Case No.: 03-60105-CIV-HUCK/TURNOFF.
August 10, 2004
ORDER GRANTING MOTIONS TO DISMISS AND COMPEL ARBITRATION
THIS CAUSE is before the Court upon the Renewed Motion of Dockwise B.V. to Dismiss, or in the Alternative, Motion to Compel Arbitration, or Motion for Summary Judgment [DE# 114-1, -2, -3,-4], filed February 12, 2004, and Dockwise B.V.'s Motion to Dismiss for Forum Non Conveniens [DE# 113], filed February 12, 2004. After carefully considering the Magistrate Judge's Report and Recommendation, the Plaintiff's objection, and counsels' oral argument, the court has determined the arbitration clause in the Indemnity Form is valid and enforceable.
Dockwise did not identify the rule upon which the motion is based, but a motion seeking to enforce a forum selection clause is properly brought as a motion to dismiss for lack of venue, pursuant to Federal Rule of Civil Procedure 12(b)(3). Lipcon v. Underwriters at Lloyd's, London, 148 F.3d 1285, 1290 (11th Cir. 1998). Hence, the instant motion will be considered as such, therefore permitting review of matters outside the pleadings. See Webster v. Royal Caribbean Cruises, Ltd., 124 F. Supp. 2d. 1317, 1320 (S.D. Fla. 2000) (stating matters outside the pleadings must be considered on a 12(b)(3) motion to enable the court to discern the factual basis for venue).
I. FACTUAL AND PROCEDURAL BACKGROUND
The Plaintiff, Leslie Holmes, sued the M/V Super Servant 3 ("Super Servant"), in rem, for breach of an implied warranty of seaworthiness; failure to provide maintenance, cure, and unearned wages; general maritime negligence; and a maritime lien. Dockwise B.V.'s motion to compel arbitration was referred to a magistrate judge for a report and recommendation. The magistrate judge recommended the case against Super Servant be referred to arbitration in The Netherlands, pursuant to the terms of an Indemnification Form signed by Leslie Holmes.
Dockwise B.V. is not a defendant but entered the case as the owner of the Super Servant by virtue of being the successor in interest to Dockwise N.V. Dockwise N.V. is the other party to the indemnification agreement.
Holmes raises four objections to the recommendation, thereby invoking de novo review. After hearing argument on the objections, the court concludes all four lack merit. The entire Report and Recommendation is ratified, affirmed, and incorporated by reference. The following three conclusions are thus rendered: (1) the arbitration clause is a valid agreement and is not a contract of adhesion; (2) the arbitration clause applies to this in rem action; and (3) arbitration is not prohibited by the Jones Act, 46 U.S.C. § 688, or the Longshore and Harbor Workers' Compensation Act, 33 U.S.C. § 901 et seq. During oral argument, Holmes resurrected an argument raised in opposition to the motion, which neither he nor Dockwise B.V. fully briefed before the magistrate judge. Holmes contends that even if the arbitration clause is valid, its enforcement is prohibited by 46 U.S.C. Appx. § 183C. Because the argument merited further consideration, supplemental memoranda were requested on the issue. After considering the parties' additional arguments, the court concludes § 183c does not bar enforcement of the arbitration clause for the following reasons.
Holmes contends the magistrate judge erred by failing (1) to determine whether his legal status onboard the Super Servant was that of a passenger, seaman, longshoreman or business invitee; (2) to recognize that Super Servant is not a party to the indemnification agreement; (3) to conclude the indemnification agreement is a contract of adhesion; and (4) to conclude the New York Convention does not apply.
II. LEGAL ANALYSIS
Title 46 governs maritime contracts. Section 183c in the appendix to Title 46 declares void any contractual limitation on a claimant's right to trial in a court of competent jurisdiction. In relevant part, it provides as follows:
(a) Negligence: It shall be unlawful for the manager, agent, master, or owner of any vessel transporting passengers between ports of the United States or between any such port and a foreign port to insert in any rule, regulation, contract, or agreement any provision or limitation . . . (2) purporting in such event to lessen, weaken, or avoid the right of any claimant to a trial by court of competent jurisdiction on the question of liability for such loss or injury, or the measure or damages therefor. All such provisions or limitations contained in any such . . . contract, or agreement are declared to be against public policy and shall be null and void and of no effect.
42 U.S.C. Appx. § 183c (emphasis added). Holmes contends this statute bars enforcement of the arbitration clause because it forecloses his right to a trial by a court of competent jurisdiction. Both parties believe his objection raises a choice-of-law question and rely on the eight factors set forth in Lauritzen v. Larsen, 345 U.S. 571 (1953), and Hellenic Lines Ltd. v. Rhoditis, 398 U.S. 306 (1970), for the analysis applicable in admiralty cases. Dockwise B.V. contends the eight factors point to the application of foreign law. On the other hand, if these factors mandate application of United States law, Dockwise B.V. argues § 183c applies only to "passengers" and "vessels transporting passengers," and the facts show neither requirement is met here. Holmes argues that United States law applies under the Lauritzen/Rhoditis analysis and that he was a passenger on the Super Servant. He does not otherwise address the argument that the Super Servant was not a "vessel transporting passengers."
Holmes agreed for the indemnity agreement to be interpreted according to the law of The Netherlands.
A. The Bremen Test
As framed by the motions to dismiss and compel arbitration, including the objection based on § 183c, the issue presented is whether the choice of forum and choice-of-law terms in the Indemnification Form are enforceable. The parties suggest the resolution turns on choice-of-law principles, but they have not considered the analysis and rule of law established in Lipcon v. Underwriters at Lloyd's, London, 148 F.3d 1285 (11th Cir. 1998).
Lipcon is a securities case where the court held that the framework for evaluating choice of forum and choice-of-law clauses in an international agreement is that established in an admiralty case, M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972). Id. at 1291-95. In Lipcon, United States citizens who had invested in Underwriters at Lloyd's filed suit in federal court for violation of securities laws. Id. at 1288. Although the Lipcons never signed an agreement that specified England as the exclusive forum and English law for any dispute arising from the underwriting business, the court applied the Bremen test and bound the Lipcons to the choice clauses in the agreement. Id. at 1289, 1299. In reaching this conclusion, the court soundly rejected the argument that enforcement of the choice clauses was prohibited by the express provisions of, and public policy behind, the Securities Act of 1933 and the Securities Exchange Act of 1934. Id. at 1291-95. In so doing, the court acknowledged the Supreme Court's two main concerns in Bremen and its progeny, Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974): "(1) ensuring `the orderliness and predictability [that are] essential to any international business transaction,' and (2) furthering international comity." Id. at 1294 (citations omitted). The Eleventh Circuit reiterated that "`[i]n Bremen itself, the Supreme Court contemplated that a forum selection clause may conflict with relevant statutes.'" Id. at 1295.
A district court sitting in admiralty begins with the premise that forum selection and choice-of-law clauses "are presumptively valid where the underlying transaction is fundamentally international in character." Id. (internal quotation omitted). "This presumption of validity may be overcome, however, by a clear showing that the clauses are unreasonable under the circumstances. Choice clauses will be found unreasonable under the circumstances and thus unenforceable only when: (1) their formation was induced by fraud or overreaching; (2) the plaintiff effectively would be deprived of its day in court because of the inconvenience or unfairness of the chosen forum; (3) the fundamental unfairness of the chosen law would deprive the plaintiff of a remedy; or (4) enforcement of the provisions would contravene a strong public policy." Lipcon, 148 F.3d at 1295-96 (internal quotations and citations omitted). See also Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 594-95 (1991); Bremen, 407 U.S. at 15-18.
The Lipcon holding is binding, and the reasoning apt, if the Indemnification Form Holmes signed is "fundamentally international in character." Lipcon, 148 F.3d at 1295. The Lipcon agreement was "truly international" because "the parties to the agreement [were] from different countries, the negotiations leading up to the agreement took place in the United States whereas the closing took place in England, and the subject matter of the transaction concerned investment in an international insurance market." Lipcon, 148 F.3d at 1293 n. 14. The Supreme Court has also found an international agreement and enforced an arbitration clause between an American company based in Illinois and a German citizen, for the purchase of foreign companies, where the sales contract was negotiated in the United States, England, and Germany, signed in Austria, and closed in Switzerland. Scherk, 417 U.S. at 508-09.
The Indemnification Form here is an addendum, on its face, to the Booking Note between United Yacht Transport (USA), Inc. ("UYT"), a Delaware corporation, and Westport Shipyard, Inc. ("Westport"), a Florida corporation. UYT is a wholly owned subsidiary of, and booking office for, Dockwise N.V., a foreign corporation with principal offices in Belgium at the time. UYT signed the Booking Note as agent for the carrier, Dockwise N.V, but the record is silent on whether the transaction was negotiated by UYT or Dockwise N.V. Since UYT and Westport both have offices in Fort Lauderdale, Florida, however, the reasonable inference is that negotiations occurred there. The transaction involved the transport of Westport's M/Y Dulcinea V onboard the Super Servant from Vancouver, British Columbia to Port Everglades, Florida. The Super Servant was a freight ship and yacht carrier, owned by Dockwise N.V. and engaged in worldwide trade. In addition to British Columbia, UYT booked contracts between Port Everglades and ports in the Mediterranean, western Mexico, and St. Thomas. Hence, the Booking Note was a contract between a foreign and domestic corporation, negotiated in Florida, for a ship routinely engaged in foreign commerce, to transport a yacht through international waters from Canada to Florida. In addition, Holmes signed the Indemnification Form and boarded the Super Servant in Vancouver. The Booking Note in this case, including the Indemnification Form incorporated as an addendum to the contract, is an agreement that is international in character.
UYT changed its name to Dockwise Yacht Transport (USA), Inc. ("DYT") in 2000, but apparently did not reprint its standard contract form to reflect the change. So the signature block actually indicates executed the contract on behalf of Dockwise, N.V. To avoid confusion, however, UYT is referred to as the agent signing for Dockwise N.V.
Enforcement of the choice clauses thus turns on the four factors of the Bremen test. Lipcon, 148 F.3d at 1296. With respect to the first factor, the conclusion that the indemnity agreement is not a contract of adhesion forecloses Holmes' only argument of overreaching, and there is no allegation of fraud. He has made no argument on the motions to dismiss or compel arbitration directed to the second and third factors. He does argue, however, that the plain language of § 183C bars enforcement, which goes to the heart of the fourth factor. The Eleventh Circuit, however, has rejected a similar argument in deciding express provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 did not bar enforcement of the choice clauses in Lipcon. Id. at 1291-95. For the same reasons there, see id. at 1291-95, § 183C does not categorically render invalid the choice of forum and law clauses at issue here. Moreover, Holmes has offered no other public policy argument against enforcement. See id. at 1298-99. He does not contend there is a strong policy in the United States favoring resolution of maritime disputes by a court rather than an arbitrator. For example, there is no showing that arbitration in The Netherlands and application of that forum's law would restrict his remedies or potential for recovering damages. See and c.f. id. at 1299. In fact, the Supreme Court announced the opposite viewpoint in Scherk:
Notably, the Supreme Court has even upheld forum selection clauses that were part of a non-negotiated form contract of adhesion. See Schute, 499 U.S. at 593.
[U]ncertainty will almost inevitably exist with respect to any contract touching two or more countries, each with its own substantive laws and conflict-of-laws rules. A contractual provision specifying in advance the forum in which disputes shall be litigated and the law to be applied is, therefore, an almost indispensable precondition to achievement of the orderliness and predictability essential to any international business transaction . . . A parochial refusal by the courts of one country to enforce an international arbitration agreement would not only frustrate these purposes, but would invite unseemly and mutually destructive jockeying by the parties to secure tactical litigation advantages.Scherk, 417 U.S. at 516-17. In addition, arbitration is not necessarily the end of the voyage for Holmes. An arbitration award tainted by an unfair process may by be set aside by court order. See 9 U.S.C. §§ 10 and 11. Hence, there is no basis in this record for assuming arbitration will contravene an important domestic public policy. Holmes has not overcome the presumption that the choice clauses are valid and enforceable.
B. Inapplicability of 42 U.S.C. § 183c
Even if Bremen and its progeny did not require enforcement of the arbitration and choice-of-law clauses in the Indemnification Form, the unambiguous language of § 183C does not prohibit arbitration. The statute applies only to "passengers" and "vessels transporting passengers." The Super Servant is engaged in the shipping business; it transports only freight and yachts. The terms of the Booking Note itself are evidence that Dockwise N.V. is not also engaged in the business of transporting passengers. In Clause 15, a non-crew member is defined as a "Rider," negating the intent for a person who accompanies a yacht during transport, like Holmes, to be considered has having the legal status of a passenger. Dockwise N.V. further distinguished its business in Clause 15 from that of a public conveyer or common carrier of passengers by requiring Westport and the "Rider" to indemnify it from all liability to the "Rider." See The Downer, 171 F.571, 573 (S.D.N.Y. 1909) (holding rider on a tug boat engaged in the business of towage not a passenger). So by virtue of the nature of Dockwise N.V.'s business, the terms of the Booking Note agreed to by Westport, and the terms of the Indemnification Form Holmes signed, the court concludes Holmes was not a passenger and the Super Servant was not a vessel transporting passengers. See Baltimore O.S.W. Ry. Co. v. Voigt, 176 U.S. 498, 513-14 (1900) (holding a messenger riding on train for his employer's purposes, and pursuant to a contract between his employer and the railway company, not a passenger). See also and c.f. Chervy v. Peninsular and Oriental Steam Nav. Co., 243 F. Supp. 654, 655 (S.D. Cal. 1964) (holding a visitor onboard not a passenger); Marks v. Home Fire and Marine Ins. Co. of Calif., 285 F. 959, 961 (App.D.C. 1923) (holding that a passenger is one who is carried by a conveyance that is held or offered for the use of the public). Hence, § 183C has no application to this case.
For the foregoing reasons, the Motion to Compel Arbitration is GRANTED. The Motion to Dismiss is GRANTED and Counts I through IV against the M/V Super Servant 3 are dismissed for lack of venue. The Motion to Dismiss for Forum Non Conveniens is DENIED as moot. The court reserves jurisdiction to confirm any arbitration award. See 9 U.S.C. § 9. The case shall proceed on the remaining claims.