SCOTUS Decides Contractual Issue in a Maritime Law Case!

The issue in Great Lakes Insurance SE v. Raiders Retreat Realty Co. LLC was whether two parties to a contract governed by admiralty law can agree to a choice of law provision that conflicts with the substantive public policy of the state in which the case is to be heard.  The general answer, provided in an opinion by Justice Kavanaugh (right), is that choice-of-law provisions in maritime contracts are generally enforceable, with certain narrow exceptions not applicable on the facts before the Court.

The case is about insurance for a boat.  Raiders Retreat is a Pennsylvania Business that purchased insurance for its boat from Great Lakes, which is a Germany company headquartered in the UK.  The instance contract was governed by New York Law.  When the boat ran aground in Florida and Raiders Retreat sought coverage, Great Lakes denied the coverage due to a Raider Retreat’s failure to maintain its fire suppression system, which had nothing to do with the boat running aground.  

Raiders Retreat sued in a Pennsylvania District Court, bringing claims under Pennsylvania contracts law.  The District Court enforced the parties’ choice-of-law provision, which meant that it dismissed the Pennsylvania claims.  Raiders Retreat appealed to the Third Circuit, which refused to apply New York law if doing so would violate Pennsylvania public policy and remanded for a determination of whether it would do so.  To resolve a Circuit split, SOCTUS granted an interlocutory appeal.   

Federal maritime law is all about uniformity, and there is a clear rule that choice-of-law provisions in maritime contracts are presumptively enforceable.  Okay, so how is the presumption overcome?  The parties agreed that “courts should disregard choice-of-law clauses in otherwise valid maritime contracts when the chosen law would contravene a controlling federal statute . . .  or conflict with an established federal maritime policy” or if the parties can provide no reasonable justification for the chosen jurisdiction.

That seems pretty straightforward and workable.  Raiders Retreat wanted either a rule that courts should not enforce the choice-of-law clause if doing so would violate the public policy with the state with the closest connection to the transaction.  Justice Kavanaugh responded with a hard no.  What part of uniformity does Raiders Retreat not understand?

Justice Thomas (left) concurred to emphasize how much he doesn’t like a case called Wilburn Boat.  Justice Kavanaugh had concluded that Wilburn Boat did not apply on these facts.  Justice Thomas needed to send a clear signal to potential litigants: I dare you to cite Wilburn Boat to me.  I double dare you!