Stamm v. Barclays Bank

Citations: 153 F.3d 30; 1998 U.S. App. LEXIS 18726; 1998 WL 472078Docket: Docket No. 97-9118

Court: Court of Appeals for the Second Circuit; August 13, 1998; Federal Appellate Court

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Arthur Allan Tamm, the Plaintiff-Appellant, appeals a judgment from the U.S. District Court for the Southern District of New York that dismissed his First Amended Complaint with prejudice on August 8, 1997. The dismissal was based on forum selection and choice of law provisions to which Tamm had previously agreed. Tamm operates as an underwriter, or "Name," in the Lloyd’s insurance market, which includes Defendants-Appellees Corporation of Lloyd’s and its associated syndicates. To become a Name, individuals must sign a General Undertaking that mandates compliance with Lloyd’s regulations and stipulates that disputes will be governed by English law, with exclusive jurisdiction in English courts.

Tamm initially filed his action in state court on June 26, 1996, alleging violations of federal securities laws and state consumer protection acts, along with common law fraud claims against the Defendants, asserting a fraudulent scheme related to asbestos and pollution liabilities. The case was removed to federal court, where Tamm dismissed his federal claims and sought remand to state court, which was denied. The Defendants then moved to dismiss the complaint, and on March 26, 1997, the district court found the choice clauses enforceable, granting Tamm leave to re-plead his federal securities law claims due to developments questioning the earlier ruling regarding the enforceability of those clauses.

Plaintiff filed a First Amended Complaint alleging violations of federal securities laws by Defendants, who moved to dismiss the case again. The district court granted the motion on August 4, 1997, ruling that the Choice Clauses rendered Plaintiff's state claims improperly venued and that the federal securities claims were time-barred (Stamm v. Corporation of Lloyd’s, No. 96 Civ. 5158 (SAS), 1997 WL 438773). The court did not address the validity of the Roby precedent. This appeal followed, marking a continuation of litigation involving allegations of fraud against Lloyd's, with six other circuits having encountered similar cases enforcing the Choice Clauses. 

Plaintiff and other litigants have consistently argued against the enforceability of these clauses. They claim: (1) the clauses are part of a broader fraudulent scheme; (2) they are unconscionable due to this alleged scheme; and (3) the clauses waive protections under U.S. securities laws and are therefore void under sections 14 and 29(a) of relevant acts. The court found the first two arguments unpersuasive, aligning with the district court's reasoning. As for the third argument regarding the waiver of securities protections, the court reaffirmed the Roby decision but did not address the statute of limitations raised by the district court. The district court expressed uncertainty about Roby's standing due to a shift in the SEC's stance on the Choice Clauses, as indicated by an amicus brief in a related case. The court noted that the SEC's current position could undermine Roby's precedent, which previously indicated that the Choice Clauses might not constitute a waiver of securities protections.

The holding in Roby was primarily based on the adequacy of English law in deterring fraud and misrepresentation, promoting full disclosure, and providing remedies to plaintiffs in cases of fraud, rather than solely on the SEC's stance regarding Lloyd’s and Choice Clauses. If it were shown that remedies in England were inadequate, the Choice Clauses could be deemed against public policy. Nevertheless, the current SEC position does not weaken the holding since English law is still deemed sufficient for discouraging fraud and providing remedies. The enforceability of the Choice Clauses is reaffirmed, and they do not waive protections under securities laws, aligning with the views of six other circuits. Consequently, the district court's dismissal of the Plaintiff's First Amended Complaint is upheld. The district court acknowledged the Ninth Circuit's earlier criticism of Roby, but this was reversed in a later en banc decision, aligning the Ninth Circuit with Roby.