Arbitration & Mediation

Eleventh Circuit Holds Carnival's Seafarer's Agreement Arbitration Clause Unenforceable and Not Retroactive

By Christopher B. Hopkins, Esq.

A cruise ship waiter trips, spills coffee on himself, and the result is an outpouring of U.S. and international confusion, swirling the Federal Arbitration Act, Jones Act, Seaman's Wage Act, and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards into one steaming brew.

The case is Puliyurumpil Mathew Thomas v. Carnival Corporation d/b/a Carnival Cruise Lines Inc. and the Eleventh Circuit (Barkett, Fay, and Trager) reversed a district court – potentially creating a stir which the U.S. Supreme Court may ultimately review.

We'll leave a lot of the maritime / arbitration details to lawyers devoted to that area of practice and, instead, address some of the interesting issues of the Convention, public policy, retroactivity and waiver of rights.

Only a brief overview of the facts is necessary to set the stage: the waiter suffered his coffee incident in November 2004, returned to work a few times, and ultimately signed a Seafarer's Agreement a year later which included an arbitration clause. Because his vessel (Carnival's Imagination) flew under a flag of convenience, the arbitration was to be held in the Phillipines and apply Panamanian law. The arbitration clause referenced “any and all disputes arising out of or in connection with this Agreement...”

The first question is whether the Convention applied and the challenge was directed at whether there was a written agreement or whether there was a commercial relationship at issue (as pure coincidence, this is the second time in a week where the Convention has come up in a case -- despite the fact we've never covered it on this site in three years). The Court held there was no written agreement since the accident occurred before the Agreement with an arbitration clause was signed; the clause's reference to “this Agreement” limited it to any claims which arose after/under the “new” Agreement. The Panel suggested that if the clause said, “this or any previous Agreement” then the Convention would apply – a point which cruise lines will likely address in future versions of their employment contracts (another alternative would be the broadest language, holding that the arbitration clause applied to any disputes). In short, each time the employee signed an employment contract, it superseded the prior version and was not retroactive – again, because of the limited reference to “this Agreement.”

The Court also made the obvious choice that a maritime employment contract was a commercial relationship.

What concerned the Court overall was the fact that arbitration was to be held in a foreign land using foreign law was a one-two punch of choice-of-law and forum selection which violated public policy since it prevented the plaintiff from claiming rights under statute (in this case, which gave him triple damages). Relying on two prior U.S. Supreme Court opinions, Mitsubishi Motor Corp v. Soler Chrysler Plymouth, Inc. and Vimar Seguros v. M/V Sky Reefer, the Panel followed the precedent that “if the choice-of-forum and choice-of-law clauses operated in tandem as a prospective waiver of a party's right to pursue statutory remedies..., we would have little hesistation in condemning the agreement as against public policy.”

Full post as published by Florida Arbitration Law on August 12, 2009 (boomark / email).