Business 8th Edition by Marianne Jennings

Exercise 4

Carnival Cruise Lines v Shute
499 U.S. 585 (1991)
Cruising for Forums : Contracts Clauses on the High Seas
Facts
Through an Arlington, Washington, travel agent, Eulala and Russel Shute (respondents) purchased passage for a seven-day cruise on the Tropicale , a ship owned by Carnival Cruise Lines (petitioner). The Shutes paid the fare to the agent, who forwarded the payment to Carnival's headquarters in Miami, Florida. Carnival then prepared the tickets and sent them to the Shutes in Washington. The face of each ticket, at its left-hand lower corner, contained this admonition:
SUBJECT TO CONDITIONS OF CONTRACT ON LAST PAGES IMPORTANT! PLEASE READ CONTRACT-ON LAST PAGES 1 , 2, 3, App. 15
The following appeared on "contract page 1" of each ticket:
TERMS AND CONDITIONS OF PASSAGE CONTRACT TICKET...
3. (a) The acceptance of this ticket by the person or persons named hereon as passengers shall be deemed to be an acceptance and agreement by each of them of all of the terms and conditions of this Passage Contract Ticket...
8. It is agreed by and between the passenger and the Carrier that all disputes and matters zuhatsoever arising under , in connection with or incident to this Contract shall be litigated , if at all , in and before a Court located in the State of Florida , U. S. A., to the exclusion of the Courts of any other state or country.
The Shutes boarded the Tropicale in Los Angeles, California. The ship sailed to Puerto Vallarta, Mexico, and then returned to Los Angeles. While the ship was in international waters off the Mexican coast, Eulala Shute was injured when she slipped on a deck mat during a guided tour of the ship's galley. The Shutes filed suit against the petitioner in the U.S. District Court for the Western District of Washington, claiming that Mrs. Shute's injuries had been caused by the negligence of Carnival Cruise Lines and its employees.
Carnival moved for summary judgment, contending that the forum clause in the tickets required-the Shutes to bring their suit in a court in the State of Florida. Carnival also contended that the District Court lacked personal jurisdiction over it because its contacts with the State of Washington were insubstantial. The District Court granted the motion, holding that Carnival's contacts with Washington were constitutionally insufficient to support the exercise of personal jurisdiction.
The Court of Appeals reversed. Reasoning that "but for" Carnival's solicitation of business in Washington, the Shutes would not have taken the cruise and Mrs. Shute would not have been injured, the court concluded that Carnival had sufficient contacts with Washington to justify the District Court's exercise of personal jurisdiction. Carnival appealed.
Judicial Opinion
BLACKMUN, Justice
Turning to the forum-selection clause, the Court of Appeals acknowledged that a court concerned with the enforceability of such a clause must begin its analysis with Tlte Bremen v Zapata Off-Shore Co., 407 U.S. 1,92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), where this Court held that forum-selection clauses, although not "historically... favored" are "prima facie valid." The appellate court concluded that the forum clause should not be enforced because it "was not freely bargained for." As an "independent justification" for refusing to enforce the clause, the Court of Appeals noted that there was evidence in the record to indicate that "the Shutes are physically and financially incapable of pursuing this litigation in Florida" and that the enforcement of the clause would operate to deprive them of their day in court and thereby contravene this Court's holding in The Bremen.
In The Bremen , this Court addressed the enforceability of a forum-selection clause in a contract between two business corporations. An American corporation, Zapata, made a contract with Unterweser, a German corporation, for the towage of Zapata's oceangoing drilling rig from Louisiana to a point in the Adriatic Sea off the coast of Italy. The agreement provided that any dispute arising under the contract was to be resolved in the London Court of Justice.
After a storm in the Gulf of Mexico seriously damaged the rig, Zapata ordered Unterweser's ship to tow the rig to Tampa, Fla., the nearest point of refuge. Thereafter, Zapata sued Unterweser in admiralty in federal court at Tampa. Citing the forum clause, Unterweser moved to dismiss. The District Court denied Unterweser's motion, and the Court of Appeals for the Fifth Circuit, sitting en banc on rehearing, and by a sharply divided vote, affirmed.
The Court further generalized that "in the light of present-day commercial realities and expanding international trade we conclude that the forum clause should control absent a strong showing that it should be set aside." The Court did not define precisely the circumstances that would make it unreasonable for a court to enforce a forum clause. Instead, the Court discussed a number of factors that made it reasonable to enforce the clause at issue in The Bremen and that, presumably, would be pertinent in any determination whether to enforce a similar clause.
The Bremen concerned a "far from routine transaction between companies of two different nations contemplating the tow of an extremely costly, piece of equipment from Louisiana across the Gulf of Mexico and the Atlantic Ocean, through the Mediterranean Sea to its final destination in the Adriatic Sea." These facts suggest that, even apart from the evidence of negotiation regarding the forum clause, it was entirely reasonable for the Court in The Bremen to have expected Unterweser and Zapata to have negotiated with care in selecting a forum for the resolution of disputes arising from their special towing contract.
In contrast, respondents' passage contract was purely routine and doubtless nearly identical to every commercial passage contract issued by petitioner and most other cruise lines. In this context, it would be entirely unreasonable for us to assume that respondents-or any other cruise passenger-would negotiate with petitioner the terms of a forum-selection clause in an ordinary commercial cruise ticket. Common sense dictates that a ticket of this kind will be a form contract the terms of which are not subject to negotiation, and that an individual purchasing the ticket will not have bargaining parity with the cruise line. But by ignoring the crucial differences in the business contexts in which the respective contracts were executed, the Court of Appeals 7 analysis seems to us to have distorted somewhat this Court's holding in The Bremen.
In evaluating the reasonableness of the forum clause at issue in this case, we must refine the analysis of The Bremen to account for the realities of form passage contracts. First, a cruise line has a special interest in limiting the fora in which it potentially could be subject to suit. Because a cruise ship typically carries passengers from many locales, it is not unlikely that a mishap on a cruise could subject the cruise line to litigation in several different fora. Additionally, a clause establishing ex ante the forum for dispute resolution has the salutary effect of dispelling any confusion about where suits arising from the contract must be brought and defended, sparing litigants the time and expense of pretrial motions to determine the correct forum and conserving judicial resources that otherwise would be devoted to deciding those motions. Finally, it stands to reason that passengers who purchase tickets containing a forum clause like that at issue in this case benefit in the form of reduced fares reflecting the savings that the cruise line enjoys by limiting the fora in which it may be sued.
In the present case, Florida is not a "remote alien forum," nor-given the fact that Mrs. Shute's accident occurred off the coast of Mexico-is this dispute an essentially local one inherently more suited to resolution in the State of Washington than in Florida. In light of these distinctions, and because respondents do not claim lack of notice of the forum clause, we conclude that they have not satisfied the "heavy burden of proof" required to set aside the clause on grounds of inconvenience.
It bears emphasis that forum-selection clauses contained in form passage contracts are subject to judicial scrutiny for fundamental fairness. In this case, there is no indication that petitioner set Florida as the forum in which disputes were to be resolved as a means of discouraging cruise passengers from pursuing legitimate claims. Any suggestion of such a bad-faith motive is belied by two facts: Petitioner has its principal place of business in Florida, and many of its cruises depart from and return to Florida ports. Similarly, there is no evidence that petitioner obtained respondents 7 accession to the forum clause by fraud or overreaching. Filially, respondents have conceded that they were given notice of the forum provision and, therefore, presumably retained the option of rejecting the contract with impunity. In the case before us, therefore, we conclude that the Court of Appeals erred in refusing to enforce the forum-selection clause.
There was no prohibition of a forum-selection clause. Because the clause before us allows for judicial resolution of claims against petitioner and does not purport to limit petitioner's liability for negligence, it does not violate § 183c.
The judgment of the Court of Appeals is reversed.
Dissenting Opinion
Justice STEVENS, with whom Justice MARSHALL joins, dissenting
I begin my dissent by noting that only the most meticulous passenger is likely to become aware of the forum-selection provision. I have therefore appended to this opinion a facsimile of the relevant text, using the type size that actually appears in the ticket itself. A careful reader will find the forum-selection clause in the 8th of the 25 numbered paragraphs.
The fact that the cruise line can reduce its litigation costs, and therefore its liability insurance premiums, by forcing this choice on its passengers does not, in my opinion, suffice to render the provision reasonable.
Even if passengers received prominent notice of the forum-selection clause before they committed the cost of the cruise, I would remain persuaded that the clause was unenforceable under traditional principles of federal admiralty law and is "null and void" under the terms of Limitation of Vessel Owners Liability Act.
Exculpatory clauses in passenger tickets have been around for a long time. These clauses are typically the product of disparate bargaining power between the carrier and the passenger, and they undermine the strong public interest in deterring negligent conduct. For these reasons, courts long before hie turn of the century consistently held such clauses unenforceable under federal admiralty law.
The stipulation in the ticket that Carnival Cruise sold to respondents certainly lessens or weakens their ability to recover for the slip and fall incident that occurred off the west coast of Mexico during the cruise that originated and terminated in Los Angeles, California. It is safe to assume that the witnesses-whether other passengers or members of the crew-can be assembled with less expense and inconvenience at a west coast forum than' in a Florida court several thousand miles from the scene of the accident.
Is the clause enforceable?