FEDERAL DISTRICT COURT IN WASHINGTON ENFORCES ARBITRAL AWARD AGAINST FOREIGN SEAMAN UNDER NEW YORK CONVENTION DISMISSING PLAINTIFF'S CLAIM

Federal District Court in Washington enforces arbitral award against foreign seaman under New York Convention dismissing the Plaintiff's Claim

By Tyler Loga

Chief of Staff

Castro v. Tri Marine Fish Co., LLC., Case No. C17-8RSL, 2017 U.S. Dist. LEXIS 120037; 2017 WL 3262473, (W.D. Wash. July 31, 2017).BackgroundPlaintiff, a citizen of the Philippines, and Defendant, Tri Marine Fish Co., a California company with world-wide offices and operations, through its agent, entered into an employment contract July 12, 2013 in American Samoa. Pursuant to the agreement, the Plaintiff was employed as a deck hand aboard the F/V CAPTAIN VINCENT GANN. This agreement included an arbitration clause stating, “’any and all disputes’ arising out of his employment shall be subject to mandatory binding arbitration in American Samoa.“ Within two weeks of serving on the vessel, the Plaintiff was injured. He was sent home to his parents in Manila, Philippines where he had surgery to repair the ligaments in his knee and collected maintenance and cure payments from Defendant.Plaintiff later contacted Defendant interested in a cash advance on maintenance and cure (which was granted in the amount of $3000.00), and then later asked about a complete settlement. When Plaintiff asked for a second advance on maintenance and cure, Defendant offered $5000.00 as an advance on any full settlement. As part of this second advance, Plaintiff signed another agreement providing, “that that Plaintiff agrees to be bound by the arbitration clause in his employment contract.” On February 12, 2014 the parties agreed to a total settlement amount of $21,160.00 including the $5000 advance. The day the agreement was executed both parties brought it to an accredited Maritime Voluntary Arbitrator. The arbitrator explained to Plaintiff that by signing the compromise agreement he would release Defendant from any future claims. The Plaintiff indicated he understood and an order was entered finding “the signed release and resulting compromise agreement were ‘not contrary to law, morals, good customs and public policy’ and dismissing the case between Plaintiff and Defendants.”On November 22, 2016, Plaintiff sued Defendant in King County Superior Court for negligence, unseaworthiness, maintenance and cure and statutory wages. Defendants removed to Federal District Court and on February 27, 2017 filed this motion to enforce the arbitral award and dismiss Plaintiff’s claim.Motion to Enforce ArbitrationAny motion to enforce arbitration must be considered by the court in light of a “strong public policy in favor of foreign arbitration.” Furthermore, foreign arbitration is governed by the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as, and hereinafter referred to as the “New York Convention.”Article V of the New York Convention provides seven grounds for refusal:(1) the parties were under some incapacity or their agreement is otherwise invalid; (2) the party against whom the award is invoked was not given proper notice of the arbitration proceedings; (3) the award deals with matters beyond the scope of the submission to arbitration; (4) the composition of the arbitral authority or procedure was not in accordance with the parties' agreement or with the law of the country where the arbitration occurred; (5) the award has not yet become binding; (6) in the country where enforcement of the award is sought, the subject matter is not capable of settlement by arbitration; and (7) the enforcement of the award would be contrary to the public policy of that country.The court considers these defenses narrowly and the burden of proof lies with the party opposing confirmation.Plaintiff’s Defenses to Confirmation of the Arbitral Award

1. Jurisdiction 

Plaintiff contended there was no agreement to arbitrate in the Philippines, therefore the court lacks jurisdiction to enforce the award.      In light of the New York Convention, signatory states must enforce “an agreements in writing” in which the parties “submit to arbitration” their future differences which stem from “valid legal agreements” of a “subject matter capable of settlement by arbitration.” An “agreement in writing” includes an arbitration clause contained in a contract such as those agreed to by the parties in the July 12, 2013 employment contract, and the $5000.00 cash advance.Plaintiff argued that he never agreed to arbitrate in the Philippines. However, as general contract law applies to agreements to arbitrate, and because Plaintiff previously accepted the $16,160 benefit of the arbitral award, via the doctrine of equitable estoppel he is barred from raising such a defense. Therefore, the court held that it had jurisdiction to enforce the arbitral award.

2. Coercion

Plaintiff contended the award was the result of a coerced settlement, thus it was void.      Relying on Garrett v. Moore-McCormack Co., 317 U.S. 239, 63 S. Ct. 246, 87 L. Ed. 239 (1942), the court reviews releases executed by seamen with high scrutiny due to the seamen’s status as a “ward of admiralty.” The party seeking to enforce the release bears the burden of showing it was made “freely, without deception or coercion” and the seaman fully understood his rights. The court may examine the adequacy of consideration as well as the legal and medical advice available to the seaman at the time of the agreement.             Defendants produced multiple witnesses who testified Plaintiff was advised of his rights and that he was giving up the right to any claims against the Defendants in exchange for the settlement payout multiple times, “orally and in writing both in English and in Tagalog.” Furthermore Plaintiff indicated that he understood.The consideration, $24,160, is greater than the standard payout based on the payment schedule for seamen's disability allowance claims in the Philippines. Someone in a similar disability grade is usually entitled to $10,075. Further, this consideration does not include the amount paid to transport Plaintiff to the Philippines or the cost of Plaintiff’s medical treatment.  Plaintiff offered no evidence suggesting that $24,160 is inadequate consideration. Even reviewing the fact that Plaintiff had no legal representation during the settlement, and in light of the “fiduciary principals of maritime law,” the court held Plaintiff was not coerced into releasing his claims against Defendant.

3. Lack of Notice

Plaintiff contended he was given no notice of the arbitration proceedings. He argues he did not know that the settlement was an arbitration. The court, citing New York Convention Article V(b) pointed out that, “this defense applies where a party is unable to participate meaningfully or at all in the proceedings due to a lack of notice.” Plaintiff negotiated his settlement with Defendant and appeared before the arbitrator, in person. The Court thus concludes that Plaintiff had sufficient notice enabling him to participate and represent his own interests in the proceedings. As previously noted, Plaintiff signed paperwork and orally affirmed that he understood his rights and the terms of settlement. The court held “Whether or not Plaintiff knew that this process constituted ‘arbitration proceedings,’ he was adequately notified of them such that he was able to advocate for himself.”

4. Scope of Agreement to Arbitrate

Plaintiff contended that the award was outside the scope of any agreement to arbitrate because it was not conducted in American Samoa. For the reasons discussed under Jurisdiction, the Court rejected this defense.

5. Selection of the Arbitrator

Plaintiff contended that Defendant unilaterally selected the arbitrator and that this selection was not in line with the agreement between the parties because the arbitration did not occur in American Samoa. For the reasons discussed under Jurisdiction, the Court rejected this defense.

6. Public Policy

Plaintiff contended that the arbitral award violates the public policy of the United States because the arbitrator did not apply the protections of the Jones Act to Plaintiff's release.Courts view the public policy defense of the New York Convention narrowly with a presumption in favor of upholding foreign arbitral awards. For it to succeed, the award must violate the United States’ “most basic notions of morality and justice.” (See Ministry of Defense and Support for the Armed Forces of the Islamic Republic of Iran v. Cubic Defense Systems, Inc., 665 F.3d 1091, 1098 (9th Cir. 2011)).Plaintiff correctly pointed out the public policy protecting seamen as wards of admiralty; however this competes with the “strong public policy in favor of foreign arbitration.” Furthermore, the policy in favor of arbitration applies with extra force in the context of international commerce. See Mitsubishi Motors Corp. v. Soler Chrysler—Plymouth, Inc., 473 U.S. 614, 631, 105 S. Ct. 3346, 87 L. Ed. 2d 444 (1985). Moreover, the court relied on the holding of Asignacion v. Rickmers Genoa Schiffahrtsgesellschaft, 783 F.3d 1010, 1018 (5th Cir. 2015) which states, courts must consider “international comity” which means that the U.S. should enforce foreign awards if it expects domestic awards to be enforced abroad.The court noted that Plaintiff was afforded some of the benefits of U.S. law, and ultimately received more than double what he would have received under the law of the Philippines. The court thus held, “despite Plaintiff's status as a ward of admiralty, Plaintiff's arbitral award does not offend the United States' ‘most basic notions of morality and justice.’”ConclusionThe court granted Defendant’s enforcement of the arbitral award and thereby dismissed Plaintiff’s claims.