Williams v. Wilmington Trust Co.

Citation: 345 F.3d 126Docket: Docket Nos. 02-9452(L), 02-9455(XAP)

Court: Court of Appeals for the Second Circuit; September 25, 2003; Federal Appellate Court

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Congress mandates that sailors must be paid immediately upon discharge from their vessel, with a penalty of two days' wages for each day of delay if payment is not made without substantial cause (46 U.S.C. 10313, 10504). Plaintiff Terry J. Williams claims he did not receive timely payment for his work on the vessel M/V APL Korea and seeks a wage penalty from defendant Wilmington Trust Company, alleged to be the vessel's owner. Wilmington contested its ownership status, arguing it had chartered the vessel and claimed that delays in payment resulted from careless errors, which it believed constituted substantial cause. The District Court accepted Wilmington’s argument regarding payment delay; however, the current ruling affirms that Wilmington is not the Korea's owner under wage statutes.

Williams served as the second mate on the Korea during a voyage from San Pedro, California, to Asia, returning on June 8, 2001. He received a check for his wages up to that date but was later issued a voucher for one week's unpaid wages upon debarking on June 13, 2001. Disputes arose over the payment method and overtime hours, with Williams claiming he was offered only 60% of his wages in cash, which he denied, and disagreements with the captain over overtime compensation. A union grievance was filed, leading to a settlement for part of the disputed overtime. Ultimately, Williams's base wages, amounting to $1,525, were paid approximately 38 days post-voyage on July 18, 2001. The cause of the payment delay is contested; Williams alleges intentional oversight by the captain, while Wilmington attributes it to clerical errors. Both parties agree Wilmington nominally held the ship in trust to qualify for U.S. subsidies.

Wilmington leased the ship Korea to American Ship Management (ASM), which managed its operations and occasionally sub-leased it. When Williams, a seaman, filed suit after experiencing a significant delay in receiving his wages, he claimed entitlement to statutory damages under the seaman’s wage statutes (46 U.S.C. 10313, 10504), amounting to approximately $27,800. The defendants, ASM and Wilmington, moved to dismiss, with ASM citing lack of personal jurisdiction and Wilmington contesting its classification as an owner under the statute. The magistrate judge sided with ASM but denied Wilmington's motion. Wilmington then sought summary judgment, asserting that its clerical errors fell under a statutory safe harbor for late payments due to substantial cause. The District Court agreed and granted Wilmington's motion. Williams appealed, while Wilmington cross-appealed the earlier ruling against it.

The seaman's wage statute mandates payment within two days post-termination or discharge and imposes a penalty for delays without sufficient cause. Wilmington contended that its negligence in payment should excuse the wage penalty, referencing case law that supports the notion that reasonable, albeit incorrect, legal interpretations can negate penalties. The Supreme Court has indicated that negligent failures do not equate to intentional refusals to pay wages, emphasizing that the statute aims to ensure prompt wage payment and deter unjustified delays.

Wilmington contends that it is constrained by the precedent established in Vinieris v. Byzantine Maritime Corp., which requires proof of the ship's Captain's conscious misconduct for a plaintiff to recover under the relevant statute. However, the Vinieris court focused solely on deliberate refusals to pay, as the plaintiffs did not present a negligence claim, leaving the question of negligence unresolved. Nonetheless, it is unnecessary to determine this issue, as the statute's plain language indicates that Wilmington cannot be liable for wage penalties if it is not the master or owner of the vessel. Wilmington’s argument that its relationship with ASM, classified as a bareboat charter, designates ASM as the owner pro hac vice is dismissed by the magistrate judge, who asserts that Wilmington still fits the statutory definition of an owner. The interpretation of the term "owner" in admiralty law has a long-established meaning, which was not altered by Congress’s 1983 revisions to the wage statutes. Historically, the bareboat charterer is treated as the owner for many legal purposes, thus assuming the responsibilities of ownership.

Federal courts have established that a bareboat charterer is considered the owner of a vessel for wage statute purposes, as long as the vessel's owner has transferred complete possession and control. Under this principle, the charterer assumes ownership responsibilities, including those related to seamen's wages. Although some judicial statements may be considered non-binding (dicta), they reflect the historical context that Congress likely recognized when enacting relevant statutes in 1983. The magistrate judge's assertion that Wilmington is automatically deemed an owner under the statute is deemed incorrect, as liability for wage penalties falls on the charterer, or owner pro hac vice, when a vessel is chartered in such a manner. 

The interpretation of "owner" should accommodate multiple entities, allowing sailors to sue any party with apparent authority. It is acknowledged that if a bareboat charterer is not subject to U.S. jurisdiction, the legal owner benefiting from U.S. law could also be liable for wage penalties under certain circumstances, though this issue does not need resolution in the current case.

The determination hinges on whether ASM was the owner pro hac vice of the vessel Korea. Evidence shows ASM had complete possession and control, while Wilmington's claims of ownership were weak, based primarily on receiving notices without any demonstrated control or financial responsibility related to the vessel. Thus, it is concluded that a reasonable fact-finder would determine Wilmington does not hold ownership of the Korea.

The magistrate judge incorrectly determined that Wilmington was an owner liable for penalties under seaman's wage statutes, leading to an entitlement of summary judgment for Wilmington. Consequently, the magistrate’s decision in appeal number 02-9455(XAP) is reversed, while the District Court's judgment in appeal number 02-9452(L) is affirmed. The record does not clarify whether any delayed wages claimed by Williams pertained to the Asia-to-Seattle leg, which would affect the applicable provisions; however, this distinction is deemed irrelevant here. The primary difference lies in penalty accrual timing, with international voyages allowing for a four-day grace period, unlike domestic voyages where penalties begin immediately.

The text argues against Wilmington's claim that certain comments in Griffin were mere dicta, noting that Griffin addressed a challenge to the Fifth Circuit’s authority regarding penalty limits under the statute, which had inconsistent interpretations with the statute's plain language. The Court’s analysis emphasized that the damages were not solely compensatory but also served to deter negligent delays.

Wilmington’s reliance on Livanos v. Pateras is also questioned, as that case did not establish that clerical errors could amount to sufficient cause for non-payment; it merely upheld the district court’s findings on evidence sufficiency. Moreover, a reference is made to the case Chung, Yong Il v. Overseas Navig. Co. Ltd., which deemed indemnification against wage penalties void as against public policy, highlighting potential unfairness if a blameless party were held liable. Although the implications of this case are acknowledged, a determination is deferred. Wilmington's affidavits were initially excluded from consideration during its motion to dismiss but were later included in its summary judgment motion, asserting lack of ownership as the basis for summary judgment.