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Terrebonne v. K-Sea Transp. Corp., 477 F.3d 271 (5th Cir. 2007)
Adam DeVrient, 2L, University of Mississippi School of Law
On January 26, 2007 the U.S. Court of Appeals for the Fifth Circuit held that an agreement to arbitrate made after a seaman was injured was governed by the Federal Arbitration Act (FAA). Furthermore, the court determined that the FAA’s definition of a corporation’s residence would determine the venue for the suit. Finally, the court held that the scope of the arbitration agreement was broad enough to apply to the seaman’s re-injury.
Background
In November of 2000, while the tugboat Maryland (owned by K-Sea Transportation Corp., or K-Sea) was in Connecticut, crew member Dextel Terrebonne suffered a hernia while lifting a pump onboard the tug. Terrebonne underwent surgery for the hernia the following month and returned to work on January 26, 2001. Two months later he signed an arbitration agreement settling claims that arose from his injury.
The arbitration agreement specifically settled all claims that Terrebonne had incurred from the date of his injury to the date of the agreement. While Terrebonne reserved the right to recover for any damages that he might later suffer as a result of the injury, those claims would be subject to arbitration.
Towards the end of April 2001 Terrebonne’s hernia afflicted him again. Nonetheless, he continued to work onboard the tug until May 25, 2001, when he alerted his employers to his re-developed hernia. Shortly thereafter he underwent surgery for his re-injury.
District Court’s Decision
Because Terrebonne’s re-injury occurred after the arbitration agreement he brought a Jones Act1 claim for maintenance and cure, as well as a claim under general maritime law for unseaworthiness. In his complaint Terrebonne neglected to tell the court of the existence of the arbitration agreement.
K-Sea asked the trial court to stay the proceedings pending arbitration. Terrebonne objected, claiming that the agreement was unenforceable under the FAA because it was subsumed by his employment contract. The trial court granted K-Sea’s motion to compel arbitration and denied a motion for rehearing made by Terrebonne. Terrebonne filed suit in state court in Louisiana, but shortly thereafter dismissed it and agreed to proceed with arbitration.
The arbitrators awarded compensation to Terrebonne following their examination of the re-injury. K-Sea asked the district court to confirm the arbitration award and Terrebonne asked for the award to be set aside. The trial court refused to set aside the award and Terrebonne appealed to the Fifth Circuit on the matter.
The Appeal
Terrebonne appealed the district court’s confirmation of the arbitration award and subsequent dismissal of his suit. Terrebonne’s appeal was based on two separate arguments: that the arbitration agreement he signed was unenforceable, and that even if the agreement was enforceable the redevelopment of his hernia fell outside the scope of the agreement.
Was the agreement enforceable?
Terrebonne argued that the agreement was unenforceable under either the FAA, the scope of which excludes seamen’s employment contracts, or § 5 of the Federal Employer’s Liability Act (FELA), which prohibits a common carrier from contractually limiting its liability. FELA applies by way of the Jones Act, which grants injured seamen the right to bring a cause of action for damages at law and the right to trial by jury.
Terrebonne attacked the arbitration agreement by pointing out that § 1 of the FAA states that “nothing herein shall apply to contracts of employment of seamen…” However, the court rejected this argument because it believed that the arbitration agreement was for Terrebonne’s damages and not his employment.
In an attempt to skirt this rejection of his argument, Terrebonne asserted that the agreement dealt with a seaman’s maintenance and cure, which is an inseparable aspect of a seaman’s employment. After noting that Terrebonne brought this issue to the attention of the lower court, the appellate court dismissed Terrebonne’s argument. The court said that maintenance and cure is indeed a crucial aspect of a seaman’s relationship with his employer, but it is still separate from the employment contract. Citing the U.S. Supreme Court, the court observed that “[t]he right to maintenance cannot be abrogated, but it can be modified and defined by contract.”2 The court determined that the arbitration agreement did not eliminate Terrebonne’s right to maintenance and cure and thus was valid.
Did the agreement violate FELA?
When Congress enacted the Jones Act it did not list the rights of seamen in the act itself. Instead, Congress extended to them those rights which existed under FELA. FELA § 5 voids “any contract…the purpose of which [is] to enable any common carrier to exempt itself from any liability…”3 Terrebonne contended that the arbitration agreement violated this statute and was therefore unenforceable. This argument rested in large part upon the U.S. Supreme Court case of Boyd v. Grand Trunk Western R. Co.4 In Boyd an injured FELA employee was injured and agreed to compensation from his employer in exchange for being able to bring suit in only one venue. The Supreme Court held that FELA § 5 rendered this agreement invalid. The appeals court was not persuaded by this argument, reasoning that Boyd was not controlling in this instance. The court said the Jones Act itself contains a venue provision for cases brought under it.
Terrebonne next argued that the Jones Act should apply a broader definition of a corporation’s “residence” for venue purposes; specifically, he asserted that the definition found in 28 U.S.C. § 1391(c), which describes the general venue requirements of district courts, is the applicable one. The court agreed that this venue provision is to be read into the Jones Act; however, the court stated that the trial court correctly applied this venue provision in denying Terrebonne’s motion to have the case transferred.
The court also reasoned that Boyd was inapplicable because it did not involve the FAA. And, according to the court, the judiciary has a policy of favoring arbitration. Therefore, the court was obliged to regard Terrebonne’s argument(s) in a light that favors arbitration.
Terrebonne relied upon Boutte v. Cenac Towing Inc., in which an arbitration agreement was held to be invalid.5 The court distinguished that case from Terrebonne’s by showing that in Boutte the arbitration agreement was contained in the actual employment contract, which was not the case with Terrebonne. Terrebonne attempted to avoid that distinction by citing Wilko v. Swan, in which the plaintiff was able to avoid arbitration because it would have violated § 14 of the Securities Act.6 The court was not swayed for two reasons: (1) Wilko had been overruled, and (2) the Wilko holding was made at a time when there was judicial hostility towards arbitration.
The court appeared to have no reservations about compelling Terrebonne to enter arbitration. The court assured him that he would not have to give up any of his substantive rights under the Jones Act; his dispute would merely be resolved in a different forum.
Was there a violation of public policy?
Terrebonne argued that requiring him to arbitrate his case was a violation of public policy. The court responded that, to succeed with that contention, Terrebonne needed to show how it violates public policy or goes against the intent of Congress, which he was unable to do. The court also stated that it was enforcing the arbitration agreement because doing so protected expectation interests and contractual rights of both the parties.
Was the agreement broad enough for the second injury?
Terrebonne finally argued that, should the agreement be held to be enforceable, his re-injury was a separate incident and therefore not governed by the arbitration agreement. The court looked to the language of the agreement and found that it did indeed govern any claims that were related to Terrebonne’s original injury. The court also stated that Terrebonne had failed to show how his re-injury was separate. Therefore, the agreement governed Terrebonne’s re-injury.
Endnotes
1. 46 U.S.C. App. § 688.
2. Terrebonne v. K-Sea Transp. Corp., 477 F.3d 271, 280 (5th Cir. 2007) (internal citations omitted).
3. 45 U.S.C. § 55.
4. 338 U.S. 263 (1949).
5. 346 F.Supp.2d 922 (S.D.Tex. 2004).
6. 346 U.S. 427 (1953). |