Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.


United States District Court, Southern District of New York

November 15, 2000


The opinion of the court was delivered by: Gerard E. Lynch, District Judge.


Plaintiff union purchased tickets from defendant cruise line for 90 of its members, officials and guests for a Caribbean cruise, intending to hold business meetings during the course of the voyage. These plans were frustrated when many of the passengers came down with a bacterial infection. The union brought this action in the courts of New York against the cruise line, alleging that defendant had "breached its agreement promise and warranty to [provide] a safe and reasonable environment" aboard ship, and seeking reimbursement for the tickets, as well as for other expenses involved in bringing the members of the New York-based union to Jamaica for the unhappy cruise. (Compl. ¶ 17.)

Defendant removed the action to this court, invoking federal jurisdiction on grounds of diversity of citizenship. It then moved to dismiss, arguing that the union is bound by contractual provisions, printed on the purchased tickets, that require any lawsuit against the cruise line relating to the contract be brought (1) within one year of the incident giving rise to the action and (2) either in a (state) court located in Dade County, Florida, or in the United States District Court for the Southern District of Florida. This lawsuit meets neither of these conditions. Plaintiff maintains that it is not bound by the provisions (although it apparently concedes that the individual passengers would be) because it claims to be suing on a contract, separate from the tickets themselves, by which cruise line agreed to provide not (just) a cruise but a conference facility.

The case presents a number of issues concerning the effect of contractual provisions limiting litigation. Defendant is correct that this action cannot be maintained in this court at this time. But precisely why, and precisely how this court should dispose of the case, turn out to involve complicated questions that have puzzled the courts.

The court having carefully considered the submissions of the parties, defendant's motion to dismiss is granted.


Choice of Law

The first question to be resolved is what law governs the validity and interpretation of the litigation-limiting clauses of the contract. Neither party has explicitly addressed this question. Defendant relies primarily on federal cases, all of which ultimately derive from M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), which favors the enforcement of forum-selection clauses; plaintiff cites no sources of law whatsoever. Perhaps the parties believed that the answer was obvious or that the question was academic; if so, perhaps they were right. Although the analysis takes a few interesting turns, there is ultimately no doubt that, however the case is viewed, federal law controls; moreover, since federal law, New York law and (if relevant) Florida law all seem to agree on the basic principles to be applied, it may not make a great deal of difference in the end whose law governs. Nevertheless, some explanation should be given of the decision to apply federal law.

In removing the case from the New York courts, defendant invoked our diversity jurisdiction. In diversity cases, the question whether state or federal law controls a particular issue is always present. Generally speaking, matters of "procedure" are determined by federal law, while matters of "substantive law" are controlled by state law, although the line between the two is notoriously elusive. See generally Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938).

The Second Circuit has held that the enforceability of forum-selection clauses should be decided according to federal law even in diversity cases, concluding that "[q]uestions of venue and the enforcement of forum selection clauses are essentially procedural, rather than substantive, in nature." Jones v. Weibrecht, 901 F.2d 17, 19 (2d Cir. 1990).*fn1 Since Jones right or wrong, is the controlling authority in this circuit, it must be followed, and federal law applied.

Still, this court has a lingering doubt whether, if the issue came before the Supreme Court, the Jones decision would prevail. It is strongly arguable that in a diversity case, the validity of such clauses should be determined by state law, which generally governs substantive questions involving the making and enforcement of contracts. See Stewart Organization. Inc. v. Ricoh Corp., 487 U.S. 22, 38-41 (1988) (Scalia, J., dissenting). As one commentator has pointed out, "[t]he right to litigate in one forum or another has an economic value that parties can estimate with reasonable accuracy. . . . Thus, `ancient concepts of freedom of contract' suggest that forum selection — like price, place of delivery and quality of goods — should be the subject of bargaining in commercial transactions." Patrick J. Borchers, Forum Selection Agreements in the Federal Courts After Carnival Cruise: A Proposal for Congressional Reform, 67 WASH. L. REV. 55, 57 (1992) (footnotes omitted). But if a forum-selection clause has economic value, and is a potential subject of bargaining between parties to a transaction, the validity of such a clause would seem to turn on whether the parties' presumptive right to determine the terms of their bargain is trumped by some competing substantive policy consideration, or principle of fairness — for example, a desire to protect consumers against abusive fine-print terms of form contracts. That is a question not of procedure, but of economic policy, within the jurisdiction of the sovereign whose law governs the contract. Thus, although the subject matter of the clause itself may appear procedural — the location of the court that will resolve the dispute — the validity of the clause is more appropriately seen as a matter of substantive contract law. Under the principles established in Erie that question would normally be one of state law.*fn2

The Jones rule, moreover, is not compelled by Supreme Court authority. In Stewart Organization, The Supreme Court applied federal law to determine the force of a forum-selection clause in a diversity case, but that was in the context of a motion to transfer venue pursuant to 28 U.S.C. § 1404 (a). That context differs in several respects from that of the instant case. First, the defendant there had invoked a statute that determined the purely procedural matter of the place of trial within the federal courts. Congress has the "power to make rules governing the practice and pleading in [the federal] courts, which in turn includes a power to regulate matters which, though falling within the uncertain area between substance and procedure, are rationally capable of classification as either." Hanna v. Plumer, 380 U.S. 460, 472 (1965). By authorizing a change of venue procedure in the federal courts, Congress has exercised that power, and created a standard for its application. Whether the plaintiff brings a case in a federal venue permitted by the contract, or brings the case in an unauthorized venue and defendant acquiesces, once the case is in federal court a defendant may invoke federal rules governing the place of trial, and in deciding such a motion, the federal court must apply the standard set out in the governing federal rule or statute, according the forum-selection clause such weight as the statute determines. In this case, unlike Stewart Organization, the defendant has not moved for a change of venue under the statute, but instead has sought to enforce the contract provision by moving to dismiss. As will be seen below, there is considerable question whether § 1404(a) governs the disposition of such a motion. If it does not, defendant is simply invoking its common-law right to enforce the terms of a contract, and not relying on an Act of Congress.

Second, Stewart Organization expressly does not approve application in a diversity case of the judge-made standard of The Bremen in preference to applicable state principles of contract law. Instead, while noting that The Bremen "may prove `instructive' in resolving the parties' dispute," 487 U.S. at 28 (quoting the Ninth Circuit's opinion in Stewart Organization), it cautions, citing Texas Indus., Inc. v. Radcliff Materials. Inc., 451 U.S. 630, 641-42 (1981), that "federal common law developed under admiralty jurisdiction [is] not freely transferable to [the] diversity setting," and "disagree[d]" with the Eleventh Circuit's conclusion that the Bremen standard provided the controlling test in a diversity case. 487 U.S. at 28-29. Thus, as Justice Scalia perceived in dissent, the first question in the case was whether § 1404(a) controlled the case; only if it did not (as he, disagreeing with the majority, believed) was it necessary to address the separate question whether state or federal law governed in the absence of a controlling statute. 422 U.S. at 34-41.*fn3

In light of these various subtleties and complications, it is not surprising that the courts of appeals, both before and after Stewart Organization, have reached conflicting results on the question whether state or federal law controls the validity of a forum-selection clause in a diversity case, with several concluding that the matter is properly governed by state law.*fn4

Thus, in an ordinary diversity case, this court would be bound by Jones to apply federal law, but would do so with some concern that the Supreme Court might eventually reject the rule of that case. In this case, however, federal law certainly governs the validity of the clause, entirely apart from the Jones rationale, even if the question is viewed as one of substantive contract law. The contract in this case is a maritime contract, governed by the federal maritime law. This is so regardless of whether we accept plaintiffs or defendant's characterization of the dispute. "[I]n determining admiralty jurisdiction the inquiry is `into the nature and subject-matter of the contract — whether it was a maritime contract, and the service a maritime service, to be performed upon the sea, or upon waters within the ebb and flow of the tide. And, again, whether the service was to be substantially performed upon the sea, or tide-waters, although it had commenced and had terminated beyond the reach of the tide; if it was, then jurisdiction has always been maintained.'" Archawski v. Hanioti, 350 U.S. 532, 534 n.2 (1956) (quoting New Jersey Steam Navigation Company v. Merchants' Bank, 6 How. (47 U.S.) 344, 392 (1848)); see also The Moses Taylor, 71 U.S. 411 (1866) (contract for ocean passage is a maritime contract governed by federal law). Whether the transaction is seen purely as a purchase of cruise tickets or as a contract for provision of a (floating) conference facility, the service contracted for was to be performed on the high seas. Cf. Archawski, 350 U.S. at 534 (characterization of action does not defeat admiralty jurisdiction, where case essentially arose from breach of contract for ocean passage).

In an admiralty case, federal law governs the interpretation and validity of contractual provisions. See Carnival Cruise Lines. Inc. v. Shute, 499 U.S. 585, 590 (1991). This case, however, was not brought here under our admiralty jurisdiction. Rather, plaintiff filed a common-law breach of contract action in the New York state courts, and defendant then removed the case here.*fn5 But federal maritime law determines the validity and interpretation of a maritime contract even in a common-law, non-admiralty suit, whether it is being heard in state court or in federal court. See Everett v. Carnival Cruise Lines, 912 F.2d 1355, 1357 (11th Cir. 1990); Hodes v. S.N.C. Achille Lauro, 858 F.2d 905, 909 (3d Cir. 1988); Lerner v. Karageorgis Lines, Inc., 66 N.Y.2d 479, 484-5 (1985); Botial v. Ace Navigation Co., 707 N.Y.S.2d 825 (1st Dep't 2000). Regardless of the citizenship of the parties, therefore, and regardless of the technical heading of this court's jurisdiction, this case, as a matter arising under a contract to be performed on the high seas, is properly determined according to federal maritime principles.


The Validity and Application of the Forum-Selection Clause

In this case, the choice of law issue may make little difference in any event. Under federal maritime law, forum-selection clauses will be enforced "unless [the plaintiff can] clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching." M/S Bremen, 407 U.S. at 15; see also New Moon Shipping Co. v. MAN B&W Diesel AG, 121 F.3d 24, 29 (2d Cir. 1997). New York has adopted the same rule, Brooke Group Ltd. v. JCH Syndicate, 488, 87 N.Y.2d 530, 534 (1996), as has Florida, Manrigue v. Fabbri, 493 So.2d at 440 (Fla. 1986).

Under federal law, there can be no doubt that the forum-selection clause is binding on the parties to this contract. Although The Bremen itself which involved a negotiated forum-selection clause in a non-routine, individually-negotiated contract between two sophisticated business entities, might be distinguishable from this case, in which the contract term is a standard "fineprint" clause in a consumer adhesion contract, any attempt to limit its holding on that ground is precluded by Carnival Cruise Lines. That case, like this one, involved a forum-selection clause contained in a form contract drafted by a cruise line and printed on a cruise ticket. Nevertheless, the Court found that the clause was reasonable and enforceable. The Court mentioned various factors as bearing on the reasonableness of the clause: (1) the forum selected was the home base of the defendant cruise line, and the place from which many of its cruises (though not the one at issue in the case) departed; (2) the cruise line had a legitimate interest in limiting the fora in which it could be sued; (3) the clause potentially benefitted all parties by providing clarity in subsequent litigation and allowing reduced costs that could result in lower fares; (4) there was no indication that the purchasers lacked fair notice or were physically or financially incapable of proceeding in the chosen forum; (5) the purchasers' agreement to the clause was not obtained by fraud or overreaching; and (6) Florida was not a "remote alien forum" bearing no relation to a purely local dispute that should logically be resolved elsewhere. See Carnival Cruise Lines, 499 U.S. at 590-95. See also Hodes v. S.N.C. Achille Lauro, 858 F.2d at 912-14 (upholding forum-selection clause on similar facts). All of these factors apply at least as favorably to the defendant in this case.*fn6

Plaintiff attempts to avoid the force of the forum-selection clause, however, by arguing that while the ticket provision controls the location of any litigation between the cruise line and the ticket-holders (that is, the individual members or guests of the union in whose names the tickets were issued), it does not bind plaintiff union, which purchased the tickets. Its complaint, it contends, claims damages for breach of a contract that arises "not from a provision of the ticket contract language which binds the individual passengers, but rather from an independent and separate contract for a cruise convention between plaintiff and defendant." (Pl's Mem. Opp. Mot. Dis., at 4.)

This argument is ingenious but unavailing. Plaintiff submits a document showing that in addition to the 90 tickets for passage on the ship, the cruise line agreed to provide, without additional charge, a variety of incidental services appropriate to the holding of business meetings, such as meeting rooms, audiovisual equipment, and refreshments, at various times during the cruise. (Pl.'s Mem. Opp. Mot. Dis., at 1-2; Bruce Decl., Ex. A.) The document demonstrates that the cruise line undertook to provide these additional services, and no doubt if they had failed to do so they would have been in breach of their agreement with the union. But this list of additional, complimentary, services to be provided by the cruise line does not constitute a separate contract with the union.*fn7 Rather, as plaintiff itself puts it, these services were provided "in order to induce plaintiff to hold the conference on one of defendant's cruise liners." (Pl.'s Mem. Opp. Mot. Dis., at 1.) That is, the consideration for the provision of these services was the purchase, by the union, of the tickets that were then issued in the names of the individual conference participants. The purchase of the tickets was integral to the agreement between the parties, whether that agreement is seen as a contract for a cruise or for a floating convention. And the tickets embody those terms of the agreement that relate to the passage — howsoever supplemented by the modest additional terms relating to the provision of meeting facilities on board. That plaintiff negotiated for additional services does not mean that it is not bound by the terms of the tickets it purchased, any more than the same fact would save the cruise line from breach if it had provided the meeting facilities, but its ship had never left the dock in Jamaica.

The agreement embodied in the ticket, by its express language, binds the "purchaser" of the ticket as well as the "passenger." Thus, the cover of the ticket provides, in large bold print,*fn8 the following language:

IMPORTANT THAT YOU READ: This is your ticket contract. It is important that you read all of the terms and conditions of this contract. Your attention is particularly drawn to the exemptions and limitations on the carrier's liability. By accepting this ticket, the passenger and/or purchaser agrees to its terms and conditions on his own behalf and also on behalf of any other person or persons for whom this ticket is purchased as his, her or their agent (whether or not signed).

(Buisman Decl. Ex. A) (second emphasis added; first emphasis in original). Similarly, the "fine print" to which this notice refers the reader begins, in its very first paragraph:*fn9

This ticket constitutes a contract between the carrier . . . and the passenger (whether or not signed by or on his behalf) and all the terms and provisions of both sides of this ticket . . . are a part of such contract of [sic] which the passenger and/or purchaser agrees by accepting this ticket, both on his own behalf and also on behalf of any other person or persons for whom this ticket is purchased as his, her or their agent.

Id. ¶ 1 (emphasis added).*fn10 No doubt the language could be drafted more elegantly, and no doubt defendant's case would be even stronger if the "passenger and/or purchaser" language had been used more consistently throughout the document.*fn11 Taken together, however, the terms of the ticket make clear that the intention is to bind both the passenger and the purchaser, if the two roles are separated in a particular case. It would be bizarre indeed if the cruise line had drafted language under which, in the event of an alleged breach, passengers who purchased their own tickets would have to sue for refunds in Florida, while purchasers, like the union, who paid for tickets for passengers, were permitted to sue in other jurisdictions. Since the union purchased the tickets, albeit as part of a larger agreement that also provided that the cruise line would provide some additional services, it — as well as the passenger-members on whose behalf it purchased the tickets — is bound by the ticket's terms.


Effect of Applying the Clause

Since the forum-selection clause binds the union as well as the individual passengers, this action cannot be maintained either in the state courts of New York or in this court. But this still leaves a minor but vexing question as to how this court should dispose of the action. Courts have differed, in cases governed by forum-selection clauses, with respect to the remedy to which the defendant is entitled. The issue is related to the proper characterization of the motion.

Defendant in this case seeks dismissal of the complaint "for lack of jurisdiction pursuant to the foreign forum selection clause." Notice of Motion, at 1-2. The supporting declaration by defendant's attorney makes clear that the reference is to "lack of subject matter jurisdiction." (Unger Decl. ¶ 1) (emphasis added). But as noted above, this court does have subject matter jurisdiction over the case. The Constitution authorizes federal jurisdiction in cases of diversity of citizenship, see U.S. CONST., ART. III, § 2, and Congress has authorized district courts to exercise that jurisdiction by removal under the circumstances present here. See 28 U.S.C. § 1332 (a)(2), 1441 (a). Private parties cannot defeat the subject matter jurisdiction of the federal courts by means of a forum-selection clause, any more than they could, by the same means, confer such jurisdiction on this court in a case in which diversity or a federal question were lacking. See Insurance Corp. of Ireland v. Compagnie Bauxites de Guinee, 456 U.S. 694, 702 (1982). Indeed, the whole point of The Bremen was that prior cases disapproving of forum-selection clauses because they illegitimately purported to "oust" a court's jurisdiction were misguided:

No one seriously contends . . . that the forum selection clause "ousted" the District Court of jurisdiction over Zapata's action. The threshold question is whether that court should have exercised its jurisdiction to do more than give effect to the legitimate expectations of the parties, manifested in their freely negotiated agreement, by specifically enforcing the forum clause.

407 U.S. at 12 (emphasis added). See also Neirbo Co. v. Bethlehem Shipbuilding Corp., 308 U.S. 165, 167 (1939) ("The jurisdiction of the federal courts — their power to adjudicate — is a grant of authority to them by Congress and thus beyond the scope of litigants to confer").

Neither does the forum-selection clause defeat the court's in personam jurisdiction. In Carnival Cruise Lines, the Supreme Court made clear that the question of enforcing a forum-selection clause is distinct from that of in personam jurisdiction, treating the issue of forum selection as "dispositive," and therefore declining to reach "petitioner's constitutional argument as to personal jurisdiction." 499 U.S. at 589. In some cases, the existence of in personam jurisdiction may be influenced by a forum-selection clause. Unlike subject matter jurisdiction, in personam jurisdiction may be based on consent. See Nat'l Equip. Rental, Ltd. v. Szukhent, 375 U.S. 311, 316 (1964); Adam v. Saenger, 303 U.S. 59, 67-68 (1938); Alexander Proudfoot Co. v. Thayer, 877 F.2d 912, 921 (11th Cir. 1989); Wilmot H. Simonson Co. v. Green Textile Assocs., 554 F. Supp. 1229, 1232 (N.D. Ill. 1983).*fn12 A forum selection clause thus could be highly relevant, or even controlling, as to whether to whether the selected forum has in personam power. Cf. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 482 (1985) (choice of law clause relevant to determination of in personam jurisdiction).

Whether such a clause can defeat the in personam power of a non-selected forum, however, is a different matter. It could perhaps be argued that, where long-arm jurisdiction is based on a single transaction connected to a state, and in that very transaction the parties have agreed that any lawsuit arising from it should be brought elsewhere, the state did not by that transaction acquire in personam jurisdiction. But it would be quite different to argue that, when a person is present in a state, and subject to its courts for all purposes, it could nevertheless carve out by contract an exception to the state's power to adjudicate its rights. Because in personam jurisdiction is not contested on this motion, however, these speculations need not be pursued further. Defendant has presented no information about its contacts with New York, and has not sought to argue that it has insufficient contacts to be considered present here for all purposes. Under these circumstances, in personam jurisdiction would seem to be conceded, at least for purposes of this motion.*fn13

Some courts, including a number of distinguished judges in this district, have treated the existence of a forum-selection clause that requires disputes to be resolved somewhere other than in plaintiffs chosen forum as a flaw in venue. See. e.g., Medoil Corp. v. Citicorp, 729 F. Supp. 1456, 1457 n. 1 (S.D.N.Y. 1990); Lexington Investment Co. v. Southwest Stainless. Inc., 697 F. Supp. 139, 144 (S.D.N.Y. 1988); Hoffman v. Burroughs Corp., 571 F. Supp. 545, 550-51 (N.D. Tex. 1982); Full-Sight Contact Lens Corp. v. Soft Lenses. Inc., 466 F. Supp. 71, 74 (S.D.N.Y. 1978). Clearly, forum-selection clauses relate to venue, in the most general sense of the word, since they concern the place in which suit can be brought. But to say this is to leave open several questions. Does such a clause render venue improper in the disfavored forum, or is venue technically proper, but subject to transfer or dismissal nonetheless? In either case, is the appropriate remedy transfer or dismissal? Is a motion seeking enforcement of a forum-selection clause properly brought under Rule 12(b)(3) or under Rule 12(b)(6), under 28 U.S.C. § 1404 (a) or under 28 U.S.C. § 1406 (a)?

No authoritative guidance on these highly technical matters can be found in cases binding on this court, as neither the Supreme Court nor the Second Circuit has addressed these questions directly. In fact, the Second Circuit has acknowledged the confusion that has "developed as to the proper procedural mechanism to request dismissal of a suit based upon a valid forum selection clause," without attempting to resolve it. New Moon Shipping, 121 F.3d at 28-29. Accordingly, this court is free to consider the question independently, with the guidance of any implications that can be drawn from the Supreme Court and Second Circuit opinions dealing with forum-selection clauses, and of the fairly numerous decisions of district courts and courts of appeals that have addressed the issue.

It seems incorrect to treat the clause as defeating venue in the non-preferred forum. Well-reasoned opinions by Judge Sifton in the Eastern District of New York, and Judge Simandle in the District of New Jersey, have rejected the application of Rule 12 (b)(3) and § 1406(a), which deal with dismissals for improper venue. See Haskel v. The FPR Registry. Inc., 862 F. Supp. 909, 915-16 (E.D.N.Y. 1994); Nat'l Micrographics Sys., Inc. v. Canon U.S.A., Inc, 825 F. Supp. 671 (D.N.J. 1993). As Judge Simandle put it:

Rule 12(b)(3) provides for a motion to dismiss for improper venue. . . . "Venue," in turn, is defined by statute at 28 U.S.C. § 1391, which sets forth where venue may properly be laid. The determination of the appropriate venue under § 1391 revolves around [various factors listed in that statute, which do not include forum-selection clauses.] Venue, as that term is defined by Congress, is proper in this district. . . . The fact that the parties contractually agreed to litigate disputes in another forum is not a question of venue, but one of contract, which will be enforeced unless fundamentally unfair.

825 F. Supp. at 678-79 (citing Carnival Cruise Lines).

A close examination of the typical forum-selection clause confirms the point that such clauses, while addressing venue in the broad sense of the particular forum where the case should be brought, are not usually concerned with "venue, as . . . defined by Congress." Nat'l Micrographics, 825 F. Supp. at 679. Forum-selection clauses are often structured to do more than merely identify' the appropriate venue within the federal system. In this case, for example, the clause authorizes suit in either a particular federal district, or in any Florida court within a particular county. Thus, the clause purports to preclude suit not only in most federal venues, but also in most venues within the state courts of Florida, as well as in the state courts of any other state. This latter aspect of the clause affects much more than a mere question of "venue," since it deals with the proper sovereign to adjudicate the dispute, not merely the particular location for bringing the suit within that sovereign's court system. Moreover, as with subject matter and in personam jurisdiction, it is not clear that the parties have the power to do so much as to render venue improper in a location in which Congress has authorized suit. By act of Congress, a civil action based on diversity of citizenship may be brought in a district where "a substantial part of the events . . . giving rise to the claim occurred," 28 U.S.C. § 1391 (a)(2); no exception is made for cases where the parties have agreed that suit may not be brought in that district. A district court is required by 28 U.S.C. § 1406 (a) to dismiss, or, in the interest of justice, transfer, any case "laying venue in the wrong . . . district." But if a case is brought where "the events . . . giving rise to the claim occurred," it cannot be said that venue has been laid in the "wrong" district within the meaning of the statutes, simply because the parties agreed that it should be brought elsewhere.

The point is even more dramatically illustrated in this case. Here, plaintiff did not bring the case in the "wrong . . . district." It did not bring the case in any federal district at all, but rather in the courts of New York state. To the extent that doing so violated its agreement with defendant, that violation is not a matter of mere venue, but of the deeper matter of which sovereign entity should be asked to adjudicate the dispute. It was, rather, the defendant itself that laid venue in this district, when it removed the case to federal court. And in doing so, defendant indisputably laid venue in the correct district, since the removal statute specifically requires that the case be removed to "the district court . . . for the district . . . embracing the place where such action is pending" — in this case, the Southern District of New York, not the Southern District of Florida. 28 U.S.C. § 1441 (a). If Congress under § 1441 has authorized initial venue in a removal case only in this district, this district could hardly be the "wrong" district under § 1406.

This conclusion finds modest support in the Supreme Court cases dealing with forum selection clauses.*fn14 In Stewart Organization, as noted above, the Court affirmed a district court order granting a transfer of venue under § 1404(a), something the district court could not have done if venue had not been technically proper in the first instance, since § 1404(a) presumes that a case is properly brought in the forum district, and authorizes transfer "in the interest of justice" to "any other district . . . where [the action] might have been brought" in the first place. (Emphasis added.) At least one district court has read Carnival Cruise Lines as implicitly resting on § 1406(a), and thus implicitly holding that venue was improper in the original forum. Flake v. Medline Indus., Inc., 882 F. Supp. 947 (E.D. Cal. 1995). Since the Court approved dismissal of the action, rather than transfer, and did so solely on the basis of the forum-selection clause, without considering the factors appropriate under § 1404(a) — so the argument goes — it must have acted pursuant to § 1406(a). Id. at 951-52. But this logic is flawed, since, as will be seen below, there are other, non-statutory, bases for dismissal that can be invoked.*fn15 For these reasons, I am persuaded that Judges Sifton and Simandle were correct that a forum-selection clause does not authorize dismissal for improper venue where venue is otherwise properly laid.

More significant, however, than the theoretical propriety of venue is the question of remedy. If the forum-selection clause is valid, and precludes an action in this court, should I dismiss the action or transfer it to the Southern District of Florida, where the clause permitted the plaintiff to bring it? The remedy could affect the future course of the litigation in a variety of ways. Which state's law applies in a diversity case, whether appellate review is available, and the correct calculation of the statute of limitations may all turn on whether the original case is dismissed or merely transferred. See generally 15 WRIGHT, MILLER & COOPER, supra, § 3846. Of course, the Supreme Court has approved both remedies in different contexts: approving a transfer in Stewart Organization, and authorizing a summary judgment of dismissal in Carnival Cruise Lines.

Some aspects of this problem are resolved by binding authority. Stewart Organization clearly stands for the proposition that, where the party relying on the clause moves for a transfer under § 1404(a), that remedy is available and appropriate, and in that circumstance, the normal factors applicable in deciding such a motion (of which the existence of a forum-selection clause is only one) apply. See 487 U.S. at 31-32. There should be nothing surprising about this result. In this case, for example, as noted above, this court has both subject matter jurisdiction of the cause and (for purposes of this motion at least) in personam jurisdiction over the defendant, and venue is properly laid here. There is thus no obstacle to proceeding to adjudicate any issue put by the parties. If a party chooses to invoke the remedy made available by § 1404(a), the court should simply proceed to apply the rule of decision provided by that statute.

But suppose the party relying on the clause chooses not to seek a transfer but instead, as has occurred here, to move for dismissal of the action? In Haskel, Judge Sifton seemed to conclude that, since a motion to dismiss for improper venue did not lie, the case could not be dismissed, and proceeded to consider whether the case should be transferred to the appropriate federal district. See 862 F. Supp. at 916. As Judge Sifton put it,

The issue here is whether a party may limit the court to considering only dismissal rather than transfer and, to the extent that there is a difference [between the standard under § 1404(a) and the standard of The Bremen], to the standard of Carnival Cruise and The Bremen, solely by virtue of the language in which he casts his motion. Such a result would be inappropriate. . . .

862 F. Supp. at 915. Moreover, § 1404(a) authorizes the court to act "[f]or the convenience of parties and witnesses, in the interest of justice," and does not require that such action be taken only on motion. Consequently, there is authority that a court may consider transfer sua sponte, at least after giving the parties an opportunity to be heard. Starnes v. McGuire, 512 F.2d 918, 933-34 (D.C. Cir. 1974) (en banc). Thus, transfer pursuant to § 1404(a) may be an appropriate remedy for effectuating a forum-selection clause even when the defendant does not seek that remedy, but argues for dismissal instead.

But this does not mean that transfer is the only appropriate remedy, or that dismissal is not available. In many cases, § 1404(a) will not provide a remedy consistent with the forum-selection clause. If for example, the clause here authorized suit only in the state courts of Florida, transferring the case to another federal district would not adequately enforce the clause. The clause in this case does permit a suit to be brought in a federal district in that state, but it does not require it; the contract permits plaintiff to bring suit in state courts as well as in federal court. True, if it did so, defendant would be able to remove the action to federal court (as it did when plaintiff filed suit in the state courts of New York). It is not clear, however, that this court can or should anticipate what the parties would do in the event plaintiff sued in a Florida state court.

Defendant did not bargain for the case to be litigated only in the Southern District of Florida, or for the right to have any federal court in the country transfer the case there. Any right to have the case transferred must therefore be predicated not on the agreement, but only on the congressional statute, which does not make the clause conclusive. More importantly, to send the case to the Southern District of Florida would eliminate the plaintiffs right to bring the case in a Florida state court. What is clear under the contract, in other words, is not where the case must be brought, since it offers a choice of fora to plaintiff but where it must not be brought — which includes this court and the New York state courts. Dismissal thus might well be the remedy most in keeping with the intentions of the parties as provided in the contract.*fn16

But is dismissal within the court's power to grant? Both Judge Sifton and the court in Flake felt that dismissal "could only reflect the application of § 1406." 882 F. Supp. at 951-52. Cf. 862 F. Supp. at 916. This is not so, however. A dismissal need not be predicated on improper venue, or specifically authorized by § 1406. The common-law doctrine of forum non conveniens illustrates the point. As the Supreme Court has recognized, even where it "is conceded that the venue statutes of the United States permitted the plaintiff to commence his action in the Southern District of New York and empower that court to entertain it . . . that does not settle the question whether it must do so. . . . This Court, in one form of words or another, has repeatedly recognized the existence of the power to decline jurisdiction in exceptional circumstances." Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 504 (1947). Just as a federal court may decline to exercise its jurisdiction in cases of forum non conveniens, notwithstanding the absence of a specific statute authorizing the dismissal, the court may similarly dismiss on the closely-related grounds that the parties have agreed in advance that some other forum is the more convenient location for resolution of the dispute.*fn17 Indeed, the early cases cited in The Bremen as precursors of its more favorable view of forum-selection clauses see 407 U.S. at 11 nn. 10-11, including a number of prescient decisions of the Second Circuit, speak in terms of whether the court should "decline to exercise jurisdiction," Central Contracting Co. v. Maryland Cas. Co., 367 F.2d 341, 342 (3d Cir. 1966), and dismiss as the mechanism for enforcing the clause; none speak of improper venue or invoke § 1406(a) or any other statutory basis for dismissal. See id William H. Muller & Co. v. Swedish American Line Ltd., 224 F.2d 806, 808 (2d Cir. 1955), overruled on other grounds, Indussa Corp. v. S.S. Ranborg, 377 F.2d 200 (2d Cir. 1967); Cerro de Pasco Copper Corp. v. Knut Knutsen. O.A.S., 187 F.2d 990 (2d Cir. 1951) (Frank, J.). The Second Circuit has similarly dismissed on the basis of forum-selection clauses in more recent cases, again without invoking § 1406(a). See, e.g., AVC Nederland B.V. v. Atrium Investment Partnership, 740 F.2d 148 (2d Cir. 1984) (Friendly, J.).

In fact, in keeping with the view expressed in Part I of this opinion, many of these decisions, as well as some more recent decisions, treat the entire matter not as one for a procedural motion addressed to venue at all, but simply as a decision to enforce the agreement of the parties as written. Thus, Judge Frank in Cerro de Pasco, thought that, far from dismissing the case for lack of jurisdiction or proper venue, a court enforcing a forum-selection clause "took jurisdiction and granted specific performance of Clause 12 of the bill on the ground that that provision was fair and not against public policy, all the facts considered." 187 F.2d at 991 n. 1. Similarly, the Third Circuit in Central Contracting, 367 F.2d 341, echoed more recently by the First Circuit in LFC Lessors. Inc. v. Pacific Sewer Maintenance Corp., 739 F.2d 4 (1st Cir. 1984), affirmed dismissal based on forum-selection clauses on the authority of Rule 12(b)(6), for failure to state a claim for which relief can be granted.*fn18 As those courts noted, the clause does not deprive the plaintiffs chosen forum of jurisdiction or venue; rather, to the extent allowed under The Bremen, it is simply a binding contract between the parties that relief under the overall agreement may only be had in particular courts — a contract which, as Judge Frank recognized, a court may in effect order specifically performed. The Supreme Court used similar language in The Bremen, indicating that a court faced with a forum-selection clause may "specifically enforc[e] the forum clause" by declining to "exercis[e] its jurisdiction to do more than give effect to the legitimate expectations of the parties." 407 U.S. at 12. This is not the language of faulty venue, but the language of contract law: where the contract on which the plaintiff sues specifically denies the remedy sought by plaintiff — relief granted by the court in which he sues — the plaintiff has not stated a claim on which relief can be granted by that court.*fn19

To summarize, then: (1) The presence of a forum-selection clause does not deprive the disfavored forum of jurisdiction or venue, where the conditions of subject matter and in personam jurisdiction and proper venue are otherwise met. (2) Cases in both the Supreme Court and the Second Circuit have long recognized that dismissal is an appropriate remedy by which a district court may enforce a forum-selection clause; such dismissal may be based either on the court's inherent power to decline jurisdiction, by analogy to the traditional doctrine of forum non conveniens, or on the power under Rule 12(b)(6) to dismiss an action for failure to state a claim. (3) Transfer of the case to another district may also be an available remedy, certainly where the defendant seeks that remedy by motion pursuant to § 1404(a), and possibly even sua sponte by the court when the defendant seeks dismissal. The court must weigh in each case whether dismissal or transfer is the most efficient and just means of enforcing the clause.

As indicated above, there are factors suggesting that dismissal might be the more appropriate remedy in this case. One still further wrinkle to this particular case, however, makes it unnecessary to decide which remedy would be granted if the forum-selection clause were the only issue presented by this motion.


Effect of the Limitations Clause

It will be recalled that defendant moved for dismissal on two grounds rooted in contractual provisions: the forum-selection clause and an additional clause providing that any claim had to be brought within one year of the episode giving rise to the cause of action. The effects of the two potential types of dismissal would be quite different. A dismissal based on the forum-selection clause would mean only that the suit had been brought in the wrong place; plaintiff would be free to try its luck in one of the fora authorized by the clause. A dismissal based on the time-limit clause, however, would be a determination that under the contract, relief could not be granted in any forum. Once again, the court is faced with a conundrum about available remedies: If, as has been found above, the parties have determined that this action should be brought in some other forum, and that agreement is binding on this court, should not the court simply decline to proceed further, and either dismiss the action altogether on forum-selection grounds or transfer the case to the Southern District of Florida, in either case leaving it to some other court to decide the limitations issue? On the other hand, defendant has also moved for dismissal on the basis of the latter clause. Such a dismissal would make further litigation unnecessary, and the parties have fully briefed the issue: does not judicial efficiency argue for the complete resolution of the case, if such can be had, rather than for this court to push that issue onto some other court's crowded docket?

The court, then, faces two further questions: (1) In light of the forum-selection clause, is there any basis for this court to consider the limitations issue at all? (2) If the issue can be considered, is that clause valid and enforceable under the circumstances of this case?

A. Can the Time-Limit Clause Be Considered in this Court?

If defendant were correct that the forum-selection clause deprived the court of subject matter jurisdiction over plaintiffs claims, that would be the end of the matter: once a court determines that it lacks jurisdiction, nothing further can be decided, no matter how efficient it might be to dispose of some other aspect of the case, nor how earnestly the parties wished the court to adjudicate. Subject-matter jurisdiction "functions as a restriction on federal power," and consequently "no action of the parties can confer [it] upon a federal court." Ins. Corp. of Ireland, 456 U.S. at 701. As has already been established, however, the clause does not affect our jurisdiction over this case.

Unlike subject matter jurisdiction, the lack of in personam jurisdiction or of proper venue can be waived. See FED R. CIV. P. 12(h)(1) (waiver of objection to venue if untimely); 28 U.S.C. § 1406 (b) (same); Hoffman v. Blaski, 363 U.S. 335 (1960) (noting that venue is a personal privilege that may be waived). A fortiori, a party with a contractual right to block litigation in a particular forum can waive any rights the contract confers on it.

The parties here, by their respective litigation tactics, have waived the forum-selection clause, at least to the extent of submitting to this court this issue of the validity and application of the limitations clause. Plaintiff union not only brought this case in New York, but also actively fought to keep the case in this court, opposing defendant's argument that the forum-selection clause applied, and arguing the merits of the limitations-clause issue. Nowhere in its submissions has plaintiff suggested that the court should not decide that issue. By bringing suit in New York in violation of the forum-selection clause, plaintiff undoubtedly has waived any right to insist on its enforcement. Had defendant not moved to dismiss, but instead acquiesced in adjudication on the merits, plaintiff could not then have objected to an unfavorable outcome on the ground that the court should not have decided the case plaintiff itself had brought.

Although defendant has raised the forum-selection clause as a defense, it has presented that and the limitations clause in the alternative, in fact placing the limitations issue first in its brief (Def's Mem. Supp. Mot. Dis., at 9-12.) Because a favorable resolution of the limitations issue would be more advantageous to defendant than a dismissal or transfer on forum-selection grounds, there can be no doubt that by raising the issue in the manner it has, defendant has intelligently and voluntarily waived its rights under the forum-selection clause, at least to the extent of seeking adjudication of the limitations issue. Both parties, then, have agreed to submit this issue to this court for resolution.

Such a partial waiver of the forum-selection clause does not bind this court. If defendant sought to waive the forum-selection clause in order to present a complex motion addressing the merits of the case, for example, while still arguing in the alternative that if the motion were denied, the court should apply the forum-selection clause and transfer the case elsewhere, neither fairness nor efficient judicial administration would be served by deciding the motion first. But that is not the case here. Defendant relies on two closely-related contractual provisions, each distinct from the underlying merits of the case, and each dispositive of the case before this court. The validity of the two clauses depends on similar considerations. For these reasons, judicial efficiency and fairness to the parties are furthered rather than undermined by reaching the merits of the limitations issue, as the parties have each requested us to do. There is thus no reason for the court to decline the parties' invitation to decide this issue, even in the presence of a valid forum-selection clause directing the case to courts in Florida.

B. Is the Limitations Clause Valid and Applicable?

The contract for passage provided, in ¶ 12 of the ticket, that

[I]n no event shall any suit for any cause against the carrier with respect to delay, detention, personal injury, illness or death or any reason be maintainable, unless suit shall be commenced within one (1) year from the day when the delay, detention, personal injury, illness or death of the passenger or other incident occurred, notwithstanding any provision of law of any state or country to the contrary.

(Busiman Decl., Ex. A ¶ 12) (emphasis added). It is undisputed that the ill-fated voyage complained of was concluded on May 24, 1998, and that the instant lawsuit was filed on January 10, 2000, much more than a year later. (See Compl. ¶ 7; Defs Mem. Supp. Mot. Dis., at 10.) If the clause is valid and applicable to this suit, the suit cannot be maintained.

The clause by its terms applies to this case. The language is sweeping, manifestly intended to cover "any" suit for "any reason." Nothing in its terms limits its application based on the nature of the lawsuit or the identity of the plaintiff and, as demonstrated above, the provisions of the contract embodied in the ticket were intended to bind purchasers such as plaintiff as well as the passengers who used the ticket. If valid, then, the clause applies to this suit.

The validity of contracting parties' efforts to shorten an otherwise-applicable limitations period by agreement has received almost as much attention from the courts as have forum-selection clauses. It is well established that such limitations clauses in tickets for sea passage are valid and enforceable under federal maritime law, provided that the limitations period allows the passenger at least one year from the date of injury to sue, 46 U.S.C. App. § 183b(a) (Supp. V 1987), and provided that the instrument gives the purchaser adequate notice that clauses in the ticket may limit rights to sue. See Spataro v. Kloster Cruise. Ltd., 894 F.2d 44, 45 (2d Cir. 1990). See also Marek v. Marpan Two. Inc., 817 F.2d 242, 245 (3d Cir. 1987); Lerner v. Karageorgis Lines, 66 N.Y.2d at 485; Shankles v. Costa Armatori, S.P.A., 722 F.2d 861, 864 (1St Cir. 1983). Here, as in Spataro, the ticket "reasonably communicated the contractual limitations period" to the purchaser. 894 F.2d at 46. The face of the ticket, as noted above, contained a bold, large print, boxed notice, specifically calling the purchaser's attention to the fact that the ticket contained terms limiting the cruise line's liability. The cases upholding such provisions are replete with variations on the type face, font size, color, and location of notices of this type; some seem, on balance, more prominent or explicit than defendant's, and others less. But the notification here is certainly adequate, so much so that plaintiff makes no attempt to argue that it was not. Instead, it relies entirely on its argument that, as purchaser rather than passenger, it was not bound by the ticket provisions in any event. That argument has been rejected.

Therefore, the limitations clause of the contract is enforceable. Because this suit was brought more than one year after the incident complained of the contract does not permit it to be brought, and the action must be dismissed.



Although careful consideration of procedural minutiae has extended the discussion of the instant motion, the result is straightforward. Whatever qualms a court might have about applying fine-print terms of an adhesion contract to relegate cruise passengers to distant fora and shortened limitations period, such qualms do not apply to the sophisticated purchaser here, and Carnival Cruise Lines forecloses them in any event. Under federal maritime law, defendant cruise line is entitled to enforce both the forum-selection and one-year limitations clauses it has written into the tickets. For the reasons stated above, the simple and conclusive disposition of this case is also the legally correct one: the complaint is dismissed, with prejudice, for failure to comply with the agreed-upon one-year limitations period.


Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.