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SUPREME COURT OF THE UNITED STATES
_________________
No. 22–500
_________________
GREAT LAKES INSURANCE SE
v. RAIDERS
RETREAT REALTY CO., LLC
on writ of certiorari to the united states
court of appeals for the third circuit
[February 21, 2024]
Justice Kavanaugh delivered the opinion of the
Court.
Maritime contracts often contain choice-of-law
provisions that designate the law of a particular jurisdiction to
control future disputes. The enforceability of those choice-of-law
provisions is governed by federal maritime law. Applying federal
maritime law in this case, we conclude that choice-of-law
provisions in maritime contracts are presumptively enforceable,
with certain narrow exceptions not applicable here.
I
To insure its boat, Raiders Retreat Realty, a
Pennsylvania business, purchased a policy from Great Lakes
Insurance, a company organized in Germany and headquartered in the
United Kingdom. The insurance contract included a choice-of-law
provision that, as relevant here, selected New York law to govern
future disputes between the parties.
Years later, Raiders’ boat ran aground near
Fort Lauderdale, Florida. After Raiders submitted an insurance
claim, Great Lakes denied coverage. Great Lakes asserted that
Raiders breached the insurance contract by failing to maintain the
boat’s fire-suppression system. According to Great Lakes, the
breach voided the insurance contract in its entirety, even though
the boat’s fire-suppression system did not contribute to the
accident.
Great Lakes sued Raiders for declaratory relief
in the U. S. District Court for the Eastern District of
Pennsylvania. Great Lakes alleged that Raiders breached the
insurance contract and that the breach allowed Great Lakes to deny
insurance coverage.
In response, Raiders advanced contract claims
under Pennsylvania law. Great Lakes countered that Pennsylvania law
did not apply to this dispute; rather, New York law applied under
the choice-of-law provision in the parties’ insurance contract.
The District Court agreed with Great Lakes. The
court reasoned that federal maritime law regards choice-of-law
provisions as presumptively valid and enforceable. 521
F. Supp. 3d 580, 585–586 (ED Pa. 2021). The court
therefore enforced the parties’ choice-of-law provision and
rejected Raiders’ Pennsylvania-law contract claims.
Id., at
588–589.
The U. S. Court of Appeals for the Third
Circuit vacated that judgment. 47 F. 4th 225 (2022). The Court
of Appeals held that choice-of-law provisions in maritime contracts
are presumptively enforceable as a matter of federal maritime law,
but nonetheless must yield to a strong public policy of the State
in which suit is brought—here, Pennsylvania’s public policy
regarding insurance.
Id., at 230, 233. The court remanded
for the District Court to consider whether applying New York
contract law here would violate Pennsylvania’s public policy and
whether Pennsylvania law therefore should apply.
Id., at
233.
This Court granted certiorari to resolve a split
in the Courts of Appeals regarding the enforceability of
choice-of-law provisions in maritime contracts. See 598 U. S.
___ (2023). Compare
Great Lakes Ins. SE v.
Raiders
Retreat Realty Co., LLC, 47 F. 4th, at 233, with
Galilea, LLC v.
AGCS Marine Ins. Co., 879 F.3d 1052,
1060 (CA9 2018);
Stoot v.
Fluor Drilling Servs.,
Inc., 851 F.2d 1514, 1517 (CA5 1988).
II
Under the Constitution, federal courts possess
authority to create and apply maritime law. Article III of the
Constitution extends the federal judicial power to “all Cases of
admiralty and maritime Jurisdiction.” U. S. Const., Art. III,
§ 2, cl. 1. That grant of jurisdiction contemplates a
system of maritime law “ ‘coextensive with, and operating
uniformly in, the whole country.’ ”
Norfolk Southern
R. Co. v.
James N. Kirby, Pty Ltd.,
543 U.S.
14, 28 (2004) (quoting
American Dredging Co. v.
Miller,
510 U.S.
443, 451 (1994)). The purposes of that uniform system include
promoting “the great interests of navigation and commerce” and
maintaining the United States’ “diplomatic relations.” 3 J. Story,
Commentaries on the Constitution of the United States §1666, p. 533
(1st ed. 1833); see also
Norfolk Southern, 543 U. S.,
at 28;
Exxon Corp. v.
Central Gulf Lines, Inc.,
500 U.S.
603, 608 (1991).
To maintain that uniform system, federal
courts “make decisional law” for maritime cases.
Norfolk
Southern, 543 U. S., at 23. When a federal court decides a
maritime case, it acts as a “federal common law court, much as
state courts do in state common-law cases.”
Air & Liquid
Systems Corp. v.
DeVries, 586 U.S. 446, 452 (2019)
(internal quotation marks omitted); see
Dutra Group v.
Batterton, 588 U.S. 358, 360 (2019). “Subject to direction
from Congress,” the federal courts fashion maritime rules based on,
among other sources, “judicial opinions, legislation, treatises,
and scholarly writings.”
Air & Liquid Systems, 586
U. S., at 452; see also
Exxon Co., U. S. A. v.
Sofec, Inc.,
517 U.S.
830, 839 (1996);
East River S. S. Corp. v.
Transamerica Delaval Inc.,
476 U.S.
858, 864 (1986).
Exercising that authority, federal courts
follow previously “established” maritime rules.
Wilburn Boat
Co. v.
Fireman’s Fund Ins. Co.,
348
U.S. 310, 314 (1955). No bright line exists for determining
when a federal maritime rule is “established,” but a body of
judicial decisions can suffice. See
Bisso v.
Inland
Waterways Corp.,
349 U.S.
85, 89–90 (1955). In the absence of an established rule,
federal courts may create uniform maritime rules. See,
e.
g.,
Norfolk Southern, 543 U. S., at 23.
When no established rule exists, and when the federal courts
decline to create a new rule, federal courts apply state law. See
Wilburn Boat, 348 U. S., at 320–321. For purposes of
this general overview, we will stop there, as the “issue of
federalism in admiralty and the scope of application of state law
in maritime cases is one of the most perplexing issues in the law.”
1 T. Schoenbaum, Admiralty and Maritime Law §4:4, p. 268 (6th ed.
2018).
A
The initial question here is whether there is
an established federal maritime rule regarding the enforceability
of choice-of-law provisions. The answer is yes. Longstanding
precedent establishes a federal maritime rule: Choice-of-law
provisions in maritime contracts are presumptively enforceable. As
a leading treatise says, it is “well established in admiralty that
choice of law clauses” will “normally be enforced.” 1 Schoenbaum,
Admiralty and Maritime Law §5:19, at 427; see also
id.,
§4:4, at 275; 2
id., §19:6, at 431–432 (similar).
Courts of Appeals have consistently decided
that choice-of-law provisions in maritime contracts are
presumptively enforceable as a matter of federal maritime law. See
Great Lakes Ins. SE v.
Wave Cruiser LLC, 36
F. 4th 1346, 1353–1354 (CA11 2022);
Great Lakes Reins. (UK)
PLC v.
Durham Auctions, Inc., 585 F.3d 236, 242–243 (CA5
2009);
Triton Marine Fuels Ltd., S. A. v.
M/V Pacific
Chukotka, 575 F.3d 409, 413 (CA4 2009);
Chan v.
Society Expeditions, Inc.,
123 F.3d 1287, 1296–1297 (CA9 1997);
Milanovich v.
Costa Crociere, S. p. A., 954 F.2d 763, 768 (CADC 1992).
Although no recent case of this Court has
addressed the issue, the Court has traditionally enforced
choice-of-law provisions in maritime contracts. The Court has
recognized, for example, that the parties to a maritime contract
may select the governing law by “clearly manifest[ing]” an intent
to follow that law “when entering into the contract.”
Liverpool
& Great Western Steam Co. v.
Phenix Ins. Co.,
129 U.S.
397, 458 (1889); see also
The Kensington,
183
U.S. 263, 269 (1902). The Court has stated that “it is no
injustice” to resolve disputes under the law that parties have
“agreed to be bound by.”
London Assurance v.
Companhia de
Moagens do Barreiro,
167 U.S.
149, 161 (1897). As the Court further opined in 1953: “Except
as forbidden by some public policy, the tendency of the law is to
apply in contract matters the law which the parties intended to
apply.”
Lauritzen v.
Larsen,
345
U.S. 571, 588–589 (1953).
The Court’s traditional enforcement of
choice-of-law provisions in maritime contracts corresponds to the
Court’s precedents in the analogous forum-selection context. The
Court has pronounced that forum-selection clauses in maritime
contracts are “prima facie valid” under federal maritime law and
“should be enforced unless” doing so would be “ ‘unreasonable’
under the circumstances.”
The Bremen v.
Zapata Off-Shore
Co.,
407 U.S.
1, 10 (1972); see also
Carnival Cruise Lines, Inc. v.
Shute,
499 U.S.
585, 593–594 (1991). Like choice-of-law provisions,
forum-selection clauses respect “ancient concepts of freedom of
contract.”
The Bremen, 407 U. S., at 11. And like
choice-of-law provisions, forum-selection clauses have “the
salutary effect of dispelling any confusion” on the manner for
resolving future disputes, thereby slashing the “time and expense
of pretrial motions.”
Carnival Cruise, 499 U. S., at
593–594.
For those reasons, as Courts of Appeals have
explained, this Court’s decisions in
The Bremen and
Carnival Cruise on the enforceability of forum-selection
clauses dictate the same conclusion for choice-of-law provisions.
See,
e.
g.,
Milanovich, 954 F. 2d, at 768.
That is especially true given that courts historically have
expressed more skepticism of forum-selection clauses than of
choice-of-law clauses because forum-selection clauses can force
parties to litigate in inconvenient places. See
The Bremen,
407 U. S., at 9; 6 S. Williston, Law of Contracts §1725 (rev.
ed. 1938).
As courts and commentators have recognized, the
presumption of enforceability for choice-of-law provisions in
maritime contracts facilitates maritime commerce by reducing
uncertainty and lowering costs for maritime actors. Maritime
commerce traverses interstate and international boundaries, so when
a maritime accident or dispute occurs, time-consuming and difficult
questions can arise about which law governs. Choice-of-law
provisions “reduce legal uncertainty.” J. Coyle, The Canons of
Construction for Choice-of-Law Clauses, 92 Wash. L. Rev. 631,
633, n. 6 (2017). By identifying the governing law in advance,
choice-of-law provisions allow parties to avoid later disputes—as
well as ensuing litigation and its attendant costs. Cf.
Carnival
Cruise, 499 U. S., at 593–594. Choice-of-law provisions
also discourage forum shopping, further cutting the costs of
litigation.
Moreover, by supplying some advance assurance
about the governing law, choice-of-law provisions help maritime
shippers decide on the front end “what precautions to take” on
their boats,
American Dredging, 510 U. S., at 454, and
enable marine insurers to better assess risk, see Brief for
American Institute of Marine Underwriters et al. as
Amici
Curiae 12–13. Choice-of-law provisions therefore can lower the
price and expand the availability of marine insurance. In those
ways, choice-of-law provisions advance a fundamental purpose of
federal maritime law: the “ ‘protection of maritime
commerce.’ ”
Exxon Corp., 500 U. S., at 608
(quoting
Sisson v.
Ruby,
497
U.S. 358, 367 (1990)).
B
Raiders argues that no established federal
maritime rule governs the enforceability of choice-of-law
provisions, and it further contends that federal courts should
assess those provisions under state law. Raiders does not specify
whether it thinks that federal maritime law should incorporate
state law on this issue, or instead that state law is not preempted
by federal maritime law and applies of its own force. See Tr. of
Oral Arg. 52–53.
In any event, Raiders argues that this Court’s
1955 decision in
Wilburn Boat Co. v.
Fireman’s
Fund Insurance Co.,
348 U.S.
310, precludes a uniform federal presumption of enforceability
for choice-of-law provisions in maritime contracts. But that case
did not involve a choice-of-law provision. Rather, the
Wilburn
Boat Court simply determined what substantive rule applied when
a party breached a warranty in a marine insurance contract. See
id., at 311–316. The Court concluded that no “established
federal admiralty rule” governed the warranty issue.
Id., at
314; see also
id., at 314–316. And the Court declined to
create a federal maritime rule on that question, both because
States historically regulated insurance and because federal courts
were poorly positioned to “unify insurance law on a nationwide
basis.”
Id., at 319; see also
id., at 316–320. The
Court therefore ordered that the warranty issue be tried “under
appropriate state law.”
Id., at 321.
Great Lakes contends that
Wilburn Boat’s
reliance on state law is in tension with the Court’s modern
maritime jurisprudence, which tends to place greater emphasis on
the need for uniformity in maritime law. See
Norfolk
Southern, 543 U. S., at 28;
Kossick v.
United
Fruit Co.,
365 U.S.
731, 741–742 (1961); see also
American Dredging, 510 U.
S., at 452–453 (noting tension between
Wilburn Boat and
Kossick);
Wilburn Boat, 348 U. S., at 322, 324
(Frankfurter, J., concurring in result) (arguing that
Wilburn
Boat should “not be found controlling” in the future beyond the
case’s “essentially localized” facts).
But here, we need not resolve any such tension
because
Wilburn Boat does not control the analysis of
choice-of-law provisions in maritime contracts. To reiterate,
Wilburn Boat did not involve a choice-of-law provision, and
the case therefore affords limited guidance on that distinct issue.
Moreover,
Wilburn Boat held only that state law applied as a
gap-filler in the absence of a uniform federal maritime rule on a
warranty issue. 348 U. S., at 314–316. Here, however, no gap
exists because a uniform federal rule governs the enforceability of
choice-of-law clauses in maritime contracts.
In addition,
Wilburn Boat rested in part
on the difficulty of creating substantive maritime insurance law
from scratch through case-by-case adjudication. See
id., at
319–320. That concern is absent when the question is whether the
parties may choose the governing law to apply.
Wilburn Boat
also cited States’ traditional responsibility for regulating
insurance. See
id., at 316–319. But preserving that
responsibility does not speak to which state law applies in a given
case, which is what a choice-of-law provision addresses. Finally,
Wilburn Boat did not prevent this Court in
The Bremen
and
Carnival Cruise from concluding as a matter of federal
maritime law that forum-selection clauses are presumptively
enforceable. For all of those reasons,
Wilburn Boat does not
preclude a uniform federal presumption of enforceability for
choice-of-law provisions in maritime contracts.
Raiders suggests that even if federal maritime
law presumes the enforceability of choice-of-law provisions in
maritime contracts,
Wilburn Boat recognized a kind of
“insurance exceptionalism” where this Court will apply state law in
marine
insurance cases. Tr. of Oral Arg. 45. We disagree.
Nothing in
Wilburn Boat purports to override parties’
choice-of-law clauses in maritime contracts generally, or in the
subset of marine insurance contracts specifically.
Moreover, in the forum-selection context,
The
Bremen and
Carnival Cruise apply to marine insurance
contracts as well as to other maritime contracts. See
Carnival
Cruise, 499 U. S., at 593–595;
The Bremen, 407
U. S., at 10–14. We discern no good reason for a different
rule in the choice-of-law context. Indeed, the uniformity and
predictability resulting from choice-of-law provisions are
especially important for marine insurance contracts given that
marine insurance is “an integral part of virtually every maritime
transaction, and maritime commerce is a vital part of the nation’s
economy.” M. Sturley, Restating the Law of Marine Insurance: A
Workable Solution to the
Wilburn Boat Problem, 29 J. Mar. L.
& Com. 41, 45 (1998).
In applying maritime rules, we also may assess
whether our decision produces an “equitable result.”
Norfolk
Southern, 543 U. S., at 35. In considering Raiders’
argument for applying state law, it bears recalling
Wilburn
Boat’s aftermath in maritime law and the maritime industry. See
G. Gilmore & C. Black, Law of Admiralty §§1–17, 2–8 (2d ed.
1975). After
Wilburn Boat, maritime actors realized that a
lot would depend on which State’s law governed each individual
maritime dispute—a question that would be unclear in advance. See 2
Schoenbaum, Admiralty and Maritime Law §19:9. Choice-of-law
provisions soon emerged as a ready answer to that problem. See W.
von Bittner, The Validity and Effect of Choice of Law Clauses in
Marine Insurance Contracts, 53 Ins. Counsel J. 573, 573, 578–579
(1986). And particularly since
The Bremen resolved the
analogous forum-selection issue in 1972, most maritime actors have
justifiably believed that choice-of-law provisions are
presumptively enforceable as a matter of federal maritime law. See
1 Schoenbaum, Admiralty and Maritime Law §5:19, at 427. That
widespread understanding is correct, and Raiders’ argument for
disrupting that longstanding consensus is essentially a solution in
search of a problem.
The bottom line: As a matter of federal maritime
law, choice-of-law provisions in maritime contracts are
presumptively enforceable.
III
Of course, to say that choice-of-law clauses
are
presumptively enforceable as a matter of federal
maritime law means that there are exceptions when the clauses are
not enforceable. The parties agree that the exceptions are
narrow—indeed, Raiders “freely concede[s] that in most every
instance, a choice-of-law provision contained in a maritime
insurance contract will be effective.” Tr. of Oral Arg. 54.
In particular, the parties agree that courts
should disregard choice-of-law clauses in otherwise valid maritime
contracts when the chosen law would contravene a controlling
federal statute, see
Knott v.
Botany Mills,
179 U.S.
69,
77
(1900), or conflict with an established federal maritime policy,
see
The Kensington,
183
U.S. 263, 269–271 (1902). For example,
The Kensington
declined to enforce a choice-of-law clause because the chosen law
would have released a carrier from liability for negligence—a
result that federal maritime law forbids. See
ibid.
The parties further agree that, as a matter of
federal maritime law, courts may disregard choice-of-law clauses
when parties can furnish no reasonable basis for the chosen
jurisdiction. Cf.
Carnival Cruise, 499 U. S., at 594–595;
The Bremen, 407 U. S., at 10, 16–17. For example, it
would be unreasonable to pick the law of a distant foreign country
without some rational basis for doing so. That said, the “no
reasonable basis” exception must be applied with substantial
deference to the contracting parties, recognizing that maritime
actors may sometimes choose the law of a specific jurisdiction
because, for example, that jurisdiction’s law is “well developed,
well known, and well regarded.” Brief for American Institute of
Marine Underwriters et al. as
Amici Curiae 17.
Raiders does not claim that either of those
exceptions applies here. To be specific, Raiders does not assert
that any federal statute or established federal maritime policy
precludes enforcing the parties’ choice-of-law provision. And
Raiders does not claim that the parties’ choice of New York’s
“well-known and highly elaborated commercial law” was unreasonable.
Restatement (Second) of Conflict of Laws §187, Comment
f, p.
567 (1969); see also
The Bremen, 407 U. S., at 13
(approving the choice of a “neutral forum”).
Unable to successfully invoke those
exceptions, Raiders says that federal maritime law should recognize
an additional exception when enforcing the law of the State
designated by the contract would contravene the fundamental public
policy of the State with the greatest interest in the dispute. We
disagree with that argument. Indeed, Raiders’ request for that
novel maritime exception is essentially a repackaged version of its
initial argument that the enforceability of choice-of-law
provisions in maritime contracts should be determined by state law.
The argument fares no better here, for essentially the same
reasons.
A federal presumption of enforceability would
not be much of a presumption if it could be routinely swept aside
based on 50 States’ public policy determinations. The ensuing
disuniformity and uncertainty caused by such an approach would
undermine the fundamental purpose of choice-of-law clauses in
maritime contracts: uniform and stable rules for maritime actors.
See
supra, at 4–7;
Carnival Cruise, 499 U. S., at
593–594;
The Bremen, 407 U. S., at 13–14.
Raiders’ proposed exception also lacks
historical roots. This Court has never discarded a choice-of-law
provision in a maritime contract on the ground that enforcement of
the choice-of-law provision would violate state law. On the
contrary, the Court has enforced those clauses without so much as
mentioning state law. See,
e.
g.,
London
Assurance, 167 U. S., at 161; see also
Siegelman v.
Cunard White Star Ltd., 221 F.2d 189, 193, 195 (CA2 1955)
(Harlan, J.).
Nor has the Court looked to state law in the
analogous forum-selection context. Raiders points to a sentence in
The Bremen stating that a “contractual choice-of-forum
clause should be held unenforceable if enforcement would contravene
a strong public policy of the forum in which suit is brought.” 407
U. S., at 15. But that sentence, read in context, was
referring to the possibility of a conflict between federal maritime
law and a foreign country’s law—there, England’s. See
ibid.
State law was not relevant to the case.
The Bremen said
nothing about the law or public policy of Florida. See
id.,
at 9–20.
Carnival Cruise likewise said nothing about the law
or public policy of Washington. See 499 U. S., at 590–595.
Raiders’ position similarly finds no footing in
the decisions of the Courts of Appeals. The opinion of the Third
Circuit in this case is the first by a Federal Court of Appeals to
hold that a State’s strong public policy may justify disregarding a
maritime choice-of-law clause.
The lack of case law supporting Raiders’
state-law argument comes as no surprise given that Raiders’
position would merely allow the substitution of one body of state
law (the law of the State with the purported greatest interest in
the matter) for another (the law of the State designated by a
choice-of-law provision). As Raiders seems to acknowledge, federal
maritime law offers no reason to categorically prefer the law of
one State over another State. See Brief for Respondent 41–42. Here,
for example, no federal maritime interest supports applying
Pennsylvania law rather than New York law.
For the same reasons, we disagree with Raiders’
related suggestion that we adopt the choice-of-law approach set
forth in §187(2)(b) of the Second Restatement of Conflict of Laws.
In relevant part, that subsection says that choice-of-law
provisions are enforceable unless they conflict with “a fundamental
policy of a state which has a materially greater interest than the
chosen state in the determination of the particular issue.”
Restatement (Second) of Conflict of Laws §187(2)(b). As the
commentary to the Restatement carefully explains, however, that
rule arose out of interstate cases and does not deal directly with
federal-state conflicts, including those that arise in federal
enclaves like maritime law. See
id. §2, Comment
c;
§3, Comment
d; §10, Comment
a. For reasons already
stated, that Restatement rule is a poor fit for maritime cases. It
would operate like a general exception for state law that would
prevent maritime actors from prospectively identifying the law to
govern future disputes. The §187(2)(b) exception would require
parties to litigate which State possesses the “materially greater
interest” in the dispute, and thereby create significant
uncertainty. As explained above, no federal maritime interest
favors injecting that kind of disuniformity and unpredictability
into maritime commerce. We therefore decline to adopt §187(2)(b)
for federal maritime law.
***
In sum, choice-of-law provisions in maritime
contracts are presumptively enforceable as a matter of federal
maritime law, with certain narrow exceptions, and no exception to
the presumption applies in this case. We reverse the judgment of
the Court of Appeals.
It is so ordered.