Post-Accident Arbitration Clauses for Jones Act Crew Claims

 

 

Image

In the United States of America seaman injured in the course of their employment may elect to bring a civil action in law, with the right of trial by jury, against the employer. Whilst a crewmember has the choice of a jury trial or a bench trial there is the possibility of a third option, arbitration. The enforceability of arbitration was discussed in the case of Vane Line Bunkering Inc v Cleveland Hooper, in the United States Court for the Southern District of Florida, Miami Division.

Background

By way of background, Cleveland Hooper (“Hooper”) was injured when he fell whilst working on board a Vane Line Bunkering (“Vane”) vessel. In the days following the incident Vane presented Hooper with the option of signing up to their post-incident Advanced Wage Agreement (“AWA”).

The aim of AWA is to allow an injured crewmember to focus fully on their rehabilitation, without having to be concerned about their financial position which often leads to attorney representation. Under the agreement with Hooper, in addition to receiving his statutory benefits of maintenance and cure, Vane agreed to make advances in unearned wages and company benefits whilst Hooper continued to recover from his injuries and to continue to do so until he was either fit for duty or reached maximum medical improvement, whatever came first.

By signing this agreement a crewmember accepts payment of unearned wages and company benefits and in return agrees to arbitrate all claims against the vessel and/or Vane under the Comprehensive Arbitration Rules
and procedures of JAMS in Washington DC, Philadelphia or New York. Further the agreement requires that:

i. Either party may call for the arbitration by notice to the other sent by registered mail;
ii. Arbitration is conducted by a sole arbitrator selected in accordance with JAMS rules;
iii. Any filing fees, case management fees and deposit for the compensation of the arbitrators shall be advanced by Vane, subject to subsequent allocation.

iv. The decision of the arbitrator is final and binding on the parties and any United States District or other court of competent jurisdiction shall have authority to enforce the agreement, to enter judgment on the award and to grant any remedy provided by law in respect of the arbitration proceedings.

Hooper signed the agreement and accepted payment of wage advances along with maintenance and cure benefits for many months.

The Case

Once the case approached the point where settlement could be considered Vane filed a motion to compel arbitration in accordance with the terms of the AWA. Hooper responded alleging Vane failed to pay an appropriate amount of maintenance and cure and filed a lawsuit alleging damages for employer negligence and unseaworthiness of the vessel as the cause of his injuries.

Significantly, Hooper alleged the arbitration statement included within the AWA was unenforceable.

Vane took the position that the fact that Hooper was a seaman did not affect the enforceability of the arbitration provision. Whilst the Federal Arbitration Act (“FAA”) does apply to contracts of employment of seaman the post-accident arbitration clause was not included within the original employment contract. However, agreements to arbitrate within post-injury AWA’s have been recognised and are also enforceable under the FAA. 

In their analysis the Court looked at the FAA which states that an agreement in writing to submit to arbitration an existing controversy arising out of such a contract shall be valid, irrevocable and enforceable.
This mandatory language reflects a strong, well established and widely recognised Federal policy in favour of arbitration.

Hooper made three arguments against the enforceability of the arbitration clause in the AWA. Firstly he argued that the AWA qualifies as a seaman’s contract of employment and was therefore void under the FAA. Secondly, that the Federal Employers’ Liability Act (FELA) prevents the Court from enforcing the arbitration provision and thirdly, that the entire AWA is void.

The Court addressed each of these three points in turn.

1. The Court agreed with Vane that the phrase “contracts of employment” does not mean any contract that has some connection to a seaman’s employment. Further the courts have uniformly held that post-incident agreements to pay seaman advanced wages are nonemployment agreements under the FAA.
2. The Jones Act incorporates parts of FELA (which protects, governs and compensates railroad workers injured on the job) and which voids any contractual provision seeking to limit a seaman’s choice of forum. However, the Fifth Circuit (in Pure Oil Co v Suarez 5th Cir [1965]) held that the venue provisions in FELA are not incorporated into the Jones Act. Therefore the Court concluded that Hooper’s argument that FELA’s provisions limiting venue should be applied to the Jones Act was rejected.
3. Hooper’s argument for voiding the AWA was based upon “fraud in the inducement” and negligent misrepresentation of the AWA. The Court, however, noted that Hooper’s challenges were to the validity of the AWA and not directed at the arbitration clause itself. The Court concluded that under FAA rules these arguments should be made to the arbitrator in the first instance and, therefore, Hooper must submit these to the appointed arbitrator.

Based upon the above the Court found in favour of Vane and granted their Motion to Compel Arbitration.

Conclusion

Whilst post-incident Advanced Wage Agreements, and in particular the relevant arbitration clause, have proved beneficial, they may not be appropriate in all cases. Shipowners should consider claims on their own individual merits before considering this as an option.

The merits of including such clauses in the original contract of employment were discussed in:

https://www.steamshipmutual.com/publications/Articles/LindoNCL0212.htm