2d Circuit upholds Agreement to Arbitrate Seaman's Maintenance and Cure Claim

The Second Circuit Court of Appeals issued a decision recently to uphold an agreement by a seaman to arbitrate his claim for maintenance and cure, over a vigorous dissent by Circuit Judge Calabresi. Frederick Harrington v. Atlantic Sound Co., Inc., et al., 2010 U.S. App. LEXIS 7844 (2d Cir. April 16, 2010). Plaintiff Frederick Harrington filed an action in the Eastern District of New York against Defendants Atlantic Sounding Co., Inc., Weeks Marine, Inc. (Atlantic's corporate parent), and the vessel, the MV CANDACE, pursuant to the Jones Act, seeking recovery for injuries sustained while he was employed as a seaman on the CANDACE.

Defendants sought to dismiss the action, or in the alternative to compel arbitration and stay the district court proceedings, pursuant to a post-injury arbitration agreement between the parties. Harrington sustained a serious back injury during the course of his employment with Weeks Marine. Doctors diagnosed Harrington with herniated disks and told him that he would need major back surgery. In light of his prognosis, Harrington requested further financial support from Weeks Marine. Weeks Marine offered to pay Harrington 60% of his wages up to a certain time as an advance on any potential settlement, provided he agree to arbitrate any personal injury/illness claim before the American Arbitration Association. 

Harrington opposed the Defendant's Motion to Dismiss, on the grounds that the arbitration agreement was unenforceable because of intoxication and a lack of mental capacity, and that the agreement was unconscionable. The District Court found that the agreement was unconscionable under applicable New Jersey law (the site of the contractual agreement) and did not reach the claims of intoxication and lack of mental capacity. Accordingly, the District Court denied Defendants' Motion to Dismiss. The Defendants immediately appealed the District Court decision.

On appeal, Plaintiff argued that the arbitration agreement was unenforceable as a matter of law under the Federal Employer's Liability Act ("FELA") as it incorporates the Jones Act, and alternatively that the unconscionability finding by the District Court was correct. The Plaintiff argued that the agreement improperly eliminated the seaman's choice to try his case to a federal judge or jury or a state court judge or jury and moreover, improperly granted the Defendant immunity from suit in all of the forums. In reviewing the historical protections for seaman intended by the Jones Act, FELA, and the Supreme Court's interpretation of same, the Second Circuit was not persuaded that the arbitration agreement was unenforceable as a matter of law. 

FELA § 5 prohibits contracts by carriers in which they seek to limit their liability and FELA § 6 provides for the right of a Plaintiff to bring an action in a convenient court. The Second Circuit relied on the liberal federal policy supporting arbitration agreements, especially those arising out of maritime transactions or commerce. Furthermore, the Court held that the agreement in the instant case was not a seaman employment contract, and therefore not exempted from including an arbitration clause. The Court held that "the purpose of FELA § 6 is to ensure the existence of a practical and convenient forum to adjudicate the employee's rights, not to ensure the existence of a particular type of forum."    The Court found that not only was Harrington ensured the existence of an eligible forum for his claim, but a favored one.

The Second Circuit also reversed the District Court holding that the agreement was unconscionable. In reviewing the applicable standards under New Jersey law the Second Circuit held that the District Court erred in concluding that the agreement was substantively unconscionable, a required element for a finding of unconscionability, and therefore, the Harrington agreement could not be voided on that basis. The Court rejected Harrington's remaining contractual defenses, reversed the District Court decision, and remanded for further handling consistent with the opinion.

In his dissent, Judge Calabresi stated that he would affirm the District Court holding that the agreement was unconscionable. The majority opinion held that the contract was not substantively unconsicionable, because it did not "shock the conscience."  Judge Calabresi found that New Jersey law concerning unconscionability was much more nuanced and fact specific then the majority acknowledged. Judge Calabresi stated that the Federal Courts must in fact often, "guess" at state law and lamented that New Jersey law prohibits the instant question from being certified to the New Jersey Supreme Court for a determinative ruling (as New Jersey only accepts certified questions of law from the Third Circuit Court of Appeals).   In the second half of the dissent, Judge Calabresi emphatically rejects the analysis of the majority opinion regarding FELA and the Jones Act and states that he would find the agreement invalid as a matter of law. The dissent states that the majority improperly defers to the Federal Arbitration Act and ignores the historical purpose of these unique federal protections for certain classes of workers such as seamen.   

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