When Foreign Law Applies
The 11th Circuit has ruled that an arbitration agreement in a seaman's employment contract that called for arbitration in a foreign country under yet another country's law is against U.S. public policy and can be denied enforcement under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) because application of that law would prospectively waive statutory protections to which the seaman is entitled.
A headwaiter on Carnival's cruise ship Imagination was injured in a slip and fall accident aboard ship. Although he was treated by the ship's doctor, he complained of inadequate treatment. Eventually he could not work and left the ship. He returned to his job but still complained of injuries and inadequate care and left the ship a second time. Both times Carnival treated his leave as vacation. When he again returned to work, he signed a new Seafarer's Agreement. This agreement required arbitration of disputes in the Philippines under Panamanian law. The ship's doctor determined that his previous injuries made him unfit for work. As a result, Carnival discharged him and paid him $700.
The seaman filed a lawsuit for damages arising from his fall on the ship and alleged poor medical treatment. He also asserted a Jones Act claim, two general maritime law claims, and the failure to pay wages under the Seaman's Wage Act. Carnival moved to compel arbitration under the New York Convention. The district court granted the motion and the seaman appealed.
The 11th Circuit reversed. First it concluded that the arbitration clause met the requirements of the New York Convention because it called for arbitration in a signatory country, one party was not a U.S. citizen, and the arbitration clause was contained in a commercial contract.
Next, the court held that the Jones Act and general maritime law claims were not covered by the arbitration clause because they were based on events that occurred prior to signing the agreement containing the arbitration clause. However, the Seaman's Wage Act claims for wages earned after the new Seafarer's Agreement was signed were subject to the arbitration clause.
Nevertheless, the court held that the arbitration clause was not enforceable on public policy grounds because it called for arbitration under Panamanian law, which would deprive him of rights under the Seaman's Wage Act as well as the right to recover treble damages. The court relied on the provision in the New York Convention permitting a court in a member State to refuse to enforce an arbitration agreement if doing so would contravene the forum's public policy.
Accordingly, the court held that the arbitration agreement was null and void insofar as it applied to Seaman's Wage Act claims.
Puliyurumpil Mathew Thomas v. Carnival Corp., 573 F.3d 1113 (11th Cir. July 1, 2009).
State Statutory Discrimination Claims
The Supreme Judicial Court of Massachusetts has ruled that, to be enforceable, a waiver of the right to litigate statutory rights must be explicitly stated in the arbitration agreement.
The former chief of anesthesiology sued Beth Israel alleging common law and statutory claims, including gender-based discrimination and retaliation in violation of Chapter 151B of Massachusetts General Laws. Beth Israel moved to dismiss the complaint and compel arbitration based on the plaintiff 's employment agreement, which required arbitration of "[a]ny claim, controversy or dispute arising out of or in connection with this Agreement or its negotiations." The trial court denied this motion. The state's highest appeals court granted Beth Israel's interlocutory appeal.
Although the Federal Arbitration Act and the Massachusetts Arbitration Act both governed the parties' arbitration agreement, the court applied state law. Under Massachusetts law, in order for statutory claims to be arbitrable, the parties must, at a minimum, state "clearly and specifically" in their agreement "that such statutory claims are covered by the contract's arbitration clause. …