65 V.I. 96
Superior Court of The Virgin I...2016Background
- Prentice sued Seaborne for wrongful termination and related tort damages after his 2006 termination; the Employment Agreement contained a broad mandatory arbitration clause covering employment-related disputes.
- Seaborne moved to stay the court proceedings pending arbitration (later supplemented by briefs); Prentice opposed, arguing the clause was unenforceable.
- Prentice raised two principal defenses: (1) noncompliance with 24 V.I.C. § 74a (a local arbitration referral statute) and (2) procedural and substantive unconscionability (including an asserted jury-trial waiver under 5 V.I.C. § 815).
- The court concluded the Federal Arbitration Act (FAA) applies because Seaborne’s airline operations have an interstate/international nexus, so the arbitration clause is valid and enforceable.
- The court held that 24 V.I.C. § 74a is preempted by the FAA and that the unconscionability and jury-waiver arguments fail (statute relied on was inapplicable/retroactive and later repealed and preempted).
- The court determined 9 U.S.C. § 3 (which directs courts of the United States to stay proceedings pending arbitration) is a procedural FAA provision not applicable to Virgin Islands courts and, exercising docket control, dismissed Prentice’s complaint (rather than staying the case).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the FAA applies to the Employment Agreement | FAA inapplicable to purely local V.I. employment contract | FAA applies because Seaborne’s operations affect interstate/international commerce | FAA applies; employment agreement "turned out" to involve interstate commerce |
| Whether 24 V.I.C. § 74a bars arbitration absent written referral/consent | § 74a requires written request and consent; clause unenforceable for noncompliance | § 74a is preempted by the FAA | § 74a is preempted; noncompliance does not void arbitration clause |
| Whether the arbitration clause is unconscionable | Clause is procedurally/substantively unconscionable; jury-waiver invalid under 5 V.I.C. § 815 | Clause was knowingly entered; statutory jury-waiver provision is inapplicable/retroactive and preempted | Arbitration clause is enforceable; unconscionability argument rejected |
| Whether the court must stay proceedings under 9 U.S.C. § 3 or may dismiss action | Implicit: party sought judicial resolution / opposed stay | Dismiss or stay as appropriate; § 3 may not apply in V.I. courts | § 3 deemed a federal procedural provision not applicable in V.I. courts; court exercised discretion to dismiss the complaint after compelling arbitration |
Key Cases Cited
- United Indus. Workers v. Gov’t of the V.I., 169 F.3d 172 (3d Cir.) (adopts interstate-commerce nexus test for FAA applicability in V.I. courts)
- Southland Corp. v. Keating, 465 U.S. 1 (U.S. 1984) (FAA preempts state laws that impair enforcement of arbitration agreements)
- Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (U.S. 1995) (scope of FAA coextensive with Commerce Clause; broad reading of "involving commerce")
- Lloyd v. Hovensa, LLC, 369 F.3d 263 (3d Cir. 2004) (discusses whether courts must stay or may dismiss after compelling arbitration)
- Edwards v. HOVENSA, LLC, 497 F.3d 355 (3d Cir. 2007) (upholding enforceability of employment arbitration clause against unconscionability challenge)