We have before discussed the confluence of factors leading to a court’s acceptance of jurisdiction to resolve the question of enforceability of an arbitration provision and simultaneously finding that the arbitration clause is unenforceable (see our posts of 8/9/10 and 8/11/10; see generally the discussion of choice of law/choice of forum and their impact on enforceability in our e-book, International Practice: Topics and Trends). In the recent case of Morocho v. Carnival Corp., 10-21715-Civ-Martinez-Brown (S.D. Fla. Jan. 2011), the District Court affirmed a decision of the Magistrate Judge.
The suit was between Peruvian seaman suing under federal maritime law and Carnival Corp. The case had been removed to federal court under the New York Convention, as embodied in 9 U.S.C. § 201 based on the arbitration provision in the agreement. The seaman moved to remand, claiming that the arbitration clause was invalid.
Unlike in earlier cases, the Defendant here did not stipulate that U.S. law would apply to the federal statutory claims in the arbitration, and the contract provided for Panamanian law to apply. The seaman relied on the Eleventh Circuit’s decision in Thomas v. Carnival Corp., 573 F.3d 1113 (11th Cir. 2009), which invalidated an arbitration provision in a contract “because the choice-of-law and choice of forum clauses work in tandem to operated as a prospective waiver of the seaman’s right to pursue his statutory remedies under U.S. law”.
Finding Thomas controlling, the District Court ruled that the arbitration clause “should be upheld if it is evident that either U.S. law definitely will be applied or if there is a possibility that it might apply and there will be later review”. The Court found that there was no certainty of later review, since the seaman may lose in the arbitration. As a result, it was insufficient to sever the choice-of-law provision. The entire arbitration clause needed to be struck, and the case was therefore entitled to be remanded and proceed in state court.
The District Court also determined that the very issue of arbitrability was one for the court, not the arbitrator, to decide. The Court distinguished the Supreme Court’s decision in Rent-A-Center, West, Inc. v. Jackson, 130 S.Ct. 2772 (2010), where the Court held that an enforceability challenge to an agreement as a whole was to be determined by the arbitrator where there was a general “delegation” provision in the agreement that the arbitrator would decide disputes relating to enforceability of the agreement.