AAR Int'l Inc v. Nimelias Enterprises ( 2001 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 00-2737
AAR International, Incorporated,
Plaintiff-Appellant,
v.
Nimelias Enterprises S.A., Vacances
Heliades S.A. and Princess Airlines S.A.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern
Division.
No. 99 C 8090--Elaine E. Bucklo, Judge.
Argued December 7, 2000--Decided April 27,
2001
Before Bauer, Manion, and Rovner, Circuit
Judges.
Bauer, Circuit Judge. AAR International,
Inc. ("AAR") appeals from the decision of
the district court granting the
appellees’ motion to abstain, stay and/or
dismiss proceedings which AAR had brought
against Vacances Heliades S.A. ("VH").
AAR also asks us to remand the case to
the district court with instructions to
deny VH’s alternative motion to dismiss
the action on grounds of forum non
conveniens. For the reasons set forth
below, we reverse and remand.
BACKGROUND
AAR leased a Boeing 737-3Q8 aircraft to
VH for a term of 96 months pursuant to an
Aircraft Lease Agreement in May of 1998.
Shortly thereafter, VH subleased the
plane to Nimelias Enterprises S.A., who
in turn sub-subleased it to Princess
Airlines. VH and Nimelias have assigned
to AAR their rights under the sublease
and subsublease, respectively. On
November 23, 1998, AAR contracted to sell
its rights in the plane, the lease, the
sublease, and the subsublease to First
Security Bank as owner trustee for the
benefit of TA Air X Corp. However, on
October 28, 1999, First Security Bank and
TA Air X Corp. assigned and transferred
back all such rights to AAR.
On August 23, 1999, First Security/1
provided defendants with written notice
asserting that they were in default of
their obligations under the various lease
and sublease agreements in several
respects. Specifically, AAR claimed that
the defendants had violated the lease by:
(1) permitting delinquent EuroControl
charges of approximately Euro 700,000 to
accrue on the plane;/2 (2) failing to
keep the plane in serviceable condition
by allowing an engine to be taken off-
wing and to remain unserviceable for over
one year and by failing to take required
steps to enable the engine to be repaired
and maintained; and (3) failing to pay
variable rent under the lease for July,
1999. As a further response to these
alleged acts of default, AAR and First
National provided the defendants with
written notice of termination of the
lease on September 7, 1999.
VH claims that AAR failed to fulfill
some of its obligations under the lease
before it sent notice of the defendants’
alleged default, and that at least one of
the actions that AAR characterizes as an
act of default was caused by AAR’s prior
breach. Specifically, AAR notes that the
lease obliged AAR to deliver the plane
"fresh from a Boeing Maintenance Planning
Document C-7 check (overhaul) with all
CPCP tasks current and completed." VH
claims that the C-7 overhaul inspection
"makes the [a]ircraft airworthy for at
least 8,000 flight hours."/3 However,
VH claims that the plane’s engines began
to develop technical problems after about
3,500 flight hours, and that a subsequent
maintenance check revealed that one of
them was in need of immediate and
extensive repairs. VH asserts that it
needed certain maintenance records to
perform the required repairs, including
video boroscopes of the engine which the
lease had required AAR to perform before
delivering the plane to VH. VH maintains
that it contacted TA Air (which was at
that time the owner-participant of the
plane and of AAR’s rights under the
lease) and requested the maintenance
records (including the boroscopes), but
that the records could not be found. VH
claims that after investigating the
matter, it concluded that the boroscopes
had not been completed. VH claims that it
was unable to repair the engine without
the required maintenance documents, and
was therefore forced to take the engine
off-wing and to replace it with a
substitute engine, which it had leased
from another company at a cost of
$700,000. According to VH, TA Air
consented in writing to the engine
substitution on June 3, 1999. VH sent the
original engine to an Israeli company for
repairs.
On October 1, 1999, less than one month
after First Security and AAR had sent the
defendants its notice of termination of
the lease, VH filed a complaint before
the One Member First Instance Court of
Athens, Greece against "AAR Corp.,"
(AAR’s parent company, which AAR insists
is a wholly separate legal entity from
AAR), Transamerica Equipment Financial
Services, and TA Air. VH alleged that AAR
and TA Air had breached the lease and
caused VH damages by failing to perform
required maintenance and by failing to
provide VH with the information necessary
to repair the engine. VH asserted that
the defendants’ termination of the lease
was "invalid, improper and fraudulent"
because: (1) it came from the owner
trustee of the aircraft (First Security)
rather than from the owner-participant
(TA Air); and (2) it was "supported on
non-existent and unfounded grounds, which
have been created by those who have made
the termination." (That is, VH claimed
that AAR and TA Air were themselves
keeping the engine off-wing, and
therefore keeping the plane out of
serviceable condition, by refusing to
turn over the records needed to make the
repairs.) The complaint sought the arrest
of AAR’s assets in Greece (including the
plane)/4 as security for VH’s damage
claims, an order prohibiting the
deregistration and departure of the
aircraft from Greece, and the maintenance
of the status quo until a hearing on the
merits of VH’s damage claims.
On October 8, 1999 AAR Corp. and TA Air
filed handwritten responses with the
Greek court. AAR Corp. denied that the
arrest of its assets and of the aircraft
was necessary, arguing that it was a
publically traded corporation with
significant assets, and that therefore VH
was exposed to no financial risk. AAR
Corp. also argued that it should be free
of any legal liability because AAR’s
rights in the lease were assigned to TA
Air at the time that the engine failure
occurred, and because the contract
expressly provided that the plane was
leased "as is" with no warranty. On
October 11, 1999 the Athens court issued
a brief handwritten provisional order
prohibiting the deregistration and
departure of the plane pending a
subsequent hearing, which was set for
November 11, 1999. At the November 11
hearing, counsel for the parties appeared
and presented arguments. AAR claims that
during the hearing, its local counsel
orally argued that AAR was a separate
entity from AAR Corp., that only the
former was a party to the lease, and that
VH had therefore named the wrong party in
its complaint. On November 15, 1999, the
court reaffirmed and extended the October
11th provisional order pending a final
decision on the merits. On November 15,
TA Air filed a written objection to the
November 11 order, in which it argued
that AAR, Corp. and AAR International,
Inc. were separate entities. On October
28, 1999 TA Air transferred back its
interest in the plane and the lease to
AAR.
On November 22, VH filed a second action
against "AAR, International Inc. Corp."
and TA Air in the Multi Member First
Instance Court in Athens (the "second
Athens action"). This time, VH sought
substantial damages for costs arising out
of the failure of the original engine.
Specifically, VH claimed $3.9 million to
cover the cost of leasing a replacement
engine, plus approximately $200,000 to
cover late fees and a lost security
deposit in connection with that leasing.
VH’s theory of recovery in the second
Athens action was that AAR breached the
lease by failing to perform the required
video boroscopes on the engine before
delivery, by failing to deliver the
engine in working condition for 8,000
flight hours, and by failing to provide
VH with the maintenance records necessary
to repair the original engine. The
damages sought covered the period from
the filing of the first action on October
1, 1999 to the date of the filing of the
second action. The Greek court set a
court date for December 14, 2000. The
parties dispute what was to occur on this
date; VH claims that the case was "set
for trial" on that date, while AAR
contends (through the affidavit of its
Greek attorney) that the December 14 date
was for a preliminary hearing only, that
no witness examination or discovery was
scheduled to occur until after that date,
and that no trial would likely occur for
several years.
On December 13, AAR filed suit against
VH, Nimelias, and Princess (the
"appellees") in the Northern District of
Illinois, seeking damages for the
defendants’ breach of the lease. The
asserted grounds for the suit were
identical to those stated in the written
notice of default (namely, that the
appellees had allowed the engine to go
off-wing, that they had allowed
EuroControl liens to accrue, and that
they had failed to pay variable rent on
the plane for July, 1999.) The complaint
asserted that these acts of default
justified AAR in terminating the lease in
September, 1999. AAR sought damages in
excess of $21 million to cover costs of
returning the plane or of any engine to
the United States, and of restoring the
plane to airworthy condition. AAR also
sought reimbursement for the EuroControl
charges that it claimed it was forced to
pay on Princess’ behalf.
On January 25, 2000 the Athens court
issued a written decision in the first
Athens action under the title "Provisory
Measures Procedure." After concluding
that Greek law applied to the action, the
court found several facts to be
"probable" in light of its consideration
of witness testimony, oral arguments,
documents, and written submissions
presented by the parties during the
November 11 hearing. For example, the
court found it probable that AAR Corp.
and AAR are the same legal person, and
that AAR Corp. failed to deliver the
aircraft with its engines properly
maintained, forcing VH to lease a
replacement engine in order to continue
operating the aircraft, thereby incurring
expenses of 221,000.000 Greek Drachmae.
The court also found that the aircraft
appeared to be AAR Corp.’s "sole
negotiable asset," and that the situation
regarding AAR Corp.’s assets was
"doubtful, creating a financial risk for
[VH] as per the satisfaction of its
requirements." The court then held that
these provisional findings supported VH’s
requested "safety measure of conservatory
seizure for 221,000 Grd against [AAR
Corp.]" plus an additional 29,000 Grd in
interest and fees. The court then ordered
"the conservatory seizure of any movable
or real estate of [AAR Corp.]" and of the
aircraft "in order to ensure [VH]’s claim
against [it] . . . up to the amount of
250,000 Grd." The court also expressly
allowed AAR Corp. to cancel (or if the
seizure had already been enforced, to
replace) the seizure by providing the
Court’s Secretarial Service with a bank
guarantee in the form of an irrevocable
line of credit in the same amount from a
creditable bank operating in Greece./5
The parties provide differing
characterizations of the purpose and
effect of the first Athens action. VH
describes the first Athens action as an
emergency action seeking the seizure (or
arrest) of the aircraft to guarantee that
there would be assets available to
satisfy a judgment that VH may obtain
against AAR, and seeking an assessment of
those damages. VH asserts that the
"findings" made by the Athens court on
January 25 are not provisional, and in
support of this proposition it provides
an affidavit of its Greek attorney which
states that it is extremely rare where
the Multimember First Instance Court of
Athens will overturn the findings of the
Emergency Court. Conversely, AAR presents
the testimony of its own Greek attorney,
who states by affidavit that under
applicable Greek law and procedure, the
First Athens action was provisional in
nature, and nothing adjudicated therein
constitutes a finding of fact or law for
any purpose. Further, he asserts that the
order entered by the Athens court on
October 11, 1999 was meant only to
protect the status quo ante until hearing
on the petition, and that the November 11
order likewise only maintained in effect
the prior order pending a judgment.
Furthermore, AAR’s Greek lawyer states
that the Greek court did not need to have
personal jurisdiction over any of the
defendants in order to issue such
provisional relief, and that no ruling in
the first Athens action operates as a
finding that the Athens court has
jurisdiction over the defendants or that
such defendants have been formally served
with process (other than by telegram).
Finally, he asserts that the January 25,
2000 order in the first Athens action
constituted only a temporary arrest (or
attachment) of the aircraft and a
provisional order prohibiting the
deregistration and departure of the
Aircraft pending the final resolution of
VH’s claims.
Subsequently, VH instituted two
additional related actions in the Greek
courts. After AAR posted the bank
guarantee and attempted to remove the
plane from Greece on February 4, 2000, VH
filed another emergency proceeding (the
"third Athens action"). Like the first
action, this action sought the immediate
seizure of the aircraft as well as a
prohibition against the deregistration
and departure of the plane until a final
and unappealable decision is issued (and
in any case until the engine is
repaired). It also sought the attachment
of all of "AAR International Corp."’s
assets in Greece, and a provisional order
prohibiting the deregistration or take-
off of the aircraft, as well as any other
action which might change the actual and
legal status of the plane and or any
other assets of the defendant. The
purpose of this action was to secure
potential recovery under the second
Athens action, that is, it was a request
for temporary relief pending the outcome
of that action in order to ensure that
"AAR International Corp." had sufficient
assets available to cover any potential
damages awarded against it in the second
action.
On February 7, 2000, the Athens Court
granted VH the relief it sought in the
third action, and again ordered the
seizure of the aircraft and provisionally
prohibited its deregistration or
departure. Once again, the court provided
that the plane would be allowed to be
deregistered and removed from Greece if
AAR posted a bank guarantee in the amount
of 250,000 Grd. AAR posted the bank
guarantee shortly thereafter, and removed
the plane from Greece. In addition, VH
filed a fourth action in Athens, which it
describes as a continuation or renewal of
the first Athens action. VH claims that,
under Greek law, it was obliged to file
the fourth, "non-emergency" action in
order to recover any damages from AAR and
to maintain in force all of the orders
and decisions given according to the
emergency procedure. VH asserts that the
fourth Athens action is "exactly the same
case" as the first Athens action, except
that it is filed according to "ordinary"
or "non-emergency" procedures.
In the federal action, the appellees
moved the district court to abstain under
the Colorado River doctrine in light of
the pending Greek actions, or in the
alternative, to dismiss the action on
grounds of forum non conveniens. Finding
that the American action was parallel to
the ongoing Greek litigation and that the
Colorado River factors favored
abstention, the district court granted
the appellees’ motion to abstain. The
court did not address the forum non
conveniens issue. AAR appealed.
DISCUSSION
A) Abstention
Federal courts have a "virtually
unflagging obligation" to exercise the
jurisdiction conferred on them by
Congress. Colorado River Water Cons.
Dist. v. United States, 424 U.S. 800, 817
(1976). Nevertheless, in "exceptional"
circumstances, a federal court may
abstain from hearing a suit and "await
the outcome of parallel proceedings as a
matter of ’wise judicial administration,
giving regard to the conservation of
judicial resources and comprehensive
disposition of litigation.’" Finova
Capital Corp. v. Ryan Helicopters U.S.A.,
Inc., 180 F.3d 896, 898 (7th Cir. 1999)
(quoting Colorado River, 424 U.S. at
817). However, because the federal courts
have a "heavy obligation" to exercise
jurisdiction, "only the clearest of
justifications will warrant dismissal" of
the federal action in deference to a
concurrent state proceeding in the name
of wise judicial administration Colorado
River, 424 U.S. at 819, 820. Therefore,
our task in determining whether
abstention is appropriate is "not to find
some substantial reason for the exercise
of federal jurisdiction by the district
court, . . . [but] rather . . .
toascertain whether there exist
’exceptional’ circumstances, the
’clearest of justifications,’ that can
suffice under Colorado River to justify
the surrender of that jurisdiction."
Moses H. Cone Mem’l Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 25-26 (1983).
We review a district court’s decision to
abstain under Colorado River for abuse of
discretion. See Finova, 180 F.3d at 898.
However, to avoid reversal, a district
court must exercise its discretion under
the standards prescribed by Colorado
River. That is, it must consider the
factors listed in Colorado River and its
progeny and determine whether in light of
those factors exceptional circumstances
exist warranting abstention. See Moses H.
Cone Mem’l Hosp., 460 U.S. at 19. If
there is any substantial doubt that the
parallel litigation will be "an adequate
vehicle for the complete and prompt
resolution of the issues between the
parties," it would be a "serious abuse of
discretion" for the district court to
stay or dismiss a case in deference to
the parallel litigation. Id. at 28.
Moreover, while the situation confronting
a court on a motion to abstain "is
somewhat different where, as here, the
alternate forum is not the tribunal of a
state of the federal union to which,
under our Constitution, we owe a special
obligation of comity," we apply the same
general principles with respect to
parallel proceedings in a foreign court
in the interests of international comity.
Finova, 180 F.3d at 898 (citing Ingersoll
Milling Mach. Co. v. Granger, 833 F.2d
680, 685 (7th Cir. 1987) (internal
quotation omitted)).
In evaluating the propriety of the
district court’s decision to abstain
under Colorado River, we must first
determine whether the federal and foreign
proceedings are parallel. See Finova, 180
F.3d at 898 (citing Caminiti & Iatarola,
Ltd. v. Behnke Warehousing, Inc., 962
F.2d 698 (7th Cir. 1992)). This is a
legal issue which we review de novo. See
Property & Cas. Ins. Ltd. v. Central
Nat’l Ins. Co. of Omaha, 936 F.2d 319,
321 (7th Cir. 1991) (citations omitted);
Ryan v. Johnson, 115 F.3d 193, 196 (3d
Cir. 1997) (citation omitted). If the
actions are not parallel, the Colorado
River doctrine does not apply. See
Interstate Material Corp. v. City of
Chicago, 847 F.2d 1285, 1287 (7th Cir.
1988). Suits are parallel if
"substantially the same parties are
litigating substantially the same issues
simultaneously in two fora." Schneider
Nat’l Carriers, Inc. v. Carr, 903 F.2d
1154, 1156 (7th Cir. 1990). Suits need
not be identical to be parallel, see
Caminiti, 962 F.2d at 700, and the mere
presence of additional parties or issues
in one of the cases will not necessarily
preclude a finding that they are
parallel. See id. at 701; Lumen Constr.,
Inc. v. Brant Constr. Co., Inc., 780 F.2d
691, 695 (7th Cir. 1985). The question is
not whether the suits are formally
symmetrical, but whether there is a "sub
stantial likelihood" that the foreign
litigation "will dispose of all claims
presented in the federal case." Day v.
Union Mines Inc., 862 F.2d 652, 656 (7th
Cir. 1988) (quoting Lumen, 780 F.2d at
695).
The district court found that the
federal action and the Greek actions were
parallel. The court reasoned that:
[t]here is a substantial likelihood that
[the Greek] cases will dispose of all the
issues in the federal litigation because
a single member of the Greek court, which
normally sits as a panel of three, has
found on an emergency hearing that AAR is
liable to the defendants here
(overlapping with some of the plaintiffs
there) and has ruled in a preliminary way
on damages.
The court also found that AAR had offered
"no plausible reason to think that this
ruling will be reversed by the full
panel," and stated that "if there will be
anything more to litigate in this matter
than liability and damages, AAR does not
explain what it is." Finally, the
district court concluded that if the
ruling of the Greek judge is upheld,
"that would probably end the matter,"
because the ruling would be entitled to
recognition and would have preclusive
effects over the claims brought in the
federal action.
AAR challenges the district court’s
finding on several grounds/6, but we
can resolve the matter by addressing only
one. AAR maintains that the claims that
it brought in the federal case are
distinct from and independent of the
claims brought in the second Athens
action, and that therefore it is unlikely
that the second Athens action will
dispose of them. In support of this
argument, AAR points to section 1E of the
lease, which provides in relevant part:
Lessee will pay all Base Rental, Variable
Rental, Supplemental Rental, costs,
charges, fees and expenses in connection
with the use, possession and operation of
the Aircraft, including maintenance,
insurance, state, local, provincial and
all other taxes, and risk of loss or
other casualty. Such obligations of
Lessee will be paid in full and will be
absolute and unconditional under any and
all circumstances and regardless of other
events, including any of the following:
(a) Any right of set-off, counterclaim,
recoupment, defense or other right
(including any right of reimbursement)
which Lessee may have against Lessor . .
. including any claim Lessee may have for
the foregoing. (b) Unavailability or
interruption in the use of the Aircraft
for any reason, including . . . any
defect in airworthiness, merchantability,
fitness for any purpose, fitness, design
. . . . (d) Invalidity or
unenforceability . . . or other defect in
this Lease. (e) Failure or delay on the
part of any party to perform its
obligations under this Lease. (f) Other
cause which but for this provision would
or might have the effect of terminating
or in any other way affecting any
obligation of Lessee hereunder.
AAR urges that, according to this
provision of the lease, the appellees’
obligation to pay rent, to keep the
aircraft in operational condition, and to
discharge any liens against the aircraft-
-which is the focus of the federal claim-
-is absolute and unconditional, and is
not subject to any claims and defenses
that VH may have against AAR. AAR notes
that VH’s obligations under this
provision were not and are not at issue
in any of the Greek actions, and that
therefore no ruling in those actions
could have preclusive effect over AAR’s
claims in the federal action. Therefore,
AAR argues that even if the Athens court
has ruled in a preliminary fashion that
AAR is liable to VH for damages resulting
from the failure of the engine, it has
not ruled that this breach by AAR excused
the defendants from their independent
duties. Indeed, AAR maintains that any
such finding would flatly contradict the
terms of section 1E of the lease.
We agree with AAR. On the facts
presented, it does not seem substantially
likely that the Greek actions will
dispose of all of the claims presented in
the federal suit. It is quite possible
that AAR’s claim that the appellees
breached the lease by taking the engine
off-wing will be disposed of in the Greek
action, as such a claim would be
precluded by a final judgment by the
Greek court that AAR breached the
contract and forced VH to remove the
engine when it leased the aircraft with a
defective engine./7 However, AAR’s other
claims are not currently before the Greek
courts in any of the Greek actions, and
it does not seem likely that any of the
Greek courts will resolve the legal and
factual issues supporting those claims in
deciding the claims actually before them.
The only lease-based defense that AAR has
put forward in any of the Greek actions
is that under a separate section of the
lease, the aircraft was leased on an "as
is" basis with no warranties of any kind.
It has not injected the issue of the
interpretation of section 1E into any of
the Greek litigation by way of either a
defense or a counterclaim. Nor has AAR
alleged in any of the Greek actions that
the appellees failed to pay rent or to
discharge any liens, or that the
appellees had a duty to pay such expenses
irrespective of any alleged breach on
AAR’s part. Neither AAR nor any of the
appellees have sought a declaration of
their rights under section 1E in any of
the Greek actions. Therefore, even if the
provisional rulings in the first and
third Athens actions are upheld on appeal
and VH prevails in the second Athens
action as well, the appellees’
obligations and potential liability under
section 1E of the lease for failing to
pay rent and to keep the aircraft free of
liens will not have been decided. While
we do not decide the issue and interpret
section 1E, we cannot find AAR’s argument
that section 1E makes the appellees’ duty
to pay rent and to discharge liens
absolute irrespective of any breach by
AAR implausible as a matter of law. Given
this, we cannot say that it is
substantially likely that the issue will
be disposed of in the Greek litigation.
Because "[i]t would be a serious abuse of
discretion" to abstain under Colorado
River if "there is any substantial doubt"
"that the parallel . . . litigation will
be an adequate vehicle for the complete .
. . resolution of the issues between the
parties," Moses H. Cone Mem’l Hosp., 460
U.S. at 28, and because any doubt regard
ing the parallel nature of the foreign
suit should be resolved in favor of
exercising jurisdiction, see Allen v.
Board of Educ., Unified Sch. Dist. 436,
68 F.3d 401, 403 (10th Cir. 1995), we
conclude that the federal and foreign
actions are not parallel.
None of this is meant to signal a
retreat from our holding in Day. In that
case, we found that a claim brought in
federal court by a group of former
shareholders against the purchasers of
their stock was parallel for Colorado
River purposes to a pending state court
action involving essentially the same
parties, where the federal action turned
on the interpretation of the payment
provision of the stock purchase agreement
which was the subject of the state
litigation. Day v. Union Mines, Inc., 862
F.2d 652, 655-57 (7th Cir. 1988). We
found the federal and state suits to be
parallel even though the particular issue
presented in the federal claim--the
interpretation of the payment provision
of the stock purchase agreement--was not
specifically raised in the state court
proceeding. In the state action, the
purchasers of the stock had claimed that
the shareholders breached certain
representations and warranties, thereby
relieving the purchasers of their
obligations under the stock purchase
agreement. The state action therefore
addressed the validity, enforceability,
and interpretation of the entire stock
purchase agreement, of which the payment
provision was a part. Under these
circumstances, we agreed with the
district court’s conclusion that the
issue presented in the federal claim
would be disposed of in the state
litigation, regardless of which party
prevailed in the state case. See id. at
656. We reasoned that if the purchasers
won the state case, then the purchase
agreement would be declared invalid in
toto, and the shareholders would be left
unable to enforce its payment provision
against the purchasers. We further
surmised that if the shareholders won the
state case, then this would constitute a
finding by the state court that they were
entitled to payment, and the state court
would almost inevitably have to interpret
the payment provision in order to
determine the amount of payment that they
could collect. Given this, we concluded
that the issue presented in the federal
action was premature, since it could not
be resolved until the issue presented in
the state action (the validity of the
stock purchase agreement) was decided.
Therefore, we found that the federal and
state actions were parallel, and we ruled
that "[w]here the validity,
enforceability and interpretation of a
contract are at issue in both federal and
state courts, and the state litigation
was commenced first and has progressed
substantially towards completion, entry
of a stay does not under Colorado River
constitute an abuse of discretion." Id.
We find this case to be distinguishable
from Day. VH has not argued in any of the
Greek actions that AAR’s claimed breach
invalidated the lease or excused VH from
its lease obligations to pay rent and
discharge liens against the aircraft.
Rather, it seeks to hold AAR liable for
breaching certain claimed warranties
which would not necessarily implicate its
own obligations under section 1E of the
lease. Therefore, it is possible that VH
could prevail in the Greek action without
defeating all of AAR’s claims in the
federal action. In addition, it is not
necessarily the case that the issue
presented by VH in the foreign action
must be resolved before the district
court can rule on the claim presented in
the federal action. While actions filed
in separate fora alleging breaches of
different provisions of the same contract
may frequently be deemed parallel for
Colorado River purposes, see generally
Evans Transp. Co. v. Scullin Steel Co.,
693 F.2d 715 (7th Cir. 1982);
Microsoftware Computer Sys., Inc. v.
Ontel Corp., 686 F.2d 531 (7th Cir. 1982)
(overruled on other grounds by Gulf
Stream Aerospace Corp. v. Mayacamas
Corp., 485 U.S. 27 (1988)); Darsie v.
Avia Group Int’l, Inc., 36 F.3d 743 (8th
Cir. 1994); Manley, Inc. v. Keystone Food
Prods., Inc., 859 F.2d 80 (8th Cir.
1988), the presence of section 1E of the
lease prevents us from drawing such a
conclusion here.
Citing Channell v. Citicorp Nat’l
Services, Inc., 89 F.3d 379 (7th Cir.
1996), the appellees seem to argue that
the Greek actions are parallel to the
federal action because the claim brought
by AAR in the federal action arises from
the same "operative facts" as the claims
brought in Greece, and therefore should
have been pled as a compulsory
counterclaim in the Greek actions.
However, Channell addressed the scope of
a district court’s authority under 28
U.S.C. sec. 1367 to exercise supplemental
jurisdiction over claims that form part
of the same "case or controversy" under
Article III of the Constitution, and not
the standards for determining whether
actions are parallel for purposes of
Colorado River abstention. Channell is
therefore inapplicable here. Moreover, in
concluding that an automobile lessor’s
counterclaim seeking contractual
termination payments against lessees who
had brought an action for violation of
the Consumer Leasing Act was sufficiently
connected to the lessees’ claims (under
sec. 1367’s liberal standards) to allow
the court to assert jurisdiction over the
counterclaims, we were careful in
Channell to note that the lessees’ claims
and the lessor’s counterclaims were based
on the same clause of the lease, and that
the basic issues were integral to the
lessees’ case even before the
counterclaim was brought. See id. at 385-
86. As has been noted, AAR’s federal
claim does not bear a similar
relationship to the Greek claims.
Nevertheless, it could be argued that a
claim brought in a federal action based
on a claim which would be a compulsory
counterclaim in a pending foreign action
might make the federal action "parallel"
to the foreign action, because the
federal claim would be "disposed of" in
the foreign action in one way or another.
(That is, it would either be asserted as
a counterclaim in the foreign action and
decided there, or lost if not asserted
before the conclusion of the foreign
action. Either way, conclusion of the
foreign litigation would leave nothing
left for the federal court to decide.)
However, the appellees point to no
authority (nor have we found any)
suggesting that a federal action is
parallel to a state or foreign action for
Colorado River abstention purposes when
the claim upon which the federal action
is based is pleadable as a compulsory
counterclaim in the other action.
Moreover, it is unclear that Greece has a
compulsory counterclaim rule analogous to
Fed. R. Civ. P. 13(a). VH submitted the
affidavit of its Greek lawyer, which
states that Greek law provides for the
filing of counterclaims either in the
original action or in a separate
procedure, and that "[i]f a party choose
[sic] the way of separate procedure,"
then the Greek court has the power to
unify the claim with the original
procedure. Moreover, the affidavit states
that "[c]laims not asserted in any of the
current proceedings or not presented on
time even in a separate procedure (which
will be unified with the existing
procedures as . . . mentioned above[)] .
. . or before the current proceedings are
concluded, will be lost."/8 From the
affidavit, it is not clear whether a
Greek court’s "unifying" of counterclaims
brought in separate proceedings with the
original proceeding is mandatory or
discretionary. Thus it is not clear that
counterclaims neither filed in the
original action nor unified with that
action before the decision is reached
will be "lost."
In addition, even if we were to
conclude that either of the Greek actions
were parallel to the federal action, we
would not affirm the district court’s
decision to abstain in this case. Once a
district court determines that the
federal action and the foreign action are
parallel, its next task is "to balance
the considerations that weigh in favor
of, and against, abstention, bearing in
mind the exceptional nature of the
measure." Finova, 180 F.3d at 898. One of
the ten factors that the court must
consider is the relative inconvenience of
the federal forum. See id. In considering
this factor, the district court placed
undue weight on the inconvenience of the
federal forum for the appellees, and did
not adequately consider the inconvenience
of the Greek forum for AAR. The court
took judicial notice that the law firm
representing AAR "advertises itself as a
global law firm . . . and is presumably
able to litigate even in Athens." Putting
aside the district court’s rather
unorthodox use of judicial notice, we
find that the court erred in considering
the law firm’s ability to litigate in
Athens as part of the "convenience"
calculus. The proper inquiry is the
relative inconvenience of the competing
fora to the parties, not to their
lawyers. Moreover, the district court did
not even consider section 20B of the
Lease, which provides that the appellees
"irrevocably consent" to non-exclusive
jurisdiction in Illinois and "irrevocably
waiv[e] any claim that any such suit, ac
tion or proceeding brought in any court
in or of the State of Illinois has been
brought in an inconvenient forum." While
we reject AAR’s argument that section 20B
bars VH’s entire abstention claim
(because an abstention motion is not the
same as an objection to venue on grounds
of inconvenience, and inconvenience to
the parties is only one of the many
factors that a district court weighs in
deciding whether to abstain), we do find
that this provision of the lease is
relevant to the convenience analysis and
should have been weighed by the court.
The court should have determined whether
section 20B precluded the defendants from
objecting to the inconvenience of venue
in Illinois altogether, therefore ceding
the inconvenience factor of the
abstention analysis to AAR. At the very
least, this error would require us to
remand to the district court for
reconsideration, even if we found the
Greek and the federal litigation
parallel.
B) Forum non conveniens
AAR also asks us to remand this case to
the district court with instructions to
deny VH’s motion to dismiss the federal
action on grounds of forum non
conveniens. The appellees brought their
forum non conveniens motion before the
district court as an alternative to their
abstention motion, but the district court
did not address it, presumably deeming it
mooted by its decision to abstain the
action. AAR now asks us to decide the
merits of the motion in its favor. The
appellees object that because the
district court did not rule on this
matter, there is nothing for us to
review.
As a general rule, an appellate court
may not consider an issue not passed on
below. See Singleton v. Wulff, 428 U.S.
106, 120 (1976). However, this rule is
subject to certain limited exceptions.
For example, an appellate court may
resolve an issue not decided by the
district court where "the proper
resolution [of that issue] is beyond any
doubt." See id. at 121 (citing Turner v.
City of Memphis, 369 U.S. 350 (1962)).
"The matter of what questions may be
taken up and resolved for the first time
on appeal is one left primarily to the
discretion of the courts of appeals, to
be exercised on the facts of individual
cases." Singleton, 428 U.S. at 120.
Inexercising this discretion, we have
resolved issues which were not resolved
below where, inter alia, "both parties
have briefed and argued [the issue’s]
merits," and where "the benefit of a
district court hearing is minimal because
proper resolution of the issue is clear."
United States v. Brown, 739 F.2d 1136,
1145 (7th Cir. 1984). See also Otto v.
Variable Annuity Life Ins. Co., 814 F.2d
1127, 1137-38 (7th Cir. 1986) (deciding a
summary judgment motion raised below but
not reached by the district court "in the
interests of judicial economy," where the
parties had a "full and fair opportunity
to argue all relevant aspects of the . .
. issue" before both the district and the
appellate courts, and where the correct
resolution of the issue was clear).
AAR argues that the proper resolution of
this issue is beyond any doubt (therefore
making it a candidate for resolution on
appeal) because section 20B of the lease
provides that the appellees irrevocably
consent to the non-exclusive jurisdiction
of the Illinois federal and state courts,
and irrevocably waive any objection to
the venue of any action brought in
Illinois as well as any objection that
any such action has been brought in an
inconvenient forum. AAR notes that we
have held that when parties freely
negotiate a forum selection clause, the
clause is to be enforced in accordance
with its terms except in exceptional
circumstances, see Bonny v. Society of
Lloyd’s, 3 F.3d 159-61 (7th Cir. 1993),
and that the appellees have identified no
such circumstances here. The appellees
counter that, while they do not dispute
the enforceabilty of section 20B’s forum-
selection clause, such clauses are not
dispositive of a court’s decision to
grant or deny a motion to dismiss based
on forum non conveniens. Citing Comedy
Partners v. Street Players Holding Corp.,
34 F. Supp. 2d 194, 197 (S.D.N.Y. 1999) and
Finova, the appellees contend that courts
entertaining such motions may properly
weigh concerns such as systematic
integrity, judicial economy and comity,
and are not bound by any agreement
between the parties not to object to
venue on grounds of inconvenience.
Moreover, the appellees note that the
forum selection clause at issue in this
case provides for concurrent, non-
exclusive jurisdiction in Illinois state
and federal courts, and therefore by its
terms does not purport to make Illinois
the mandatory or exclusive forum for
adjudicating disputes over the contract.
Therefore, even if the existence of a
mandatory forum selection clause were
wholly dispositive of the issue (which
the appellees deny), this rule would be
of no help to AAR.
Before we can determine whether the
resolution of this issue is sufficiently
clear to permit us to decide it instead
of remanding it, we need to determine
what legal standards govern a court’s
analysis of a motion to dismiss on forum
non conveniens grounds when the parties
have agreed to a forum selection clause
like the one in this case. The usual
forum non conveniens analysis (that is,
the analysis applicable to cases not
involving forum selection clauses)
consists of a two-step inquiry. The court
must first determine that an adequate
alternative forum is available to hear
the case, meaning that all parties are
within the jurisdiction of the
alternative forum and amenable to process
there, and that the parties would not be
treated unfairly or deprived of all
remedies if the case were litigated in
the alternative forum. See Kamel v. Hill-
Rom Co., Inc., 108 F.3d 799, 802-03 (7th
Cir. 1997). If the court finds that such
an adequate alternative forum exists,
then the court must proceed to weigh a
host of private interest factors (for
example, the "relative ease of access to
sources of proof" in each forum, and "the
availability of compulsory process for
the attendance of unwilling witnesses"),
and public interest factors (for example,
"administrative difficulties stemming
from court congestion," and the interest
of trying a diversity case in a forum
that is "at home with the law that must
govern the action.") Id. at 803.
Moreover, under the usual analysis, there
is "a strong presumption in favor of the
plaintiff’s choice of forum, which may be
overcome only when the private and public
interest factors clearly point towards
trial in the alternative forum." See
Macedo v. Boeing Co., 693 F.2d 683, 688
(7th Cir. 1982) (citations omitted), and
this is particularly true where a
domestic plaintiff has filed suit in his
own home forum. See id.; see also Kamel,
108 F.3d at 803.
However, some of our sister circuits
have suggested that where the parties to
an international dispute have agreed to a
mandatory forum selection clause, the
usual forum non conveniens analysis no
longer applies, and the only question
remaining for the district court to
determine is whether the forum selection
clause is enforceable under the standards
set forth in Bremen v. Zapata Off-Shore
Co., 407 U.S. 1 (1972). See Evolution
Online Sys., Inc. v. Koninklijke PTT
Nederland N.V., 145 F.3d 505, 509-10 (2d
Cir. 1998) (suggesting that a district
court should first apply the Bremen
standards to determine whether the forum
selection clause was enforceable, and
should only reach the defendant’s motion
to dismiss on forum non conveniens
grounds if it finds that the parties did
not form a contract containing a forum
selection clause); Cf. Mitsui & Co.
(USA), Inc. v. Mira M/V, 111 F.3d 33, 37
(5th Cir. 1997) (rejecting appellant’s
challenge to the enforcement of a
mandatory forum selection clause for
reasons of forum non conveniens, and
stating that "increased cost and
inconvenience are insufficient reasons to
invalidate foreign forum-selection or
arbitration clauses."); but see Royal Bed
& Spring Co., Inc. v. Famossul Industria
e Comercio de Moveis LTDA., 906 F.2d 45,
51 (1st Cir. 1990) (ruling that a forum
selection provision is not dispositive of
a motion to dismiss on forum non
conveniens grounds, but rather is "simply
one of the factors that should be
considered and balanced" in the ordinary
forum non conveniens analysis.) In
Bremen, the Court ruled that a freely
negotiated mandatory forum selection
clause is enforceable unless the party
challenging its enforcement can "clearly
show that enforcement would be
unreasonable and unjust, or that the
clause was invalid for such reasons as
fraud or overreaching," or that "trial in
the [chosen] forum will be so gravely
difficult and inconvenient that he will
for all practical purposes be deprived of
his day in court."/9 Applying these
standards together with standards articu
lated in later Supreme Court cases, we
have ruled that a forum selection clause
is presumptively valid and enforceable
unless (1) "[its] incorporation into the
contract was the result of fraud, undue
influence, or overweening bargaining
power; (2) the selected forum is so
gravely difficult and inconvenient that
[the complaining party] will for all
practical purposes be deprived of its day
in court; or (3) [its] enforcement . . .
would contravene a strong public policy
of the forum in which the suit is
brought, declared by statute or judicial
decision." Bonny, 3 F.3d at 160 (internal
citations and quotation omitted).
Nevertheless, it can be argued that the
Bremen and Bonny standards should not
control in this case, for as VH notes,
the forum selection clause in the Lease
agreement is permissive, not mandatory.
(That is, it provides that suit may be
brought in Illinois as well as in other
jurisdictions, but does not mandate that
suit must be brought exclusively in
Illinois.) At least one circuit has held
that the traditional forum non conveniens
analysis (rather than the stricter
scrutiny required by Bremen) applies in
cases involving permissive forum
selection clauses. See Blanco v. Banco
Industrial de Venezuela, S.A., 997 F.2d
974, 979-80 (2d Cir. 1993). This
conclusion seems reasonable. However, in
this case we have more than merely a
permissive forum selection clause; we
have such a clause plus unambiguous lang
uage providing that the lessee shall not
object to venue in an Illinois state or
federal court on the ground that such a
court is an inconvenient forum. We have
held that by agreeing to a mandatory
forum selection agreement, a party waives
objections to venue in the chosen forum
on the basis of cost or inconvenience to
itself. See Northwestern Int’l, 916 F.2d
at 375, 378 (7th Cir. 1990). It would
seem incongruous to conclude that a party
does not similarly waive such objections
when he agrees to a permissive forum
selection clause which specifically
provides for the waiver of convenience-
based objections to suits brought in a
particular venue. See generally Blanco,
997 F.2d at 979 (deciding to apply the
traditional forum non conveniens analysis
rather than the Bremen standards where
the forum selection clause at issue was
permissive and did not include either the
defendant’s irrevocable consent to suit
in designated fora or the defendant’s
waiver of forum non conveniens
objections). The forum selection clause
and the waiver provisions at issue here
were part of a lease that was freely
negotiated between sophisticated
international corporations. Whatever
inconvenience VH would suffer by being
forced to litigate in a court in Illinois
was foreseeable at the time that it
agreed to waive objections based on such
factors. See Bremen, 407 U.S. at 17-18.
Under these circumstances, we conclude
that the stricter standards announced in
Bremen and Northwestern Int’l should
control the analysis of the appellees’
forum non conveniens motion./10
Therefore, the appellees’ forum non
conveniens motion must fail unless they
can demonstrate one of the three factors
set forth in Bonny. This they cannot do,
because they have effectively conceded
the enforceability of the lease’s forum
selection clause. When confronted with
AAR’s argument that the forum selection
clause and its waiver provisions should
control the disposition of its forum non
conveniens motion, the appellees argued
only that cases like Bonny are
inapposite, that the forum selection
clause was permissive rather than
mandatory, and that contractual
agreements not to object to venue on
grounds of convenience are not
dispositive of forum non conveniens
motions. Although AAR cited Bonny and
argued that the appellees had not
established that any of its three factors
were present in this case, the appellees
merely asserted that Bonny was
inapplicable and did not argue in the
alternative that the forum selection
clause and its waiver provisions were
unenforceable under Bonny. In effect, the
appellees have premised their entire
argument regarding forum non conveniens
on the assumption that the standards set
forth in Bonny and Bremen do not control
the forum non conveniens inquiry in this
case. We have rejected that assumption,
and unfortunately for the appellees, they
have waived any argument that the forum
selection clause is unenforceable.
Therefore, since the forum non
conveniens issue was fully briefed by
both of the parties on appeal, the
resolution of the issue is clear, and the
dispositive issue (the enforceability of
the forum selection clause) is a question
of law which we review de novo, see
Bonny, 3 F.3d at 159 (citations omitted),
we conclude that nothing would be gained
by remanding this issue to the district
court for further consideration. See
Amcast Indus. Corp. v. Detrex Corp., 2
F.3d 746, 749-50 (7th Cir. 1993); Bruneau
v. FDIC, 981 F.2d 175, 178-79 (5th Cir.
1992). Accordingly, we hold that
appellee’s motion to dismiss on grounds
of forum non conveniens should be denied.
CONCLUSION
For the foregoing reasons, we REVERSE the
district court’s decision to abstain and
REMAND with instructions to vacate the
dismissal order and to deny the
appellees’ motion to dismiss on grounds
of forum non conveniens.
REVERSED and REMANDED.
/1 AAR claims that it sent this notice together with
First Security, but VH claims that First Security
sent it with a carbon copy to TA Air but that the
notice "on its face does not appear to have been
communicated to AAR." However, VH does state that
the later notice of termination of lease was sent
by First Security and signed by a representative
of AAR.
/2 EuroControl is the European Organization for the
Safety of Air Navigation. AAR claims that, by
November 4, 1999, EuroControl had asserted a lien
against the plane to secure unpaid EuroControl
route charges plus interest in the amount of Euro
1,284,606,22 and had sued Princess to recover
this amount. AAR also asserts that it paid EuroC-
ontrol in order to recover possession of the
plane, to discharge the lien, and to terminate
litigation over the lien, and that the defendants
have refused to reimburse AAR for the payment.
/3 This contention is hotly disputed by AAR, which
notes that the lease expressly provides that the
plane was leased in an "as is" condition and that
VH bore the risk of any mechanical problems with
the plane, including the engine. AAR contends
that such agreements are the standard custom and
practice in the aircraft leasing industry. While
AAR concedes that the leased obliged it to deliv-
er the plane "fresh from a C-7 inspection," it
denies that this obligation included a warranty
that the aircraft would remain airworthy for any
specified period of time (much less 8,000 flight
hours), or that the engine would not develop
mechanical problems before any specified number
of flight hours. Indeed, AAR claims that the C-7
inspection was strictly an airframe inspection
which did not entail any examination or warranty
of the engines.
/4 VH claims that it sought the arrest of AAR’s
assets in Greece and of the aircraft as security
for its claims for damages stemming from AAR’s
alleged breach of the Lease. AAR disputes this
characterization.
/5 The court also found that VH’s claims against the
other defendants (Transamerica and TA Air) "do
not appear to be proven."
/6 For example, AAR argues that it was not a party
to any of the Greek actions, and that therefore
those actions are not parallel to the federal
action. While we do not decide the issue, we
assume throughout the opinion that AAR was a
party to the Greek litigation.
/7 Even this is uncertain, however. Because, if AAR
prevails in the Greek actions, its claims against
the appellees will not be resolved.
/8 AAR’s Greek lawyer submitted an affidavit denying
that Greece has a compulsory counterclaim rule.
/9 We have also noted that "the only good reason for
treating a forum selection clause differently
from any other contract . . . is the possibility
of adverse effects on third parties," and have
ruled that where that possibility is slight, it
should be treated like any other contract, North-
western Nat’l. Ins. Co. v. Donovan, 916 F.2d 372,
376 (7th Cir. 1990), and should therefore be
enforced "unless it is subject to any of the
sorts of infirmity, such as fraud and mistake,
that justify a court’s refusing to enforce a
contract." Id. at 375.
/10 The appellees rely on Comedy Partners for the
proposition that a permissive forum selection
clause containing irrevocable consent to suit in
a particular forum plus a waiver of forum noncon-
veniens objections is not "binding on the court"
and is not dispositive of a forum non conveniens
motion. However, Comedy Partners did not involve
a motion to dismiss on grounds of forum non
conveniens. Rather, it involved a motion to
dismiss pursuant to the "first filed rule," which
is more analogous to an abstention motion than a
forum non conveniens motion. As we have noted, a
contractual agreement not to object to the incon-
venience of a particular venue is not dispositive
of an abstention motion. Moreover, the statements
in Comedy Partners regarding the effect of a
contractual agreement not to object to venue upon
a motion to dismiss the action in deference to an
earlier filed suit is dicta. The court actually
held that the party challenging the dismissal
could not rely on the alleged contractual agree-
ment not to object to venue, because its substan-
tive claim was premised on a denial that the
contract existed in the first place.