Forum Selection Clauses and Cruise Ship Contracts
On August 19, 2021, the U.S. Court of Appeals for the Eleventh Circuit issued its latest decision on foreign forum selection clauses in cruise ship contracts. The case was Turner v. Costa Crociere S.P.A. The plaintiff was an American cruise ship passenger, Paul Turner, who brought a class action in federal district court in Florida alleging that the cruise line’s “negligence contributed to an outbreak of COVID-19 aboard the Costa Luminosa during his transatlantic voyage beginning on March 5, 2020.”
The cruise line moved to dismiss the case on the basis of a forum selection clause in the ticket mandating that all disputes be resolved by a court in Genoa, Italy. The contract also contained a choice-of-law clause selecting Italian law. By way of background, it is important to note that (1) the parent company for the cruise line was headquartered in Italy, (2) its operating subsidiary was headquartered in Florida, (3) the cruise was to begin in Fort Lauderdale, Florida, and (4) the cruise was to terminate in the Canary Islands.
The Eleventh Circuit never reached the merits of the plaintiffs’ claims. Instead, it sided with the cruise line, enforced the Italian forum selection clause, and dismissed the case on the basis of forum non conveniens. A critique of the Eleventh Circuit’s reasoning in Turner is set forth below.
Years ago, the U.S. Congress enacted a law imposing limits on the ability of cruise lines to dictate terms to their passengers. 46 U.S.C. § 30509 provides in relevant part:
The owner . . . of a vessel transporting passengers . . . between a port in the United States and a port in a foreign country, may not include in a . . . contract a provision limiting . . . the liability of the owner . . . for personal injury or death caused by the negligence or fault of the owner or the owner’s employees or agents . . . . A provision described in paragraph (1) is void.
Boiled down to its essence, the statute provides that any provision in a cruise ship contract that caps the damages in a personal injury case is void. If the cruise ship were to write an express provision into its passenger contracts capping the damages recoverable by plaintiffs such as Paul Turner at $500,000, that provision would be void as contrary to U.S. public policy.
The cruise lines are sharp enough, however, to know not to write express limitations directly into their contracts. Instead, they have sought to achieve the same end via a choice-of-law clause. The contract in Turner had a choice-of-law clause selecting Italian law. Italy is a party to an international treaty known as the Athens Convention. The Athens Convention, which is part of Italian law, caps the liability of cruise lines at roughly $568,000 in personal injury cases. If a U.S. court were to give effect to the Italian choice-of-law clause and apply Italian law on these facts, therefore, it would be required to apply the liability cap set forth in the Athens Convention. It seems highly unlikely that any U.S. court would enforce an Italian choice-of-law clause on these facts given the language in Section 30509.
Enter the forum selection clause. If the forum selection clause is enforced, then the case must be brought before an Italian court. An Italian court is likely to enforce an Italian choice-of-law clause and apply the Athens Convention. If the Athens Convention is applied, the plaintiff’s damages will be capped at roughly $568,000. To enforce the Italian forum selection clause, therefore, is to take the first step down a path that will ultimately result in the imposition of liability caps in contravention of Section 30509. The question at hand, therefore, is whether the Eleventh Circuit was correct to enforce the forum selection clause knowing that this would be the result.
While the court clearly believed that it reached the right outcome, its analysis leaves much to be desired. In support of its decision, the court offered the following reasoning:
[B]oth we and the Supreme Court have directly rejected the proposition that a routine cruise ship forum selection clause is a limitation on liability that contravenes § 30509(a), even when it points to a forum that is inconvenient for the plaintiff. Shute, 499 U.S. at 596–97 (“[R]espondents cite no authority for their contention that Congress’ intent in enacting § [30509(a)] was to avoid having a plaintiff travel to a distant forum in order to litigate. The legislative history of § [30509(a)] suggests instead that this provision was enacted in response to passenger-ticket conditions purporting to limit the shipowner’s liability for negligence or to remove the issue of liability from the scrutiny of any court by means of a clause providing that ‘the question of liability and the measure of damages shall be determined by arbitration.’ There was no prohibition of a forum-selection clause.”)
The problem with this argument is that there was no evidence in Shute—none—suggesting that the enforcement of the forum selection clause in that case would lead to the imposition of a formal liability cap. Indeed, the very next sentence in the passage from Shute quoted above states that “[b]ecause the clause before us . . . does not purport to limit petitioner’s liability for negligence, it does not violate [Section 30509].” This language suggests that if enforcement of a forum selection clause would operate to limit the cruise line’s liability for negligence, it would not be enforceable. The Eleventh Circuit’s decision makes no mention of this language.
The Turner court also cites to a prior Eleventh Circuit decision, Estate of Myhra v. Royal Caribbean Cruises, for the proposition that “46 U.S.C. § 30509(a) does not bar a ship owner from including a forum selection clause in a passage contract, even if the chosen forum might apply substantive law that would impose a limitation on liability.” I explain the many, many problems with the Eleventh Circuit’s decision in Myhra here. At a minimum, however, the Myhra decision is inconsistent with the Supreme Court’s admonition in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc that “in the event the choice-of-forum and choice-of-law clauses operated in tandem as a prospective waiver of a party’s right to pursue statutory remedies . . . we would have little hesitation in condemning the agreement as against public policy.” There is no serious question that the cruise line is here attempting to use an Italian choice-of-law clause and an Italian forum selection clause “in tandem” to deprive the plaintiffs in Turner of their statutory right to be free of a damages cap. This attempt would seem to be foreclosed by the language in Mitsubishi. The Eleventh Circuit does not, however, cite Mitsubishi in its decision.
At the end of the day, the question before the Eleventh Circuit in Turner was whether a cruise company may deprive a U.S. passenger of rights guaranteed by a federal statute by writing an Italian choice-of-law clause and an Italian forum selection clause into a contract of adhesion. The Eleventh Circuit concluded the answer is yes. I have my doubts.
Many thanks John for this interesting report.
I note that the US plaintiff sued the Italian company, not the US subsidiary. I further note that the cruise was not a “US” cruise (say, Florida to Boston), but a truly international one, which ended in Spain. The choice of Italy as a forum can barely been seen, therefore, as illegitimate.
Furthermore, the cap on damages is not a peculiar Italian invention, but is contained in an international convention. which is widely ratified.
So I must say that I am pleasantly surprised by this US decision.
Yes, thank you John. I agree with Giles. It’s good to see a US court observing the enforceability of a forum selection clause even against the interests of a US-based plaintiff. Would other Circuits do likewise?
Interesting, as well important these days let alone.
But, what is claimed in the post, couldn’t change it seems the result or conclusion. For, the plaintiff- appellant, has claimed, that, due to the Covid restrictions, he can’t manage properly the lawsuit in Italy. But, he has the burden of proof on him, and he didn’t show it properly or strongly enough.
” But as we have just explained, Turner has not shown that travel and medical issues will prevent him from being able to litigate in Italy, much less done so “strongly” enough to overcome the presumption in favor of forum selection clause enforceability”
And why, I quote again:
” The Defendants produced an affidavit from an Italian attorney explaining that Turner would not be required to attend routine proceedings in person and that even for those events that required attendance, he could possibly either arrange for appointment of
a special attorney to attend on his behalf or request that the event take place in the United States via international rogatory.”
To Gilles: I fully agree that Italy has a connection to the dispute. The decision raises hard questions, however, about whether the courts should allow foreign corporations to use foreign forum selection clauses and foreign choice-of-law clauses to sidestep laws enacted by the U.S. Congress to protect U.S. cruise passengers on cruises departing from U.S. ports.
To Alex: Virtually all of the cruise ship passenger litigation in the United States occurs in Florida. This is because the U.S. cruise lines overwhelmingly write Florida forum selection clauses into their ticket contracts. To my knowledge, the issue presented in Turner has not been addressed by other federal circuits, though the Ninth Circuit (which covers California) has previously held that Section 30509 was inapplicable to a cruise that did not stop at a U.S. port. Wallis v. Princess Cruises, Inc., 306 F.3d 827, 834 (9th Cir. 2002).
To El Roam: Forum selection clauses are presumptively enforceable in the United States unless they are (1) unreasonable, or (2) contrary to public policy. The passages you cite stand for the proposition that the clause is “reasonable” in that there are no insurmountable obstacles to the suit being brought in Italy. Even if a clause is reasonable, however, it may still be void as a matter of public policy if it runs afoul of a valid statute directing the courts not to give it effect.
Thank you John, very interesting.
The 11th Circuit is not 100% new in this respect, you might remember Seung v. Regent Seven Seas Cruises, Inc., 393 F. App’x 647 (11th Cir. 2010) where both the District and the Circuit courts enforced the choice of forum in favour of Paris, thereby applying Carnival Cruise beyond the usual “domestic” intra-state transfer to Florida (probably for the first time in a published decision).
Although the Seung case is not a mirror image of the existing one, I wonder why it is not cited at all in the decision: perhaps it is a consequence of the new procedural vehicle to enforce choice of court agreements announced in the obiter of Atlantic Marine.
Interestingly enough, the specific choice of court agreement in the Turner case is probably not valid as a matter of Italian law (i.e. EU law), as it cannot be considered to be in writing for purposes of art. 25 (it’s just on the back of the ticket), and also appear to contravene section 4 of the Regulation that protects consumers (I guess that the exception of art. 17(3) of the Regulation does not apply to cruises, which are a combination of travel and accommodation).
I wonder whether a US court would have accepted the following argument, if pleaded: the clause is not valid or not enforceable in a US court, because it is null and void under the applicable foreign law (there is US case law on the law applicable to choice of court agreement that is very nuanced, e.g. Bloomberg v. Martinez of the 2nd Circuit).
If we look at the Hague Convention, art. 6(1)(a) allows a non-chosen court not to enforce a choice of court that is not valid under the law of the chosen court; but of course the US have signed it, but not ratified it.
What do you think?
To Giacomo: Your query may be usefully reframed as one relating to choice of law. When evaluating whether a foreign forum selection clause is enforceable, will a U.S. court apply (1) the law of the forum (the United States), or (2) the law of the jurisdiction selected in the choice-of-law clause (Italy)?
Symeon Symeonides wrote about this issue in 2018. Symeon Symeonides, What Law Governs Forum Selection Clauses? 78 LA. L. REV. 1119 (2018). As a descriptive matter, he observes that U.S. court practice is varied in this area. Most courts apply the law of the forum. Some courts apply the law of the jurisdiction selected in the choice-of-law clause. As normative matter, Symeon convincingly argues that U.S. courts should apply the law of the forum to determine whether a foreign forum selection clause is enforceable. This recommendation is consistent with one offered by Kevin Clermont in a 2015 paper. Kevin M. Clermont, Governing Law on Forum-Selection Agreements, 66 HASTINGS L.J. 643 (2015).
While there’s no way to know for certain, I do not believe that the Eleventh Circuit would have accepted the argument that the forum selection clause in Turner was unenforceable if the plaintiffs had shown that it was not valid as a matter of Italian law. I recently had occasion to read every decision involving foreign forum selection clauses and cruise ship contracts decided in the Eleventh Circuit between 2014 and 2020. In none of these cases did the Eleventh Circuit consider whether the clause was valid and enforceable under the law of the foreign jurisdiction. It applied U.S. law to answer this question in every case. In the overwhelming majority of these cases, the court concluded that the clause was enforceable under U.S. law and dismissed the suit.