Rogers v. Royal Caribbean Cruise Line

Citations: 547 F.3d 1148; 2008 A.M.C. 2752; 14 Wage & Hour Cas.2d (BNA) 336; 185 L.R.R.M. (BNA) 2263; 2008 U.S. App. LEXIS 23401; 2008 WL 4811882Docket: 07-55071

Court: Court of Appeals for the Ninth Circuit; November 6, 2008; Federal Appellate Court

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Michael Rogers and Hulya Kar, seafarers employed by Royal Caribbean Cruises, appealed a district court decision that compelled arbitration of their employment dispute. They contended that federal statutes exempt their contracts from Title 9 of the United States Code, which governs arbitration. The Ninth Circuit concluded that their contracts are "considered as commercial" under Title 9, affirming the enforceability of the arbitration provisions. Both Rogers and Kar had signed employment agreements stipulating their wages and incorporating a Collective Bargaining Agreement (CBA) with the Norwegian Seafarers' Union, which included a mandatory arbitration clause for grievances related to their employment. The plaintiffs filed suit, alleging unpaid wages and violations of maritime and California law regarding timely wage payments.

On October 13, 2006, Royal Caribbean filed a motion to compel arbitration based on the employment contract and collective bargaining agreement, which the district court granted during a December 11, 2006 hearing. A written order confirming the motion and dismissing the complaint with prejudice was issued on January 25, 2007. Rogers and Kar subsequently appealed. The standard of review for the district court's decision is de novo, including the validity and scope of the arbitration clause and whether a party waived its right to sue. The burden lies with the opposing party to demonstrate Congressional intent to prevent waiver of judicial remedies for statutory rights.

The case's central issue is the enforceability of the employment agreement's mandatory arbitration provision, which the court affirmed. The excerpt outlines the historical context of statutory protections for seafarers' wages, tracing back to 1790, when Congress first enacted such laws, culminating in the current codification at 46 U.S.C. 10313. This legal framework reflects Congress's longstanding policy to protect seafarers, deemed a "favored class," due to their vulnerability and the significant power imbalance between them and shipowners. The excerpt cites various legal precedents that underscore the protective role of federal courts regarding seafarers' rights and wage claims.

Subsection (f) of Section 10313 mandates that a master must pay a seaman their remaining wages within 24 hours after cargo is discharged or within 4 days after the seaman is discharged, whichever comes first. Subsection (g) imposes a penalty of 2 days’ wages for each day payment is delayed without sufficient cause. Subsection (i) extends these provisions to seamen on foreign vessels in U.S. harbors, affirming their access to U.S. courts for enforcement. The Supreme Court has clarified that Congress intended to provide this benefit to foreign seamen, as American seamen already had independent rights to seek court remedies. 

The legal framework for arbitration is codified in Title 9 of the United States Code, encompassing the Federal Arbitration Act (FAA) enacted in 1947 and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards enacted in 1970. Section 1 of the FAA includes an exemption clause for contracts of employment of seamen, explicitly stating that it does not apply to such contracts. This exemption is interpreted narrowly by the Supreme Court, which has determined that it pertains only to contracts of employment for transportation workers.

The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the Convention) came into effect for the United States on December 29, 1970. Article II(1) mandates that Contracting States recognize written agreements for arbitration of disputes regarding defined legal relationships, which can be contractual or not. Article I, Paragraph 3 allows Contracting States to limit the Convention's application to disputes deemed commercial under their national law. The U.S. declared it would apply the Convention only to commercial legal relationships. Section 202 of the Convention Act specifies that arbitration agreements or awards from such relationships fall under the Convention. Section 2 of the Federal Arbitration Act (FAA) states that written provisions in maritime or commerce-related contracts to settle disputes through arbitration are valid and enforceable unless legally revocable. Section 206 permits courts to direct arbitration according to the agreement's terms, regardless of location. Section 208 incorporates Chapter 1 of the FAA into the Convention Act, provided there is no conflict. 

The key question is whether the FAA's exemption clause in Section 1 applies to arbitration agreements covered by the Convention Act. It was concluded that it does not, as the Convention Act applies to agreements from legal relationships considered commercial. The Convention Act encompasses agreements described in Section 2 of the FAA, which includes contracts related to commerce, such as employment contracts, as confirmed by the Supreme Court in Circuit City Stores and further analyzed in Allied-Bruce Terminix Cos. v. Dobson, where the Court recognized the FAA's preemption of state law and its broad applicability.

The Court analyzed the phrase 'a contract evidencing a transaction involving commerce' in two parts. Firstly, it clarified that 'involving commerce' is broader than 'in commerce' and equates to 'affecting commerce,' indicating Congress' intent to fully utilize its Commerce Clause powers. Secondly, the Court interpreted 'evidencing a transaction' to mean that while the transaction must involve interstate commerce, the parties do not need to have recognized this connection. The Court referenced that Section 1 of the FAA defines 'commerce' in terms of the Commerce Clause, encompassing various forms of interstate and foreign commerce. 

The exemption clause in Section 1 is not part of the definition of commerce and serves as an exemption rather than a limitation on what constitutes 'commercial' relationships. It affirms that transportation workers are engaged in commerce, yet their employment contracts are excluded from FAA applicability. The exemption clause does not affect the definition of 'commerce' within the Convention Act, which only states that arbitration agreements arising from legal relationships considered commercial fall under the Convention. Employment contracts for seafarers are thus considered commercial and fall within the Convention's scope.

Furthermore, Section 208 of the FAA incorporates its provisions unless conflicting with the Convention Act. The Convention allows states to declare its applicability only to commercial legal relationships under their national law, but the U.S. declaration did not include the exemption clause. Therefore, the exemption clause does not impose an additional limitation on the Convention’s applicability nor does it alter the definition of 'commercial.' It simply signifies that the FAA is inapplicable to contracts covered by the exemption clause, even if those contracts are commercial in nature.

Rogers and Kar assert that the U.S. Supreme Court case U.S. Bulk Carriers, Inc. v. Arguelles prohibits arbitration agreements from limiting court jurisdiction over seafarer wage disputes under 46 U.S.C. 10313, which guarantees wages to seafarers. Specifically, Section 10313(i) states that courts are available for seamen to enforce their wage rights. The Fifth and Eleventh Circuits have previously ruled that the exemption clause of Section 1 does not apply to the Convention Act; however, these rulings did not involve wage claims under Section 10313. In Lobo v. Celebrity Cruises, the Eleventh Circuit extended its previous holding to include lost wage claims. The current ruling aligns with the Eleventh Circuit's conclusion that the Convention Act supersedes any presumption that courts remain accessible to foreign seafarers when they have signed valid arbitration agreements regarding wage claims. The Supreme Court's ruling in Arguelles, which addressed whether Section 301 of the Labor Management Relations Act (LMRA) abrogated jurisdiction under the predecessor to Section 10313, does not necessitate a different outcome. The Court held that the LMRA does not undermine federal court jurisdiction over seamen’s wage claims, emphasizing that federal courts are protectors of seamen's rights, without indicating that arbitration could replace judicial recourse for seamen, as historically established since 1790.

The Court clarified that Section 10313 is not the exclusive remedy for seamen, allowing them to pursue grievance and arbitration processes if they choose. However, the Court emphasized that it is not in a position to determine whether these processes serve the seaman's best interests better than Section 10313. The historical context of these statutes indicates that the judicial remedy in Section 10313 remains intact and was not overridden by Section 301 of the Labor Management Relations Act (LMRA). The Court expressed hesitance to deny the judicial remedy that Congress has historically granted to seamen, highlighting that the LMRA does not abrogate existing statutory remedies in the maritime context but rather provides an optional remedy. 

The Eleventh Circuit supported this view, reinforcing that the LMRA's silence on the repeal of seamen's remedies aligns with the notion that Section 301 offers only an alternative, not a compulsory, route. In contrast, the Convention Act explicitly mandates federal courts to enforce arbitration agreements, compelling arbitration for qualifying disputes, which the Supreme Court found the LMRA does not address. Therefore, the analysis suggests that while the Convention Act applies to seafarers' wage claims, the arbitration provisions in the Collective Bargaining Agreement could be challenged as unenforceable due to unconscionability and public policy concerns. The arguments regarding the enforceability of these arbitration provisions are acknowledged and will be examined further.

Unconscionability claims raised by Rogers and Kar regarding the arbitration clause in their Collective Bargaining Agreement are unsubstantiated. Florida law employs a two-pronged test for unconscionability, assessing both procedural and substantive elements. Procedural unconscionability exists when one party has no meaningful choice in accepting the terms, while substantive unconscionability pertains to terms that are excessively unreasonable. Rogers and Kar failed to demonstrate procedural unconscionability as the arbitration provision resulted from negotiations between Royal Caribbean and their union, with no evidence presented that the union or the employees lacked meaningful choice. Similarly, their arguments against substantive unconscionability—regarding the selection of arbitrators and the requirement to travel to distant arbitration locations—were insufficient. The union's involvement in the arbitrator selection process and the default arbitration location being the employee's country of citizenship undermine their claims.

Rogers and Kar also contended that the arbitration provision is contrary to public policy, asserting that seafarers should have open access to courts for wage claims. However, this argument does not invalidate the arbitration clause, as federal law strongly favors the enforcement of arbitration agreements. The courts are directed to uphold arbitration as a means of dispute resolution, particularly in international commerce, which overrides any claimed public policy favoring seafarers. Consequently, the arbitration agreement between Royal Caribbean and the Norwegian Seafarers' Union is deemed enforceable under the Convention. The ruling is affirmed.

The excerpt presents a dissenting opinion by Circuit Judge Noonan regarding the historical and legal framework surrounding seamen's rights to wages. The Act of July 20, 1790 established a unique right for seamen to prompt wage payment, which is supported by federal remedies. This right is distinct from other contract types, highlighting the strong legal connection between seamen and the vessels they serve. The lien on a ship for seamen's wages is described as "sacred," emphasizing the importance of these protections, which arose from the challenging realities faced by seamen compared to ship owners. The federal government's concern for seamen's welfare has historical roots, as illustrated by significant cases, including Harden v. Gordon and Vaughan v. Atkinson, which reinforce this protective framework.

Additionally, the extension of these protections to foreign seamen in American ports is discussed, aimed at preventing American seamen from being replaced by those who lacked similar legal recourse. The National Labor Relations Act of 1937, while changing bargaining dynamics, did not diminish seamen's rights to sue for unpaid wages, as upheld in U.S. Bulk Carriers, Inc. v. Arguelles. Current federal law, codified in 46 U.S.C. 10313, outlines seamen's entitlements, including when wages begin, stipulations for advance payments, and obligations for wage payment after voyages, including penalties for delayed payment. The statute reflects a continued commitment to seamen's rights and protections in maritime law.

Fishing, whaling vessels, and yachts are excluded from certain legal provisions, while seamen on foreign vessels in U.S. harbors are included. Chapter 103, which pertains to Foreign and Intercoastal Voyages, applies specifically to U.S. vessels traveling between U.S. ports and foreign countries, excluding Canada, Mexico, and the West Indies. This suggests that the Wage Act does not apply to such vessels; however, it explicitly states that it does cover seamen on foreign vessels while in U.S. ports, without requiring the vessel to be American or having a specific international destination. The statute indicates that it primarily protects foreign seamen in American ports, supported by a broad jurisdictional grant allowing seamen to enforce their rights.

The provisions of Chapter 103 should be harmonized with the Seamen's suits statute, which allows seamen to pursue legal actions for wages, salvage, and health and safety enforcement without prepayment of costs. Both the Wage Act and the Seamen's suits statute remain in effect and do not mention federal arbitration law. Royal Caribbean argues that these statutes have been effectively repealed concerning foreign seamen, supporting this claim with a Sign-On Agreement for an employee named Hulya Kar, detailing her position as Assistant Waiter and outlining her pay structure.

The agreement acknowledges that the employer can terminate the contract with seven days’ notice and incorporates a Collective Bargaining Agreement that binds both the employee and the company, which is also referenced in the acknowledgment of receipt of the Employee Handbook.

The signature line is designated for the "Payroll Purser," who has signed and dated the document. A Collective Bargaining Agreement (CBA) between Royal Caribbean and the Norwegian Seafarers Union spans 24 pages, with the company's signature dated August 23, 2005, while stating its effectiveness from January 1, 2005. Article 26 of the CBA outlines the "Grievance and Dispute Resolution Procedure," specifying that if a wage dispute arises, the Employer has 60 days to either pay the claimed amount or deposit it in an interest-bearing account. Should the grievance be resolved in favor of the employee, the employee is entitled only to the deposited sum plus accrued interest. Article 26 also mandates that all grievances be resolved through binding arbitration in accordance with the United Nations Convention.

Royal Caribbean argues that by signing the form, Kar agreed to arbitrate as stipulated by the CBA, which purportedly precludes actions in federal court. However, this argument is flawed as it assumes that the rights granted to seamen under 46 U.S.C. 10313 can be waived by contract, contradicting general maritime law principles. Under such law, agreements between shipowners and seamen are closely scrutinized, with any clause that undermines a seaman's rights deemed void unless it has been fully and fairly explained to them, and they have received compensation for the waiver. 

Kar has acknowledged signing the Sign-On Agreement that referenced the CBA but has not confirmed that she reviewed or understood the CBA or was made aware of the federal rights she was waiving. The only evidence presented is that copies of the CBA were received by the purser. Consequently, the incorporation of the arbitration clause into the Sign-On Agreement is considered void. Royal Caribbean further contends that the arbitration is enforceable under 9 U.S.C. 202, which upholds international agreements to arbitrate. However, this statute only applies if a valid arbitration agreement exists, which has been determined not to be the case here. Thus, the international arbitration statute cannot be invoked.

The excerpt addresses the legal interplay between statutes governing the rights of foreign seamen and the implications of arbitration agreements. It argues against the notion that a 1971 statute overrides earlier laws, particularly those from the 1980s, without explicit language indicating such a repudiation. Historical context is provided, referencing the case Frost v. Wenie to illustrate that Congress has historically maintained avenues for seamen to pursue remedies through federal courts, alongside arbitration options. 

The text highlights that neither the National Labor Management Relations Act nor the Convention affects seamen's statutory rights, asserting that Congress has not eliminated these rights. It emphasizes that seamen, including foreign ones, retain the choice to arbitrate or to sue in federal court without incurring costs. 

Additionally, it notes that Royal Caribbean cannot confirm the employment of an individual named Michael Rogers, but assumes for the sake of argument that he is an employee. Rogers has agreed to an arbitration clause in his employment agreement. Relevant legal provision 46 U.S.C. 10317 is cited, stipulating that any agreement cannot deprive a seaman of statutory remedies related to wage recovery. Since Rogers and Kar have not been deprived of such remedies, the question of whether Article V(1)(a) of the Convention allows courts to refuse enforcement of an arbitral award based on such deprivation remains unaddressed.