Forum Selection Agreements in the Federal Courts After Carnival Cruise: A Proposal for Congressional Reform

Abstract:     
After decades of hostility to exclusive forum selection agreements (i.e., agreements that require parties to litigate only in a particular court), the Supreme Court embraced them in 1973 in The Bremen v. Zapata Offshore Co. The Bremen, however, involved two sophisticated business entities of roughly equal bargaining power. It was unclear, however, whether The Bremen's rationale extended beyond such contracts to consumer agreements. In Carnival Cruise Lines, Inc. v. Shute, decided in 1992, the Supreme Court extended The Bremen to this context. The Court thus enforced an exclusive forum selection clause printed on the back of a cruise line ticket and required a plaintiff to bring suit in Florida even though she was a resident in the State of Washington and was injured while the defendant's boat was sailing from Los Angeles. The Court reasoned that the benefits of lower costs to the cruise line in being able to funnel all litigation to a particular court would ultimately be passed on to the consumers of such cruises. The article argues, however, that consumers are at an informational disadvantage in such agreements and that it is cost-prohibitive for them in small transactions to estimate the burden placed on them by such a clause. The article thus proposes a comprehensive statutory scheme that would allow for enforcement of such clauses only in transactions exceeding $50,000.

Number of Pages in PDF File: 57

Keywords: forum selection clause, The Bremen, Carnival Cruise Lines, derogation, prorogation

JEL Classification: K00, K12

Accepted Paper Series