Edwards v. Hovensa, LLC

• Citation: 497 F.3d 355
• Decision Date: 02 August 2007
• Docket Number: No. 06-4601.,06-4601.
• Parties: Leland EDWARDS v. HOVENSA, LLC, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

497 F.3d 355

Leland EDWARDS v. HOVENSA, LLC, Appellant.

No. 06-4601.

United States Court of Appeals, Third Circuit.

Argued May 8, 2007.

Filed: August 2, 2007.

W. Carl Jordan, (Argued), Vinson & Elkins, Houston, TX, Attorney for Appellant.

K. Glenda Cameron, (Argued), Law Office of Rohn & Cameron, Attorney for Appellee.

Before: SLOVITER, STAPLETON, and VAN ANTWERPEN, Circuit Judges.

OPINION OF THE COURT

SLOVITER, Circuit Judge.

HOVENSA, LLC appeals from the decision of the District Court of the Virgin Islands denying HOVENSA's motion to compel arbitration on the ground that the relevant arbitration agreement is unconscionable under Virgin Islands law. Because the District Court's opinion relied on its view that it was not bound by contrary decisions of the Virgin Islands Superior Court, it is incumbent upon us to examine the restructured judicial system for the Virgin Islands following the 1984 Revised Organic Act and the 1990 amendment by the Virgin Islands legislature to 4 V.I.Code § 76(a).

I.

Leland Edwards entered into a Dispute Resolution Agreement ("DRA") with Wyatt, V.I., Inc. ("Wyatt"), his prospective employer, before he began to work at the HOVENSA factory in St. Croix. The DRA provided, in relevant part:

Regardless of whether Wyatt offers me employment, both Wyatt and I agree to resolve any and all claims, disputes or controversies arising out of or relating to . . . (4) any claims for personal injury or property damage arising in any way from my presence at the HOVENSA refinery that are not covered by the [Collective Bargaining Agreement]; exclusively and by final and binding arbitration before a neutral arbitrator pursuant to the American Arbitration Association's ("AAA") National Rules for the Resolution of Employment Disputes ["National Rules"], a copy of which is available at www.adr.org or from Wyatt. This agreement extends to such disputes with or claims against Wyatt, HOVENSA, LLC, other contractors or subcontractors employed at the HOVENSA refinery, and any of their related or affiliated companies, entities, employees or individuals (as intended third party beneficiaries to this agreement).

App. at 18 (emphasis added). Wyatt, V.I., Inc., which became Edwards' employer, is a contractor for HOVENSA.

Edwards was injured in January 2005 due to what he alleged was HOVENSA's negligence. He filed a complaint against HOVENSA in the District Court for the District of the Virgin Islands, St. Croix Division, asserting negligence and personal injury claims against HOVENSA arising out of the injury allegedly suffered during his employment. HOVENSA thereafter sought to enforce the terms of the DRA and filed a motion to compel arbitration and to stay the proceedings pending arbitration pursuant to 9 U.S.C. §§ 3 and 4. The District Court denied HOVENSA's motion, and it filed a timely notice of appeal.

II.

The District Court had subject matter jurisdiction pursuant to 28 U.S.C. § 1332 and 48 U.S.C. § 1612(a). The parties are diverse. Edwards is a citizen of Massachusetts. HOVENSA is a limited liability corporation, incorporated in the U.S. Virgin Islands with its principal place of business in St. Croix. The amount in controversy exceeds $75,000.

This court has jurisdiction pursuant to 9 U.S.C. § 16(a)(3) which provides that an appeal may be taken from an order denying an application to compel arbitration. We exercise plenary review over questions regarding the validity and enforceability of an agreement to arbitrate. Lloyd v. HOVENSA, LLC, 369 F.3d 263, 273 (3d Cir. 2004). "[T]o the extent that the District Court predicated its decision on findings of fact, our standard of review is whether those findings were clearly erroneous." Id. (quoting Medtronic AVE, Inc. v. Advanced Cardiovascular Sys., Inc., 247 F.3d 44, 53-54 (3d Cir.2001)).

III.

In denying HOVENSA's motion to compel arbitration, the District Court concluded that "[t]he manner in which Edwards entered into the Dispute Resolution Agreement is procedurally unconscionable and that the agreement to arbitrate personal injury claims against intended third-party beneficiaries is substantively unconscionable." App. at 11. In reaching this conclusion, the District Court rejected HOVENSA's contention that it must follow Superior Court decisions that have upheld similar agreements to arbitrate personal injury claims against third-party tortfeasors. See, e.g., Moore v. HOVENSA, LLC, 2005 WL 1677522 (V.I.Super. Ct. June 22, 2005); St. Rose v. HOVENSA, L.L.C., 2005 WL 1018071 (V.I.Super.Ct. Mar. 15, 2005).

In this appeal, HOVENSA argues that (1) the District Court improperly concluded that it was not bound by prior decisions of the Superior Court of the Virgin Islands that, as a matter of local contract law, agreements to arbitrate personal injury claims are not unconscionable and must be enforced; and (2) the District Court improperly refused to compel arbitration, pursuant to the Federal Arbitration Act, by concluding that Edwards' arbitration agreement with his employer, as applied to personal injury claims against the third party upon whose premises he worked, was not supported by adequate consideration and therefore was unconscionable.

IV.

A.

A brief analysis of the jurisdiction of the District Court of the Virgin Islands is necessary to put the issue before us in perspective. In our opinion in Carty v. Beech Aircraft Corp., 679 F.2d 1051 (3d Cir. 1982), where we considered in some detail the basis on which the District Court of the Virgin Islands had jurisdiction over the matter at issue there, we analyzed that court's jurisdiction "in light of historical perspective and the applicable authorities[.]" Id. at 1053. After reviewing the origin of the United States' dominion over the Virgin Islands and the establishment of its courts, in particular the 1936 Organic Act of the Virgin Islands, we concluded that "when Congress acted to establish the District Court of the Virgin Islands, it established it as a court of original and general jurisdiction." Id. at 1055.

Thereafter, Congress amended the Revised Organic Act in 1984, 48 U.S.C. § 1611 et seq., and "established the framework for a dual system of local and federal judicial review in the Virgin Islands." Parrott v. Gov't of the V.I., 230 F.3d 615, 619 (3d Cir.2000). Under the 1954 Revised Organic Act, 48 U.S.C. § 1612, the District Court of the Virgin Islands had "jurisdiction over federal questions, regardless of the amount in controversy, and general original jurisdiction over questions of local law, subject to the exclusive jurisdiction of the local courts over civil actions where the amount in controversy was less than $500." Moravian Sch. Advisory Bd. v. Rawlins, 70 F.3d 270, 272 (3d Cir.1995). As we explained in Parrott, "[b]y virtue of [the 1984] amendments, the District Court now possesses the jurisdiction of a `District Court of the United States.' 48 U.S.C. § 1612(a)." 230 F.3d at 619.

Significantly, in Parrott we noted that under the statute,

The Virgin Islands Legislature was now able, however, to divest the District Court of original jurisdiction for local matters by vesting that jurisdiction in territorial courts established by local law for all causes for which "any court established by the Constitution and laws of the United States does not have exclusive jurisdiction."

Id. We made explicit that "[t]o the extent that that divestiture power is exercised by the legislature, the District Court loses jurisdiction to the Territorial Court over local matters. See 48 U.S.C. § 1612(b)[.]" Id.¹

The Virgin Islands statute enacted September 5, 1990, provided that:

effective October 1, 1991, the Superior Court shall have original jurisdiction in all civil actions regardless of the amount in controversy; to supervise and administer estates and fiduciary relations; to appoint and supervise guardians and trustees; to hear and determine juvenile, divorce, annulment and separation proceedings; to grant adoptions and changes of name; to establish paternity; to legitimize children and to make orders and decrees pertaining to the support of relations.

4 V.I.C. § 76(a).

As we stated in Parrott, "§ 1613 of the Revised Organic Act acts in combination with § 76(a) of the V.I.Code to effectively repeal any grant of concurrent jurisdiction to the District Court over local actions once the Virgin Islands legislature has vested jurisdiction over local civil actions in the Territorial Court." 230 F.3d at 620 (citing Brow v. Farrelly, 994 F.2d 1027, 1035-36 (3d Cir.1993) (recognizing implicit repeal in 4 V.I.Code § 32)).

It follows that Edwards errs when he argues that the District Court of the Virgin Islands still remains vested with the "judicial power of the territory." He cites a pre-1984 case of this court for the proposition that the District Court of the Virgin Islands sits "essentially as a local court," not a federal court interpreting local law, V.I. Dep't of Conservation & Cultural Affairs v. V.I. Paving, Inc., 714 F.2d 283, 285-86 (3d Cir.1983), but that opinion preceded the restructure of the courts of the Virgin Islands. Thus, we reiterate that which we previously made clear in Parrott: the 1991 Virgin Islands statute divested the District Court "of original jurisdiction over purely local civil matters." Parrott, 230 F.3d at 620. In addition, the District Court has been divested of its appellate jurisdiction.²

We recognize that it is not easy for the District Court, which has contributed generously and productively to the local law of the Virgin Islands, to accept its divestiture but that follows inexorably from the statutes and is confirmed by the legislative history. In 1991, the Virgin Islands legislature exercised the authority granted it under 48 U.S.C. § 1612(b) to divest the District Court of original jurisdiction over any cause over which local law has vested jurisdiction in the local courts. See 30 Cong. Rec. 23783, 23789 (1984) (statement of Sen. Weicker) ("At any...