Case of the Day: Diamond Offshore (Bermuda) Ltd. v. Haaksman

Oil RigThe case of the day, Diamond Offshore (Bermuda) Ltd. v. Haaksman (Tex. App. 2011), asks about the limits of the judgment debtor’s power to resist recognition of a foreign judgment on the grounds that the foreign court wrongly ignored the parties’ exclusive choice of forum clause.

Diamond Offshore (Bermuda) operated an oil rig off the coast of the Netherlands. When it shut down the rig, it offered two of its employees on the rig, Robert Duncan Burn Quinn and Thomas Joseph McCartney, jobs on another right. But although their employment contracts had an exclusive choice of forum clause designating Bermuda as the forum for litigation, Quinn and McCartney sued Diamond Bermuda in the Netherlands. The claim did not arise under the employment contracts, but under a Netherlands statute, the Employment in North Sea Mining Act. And although the employment contract had a choice of law clause designating Bermuda law to govern, the Netherlands court gave a judgment in favor of Quinn and McCartney under Netherlands law.

Quinn and McCartney sought recognition and enforcement of the judgment in Texas. Diamond Bermuda moved to dismiss on grounds of improper venue, insufficient service of process, and on substantive grounds. In its initial decision, the district court held that it lacked personal jurisdiction over Diamond Offshore, but the Court of Appeals reversed, holding that there was no requirement that it be able to exercise jurisdiction over the defendant in personam or over the defendant’s property quasi in rem before recognizing a foreign judgment. Haaksman v. Diamond Offshore (Bermuda), Ltd., 260 S.W.3d 476 (Tex. App. 2008).

On remand, Diamond Bermuda asserted that the judgment was not entitled to recognition because the Dutch proceeding was contrary to the choice of forum and choice of law clause. The district court again ruled in favor of Quinn and McCartney, but this time the Court of Appeals reversed.

Under the Texas UFCMJRA, a foreign judgment is not conclusive if “the proceeding in the foreign country was contrary to an agreement between the parties under which the dispute in question was to be settled otherwise than by proceedings in that court.” The Texas statute is essentially identical to the model UFCMJRA on this point.

Quinn and McCartney argued that Diamond Bermuda had to show that the Netherlands courts would enforce the forum selection clause (which, if correct would be fatal to Diamond Bermuda’s argument, since we know from the course of proceedings that the Dutch court did not enforce the clause). But the court disagreed. Instead, the court asked whether the clause would be enforced under Texas law, and held that it would. Quinn and McCartney had not shown that trial in Bermuda would be so inconvenient that they would be, in effect, deprived of their day in court, which is the standard of M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972).

The court also rejected the notion that Diamond Bermuda was engaged in an impermissible collateral attack on the Netherlands judgment, on the grounds that while in general a party cannot collaterally attack the merits of a foreign judgment, it can do so on one of the limited grounds in the UFCMJRA.

Judge Frost dissented and raised what I think is a strong point. Under the UFCMJRA, violation of a forum selection clause is a non-mandatory ground for refusing to recognize a foreign judgment. So the courts have discretion to grant or refuse recognition—a point the majority didn’t really come to grips with. According to Jude Frost, Diamond Bermuda had not sought dismissal of the Dutch case in the Netherlands on forum selection clause grounds, and so the lower court in Texas did not abuse its discretion by recognizing the judgment notwithstanding the clause. As an aside, I would like to observe that my own jurisdiction, Massachusetts, is one of the few, if not the only, American jurisdictions that have modified the Uniform Act to make all of the grounds for non-recognition mandatory. So the dissent would have had less bite in Massachusetts.

I think Diamond Offshore raises interesting questions about the effect of forum selection clauses in consumer or labor cases, or other cases where there may be public policy issues at play in determining whether a choice of forum clause is enforceable. Suppose the Dutch court had concluded that as a matter of public policy in the Netherlands the clause was unenforceable because the contract was an employment contract. Public policy in the US may differ. But is this difference fundamental enough that the US court should refuse to recognize the judgment?

Photo credit: kenhodge13 (license)

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