87 N.Y.2d 530 (1996)

A “Service of Suit Clause” in an insurance contract, which states that underwriters will submit to the jurisdiction of a competent court within the United States, is generally interpreted as a permissive consent to jurisdiction and not a mandatory forum selection clause.

Summary

Brooke Group Ltd. sued JCH Syndicate 488, a Lloyd’s of London underwriter, in New York, seeking to recover on an insurance policy for losses sustained in Russia. The policy contained both an arbitration clause requiring disputes to be resolved in London and a “Service of Suit Clause” allowing Brooke Group to sue the underwriters in a U.S. court. JCH Syndicate moved to dismiss the New York action based on forum non conveniens, arguing that the case involved foreign entities, insurance issued in England, and property located in Russia. The New York Court of Appeals affirmed the dismissal, holding that the Service of Suit Clause was permissive and did not preclude dismissal on forum non conveniens grounds, especially considering the existence of the arbitration clause and other factors favoring a foreign forum.

Facts

Brooke Group Ltd., a Delaware corporation based in Florida, and its subsidiary, BrookeMil Ltd., entered into an insurance contract with Lloyd’s of London underwriters, including JCH Syndicate 488, for expropriation and forced abandonment insurance covering their property and business assets in Russia. The insurance policy, issued in London, contained both a broad arbitration clause requiring disputes to be arbitrated in London under English law and a “Service of Suit Clause,” stating that the underwriters would submit to the jurisdiction of a competent court within the United States at the insured’s request. When the Moscow City Council invalidated BrookeMil’s property interests, Brooke Group filed a claim under the policy, which the underwriters refused to pay.

Procedural History

Brooke Group initiated a lawsuit against JCH Syndicate 488 in New York. Simultaneously, the underwriters initiated arbitration proceedings in London, seeking a declaration of non-liability under the insurance policy. JCH Syndicate then moved to dismiss the New York complaint on the grounds of forum non conveniens. The Supreme Court granted the motion to dismiss. The Appellate Division affirmed the Supreme Court’s decision, and Brooke Group appealed to the New York Court of Appeals.

Issue(s)

Whether a “Service of Suit Clause” in an insurance contract constitutes a mandatory forum selection clause, precluding dismissal on forum non conveniens grounds, or merely a consent to jurisdiction.

Holding

No, because the “Service of Suit Clause” in this case is permissive and does not contain mandatory language binding the parties to litigate in a particular forum; it only provides that the underwriters will submit to the jurisdiction of a U.S. court.

Court’s Reasoning

The Court of Appeals reasoned that while forum selection clauses are generally valid and enforceable, a “Service of Suit Clause” typically provides no more than consent to jurisdiction. It doesn’t bind parties to litigate in a specific forum or give the insured the exclusive right to choose a forum unrelated to the dispute. The court distinguished the clause in this case from the mandatory language in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), which explicitly required disputes to be treated before the London Court of Justice. The court emphasized that the words and phrases used in the contract must be given their plain meaning, and the plain meaning of the “Service of Suit Clause” in this contract did not manifest an intention to limit jurisdiction to a particular forum. The court also noted that interpreting the clause as a mandatory forum selection clause would conflict with the contract’s mandatory arbitration provision. The court stated: “The words and phrases used by the parties must, as in all cases involving contract interpretation, be given their plain meaning (Levine v Shell Oil Co., 28 NY2d 205, 211), and the plain meaning of the words used by the parties to this contract do not manifest an intention to limit jurisdiction to a particular forum.” Because the Service of Suit Clause was permissive, the court concluded the lower courts didn’t abuse their discretion when dismissing the case based on forum non conveniens. Other factors, such as the location of the insured property in Russia, the issuance of the policy in London, and the existence of a London-based arbitration proceeding, weighed against litigating the dispute in New York.