Data

Date:: 07-07-2010
Country:: USA
Number:: 10–60830–CIV
Court:: United States District Court, S.D. Florida
Parties:: Amanda Matthews v. Princess Cruise Lines, Ltd.

Keywords

DISPUTE BETWEEN A CANADIAN EMPLOYEE AND A BERMUDAN EMPLOYER -
NEW YORK CONVENTION ON THE RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS - INTERPRETATION OF ARTICLE II(3) - REFERENCE TO UNIDROIT PRINCIPLES

ALLEGED INVALIDITY OF ARBITRATION CLAUSE BY REASON OF UNEQUAL BARGAINING POWER BETWEEN THE PARTIES - REFERENCE TO ART. 3.10 UNIDROIT PRINCIPLES [ART. 3.2.7 OF THE 2010 EDITION] NOT RELEVANT - CLAIM DISMISSED BECAUSE UNDER THE NEW YORK CONVENTION PARTIES' BARGAINING POWER DISPARITY DOES NOT CONSTITUTE DEFENSE TO VALIDITY OF ARBITRATION CLAUSE

Abstract

Plaintiff, a Canadian seafarer, brought an action against Defendant, a Bermudan cruise ship employer, alleging to have suffered injuries while working. Defendant opposed the action, contending that, pursuant to the contract, any dispute between the parties must be settled through arbitration in Bermuda by applying the laws of Bermuda. Plaintiff asserted that the arbitration clause was unenforceable by reason, inter alia, of the unequal bargaining power of the parties, especially from an economic point of view.

The Court rejected this argument affirming that “even assuming the existence of a bargaining advantage, Plaintiff has failed to establish that the disparity complained of constitutes a defense under the [New York] Convention [on the Recognition and Enforcement of Foreign Arbitral Awards]”. In doing so, the Court cited with approval the decision Koda v. Carnival Corp. [see UNILEX: United States District Court, S.D. Florida, 30 March 2007], which affirmed that Art. 3.10 of the UNIDROIT Principles [Art. 3.2.7 of the 2010 Edition] regarding bargaining power was not controlling in cases where enforcement of an arbitration agreement is sought pursuant to the New York Convention.

Fulltext

I. Introduction
THIS CAUSE is before the Court upon Defendant’s Motion to Compel Arbitration [DE 3].1 On June 21, 2010, Plaintiff filed a response in opposition [DE 7], and on June 28, 2010, Defendant filed a reply [DE 12]. Having carefully considered the relevant submissions, the record, and the applicable case law, I grant the motion in part, deny the motion in part, and stay this matter pending arbitration for the reasons that follow.

II. Background
This case arises from injuries sustained by the Plaintiff, a Canadian seafarer by the name of Amanda Matthews (“Plaintiff”), while employed aboard Defendant Princess Cruise Lines Ltd.’s (“Defendant” or “Princess”) Bermuda-flagged vessel, the “Caribbean Princess.” [DE 1-5, p. 5]. On or about April 27, 2010, Plaintiff filed a three-count complaint in Broward County Circuit Court alleging Jones Act negligence,2 unseaworthiness, and failure to provide maintenance and cure. [DE 1-5, p. 10]. On May 18, 2010, Defendant removed the matter to federal court pursuant to 28 U.S.C. § 1441, and on May 24, 2010, Defendant moved to compel arbitration pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 9 U.S.C. § 201, et seq. (“the Convention Act”).3 The basis for Defendant’s motion to compel is an agreement signed by Plaintiff on October 17, 2007, entitled “Acceptance of Employment Terms and Conditions” (“the Acceptance Agreement”). The Acceptance Agreement provides that “any and all disputes shall be referred to and resolved by arbitration as provided for in the Principal Terms and Conditions of Employment,” which Plaintiff acknowledged that she had received, reviewed, and accepted at the time she signed the Acceptance Agreement. [DE 3-1, p. 2]. In this regard, Article 14 of the Principal Terms and Conditions of Employment (“the Principal Terms”) contains two pertinent paragraphs. The first is an arbitration clause providing that “any and all disputes . . . relating to or in any way arising out of or connected with” services performed by Plaintiff for Defendant “shall be referred to and resolved exclusively by binding arbitration pursuant to [the Convention] in Bermuda . . . .” [DE 3-2, p. 7].4 The second is a choice-of-law clause stating that "any such dispute arising under or in connection with these terms or [Plaintiff’s] service shall be governed exclusively in all respects by the laws of Bermuda without regard to principles of conflicts of laws." Id. The Principal Terms also contain a severability provision in Article 15: “The conditions of these Terms are severable. If any of these Terms is determined to be void or otherwise unenforceable by any court or tribunal of competent jurisdiction, then the remainder of the Terms shall stand in full force in effect.” Id. Defendant now moves this Court to compel arbitration pursuant to the Convention and the aforementioned provisions of the Principal Terms, while “stipulating” to the application of U.S. law to Plaintiff’s statutory claims in the Bermuda arbitration. See [DE 3, p. 8 n.1]. Plaintiff opposes Defendant’s motion, arguing that the arbitration clause is unenforceable for a number of reasons. First, she asserts that the arbitration clause is void because the Principal Terms impermissibly restrict her U.S. statutory and common law rights and remedies in violation of public policy. See [DE 7]. Second, she asserts that her Jones Act claim is non-arbitrable, arguing that the case of Bautista v. Star Cruises – which affirmed an order compelling arbitration of plaintiff’s Jones Act claims under the Convention – is inapplicable. See generally 396 F.3d 1289 (11th Cir. 2005). Third, she argues that the arbitration provision is unconscionable. [DE 7]. Finally, she argues that the arbitration provision “is incapable of being performed” under the Convention because “Plaintiff cannot afford the airfare to get to Bermuda from Canada; cannot afford to pay for her lodging expenses in Bermuda; and cannot afford legal representation and the costs and fees of the arbitration itself.” Id. at 12. I address each argument in turn.

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IV. Analysis
A. Expense of Arbitration and Procedural Unconscionability
Plaintiff opposes Defendant’s motion on the grounds that the arbitration provision is effectively “incapable of being performed” because a Bermuda arbitration is likely to be prohibitively expensive. I reject this argument and note that Plaintiff has failed to cite a single case holding that the prospect of having to incur arbitration costs renders an arbitration agreement “incapable of being performed” pursuant to the Convention. See generally [DE 7]. Meanwhile, at least two judges in this district have expressly rejected the “prohibitive costs” defense recognized under the FAA in the context of the Convention.7 See Bulgakova v. Carnival Corp., Case No. 09-CV-20023, [DE 16] at *3-4 (S.D. Fla. June 22, 2009) (Seitz, J.) (refusing to apply FAA prohibitive costs defense in context of the Convention and noting that courts “cannot lightly transpose defenses recognized under the FAA to the ‘unique circumstances of foreign arbitration’ ”) (citing Bautista, 396 F.3d at 1302); Koda v. Carnival Cruise Lines, Inc., Case No.: 06-CV-21088, [DE 38] at *6-7 (S.D. Fla. Mar. 30, 2007) (Hoeveler, J.) (acknowledging expenses and burdens that would be imposed upon Plaintiff as a result of foreign arbitration but noting that the court was “constrained by the precedent set in this Circuit.”). Because Plaintiff has failed to demonstrate how the prohibitive costs it alleges constitute a defense under the Convention, the potential financial hardship cannot invalidate the agreement to arbitrate. Bautista also concluded that traditional principles of procedural unconscionability (e.g., unequal bargaining power) do not “fit within the limited scope of defenses” to the enforceability of an arbitration agreement provided for by the Convention. Bautista, 396 F.3d at 1302 (concluding that “[w]hile it is plausible that economic hardship might make a prospective [] seaman susceptible to a hard bargain during the hiring process, Plaintiffs have not explained how this makes for a defense under the Convention”). Thus, even assuming the existence of a bargaining advantage, Plaintiff has failed to establish that the disparity complained of constitutes a defense under the Convention.8 See Bautista, 396 F.3d at 1302; Koda v. Carnival Cruise Lines, Inc., Case No.: 06-CV-21088, [DE 47] at *2 (S.D. Fla. Sept. 7, 2007) (Hoeveler, J.) (noting that UNIDROIT Principles regarding bargaining power are not controlling in cases where enforcement of an arbitration agreement is sought pursuant to the Convention); see also Polychronakis v. Celebrity Cruise Lines, Inc., 2008 WL 5191104, *3 n.2 (S.D. Fla. Dec. 10, 2008) (King, J.) (concluding that traditional principles of unconscionability and unequal bargaining power were not valid defenses pursuant to the Convention, even where Plaintiff was required to execute the pertinent agreements when he “was well into the voyage, at sea, and in the midst of performing his duties. . . after any opportunity for negotiation or disembarkation had passed”).9

B. Thomas Analysis
Plaintiff further argues that the Bermuda choice-of-law provision contained in the Principal Terms renders the agreement to arbitrate unenforceable because the two clauses operate in tandem to impermissibly limit Plaintiff’s U.S. statutory and common law remedies, relying on Thomas v. Carnival Corp., 573 F.3d 1113 (11th Cir. 2009). There is no dispute that the Principal Terms, as written, would require Plaintiff to arbitrate her claims in Bermuda applying Bermuda substantive law. However, the parties disagree as to whether the arbitration clause is void as a matter of public policy given Defendant’s purported “stipulation” to the applicability of U.S. statutory law in the arbitral forum. Defendant argues that because of its choice-of-law “stipulation,” Thomas does not control, while Plaintiff asserts that the agreement to arbitrate cannot be salvaged. Having considered the relevant submissions and the applicable law, I agree with Plaintiff that the choice-of-law clause contained in the Principal Terms is void as a matter of public policy pursuant to Thomas. However, given the stand-alone nature of the choice-of-law clause and the Principal Terms’ severability provision, the arbitration clause remains enforceable. Although the Eleventh Circuit’s narrow holding in Thomas applied only to claims asserted pursuant to the Seaman’s Wage Act, 10 a holistic reading of Thomas indicates that the Eleventh Circuit’s reasoning applies with equal force to claims brought pursuant to the Jones Act. Specifically, I note that the Eleventh Circuit did not focus on the unique nature of the Seaman’s Wage Act in reaching its conclusion that foreign choice-of-law and arbitration clauses can – if enforced in tandem – constitute a prospective waiver of statutory rights in violation of public policy. Instead, the Eleventh Circuit focused on the fact that the clauses would “have ‘operated in tandem’ to completely bar Thomas from relying on any U.S. statutorily-created causes of action.” Id. at 1113 (emphasis added); see also id. at 1124 (noting that enforcing the foreign choice-of-law and arbitration clauses in tandem “is exactly the sort [of result] that the Supreme Court has described as a prospective waiver of parties rights to pursue statutory remedies without the assurance of a ‘subsequent opportunity for review.’ ”) (cites and quotes omitted). Accordingly, I conclude that Thomas’ directives regarding the prospective waiver of statutory remedies are applicable here and that, as a result, the Principal Terms’ choice of law and arbitration clauses purporting to eliminate Plaintiff’s Jones Act rights and remedies cannot be enforced in tandem.

C. Severability
Having concluded that the choice-of-law and arbitration clauses contained in the Principal Terms – if enforced in tandem – would render the agreement a prospective waiver of Plaintiff’s statutory remedies in violation of public policy, I must now determine how this matter should proceed. In crafting a remedy, I note that there are at two policy interests at issue here that must be respected, if possible. The first is the powerful “international policy favoring commercial arbitration,” which, as the Supreme Court has expressly noted, requires the “subordinat[ion] [of] domestic notions of arbitrability” in domestic courts. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 638-39 (1985). The second is the policy at the heart of the Thomas decision, which calls on courts to protect “a party’s right to pursue statutory remedies” as a matter of “public policy.” 11 Thomas, 573 F.3d at 1122. Having carefully considered the applicable law and the aforementioned policy interests, I conclude that the appropriate remedy is to sever the Bermuda choice-of-law provision in accordance with the Principal Terms’ severability clause. See, e.g., Krstic v. Princess Cruise Lines, Ltd., --- F. Supp. 2d ----, 2010 WL 1542083 (S.D. Fla. Mar. 25, 2010) (Gold, J.) (severing choice of law clause from identical agreement and enforcing arbitration agreement pursuant to the Convention); Dockeray v. Carnival Corp., Case No.: 10-CV-20799, [DE 34] (S.D. Fla. May 11, 2010) (Altonaga, J.) (same, with thorough discussion of intra-district split of authority on this issue); see also Rent-A-Center, West, Inc. v. Jackson, --- S. Ct. ----, 2010 WL 2471058, *1, *5 (U.S. June 21, 2010) (noting that “a party's challenge to another provision of the contract, or to the contract as a whole, does not prevent a court from enforcing a specific agreement to arbitrate” and stating that “as a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract") (cites and quotation marks omitted).12

V. Conclusion
Based on the foregoing, I conclude that the choice-of-law provision at issue should be severed from the Principal Terms pursuant to the severability provision contained in the Principal Terms. However, the arbitration provision remains enforceable pursuant to the Convention and its implementing legislation.13
Accordingly, it is hereby
ORDERED AND ADJUDGED that:
1. Defendant’s Motion to Compel Arbitration [DE 3] is GRANTED.
2. The Bermuda choice-of-law provision contained in Paragraph 1 of Article 14 of the Principal Terms is hereby STRICKEN and shall heretofore be treated by the parties as null and void.
3. Plaintiff’s claims shall be submitted to binding arbitration in Bermuda in accordance with the Principal Terms and the provisions of this Order.
4. Plaintiff’s Motion for Remand [DE 9] is DENIED AS MOOT.
5. Plaintiff’s Motion for Discovery [DE 11] is DENIED.
6. This case is STAYED.
7. The clerk is directed to ADMINISTRATIVELY CLOSE this case.
8. All pending motions are DENIED AS MOOT and all upcoming hearings – including
the oral argument previously set for July 12, 2010 – are CANCELLED.
9. Either party may move to re-open this matter for good cause shown.}}

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