Bonny v. The Society Of Lloyd's

3 F.3d 156 (7th Cir. 1993)

Purchase the Printed Copy at bsmsphd.com

Nature of the Case

To access this section all you need to do is click here and register.

Facts

D operates one of the largest insurance markets in the world. Individuals invest in D and thereby obtain the right to participate in D's insurance underwriting syndicates by becoming an Underwriting Member. Most syndicates specialize in the underwriting of a particular type of insurance. An underwriter is not allowed to deal directly with D and must designate a 'Members Agent' to handle the underwriter's affairs. Members' Agents owe a fiduciary duty to their underwriters and must act in the sole interest of their underwriter. In making decisions regarding in which syndicates to invest, underwriters rely to a great extent on the advice of their Members' Agents. An underwriter must prove financial means. The candidate must also deposit a specified sum via an irrevocable letter of credit issued by a D approved bank in favor of D. When insurance claims exceed premium available, D makes 'cash calls' upon the underwriters responsible for those claims. Northfield, King, and Hunken are agents of D operating in the United States. P was solicited by King in Illinois to invest in D. P invested based on the representations made to her husband. Robert Flesvig (P), who joined the suit in the Amended Complaint, was solicited by Hunken. King and Hunken introduced Ps to Lime Street, the designated 'Members' Agent.' Lime Street compensated King and Hunken for the introduction. Ps traveled to England and executed a General Undertaking for Membership that included both forum selection and choice of law clauses. They also signed a Members' Agent Agreement providing that disputes between Names and Members' Agents will be arbitrated in England under English law. The syndicates in which Ps participated ultimately experienced large losses resulting in calls in excess of 300,000 pounds. Ps sued Ds claiming Ds failed to disclose material facts and risk factors concerning investment in D. Ps brought suit under Section 12(1) and 12(2) of the Securities Act of 1933 and under Section 10(b) of the 1934 Securities and Exchange Act of 1933. Plaintiffs also allege RICO violations and causes of action in common law for fraud, negligence, and breaches of duty. The court dismissed the suit based on the forum-selection and arbitration clauses that designated England as the forum for litigation. Ps appealed.