Going overboard: the Ninth Circuit forces seamen to walk the plank of arbitration in Rogers v. Royal Caribbean Cruise Line.
Plaintiffs Michael Rogers and Hulya Kar, citizens of Trinidad and Tobago and Turkey respectively, entered into employment agreements with Defendant Royal Caribbean Cruises Ltd ("Royal Caribbean"). (1) The agreements outlined the pay that both Rogers and Kar were to receive, and provided for, among other things, the incorporation of a pre-existing Collective Bargaining Agreement ("Bargaining Agreement"). (2) The Bargaining Agreement outlined a Grievance and Dispute Resolution Procedure that required employees to submit to binding arbitration in the event a dispute under the contract arose. (3)
After Royal Caribbean allegedly failed to pay the Plaintiffs their full wages, the Plaintiffs brought suit in the United States District Court for the Central District of California under 46 U.S.C. [section] 10313(f) (the "Seaman's Wage Act"). (4) In response, Royal Caribbean moved to compel arbitration citing the terms of the employment contract and the incorporated collective bargaining agreement. (5) The district court granted the motion and ordered Rogers and Kar to submit to arbitration. (6) The Plaintiffs appealed the order to the United States Court of Appeals for the Ninth Circuit. (7) The court of appeals affirmed the district court, ruled the exemption clause of the Federal Arbitration Act did not apply, found the arbitration clause distinguishable from Supreme Court precedent and to be neither unconscionable nor contrary to public policy. (8)
For over two hundred years, the United States Congress has looked upon seamen with particular favor. (9) Congress has expressed this favorable attitude by enacting specific pieces of prophylactic legislation aimed at guarding a seaman's various interests. (10) One such piece of legislation is the Seaman's Wage Act. (11) The Seaman's Wage Act addresses a seaman's right to collect wages "within 24 hours after the cargo has been discharged or within 4 days after the seamen is discharged, whichever is earlier." (12) The Act further provides for specific damages in the event an employer fails to render payment and declares that "[t]he courts are available to the seamen for the enforcement of this section." (13) Legislation of this kind can be traced back as early as 1790 and evidences a historic national policy of preferential treatment towards seamen. (14)
The unique protections enjoyed by seamen and the rational supporting the protections was best addressed by Justice Story in the in the famous case of Harden v. Gordon. (15) In Hardin, Justice Story elaborated on the dangers faced by seamen and explained why special status and protection is merited. (16) His Honor noted that "[s]eamen are by the peculiarity of their lives liable to sudden sickness from change of climate, exposure to perils, and exhausting labour." (17) As a result, the court unequivocally declared that seamen are "emphatically the wards of the admiralty." (18) With the wardship doctrine in mind, the court considered the extent to which a seaman may enter into a valid contract. (19) Specifically, Justice Story directed courts to set aside any contract calling for a seaman to sacrifice a right unless the sacrifice was compensated by "extraordinary benefits" and where the sacrifice has been "proved by the most satisfactory evidence to have been fully explained to the seamen." (20) The Hardin court rationalized its decision by comparing seamen to "young heirs" who are incapable of entering into a valid contract. Because seamen are "credulous," "complying," "easily overreached" and are in need of counsel, a court should act in their stead. (21) With these principles in mind, Justice Story pronounced that a court should "watch with jealousy an encroachment upon the rights of seamen." (22)
Since Justice Story's infamous pronouncements, the Supreme Court has sustained this protectionist attitude and has expressed a willingness to guard the unique status granted to seamen. (23) In Strathearn S.S. Co. v. Dillon, the Court held that the protections of Section 4 of the Seamen's Act, a law that provided for periodic recovery of wages, extended to both foreign and American seamen. (24) After reviewing the explicit language and statutory instruction of Section 4, the Court further held that any contract purporting to abrogate the rights outlined in the Section 4 void, and the right to recover would survive a contractual obligation to the contrary. (25) The Court's opinion also expressed their considerable concern regarding the commercial implications of an opposite outcome. (26) The Dillon Court's reasoning reflects the Court's desire to place American and foreign seamen on equal footing, noting that if the statute provided protections for only American seamen, then there would be a tendency not to employ American maritime workers for fear of being hailed into an American court. (27)
In 1971, in U.S. Bulk Carriers, Inc. v. Arguelles, the Supreme Court again addressed a seamen's ability to contract away an admiralty protection. (28) This time, however, the Court faced raw, conflicting federal policies expressed in 46 U.S.C. [section] 596 and section 301 of the Labor Management Relations Act (LMRA). (29) Section 596, the ancestor statute of 46 U.S.C. [section] 10313, specifically granted federal court access to seaman complaining of wage violations. (30) Section 301 of the LMRA, provided a federal remedy to enforce arbitration provisions in collective bargaining agreements. (31) Because the plaintiff, Arguelles, was a seaman who entered into a collective arbitration agreement, the two statutes were brought into direct conflict when Arguelles refused to submit to arbitration and sought relief in United States District Court. (32)
The Court framed the issue presented in Arguelles as "whether the earlier, express, and alternative method of collecting seamen's wages contained in ... s[ection] 596 has been displaced by s[ection] 301 of the Labor Management Relations Act or whether so far as seamen and their wages are concerned s[ection] 301 is only an optional method of resolving the controversy." (33) In order to reach its conclusion whether FMLA Section 301 was to displace the Seaman's Wage Act, the Court looked to the underlying historical polices of the respective statutes. (34)
The Court addressed the policies of section 596 by first noting that "[s]eamen from the start were wards of admiralty" and that the wardship traced its roots to the historical role that the court played as the guardian of seamen. (35) In particular, the Court recognized that the federal courts were given the power to appoint administrative adjuncts known as shipping commissioners who superintended the shipping and discharge of seamen. (36) After the Congress subsequently suspended the commissioners' position, the federal courts were "chosen by Congress" to enforce seamen's rights. (37) The Court concluded that the modern guardian concept was "not much different from what it was in the 18th century." (38)
The Arguelles court then turned to the historical policies underlying section 301 of the LMRA, concluding that the foremost concern of Congress was the enforceability of collective-bargaining agreements, the essence being "that federal courts should enforce these agreements on behalf of or against labor organizations." (39) Furthermore, the Court noted that the LMRA was enacted to address suits by and against unions, further recognizing that Congress gave little attention to the assertion of claims by individual employees and no attention whatsoever regarding the impact of 301 and the special protection procedures governing the collection of wages of maritime workers. (40) However, the Court unambiguously stressed the importance of what did not exist in the LMRA. Specifically, the Court noted that there existed no suggestion that Congress intended for the LMRA "to take the place of the old shipping commissioners or to assume part or all of the roles served by the federal courts protective of the rights of seamen since 1790." (41) The concluding remarks of the Arguelles opinion succinctly expresses the crux of the Court's analysis and conclusion:
The chronology of the two statutes--s[ection] 596 and s[section] 301- makes clear that the judicial remedy was made explicit in s[ection] 596 and was not clearly taken away by s[ection] 301. What Congress has plainly granted we hesitate to deny. Since the history of s[ection] 301 is silent on the abrogation of existing statutory remedies of seamen in the maritime field, we construe it to provide only an optional remedy to them. We would require much more to hold that s[ection] 301 reflects a philosophy of legal compulsion that overrides the explicit judicial remedy provided by 46 U.S.C. s[ection] 596." (42)
Since the Supreme Court's ruling in Arguelles, the Court has not again addressed the conflicting policies inherent in arbitration agreements purporting to bind maritime seamen. However, the Court has addressed the policies that support arbitration agreements in other contexts.
In Allied-Bruce Terminix Companies, Inc. v. Dobson, the Supreme Court issued a writ of certiorari to the Alabama Supreme Court to determine the extent and reach of arbitration agreements under the Federal Arbitration Act (FAA). (43) Reversing the Alabama state court, the Supreme Court reasoned that the historical hostility typical of American Courts towards arbitration agreements was at opposites with the intentions of the United States Congress when enacting the FAA. (44)
After Harden, Dillon, Arguelles and Dobson, the circuit courts have shown a tendency to enforce arbitration agreements between seamen and their employers when the FAA is invoked. One such case was addressed by the Fifth Circuit in the matter of Terrebonne v. K-Sea Transportation Corporation. (45) In Terrebonne, the Fifth Circuit reasoned that the FAA does not prevent a seaman from entering into a post-injury arbitration agreement that subjects a seaman's subsequent claims for maintenance and cure to an arbitration hearing, reasoning that maintenance and cure, while inherent in the employment relationship, is a separate concept and not an intrinsic part of the employment contract. (46)
III. THE NINTH CIRCUIT'S DECISION
As discussed above, in Rogers v. Royal Caribbean Cruise Line, the Ninth Circuit enforced an employment contract that required two maritime seamen to arbitrate their respective wage claims despite the inherent right to federal court access codified in the Seaman's Wage act. (47) However, before reaching its conclusion, the court discussed the Seaman's Wage Act and the policies behind protecting a seafarers' wages. (48) The court made clear that there exists a federal policy of heightened protections for seamen, one that is deeply rooted and historically enjoyed. (49)
After laying the history background of maritime wage protections, the court then discussed federal arbitration law. According to the court, the FAA and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the Convention) were the only laws relevant to their inquiry. The court highlighted the express exemptions (involving maritime workers employment contracts) and the express inclusions (involving maritime transactions) both of which are found in Section 1 of the FAA. (50) The court further highlighted the fact that the Convention applied to legal relationships that are "considered as commercial." (51) In concluding the historical discussion, the court recognized that the Convention expressly incorporates the provisions of the FAA to the extent that the FAA is not in conflict with the Convention. (52)
With the historical discussion as a backdrop, the court framed the first issue as "whether the exemption clause in Section 1 of the FAA applies to arbitration agreements that would, in the absence of the exemption clause, be covered by the Convention Act." (53) Influenced by the Supreme Court's expansive definition of commerce in Allied-Bruce, the court answered the question in the negative. (54)
The court considered the issue disposed of by the Convention's reference to relationships "considered as commercial." (55) Specifically, the Convention incorporated agreements described in Section 2 of the FAA. (56) Section 2 of the FAA defines provisions in contracts as "evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract." (57) In this regard, the court noted that the exemption clause was located in section 1 and was neither part of the definitions in section 1 nor a limitation on which relationships are "considered as commercial" under section 2. (58) The court made note of exactly what an exemption is, explaining that "the exemption clause does not state that transportation workers are not engaged in commerce or that their employment contracts are not 'considered as commercial.'" (59) The court continued, "even though such workers are engaged in commerce and even though their employment contracts are considered as commercial, the FAA does not apply to them." (60) As a result, because the exemption clause did not affect the definition of commerce or the description of which relationships are considered as commercial, the Ninth Circuit held that the exemption is not incorporated into the Convention by virtue of section 202. (61)
In addition to not being applicable pursuant to the definition in section 1 or the description of what is commercial, the court held that the "conflict clause" found in section 208 also sufficiently resolved the issue. (62) As stated above, section 208 incorporates section 1 into the Convention as long as section 1 was not in conflict with section 2. (63) Because the Convention applied to commercial relationships and because an employment contract is classified as commercial by the Supreme Court, the employment contract exemption was in conflict with the commercial relationship description in the Convention. (64) Per the explicit language of the Convention, the court resolved the conflict in favor of arbitration.
After resolving the statutory interpretation argument in favor of arbitration, the court addressed whether the Supreme Court's holding in U.S. Bulk Carriers, Inc. v. Arguelles controlled the case at bar. (65) Again, the court answered the question in favor of arbitration, finding Arguelles distinguishable as a matter of law and fact.
Following the holding of the Eleventh Circuit in Lobo, the Ninth Circuit held that the Convention Act, unlike the LMRA, evidenced a Congressional desire to supplant the federal court access outlined in 10313. (66) The court agreed with the Eleventh Circuit's conclusion that Arguelles concerned a Congressional act (the LMRA) lacking in sufficient legislative history indicating Congressional intent to supplant the wage protections of a seamen, which, if present, would support an abrogation of 10313. (67) The Ninth Circuit further agreed with the Eleventh Circuit's finding that the Convention did evidence a desire by Congress to abrogate 10313 because it "compels federal courts to direct qualifying disputes to arbitration, while the Supreme Court [in Arguelles] found the LMRA to be silent on this matter." (68) Furthermore, because the Convention required the United States to "recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen ..." the court concluded that this language evidences congressional desire to override 10313. (69)
After rejecting Arguelles as controlling precedent, the court turned to the appellant-plaintiffs argument that the contract was unconscionable and contrary to public policy. (70) The arguments stemmed from the Convention's wording, which provided an avenue to void a contract if the contract was "null and void." (71) The court addressed each argument in turn, rejecting the notion that the agreement at bar was unconscionable. (72) Next, the court looked to the choice of law provision in the employment contract as the parties had agreed to decide disputes under Florida law. (73) According to Florida law, a contract is unconscionable if either: 1) one party to an agreement has no meaningful choice but to accept the agreement or 2) where the terms of the agreement are not merely unreasonable but shock the judicial conscience. (74) The court summarily dismissed the argument of unconscionability because, in essence, the plaintiffs failed to meet their burden of proof in the trial court. (75)
The court then rejected the argument that the contracts were contrary to the public policy, specifically the policy surrounding the wardship doctrine. (76) The court reasoned the argument insufficient because Congress expressly directed courts to ensure that arbitrations agreements are enforced. (77) The court buttressed its conclusion on various Supreme Court cases that recognized the emphatic federal policy in favor of arbitral dispute resolution with special force in the field of international commerce. (78)
The Ninth Circuit's construal of the Convention in the noted cases exemplifies sound reason. However, the court's reading of Arguelles cries out for reversal by the Supreme Court of the United States. The Ninth Circuit's failure to address the concerns raised in Arguelles should be corrected and the policies of Arguelles reaffirmed.
The court's interpretation of the Convention in conjunctions with other parts of the FAA is sound and its conclusion that the exemption clause was not meant to be incorporated by the Convention is convincing. The logical weight placed on the location of the exemption clause in the FAA, what an exemption is, and the fact that it is not part of the definition of commercial is self-explanatory. It is difficult to argue for an opposite holding. Moreover, the fact that the exemption clause is in conflict with the Convention compels an undeniable conclusion that the Convention itself did not contemplate that the exemption clause be incorporated into the Convention. Yet the Convention did not expressly provide that seamen's wage claims should be affected, as implicit as this conclusion may be. In fact, the Convention is absolutely silent with regard to the effect it has upon a seaman's wage claim. All that is provided in the Convention is a blanket statement that the Convention applies to dealings considered commercial by the signing country. In any event, the court's ruling that the exemption clause was not incorporated into the Convention is compelling.
Unlike the Ninth Circuit's statutory construal of the Convention, its interpretation of Arguelles is curious. The crux of the court's opinion (and the crux of Lobo cited and followed by the noted case) supposes that the Supreme Court, in Arguelles, found the LMRA to be silent with regard to compelling arbitration. A closer look at Arguelles reveals nothing of the sort. Furthermore, the Ninth Circuit makes no mention of several considerations and concerns raised by the Supreme Court when the Court decided that the LMRA should not be construed to require seamen to submit to arbitration. Moreover, the Ninth Circuit's conclusion that the Convention pronounces "much more", i.e. a stronger policy, than the LMRA is also intriguing.
The Ninth Circuit read Justice Douglas' opinion in Arguelles as finding the LMRA to be silent with regard to compelling arbitration. Yet Justice Douglas expressly described the pertinent portion of the LMRA as "a federal remedy to enforce grievance and arbitration provisions of collective bargaining agreements in an industry affecting commerce." (79) His Honor recognized that the LMRA provided a litigant an avenue to enforce an arbitration agreement, and expressly held that a seaman may invoke the LMRA to compel arbitration. (80) It is true, however, that the Court found the LMRA to be silent on one issue; that issue was whether the LMRA was intended to supplant the statutory right of a seamen to access federal court in the event a wage claim arose. In this regard, the Court's analysis is instructive on what evidence might have demonstrated Congressional intent to supplant the right to access federal courts.
In determining whether the LMRA required a seaman to submit to an arbitration agreement, the Court sought evidence that Congress desired the LMRA "to take the place of the old shipping commissioners or to assume part or all of the roles served by the federal courts protective of the rights of seamen since 1790." (81) This analysis reveals that the Court understood that the LMRA might compel arbitration if the LMRA revealed Congressional intent to replace the commissioner/federal court's guardianship. The Court recognized that the LMRA applied to wage contracts entered into by seamen, but because of the conflicting policies expressed in the ancestor statute of 10313 held the LMRA to be optional. The Court did not find the LMRA to be silent on whether it would compel arbitration, it merely construed the LMRA as an optional avenue of redress. Nothing in the Convention evidences a policy to override the historic protections given to seamen and more than the LMRA did in Arguelles. Indeed the court in the noted case did not even address the extent which evidence questioning whether such evidence existed. Instead, the court opts to interpret the Convention's blanket statement as one that would override the historic treatment granted to seafaring workers.
With the proper reading of Arguelles in mind, the Ninth Circuit should have examined whether the Convention evidenced a congressional desire to supplant the historic admiralty protections that are enjoyed by seamen. In this regard, the court could have honored the Supreme Court's cautioning a court to be hesitant to take a remedy plainly granted by Congress and like the Court in Arguelles considered the Convention an optional avenue of redress. Instead, the court read the language in the Convention as demonstrating much more than the LMRA. A reading of both the acts reveals that each has at least one goal, to enforce arbitration agreements. When deciding whether a Congressional act is supposed to supplant the historic protections granted to seamen, the Supreme Court requires much more than simply intention to enforce contractual agreements. The act must demonstrate a Congressional intention to clearly take away the seaman's access to the courts. (82)
The circuit courts seem to have discarded the historic position enjoyed by maritime seamen and thus placed a seaman's wardship status under siege. Such an attack should not stand in the face of the prophylactic policies outlined by Congress and recognized by the Supreme Court in nearly two hundred years of admiralty jurisprudence. The conflict existing between the FAA and other admiralty rights should be addressed by the United States Supreme Court. Otherwise, the wards of the admiralty will slip into a careless state.
(1.) Rogers v. Royal Caribbean Cruise Line, 547 F.3d 1148, 1150 (9th Cir. 2008).
(4.) Id. at 1151.
(7.) Rogers, 547 F.3d at 1151.
(9.) See, e.g. U.S. Bulk Carriers, Inc. v. Arguelles, 400 U.S. 351 (1971).
(10.) See, e.g. 46 U.S.C. [section] 10313.
(11.) 46 U.S.C. [section] 10313.
(14.) Arguelles, 400 U.S. at 356.
(15.) 11 F. Cas. 480 (C.C.D. Me. 1823) (No. 6047).
(16.) Id. at 483.
(18.) Id. at 485.
(21.) Harden, 11 F. Cas. At 485.
(24.) 252 U.S. 348 (1920).
(25.) Id. at 352-353.
(26.) Id. at 354.
(28.) 400 U.S. 351 (1971).
(29.) 61 Stat 136 (1947).
(30.) Arguelles, 400 U.S. at 364-65.
(31.) Id. at 352-53.
(32.) Id. at 351-52.
(33.) Id. at 352.
(34.) Id. at 355-358.
(35.) Id. at 355 (citing Robertson v. Baldwin, 165 U.S. 275 (1897).
(36.) Arguelles, 400 U.S. at 355.
(39.) Id. at 355.
(41.) Id. at 356.
(42.) Arguelles, 400 U.S. at 357-58.
(43.) 513 U.S. 265 (1995).
(44.) Id. at 272.
(45.) 477 F.3d 271 (5th 2007).
(46.) Id. at 279. See also, Lobo v. Celebrity Cruises, Inc., 488 F.3d 891, 896 (11th Cir.2007), where the Eleventh Circuit interpreted section 2 of the FAA, as superseding a seamen's 10313 wage claim.
(47.) Rogers v. Royal Caribbean Cruise Line, 547 F.3d 1148 (9th Cir. 2008).
(48.) Id. at 1151-52.
(50.) Id. at 1152-54.
(51.) Id. at 1153.
(52.) Id. at 1153-54.
(53.) Rogers, 547 F.3d at 1154.
(54.) Id. at 1154-55.
(55.) Id. at 1155.
(56.) Id. at 1155.
(57.) Id. at 1154.
(58.) Id. at 1154-55.
(59.) Rogers, 547 F.3d at. 1155.
(63.) 9 U.S.C. [section] 202 (2006).
(64.) See Rogers, 547 F.3d at 1154 (citing Circuit City Stores, 532 U.S. at 113).
(65.) Rogers, 547 F.3d at 1155-56.
(66.) Id. at 1157 (citing Lobo, 488 F.3d at 895).
(67.) Id. at 1157.
(70.) Id. at 1158.
(71.) Rogers, 547 F.3d at 1158.
(72.) Id. at 1158.
(74.) Id. (citing Belcher v. Kier, 558 So.2d 1039 (Fla. Dist. Ct. App. 1990).
(75.) Id. at 1158-59.
(77.) Rogers, 547 F.3d at 1158-59.
(78.) Id. (citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985).
(79.) U.S. Bulk Carriers, Inc. v. Arguelles, 400 U.S. 351, 352 (1971) (internal punctuation omitted).
(80.) Id. at 357.
(81.) Id. at 356.
(82.) Id. at 357.
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|Publication:||Loyola Maritime Law Journal|
|Date:||Sep 22, 2010|
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