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Johnson v. The F/V Kilauea

United States District Court, D. Hawaii

April 22, 2016

JOHN JOHNSON and LOIS JOHNSON, d/b/a SEA FARMERS, LLC, Plaintiff,
v.
THE F/V KILAUEA, in rem, and F/V KILAUEA, INC., a Washington Corporation, and MICHAEL OSTENDORP, IN PERSONNAM, Defendants.

          ORDER DENYING DEFENDANTS' MOTION TO COMPEL ARBITRATION AND LIFTING STAY ORDERED ON MARCH 3, 2016

          LESLIE E. KOBAYASHI, District Judge.

         On January 14, 2016, Defendants F/V Kilauea, in rem, and F/V Kilauea, Inc., a Washington Corp. (collectively "Defendants"), filed a Motion to Compel Arbitration ("1/14/16 Motion to Compel"). [Dkt. no. 58.] On February 8, 2016, Plaintiffs John Johnson ("Mr. Johnson") and Lois Johnson ("Mrs. Johnson"), doing business as Sea Farmers, LLC (collectively "Plaintiffs"), filed their memorandum in opposition, and Defendants filed their reply on February 15, 2016. [Dkt. nos. 68, 69.] On February 25, 2016, this Court issued an entering order ("2/25/16 EO") finding this matter suitable for disposition without a hearing pursuant to Rule 7.2(d) of the Local Rules of Practice of the United States District Court for the District of Hawaii ("Local Rules") and ruling on the 1/14/16 Motion to Compel. [Dkt. no. 71.] The instant Order supersedes the 2/25/16 EO. After careful consideration of the motion, supporting and opposing memoranda, and the relevant legal authority, Plaintiff's 1/14/16 Motion to Compel is HEREBY DENIED because under Hawaii law, there must be bilateral consideration for an arbitration agreement and it must be in writing. As to Mrs. Johnson, she did not sign the agreement, and therefore she cannot be compelled to arbitrate. As to Mr. Johnson, he did sign the agreement, but Defendants reserved the right to alter its terms unilaterally - that is, without input or notice to Mr. Johnson, and therefore there is no bilateral agreement and he cannot be compelled to arbitrate.

         BACKGROUND

         On March 19, 2015, Defendants filed a Motion to Compel Mediation and Arbitration ("3/19/15 Motion to Compel"). [Dkt. no. 14.] On May 12, 2015, the magistrate judge filed an order ("5/12/15 Order") granting in part and denying in part the 3/19/15 Motion to Compel. [Dkt. no. 27.] The background of this case is well known to the parties and was explained in the 5/12/15 Order. See 5/12/15 Order at 2-4.

         In 5/12/15 Order, the magistrate judge ordered Plaintiffs to mediate their claims pursuant to Local Rule 88.1(d)(2), and he stayed the case pending mediation. [5/12/15 Order at 12.] On December 2, 2015, the magistrate judge lifted the stay. [Minutes, filed 12/2/15 (dkt. no. 49).] The 1/14/16 Motion to Compel moves to compel arbitration on all of Plaintiffs claims. [1/14/16 Motion to Compel at 2.] Plaintiffs argue that the agreement at issue, see 1/14/16 Motion to Compel, Exh. A (Captain Employment Agreement) ("Agreement"), "is unenforceable due to Defendants' misrepresentations, for lack of consideration, under the doctrine of unconscionabilty, and for failure to satisfy the requirement of signing written employment agreements before the commencement of fishing voyages in violation of 46 U.S.C. § 10601." [Mem. in Opp. at 2.]

         DISCUSSION

         The Court must first determine the law that applies to the instant matter. Insofar as Defendants argue that the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1, applies here, see Mem. in Supp. of 1/14/16 Motion to Compel at 7 ("[S]hould Plaintiffs attempt to contend that the present matter cannot be subject to arbitration because it supposedly falls beyond the scope of the [FAA], no such argument can be availing."), they are incorrect. The FAA states, in relevant part, "nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign and interstate commerce." 9 U.S.C. § 1. "Although the FAA does not define seamen, ' courts have relied on judicial interpretation of the Jones Act, such that a seaman under the Jones Act is also a seaman for the purposes of exemption under § 1 of the FAA." Veliz v. Cintas Corp., No. C 03-1180 SBA, 2004 WL 2452851, at *4 (N.D. Cal. Apr. 5, 2004) (footnote and some citations omitted) (citing Brown v. Nabors Offshore Corp., 339 F.3d 391, 393 (5th Cir. 2003)), modified on other grounds on reconsideration, 2005 WL 1048699 (N.D. Cal. May 4, 2005). The United States Supreme Court has held:

We believe the better rule is to define... "seaman" under the Jones Act[] solely in terms of the employee's connection to a vessel in navigation. This rule best explains our case law and is consistent with the pre-Jones Act interpretation of "seaman" and Congress' land-based/sea-based distinction. All who work at sea in the service of a ship face those particular perils to which the protection of maritime law, statutory as well as decisional, is directed.

McDermott Int'l, Inc. v. Wilander, 498 U.S. 337, 354 (1991) (citation omitted). The Court CONCLUDES that Plaintiffs, who are connected to "a vessel in navigation, " see id., are seamen for purposes of the FAA exemption.

         There also appears to be some uncertainty about whether Hawaii law or Washington law applies to the Agreement. See, e.g., Mem. in Supp. of 1/14/16 Motion to Compel at 7 ("Further, even if - as Plaintiffs have incorrectly contended in the past - Washington law is applicable to the present matter, they will be able to show no distinction between Washington law and Hawaii law."). "A seaman's contract to work aboard a vessel is a maritime contract." Madeja v. Olympic Packer, LLC, 155 F.Supp.2d 1183, 1209 (D. Hawaii 2011) (citing Aqua-Marine Constructors, Inc. v. Banks, 110 F.3d 663, 670-71 (9th Cir.), cert. denied, 522 U.S. 933, 118 S.Ct. 339, 139 L.Ed.2d. 263 (1997)).[1] Further, "[u]nder choice of law rules in maritime contract cases in the Ninth Circuit, the court must apply the law of the state which has the most significant relationship to the transaction." Id . (citations and internal quotation marks omitted). In making that determination, "the court must consider: (a) the place of contracting; (b) the place of negotiation; (c) the place of performance; (d) the location of the subject matter of the contract; and (e) the domicile, residence, nationality, place of incorporation, and place of business of the parties." Id . (citing Aqua-Marine, 110 F.3d at 673). Here, the Agreement was signed in Hawaii, the work was performed in Hawaii, and the subject of the contract is located in Hawaii. The Court therefore FINDS that Hawaii has the most significant relationship to the Agreement, and it will apply Hawaii law.

         The Hawaii Uniform Arbitration Act ("HUAA"), Haw. Rev. Stat. Chapter 658A, "codifie[s] [the state's] endorsement of the enforceability of arbitration agreements." See Brown v. KFC Nat'l Mgmt. Co., 82 Hawaii 226, 233, 921 P.2d 146, 153 (1996). The HUAA states, in relevant part that, "[a]fter June 30, 2004, this chapter governs an agreement to arbitrate whenever made." § 658A-3(c). Section 658A-6(b) states that "[t]he court shall decide whether an agreement to arbitrate exists or a controversy is subject to an agreement to arbitrate." Further,

[o]n motion of a person alleging that an arbitration proceeding has been initiated or threatened but that there is no agreement to arbitrate, the court shall proceed summarily to decide the issue. If the court finds that there is an enforceable agreement to arbitrate, it shall order the parties to arbitrate.

         Â§ 658A-7(b).

         The Hawaii Supreme Court has held that, on "a motion to compel arbitration, the court is limited to answering two questions: 1) whether an arbitration agreement exists between the parties; and 2) if so, whether the subject matter of the dispute is arbitrable under such agreement." Douglass v. Pflueger Haw., Inc., 110 Hawaii 520, 530, 135 P.3d 129, 139 (2006) (footnote, ...


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