Willman Suazo v. NCL (Bahamas), Ltd. , 822 F.3d 543 ( 2016 )

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 14-15351
________________________
D.C. Docket No. 1:14-cv-23105-KMW
WILLMAN SUAZO,
Plaintiff - Appellant,
versus
NCL (BAHAMAS), LTD.,
Defendant - Appellee.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(May 10, 2016)
Before MARCUS, JORDAN and WALKER, * Circuit Judges.
*
Honorable John Walker, Jr., United States Circuit Judge for the Second Circuit, sitting by
designation.
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MARCUS, Circuit Judge:
In this appeal, we address a question of first impression in the Circuit:
whether a cruise ship employee who is injured on the job, and whose employment
contract contains an arbitration agreement governed by the New York Convention
and Chapter 2 of the Federal Arbitration Act, can bar arbitration by showing that
high costs may prevent him from effectively vindicating his federal statutory rights
in the arbitral forum. Our New York Convention precedent suggests (but does not
hold) that a party may only raise this type of public-policy defense in opposition to
a motion to enforce an arbitral award after arbitration has taken place, and not in
order to defeat a motion to compel arbitration. However, we need not definitively
answer this question today because, even if we were to assume that the plaintiff-
appellant Willman Suazo could raise a cost-based (public policy) defense in
response to defendant-appellee NCL’s motion to compel arbitration, on this record
he has plainly failed to establish that the costs of arbitration would preclude him
from arbitrating his federal statutory claims. Thus, we affirm the district court’s
order compelling the parties to arbitrate. We deny, however, the defendant’s
motion for sanctions.
I.
In 1958, the United Nations Economic and Social Council adopted the
Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
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Convention Done at New York June 10, 1958, T.I.A.S. No. 6997, 21 U.S.T. 2517
(Dec. 29, 1970) (the “New York Convention”). The New York Convention
requires signatory states to recognize written arbitration agreements “concerning a
subject matter capable of settlement by arbitration.” New York Convention, art.
II(1). The United States became a signatory to the Convention in 1970. Chapter 2
of the Federal Arbitration Act, the “Convention Act,” implements the New York
Convention: “The Convention on the Recognition and Enforcement of Foreign
Arbitral Awards of June 10, 1958, shall be enforced in the United States in
accordance with this chapter.” 9 U.S.C. § 201. The Supreme Court has explained
that “the principal purpose” behind the adoption of the Convention “was 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).
We have elaborated on this theme:
The purpose of the New York Convention, and of the United States’
accession to the convention, is to “encourage the recognition and
enforcement of international arbitral awards,” Bergesen v. Joseph
Muller Corp., 710 F.2d 928, 932 (2d Cir. 1983), to “relieve congestion
in the courts and to provide parties with an alternative method for
dispute resolution that [is] speedier and less costly than litigation.”
Ultracashmere House, Ltd. v. Meyer, 664 F.2d 1176, 1179 (11th Cir.
1981). . . . The Convention, and American enforcement of it through
the FAA, “provide[ ] businesses with a widely used system through
which to obtain domestic enforcement of international commercial
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arbitration awards resolving contract and other transactional disputes,
subject only to minimal standards of domestic judicial review for
basic fairness and consistency with national public policy.” G.
Richard Shell, “Trade Legalism and International Relations Theory:
An Analysis of the World Trade Organization,” 44 Duke L.J. 829, 888
(1995).
Indus. Risk Insurers v. M.A.N. Gutehoffnungshutte GmbH, 141 F.3d 1434, 1440
(11th Cir. 1998).
Basically, the Convention Act creates two causes of action in federal court
for a party seeking to enforce an arbitration agreement that falls under the New
York Convention: a motion to compel arbitration “in accordance with the
agreement,” 9 U.S.C. § 206; and a motion to “confirm” an arbitral award, id. § 207
(emphasis added). The Convention provides that certain defenses may be raised in
response to each cause of action. Article II of the Convention, like 9 U.S.C. § 206,
applies at the “initial arbitration-enforcement stage.” Escobar v. Celebration
Cruise Operator, Inc., 805 F.3d 1279, 1286 (11th Cir. 2015). Article II carefully
prescribes a limited set of defenses that may be considered at the arbitration-
enforcement stage:
The court of a Contracting State, when seized of an action in a matter
in respect of which the parties have made an agreement within the
meaning of this article, shall, at the request of one of the parties, refer
the parties to arbitration, unless it finds that the said agreement is null
and void, inoperative or incapable of being performed.
New York Convention, art. II(3) (emphasis added). “Importantly, Article II
contains no explicit or implicit public-policy defense at the initial arbitration-
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enforcement stage.” Escobar, 805 F.3d at 1287. We have held that the Convention
requires that a motion to compel arbitration must be granted “so long as (1) the
four jurisdictional prerequisites are met and (2) no available affirmative defense
under the Convention applies.” Lindo v. NCL (Bahamas), Ltd., 652 F.3d 1257,
1276 (11th Cir. 2011) (footnote omitted) (citing Bautista v. Star Cruises, 396 F.3d
1289, 1294-95 (11th Cir. 2005)); see also Escobar, 805 F.3d at 1285-86. An
arbitration agreement falls within the jurisdiction of the New York Convention if:
(1) the agreement is “in writing within the meaning of the [New York]
Convention”; (2) “the agreement provides for arbitration in the territory of a
signatory of the [New York] Convention”; (3) “the agreement arises out of a legal
relationship, whether contractual or not, which is considered commercial”; and (4)
a party to the agreement is not an American citizen or the commercial relationship
has some reasonable relation with one or more foreign states. Bautista, 396 F.3d at
1294 n.7.
Article V of the Convention, like 9 U.S.C. § 207, governs only the “award-
enforcement” stage, and provides for a substantially broader set of defenses that
may be raised in response to a motion to confirm an arbitral award. See New York
Convention, art. V(1)-(2). One of Article V’s seven permitted defenses is a
“public policy” defense:
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Recognition and enforcement of an arbitral award may also be refused
if the competent authority in the country where recognition and
enforcement is sought finds that:
...
(b) The recognition or enforcement of the award would
be contrary to the public policy of that country.
Id., art. V(2). Notably, this public-policy defense, like the other Article V
defenses, “applies only at the award-enforcement stage.” Lindo, 652 F.3d at 1263.
Therefore, parties must “wait until the award-enforcement stage to assert an Article
V public-policy claim.” Escobar, 805 F.3d at 1287.
Chapter 1 of the FAA governs domestic arbitration, and provides a broad
array of defenses to the enforcement of arbitration agreements in the cases that it
governs. See 9 U.S.C. § 2 (Courts shall enforce agreements governed by Chapter 1
of the FAA “save upon such grounds as exist at law or in equity for the revocation
of any contract.”). However, the broad defenses applicable in the context of
domestic arbitration are not generally available in cases governed by the New York
Convention:
Domestic defenses to arbitration are transferrable to a Convention Act
case only if they fit within the limited scope of defenses [contained in
Articles II and V of the Convention]. Such an approach is required by
the unique circumstances of foreign arbitration[, where]
concerns of international comity, respect for the
capacities of foreign and transnational tribunals, and
sensitivity to the need of the international commercial
system for predictability in the resolution of disputes
require that we enforce the parties’ agreement, even
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assuming that a contrary result would be forthcoming in a
domestic context.
Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S.
614, 629 (1985).
Bautista, 396 F.3d at 1302.
The “effective vindication doctrine” is one defense that the federal courts
have recognized in the context of domestic arbitration. As the Supreme Court has
explained:
The “effective vindication” exception . . . originated as dictum in
Mitsubishi Motors, where we expressed a willingness to invalidate, on
“public policy” grounds, arbitration agreements that “operat[e] ... as a
prospective waiver of a party’s right to pursue statutory remedies.”
473 U.S., at 637, n. 19 (emphasis added). Dismissing concerns that
the arbitral forum was inadequate, we said that “so long as the
prospective litigant effectively may vindicate its statutory cause of
action in the arbitral forum, the statute will continue to serve both its
remedial and deterrent function.” Id., at 637. Subsequent cases have
similarly asserted the existence of an “effective vindication”
exception, see, e.g., 14 Penn Plaza LLC v. Pyett, 556 U.S. 247, 273–
274 (2009); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 28
(1991), but have similarly declined to apply it to invalidate the
arbitration agreement at issue.
. . . . As we have described, the exception finds its origin in the desire
to prevent “prospective waiver of a party's right to pursue statutory
remedies,” Mitsubishi Motors, supra, at 637, n. 19 (emphasis added).
That would certainly cover a provision in an arbitration agreement
forbidding the assertion of certain statutory rights. And it would
perhaps cover filing and administrative fees attached to arbitration
that are so high as to make access to the forum impracticable. See
Green Tree Financial Corp.–Ala. v. Randolph, 531 U.S. 79, 90 (2000)
(“It may well be that the existence of large arbitration costs could
preclude a litigant ... from effectively vindicating her federal statutory
rights”). But the fact that it is not worth the expense involved in
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proving a statutory remedy does not constitute the elimination of the
right to pursue that remedy.
Am. Exp. Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2310-11 (2013) (footnote
omitted). The Supreme Court has never invoked the effective vindication doctrine
to justify the refusal to enforce an arbitration clause in either the domestic or
foreign arbitration context. Id. at 2310. Moreover, we are aware of no court that
has even applied the effective vindication doctrine to invalidate an arbitration
agreement in the context of a New York Convention case. See Escobar, 805 F.3d
at 1291.
II.
A.
The basic facts essential to the resolution of this appeal are undisputed.
Suazo, a Nicaraguan citizen, signed an employment contract (the “Employment
Agreement”) with NCL to work aboard one of its cruise ships. The Employment
Agreement plainly requires arbitration of any dispute arising out of his
employment with NCL:
ARBITRATION – Seaman agrees, on his own behalf and on behalf of
his heirs, executors, and assigns, that any and all claims, grievances,
and disputes of any kind whatsoever relating to or in any way
connected with the Seaman’s shipboard employment with Company
. . . shall be referred to and resolved exclusively by binding arbitration
pursuant to the United Nations Convention on Recognition and
Enforcement of Foreign Arbitral Awards [(the “New York
Convention”)], except as otherwise provided in any government
mandated contract . . . .
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The place of the arbitration shall be the Seaman’s country of
citizenship, unless arbitration is unavailable under The Convention in
that country, in which case, and only in that case, said arbitration shall
take place in Nassau, Bahamas. The substantive law to be applied to
the arbitration shall be the law of the flag state of the vessel. . . .
The arbitration referred to in this Article is exclusive and mandatory.
Lawsuits or other proceedings between the Seaman and the Company
may not be brought except to enforce the arbitration provision of this
Agreement or to enforce a decision of the Arbitrator.
The Agreement is silent as to who must bear the costs of arbitration. However, it
says that “the employment relationship established hereunder shall at all times be
subject to and governed by the [Collective Bargaining Agreement (“CBA”)].”
The CBA in turn provides: 1
7. Arbitration
....
e. In the event a dispute between the [Norwegian Seafarers’
Union (“NSU”)] and NCL, or between NCL and a Seafarer
represented by the NSU, cannot be resolved through good faith
negotiations and either party commences an arbitration
proceeding, NCL shall bear the reasonable costs related to the
arbitration process from beginning to end including, but not
limited to fees charged and expenses incurred by arbitrators,
and any costs related to proceedings brought by the NSU
necessary to enforce a decision. The NSU and NCL shall each
bear the costs of their own attorney fees and legal
representation.
1
The CBA was not provided to the district court. However, it was referenced in the
Employment Agreement, which was presented to the district court. Moreover, NCL quoted from
the CBA at length in its filings in the district court and offered to submit it upon request. Suazo
did not object to NCL’s references to the CBA in the district court or request that the full CBA
be submitted. Accordingly, we consider the pertinent portions of the CBA on appeal.
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f. If the Seafarer rejects the representation appointed by the
NSU at arbitration or thereafter, or if he or she initiates
arbitration independently, then he or she will cover the cost of
his or her own legal representation, if any. Where the Seafarer
is not represented by the NSU, the arbitrator shall seek the
NSU’s opinion as to the interpretation of this Agreement before
making a decision.
Thus, the CBA provides that, if the Seafarer is represented by the Norwegian
Seafarers’ Union in arbitration, NCL will bear the “reasonable costs related to the
arbitration process from beginning to end.” However, the CBA is silent as to who
bears the cost of arbitration if the “Seafarer rejects the representation appointed by
the NSU.” In this situation -- which the parties agree is applicable here -- both
NCL and the International Center for Dispute Resolution, which performs the
arbitrations between NCL and its employees, have taken the position that the
employee and NSU must each bear one-half of the costs until the arbitrator decides
who will pay the costs
Suazo worked for NCL aboard the Bahamian vessel Norwegian Epic, where
his duties consisted of frequent heavy lifting. In April 2011, he was injured while
lifting heavy garbage bins as part of his duties onboard the ship. He went to the
ship’s doctor complaining of back pain, was prescribed pain medications, and was
sent back to work. His pain continued to worsen until he could no longer work.
On August 24, 2011, Suazo was flown home to Nicaragua on medical leave. NCL
did not make arrangements for his medical care in Nicaragua until after Suazo
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contacted the local hiring agency requesting medical attention. On August 31,
2011, NCL referred Suazo to an orthopedic surgeon, who diagnosed him with a
herniated disc that was compressing a nerve in his spine and prescribed physical
therapy and epidural steroid injections. Suazo received treatment throughout 2012,
but his medical care was terminated in December 2012 before he was healed. NCL
ignored requests to reinstate his medical care.
B.
On December 20, 2013, Suazo, represented by private counsel, brought suit
against NCL in Florida circuit court in Miami-Dade County. The four-count
complaint asserted claims for negligence under the Jones Act, 46 U.S.C. § 30104,
and under general maritime law. NCL timely removed the case to the United
States District Court for the Southern District of Florida pursuant to 9 U.S.C. §
205, which allows for the removal of state court actions relating to an arbitration
agreement that falls under the New York Convention “at any time before the trial
thereof.” After removing the case to federal court, NCL filed a motion to dismiss
and compel arbitration.
Suazo opposed NCL’s motion to compel arbitration. He noted that, although
the employment agreement was silent as to who would bear the costs of arbitration
for individuals who forego representation by the Norwegian Seafarers’ Union,
NCL had said that it would require him to pay half of the costs of arbitration. He
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claimed that he was too poor to bear that cost and, therefore, that the district court
should refuse to compel arbitration in the first place. Suazo submitted an affidavit
in support of his opposition, which stated, in pertinent part only this:
5. I am from a poor rural community in Nicaragua. It is not easy to
find work in my home country.
6. I am the main source of income in my family. I financially support
my family.
7. I do not have any money to pay for an arbitration, much less for an
arbitrator’s salary.
8. I do not have the means to pay for thousands of dollars to an
arbitrator. To do so would mean to deprive my family of support.
On November 4, 2014, the district court granted NCL’s motion and
compelled the parties to arbitrate, retaining jurisdiction of the case in order to
enforce the arbitration award “if appropriate.” The court reasoned that Suazo’s
argument that he could not afford to pay the costs of arbitration invoked the
“effective vindication doctrine,” which was a “public policy” defense that could
not be considered at the arbitration-enforcement stage under the New York
Convention.2 This timely appeal ensued.
Suazo raises a single question on appeal: whether he may defeat NCL’s
motion to compel arbitration by showing that he is too poor to afford the costs of
2
The district court also rejected Suazo’s claims that the FAA precludes enforcement of
arbitration agreements in seaman’s employment contracts, and that the arbitration agreement’s
choice of foreign law rendered the agreement unenforceable. Suazo has not raised those
arguments on appeal.
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arbitration. On May 6, 2015, NCL moved to dismiss the appeal for want of
jurisdiction, suggesting that the district court’s order compelling arbitration was a
non-final, non-appealable order under 9 U.S.C. § 16(b). While that motion was
pending in our Court, NCL moved for sanctions, arguing that Suazo’s appeal was
frivolous and that the Court should award it double costs and reasonable attorneys’
fees.
On June 23, 2015, we denied NCL’s motion to dismiss, concluding that the
order compelling arbitration was a final, appealable order. See 9 U.S.C. §
16(a)(3); Martinez v. Carnival Corp., 744 F.3d 1240, 1243-45 (11th Cir. 2014)
(holding that an order compelling arbitration was final and appealable where the
order denied all pending motions as moot, administratively closed the case, and
neither expressly stayed nor expressly dismissed the case); Bautista, 396 F.3d at
1294 (holding that a district court’s retention of jurisdiction to enforce or confirm a
resulting arbitral award does not destroy finality). NCL’s motion for sanctions is
still pending in this Court.
III.
We review de novo a district court order granting a motion to compel
arbitration. In re Checking Account Overdraft Litig., 754 F.3d 1290, 1293 (11th
Cir. 2014). The district court was required to compel arbitration if the arbitration
agreement satisfied the four jurisdictional prerequisites found in the New York
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Convention and none of Article II’s arbitration-enforcement stage defenses
applied. Lindo, 652 F.3d at 1276. It is undisputed that the four jurisdictional
prerequisites have been met. The parties agree that: the employment agreement is
in writing; the agreement provides for arbitration in Nicaragua, which has signed
the Convention; Suazo’s employment with NCL was a commercial relationship;
and Suazo is not an American citizen. See Bautista, 396 F.3d at 1295 n.7 (listing
jurisdictional requirements). Suazo argues, nevertheless, that the district court
erred in compelling him to arbitrate because he cannot afford the costs of
arbitration that he will be required to pay and, therefore, he will be unable to
effectively vindicate his federal statutory rights in the arbitral forum.
A.
We have not squarely decided whether a party can raise a cost-based
effective vindication defense at the arbitration-enforcement stage under the New
York Convention, and we are aware of no other federal circuit court that has done
so. Nevertheless, three of our decisions provide substantial guidance.
In Bautista v. Star Cruises, 396 F.3d 1289 (11th Cir. 2005), several cruise
ship employees who were injured at work brought suit in federal district court
against their employers, asserting claims under the Jones Act, 46 U.S.C. § 688, and
under the general maritime law of the United States. Id. at 1292. The district court
found that the employment relationship was governed by an arbitration clause and
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compelled the parties to arbitrate the dispute under the New York Convention. Id.
at 1294. The plaintiffs appealed the order compelling arbitration, arguing, among
other things, that the arbitration provision was unconscionable. Id. at 1301-02.
We affirmed the order compelling arbitration. We began by explaining that
the New York Convention “requires that courts enforce an agreement to arbitrate
unless the agreement is ‘null and void, inoperative or incapable of being
performed.’” Id. at 1301 (quoting New York Convention, art. II(3)). We adopted
the First Circuit’s view that Article II’s “‘null and void’ clause . . . limits the bases
upon which an international arbitration agreement may be challenged to standard
breach-of-contract defenses,” and that the clause “must be interpreted to
encompass only those situations – such as fraud, mistake, duress, and waiver – that
can be applied neutrally on an international scale.” Id. at 1302 (internal quotation
marks omitted) (quoting DiMercurio v. Sphere Drake Ins. PLC, 202 F.3d 71, 79-80
(1st Cir. 2000)). We observed that unconscionability could provide a defense to
arbitration enforcement in the domestic context, but that “[d]omestic defenses to
arbitration are transferrable to a Convention Act case only if they fit within the
limited scope of defenses” contained in the Convention. Id. (emphasis added).
Because we “doubt[ed] that there exists a precise, universal definition of
[unconscionability] that may be applied effectively across the range of countries
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that are parties to the Convention,” we refused to consider the plaintiffs’
unconscionability defense and affirmed the order compelling arbitration. Id.
After Bautista, some confusion arose in this Circuit about which defenses
could properly be raised at the arbitration-enforcement stage under the New York
Convention. In Thomas v. Carnival Corp., 573 F.3d 1113 (11th Cir. 2009), a panel
of our Court reversed a district court’s order compelling arbitration because the
arbitration agreement required the application of Panamanian law and would,
therefore, deprive the plaintiff of his ability to assert his United States statutory
claims. Id. at 1124. Citing Article V -- which, unlike Article II, contains an
explicit public policy defense -- the panel reasoned that the New York Convention
allowed a party to defeat a motion to compel arbitration by establishing that an
arbitration clause “is null and void as a matter of public policy.” Id. at 1120-24 &
n.17.
We addressed the apparent conflict between Bautista and Thomas in Lindo
v. NCL (Bahamas), Ltd., 652 F.3d 1257 (11th Cir. 2011). In Lindo, a Bahamian
cruise ship employee sued his employer, NCL, in Florida circuit court in Miami-
Dade County, alleging that he had injured his back while lifting trash bags at work,
bringing a claim under the Jones Act. Id. at 1260-61. The employment agreement
between NCL and the employee required all such claims to be arbitrated in the
employee’s country of citizenship, which was Nicaragua, and that the law of the
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vessel, which was the Bahamas, would apply. Id. NCL removed the case to
federal court and moved to compel arbitration; the district court granted the
motion. Id. at 1261-62. Lindo appealed and, relying heavily on Thomas, argued
that the application of Bahamian law in the arbitral forum would prevent him from
effectively vindicating his United States statutory rights under the Jones Act. He
also asserted that the arbitration agreement was unconscionable and, therefore,
unenforceable. Id. at 1276.
We affirmed the district court’s order compelling arbitration. First, we
explained, we were required to “start our analysis with a strong presumption in
favor of the arbitration agreement in Lindo’s Contract,” and that presumption was
unaffected by the fact that Lindo was seeking to litigate federal statutory claims.
Id. at 1275-76. Because Lindo conceded that the four jurisdictional prerequisites
to the New York Convention were met, id. at 1276 & n.17, we needed only to
decide whether Lindo’s effective vindication argument constituted an available
affirmative defense under the Convention. Citing Bautista, 396 F.3d at 1302, we
held that Lindo had not made any “claim – much less any showing – of fraud,
mistake, duress, or waiver,” and he therefore could not avoid arbitration under
Article II. Id. at 1276.
We explained that Thomas could not help Lindo avoid arbitration because,
“to the extent Thomas allowed the plaintiff seaman to prevail on a new public
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policy defense under Article II, Thomas violate[d] Bautista and our prior panel
precedent rule.” Id. at 1278. Furthermore, Lindo could not raise any public policy
defense under Article V because “Article V applies only at the arbitral award-
enforcement stage and not at the arbitration-enforcement stage.” Id. at 1280.
Moreover, we noted that it was likely Bahamian law would permit Lindo to pursue
the same types of claims as American law. Thus, Lindo’s “public policy” defense
was “premature” at the arbitration-enforcement stage, since Lindo could challenge
the manner in which the arbitration was conducted under Article V at the arbitral
award-enforcement stage, when “the arbitrator . . . will have ruled and the record
will show what legal principles were applied and what Lindo recovered, or did not
recover, and why.” Id. at 1284. To allow Lindo to raise his choice-of-law
effective vindication argument at the arbitration-enforcement stage, we concluded,
“would effectively eviscerate the mutually binding nature of the Convention”
because it would enable all signatory nations to refuse to enforce arbitration
agreements that selected any law but their own. Id.
Most recently, in Escobar v. Celebration Cruise Operator, 805 F.3d 1279
(11th Cir. 2015), we confronted the precise question presented in this case:
whether a cost-based effective vindication defense could be raised at the
arbitration-enforcement stage under the New York Convention. In Escobar, the
plaintiff -- a cruise ship employee who had been injured on the job -- brought suit
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in state court against his employer, who removed the case to federal court and
moved to compel arbitration. Id. at 1282-83. The plaintiff had signed an
employment agreement that contained an arbitration clause, which stated:
“[a]lthough [the employer] shall bear the initial cost of the arbitration, each [party]
shall be responsible for one half of the cost of arbitration.” Id. at 1282. Escobar
argued that his arbitration fees would be $20,000 for even a short, three-day
arbitration, and he submitted an affidavit stating that he had no money to pay the
fees. Id. at 1283. Nevertheless, the district court granted the motion to compel
arbitration. Id. Escobar appealed, arguing under the effective vindication doctrine
that the cost-splitting provision in the arbitration agreement “effectively denie[d]
him access to the forum because he is indigent.” Id. at 1291.
We affirmed. We began by observing that we had found no court that had
ever applied the effective vindication doctrine to a New York Convention case. Id.
at 1291. Yet we found it unnecessary to decide whether Escobar’s cost-based
effective vindication defense could be raised at the arbitration-enforcement stage,
in as much as Escobar’s effective vindication claim failed for three other reasons.
“First, to the extent Escobar could make [an effective vindication] claim in a New
York Convention case,” it was “premature for Escobar to do so at this arbitration-
enforcement stage.” Id. at 1292. We reached this conclusion because the cost-
splitting clause in the arbitration agreement required the employer to pay the initial
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fee to “open the doors to begin the arbitration and begin the proceedings,” id. at
1292 & n.16, meaning that “Escobar has access to the forum,” id. at 1292.
Second, we determined that the “most reasonable reading” of the cost-
splitting clause was that the employer would “initially pay for the cost of the
arbitration itself,” and that Escobar “ultimately [would] be responsible for his one-
half share.” Id. Recognizing that “the precise application of the cost-splitting
clause [was] an issue properly for the arbitrator to consider,” we found that
Escobar had failed to show that he was likely to incur “any costs due prior to the
arbitrator’s decision.” Id. (emphasis added). Third, we determined that Escobar
had not provided any evidence of how much arbitration actually would cost him,
and, therefore, had failed to carry his burden to prove that he would be denied
access to the forum. Id. Thus, we observed that based on the arbitration clause
language and his own filings, Escobar had “wholly failed to establish that he would
be denied access to the forum.” Id. We indicated that “the appropriate time for
Escobar to raise any argument relating to the payment of fees would be at the
award-enforcement stage, if and when [his employer] attempt[ed] to collect arbitral
costs from him.” Id.
B.
Because Suazo is attempting to defeat a motion to compel arbitration, he can
only raise his cost-based effective vindication defense if it falls within the defenses
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enumerated in Article II of the New York Convention. See Lindo, 652 F.3d at
1263. Again, Article II requires that a court enforce an agreement to arbitrate
“unless it finds that the said agreement is [1] null and void, [2] inoperative or [3]
incapable of being performed.” New York Convention, art. II(3). The Supreme
Court has never applied the effective vindication doctrine and “no court [] has
applied it in the context of a New York Convention case.” Escobar, 805 F.3d at
1291. We have never determined whether a cost-based effective vindication
defense can be raised under the “incapable of being performed” clause of Article
II, and we need not resolve that question today because Suazo has fallen far short
of establishing that enforcing the arbitration agreement in this case will effectively
deny him access to the arbitral forum.
In order to prevail on a cost-based effective vindication defense in a
domestic arbitration case – assuming such a defense can be raised under Article II -
- a party seeking to avoid arbitration must “demonstrate that he faces such ‘high
costs’ if compelled to arbitrate his claim . . . that he is effectively precluded from
vindicating his [federal statutory] rights in the arbitral forum.” Musnick v. King
Motor Co. of Fort Lauderdale, 325 F.3d 1255, 1259 (11th Cir. 2003) (quoting
Green Tree, 531 U.S. at 90). Recently in Escobar, we explained:
The “party seek[ing] to invalidate an arbitration agreement on the
ground that arbitration would be prohibitively expensive . . . bears the
burden of showing the likelihood of incurring such costs.” Green
Tree, 531 U.S. at 92. The mere existence of a cost-splitting clause in
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an arbitration agreement does not satisfy a plaintiff’s burden to prove
the likelihood of prohibitive costs. See Musnick v. King Motor Co. of
Fort Lauderdale, 325 F.3d 1255, 1259 (11th Cir. 2003). Rather, a
party invoking the effective-vindication doctrine because the cost of
arbitration is prohibitively expensive must present evidence of two
things: (1) “the amount of the fees he is likely to incur;” and (2) “his
inability to pay those fees.” Id. at 1260. Speculative fear of high fees
is insufficient. Id.
Escobar, 805 F.3d at 1291.
In Escobar, the arbitration agreement at issue required the employer to bear
the initial cost of arbitration, but then required the parties to evenly split the
remaining costs of arbitration. Id. at 1282. Escobar presented affidavit evidence
that he “was unemployed, had $0 in his bank account, and did not have any money
to pay for arbitration.” Id. at 1283. In addition, his counsel opined that Escobar’s
share of the arbitration fees could amount to $20,000. Id.
We rejected Escobar’s effective vindication defense for three reasons. First,
Escobar would have been able to bring his claims in the arbitral forum because the
arbitration agreement at issue required the employer to “pay the initial cost of
arbitration.” Id. at 1292 (internal quotation marks omitted). Second, we
understood the arbitration agreement to require the employer to pay for all of the
costs of arbitration and then to seek reimbursement from Escobar, so Escobar had
not “shown that he is likely to incur any costs due prior to the arbitrator’s
decision.” Id. (internal quotation marks omitted and emphasis added). And third,
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Escobar had not provided any evidence (apart from counsel’s speculation) to show
how much arbitration would cost him. Id.
In this case, Suazo’s evidential foundation offered in support of his effective
vindication argument falls short of even the paltry showing that we found
insufficient in Escobar. In the district court, Suazo submitted no evidence
concerning “the amount of the fees he is likely to incur.” Escobar, 805 F.3d at
1291 (internal quotation mark omitted). His counsel simply opined that arbitration
costs could exceed $20,000, but he cited no evidence in support of that claim.
Suazo also submitted an email exchange with NCL’s counsel, which stated that
Suazo would be billed for half of the costs of arbitration “until a decision is made
by the arbitrator once appointed.” In a later email, NCL’s counsel clarified this to
mean that “the costs are to be equally divided among the parties until such time as
the arbitrator addresses the issue.” Finally, in his appellate brief, Suazo cited to
additional evidence outside the record regarding the costs of arbitration, which
suggests that Suazo would have to pay up to $2,000 to initiate arbitration and
$1,750 as a final arbitration fee, assuming that the arbitrator required the parties to
continue splitting costs until the end of arbitration.3 Even if we could consider the
3
In his reply brief on appeal, Suazo cited to the website of the International Center for Dispute
Resolution (“ICDR”), the arbitration body that would hear his claim. That website shows that
the “Initial Filing Fee” for a claim of Suazo’s value is $4,000, and the “Final Fee” is $3,500. See
ICDR, International Dispute Resolution Procedures, Amended and Effective July 1, 2015,
http://info.adr.org/ICDRfeeschedule/. He contends that he would have to pay half of that fee, or
$2,000.
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evidence submitted for the first time on appeal, which we generally would not do,
see Sammons v. Taylor, 967 F.2d 1533, 1544 (11th Cir. 1992), Suazo still could
not prevail.
Suazo’s factual foundation for regarding his “inability to pay [the
arbitration] fees,” Escobar, 805 F.3d at 1291, is insufficient. The only record
evidence offered is Suazo’s affidavit, which states, in sum, that he lives in a poor
community where it is “not easy to find work,” that he “do[es] not have money to
pay for an arbitration, much less for an arbitrator’s salary,” and that he “do[es] not
have the means to pay for thousands of dollars to an arbitrator.” These conclusory
statements do not establish that Suazo could not afford to pay even $3,750, a figure
he claims he might incur in arbitration. Indeed, Suazo’s affidavit is less specific
than the affidavit offered by the plaintiff in Escobar, which said that he was
unemployed and had $0 in his bank account. Escobar, 805 F.3d at 1283.
We recognize that the arbitration agreement in this case is distinguishable
from the agreement at issue in Escobar. While “application of the cost-splitting
clause is an issue properly for the arbitrator to consider,” id. at 1292, it seems
likely that Suazo will be required to bear half of the cost of initiating arbitration
and “may” also become responsible for some other costs prior to the arbitrator’s
decision. Even so, on this almost barren record, Suazo has not carried his burden
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of proving that it is likely that unaffordable costs will deny him “access to the
forum.” Id.
We hold that Suazo cannot prevail on his effective vindication defense for a
second and independent reason. The CBA between Suazo and NCL provided that,
as long as Suazo was represented by the Norwegian Seafarers’ Union, NCL “shall
bear the reasonable costs related to the arbitration process from beginning to end.”
However, if Suazo chose to initiate arbitration “independently” of the NSU, the
CBA is silent as to who must bear the costs of arbitration. On this record, it
appears that the only reason Suazo would be required to bear any cost in arbitrating
his dispute with NCL is because he opted to retain private counsel instead of
proceeding to arbitrate with union-appointed counsel. The agreement gave him a
choice: arbitrate for free with your union-chosen representation, or pay your own
way with counsel of your choice. Having chosen the latter course of action, we
will not second-guess the bargain struck in the contract and let Suazo eat his cake
and have it too. Because the arbitration agreement and the CBA gave him the
ability to arbitrate for free and thereby “vindicate[e] his [federal statutory] rights in
the arbitral forum,” Musnick, 325 F.3d at 1259, his effective vindication defense is
unmeritorious.4
4
At oral argument, Suazo’s counsel suggested that NSU would not actually represent a seafarer
in a dispute with NCL and, therefore, the CBA does not provide an alternative means of
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Thus, since Suazo has not established any basis on which to deny NCL’s
motion to compel arbitration, we affirm the district court’s order compelling the
parties to arbitrate the dispute.
IV.
After Suazo filed his opening appellate brief, NCL moved for sanctions
pursuant to Fed. R. App. P. 38 and 28 U.S.C. § 1927, arguing that Suazo’s appeal
is frivolous because his “public policy defense has been repeatedly and expressly
rejected by binding Eleventh Circuit precedent following Lindo,” and seeking an
award of double costs and reasonable attorneys’ fees from Suazo or his counsel.
Fed. R. App. P. 38 provides:
If a court of appeals determines that an appeal is frivolous, it may,
after a separately filed motion or notice from the court and reasonable
opportunity to respond, award just damages and single or double costs
to the appellee.
“Rule 38 sanctions have been imposed against appellants who raise ‘clearly
frivolous claims’ in the face of established law and clear facts.” Farese v. Scherer,
342 F.3d 1223, 1232 (11th Cir. 2003). Where an appeal requires a court to decide
an issue of first impression in a circuit court, it is not frivolous. See Albra v.
Advan, Inc., 490 F.3d 826, 835 (11th Cir. 2007). Title 28 U.S.C. § 1927, in turn,
provides:
effectively vindicating his rights. However, there is no evidence in this record that the CBA does
not operate as its text suggests or that Suazo sought and was refused NSU representation.
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Any attorney or other person admitted to conduct cases in any court of
the United States or any Territory thereof who so multiplies the
proceedings in any case unreasonably and vexatiously may be
required by the court to satisfy personally the excess costs, expenses,
and attorneys’ fees reasonably incurred because of such conduct.
We have “consistently held that an attorney multiplies proceedings unreasonably
and vexatiously within the meaning of the statute only when the attorney’s conduct
is so egregious that it is tantamount to bad faith.” Amlong & Amlong, P.A. v.
Denny’s, Inc., 500 F.3d 1230, 1239 (11th Cir. 2006) (internal quotation marks
omitted).
Sanctions are not appropriate in this case. To the extent that NCL’s motion
was based on its claim that we did not have jurisdiction to consider this appeal, we
already decided that NCL was incorrect when we denied NCL’s motion to dismiss.
Moreover, Suazo’s appeal was not frivolous. He raised a single argument on
appeal relating to the effective vindication doctrine, which involved a question of
first impression in our Court. Finally, Suazo’s appeal did not unnecessarily
multiply the proceedings in this case, since he raised only a single issue, and a
narrow one at that. Accordingly, we deny NCL’s motion for sanctions.
ORDER TO COMPEL ARBITRATION AFFIRMED AND MOTION
FOR SANCTIONS DENIED.
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