## Facts

- U.S. investors residing in Illinois became “Names” in the Lloyd’s insurance market and invested through Lloyd’s syndicates.
- Lloyd’s-related representatives solicited the investors in Illinois; the investors then traveled to England to execute membership documents.
- The membership agreements included forum-selection and choice-of-law clauses designating England and English law, and arbitration clauses requiring arbitration in England under English law.
- After sustaining substantial losses, the investors sued in federal court in Illinois, alleging fraudulent inducement and violations of federal and state securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934.
- The investors sought to prevent defendants from drawing on a letter of credit required as a condition of membership.
- The district court denied a preliminary injunction against the letter-of-credit draw and later dismissed the action based on the English forum-selection/arbitration provisions, ultimately applying the dismissal to all defendants, including U.S. “local” and bank defendants.
- The investors appealed both orders; the appeals were consolidated.

## Issues

1. Whether contractual forum-selection, choice-of-law, and arbitration clauses requiring dispute resolution in England under English law are enforceable against U.S. investors alleging fraud and U.S. securities-law violations.
2. Whether the anti-waiver provisions and public policy of the federal securities laws prevent enforcement of the English forum and English-law clauses.
3. Whether the district court properly (a) dismissed the case as to all defendants, including nonmoving domestic defendants, and (b) denied a preliminary injunction against the letter-of-credit draw.

## Decision

- The Seventh Circuit affirmed the denial of the preliminary injunction.
- The Seventh Circuit affirmed dismissal of the complaint in favor of litigation/arbitration in England under English law.
- The court enforced the forum-selection and arbitration clauses, finding no showing that enforcement was unreasonable, unjust, or contrary to strong U.S. public policy.
- Allegations of fraud relating to the overall transaction did not invalidate the clauses absent proof that the clauses themselves were procured by fraud or overreaching.
- The court approved dismissal as to all defendants because the claims were intertwined with the Lloyd’s contractual structure and splitting claims between countries would undermine the agreements.

## Legal Principles

- Forum-selection clauses in international agreements are presumptively valid and are enforced unless the resisting party shows unreasonableness, injustice, grave inconvenience denying a fair opportunity to be heard, or conflict with strong forum public policy.
- Fraud allegations generally do not defeat a forum-selection clause unless the fraud is directed at the clause itself rather than the contract as a whole.
- Foreign forum-selection and choice-of-law clauses may be enforced even when U.S. securities statutes are invoked, so long as enforcement does not effectively eliminate a meaningful remedy or nullify nonwaivable statutory protections.
- Courts may apply such clauses to related parties and claims, including domestic defendants, when the dispute arises from the same contractual relationship and coordinated adjudication is necessary to honor the parties’ agreed dispute-resolution scheme.
- When enforceable forum-selection/arbitration provisions make success on the merits unlikely in the chosen U.S. forum, denial of preliminary injunctive relief premised on litigating there is not an abuse of discretion.

## Conclusion

The Seventh Circuit required U.S. Lloyd’s investors to pursue their fraud and securities-related claims in England under English procedures and law, enforcing the membership agreements’ forum-selection and arbitration clauses and upholding both dismissal of the U.S. action and denial of an injunction aimed at preventing a letter-of-credit draw.


Bonny v. Soc'y of Lloyd's, 3 F.3d 156 (7th Cir. 1993)