Yang v. Majestic Blue Fisheries, LLC, No. 15-16881 (9th Cir. Nov. 30, 2017) [click for opinion]
Mr. Yang was a fisherman on a vessel owned by Majestic Blue Fisheries, LLC (“Majestic”), a Delaware entity and affiliate of Dongwon Indus. Co., Ltd. (“Dongwon”), a Korean entity. Although Majestic owned the vessel, Dongwon was required to supply the vessel’s crew and to supervise the vessel’s repair and maintenance. Despite known mechanical issues with the vessel, on May 21, 2010 the vessel set out from Guam with Mr. Yang on board as the chief engineer. On June 14, 2010, the vessel sank with the crew abandoning ship, leaving the captain to “execute critical abandon ship procedures on his own.” Mr. Yang, having initially abandoned ship, re-boarded the vessel to look for the captain. Both men died when the vessel sank.
Mr. Yang’s widow, their children, and his estate filed suit against Dongwon and Majestic for wrongful death under four separate causes of action: (1) a survival action for pre-death pain and suffering under the Jones Act, 46 U.S.C. § 30304; (2) wrongful death under general maritime law; (3) wrongful death under the Death on the High Seas Act, 46 U.S.C. § 30301 et seq.; and (4) wrongful death under the Jones Act. Dongwon filed a motion to compel arbitration relying on the employment agreement between Majestic and Mr. Yang, which contained an arbitration clause. The Guam District Court dismissed Dongwon’s motion to compel arbitration, and Dongwon appealed.
On appeal, Dongwon argued that it could compel arbitration pursuant to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 9 U.S.C. § 201 et seq. (the “New York Convention” or “Convention”). In order to compel arbitration under the New York Convention, a party “must prove the existence and validity of an agreement in writing within the meaning of the Convention.” The New York Convention’s Art. II(2) defines an “agreement in writing” as “an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters.”
Recognizing that it was neither a signatory nor a party to Mr. Yang’s employment agreement, Dongwon argued that the signed by the parties requirement only applied to an arbitration agreement, and not an arbitration clause contained in a contract. The court disagreed. The court employed the rules of English punctuation, a review of the equally authoritative French and Spanish texts of the Convention, and the legislative history of the Convention, to conclude that the phrase signed by the parties modified both antecedent phrases. The court also noted that Article II of the Convention makes clear that arbitration is permissible only where there is an agreement in writing under which the parties agree to submit to arbitration regarding differences that may arise between them.
In response, Dongwon argued that a litigant who is not a party to an arbitration agreement should be allowed to invoke arbitration under the FAA if the relevant state contract law allows the litigant to enforce the agreement. The court first noted that “the FAA expressly exempts from its scope any contracts of employment of seamen” from its first chapter. While Dongwon had invoked the second chapter, the FAA also expressly provides in that chapter that it will apply only to the extent it does not conflict with the Convention. Thus, if the FAA could be read to provide for arbitration of disputes with non-signatories or non-parties in this case, it would conflict with the Convention and not apply.
Yet even if Dongwon could look through to state contract law, it would still not be entitled to arbitrate the dispute. Dongwon presented three state law theories in support of its motion to compel arbitration: equitable estoppel, agency and alter ego. As to equitable estoppel, the court found that it was inapplicable because Mr. Yang’s widow had a claim against Dongwon independent of the existence of the employment agreement with Majestic. The claims against Dongwon relied on its acts and omissions—providing an unseaworthy vessel and crew—and not on the existence of an employment relationship. As to the agency and alter ego theories, the court found that Dongwon waived these arguments by failing to raise them below, in the district court.
In its conclusion, the court addressed one further argument of Dongwon’s—the federal policy in favor of arbitration should permit its motion to compel. But the court was unconvinced. “[T]he federal policy applies to the scope of arbitrable issues and is inapposite when the question is whether a particular party is bound by the arbitration agreement.” The Guam District Court’s decision to deny Dongwon’s motion to compel arbitration was affirmed by the court, and costs were taxed against Dongwon.