Carnival Cruise Lines, Inc. v. Shute

499 U.S. 585 (1991)

What's Going On?

Petitioner cruise line seeks review of a decision holding that a forum selection clause contained in tickets issued by Petitioner was unenforceable.

Who's Who?

Petitioner      :

Carnival Cruise Lines, Inc. – (original defendant) owner of cruise ship on which Respondents were passengers.

Respondents :

Eulala and Russel Shute – (original plaintiffs) passengers on Petitioner's cruise ship.

Facts:

Respondents Eulala and Russel Shute purchased tickets for passage on Petitioner Carnival Cruise Lines, Inc.'s cruise ship by paying an agent in the state of Washington, who forwarded the payment to Petitioner's headquarters in Florida. The last pages of the ticket contained a contract that included a forum selection clause, requiring all disputes to be settled in Florida. Respondent Eulala Shute was injured when she slipped on a deck mat during a tour of Petitioner's ship. Respondents filed suit alleging negligence on behalf of Petitioner in a federal district court in Washington. Petitioner moved for summary judgment on the grounds that the forum selection clause in the tickets required suit to be brought in Florida. Respondents, conceding notice of the forum selection clause, argued that the clause was unenforceable because it was not the product of negotiation.

Issue:

May a forum selection clause in a contract establish jurisdiction?

Decision:

Yes. Because this is an admiralty case, federal law governs the enforceability of the forum-selection clause. Because the contract on Petitioner's ticket was routine in nature, it is unreasonable to assume that Respondents would negotiate the terms of a forum selection clause with Petitioner. The forum selection clause, of which Respondents concede notice, promotes a significant interest for Petitioner by limiting the fora in which it could be subject to suit due to the amount of passengers it carries from numerous locales. The forum clause also prevents litigants from having to engage in pretrial motions to determine where a suit arising from the contract will be brought. Purchasers of tickets from Petitioner also benefit from reduced fares reflecting the savings Petitioner enjoys by limiting the fora in which it may be sued. Petitioner did not select Florida as the forum in bad faith. Petitioner's principal place of business is in Florida, and many of its cruises depart from there. Because there is no fundamental unfairness in enforcing the forum selection clause, and Petitioners had notice of the terms in the clause, the forum selection clause is enforceable. Reversed.

Basic Rule:

A forum selection clause may confer jurisdiction if not fundamentally unfair.

Dissent:

Forum selection clauses such as the one at issue in this case have traditionally been reviewed with heightened scrutiny pursuant to two theories of contract law. The first theory questions the enforceability of such clauses because they are often contained in contracts that arise between parties with unequal bargaining power. The second theory holds that contractual provisions which seek to limit the place or court in which an action may be brought are invalid as contrary to public policy. Although forum selection clauses are gaining more acceptance, the prevailing rule is that they are not enforceable if fundamentally unfair.

Terms:

Admiralty :

Referring to the traditional body of rules relating to navigation, commerce, and business transacted at sea, and actions arising under those rules, over which the federal courts have exclusive jurisdiction.

Fora :

Plural of “forum.”

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