Fifth Circuit Addresses Definition of Seaman Under the Fair Labor Standards Act

3338710223_a1ba090d11_zUnder the Fair Labor Standards Act, for every hour that an employee works beyond 40 hours in a seven day work week, that employee must be paid overtime, that is, one and a half times his normal hourly rate. However, if the employee meets the statutory definition of a “seaman,” then he is not entitled to overtime pay.

29 C.F.R. § 783.32 lays out the criteria for being a seaman: An employee will ordinarily be regarded as a seaman, (1) If the employee is a master or subject to the authority of a master (2) aboard a vessel (3) performing service primarily as an aid to the operation of the vessel as a means of transportation, and (4) does not perform a substantial amount of different work.

In Coffin v. Blessey Marine Services, Inc., No. 12-20144 (5th Cir. 11/13/14), the Fifth Circuit addressed whether or not vessel-based tankermen were ‘seamen’ under the statute.

The dispute in Blessey arose when the plaintiffs – vessel-based tankermen – sought to collect overtime pay from their employer under the FLSA. The seamen-non-seamen distinction was crucial because the plaintiffs – working an average 84 hours in a seven day period – would not be entitled to recover if they fell within the seamen exclusion under the FLSA.

Blessey is a company that transports liquid cargo by vessels throughout inland and coastal waterways. The plaintiffs in Blessey worked as tankermen as part of a crew aboard a “tow-unit.” The tow-unit consists of one towboat and two tank barges that are connected through a system of cables. Each member of a tow-unit crew has specific responsibilities. A “wheelman,” (captain), and a deckhand are customarily recognized as seamen. A tankerman’s status as a seaman is less clear.

Tankermen’s duties include many of the same duties that deckhands perform. Some of these duties include: cleaning, handling lines, changing engine filters, tying off to docks, painting, troubleshooting engine problems and handling running lights. As deckhand duties, these tasks are recognized as seamen work. In addition to these traditional seamen tasks, tankermen are responsible for loading and unloading the tank barge’s liquid cargo. Some of these tasks include: oiling grease-fittings on barges, cleaning oil spots on barges, performing barge readiness inspections, and making sure all hatches and dogs are tightly secured.

Plaintiffs argued that the tasks exclusively required for tankermen – loading and unloading – determined their status as non-seamen under the statute. Plaintiffs principally relied on Owens v. SeaRiver Maritime, Inc. 272 F.3d 698 (5th Cir. 2001). In Owens, the court held that loading and unloading duties while part of a “land-based Strike Team,” did not meet the statutory seaman definition. In this case, plaintiffs argued that Owens stood for the principle that loading and unloading a vessel is always non-seaman work.

The court disagreed. First, the plaintiff in Owens only sought overtime for his employment as part of the land-based Strike Team, not as a tankerman. Second, the language in Owens did not foreclose the possibility that any employee who performed loading or unloading operations was categorically a non-seaman. Owens acknowledged that performing these operations was not dispositive of status. Instead, the general character of the work is determinative.

Considering the seamen factors in 29 C.F.R. § 783.32, the parties agreed that the plaintiffs were under the authority of a master and that they were members of a crew of a vessel. The parties disagreed as to whether or not the plaintiff’s performed service in operating the vessel for transportation.

The court acknowledged many situations in which loading and unloading operations were merely incidental to the vessel’s operation, and such employees were not seamen under the statute. For example, employees who only loaded and unloaded the vessel at the beginning and end of a voyage and had little other seamen-related duties would not be seamen.

In this case, the court found that the tankermans’ duties were intertwined with the safe operation of the vessels themselves. Namely, safe loading and unloading affects a tank-barge’s seaworthiness and navigational integrity. Further, the plaintiffs’ conceded that their regular duties such as keeping watch and making sure the barge is level were supposed to ensure a safe operation. Finding that the loading and unloading duties in this case could not be separated from the traditional seamen duties, the court did not have to address the question of ‘substantial different work.’

Thus, the court reversed the district court and held that in this case the vessel-based tankermen were in fact seamen under the FLSA.

Excellent image courtesy of Flickr user greeblie.

Jones Act Claim Dismissed on Summary Judgment

Plaintiff worked as a relief captain for Defendant. He maintained that he was injured as a result of an accident aboard Defendant’s vessel, or that Defendant was negligent or provided an unseaworthy vessel. Defendants moved for summary judgment on the grounds that Plaintiff could not establish the necessary elements of his case.

Plaintiff alleged that he was injured while chipping with a needle gun at the instruction of the vessel’s captain. Upon learning that he could not have been injured on the date he alleged because he was not working aboard Defendant’s vessel on that date, he claimed new potential dates of injury. Still, the vessel logs did not show that Plaintiff did any chipping work. Additionally, although Plaintiff testified that the vessel’s captain ordered him to do the work and a tankerman saw him performing the work, the vessel’s captain said he did not order the work and would not have ordered the work for various reasons, and the tankerman said he never saw Plaintiff doing the work in question. No injury was ever reported by Plaintiff to Defendant until the instant suit, and no injury was reported to any medical provider.

In reviewing the facts in a light most favorable to the non-moving party, the Court found that Plaintiff did not create any genuine issues of material fact regarding his claims of negligence, unseaworthiness or maintenance and cure. Based upon Plaintiff’s inconsistent testimony regarding the date of the accident, the lack of corroboration by witnesses, and Plaintiff’s failure to report any injury, the Court held that Plaintiff could not prove that he had any accident or suffered any injury while working aboard Defendant’s vessel. The Court therefore granted Defendant’s Motion for Summary Judgment.

Glaze v. Higman Barge Lines, Inc., 2014 WL 5393355 (E.D. La. 2014).

Historical Background Anchors Judge Clement’s McBride Concurrence

On September 25, 2014, the Fifth Circuit Court of Appeals, sitting en banc, rendered its decision in the high-profile case McBride v. Estis Well Service, L.L.C.,12-30714, 2014 WL 4783683 (5th Cir. Sept. 25, 2014)McBride garnered national attention after the Fifth Circuit panel reversed the district court and held that punitive damages were available to seamen as a remedy for the general maritime law claim of unseaworthiness.  731 F.3d 505.  On rehearing, a majority of the Fifth Circuit judges determined that punitive damages were not available.  The majority opinion was about fifteen pages long and was followed by nearly sixty pages of concurring and dissenting opinions.

The first concurrence, penned by Circuit Judge Edith Brown Clement and joined by Circuit Judges Jolly, Smith, and Owen, took a closer look at the historical background that, in Judge Clement’s opinion, mandated the result reached by the majority.  Judge Clement dissected what she viewed as the three main points that McBride relied on and determined that, “[w]hen examined closely, none of these arguments establish McBride’s ultimate contention.”  Id. at *7.

Judge Clement first analyzed and concluded that United States Supreme Court jurisprudence does not require punitive damages in unseaworthiness cases.  The Judge noted that Exxon Shipping Co. v. Baker, 554 U.S. 471 (2008), only addressed the narrow issue of whether punitive damages were preempted by the Clean Water Act and that this narrowness accounted for the Court’s need in Atlantic Sounding Co. v. Townsend, 557 U.S. 404 (2009), to even address the issue of punitive damages in maintenance and cure cases.  According to Judge Clement, this left McBride with “only the thin strand of Townsend.”  McBride at *7.  However, Townsend, a maintenance and cure case, was of little help in light of the “significant differences” between actions for maintenance and cure and unseaworthiness.  Judge Clement cleverly cited to the academic writings of McBride’s own counsel to underscore the well-recognized distinction between the two causes of action. The Judge concluded that “[t]he difference between maintenance and cure and unseaworthiness actions make maintenance and cure cases a poor guide for determining unseaworthiness remedies.”  McBride at *8.

Judge Clement went on to examine the Fifth Circuit’s pre-Miles case law approving punitive damages in unseaworthiness cases, starting with In re Merry Shipping, Inc., 650 F.2d 622 (5th Cir. Unit B 1981).  She concluded that, notwithstanding Merry Shipping and a handful of other cases, there is an absence of actual authority establishing that pre-Jones Act plaintiffs claiming unseaworthiness were entitled to punitive damages.  The Judge characterized the support for such entitlement to punitive damages the result of a “collective judicial ‘oh, hell, why not’ principle” equating the availability of punitive damages in other types of actions to the availability of punitive damages for unseaworthiness.  McBride at *9.

Finally, Judge Clement waded through pre-Jones Act unseaworthiness cases cited by McBride in support of the availability of punitive damages and found only one unseaworthiness case that arguably awarded punitive damages.  The Judge concluded that, even assuming that this case did award punitive damages, one “dust-covered” case should not provide the basis for the general availability of punitive damages in unseaworthiness cases.  This was particularly true when considering the Supreme Court decisions in The Osceola, 189 U.S. 158 (1903) and Pacific Steamship Co. v. Peterson, 278 U.S. 130 (1928) that recognized the remedy for unseaworthiness was an indemnity by way of compensatory damages.

Judge Clement concluded her concurrence by explaining the need for caution “before signing off on an aggressive expansion of punitive damages in the unseaworthiness context.”  McBride at *12.  This is a product of the varying availability of insurance for punitive damages and the direct and indirect impacts such an expansion would have on commercial shipping.  “In light of the potentially sizable impact, this court should not venture too far and too fast in these largely uncharted waters without a clear signal from Congress.”  McBride at *12.

McBride v. Estis Well Serv., L.L.C., 12-30714 (5th Cir. Sept. 25, 2014) (en banc).

Jones Act Employees Could Not Sue a Dual-Listed Company

On August 12, 2014, the Eleventh Circuit published a decision discussing jurisdiction and business entity structure in the context of a Jones Act lawsuit.  The plaintiffs were three injured sea workers, each of whom collected maintenance and cure.  Those were the benefits that the injured sea workers and other employees agreed to in their contracts with Cunard Celtic Hotel Services, Ltd.  The plaintiffs became unsatisfied with the extent of their maintenance and cure, believing that the contracts impermissibly limited their compensation.  So, they filed a class action against Carnival Corporation and Carnival PLC.

The Defendants’ corporate structure was particularly important here.  Cunard operated “under the corporate umbrella of Carnival Corporation & PLC–the dual-listed company (“DLC”) comprised of Carnival Corporation (a Panamanian corporation headquartered in Miami, FL) and Carnival PLC (a British corporation headquartered in Southampton, England).” 

The district court dismissed the plaintiffs’ lawsuit, determining that the court did “not have personal jurisdiction over the dual-listed corporation Carnival Corporation and PLC.”  The plaintiffs appealed, asking the Eleventh Circuit to determine whether, under the laws of Florida, the Carnival Corporation & PLC, a dual-listed company, was subject to suit as a corporation, according to the doctrine of estoppel, or under a joint venture theory of liability.  It was not.

The Eleventh Circuit first explained the structure of a DLC:

A dual-listed company (DLC) is a corporate structure that binds two separate corporations into a unified economic enterprise, but allows the participating entities to maintain their individual legal identities.  The arrangement is established through the execution of an equalization agreement, a contract that defines and governs the relationship between the two companies.  Such a structure bears many merger-like qualities, such as common ownership of assets and integrated management, but also exhibits some hallmarks of corporate independence, such as separate stock exchange listings.  Almost always utilized by corporations of disparate national origin, DLCs are employed for a variety of reasons, including the advantages they potentially offer in the areas of tax, investor/public relations, and regulatory oversight.

But is a dual-listed company suable as a corporation?  No.  “Indeed, regardless of whether an entity exhibits qualities common to corporations, it is not properly subject to treatment as a corporation absent incorporation, the fundamental act of corporate creation and the dividing line between corporations and non-corporations.”

Further, Carnival & PLC was not estopped from denying that it was a corporation, even if it had publicly promoted itself as a single entity.  The plaintiffs lodged an interesting argument called “corporation by estoppel,” which the state of Florida codified:

No body of persons acting as a corporation shall be permitted to set up the lack of legal organization as a defense to an action against them as a corporation, nor shall any person sued on a contract made with the corporation or sued for an injury to its property or a wrong done to its interests be permitted to set up the lack of such legal organization in his or her defense.

The Eleventh Circuit reasoned that “the doctrine of corporation by estoppel is most appropriately used to maintain the expectations of parties to a contract, allowing a ‘corporation [to] sue and be sued as if it exited if the parties to the contract behaved as if it existed.'”  But here, the plaintiffs had employment contracts with Cunard, not Carnival & PLC.  The plaintiffs never alleged that they believed they were contracting with Carnival & PLC, or that Carnival & PLC was a legal entity capable of being sued.  Accordingly, the doctrine of corporation by estoppel was not applicable.

The court also determined that Carnival & PLC was not suable as a joint venture.  The plaintiffs sought to liken DLCs to “a joint venture on steroids.”  Not so.  A joint venture is “an association of persons or legal entities to carry out a single business enterprise for profit.”  Even though DLCs and joint ventures are collaborative in nature, “the scopes of the two structures are diametrically distinct, thereby rendering inappropriate the application of Florida’s joint venture laws to Carnival Corporation & PLC.”

Finally, the Eleventh Circuit concluded its opinion with a zinger–essentially stating that the plaintiffs outfoxed themselves:

Our ruling today–that Carnical Corporation & PLC is not properly suable in this action–may appear, at first glance, to produce a harsh and unfair result.  However, the Seafarers could have pressed their claims against another entity.  Indeed, it seems abundantly clear that the Seafarers could have brought an action against Carnival PLC (the Cunard Line’s parent company), but chose not to, instead making a tactical decision to pursue potentially broader claims against Carnival Corporation & PLC.  The Seafarers rolled the dice in targeting Carnival Corporation & PLC exclusively in this case; unfortunately for them, that roll did not pay off.

Sabo v. Carnival Corp., — F.3d —- (11th Cir. 2014).