If They Could Sue Me Now: Minimum Contacts on the Love Boat
5 Preview of Supreme Court Cases 135 (January 1991)
5 Pages Posted: 22 Feb 2013
Date Written: January 7, 1991
This article previews the issues and arguments in Carnival Cruise Lines, Inc. v. Shute, on the Supreme Court’s 1990-91 docket. The Court has to decide two separate issues in Carnival Cruise Lines. First, it must determine whether a state, consistent with due process, may exercise personal jurisdiction over a nonresident business for injury to a resident when, "but for" the business's activities in the state, the resident would not have been injured. In technical terms, the Court is being asked whether specific jurisdiction may be determined by a "but for" test, where a person's injury has no direct relationship to a business's activities. The second issue is whether federal courts should recognize so-called forum selection clauses contained in consumer contracts that designate a certain state's courts as the place of litigation, if litigation should occur.
In what is destined to be the Court's most important procedural decision this term, if not this half-century, the justices in Carnival Cruise Lines will once again revisit the fundamental problem of personal jurisdiction. This case comes hard on the heels of last term's controversial ruling in Burnham v. California Superior Court, 110 S.Ct. 2105 (1990), in which a badly divided Court approved the doctrine of transient jurisdiction over persons temporarily visiting a state.
Carnival Cruise Lines is a textbook personal jurisdiction case. The facts are simple; the doctrine, complex. The Court has two tasks. First, it must clarify the distinction between general and pecific jurisdiction. Second, the Court must assess the scope and validity of forum selection clauses. In the last 45 years, the Court painstakingly has constructed an elaborate canon of personal jurisdiction, layering distinction upon distinction, phrase upon phrase, nuance upon nuance. It is a telling testament to this jurisprudence that the parties on both sides of this appeal quote freely from the same landmark cases. In Carnival Cruise Lines, the Court now must make sense of personal jurisdiction. It must bring order out of chaos.
Carnival Cruise Lines is of major significance because the parties have asked the Supreme Court, once and for all, to clarify a state's judicial authority when a resident sues a nonresident in the state. This is the concept of "personal jurisdiction," and the Supreme Court, for almost 50 years, has sought to balance individual fairness with countervailing principles of state sovereignty and federalism. The Supreme Court thus developed a "minimum-contacts" test that requires courts to assess the nature and quality of a nonresident's activities in a state to determine whether the allowing a lawsuit against a nonresident is fair.
The Supreme Court must determine whether this "but for" test, applied by both the Washington State Supreme Court and the Ninth Circuit, defines the appropriate relationship necessary for specific jurisdiction and comports with due process. In so doing, the Court must address the strong criticism that this "but for" test vitiates the distinction between general and specific jurisdiction. With regard to the second issue concerning the scope and validity of forum selection clauses, the Supreme Court will have to determine whether such clauses are enforceable when they are used in domestic commercial consumer contracts. The Supreme Court generally has endorsed the use of forum selection clauses in international commercial contracts between sophisticated businesspersons, and has stated that these clauses are presumptively valid.
Nonetheless, the Court also has indicated that such clauses are invalid and unenforceable if a party can show that enforcement of the clause would be unreasonable or unjust; if the clause was the result of fraud or overreaching; if enforcement would contravene a strong public policy of the state in which the suit was brought; or if the parties who sued would be deprived of their day in court because the forum selected in the contract would be "so gravely difficult and inconvenient."
The Supreme Court will have to decide whether the principles articulated in The Bremen apply to consumer contracts such as the Shutes' cruise-line tickets. The Court may reaffirm the Bremen rule favoring forum selection clauses and find that the passenger ticket was not within any of the exceptions. Or, the Supreme Court may distinguish tile situation of adhesive consumer contracts where little or no bargaining is conceivable, and further refine the Bremen doctrine. Given the widespread use of various consumer contracts that include forum selection clauses, the Supreme Court's ruling on these clauses is certain to have a major impact on the business community.
Indeed, both issues in Carnival Cruises Lines will be closely watched by large and small businesses that advertise nationally and solicit sales throughout the states. If the Supreme Court approves a "but for" test, this conceivably would subject nationwide advertisers such as Carnival Cruise Lines to lawsuits in every state where they solicit passengers, even when the basis for the lawsuit occurs elsewhere. Similarly the Supreme Court's pronouncement on forum selection clauses trenches on the sanctity of contractual agreements and the ability of parties to designate a forum in advance of litigation.
Keywords: Forum selection clauses, personal jurisdiction, specific jurisdiction, The Bremen, Carnival Cruise Lines v. Shute, due process, contract unconscionability
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