Great Lakes Ins. SE v. Raiders Retreat Realty Co.

Supreme Court of the United States
601 U.S. 65 (2024)

ELI5:

Sections

Rule of Law:

Choice-of-law provisions in maritime contracts are presumptively enforceable under federal maritime law and generally do not yield to the public policy of the state where a lawsuit is filed.

Facts:

Great Lakes Insurance, a company organized in Germany and headquartered in the UK, entered into a marine insurance contract with Raiders Retreat Realty, a Pennsylvania company.
The insurance contract contained a choice-of-law provision designating New York law to govern any future disputes between the parties.
Years after the contract was signed, Raiders' boat ran aground near Fort Lauderdale, Florida.
Raiders submitted an insurance claim for the damage sustained during the grounding.
Great Lakes denied the claim, asserting that Raiders breached the contract by failing to maintain the boat's fire-suppression system.
Raiders alleged that the fire-suppression system issue did not contribute to the grounding accident and argued that Pennsylvania law should apply to the coverage dispute.

Procedural Posture:

Great Lakes sued Raiders for declaratory relief in the U.S. District Court for the Eastern District of Pennsylvania.
Raiders asserted counterclaims against Great Lakes under Pennsylvania law.
The District Court enforced the choice-of-law provision and rejected Raiders' Pennsylvania-law claims.
Raiders appealed to the U.S. Court of Appeals for the Third Circuit.
The Third Circuit vacated the District Court's judgment, holding that the clause must yield to Pennsylvania's strong public policy.
Great Lakes petitioned the U.S. Supreme Court for a writ of certiorari.

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Issue:

Are choice-of-law provisions in maritime contracts presumptively enforceable under federal maritime law, or must they yield to the strong public policy of the specific state where the suit is brought?

Opinions:

Majority - Justice Kavanaugh

Yes, choice-of-law provisions in maritime contracts are presumptively enforceable as a matter of federal maritime law. The Constitution extends federal judicial power to maritime jurisdiction to ensure a uniform system of laws for commerce and navigation. To maintain this uniformity, federal courts act as common law courts, following established maritime rules. There is a longstanding precedent that choice-of-law provisions in maritime contracts are valid, similar to forum-selection clauses upheld in cases like The Bremen and Carnival Cruise. These provisions reduce legal uncertainty and lower costs for maritime actors by identifying the governing law in advance. The Court rejected the argument that Wilburn Boat (1955) precludes this rule; Wilburn Boat only applied state law as a 'gap-filler' where no federal rule existed, whereas here, a federal presumption of enforceability exists. Furthermore, allowing the public policy of the 50 individual states to override these federal maritime contracts would create disuniformity and undermine the predictability essential to maritime commerce.

Concurring - Justice Thomas

Yes, federal maritime law governs the enforceability of these provisions. While joining the majority in full, the concurring opinion emphasizes that the Court's previous decision in Wilburn Boat was deeply flawed and rested on unsound premises. Wilburn Boat ignored the fundamental principle of uniformity in admiralty law and disrupted settled practice by inviting courts to apply state law in marine insurance disputes. The concurrence notes that the Court has rightly retreated from Wilburn Boat in subsequent decisions, limiting it to inherently local disputes, and suggests that litigants should not rely on it to override general maritime law.

Analysis:

This decision reinforces the supremacy of federal maritime law over state law in the context of marine insurance contracts. By affirming the presumptive enforceability of choice-of-law clauses, the Supreme Court prioritized the need for uniformity and predictability in maritime commerce over the specific public policy interests of individual states. This ruling effectively limits the application of Wilburn Boat, limiting the ability of parties to use state public policy arguments to invalidate contract terms in admiralty cases. Future litigants will find it significantly harder to challenge choice-of-law clauses unless they can point to a federal statute, federal maritime policy, or a lack of reasonable basis for the chosen law.

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