CALIFORNIA
APPELLATE COURT IMPOSES $18,500 IN SANCTIONS FOR PASSENGER'S VIOLATION
OF FORUM SELECTION CLAUSE
(published
March 1998)
As our readers are well aware, enforcement of a forum selection clause contained in a passenger's ticket contract is never guaranteed, especially when a lawsuit is brought in a state court. Despite the long history of enforcement of forum selection clauses, both in maritime and non-maritime settings, by the U.S. Supreme Court and countless federal and state appellate courts, many state trial courts remain reluctant to enforce the clauses fearing plaintiffs will be deprived of their day in a local court. In California, for example, the sole state court decision addressing this issue published in the official California Reporters, Carnival Cruise Lines v. Superior Court (Williams), 234 Cal. App. 3d 1019 (2d Dist. 1991), is often cited by plaintiffs as authority to refuse enforcement of forum selection clauses. However, in Williams the court did not render a decision whether the forum selection clause at issue was enforceable; the court simply remanded the matter to the trial court for further proceedings on whether the passengers had notice of the ticket provisions. This was necessary because the facts of the case established many of the plaintiffs did not receive their tickets until actually embarking the vessel, and a few plaintiffs claimed they did not receive tickets at all. When notice and timely receipt of the ticket contract are not at issue, Williams is irrelevant. Nonetheless, there has been little deterrent to passengers deliberately ignoring a forum selection clause, forcing cruise lines to frequently litigate the enforceability of the clause even in the wake of the Supreme Court's decision in Shute - until now.
Kaye, Rose & Partners, LLP ("KRP") recently enforced a forum selection clause in a California trial court on behalf of Holland America Line-Westours Inc. (HALW), which was upheld on appeal. In Tady v. Holland America Line-Westours. Inc., No. E018808, slip op. (Aug. 11, 1997, Cal. Ct. App., 4th App. Dist, Div. 2), a retired attorney and an avid cruiser who had sailed with HALW on eleven prior voyages, filed suit for breach of contract. His claim: "[[t]he cabin was fifteen percent 15% smaller than represented; the cabin was located too close to the bow of the ship; the location of the beds was entirely different than represented to plaintiff; and the cabin was located at the ship's waterline." The cruise never touched a California port and the sole reason plaintiff filed in California, as opposed to Washington State as specified in the ticket contract, was because the plaintiff was a California resident. Tady alleged damages in the amount of $1,315 for reimbursement of his cruise fare plus $50,000 in general damages.
KRP responded with a motion to enforce HALW's forum selection clause, citing the long history of maritime and non-maritime cases enforcing them. Tady opposed HALW's motion citing outdated California case law and arguing extensively that enforcement of forum selection clauses is against "public policy" and violative of constitutional rights. Tady offered no evidence that HALW's clause was procured by fraud or that enforcement of the clause would be unreasonable or unjust, i.e., that Washington was unavailable or unable to accomplish substantial justice. The trial court did not find Tady's arguments persuasive and granted HALW's motion to dismiss.
Despite the controlling case law mandating that enforcement of the forum selection clause and dismissal of Tady's suit was proper, he filed an appeal with the Court of Appeal, Fourth Appellate District, Division Two. He raised the identical arguments he had raised in the trial court, namely that enforcement of forum selection clauses contained in cruise ship ticket contracts is contrary to public policy and violated his constitutional rights. He even argued that the U.S. Supreme Court's decision was "nothing more than an aberration." He failed to recognize that his lawsuit and the allegations raised against HALW arose from a maritime contract, and were therefore governed exclusively by maritime law, not California law or policy. He also failed to acknowledge that even modern California courts have consistently upheld the enforceability of forum selection clauses in non-maritime settings, and that such clauses are no longer considered contrary to public policy.
In addition to opposing the appeal, KRP filed a motion for costs and sanctions on the basis the appeal was entirely frivolous and brought in bad faith with the intent to vex and harass HALW. The Court of Appeal affirmed the lower court's decision to enforce the forum selection clause and dismiss plaintiff's suit, and further agreed the appeal was frivolous. The Court held "the reason for Tady's continuation of this litigation was to force Holland into an unreasonable settlement by taking a position that every reasonable person would agree is totally and completely devoid of merit and therefore frivolous." Tady v. Holland America Line-Westours. Inc., No. E018808, slip op. (Dec. 12, 1997, Cal. Ct. App., 4th App. Dist. Div. 2.) The Court found that the obvious purpose of Tady's appeal was to delay the lawsuit long enough to exact a settlement with HALW, a motive which in and of itself warranted the imposition of sanctions. Under an objective analysis, the Court found Tady not only failed to cite any applicable law supporting his position, that he also he refused to acknowledge the applicability of contrary federal maritime law. The Appellate Court sanctioned Tady $18,500, $12,500 of which was directly payable to HALW as reimbursement for legal fees and $6,000 of which was payable to the Clerk of the Court for processing the appeal.
KRP has requested that each of the successful Tady decisions be published and the request is now being considered by the California Supreme Court. Alternatively, publication will also be sought in American Maritime Cases. It is expected that the decision will be a useful deterrent to similar wasteful litigation.
