Court Opinion

ID: 5701938
Source: CourtListenerOpinion
Date Created: 2022-01-12 15:41:51.575415+00
Date Added: 2024-06-11T08:40:21.010938
License: Public Domain

Andrias, J. (dissenting in part).
Because the IAS court improperly placed the burden on petitioner’s employer, K-Sea Transportation Corp. (K-Sea), of proving that there was no *112deception or coercion on its part and that petitioner understood his obligations under the parties’ postinjury claims arbitration agreement, dated January 3, 2003,1 would reverse, deny the petition, and grant K-Sea’s cross motion to compel arbitration with leave to petitioner to renew in the event his good-faith application to the American Arbitration Association (AAA) for a hardship waiver or reduction of the filing fee is denied. In such event, the denial of the petition and the granting of K-Sea’s cross motion ought to be conditioned upon K-Sea advancing any filing fee in excess of $750 subject to subsequent allocation.
In this proceeding to permanently stay arbitration of a seaman’s claim for damages for personal injury allegedly caused on October 30, 2002 by the unseaworthiness of the tugboat Tasman Sea, which was owned and operated by K-Sea, the parties’ agreement to arbitrate petitioner’s claim provided, inter alia, that “[a]ny filing fee up to $750.00 and any deposit for compensation of the arbitrators shall be advanced by K-Sea, subject to subsequent allocation.”
The IAS court held that the parties’ agreement is valid on its face and rejected petitioner’s claim that it is unenforceable because the Federal Arbitration Act exempts agreements to arbitrate in “contracts of employment of seamen . . . engaged in foreign or interstate commerce.” (9 USC § 1.) But, applying the heightened judicial scrutiny and protection afforded to seamen as wards of admiralty, the court held that because petitioner not only released his right to a jury trial, but accepted a financial burden disproportionate to his ability to pay, respondents have not met their burden of showing that there was no deception or coercion on their part and that petitioner understood his obligations under the agreement.
The majority opinion fairly states the facts and I am in agreement with its finding that the arbitration agreement in issue is valid. I further agree that petitioner has failed to sustain his burden of showing that Congress intended to preclude his waiver of his judicial remedies, including presumably the right to a jury trial, under the Jones Act, and that the Federal Arbitration Act’s exclusion for arbitration provisions inserted into contracts of employment does not, on its face, extend to the agreement at issue in this case.
I also agree with the majority that the arbitration agreement is not tantamount to a seaman’s release (“Here, no defendant was released from liability and no defendant’s liability was determined. Plainly, the arbitration agreement is not a release”) *113and its conclusion that case law obligating a party who obtains a release from a seaman to demonstrate that it was fairly obtained is inapposite (see Garrett v Moore-McCormack Co., 317 US 239, 246 [1942]).
Rather than embrace the conclusion compelled by its analysis to this point, however, the majority, almost as an afterthought, raises an issue not previously raised and finds that the question remains as to whether petitioner was sufficiently apprised of the consequences of his agreement to arbitrate so that his decision to waive the right to jury trial can be deemed to be an informed one. Although mindful that the right surrendered by petitioner is the right to proceed in a judicial forum, and not the right to seek any further recovery in arbitration, the majority subsequently analogizes to the sole case relied upon by the IAS court, Gibson v American Export Isbrandtsen Lines (125 AD2d 65, 69 [1987]), a case involving a seaman’s release (which we all agree is not the case here), and concludes that a trial of the factual issue of whether there was sufficient disclosure to petitioner to permit a finding that he freely and intelligently entered into the arbitration agreement is necessary in order for the court to decide if the arbitration agreement entered into by the parties should be enforced.
Thus, although it disagrees with the IAS court’s finding that the arbitration agreement was not tantamount to a seaman’s release, the majority nevertheless is doing exactly the same thing that the IAS court did—improperly shifting the burden of proof from petitioner to K-Sea. That is clearly wrong and contrary to well-settled law that the party opposing arbitration bears the burden of proving that the claims at issue are not subject to arbitration (see Green Tree Financial Corp.-Ala. v Randolph, 531 US 79, 91-92 [2000]). Petitioner’s status as a seaman is, in itself, insufficient to shift that burden and, other than generalizations about the heightened protection to be afforded to seamen as wards of admiralty, the majority cites no authority for such a holding.
Moreover, overlooked by the majority is the fact that, notwithstanding the conclusory language it quotes from the attorney’s affirmation in support of the petition to the effect that petitioner had no knowledge of the rights and remedies afforded by the Jones Act and that K-Sea at no time informed him of his right to consult with an attorney before signing the agreement, the issue of an informed waiver of the Jones Act right to a jury trial was never raised by petitioner himself in his affidavit in support of the petition.
*114That six-page document, as well as counsel’s reply affirmation, nowhere mentions that petitioner was unaware of his right to a jury trial under the Jones Act. His sole argument was that the arbitration agreement is unconscionable due to K-Sea’s intentional withholding of information and its failure to disclose the cost of arbitration under the Commercial Rules of the American Arbitration Association (“If this information had been disclosed I would not have signed the ‘Claims Arbitration Agreement’ ”).
Petitioner now raises the issue for the first time on appeal in the final point of his respondent’s brief, in which he argues that K-Sea’s claims manager “does not dispute that Petitioner was unaware of his right to a jury trial as provided by the Jones Act.” What petitioner neglects is the fact, which is also not mentioned by the majority, that, in his letter dated December 16, 2002, K-Sea’s claims manager specifically advised petitioner: “In exchange for the settlement advances, you agree to submit any claims you may have against K-Sea to binding arbitration. The arbitration is a private process and the outcome will be decided by one or more arbitrators, not by a jury ” (emphasis added). Clearly, petitioner was advised that, by agreeing to arbitrate any claims, he was relinquishing his right to have such claims decided by a jury. Nor was there any showing by petitioner, who, as the party opposing arbitration, bears the ultimate burden of proving that the contract is unenforceable, of any deception or coercion on the part of K-Sea’s claims manager. In fact, his letter advised petitioner in bold print:
“You are not obligated to sign the Agreement. You will continue to receive $15/day as maintenance, and medical cure at the Company’s expense until you are fit for duty and/or reach maximum medical improvement, whether you sign the Agreement or not. If you have any questions, or require further information, please feel free to call.”
The enclosed “Claims Arbitration Agreement” also contains in bold print at the end the following statement:
“Other than the promises contained in this agreement, I have been given no other promises to induce me to sign this Claims Arbitration Agreement. There has been no coercion used to make me sign this agreement. I have signed this agreement knowingly and willingly.”
*115Accordingly, on a plain reading of the record before us, petitioner has failed to demonstrate that his agreement to arbitrate constituted an invalid waiver of his right to a trial by jury.
If that were the only issue presented, the agreement would be enforceable and the judgment appealed from should be reversed, the petition denied and K-Sea’s cross motion to compel arbitration granted unconditionally. Petitioner is on firmer ground, however, when he argues that the arbitration agreement is unconscionable in that his inability to pay the required filing fee precludes him from pursuing his claim against K-Sea.
The Supreme Court has held that excessive fees associated with arbitration can invalidate an otherwise binding arbitration agreement; however, “where ... a party seeks to invalidate an arbitration agreement on the ground that arbitration would be prohibitively expensive, that party bears the burden of showing the likelihood of incurring such costs” (Green Tree Financial Corp.-Ala. v Randolph, 531 US at 92). Thus, given the strong federal and state policy of encouraging arbitration agreements, it is incumbent upon petitioner, in attempting to avoid a clearly valid arbitration agreement, to demonstrate that the filing fee is so excessive and burdensome as to violate that public policy.
The majority cites Green Tree for its holding that the mere “risk” that a party may be saddled with prohibitive costs is too speculative to overcome “the ‘liberal federal policy favoring arbitration agreements’ ” and is not a valid ground to avoid the arbitration agreement {id. at 91) and finds no record support for the conclusion that petitioner has assumed a financial burden disproportionate to his ability to pay.
In this case, however, unlike Green Tree, the “risk” of prohibitive costs is more than speculative. In its letter to the parties, dated April 29, 2004, acknowledging receipt of $750 as K-Sea’s portion of the filing fee, the AAA advised the parties that under the Association’s rules the minimum filing fee is $10,000 based upon the fact that petitioner seeks unspecified monetary damages. Moreover, petitioner’s summary of his financial resources and obligations and his claim that he cannot afford that amount is not questioned by K-Sea.
In a case not cited by either party or the court below, the Fourth Department has held, as a matter of law, that the requirement of an excessive filing fee ($4,000 plus $200,000 based on a rate of .5% of the $40 million claim) to arbitrate the parties’ dispute was unreasonable, unjust, unconscionable on its *116face and unenforceable (Matter of Teleserve Sys. [MCI Telecom. Corp.], 230 AD2d 585, 593 [1997]). Other courts have granted defendants’ motions to compel arbitration on the condition that defendants pay most or all of the arbitration costs (see Res v Masterworks Dev. Corp., 5 Misc 3d 1003[A], 2004 NY Slip Op 51169[U] [Sup Ct, NY County 2004] [at court’s suggestion, after receiving plaintiff’s extensive and convincing affidavit discussing the actual fees and expenses associated with arbitration and detailing her current financial status, defendants agreed to pay all but $5,000 of the arbitration costs and their motion to compel arbitration was granted on that condition]; see also Phillips v Associates Home Equity Servs., Inc., 179 F Supp 2d 840 [2001] [where plaintiff had carried her burden of proving that she could not afford the more than $4,000 filing fee and other costs associated with arbitration before the AAA and was effectively precluded from proceeding, the court denied the defendant’s motion to compel arbitration but said that it would be willing to entertain a motion to reconsider its ruling in the event defendant agreed to bear the costs associated with the arbitration]).
Petitioner also criticizes K-Sea for not advising him of the cost of arbitration before he signed the agreement. However, K-Sea cogently points out that, at the time of the agreement, it had no idea or indication as to the amount of any potential claim by petitioner. Unlike Gibson v American Export Isbrandtsen Lines (supra), a clearly inapposite case relied upon by the majority since it involved a seaman’s release of any claim of liability, there is no evidence that K-Sea knew the alleged seriousness of petitioner’s injury (petitioner himself states that he did not) and somehow took advantage of petitioner’s naivete in legal matters. The record in fact is to the contrary since it appears that, prior to the events in question, petitioner was sophisticated enough to be a director of two Florida corporations, to retain counsel to defend him against a misdemeanor traffic charge in 1998, and to retain counsel to file for personal bankruptcy in 2001. Subsequent to the agreement, petitioner was also able to retain counsel to represent him in this proceeding and his companion personal injury action.
Ordinarily I would think the best solution would be to condition compelling arbitration upon respondents agreeing to advance the filing fee subject to subsequent allocation by the arbitrator. However, it is undisputed that the AAA’s rules provide that the filing fee to be advanced by the party or parties *117making a claim or counterclaim, subject to final apportionment by the arbitrator in the award, may, in the event of extreme hardship on the part of any party, be deferred or reduced. Therefore, I think the better course is to deny the petition and grant the cross motion to compel arbitration with leave to petitioner to renew in the event that his best efforts application for a reduction or waiver of the filing fee is denied by AAA. In such event, the denial of the petition and the granting of K-Sea’s cross motion ought to be conditioned upon K-Sea advancing any filing fee in excess of $750 subject to subsequent allocation.
Gonzalez and Catterson, JJ., concur with Tom, J.E; Andrias, J., dissents in part in a separate opinion.
Order and judgment (one paper), Supreme Court, New York County, entered on or about August 23, 2004, reversed, on the law, without costs, to the extent of vacating the permanent stay and preliminarily enjoining arbitration of this dispute, and remanding the matter to Supreme Court for a hearing as to whether the subject arbitration agreement is enforceable. Motion seeking leave to enter stipulation of parties granted to the extent of accepting stipulation for filing and consolidating the actions for disposition.