Michael Castro v. Tri Marine Fish Company LLC , 916 F.3d 1191 ( 2019 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
MICHAEL D. CASTRO, an individual, No. 17-35703
Plaintiff-Appellant,
D.C. No.
v. 2:17-cv-00008-
RSL
TRI MARINE FISH COMPANY LLC, an
unknown entity; TRI MARINE
MANAGEMENT COMPANY LLC, an OPINION
unknown entity; CAPE MENDOCINO
FISHING LP, an unknown entity;
CAPE MENDOCINO FISHING LLC, an
unknown entity; DOES, 1 through 20,
inclusive,
Defendants-Appellees.
Appeal from the United States District Court
for the Western District of Washington
Robert S. Lasnik, Senior District Judge, Presiding
Argued and Submitted November 8, 2018
Seattle, Washington
Filed February 27, 2019
2 CASTRO V. TRI MARINE FISH CO.
Before: M. Margaret McKeown and Michelle T. Friedland,
Circuit Judges, and Susan R. Bolton, * District Judge.
Opinion by Judge McKeown
SUMMARY **
Arbitration
The panel reversed in part and vacated in part the district
court’s order treating an order issued by an arbitrator in the
Philippines as a foreign arbitral award and confirming the
arbitrator’s order under the New York Convention and the
Convention Act.
Looking to the essence of the arbitrator’s order, the panel
held that the order was not a foreign arbitral award because
the parties had already agreed to settle their dispute, and so
there was no outstanding dispute to arbitrate when they
brought the matter to the arbitrator. In addition, the
purported arbitration did not follow the parties’ prior
agreements to arbitrate, nor did it follow Philippine arbitral
procedure.
The panel remanded for the district court to
assess jurisdiction under the Convention Act and—as
*
The Honorable Susan R. Bolton, United States District Judge for
the District of Arizona, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
CASTRO V. TRI MARINE FISH CO. 3
appropriate—venue and any defenses to enforcement of the
settlement.
COUNSEL
William L. Banning (argued), Banning LLP, Rancho Santa
Fe, California; John W. Merriam, Law Offices of John W.
Merriam, Seattle, Washington; for Plaintiff-Appellant.
Colin J. Folawn (argued) and David Boyajian, Schwabe
Williamson & Wyatt P.C., Seattle, Washington, for
Defendants-Appellees.
OPINION
McKEOWN, Circuit Judge:
Central to the United Nations Convention on the
Recognition and Enforcement of Foreign Arbitral Awards,
June 10, 1958, 21 U.S.T. 2517 (“New York Convention”),
and related federal law is the principle insulating foreign
arbitral awards from second-guessing by courts. But this
appeal involves an even more fundamental question—
whether we are presented with a foreign arbitral award at all.
In the mine run of cases, the answer is uncontroversial:
when it looks, swims, and quacks like an arbitral award, it
typically is. Yet, in this unusual appeal, we have an arbitral
award in name only. There was no dispute to arbitrate, as
the parties had fully settled their claims before approaching
an arbitrator; the purported arbitration consisted of an
impromptu meeting in a building lobby; and the
“proceedings” disregarded the terms of three arbitration
agreements between the parties and the issuing forum’s
4 CASTRO V. TRI MARINE FISH CO.
arbitral rules. We conclude that the resulting order is not an
arbitral award entitled to enforcement under the Convention.
BACKGROUND
In late 2012, Michael Castro moved from the
Philippines, where he retains citizenship, to American
Samoa to live with April Castillo, his fiancé, and her family.
Several months later, Castro was working in a Tri Marine
warehouse when Tri Marine offered him a crew position
aboard the F/V Captain Vincent Gann (the “Vessel”), a
fishing vessel with an imminent departure date. 1 He
accepted a position as a deck hand.
The day before departing, Castro visited Tri Marine’s
offices to sign employment paperwork. Castro and Tri
Marine dispute what was signed that day. Tri Marine
contends that Castro signed his employment agreement,
which is consistent with the date typed on the agreement
itself. Castro insists that before departing he signed only “a
half sheet of paper with a few sentences on it including [a]
pay rate of $3.00 per ton [of fish caught], the name of the
Vessel[,] and a signature line,” and that he did not sign the
employment agreement until he appeared before an
arbitrator in February 2014. The employment agreement—
whenever Castro signed it—contained a mandatory
arbitration provision applicable to all disputes or claims
arising out of Castro’s employment aboard the Vessel. It
required arbitration to occur in and subject to the procedural
rules of American Samoa.
1
Castro sued several entities with alleged interests in the Vessel.
For purposes of this appeal, there is no relevant distinction between the
entities. We refer to them collectively as Tri Marine.
CASTRO V. TRI MARINE FISH CO. 5
On July 30, 2013, approximately two weeks into the
fishing trip, Castro fell down a set of stairs and severely
injured his knee. Castro requested that Tri Marine return
him to American Samoa so he could travel to Hawaii for
medical care, but Tri Marine instead arranged for Castro’s
transport to and medical care in the Philippines. In mid-
August, Castro underwent surgery for a torn anterior cruciate
ligament and a torn meniscus, followed by treatment and
physical therapy. Tri Marine paid Castro’s medical
expenses and monthly maintenance.
Several months into Castro’s rehabilitation, doctors
diagnosed his father with kidney cancer and predicted he
would die without surgery. Castro and his family could not
afford his father’s surgery, so Castro approached Rhodylyn
De Torres, a Tri Marine agent in the Philippines, and
negotiated a settlement of his disability claims. In exchange
for an advance of $5,000, Castro reiterated his assent to the
employment agreement’s arbitration and choice of law
clauses. Shortly after, Castro agreed in principle to release
fully his claims in exchange for an additional $16,160. 2
After Tri Marine prepared the settlement paperwork,
Castro met De Torres at her office in Manila to finalize the
settlement. Castro speaks only rudimentary English—his
native tongue is Tagalog—so Castillo, who has a greater
proficiency in English, attended the meeting and helped him
review the settlement materials. De Torres informed Castro
in advance that he would be signing release documents to
2
We use variants of the terms “agree” and “settle” for convenience’s
sake. We do not suggest any conclusion regarding Castro’s defenses to
formation and enforcement of the purported settlement. Those defenses
remain open issues on remand.
6 CASTRO V. TRI MARINE FISH CO.
conclude his case, but not that he would be participating in
an arbitration.
De Torres and Castro provide divergent accounts of the
meeting. De Torres attests that over the course of two hours,
she explained the documents to Castro in “Filipino
language” (presumably, Tagalog), Castro indicated that he
understood, and Castro signed the release documents. She
also indicates that she explained, and Castro agreed, that an
arbitrator would review and approve the release documents
“to make the settlement legal and binding.” Castro disputes
whether De Torres translated documents into Tagalog,
explained that he would be foregoing future legal claims by
signing them, or informed him that he would be participating
in arbitration. According to Castro, De Torres told him they
would go to a different office merely to pick up the
settlement check and execute paperwork acknowledging
receipt.
Although it is disputed when in the day this happened,
Castro executed a release of Tri Marine “from any and all
liability or claims . . . arising out of or in any way connected
with an illness, incident, and/or incidents aboard the [Vessel]
on or about 30 July, 2013.” Castro acknowledged and
released his right to future maintenance and cure in exchange
for the settlement amount. Like Castro’s employment
agreement (and as he reiterated when accepting his advance
payment), the release provided that disputes over its validity
and enforceability would be arbitrated in American Samoa.
After the parties had agreed to the terms of the release, a
Tri Marine agent ushered Castro and Castillo to an office
building that housed the National Conciliation and
Mediation Board. De Torres had led Castro to believe that
they would merely pick up the settlement disbursement and
acknowledge receipt. Tri Marine now contends that they
CASTRO V. TRI MARINE FISH CO. 7
went to the Board’s office to submit their dispute to
arbitration. Gregorio Biares, an accredited maritime
voluntary arbitrator, met the parties in the lobby and
introduced himself as a neutral arbitrator.
The meeting was Castro’s first and only interaction with
an arbitrator. Seated at a small table in the public lobby,
surrounded by strangers entering and leaving the building,
Biares reviewed the settlement paperwork with Castro.
Biares attests that he explained the implications of the
release and confirmed in Tagalog that Castro understood the
documents. Castro paints a different picture: Biares
“hurriedly flipped through the pages showing [Castro] where
to sign,” emphasized that the settlement was favorable to
Castro, and misled Castro by characterizing the settlement
as “just a first payment” and informing Castro that he is
ineligible for protection under the Jones Act.
Although there was no arbitral case filed, Tri Marine
provided Biares a “joint motion to dismiss” pursuant to the
parties’ settlement, accompanied by the release paperwork
that Castro had already signed. The two-page joint motion
to dismiss was the first “filing” in the “case,” which lacks a
case number. Biares signed a one-page document, labeled
an “order,” which recognized the settlement, stated that
Biares found the settlement “not contrary to law, morals,
good customs and public policy,” and dismissed the “case”
with prejudice. The order acknowledges that it is the product
of a “Walk In Settlement” and that the release had already
been “duly signed by both parties” before meeting with
Biares.
Later treatment revealed that Castro’s initial surgery had
failed to graft his anterior cruciate ligament or address his
torn meniscus. Facing additional surgery to repair these
mistakes, Castro sued Tri Marine in Washington state court
8 CASTRO V. TRI MARINE FISH CO.
to recover the additional expenses. Invoking the New York
Convention, Tri Marine removed the case to federal court
and moved to confirm the order as a foreign arbitral award.
The district court denied Castro’s motion to remand,
confirmed the order, and dismissed the case.
ANALYSIS
I. The New York Convention
The New York Convention, to which the United States
is a party, governs “the recognition and enforcement of
arbitral awards made in the territory of” a foreign state.
New York Convention, art. I(1) (emphasis added). Through
the Convention and implementing legislation, the United
States sought “to encourage the recognition and enforcement
of commercial arbitration agreements in international
contracts and to unify the standards by which agreements to
arbitrate are observed and arbitral awards are enforced in the
signatory countries.” Scherk v. Alberto-Culver Co., 417 U.S.
506, 520 n.15 (1974).
The United States codified its Convention obligations in
the Convention Act, 9 U.S.C. §§ 201–08. Rogers v. Royal
Caribbean Cruise Line, 547 F.3d 1148, 1152–53 (9th Cir.
2008). Just as the Federal Arbitration Act (“FAA”) affords
considerable deference to domestic arbitral awards, the
Convention Act does the same for foreign arbitral awards.
Polimaster Ltd. v. RAE Sys., Inc., 623 F.3d 832, 836 (9th Cir.
2010). A court must confirm a foreign arbitral award unless
the party resisting enforcement meets its “substantial”
burden of proving one of seven narrowly interpreted
defenses. Id.; see 9 U.S.C. § 207 (incorporating the
Convention’s defenses); New York Convention, art. V
(listing defenses). The judicial role in this process is
circumscribed: “Confirmation under the Convention is a
CASTRO V. TRI MARINE FISH CO. 9
summary proceeding in nature, which is not intended to
involve complex factual determinations, other than a
determination of the limited statutory conditions for
confirmation or grounds for refusal to confirm.” Zeiler v.
Deitsch, 500 F.3d 157, 169 (2d Cir. 2007).
Yet, before we employ the Convention’s and the
Convention Act’s substantial protections, the threshold step
is, of course, to ensure they apply. This interpretive inquiry
requires our de novo review. CVS Health Corp. v. Vividus,
LLC, 878 F.3d 703, 706 (9th Cir. 2017) (statutes); Hosaka v.
United Airlines, Inc., 305 F.3d 989, 993 (9th Cir. 2002)
(treaties). The key question here is whether there is an
“arbitral award” to consider. Amazingly, that term is not
defined in the Convention Act, which governs only “arbitral
award[s] falling under the Convention.” 9 U.S.C. § 207.
Congress defined “falling under the Convention,” id. § 202,
but not “arbitral award” or “arbitration.” “Arbitration” and
“arbitral award” are also undefined in the Convention itself
and in the FAA, 9 U.S.C. §§ 1–16. See Polimaster, 623 F.3d
at 836 (“When interpreting the defenses to confirmation of
an arbitration award under the New York Convention, we
may look to authority under the FAA.”).
We therefore interpret the term by applying its common
meaning and common sense. Green Tree Fin. Corp.–Ala. v.
Randolph, 531 U.S. 79, 86 (2000). We also look to the
American Law Institute’s recent restatement on international
commercial arbitration, which offers helpful guidance and
background. See Restatement (Third) U.S. Law of Int’l
Commercial Arbitration § 1-1 (Am. Law Inst., Tentative
10 CASTRO V. TRI MARINE FISH CO.
Draft No. 2, 2012) (“Restatement TD No. 2”). 3 It sets forth
several helpful definitions:
An “arbitral award” is a decision in writing
by an arbitral tribunal that sets forth the final
and binding determination on the merits of a
claim, defense, or issue, regardless of
whether that decision resolves the entire
controversy before the tribunal. . . .
An “arbitral tribunal” is a body consisting of
one or more persons designated directly or
indirectly by the parties to an arbitration
agreement and empowered by them to
adjudicate a dispute that has arisen between
or among them.
“Arbitration” is a dispute resolution method
in which the disputing parties empower an
arbitral tribunal to decide a dispute in a final
and binding manner.
Id. § 1-1(a)–(c).
II. The Purported Arbitral Award
In a superficial sense, the order issued here resembles an
arbitral award: it was issued by an arbitrator and purports to
3
Although the membership has not formally approved the full
Restatement (Third) of the U.S. Law of International Commercial
Arbitration, the American Law Institute has approved Tentative Draft
No. 2, which contains the only sections that we consider here. See
Discussion of Restatement of the Law Third, The U.S. Law of
International Commercial Arbitration, 2012 A.L.I. Proceedings 143
(Am. Law Inst., May 22, 2012).
CASTRO V. TRI MARINE FISH CO. 11
award Castro a monetary remedy and dismiss the “case”
with prejudice. But labels and appearances are not
controlling—we evaluate an award by looking to its essence.
Id. § 1-1 cmt. a. Several unique aspects of these proceedings
lead us to conclude that the order is not an arbitral award
within the meaning of the Convention.
To begin, there was no outstanding dispute to arbitrate
by the time Castro and Tri Marine sat down with the
arbitrator. Id. § 1-1(c) (“‘Arbitration’ is a dispute resolution
method . . . .”). Integral to the Convention’s conception of
arbitration is the endeavor to resolve a dispute:
[T]he tribunal must be dealing with a genuine
disagreement to have jurisdiction. Where
parties appoint an arbitral tribunal after a
settlement to merely record the settlement in
the . . . award, there is no “difference”
between the parties to resolve; the parties
have already settled the dispute. A
“difference” is a necessary precondition of an
“award” in the sense of the New York
Convention.
Yaraslau Kryvoi & Dmitry Davydenko, Consent Awards in
International Arbitration: From Settlement to Enforcement,
40 Brook. J. Int’l L. 827, 854 (2015); see also Arbitration,
Black’s Law Dictionary (10th ed. 2014) (“A dispute-
resolution process in which . . . neutral third parties . . .
resolv[e] the dispute.”); A Decree Instituting a Labor Code
Thereby Revising and Consolidating Labor and Social Laws
to Afford Protection to Labor, Promote Employment and
Human Resources Development and Insure Industrial Peace
Based on Social Justice, Pres. Dec. No. 442 (as amended),
art. 262 (1974) (Philippine Labor Code permitting
12 CASTRO V. TRI MARINE FISH CO.
arbitrators to “hear and decide . . . labor disputes”); Revised
Procedural Guidelines in the Conduct of Voluntary
Arbitration Proceedings, National Conciliation and
Mediation Board, Rule II § 1(d) (2005) (“Procedural
Guidelines”) (Philippine rules of voluntary arbitration
defining “Voluntary Arbitration” as a “mode of settling
labor-management disputes”).
Castro and Tri Marine agreed to settle their dispute, and
to terms for doing so, before they ever visited an arbitrator.
In exchange for a monetary settlement, Castro released Tri
Marine “from any and all liability or claims . . . arising out
of or in any way connected with” the July 30, 2013 incident.
Having settled their dispute, Castro and Tri Marine had
nothing to arbitrate. See Restatement TD No. 2 § 1-1(c);
Kryvoi & Davydenko, 40 Brook. J. Int’l L. at 854.
What’s more, the purported arbitration in no way
followed the parties’ prior agreements to arbitrate. Because
“[a]rbitration is consent-based,” Restatement TD No. 2 § 1-
1 Reporters’ Note d, the tribunal “derives its jurisdiction and
remedial powers” from the parties’ assent, id. § 1-1 cmt. b.
The employment agreement provided for arbitration in and
subject to the procedural rules of American Samoa, the
advance payment receipt reiterated the employment
agreement’s arbitration and choice of law clauses, and even
the executed release provided for arbitration in American
Samoa. The lobby meeting with Biares was a far cry—in
venue and law—from the agreed procedure.
To be sure, parties can waive contractual terms, but
Castro’s conduct hardly demonstrates an intent to arbitrate
his dispute in the Philippines. Castro had no dispute. He
simply sought to pick up the settlement check and
acknowledge receipt—which Tri Marine led him to believe
he was doing. The setting and surroundings of the lobby sit-
CASTRO V. TRI MARINE FISH CO. 13
down suggested a coffee date more than an arbitral
proceeding; little wonder, then, that Castro professed
ignorance that the meeting supposedly constituted
arbitration. These circumstances scarcely demonstrate that
Castro sought to waive or amend his thrice-written
agreement to arbitrate disputes in American Samoa. Nor do
any of the final documents reference waiver of the parties’
repeated commitments to arbitrate in American Samoa.
Beyond fidelity to the terms of the arbitration agreement,
an “arbitrator[] . . . act[s] pursuant to the arbitration law of
the arbitral seat . . . and any procedural rules that the parties
may have adopted.” Restatement TD No. 2 § 1-1 cmt. c.
The parties did not “adopt” any procedural rules apart from
those set forth in the three written agreements. The meeting
also flouted Philippine arbitral procedure. In the Philippines,
voluntary arbitration begins upon receipt of a submission
agreement signed by both parties. Procedural Guidelines,
Rule IV § 4. No submission agreement was filed here. The
submission agreement must list the specific issues to be
arbitrated. Id., Rule IV § 5. But no arbitrable issues existed
here, as the parties had already resolved their dispute. Other
Philippine pre-arbitration procedures, such as an initial
conference, joint formulation of ground rules, and pleadings,
were conspicuously absent as well. Id., Rule VI §§ 2, 3, 6,
8. In sum, the procedure here deviated completely from
typical Philippine procedures. This divergence confirms our
understanding that arbitration did not occur.
We conclude that the parties’ free-floating settlement
agreement and order did not transform into an arbitral award
simply because the parties convened with an arbitrator. Tri
Marine may seek to enforce the release as a matter of
contract, but the order approving the settlement is not an
arbitral award under the Convention.
14 CASTRO V. TRI MARINE FISH CO.
Importantly, our decision does not encroach on the
common practice of reducing settlements reached during
arbitration into arbitral awards, frequently termed “consent
awards.” Many international arbitral rules empower
arbitrators—upon the parties’ request—to enter consent
awards. See Margaret L. Moses, The Principles and
Practice of International Commercial Arbitration 205 (3d
ed. 2017). Consent awards encourage settlement by
conferring substantial benefits—including the Convention’s
protections—upon parties that obtain them. See Nigel
Blackaby et al., Redfern and Hunter on International
Arbitration §§ 9.33, 9.34, 9.36 (Student ed. 2009) (noting
that several international arbitral bodies embrace consent
awards).
Our decision does not disturb this practice for a simple
reason: it did not occur here. “Timing is important for a
settlement agreement to become an award. Usually a
consent award becomes possible after a tribunal has been
constituted. . . . Otherwise the tribunal will have no right to
render a consent award.” Kryvoi & Davydenko, 40 Brook.
J. Int’l L. at 842–43. 4 Philippine, American, and broadly
applicable international rules impose this temporal
limitation on consent awards. Philippine arbitrators may
issue a consent award “[i]n the event that the parties finally
settle their dispute during the pendency of the arbitration
proceedings.” Procedural Guidelines, Rule VII § 4
(emphasis added). Leading American and international
arbitration groups espouse the same limitation. See Am.
Arbitration Ass’n, Commercial Arbitration Rules and
Mediation Procedures R-48(a) (2013); United Nations
4
The authors characterize their article as “the first major study of
the legal regime governing consent awards in international arbitration.”
Kryvoi & Davydenko, 40 Brook. J. Int’l L. at 828.
CASTRO V. TRI MARINE FISH CO. 15
Commission on International Trade Law, Model Law on
International Commercial Arbitration, art. 30(1) (2006).
Even the two cases involving consent awards cited favorably
by Tri Marine are consistent with this timing requirement.
See United States v. Sperry Corp., 493 U.S. 52, 56–57 (1989)
(parties initiated arbitration, then settled, and then obtained
a consent award); Transocean Offshore Gulf of Guinea VII
Ltd. v. Erin Energy Corp., No. CV H-17-2623, 2018 WL
1251924, at *1 (S.D. Tex. Mar. 12, 2018) (same). The
timing here was backwards—Castro and Tri Marine settled
and then sought to arbitrate. The result is not a consent
award.
Finally, we emphasize that our decision does not elevate
form over function. Tri Marine protests, for instance, that to
obtain a proper consent award, it could have simply initiated
arbitral proceedings before finalizing the settlement.
Perhaps, but not for nothing. An essential aspect of
arbitration is each party’s inability to unilaterally withdraw
from proceedings. Restatement TD No. 2 § 1-1 cmt. c.
Other, “[c]ollaborative forms of [alternative dispute
resolution],” by contrast, “require the parties’ continuing
willingness to participate.” Id. § 1-1 Reporters’ Note c.
Accordingly, “the weight of decisional authority and
international consensus” does not treat collaborative
processes, such as mediation, as “arbitration” under the
Convention. Id. Had the arbitrator here balked—for
instance, by ordering a hearing on voluntariness or enforcing
the venue provision pointing to American Samoa—Tri
Marine could have taken its settlement and gone home.
Although perhaps a modest hurdle, the modicum of
formality required for a proceeding to constitute arbitration
is no empty ritual.
16 CASTRO V. TRI MARINE FISH CO.
III. Remand
Because the district court treated the order as a foreign
arbitral award, it proceeded in summary fashion under the
Convention. For example, it weighed evidence and resolved
genuine disputes of material fact in favor of Tri Marine,
thereby rejecting out of hand Castro’s coercion defense. In
light of our conclusion, the district court’s approach was in
error. We vacate in full the order confirming the arbitral
award, including the ruling on the validity of the seaman’s
release.
At oral argument, Castro suggested for the first time that
the absence of an arbitral award calls into question federal
jurisdiction. The Convention Act permits removal of cases
that “relate[] to an arbitration agreement or award falling
under the Convention.” 9 U.S.C. § 205. Although the order
here is not an arbitral award, the subject matter of the case
may nonetheless “relate[] to an arbitration agreement.” Id.;
see Infuturia Glob. Ltd. v. Sequus Pharm., Inc., 631 F.3d
1133, 1138 (9th Cir. 2011) (“The phrase ‘relates to’ is
plainly broad . . . .”).
In light of the parties’ failure to brief this issue on appeal,
we take no position on the ultimate disposition of this
jurisdictional question. We remand for the district court to
assess jurisdiction and—as appropriate—venue and any
defenses to enforcement.
CONCLUSION
We review foreign arbitral awards deferentially, but we
do not blind ourselves to reality when presented with an
order purporting to be one. To cloak its free-floating
settlement agreement in the New York Convention’s
favorable enforcement regime, Tri Marine asked an
CASTRO V. TRI MARINE FISH CO. 17
arbitrator to wave his wand and transform the settlement into
an arbitral award. That is not sufficient to produce an award
subject to the Convention.
REVERSED IN PART, VACATED IN PART, AND
REMANDED.
Tri Marine shall bear costs on appeal.