Suazo v. NCL (Bahamas), Ltd., 822 F.3d 543 (11th Cir. 2016) [click for opinion]
A Nicaraguan cruise ship employee, Suazo, sued his employer, NCL, in Florida state court, alleging that he suffered injuries while lifting heavy garbage bins at work and claiming negligence under the Jones Act and general maritime law. The employment agreement between NCL and Suazo required arbitration of any dispute arising out of Suazo's employment with NCL.
NCL removed the case to federal court and moved to compel arbitration. Suazo opposed NCL's motion to compel, arguing that he was too poor to bear the cost of arbitration. Notably, the employment agreement was silent as to who would incur the costs of arbitration for individuals who forewent representation by the NCL union. Notwithstanding, NCL said that it would require Suazo to pay half of the costs.
The federal district court granted NCL's motion to compel arbitration, retaining jurisdiction of the case to enforce a subsequent arbitration award, "if appropriate." The court reasoned that Suazo's argument that he could not afford to pay the costs of arbitration invoked a public policy defense known as the "effective vindication doctrine," which could not be considered in connection with the enforcement of an agreement to arbitrate under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention").
Suazo appealed, raising a narrow issue of first impression: whether he could defeat NCL's motion to compel arbitration by showing that he was too poor to afford the costs of arbitration. The appellate court noted that 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. The Supreme Court has never invoked the effective vindication doctrine to justify the refusal toenforce an arbitration clause in either the domestic or foreign arbitration context.
The appellate court concluded that, because Suazo was attempting to defeat a motion to compel arbitration, he could only raise his cost-based effective vindication defense if it fell within the defenses enumerated in Article II of the New York Convention. Pursuant to Article II, a court must enforce an agreement to arbitrate unless it finds that the agreement is (1) null and void; (2) inoperative; or (3) incapable of being performed.
Acknowledging that the Eleventh Circuit had not determined whether a cost-based effective vindication defense could be raised under the "incapable of being performed" clause of Article II, the court concluded that it need not resolve that question as Suazo failed to establish that enforcing the arbitration agreement would effectively deny him access to the arbitral forum.
First, the court found that Suazo failed to carry his burden of proving that it was likely that unaffordable costs would deny him access to the forum; Suazo submitted no evidence concerning the amount of fees he was likely to incur in arbitration, and his factual foundation regarding his inability to pay the arbitration fees was insufficient. Second, and independently, the court found that Suazo could not prevail on his effective vindication defense because the employment agreement gave Suazo a choice: to arbitrate for free with his union-chosen representation, or to pay his own way with counsel of his choice. Because Suazo had the ability to arbitrate for free and thereby vindicate his federal statutory rights in the arbitral forum, his effective vindication defense was unmeritorious.
While refusing to rule directly on the issue, the appellate court's holding leaves open the possibility that an effective vindication defense could be successfully raised by a future party to avoid arbitration if access to the arbitral forum was cost-prohibitive, such that the underlying arbitration clause was incapable of being performed pursuant to the New York Convention.