Jim Flannery, Soundings Magazine Mariner ARBITRATION MAY 2001

This is the Jim Flannery, Soundings Magazine article as it appeared in May 2001. Soundings Magazine

By Jim Flannery

Senior Writer

Arthur Kappele’s dream of cruising hit the bricks early one morning four years ago when he ran his 12 Meter yacht up on a Florida beach in bad weather, a mistake that cost him his boat and his faith in a legal remedy called binding arbitration.

Kappele and two passengers set sail from Florida’s New Smyrna Beach Oct. 21, 1996, for Mariner’s maiden voyage as a cruising yacht. Headed for the Florida Keys, the 62-foot yacht ran into deteriorating weather from Hurricane Lili, 600 miles offshore.

Kappele, at the wheel all day and throughout the night in winds gusting to 45 knots and seas 15 to 20 feet, fell asleep at the helm. Mariner ran aground on the beach eight miles south of Lake Worth Inlet, at West Palm Beach.

Kappele contracted a salvor to pull the uninsured yacht off the beach in dangerous surf. The effort failed and the aluminum-hulled Mariner —

a 12 Meter racer that wasn’t fast enough to make the cut for the 1974 America’s Cup defense —

languished on the beach for a year until a beachfront-condominium association raised money to cut up the unsightly wreck and remove it piece by piece.

He sought a court award from the salvage firm, but the judge wouldn’t hear the case because the salvage agreement Kappele signed carried an arbitration clause. That clause said if there were any disputes, they must be resolved not in court, but in binding arbitration.

Jim Flannery, Soundings Magazine continues...

“When you sign that contract, you agree to abide by the decision of the arbitration board and give up your rights to go to court,” says Kappele, of New Smyrna Beach.

That’s OK if you can live with the arbiters’ decision, not so good if you can’t. Kappele, a 53-year-old mechanical engineer, had dreamed of cruising for 20 years. That dream is shattered now, and Kappele says he can scarcely believe he has no other recourse.

The arbiters’ decision is final: Salvor Sea Tow of the Palm Beaches is responsible only for the loss of Mariner’s mast. Since Kappele ran the boat onto the beach, he alone is responsible for putting it in grave peril, the arbitration chairman wrote in his decision.

Nothing Sea Tow did worsened that peril. No damages have been awarded yet, but Kappele isn’t expecting much for a boat that he bought for $30,000 and spent another $130,000 and 9,600 hours fixing. Kappele says he would rather have filed a negligence suit in court, a remedy he thought was an option when he signed the salvage agreement shortly after running aground.

He says he believed that if the arbitration didn’t produce a mutually agreeable outcome, he could take his case to federal court and seek a ruling there.

“I was wrong,” he says. Kappele was not happy with the arbiters’ decision. He was not happy with the cost of the arbitration process, about $7,000. He was not happy with the timeliness of the proceeding.

The three-man panel took nearly a year to render a decision, and 11 months after that Kappele still was waiting for a hearing to decide his monetary award.

Jim Flannery, Soundings Magazine

Front Cover

May 2001 issue

Yet Kappele’s chief complaint is he didn’t know what he was getting into when he signed the salvage agreement and agreed to accept binding arbitration.

“The problem is that people don’t know what arbitration is,” he says.Tom Fox of Southold, N.Y., a director of the Society of Maritime Arbitrators of New York, agrees. Fox says arbitration is an arcane subject that boaters need to know more about.

When a towboat operator responds to a boater’s call for assistance and it is more than a routine tow or simple grounding — the boat is in some peril — the case escalates to a salvage job and the towboat operator may ask the boat owner to sign a salvage agreement.

More and more salvage agreements include a binding arbitration clause, says Fox. The courts have encouraged it because it is a thrifty alternative to civil suits and cuts the caseload of the nation’s clogged judiciary.

Salvors and insurers also have promoted the practice because it is less costly and time-consuming than going to federal court, the usual venue for maritime cases. In theory, if a boater doesn’t like the wording of a salvage agreement he or she can call another tow operator or salvor for assistance. In practice, the situation often is so perilous that time is of the essence.

Fox says the boater may not, in fact, have much choice but to sign the contract. He says if the contract is fair, courts generally uphold it even though it is signed under some duress. If it is not a fair and reasonable contract and it is signed under duress, the court may invalidate it.

Bruce McAllister, chairman of the Miami Maritime Arbitration Council that heard Kappele’s case, says experience has pretty well shown that arbitration is faster and cheaper than going to court, and produces generally satisfactory results. Jim Flannery, Soundings Magazine article will continue on the next page.

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