Opinion ID: 783410
Heading Depth: 1
Heading Rank: 3

Heading: the united states's cross-appeal

Text: 34 On the cross-appeal, the United States contends (a) that the district court erred in awarding Ammar maintenance in excess of the $8-per-day rate agreed to in the collective bargaining agreement, and (b) that the court should have discounted to present value the award for future wages and future medical expenses. For the reasons that follow, we agree.
35 Under the general maritime law of the United States, maintenance refers to the duty of a vessel owner to provide food and lodging, comparable to that received aboard the vessel, to a seaman who falls ill or becomes injured while in the service of the vessel. See, e.g., Vella v. Ford Motor Co., 421 U.S. 1, 3, 95 S.Ct. 1381, 43 L.Ed.2d 682 (1975); The Osceola, 189 U.S. 158, 175, 23 S.Ct. 483, 47 L.Ed. 760 (1903); G. Gilmore and C. Black, Jr., The Law of Admiralty 281 (2d ed. 1975) (Gilmore & Black); T. Schoenbaum, Admiralty and Maritime Law § 6-28, at 348 (2d ed. 1994) (Schoenbaum). The duty to pay maintenance arises regardless of whether the shipowner was negligent and regardless of whether the illness or injury was job-related, see, e.g., Vella v. Ford Motor Co., 421 U.S. at 4, 95 S.Ct. 1381; and the duty to make such payments continues until the seaman has recovered or his condition is declared permanent and incurable, see, e.g., id. at 5, 95 S.Ct. 1381; Vaughan v. Atkinson, 369 U.S. 527, 531, 82 S.Ct. 997, 8 L.Ed.2d 88 (1962). 36 The reasons underlying the rule ... are those enumerated in the classic passage by Mr. Justice Story in Harden v. Gordon, Fed. Cas. No. 6047 (C.C.) [1823]: the protection of seamen, who, as a class, are poor, friendless and improvident, from the hazards of illness and abandonment while ill in foreign ports; the inducement to masters and owners to protect the safety and health of seamen while in service; the maintenance of a merchant marine for the commercial service and maritime defense of the nation by inducing men to accept employment in an arduous and perilous service. 37 Vaughan v. Atkinson, 369 U.S. at 531, 82 S.Ct. 997 (internal quotation marks omitted). As a right judicially fashioned to protect poor, friendless and improvident seamen, 38 [m]aintenance ... differs from rights normally classified as contractual. As Mr. Justice Cardozo said in Cortes v. Baltimore Insular Line, supra, [287 U.S. 367,] 371, 53 S.Ct. 173, 77 L.Ed. 368 [1932], the duty to provide maintenance... is imposed by the law itself as one annexed to the employment.... Contractual it is in the sense that it has its source in a relation which is contractual in origin, but given the relation, no agreement is competent to abrogate the incident. 39 Vaughan v. Atkinson, 369 U.S. at 532-33, 82 S.Ct. 997 (footnote omitted). See also De Zon v. American President Lines, 318 U.S. 660, 667, 63 S.Ct. 814, 87 L.Ed. 1065 (1943) (a shipowner's provision of maintenance is a duty that no private agreement is competent to abrogate.) Historically, the amount of a maintenance award was determined by the court, taking into account all relevant circumstances, such as the somewhat equivalent costs for housing and food ashore as well as regional differences in prices in the United States. G. Mangone, United States Admiralty Law 127 (1997) (Mangone). In the late 1940s, the judicially approved rate of maintenance was $8 per day. See, e.g., Gilmore & Black at 307. That $8-per-day rate remained standard until the 1970s. See, e.g., Gary Michael Haugen, Maintenance and Cure: Contract Right or Legal Obligation?, 62 Tul. L.Rev. 625, 625 (1988). 40 From at least 1957 until the late 1980s, collective bargaining agreements (CBAs) between vessel owners and seamen's unions uniformly set the maintenance rate at $8 per day. See Mangone at 127. Thereafter, some CBAs set different amounts such as $10 per day, see, e.g., Macedo v. F/V Paul & Michelle, 868 F.2d 519, 522 (1st Cir.1989), or $15 per day, see, e.g., Frederick v. Kirby Tankships, Inc., 205 F.3d 1277, 1292 (11th Cir.2000); Durfor v. K-Sea Transportation Corp., No. 00 Civ. 6782, 2001 WL 856612, at  (S.D.N.Y. July 30, 2001), or $30 per day, see, e.g., Covella v. Buchanan Marine, Inc., No. 95 Civ. 6514, 1996 WL 164482, at  (S.D.N.Y. Apr.9, 1996). In the wake of such agreements, defendants in suits by seaman claiming maintenance have contended that the maintenance to which the seaman is entitled is the rate specified in the CBA. This contention has divided the federal courts of appeals that have addressed it, with the First, Fifth, Sixth, Ninth, and Eleventh Circuits ruling that a seaman who is a member of a union that has agreed to a specified daily rate of maintenance is, despite having incurred higher actual costs, limited to recovery of that rate, see Frederick v. Kirby Tankships, Inc., 205 F.3d 1277, 1292 (11th Cir.2000); Baldassaro v. United States, 64 F.3d 206, 212-13 (5th Cir.1995); Al-Zawkari v. American Steamship Co., 871 F.2d 585, 588 (6th Cir.1989); Macedo v. F/V Paul & Michelle, 868 F.2d 519, 522 (1st Cir.1989); Gardiner v. Sea-Land Service, Inc., 786 F.2d 943, 949-50 (9th Cir.) ( Gardiner ), cert. denied, 479 U.S. 924, 107 S.Ct. 331, 93 L.Ed.2d 303 (1986), and the Third Circuit ruling that the collective bargaining agreement rate is not binding, see Barnes v. Andover Co., L.P., 900 F.2d 630, 640 (3d Cir.1990) ( Barnes ). 41 In Gardiner, the seminal court of appeals decision on this issue, the Ninth Circuit — although rejecting the defense contention that, to the extent a CBA establishes a daily maintenance rate, the traditional right to maintenance has been preempted by the federal labor laws — ruled that the broad policies which underg[ir]d the labor laws, as well as the nature of the collective bargaining process, require nevertheless that the maintenance rate expressed in the collective bargaining agreement be enforced. Id. at 948. The court reasoned that the importance of collective bargaining to industrial peace is such that a CBA, although it could not properly eliminate all right to maintenance, may properly limit its amount: 42 Important policies support the enforceability of the maintenance rate involved in this case .... Congress viewed collective bargaining as a key instrument in its effort to promote industrial peace.... Our national labor policy is built on the premise that employees can bargain most effectively for improvements in wages, hours, and working conditions by pooling their economic strength and acting through freely chosen labor organizations. NLRB v. Allis-Chalmers Manufacturing Co., 388 U.S. 175, 180, 87 S.Ct.2001, 2006, 18 L.Ed.2d 1123 (1967). Consequently, this court will not lightly embrace the repudiation of contractual obligations enumerated in a collective bargaining agreement and will choose the rule that will promote the enforcement of collective bargaining agreements.... Although the right to maintenance is presumed to exist because of its establishment at common law, its rate may be subject to the negotiation process. The collective agreement covers the whole employment relationship. It calls into being a new common law — the common law of a particular industry or of a particular plant. United Steelworkers of America v. Warrior & Gulf Nav. Co., 363 U.S. 574, 578-79, 80 S.Ct. 1347, 1350-51, 4 L.Ed.2d 1409 (1960). Thus, it is clearly the policy of our national labor legislation to encourage both labor and management to negotiate contracts that will effectively regulate every aspect of their complex relationship.... As the Supreme Court has noted, [t]he mature labor agreement may attempt to regulate all aspects of the complicated relationship, from the most crucial to the most minute over an extended period of time. United Steelworkers of America, 363 U.S. at 580, 80 S.Ct. at 1350-51, 80 S.Ct. 1347. 43 Here, the parties to the agreement included the traditional right to maintenance as a subject of the negotiating process. The resulting collective bargaining agreement incorporated an explicit rate of maintenance as one of its terms. We cannot fairly say that this rate, as a consequence of the normal give and take process of collective bargaining, is not entitled to the same reliability accorded to other terms and conditions within the same agreement. The national labor policy of promoting and encouraging collective bargaining agreements would be unduly compromised were we to conclude otherwise. 44 Gardiner, 786 F.2d at 948-49 (other internal quotation marks omitted) (emphases ours). 45 The court reasoned that, because [t]he rate of maintenance is but one of many elements contained within the Union contract and over which the parties negotiate, id. at 949 (internal quotation marks omitted), the adequacy of the maintenance rate should not be examined in isolation by the court because the determination of its adequacy in relation to the whole scheme of benefits has already been made by the union and the seamen who voted for the contract, id. Observing that there may be a considerable amount of `give and take' exercised by the parties in coming to a final agreement on all of the elements, id. (internal quotation marks omitted), and noting that the collective bargaining agreement in the case before it had, for example, provided for overtime, premium and penalty pay for unpleasant tasks, for very generous vacation allowances, and for such amenities as television sets and feature films, washers/dryers, ice cream and fresh baked bread, id., the court concluded that acceptance of a particular package of benefits should be binding on the union members, id. 46 [W]hen a benefits package includes an express reference to a precise rate of maintenance, the adequacy of this rate, considered in isolation, is not a subject for judicial speculation when the rate is part of a total package of wages and benefits resulting from the process of collective bargaining. 47 Id. 48 The Ninth Circuit's reasoning in Gardiner was soon followed by the Sixth Circuit, see Al-Zawkari v. American S.S. Co., 871 F.2d at 588 ([T]he maintenance per diem rate, like any other benefit, which is the ultimate result from give and take collective bargaining between the parties, should be binding on them.... Courts generally have decided that it is more appropriate for the courts to enforce privately negotiated contractual rates of maintenance, rather than engaging in overt legislation of particular dollar figures.), and by the First Circuit in Macedo v. F/V Paul & Michelle, 868 F.2d at 522 (Supreme Court's dictum in Vaughan v. Atkinson, that no agreement is competent to abrogate the incident of maintenance, 369 U.S. at 533, 82 S.Ct. 997, is not dispositive in the quite different circumstances of a collective bargaining agreement). 49 Thereafter, the Third Circuit reached the contrary view in Barnes, holding that a union cannot bargain away the individual seaman's common law right to maintenance by agreeing to a wholly inadequate figure as a daily maintenance rate. 900 F.2d at 640. The Barnes court acknowledged that almost every case concerning the right to maintenance relies on Justice Story's description of the seaman as `generally poor and friendless.' Id. at 636 (quoting Harden v. Gordon, 11 F. Cas. 480, 483 (No. 6,047) (CC Me. 1823)). And it acknowledged that today those seamen who are unionized are neither friendless nor improvident, Barnes, 900 F.2d at 636; that the Seafarers International Union... has obtained for its members overtime and premium pay, vacation allowances, disability pensions, and amenities such as televisions, washers and dryers, coffee breaks, and midnight lunches, id. at 637; that now, under union contracts[,] ill or injured seamen are quickly repatriated, id.; and that the changed circumstances of seamen's unionization undercut the rationale supporting the traditional right to maintenance and cure, id. However, the Barnes court found it inconsistent both with the traditional doctrine of maintenance and with [the] rejection of preemption of maintenance by the labor laws to hold that the maintenance rate set in the collective bargaining agreement is binding on a seaman who can show higher daily expenses. Id. at 640. Having noted that the Supreme Court has shown no inclination to depart from its long-established solicitude for seamen, id. at 637, the Third Circuit concluded that unless Congress determines that the circumstances giving rise to the need for maintenance have changed and that collective bargaining is now a more appropriate way to deal with the issue of the ill or injured seaman, the common law remedy must remain in full force, id. at 640. 50 Thereafter, despite the rationale of Barnes, the Eleventh and Fifth Circuits found the reasoning of Gardiner more persuasive and ruled that, in light of unionization, seamen should no longer be considered weak and friendless, and that in the absence of any assertion of unfairness in the collective bargaining agreement as a whole the CBA-established maintenance rate should be honored. See Frederick v. Kirby Tankships, Inc., 205 F.3d at 1291-92; Baldassaro v. United States, 64 F.3d at 212-13. 51 No opinion of this Court has discussed the issue of whether the maintenance rate in a CBA should be upheld when that amount is less than the unionized seaman's actual expenses. In a case involving a seaman who was not a union member, we held that the $8-per-day union rate was not binding. See Incandela v. American Dredging Co., 659 F.2d 11, 14 (2d Cir.1981). In a case brought by a union member, we affirmed the judgment limiting his maintenance award to the $8-per-day collective bargaining rate, but we did so without opinion. See Dixon v. Maritime Overseas Corp., 490 F.Supp. 1191, 1194 (S.D.N.Y.), aff'd, 646 F.2d 560 (2d Cir.1980) (table), cert. denied, 454 U.S. 838, 102 S.Ct. 145, 70 L.Ed.2d 120 (1981). 52 The district court opinions within this Circuit have been divided. Some have adopted the majority view initiated in Gardiner. See, e.g., Denardo v. Energy Transportation Corp., No. 87 Civ. 7202, 1989 WL 58038, at  (S.D.N.Y. May 19, 1989) (CBA rate of $8 per day binding); Dixon v. Maritime Overseas Corp., 490 F.Supp. at 1194 (same). But most have adopted the view of the Third Circuit in Barnes. See, e.g., Durfor v. K-Sea Transportation Corp., 2001 WL 856612, at - (CBA rate of $15 per day not binding); Bachir v. Transoceanic Cable Ship Co., No. 98 Civ. 4625, 1998 WL 831035, at  (S.D.N.Y. Nov.24, 1998) (CBA rate of $8 per day not binding); Brown v. United States, 882 F.Supp. 1424, 1427 (S.D.N.Y. 1995) (same); Gillikin v. United States, 764 F.Supp. 261, 264-65 (E.D.N.Y.1991) (same). 53 After reviewing the competing factors, we adopt the majority view as elaborated by Gardiner. We are persuaded by the considerations that [n]ational labor policy has been built on the premise that by pooling their economic strength and acting through a labor organization freely chosen by the majority, the employees of an appropriate unit have the most effective means of bargaining for improvements in wages, hours, and working conditions, NLRB v. Allis-Chalmers Manufacturing Co., 388 U.S. 175, 180, 87 S.Ct. 2001, 18 L.Ed.2d 1123 (1967); that the federal courts have authority to fashion a body of federal law for the enforcement of... collective bargaining agreements, Textile Workers Union of America v. Lincoln Mills, 353 U.S. 448, 451, 77 S.Ct. 912, 1 L.Ed.2d 972 (1957); and that today, most seamen are union members with a union-negotiated package of compensation and benefits of which the right to maintenance is a small component, Schoenbaum § 6-32, at 361. The modern reality is that most seamen are no longer friendless; rather, they have gained strength through collectivity, and they are a well-organized work force with sophisticated leaders who constantly press for better working conditions, pay, and benefits, as well as increased job security. Thus, the need for judicial intervention to protect seamen has been substantially lessened. Recognizing both the goal of providing protection for injured seamen and the importance of collective bargaining to industrial peace, we conclude that, in light of the reality of modern circumstances, the appropriate accommodation between federal maritime common law and federal common law for the enforcement of collective bargaining agreements is to allow unionized seamen to bargain for rights and privileges they prefer in exchange for limiting the per diem rate of maintenance. 54 As noted in Part I.B above, § 13 of the collective bargaining agreement between BSM and Ammar's union, the Seafarers International Union, provides that when a member is entitled to maintenance, the rate is to be $8 per day. That agreement also covers work rules, compensation including wage increases, and work-related perquisites including bonuses, overtime, vacation, and benefits plans. Plainly, many, if not all, aspects of the seamen's working conditions were considered and were the subject of bargaining. Ammar does not assert that that agreement was not a legitimately negotiated agreement, or that his interests were not adequately represented in the negotiation process, or that the agreement as a whole is unfair. Nor have we seen in the record any reason to believe that the collective bargaining process was unfair or that the maintenance provision in the CBA was not subject to negotiation. We conclude that, in these circumstances, although $8 per day is not sufficient to meet modern daily living expenses and would be an inappropriate rate if viewed in isolation, that per diem is more properly viewed as but a small component of the union-negotiated package of compensation and benefits that should as a package be accorded deference from the courts. We thus conclude that the district court should have limited Ammar's recovery of maintenance to the CBA-established rate of $8 per day, and we remand for recalculation of that award. 55
56 Finally, the United States contends that the district court erred in failing to discount to present value Ammar's award for lost future wages and future medical expenses. The United States argues that the court should have applied a 2% discount rate, calculated on a year-by-year sliding scale basis using standard economic tables. We agree that adjustment should have been made. 57 It is established that an award of damages to compensate for losses of future income or for anticipated future expenditures must be adjusted to take into account the earning power of money over a period of time. See, e.g., Jones & Laughlin Steel Corp. v. Pfeifer, 462 U.S. 523, 536-37, 103 S.Ct. 2541, 76 L.Ed.2d 768 (1983) (It has been settled since our decision in Chesapeake & Ohio R. Co. v. Kelly, 241 U.S. 485, 36 S.Ct. 630, 60 L.Ed. 1117 (1916), that `in all cases where it is reasonable to suppose that interest may safely be earned upon the amount that is awarded, the ascertained future benefits ought to be discounted in the making up of the award.' Id., at 490, 36 S.Ct. 630); Ramirez v. New York City Off-Track Betting Corp., 112 F.3d 38, 42 (2d Cir.1997); Metz v. United Technologies Corp., 754 F.2d 63, 66 (2d Cir.1985) ([I]n computing the damages recoverable for the deprivation of future benefits, the principle of limiting the recovery to compensation requires that adequate allowance be made, according to circumstances, for the earning power of money; in short, that when future payments or other pecuniary benefits are to be anticipated, the verdict should be made up on the basis of their present value only. (internal quotation marks omitted)). 58 Additional discounting may be needed to account for inflation where the award has been increased to anticipate an inflationary effect on, for example, higher wages, see, e.g., Jones & Laughlin Steel Corp. v. Pfeifer, 462 U.S. at 538-39, 103 S.Ct. 2541; but where there has been no such increase, there need be no deeper discounting, and the discount rate should reflect only the time value of the money, see, e.g., id. at 536, 103 S.Ct. 2541 ([E]ven in an inflation-free economy the award of damages to replace the lost stream of income cannot be computed simply by totaling up the sum of the periodic payments. For the damages award is paid in a lump sum at the conclusion of the litigation, and when it — or even a part of it — is invested, it will earn additional money.); In re Connecticut National Bank, 928 F.2d 39, 44-45 (2d Cir.1991) (To account for inflation, a future stream of earnings could be increased, before discounting, to reflect cost-of-living increases likely to occur because of inflation; if such increases are made, then the appropriate discount rate is the estimated future market rate of interest, i.e., a rate that includes a component to reflect inflation. Alternatively, inflation can be accounted for by using an inflation-free discount rate, in which event no increase should be made to the stream of earnings because of inflation .... (emphasis added)); Metz v. United Technologies Corp., 754 F.2d at 68 n. 3 (even where there has been no adjustment on account of inflation, the court must reach a result that properly takes into account the time value of money). 59 In order to calculate the present value of a lost stream of earnings in an inflation-free economy, the court should calculate 60 (1) the amount that the employee would have earned during each year that he could have been expected to work after the injury, and (2) the appropriate discount rate, reflecting the safest available investment. The trier of fact should apply the discount rate to each of the estimated installments in the lost stream of income, and then add up the discounted installments to determine the total award. 61 Jones & Laughlin Steel Corp. v. Pfeifer, 462 U.S. at 537-38, 103 S.Ct. 2541. Where the parties have adduced no evidence relating to the discount rate and there has been no upward adjustment of the undiscounted lost wages figure to cover future inflation, this Court has authorized district judges to use a discount rate of 2% per year. See, e.g., Ramirez v. New York City Off-Track Betting Corp., 112 F.3d at 41; Oliveri v. Delta S.S. Lines, Inc., 849 F.2d 742, 746 (2d Cir.1988); Doca v. Marina Mercante Nicaraguense, S.A., 634 F.2d 30, 39-40 (2d Cir.1980), cert. denied, 451 U.S. 971, 101 S.Ct. 2049, 68 L.Ed.2d 351 (1981). See also Jones & Laughlin Steel Corp. v. Pfeifer, 462 U.S. at 548-49, 103 S.Ct. 2541 (noninflationary discount rate within the 1-3% range deemed acceptable). The arithmetic necessary for discounting can be simplified through the use of a so-called `present value table'.... Id. at 537 n. 21, 103 S.Ct. 2541. 62 In the present case, the district court made no time-value discount of its awards to Ammar for future lost wages and future medical expenses. The court had noted the appropriateness of discounting for the time value of money in connection with the awards to Ammar for his lost pension and for pain and suffering. ( See Oct. 30 Tr. at 27-28 (I have to award ... the present value of ... pension benefits because a dollar today, awarded today, is worth more in the future than it would be if it was received at that later date.); Dec. 5 Tr. at 57 (With respect to the pain and suffering, I recognize that.... [it] is required... that the time value of money be taken into account.).) And at the October hearing, the court had asked the parties to make whatever submissions they wished as to the proper discounting of future damages. In response, the United States contended that the court should apply a 2% discount to all categories of future damages once the court had apportioned its awards between past damages and future damages; the United States attached a sliding-scale Present Value Table to facilitate the calculation of the present value of future damages with respect to the appropriate rate of interest and number of years. 63 At the December 5 hearing, noting that neither side had submitted precise dollar amounts reflecting discounting, the court stated that it would not discount the award for future lost wages because it had not adjusted lost wages upward to account for inflation: 64 THE COURT: Let me explain how the Court is going to deal with the question of adjustment. In reading the Ramirez case, which I will note did not involve the United States as a defendant, the Court discusses a number of factors that are relevant to calculating damages. Even before it gets to discounting pain and suffering damages by 2%, it does some discussion of discount rates with respect to wage figures. In that case, there was an adjustment to the wage figure to cover future inflation and then there was a question of discounting. Indeed, the case was remanded on the issue of the discount rate to be applied to the damage awards for loss of income, since it was not clear that that had been applied. 65 In this case, where I did not adjust for inflation because I had no evidence presented to me as to how collective bargaining agreements in the past had dealt with that subject, but because common sense necessarily dictates that increases, especially in industries that have bargaining, do take place with some regularity based on inflation and costs, I am prepared to not adjust the wages at all. I have not adjusted them upward but I don't think that it would be appropriate to discount them. 66 (Dec. 5 Tr. at 56-57.) Although the court correctly reasoned that it need not discount for inflation the future lost wages it had calculated without reference to inflation, it erred in not proceeding to discount that award at a noninflationary rate to account for the time value of money. The court similarly did not discount the sum awarded for future medical expenses. 67 Because the court should have discounted the awards for future lost wages and future medical expenses to account for the time value of money, we remand for recalculation of those two awards.