Carnival Cruise Lines Inc. v. Shute/Dissent Stevens

by John Paul Stevens

Justice STEVENS, with whom Justice MARSHALL joins, dissenting.

The Court prefaces its legal analysis with a factual statement that implies that a purchaser of a Carnival Cruise Lines passenger ticket is fully and fairly notified about the existence of the choice of forum clause in the fine print on the back of the ticket. See ante, at 587-588. Even if this implication were accurate, I would disagree with the Court's analysis. But, given the Court's preface, 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.

Of course, many passengers, like the respondents in this case, see ante, at 587, will not have an opportunity to read paragraph 8 until they have actually purchased their tickets. By this point, the passengers will already have accepted the condition set forth in paragraph 16(a), which provides that "[t]he Carrier shall not be liable to make any refund to passengers in respect of . . . tickets wholly or partly not used by a passenger." Not knowing whether or not that provision is legally enforceable, I assume that the average passenger would accept the risk of having to file suit in Florida in the event of an injury, rather than canceling-without a refund-a planned vacation at the last minute. 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. Cf. Steven v. Fidelity & Casualty Co. of New York, 58 Cal.2d 862, 883, 27 Cal.Rptr. 172, 186, 377 P.2d 284, 298 (1962) (refusing to enforce limitation on liability in insurance policy because insured "must purchase the policy before he even knows its provisions").

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, ch. 521, 49 Stat. 1480, 46 U.S.C.App. § 183c, which was enacted in 1936 to invalidate expressly stipulations limiting shipowners' liability for negligence.

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 the turn of the century consistently held such clauses unenforceable under federal admiralty law. Thus, in a case involving a ticket provision purporting to limit the shipowner's liability for the negligent handling of baggage, this Court wrote:

"It is settled in the courts of the United States that exemptions limiting carriers from responsibility for the negligence of themselves or their servants are both unjust and unreasonable, and will be deemed as wanting in the element of voluntary assent; and, besides, that such conditions are in conflict with public policy. This doctrine was announced so long ago, and has been so frequently reiterated, that it is elementary. We content ourselves with referring to the cases of the Baltimore & Ohio &c. Railway v. Voigt, 176 U.S. 498, 505, 507 [20 S.Ct. 385, 388, 44 L.Ed. 560 (1900) ], and Knott v. Botany Mills, 179 U.S. 69, 71 [21 S.Ct. 30, 30-31, 45 L.Ed. 90 (1900) ], where the previously adjudged cases are referred to and the principles by them expounded are restated." The Kensington, 183 U.S. 263, 268, 22 S.Ct. 102, 104, 46 L.Ed. 190 (1902).

Clauses limiting a carrier's liability or weakening the passenger's right to recover for the negligence of the carrier's employees come in a variety of forms. Complete exemptions from liability for negligence or limitations on the amount of the potential damage recovery, ^[1] requirements that notice of claims be filed within an unreasonably short period of time, ^[2] provisions mandating a choice of law that is favorable to the defendant in negligence cases, ^[3] and forum-selection clauses are all similarly designed to put a thumb on the carrier's side of the scale of justice. ^[4]

Forum-selection clauses in passenger tickets involve the intersection of two strands of traditional contract law that qualify the general rule that courts will enforce the terms of a contract as written. Pursuant to the first strand, courts traditionally have reviewed with heightened scrutiny the terms of contracts of adhesion, form contracts offered on a take-or-leave basis by a party with stronger bargaining power to a party with weaker power. Some commentators have questioned whether contracts of adhesion can justifiably be enforced at all under traditional contract theory because the adhering party generally enters into them without manifesting knowing and voluntary consent to all their terms. See, e.g., Rakoff, Contracts of Adhesion: An Essay in Reconstruction, 96 Harv.L.Rev. 1173, 1179-1180 (1983); Slawson, Mass Contracts: Lawful Fraud in California, 48 S.Cal.L.Rev. 1, 12-13 (1974); K. Llewellyn, The Common Law Tradition 370-371 (1960).

The common law, recognizing that standardized form contracts account for a significant portion of all commercial agreements, has taken a less extreme position and instead subjects terms in contracts of adhesion to scrutiny for reasonableness. Judge J. Skelly Wright set out the state of the law succinctly in Williams v. Walker-Thomas Furniture Co., 121 U.S.App.D.C. 315, 319-320, 350 F.2d 445, 449-450 (1965) (footnotes omitted):

"Ordinarily, one who signs an agreement without full knowledge of its terms might be held to assume the risk that he has entered a one-sided bargain. But when a party of little bargaining power, and hence little real choice, signs a commercially unreasonable contract with little or no knowledge of its terms, it is hardly likely that his consent, or even an objective manifestation of his consent, was ever given to all of the terms. In such a case the usual rule that the terms of the agreement are not to be questioned should be abandoned and the court should consider whether the terms of the contract are so unfair that enforcement should be withheld."

See also Steven, 58 Cal.2d, at 879-883, 27 Cal.Rptr. at 183-185, 377 P.2d, at 295-297; Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 161 A.2d 69 (1960).

The second doctrinal principle implicated by forum-selection clauses is the traditional rule 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." See Dougherty, Validity of Contractual Provision Limiting Place or Court in Which Action May Be Brought, 31 A.L.R.4th 404, 409, § 3 (1984). See also Home Insurance Co. v. Morse, 20 Wall. 445, 451, 22 L.Ed. 365 (1874). Although adherence to this general rule has declined in recent years, particularly following our decision in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), the prevailing rule is still that forum-selection clauses are not enforceable if they were not freely bargained for, create additional expense for one party, or deny one party a remedy. See 31 A.L.R.4th, at 409-438 (citing cases). A forum-selection clause in a standardized passenger ticket would clearly have been unenforceable under the common law before our decision in The Bremen, see 407 U.S., at 9, and n. 10, 92 S.Ct., at 1912-13, and n. 10, and, in my opinion, remains unenforceable under the prevailing rule today.

The Bremen, which the Court effectively treats as controlling this case, had nothing to say about stipulations printed on the back of passenger tickets. That case involved the enforceability of a forum-selection clause in a freely negotiated international agreement between two large corporations providing for the towage of a vessel from the Gulf of Mexico to the Adriatic Sea. The Court recognized that such towage agreements had generally been held unenforceable in American courts, ^[5] but held that the doctrine ofthose cases did not extend to commercial arrangements between parties with equal bargaining power.

The federal statute that should control the disposition of the case before us today was enacted in 1936 when the general rule denying enforcement of forum-selection clauses was indisputably widely accepted. The principal subject of the statute concerned the limitation of shipowner liability, but as the following excerpt from the House Report explains, the section that is relevant to this case was added as a direct response to shipowners' ticketing practices.

"During the course of the hearings on the bill (H.R. 9969) there was also brought to the attention of the committee a practice of providing on the reverse side of steamship tickets that in the event of damage or injury caused by the negligence or fault of the owner or his servants, the liability of the owner shall be limited to a stipulated amount, in some cases $5,000, and in others substantially lower amounts, or that in such event the question of liability and the measure of damages shall be determined by arbitration. The amendment to chapter 6 of title 48 of the Revised Statutes proposed to be made by section 2 of the committee amendment is intended to, and in the opinion of the committee will, put a stop to all such practices and practices of a like character." H.R.Rep. No. 2517, 74th Cong., 2d Sess., 6-7 (1936) (emphasis added); see also S.Rep. No. 2061, 74th Cong., 2d Sess., 6-7 (1936).

The intent to "put a stop to all such practices and practices of a like character" was effectuated in the second clause of the statute. It reads:

"It shall be unlawful for the manager, agent, master, or owner of any vessel transporting passengers between ports of the United States or between any such port and a foreign port to insert in any rule, regulation, contract, or agreement any provision or limitation (1) purporting, in the event of loss of life or bodily injury arising from the negligence or fault of such owner or his servants, to relieve such owner, master, or agent from liability, or from liability beyond any stipulated amount, for such loss or injury, or (2) purporting in such event to lessen, weaken, or avoid the right of any claimant to a trial by court of competent jurisdiction on the question of liability for such loss or injury, or the measure of damages therefor. All such provisions or limitations contained in any such rule, regulation, contract, or agreement are declared to be against public policy and shall be null and void and of no effect." 46 U.S.C.App. § 183c (emphasis added).

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.

A liberal reading of the 1936 statute is supported by both its remedial purpose and by the legislative history's general condemnation of "all such practices." Although the statute does not specifically mention forum-selection clauses, its language is broad enough to encompass them. The absence of a specific reference is adequately explained by the fact that such clauses were already unenforceable under common law and would not often have been used by carriers, which were relying on stipulations that purported to exonerate them from liability entirely. Cf. Moskal v. United States, 498 U.S. 103, 110-113, 111 S.Ct. 461, ----, 112 L.Ed.2d 449 (1990).

The Courts of Appeals, construing an analogous provision of the Carriage of Goods by Sea Act, 46 U.S.C.App. § 1300 et seq., have unanimously held invalid as limitations on liability forum-selection clauses requiring suit in foreign jurisdictions. See, e.g., Hughes Drilling Fluids v. M/V Luo Fu Shan, 852 F.2d 840 (CA5 1988), cert. denied, 489 U.S. 1033, 109 S.Ct. 1171, 103 L.Ed.2d 229 (1989); Union Ins. Soc. of Canton, Ltd. v. S.S. Elikon, 642 F.2d 721, 724-725 (CA4 1981); Indussa Corp. v. S.S. Ranborg, 377 F.2d 200, 203-204 (CA2 1967). Commentators have also endorsed this view. See, e.g., G. Gilmore & C. Black, The Law of Admiralty 145, and n. 23 (2d ed. 1975); Mendelsohn, Liberalism, Choice of Forum Clauses and the Hague Rules, 2 J. of Maritime Law & Comm. 661, 663-666 (1971). The forum-selection clause here does not mandate suit in a foreign jurisdiction, and therefore arguably might have less of an impact on a plaintiff's ability to recover. See Fireman's Fund American Ins. Cos. v. Puerto Rican Forwarding Co., 492 F.2d 1294 (CA1 1974). However, the plaintiffs in this case are not large corporations but individuals, and the added burden on them of conducting a trial at the opposite end of the country is likely proportional to the additional cost to a large corporation of conducting a trial overseas. ^[6]

Under these circumstances, the general prohibition against stipulations purporting "to lessen, weaken, or avoid" the passenger's right to a trial certainly should be construed to apply to the manifestly unreasonable stipulation in these passengers' tickets. Even without the benefit of the statute, I would continue to apply the general rule that prevailed prior to our decision in The Bremen to forum-selection clauses in passenger tickets.

I respectfully dissent.

Notes

1. See 46 U.S.C.App. § 183c:
2. See 46 U.S.C.App. § 183b(a):
3. See, e.g., The Kensington, 183 U.S. 263, 269, 22 S.Ct. 102, 104, 46 L.Ed. 190 (1902) (refusing to enforce clause requiring that all disputes under contract for passage be governed by Belgian law because such law would have favored the shipowner in violation of United States public policy).
4. All these clauses will provide passengers who purchase tickets containing them with a "benefit in the form of reduced fares reflecting the savings that the cruise line enjoys by limiting [its exposure to liability]." See ante, at 594. Under the Court's reasoning, all these clauses, including a complete waiver of liability, would be enforceable, a result at odds with longstanding jurisprudence.
5. "In [Carbon Black Export, Inc. v. The Monrosa, 254 F.2d 297 (CA5 1958), cert. dism'd, 359 U.S. 180, 79 S.Ct. 710, 3 L.Ed.2d 723 (1959),] the Court of Appeals had held a forum-selection clause unenforceable, reiterating the traditional view of many American courts that 'agreements in advance of controversy whose object is to oust the jurisdiction of the courts are contrary to public policy and will not be enforced.' 254 F.2d, at 300-301." The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 6, 92 S.Ct. 1907, 1911, 32 L.Ed.2d 513 (1972).
6. The Court does not make clear whether the result in this case would also apply if the clause required Carnival passengers to sue in Panama, the country in which Carnival is incorporated.