When a San Diego man got a job offer to work in the United Arab Emirates, he jumped at the chance. Placing his belongings into two sets of boxes, one for his new home in Abu Dhabi and the other bound for storage in California, he made the journey to his new home. Alas, the moving company switched the boxes and those that arrived in the UAE landed him in jail as an arms smuggler. The 9th Circuit agreed that a lawsuit against the company can proceed in court, avoiding arbitration.
When Gary Smallwood was hired to work in Abu Dhabi four years ago he contracted with a UAE company, Allied Pickfords, to ship some of his belongings to the UAE and to store the remainder in California. According to the facts in the opinion, the items destined for storage in California included a box full of firearms and ammunition. A representative of the company met him at his home, took note of which goods were destined for shipment to the UAE and which for storage in California, and had the separately boxed items placed on one truck. Smallwood then moved to the UAE.
When UAE officials discovered Smallwood’s firearms, an Allied International employee (an affiliate of Allied Pickfords) called Smallwood to come to the port in Abu Dhabi to “straighten things out” out and he was promptly arrested by UAE police, interrogated, “tricked” into pleading guilty and convicted of gun smuggling. During this time he was imprisoned for 11 days. He is presently in deportation proceedings.
Smallwooed sued Allied affiliate Allied Van Lines (AVL) in state court for negligence and negligent infliction of emotional distress, intentional infliction of emotional distress, defamation, breach of fiduciary duty, fraudulent deceit and breach of contract. The AVL removed the case to federal court in San Diego and moved to compel arbitration based on language in a document on Allied Pickfords’ letterhead entitled “Acceptance of Quotation.” It stated:
Any disputes in relation to the conclusion, implementation, interpretation, cancellation, dissolution or invalidity of the contract or stemming therefrom or connected thereto in any form shall be referred to arbitration in accordance with the Dubai Chamber of Commerce and Industry Commercial Conciliation and Arbitration Regulation.
The district court denied AVL’s motion to compel arbitration, concluding that the shipment was governed by the 1906 Carmack Amendment to the Interstate Commerce Act which granted “the right of the shipper to sue the carrier in a convenient forum of the shipper’s choice.”
AVL appealed, arguing that the district court erred for because either the Carmack Amendment permits foreign arbitration clauses or the Federal Arbitration Act requires enforcement of the arbitration clause even if it conflicts with the Carmack Amendment. A three-judge panel of the 9th Circuit disagreed with both. It found that the “statutory scheme is clearly intended to protect shippers from being forced to submit to foreign arbitration as a condition of contracting with a carrier of household goods.” As for the potential conflict between laws, it noted that although the Carmack Act was older than the 1925 Federal Arbitration Act, it’s relevant language had been updated and enacted more recently, thus inferring “Congress intended Carmack to be a minor exception to the FAA.”