Chapter 14 - § 14.6 • CHOICE OF LAW PROVISIONS BINDING

• Jurisdiction: Colorado

§ 14.6 • CHOICE OF LAW PROVISIONS BINDING

The preceding cases discussed jurisdiction over foreign defendants when there are no agreements between the parties that include choice of law and forum selection provisions. Federal courts have generally denied jurisdiction over federal securities laws claims when the relevant agreements contain forum selection and choice of law agreements.

In Bonny v. Society of Lloyds,⁷³ the court held that U.S. investors in the Lloyd's insurance syndicates were bound by English forum selection and choice of law provisions in the membership agreements even if "the United States' securities laws would provide . . . a greater chance of success" to the plaintiffs.⁷⁴

In Trafton v. Deacon Barclays de Zoete Wedd Ltd.,⁷⁵ federal courts asserted jurisdiction over a Canadian investment adviser whose only contacts with the United States were telephone calls made by company employees to U.S. brokers and investment advisers soliciting investment in a Canadian company.

In Frietsch v. Refco, Inc.,⁷⁶ the federal court refused to accept jurisdiction in the United States in an action by German investors against a U.S. commodities broker when the investment contracts required that suits be brought in Germany. In Intershop Communications AG v. Superior Court,⁷⁷ a California state court found that it would not apply U.S. law when the plaintiff was bound by a forum selection clause in the German employer's stock exchange agreement.

In Richards v. Lloyds of London,⁷⁸ the Ninth Circuit en banc reversed a 1997 panel decision that held contrary to many other cases that enforce a choice of law provision. The plaintiff had agreed to participate in a Lloyd's insurance syndicate as a "Name," one who had unlimited liability to pay insurance claims incurred by the syndicate. The syndicate in question found itself with a huge liability reinsuring toxic waste claims. Lloyd's had undertaken a major recruitment program in the United States, using the mails and paying commissions to broker-dealers for the introduction of people who would be Names. Many of the Names were attracted to the Lloyd's syndicates because of the Lloyd's name and the historic return many syndicates had achieved. (Each syndicate operated independently under Lloyd's supervision.) The investors each signed an agreement with Lloyd's, which provided that any litigation regarding the agreements would be subject to English law and be brought in English courts. The plaintiffs brought suit against...