Yavuz v. 61 MM, LTD

F IL E D
United States Court of Appeals
Tenth Circuit
PUBLISH
September 20, 2006
U N IT E D ST A T E S C O U R T O F A PP E A L S
Elisabeth A. Shumaker
Clerk of Court
T E N T H C IR C U IT
OR HA N Y AV UZ ,
Plaintiff - Appellant ,
v. No. 04-5152
61 M M , LTD, an Oklahoma limited
partnership; 61 M M CORP., an
Oklahoma corporation; AD I KA M EL
M OHAM ED, also known as Kamal
Adi; FPM S.A., a corporation, doing
business as FPM Finastate Projects
M anagement S.A., a Swiss
corporation ,
Defendants - Appellees,
--------------------------------------------
ORHAN YAVUZ,
Plaintiff - Appellant,
v. Nos. 04-5188 and 05-5155
61 M M , LTD., an Oklahoma limited
partnership; 61 M M CORP., an
Oklahoma corporation; AD I KA M EL
M OHAM ED, also known as Kamal
Adi; FPM S.A., doing business as
FPM Finastate Projects M anagement
S.A., a Swiss corporation,
Defendants - Appellees.
A PPE A L FR O M T H E U N IT ED ST A T ES D IST R IC T C O U R T
FO R T H E N . D IST R IC T O F O K L A H O M A
(D .C . N O . C V -03-586-E(J) )
Kenneth M ichael Smith, (Robert P. Skeith, with him on the brief), Riggs, Abney,
Neal, Turpen, Orbison & Lewis, Tulsa, Oklahoma, for Plaintiff - A ppellant .
Timothy A. Carney, (James M . Sturdivant, Cason P. Carter, with him on the
brief), Gable & Gotwals, Tulsa, Oklahoma, for Defendants - Appellees, Kamal
Adi and FPM , S.A.
Grant E. Cheadle, Cheadle & Associates, Inc., Tulsa, Oklahoma, for Defendants -
Appellees, 61 M M Corp. and 61 M M Ltd.
Before H A R T Z, M cK A Y , and T Y M K O V IC H , Circuit Judges.
H A R T Z, Circuit Judge.
Orhan Yavuz, a Turkish citizen, has been involved in various international
business transactions with Kamal Adi, a dual Syrian and Swiss citizen, since the
early 1980s. Frustrated with the treatment of what he considers an investment in
certain real property in Tulsa, Oklahoma (the Tulsa Property), M r. Yavuz has
brought suit against M r. Adi and others, seeking relief under the federal
Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C.
§ 1964(c), and a variety of other causes of action based on allegations of
misrepresentations and breach of contract. Title to the Tulsa Property is held by a
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limited partnership, 61 M M , Ltd., whose general partner is 61 M M Corp., an
Oklahoma corporation. The partnership and the corporation are both parties to
this dispute and will be referred to collectively as the 61 M M Defendants. The
remaining defendant who is a party to this appeal is FPM S.A. d/b/a Finastate
Projects M anagement S.A. (FPM ), a Swiss corporation whose principal place of
business is Fribourg, Sw itzerland. Two other defendants, Euroeast Corp. and
Sigofine S.A., both of which are Panamanian corporations, have not been served.
The district court dismissed the suit for improper venue on the basis of a
forum-selection clause in a 1989 written agreement (the Fiduciary Agreement)
between M r. Yavuz and Finastate SA. (FSM is the successor in interest to
Finastate SA, and the latter will be referred to as FSM in this opinion.) On appeal
M r. Yavuz argues that the district court erred by (1) dismissing the case under the
forum-selection clause; (2) dismissing the case under the doctrine of forum non
conveniens (to the extent that the court relied on that doctrine); and (3)
dismissing the case against the 61 M M Defendants, who were not parties to the
Fiduciary Agreement and who forfeited any objection to venue by not timely
raising it. He also contends that the district court erred in ordering him to execute
documents to remove any cloud on the title to the Tulsa Property.
W e have jurisdiction under 28 U.S.C. § 1291. W e hold that when an
international commercial agreement has both choice-of-law and forum-selection
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provisions, the forum-selection provision must ordinarily be interpreted under the
law chosen by the parties. W e reverse and remand for further proceedings
regarding the meaning under Sw iss law of the forum-selection clause and whether
dismissal is appropriate under the doctrine of forum non conveniens. W e need
not address M r. Yavuz’s arguments directed specifically at the dismissal of the 61
M M Defendants. Also, we vacate the order requiring M r. Yavuz to execute
documents.
I. FA C TS A N D PR O C E D U R A L B A C K G R O U N D
A. State-C ourt Proceedings
M r. Yavuz filed suit in the District Court of Tulsa County, Oklahoma, on
June 18, 2002, against Lee James A . Bentley, an individual whom he believed to
control the Tulsa Property. On September 27, 2002, he filed an amended petition
adding the 61 M M Defendants, and dropping Bentley. The 61 M M Defendants
filed an answer, asserted a counterclaim against M r. Yavuz, and moved for
summary judgment. The state court denied the summary-judgment motion on
February 10, 2003. M eanw hile, FPM had filed suit in Switzerland against
M r. Yavuz on December 24, 2002, to enforce his alleged promise to invest further
funds in the Tulsa Property.
On July 28, 2003, M r. Yavuz filed a Second Amended and Restated Petition
(Second Amended Petition), adding M r. Adi, FPM , Euroeast Corp., and Sigofine
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S.A. as defendants. The Second A mended Petition alleged the follow ing course
of conduct:
M r. Yavuz first gave “gold, silver and foreign currencies” to M r. Adi and
Euroeast in “the early 1980’s,” Aplt. App. at 58, for “various investment
purposes,” including an interest in the Tulsa Property, id. at 59. According to the
terms of the parties’ investment agreement, outlined in a letter dated February 11,
1981, M r. Yavuz was to have a 20% ownership share in the Tulsa Property.
At some unspecified point in the 1980s, M r. Yavuz discovered that the
defendants “had misappropriated much of the gold and silver” that he had placed
with them. Id. at 59. He confronted M r. Adi in 1989 about the missing
comm odities, and M r. Adi offered to settle the dispute by compensating
M r. Yavuz in the form of a loan in addition to the 20% interest in the Tulsa
Property. The amount of the loan, about $735,000, was the value of the gold and
silver that M r. A di had “misappropriated,” plus accumulated interest. Id. This
new agreement was memorialized in the December 31, 1989, Fiduciary Agreement
betw een M r. Y avuz and FPM (w hich was controlled and directed by M r. A di).
The full text appears in the Appendix to this opinion.
The Fiduciary Agreement describes M r. Yavuz’s investment as two assets
held in trust by FPM :
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- an investment of 20 % in the share capital of M adonna BV [the
predecessor of 61 M M Corp.], Curaçao at a market value of
US$ 201’420.– at December 31, 1989.
- a loan of US$ 401’880.– granted to M adonna BV , Curaçao
with additional accrued interest of US$ 333’238.46 at
December 31, 1989.
Id. at 131. Article 2 of the Fiduciary Agreement states:
[Yavuz] undertakes to give all the documents, information and
technical assistance, that are necessary for [FPM ] to perform its
mandate.
In particular it is agreed that [Yavuz] will release [FPM ] from all
obligations w hich have been contracted as fulfilment of the mandate
according to article 1 hereinabove.
Id. Article 10 contains the following choice-of-law and forum-selection
provisions:
This convention is governed by the Swiss law , in particular article
394 and following of the Swiss Code of Obligation. Place of courts
is Fribourg.
Id. at 133.
“Over the next several years,” M r. Yavuz received “very sporadic and
sketchy reports” regarding his investment in the Tulsa property. Id. at 60. In
M ay 1999, nearly 10 years after execution of the Fiduciary Agreement, M r. Yavuz
inquired about the status of the investment “due to the lack of transparency in
reporting to him.” Id. At some unspecified time after this inquiry, M r. Adi and
FPM began “corresponding via facsimile” with representatives of 61 M M Corp.
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and 61 M M Ltd., for the purpose of devising a “strategy” to provide him with
“misleading financial information.” Id. Part of this strategy was to send on
behalf of 61 M M Corp. a letter to M r. Yavuz on FPM letterhead containing
unspecified “false and misleading information” to convince M r. Yavuz that he
would need to pay several hundred thousand dollars “to vest his interest in the
Tulsa property.” Id.Communications between M r. Yavuz and the defendants about the property
continued, culminating in a letter dated November 27, 2000, from FPM to
M r. Yavuz. This letter “contained false and misleading accounting data” that
M r. A di and FPM had prepared with the cooperation of the 61 M M Corp., id. at
61, and demanded that M r. Yavuz transfer $874,703 to a bank in Fribourg,
Switzerland, to vest his interest in the Tulsa Property.
Also during this time, the defendants defrauded and misled M r. Yavuz by
“structuring” the finances of 61 M M Corp. (by “creating layers of affiliate
corporations and entities,” id.) so that his 20% equity interest in 61 M M Corp.
and his $735,000 loan “are essentially worthless,” id. Finally, the defendants
have been selling portions of the Tulsa Property since 1997, receiving over
$800,000 from sales without sharing any profits with him.
The Second Amended Petition asserted 10 claims based on the foregoing
allegations:
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(1) Constructive Trust— The defendants’ “denial that [M r. Yavuz] has an
interest in the property,” and their “structuring the corporate ownership of the
property in such a fashion as to deprive him of any value in his investment in the
corporate general partner,” has put them “in a position of ownership of the Tulsa
property which they ought not to, in equity and in good conscience, hold and
enjoy,” entitling him to a constructive trust on the Tulsa Property. Id. at 63.
(2) Restitution— The defendants were unjustly enriched by having “the use
of [M r. Yavuz’s] invested funds for over twenty years . . . without properly
recognizing [his] investment in the remaining Tulsa property,” entitling him to
restitution of $935,000 plus interest from December 31, 1989. Id. at 63-64.
(3) Common Law Fraud— The defendants’ communications to M r. Yavuz,
“culminat[ing] in the [letter from FPM ] of November 27, 2000,” constituted
comm on-law fraud entitling him to compensatory damages of $935,000 and
punitive damages of at least $10,000. Id. at 64.
(4) Constructive Fraud— Even if “the statements made to [M r. Yavuz] by
the Defendants . . . [were] made without an actual fraudulent intent,” they still
“gained an advantage to the foregoing Defendants by misleading [M r. Yavuz] to
his prejudice,” entitling him to damages of at least $935,000. Id. at 65.
(5) Breach of Implied Contract— The defendants (a) committed an implied
breach of contract when they accepted his money, “entitling him to an appropriate
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share in the profits, losses and assets of [defendant corporations] and/or the
remaining Tulsa Property,” and (b) subsequently “refus[ed] to acknowledge
[M r. Yavuz’s] appropriate and proper share in the entities and/or property,” again
entitling him to damages of at least $935,000. Id. at 65-66.
(6) Civil Conspiracy— The defendants conspired to obtain $935,000 from
M r. Yavuz through false and fraudulent statements and their acts in structuring
the investment transaction so that his investment would be worthless. He requests
compensatory damages of $935,000, and punitive damages of not less than
$10,000. Id. at 66.
(7) Breach of Fiduciary Duty— The defendants breached their fiduciary
duty to M r. Yavuz with respect to his investment “based upon the facts set forth
as aforesaid.” Id. at 67. On this claim he requests damages “to the extent of the
amount of his investment with them,” and punitive damages of not less than
$10,000. Id.(8) Embezzlement— M r. Yavuz deposited “several hundred thousand
dollars to be used for various purposes, including the investment in the Tulsa
Property,” and the defendants embezzled from him by “appropriat[ing] the sum of
$230,000 of [his] funds for their own use.” Id. at 68. He seeks compensatory
damages of $230,000, and punitive damages of at least $10,000.
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(9) RICO— The defendants violated RICO by (1) furnishing false and
misleading financial information and (2) diverting to foreign entities controlled
by Adi and FPM certain funds that should have been used to repay M r. Yavuz’s
investments. The “racketeering enterprise” consists of 61 M M Corp. “and the
various foreign entities who are in an affiliate position or in a position of control
of 61 M M Corp.” Id. at 69. “The predicate acts performed by the above named
Defendants which form the basis for the racketeering activity, are numerous
comm unications between the RICO Defendants . . . [and] the Plaintiff . . . denying
his request for accurate accounting information, the furnishing to him of false and
incomplete financial information and the requirement that he pay exorbitant sums
of several hundred thousand dollars in order to vest his investment.” Id. at 70.
H e seeks $935,000 in damages, to be trebled under RICO.
(10) Accounting— M r. Yavuz requests an accounting “as to all financial
aspects of his investment in the Tulsa property and/or in the above named entities,
including complete information regarding the investment of all other partners or
shareholders of those entities since the inception of those entities.” Id. at 72.
The 61 M M Defendants filed their answer to the Second Amended Petition
on August 18, 2003, and asserted a counterclaim against M r. Yavuz for alleged
abuse of process. They then removed the case to federal district court on
August 28.
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B. M otion to D ism iss
On November 25, 2003, M r. Adi and FPM responded to the Second
Amended Petition by filing a motion to dismiss on the grounds of improper venue,
forum non conveniens, and failure to state a claim upon which relief can be
granted. M r. Yavuz filed his response on December 23, 2003. The 61 M M
Defendants (who had not previously raised improper venue in their answer or a
motion) filed a document on January 30, 2004, stating that they had no objection
to the motion to dismiss.
On September 1, 2004, the district court granted the motion to dismiss on
the basis of improper venue. The district court observed that all claims in the
dispute arose from M r. Yavuz’s investment relationship with M r. Adi and FPM ,
which was governed by the Fiduciary Agreement. It stated that Fribourg,
Sw itzerland, would be a more appropriate forum for the dispute than Tulsa,
Oklahoma, because “the only connection these parties have to Tulsa, Oklahoma is
that one or more of the Defendants own real estate here and Yavuz is attempting
to use this proceeding as a prejudgment attachment of the real estate.” Id. at 199.
The court continued:
The Agreement was negotiated and executed in Sw itzerland and
witnesses with knowledge of the Agreement are going to be located
in Switzerland. At the time of the execution of the Agreement, both
Adi and FPM were residents of Switzerland. FPM is still located in
Switzerland and Adi is a resident of Syria, although he is still a
citizen of Sw itzerland and frequently travels to Sw itzerland. Yavuz
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is a citizen of Turkey and litigation in Sw itzerland is going to be
much more convenient than litigation in Tulsa, Oklahoma.
Furthermore, there is litigation between these parties and regarding
the Agreement which is currently pending in Fourth Circuit Sarine
W ard, Fribourg, Sw itzerland. The Court finds that the forum
selection clause in the Agreement is valid and should be honored
[citing cases]. The disputes between the parties to this action should
be litigated in Sw itzerland, not Tulsa, Oklahoma.
Id. at 199-200. The district court’s order dismissed the case for improper venue
“as [to] all Defendants,” id. at 200, even though the 61 M M Defendants had not
joined the motion or otherwise sought dismissal of the suit, and indeed had
asserted a counterclaim against M r. Yavuz. In addition, the order stated:
This Order shall also act as a dismissal of any lis pendens notices
that have been filed w ith the records of the County Clerk of Tulsa
County regarding this lawsuit. The Plaintiff is hereby ORDERED to
execute any documents reasonabl[y] necessary to remove this lawsuit
as a cloud on the title to any Tulsa County real estate owned by the
Defendants.
Id.M r. Yavuz filed a motion under Fed. R. Civ. P. 60(a) on September 9,
2004. The motion asked the district court to clarify whether it had dismissed the
case “as to all Defendants” and whether it had dismissed the case in its entirety,
including the 61 M M Defendants’ counterclaim against him. Id. at 202. Also, it
protested that the court had not described the documents he was to execute.
M r. Yavuz then filed a timely notice of appeal on September 30. On October 25
we issued an order abating the appeal pending resolution of the Rule 60 motion.
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The court entered an order on November 2, 2004, stating that it had indeed
dismissed all claims and the counterclaim of the 61 M M Defendants. The order
did not clarify what documents were to be executed. M r. Yavuz filed a motion to
vacate this order on November 10, and filed a timely notice of appeal from the
November 2 order on December 2, 2004. W e consolidated the two pending
appeals. On August 8, 2005, the district court denied M r. Yavuz’s m otion to
vacate its order. M r. Yavuz then filed a notice of appeal from that denial on
September 1, 2005. This opinion w ill dispose of all three appeals.
II. D ISC U SSIO N
A. Forum N on Conveniens
The parties devote substantial portions of their briefs to debating whether
the district court’s dismissal can be affirmed under the doctrine of forum non
conveniens. W e hold, however, that the court did not rule on that ground, and it
would be inappropriate for us to address the matter in the first instance.
As the Supreme Court has stated:
Under the federal doctrine of forum non conveniens, when an
alternative forum has jurisdiction to hear a case, and when trial in the
chosen forum would establish oppressiveness and vexation to a
defendant out of all proportion to the plaintiff’s convenience, or
when the chosen forum is inappropriate because of considerations
affecting the court’s own administrative and legal problems, the
court may, in the exercise of its sound discretion, dismiss the case,
even if jurisdiction and proper venue are established.
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Am. Dredging Co. v. M iller, 510 U.S. 443, 447-48 (1994) (internal quotation
marks, brackets, and ellipses omitted). In our circuit, Gschwind v. Cessna
Aircraft Co., 161 F.3d 602 (10th Cir. 1998), sets forth the manner in which this
determination must be made. “There are two threshold questions in the forum non
conveniens determination: first, whether there is an adequate alternative forum in
which the defendant is amenable to process, and second, whether foreign law
applies.” Id. at 605 (internal citation omitted). If both questions are answered
affirmatively, “the court goes on to weigh the private and public interests bearing
on the forum non conveniens decision.” Id. at 606. The factors relating to private
interests are:
(1) the relative ease of access to sources of proof; (2) availability of
compulsory process for compelling attendance of witnesses; (3) cost
of obtaining attendance of willing non-party witnesses; (4) possibility
of a view of the premises, if appropriate; and (5) all other practical
problems that make trial of the case easy, expeditious and
inexpensive.
Id. Included in the public-interest factors are:
(1) administrative difficulties of courts with congested dockets which
can be caused by cases not being filed at their place of origin; (2) the
burden of jury duty on members of a community with no connection
to the litigation; (3) the local interest in having localized
controversies decided at home; and (4) the appropriateness of having
diversity cases tried in a forum that is familiar with the governing
law.
Id. Although there is ordinarily a “strong presumption in favor of hearing the
case in the plaintiff’s chosen forum,” a foreign plaintiff’s choice of forum
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“warrants less deference.” Id. “W hen the plaintiff is foreign, the private and
public interest factors need not so heavily favor the alternate forum.” Id.The district court’s dismissal order noted some of the factors relevant to
application of the doctrine of forum non conveniens. It recited that Sw itzerland
had the most significant contacts with the parties and the transactions at issue;
that the Fiduciary Agreement was negotiated and signed in Sw itzerland; that
witnesses w ith knowledge of the Fiduciary Agreement “are going to be located in
Sw itzerland”; that some of the parties are Swiss residents, and that M r. Yavuz
resides in Turkey, which is closer to Sw itzerland than Tulsa; and that litigation
betw een the parties has already commenced in Fribourg. Aplt. A pp. at 199-200.
After reciting these factors, however, the district court’s ruling was: “The Court
finds that the forum selection clause in the Agreement is valid and should be
honored. The disputes between the parties to this action should be litigated in
Switzerland, not Tulsa, Oklahoma. The M otion to Dismiss of Adi and FPM is
GRANTED as [to] all Defendants and this case is hereby DISM ISSED pursuant to
Rule 12(b)(3) of the Fed. R. Civ. P.” Id. (internal citations omitted).
The Order does not cite any caselaw regarding the doctrine of forum non
conveniens, nor do the words “forum non conveniens” appear. Several of the
relevant factors are not mentioned in the order, and the district court did not
engage in the requisite balancing of interests. Although there may be some merit
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in resolving this issue on appeal, we believe the better practice is for the district
court to make the initial ruling. See Pac. Frontier v. Pleasant Grove City, 414
F.3d 1221, 1238 (10th Cir. 2005) (“W here an issue has been raised, but not ruled
on, proper judicial administration generally favors remand for the district court to
examine the issue initially.”). W e therefore remand to the district court for
resolution of this issue.
B. Forum -Selection C lause
Article 10 of the Fiduciary Agreement states: “This convention is governed
by the Swiss law, in particular article 394 and following of the Swiss Code of
Obligation. Place of courts is Fribourg.” A plt. App. at 133. The district court
interpreted the second sentence— the forum-selection provision— to require that
M r. Yavuz bring all the claims in his complaint in a Swiss court. In so ruling, the
court had to resolve several subsidiary questions: (1) Is the forum-selection
provision mandatory or permissive? That is, does it require that the claims be
brought in a Swiss court, or does it simply perm it the claims to be brought there?
(2) Are all of M r. Yavuz’s claims governed by the provision, or only some? For
example, perhaps the contract claims are so governed but the provision does not
govern the tort or RICO claims? (3) Does the clause bind M r. Yavuz with respect
to claims against all the defendants, or with respect to only his claims against
FPM , or perhaps only those against FPM and M r. Adi?
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To answer those questions, a court must first resolve a preliminary
question: W hat law does it apply to answ er them? This choice-of-law issue is
one of first impression for this court, and, with the exception of a very recent
decision by a district court in our circuit, TH Agriculture & Nutrition, L.L.C. v.
Ace European Group Ltd., 416 F. Supp. 2d 1054 (D. Kan. 2006), and one recent
law-review article, it has received virtually no attention from the federal courts,
or even scholars, in the context of international contracts. As stated in that recent
article: “In practice, and with rare exceptions, United States courts tend not to
engage in explicit choice of law analysis when determining the validity and
enforceability of a given international [forum-selection clause]. Those courts
tend instead to reflexively apply lex fori, even when the contract contains an
explicit choice of law clause selecting the law s of another jurisdiction to govern
the contract as a whole.” Jacob W ebb Yackee, Choice of Law Considerations in
the Validity & Enforcement of International Forum Selection Agreem ents: Whose
Law Applies?, 9 UCLA J. Int’l L. & Foreign Aff. 43, 67 (2004) (internal footnote
omitted) (hereinafter Yackee); see also Linda S. M ullenix, Another Choice of
Forum, Another Choice of Law: Consensual Adjudicatory Procedure in Federal
Court, 57 Fordham L. Rev. 291, 348 (1988) (“In large measure, the scope of
choice-of-law clauses combined with forum-selection clauses has not been
examined in any meaningful fashion [by federal courts].”) (hereinafter M ullenix).
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Nevertheless, we are not without significant guidance. To begin with,
when a court interprets a contract, as a general matter it applies the law that the
parties selected in their contract. See Restatement (Second) of Conflict of Laws
§ 187 (hereinafter Restatement); id. cmt. e (1971) (“[T]he demands of certainty,
predictability, and convenience dictate that, subject to some limitations, the
parties shall have power to choose the applicable law.”). As we stated in Boyd
Rosene & Associates v. Kansas M unicipal Gas Agency, 174 F.3d 1115, 1121 (10th
Cir. 1999):
Because conflicts of law are inevitable in a federal system, parties to
a contract are empow ered to and frequently do choose a particular
state’s law to apply to the execution and interpretation of the
contract. Absent special circumstances, courts usually honor the
parties’ choice of law because two “prime objectives” of contract law
are “to protect the justified expectations of the parties and to make it
possible for them to foretell with accuracy what will be their rights
and liabilities under the contract.” Restatement § 187 cmt. e.
A forum-selection clause is part of the contract. W e see no particular
reason, at least in the international context, why a forum-selection clause, among
the multitude of provisions in a contract, should be singled out as a provision not
to be interpreted in accordance with the law chosen by the contracting parties.
See Restatement § 204(a) (meaning of ambiguous contractual terms should be
determined “in accordance with the local law of the state chosen by the parties”).
On the contrary, as we are about to discuss, Supreme Court opinions in
international disputes emphasize the primacy of the parties’ agreement regarding
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the proper forum. That agreement consists of more than just the bare words in the
forum-selection provision. The words may take on different meanings depending
on the law used to interpret them. Thus, when the contract contains a choice-of-
law clause, a court can effectuate the parties’ agreement concerning the forum
only if it interprets the forum clause under the chosen law.
Turning now to the Supreme Court’s view of forum-selection clauses, the
Court has recognized several considerations compelling deference to the
contracting parties’ choice of a forum in international commercial transactions.
(W e note at the outset that these considerations may not have equal force, or may
be limited by compelling contrary considerations, in the context of domestic
disputes. See generally M ullenix, supra, at 314.) In M /S Bremen, GmBH v.
Zapata Off-Shore Co., 407 U.S. 1 (1972), the Court held enforceable (absent
evidence that enforcement would be unreasonable, unfair, or unjust) a contractual
requirement that the London H igh Court of Justice be the forum for disputes
regarding an agreement by a German corporation to tow an American
corporation’s drilling rig from Louisiana to Italy. Reversing a closely divided en
banc circuit court, the opinion explained:
For at least two decades we have witnessed an expansion of overseas
commercial activities by business enterprises based in the United
States. The barrier of distance that once tended to confine a business
concern to a modest territory no longer does so. Here we see an
American company with special expertise contracting with a foreign
company to tow a complex machine thousands of miles across seas
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and oceans. The expansion of American business and industry will
hardly be encouraged if, notwithstanding solemn contracts, we insist
on a parochial concept that all disputes must be resolved under our
laws and in our courts. Absent a contract forum, the considerations
relied on by the Court of Appeals would be persuasive reasons for
holding an American forum convenient in the traditional sense, but in
an era of expanding world trade and commerce, the absolute aspects
of the doctrine of [a circuit precedent holding a forum-selection
clause unenforceable] have little place and would be a heavy hand
indeed on the future development of international commercial
dealings by Americans. W e cannot have trade and commerce in
world markets and international waters exclusively on our terms,
governed by our laws, and resolved in our courts.
Id. at 8-9; see also Vimar Seguros y Reaseguros, S.A. v. M /V Sky Reefer, 515 U.S.
528, 537-38 (2000) (quoting portions of the above passage in speaking of
“contemporary principles of international comity and commercial practice”). The
Court said that its approach “accords with ancient concepts of freedom of contract
and reflects an appreciation of the expanding horizons of A merican contractors
who seek business in all parts of the world.” Bremen, 407 U.S. at 11. “The
choice of . . . forum was made in an arm’s-length negotiation by experienced and
sophisticated businessmen, and absent some compelling and countervailing reason
it should be honored by the parties and enforced by the courts.” Id. at 12. The
opinion continued: “There are compelling reasons w hy a freely negotiated private
international agreement, unaffected by fraud, undue influence, or overweening
bargaining power, such as that involved here, should be given full effect.” Id. at
12-13 (internal footnote omitted). “M anifestly much uncertainty and possibly
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great inconvenience to both parties could arise if a suit could be maintained in
any jurisdiction in which an accident might occur or if jurisdiction were left to
any place where the Bremen or [the German corporation] might happen to be
found.” Id. at 13. Therefore,
[t]he elimination of all such uncertainties by agreeing in advance on
a forum acceptable to both parties is an indispensable element in
international trade, commerce, and contracting. There is strong
evidence that the forum clause was a vital part of the agreement, and
it would be unrealistic to think that the parties did not conduct their
negotiations, including fixing the monetary terms, with the
consequences of the forum clause figuring prominently in their
calculations.
Id. at 13-14 (internal footnote omitted).
The Supreme Court has not departed from this approach. In Scherk v.
Alberto-Culver Co., 417 U.S. 506, 519 (1974), the Court treated “[a]n agreement
to arbitrate before a specified tribunal [as], in effect, a specialized kind of forum-
selection clause.” The plaintiff claimed violations of United States securities
laws, and the Court had held in Wilko v. Swan, 346 U.S. 427 (1953), that “an
agreement to arbitrate could not preclude a buyer of a security from seeking a
judicial remedy under the Securities Act of 1933,” Scherk, 417 U.S. at 510.
Nevertheless, the Court enforced “the agreement of the parties in this case to
arbitrate any disputes arising out of their international commercial transaction.”
Id. at 519. Echoing Bremen, the Court wrote:
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[U]ncertainty [regarding the law applicable to disputes arising out of
a contract] will almost inevitably exist with respect to any contract
touching tw o or more countries, each with its own substantive laws
and conflict-of-laws rules. 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. Furthermore, such a provision
obviates the danger that a dispute under the agreement might be
submitted to a forum hostile to the interests of one of the parties or
unfamiliar w ith the problem area involved.
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.
Id. at 516-17 (internal footnote omitted). The Court provided a specific
hypothetical instance of what could happen:
In the present case, for example, it is not inconceivable that if Scherk
had anticipated that Alberto-Culver would be able in this country to
enjoin resort to arbitration he might have sought an order in France
or some other country enjoining Alberto-Culver from proceeding
with its litigation in the United States. W hatever recognition the
courts of this country might ultimately have granted to the order of
the foreign court, the dicey atmosphere of such a legal no-man's-land
would surely damage the fabric of international commerce and trade,
and imperil the willingness and ability of businessmen to enter into
international commercial agreements.
Id. at 517.
Similarly, a decade later in M itsubishi Motors Corp. v. Soler Chrysler-
Plym outh, 473 U.S. 614 (1985), the Court held that the circuit court had erred in
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holding that an antitrust claim was not subject to arbitration in accordance with a
provision in an international commercial agreement. The Court explained:
[W ]e conclude that concerns of international comity, respect for the
capacities of foreign and transnational tribunals, and sensitivity to
the need of the international commercial system for predictability in
the resolution of disputes require that we enforce the parties’
agreement, even assuming that a contrary result would be
forthcoming in a domestic context.
Id. at 629.
To be sure, the above Supreme Court opinions did not address the choice-
of-law issue presented here. In those cases there was no question regarding the
meaning of the contractual forum-selection provision at issue, only its
enforceability. But the same reasoning applies: If the parties to an international
contract agree on a forum-selection clause that has a particular meaning under the
law of a specific jurisdiction, and the parties agree that the contract is to be
interpreted under the law of that jurisdiction, then respect for the parties’
autonomy and the demands of predictability in international transactions require
courts to give effect to the meaning of the forum-selection clause under the
chosen law, at least absent special circumstances (such as, perhaps, the chosen
jurisdiction’s refusal to hear a case that has no ties to the jurisdiction). See
Yackee, supra, at 84-85. In other words, just as the Supreme Court has made
clear that under federal law the courts should ordinarily honor an international
comm ercial agreement’s forum-selection provision, we now hold that under
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federal law the courts should ordinarily honor an international commercial
agreement’s forum-selection provision as construed under the law specified in the
agreement’s choice-of-law provision. The practice, although apparently merely
reflexive, of applying the law of the jurisdiction in which the suit is pending (lex
fori), is unsatisfactory. As one author has expressed the point:
Lex fori is, in most circumstances and for a number of reasons, a
poor choice of law to govern an international [forum-selection
clause]: it risks subjecting the contract to multiple laws, it makes it
difficult for parties to anticipate at the contract drafting stage which
law will actually be applied to [the forum-selection clause], it may
promote forum shopping, and it ignores the parties’ bargained-for
jurisdictional expectations by overlooking a contract’s explicit or
im plicit choice of law .
Yackee, supra, at 83 (internal footnotes omitted).
Turning to the Fiduciary Agreement, the choice-of-forum clause states:
“Place of courts is Fribourg.” A plt. App. at 133. Under American law this
language appears rather ambiguous. W e would be inclined to hold that the clause
is permissive rather than mandatory, see K & V Scientific Co. v. Bayerische
M otoren Werke Aktiengesellschaft, 314 F.3d 494 (10th Cir. 2002), and it is hardly
obvious what claims, against what parties, are governed by the clause. W e might
reach the same conclusions under Swiss law, but perhaps not. See Yackee, supra,
at 61 (noting that European Union law presumes forum-selection clauses are
exclusive). The parties have not addressed the issue.
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W hat is not ambiguous is that the parties agreed that Sw iss law governs the
Fiduciary Agreement. Accordingly, we hold that the choice-of-forum provision in
that contract must be construed under Sw iss law. W e recognize that we have
some discretion to decide to determine ourselves what Swiss law provides. See
Fed. R. Civ. P. 44.1; Swiss Credit Bank v. Balink, 614 F.2d 1269, 1272 (10th Cir.
1980) (applying Swiss law on appeal). But the better practice is to remand to
district court to permit the parties to present the applicable law and perhaps to
develop further any facts that may be relevant under that law. See SEC v. Dunlap,
253 F.3d 768, 777 (4th Cir. 2001) (remanding to district court with instructions to
determine “what Costa Rican law actually provides, and its significance, if any, in
this matter”); Banque Paribas v. Hamilton Indus. Int’l, Inc., 767 F.2d 380, 386
(7th Cir. 1985) (remanding with instructions to “determine, in accordance with
Rule 44.1 of the Federal Rules of Civil Procedure, whether there was any
violation of the guarantee, when that guarantee is interpreted in according with
Saudi Arabian law”). W e also note that the issue may be mooted by a
determination that venue is inappropriate under the forum non conveniens
doctrine.
C. E xecuting D ocum ents
Finally, M r. Yavuz contends that the district court erred when, as part of its
order granting the motion to dismiss, it ordered him to execute documents to
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remove any cloud on the title to the Tulsa Property. The district court’s order
stated:
This Order shall also act as a dismissal of any lis pendens notices
that have been filed w ith the records of the County Clerk of Tulsa
County regarding this lawsuit. The Plaintiff is hereby ORDERED to
execute any documents reasonabl[y] necessary to remove this lawsuit
as a cloud on the title to any Tulsa County real estate owned by the
Defendants.
Aplt. App. at 200 (emphasis added). W e are perplexed by the order. It did not
relate to any lis pendens filed by M r. Yavuz, because all of them had been
expunged. Defendants’ brief on appeal does not explain what M r. Yavuz was to
do in response to the order or how the district court had the authority to issue the
order when it was dismissing the case. W e therefore vacate the order.
III. C O N C L U SIO N
W e REVERSE the judgment of the district court and REM AND for further
proceedings consistent with this opinion.
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APPENDIX
The full text of the 1989 A greement is as follow s:
FID UCIARY AGREEM ENT
between
Orhan YAVUZ
Cumhuryet Caddesi 20/6
Taksim - Istanbul
Turkey
hereinafter referred to as “TRUSTOR”
and
FINASTA TE SA
Rue St-Pierre 18
1700 Fribourg
hereinafter referred to as “FINA STATE”
Article 1
TRUSTOR hereby instructs FINASTATE to acquire and to administer, in its
name, but for the account and risk of TRUSTOR, the follow ing assets:
- an investment of 20% in the share capital of M adonna BV, Curaçao at a
market value of US$ 201’420.— at December 31, 1989.
- a loan of US$ 401’880.— granted to M adonna BV , Curaçao with additional
accrued interest of US$ 333’238.46 at December 31, 1989.
These assets, held by FINASTATE or registered in its name, in fiduciary capacity,
for the account of TRUSTOR, remain the property of TRUSTOR.
TRUSTOR has, or will make available to FINASTATE, the necessary funds in
order to cover the investments and the related expenses.
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Article 2
TRUSTOR undertakes to give all the documents, information and technical
assistance, that are necessary for FINASTATE to perform its mandate.
In particular it is agreed that TRUSTOR will release FINASTATE from all
obligations w hich have been contracted as fulfilment of the mandate according to
article 1 hereinabove.
Article 3
FIN ASTATE gives no guarantee nor takes any responsibility in respect of this
operation. It is well understood that all risks of exchange and transfer as well as
risks of disposal and of fiscal actions, are entirely to the charge of TRUSTOR.
Article 4
TRUSTOR accept[s] that FINASTATE acts as trustee at the risk of TRUSTOR.
In addition, TRUSTOR releases FINASTATE, and all persons acting on behalf of
FINASTATE in the execution of this agreement, from all responsibility.
TRUSTOR will indemnify FINASTATE and all persons acting on behalf of
FINASTATE in the execution of this agreement, against all claims made by third
parties in direct or indirect relation with the present agreement.
FINASTATE will only act on clear instructions given by TRUSTOR. In urgent
circumstances, or if TRUSTOR cannot be contacted in time, FINASTATE may
undertake whatever steps necessary in accordance with its judgment in order to
safeguard the interests of TRUSTOR.
Article 5
The funds deriving from the assets held through this agreement will be transferred
to TRUSTOR after said funds have been cashed by FINASTATE, on the
understanding that TRUSTOR will communicate to FINASTATE how payment
has to be made.
In the case of FINASTATE not receiving the funds, FINASTATE transfers the
claim or asset to TRUSTOR and so will be released from all other obligations.
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Article 6
TRUSTOR authorizes FINASTATE to represent the shares held as trustee at the
shareholders meeting, without having in fact the obligation to use the violating
rights attached to these shares according to the instructions received from
TRUSTOR or according to the judgement of FINASTATE in order to safeguard
the interests of TRUSTOR.
Article 7
In consideration for carrying out this mandate, FINASTATE is entitled to a
comm ission of 5 % per annum, calculated on the total assets held as trustee at
market value.
Article 8
FINASTATE is authorized to communicate the existence of this agreement to the
competent fiscal authorities, if duly requested by them. FINASTATE is also
authorized to give a detailed list of the assets held in fiduciary capacity on behalf
of TRUSTOR.
Article 9
This agreement may be cancelled at any time, without mention of the reason, by
both parties, with notice of one month to be given by registered mail to the
address of the other party as per this agreement.
In such a case, on condition that the claim of FINASTATE against TRUSTOR is
completed, FINASTATE will transfer the assets as per article 1 with all attached
rights to TRUSTOR, or to another person nominated by TRUSTOR, by giving the
related documentation or title and against declaration of release.
The notice to this contract will not affect transactions which are in progress.
Article 10
This convention is governed by the Swiss law, in particular article 394 and
following of the Swiss Code of Obligation. Place of courts is Fribourg.
Fribourg, December 31, 1989
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Orhan YA VUZ FINASTA TE SA
/s/ /s/
Aplt. App. at 131-33.
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