Royal Bed & Spring Co. v. Famossul Industria e Comercio de Moveis LTDA

Royal Bed & Spring Co. (Royal Bed) (plaintiff) was a Puerto Rican corporation that distributed furniture products. Famossul Industria e Comercio de Moveis LTDA (Famossul) (defendant) was a Brazilian manufacturer of furniture products. Royal Bed and Famossul entered into a contract that gave Royal Bed exclusive rights to distribute Famossul’s products in Puerto Rico. The contract was signed in Brazil and written in Portuguese, and all of the furniture was manufactured in Brazil. The contract contained a forum-selection clause that designated Brazilian courts to decide any disputes that arose from the contract. It also provided that Brazilian law would apply. Royal Bed was no stranger to Brazil, as it had previously litigated and won cases in that forum. Royal Bed filed a diversity action in the federal district court of Puerto Rico, alleging that Famossul had wrongfully terminated the contract and suspended the shipment of goods, resulting in damages. Famossul moved to dismiss the case on the ground of forum non conveniens. The district court balanced several factors including convenience and fairness. The district court also noted that, based on Puerto Rico’s Law 75, which refused enforcement in Puerto Rico forum-selection clauses providing for out-of-state or foreign venues as a matter of public policy, the agreement between Royal Bed and Famossul was not dispositive but rather should be included in the analysis. The district court granted the motion to dismiss, concluding that Brazil was the most convenient forum given the parties’ express preference for that venue, the lack of unfairness or uneven bargaining power between the parties, and the parties’ familiarity with Brazilian laws. Royal Bed appealed.