Carnival
Cruise Lines, Inc. v. Shute
499
Yeazell,
pp. 169-172
Facts: The Shutes
went on a cruise. On the ticket, there was
a forum selection clause that said any litigation related to the cruise must be
tried in
Procedural
Posture:
The suit was first brought in the Western District of Washington. The Ninth Circuit refused to enforce the
clause, and the cruise line appealed to the United States Supreme Court.
Issue: Is the forum selection
clause enforceable?
Rule: Courts have the
responsibility to determine whether forum selection clauses in form passage contracts
are fair.
Analysis: The Court says that the
ticket contract was a routine commercial passage contract. It was not negotiated, and the parties did
not have equal bargaining power.
The
Court enumerates several good reasons for a forum selection clause in a cruise
ticket contract:
1. A cruise will
have passengers from all over the country, and absent a forum selection clause,
the cruise company could be subject to suit in all sorts of places.
2. A forum
selection clause eliminates uncertainty about the forum and avoids costly
pretrial motions.
3. Forum
selection clauses mean lower fares for passengers because the cruise company
passes along savings from limiting the forums where the company must defend itself.
The
Court says that the key question is whether the clause is fair. In evaluating the fairness of such clauses,
the Court must consider whether Carnival was, in bad faith, discouraging
legitimate claims from its passengers.
The Court says that because Carnival does business primarily in
Stevens,
in his dissent, refers to two “strands” of contract law that come into play in
this case.
1. Courts look
closer at contracts made between parties with unequal bargaining power, especially “take it or leave it” contracts.
2. At least in
the past, forum selection clauses have been found to be counter to public
policy. In particular, they are not
enforced if they (1) “were not freely bargained for”, (2) “create additional
expense for one party”, or (3) “deny one party a remedy”.
Notes
and Problems
1.
a. It is most
likely that the suit would either be brought in
b. In
2.
a. So there’s a contract
law issue.
b. So there’s a
public policy issue.
c. The majority
spends more time on the enforceability issue.
They argue that the contract clause is enforceable even though the
passengers were not allowed to negotiate it.
The court gives three reasons why this is acceptable: (1) the diversity
of Carnival’s passengers could subject them to suit in a variety of jurisdictions;
(2) a forum selection clause reduces the uncertainty, time and money involved
in determining a forum; and (3) forum selection clauses have benefits for
Carnival that they pass along to their customers as lower fares.
d. The majority
implies that they would not enforce a forum selection clause that is intended
to “discourag[e] cruise passengers from pursuing
legitimate claims”. They also would not
enforce a forum selection clause that was obtained by “fraud or overreaching”.
3.
a. A forum
selection clause will only help in cases that involve a contractual
relationship. In Pennoyer, I suppose Mitchell could have
included a forum selection clause in his service contract with Neff such that
Neff agreed to appoint an agent in
b. I don’t know
what constitutes malpractice, but I suppose a lawyer ought to study contracts
so far as the benefits outweigh the costs.
It’s tempting to say that lawyers must study every clause exhaustively
(charging zillions of dollars in fees while doing so), but I think there’s a
cutoff.
4.
a. This kind of
clause says we’ll use the laws of such-and-such a forum, even if we don’t do
the trial in that particular forum.
b. This one says “we
definitely can do the suit in forum X, but not necessarily only forum X”.
c. Here we’re
doing any and all suits in forum X and only forum X.
d. I like
arbitration.
e. This is pretty
extreme.
Conclusion: The forum selection clause
is enforceable.
Back to Consent as a Substitute for
Power