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September 17, 1999


The opinion of the court was delivered by: McMAHON, District Judge.


In 1989 and 1990, defendant La Suisse Life Insurance Company ("La Suisse"), a Swiss insurance company, acting through various agents, sold a number of life insurance policies to plaintiffs, who are members of the Orthodox and Hasidic Jewish communities resident in Rockland County and New York City. The insureds under the policies, which had a face value of either 50,000 or 100,000 Swiss francs (approximately 32,250 or 64,500 U.S. dollars at the current exchange rate), were all minor children at the time of the purchases. The face amount of the policy was payable to the beneficiary (who was, in most cases, the parent of the insured child) in the event the insured either (1) married or died prior to the end of the contract term, which ran for a term of either fifteen or sixteen years from the date of issue, or (2) survived to the end of the policy term. The economics of the policies were structured so that the annual premiums would more than cover the face value of the policy. The insurer in effect took the risk that the child would either marry or die before the termination of the contract.

The Court is advised that these unusual life insurance policies were quite popular in Switzerland, where people tend to marry later in life, if they marry at all,*fn1 and the risk of having to make an early payout is quite manageable. However, it appears that the defendant sellers violated an insurer's equivalent of the "know your customer" rule when they permitted the policies to be marketed among plaintiffs and their neighbors. Customs among many Orthodox Jews, particularly within the Hasidic community, are quite different than those in Switzerland. Marriage is the norm, and marriage at an early age (i.e., in the late teens and sometimes younger) is the rule, not the exception. As a result, the policies were a good investment for American Orthodox Jews. Papers before the Court indicate that as many as 7,000 policies were purchased in this State, of which at least half were sold by a Mr. Elias Horowitz of Bituswiss S.A. from his office in Monroe, New York. The purchasers apparently anticipated that they would work something like burial insurance, except that in most cases, the proceeds would be used to cover the cost of a wedding instead of a funeral. In fact, it is alleged that the agents who peddled them represented that they had been designed especially for the needs of the Orthodox Jewish community. That sales gambit worked, and the policies sold quite well. As a result, the claims began raining down on Lausanne in fairly short order. Therein lies the genesis of this lawsuit.

In July 1997, the Court of Commerce in Zurich (Handelsgericht) held the same La Suisse policy at issue in this case invalid under Swiss law, on the ground that the policy violated Swiss public policy by pressuring young children to marry as early as possible. See Gutmann v. La Suisse Lebensversicherungs-Gesellschaft, No. U/O/HG950445 (Jul. 2, 1997). Faced with the voiding of their policies, plaintiffs, members of the Hasidic and Orthodox Jewish communities in New York State, commenced this action here in the United States. They asserted nine claims: breach of contract, common law fraud, civil RICO, violation of 42 U.S.C. § 1981, violation of the New York General Business Law, breach of fiduciary duty, conversion, conspiracy to misappropriate and defraud, and economic duress. Defendants have moved to dismiss on a variety of grounds, both jurisdictional and substantive.

I referred the motion to The Hon. Mark D. Fox, United States Magistrate Judge, who has issued a report and recommendation that the First Cause of Action (for breach of contract) be dismissed with leave to replead, and that the remaining causes of action be dismissed. I agree with the bulk of Judge Fox's conclusions; in particular, I agree with his conclusions that this action cannot be dismissed as against defendant La Suisse, either for lack of personal jurisdiction or under the policy's forum selection clause. I also concur that eight of plaintiffs' nine causes of action should be dismissed, although plaintiffs should have leave to replead one of those claims. I part company with him concerning the First Cause of Action, which states a claim and seems to me to meet the minimal pleading requirements for a breach of contract claim. I also disagree with his conclusion that a sufficient showing has been made to keep La Suisse's parent company, defendant Schweizerische Lebensversicherungsund Rentenanstalt ("Rentenanstalt"), in the case; I conclude that the case should be dismissed for lack of personal jurisdiction over the parent.

I therefore accept so much of the learned Magistrate Judge's recommendation as denied defendants' motions to dismiss for improper venue and lack of personal jurisdiction, and granted their motions to dismiss the Second, Third, Fourth, Fifth, Sixth, Seventh, Eighth and Ninth Causes of Action, although I grant leave to replead the Fourth Cause of Action. I do not accept his recommendation that the First Cause of Action be dismissed with leave to replead. I order that the complaint be dismissed as to Rentenanstalt.

The Forum Selection Clause Does Not Bar Suit in a United States Federal Court

The primary basis for defendants' motion to dismiss is that venue does not lie in this district because each of the policies contained a forum selection clause, which (translated into English from the French and German in which the policies are written) reads as follows:

  The policyholder or the [person having
  title/beneficiary] have the right to take any dispute
  between themselves and "La Suisse" either before the
  judge of the competent court of their domicile in
  Switzerland or in front of the civil court in
  Defendants argue that the forum selection clause mandates the litigation of all disputes in Switzerland — and insofar as plaintiffs are concerned, in the civil court in Lausanne, since they have no domicile in Switzerland. Plaintiffs characterize the language of the clause as "ambiguous" and as not foreclosing suit in other fora.

While the result reached by Judge Fox is probably not what defendants intended when they drafted the policy, plaintiffs are correct. Federal courts in this country construe forum selection clauses in accordance with federal law, see Bense v. Interstate Battery System of America, Inc., 683 F.2d 718, 721 (2d Cir. 1982), and under federal law, forum selection clauses are not favored. See M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972); Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 589, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991). Thus, clauses like the one before this Court are generally to be construed, if they can be, in ways that will not divest the United States courts of jurisdiction.

The key is whether the language can only be interpreted as providing for a mandatory and exclusive forum, or whether it can be construed as permitting suit in additional fora. In interpreting the relevant language of the contract, U.S. courts have not hesitated to stretch the usual meaning of the words used and have taken every opportunity to construe any possible ambiguity as indicative of permissiveness. For example, in John Boutari and Son, et al. v. Attiki Importers and Distributors, Inc., 22 F.3d 51 (2d Cir. 1994), the forum selection clause read, "Any dispute arising between the parties hereunder shall come within the jurisdiction of the competent Greek Courts, specifically of the Thessaloniki Courts." The language, including its use of the word "shall" (which the Second Circuit acknowledged "is a mandatory term") might seem clear and straightforward in calling for disputes to be resolved in a court in Greece. Nonetheless, the Court of Appeals concluded that the clause was merely permissive, not mandatory; it sidestepped the "mandatory" nature of the word "shall" by concluding, ". . . here it mandates nothing more than that the [Greek courts] have jurisdiction." Id. at 53. In explaining the antipathy of American federal courts for international forum selection clauses, the Circuit all but ruled that a forum selection clause would not be enforced unless it contained language on the order of, "All disputes must be brought in a particular forum and may not be maintained anywhere else."

The panel in Boutari relied on an earlier opinion by Judge Friendly in AVC Nederland B.V. v. Atrium Investment Partnership, 740 F.2d 148, 155 (2d Cir. 1984), in which that great jurist, confronted with what appears to be an even less equivocal forum selection clause, declined to enforce its terms literally. The clause read: "All and any disputes, differences or questions arising form the present Agreement shall be decided and determined by the competent court at Utrecht." Id. at 151. Certainly, were the identical words used in an arbitration clause in a U.S. commercial contract, no federal court would hesitate for a moment to compel arbitration, which is a favored form of dispute resolution. Nonetheless, Judge Friendly held that the language about litigating in Utrecht was merely permissive and not mandatory:

  The clause was indeed more than a
  jurisdiction-conferring clause which, although
  providing a plaintiff with a guaranteed forum, does
  not deprive him of the right to sue in another having
  personal jurisdiction over the defendant. Id.

See also Blanco v. Banco Industrial de Venezuela, S.A., 997 F.2d 974, 979 (2d Cir. 1993); Proyecfin de Venezuela, S.A. v. Banco Industrial de Venezuela, ...

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