11th Circ. Told Cost-Splitting Sinks Seaman Arbitration Clause


By Nathan Hale

Law360, Miami (March 27, 2015, 8:18 PM ET) — A former seaman for Celebration Cruise Operator Inc. presented the Eleventh Circuit with an issue of first impression Friday, arguing that an order compelling foreign arbitration of a worker injury dispute should be reversed because of a clause requiring him to share costs.

The appeals court said it did not believe this argument had previously been raised regarding an arbitration agreement under the Convention on Recognition and Enforcement of Arbitral Awards, but counsel for appellant Jorge Escobar, told the court that much is at stake beyond just his individual client’s ability to pursue his claims

Upholding the foreign arbitration clause in Celebration’s employment contract, which stands alone among cruise lines with its cost-splitting provision, would be the last straw in industry efforts to dismantle more than 200 years of special treatment that federal and common law have afforded seamen to ensure adequate working conditions and safety for ship passengers, said Carlos Felipe Llinas Negret of Lipcon Margulies Alsina & Winkleman PA.

“Little by little their rights have been chipped away,” he said. “Now, with this case, if the court affirms this type of contract allowing them to force my client to pay for the costs of arbitration, that’s going to be the end of it.”

Escobar, a Honduran national who claims he suffered various injuries from repeated heavy lifting while serving as a housekeeping attendant onboard the M/V Bahamas Celebration, originally brought claims in Florida state court, but Celebration had the case removed to federal court, where it was ultimately granted a motion to dismiss the case and compel Escobar to enter arbitration in the Bahamas.

Escobar’s appeal seeks reversal and remand of that decision. His initial brief argues that the Federal Arbitration Act excludes employment contracts for seamen from containing arbitration clauses, but Llinas told the court Friday his client is not completely against arbitration.

Instead, the oral arguments focused on the cost-splitting provision, under which Celebration says it would pay the initial costs, estimated by Llinas at about $3,000 in other cases he has handled, but require Escobar to split the arbitrator’s fees, which his lawyer says could be $20,000 total for a typical three-day hearing and seven-page opinion.

Escobar filed an affidavit in the lower court saying that he has no money in bank accounts and barely enough from his current work income to support his wife and daughter, according to case documents.

“It prices out my client from the dispute resolution process,” Llinas said of the Celebration contract.

Answering the judges’ questions about his experience handling similar cases, Llinas said he has never recovered money for his cruise line worker clients in a foreign arbitration case, except when the companies have on occasion chosen to settle the claims.

Celebration argues that four circuits, including the Eleventh, have held that the seaman’s exemption in the Federal Arbitration Act does not apply to the convention, and the contract and the parties satisfy the jurisdictional prerequisites of the convention for the foreign arbitration to move forward.

Escobar’s arguments regarding “public policy” issues, such as the cost-splitting, are premature and are appropriately raised in the arbitration award stage after the process has been allowed to play out, the company said.

Michael J. Dono of Hamilton Miller & Birthisel LLP also argued Friday that the record lacks specific evidence of the costs of the proceedings and of Escobar’s actual financial status, beyond his affidavit about his bank accounts.

“The amount of costs in the record is all speculative,” he told the court.

Dono said Celebration had objected to Escobar’s affidavit of his impoverished state as being untimely, but the lower court had not addressed that issue, ruling based on other grounds related to the convention.

Llinas countered by asking what difference it makes if the arbitration costs are ultimately $5,000 or $20,000: His client would not be able to afford to move forward at either cost.

He argued that case law raised by Celebration does not address this issue of cost, because all of the other cruise lines pay for the full arbitration process.

“Not just because they’re doing it out of the goodness of their heart; it’s because they’re following the law,” Llinas argued.

Circuit Judges Joel F. Dubina and Frank M. Hull and U.S. District Judge Dudley Hollingsworth Bowen Jr. sat on the panel for the Eleventh Circuit.

Escobar is represented by Carlos Felipe Llinas Negret of Lipcon Margulies Alsina & Winkleman PA.

Celebration is represented by Jerry D. Hamilton and Michael J. Dono of Hamilton Miller & Birthisel LLP.

The case is Escobar et al. v. Celebration Cruise Operator Inc., case number 14-11793, in the U.S. Circuit Court of Appeals for the Eleventh Circuit.

–Editing by Mark Lebetkin.