In Yu v. Dalian International Maritime Services Co., slip copy, 12-0707, 2012 WL 1932974 (E.D.La. 5/29/2012), plaintiff, a citizen of the People’s Republic of China, brought suit in Louisiana state court seeking damages for injuries sustained on Defendants’ vessel under the Jones Act or, alternatively, under Chinese law.  Defendants removed the case and Judge Berrigan DENIED plaintiff’s Motion to Remand, holding that: (1) Under the Lauritizen-Rhoditis factors, United States law did not apply and thus the Jones Act did not serve to prevent removal; (2) Removal was proper under the Federal Sovereign Immunities Act (FSIA); and (3) Defendants presented insufficient evidence to establish existence of an arbitration clause in seaman’s employment contract, and thus arbitration clause could not be a basis for removal under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Jones Act Did Not Apply

The Lauritzen–Rhoditis factors, which are used to determine whether United States or foreign law applies to a maritime claim, are (1) the place of the wrongful act; (2) the law of the flag; (3) the allegiance or domicile of the injured seaman; (4) allegiance of the defendant shipowner; (5) the place where the contract of employment was made; (6) the inaccessibility of a foreign forum; (7) the law of the forum; and (8) the shipowner’s base of operations. Lauritzen v.. Larsen, 345 U.S. 571, 583–92 (1953); Hellenic Lines Limited v. Rhoditis, 398 U.S. 306, 309 (1970).

Following U.S. Supreme Court precedent in Lauritizen, the Court found the ‘law of the flag’ factor to be of “cardinal importance.”  Also influential were the allegiance or domicile of the injured seaman and the defendant shipowner.  All three of these factors favored application of Chinese law.  Furthermore, “[t]he evidence overwhelmingly suggest[ed] a Chinese base of operations.” That evidence included the seaman’s contract written entirely in Chinese, a register of ships with Chinese addresses for Defendant shipowners, and web documents and websites pertaining to Defendants and several members of its operations team, indicating that same were based in China.   The Court was not influenced by the other factors, and held that Chinese law applied.  “‘The mere fact that a vessel periodically visits this country is not enough to merit application of the Jones Act.’” Yu, 2012 WL 1932974, at *3 (E.D. La. May 29, 2012), quoting Volyrakis v. Isabelle, 668 F.2d 863, 868 (5th Cir.1991) (overruled on other grounds).  As a result, the Jones Act did not serve to defeat removal.

Removal Proper under Federal Sovereign Immunities Act

Defendants argued removal was proper under 28 U.S.C. § 1441(d), which allows removal by any “foreign state” as defined by 28 U.S.C. § 1603.  A “foreign state” includes “an agency or instrumentality of a foreign state,” meaning any entity:

(1) which is a separate legal person, corporate or otherwise; and

(2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof; and

(3) which is neither a citizen of a State of the United States as defined in section 1332(c) and (e) of this title, nor created under the laws of any third country.

28 U.S.C. § 1603.  At issue was the second prong.  Defendants established a prima facie case that the corporation was an “agency or instrumentality of a foreign state” by offering a declaration that all the shares of stock in defendant corporation were owned by The People’s Republic of China.  Plaintiff acknowledged that “[a]ll Chinese companies are in some way owned or managed by the Chinese government,” and did not directly attempt to refute Defendants’ declaration.  The Court cited  Kelly v. Syria Shell Petroleum Development, 213 F.3d 841 (5th Cir. 2000), where a similar declaration was sufficient to establish such a prima facie case and held that Defendants could remove the case under the FSIA.

Arbitration clause-based removal not established

Defendants also argued that plaintiff’s employment contract contained an arbitration clause, and removal was thus permitted under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, quoting Beiser v. Weyler, 284 F.3d 665, 671-72, which held that “[A]bsent the rare frivolous petition for removal, as long as the defendant claims in its petition that an arbitration clause provides a defense, the district court will have jurisdiction to decide the merits of that claim,” provided the arbitration clause “could conceivably have had an effect on the outcome of the case.”

In support, Defendants submitted the employment contract, untranslated from Chinese.   In response, Plaintiff asserted the contract did not contain an arbitration provision and submitted a partial translation of the employment contract in support of his position.  The Court held that the burden of proof fell on Defendants, who failed to establish the existence of an arbitration clause.

Nevertheless, plaintiff’s Motion to Remand was denied because removal was proper under the FSIA and the Jones Act did not apply to prevent removal.

Author: Charles E. Rothermel