Case of the Day: Castro v. Tri-Marine Fish

The case of the day is Castro v. Tri-Marine Fish Co. (9th Cir. 2019). Michael Castro, a national of the Philippines who lived in American Samoa, was a deck hand aboard the F/V Captain Vincent Gann. He was seriously injured during the voyage. Tri-Marine transported him to the Philippines and paid his medical expenses and maintenance. There was a dispute about whether Castro had signed an employment agreement containing an agreement to arbitrate before the voyage. In any case, while he was recovering from the injury, he found he needed money to pay for a relative’s medical care. So he negotiated a settlement of his own claims with Tri-Marine in return for a cash payment. He signed the settlement papers. There was a dispute of fact about whether he knew or was told what they said or that they contained a release. Castro’s testimony was that he was told that he would go to another office to “pick up the settlement check and execute paperwork acknowledging receipt.” Tri-Marine’s representative, Rhodylyn De Torres, testified she told Castro that she explained the documents to him, that he said he understood, and that “an arbitrator would review and approve the release documents ‘to make the settlement legal and binding.’”

After he signed the documents, Castro was taken to an office where he found Gregorio Biares, an arbitrator. Here was the court’s account of what happened next:

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.

This is the arbitral award Tri-Marine sought to enforce.

The court rejected Tri-Marine’s case for several reasons. First, at the time of the arbitration, there was no dispute between the parties. The parties had, on Tri-Marine’s view, already settled their dispute. Second, the agreement to arbitrate called for arbitration in American Samoa, not in the Philippines, and the facts did not support the view that Castro had agreed to arbitrate there. Third the procedure in the “arbitration” did not accord with Philippines procedural law. In short, the “arbitration” wasn’t a real arbitration, and thus the award was not entitled to enforcement under the New York Convention.

I like this decision because it focuses on reality, not appearances. It’s important to police the boundaries of arbitration, which is a creature of consent, because once you have a valid arbitration the courts’ role is so circumscribed. Practices such as the practice seen here also tend to bring the idea of arbitration into disrepute. My own view is that it’s wrong for an arbitrator to take part in such a proceeding, because it relies on a misunderstanding of what arbitration is.

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