SCOTUS Clarifies Choice of Law in Admiralty Litigation
Choice of law is a notoriously dense area of civil procedure. There is an ongoing split between federal courts of appeals, for example, about whether federal common law or state law governs the enforceability of forum selection clauses in contracts under diversity jurisdiction. There was also, until recently, a split between federal courts of appeals about what law governs the enforceability of choice of law clauses in maritime contracts under admiralty jurisdiction. The Supreme Court of the United States resolved the latter split in favor of applying federal common law on February 21, 2024, in Great Lakes Insurance SE v. Raiders Retreat Realty Co., LLC, Case No. 22-500, slip op. at 1 (Feb. 21, 2024).
Associate Justice Brett M. Kavanaugh, in writing for a unanimous Court, highlighted admiralty scholar Thomas Schoenbaum’s remark that the applicability of state law in admiralty cases “is one of the most perplexing issues in the law.” The Court endeavored to provide more clarity in holding that the enforceability of choice of law clauses in maritime contracts is uniformly governed by federal common law. The Court also held that choice of law clauses in maritime contracts are presumptively enforceable. The Court’s decision in Great Lakes therefore falls in line with the Court’s precedent in M/S Bremen v. Zapata Off-Shore Co., 407, U.S. 1, 15 (1972) holding that forum selection clauses in maritime contracts are presumptively enforceable under federal common law.
The Court highlighted two exceptions to the presumption of enforceability of choice of law clauses in maritime contracts under federal common law. First, federal courts must disregard choice of law clauses in maritime contracts when the selected law contravenes a binding federal statute. Second, federal courts can ignore choice of law clauses when parties cannot show any reasonable basis for the law of the jurisdiction they selected. Neither exception was applicable in Great Lakes.
Associate Justice Clarence B. Thomas wrote a brief concurring opinion to scrutinize the Court’s precedent originally establishing that state law can apply to admiralty disputes to begin with in Wilburn Boat Co. v. Fireman’s Fund Ins. Co., 348 U.S. 310 (1955). Justice Thomas observed that marine insurance disputes fell under admiralty jurisdiction for nearly a century and a half before the Court handed down that opinion. He characterized the Court’s rationale in Wilburn Boat as “deeply flawed” because federal common law was always sufficient to dispose of substantive marine insurance disputes, for example, disputes about whether breach of warranty is an appropriate basis for denying coverage.
The Court’s skepticism in Wilburn Boat about the federal judiciary developing marine-insurance rules on a case-by-case basis was nothing more, in Justice Thomas’s view, than skepticism of the federal common law process already framed under Article III of the United States Constitution. This skepticism did not age well. Justice Thomas noted that legal scholars have excoriated Wilburn Boat over the past seventy years for, among other things, undermining legal uniformity and instead creating a “crazy-quilt pattern of federal-state regulation of marine insurance.”
The Court’s decision in Great Lakes received guidance from several “friends of the court,” including a pair of particularly esteemed scholars of federal civil procedure. Professors John F. Coyle and Kermit Roosevelt III filed an amicus brief arguing that the Court should apply federal common law to the enforceability of choice of law clauses in maritime contracts. The Court arrived at that result but explicitly declined Professor Coyle and Roosevelt’s recommendation to adopt Section 187 of the American Law Institute’s Restatement (Second) of Conflict of Laws as the relevant framework. Section 187(b)(2) requires parties to litigate which state possesses a materially greater interest in a dispute in determining choice of law. The Court feared that this requirement would undermine legal uniformity. Practitioners should therefore heed the Court’s warning in Great Lakes that Section 187 is “a poor fit for maritime cases.”
Written by associate Joshua Carback.