Legal Docket: Law of the sea

NICK EICHER, HOST: It’s Monday morning, October 23rd and you’re listening to The World and Everything in It from WORLD Radio. Good morning! I’m Nick Eicher.

MARY REICHARD, HOST: And I’m Mary Reichard. It’s time for Legal Docket.

Today, we’ll cover a dispute pending at the U.S. Supreme Court. But I’ll start with a few other mentions.

One is a dispute that the court will NOT hear.

And in not hearing it, the justices essentially affirmed a lower-court ruling that the First Amendment protects undercover investigative journalism.

Here, the case involved the activist group People for the Ethical Treatment of Animals and a state law barring secret recordings. North Carolina passed a law that lets employers sue employees if they make secret recordings that harm the reputation of the business.

PETA says one of its aims is to bring accountability to animal agriculture, and so it sued, claiming the law is unconstitutional.

The U.S. Court of Appeals for the 4th Circuit agreed with PETA. In a fairly narrow ruling, it said the law violates the First Amendment right to free speech when enforced against news gathering.

EICHER: That brings to mind the case of pro-life activist David Daleiden. You remember him as the man who secretly recorded abortion industry bigwigs freely admitting they sell body parts from the unborn babies they kill.

What about his case?

Just this month, the Supreme Court turned down his appeal.

The justices left in place a lower court award of $2 million in damages Daleiden has to pay Planned Parenthood.

REICHARD: So two completely different results, and you’re probably wondering how that can be. For starters, different states have different laws and federal charges can figure in as well.

But you’d be right to think that the core issue of how to conduct undercover investigations clearly needs clarity.

EICHER: Also last week, U.S. Supreme Court Justice Amy Coney Barrett made a public appearance. That’s always a big deal when a Supreme Court justice makes public remarks. She sat for an interview with a senior law professor at the University of Minnesota. And, per usual, there were protests at the school.

PROTESTERS: Sexist, racist, antigay! ACB go away! Sexist, racist, antigay! ACB go away!

“ACB.” She should go with that.

Inside the building, though, school officials overrode the heckler’s veto.

SCHOOL OFFICIAL: All disruptive parties are asked to vacate the room or be subject to arrest. (cheers)

One bit of news: Justice Barrett backed the idea of an ethical code for the court.

JUSTICE BARRETT: There is no lack of consensus among the justices. There's unanimity among all nine justices that we should and do hold ourselves to the highest ethical standards possible.

And Justice Barrett took a question on collegiality:

JUSTICE BARRETT: I attack ideas, not people. I think that is what opinions are: you know, the fire gets put on the page but it is not expressed in interpersonal relationships.

REICHARD: Alright, now on to the one oral argument we’ll cover today. It deals with admiralty and insurance law.

Here are the facts. Four years ago, a yacht ran aground in Florida resulting in around $300,000 in damages. The yacht owner filed a claim under the insurance policy. But the insurance company denied the claim, saying that even though none of the damage was due to fire, the whole policy was void because the yacht owner hadn’t inspected and certified the fire-extinguishers on board.

EICHER: At risk of having to pay out of pocket the yacht owner sued. By the time the case reached the Supreme Court, the legal issue narrowed down to a contract question within the law of the sea. Which, as you’ll come to understand is very specialized.

Contract jurisprudence says the parties can decide which state laws will be used to interpret a contact. Here, it’s the laws of New York. If that understanding prevails, then the insurance company wins.

But the question is whether that contract can be overridden by the “strong public policy” of the state in which the case is litigated. In this case, Pennsylvania, where the company that owns the yacht is based.

Insurance company lawyer, Jeffrey Wall:

JEFFREY WALL: We put the choice-of-law clause in the contract, what now? We have a presumption. Well, it wouldn't be much of a presumption as federal law goes if 50 states could just set it aside. And even looking at the facts of this case, it seems to have a fairly international flavor. You have a German insurer. You have an insured in Pennsylvania that designates an agent in the contract in Florida, and the boat can travel up and down the Eastern Seaboard and the Bahamas, nowhere else. That's the navigational limit. That sure triggers some interests of Pennsylvania, but it doesn't seem like the only state in play, and more importantly, it seems like the sort of national and international thing that triggers the broader purposes of maritime.

REICHARD: You may say: a contract’s a contract. Just follow what the parties agreed to.

But it turns out, maritime law is its own thing. And the lower court here found the policy can’t be enforced if it contravenes a strong public policy of the forum in which the suit is brought. Listen to this more lengthy exchange between Justice Samuel Alito and Wall for the insurer:

JUSTICE ALITO: Your client denies the claim because you say they didn't do what they were supposed to do regarding fire extinguishers. But there was no fire. The – the absence of fire extinguishers up to your standards had nothing whatsoever to do with this. And so to deny coverage on that ground does seem harsh, but you say: Although that denial may seem harsh to the land-bound, it reflects traditional maritime principles. Now, if I were not land-bound, suppose I -- you know, I -- I spent a lot of time sailing around the world on ships, it wouldn't seem harsh to me anymore?

WALL: It would not if you were a member of the admiralty bar as I've come to understand. Justice Alito, I've always been worried about this because it struck me as harsh too when I approached the case. There is a different tradition that grew up around the admiralty system and Lloyd's of London.

JUSTICE ALITO: Yeah. I know there are a lot of things about old-time maritime law that are very harsh. Like, we had a case a few years ago about maintenance and cure of seamen, and we had cases -- we had a case involving a -- a sailor who got a fractured skull shortly after leaving port, and then the captain refused -- made the entire journey, refused to put the person -- ashore at any port to get medical treatment, waited until the person came home. So I -- I mean, I don't know about --

WALL: And no punitive damages. But the reason for this, Justice Alito, is that you had international insurers located overseas who had no way of monitoring these vessels or incentivizing compliance. And so this tradition grew up and it's very different from what we think of car insurance or home insurance, where you pay your premiums and they process the claims in the pool. These are sort of specialized policies.

EICHER: Still, the yacht owner’s lawyer had to give it his best. Here’s Howard Bashman. He’ll cite a case from 1955 called Wilburn Boat:

HOWARD BASHMAN: Under Wilburn Boat, state law applies. As a result, the fundamental public policy of the state with the greatest connection to the dispute can override the contractual choice-of-law provision, selecting the law of another state.

REICHARD: Ergo, Pennsylvania law wins because it has the greatest connection to the dispute. Recall that the company that owns the boat is based there.

But Bashman for the yacht owner didn’t gain much traction. Listen to his exchange with Justice Neil Gorsuch:

JUSTICE NEIL GORSUCH: What's the point of distinction, why we would maybe listen to forum-selection clauses in all areas except for maritime insurance?

BASHMAN: Well, I -- I -- I think -- I think the point is that there is no established federal rule applying in the maritime insurance context to forum-selection clauses.

JUSTICE GORSUCH: Yeah. But --

BASHMAN: So the argument would be open --

JUSTICE GORSUCH: But the question --

BASHMAN: -- under Wilburn Boat.

JUSTICE GORSUCH: Everybody agrees it's -- you know, fine, it's open. Why would -- why would we say that state law would control there?

BASHMAN: Because the need for states to protect insurance policyholders in the insurance context from sharp practices involving choice-of-forum clauses --

JUSTICE GORSUCH: Or one would could say we have very sophisticated entities who are engaged in trade on the high seas. These are bespoke agreements, this isn't GEICO, and, you know, they -- they make their choices, they live with them.

EICHER: When Justice Gorsuch says “bespoke agreement” he’s talking about language tailored to fit the project. It’s a fancy way of saying “custom.” You write up a bespoke agreement when boilerplate language isn’t suitable.

In this case, the insurance company is one you go to when other insurance companies won’t take you: what’s known as a surplus-lines insurance company.

But this was just not lawyer Bashman’s day and everyone seemed to know it. So Justice Clarence Thomas can be forgiven the seemingly off-the-point inquiry.

JUSTICE CLARENCE THOMAS: Just a short question, Mr. Bashman, to satisfy my curiosity. Were they able to salvage those twin 12-V 71s? (Laughter.)

BASHMAN: I -- I -- you know, it's a little bit outside of the record that's in front of this Court, but -- but I -- I think that what happened was the boat was taking on water and -- and may have been run aground to avoid sinking it so that it could be salvaged more easily, and -- and the boat is repaired now and -- and is back in -- in working order.

REICHARD: And in rebuttal, lawyer Wall for the insurer could not resist:

WALL: Justice Thomas, to your central question, the boat is available for sale online if you have a half million dollars (laughter) and as best I can tell from the pictures, the engines were salvaged. So don’t worry.

I don’t think the yacht owner will be able to salvage the case, though.

The importance of the eventual ruling could well reverberate beyond the confines of maritime law. It could go as far as all insurance policies. As such, it’s a good idea to consult a lawyer when you are facing one of those “choice-of-law” clauses in an insurance policy.

And that’s this week’s Legal Docket!

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