Fifth Circuit: Mandamus Granted Directing Case Dismissal on Forum Non Conveniens Grounds | Practical Law

Fifth Circuit: Mandamus Granted Directing Case Dismissal on Forum Non Conveniens Grounds | Practical Law

In In re Lloyd's Register North America, Inc., the US Court of Appeals for the Fifth Circuit granted a writ of mandamus directing the lower court to dismiss the case after finding the plaintiff, a non-signatory to a contract containing a forum-selection clause, was nevertheless bound to bring its claims in England through the doctrine of direct-benefits estoppel.

Fifth Circuit: Mandamus Granted Directing Case Dismissal on Forum Non Conveniens Grounds

by Practical Law Litigation
Published on 27 Feb 2015 • USA (National/Federal)
In In re Lloyd's Register North America, Inc., the US Court of Appeals for the Fifth Circuit granted a writ of mandamus directing the lower court to dismiss the case after finding the plaintiff, a non-signatory to a contract containing a forum-selection clause, was nevertheless bound to bring its claims in England through the doctrine of direct-benefits estoppel.
On February 24, 2015, the US Court of Appeals for the Fifth Circuit in In re Lloyd's Register North America, Inc. granted a writ of mandamus directing the lower court to dismiss the case on forum non conveniens (FNC) grounds after finding a non-signatory to a contract containing a forum-selection clause was nevertheless bound through the doctrine of direct-benefits estoppel (No. 14-20554, (5th Cir. Feb. 24, 2015)).
Lloyd’s Register North America, Inc. (LRNA) contracted with Irving Shipbuilding, Inc. as the classification society responsible for certifying a ship built by Irving for Pearl Seas Cruises, LLC. Pearl Seas subsequently sued LRNA, who moved to dismiss on FNC grounds claiming that a forum selection clause in the LRNA/Irving contract required the action to be brought in England. The district court denied the motion to dismiss without written or oral explanation. LRNA filed a petition for writ of mandamus with the Fifth Circuit.
The Fifth Circuit vacated the district court's denial of LRNA’s motion to dismiss and granted the writ of mandamus. The court applied the three-prong test articulated in Cheney v. U.S. Dist. Court for Dist. of Columbia, 542 U.S. 367, 380 (2004):
  • The party seeking mandamus has no other adequate means, such as direct appeal, to attain the relief that he or she desires.
  • The petitioner must show a clear and indisputable right to the writ.
  • The court must be satisfied that mandamus is appropriate under the circumstances.
As the usual appeals process does not provide an interlocutory appeal of a denial of a motion to dismiss, the Court concluded that LRNA has no other "adequate means" and, therefore, meets the first prong for mandamus relief.
In considering the second and third prongs, the court examined whether there was a clear abuse of discretion and whether the district court reached a patently erroneous result. The court reasoned that the district court's denial of the motion to dismiss "without explanation, and without any visible weighing of the factors of FNC amounted to a "clear abuse of discretion" leaving the parties and reviewing courts no way of understanding how the court reached its conclusion.
Regarding the forum-selection clause, the Fifth Circuit looked to the doctrine of direct-benefits estoppel in arriving at the conclusion that the forum-selection clause applies to Pearl Seas' claims. Direct-benefits estoppel holds a non-signatory to a forum-selection (or arbitration) clause in a contract if the non-signatory "knowingly exploits the agreement" containing the clause by either:
  • Knowingly seeking and obtaining "direct benefits" from that contract.
  • Seeking to enforce the terms of that contract or asserting claims that must be determined by reference to that contract.
In this case, Pearl Seas is bound to the forum-selection clause because:
  • Pearl Seas knew about the content of the contract between LRNA and Irving well before the instant litigation.
  • Pearl Seas acted to exploit that contract through actively attempting to enforce those terms that benefitted it.
  • Pearl Seas gained a direct benefit from LRNA’s performance of the contract’s terms.
The court followed Bridas S.A.P.I.C. v. Government of Turkmenistan, (where a non-signatory was bound to an arbitration clause) in applying direct benefits estoppel to the forum-selection clause (447 F.3d 411 (5th Cir. 2006)). (For a discussion of binding non-signatories to arbitration agreements through estoppel and other theories, see Article, Joining non-signatories to an arbitration.)
Next, the court followed Atlantic Marine Const. Co., Inc. v. U.S. Dist. Court for Western Dist. of Texas regarding the standard to be applied to enforcing the forum selection clause (134 S. Ct. 568, 582 (2013)). Because a valid forum-selection clause generally prevails but for "unusual cases" and Pearl Seas did not identify any "unusual" factors, the district court reached a patently erroneous result.
Under these facts, LRNA had a "clear and indisputable" right to issuance of the writ.