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All expressions are those of the speaker. Hello, and welcome to SCO Discust.
I'm your host, Kyle hamerniz On, behalf of the Faculty division of
the Federalist Society. We are here today to discuss Great Lakes Insurance se versus
Raiders Retreat Realty Co LLC, in which the Supreme Court issued a nine to
zero decision on February twenty first, twenty twenty four. It is my honor
to introduce our guests today, Professor Andrew Hesseck. Professor Hesseck is the Judge
John J. Parker Distinguished Professor of Law and Associate Dean for Strategy Planning at
the University of North Carolina School of Law. His teaching and research interests include
federal courts, administrative law, remedies, and criminal sentencing. And with that,
I like to turn things over to our guest to discuss the overview of
the case and the court's decision. Well, thank you for having me on.
So the Great Lakes case, it started out as what seemed like a
basic contract dispute case. The case involved a maritime insurance contract. Raiders wanted
to get insurance for its voted entered into a contract with Great Lakes for insurance,
and the contract had a standard choice of law clause, said New York
law would apply to claims arising under the contract or related to the contract.
So subsequently there were events that led raiders to want to possibly make insurance claims.
But Great Lakes it said that the insurance claims the insurance policy was void
because raiders hadn't complied with the terms of it by not doing fire checks and
providing information to Great Lakes. Okay, so, so far, very basic
insurance claim. Great Lakes file suit in Pennsylvania in federal court. That's consistent
with the form selection clause in the contract. And so because it's in Pennsylvania,
Pennsylvania law presumptively applies. But there is the choice of law provision in
the contract, so Pennsylvania law would say, hey follow New York law.
For the contract raiders file some counterclaims under Pennsylvania law. Now these counterclaims under
Pennsylvania law, they are not available under New York law. Right says,
yes, I know that the choice of law clause would say, apply New
York law, which would preclude my claims under Pennslvania law. But we're in
Pennsylvania. Pennsylvania law presumptively applies, and we think that under Pennsylvania has a
special rule that says that if applying a different are applying a choice of block
claw sorry, precludes a Pennsylvania claim. Basically, Pennsylvania law will trump.
You're not going to enforce the choice of law clause in that context because it's
against Pennsylvania's public policy. Right, that's the important part. It's against Pennsylvania's
public policy. Now Great Lakes responds, well, this is a maritime insurance
contract, and so Pennsylvania law should not dictate whether the choice of law clause
applies. Instead, federal law should dictate whether the choice of law clause applies.
And at that point that's where the case flips from being a normal contracts
case to an extremely complicated issue that led to the Supreme Court's intervention. The
question was basically, does federal law control that choice of law provision, that
is to say, the enforcement of the choice of law provision? And if
so, if federal law does apply, what would be the content of that
federal law? Right? So we actually have three really complicated issues for federal
courts. The first is under erie, is it say, federal issue or
a state issue? Right? Should federal law control or should state law control?
The second is admiralty right, this is just an admiralty area. And
then the third is okay, if federal law controls, what should be the
content of federal common law? So we have eerie, federal common law,
and admiralty very complicate. So you know, when you look at the opinion,
how does how does Kavanaugh address each of these issues when when he's bringing
the well, when when he's writing in the opinion right. So, so
it goes to the Supreme Court and Great Lakes ends up winning. So the
Supreme Court takes the position that federal law controls not Pennsylvania law, and federal
law is not going to follow Pennsylvania law. That was an option. It's
going to be that federal law has its own separate sort of content that applies
uniformly across the country. So Kevinaugh, who wrote the opinion for the court,
addresses all three issues. The first was sort of eerie question, does
federal law apply or does? Is this a state law issue? And and
choice of law is probably a substantive issue to which to which state law would
apply. I guess we know that from Claxon and and Kevinall says no,
you know, in the context of admiralty law, the federal law law applies
admiralty is one of the exceptions to eerie right, because the Constitution says,
or it has been read, let's say to uh to say that there shall
be federal law controlling admiralty and that includes federal common law. Okay, it's
been extended to cover maritime insurance contracts. Not the most obvious conclusion in the
world, but it has been extended in that way that was in prior opinions
that that wasn't questioned in this case. Okay, So that's the first question.
First two questions essentially like we're in admiralty and and federal law is going
to control. Now the big question is what will be the content of that
federal law. And this is where it gets really interesting, actually, because
normally the Supreme Court is the one who who makes up federal law, right
when they're when they're going to create federal common law. That's in court fashion
said, that's not quite what happened here. So the Court says, look,
if there's a set federal rule, we will follow that federal rule.
And if there's not a set federal rule, then we have to decide should
we make a federal rule or should we follow state law? Should we adopt
state law as our federal rule. And the Court said that there is a
set federal rule in this context, and they said, the set federal rule
is that a choice of law clause applies and presumptively unless there's a really good
federal public policy for it not to apply. Depends on being a public policy.
Wouldn't matter, it would be federal public policy. And what's so interesting
is the Court said that the federal rule had largely been established by the lower
court's decisions, by decisions of the courts of appeals. There are a few
Supreme Court opinions that sort of hinted that choice of law clauses should be applied,
but it was really the federal courts of appeals that the Court pointed to.
So there's a context where it's really interesting that Supreme Court pointed to lower
court decisis as strong evidence of establishing the federal rule, and then their decisions
fashion the federal rule that then dictated what the content of federal law would be.
The Court also acknowledged upfront that there's lots of complicated questions about how precisely
eerie and federal common law interact with each other. And they said that they
have this quote that's great. It says that basically it's one of the most
complex areas in all law, and they're just they're going to avoid it,
right, And they say, like here that the answer is easy, We're
just going to follow the federal rule as established. Great. And then obviously
Justice Thomas wrote a concurring opinion, right, and he basically is almost warning,
you know, litigants and courts about the Wilburn boat case. Can you
go a little bit more into that, you know, kind of explaining what
that case is about and then also maybe how it applies in future litigation.
Yeah. Sure, So Wilburn Boate is this case out of the nineteen fifties
that was sort of an anomaly. Let's say under admiralty law involving maritime insurance
contracts. So in Wilburn vote, there was a claim for a warranty under
I think it was under a contract, and the and the Supreme Court said
there was no set federal rule about warranties and therefore state law would control the
warranty claims under those maritime contracts. Now, the problem with that is is
the court has said, look, you know, maritime contracts, they're part
of admiralty animalty controls. So federal law should control across the board and so
and so it should never be that there's sort of like sometimes federal law and
sometimes state law. As a matter of just how the eerie analysis shapes out,
it should all be federal law. It's just like what would the content
of that federal law be. And I think Justice Thomas is really getting at
is that wilverm Boat is anomalist for saying that state law plays a role here.
It just doesn't. Right, This is all federal law. And now
there are ways of reconciling it. You can say, like go, in
some context federal law should follow state law, but it would be a matter
of federal law right, and the way Well Wilburn is written is much more
like, well, state law is controlling here, and it's just it is
confusing. And then I guess if we're just you know, looking out into
the into the future, what I mean, how does this shape the landscape
of admiralty law and that sort of thing as we look forward into Obviously there's
going to be future litigation from obviously different parties. You know, it's it's
inevitable that that it comes up in these cases are then use as precedent.
Are what do you see as being the real ramification of a decision like this?
Yeah, so I think two things. So theoretically is that federal law
is going to just play more and more of an important role in animalty law.
It already had, but now it's going to play even more. Because
there was wilbrim Boat out there which suggested state law sometimes played a role,
it was confusing. This helped clean it up. But the way that it
cleaned it up is basically to say, federal law is always going to control
and so you know, to the extent we're going to have any state law,
it's only going to be because the federal courts have decided to incorporate it,
not because they are bound by state law. And what's interesting about that
is actually it goes It shows that admiralty law is really one of those small
bubbles. It sort of goes in the opposite direction from the general trend of
the court towards not making federal common law. Right. This is very opposite
the more recent Vivince cases like a Bassi, in that the court says like,
this is a this is a realm where we get to make all sorts
of law. And that's that's actually been the case. Let's say since since
post Erie, right, I mean after Erie, they said anualty is one
of those areas where there can be federal common law, and they are.
They are capitalizing on it right now, and they are really making it more
practically. I think what happens is, you know, almost there must how
do I say this. I'm sure that most people engaged in maritime commerce are
engaged are entering into contracts that have choice of law provisions, and now they
have a little bit more clarity about how those choice of law provisions are going
to be enforced. And so I don't know that in the end it's going
to affect things too much. It might reduce the cost of business. Because
the contracts are a little clearer and they know exactly which law is going to
apply. It's going to be the law that they have specified. They don't
have to worry about like the idiosyncrasies of Pennsylvania or Delaware or Florida. They
know that if we pick New York, it's going to be New York unless
there's some really strong reason why it's not going to be New York. Great.
Thank you so much for joining us. Andy. Do you have any
concluding thoughts points that you want to want to make or do you think that
that settles it? I think that settles it. I think that settles it.
I do think that there's some areas of the law where where the Court
has done a really good job of the last like twenty or thirty years,
cleaning up areas that were so complicated, like complete preemption or Rooker Feldman,
and where there were just decisions going in different directions it was hard to figure
out what was going on. This isn't quite to that level, but it's
definitely pushing in that direction, saying because Wilburn vote was one of those decisions
that you're like, how do you sort of make this all work? And
they have said you make it work by sort of ignoring Wilburn vote, and
so you know it, regardless of what one thinks of like the precise outcome,
I think that part of it is good. Well, Andndy, thank
you so much for joining us. Sure, thank you, Thank you for
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