Cheruvoth v. SeaDream Yacht Club Inc.

• Decision Date: 06 October 2021
• Docket Number: 20-14450
• Parties: RAMESH CHERUVOTH, Plaintiff-Appellant, v. SEADREAM YACHT CLUB INC., SEADREAM YACHT CLUB LIMITED CORPORATION, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

RAMESH CHERUVOTH, Plaintiff-Appellant, v. SEADREAM YACHT CLUB INC., SEADREAM YACHT CLUB LIMITED CORPORATION, Defendants-Appellees.

No. 20-14450

United States Court of Appeals, Eleventh Circuit

October 6, 2021

DO NOT PUBLISH

Appeal from the United States District Court for the Southern District of Florida D.C. Docket No. 1:19-cv-24416-DPG

Before Jordan, Lagoa, and Brasher, Circuit Judges.

PER CURIAM.

This case requires us to consider whether a party who signed two contracts to charter a yacht and paid deposits under those contracts can later avoid the arbitration clauses contained in the agreements because of his own failure to abide by certain conditions precedent. Because of the limited scope of review of agreements falling under the New York Convention and the well-established presumption favoring arbitration, we affirm the district court's order compelling arbitration in accordance with the clear terms of the parties' contracts.

I

Ramesh Cheruvoth, a citizen of Saudi Arabia, filed suit in the Southern District of Florida against SeaDream Yacht Club Inc., a Florida corporation, and SeaDream Yacht Club Limited Corporation, a foreign corporation registered and incorporated in the Bahamas. The complaint asserted various quasi-con-tract claims, including claims for quantum meruit breach of implied contract, unjust enrichment, and breach of oral contract. Although Mr. Cheruvoth presented only quasi-contract theories, the parties' dispute arose out of two yacht charter agreements signed by Mr. Cheruvoth on behalf of Abdullah Saleh Kamel in August of 2017 and July of 2018 (the "Agreements").^[1]

The Agreements contain identical arbitration clauses that state in relevant part:

Section 14, Governing Law and Venue:

This Agreement is governed by Norwegian law, except for Norwegian choice of law principles. All disputes arising out of or in connection with this Agreement shall be referred to arbitration in accordance with the Norwegian Arbitration Act 14 May 2004 no. 25. The arbitration court shall be composed of three arbitrators. The chairman shall be a Norwegian legal professional. The seat of the arbitral proceedings shall be in Oslo, Norway, and the proceedings shall be conducted in the English language.

After signing the Agreements and paying the required deposits, Mr Kamel was unable to embark on either of the planned charters because he was being detained by the Saudi Arabian government. Rather than proceed to arbitration, Mr. Cheruvoth filed suit against the SeaDream defendants seeking the return of the deposits. The SeaDream defendants filed a motion to compel arbitration and dismiss the case, which the district court granted. This appeal follows.

II

We review the district court's order compelling arbitration de novo. See Solymar Invs., Ltd. v. Banco Santander S.A., 672 F.3d 981, 985 n.1 (11th Cir. 2012) (citing Lobo v. Celebrity Cruises, Inc., 488 F.3d 891, 893 n.1 (11th Cir. 2007)).

III

We have stated that "federal courts interpret arbitration clauses broadly where possible." Solymar Invs Ltd., 672 F.3d at 988-89 (citing AT&T Techs Inc. v. Commn'cs Workers of Am., 475 U.S. 643, 649-50 (1986)). "The result of such broad interpretation is that 'any doubts concerning the scope of arbitral issues should be resolved in favor of arbitration.'" Id. (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 945 (1995)). See also AT&T Techs., Inc., 475 U.S. at 650 ("Doubts should be resolved in favor of coverage."). The Supreme Court has instructed that "as a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract." Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445 (2006).

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, T.I.A.S. No. 6997 (the "Convention"), "is a multilateral treaty that addresses international arbitration." GE Energy Power Conversion France SAS, Corp. v. Outokumpu Stainless USA, LLC, 140 S.Ct. 1637, 1644 (2020) (citation omitted). "In 1970, the United States acceded to the New York Convention, and Congress enacted implementing legislation in Chapter 2 of the FAA . . . [which] grants federal courts jurisdiction over actions governed by the Convention." Id. (citing 84 Stat. 692, 9 U.S.C. §§ 201-08).

Article II of the Convention, which addresses arbitration agreements, states that "[e]ach Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them . . . ." T.I.A.S. No. 6997 (Dec. 29, 1970). Article II defines an "agreement in writing" as "an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams." Id. Finally, Article II(3) states that "[t]he court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed." GE Energy Power Conversion France SAS, Corp., 140 S.Ct. at 1644 (citation omitted).

In deciding a motion to compel arbitration under the Convention, courts conduct "a very limited inquiry." Bautista v. Star Cruises, 396 F.3d 1289, 1294-95 (11th Cir. 2005) (quoting Francisco v. STOLT ACHIEVEMENT MT, 293 F.3d 270, 273 (5th Cir. 2002)). A district court must order arbitration unless (1) the four jurisdic-tional prerequisites are not met, or (2) one of the Convention's affirmative defenses applies. See Bautista, 396 F.3d at 1294-95 (citations omitted). The four prerequisites require that "(1) there is an agreement in writing within the meaning of the Convention; (2) the agreement provides for arbitration in the territory of a signatory of the Convention; (3) the agreement arises out of a legal relationship, whether contractual or not, which is considered commercial; and (4) a party to the agreement is not an American citizen, or that the commercial relationship has some reasonable relation with one or more foreign states." Id. at 1295 n.7.

Rather than framing his arguments in the context of the Convention and its requirements, Mr. Cheruvoth simply maintains that the Agreements "were never formed" because the parties failed "to fulfill certain conditions precedent." Appellant's Br. at 2. Thus, according to Mr. Cheruvoth, the district court erred by compelling arbitration without first considering the issue of contract formation. The SeaDream defendants contend that the district court correctly ruled in their favor because Mr. Cheruvoth has not argued that any of the four jurisdictional prerequisites were not met and failed to raise any of the narrow affirmative defenses available at this stage under the Convention.

As we see it, all of Mr. Cheruvoth's arguments-although he does not present them as such-go to the first jurisdictional prerequisite: whether there is "an agreement in writing" under the Convention. By focusing solely on the issue of contract formation, Mr. Cheru-voth misapprehends both Supreme Court and Eleventh Circuit precedent, which make it clear that formation and arbitrability are often intertwined. In Solymar, we held that there is "a two-step process required in considering the arbitrability of any contract containing an arbitration clause: 1) resolution of any formation challenge to the contract containing the arbitration clause, in keeping with Granite Rock; and 2) determination of whether any subsequent challenges are to the entire agreement, or to the arbitration clause specifically, in keeping with Prima Paint." Solymar Invs., Ltd., 672 F.3d at 990.^[2]

As in Solymar, we first address the contract formation challenges raised by Mr. Cheruvoth (i.e., we determine whether there is, in fact, an "agreement in writing" between the parties). Mr. Cheru-voth argues that a valid contract was never formed between the parties because (1) Mr. Kamel signed the Agreements after the dates stated in the contracts, but (2) Mr. Kamel did not send a letter of credit and an original of the executed Agreements to the offices of the SeaDream defendants in Florida. This argument fails for two reasons.

First, Mr. Cheruvoth does not contest the veracity of the signatures or the existence of the Agreements in general. Under Bautista, his arguments about conditions precedent do not go to the threshold issue of contract formation. See Bautista, 396 F.3d at 1300 ("Although Plaintiffs claim the crewmembers did not have an opportunity to review the entirety of the Standard Terms before signing, Plaintiffs do not dispute the veracity of the signatures. . . . Accordingly, this documentation fulfills the jurisdictional prerequisite that the court be provided with an agreement to arbitrate signed by the parties."). See also Buckeye Check Cashing, 546 U.S. at 448-49 (holding that validity challenges to an entire contract go to the arbitrator); Benoay v. Prudential-Bache Sec., Inc., 805 F.2d 1437, 1441 (11th Cir. 1986) (reserving for arbitrator consideration of certain claims regarding validity of underlying contract as opposed to validity of arbitration clause); Chastain v. Robinson-Humphrey Co., Inc., 957 F.2d 851, 854 (11th Cir. 1992) ("Under normal circumstances, an arbitration provision within a contract admittedly signed by the contractual parties is sufficient to require the district court to send any controversies to arbitration. The calculus changes when it is undisputed that the party seeking to avoid arbitration has not signed any contract requiring arbitration.").

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