It is always news when a cruise ship has trouble at sea. Whether it is a disease outbreak, a fire on board, running aground, or engine failure, there are unhappy people. Of course, the cruise ship offers passengers some refund, credit toward another cruise, or other compensation for the danger, inconvenience, or pain suffered. This will satisfy many passengers; many, however, will go away dissatisfied.
A few will sue the cruise line. That is what Starleen Cline and 28 other passengers did after the Carnival Triumph experienced an engine room fire and lost power (Cline v. Carnival Corporation, 2014 U.S. Dist. LEXIS 17415). Passengers had to endure a five day period on the ship under conditions that Cline defined as “unsafe, unsanitary, and unreasonable living conditions.” In light of the fact that the ship had allegedly experienced related safety issues in the weeks prior to the trip and failed to warn clients or take adequate precautions, Cline sued alleging negligence and other claims.
The Forum Selection Clause
As a resident of Texas and sailing out of Galveston, she filed suit in the United States District Court for the Northern District of Texas. Then one of those little items in the long cruise contract showed up: the Forum Selection Clause. This clause states:
It is agreed by and between the Guest and Carnival that all disputes and matters whatsoever arising under, in connection with or incident to this Contract or the Guest’s cruise, including travel to or from the vessel, shall be litigated, if at all, before the United States District Court for the Southern District of Florida in Miami, or as to those lawsuits to which the Federal Courts of the United States lack subject matter jurisdiction, before a court located in Miami-Dade County, Florida, U.S.A. to the exclusion of the Courts of any other county, state or country.
Passengers were advised in the contract in bold and capital letters that the document was legally binding and directed them to the clauses that limited their rights to file suit and specified where litigation must be filed.
Carnival, relying on a Supreme Court ruling (Atlantic Marine Construction v. United States District Court, 2013), then moved to dismiss, or alternatively, transfer venue to the Miami court. According to the Atlantic ruling, the court must first determine the validity and enforceability of the clause, and if it is valid, must then evaluate whether to enforce it.
Enforceability of a Forum Selection Clause
The court then looked toward another Supreme Court ruling (M/S Bremen v. Zapata Off-Shore Co., 1972) which dictates “that in maritime actions forum selection clauses are to be enforced unless the forum selection clause is fundamentally unfair and therefore unreasonable.” In effect, the Court explained that a clause is “unreasonable” if the party seeking to set the forum selection clause aside shows that:
(1) the incorporation of the forum selection clause into the agreement was the product of fraud or overeaching;
(2) the party seeking to escape enforcement “will for all practical purposes be deprived of his day in court” because of the grave inconvenience or unfairness of the selected forum;
(3) the fundamental unfairness of the chosen law will deprive the plaintiff of a remedy; or
(4) enforcement of the forum selection clause would contravene a strong public policy of the forum state.
The Texas court stated that while other courts in the Fifth Circuit have enforced such clauses, a court can set aside the forum selection clause “if Plaintiffs are able to show that enforcement in these particular circumstances would be unreasonable under one of the four bases set forth by the Bremen analysis….”
Plaintiff’s Argument of Unreasonableness
Cline made two arguments that the clause was unreasonable. Cline submitted that the clause was a “product of fraud or overreaching because Carnival ‘knew that the Vessel in question was not sufficiently seaworthy to be able to provide Plaintiffs a safe, sanitary, and enjoyable voyage,’ and did not disclose this information to Plaintiffs before having them agree to the non-negotiated forum selection clause.” The court responded that the fraud does not refer to fraud in the transaction, but “it means that . . . [a] forum-selection clause in a contract is not enforceable if the inclusion of that clause in the contract was the product of fraud or coercion.”
Second, Cline claimed the forum selection clause “should be set aside as unfair and unreasonable in light of Plaintiffs’ lack of bargaining power, Carnival’s alleged knowledge of the Triumph’s mechanical issues, and the fact that 3000 passengers, most of whom are presumably from Texas, were affected by Carnival’s actions and should not be required to travel to Florida.” The court stated that no cases were provided in support of setting aside the clause and there was no evidence that plaintiff would be deprived of a day in court. Thus the court had to conclude the clause was enforceable under Federal Law.
The next duty of the court was to determine the appropriate procedural rules through which the clause may be enforced. The court stated that 28 U.S.C. § 1404(a) provided the applicable rule — it authorizes a venue transfer when justice would be better served by the trial of the case in another jurisdiction or district.
There was much discussion regarding the procedural rules, but the court cited the Atlantic court which clarified the proper application of § 1404(a) “requires that a forum-selection clause be given controlling weight in all but the most exceptional cases.” The Supreme Court went on to specify three adjustments to § 1404(a):
(1) The plaintiff’s choice of forum merits no weight, because the plaintiff has effectively exercised its ‘venue privilege’ before the dispute arises through the forum selection clause agreement.
(2) Arguments about the parties private interests must not be considered, since by agreeing to the forum selection clause, the parties effectively “waive the right to challenge” any private inconvenience the preselected forum may create.
(3) That a § 1404(a) transfer of venue will not carry with it the original venue’s choice of law rules—a factor that in some circumstances may affect public-interest considerations.
Cline argued that the private-interest factors such as convenience and travel distance weigh against transfer, however the Atlantic ruling dictates that, in these circumstances, the Court may only consider arguments related to the public-interest factors. The public-interest factors include:
- the administrative difficulties flowing from court congestion;
- the local interest in having localized controversies decided at home;
- and the interest in having the trial of a diversity case in a forum that is at home with the law.
The Court found that Cline failed to meet the burden § 1404(a) places on them in these circumstances and granted Carnival’s Motions to transfer as per the forum selection agreement.
The United States Supreme Court has been consistent in ruling for the enforcement of forum selection clauses and has strict requirements for exceptions. If you cruise, you will accept the cruise contract, and you will agree to a forum selection agreement that specifies where (Miami, for most cruise lines) any suit must take place. Exceptions to enforcement of the forum selection clause have been few and far between.