Cruise Liners Can Ride the Waive(ers), Even in Catastrophic Storms

When an injury or tort occurs in the maritime industry, Article III, Section 2 of the United States Constitution allows the injured to bring an action in the United States federal court or state courts. However, maritime cases that deal with the limitation of the ship owner’s liability may only be brought in federal court. As a ship owner, vessel operator or manager, maritime law allows one to limit liability in some aspects. Thus, an understanding of intricate maritime laws is critical for reducing risk and limiting liability when drafting ticket provisions or contracts with a maritime nexus.

Recently, the United States District Court for the Southern District of Florida analyzed the enforceability of a class action wavier included in a Royal Caribbean Cruise Line ticket in McIntosh v. Royal Caribbean Cruises, Ltd., 2018 U.S.Dist.LEXIS 60234 (S.D.Fla. Apr. 10, 2018). On or about, August 27, 2017, Royal Caribbean Cruises, Ltd. canceled a cruise that was set to leave the Port of Galveston, Texas, because the cruise coincided with Hurricane Harvey. A passenger filed a class action lawsuit, alleging that Royal Caribbean’s decision to not cancel the cruise until the day it was set to sail subjected thousands of passengers to travel to the Houston area, placing them in the path of Hurricane Harvey. Further, the plaintiff alleged that would-be passengers were forced to endure dangerous hurricane conditions which caused them to suffer injuries, including “temporary and/or permanent physical disability, mental and emotional anguish, and feelings of economic insecurity.”

When a vessel touches a United States port, the vessel’s owner may limit its liability to the extent that is does not disclaim liability for loss, death, damage, or delay caused or contributed to by the vessel’s negligence. 46 U.S.C. § 30509(b) allows the owner, master, manager or agent of a vessel transporting passengers between ports in the United States, or between a port in the United States and a port in a foreign country, to include provisions in a contract or in a ticket conditions of carriage of a passenger that relieves liability for infliction of emotional distress, mental suffering or psychological injury. However, a vessel owner or agent is not relieved from such liability if there is a physical injury to the claimant caused by the negligence or fault of a crewmember or the owner, master, manager, agent or operator; if the injury is intentionally inflicted; or if the injury is a result of the claimant having been at actual risk of physical injury due to a vessel owner’s, operator’s or agent’s negligence.

In McIntosh, the plaintiff alleged that the defendant’s failure to warn of the dangers of traveling into a hurricane zone, failure to promulgate a refund policy, and failure to timely cancel the trip caused the would-be passengers to suffer intentional infliction of emotional distress. Further, the plaintiff alleged that thousands of passengers “were strong armed into traveling to Houston, based on Royal Caribbean Cruise Line’s assurances that safety was the primary concern and that the voyage would sail as scheduled.” Although Royal Caribbean ended up canceling the cruise and offering a refund, the plaintiff alleged that passengers were forced to remain in Texas for five to six days while Hurricane Harvey made landfall.

Royal Caribbean’s ticket contract included a contractual provision allowing the cruise line to limit liability and prevent its passengers from filing their claims as a class action. The plaintiff argued that such an attempt violated 46. U.S.C. § 30509. As such, the plaintiff argued, the provision should be null and void as Royal Caribbean intentionally placed these passengers in harm’s way. Further, the plaintiff acknowledged that identical contractual provisions have been upheld by other decisions in the 11^th Circuit and sought an extension or modification of the existing law. The plaintiff also argued that the class action waiver was unenforceable as unconscionable.

Royal Caribbean moved to dismiss the plaintiff’s complaint for failure to state a claim, arguing the plaintiff’s claim was precluded by the ticket contract’s class action waiver. Royal Caribbean claimed that when the plaintiff purchased her ticket approximately 50 days before the cruise was to set sail, Royal Caribbean provided her with a ticket booklet that included the terms of her ticket contract. According to the contract in the booklet, the plaintiff was made aware that the cruise ticket contract limited her rights, specifically as it pertains to the waiver of her ability to file a class action.

The court granted Royal Caribbean’s motion, holding that, “[i]t is well settled that the general maritime law of the United States, and not state law, controls the issue of whether a passenger is bound to terms set forth in a cruise ship’s ticket and contract of passage.” Veverka v. Royal Caribbean Cruises, Ltd., 2015 U.S.Dist.LEXIS 33163 (D.N.J. Mar. 18, 2015). Under general maritime law, a term or condition of a cruise ticket contract is enforceable once it is reasonably communicated to the passenger. Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 595 (1991). The test to determine reasonable communication to the passenger involves a two-pronged analysis of: (1) the physical characteristics of the clause in question; and (2) whether the plaintiff had the ability to become meaningfully informed of the contract terms. Estate of Myhra v. Royal Caribbean Cruises, Ltd., 695 F.3d 1233, 1244 (11th Cir. 2012). See, McIntosh v. Royal Caribbean Cruises, Ltd., U.S.Dist.LEXIS 60234.

The plaintiff argued that the class action waiver violated 46 U.S.C. § 30509, which states in relevant part:

The owner, master, manager, or agent of a vessel transporting passengers between ports in the United States, or between a port in the United States and a port in a foreign country, may not include in a regulation or contract a provision limiting . . . (A) the liability of the owner, master, or agent for personal injury or death caused by the negligence or fault of the owner or the owner’s employees or agents; or (B) the right of a claimant for personal injury or death to a trial by court of competent jurisdiction. . . . (2) Voidness.—A provision described in paragraph (1) is void.

The court found that the class action waiver was not substantively unconscionable and relied on the U.S. Supreme Court holding in Shute, which held that ticket contract provisions are enforceable so long as they are reasonably communicated to a passenger despite a passenger’s claim that they lack equal bargaining power with the cruise line. Further, the court held that the class action waiver and ticket were not contracts of adhesion as the terms were reasonably communicated to the plaintiff.

Federal courts have established strong precedent in enforcing limitation of liability provisions in maritime contracts. As with the drafting of any contract, an understanding of the law is important to reduce risk and limit liability. Carefully drafted provisions in maritime contracts or tickets for carriage of persons can protect a ship owner or manager. Therefore, the next time you draft a contract for carriage of person or goods by sea, it is important to include limitation of liability provisions.

*Corey is an associate in our Jacksonville, Florida office. He can be reached at 904.364.4214 or cjportnoy@mdwcg.com.

_{Defense Digest, Vol. 24, No. 4, December 2018. Defense Digest is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2018 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}