Volume 30, Issue 6: This Report summarizes opinions issued on February 22 and 28, 2023 (Part I); and cases granted review on February 27 and March 6, 2023 (Part II).
Case Granted Review: Great Lakes Insurance SE v. Raiders Retreat Realty Co., 22-500
Great Lakes Insurance SE v. Raiders Retreat Realty Co., 22-500. The Court limited its grant of certiorari to the second question presented, which asks: “Under federal admiralty law, can a choice of law clause in a maritime contract be rendered unenforceable if enforcement is contrary to the ‘strong public policy’ of the state whose law is displaced?” Respondent Raiders Retreat Realty Co. filed an action in federal district court in Pennsylvania against petitioner Great Lakes Insurance SE, contesting Great Lakes’ denial of its insurance claim for a damaged yacht. Great Lakes filed several counterclaims. The insurance policy included a choice-of-law clause specifying that any dispute arising from its terms would be adjudicated under New York law when there was no well-established federal admiralty law on point. The question presented concerns the enforceability of this clause.
The Pennsylvania district court determined that the choice-of-law clause was enforceable and, applying New York law, dismissed Raiders’ counterclaims that arose under Pennsylvania law. The Third Circuit vacated the district court’s judgment. 47 F.4th 225. Relying on principles of federal admiralty law and Supreme Court precedent on forum-selection provisions, the court held that “choice-of-law provisions in maritime insurance contracts are presumed enforceable unless enforcement would be unreasonable or unjust,” which includes when a forum state has a “strong public policy” that would be undermined by enforcing the provision. (Internal quotations omitted) (discussing The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972)). The court instructed the district court to consider on remand whether “Pennsylvania has a strong public policy that would be thwarted by applying New York law.”
Noting that the Third Circuit’s decision conflicts with decisions from the Fifth and Ninth Circuits, Great Lakes seeks reversal. Great Lakes argues that the Third Circuit incorrectly relied on The Bremen. Even assuming that The Bremen—which concerned a forum-selection clause—applies to choice-of-law clauses, that decision was driven by “distinctly international concerns” not present here. Specifically, argues Great Lakes, when the Court ruled that “a strong public policy of the forum in which suit is brought” can render a forum-selection clause unenforceable, it was referring to federal maritime policy—not state policies. As the Ninth Circuit and the district court below recognized, this difference matters: when choosing between the policies of “two sovereign nations,” courts must consider “’concerns of international comity,’” “’respect . . . the capacities of foreign and transnational tribunals,’” and maintain “‘sensitivity to the need of the international commercial system for predictability.’” The same considerations are not present, says Great Lakes, for state choice-of-law questions. “[A]llowing each State to fashion its own standard for enforcing choice-of-law provisions would undercut the need for predictability and uniformity, which The Bremen emphasized.” Great Lakes insists that, in concluding otherwise, the Third Circuit incorrectly relied on Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991), which did not address the “strong public policy of the forum” exception and was careful to limit its analysis of The Bremen.
Raiders counters that the Third Circuit’s decision did not create a circuit split, and instead is consistent with other circuits’ decision and well-established federal maritime principles. On the merits, it principally argues that courts must consider whether a state law “would conflict with the fundamental purposes of maritime law” before enforcing a choice-of-law provision, and submits that this inquiry “includes considering whether applying the designated law would violate the strong public policy of the forum State.”
