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Cheeky Cruise Company Lawyering

posted by Mitu Gulati

This past week’s episode of Andrew Jennings’ Business Scholarship Podcast tells a wonderful story of sneaky cruise ship lawyering. Andrew’s guest was John Coyle, contracts/choice-of-law guru. The discussion focused on the 11th Circuit’s recent decision in Myhra v. Royal Caribbean Cruises, Ltd., and John’s new article about that case, “Cruise Contracts, Public Policy, and Foreign Forum Selection Clauses”  

The backdrop to this story is US federal law that constrains cruise companies from contracting to limit liability in the small print of their contracts with customers; contract provisions that few read and fewer still pay attention to.  John explains:

46 U.S.C. § 30509 . . . prohibits cruise companies from writing provisions into their passenger contracts that limit the company’s liability for personal injury or death incurred on cruises that stop at a U.S. port.  The policy goal underlying this statute is simple.  A cruise contract is the prototypical contract of adhesion.  Absent the constraints imposed by the statute, a cruise company could write language into its passenger contracts that would absolve the company from liability for passenger injuries even when the company was at fault.  The statute clearly states that such provisions are void as against U.S. public policy and directs courts not to give them any effect.

That strikes me as a pretty clear dictate to the courts.  And if I were a cruise company contract lawyer, I’d be worried about trying to draft around such a clear dictate.  (Wouldn’t courts, customers, and just about everyone else look with disfavor upon such sneakiness?). Cruise company lawyers though, at least in the 11th Circuit (which is the key circuit for such matters, since it covers Florida) have figured out a back door way around the explicit prohibition by using a combination of forum selection and governing law clauses.  This enables them to limit liability to foreign customers, even though they are taking the same cruise as their US counterparts.  John’s article explains:

Notwithstanding this clear statement of U.S. policy, cruise companies have worked diligently to develop a workaround to Section 30509 for passengers who reside outside the United States. First, the companies write choice-of-law clauses into their passenger contracts selecting the law of the passenger’s home country.  In many cases, the enforcement of such clauses will result in the application of the Athens Convention, a multilateral treaty which caps the liability of cruise ship companies.  When the Athens Convention applies, an injured cruise ship passenger generally cannot recover more than $66,000 in a tort suit against the cruise ship company.  In this way, the cruise company seeks to accomplish indirectly through a choice-of-law clause what it could not achieve directly via a contract provision limiting their liability.

I’m astonished.  Surely a US federal court would not permit such a sneaky workaround.  And John’s article explains, after canvasing a large set of cases across a range of subject areas, that that is the case. Except, maybe, if you are a cruise company litigating in the 11th Circuit against a foreign customer.

A number of questions interest me about the story that John and Andrew end up telling through their discussion on the podcast.

First, what’s going on with the 11th circuit? Yes, courts get things wrong on occasion. But this case had fancy lawyers and fancy judges. They surely knew what the caselaw was.  If that is the case, then one has to ask whether economics and politics played a role? That the 11th circuit tends to support cruise companies, that are big contributors to the local economy, over foreign customers? (empirical research in political science and economics suggests that there is sometimes a home court advantage).  Or maybe there is a general bias towards corporations and business? (again, there is research on this front). I wonder whether there are enough cases involving cruise companies to do a little empirical study of the 11thCircuit. 

Second, does the pricing adjust?  I wonder whether the prices that foreign customers pay when they buy their cruise tickets are lower than what US customers pay.  That’s certainly the story some contract law teachers would tell in response to students being outraged.  But does this adjustment actually happen? 

Third, what about reputation? I’ve never been on a cruise, but my impression is that they are expensive and that these companies depend on repeat customers who expect white glove service.  Under such conditions, why aren’t the cruise companies going out of their way to pay claims, regardless of formal legal liability?  Put differently, isn’t this a setting where there should not be cheeky lawyering?

All in all, this podcast was great fun. Bravo, Andrew and John. I'm definitely planning to use it in class and ask you both to come in as guest commentators.

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