Castro v. TriMarine Fish Co. LLC, No. 17-35703 (9th Cir. Feb. 27, 2019) [click for opinion]

Plaintiff Castro was injured while working as a deck hand aboard a fishing vessel owned by Defendants, several TriMarine companies (collectively referred to as “TriMarine”). Castro, a citizen of the Philippines who had relocated to American Samoa, had an employment agreement with TriMarine calling for arbitration in, and subject to the procedural rules of, American Samoa.

After his injury, TriMarine returned Castro to the Philippines for surgery and further treatment, and the parties negotiated a settlement of his disability claims. Castro reiterated his assent to arbitration in American Samoa and agreed to release fully his claims in exchange for a monetary sum. He met with a TriMarine representative in Manila to sign the settlement paperwork, and the parties agreed to the terms of Castro’s release.

Thereafter, TriMarine’s representative brought Castro to the office building of the National Conciliation and Mediation Board, where Castro understood he would retrieve and acknowledge receipt of his settlement payment. TriMarine instead purported to submit the parties’ “dispute” to arbitration, and had a maritime arbitrator join the parties at a small table in the public lobby. TriMarine had Castro sign a “joint motion to dismiss,” accompanied by the release that Castro had previously signed. The maritime arbitrator then signed a single-page “order” on the parties’ “Walk In Settlement,” and dismissed the case with prejudice. No arbitral case had been filed and no case number was assigned.

After further medical issues developed requiring Castro to undergo additional surgery, he filed suit in Washington state court against TriMarine, which removed the case to federal court and moved to confirm the arbitrator’s order as a foreign arbitral award under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention“). The district court so confirmed the order and dismissed the case. Castro appealed.

The term “arbitral award” is not defined in the New York Convention or in the Federal Arbitration Act. The Ninth Circuit therefore applied the term’s “common meaning and common sense,” and looked to the American Law Institute’s restatement on international commercial arbitration for guidance on what constitutes an “arbitral award.” Superficially, the arbitrator’s order carried labels and appearances of an arbitral award, but its essence was something different.

First, there was no pending dispute to arbitrate when the order was entered. The genuine disagreement inherent in an arbitration proceeding was conspicuously absent by the time Castro and TriMarine visited the arbitrator, as they had already agreed to settle their dispute. Second, the arbitration “proceedings” conflicted with the parties’ prior agreements to arbitrate, as the brief meeting in the building lobby in Manila went against the parties’ multiple written agreements to arbitrate in American Samoa, under its procedural rules.

Accordingly, the Ninth Circuit concluded, no arbitration had taken place, and “the parties’ free-floating settlement agreement and order did not transform into an arbitral award simply because the parties convened with an arbitrator.” Nor was it an arbitral consent award, which may be entered only after a tribunal has been constituted, during the pendency of arbitration proceedings. Because Castro and TriMarine first settled their dispute, and only then sought to arbitrate, “[t] he result is not a consent award.”

Accordingly, the Ninth Circuit found that the maritime arbitrator’s order in this case did not constitute an arbitral award within the meaning of the New York Convention, and pointed out that “the modicum of formality required for a proceeding to constitute arbitration is no empty ritual.” Whereas Castro’s release may be enforceable under general contract principles, the order approving the parties’ settlement does not constitute an arbitral award under the New York Convention and is not afforded the Convention’s favorable enforcement regime.

As the district court erroneously evaluated the order under the New York Convention, its order confirming the arbitral award was vacated in full, and the case remanded for the district court to assess the existence of federal jurisdiction and, if appropriate, venue and defenses to enforcement.

A version of this post originally appeared in the May 2019 edition of Baker McKenzie’s International Litigation & Arbitration Newsletter, which is edited by David Zaslowsky and Grant Hanessian.

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