In re Lloyd’s Register North America, Inc., No. 14-20554 (5th Cir. Feb.18, 2015) [click for opinion]

Lloyd’s Register North America, Inc. (“LNRA”) agreed to classify a vessel for Pearl Seas, assuring the ship’s compliance with its flag state and classification society’s rules.  Pearl Seas entered into a contract with Irving Shipbuilding, Inc. (“Irving”) to build the ship, and LRNA entered into a contract with Irving to survey the ship during construction.  During construction, there was a dispute between Irving and Pearl Seas, and Irving invoked the arbitration clause in the Shipbuilding Contract.  The parties settled in 2013.

Pearl Seas then sued LRNA in 2013 for misrepresenting the status of the vessel to Pearl Seas and to the arbitrators.  LRNA moved to dismiss on the grounds of forum non conveniens, which was denied by the district court without any explanation. 

LRNA filed a writ of mandamus based on the denial of its motion to dismiss.  The Fifth Circuit considered the following three factors to determine whether to grant mandamus: (1) whether no other adequate means to attain relief exists; (2) whether a clear and indisputable right to the writ exists; and (3) whether the court is satisfied that the writ is appropriate under the circumstances.

First, the court found that there was no adequate way to review a denial of forum non conveniens, since it is not immediately appealable nor is an interlocutory appeal available.  The court considered In re Volkswagen of America Inc. instructive on the issue, since Volkswagen considered a mandamus petition regarding a denial of a motion to transfer venue. Similar to a denial of a motion to transfer venue, the court found that a denial of forum non conveniens cannot be remedied by the ordinary appeals process.  If a mandamus petition is not granted and a defendant has to wait to appeal, the defendant would have to satisfy an appellate court after final judgment that a denial of forum non conveniens was sufficiently prejudicial as to be outcome determinative and the very harm sought to be avoided by invoking forum non conveniens will have already worked irreversible damage and prejudice by the time a final judgment is issued.

Second, the court found that there was clear abuse of discretion when the district court failed to explain its decision without any visible weighing of the factors of forum non conveniens.  The court also found the district court reached a patently erroneous result because it failed to enforce a valid forum selection clause.  Although Pearl Seas was not a signatory to the contract between Irving and LRNA, under the direct-benefits estoppel doctrine, Pearl Seas should have been held to the terms of the contract since it embraced the contract, despite attempting to repudiate it during litigation.  Pearl Seas obtained benefit under the contract, which is the value a classification society offers.  And Pearl Seas’ suit was premised at least in part on the contract. 

Lastly, the court found that a writ of mandamus was appropriate under the circumstances since grating a writ would have significance beyond the immediate case.  The court noted that there was an appeal pending from another case on the same issue and that there was a likelihood of more such appeals being filed in light of the Supreme Court’s decision inAtlantic Marine, which strengthened the enforcement of forum-selection clauses.

Erin Hughes of the Chicago office contributed to this summary.