Ninth Circuit Voids Foreign Seaman’s Settlement Clothed as Arbitral Award
Castro v. Tri Marine Fish Company LLC, 2019 U.S. App. LEXIS 5864, 2019 WL 942967 (9th Cir., No. 17-35703, Feb. 27, 2019)
By: Arthur Crais
Foreign seamen are often required to sign employment contracts mandating arbitration of any employment disputes including any personal injury, death, or maintenance and cure claims. As these are subject to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards,[1] the prohibition of such agreements in a contract of employment of “seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce,”[2] does not apply.[3] Federal courts in the U.S. have routinely enforced foreign arbitral awards of foreign seaman claims and arbitration provisions in foreign seaman contracts.[4]
In the case before the Ninth Circuit, the court first had to address whether the arbitral award which the employer sought to enforce under the Convention was in fact an arbitral award. The contract of employment required arbitration of such claims to be brought in American Samoa and subject the procedural rules of American Samoa.[5] The seaman[6] settled his maintenance and cure claim with the employer and was told that an arbitrator would review the release to make it binding. The settlement agreement also required arbitration of its validity and enforcement under the law and procedure of American Samoa. Once an agreement was reached, the parties went to the National Conciliation and Mediation Board[7] where an accredited maritime voluntary arbitrator met them and approved the settlement.[8] Thereafter, a joint motion to dismiss which was the first filing in the matter, was filed.
Later medical treatment indicated that the initial surgeons “failed to graft his anterior cruciate ligament or address his torn meniscus.”[9] He then sued Tri Marine in state court in Washington State. The employer removed under the New York Convention.[10]
The trial court granted the employer’s motion to enforce the award. The Ninth Circuit, however, reversed and examined whether the purported arbitral award was, in fact, an arbitral award. Noting that term is not defined in the Convention, the panel turned to the Restatement (Third) U.S. Law of Int’l Commercial Arbitration § 1- 1 (Am. Law Inst., Tentative Draft No. 2, 2012) (“Restatement TD No. 2”) which defines “arbitral award.”[11] Here, there was no arbitral issue and there was no submission to an arbitrator or panel and the “proceedings” failed to comply with the express provisions of the agreement to arbitrate as it required arbitration in American Samoa and subject to the procedural rules of American Samoa. The “approval” even deviated from procedures in The Philippines.[12]
The unanimous court concluded that the “award” was not an arbitration award and could not be converted into one merely because the settlement was approved by the arbitrator.[13] The court noted that this does not undermine a settlement reached between parties during an arbitration proceeding (and presumably after the hearing and still under consideration by the arbitrator or tribunal).
Having found that the “award” was not an arbitral award, the question then arose whether there was federal jurisdiction under the Convention. This was not raised until the appeal and thus not addressed by the panel.
The case was remanded to the district judge to assess its jurisdiction (the state court suit was removed to federal court pursuant to the Convention)[14] as well as the validity of the release.
The decision may be accessed via this hyperlink:
http://cdn.ca9.uscourts.gov/datastore/opinions/2019/02/27/17-35703.pdf
[1] 9 U.S.C § 201-208[2] 9 U.S.C.§ 201[3] Aggarao v. MOL Ship Mgmt. Co., Ltd., 675 F.3d 355 (4th Cir. 2012); Francisco v. Stolt Achievement MT, 293 F.3d 270, 274 (5th Cir. 2002)[4] Lindo v. NCL (Bahamas) Ltd., 652 F.3d 1257 (11th Cir. 2011); Asignacion v. Rickmers Genoa Schiffahrtsgesellschaft mbH & Cie KG, 783 F.3d 1010 (5th Cir. 2010)[5] American Samoa is an unincorporated territory of the United States.[6] Castro was a citizen of The Philippines but moved to American Samoa. The settlement negotiations occurred in the office of the employer in The Philippines.[7] In Manila, The Philippines.[8] Castro asserted that the “neutral arbitrator” “misled [him] by characterizing the settlement as ‘just a first payment’ and informing Castro that he is ineligible for protection under the Jones Act.” (2019 U.S. App. LEXIS 5864 *3)[9] Id.[10] 9 U.S.C. § 205[11] “An ‘arbitral award’ is a decision in writing by an arbitral tribunal that sets forth the final and binding determination on the merits of a claim, defense, or issue, regardless of whether that decision resolves the entire controversy before the tribunal….” 2019 U.S. App. LEXIS 5864 at *4[12] 2019 U.S. App. LEXIS 5864 at *5[13] Id.[14] 9 U.S.C. § 205
