Lujan v. Carnival Corporation
Filing
33
ORDER GRANTING 6 Motion to Compel Arbitration. See ORDER for details. All other pending Motions are DENIED AS MOOT. The Clerk shall CLOSE this case. Signed by Judge Robert N. Scola, Jr. on 4/2/2012. (jky)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 11-23826-Civ-SCOLA
GONZALO LUJAN,
Plaintiff,
vs.
CARNIVAL CORPORATION,
Defendant.
_____________________________________/
ORDER ON MOTION TO COMPEL ARBITRATION
THIS MATTER is before the Court on the Motion to Compel Arbitration [ECF No. 6],
filed by Defendant Carnival Corporation (“Carnival”). For the reasons set forth below, this
Motion is granted.
Introduction
Plaintiff Gonzalo Lujan (“Lujan”) filed suit in Florida state court to recover for injuries
allegedly sustained in the course and scope of his employment with Carnival in 2008, 2009, and
2010. Lujan, a Peruvian seaman, alleges he was injured while working on board Carnival’s
foreign-flagged vessels, the M/S Imagination, M/S Triumph, and M/S Conquest. His Complaint
asserts claims for Jones Act negligence, unseaworthiness, failure to provide maintenance and
cure, and failure to treat. Carnival timely removed the Complaint to this Court pursuant to
9 U.S.C. § 205 on the basis that Lujan’s claims are subject to arbitration. Shortly after removal,
Carnival filed the instant Motion to Compel Arbitration, which Lujan opposes.
Carnival’s Motion to Compel Arbitration
Carnival argues that Lujan is required to arbitrate his claims because he signed a
Seafarer’s Agreement (the “Agreement”) upon employment that contains an arbitration clause.
Paragraph 7 of the Agreement provides that “any and all disputes arising out of or in connection
with this Agreement . . . shall be referred to and finally resolved by arbitration under the
American Arbitration/International Centre for Dispute Resolution International Rules,” and that
the arbitration shall be held in London, Monaco, Panama City, or Manila, “whichever is closer to
the Seafarer’s home country.” Agmt. ¶ 7 [ECF No. 6-1]. The Agreement further states that all
disputes shall be decided under “the laws of the flag of the vessel on which [the] Seafarer is
assigned at the time the cause of action accrues, without regard to principles of conflicts of laws
thereunder.” Id. ¶ 8. Because this Agreement was in effect during the incidents in question,
Carnival insists that Lujan must arbitrate his claims. Under the terms of the Agreement, such
arbitration would be held in Panama City (which is nearest to Lujan’s home of Peru) and would
be decided under Panamanian law (because the vessels in question are all flagged in Panama).
Lujan contends that his claims are not subject to arbitration because the Agreement is, for
three fundamental reasons, null and void. First, he argues that “Carnival has a system in place in
which it is impossible for seaman to review and examine the terms and conditions of Carnival’s
arbitration agreements before signing them,” and that he was required to sign quickly and
without an opportunity to properly review the Agreement or seek advice of counsel concerning
its terms. Resp. at 6 [ECF No. 8]; Lujan Decl. ¶¶ 7-9. According to Lujan, this system
employed by Carnival violates the Seamen’s Articles of Agreement Convention, rendering the
arbitration clause invalid and/or unenforceable. Second, Lujan contends that the arbitration
provision is void because Panamanian law, if applied to his claims, would deprive him of all
meaningful relief. He argues that he would not be able to pursue his Jones Act cause of action in
arbitration, as Panama neither recognizes such a claim nor provides an adequate equivalent.
Further, Lujan maintains that Panama employs shorter limitations periods, limits maximum
recovery to $50,000 per maritime incident, does not impose strict liability for unseaworthiness,
and does not permit punitive damages for maintenance and cure. Third and finally, Lujan argues
that the arbitration agreement is void as against public policy pursuant to Thomas v. Carnival
Corp., 573 F.3d 1113, 1123 (11th Cir. 2009), wherein the Eleventh Circuit refused to enforce an
arbitration agreement requiring the application of Panamanian law because it would “completely
bar [the seaman] from relying on any U.S. statutorily-created causes of action.”
Legal Standards
This Court is empowered to compel arbitration under the Federal Arbitration Act and the
Convention on Recognition and Enforcement of Foreign Arbitral Awards, 9 U.S.C. § 202
(the “Convention”).
See Bautista v. Star Cruises, 396 F.3d 1289, 1294 (11th Cir. 2005).
In determining whether to order arbitration, the district court conducts a “limited jurisdictional
inquiry,” which is “colored by a strong preference for arbitration.” Id. at 1301.
Initially, a court must consider whether four jurisdictional prerequisites are met.
Id. at 1294. Specifically, there must be an agreement in writing within the meaning of the
Convention; the agreement must provide for arbitration in the territory of a signatory of the
Convention; the agreement must arise out of a commercial legal relationship; and a party to the
agreement must not be not an American citizen, or the commercial relationship must relate to a
foreign state. Id. at 1295, n.7.
If the four prerequisites are met, the district court must compel arbitration unless an
available affirmative defense under the Convention applies.1 See Alcalde v. Carnival Cruise
Lines, 2011 WL 2883287, at *2 (S.D. Fla. Jul. 19, 2011). At the arbitration enforcement stage,
these are limited to claims that the agreement is “null and void, inoperative, or incapable of being
performed.” Bautista, 396 F.3d at 1301-02. An arbitration agreement is “null and void” within
the meaning of the Convention “only where it is obtained through those limited situations, such
as fraud, mistake, duress, and waiver, constituting standard breach-of-contract defenses that can
be applied neutrally on an international scale.” Lindo v. NCL (Bahamas), Ltd., 652 F.3d 1257,
1276 (11th Cir. 2011) (citations omitted). Arguments that the arbitration agreement is “contrary
to public policy” may only be raised after arbitration, at the arbitral award enforcement stage;
such defenses are not available initially. Id. at 1280 (public policy defense has no application
“where [defendant] seeks to enforce arbitration at the outset of the dispute”).
Legal Analysis
Upon careful consideration, the Court concludes that arbitration must be compelled here.
The four jurisdictional prerequisites are satisfied, and Lujan’s defenses are not viable at this
stage in the proceedings. Any public policy arguments he has must await the outcome of
arbitration, at which time they may be asserted during the arbitral award enforcement stage. To
ensure that a forum remains available to Lujan to raise any such challenges down the road, the
Court will, to the extent necessary, retain jurisdiction to hear them after arbitration is completed.
A. The Four Jurisdictional Prerequisites
The four jurisdictional prerequisites are clearly satisfied in this case.
First, Lujan does not dispute that there is a written agreement, which he signed, requiring
arbitration of his claims. See Bautista, 396 F.3d at 1300. He does argue, however, that the
arbitration agreement was not validly formed because he was rushed into signing the agreement
and was not given an adequate opportunity to review it or seek advice of counsel. According to
Lujan, this violates the Seamen’s Articles of Agreement Convention and renders the arbitration
1
In some circumstances, arbitration may also be avoided when the party who seeks to
arbitrate has waived its right to do so. Krinsk v. SunTrust Banks, Inc., 654 F.3d 1194, 1200
(11th Cir. 2011). Waiver is not an issue in this case, however.
agreement not validly formed.
In other cases, similar arguments have been asserted as
affirmative defenses, rather than challenges to the valid formation of the contract under the first
jurisdictional prerequisite. For example, in Henriquez v. NCL (Bahamas), Ltd., 440 F. App’x
714, 716 (11th Cir. 2011), the seaman argued that he signed his agreement under duress, which is
an affirmative defense rendering the arbitration clause null and void. His duress argument was
that “the district court should not have compelled arbitration because he did not have the
opportunity to read the contract before signing it and, if he did not sign it, he would not have
been allowed to stay on the ship to work.” Id.
In the end, it is immaterial whether this contention is treated as a challenge to a
jurisdictional prerequisite or as an affirmative defense. In either case, the result is the same; this
argument is insufficient to avoid arbitration. Compare Bautista, 396 F.3d at 1300 (“Although
Plaintiffs claim the crewmembers did not have an opportunity to review the entirety of the
Standard Terms before signing, Plaintiffs do not dispute the veracity of the signatures.
Accordingly, this documentation fulfills the jurisdictional prerequisite that the court be provided
with an agreement to arbitrate signed by the parties.”) (citation omitted), with Henriquez, 440 F.
App’x at 716 (enforcing arbitration despite “duress” defense). While a seaman rushed into
signing an agreement without adequate time to review upon fear of losing employment surely
faces “a tough choice,” this does not amount to duress, nor does it mean that the agreement was
invalidly formed.2 See id.; see also Bautista, 396 F.3d at 1302 (fact that prospective seamen face
“a hard bargain during the hiring process” does not render arbitration agreement unenforceable).
Over the course of three years, Lujan signed three separate Seafarer’s Agreements
containing an identical arbitration provision. Yet, as far as we know, he never once questioned
2
Lujan’s affidavit states that although he is a Spanish speaker, Carnival gave him the
Agreement in English and not Spanish. Lujan Aff. ¶ 15. While he does not argue the point
anywhere in his Response, one could conceive that this fact raises a question as to whether the
contract was validly formed for purposes of the first jurisdictional prerequisite. Not so, however.
“In the absence of fraud, the fact that an offeree cannot read, write, speak, or understand the
English language is immaterial to whether an English-language agreement the offeree executes is
enforceable.” Morales v. Sun Constructors, Inc., 541 F.3d 218, 223 (3d Cir. 2008). “Persons not
capable of reading English, as well as those who are, are free to elect to bind themselves to
contract terms they sign without reading.” Merrill, Lynch, Pierce, Fenner & Smith, Inc. v.
Benton, 467 So. 2d 311, 313 (Fla. 5th DCA 1985); see also La Torre v. BFS Retail & Comm’l
Ops., LLC, 2008 WL 5156301, at *4 (S.D. Fla. Dec. 8, 2008) (arbitration clause valid even
where “[signor] has a limited understanding of the English language and is an unsophisticated
individual”); Hall v. Burger King Corp., 912 F. Supp. 1509, 1523 (S.D. Fla. 1995) (parties may
not avoid contract because “their English was ‘not very good’ at the time they executed it”).
the terms of the Agreement, nor asked for it to be explained to him. Under such circumstances,
Lujan’s signature manifested his assent to the entire Agreement, and he is bound by it.
See Bautista, 396 F.3d at 1301 (“In the limited jurisdictional inquiry prescribed by the
Convention Act, we find it especially appropriate to abide by the general principle that ‘[o]ne
who has executed a written contract and is ignorant of its contents cannot set up that ignorance to
avoid the obligation absent fraud and misrepresentation.’”); Morales v. Sun Constructors, Inc.,
541 F.3d 218, 223 (3d Cir. 2008). Thus, the first jurisdictional prerequisite is satisfied here.
Turning to the second, the Agreement provides for arbitration in the territory of a
signatory of the Convention, as it indicates that arbitration shall take place in London, Monaco,
Panama City, or Manila. The United Kingdom, Monaco, Panama, and the Philippines are all
signatories to the Convention, satisfying the second prerequisite. Neither party disputes this fact.
Third, the Agreement arises out of a commercial legal relationship. Indeed, the Eleventh
Circuit has held that seafarer agreements requiring arbitration may be so categorized.
See Bautista, 396 F.3d at 1300 (“The crewmembers’ arbitration provisions constitute commercial
legal relationships within the meaning of the Convention Act.”).
Fourth, a party to the agreement is not an American citizen, satisfying the final
jurisdictional prerequisite, because Lujan is a citizen of Peru.
Thus, the four jurisdictional prerequisites are satisfied. As such, the Court must compel
arbitration unless any affirmative defenses apply – a matter to which the Court now turns.
B. Affirmative Defenses
Lujan fails to raise any affirmative defense that would permit him to avoid arbitration at
this stage. Lujan makes two arguments3 in the nature of an affirmative defense. He contends
that application of Panamanian law will deprive him of all meaningful relief because Panama
will not recognize his Jones Act claim, the applicable statute of limitations is shorter in Panama
than in the United States, Panama limits maximum recovery to $50,000 per maritime incident,
Panama does not impose strict liability for unseaworthiness, and it does not permit punitive
damages for maintenance and cure. He also argues that the arbitration agreement is void as
against public policy pursuant to the Eleventh Circuit’s decision in Thomas v. Carnival Corp.,
573 F.3d 1113, 1123 (11th Cir. 2009). These arguments go hand-in-hand and really only raise a
3
As noted above, Lujan framed his first argument – that he was rushed and did not have
sufficient opportunity to review the Agreement’s terms – as a challenge to the contract’s
formation, not as an affirmative defense. Whether this argument is more properly considered as
one or the other is immaterial, however. In either case, the argument fails; it will not defeat
Carnival’s right to arbitrate. See Henriquez, 440 F. App’x at 716; Bautista, 396 F.3d at 1302.
single affirmative defense. Both essentially ask the Court to declare the arbitration provision
unenforceable on public policy grounds because Panama law, if applied to Lujan’s claims, will
defeat meaningful recovery and deprive Lujan of available remedies under United States law.
This path of argument leads to a dead-end, however. Public policy arguments apply only
at the arbitral award enforcement stage and not at the arbitration enforcement stage at issue here.
As noted at the outset, the only available affirmative defenses at the arbitration enforcement
stage are that the arbitration agreement is “null and void, inoperative, or incapable of being
performed.” Bautista, 396 F.3d at 1301-02. An arbitration agreement is “null and void” within
the meaning of the Convention “only where it is obtained through those limited situations, such
as fraud, mistake, duress, and waiver, constituting standard breach-of-contract defenses that can
be applied neutrally on an international scale.” Lindo, 652 F.3d at 1276. To be viable at the
arbitration enforcement stage, a defense must be subject to neutral application on an international
scale. Bautista, 396 F.3d at 1302. Public policy arguments are just the opposite – “by definition
[they] cannot be applied ‘neutrally on an international scale,’ as each nation operates under
different statutory laws and pursues different policy concerns.”
Lindo, 652 F.3d at 1278.
Accordingly, Lujan cannot avoid arbitration on any public policy basis.
Lujan does attempt a somewhat creative end-run around this outcome. He argues that
Thomas controls here and, under Thomas, the arbitration provision cannot be enforced. To be
sure, “Thomas crafted a new public policy defense, providing that arbitration is unenforceable if
foreign law applies because the plaintiff cannot assert U.S. statutory claims.” Lindo, 652 F.3d at
1274. In Lindo, however, the Eleventh Circuit found that Thomas was a departure from prior
precedent in Bautista and that it was therefore not governing law of the Circuit under the priorpanel rule.4 Id. at 1278. Accordingly, Thomas is dead-letter in this Circuit.
Yet Lujan argues that Thomas lives on. He contends that before the Eleventh Circuit
issued its mandate in Lindo, the parties to that case settled and, under controlling precedent,
when a case settles before the end of the appellate process, any opinion that has been produced
should be vacated. Resp. at 15 (citing Flagship Marine Servs., Inc. v. Belcher Towing Co.,
4
The prior-panel rule is familiar to most jurists. It holds that a panel of the Eleventh
Circuit, or any court of appeals, is bound by earlier panel holdings unless and until they are
overruled en banc or by the Supreme Court. See Horowitch v. Diamond Aircraft Indus., Inc.,
645 F.3d 1254, 1258 (11th Cir. 2011). Under this rule, “consistency with earlier decisions is
everything.” Hurth v. Mitchem, 400 F.3d 857, 862 (11th Cir. 2005). Therefore, any intervening
panel decisions that depart from the prior panel’s earlier holdings are not to be followed.
See Walker v. Mortham, 158 F.3d 1177, 1189 (11th Cir. 1998); Hurth, 400 F.3d at 862.
23 F.3d 341 (11th Cir. 1994)). Review of the docket in Lindo does indeed reveal that the parties
settled after the opinion was released, but before the mandate had issued. The panel opinion was
released on August 29, 2011. The parties notified the Court of settlement on October 3, 2011, by
motion to dismiss the appeal as moot. But, on October 13, 2011, the Court denied that motion.
Subsequently, on October 20, 2011, an amicus party attempted to file a paper styled as an
emergency motion to vacate the panel opinion based upon settlement, but the clerk of court
returned the motion unfiled a day later with a letter stating that the Court has no provision to file
such a document. That same day, October 21, 2011, the mandate issued. It was entered on the
district court docket a week later, on October 28, 2011.
While recognizing that certain cases, such as Flagship Marine, do state that panel
opinions should be vacated where the parties reach a settlement prior to issuance of the mandate,
there are other cases, from a higher authority, that also say vacatur is not typically available
where mootness results from settlement of the parties. See U.S. Bancorp Mortg. Co. v. Bonner
Mall P’ship, 513 U.S. 18, 25 (1994). As the Supreme Court has noted, “[j]udicial precedents are
presumptively correct and valuable to the legal community as a whole. They are not merely the
property of private litigants and should stand unless a court concludes that the public interest
would be served by a vacatur.” Id. at 26 (citation omitted). “[T]he determination is an equitable
one,” see id. at 29, and in the case of Lindo, the Court of Appeals must have found vacatur
inappropriate.5 This Court need not speculate on the Eleventh Circuit’s motivations. In short, all
that matters is that the panel did not vacate its opinion, the mandate was issued, and subsequent
panels of the Eleventh Circuit have regarded Thomas as dead-letter and Lindo as law of the land.
See Maxwell v. NCL (Bahamas), Ltd., 2011 WL 4928737, at *1 (11th Cir. 2011); Henriquez,
440 F. App’x at 716. Courts that have not heeded Lindo, have been reversed. See Maxwell,
2011 WL 4928737, at *1 (reversing district court that applied public policy defense at the
arbitration enforcement stage). This Court is not interested in a similar fate. Accordingly,
Lujan’s argument, creative as it may be, is ultimately unavailing. Arbitration must be compelled
here.
5
Given the Lindo panel’s determination that Thomas was an unwarranted departure from
prior precedent, it should come as no surprise that the equities would counsel against vacatur.
The Court of Appeals may have reasonably concluded that the Lindo decision was necessary to
set the law of the Circuit straight and that it would prevent further confusion and error among the
lower courts. Cf. Fernandes v. Holland Am. Line, 810 F. Supp. 2d 1334, 1336 (S.D. Fla. 2011)
(“The question posed in this case has divided the Judges of this District since the Eleventh
Circuit decided Thomas.”).
Conclusion
For the reasons explained above, this dispute must be resolved in arbitration under the
parties’ Agreement. The four jurisdictional prerequisites are satisfied and there is no affirmative
defense available to Lujan at this stage in the proceedings. To ensure that a forum remains
available to Lujan to raise any available affirmative defenses after arbitration, the Court will, to
the extent necessary, retain jurisdiction to hear those challenges at the appropriate time.
Accordingly, it is hereby ORDERED and ADJUDGED that Carnival’s Motion to
Compel Arbitration [ECF No. 6] is GRANTED. All remaining pending Motions are DENIED
AS MOOT. The Clerk is directed to CLOSE this case.
DONE and ORDERED in chambers, at Miami, Florida on April 2, 2012.
________________________________
ROBERT N. SCOLA, JR.
UNITED STATES DISTRICT JUDGE
Copies to:
Designated U.S. Magistrate Judge
Counsel of record
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