Case Digest: Carnival Cruise Lines, Inc. Vs. Shute, 499 U.S 585 (1990)

Private International Law  

• Petitioner: Eulala and Russel Shute

• Respondents: Carnival Cruise Lines, Inc. 

• Forum:  Washington

Recit Version:

• Eulala and Russel Shute were passengers on a Carnival Cruise Lines ship. The Shutes bought tickets in Washington, which included a forum selection clause requiring lawsuits to be filed in Florida. Mrs. Shute suffered an injury while on the cruise in international waters near Mexico. The Shutes filed a lawsuit in Washington, violating the forum selection clause. Carnival Cruise Lines sought summary judgment based on the forum clause and insufficient connection with Washington.

• On whether the forum selection clause is enforceable, the court held that the forum selection clause is valid and binding. Cruise lines have a legitimate interest in limiting the jurisdictions where they can be sued. The clause reduces confusion about where disputes should be resolved and helps lower ticket prices for passengers by reducing litigation costs.

• The Court of Appeals' findings on the Shutes’ inability to sue in Florida were not supported by the record. Florida is not an unreasonably remote forum for this case, and the Shutes had notice of the clause. No evidence of fraud or bad faith was found in the inclusion of the forum clause.

Facts:

• The plaintiffs, Eulala and Russel Shute, were passengers on a cruise ship operated by the defendant, Carnival Cruise Lines, Inc. 

• The Shutes had bought tickets in Washington and signed a contract, with a forum selection clause mandating that injured parties would sue in Florida, to the exclusion of all other jurisdictions. 

• The plaintiffs boarded the cruise ship in Los Angeles, California.

• However, Mrs. Shute slipped, fell, and suffered injuries during the cruise in international waters off the coast of Mexico. 

• The plaintiffs then filed a lawsuit in Washington, in violation of the contract clause.

• The defendant sought summary judgment based on:

1. the forum selection clause, and

2. a lack of minimum contacts between the defendant and the forum state

• Trial Court: Dismissed based solely on the lack of sufficient contacts.

• CA: Reversed the dismissal.

• The forum selection clause was void because of unequal bargaining power between the parties, and because it would be an undue hardship for the Shutes to have to go all the way to Florida to sue. 

Issue:  Whether the forum selection douse is enforceable. 

Held: Yes, the forum selection clause is valid and binding.

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. 

As an initial matter, we do not adopt the Court of Appeals' determination that a nonnegotiated forum selection clause in a form ticket contract is never enforceable simply because it is not the subject of bargaining. Including a reasonable forum clause in a form contract of this kind well may be permissible for several reasons: 

1. 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. 

2. 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. 

3. 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.

We also do not accept the Court of Appeals' "independent justification" for its conclusion that The Bremen dictates that the clause should not be enforced because "[t]here is evidence in the record to indicate that the Shutes are physically and financially incapable of pursuing this litigation in Florida." 

We do not defer to the Court of Appeals' findings of fact. In dismissing the case for lack of personal jurisdiction over petitioner, the District Court made no finding regarding the physical and financial impediments to the Shutes' pursuing their case in Florida. The Court of Appeals' conclusory reference to the record provides no basis for this Court to validate the finding of inconvenience. 

Furthermore, the Court of Appeals did not place in proper context this Court's statement in The Bremen that "the serious inconvenience of the contractual forum to one or both of the parties might carry greater weight in determining the reasonableness of the forum clause." The Court made this statement in evaluating a hypothetical "agreement between two Americans to resolve their essentially local disputes in a remote alien forum." 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' accession to the forum clause by fraud or overreaching. Finally, 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.