August 09, 2012
Plaintiff v. Celebrity Cruises
Response in Opposition to Motion for Sanctions
Our maritime attorneys are experienced in all areas of practice including pre-trial litigation, trial, appeals, mediation, and arbitration. No matter where your case goes, the team of attorneys at Lipcon, Margulies, Alsina & Winkleman, P.A. are prepared to advocate for your rights. In this case, a plaintiff was forced to arbitrate his case due to a collective bargaining agreement. After arbitration, our attorneys filed suit in federal court to vacate an unfair arbitration award. Celebrity attempted to block this action by demanding sanctions, claiming that the Plaintiff’s case had no merit. In this response, our attorneys demonstrate to the court that the case has merit and that Celebrity’s motion for sanctions is hollow and innappropriate.
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO.: 12-22287-CIV-Lenard
PLAINTIFF, et. al.
CELEBRITY CRUISES, INC.
PLAINTIFF’S RESPONSE IN OPPOSITION TO CELEBRITY’S MOTION FOR SANCTIONS
COME NOW, PLAINTIFF, et. al. (hereinafter “the seafarers”) by and through undersigned counsel and hereby file their Response in Opposition to Celebrity’s Motion for sanctions.
The factual and procedural background of this action is set out in Plaintiffs’ Response in Opposition to Celebrity’s Motion to Dismiss [D.E. 11]. As shown below Celebrity’s Motion for Sanctions should be denied and stricken:
I. Celebrity Failed to Meet the Motion for Sanctions Requirements Under either Federal Rule of Civil Procedure 11 or Hercules Steel.
Celebrity fails to meet, or even mention, this Court’s requirements for the imposition of sanctions upon a party. Specifically, pursuant to Rule 11, sanctions are improper if: “the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law.” Fed. R. Civ. P. 11(b)(2).
Notably, when drafting the rule, the Advisory Committee explained that “the rule is not intended to chill an attorney’s enthusiasm or creativity in pursuing factual or legal theories.”Golden Eagle Distributing Corp. v. Burroughs Corp., 801 F. 2d 1531 (9th Cir. 1986) (quoting Advisory Committee). Moreover, a Motion for Sanctions should not be used as “a weapon for personal or economic harassment.” Id, citing Zaldivar v. City of Los Angeles, 780 F.2d 823, 830 (9th Cir. 1986).Thus, in order to avoid this, Courts only impose sanctions under Rule 11 only if (1) “after a reasonable inquiry, a competent attorney could not form a reasonable belief that the pleading is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification or reversal of existing law” or if (2) “a pleading has been interposed for an improper purpose.” Golden Eagle, 801 F. 2d 1531 (9th Cir. 1986). See also Donaldson v. Clark, 819 F. 2d 1551 (11th Cir. 1987):
The reasonable inquiry standard of Rule 11 does not preclude plaintiffs from establishing the merits of claims through discovery. Nor is Rule 11 intended to chill innovative theories and vigorous advocacy that bring about vital and positive changes in the law. The rule should not be used to deter potentially controversial or unpopular suits. It does not mean the end of doctrinal development, novel legal arguments, or cases of first impression. The Advisory Committee Note specifies that the rule “is not intended to chill an attorney’s enthusiasm or creativity in pursuing factual or legal theories.”
Instead of addressing Rule 11, however, Celebrity attempts to rely solely on the Eleventh Circuit Court’s decision in B.L. Harbert Int’l, LLC v. Hercules Steel Co., 441 F.3d 905, 913 (11th Cir. 2006) to justify an award for sanctions. Such efforts, however, still fall short.
As set forth below, Celebrity fails to meet the requirements to justify the imposition of sanctions under either Rule 11 or Hercules Steel.
A. Celebrity’s Motion Fails to Comply with the “Safe Harbor” requirement of Rule 11(c)(2).
Rule 11(c)(2) does not permit sanctions motions to be filed with the Court until 21 days after service of the motion, or within any other time frame the court provides. Winterrod v. American General Annuity Insurance Co., 556 F. 3d 815, 826 (9th Cir. 2009) (failure to provide required notice precludes an award of Rule 11 Sanctions); Lawrence v. Richman Group of CT LLC, 620 F. 3d 153 (2d Cir. 2010) (overturned sanctions when Defendants filed for sanctions without 21-day safe harbor); Brickwood Contractors Inc., v. Datanet Engineering, Inc., 369 F. 3d 385, 389 (4th Cir. 2004) (en banc) (safe harbor is mandatory condition precedent to sanctions).
In this case, Celebrity filed its Motion for Sanctions [D.E. 10] without first conferring with the Plaintiffs (in violation of the meet and confer requirements under S.D. Local. R. 7.1). Celebrity also failed to comply with the 21-day “safe harbor” requirement. On this ground alone, the Motion for Sanctions should be denied.
B.Plaintiffs’ petition to vacate the arbitrator’s decision is not sanctionable under Rule 11 or Hercules Steel because it is with legal merit supported by existing law and a reasonable argument for the extension, modification, or reversal of existing law, or the establishment of new law.
i. Pursuant to binding Eleventh Circuit Court precedent, the Plaintiffs have a right to challenge the arbitrator’s decision pursuant to Article V of the Convention on Enforcement and Recognition of Foreign Arbitral Awards (“Convention Act”).
On June 19, 2012, the Seafarers filed a Complaint seeking an order from this Court to vacate the arbitrator’s decision, pursuant to Article V of the Convention on the Recognition and Enforcement of Arbitral Awards, 21 U.S.T. 2517 (the “Convention Act”). See TEuropcar Italia S.p.A. v. Maiellano Tours, Inc., 156 F.3d 310, 315 (2d Cir. 1998) (The public policy exception in Article V(2)(b) of the Convention applies where enforcement of the award would violate “the most basic notions of morality and justice” of the forum where enforcement is sought).
The Eleventh Circuit has recently recognized that Seafarers as a matter of law can challenge an arbitrator’s decision in federal district court afterarbitration.
In Lindo v. NCL (Bahamas), Ltd., 652 F. 3d 1257 (11th Cir. 2011), the Eleventh Circuit expressly held that a seafarer can challenge an arbitrator’s decision in federal court, on the basis that the arbitrator’s award is contrary to public policy. See Lindo:
One of Article V’s seven defenses is the “public policy” defense, which states: Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: …(b) The recognition or enforcement of the award would be contrary to the public policy of that country.
& Afterarbitration, a court may refuse to enforce an arbitral award if the award is contrary to the public policy of the country. Id. The party defending against the enforcement of an arbitral award bears the burden of proof. Imperial Ethiopian Gov’t v. Baruch-Foster Corp., 535 F. 2d 334, 336 (5th Cir. 1976).
In Mitsubishi the Supreme Court stated: “Having permitted the arbitration to go forward, the national courts of the United States will have the opportunity at the award-enforcement stage to ensure that the legitimate interest in the enforcement of the antitrust laws has been addressed.” 473 U.S. at 638, 105 S. Ct. at 3359 (emphasis added). On this point, the Mitsubishi Court continued: “The Convention reserves to each signatory country the right to refuse enforcement of an awardwhere the ‘recognition or enforcement of the award would be contrary to the public policy of that country.’ ” Id. at 638, 105 S. Ct. at 3359-60(quoting New York Convention, art. V(2)(b), and citing Scherk, 417 U.S. at 519 n. 14, 94 S. Ct. at 2457 n. 14) (emphasis added).
Id (emphasis added); See also Ved P. Nanda, David K. Pansius , 2 Litigation of International Disputes in U.S. Courts § 19:27 (“The Convention indirectly grants the U.S. court the authority to vacate an award rendered in the United States”).
Courts in other Circuits have similarly held that non-prevailing parties in arbitration have a right to seek vacatur of the decision in federal district court. See, i.e. PMA Capital Ins. Co. v. Platinum Underwriters Bermuda, Ltd., 659 F. Supp. 2d 631 (E.D. Pa. 2009):
On June 3, 2009, PMA filed the instant Petition to Vacate & Because the Arbitrators adjudicated rights and obligations conferred by a commercial contract between a United States citizen and a foreign citizen, the Award is subject to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958. See 9 U.S.C. § 202; 9 U.S.C. § 2. Accordingly, this Court has subject matter jurisdiction pursuant to Section 203 of the Federal Arbitration Act. See 9 U.S.C. § 203 (“An action or proceeding falling under the Convention shall be deemed to arise under the laws and treaties of the United States. The district courts of the United States … shall have original jurisdiction over such an action or proceeding, regardless of the amount in controversy.”).
Id; see also PMA Capital Ins. Co. v. Platinum Underwriters Bermuda, Ltd., 659 F. Supp. 2d 631 (E.D. Pa. 2009):
Although my review of the [arbitrator] Panel’s award must be highly deferential, I am “neither entitled nor encouraged simply to ‘rubber stamp’ the interpretations and decisions of arbitrators.” Matteson v. Ryder Sys., 99 F.3d 108, 113 (3d Cir. 1996).
Therefore, the seafarers Motion to Vacate the Arbitrator’s decision on public policy grounds is valid and supported by existing law.
ii. Plaintiffs’ petition to vacate is not sanctionable under Rule 11 or Hercules Steel because it is not without legal basis.
The Plaintiffs’ petition to vacate contains a real legal basis which should preclude sanctions under Hercules Steel. Specifically, in Hercules Steel, the Court stated as follows:
When a party who losses an arbitration award assumes a never-say-die attitude and drags the dispute through the court system without an objectively reasonable belief that it will prevail, the promise of arbitration is broken.
Courts cannot prevent parties from trying to convert arbitration losses into court victories, but it may be that we can and should insist that if a party one the short end of an arbitration award attacks the award in court without any real legal basis for doing so, that party should pay sanctions.
Id., at 913 (emphasis added).
Celebrity only cites to one case where sanctions was awarded under Hercules Steel. That case is World Business Paradise, Inc. v. SunTrust Bank, 403 Fed. Appx. 668 (11th Cir. 2010). Yet, its facts are entirely distinguishable to the case at bar. Specifically, the Sun Trust Bank appellants “provided no evidence to support their claims.” In the end, the Sun Trust Court explained its decision to impose sanctions as follows: “Unlike in Hercules Steel, Appellants have failed to muster any controlling authority to support their position. Appellants cite to only one case & [and] never filed a reply brief.” Id.
In stark contrast to the above, the Plaintiffs herein 1) have produced considerable evidence in support of their claims (i.e. the Seafarers affidavits and the arbitrator’s rulings); and 2) presented substantial authority to support their position.
As to the authority presented, the Plaintiffs rely on the express language of Article V(2)(b) of the Convention Act and the case of Lindo v. NCL (Bahamas), Ltd., 652 F. 3d 1257 (11th Cir. 2011), in which the Eleventh Circuit expressly held that a seafarer can challenge an arbitrator’s decision in federal court, on the basis that the arbitrator’s award is contrary to public policy.
With regards to their public policy arguments in support of vacatur, as set forth in the Seafarers Response in Opposition to NCL’s Motion to Dismiss [D.E. 11], the Seafarers challenge is based on the following:
1. Enforcing the arbitrator’s decision will change two hundred years of federal jurisprudence: seafarers will be disenfranchised because they will have no mechanism to bring claims against their employer.
The public policy of the United States is to treat seafarers as a favored class and to give them a special status in our system of justice. Since the foundation of the American Republic, “[t]he policy of Congress, as evidenced by its legislation, has been to deal with [seafarers] as a favored class.” Bainbridge v. Merchants’ & Miners’ Transp. Co., 287 U.S. 278 (1932). Further, as the Fifth Circuit explained in Castillo v. Spiliada Maritime Corp., 937 F. 2d 240, 243 (5th Cir. 1991), “[h]istorically, seamen have enjoyed a special status in our judicial system. They enjoy this status because they occupy a unique position. A seaman isolated on a ship on the high seas is often vulnerable to the exploitation of his employer. Moreover, there exists great inequality in bargaining position between large ship-owners and unsophisticated seamen.” Id. at 243.
Thus, [t]o shield seamen against unfair conduct by ship-owners, Congress enacted special wage protection statutes. Like Congress, from the beginning, federal courts have remained guardians of seamen. See U.S. Bulk Carriers, Inc. v. Arguelles, 400 U.S. 351, 355 (1971) (Seamen from the Start were wards of admiralty. The federal courts remained as the guardians of seamen, the agencies chosen by Congress, to enforce their rights-a-guardian concept which, so far as wage claims are concerned, is not so much different than what it was in the 18th century”); see also Castillo, 937 F. 2d at 243:
We are convinced that federal courts must remain vigilant in protecting the rights of seamen, whether foreign or domestic, in their relations with their employer. This protection comports with our nation’s long history of concern and solicitude for seamen with employment disputes.
The Seafarers could not litigate their claims in Federal Court. As set forth in Lobo v. Celebrity Cruises Inc., 488 F. 3d 891, 894-95 (11th Cir. 2007), which dealt with the same arbitration provision in a Celebrity contract, the Seafarers could not have filed their claims in Federal Court because they would have been compelled to arbitration.
The Seafarers cannot arbitrate their claims either. Once the doors of the Federal Court were closed (under the assumption that the seafarers would be able to adjudicate the merits of their claims at arbitration), the Seafarers tried to arbitrate their claims. At arbitration, however, the arbitrator held that the claims were “not arbitrable.”
The Seafarers are thus left without a remedy and a day in Court. Because the Federal Courts refuse to adjudicate the merits of the Plaintiffs claims and Celebrity’s hand-picked arbitrator has held that these claims are “not arbitrable;” the Seafarers were left without a remedy and without a mechanism to bring claims against their employer. Such an end result is contrary to the public policy of the United States which has protected seafarer’s rights for over two-hundred years.
2. The arbitrator’s decision is contrary to public policy because the 30-day provision impermissibly shortened the seafarers’ statute of limitations to bring wage claims from 3 years to 30 days.
In support of its decision to dismiss the Seafarers claims as “non-arbitrable,” the arbitrator relied on an obscure provision in a grievance procedure setting forth that:
“Unless Extenuating Circumstances exist justifying delay, no grievance shall be recognized if raised more than thirty (30) days after the Seafarer has left the vessel.”
Thus, the arbitrator reasoned, the Seafarers had 30 days (after leaving the ship) to assert their wage claims at arbitration. See D.E. 11.
In striking contrast, under the General Maritime Law of the United States, Seaman’s Wage Act claims are governed by the doctrine of “laches” which gives seafarers three years or more to file their wage claims. Powel, et. al. v. Global Marine, LLC a/k/a Global Marine, Inc., 671 F. Supp. 2d 830 (E.D. La. 2009).
Thus, by shortening the limitations period of the Seafarers claims from 3 years to 30 days, the seafarers were deprived of their rights under U.S. law. Such deprivation is contrary to public policy because it deprived the seafarers of their statutory rights (enacted by Congress for their protection) and of the maritime common law laches doctrine (promulgated by the federal courts for their protection. See, i.e. Paladino v. Avnet Computer Technologies, Inc., 134 F. 3d 1054 (11th Cir. 1998):
Federal statutory claims are generally arbitrable because arbitration, like litigation, can serve a remedial and deterrent function, and federal law favors arbitration& But the arbitrability of such claims rests on the assumption that the arbitration clause permits relief equivalent to court remedies. See Glimer, 500 U.S. at 28. When an arbitration clause has provisions that defeat the remedial purpose of the statute, therefore, the arbitration clause is not enforceable.
This clause defeats the statute’s remedial purposes because it insulates Avnet from Title VII damages and equitable relief. Cf. Brisentine v. Stone & Webster Eng’g Corp., 117 F. 3d 519, 526-27 (11th Cir. 1997) & Arguably, Paladino could hope for a finding of liability from the arbitrator. In that event, she would still have to repair to a judicial forum to pursue any Title VII remedy. These difficulties considered, we treat this clause as an impermissible waiver of Title VII rights. See Alexander Gardner-Denver Co., 415 U.S. 36, 51-52 (1974); Schwartz v. Florida Bd. of Regents, 807 F. 2d 901, 906 (11th Cir. 1987).
& A clause such as this one that deprives an employee of any hope of meaningful relief, while imposing high costs on the employee, undermines the policies that support Title VII. It is not enforceable.
Id., (emphasis added). See also Fla. Stat. §95.03 (2012) (“Any provision in a contract fixing the period of time within which an action arising out of the contract may be begun at a time less than that provided by the applicable statute of limitations is void.”)
Therefore, as set forth in Paladino and similarly under §95.03, by depriving the seafarers of their statutory rights (the Seaman’s Wage Act limitations period); the arbitrator’s decision is null and void and contrary to the public policy of the United States.
3. The arbitrator’s decision is contrary to public policy because it ignored the Seafarers sworn declarations.
The arbitrator’s ruling was premised on the fact that the Plaintiffs had knowledge of Celebrity’s hyper-technical grievance procedure requiring submission of claims within 30 days.
In fact, the opposite is true. At the arbitration, the Plaintiffs submitted sworn declarations setting forth that they: 1) never received copies of any collective bargaining agreements – and therefore never received copies of any grievance procedure; 2) were never informed and therefore never knew that they were members of a labor union; 3) never paid any union fees (this is so because during the relevant period Celebrity – not the employees – paid for union dues); 4) never met, talked, or corresponded with any representative of any union; 5) never attended any union meetings, or any other meetings where rights to submit grievances under Collective Bargaining Agreements were discussed; and, 6) were never informed by either Celebrity or any union that, in the event of a dispute concerning their wages, they were required to submit their claims to a union in Italy and to Celebrity in Miami within 30 days. D.E. 1, Exhibit “3.”
All in all, at the arbitration, the seafarers showed that Celebrity not only prevented them from participating in the collective bargaining process, but also failed to communicate to them the contents of a CBA negotiated behind closed doors (without their knowledge or input). D.E. 1, Exhibit “3.”
Therefore, in light of the seafarers lack of knowledge, it is contrary to the public policy of the United States to allow a ship-owner employer to deprive its seafarers from Federal statutory rights (Seaman’s Wage Act three year provision) by relying on the contents of a document which the Seafarers never saw and never knew about.
In other words, it is contrary to public policy to allow Celebrity to benefit from a hyper-technical grievance procedure, when its own business practice was to conceal the information of such grievance procedure from the employees themselves. See D.E. 1, Exhibit “3.”
4. The arbitrator’s decision is contrary to public policy because as a matter of law seafarers, wards of the courts, are not required to follow grievance procedures (including the 30 day provision).
In his decision, the arbitrator held that the hyper-technical grievance procedure requiring submission of the seafarers claims within 30 days.
However, it is well settled law that a seaman is not required to follow grievance procedures before seeking a resolution of his claims in a tribunal. Larkins v. Hudson, 640 F. 2d 997, 999 (9th Cir. 1980), citing the United States Supreme Court in Bulk v. Arguelles, 400 U.S. 351 (1971). In fact, in allowing individual seafarers to bring claims for wages directly before a judicial tribunal, in Bulk v. Arguelles, the United States Supreme Court established an exception for seafarers to the requirement that contract grievance procedures must be exhausted. Suissa v. American Export Lines, Inc., 507 F. 2d 1343 (2d Cir. 1974), citing Arguelles, 400 U.S. at 356.
All in all, through this long-standing principle, the United States Supreme Court declared that a seaman had the option of choosing either route [filing suit in a tribunal or through the grievance process] to enforce his claim. See Larkins v. Hudson, 640 F. 2d 997, 1000 (9th Cir. 1980), citing the United States Supreme Court in Bulk v. Arguelles, 400 U.S. 351 (1971):
Larkins [seafarer] decided to forego the grievance process outlined in the Collective Bargaining Agreement and to pursue his claims in federal court. That was his right. It is well settled that a seaman is not required to exhaust grievance procedures before seeking a resolution of his wage claims in Court. United States Bulk Carriers, Inc. v. Arguelles, 400 U.S. 351, 356 (1971).
This is particularly the case when a seafarer is attempting to make claims for wages. See also Suissa v. American Export Lines, 507 F. 2d 1343 (2nd Cir. 1974):
The Court [in United States Bulk Carriers, Inc. v. Arguelles] read the provisions of 46 U.S.C. 596 [the Seaman’s Wage Act], concerning the amount and schedule for payment of seamen’s wages, and penalties for employer non-compliance, to imply a judicial remedy which an aggrieved maritime worker might in the first instance pursue in lieu of the grievance procedures favored by §301 of the Labor Management Relations Act, 29 U.S.C. §185 (1970) & In allowing an individual to bring his claim for wages directly before a judicial tribunal, Arguelles established an exception to the otherwise rigid principle that contract grievance procedures must be exhausted before any redress may be sought in Court. (Emphasis Added).
As explained by the Court in Suissa, the reason for the unique departure from the established rule lays in the public policy which for nearly two hundred years the Seaman’s Wage Act and its predecessors, had been designated to effectuate. Suissa, at 1347. Seafarers – unlike workers in other industries – have been designated by Congress and the Federal Courts as a protected class with special rights and privileges. These laws aim to secure prompt payment of seamen’s wages & and thus to protect them from the harsh consequences of arbitrary and scrupulous action of their employers, to which, as a class, they are particularly exposed. Id. Therefore, by carving out this exception – and allowing seafarers to skip the grievance process – “it was the [Supreme] Court’s objective to give full measure to this established purpose.” Suissa, at 1347. “Thus the Court resolved the literal conflict & by allowing a seaman the option of choosing either route to enforce his claim.” Id., at 1347, citing United States Bulk Carriers, Inc. v. Arguelles, 400 U.S. 351, at 356 (1971).
Herein, it is undisputed by Celebrity that the claimants are seafarers. By virtue of being seafarers the supreme law of the land exempted them from the requirement of complying with a hyper-technical 30 day provision. As a result, they properly exercised their legal right to 1) bring their wage claims directly before this tribunal and 2) forego any grievance process. On this ground alone, Celebrity’s Motion to Dismiss should have been denied by the arbitrator.
The fact that the arbitrator ruled that the Seafarers were bound by the grievance procedure (and the 30 day provision), is contrary to the public policy of the United States because it denies these seafarers of their right to forgo the grievance process; a right promulgated under the wards of admiralty doctrine by the Supreme Court in Arguelles and explained by the Second Circuit in Suissa and the 9th Circuit in Larkins.
In light of the above, imposing sanctions on a party with as much evidence and authority as the Plaintiffs herein would render meaningless the rights parties have to contest arbitration awards in federal district court. See Lindo v. NCL (Bahamas), Ltd., 652 F. 3d 1257 (11th Cir. 2011). While Hercules Steel and Sun Trust Bank set forth legitimate reasons for imposing sanctions on “baseless claims,” it is evident from the above that Plaintiffs’ case should not qualify as baseless.
All in all, because Plaintiffs’ case contains a real legal basis that is supported by case law or alternatively seeks to extend and modify existing law, it is not sanctionable under Hercules Steel or Rule 11.