Carnival Cruise Lines v. Shute

Citation: Carnival Cruise Lines v. Shute, 499 U.S. 585 (1991).

Factual Background
The Respondents, The Shutes, was a couple from the State of Washington that purchased cruise tickets through a local travel agent for a 7-day cruise on the petitioner’s ship, the Tropicale. The Shute’s paid the fare to the travel agent who forwarded the payment to Carnival Cruise Lines (“Carnival”) headquarters in Miami, Florida. Carnival then prepared the tickets and sent them directly to the respondents' home in Washington.

The face of each ticket contained an admonition that the conditions of the contract on the last pages were “IMPORTANT” and should be read. The language on the face of each ticket referred to the acknowledgment and agreement by all passengers of all the terms and conditions contained in the Passage Contract Ticket. Among the terms assented to by accepting the Carnival’s ticket was a forum selection clause, which required “all disputes and matters whatsoever arising under, in connection with or incident to this Contract. . . to be litigated, if at all, in and before a Court located in the State of Florida.”

Shortly after receiving the tickets, the Shutes traveled to Los Angeles, California where they boarded the Tropicale. During their ship's journey from Puerto Vallarta, Mexico back to Los Angeles, respondent, Eulala Shute, slipped and fell on a deck mat during a guided tour of the ship’s galley. Following this incident, the Shutes filed suit against Carnival in the District Court of Washington on the grounds that Eulala Shute’s injuries were caused by the negligence of the petitioner and its employees.

Carnival moved for summary judgment, contending that the Washington district court lacked personal jurisdiction since the forum selection clause required the Shute’s to bring suit in Florida.

Trial Court Proceedings
At trial, the District Court of Washington granted Carnival’s motion for summary judgment. In arriving at this decision, the court determined that the terms and conditions of the Passage Contract Ticket were to be given full effect. Therefore, the district court lacked personal jurisdiction and was unable to hear the claim brought by the Shutes. The Shutes filed a timely appeal.

Appellate Court Proceedings
The Ninth Circuit reversed the district courts holding and determined that the forum selection clause should not be enforced. Relying on Bremen v. Zapata Off-Shore Co., the Ninth Circuit determined that the forum selection clause was not “freely bargained for”. The lack of bargaining coupled with the fact that forum selection clauses are not “historically. . . favored,” was enough for the court to reverse the district court’s decision and remand the case for further proceedings. Additionally, as an independent justification for refusing to enforce the clause, the court looked as the affect that enforcement would have in depriving the respondents' of their day in court, since the Shutes were “physically and financially incapable of pursuing litigation in Florida.” Carnival appealed this holding.

Supreme Court Proceedings
The Supreme Court refused to adopt the Court of Appeals’ determination that non-negotiated forum selection clauses are unenforceable simply because there was a lack of bargaining. In arriving at this conclusion, the Supreme Court looked at the impracticability of every passenger negotiating separate terms of Carnival’s forum selection clause. The Ninth Circuit’s refusal to enforce the clause would have the effect of opening Carnival up to litigation in many different venues, since the cruise line typically carries passengers from a variety of locales.

Additionally, the court determined, that passengers who purchased tickets containing the forum selection clause actually derived benefit from the clause since it had the tendency to reduce fares because the savings that Carnival enjoyed by limiting the fora could be passed on to the consumer. Additionally, since the respondents did not claim that they were improperly notified about the clause or induced into entering the agreement by fraud, there was no legitimate reason to deny its effect.