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Friday, May 10, 2013

Petersen v. Boeing: Ninth Circuit Reverses Decision Enforcing Saudi Arabia Forum Selection Clause

Petersen v. Boeing Company, ___ F.3d ___ (9th Cir. 4/26/13) (Case No. 11-18075), is an interesting decision on forum selection, even if it is likely to be of limited application because of its unique facts. I hate to use big block quotes, but the decision details the facts clearly and concisely:  
Plaintiff Robin P. Petersen, who appears pro se and in forma pauperis on appeal, is a former Navy pilot with the rank of Commander who was recruited to work in Saudi Arabia as a flight instructor for Boeing International Support Services (“BISS”), a wholly-owned subsidiary of The Boeing Corporation (“Boeing”)... 
Prior to departing for Saudi Arabia, Petersen was required to sign a preliminary employment agreement. That agreement did not contain a forum selection clause. On arrival in Saudi Arabia, however, he was forced to sign a second employment agreement—which he was not given time to read and which he was told he must sign or else return immediately to the United States at his own expense. This agreement contained a forum selection clause requiring any contractual disputes to be resolved in the Labor Courts of Saudi Arabia. Petersen signed the second agreement without reading it, as he was instructed to do by his employer.  
Petersen’s passport was then confiscated; he was effectively imprisoned in his housing compound under miserable living conditions; and his work environment was marked by rampant safety and ethics violations. When he attempted to resign and return to the United States, his employer refused to return his passport for a period of nearly three months. During his time in Saudi Arabia, Petersen contracted an upper respiratory infection as a result of his living conditions and was permanently maimed as a result of receiving inadequate surgical treatment for an Achilles tendon tear, which he would have had treated in the United States had he been permitted to leave Saudi Arabia.  
When he finally returned to the United States (after the intervention of the United States Consulate in Jeddah), Petersen brought suit against Boeing and BISS alleging breach of contract as well as several statutory and common law claims. In addition to his Complaint, his submissions to the district court included a sworn affidavit claiming that (1) he was not financially capable of traveling to Saudi Arabia in order to institute proceedings against his employer; (2) he would be subjected to harsh conditions and internal travel restrictions if he were somehow able to return to Saudi Arabia; and(3) the forum selection clause was foisted on him through fraud and undue pressure. He also submitted a report from the United States Department of State tending to demonstrate that (1) he would not be legally permitted to travel to Saudi Arabia; (2) he would not in any event be able to obtain a fair trial in Saudi Arabia; and (3) his employer could detain him in Saudi Arabia for the entire duration of any legal proceedings. The district court nonetheless dismissed the entire lawsuit without a hearing under Federal Rule of Civil Procedure 12(b)(3) for improper venue, holding that the forum selection clause was enforceable, relying largely on our opinion in Spradlin v. Lear Sigler Mgmt. Servs. Co., 926 F.2d 865 (9th Cir. 1991). The district court then denied Petersen leave to amend his Complaint in order to address some of the supposed shortfalls identified by the district court. 
Slip op. at 3-5.  The Court of Appeals reversed, holding:  
  1. Petersen provided specific evidence to show that he "would effectively be deprived of his day in court were the clause enforced."  As a result, the district court abused its discretion by not -- "at the very least" -- conducting an evidentiary hearing on the issue and by dismissing the complaint without leave to amend.  Slip op. 6-10.  
  2. Petersen provided specific evidence to show that inclusion of the forum selection clause in the agreement was the product of fraud or coercion. "Therefore, the district court abused its discretion by dismissing on the basis of the forum selection clause without at the very least holding an evidentiary hearing as to whether Petersen was induced to assent to the forum selection clause through fraud or overreaching."  Slip op. 11-12. 
Petersen v. Boeing is available here.  

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