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Costa Concordia shipwreck litigation could stall

Courts likely to uphold forum-selection clause in passenger tickets

Online Exclusive: Read about cruise industry changes since the Costa Concordia disaster

Just three months and two days shy of the 100-year anniversary of the infamous Titanic shipwreck, history eerily seemed to repeat itself.

On the evening of Jan. 13, Captain Francesco Schettino of the Carnival Corp.-owned Italian cruise ship Costa Concordia steered his vessel alongside the shore of the small Italian island Giglio, where he intended to salute its residents.

But Schettino’s ceremonious greeting turned disastrous when the ship struck a rock, which tore a hole in its hull and caused it to capsize. What followed was a bungled evacuation procedure with passengers receiving minimal direction from crew members. Many of the 4,200 people onboard fought to get onto lifeboats, while others opted to jump into the sea. At press time, the disaster’s official death toll was 25, with seven people still missing.

In the wake of the catastrophe, Costa Crociere, the Italian business unit of Carnival, announced that it would offer to pay about $14,460 in damages to each uninjured Costa Concordia passenger through March 31. The company said it would compensate injured passengers and the families of dead and missing victims based on their individual circumstances.

Jeffrey Maltzman, a partner at Maltzman Partners, which specializes in admiralty and maritime law, says the $14,460 damages offer is in line with what cruise lines have extended to passengers in the past. “In past sinking cases, almost all passengers accepted the cruise line’s settlement offer, even though those offers were lower than what Costa has offered its guests,” he says. “For guests who survived the incident without any significant injury, the offer provides a quick resolution to what might otherwise be a lengthy legal process.”

Nonetheless, some survivors were unsatisfied with the offer and decided to sue the ship’s owners. Plaintiffs firms were happy to oblige.

Offensive Offer

One lawsuit, which a group of plaintiffs firms filed on behalf of 39 plaintiffs, accuses Costa Crociere and Carnival of gross negligence and fraud, and it seeks at least $528 million in damages.

“It has been more than 100 years since a disaster of this proportion has occurred on a cruise ship. Only the most senseless, callous disregard for human life and safety could cause such a disaster,” says Marc Jay Bern, a senior partner at Napoli Bern Ripka Shkolnik, one of the plaintiffs firms that filed the lawsuit. Bern calls the cruise line’s damages offer “insulting,” and says a better offer would be $100,000 or more per uninjured passenger.

But Bern and other lawyers representing Costa Concordia passengers might encounter a roadblock. The contracts within the ship’s tickets state that ticketholders must bring lawsuits in Genoa, Italy. Bern and his team filed their lawsuit in Florida. Even so, Bern says he’s willing to challenge the contract’s forum-selection clause because “the nature of the conduct was so reckless … that the limitations of the ticket are null and void.”

Common Clause

Cruise companies say they have good reason to incorporate forum-selection clauses into their tickets. They claim the clauses simplify the litigation process while deterring frivolous claims and lowering overall cruise costs for passengers.

Federal courts historically have upheld forum-selection clauses. For instance, in August 2010, the 11th Circuit affirmed the dismissal of a woman’s lawsuit against Regent Seven Seas Cruises. Nina Janet Seung was injured while onboard a Regent cruise in French Polynesia. Upon her return home to the U.S., she sued the cruise line in Florida. However, Regent’s contract required ticketholders to file claims in Paris. Although Seung argued that the forum-selection clause was unfair and too burdensome, the 11th Circuit said that it did “not believe that Seung has made the ‘strong showing’ required to prove that the forum selection clause should not be enforced in this case.” To further bolster its decision, the court cited a 1991 Supreme Court decision, Carnival v. Shute, which also found such clauses enforceable (see “Permissible Passage”).

Therefore, experts say it’s likely that Costa Concordia plaintiffs will have to pursue their claims in Italy. “Although plaintiffs lawyers will no doubt try creative arguments to keep the cases here, it seems fairly clear that the courts will ultimately enforce the forum-selection clause,” Maltzman says. “Costa is an independent company, and virtually all of its operational employees are based in Italy, and the incident occurred in Italian waters.”

Stalled Suits

Plaintiffs who pursue lawsuits overseas are apt to face challenges.

“European courts tend to be more strict about the recovery of specific damages,” says Cozen O’Connor Member David Loh, who adds that plaintiffs firms might be underestimating the complexity of maritime law. “None of [the plaintiffs firms] have a lot of technical expertise in terms of how vessels are run and operated.”

Furthermore, litigation in Italy can be expensive, and Italian lawyers rarely accept cases on a contingency basis, which means plaintiffs will probably have to pay them upfront. The fact that Italy is pursuing a criminal case against Captain Schettino also could make personal-injury lawsuits drag on for years. In Italy, criminal investigations must be completed before plaintiffs attorneys in civil cases can have access to evidence.

Additionally, although Carnival is the parent company of Costa Crociere, it might not be liable for damages. “Some attorneys say the theory is that Costa and Carnival are identical in terms of who makes the decisions, and therefore Carnival should be a defendant,” says James Chatz, of counsel at Arnstein & Lehr. “That’s not true because they are separate entities.”

Still, some experts say Carnival’s decision to lay low and release minimal public statements concerning the disaster may not have been the most appropriate response. “It’s going to be perceived as trying to avoid the responsibility to these passengers,” says Robert A. McKenzie, a lawyer at Arnstein & Lehr. “In terms of a PR maneuver, it doesn’t seem to be the best possible move.”

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