Arbitration in Seamen Cases

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1 Arbitration in Seamen Cases Recently, seamen have been facing mandatory arbitration provisions in their employment agreements which deny them their rights to a jury trial under the Jones Act, and also their right to the selection of the forum in which to file their claims for personal injuries. We are surprised that the courts have been enforcing the mandatory arbitration provisions in seamen employment agreements despite the unequal bargaining power that exists between a seaman and their employer. The agreements deny seamen of substantive rights under the Jones Act, and should be held unconscionable and thus unenforceable. With respect to seamen from foreign countries, their employment contracts have been labeled international commercial transactions which subjects the arbitration agreements to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 21 U.S.T. 2517, 9 U.S.C (Convention Act). When the Convention on the Recognition and Enforcement of Foreign Arbitral Awards is triggered, a court faced with a Motion to Compel Arbitration pursuant to the mandatory arbitration provision in a seaman s employment agreement must consider four jurisdictional requirements that must be met in order for the arbitration provision to be enforced. It has been labeled a limited inquiry. If these four jurisdictional elements are met, the Court must compel arbitration. Federal laws strongly favor agreements to arbitrate, and this law applies equally to international commercial transactions. Surprisingly a seaman s employment agreement was considered an international commercial transaction subject to the Convention despite the fact that seamen employment agreements are specifically exempted from the Federal Arbitration Act. The four jurisdictional prerequisites that must be met for a court to compel arbitration are as follows: 1. There is an agreement in writing within the meaning of the Convention; 2. The agreement provides for arbitration in the territory of a signatory of the Convention; 3. The agreement arises out of a legal relationship, whether contractual or not, which is considered commercial; and 4. A party to the agreement is not an American citizen, or that the commercial relationship has some reasonable relation with one or more foreign states. We have faced many motions to compel arbitration in seamen cases involving the cruise ship industry. With respect to Royal Caribbean Cruise Lines, the seaman s employment agreement

2 typically incorporates a collective bargaining agreement which has a mandatory arbitration provision contained in it. Although the seaman is given no choice whether to sign the employment agreement, and does not know that he has given up substantive rights under the Jones Act, the courts do not consider the unequal bargaining power in determining whether the four jurisdictional prerequisites are met. The courts have consistently found that the four jurisdictional prerequisites are met with respect to the seamen employment agreements that are executed with the cruise ship companies. These agreements exist with Norwegian Cruise Lines, Princess Cruise Lines, as well as Carnival Cruise Lines. Other shipping companies also have these type of agreements. There are affirmative defenses that could be asserted under the Convention to argue against compelling arbitration, but the courts have rejected the key defenses a seaman would have to enforcement of such an arbitration agreement. The main argument has always been that the employment agreement is a take it or leave it employment agreement, and the seaman has absolutely no bargaining power. The agreement is often a result of overreaching on the part of the ship owner, attempting to take advantage of the seaman, realizing the employment agreement is a take it or leave it agreement, and that the seaman does not know his legal rights at the time he is executing the agreement. Unfortunately, the courts have rejected the defense of unequal bargaining power in considering enforcement of the mandatory arbitration agreements under the Convention. The other defense that has been asserted is that the Jones Act itself, a Federal Statute of the United States, mandates that a seaman has a right to select a forum to file a lawsuit, and has a absolute right to a jury trial on his claims. The Jones Act prohibits contractual clauses that are designed to eliminate liability on the part of the employer under the Jones Act. It has been argued that the mandatory arbitration provisions, requiring the seaman to litigate his claims in another country outside of the United States and give up his rights to a jury trial, violates the express provisions of the Jones Act and thus should be deemed unenforceable. The courts have rejected this argument. In a decision of the 11 th Circuit Court of Appeals, Lindo v. NCL (Bahamas) Ltd., 2011 WL (11 th Cir. Aug. 29, 2011), the 11 th Circuit Court of Appeals affirmed the line of cases recognizing the strong presumption in favor of arbitration and held Jones Act claims can be subject to arbitration notwithstanding the language set forth in the Jones Act itself. More disturbingly, Lindo addressed the affirmative defenses available to a party opposing a Motion to Compel Arbitration in the context of a Jones Act case. The Lindo case determined that the only defenses to enforcing the arbitration clause is contained in Article Two of the Convention, and those defenses are limited to a consideration whether the agreement itself is null and void, inoperative or incapable of being performed.

3 As stated above, the courts have rejected the argument that the agreement is null and void on the basis that it is a product of unequal bargaining power or is otherwise unconscionable, at least with respect to the seamen claims under the Jones Act. Another argument that has been made is that the cruise ship companies have also tried to escape the applicability of United States law by inserting a choice of law clause along with the arbitration provision requiring the application of foreign law. The courts had recognized that although statutory claims, such as the Jones Act, are subject to arbitration, the employer cannot deny a seaman enforcement of his statutory rights under the Jones Act by the choice of law clauses in the employment agreements. Many of the lower district courts were striking the arbitration agreements on the basis that the attempt to contract away the Jones Act by the employer rendered the agreement unenforceable under Article Five, finding that it would be against the public policy of the United States to allow the employer to contract away the Jones Act. However, the Lindo court stated that this Article Five argument, which is that a choice of law clause requiring the application of foreign law violates the public policy of the United States, is not the type of defense that can be asserted in the initial stages when faced with a Motion to Compel arbitration. Instead, the four jurisdictional prerequisites are all that is to be considered by the court, and any argument that the agreement violates the public policy of the United States must be asserted after the arbitration proceedings when enforcement of the arbitration award is sought. With respect to compelling arbitration, the court concluded the null and void defenses are applicable only if the agreement is obtained through fraud, mistake, duress and waiver, or other standard breach of contract defenses apply. However, since the court stated that there was no international definition for what constitutes unequal bargaining power, they rejected this as a defense in the context of a seaman s employment agreement with their employer, citing an earlier 11 th Circuit Court of Appeals decision, Bautista v. Star Cruises, 396 F.3d 1289 (11 th Cir. 2005). Unfortunately, the 11 th Circuit decision in Lindo has emphasized that the Article Two defenses are slim, if not none, with respect to seamen employment agreements contained in arbitration provisions. Surprisinly, the court did not follow its prior decision of Thomas v. Carnival Corp., 573 F.3d 1113 (11 th Cir. 2009), which did recognize an Article Five public policy defense in the enforcement stages of a Motion to Compel Arbitration. In Thomas, the employment agreement required arbitration under Panamanian Law for the seaman. Since the seaman had asserted a United States statutory claim under the Seaman s Wage Act, the seaman argued it was against the public policy of the United States to eliminate his United States statutory claim under the Seaman s Wage Act and require him to pursue his action in arbitration under Panamanian Law. The Lindo court simply did not follow Thomas, and said such an argument must be made later during an enforcement stage of an arbitration proceedings, after it is determined whether the arbitrator failed to recognize the United States statutory rights of the seaman. In other words, the

4 court said let s wait and see what the arbitrator does, and if the arbitrator denies the seaman of his substantive rights under the United States Law that he is entitled to, the seaman can come back later in the Federal Court and argue against enforcement of the arbitration award based on a violation of the public policy of the United States. Lindo said an Article Five public policy defense would be timely only at the award enforcement stage at which time the record will show what legal principles were applied and what Plaintiff recovered, or did not recover, and why. Id at 77. This is a recently developing line of cases regarding enforceability of arbitration provisions in seamen employment agreements. The Southern District Court of Florida and the 11 th Circuit Court cases mainly focus on cases dealing with seamen and cruise ship companies. All of the cruise ship companies now have arbitration provisions requiring seamen to arbitrate their claims, including their Jones Act claims. It remains to be seen what will happen with respect to choice of law clauses in seamen s employment agreements. These choice of law clauses should not be enforceable. The Lindo court does refer to prior precedent of the United States Supreme Court in Bremen v. Zapata Offshore Co., 407 U.S. 1 (1972), which deals with enforcement of forum selection clauses and choice of law clauses. If Bremen was followed and the line of cases that followed Bremen s reasoning, these provisions in the seamen s employment agreements would be stricken since they are an unfair attempt on the part of the shipowner to avoid their legal obligations under the United States Law to the seamen, and are clearly a result of unequal bargaining power. It is simply an example of taking advantage of the seamen who have no power to negotiate their contracts, and also do not know their legal rights when they sign an employment agreement. The courts have recognized the status of seamen for centuries, and have enacted laws designed to protect them from overreaching by ship owners. This new line of cases simply ignores all of the law recognizing seamen as wards of the court, and ignores the law that requires any contracts with a seaman to be scrutinized closely by the courts to avoid the type of overreaching we are seeing now on the part of the ship owners. The Supreme Court of the United States, in the decision of Helenic Lines, Ltd. v. Rhoditis, 398 U.S. 306, (1970), specifically was faced with a case involving a foreign seaman pursuing an action under the Jones Act where his employer had inserted a choice of law provision that would have required him to litigate his claims in Greece under Greek law. However, after a detailed analysis of the factors that must be considered when addressing the applicability of United States law to a foreign seaman pursuing a case against a foreign ship owner who flies a foreign flag, the Supreme Court of the United States stated United States law must be held applicable in order to avoid allowing foreign ship owners to escape their obligations under the United States law, giving them an unfair advantage over their American counter parts. In other words, the choice of law clause and forum selection clause could not deny the seaman his rights

5 under the Jones Act, and his rights to a United States forum against a ship owner with a substantial base of operations here in the United States. There is a lot of case law after Rhoditis recognizing that these choice of law clauses and forum selection clauses are not enforceable against a seaman, recognizing the unequal bargaining power and recognizing that enforcement of such clauses would thwart the public policy of the United States. Accordingly, it is hopeful that when further case law is developed with respect to these mandatory arbitration agreements with the seamen working on a cruise ship, the courts will reconsider the issue as to whether such agreements can be enforced, and declare them unenforceable across the board in seaman s employment agreements, recognizing them as exempt from coverage as the Federal Arbitration Act does. At the very least, the courts need to recognize that the employers cannot contract away the rights seamen have under United States law against ship owners who are essentially domestic corporations even though they register in foreign countries, such as all the major cruise ship companies based here in the United States do. Our firm continues to be safety advocates for crewmembers who suffered injuries on cruise ships as well as on yachts and other types of boats and ships.

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