Opinion ID: 540154
Heading Depth: 2
Heading Rank: 1

Heading: Jurisdiction to Hear the Intervening Claims

Text: 16 Point Vail Company asserted in the court below and argues on appeal that the district court lacked subject matter jurisdiction to adjudicate the intervening claims presented by the Seafarers Trust Funds. Point Vail contends that its agreements to make contributions to the various trust funds are not maritime contracts because the obligations do[ ] not remotely affect the operation, navigation or management of a vessel. Brief of Appellant at 14. Therefore, reasons Point Vail, no basis exists to support the court's admiralty jurisdiction, since these contract obligations provided the only jurisdictional basis alleged by the Seafarers Trust Funds. The Seafarers Trust Funds respond that the agreements which created the trusts, and Point Vail's obligation to make contributions, are founded upon and incorporated in the master collective bargaining agreement. This agreement, known as the Standard Tanker Agreement, provides for and governs employment of union seamen. The Funds then argue that since the services of these unlicensed crewmembers are an aid to maritime commerce and navigation, [t]he contract setting forth the obligation to pay fringe benefit contributions, plainly falls within the maritime jurisdiction. Brief of Appellee at 18. We are presented with the issue of whether this claim properly concerns matters within the district court's admiralty jurisdiction. We conclude that the district court's exercise of jurisdiction was proper. 17 Article III, Section 2 of the Constitution states that the judicial power of the United States shall extend to all cases of admiralty and maritime jurisdiction. With regard to contracts, determining whether a particular agreement falls within this jurisdictional grant focuses on  'the nature of the contract, as to whether it has reference to maritime service or maritime transactions.'  E.S. Binnings, Inc. v. M/V Sandi Riyadh, 815 F.2d 660, 662 (11th Cir.) reh'g en banc denied 820 F.2d 1231 (1987), quoting North Pacific S.S. Co. v. Hall Bros. Marine R. & Shipbuilding Co., 249 U.S. 119, 125, 39 S.Ct. 221, 223, 63 L.Ed. 510 (1918). Not every contract that somehow relates to a ship or its business is considered maritime. To come within the federal court's admiralty and maritime jurisdiction, such contracts must pertain directly to and be necessary for commerce or navigation upon navigable waters. 7A Moore's Federal Practice p .230, at 2761 (1988). See also E.S. Binnings, Inc., 815 F.2d at 663; 1 Benedict on Admiralty Sec. 182, at 12-5, 6 (1989) (In order to be considered maritime, there must be a direct and substantial link between the contract and the operation of the ship, its navigation, or its management afloat, taking into account the needs of the shipping industry.). Deciding whether contracts come within federal maritime jurisdiction, however, is not subject to exactitude. Precedent and usage are helpful with regard to more common types of contracts, id. at 12-3, while less common situations must be considered on a case-by-case basis. Ford Motor Co. v. Wallenius Lines, Inc., 476 F.Supp. 1362, 1366 (E.D.Va.1979); Cf. Crotwell v. Hockman-Lewis, Ltd., 734 F.2d 767 (11th Cir.1984) (noting that determination of whether particular personal injury claims are sufficiently proximate to traditional maritime activity to satisfy admiralty jurisdiction will develop on case-by-case basis). 18 The test we apply in deciding whether the subject matter of a contract is necessary to the operation, navigation, or management of a ship afloat is a test of reasonableness, not of absolute necessity. 7A Moore's Federal Practice p .230, at 2762. See generally, id. p , at 2781 to 2872, and 1 Benedict on Admiralty Sec. 184, at 12-11 to -22 for specific examples of contracts deemed to be within the admiralty and maritime jurisdiction. 19 We have found no cases directly on point holding that agreements such as those upon which the Seafarers Trust Funds rely in bringing their claims for contribution relate to the operation, navigation or management of a ship and therefore are within the court's admiralty jurisdiction. Point Vail asserts, without citation of authority, that an obligation to make contributions to union plans does not give rise to any in personam right that is recognizable in a court of admiralty. Appellant's Brief at 13. We disagree. One author has noted that when courts have extended admiralty jurisdiction beyond its traditional parameters, they have done so in two basic ways, of which the first applies here. [W]here a party has contractually undertaken some activity which, standing alone, would not be an admiralty matter, but has undertaken that activity in conjunction with an indisputable maritime contract, the Courts have included the ordinarily non-maritime activity in admiralty jurisdiction. Bridwell, Admiralty Contract Jurisdiction and Contract Liens under American Law 6, reprinted in 1988 Southeastern Admiralty Law Institute Program Materials. This statement accurately describes our determination that admiralty jurisdiction exists in this case. Standing alone, Point Vail Company's obligation to make trust fund contributions is not an admiralty matter. Taken in conjunction with the employment of the represented crewmembers, however, the obligation becomes subject to admiralty jurisdiction. 20 Several courts have held that claims by maritime union trust funds, such as the Seafarers Trust Funds, for failure to make contributions due based upon work performed by union-represented seamen do not constitute wages of the crew for purposes of determining preferred maritime liens. See, e.g., Citibank, N.A. v. Vessel American Maine, 865 F.2d 24 (2d Cir.1988); West Winds, Inc. v. M.V. Resolute, 720 F.2d 1097 (9th Cir.1983) cert. denied, 467 U.S. 1242, 104 S.Ct. 3513, 82 L.Ed.2d 822 (1984); Puerto Rico Maritime Shipping v. Point Vigilance, 643 F.Supp. 661 (M.D.Fla.1985) aff'd, 803 F.2d 1183 (11th Cir.1986). The trust funds in the three cases mentioned argued that the unpaid contributions based on employment of the union seamen should constitute wages of the crew, thus entitled to a higher status than the ships' preferred mortgage liens. If these claims had represented direct wage claims arising from the crewmembers' contracts of employment, then clearly they would have been entitled to preferred status. The courts held that the plaintiffs had failed to prove actual economic loss sustained by each seaman's trust account, and for that reason, the unpaid contributions would not support liens for unpaid wages. 5 Conceivably, the Citibank, West Winds, and Puerto Rico Maritime Shipping courts might have decided that although the plaintiffs' claims would not support a maritime lien, they nonetheless would support an in personam judgment. That issue, however, was not placed before those courts. To our knowledge, then, the precise issue now before us has not been considered in a reported opinion. Other authority leads us to conclude that admiralty jurisdiction is appropriate in this case. 21 In Ingersoll Milling Machine Co. v. M/V Bodena, 829 F.2d 293 (2d Cir.1987), cert. denied, 484 U.S. 1042, 108 S.Ct. 774, 98 L.Ed.2d 860 (1988), a shipper sued a carrier, a freight forwarder, and its own insurer for damages suffered to its goods which had been stored on deck as opposed to under deck. The portion of the opinion dealing with the liability of the freight forwarder is relevant here. As a general rule, general agency contracts (husbandry contracts), whereby one provides certain landside marine support services such as cargo solicitation, procurement of supplies, crews, stevedores or tugs, are not cognizable in admiralty since these services are considered to be of a nature preliminary to the voyage. In Ingersoll, the freight forwarder challenged the district court's assertion of admiralty jurisdiction on this ground, arguing that its freight forwarding services, which included [t]he preparation and processing of export declarations, delivery orders, dock receipts, bills of lading, and advance notification of shipping, id. at 302, partook of the preliminary nature of a general agency contract and therefore the contract was excluded from the court's admiralty jurisdiction. In analyzing the issue, the Second Circuit pointed out the Supreme Court's admonition in Kossick v. United Fruit Co., 365 U.S. 731, 735, 81 S.Ct. 886, 890, 6 L.Ed.2d 56 (1961), in which the Court stated that  '[t]he boundaries of admiralty jurisdiction over contracts--as opposed to torts or crimes--being conceptual rather than spatial, have always been difficult to draw.'  829 F.2d at 301. The Ingersoll court then looked to the nature of the services performed by the freight forwarder and concluded that without them, there can be no voyage and that provision of such services constituted an essential and integral part of the shipping process. Id. at 302. The court then found that invocation of admiralty jurisdiction against the freight forwarder was proper. 22 Likewise, in Bergen Shipping Co. Ltd. v. Japan Marine Services, Ltd., 386 F.Supp. 430 (S.D.N.Y.1974), the court held that admiralty jurisdiction existed in another atypical circumstance. In Bergen Shipping, Japan Marine Services (JMS) was sued for breach of its contract to provide a crew to man a vessel owned by the plaintiff. Generally, a contract to provide a crew is considered to be without the admiralty and maritime jurisdiction of the federal courts, since it again is preliminary to the voyage. The court, however, noting that every case turns on its individual facts, id. at 434, held that because JMS was contractually bound to effect a compromise with the crew (through the Union) in the event of any grievance or demand as to 'daily life on board' the ship, the contract was for more than simply furnishing a crew. After providing a crew, JMS later refused or was unable to effect a compromise over the crew's objections to a labor agreement. The court held that admiralty jurisdiction existed on the facts before it, noting that the issues in contention are clearly 'an integral part of ... maritime commerce and, consequently, should be cognizable within the admiralty jurisdiction of the district court.'  Id. at 435 (quoting 7A Moore, Federal Practice p .250 at 3006 (2d ed. 1972)). 23 These cases demonstrate the necessity of a case-by-case approach to the introduction of admiralty jurisdiction to novel or unusual situations. In the case before us, it is not the actual contract to make contributions to the Seafarers Trust Funds that is an integral part of the maritime commerce in this case, but rather, the employment of the seamen without whom the voyage would be impossible. Through collective bargaining, union representatives of these seamen have traded higher wages for the right to receive trust fund benefits that are funded by employer contributions. The obligation to make contributions is breached, if at all, only after the crewmembers have provided essential maritime services to their vessel, since contributions are paid after the fact, on a man-days worked basis. The failure to compensate seamen in the manner here at issue will, in our view, support an in personam claim in admiralty. 24 In West Winds, Inc. v. M.V. Resolute, 720 F.2d 1097 (9th Cir.1983), the Ninth Circuit Court of Appeals stated that [d]emands for contributions to trust funds providing benefits to employees increasingly serve as a substitute for wage demands in collective bargaining negotiations. Id. at 1102. In support of its conclusion, the West Winds court noted that the Supreme Court in Morrison-Knudsen Constr. Co. v. Director, Office of Worker's Compensation Programs, 461 U.S. 624, 103 S.Ct. 2045, 76 L.Ed.2d 194 (1983) recognized the changes that have occurred in methods of paying compensation. Although both the Ninth Circuit in West Winds and the Supreme Court in Morrison-Knudsen were constrained legislatively from holding, respectively, that trust fund contributions constituted wages (for purposes of determining preferred maritime liens) or that contributions to union trust funds were includable in calculating a federal worker's compensation award, the recognition that such contributions are a form of compensation is sound. Indeed, common sense leads to the conclusion that payments to trust funds such as the Seafarers Trust Funds constitute compensation. Payments to these trust funds are a portion of the total collective bargaining package which facilitates employment of these unlicensed seamen. Employment of these seamen, in turn, is not only necessary, but indispensable to the operation, navigation, or management of the ship. If we, like the court in West Winds, were presented the question of whether a claim for contributions would support a preferential in rem claim for wages, we too would be compelled to find in the negative. We are presented an in personam claim, however, and find no bar to jurisdiction. 25