Tropp v. Corporation of Lloyd’s, 08-2332-cv (2nd Cir., July 19, 2010).
Corporation of Lloyd’s (“Lloyd’s”) obtained a judgment against Richard A. Tropp (“Tropp”) in the United Kingdom for breach of contract. The contract between the parties contained a forum selection clause identifying the UK as the forum for resolving a dispute between the parties. Tropp filed an action against Lloyd’s in the U.S. District Court for the Southern District of New York, but the District Court dismissed the action under FRCP Rule 12(b)(3), based on the forum selection clause, and 12(b)(6), for failure to state a claim. The Court of Appeals affirmed.
On a motion to dismiss, a party seeking to enforce a forum selection clause must demonstrate that: 1) the clause was reasonably communicated to the party resisting enforcement; 2) the clause was mandatory and not merely permissive; and 3) the claims and parties involved in the suit are subject to the forum selection clause. Lloyd’s having established these elements, the burden shifted to Tropp to rebut the presumption of enforceability by “making a sufficiently strong showing that enforcement would be unreasonable or unjust, or that the clause was invalid for reasons such as fraud or overreaching.” Tropp’s primary challenge was that the clause was unenforceable because UK law deprived him of any remedy and that his prior record of preclusion of his claims in UK courts showed the lack of a remedy. The Court disagreed, concluding the UK courts did not deprive Tropp of a remedy.
The Court also affirmed dismissal for failure to state a claim because, under New York law, the judgment against Tropp obtained in a UK court was enforceable against him. Whether a foreign judgment is domestically enforceable is a matter of state law, here NY CPLR 5302. A foreign judgment will not be enforceable if it was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law. Tropp argued the UK system denies due process of law to claims like his. The Court of Appeals again disagreed, finding the relevant inquiry is the overall fairness of the UK’s legal system “which is beyond dispute.” The Court found the UK legal system did not deprive Tropp of due process and affirmed dismissal of his action.
For a copy of the decision click here
Patrick Omilian and Jeffrey Kingsley