corporation of Lloyd's, 1996 U.S. Dist. LEXIS 12606 (S.D.N.Y. Sept. 18, 1996) ... passim
Wilko v. Swan, 346 U.S. 427 (1953) ... 11, 13, 23
Deeny and Others v. Goode Walker Ltd., LRLR 183, Queen's Bench Division (Commercial Court) The Times 7 October 1994 ... 7
Hallam-Eames v. Merrett Syndicates. Ltd., 1993 Folio 145, High Court of Justice, Queen's Bench Division (Commercial Court) ... 7, 46
Rio Tinto Zinc Corp. v. Westinghouse Elec. Corp.  A.C. 547, 617, 1 All E.R. 434 ... 16
Society of Lloyd's v. Clementson, LRLR 307, (Nov. 10, 1994) ... 30
15 U.S.C. § 77n ... 20
15 U.S.C. § 78cc(a) ... 20
Cal. Corp. Code Section 25120 ... 9
Cal. Corp. Code § 25701 ... 20, 23
C.R.S. § 11-51-604(11) ... 20
N.J.S.A. § 49:3-71(f) ... 20
*1 SUMMARY OF ARGUMENT
By this appeal, plaintiffs David, Deborah and Susan West seek to overturn the trial court's decision enforcing a forum selection agreement between themselves and Lloyd's. The trial court's decision to enforce the forum agreement follows the precedent set by five United States Circuit Courts of Appeals and several United States District Courts, including the Southern District of California. Relying upon the same forum agreement at issue here, these federal court decisions have dismissed claims identical to those dismissed here, brought by persons who, like plaintiffs, were Lloyd's Names.
Like plaintiffs, other Names whose claims were dismissed by federal courts, unsuccessfully argued that so-called "anti-waiver" provisions in state and federal statutes preclude enforcement of the forum agreements. The mere assertion of statutory claims that implicate "anti-waiver" provisions is not sufficient to overcome California's policy of liberally enforcing forum agreements. Instead of turning on a plaintiff's whim of pleading a statutory violation, the California Supreme Court, and the United States Supreme Court cases it has followed have instructed courts to examine whether the policies underlying California law conflicts with the chosen forum's laws. Factored into this policy analysis is the deference afforded to international comity and the desire to foster international business transactions which require that a forum agreement that is part of an international transaction, like that at issue here, be liberally enforced.
This careful analysis mandated by the higher courts implicitly eschews the "bright-line" rule plaintiffs ask this Court to adopt -- denying enforcement of forum agreements whenever violations of California's Corporations Code or Consumer Protection Act are merely alleged. Such *2 an approach is an imprudent and unprecedented manner for dealing with the complex international issues presented by this case. Doing so would ignore England's over-arching interest in the subject matter of this action, and encourage foreign intervention in the self-regulation of the Lloyd's insurance market, whose actions are governed by numerous acts of British Parliament. Plaintiffs' only support for their position are two decisions by the Fourth District Court of Appeal, both of which are inapposite because they do not deal with international transactions. In both cases, California law would have applied in the absence of forum agreements.
Plaintiffs' fraud and adhesion defenses are also insufficient grounds for ignoring the well-tested forum agreement here. Those defenses are legally insignificant because of plaintiffs' inexplicable and unreasonable refusal to read the 1986 General Undertaking containing the forum agreement before signing it. The 1986 General Undertaking is a short (one and one-half page) document and the forum agreement is set forth clearly and unambiguously therein. Had plaintiffs simply read the agreement, which they had ample opportunity to do, they would have seen the forum agreement.
Finally, as an alternative ground for affirming the trial court, this Court should conclude that dismissal of this action was also appropriate under the doctrine of forum non convenient. England is unquestionably a suitable forum for resolution of plaintiffs' claims. Further, England is the location of virtually all witnesses and documents. England also has a substantially greater interest in resolving plaintiffs' claims. Applying the same forum non conveniens factors utilized by California courts, other courts have concluded that even without the forum agreement, the most appropriate venue for this action is England.
*3 STATEMENT OF FACTS
In June 1986, each plaintiff voluntarily entered into a one and one-half page agreement with Lloyd's known as the General Undertaking (the "1986 General Undertaking"), which provides:
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 ...
A.A. Vol. XXVII at 6585. Each plaintiff admitted to having signed the 1986 General Undertaking without bothering to read it first. A.A. Vol. XXVII at 6402:1-10; A.A. Vol. XXVIII at 6497:1-2, 6502:17-22, 6658:26-27, 6660:23-27. Plaintiffs Deborah West and Susan West did so on the advice of plaintiff David West. A.A. Vol. XXVIII at 6497:17-20, 6498:28-6499:9, 6659:12-15, 6660:8-14; A.A. Vol. X at 2326, 2338.
The 1986 General Undertaking bound plaintiffs, who are underwriters or "Names," to abide by Lloyd's rules and regulations as a condition of continued participation in the Lloyd's insurance market. Worldwide, there are approximately 30,000 Names, residing in 80 countries. A.A. Vol. VIII at 1883:18-20. Nearly 80% of Names are English citizens. Id. The Lloyd's insurance market is physically located in London, England, where the underwriting activities of Names occur. A.A. Vol. I at 5:6-7; see also, Alien v. Lloyd's of London, 94 F.3d 923, 929 (4th Cir. 1996). Thus, all of plaintiffs' underwriting activities occurred in England.
Defendants the Society of Lloyd's, the Corporation of Lloyd's and the Council of Lloyd's (collectively, "Lloyd's") only regulate, and provide limited services for, the insurance market. Lloyd's provides the physical *4 facilities and the personnel that regulate the market. The Council of Lloyd's is Lloyd's governing body. A.A. Vol. VIII at 1882:9-20.
Plaintiffs Deborah and Susan West first became Names in 1983 on the recommendation of plaintiff David West, who became a Name in 1973. A.A. Vol. I at 16:20-21, 23:17-20. Like all prospective Names, plaintiffs had to meet defined financial criteria (known in the Lloyd's community as a financial "means" test), required by Lloyd's to ensure that Names have sufficient personal resources to cover claims on insurance policies they underwrite. A.A. Vol. VIII at 1883:21-1884:5. Plaintiffs also had to post security, usually in the form of a letter of credit or pledged securities, to ensure such claims are covered. Id. Plaintiffs Deborah and Susan West acknowledged, in writing, that they had the necessary "knowledge and experience in financial and business matters" to "evaluat[e] the merits and risks of membership at Lloyd's." Id.; A.A. Vol. X at 2338 (Deborah West); 2326 (Susan West). They further acknowledged that they accepted and understood the risks they assumed upon becoming Names. Id. To ensure that they understood the risks, including their unlimited liability, and that they were suitable persons to underwrite insurance, as a condition of joining Lloyd's, each plaintiff traveled to London before becoming a Name, to appear before the Council of Lloyd's. Id.; see also. A.A. Vol. XXVIII at 6487:17-28; A.A. Vol. VIII at 1883:25-1884:5.
In addition to undergoing this screening process, plaintiffs entered into a series of contracts in 1973 and 1983, when they first became Names. These included an earlier version of the 1986 General Undertaking, and agreements with their agents, which define the relationship between plaintiffs and their chosen agents, who managed plaintiffs' underwriting activities. A.A. Vol. VIII at 1884:6-14; A.A. Vol. I at 14:19-27, 22:11-28. *5 The form of the general undertaking is the same for Names throughout the world. Roby v. Corporation of Lloyd's, 996 F.2d 1353, 1359 (2nd Cir. 1993), cert. denied, 510 U.S. 945 (1993). The earlier version of the undertaking contain clauses concerning arbitration and litigation in England of disputes between Names and other participants in the Lloyd's community. A.A. Vol. XXVIII at 6520-24; 6678-82; A.A. Vol. I at 105-108.
The 1986 General Undertaking (which contains the forum agreement at issue here) was less than one and one-half pages of large, in easy-to-read type, and significantly shorter and less complex than the five-page agreement it replaced. Ccmpair A.A. Vol. XXVIII at 6520-6524 (1983 General Undertaking) to 6585-6586 (1986 General Undertaking).
Plaintiffs received the 1986 General Undertaking with a June 23, 1986 letter from their Members' Agent, R.W. Sturge ("Sturge"). A.A. Vol. XXVII at 6395:10- 13; A.A. Vol. XXVIII at 6496:12-14, 6658:10-12. The cover letter requested that the 1986 General Undertaking be signed and returned to Sturge by July 31, 1986. A.A. Vol. XXVIII at 6695-6696. Plaintiffs, therefore, had several weeks to review the short agreement and analyze its legal significance. There is no evidence that plaintiffs were ever advised by Lloyd's, orally or in writing, not to read the agreement. Indeed, the cover letter invited plaintiffs to direct any questions about the agreement to Sturge. A.A. Vol. XXVIII at 6696 ("if you have any queries whatsoever, please do not hesitate to contact this office.") Although plaintiffs now claim that they were awaiting receipt of an explanatory memorandum, the cover letter contains no reference to such a memorandum, and there is no evidence or allegation that one was promised at the time of, or subsequent to, plaintiffs' receipt of the 1986 General Undertaking. Moreover, there is *6 no evidence that plaintiffs ever contacted Lloyd's or Sturge to inquire about such a memorandum. Nor is there evidence that plaintiffs sought professional advice about the effect of the 1986 General Undertaking. Instead, David West -- a former insurance company president (A.A.Vol. X at 2308) - admits that he signed the 1986 General Undertaking without bothering to read it and advised his daughters, Deborah and Susan West, to do the same. A.A. Vol. XXVII at 6402:1-10; A.A. Vol. XXVIII at 6497:1-2, 6502:17-22, 6658:26-27, 6660:23-27, 6497:17-20, 6498:28-6499:9, 6659:12-15, 6660:8-14; A.A. Vol. X at 2326, 2338.
A single litigation forum is essential for Lloyd's effectively to regulate and oversee the insurance market. Lloyd's is responsible for ensuring that all valid claims on policies issued by any Name are paid. A.A. Vol. VIII at 1883:11-12. If a Name refuses to pay valid policyholder claims he or she owes, Lloyd's can draw down the Name's letter of credit or other security for that purpose. A.A. Vol. I at 11:3-6. If Names who try to escape their underwriting obligations to policyholders to fund payments for legitimate insurance claims could litigate their grievances in some 80 different jurisdictions worldwide and in 50 different states in the United States, Lloyd's efforts to regulate the 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, including plaintiffs, have sustained large losses due to policyholder claims arising from various cataclysmic events such as European storms and the Piper Alpha and Exxon Valdez disasters, as well as American asbestos and pollution coverage judgments. A.A. Vol. VIII at 1886:13-17. Some of these Names, like plaintiffs here, have questioned the management of their affairs that resulted in these losses and filed suit in *7 England. A.A. Vol. VIII at 1886:17-18-1887:6. In these cases Names sought to recover the same damages they now seek against Lloyd's, namely underwriting losses they sustained during unprofitable underwriting years. Indeed, so many Names, including many American Names, have instituted litigation in the English courts that a single judge was appointed to coordinate the hearing of all such cases. Some of this litigation has resulted in substantial judgments against auditors, Members' Agents and Managing Agents in favor of Names. [FN1] Plaintiff David West was a plaintiff in one such action that resulted in a substantial award for many Names. Hallam-Eames v. Merrett Syndicate, Ltd., 1993 Folio 145, High Court of Justice, Queen's Bench Division, Commercial Court. Respondents' Appendix at 91. [FN2]
FN1. See, e.g., Deeny and Others v. Gooda Walker Ltd., LRLR 183 Queens Bench Division (Commercial Court), The Times 7 October 1994, in which Mr. Justice Phillips awarded very substantial sums to Names after the House of Lords had determined that the defendant agents had breached their duty to Names.
FN2. The page identifying David West as a plaintiff in the Merrett litigation was missing from Appellants' Appendix (see A.A. Vol. XIV at 3129-3130). A complete copy of this document is included in Respondents' Appendix.
The efforts of hundreds of other Names to circumvent their forum agreements and bring suit in United States courts have not been successful. In case after case, Names' suits in American courts have been dismissed on the ground that they have entered into an enforceable and legally binding agreement to resolve disputes in English courts. Those dismissals have been upheld, and refusals to dismiss overturned, by five United States appellate courts. See, infra at 17. The trial court correctly followed this overwhelming authority and rejected the Wests' attempt to become the first *8 Names to prosecute their claims against Lloyd's in the United States courts.
STANDARD OF REVIEW
The applicable standard of review is abuse of discretion. Bancomer, S.A. v. Superior Court, 44 Cal. App.4th 1450, 1457 (2d Dist. 1996). In Bancomer, this Court said:
A forum selection clause is valid in the absence of the resisting party meeting a heavy burden of proving enforcement of the clause would be unreasonable under the circumstances of the case. [citations omitted] "We review a trial court's decision to enforce [or refuse to enforce] a forum selection clause for an abuse of discretion."
Id., [FN3] quoting Lu v. Dry Clean-U.S.A. of California. Inc., 11 Cal.App.4th 1490, 1493 (1992). In so holding, this Court explicitly rejected the use of the "substantial evidence" standard of review espoused by the Third District Court of Appeal in Cal-State Business Products & Services, Inc. v. Ricoh, 12 Cal. App.4th 1666, 1680 (1993). Bancomer, 44 Cal. App.4th at 1457, n.7. [FN4]
FN3. Like this case, Bancomer involved an appeal from a decision by Los Angeles County Superior Court Judge Dzintra Janavs.
FN4. In addition to being contrary to precedent in this district, plaintiffs' argument for a de novo standard of review is contrary to their position in the trial court, where they relied on Cal-State, 12 Cal. App.4th at 1680, and argued that the proper standard of review is "substantial evidence." A.A. Vol. XIX at 4477; Reporter's Transcript of Proceedings ("R.T."), May 12, 1995 at 75:7-12.
I. PLAINTIFFS HAVE THE BURDEN OF PROVING THAT THE FORUM AGREEMENTS ARE UNENFORCEABLE
It is plaintiffs, not Lloyd's, who bear the burden of proving that the forum selection agreement in the 1986 General Undertaking is *9 unenforceable. Nedlloyd Lines B.V v. Superior Court, 3 Cal.4th 459, 467-468 (1992); Smith, Valentino & Smith v. Superior Court, 17 Cal.3d 491, 494 (1976); Bancomer, 44 Cal. App.4th at 1457; Cal-State, 12 Cal. App.4th at 1680; Lu, 11 Cal. App.4th at 1493. In the most recent judicial pronouncement of this rule, the court in Benefit Ass'n Int'l v. Superior Court, 46 Cal.App.4th 827 (1996), held:
A forum selection clause is prima facie valid and is to be enforced unless the resisting party shows enforcement would be unreasonable under the circumstances. [citations] [Defendant] met its burden of proof by showing the existence of a forum-selection clause. [Plaintiff] failed to present any justification for ignoring the clause and the court erred in doing so.
Benefits Ass'n Int'l, 46 Cal. App.4th at 835 (citations omitted).
These decisions are consistent with the position plaintiffs argued to trial court where they admitted that they, not Lloyd's, bear the burden of proving that the forum selection provision of the 1986 General Undertaking is unenforceable. A. A. Vol. XIX at 4477. ("Plaintiffs bear the burden of proof on the forum selection clause issue.") An argument not raised in the trial court is waived and may not be considered on appeal. Cabrera v. Plager, 195 Cal. App.3d 606, 611 (2nd Dist 1987). Allowing plaintiffs to change their theory now would be unfair to both the trial court and to Lloyd's. North Coast Bus. Park v. Neilsen Construction Co., 17 Cal.App.4th 22, 29 (1993). Plaintiffs' new argument regarding burden of proof was waived and should not be considered. [FN5]
FN5. Plaintiffs also did not raise in the trial court, their new argument that the forum agreement amounted to a retroactive change in a pre-existing security contract, in violation of Cal. Corp. Code Section 25120. That argument, too, has been waived.
Having admitted in the trial court that they have the burden of *10 proving the forum agreement unenforceable, plaintiffs now argue that the decision of the Fourth District in Wimsatt v. Beverly Hills Weight Etc. Internat. Inc., 32 Cal.App.4th 1511, 1522 (1995), saddles Lloyd's with the burden of proving that the forum agreement is fair and reasonable. Wimsatt, however, is specifically limited to the California Franchise Investment Law. Wimsatt, 32 Cal. App.4th at 1523 n.8. Further, Wimsatt did not concern an international transaction, like those at issue here, in Nedlloyd and in M/S The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972). Wimsatt was also decided by the Fourth District and, to the extent it conflicts with Bancomer, which emanated from this District, should not be followed. [FN6] In re Ruth H., 26 Cal. App.3d 77, 86 (2nd Dist. 1972) (noting the Court's "obligat[ion]" to follow the holdings of other divisions within its district.) Accordingly, Wimsatt is not applicable here and does not compel this Court to deviate from the rule that requires plaintiffs to prove that the forum agreement is unenforceable.
FN6. Plaintiffs incorrectly assert that Wimsatt was decided by the Second Appellate District. Appellants' Opening Brief ("AOB") at 26.
II. THE "ANTI-WAIVER" PROVISIONS OF CERTAIN CALIFORNIA STATUTES DO NOT INVALIDATE THE FORUM SELECTION CLAUSES IN PLAINTIFFS' CONTRACTS WITH LLOYD'S
California law recognizes the enforceability of agreements to resolve disputes in a particular forum. The policy supporting enforcement is stronger, where, as here, the forum agreement is part of an international business transaction. Applying this same principle, every United States Circuit Court of Appeals (the Second, Fourth, Sixth, Seventh and Tenth Circuits) to consider claims brought by Names against Lloyd's has held that *11 public policy dictates that the forum agreements contained in the 1986 General Undertaking are to be enforced.
Notwithstanding so-called "anti-waiver" provisions, the public policies behind California securities laws and other statutes, do not nullify the forum agreement. Plaintiffs' entire "public policy" argument relies upon two California appellate decisions, neither of which is on point. Neither case dealt with an international transaction, where forum agreements are to be more liberally enforced. Only one (Hall v. Superior Court, 150 Cal.App.3d 411 (1983)) was a securities case and it relied on a United States Supreme Court holding (Wilko v. Swan, 346 U.S. 427(1953)), which has since been overruled. The other (Wimsatt, supra) expressly limited its holding to franchise cases and relied on Hall. Neither case provides any persuasive reason to depart from the settled holding of every appellate court to consider the same issue before this Court.
A. California Follows Federal Cases Which Hold That Forum Selection Clauses In International Contracts Are To Be Treated With Great Deference
Under California law, a forum agreement is "prima facie valid." Benefit Ass'n Int'l, 46 Cal. App.4th at 835. A knowing and voluntary agreement to litigate disputes in a particular country with which the parties have reasonable contacts must be given effect. Furda v. Superior Court. 161 Cal.App.3d 418, 425-426 (1984).
These principles of California jurisprudence flow from California's acceptance of the "modern trend which favors enforceability of ... forum selection clauses." Smith. Valentino & Smith, 17 Cal.3d at 495. In Nedlloyd, supra, the California Supreme Court reaffirmed its earlier holding in Smith, that contractual choice-of-forum provisions should be upheld *12 absent a fundamental violation of public policy, and extended this ruling to the "closely related" issue of contractual choice-of-law provisions. Nedlloyd, 3 Cal.4th at 464.
The Smith court credited its analysis and adoption of the "modern trend" to the United States Supreme Court's opinion in M/S The Bremen v. Zapata Off-Shore Oil Co., 407 U.S. 1 (1972). In The Bremen, a Texas company (Zapata) hired a German company (Unterweser) to tow an oil rig from Louisiana to Italy. Zapata and Unterweser's contract specified that all disputes would be resolved in England. The contract also contained a clause exculpating Unterweser from liability for injury to the towed rig. The Court explained that such an exculpatory clause would be rejected by United States courts as contrary to public policy, but would be enforced in England, and that enforcing the forum agreement meant that English law would be applied because "the forum clause was also an effort to obtain certainty as to the applicable substantive law." 407 U.S. at 8 n.8, 14 n. 15.
The Supreme Court rejected Zapata's argument that the exculpatory clauses rendered the forum clause contrary to public policy. Bremen held that domestic public policies that otherwise prohibited 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:
[N]otwithstanding 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, and resolved in our courts.
Id. at 9. The Court concluded:
In the light of present-day commercial realities and expanding *13 international trade we conclude that the forum clause should control absent a strong showing that it should be set aside.
Id. at 15. California courts after Smith continue to apply The Bremen standard. Benefit Ass'n Int'l, 46 Cal. App. 4th at 835; Lu, 11 Cal. App.4th at 1493; Cal-State, 12 Cal. App.4th at 1678-1679.
The Bremen was the first of an unbroken line of Supreme Court precedents upholding the enforceability of forum selection or arbitration clauses in international contracts. In Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974), the Court expanded the holding of The Bremen to encompass claims for violations of American securities laws. The plaintiff in Scherk asserted fraud claims under Section 10(b) of the Securities Exchange Act of 1934; these claims are directly analogous to the claims plaintiffs assert under California law. The Court noted that the purpose of forum selection clauses in international contracts is to eliminate "uncertainty ... concerning the law applicable to the resolution of disputes arising out of the contract." Id. at 516. Although the Court had held twenty years earlier in Wilko, supra, that an arbitration clause in a domestic contract violated the anti-waiver provisions of the Securities Act of 1933, the Court, without overruling Wilko, held in Scherk that such a clause in an international contract should be enforced:
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.
Scherk, 417 U.S. at 516. The alleged violations of the anti-fraud provisions of the Securities Exchange Act of 1934 in the Scherk complaint and the *14 Court's uncertainty as to whether the chosen forum (arbitration in France) would even entertain those claims, did not change the Court's analysis. Id. at 514 n.8, 516. [FN7]
FN7. Wilko was finally overruled by the Supreme Court for all purposes in Rodriguez de Ouijas v. Shearson/American Express, Inc., 490 U.S. 477, 484 (1989).
Scherk rejects the proposition that the federal securities anti-waiver provisions require that the mere assertion of claims under those laws automatically nullifies 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 provision inapplicable:
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.
... 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 achievement of the orderliness and predictability essential to any international business transaction.
Id. at 516. The Scherk court rejected the post-contract forum shopping so vividly illustrated by 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.
*15 Id. at 516-17. [FN8] Thus, the Court made clear that when it comes to international transactions, anti-waiver provisions in domestic statutes are not a compelling reason to ignore an otherwise enforceable forum agreement. The California Supreme Court has recognized Scherk's message that the anti-waiver provision of United States securities laws does not preclude enforcement of international arbitration agreements.
Keating v. Superior Court, 31 Cal.3d 584, 597 n.7 (1982), rev'd in part on other grounds, Southland Corp. v. Keating, 465 U.S. 1 (1984).
FN8. The Court noted that because an arbitration clause is "in effect, a specialized kind of forum-selection clause," the principles of The Bremen were fully applicable. Scherk, 417 U.S. at 519.
Relying upon the same principles set forth in The Bremen and Scherk, the Supreme Court in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985), again made clear that arbitration agreements in international transactions are to be more liberally enforced than those in domestic transactions. The Mitsubishi court ordered arbitration in Japan of a United States auto dealer's antitrust claims against its franchisor. In so doing, the Court understood that the Japanese forum might not correctly apply United States antitrust law. Nevertheless, the Court held that:
[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.
Mitsubishi Motors Corp. 473 U.S. at 629 (emphasis added). Thus, the Court held that the longstanding policy against arbitration of antitrust claims in purely domestic cases did not apply where the transactions at *16 issue were international in character, even where the proposed forum was not only arbitral in nature, but foreign. [FN9] California courts also recognized the Mitsubishi Court's willingness to more liberally enforce arbitration agreements in international transactions:
FN9. Although plaintiffs do not rely on it, the Mitsubishi court noted in dictum in a footnote that it might condemn as contrary to public policy a contract where choice of forum and choice of law clauses operated to deprive a party of its rights under the antitrust laws. Mitsubishi Motors Corp. 473 U.S. at 637 n.19. All five federal appellate courts to have considered the Lloyd's forum agreement have held, unanimously, that the Mitsubishi footnote dictum is inapposite. Those courts cited three reasons. First, the footnote is dictum because there was no dispute in that case that the United States antitrust laws applied. Mitsubishi Motors Corp., 473 U.S. at 637 n.19. As dictum, the footnote did not purport to, and could not, overrule the direct holding of Scherk. Here, by contrast, there is a dispute whether United States securities laws apply to the relations between Lloyd's and United States Names. Alien, 94 F.3d at 929; Roby, 996 F.2d at 1364. Second, the Court stated in The Bremen that its principles applied regardless of whether the party seeking to avoid its obligations under the choice clause asserted rights under statutory or judicially created law. 407 U.S. at 15. Third, a foreign forum may not have laws analogous to the antitrust laws, making it unlikely that any remedy will exist for the plaintiff's claims. It is well known that many other countries are fundamentally opposed to the goals and/or methods of the United States antitrust laws. See Rio Tinto Zinc Corp. v. Wcstinghouse Elec. Corp.  A.C. 547, 617, 1 All E.R. 434, 498 ("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"); Timberlane Lumber Co. v. Bank of America, N.A., 549 F.2d 597, 609 (9th Cir. 1976), after remand, 749 F.2d 1378 (9th Cir. 1984), cert. denied, 472 U.S. 1032 (1985). By contrast, there can be no dispute that the laws and courts of England provide remedies for fraud and misrepresentation.
Mitsubishi concluded that nothing in the federal antitrust laws prohibited parties from agreeing to arbitrate antitrust claims which arose out of international commercial transactions.
Crown Homes, Inc. v. Landes, 22 Cal. App.4th 1273, 1277 (2d Dist. 1994).
*17 B. Five Federal Appellate Courts and Numerous Lower Courts Have Upheld the Choice Clauses in Lloyd's Contracts With Names in the Face of "Anti-Waiver" Provisions in Federal Laws Indistinguishable From the California Provisions On Which Plaintiffs Rely
Plaintiffs are not the first United States Names to refuse to abide by the forum agreement. To date, five United States Courts of Appeals have held that the claims of hundreds of identically-situated Names must be litigated in England pursuant to the forum agreement. The vast majority of those Names brought claims under federal securities and racketeering laws and state securities and consumer protection laws, many of which contain anti-waiver provisions. The federal appellate courts have all held, without a single dissent, that the Names' forum agreements must be enforced; three times the United States Supreme Court has denied review. Allen, 94 F.3d 923; Shell v. R.W. Sturge, Ltd., 55 F.3d 1227 (6th Cir. 1995); Bonny v. Society of Lloyd's, 3 F.3d 156 (7th Cir. 1993), cert. denied, 510 U.S. 1113 (1994); Hugel v. The Corporation of Lloyd's. 999 F.2d 206 (7th Cir. 1993); Roby, 996 F.2d 1353, cert. denied, 510 U.S. 945 (1993); Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953 (10th Cir. 1992), cert. denied, 506 U.S. 1021 (1992). See also Hirsch v. Oakeley Vaughn Underwriting. Ltd., No. 89-2563 (5th Cir. May 31, 1990), cert. denied, 498 U.S. 981 (1990) (holding that doctrine of forum non conveniens requires litigation of Names' claims in English courts) [A.A. Vol. IX at 1932-39].
The federal courts have held that the public policy behind the United States securities laws -- the prevention of fraud through a policy of full disclosure -- would not be thwarted by enforcing the Names' forum agreements, because British law provides the Names with ample remedies *18 for their claims. Most recently, the Fourth Circuit in Allen, stated:
We do not believe that enforcing the parties' forum selection and choice of law provisions in this case will subvert the United States securities laws' policy of prohibiting fraud. British law not only prohibits fraud and misrepresentations as do the United States securities laws, but also affords Names adequate remedies in the United Kingdom. [Citing Shell, Benny, Roby and Riley]. Under British law, the Names could bring claims based on the tort of deceit, breach of contract, negligence, and breach of fiduciary duty, and could obtain injunctive, declaratory, rescissionary, and restitutionary relief. And "the fact that an international transaction may be subject to laws and remedies different or less favorable than those of the United States is not a valid basis to deny enforcement." Riley, 969 F.2d at 958.
Alien. 94 F.3d at 929 (citations omitted.)
The federal courts have recognized that Lloyd's forum agreements serve the purposes behind the principles of The Bremen and its progeny: providing certainty and predictability in international commerce, in the face of substantial doubt as to whose law should otherwise apply. The Second Circuit in Roby, stated:
We are cognizant of the important reasons for enforcing such clauses in Lloyd's agreements. Lloyd's is a British concern which raises capital in over 80 nations. Its operations are clearly international in scope. 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.
The Fourth Circuit went further, holding that notwithstanding the anti-waiver provision in federal securities laws, it would be inappropriate to impose United States securities laws on markets conducted entirely in other countries:
simply because membership in such markets is solicited in the United States. Membership solicitation is incidental to the formation *19 of underwriting syndicates and the management of risks, all of which occur in London, ... The United States nexus to the transactions involved in this case is thus incidental and tangential.
To permit the Names to escape their agreements to be bound by the laws and rules of the British market just at a time when they face losses would also violate the most fundamental precepts of international comity.
Allen, 94 F.3d at 929-930.
Federal courts in addition to Alien have considered and rejected the argument that the "anti-waiver" provisions of federal securities laws render the forum agreement in the 1986 General Undertaking unenforceable. Like the Fourth Circuit in Allen, other courts have held that public policies favor enforcement, and that the provisions of English law are consistent with the policies of the United States securities laws. Shell, 55 F.3d at 1231; Bonny. 3 F.3d at 162; Roby, 996 F.2d at 1366; see also Richards v. Lloyd's of London, Fed. Sec. L. Rep. (CCH) ¶98,801, 1995 U.S. Dist. LEXIS 6888 (S.D. Cal. May 1, 1995) (dismissing claims by over 600 Names, including claims under California Securities laws); Tufts v. Corporation of Lloyd's. 1996 U.S. Dist. LEXIS 12606 (S.D.N.Y. Sept. 18, 1996); Ashenden v. Lloyd's of London, 1996 U.S. Dist. LEXIS 18336 (N.D. Ill. Dec. 9, 1996); McDade v. Lloyd's of London, Civil Action No. H-94-3714 (S.D. Tex. June 26, 1995). [FN10]
FN10. Leslie v. Lloyd's of London, 1995 WL661090 (S.D. Tex.), cited exhaustively by plaintiff because it is the only case to have refused to enforce the forum agreement, is currently on appeal to the Fifth Circuit. Its holding is so at odds with other decisions that it has not even been accepted by sister courts in the same judicial district. See Haynsworth v. Lloyd's of London, 933 F. Supp. 1315 (S.D. Tex. 1996), McDade, Civil Action No. H-94-3714 (S.D. Tex. June 26, 1995).
*20 In many of these cases, the courts dismissed claims brought under state securities and common law theories as well as federal claims. For example, the Shell plaintiffs brought only state securities law claims. They argued that because their state law claims were "strict liability" claims and did not require proof of fraud, their potential remedies in England were inadequate. The Sixth Circuit disagreed:
The fact that parties will have to structure their case differently than if they were litigating in federal court is not a sufficient reason to defeat a forum selection clause.
Shell, 55 F.3d at 1231. The court further held that the Choice Clauses would not offend Ohio public policy. Noting that earlier cases had "upheld the forum selection clauses despite the federal and state policies underlying protection for investors against fraud and nondisclosure," the court held that those interests "are at least equal to, if not greater than, the interest Ohio has in protecting the public from its own lack of knowledge." Id. at 1231-32.
The courts in Bonny and Riley also dismissed claims brought under state securities laws with anti-waiver provisions indistinguishable from California securities laws. The Bonny complaint alleged violations of New Jersey securities laws. A.A. Vol. IX, pp. 2052-54. The Riley Complaint asserted claims under Colorado securities laws. A.A. Vol. IX, pp. 2080-81. The Colorado and New Jersey statutes contain anti-waiver provisions comparable to the federal and California provisions. Compare Cal. Corp. Code § 25701with 15 U.S.C. §§ 77n, 78cc(a) (anti-waiver provisions of federal securities laws) with N.J.S.A. § 49:3-71(f) and C.R.S. § 11-51604(*21 11) (New Jersey and Colorado anti-waiver provisions, respectively). [FN11]
FN11. Throughout their brief, beginning with the footnote on page 1, plaintiffs rely extensively on documents not in the record, such as complaints filed by state regulators and an amicus brief from the Securities and Exchange Commission. This Court denied plaintiffs' request to take judicial notice of these items. See Court Order dated October 29, 1996. Given the Court's ruling, Lloyd's will not further refer to those items.
In Richards, the United States District Court for the Southern District of California found no basis to distinguish Roby, et al., and dismissed the claims of over 600 Names brought under the securities laws of the United States and under California Corporations Code sections 25000, et. seq., the same provisions upon which plaintiffs here rely. A.A. Vol. XXXV at 8358-8360, 8459- 8461, 8481. The court in Haynsworth, rejecting the rationale of its sister court in Leslie, held that enforcement of the forum agreement was not barred by an anti-waiver provision in a Texas consumer protection law:
When a party chooses to go to England to become an underwriter in England, he probably chooses English laws and courts; this choice is not a waiver but a consequence of independent, substantial choices otherwise made.
Haynsworth, 933 F. Supp. at 1323. [FN12]
FN12. In Ashenden, 1996 U.S. Dist. LEXIS 18336, the court dismissed claims brought under Illinois securities laws. Illinois had no anti-waiver provision; nonetheless, the court stated: "This Court can discern no relevant differences between the policies served by the federal securities laws addressed in Bonny and those served by the Illinois securities laws at issue here." Id. at *11.
If enforcement of the forum agreement at issue here does not offend the public policy behind federal securities laws, for the same reasons, the policy underlying California securities laws does not justify ignoring the *22 forum agreement here. "[T]he public policies of a state deserve less weight than the public policies of the nation." Gau Shan Co. v. Bankers Trust Co., 956 F.2d 1349, 1358 (6th Cir. 1992). "The reason for giving effect to the parties' choice of law are compelling when the courts are concerned with a sophisticated transnational business transaction." Nedlloyd, 3 Cal.4th at 487 (Kennard, J., concurring and dissenting).
To hold that the right created in [one state] is so immoral as to be unenforceable here would involve a complacent attribution of moral superiority to this state. This concern takes an even greater importance in the context of international relations.
Wong v. Tenneco, Inc., 39 Cal.3d 126, 136-137 (1985) (internal citation and quotations omitted) (footnote omitted) (court declined to apply the "public policy" exception to the comity doctrine, noting that it must not overlook any international interests in seeking to achieve substantial justice); See also, Shell v. R.W. Sturge Ltd., 850 F. Supp. 620, 630 (S.D.Oh. 1993), aff'd 55 F.3d 1227 (6th Cir. 1995) ("public policy interests behind ... statutes which contain anti-waiver ... provisions, must yield to the countervailing interest in the enforceability of international agreements.")
C. Hall and Wimsatt Do Not Compel A Different Result Under California "Anti-Waiver" Provisions
Plaintiffs rely almost exclusively on two decisions from California's Fourth District Court of Appeal that declined to enforce forum selection clauses. Neither case is dispositive of the issues here. Unlike this case, neither case had international implications. Indeed, had there been no forum or choice of law agreements in the relevant contracts, there would have been no choice of law issue: it was clear in those cases that California law would have applied.
*23 The first case, Hall, 150 Cal. App.3d at 418, held that the anti-waiver provision in Cal. Corp. Code § 25701prohibited enforcement of a forum selection clause. The court relied upon the reasoning of Wilko v. Swan, which has since been overruled. Rodriguez de Quijas, 490 U.S. at 484-85.
Further, in Hall, unlike this case, the chosen forum was not the home of any party, nor were any witnesses located there. Hall, 150 Cal.App.3d at 421 (Wallin, J., concurring). On the contrary, in Hall, all the parties were California residents, the corporate defendant's principal place of business was in California and the entire transaction took place in California. Id. Although Nevada was designated as the forum for any litigation, the only relationship between Nevada and the transaction was that the parties had flown there to execute papers in the Las Vegas airport. Id. "Under these facts a Nevada forum makes no sense." Id. Thus, the lack of any relationship between Nevada and the transaction in question made it easy for the Hall court to conclude that the forum agreement was unreasonable. Here, by contrast, the locus of all relevant activities is England. England is not only where Lloyd's is, and where it regulates the insurance market under English law, it is also where the formation of syndicates and the underwriting of risks by Names take place. Allen, 94 F.3d at 929. [FN13]
FN13. Although the 1986 General Undertaking was signed in the United States and certain communications about Lloyd's membership occurred here, such limited activities do not transfer the locus of the parties' transaction to the United States. The solicitation of members is "incidental" to the market activities that occur in England. Allen, 94 F.3d at 929. That is why one court held that the Name's contract with Lloyd's -- the 1986 General Undertaking - is not a "security" or an agreement to purchase a "security." Ashenden, 1996 U.S. Dist. LEXIS 18336 at * 16-17.
Moreover, in Hall, the transactions at issue were indisputably *24 securities transactions. In contrast, Lloyd's strenuously disputes the application of state or federal securities laws to the transactions at issue, the Wests' decision to become Names, and their subsequent underwriting of insurance risks in the Lloyd's market. The Hall parties' apparent efforts to avoid the application of a California statute that would otherwise have clearly applied stands in stark contrast to plaintiffs' argument that even the bare allegation that California securities laws apply invalidates a forum selection clause which serves the important purpose of facilitating the regulation of an international marketplace, located in England, by an English regulator.
The second case plaintiffs cite, Wimsatt, supra, is also inapposite. It was not a securities case and expressly limited its holding to cases arising under franchise agreements. Wimsatt, 32 Cal.App.4th at 1523 n.8. Wimsatt partially relies on Hall (id. at 1521-22), and so suffers the same defect of relying ultimately on Wilko, which is now overruled.
Critically, like Hall, Wimsatt did not involve an international transaction, like those at issue here. Thus, those cases did not implicate the concerns for international comity and commerce that were the guiding spirit not only of Nedlloyd and The Bremen, but also of Scherk, Mitsubishi and all their progeny. The total lack of international connections in both cases is alone sufficient to distinguish both Hall and Wimsatt. [FN14]
FN14. Plaintiffs' reliance on Haisten v. Grass Valley Medical Reimbursement Fund. Ltd., 784 F.2d 1392 (9th Cir. 1986), is misplaced. Haisten was a "direct action" suit by the estate of a victim of medical malpractice against the insurer of the deceased's negligent doctor. The plaintiff was never a party to any contract choosing the law of a foreign country to resolve policy issues. The policy of affording insurance coverage to innocent victims within the State thus predominated. Insurers generally expect that their obligations to insureds and, in the case of liability insurance, to third parties, will be governed at least to some extent by the law of the forum.
This case, by contrast, does not concern insurance protection of innocent third party victims, except in the ironic sense that here it is the plaintiffs who seek to avoid their obligations to insureds. If anything, the concerns that motivated the Haisten court argue against, not for, allowing these plaintiffs to escape their insurance obligations. See Allen, 94 F.3d at 929-30.
*25 The national, instead of international, focus of Wimsatt led that court to give less consideration to The Bremen, for the Wimsatt court seems to have wrongly concluded that choice of law was not an issue in The Bremen.
Obviously there was no contravention of any special protections afforded oil exploration companies in ultimately requiring the case to be tried in the United Kingdom.
Wimsatt, 32 Cal.App.4th at 1523 and n.7. Choice of law, however, was critical to The Bremen's analysis. The law of the chosen forum provided the defendant a special protection -- enforcement of an exculpatory clause -- that would not have been enforced in a United States court. The Supreme Court reversed the Fifth Circuit because the lower courts gave too much emphasis to the different laws of the competing forums and too little weight to the contract. The Bremen, 407 U.S. at 8. See also Milanovich v. Costa Crociere, S.p.A., 954 F.2d 763, 767 n.7 (D.C. Cir. 1992) (noting that the Bremen Court "recognized that enforcing the provision would have the effect of subjecting the contract to foreign law.")
The Bremen is also controlling despite it involving judge-made rather than legislatively-ordained precepts of public policy, like anti-waiver provisions. The Court expressly recognized the importance of both statutory and judicially recognized public policy. The *26 Bremen. 407 U.S. at 15. The Court concluded that the policy considerations that justify rejection of exculpatory clauses in towage contracts in domestic waters "are not controlling in an international commercial agreement." Id. at 15-16. The Bremen Court adopted the view of the dissenters at the Fifth Circuit, who stated:
[W]e 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. The Bremen court's explicit adoption of this flexible balancing test for all cases in the international sphere, and the California Supreme Court's adoption of The Bremen standard, rather than the principles of Wimsatt, control this case.
D. Fundamental Public Policy Would Be Served, Not Offended, by Enforcement of the Forum Agreements
In Nedlloyd, the California Supreme Court directed California courts to apply the principles of Section 187 of the Restatement (Second) of Conflict of Laws, "which reflects a strong policy favoring enforcement of such provisions" in analyzing the enforceability of a choice of law agreement. Nedlloyd, 3 Cal.4th at 464-65 (footnote omitted). This analysis is equally applicable here. The careful balancing required by section 187 is at odds with the bright-line prohibition on forum agreements plaintiffs ask this Court to adopt.
As the court explained in Nedlloyd, the proper approach under the Restatement is for a court first to ascertain whether the chosen forum has a substantial relationship to the parties or their transaction. Id. at 466. Next, the Court is to consider "whether the chosen state's law is contrary to a fundamental policy of California." Id. (emphasis in original). If there is no conflict in the law, of the chosen forum is appropriate. If California's *27 fundamental policy does conflict with the chosen law, the chosen law is still to be applied unless California has a "'materially greater interest than the chosen state"' in the issue. Id. (internal citation omitted).
Here, there is unquestionably a substantial relationship between Lloyd's, Names and the underwriting of insurance in the Lloyd's market. Lloyd's is not only an English entity, it is, by Act of British Parliament, the regulator of an international marketplace located in London. Its members (including plaintiffs), over 80% of whom are English and the rest of whom come from dozens of countries, contract in England to underwrite insurance risks located throughout the world.
Whether a particular policy is "fundamental," and whether it is contravened by a forum agreement, requires inquiry into the policies behind the laws of California. The goal of California's securities laws "is to protect the public from fraud and deception." Hall. 150 Cal.App.3d at 417. English law does not conflict with this policy. "[T]he available remedies and potential damages recoveries [under English law] suffice to defer deception of American investors." Roby, 996 F.2d at 1365. Accord, Allen, 94 F.3d at 929; Shell, 55 F.3d at 1231-32; Bonny, 3 F.3d at 161. Indeed, English law is in some ways more favorable with respect to statutes of limitation, and affords successful plaintiffs their attorneys' fees even for common law recoveries. A.A. Vol. XXVIII at 6735; A.A. Vol. X at 2284-85.
Plaintiffs' argument that the so-called "anti-waiver" statutes remove all discretion from the court (AOB at 25) is not consistent with Nedlloyd, or with the federal court decisions that have rejected the same anti-waiver argument plaintiffs make here. The thoughtful balancing and comparison of policy concerns mandated by Nedlloyd is at odds with the "bright-line" rule *28 plaintiffs urge upon this Court. The automatic rejection of a forum agreement whenever an anti-waiver provision is potentially implicated ignores the respect for international comity and the laws of other nations which is as much a part of California's public policy as is respect for party autonomy in international commerce. The California Supreme Court held in Wong, 39 Cal.3d at 135-36, that the laws of other nations are accorded comity unless they are "so offensive to our public policy as to be prejudicial to recognized standards of morality and to the general interests of the citizens." Wong, 39 Cal.3d at 135-36 (internal quotations and citations omitted).
Accordingly, courts have upheld the enforcement of forum or choice of law agreements where the new forum's law differed from California's, but still furthered the same general policy. For example, despite California's "strong public policy" against usury, courts in California enforce contracts with choice-of-law provisions that would allow for rates of interest higher than California law permits. See Sarlot-Kantarjian v. First Pennsylvania Mortgage Trust 599 F.2d 915, 916-17 (9th Cir. 1979). California law also permits parties to vary statutes of limitation by contract despite public policy reflected in California statute of limitations. Hambrecht & Quist Venture Partners v. American Medical lnt'1. Inc., 38 Cal.App.4th 1532, 1548-49 (2d Dist. 1995). Further, the fact that a chosen forum would apply a more stringent evidentiary standard for proving fraud does not offend fundamental California public policy. General Signal Corp. v. MCI Telecommunications Corp., 66 F.3d 1500, 1506 (9th Cir. 1995), cert. denied, 116 S. Ct. 1017 (1996). [FN15]
FN15. General Signal is particularly relevant here, because English law on fraud prevention differs from California law since the English standard of proof is "high" and that allegations of fraud "must be specifically pleaded and particularised." A.A. Vol. XXVIII at 6733-34.
*29 Under Nedlloyd and the Restatement analysis required therein, the fact that England does not have statutes and remedies identical in all respects to California is not determinative. English law provides remedies for fraud, whether or not in connection with the sale of a security. Thus, there is no fundamental conflict with California policy. Here, as in Haynsworth,
[t]he plaintiffs' strict view of remedies would invalidate all forum selection because remedies, by the very nature of differing jurisdictions, will inevitably vary.
Haynsworth, 933 F. Supp. at 1324. Further:
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.
Roby, 996 F.2d at 1360. This Court should "refuse to allow a party's solemn promise to be defeated by artful pleading." Id.
The final step of the Nedlloyd analysis is to determine whether California has a "materially greater interest" than England in this dispute. 3 Cal.4th at 466. To render the forum agreement unenforceable, California's interest must be materially greater, even if England's law conflicts with a fundamental public policy of California.
Here, England has a materially greater interest in this dispute. As the Fifth Circuit has recognized, suits by Names against Lloyd's arising from their underwriting at Lloyd's "aim at the heart of the unique self-regulatory mechanism within Lloyd's, which is a product of complex English legislation." Hirsch, Slip Opinion at 7 (A.A. Vol. IX at 1938). *30 The very purpose of the 1986 General Undertaking, as an English appellate court recently noted, was to:
[E]nsure that upon [the Name] becoming a Name, [the Name] became subject to the regulatory regime of Lloyd's. The clauses governing choice of law and choice of venue were ancillary to that object.
Society of Lloyd's v. Clementson, LRLR 307 (Nov. 10, 1994). England's interests in adjudicating cases involving Lloyd's regulatory regime are clearly greater than California's. The only argument proffered by plaintiffs that would arguably support California's interest is that plaintiffs are California residents, who signed the forum selection agreement in California. But, as previously discussed, the Fourth Circuit in Allen noted that mechanics of becoming a Name, solicitation and signing of agreements is incidental to the core activity of Names, which is underwriting. Allen, 94 F.3d at 929.
III. FRAUD IS NOT A BASIS FOR REFUSING TO ENFORCE THE FORUM AGREEMENTS
The trial court did not abuse its discretion in rejecting plaintiffs' claim that the forum agreement was a product of fraudulent inducement. California law does not require that Lloyd's explain to plaintiffs the meaning and significance of each provision in the 1986 General Undertaking. Also, there is no evidence in the record that Lloyd's misrepresented the nature of the forum agreements to plaintiffs. Even if there were, plaintiffs' failure to read the agreement renders unreasonable any purported reliance on such misrepresentations.
A. Lloyd's Did Not Have A Duty To Disclose The Effect Of The One and One-Half Page Forum Agreement To Plaintiffs ___
Plaintiffs suggest that Lloyd's owed them a fiduciary obligation and *31 therefore Lloyd's should have disclosed "the presence and effect of any choice clauses." AOB at 38-39. Plaintiffs offer no legal authority for this conclusion. They have not demonstrated that Lloyd's was a fiduciary to plaintiffs or was otherwise legally obligated to make any disclosures about the forum agreement to plaintiffs.
The law on this point, which plaintiffs have not refuted, makes clear that Lloyd's had no duty to disclose. [FN16] Indeed, in an affidavit filed in the trial court, plaintiffs' own expert opined mat under English law, Lloyd's "does not have any duty of disclosure to Names." A.A. Vol. XXVIII at 6733, ¶ C. United States courts that have considered this issue agree that Lloyd's had no obligation to disclose to Names anything about the forum agreement. Tufts. 1996 U.S. Dist. LEXIS 12606 at *18; Richards. 1996 U.S.Dist. LEXIS 12606 at *30-*31, *35-*36.
FN16. [B]efore a person can be charged with a fiduciary obligation, he must either knowingly undertake to act on behalf and for the benefit of another, or must enter into a relationship which imposes that undertaking as a matter of law.
Committee on Childrens Television, Inc. v. General Foods Corp., 35 Cal.3d 197, 221 (1983). Furthermore, the typical fiduciary relationship is characterized by the repose of trust and confidence in one who "is in a superior position to exert unique influence over the dependent party." In Re Marriage of Reuling, 23 Cal.App.4th 1428, 1438 n.5 (1994) (internal quotations omitted.) Plaintiffs, have not shown that these elements of a fiduciary relationship exist here.
The only support plaintiffs offer for their position that Lloyd's should have made disclosures about the forum agreement are self-serving and irrelevant statements from Deborah and David West, that they relied on and trusted their Members' Agents in selecting syndicates for them. AOB at 7 n.9. Undisputed evidence presented in the trial court by Lloyd's firmly *32 establishes that Members' Agents are agents of the Names, not Lloyd's. A.A. Vol. VIII at 1881- 83. Tufts, 1996 U.S. Dist. LEXIS 12606 at *18; Richards. 1996 U.S. Dist. LEXIS 12606 at *19. Therefore, plaintiffs' purported trust and reliance on their Members' Agents' selection of syndicates does not render Lloyd's liable for not informing plaintiffs of the nature and effect of the forum agreement.
B. Lloyd's Made No Misrepresentations To Plaintiffs That Could Render The Forum Agreement Unenforceable
California law does not excuse plaintiffs' inexplicable failure to read the one and one-half page 1986 General Undertaking, even in the face of purported misrepresentations about its content. Further, the statements cited by plaintiffs did not misrepresent anything about the forum agreement in the 1986 General Undertaking, and are therefore not grounds for disregarding the forum agreement. Also, most of those representations were not even made by Lloyd's.
1. Plaintiffs Are Not Excused from Their Unreasonable Refusal to Read the Forum Agreement
The California Supreme Court's recent decision in Rosenthal v. Great Western Fin. Sec. Corp., 14 Cal.4th 394 (1996) makes clear that California law requires a plaintiff to read a contract before signing it, where there is a reasonable opportunity to do so, even in the face of alleged misrepresentations about its content:
One party's misrepresentations as to the nature or character of the writing does not negate the other party's apparent manifestation of assent, if the second party had "reasonable opportunity to know of the character or essential terms of the proposed contract.
Rosenthal, 14 Cal.4th at 423 (quoting Rest.2d Contracts, § 163.) Further:
[i]f a party, with such reasonable opportunity, fails to learn the *33 nature of the document he or she signs, such 'negligence' precludes a finding the contract is void for fraud in the execution.
Id. (citation omitted.) Thus, the court held:
[O]ne party's unreasonable reliance on the other's misrepresentations, resulting in a failure to read a written agreement before signing it, is an insufficient basis, under the doctrine of fraud in the execution, for permitting that party to avoid an arbitration agreement contained in the contract.
Id. (emphasis in original).
Rosenthal also makes clear that Lynch v. Cruttendon & Co., 18 Cal.App.4th 802, 807 (1990), cert. denied, 115 S. Ct. 52 (1994), and Strotz v. Dean Witter Reynolds Inc., 223 Cal.App.3d 208, 218-219 (1990), cert. denied, 499 U.S. 948 (1991), upon which plaintiffs rely, are incorrect in stating "that a 'plaintiff's failure to read a contract is excusable where reliance is placed on the misrepresentations of the other party."' Rosenthal, 14 Cal.4th at 419-421, 423.
The California Supreme Court's pronouncements in Rosenthal and rejection of Lynch and Strotz are fatal to plaintiffs' fraud defense to the forum agreements. Plaintiffs had at least three weeks to read, analyze, and seek advice about the terms of the 1986 General Undertaking and the forum agreement contained therein. They do not contend that the forum agreement was "hidden" in the 1986 General Undertaking. Nor do plaintiffs contend that the 1986 General Undertaking was too complex to understand. Had plaintiffs read the short 1986 General Undertaking, they would have seen and comprehended the forum agreement.
[N]othing excuses the plaintiffs for not being aware of the substantive provisions of English law that the forum selection clause incorporates into their agreement.
*34 Bonny, 3 F.3d at 160 n.10.
2. Lloyd's Made No Misrepresentations That Render The Forum Agreement Unenforceable.
A fraudulent representation will only invalidate a forum agreement where the misrepresentation was about the forum agreement itself. Ericksen, Arbuthnot, McCarthy, Keamey & Walsh, Inc. v. 100 Oak Street, 35 Cal.3d 312, 323-324 (1983); Rowland v. Paine Webber Inc., 4 Cal. App.4th 279, 287 (1992) (to avoid arbitration agreement, plaintiff must show fraud in the inducement of the arbitration clause, not fraud as to the entire contract). [FN17] To overcome the presumption favoring forum agreements, plaintiffs must provide "clear evidence" of fraud. See Roby 996 F.2d at 1363: Bonny, 3 F.3d at 160; Richards, 1995 LEXIS 6888 at *25; see also, CQL Original Products. Inc. v. National Hockey League Players' Association, 39 Cal. App.4th 1347, 1354 ("the courts have placed a substantial burden on a plaintiff seeking to defeat such a [forum selection] clause ..."); Bancomer, S.A. v. Superior Court 44 Cal.App.4th 1450, 1457 (2d Dist. 1996) ("A forum selection clause is valid in the absence of the resisting party meeting a heavy burden" of proving the clause unreasonable.) (citations omitted.)
FN17. Plaintiffs acknowledge that because forum agreements are similar to arbitration agreements, cases involving the enforceability of arbitration agreements are relevant here. AOB at 39 n.56.
Lloyd's made no misrepresentations regarding the forum agreements to plaintiffs. Each of the statements which allegedly misrepresented the forum agreement -- the October 1983 letter from plaintiffs' Members' Agent Bland Welch to Susan and Deborah West; articles in two Lloyd's publications; a March 1986 letter from plaintiffs' Members' Agent Sturge to *35 the Wests; and a discussion at June 1986 meeting between plaintiffs and a representative of Sturge -- did not misrepresent anything. Thus, the trial court concluded mat these statements were not a basis for invalidating the forum agreement. Further, all but the Lloyd's articles were made by plaintiffs' Members' Agent, not Lloyd's.
The cornerstone for plaintiffs' claim is an October 1983 Bland Welch letter to plaintiffs Deborah and Susan West. [FN18] See AOB at 7-8, ¶ 4. The letter correctly forecasts that the 1986 General Undertaking would be "simple." A.A. Vol. XXXV at 8561. The trial court found both that this statement was not a misrepresentation and that it did not excuse plaintiffs' failure to read the 1986 General Undertaking. R.T., May 19, 1995 at 132:11-18. The 1986 General Undertaking was one and one-half pages long. By contrast, the prior undertaking was a 5-page document that contained provisions that were not yet incorporated into Lloyd's Bye Laws. Further, the Bland Welch letter was sent more than three years before plaintiffs were asked to sign the 1986 General Undertaking. Based upon this significant time lag, it is hard to imagine that plaintiffs considered this letter when, in June 1986, they elected to sign the 1986 General Undertaking without first reading it. Finally, Lloyd's is not responsible for the content of the letter because it was written by plaintiffs' Members' Agent, not Lloyd's.
FN18. There is no evidence that plaintiff David West received such a letter from his Members' Agent or anyone else.
The March 10, 1986 letter is from plaintiffs' Members' Agent Sturge. See AOB at 9, ¶7. That letter made no representations about the content of the forum agreement. It merely stated that an explanatory memorandum would be forthcoming. Had plaintiffs truly read and relied upon this letter, *36 one would have expected that upon receiving the 1986 General Undertaking and finding no explanatory memorandum, plaintiffs would have contacted Sturge to request one. The fact that they did not suggests that plaintiffs either did not read the March 10 letter or did not consider the memorandum important enough to bother with. Either way, because the letter did not misrepresent the terms of the forum agreement, it cannot be the basis for rendering the agreement unenforceable.
Plaintiffs' June 1986 meeting was with Charles Parnell, of Sturge, plaintiffs' Members' Agent. Parnell was not an agent of Lloyd's. Further, plaintiffs admit that he said nothing about the forum agreement. AOB at 10,19.
The so-called "public" descriptions of the 1986 General Undertaking (in the March 1985 Lloyd's Log and Annual Report & Accounts 1985) accurately described the 1986 General Undertaking. See AOB at 8-10, ¶¶ 6, 8. The Lloyd's Log correctly states that "[t]he new undertaking reinforces the Name's obligation to comply with Lloyd's rules." The 1985 Annual Report informed plaintiffs that a "forum agreement" was forthcoming. By this statement, which plaintiffs claim to have seen, [FN19] Lloyd's did disclose that a forum agreement would be included with the new undertaking, thus, satisfying the disclosure obligation that plaintiffs contended Lloyd's owed. Moreover, the article correctly explains that the *37 forum agreement "provide[s] a better protection for Names and assureds." Since Names are dispersed among 80 countries and all Names benefit when all Names are held to honor their underwriting obligations, both insureds and Names benefit from the forum agreement.
FN19. None of the Wests can unequivocally state that they actually read these documents at the time. David West only says that he frequently "skimm [ed]" such publications and that "I believe I read this statement." A.A. Vol. XXVII at 6389. Deborah West admits she does not recall reading either of these statements. A.A. Vol. XXVIII at 6493-6494. Likewise, there is no evidence that Susan West read these statements or the publications they were in. A.A. Vol. XXVIII at 6655-6656.
Thus, plaintiffs' alleged misrepresentations distill into the claim that their own Members' Agent who was not a representative of Lloyd's, represented that the 1986 General Undertaking would be a simpler document than its predecessor. It was. Accordingly, the representations cited by plaintiffs were not false and were not made by Lloyd's. They therefore do not amount to fraud in the inducement.
In the face of fraud allegations similar to those raised by plaintiffs here, other federal courts have nevertheless enforced the forum agreement against other disgruntled Names. For example, in Richards, the plaintiffs proffered evidence of alleged fraud, but the district court determined that the evidence was not sufficiently probative to support the plaintiffs' claims of fraudulent inducement. [FN20] A.A. Vol. XXXV at 8355. Similarly, in Tufts, the court found that representations that the 1986 General Undertaking was for Names' "benefit," did not prove fraud. Tufts, 1996 U.S. Dist. LEXIS 12606 at * 17. In Haynsworth, the court found that allegations that the forum agreement was part of a fraudulent scheme were not probative of fraud. Haynsworth, 933 F. Supp. at 1322. Thus, plaintiffs' are incorrect to allege that no other court has considered the purported quality of fraud *38 evidence they proffer in this case. [FN21]
FN20. Likewise, plaintiffs cite to a case quoting Pelleport Investors v. Budco Quality Theatres, 741 F.2d 273 (9th Cir. 1984). In Pelleport it was not that the challenging party failed to present any evidence, but that it presented "no significant probative evidence" to support its claim of unenforcement due to adhesion. Pelleport Investors. 741 F.2d at 280.
FN21. See also, Rowland. 4 Cal.App.4th at 286 (declaration that the party opposing enforcement of an arbitration clause was (1) besieged with numerous documents represented as simply necessary paperwork, (2) told that since the documents did not affect the party's legal rights he did not have to read them, and (3) not given sufficient time to read the documents, was insufficient to satisfy the burden of proof regarding fraud).
The other cases upon which plaintiffs rely for this prong of their argument are inapposite. Rice v. Dean Witter Reynolds, Inc., 235 Cal. App. 3d 1016 (1991), and Main v. Merrill Lynch, 67 Cal. App. 3d 19 (1977), involved plaintiffs, unlike the Wests, who were unsophisticated and inexperienced investors. Main, 67 Cal. App. 3d at 30 ("[p]laintiff was aged and unschooled in business affairs"); Rice, 235 Cal.App.3d at 1025 (75-year-old woman in poor health who was "unsophisticated in business and had no experience with securities investments"). By contrast, David West was a former insurance company executive, who had been a Lloyd's Name for thirteen years when he signed the 1986 General Undertaking. A.A. Vol. I at 16:20-21; A.A. Vol. X at 2308. Deborah and Susan West represented that they were knowledgeable about investments and that their father would advise them. A.A. Vol. X at 2326, 2338.
Finally, while plaintiffs cite Main, supra, Ford v. Shearson Lehman American Express. Inc., 180 Cal. App.3d 1011 (1986). and Moseley v. Electronic & Missile Facilities, 374 U.S. 167 (1963), in support of the proposition that a forum agreement which is "part" of an "overall" scheme of fraud is unenforceable (AOB at 38-39), this proposition is inconsistent with California law. Rosenthal, 14 Cal.4th at 415-419. In Rosenthal, the California Supreme Court rejected the so-called "permeation doctrine" discussed in Main and Ford because it conflicts with the United States *39 Supreme Court's ruling in Prima Paint v. Flood & Conklin, 388 U.S. 395 (1967), that a forum agreement may only be found invalid by reason of fraud if the fraud relates directly and specifically to the forum agreement itself. Rosenthal, 14 Cal.4th at 417-419. Rosenthal thus follows Prima Eainl in holding that allegations that the underlying contract or transaction were induced by fraud will not defeat the parties' agreement to resolve their disputes in the chosen forum.
Nor does Moseley -- in which the Supreme Court stayed arbitration of a dispute where the plaintiffs alleged that the arbitration clause was part of a fraudulent scheme -- help plaintiffs here. Moseley was significantly eroded, if not overruled by the Supreme Court's subsequent holding in Prima Paint, which made clear that general allegations of fraud in the inducement of a contract do not suffice to avoid a forum clause in that contract. Haves Children Leasing Co. v. NCR Corp., 37 Cal. App.4th 775, 787 (1995). [FN22] None of the cases cited by the plaintiffs supports theirassertion *40 that they have made a showing of fraud sufficient to deny enforcement of the forum agreement at issue here.
FN22. For this reason, plaintiffs' request for discovery should be rejected. The trial court's order precluding discovery is reviewed for abuse of discretion. Morgan v. Community Redevelopment Agency of the City of Los Angeles, 231 Cal. App.3d 243, 259 (2d Dist. 1991), cert. denied, 503 U.S. 937 (1992) (trial court's exercise of discretion regarding discovery will be disturbed only if there is an abuse of discretion). The trial court did "not see what evidence could conceivably be discovered here that will result in a change of the result as far as the court's decision is concerned." R.T., May 19, 1995, at 133:20-27. Because Moseley has been rejected by California courts, evidence the plaintiffs speculate about, from which they hope to show that the forum agreement is part of an alleged fraudulent scheme is irrelevant. Hayes, 37 Cal. App.4th at 787.
Moreover, permitting further discovery and "[requiring extensive investigation would defeat the purpose of [a forum non conveniens] motion." Piper Aircraft Co. v. Reyno, 454 U.S. 235, 258 (1981). Accordingly, other courts have similarly denied Names' requests to conduct further discovery. See, e.g., Hirsch, Slip Opinion at 8 [A.A. Vol. IX at 1939].
IV. THE FORUM AGREEMENTS ARE NOT UNENFORCEABLE CONTRACTS OF ADHESION
The trial court did not abuse its discretion in rejecting plaintiffs' argument that the forum agreements are unenforceable because the 1986 General Undertaking is a contract of adhesion. An adhesion contract is not automatically invalid. Rather, it is fully enforceable unless its terms are unconscionable or beyond the reasonable expectations of the party challenging the agreement. Graham v. Scissor-Tail, Inc., 28 Cal.3d 807, 819-820 (1981). On appeal, plaintiffs argue that the forum agreement in the 1986 General Undertaking is unenforceable because it was not within their "reasonable expectations." AOB at 44.
In Graham, the California Supreme Court made clear that notice of a contractual provision is a significant factor in determining whether the provision is within the reasonable expectations of a party. Graham. 28 Cal.3d at 820 n.18. "Notice" of a contractual term does not require an oral explanation of the term. Courts charge a party with notice of a contractual provision if the provision is clearly set forth. Allan v. Snow Summit. Inc. 96 Daily Journal D.A.R. 9, 14 (December 30, 1996) ("Here, the release provisions were prominent, including large, bold type ....Notification was 'plain and clear."'). Similarly, in Hulsey v. Elsinore Parachute Center, 168 Cal. App. 3d 333 (1985), the court noted:
It is hard to imagine that plaintiff, after having initialed the agreement in three places and signed it in one could have harbored any reasonable expectations other than what was unambiguously *41 recited in the title and text of the agreement.
Id. at 345 (emphasis in original). [FN23] See also Olsen v. Breeze. Inc., 48 Cal. App. 4th 608, 622 (1996) (holding that a liability release in a ski equipment repair agreement was not a surprise because the agreements were short, the "release language was as prominent as other language in the form" and the release was not concealed or misrepresented); San Francisco Newspaper Printing Co. v. Superior Court 170 Cal. App. 3d 438, 443 (1985) (holding that plaintiff "could not reasonably have expected" a contractual provision "to mean something other than what it says," in light of the fact that provision was "clear and unambiguous.") (Emphasis in original). [FN24]
FN23. The release at issue in Hulsey and the forum agreements at issue here share the characteristics of being short and simple and both were signed by the parties attempting to disclaim them. Moreover, unlike the Hulsey plaintiff, who was presented with the release just prior to his first parachute jump, plaintiffs here had at least three weeks to study and consider the significance of the 1986 General Undertaking.
FN24. Contrary to plaintiffs' argument, San Francisco Newspaper is not distinguishable on the grounds that there was no evidence of the deceased husband's reasonable expectations. The court makes clear it did not rest its decision on that ground. San Francisco Newspaper, 170 Cal. App.3d at 441.
The 1986 General Undertaking was a short, less than one and one-half page, document. The forum and choice of law provisions are prominently set forth and themselves constitute most of the short agreement. They are impossible to miss if one reads the agreement. Plaintiffs had at least three weeks to review and study the 1986 General Undertaking before signing it. They do not claim that the forum agreement was "hidden" in the text of the 1986 General Undertaking, or that it is ambiguous, complex or otherwise difficult to understand. If they did not *42 understand that simple clause, plaintiffs had the time and resources to seek professional advice. The only conclusion to be drawn from these facts is that had they taken a few minutes to read the 1986 General Undertaking, they would have understood that they were agreeing to litigate any disputes with Lloyd's in England. Their failure to read the agreement is not a defense to its enforceability. "[F]ailing to read the contract is no excuse, otherwise all contracts of adhesion would be unenforceable at the whim of the adhering party." San Francisco Newspaper, 170 Cal. App. 3d at 443.
The nature of the parties' relationship also made it reasonable for plaintiffs to expect that disputes with Lloyd's would be litigated in England. See Cal-State, 12 Cal. App. 4th at 1681. In Cal-State, the court rejected the same adhesion argument advanced by plaintiffs here and enforced a forum clause encased in a lengthy dealer franchise agreement:
[T]he fact that Cal-State had no power to change this term of the contract is of no import so long as it signed the contract freely and voluntarily, and possessed the power to walk away from negotiations if displeased with the provision. Nor is the provision outside the reasonable expectations of Cal-State -- obviously if two parties to a contract are domiciled on opposite coasts, either one party or the other will wind up with the home-court advantage ..., so the plaintiff would have to recognize this would be part of the price of doing business with Ricoh ....
Cal-State, 12 Cal. App. 4th at 1681. [FN25]
FN25. Plaintiffs' attempt at distinguishing Cal-State is misleading. The case does not say, and the court does not presume, that the plaintiffs president was familiar with the forum agreement at issue there because of his previous relationship with the defendant. Indeed, the court found that the plaintiffs president's statement that he was unaware of the forum agreement "strains credulity" because "he did not claim there was any active concealment of this clause in the arm's length negotiations between the parties," Cal-State, 12 Cal.App. 4th at 1674 n. 7. And, while the plaintiff did not argue on appeal that it was unaware of the forum agreement, the court still concluded that because Ricoh was headquartered in New Jersey, it was reasonable for the plaintiff to expect that disputes could be litigated in New York. Id. at 1681-82.
*43 In becoming Names, plaintiffs were certainly aware that the Lloyd's insurance market is distinctly English. Underwriting and the formation of syndicates take place in England. Virtually all of the parties involved in plaintiffs' Lloyd's-related activities were in England. To become Names, plaintiffs had to travel to England to be interviewed. The agreements plaintiffs signed on becoming Names, including the pre-1986 General Undertaking, contained provisions concerning litigation or arbitration in England. A.A. Vol. I at 105-108; A.A. Vol. XXVIII at 6520-6524, 6678-6682. Thus, in becoming Names, it was reasonable for plaintiffs to expect that they might be required to litigate disputes in England. Indeed, the reasonableness of this expectation is so evident that courts, including the trial court, have determined that under the forum non conveniens doctrine, the multitude of English connections are sufficient grounds for requiring Names to litigate disputes in England, regardless of the forum agreement. Roby v. Corporation of Lloyd's, 824 F. Supp. 336, 348 (S.D.N.Y. 1992); Hirsch, Slip Opinion at 4-8 [A.A. Vol. DC at 1935-39]; R.T. May 19, 1995 at 133:13-19.
V. THIS ACTION SHOULD ALSO BE DISMISSED UNDER THE DOCTRINE OF FORUM NON CONVENIENS
Dismissal pursuant to the forum non conveniens doctrine is an alternative ground for affirming the trial court. While the trial court dismissed the case due to the forum agreement, it noted that had it needed to do so, it would have dismissed the case pursuant to forum non *44 convenient as well. R.T., May 19, 1995 at 133:13-19.
Under California law, dismissal on forum non conveniens grounds is analyzed in three steps. First, it must be determined whether the alternative forum is "suitable." If so, the second step is to weigh the competing public and private interests involved. Stangvik v. Shiley, 54 Cal.3d 744, 751 (1991). Here, the alternate forum, England, is indisputably suitable. Further, the private and public interest factors favor England over California as the site for mis action. Accordingly, several courts have held that the doctrine of forum non conveniens requires dismissal of identical actions filed by other United States Names against Lloyd's. Hirrsch, Slip Opinion at 4-8 [A.A. Vol. DC at 1935- 1939]; Haynsworth, 933 F. Supp. at 1325; Roby, 824 F. Supp. at 348.
A. England Is A Suitable Forum.
"Suitability" involves a narrow inquiry into whether the alternate forum has jurisdiction and whether the statute of limitations in the alternate forum would bar the plaintiffs' causes of action. Stangvik, 54 Cal.3d at 752. Plaintiffs did not dispute below that an English court would have jurisdiction over Lloyd's or that English statutes of limitations were as favorable to plaintiffs as those employed in California. A.A. Vol. XIX at 4493-4499.
Instead, plaintiffs urged that England was an inappropriate forum because plaintiffs would not get a fair hearing. This provincial argument has been soundly rejected by United States courts. "The sophistication and fairness of English courts cannot seriously be disputed, and has repeatedly been recognized by American courts," Roby, 824 F. Supp. at 347. English courts are clearly adequate forums in which to air fraud claims, such as those asserted by plaintiffs against Lloyd's. *45 British Midland Airways Ltd. v. Int'l Travel. Inc., 497 F.2d 869, 871 (9th Cir. 1974). England's courts offer Names a "full panoply" of "ample," "adequate" and "substantial" remedies, including damages. Roby, 996 F.2d at 1365; Roby, 824 F. Supp. at 347-48; see also. Bonny, 3 F.3d at 161-62. (England offers Names "remedies" in "vindication" of their "substantive rights," and also ensures that Lloyd's does not engage in the "exploitation of American investors"). [FN26]
FN26. In addition, the affidavits of English law expert, Mr. Powell, clearly show (as do the Lloyd's Acts) that Lloyd's is not immune from damages for acts done in "bad faith," including fraud and that Lloyd's is not immune from actions seeking equitable relief. A.A. Vol. X at 2279-2292. Numerous courts have relied on evidence given by Mr. Powell to reach this conclusion. See, e.g., Bonny, 3 F.3d at 161-62; Roby, 996 F.2d at 1363-66; Shell, 850 F. Supp. at 623.
Plaintiffs' true objection to England is their belief that a California court will provide them with more favorable remedies -- not that an English court will deprive them of all remedies. The California Supreme Court has determined that differences in the competing forums' procedural or substantive laws are irrelevant unless the alternate forum provides no remedy at all for plaintiffs. Stangvik, 54 Cal.3d at 764.
B. Private Interest Factors Favor England.
Private interest factors are to be weighed in the second step of the forum non conveniens analysis. Such factors include:
[T]hose that make trial and the enforceability of the ensuing judgment expeditious and relatively inexpensive, such as the ease of access to sources of proof, the cost of obtaining attendance of witnesses, and the availability of compulsory process for the attendance of witnesses
Stangvik, 54 Cal.3d at 751. Here, virtually every witness and document of *46 importance is located in England. Any Lloyd's personnel who would act as witnesses reside in England, as do representatives of plaintiffs' Member's Agents. In fact, the only significant witnesses who do not reside in England, or outside of California, are plaintiffs themselves. That plaintiffs traveled to England when they became Names (A.A. Vol. XXVIII at 6487:17-28) suggests that litigating this action in England is not inconvenient for them. Roby, 996 F.2d at 1363. Indeed, Mr. West has presumptively conceded that England is not an "inconvenient" forum since he successfully sued one of his Managing General Agents in London. Hallam-Eames v. Merrett Syndicates. Ltd. 1993 Folio 145, High Court of Justice, Queen's Bench Division, Commercial Court.
Trying this action in California, on the other hand, would require the many England-based witnesses to travel to California for trial at significant expense. Many witnesses, of course, likely will not come to trial at all, and cannot be compelled to do so by a California court. Thus, the private interest factors favor litigation in England.
C. Public Interest Factors Favor England.
The public interest factors include:
[A]voidance of overburdening local courts with congested calendars, protecting the interests of potential jurors so that they are not called upon to decide cases in which the local community has little concern, and weighing the competing interests of California and the alternate jurisdiction in the litigation.
Stangvik, 54 Cal.3d at 751. These factors, too, favor England.
England clearly has the greatest interest in regulating its own insurance market. It is England and not California that has the greatest interest in insuring that all Names and the market in which they do business is fairly regulated. English law governs the relationships among these *47 parties, and it is a peculiarly specialized and intricate set of legal relationships. If a California court were to hear this case, it would find itself instantly knee-deep in the complexities of the market at Lloyd's and the laws that govern it. This would not be the ordinary application of foreign law to a contractual dispute, and would involve a potential morass for the uninitiated. In Piper Aircraft Co., 454 U.S. at 251, the Supreme Court noted:
[T]he doctrine of forum non conveniens ... is designed in part to help courts avoid conducting complex exercises in comparative law. As we stated in [Gulf Oil Corp. v. Gilbert 330 U.S. 501 (1947)], the public interest factors point towards dismissal where the court would be required to "untangle problems in conflict of laws, and in law foreign to itself." 330 U.S. at 509.
In Hirsch, the Fifth Circuit found that English law would govern Names' claims against Lloyd's, and that the public interest favored sending to England a lawsuit "aim[ed] at the heart of the unique self-regulatory mechanism within Lloyds, which is a product of complex English legislation." Hirsch, Slip Opinion at 7 [A.A. Vol. DC at 1938].
That the plaintiffs' claims include causes of action arising under state securities law is no barrier to dismissal on forum non conveniens grounds. In a case directly on point, the Court of Appeals for the First Circuit held that dismissal in favor of litigation in Canada was appropriate despite fraud and misrepresentation allegations under United States securities laws. Howe v. Goldcorp Investments, Ltd., 946 F.2d 944 (1st Cir. 1991), cert. denied, 112 S. Ct. 1172 (1992); See also, Kempe v. Ocean Drilling & Exploration Co., 876 F.2d 1138, 1145 (5th Cir.), cert. denied, 493 U.S. 918 (1989); Transunion Corp. v. PepsiCo. Inc., 811 F.2d 127 (2d Cir. 1987) (dismissing federal RICO claims).
*48 Further, several federal appellate courts have held that the anti- waiver provision of federal securities law does not evidence a United States interest that outweighs the interests of international comity or the English government Allen, 94 F.3d at 928-30; Benny, 3 F.3d at 159-162; and Roby, 996 F.2d at 1362-66. Other courts have considered state anti-waiver provisions and still dismissed Names' lawsuits. Shell, 55 F.3d at 1231-32; Haynsworth, 933 F. Supp. at 1323.
Accordingly, notwithstanding the forum agreement, the nexus of this action is clearly England, which has a substantial interest in claims made against a self-regulatory market located there. Dismissal of this action is therefore appropriate pursuant to the forum non conveniens doctrine.
For the forgoing reasons, the trial court's dismissal of this action should be affirmed.