Limiting Seastead Visitor’s Power to Sue Within the United States
July 23, 2012 by Robert Mongole
This penultimate blog post is part of an ongoing series (see part 1 and part 2 and part 3) examining how a seastead might limit the risk of being sued in the court system of the United States. Robert Mongole is a Juris Doctor and Doctor of Civil Law candidate at the Louisiana State University Paul M. Hebert Law Center, conducting this investigation in conjunction with The Seasteading Institute.
Seastead’s are going to want to derive income from a number of sources. One option is going to be tourism. Cruise ships often place selection clauses on the back of tickets issued to passengers and have had the selection clauses routinely upheld in court. This blog post is dedicated to how a ticketing system will be examined in American courts.
Carnival Cruise is a maritime case where a selection clause was placed on the back of the cruise ticket limiting suit to Florida courts. The Supreme Court applied the Bremen ruling that forum selection clauses are presumed valid and extended it to an adhesion contract on the back of the cruise ticket. (An adhesion contract is a contract in which one party holds all the bargaining power.) The Court articulated three reasons for using forum selection clauses in this case. First, cruise ships carry passengers from many different locations and a cruise ship has an interest in limiting where it can be sued. Next, by agreeing on the forum in advance, the clause limits the waste of judicial resources. Finally, the passengers likely paid less for their tickets because of the selection clause, which is a desirable market allocation.
Similarities between seasteads and cruise ships are frequent and some early seastead options even involve using retrofitted cruise ships. Like cruise ships, seasteads are likely to both employ and have as guests large amounts of people from multiple countries and geographic locations within countries. Seasteads, like cruise ships, will have an interest in deciding any and all cases in one place to lessen the burden of defending itself in many different locations. A selection clause will also limit the waste of judicial resources. Whether guests aboard a seastead pay anything at all to come aboard a seastead is up to each individual seastead. It is easy to see a large seastead wanting to attract tourists to vacation on it as an additional source of income. The court should use similar logic to allow selection clauses to be placed on the back of any tickets, whether free or paid, allowing guests on board.
The core of Carnival Cruise, that forum selection clauses are presumed valid despite the possible inequity of bargaining power, has been applied to maritime and non-maritime cases. Though selection clauses are presumed valid, if they cannot withstand judicial scrutiny for fundamental fairness this presumption will be overturned. Carnival Cruise considers four fundamental fairness factors: notice, inconvenience, bad faith, and fraud or overreaching. Bad faith and fraud will not be examined in this blog post nor in the forthcoming paper. The Seastead Institute works to promote “political and industry diplomacy and building a community of aspiring seasteaders” and bad faith and fraud works against these goals.
Notice was not at issue in Carnival Cruise, but other courts have required forum selection clauses in cruise ticket contracts to be reasonably communicated. The reasonably communicated standard is a two part analysis. First examining the text to see if it is “clear and conspicuous” and then examining the circumstances around the receipt of the ticket to determine the likelihood that the passenger had the opportunity to be informed. The court has declined to enforce a forum selection clause when a passenger must buy a non-refundable ticket before receiving notice of the forum selection clause. A passenger simply not reading the contract is not a lack of notice.
Inconvenience requires the party opposing the clause to “show that the trial in the contractual forum will be so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court.” Forcing Americans to settle foreign disputes in a remote forum is not an inconvenience. An exception has been made when neither the parties nor the action had any contact with the selected forum.
Issuing tickets with selection clauses to all visitors ahead of time appears to be the best method for preventing visitors from unnecessarily suing in American courts. Seasteads should keep in mind that notice must be reasonably given and examine the seldom used inconvenience test. Barring, failing this test, seasteads should not worry much about notice, fraud or bad faith.