Firm News

Firm Successfully Defends Shipowner in POEA Case

On April 16, 2015, the U.S. Fifth Circuit Court of Appeals upheld the enforceability of the Philippine arbitration system employed in Filipino seamen injury and other cases arising under the POEA standard employment contract for Filipino seamen.

The case involved serious burn injuries to Filipino seaman Lito Martinez Asignacion, who was burned over 35% of his body by steam and scalding water in the engine room of the M/V RICKMERS DALIAN while the vessel was in New Orleans in October 2010. Asignacion filed suit in Louisiana state court, which ultimately ruled that he must arbitrate this claim in the Philippines based on the arbitration requirement in the POEA standard contract. In February 2013, the Philippine arbitrators, applying Philippine law, awarded Asignacion compensation for a Grade 14 disability, US$1,870.

Asignacion then returned to the Louisiana state court arguing that the arbitral award was unenforceable as against U.S. public policy, and that he should be allowed to proceed with claims against the vessel owner under the Jones Act and U.S general maritime law. The case was removed to federal court and the vessel owner moved the court to enforce the Philippine arbitral award. But the federal district court refused to enforce the Philippine arbitral award, holding that the award violated U.S. public policy because the arbitrators applied Philippine law and thereby deprived plaintiff of the remedies to which seamen are entitled under U.S. law.

The decision was appealed to the U.S. Fifth Circuit Court of Appeals. The appeal was argued to a three judge panel in early September 2014, and the panel ruled on April 16, 2015 in favor of the vessel owner.

The Fifth Circuit held that the district court erred in refusing to enforce the Philippine arbitral award. The court held that the Philippine arbitrators’ application of Philippine law to this Filipino seaman did not violate any U.S. public policy. To the contrary, U.S. Supreme Court precedent supports applying foreign law to foreign seamen, even where the applicable foreign law remedies are less generous than what the seaman could potentially recover under U.S. law. The court distinguished the Maryland district court decision in Aggarao v. MOL Ship Management, because in this case, unlike Aggarao, there is no evidence, or finding by the district court, that the Philippine arbitral award was legally inadequate to meet Asignacion’s medical needs. Finally, the Fifth Circuit held that the district court erred in denying enforcement of the award based on the so-called "prospective waiver" doctrine, which is based on dicta in two U.S. Supreme Court cases condemning on public policy grounds contractual choice of law and forum clauses that would prospectively waive a suitor’s U.S. statutory remedies. The Fifth Circuit held that the "prospective waiver" doctrine has no application to the present case, in which the plaintiff was seeking only non-statutory remedies under U.S. general maritime law. The court therefore reversed the lower court decision and remanded the case to the district court to enforce the award.

This is a very significant decision for vessel owners who employ Filipino seamen and their P & I clubs. The lower court decisions in this case and in Aggarao threatened to reopen the U.S. courts to Filipino seamen claims that had been relegated to Philippine forums applying Philippine law based on the POEA contract. The Fifth Circuit’s decision restores the enforceability of the dispute-resolution procedures in the POEA contract and sharply reduces the risk that owners and the clubs will have to defend Filipino seamen claims in U.S. courts.

For questions about this case, please contact Peter Sloss.