EXCERPTS (pages 1 - 8) of









DAVID WEST, et al, B095440

Plaintiffs and Appellants,

(Super.CT. No. BC 111313)


LLLOYD'S, etc., et al.,

Defendants and Respondents.


APPEAL from a judgment of the Superior Court of Los Angeles County. Dzintra Janavs, Judge. Reversed.

DeCastro, West & Chodorow, Inc., David T. Stowell and Richard S. Zeilenga for Plaintiffs and Appellants.

LeBoeuf, Lamb, Greene & MacRae, Dean Hansell, Aaron C. Gundzik, Allyson S. Taketa, Taylor R. Briggs, Sheila H. Marshall and Stephen Orel for Defendants and Respondents.

Appellants appeal after their action alleging securities violations under California law was dismissed upon respondents' motion to enforce a forum selection clause in the parties' contract. Appellants contend that the forum selection clause violates California's fundamental public policy against waivers of the protections afforded by its securities laws, and that the clause is therefore void. We agree, and reverse the judgment.


On August 23, 1994, appellant David, Deborah, and Susan West filed this action against "Lloyd's, also known as the Society of Lloyd's, also known as Lloyd's of London, a corporation, also known as the Corporation of Lloyd's, also known as the Society and Council of Lloyd's." The complaint alleged common-law fraud, as well as violations of provisions of the California Corporations and Insurance Codes relating to the offering for sale of securities. The action was removed to federal court and remanded.

On November 30, 1994, respondents filed their "Motion to Dismiss for Improper Venue Based on Contractual Forum Selection Clauses and/or Forum Non Conveniens." Pending hearing on the motion, the trial court stayed all discovery. The motion was heard over three days, and on May 19, 1995, it was granted in open court, on grounds set forth orally by the court and on all the grounds stated in respondents' moving papers. Appellants brought a motion to reconsider, which was granted by the court, but after hearing, the court entered the same order, granting the motion anew. Judgment was entered on July 27, 1995, dismissing the action, and appellants thereafter filed a timely notice of appeal.


Allegations of the Complaint

Appellants are California residents. Lloyd's operates an insurance business which has offices in London, England. Investors in Lloyd's, such as appellants, are referred to as "Names" who are members of syndicates organized by Lloyd's to underwrite insurance risks on which Names are obligated. There are two types of Names: the "Working Names" are Names who take part in the day-to-day activities at Lloyd's; the "Passive" or "External Names" are passive investors, who take no part in directing affairs at Lloyd's, and who rely upon Lloyd's underwriting agents to manage their investments in the insurance issued by Lloyd's. Appellants are External Names. Names have unlimited potential liability, which is several, not joint. Appellants' potential liability was secured by letters of credit payable to Lloyd's. In addition appellants were required to make periodic deposits to be held by Lloyd's.

Lloyd's has two types of agents; the "Managing Agent" employs an "active underwriter" who conducts the day-to-day business of accepting risks to insure, collecting premiums, and settling claims; the "Member's Agent" recruits Names for particular syndicates, solicits increased investment from them, and advises the Names with regard to their dealings with the managing Agent.

Names remain potentially liable for losses for a particular underwriting year until it is closed. Closing is accomplished through reinsurance, at a time when the number and scope of potential claims is sufficiently certain. Some syndicates underwrite "short-tail" risk, which can usually be reinsured at the end of a three-year accounting period, and others underwrite "long-tail" risks, which can result in claims which are too great to permit closing for a much longer period. A Name may not withdraw from a syndicate until its underwriting year is closed, and could therefore remain reliable for that year's risks indefinitely.

In the late 1970's and early 1980's, Lloyd's sought to expand substantially the number of Names. At the same time, Working Names became increasingly aware of potentially huge, catastrophic claims for asbestos-related illnesses and deaths, and for environmental pollution and property damage related to the clean-up of contaminated real property. In spite of having substantial evidence that the asbestos claims would have an adverse impact on its syndicates, Lloyd's continued to form long-tail syndicates to underwrite the risks, without disclosing the information they had obtained. In addition, Lloyd's failed to obtain permits required by the California Insurance and Corporations Codes before soliciting investors and selling securities.

Appellant David West became a Name in 1973. His daughters, Susan and Deborah, became Names in 1983. Appellants' initial contact with Lloyd's was from their homes in California; Lloyd's mailed applications and other forms to them at their California homes, and appellants filled them out there and mailed them back. At the end of the application process, each of the appellants traveled to England for a five-minute interview, sometime after which they each signed an agreement ("undertaking"). At the time appellants became Names, Lloyd's did not tell them that some syndicates could remain open after three years, exposing them to unlimited liability for an indefinite period, or that they could not resign so long as a syndicate remained open. Lloyd's assured appellants that the risk of unlimited liability was minimal. The undertaking that they initially signed did not contain a choice of law or forum selection provision.

In 1982, while soliciting more American investors, and knowing the long-tail syndicates were about to experience large numbers of asbestos and toxic clean-up claims, Lloyd's obtained the passage of a private bill by the British Parliament, excluding Lloyd's from certain regulatory laws relating to financial and insurance services and the raising of capital by British corporations. The bill also limited Lloyd's liability for damages. Lloyd's failed to tell the American Names, including appellants, about the anticipated claims or about the private bill.

Between 1982 and 1986, Lloyd's solicited many new Names and obtained increased participation from existing Names for the asbestos and toxic waste syndicates, without telling them of the increased risk. At the same time, without informing External Names, the Working Names decreased their own participation in such syndicates, and increased their participation in more profitable syndicates which experienced few claims. Syndicates which should have been left open were closed by means of reinsurance underwritten by the new and increased participation of American Names. Appellants invested in several of these risky syndicates.

By 1986, Lloyd's knew that the asbestos claims were extensive enough to bankrupt most of the Names who were members of the syndicates which had underwritten them. Anticipating the American Names would file lawsuits, Lloyd's prepared a new form of undertaking which it sent to all Member's Agents, instructing them that their Names were required to sign them in order to continue to be a Lloyd's underwriter. The new undertaking contained a choice of law and forum provision, providing that any action against Lloyd's must be brought in England under British law. In June 1986, Lloyd's representatives met with appellants in Los Angeles, California, to solicit increased participation and to explain the new undertaking and other documents. Lloyd's did not reveal what it knew about the impending losses. Relying upon false representations that the undertaking merely confirmed the "existing situation", and faced with termination fees and potential liability with no right to share in profits if they did not sign, appellants signed the new undertaking. Appellants discovered the fraud in 1994.

In addition to a common–law cause of action for fraudulent concealment, appellants have alleged securities violations under the California Insurance Code (§§820-860) and the California Corporations code (§25000, et seq.), and a violation of the Unfair Trade Practices Act (Civ. Code, §1750 et seq.). In addition appellants seek declaratory relief, finding the forum selection and choice of law provisions in the 1986 undertaking to be void.

A few days after respondents filed their motion to dismiss, appellants filed a First Amended Complaint, alleging essentially the same facts as alleged in the original complaint.

The Venue Motion

Respondents' evidence in support of their motion to dismiss consisted of the declaration of their attorney, Dean Hansell, and four requests for judicial notice. The four requests for judicial notice attached copies of pleadings, exhibits, orders, judgments, and opinions excerpted from other actions involving respondents and parties other than appellants. Of these 450 pages of material, only Hansell's declaration contains facts which might be said to controvert any of the allegations of the complaint (although it consists mostly of argument and legal conclusions). The conflict relates mostly to the details of Lloyd's operations and organization. However, respondents' supporting evidence did not controvert appellants' allegations regarding fraudulent concealment, the sale of securities, or failure to comply with the license and permit provisions of the Insurance and Corporations Codes. Instead, respondents sought enforcement of the forum selection clause of the undertaking, relying by analogy on federal cases where violations of federal securities law were alleged, but forum selection contracts were enforced nevertheless. In the alternative, respondents' motion was made upon traditional forum non conveniens grounds of convenience of witnesses, cost, and availability of process.

Appellants' opposition to the motion to dismiss included certificates from the California Department of Corporations and the Department of Insurance stating that permits authorizing the offering or sale of securities had not been obtained by Lloyd's, Lloyd's of London, the Corporation of Lloyd's, The Society and Council of Lloyd's, or the Society of Lloyd's, and that there was no application pending for such permits. Attached to the declaration of Richard Zeilenga, appellants' counsel, were unauthenticated documents offered to show that once discovery is permitted, appellants will be able to prove the allegations of the complaint. Each of the appellants provided a declaration supporting various allegations of the complaint.

The opposition of the motion also included the affidavit of Charles Anthony Hicks, a Solicitor of the Supreme Court of England and Wales, who has over 500 clients who are Lloyd's Names, and has ten years of experience in advising clients regarding their relations with Lloyd's. Hicks stated that no Name has ever successfully sued Lloyd's for damages or rescission in England, and that under the Lloyd's' Act of 1982, no cause of action against Lloyd's in tort is available, except personal injury, libel, or slander, unless the wrong was committed in bad faith, proof of which involves a very difficult burden. Fraudulent nondisclosure by Lloyd's is not an actionable wrong under English law because Lloyd's has been held to have no duty of disclosure to Names. Hicks further stated that it was his opinion that no English court would apply California securities law, whether or not it enforced the choice of law provision, and that appellants, as nonresidents of England, would be required to post a bond in the range of $1,000,000.


Respondents' motion was made on two grounds: enforcement of a contractual forum selection and choice of law provision; and noncontractual forum non conveniens, based upon the convenience of witnesses and other factors. The trial court granted the motion by enforcing the parties' contract, not on the noncontractual forum non conveniens ground.

The complaint and appellants' declarations state that appellants were California residents at all relevant times, a fact in no way disputed by respondents. It was therefore established that appellants were California residents and the court had no power to dismiss the action on the noncontractual forum non conveniens ground. (See Beckman v. Thompson (1992) 4 Cal. App.4th 481, 487-488.) Respondents argue that now that it is shown that appellants are no longer residents of California, we should consider noncontractual forum non conveniens as an alternative ground for affirming the judgment.

In general, review of the correctness of a judgment granting a motion of change venue is made as of the time of its rendition. (Hansen v. Owens-Corning Fiberglass Corp.

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