THE BREMEN ET AL. v. ZAPATA OFF-SHORE CO.
No. 71-322
Supreme Court of the United States
Argued March 21, 1972—Decided June 12, 1972
James K. Nance argued the cause for respondent. With him on the brief was Dewey R. Villareal, Jr.
MR. CHIEF JUSTICE BURGER delivered the opinion of the Court.
We granted certiorari to review a judgment of the United States Court of Appeals for the Fifth Circuit declining to enforce a forum-selection clause governing disputes arising under an international towage contract between petitioners and respondent. The circuits have differed in their approach to such clauses.1 For the reasons stated hereafter, we vacate the judgment of the Court of Appeals.
In November 1967, respondent Zapata, a Houston-based American corporation, contracted with petitioner Unterweser, a German corporation, to tow Zapata‘s ocean-going, self-elevating drilling rig Chaparral from Louisiana to a point off Ravenna, Italy, in the Adriatic Sea, where Zapata had agreed to drill certain wells. Zapata had solicited bids for the towage, and several companies including Unterweser had responded. Unterweser was the low bidder and Zapata requested it to submit a contract, which it did. The contract submitted by Unterweser contained the following provision, which is at issue in this case:
“Any dispute arising must be treated before the London Court of Justice.”
After reviewing the contract and making several changes, but without any alteration in the forum-selection or exculpatory clauses, a Zapata vice president executed the contract and forwarded it to Unterweser in Germany, where Unterweser accepted the changes, and the contract became effective.
On January 5, 1968, Unterweser‘s deep sea tug Bremen departed Venice, Louisiana, with the Chaparral in tow bound for Italy. On January 9, while the flotilla was in international waters in the middle of the Gulf of Mexico, a severe storm arose. The sharp roll of the Chaparral in Gulf waters caused its elevator legs, which had been raised for the voyage, to break off and fall into the sea, seriously damaging the Chaparral. In this emergency situation Zapata instructed the Bremen to tow its damaged rig to Tampa, Florida, the nearest port of refuge.
On January 12, Zapata, ignoring its contract promise to litigate “any dispute arising” in the English courts, commenced a suit in admiralty in the United States
Thereafter, on January 21, 1969, the District Court denied another motion by Unterweser to stay the limitation action pending determination of the controversy in the High Court of Justice in London and granted Zapata‘s motion to restrain Unterweser from litigating
On appeal, a divided panel of the Court of Appeals affirmed, and on rehearing en banc the panel opinion was adopted, with six of the 14 en banc judges dissenting. As had the District Court, the majority rested on the Carbon Black decision, concluding that “‘at the very least‘” that case stood for the proposition that a forum-selection clause “‘will not be enforced unless the selected state would provide a more convenient forum than the state in which suit is brought.‘” From that premise the Court of Appeals proceeded to conclude that, apart from the forum-selection clause, the District Court did not abuse its discretion in refusing to decline jurisdiction on the basis of forum non conveniens. It noted that (1) the flotilla never “escaped the Fifth Circuit‘s mare nostrum, and the casualty occurred in close proximity to the district court“; (2) a considerable number of potential witnesses, including Zapata crewmen, resided in the Gulf Coast area; (3) preparation for the voyage and inspection and repair work had been performed in the Gulf area; (4) the testimony of the Bremen crew was available by way of deposition; (5) England had no interest in or contact with the controversy other than the forum-selection clause. The Court of Appeals majority further noted that Zapata was a United States citizen and “[t]he dis-
We hold, with the six dissenting members of the Court of Appeals, that far too little weight and effect were given to the forum clause in resolving this controversy. 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
Forum-selection clauses have historically not been favored by American courts. Many courts, federal and state, have declined to enforce such clauses on the ground that they were “contrary to public policy,” or that their effect was to “oust the jurisdiction” of the court.10 Al-
“[I]t is settled . . . that parties to a contract may agree in advance to submit to the jurisdiction of a given court, to permit notice to be served by the opposing party, or even to waive notice altogether.” Id., at 315-316.
This approach is substantially that followed in other common-law countries including England.12 It is the view advanced by noted scholars and that adopted by the Restatement of the Conflict of Laws.13 It accords with ancient concepts of freedom of contract and reflects an appreciation of the expanding horizons of American contractors who seek business in all parts of the world. Not surprisingly, foreign businessmen prefer, as do we, to
The argument that such clauses are improper because they tend to “oust” a court of jurisdiction is hardly more than a vestigial legal fiction. It appears to rest at core on historical judicial resistance to any attempt to reduce the power and business of a particular court and has little place in an era when all courts are overloaded and when businesses once essentially local now operate in world markets. It reflects something of a provincial attitude regarding the fairness of other tribunals. No one seriously contends in this case that the forum-selection clause “ousted” the District Court of jurisdiction over Zapata‘s action. The threshold question is whether that court should have exercised its jurisdiction to do more than give effect to the legitimate expectations of the parties, manifested in their freely negotiated agreement, by specifically enforcing the forum clause.
There are compelling reаsons why a freely negotiated private international agreement, unaffected by fraud, undue influence, or overweening bargaining power,14 such
We note, however, that there is nothing in the record presently before us that would support a refusal to enforce the forum clause. The Court of Appeals suggested that enforcement would be contrary to the public policy of the forum under Bisso v. Inland Waterways Corp., 349 U. S. 85 (1955), because of the prospect that the English courts would enforce the clauses of the towage contract purporting to exculpate Unterweser from liability for damages to the Chaparral. A contractual choice-of-forum clause should be held unenforceable if enforcement would contravene a strong public pоlicy of the forum in which suit is brought, whether declared by statute or by judicial decision. See, e. g., Boyd v. Grand Trunk W. R. Co., 338 U. S. 263 (1949). It is clear, however, that whatever the proper scope of the policy expressed in Bisso,17 it does not reach this case. Bisso rested on considerations with respect to the towage business strictly in
“[W]e should be careful not to over-emphasize the strength of the [Bisso] policy. . . . [T]wo concerns underlie the rejection of exculpatory agreements: that they may be produced by overweening bargaining power; and that they do not sufficiently discourage negligence. . . . Here the conduct in question is that of a foreign party occurring in international waters outside our jurisdiction. The evidence disputes any notion of overreaching in the contractual agreement. And for all we know, the uncertainties and dangers in the new field of transoceanic towage of oil rigs were so great that the tower was unwilling to take financial responsibility for the risks, and the parties thus allocated responsibility for the voyage to the tow. It is equally possible that the contract price took this factor into account. I conclude that we should not invalidate the forum selection clause here unless we are firmly convinced that we would thereby significantly encourage negligent conduct within the boundaries of the United States.” 428 F.2d, at 907-908. (Footnotes omitted.)
Courts have also suggested that a forum clause, even though it is freely bargained for and contravenes no important public policy of the forum, may nevertheless be “unreasonable” and unenforceable if the chosen fоrum is seriously inconvenient for the trial of the action. Of course, where it can be said with reasonable assurance that at the time they entered the contract, the parties to a freely negotiated private international commercial agreement contemplated the claimed inconvenience, it is difficult to see why any such claim of inconvenience should be heard to render the forum clause unenforceable.
This case, however, involves a freely negotiated international commercial transaction between a German and an American corporation for towage of a vessel from the Gulf оf Mexico to the Adriatic Sea. As noted, selection of a London forum was clearly a reasonable effort to bring vital certainty to this international transaction and to provide a neutral forum experienced and capable in the resolution of admiralty litigation. Whatever “inconvenience” Zapata would suffer by being forced to litigate in the contractual forum as it agreed to do was clearly
In the course of its ruling on Unterweser‘s second motion to stay the proceedings in Tampa, the District Court did make a conclusory finding that the balance of convenience was “strongly” in favor of litigation in Tampa. However, as previously noted, in making that finding the court erroneously placed the burden of proof on Unterweser to show that the balance of convenience was strongly in its favor.19 Moreover, the finding falls far short of a conclusion that Zapata would be effectively deprived of its day in court should it be
Zapata‘s remaining contentions do not require extended treatment. It is clear that Unterweser‘s action in filing its limitation complаint in the District Court in Tampa was, so far as Zapata was concerned, solely a defensive measure made necessary as a response to Zapata‘s breach of the forum clause of the contract. When the six-month statutory period for filing an action to limit its liability had almost run without the District Court‘s having ruled on Unterweser‘s initial motion to dismiss or stay Zapata‘s action pursuant to the forum clause, Unterweser had no other prudent alternative but to protect itself by filing for limitation of its liability.20 Its action in so doing was a direct consequence
For the first time in this litigation, Zapata has suggested to this Court that the forum clause should not be construed to providе for an exclusive forum or to include in rem actions. However, the language of the clause is clearly mandatory and all-encompassing; the language of the clause in the Carbon Black case was far different.21
The judgment of the Court of Appeals is vacated and the case is remanded for further proceedings consistent with this opinion.
Vacated and remanded.
MR. JUSTICE WHITE, concurring.
I concur in the opinion and judgment of the Court except insofar as the opinion comments on the issues which are remanded to the District Court. In my view these issues are best left for consideration by the District Court in the first instance.
MR. JUSTICE DOUGLAS, dissenting.
Petitioner Unterweser contracted with respondent to tow respondent‘s drilling barge from Louisiana to Italy. The towage contract contained a “forum selection clause”
Petitioners sued respondent in the High Court of Justice in London, which denied respondent‘s motion to dismiss.
Petitioners, having previously moved the District Court to dismiss, filed a complaint in that court seeking exoneration or limitation of liability as provided in
Respondent moved for an injunction against petitioners’ litigating further in the English case and the District Court granted the injunction pending determination of the limitation action. Petitioners moved to stay their own limitation proceeding pending a resolution of the suit in the English court. That motion was denied. 296 F. Supp. 733.
That was the posture of the case as it reached the Court of Appeals, petitioners appealing from the last two orders. The Court of Appeals affirmed. 428 F.2d 888, 446 F.2d 907.
Chief Justice Taft in Hartford Accident Co. v. Southern Pacific, 273 U. S. 207, 214 (1927), in discussing the Limitation of Liability Act said that “the great object of the statute was to encourage shipbuilding and to induce the investment of money in this branch of industry, by limiting the venture of those who build the ship to the loss of the ship itself or her freight then pending, in cases of damage or wrong, happening without the privity or
Chief Justice Taft went on to describe how the owner of a vessel who, in case the vessel is found at fault, may limit his liability to the value of the vessel and may bring all claimants “into concourse in the proceeding, by monition” and they may be enjoined from suing the owner and the vessel on such claims in any other court. Id., at 215.
Chief Justice Taft concluded: “[T]his Court has by its rules and decisions given the statute a very broad and equitable construction for the purpose of carrying out its purpose and for facilitating a settlement of the whole controversy over such losses as are comprehended within it, and that all the ease with which rights can be adjusted in equity is intended to be given to the proceeding. It is the administration of equity in an admiralty court. . . . The proceeding partakes in a way of the features of a bill to enjoin a multipliсity of suits, a bill in the nature of an interpleader, and a creditor‘s bill. It looks to a complete and just disposition of a many cornered controversy, and is applicable to proceedings in rem against the ship as well as to proceedings in personam against the owner, the limitation extending to the owner‘s property as well as to his person.” Id., at 215-216.
The Limitation Court is a court of equity and traditionally an equity court may enjoin litigation in another court where equitable considerations indicate that the other litigation might prejudice the proceedings in the Limitation Court. Petitioners’ petition for limitation
Respondent is a citizen of this country. Moreover, if it were remitted to the English court, its substantive rights would be adversely affected. Exculpatory provisions in the towage control provide (1) that petitioners, the masters and the crews “are not responsible for defaults and/or errors in the navigation of the tow” and (2) that “[d]amages suffered by the towed object are in any case for account of its Owners.”
Under our decision in Dixilyn Drilling Corp v. Crescent Towing & Salvage Co., 372 U. S. 697, 698 (1963), “a contract which exempts the tower from liability for its own negligence” is not enforceable, though there is evidence in the present record that it is enforceable in England. That policy was first announced in Bisso v. Inland Waterways Corp., 349 U. S. 85 (1955); and followed in Boston Metals Co. v. The Winding Gulf, 349 U. S. 122 (1955); Dixilyn, supra; Gray v. Johansson, 287 F.2d 852 (CA5 1961); California Co. v. Jumonville, 327 F.2d 988 (CA5 1964); American S. S. Co. v. Great Lakes Towing Co., 333 F.2d 426 (CA7 1964); D. R. Kincaid, Ltd. v. Trans-Pacific Towing, Inc., 367 F.2d 857 (CA9 1966); A. L. Mechling Barge Lines, Inc. v. Derby Co., 399 F.2d 304 (CA5 1968). Cf. United States v. Seckinger, 397 U. S. 203 (1970). Although the casualty occurred on the high seas, the Bisso doctrine is nonetheless applicable. The Scotland, 105 U. S. 24 (1881); The Belgenland, 114 U. S. 355 (1885); The Gylfe v. The Trujillo, 209 F.2d 386 (CA2 1954).
Moreover, the casualty occurred close to the District Court, a number of potential witnesses, including respondent‘s crewmen, reside in that area, and the inspection and repair work were done there. The testimony of the tower‘s crewmen, residing in Germany, is already available by way of depositions taken in the proceedings.
I would affirm the judgment below.
*It is said that because these parties specifically agreed to litigate their disputes before the London Court of Justice, the District Court, absent “unreasonable” circumstances, should have honored that choice by declining to exercise its jurisdiction. The forum-selection clause, however, is part and parcel of the exculpatory provision in the towing agreement which, as mentioned in the text, is not enforceable in American courts. For only by avoiding litigation in the United States could petitioners hope to evade the Bisso doctrine.
Judges in this country have traditionally been hostile to attempts to circumvent the public policy against exculpatory agreements. For example, clauses specifying that the law of a foreign place (which favors such releases) should control have regularly been ignored. Thus, in The Kensington, 183 U. S. 263, 276 (1902), the Court held void an exemption from liability despite the fact that the contract provided that it should be construed under Belgian law which was more tolerant. And see E. Gerli & Co. v. Cunard S. S. Co., 48 F.2d 115, 117 (CA2 1931); Oceanic Steam Nav. Co. v. Corcoran, 9 F.2d 724, 731 (CA2 1925); In re Lea Fabrics, Inc., 226 F. Supp. 232, 237 (NJ 1964); F. A. Straus & Co. v. Canadian P. R. Co., 254 N. Y. 407, 173 N. E. 564 (1930); Siegelman v. Cunard White Star, 221 F.2d 189, 199 (CA2 1955) (Frank, J., dissenting). 6A A. Corbin on Contracts § 1446 (1962).
The instant stratagem of specifying a foreign forum is essentially the same as invoking a foreign law of construction except that the present circumvention also requires the American party to travel across an ocean to seek relief. Unless we are prepared to overrule Bisso we should not countenance devices designed solely for the purpose of evading its prohibition.
It is argued, however, that one of the rationales of the Bisso doctrine, “to protect those in need of goods or services from being overreached by others who have power to drive hard bargains” (349 U. S., at 91), does not apply here because these parties may have been of equal bargaining stature. Yet we have often adopted prophylactic rules rather than аttempt to sort the core cases from the marginal ones. In any event, the other objective of the Bisso doctrine, to “discourage negligence by making wrongdoers pay damages” (ibid.) applies here and in every case regardless of the relative bargaining strengths of the parties.
Notes
“1. . . . [Unterweser and its] masters and crews are not responsible for defaults and/or errors in the navigation of the tow.
“2. . . .
“b) Damages suffered by the towed object are in any case for account of its Owners.”
In addition, the contract provided that any insurance of the Chaparral was to be “for account of” Zapata. Unterweser‘s initial telegraphic bid had also offered to “arrange insurance covering towage risk for rig if desired.” As Zapata had chosen to be self-insured on all its rigs, the loss in this case was not compensated by insurance.
“The lаw on the subject, I think, is not open to doubt. . . . It is always open to parties to stipulate . . . that a particular Court shall have jurisdiction over any dispute arising out of their contract. Here the parties chose to stipulate that disputes were to be referred to the ‘London Court,’ which I take as meaning the High Court in this country. Prima facie it is the policy of the Court to hold parties to the bargain into which they have en-
tered. . . . But that is not an inflexible rule, as was shown, for instance, by the case of The Fehmarn, [1957] 1 Lloyd‘s Rep. 511; (C. A.) [1957] 2 Lloyd‘s Rep. 551 . . . .“I approach the matter, therefore, in this way, that the Court has a discretion, but it is a discretion which, in the ordinary way and in the absence of strong reason to the contrary, will be exercised in favour of holding parties to their bargain. The question is whether sufficient circumstances have been shown to exist in this case to make it desirable, on the grounds of balance of convenience, that proceedings should not take place in this country. . . .” [1968] 2 Lloyd‘s Rep. 158, 162-163.
In addition, it is not disputed that while the limitation fund in the District Court in Tampa amounts to $1,390,000, the limitation fund in England would be only slightly in excess of $80,000 under English law.
For leading early cases, see, e. g., Nute v. Hamilton Mutual Ins. Co., 72 Mass. (6 Gray) 174 (1856); Nashua River Paper Co. v. Hammermill Paper Co., 223 Mass. 8, 111 N. E. 678 (1916); Benson v. Eastern Bldg. & Loan Assn., 174 N. Y. 83, 66 N. E. 627 (1903).
The early admiralty cases were in accord. See, e. g., Wood & Selick, Inc. v. Compagnie Generale Transatlantique, 43 F.2d 941 (CA2 1930); The Ciano, 58 F. Supp. 65 (ED Pa. 1944); Kuhnhold v. Compagnie Generale Transatlantique, 251 F. 387 (SDNY 1918); Prince Steam-Shipping Co. v. Lehman, 39 F. 704 (SDNY 1889).
In Insurance Co. v. Morse, 20 Wall. 445 (1874), this Court broadly stated that “agreements in advance to oust the courts of the jurisdiction conferred by law are illegal and void.” Id., at 451. But the holding of that case was only that the State of Wisconsin could not by statute force a foreign corporation to “agree” to surrender its federal
statutory right to remove a state court action to the federal courts as a condition of doing business in Wisconsin. Thus, the case is properly understood as one in which a state statutory requirement was viewed as imposing an unconstitutional condition on the exercise of the federal right of removal. See, e. g., Wisconsin v. Philadelphia & Reading Coal Co., 241 U. S. 329 (1916).As Judge Hand noted in Krenger v. Pennsylvania R. Co., 174 F.2d 556 (CA2 1949), even at that date there was in fact no “absolute taboo” against such clauses. See, e. g., Mittenthal v. Mascagni, 183 Mass. 19, 66 N. E. 425 (1903); Daley v. People‘s Bldg., Loan & Sav. Assn., 178 Mass. 13, 59 N. E. 452 (1901) (Holmes, J.). See also Cerro de Pasco Copper Corp. v. Knut Knutsen, O. A. S., 187 F.2d 990 (CA2 1951).
The Muller case was overruled in Indussa Corp. v. S. S. Ranborg, 377 F.2d 200 (CA2 1967), insofar as it held that the forum clause was not inconsistent with the “lessening of liability” provision of the Carriage of Goods by Sea Act,
“Zapata has neither presented evidence of nor alleged fraud or undue bargaining power in the agreement. Unterweser was only one of several companies bidding on the project. No evidence contradicts its Managing Director‘s affidavit that it specified English courts ‘in an effort to meet Zapata Off-Shore Company half way.’ Zapata‘s Vice President has declared by affidavit that no specific negotiations concerning the forum clause took place. But this was not simply a form contract with boilerplate language that Zapata
had no power to alter. The towing of an oil rig aсross the Atlantic was a new business. Zapata did make alterations to the contract submitted by Unterweser. The forum clause could hardly be ignored. It is the final sentence of the agreement, immediately preceding the date and the parties’ signatures. . . .” 428 F.2d 888, 907.The record contains an affidavit of a Managing Director of Unterweser stating that Unterweser considered the choice-of-forum provision to be of “overriding importance” to the transaction. He stated that Unterweser towage contracts ordinarily provide for exclusive German jurisdiction and application of German law, but that “[i]n this instance, in an effort to meet [Zapata] half way, [Unterweser] proposed the London Court of Justice. Had this provision not been accepted by [Zapata], [Unterweser] would not have entered into the towage contract . . . .” He also stated that the parties intended, by designating the London forum, that English law would be applied. A responsive affidavit by Hoyt Taylor, a vice president of Zapata, denied that there were any discussions between Zapata and Unterweser concerning the forum clause or the question of the applicable law.
“[Zapata] pointed out that in this case the balance of convenience so far as witnesses were concerned pointed in the direction of having the case heard and tried in the United States District Court at Tampa in Florida because the probability is that most, but not necessarily all, of the witnesses will be American. The answer, as it seems to me, is that a substantial minority at least of witnesses are likely to be German. The tug was a German vessel and was, as far as I know, manned by a German crew. . . . Where they all are now or are likely to be when this matter is litigated I do not know, because the experience of the Admiralty Court here strongly points out that maritime witnesses in the course of their duties move about freely. The hоmes of the German crew presumably are in Germany. There is probably a balance of numbers in favour of the Americans, but not, as I am inclined to think, a very heavy balance.” App. 212.
It should also be noted that if the exculpatory clause is enforced in the English courts, many of Zapata‘s witnesses on the questions of negligence and damage may be completely unnecessary.