Litigation or Arbitration?

Rodgers-Rouzier v. American Queen Steamboat Operating Company, LLC, 104 F.4th 978 (7th Cir. 2024)

By Fraser K. Mitchell, Managing Editor of Loyola Maritime Law Journal

Mary Rodger-Rouzier (“Rodgers-Rouzier”), Plaintiff-Appellant, instituted a suit against American Queen Steamboat Operating Company, LLC (“American Queen”), Defendant-Appellee, alleging that she was denied overtime pay to which she was entitled to under the Fair Labor Standards Act.[1] American Queen responded by moving to dismiss the case for improper venue and argued that the employee’s had agreed to settle claims in arbitration; thus, the claim was governed by the Federal Arbitration Act (“FAA”).[2] After the initial attempt of dismissal by American Queen, the company would later invoke the Indiana Uniform Arbitration Act (“IUAA”) after the Southern District of Indiana determined that the FAA did not apply to Rodgers-Rouzier.[3] The Indiana district court ultimately granted American Queen’s motion to dismiss the case subject to the arbitration agreement.[4]

Rodgers-Rouzier appealed the decision of the district court to the Seventh Circuit and set forward three primary arguments against the dismissal.[5] Plaintiff argued that (1) Rule 12 of Federal Rules of Civil Procedure prohibited enforcement of the arbitration agreement; (2) the district court lacked the authority to apply state law and compel arbitration; and (3) state law did not allow for compelled arbitration.[6] The Seventh Circuit reversed the district court holding and ultimately determined that American Queen must be held to its bargain and the arbitration agreement is governed by the FAA, which in fact, does not apply to any contracts of employment of seaman.[7]

Rodgers-Rouzier had been working for the appellee as a bartender on a steamboat operated by appellee.[8] As a condition of the appellant’s employment, appellant signed an arbitration agreement which contained a provision that the arbitration agreement shall be governed by the FAA.[9] Section six of the arbitration agreement provides that it shall be governed by the FAA.[10]

With regards to the waiver of rights under 12(b)(3), the appellate court held that American Queen did not waive its right to enforce arbitration because a motion to dismiss for improper venue is not the proper mechanism to enforce arbitration.[11] The appellate panel followed Supreme Court precedent that the Federal Rules do not control the enforcement of a waiver of arbitration clauses, rather common law principles govern whether the court decides issues and what evidence may be used.[12]

The Seventh Circuit then dissected the appellant’s argument that the district court erred in applying the IUAA and the “equitable remedial rights doctrine.”[13] The circuit court agreed that the FAA did not apply to Rodgers-Rouzier as a seaman but determined that some law had to apply and settled on Indiana law, including the IUAA.[14] Finding no unconscionable provision in the contract relating to arbitration, the reviewing court upheld the district court’s dismissal and compelled Rodgers-Rouzier to arbitrate.[15] In so doing, the Seventh Circuit clarified that ordinary state law always fills the gaps in an arbitration agreement and is only displaced when needed to overcome conflict.[16]

Agreeing with the district court’s conclusion that Indiana law applied, the Seventh Circuit determined that Indiana law favors choice of law provisions within contracts.[17] Therefore, section six of the parties’ agreement which provided that the FAA governed was valid.[18] Then, the court addressed the applicability of the FAA as to Rodgers-Rouzier given her seaman status. On that issue, the court held that Rodgers-Rouzier could not be compelled to arbitrate because the FAA does not apply to seamen.[19] Although arguments for severability and waiver due to unconscionability were made by American Queen and Rodgers-Rouzier, the panel declined to follow the district court’s ruling and holdings of law on those issues.[20]

Ultimately, the decision to select the FAA as the chosen law under the agreement proved self-defeating in a contract between an employer and its seaman employee, Rodgers-Rouzier.

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[1] Rodgers-Rouzier v. American Queen Steamboat Operating Company, LLC, 104 F.4th 978, 981 (7th Cir. 2024).

[2] Id.

[3] Id.

[4] Id. at 981.

[5] Id.

[6] Rodgers-Rouzier, 104 F.4th at 983.

[7] Id. at 982.

[8] Id.

[9] Id.

[10] Id. at 983.

[11] Rodgers-Rouzier, 104 F.4th at 984.

[12] Id. at 984–85 (citing Atl. Marine Const. Co. v. U.S. Dist. Ct. for W. Dist. of Tex., 571 U.S. 49, 55 (2013); Pavey v. Conley, 544 F.3d 739, 741 (7th Cir. 2008)).

[13] Id. at 985.

[14] Id. at 983.

[15] Id. at 983.

[16] Rodgers-Rouzier, 104 F.4th at 991.

[17] Id. at 992.

[18] Id.

[19] See id. at 993.

[20] Id. at 993–95.