AMERICAN FOREIGN S. S. CO. v. MATISE
Legal provision: 46 U.S.C. 596
Argument of Francis L. Tetreault
Chief Justice Warren E. Burger: We will hear arguments first this morning in number 74-966, American Foreign Steamship Company against Matise.
Mr. Tetreault, you may proceed whenever you are ready.
Mr. Francis L. Tetreault: Mr. Chief Justice and may it please the Court.
This case involves the imposition against the shipowner of penalties in excess of $35,000.00 and this amount fine due is in addition to an award in favor of a seaman or the seaman’s estate of the sum of $510.00 plus interest, which amount had been brought by the shipowner found by the District Court in the first instance to have been an amount which was in fact paid to the seaman as part of the shipowners’ obligation to pay his wages in full.
Throughout the handling of the case in the District Court and the Court of Appeals, and I think there is no question of the law on the subject as the shipowner, the money was paid in Vietnam under circumstances where U.S. dollar currency by the local law was not permitted to go into circulation.
I assume the reason was simply that there was a great disparity between the black market rate and the official rate.
The seaman was discharged for a cause.
There is simply is no question about that.
That has been conceded throughout the case.
It would also has been held even by the Court of Appeals, whose opinion imposed this penalty that the cost of repatriation following a discharge for cause was as between the shipowner and the seaman, the obligation of the seaman.
We thus have a situation which quite literally is one in which a penalty of $35,000.00 has been imposed, and if we apply the maximum of the law that will assume to have been done which should have been done, where if everything had been followed literally, even in accordant with the plaintiff’s desire and wish, the $510 representing the cost of buying air transportation back to this country would immediately on the seaman’s return to this country and the payment of the remainder of his wages have been returned by the seaman to the shipowner.
So one has, may I say either absurd or outrageous depending upon the point of view, a situation in which we have a penalty in excess of $35,000.00 imposed for the theoretical deprivation, taking the plaintiffs’ case at its best.
Justice Byron R. White: You say that it is conceited that the sailor or seaman owed to the shipowner for the airline ticket?
Mr. Francis L. Tetreault: This is further as the counsel concedes or not, I do not know, he did concede it in the District Court.
In the Court of Appeals there was a holding that the cost of repatriation was the seaman’s obligation, not the shipowners’.
Justice Byron R. White: Even though the ship was obligated to get him out of Vietnam under the law, nevertheless, that did not mean that they had to pay his way home?
Mr. Francis L. Tetreault: May I say this is true, but before I say it is true, may I say that the Court of Appeals refers to Vietnam treaties and obligations of the shipowner to bring him home.
There was nothing in the District Court record to that --
Justice Byron R. White: Well, they can get him out of Vietnam, but that does not mean that they have to get him out of their own expense.
At least the Court of Appeals said it was the seaman’s obligation, the money?
Mr. Francis L. Tetreault: The Court of Appeals said it was the -- the money was the seaman’s obligation, that went further and I had some discussion about Vietnam treaties and the shipowner’s obligation to put to their sole support for the --
Justice Byron R. White: For the Court of Appeals -- it did not seem to make any difference to the Court of Appeals whether it was his obligation or not, whether it was or whether it was not, this penalty was to be invoked?
Mr. Francis L. Tetreault: That is correct, Your Honor.
Justice Potter Stewart: And also, while under treaties it might have been the shipowners’ obligation to get him out of Vietnam.
There was nothing in that treaty that required the shipowner to send him to the United States of America.
It was just to get him out of Vietnam?
Mr. Francis L. Tetreault: If one assumes --
Justice Potter Stewart: It was part of the treaty?
Mr. Francis L. Tetreault: If one would assume that there was a treaty obligation, that is correct.
Justice Potter Stewart: It could not have gone beyond an obligation to get him out of Vietnam?
Justice William H. Rehnquist: Why is not the payment for the air fare made in Saigon treatable as a partial payment of wages?
Mr. Francis L. Tetreault: This is exactly the shipowners’ position, Your Honor, exactly.
Justice Potter Stewart: Why is it not?
I mean, you say it is, but what -- it was decided that is was not and --
Mr. Francis L. Tetreault: Well, may I -- the -- I have spent many hours attempting to understand the Court of Appeals' first opinion.
I believe in good conscience and the best of my study can come forward with, that the explanation lies in a misreading of this Courts’ opinion and Isbrandtsen versus Johnson.
And I assume that the Court has some familiarity with that.
That is a case in which the shipowner offset or attempted to offset, against the seaman’s’ wages, the cost of deviating the ship to provide medical treatment to a seaman who had been, without justification stabbed by the seaman plaintiff who was suing for his wages and penalty wages.
The holding in Johnson versus Isbrandtsen in its express terms and I quote is that the, well, there are few three dots, if you will, before that that the shipowner so far and here is the quote, “deductions for derelictions in the performance of duty” is limited to the specific fines and penalties that are provided in Section 701 or a few other miscellaneous provisions of the statute.
The heart and the basis of the misunderstanding I think by the Court of Appeals in this case and some of the trouble in the other Circuits relates to the extrapolation of the carrying beyond the holding of this Court which related to penalties into the subject which we have here, where there is in fact an attempt with, again, some of the seaman with all sorts of official watch dogging, if you will, of a payment in kind of an attempt to actually make the full payment to the seaman.
Justice Byron R. White: If the seaman had gone with them to the airline office then they had given him the cash, the seaman the cash and said this is part of your wages and the seaman had bought his own ticket, there would not have been any problem, I guess there?
Mr. Francis L. Tetreault: There should not have been.
Justice Byron R. White: He might have violated Vietnam law, giving him the cash having the currency there, but nevertheless there would not have been any problem. The real problem is paying a third party what the lawyer claims to be what the seaman owed him?
Mr. Francis L. Tetreault: I think there is no question under the record that we have in this case that the seaman in fact did go to the airline office, accompanied by the agent.
The money was paid to the airline, he got the ticket.
Justice Byron R. White: (Inaudible)
Mr. Francis L. Tetreault: This could be and here we have the fines or problem that the shipowner faces, that if had given the cash to the seaman one second before he gave it to the agent, theoretically they are on that side, you have a technical violation.
Justice William J. Brennan: If you do not prevail on your submission that the this was a wages, that were paid when he got the airline ticket.
Has there been any doubt that he would be liable for the penalty dated from the day when the wages should have been paid, assuming now they were not?
Mr. Francis L. Tetreault: Assuming that this did not constitute legal payment then we will come to the question of the quantum of the penalty, is that correct Your Honor? I think there is a very, very serious question and here we have, I do not intend this as a digression, but this brings, I think into play, the entire subject of this group of statutes, and how they are being handled and what is to be done in fairness on both sides.
The Enforcement Section of more than 100 Sections of Title 46 which are designed for protecting seamen and particularly in their wage relationships.
The Enforcement Section is the Section 596, which is directly before the Court, and which as the Court is aware, provides that there shall be a penalty of two days pay for each day that goes by where the master or owner who refuses or neglects to make payment without sufficient cause.
It has been held by this Court, so far as I am aware consistently in the opinions to this Court since Pacific Mail Steamship versus Schmidt, that without sufficient cause language embodies, should be read as including within the statute a rule of reasons so that if the shipowner is acting reasonably at any stage of the process in which payment is not made, the penalty is not triggered and this is true, even though there may be a legal, a technical-legal failure on the shipowners’ part in having either made payment in the wrong manner and the wrong medium, or having made an improper deduction.
Here in the Schmidt case, it was held by this Court, that the shipowner had a valid, let us say by valid, I mean a colorable, an arguable, a good faith argument from appealing from the District Court opinion and during the course of the appeal, this Court reversed the Court of Appeals’ decision, which had imposed the penalty during the course of appeal, saying in effect that the shipowner was entitled to pursue his rights.
That is to inquire out -- to inquire whether he was right at any event.
In this case, we have an even, may we say, in my view of it, the strongest possible situation where we not only thought in good faith that we had made payment, we complied with the requirements of the statutes and the regulations which has set up a very, may I say, extensive infrastructure of bureaucracy, in the good sense of the word, to enforce the seaman’s’ rights.
These were complied within Vietnam.
The Vice Consul was present and members of the coast guard.
The Court of Appeals with, may I say, no reason and no justification of the record, stated that the presence of the United States Vice Consul and the Coast Guard officers, that they were not acting within their official capacity.
There is simply nothing in the record and no justification for that.
I think it is --
Justice William J. Brennan: Does the record indicate how they got -- how it was that they were present?
Mr. Francis L. Tetreault: The record does not indicate who called whom, but that record does indicate that the Vice Consul was inquiring into the circumstances of the discharge into the loggings, that he performed all the duties which the statute requires him to perform, including the issuance of a certificate of discharge to the seaman, reassuring that he had received a wage voucher.
The participation and the termination of the seaman wanted to be repaid by air and consented to this procedure and might as -- what occurs to me as the only possible explanation is that in this mass of statutes and there are more than a hundred sections and detailed regulations, it simply may have well escaped the attention of the Court of Appeals that this procedure was one that was called for by a statute and that the Vice Consul was not simply acting --
Justice William J. Brennan: And the coast guard?
Mr. Francis L. Tetreault: The coast guard, I suspect, and the record does not disclose except that they all came.
As far as I am aware the coast guard was in attendance presumably at the request of the Vice Consul because presumably the coast guard officers that had some experience in the shipping commissioner capacity and had greater familiarity with the signing on and off of seamen.
Justice Byron R. White: Let us assume that it was determined after studying whatever laws or treaties there are that it really was the shipowner's duty and also his financial obligation to return him to the United States, that it was to be on his pocket, not the seaman’s and they just made a mistake, you have just been wrong.
You would still say that was a good faith defense, I understand from your answer to Justice Brennan as far as the penalty was concerned.
Mr. Francis L. Tetreault: I did not, I believe, give adequate or a proper answer.
What I think is a very strong and outstanding in this case is the fact that we not only went through all of those procedures.
There was a trial in the District Court in which the District Court found that we had in fact made payment.
So we would think that the shipowner so far as the question of sufficient cause is concerned or a rule of reason or an entitlement to assume, if you will, among other things should have been, at least so far as the calculation of the quantum of the penalty is concerned, entitled to, may I say, rely on the, after a full contest, it was no-default procedure, decision of the District Court after a trial that payment had been made and certainly in the --
Justice Byron R. White: That may be so, but what about the penalty up to that time?
Assuming you were wrong, assume you are wrong that it was really the shipowner's cost to send him home, assuming you were wrong, how about the penalty up to the date of the trial?
Mr. Francis L. Tetreault: I would think that up to date of the trial in a case where the District -- I think --
Justice Byron R. White: (Voice Overlap) in the understanding that you were paying him, that you had paid him, and you were advised that you would -- that you have paid him, and that it was his cost, not yours?
Mr. Francis L. Tetreault: And so far as the calculation of a period of time is concerned, I would think that certainly through the decision, through the two decisions of the trial court of course, the first one found that we had paid, I would say that through that one, we are affirmed in the sufficiency of our cause and persisting in our, we are assuming, a wrongful belief, and I would say that, certainly, in applying the rule of reason that the courts have applied, and I would say that this Court applied in the Smith case, we were entitled to persist in this assumed, erroneous course, certainly up to the time of the opinion of the Court of Appeals.
And I would suggest up to the time of the second judgment of the trial court which was entered in response to the mandate and injunction of the Court of Appeals, based not only on the opinion of the Court of Appeals in this case, but on the intervening opinion of the Court of Appeals for the Ninth Circuit by a different panel in Escobar saying.
Justice William J. Brennan: (Voice Overlap) about that.
Mr. Francis L. Tetreault: I am sorry sir.
Justice William J. Brennan: If you were right about that, assuming you had some penalty to pay, how much would the penalty be?
Mr. Francis L. Tetreault: The penalty calculates at the rate of approximately $29.00 per day and presumably would -- the -- I am sorry I do not have at the moment the date of entry of the trial court judgment.
I would say that would have been last June, it would be approximately $8,000.00, I would think, Your Honor.
Justice William J. Brennan: As against 35?
Mr. Francis L. Tetreault: That is correct, Your Honor.
May I -- on the subject of discharge and this mass of statutes that I was touching upon, although the amount here was $510.00, under the statute that of course would be triggered by any failure to pay if it were willful, even though it were a matter of just a few cents.And among the mass of statutes and the question of airline versus other repatriation, there is a statute, 46 U.S.C. Section 683 and this must be the one that the counsel and the coast guard were directing their attention to, even though the master had not.
That the master, in case of a discharge abroad shall provide any seaman so discharged with employment on a vessel agreed to by the seaman, or shall provide him with one months’ extra wages, if it shall be shown to the satisfaction of the counsel, that such seaman was not discharged for neglect of duty, incompetence, or injury incurred in the vessel.
This is not our case.
He was discharged for misconduct and there is no question on that when that is conceded for --
Justice William J. Brennan: I gather your first position is that he was paid full wages and therefore there is penalty involved at all?
Mr. Francis L. Tetreault: That is correct.
Justice William J. Brennan: And if you are wrong about that -- your second argument is that in any event you have a good faith defense (Inaudible), is that it?
Mr. Francis L. Tetreault: That is correct, Mr. Justice and this statutory provision that I just adverted to, I think points out the absurdity of the result because of the shipowner, in this case, as it did not, had discharged the seaman wholly without cause, the shipowner's obligation would have been to pay one months’ wages or to find him a work-away job on another ship.
There is no requirement for air transportation home so far as the statutes are concerned.
Justice William H. Rehnquist: Mr. Tetreault, if you take a look at page 5 of the tan appendix, where there is the statement apparently furnished by your client to the respondent of deductions and look down the lower half of the page where it says first and half deductions transportation Saigon to San Francisco, $510.00 and then right below that says advances such and such then beyond that it says, slop chest, $51.00.
Now, I take if that is the kind of a canteen that the man goes into and gets cigarettes and that sort of thing.
Mr. Francis L. Tetreault: That is correct, Your Honor and I --
Justice William H. Rehnquist: Well, what is the authority?
Is there a statutory authority for deducting slop chest chits, or is that just a process of consent by the seaman?
Mr. Francis L. Tetreault: That is, I believe the Statute is 46, Section 670.
It requires the ship to maintain a slop chest.
It says the seaman can buy from it and the reason I am delighted of the question is that there is no statutory provision for sales on credit.
That is for deducting from the seaman’s wages, the amount of slop chest purchases.
Although incidentally the form has -- although it has American form esteem on it, essentially follows the forms of the coast guard use for and it is a traditional type of form, they always have had prevision for advances for slop chest and this was another one of those where the money is for the benefit of the seamen and has traditionally been done and never has been --
Justice William H. Rehnquist: Consent is enough without specific statutory authorization?
Mr. Francis L. Tetreault: This is the case in connection with the slop chest.
Now, what -- following today, I do not know, he may have a mass of slop chest, I do not know.
Unknown Speaker: Is that allotted?
Mr. Francis L. Tetreault: Allotments are specific or statutory and that is so specific in the statute that I would make no argument based on an allotment that was not justified by the statute.
Justice Harry A. Blackmun: What about fines?
Mr. Francis L. Tetreault: The fines are also specific and fines, I believe, Mr. Justice are exactly what was determined by this Court in U.S. versus Johnson.
I am not aware of any instance, either in the courts or other wise, in which since U.S. versus Johnson, there has been a penalty type of withholding.
Justice William H. Rehnquist: I think it is Isbrandtsen.
Mr. Francis L. Tetreault: It is Isbrandtsen versus Johnson, yes.
Justice Harry A. Blackmun: What were the fines imposed before, do you know?
Mr. Francis L. Tetreault: In the Isbrandtsen case, Your Honor?
Justice Harry A. Blackmun: In this case?
Mr. Francis L. Tetreault: They were no fines.
Unknown Speaker: Well, it says a hundred and --
Mr. Francis L. Tetreault: Oh, no, no, I am sorry.
The fines are not in controversy for this case.
Those were in connection with the repeated episodes of misconduct in connection with which he was finally discharged.
And there is no controversy concerning the fines in this case.
It is only the 510.
To conclude very briefly, essentially, I believe where we now are is a result of a misreading by the Ninth Circuit and some of the other Courts of Isbrandtsen versus Johnson as reading it as going beyond the deductions in the nature of penalty.
We also have, perhaps not directly involved in this case, but if I may touch on it, the statutory scheme which is very complex, which obviously has caused the Court of Appeals for the Ninth Circuit in this case some difficulty, perhaps compounded by the accident in the Ninth Circuit of published opinions, of which this is one, unpublished opinions by other panels dealing with exactly the same subject matter, reaching opposite results and which we apparently under in terrorem injunctions of rules of the Court are not permitted to use as precedent or authority.
So we have some difficulty in telling what the law in the Ninth Circuit is, but we do have the situation in this Court that represent, sorry in this case, which represents the difficulty that it had in dealing with the complex statutory and regulatory scheme and one is left with the thought, although it may never surface simply because of the difficulty of another case in which it will be presented of this Court, perhaps taking another look at its decision in U.S. Bulk Carriers versus Arguelles, in 400 U.S.351, which dealt with the subject of arbitration of this type of thing under the collective bargaining agreement.
Unknown Speaker: I think in your arguments you could prevail without reference to Arguelles, can you not?
Mr. Francis L. Tetreault: Yes, this is a total digression Your Honor.
May I reserve 5 minutes?
Chief Justice Warren E. Burger: Very well.
Argument of Eric J. Schmidt
Mr. Eric J. Schmidt: Mr. Chief Justice and may it please the Court.
This proceeding this morning challenges two of the most important and basic rights belonging to the American seamen.
The first one became a seaman’s right at the same time that all American citizens acquired that the constitutional right to due process before being deprived of his property.
The second right is a very important one that makes enforcement of the first possible.
My respected opponent has just referred to Section 596 as the Enforcement Section.
The shipowner’s position in these proceeding this morning attempts to render useless this very important Enforcement Section.
I have prepared a statement to explain the respondents’ position here and I do not want to take up a point-by-point refutation or discussion of the statement that had just been made by opposing counsel.
However, on the repatriation point, I am going to deal with that first.
At the trial, I summarize by saying there has been error carried consistently through this litigation with respect to the repatriation aspect, the contract implied on the part of the seaman to repay the vessel.
At the trial, the court spoke to the seaman’s counsel and said the proposed findings of the defendant indicate that the shipowner had no obligation to bear the expense of the plaintiffs’ return to the United States.
Do you dispute that?
Counsel replied, I dispute it emphatically Your Honor, but I say that it is irrelevant.
It is not at issue in this trial.
Court: al right, alright, proceed.
In the court’s findings of fact in conclusions of law, the trial court’s findings at length --
Justice William H. Rehnquist: Where you referring to --
Mr. Eric J. Schmidt: They appear in the transcript to page 44, line 12.
Chief Justice Warren E. Burger: Transcript or appendix?
Are you looking into -- about the colored brief or appendix rather?
Mr. Eric J. Schmidt: Yes, they are, Your Honor.
Chief Justice Warren E. Burger: 44?
Mr. Eric J. Schmidt: No.
I have you to give you the correct page.
It is page 80 of the appendix, two-thirds of the weight to the bottom of the page.
From the evidence it is undisputed that the obligation to repatriate the plaintiff was not upon the shipowner, but was rather the personal responsibility of the seaman.
But the Appellate Court simply accepted that and because even down to today the question of the validity of the obligation, of the existence of any obligation on the part of the seaman to reimburse the shipowner is not actually at issue in this case.
The question presented by this proceeding is whether or not the statutory rights, given to a seaman by Congress to ensure that he would not be overreached by recoupments and repayments asserted unilaterally by his employer.
His employer being historically, and today, in a position to produce proofs from foreign places to obtain the assistance of consular officials, his own agents in foreign ports, locally.
There is simply no fair contest between a nomad who worked on a ship for a while and the corporation that owns and operates those ships.
Justice Byron R. White: Do you suggest that we are entitled to decide this case on the assumption or accept the finding that it was the seaman’s obligation to pay air fare home?
Is it -- we -- you say we -- it is perfectly all right to proceed on that basis?
Mr. Eric J. Schmidt: Well, Your Honor, I want to say that I consider that to be completely erroneous, but that this Court’s decision would be the same in either event.
Justice Byron R. White: Alright.
So we may proceed on that basis.
Chief Justice Warren E. Burger: Let us move to the top of page 9 following the paragraphs you were talking about.
The plaintiff consented to and approved the purchase of an airline ticket for his purposes with his money, under the circumstances that were arranged by the master and the Vice Consul with the special permission of the South Vietnamese Customs officials.
The purchase of that ticket under those circumstances constituted the equivalent of payment of moneys over to the seaman.
Now, that is certainly is as exclusive finding as we could have on the subject, does it not?
Mr. Eric J. Schmidt: Yes, Your Honor and I think that it is completely erroneous, and I say that without resorting to (Inaudible) it is completely erroneous in view of the statutory protections which Congress established for a seaman in order to prevent precisely this kind of a finding being made by a court.
Chief Justice Warren E. Burger: Does it bear on a good faith defense aspect of this case?
Mr. Eric J. Schmidt: I am sorry.
Chief Justice Warren E. Burger: Does it bear on the good faith defense issue in this case?
Mr. Eric J. Schmidt: I think that it definitely does.
I think that the law with respect to the fact that seamen cannot contract and cannot enter into any kind of an agreement, that would diminish their rights to wages at the time that they are paid off before a shipment commissioner, the knowledge on the part of shipowners which they are certainly are required since 1872 down to the present time to have acquired, the knowledge that they cannot repay themselves unilaterally from a seaman’s earned wages goes right to the good faith of the entire transaction.
If a shipowner claims that a seaman owes it money, it must do what everyone else must do in our society who says that a seaman owes it money, it must resort to a judicial process.
Justice William H. Rehnquist: What if the seaman agrees as in the case of the case of a slop chest that he has bought so much and agrees to have it deducted consensually?
Does the shipowner still have to sue him?
Mr. Eric J. Schmidt: No, Your Honor.
The statutes create the slop chest and it has historically been the procedure for a seaman who purchases something from the slop chest to sign his name on the date of the purchase in the official logbook.
The logbooks are printed by the Government and they carry pages labeled for the specific purpose of keeping track of the seaman’s purchases from the slop chest. So on the day that he purchases, he signs his name or initials opposite the amount.
That is statutory.
Justice William H. Rehnquist: But the statute does not authorize a deduction from wages for the slop chest purchases?
Mr. Eric J. Schmidt: I believe that it would be reasonable to say that a statute that creates a slop chest limits the percentage that the captain can charge in terms of profit, specifies sold items that the slop chest must carry under penalty or fine.
When the logbook carries pages devoted to keeping that record that certainly comes close to being statutory.
It is a formal procedure that is subject to close scrutiny and it requires a seaman’s signature in exactly the same manner that wage advances made to him in foreign places require his signature in the official logbook.
Justice Lewis F. Powell: Mr. Schmidt, are you arguing that under no circumstances could the seaman consent to payment in kind?
Suppose a seaman on his own initiative in Saigon, for example, had come to the shipowner, putting all the currency problems and regulations aside, and said, I would rather you buy the ticket for me, I am not really very smart at figuring out how to get home on airlines.
Will you go down and buy the ticket for me?
Are you saying that under no circumstances does consent relieve the shipowner?
Mr. Eric J. Schmidt: Absolutely, yes Your Honor.
Justice Lewis F. Powell: Under nothing?
Mr. Eric J. Schmidt: Under the statutes enacted in 1872, Shipping Commissions Act of June 4, 1872, a seaman cannot agree.
Justice William H. Rehnquist: What are the U.S. code citations to the statute that you rely on?
Mr. Eric J. Schmidt: Contracts are forbidden by Section 600 of Title 46.
It is very brief.
Section 600; No seaman shall by any agreement, other than as provided by Title 53 of the revised statutes, forfeit his lien upon the ship or be deprived of any remedy for the recovery of his wages, to which he would otherwise have been entitled.
And every stipulation in any agreement inconsistent with any provision of Title 53 of the revised statutes and every stipulation by which any seaman consents to abandon his right to his wages in the case of the loss to ship, or to abandon any right which he may have or obtained in the nature of salvage shall be holding an altitude.
Justice William H. Rehnquist: Well, that does not say it does not seem to me what you said it said.
That certainly does not say that the seaman may never consent to receive his wages in some other form or to have some other payment made such as was made in this case.
What language of Section 6, under what particular phrase in it do you think supports your contention?
Mr. Eric J. Schmidt: No seaman shall by any agreement other than as provided by Title 53 of the revised statutes forfeit his lien upon the ship or be deprived of any remedy for the recovery of his wages to which he would otherwise have been entitled.
Justice William H. Rehnquist: Well, that is talking about remedies for the recovery of wages not to the substantive question of whether the wages are due and owing or not?
Mr. Eric J. Schmidt: But Your Honor the cases have -- I can cite I believe Selman offhand, the cases have interpreted this language to me that a seaman cannot contract.
Justice William H. Rehnquist: Cases from this Court?
Justice Byron R. White: But it does require a contract it or not that section does not answer the question where the wage is paid in this case?
Mr. Eric J. Schmidt: That is true.
Justice Byron R. White: (Voice Overlap)The issue is was the wages paid -- were the wages paid by buying an airline ticket, that is the question.
Mr. Eric J. Schmidt: I would like to invite the Court to note Section 644, rules for settlement.
The fourth section says, in cases in which discharge and settlement before a coast guard official to whom the duties of shipping commissioner had been delegated are required, and that is all off-shore trips, including this one, discharge and settlement is required before shipping commissioner or the coast guard official performing those duties.
No payment, receipt, settlement or discharge otherwise made shall operate as evidence of the release or satisfaction of any claim.
Chief Justice Warren E. Burger: Did you not have a coast guard official present in Saigon and a U.S. Commissioner present in San Francisco when these vouchers were signed?
Mr. Eric J. Schmidt: I think nothing -- to answer Your Honor there were two coast guards hearing officers, not hearing officers, investigating officers present at the time that the man was discharged in Saigon.
There was no disposal made of his wages there.
The shipowner at the time of the pay-off in San Francisco said, I am keeping back $510.00 of the wages which I admit you earned to repay myself for an airline ticket that was bought for your benefit.
And the cases have been clear from Jolly’s for example, the man who was put in jail.
He signed an agreement, a written agreement to repay from his wages the amounts that the captain let him have in order to buy a mattress, to buy some food, and to procure legal help.
The captain knew that such an advance, presumably he knew it was illegal because he put down the sums that he had given to the seaman as fines and the Court held that this was not a deduction permitted by a statute and the double-wage penalty was applied.
Justice William H. Rehnquist: That is a District Court case?
Mr. Eric J. Schmidt: Gonzalez was an Appellate Court case, I believe.
Justice Byron R. White: What if the employer pays in advance to the seaman cash?
Are not the seaman comes to him and says, I want a little prior payment on, I had a bad luck at the table and I need a little, I need a hundred dollars and employer gives it to him in cash?
Mr. Eric J. Schmidt: The usual situation of that kind would involve the seaman signing an entry in the official logbook that he had received in advance of his wages.
Justice Byron R. White: Well, then when they finally pay him off in San Francisco, they will deduct that advance?
Mr. Eric J. Schmidt: That is correct.
The advances show --
Justice Byron R. White: That advance is quite alright, you say, but an advance to buy an airline ticket is not?
Mr. Eric J. Schmidt: Yes, that is what I am saying.
That an advance made pursuant to Section 597, requiring it to be added in the logbook and signed by the seaman is a statutory, legal and enforceable payment of wages.
Justice Byron R. White: That is the way to do it.
Now, if they entered that in the logbook in this case, we would not be here?
If they had entered this $500.00 in the logbook as an advance to the seaman, he would not be here?
Mr. Eric J. Schmidt: And the seaman had signed it.
If it had observed the procedures for paying a man wages in advance there would be no contest.
Justice Thurgood Marshall: Is that advance agreement?
Mr. Eric J. Schmidt: Pardon.
Justice Thurgood Marshall: Is he signing that an agreement because you say he cannot make an agreement, well, he did not make it in your case?
Mr. Eric J. Schmidt: The law permits him to obligate wages for allotments to be sent to his family, for slop chest purchases, and for wages.
Justice Thurgood Marshall: I thought you said he could make any agreement, from what you read?
Mr. Eric J. Schmidt: Well, this is provided for by statute.
He cannot enter into any kind of an agreement with the shipowner or anyone else that involves his wages.
Justice Thurgood Marshall: (Voice Overlap) statutes you read said, any agreement except those covered by revised statutes some number?
Mr. Eric J. Schmidt: Yes.
Justice Thurgood Marshall: Well, does the advance in that statute?
Mr. Eric J. Schmidt: Yes, Your Honor.
Advances are provided for by Section 599, advances and allotments.
Justice Thurgood Marshall: Of that revised statutes you are talking about?
Mr. Eric J. Schmidt: Well, this is the number given by the amendment I think of 1915, the Seaman’s Bill?
Justice Thurgood Marshall: I do not think we understand each other.
What is the revised statute that is in there that says no agreements are binding except those provided in revised statute and what is that revised statute number?
Mr. Eric J. Schmidt: The revised statute number, I have not put down the equivalents.
Justice Thurgood Marshall: Read the statutes you just read us that said no agreement can be binding?
Chief Justice Warren E. Burger: Section 600.
Mr. Eric J. Schmidt: That is 600, yes.
Agreements concerning laws apply to wages.
Justice Thurgood Marshall: What is the revised statute mentioned there?
Mr. Eric J. Schmidt: I believe it would be Section 31.
I am looking at their historical note.
Justice Thurgood Marshall: Well, you read the statute before.
You did not read the historical note.
You read the statute.
Unknown Speaker: Section 600, just read it again.
Mr. Eric J. Schmidt: Yes, alright.
And every stipulation in any agreement inconsistent with any provision of Title 53 of the revised statutes.
Justice Thurgood Marshall: Well now, is advance is in Title 53?
Mr. Eric J. Schmidt: I am not prepared to answer the --
Justice Thurgood Marshall: Well then, why is not this blocked, why is an advance blocked by that statute 600?
Mr. Eric J. Schmidt: The revised statutes --
Justice Thurgood Marshall: It is an agreement?
Is it not an agreement?
It quote and end quote.
Mr. Eric J. Schmidt: The statute permits certain specified deductions from wages and the statute that permits deductions for advances is Section 599 and I could, given time I could find the equivalent of it in the revised statutes because it is an old law.
It is there, it provided that a seaman --
Justice Thurgood Marshall: But 600 says, under Title 53 or any other one.
It must say that for you to win?
Mr. Eric J. Schmidt: Well, I can only say Your Honor, I am under the impression that the Seaman’s Bill incorporated a great amount of past law and gave it -- gave these sections new numbers.
I have the numbers for the Seaman’s bill enacted in 1915.
I know that the right to pay seaman advances existed before 1915 because prior to that time a seaman was entitled to demand one-third of his earned wages and the -- the LaFollette Act of the Seaman’s bill changed that to one-half.
So, I cannot answer your --
Justice Thurgood Marshall: (Voice Overlap) if it is signed in the logbook, otherwise it is not?
Mr. Eric J. Schmidt: With the respect to wage advances that is correct Your Honor.
That is the only way to advance money to the seaman under the law.
Justice William H. Rehnquist: Certainly the first sentence of Section 599, talking about advances and allotments says, would give the impression anyway that a seaman cannot assign wages not yet earned.
It looks like a flat prohibition, does it not?
Mr. Eric J. Schmidt: 599 does completely prohibit the payment to seamen of wages in advance at the time that he has earned them.
Justice William H. Rehnquist: And then it goes out and says he can a lot of, but the allotment would take effect after the wage has been earned, I would think.
Mr. Eric J. Schmidt: That is correct.
So that is a statutory provision for an employer to pay out a seaman’s wages after they have been earned, but in advance of the payoff before a shipping commissioner.
Justice William H. Rehnquist: But I suppose your opponents’ contention here is that these were not assignments of wages, unearned wages, this was a payoff of wages that had in fact been earned?
Mr. Eric J. Schmidt: For what its worth that argument can properly be made because the wages had been earned at the time the shipowner spent this money.
The man did not earn any more money after the time that he was discharged.
Unknown Speaker: (Inaudible) advance, the advances routine, (Inaudible), would you agree here?
Mr. Eric J. Schmidt: That is correct Your Honor.
Unknown Speaker: Well, will you point out to me Mr. Schmidt, where is it that it says that an advance is to be treated as an advance only if the seaman signs the logbook that you have mentioned, is that in the statute?
Mr. Eric J. Schmidt: I do not believe that specific language is in the statute, Your Honor.
Unknown Speaker: Where does that come from?
If I understand you correctly, if a seaman came to the ship's captain and said that I want to go ashore, I need -- I want to buy some things, but I am broke, would you give me a hundred dollars?
The captain gives him a hundred dollars and puts it down as advance, but does not get the seaman to sign the logbook.
I gather in that situation the seaman would still be owed a hundred dollars, is that right?
He would not have had an advance of wages.
Mr. Eric J. Schmidt: I think your facts included the captain making it in advance and making a record out as an advance.
Unknown Speaker: No, no record.
Just forget it.
He goes to the safe and he gives the seaman a hundred dollars, and they do not take out the logbook, and go through the formality that you suggested has to be completed before there is an advance?
Mr. Eric J. Schmidt: I think that is correct.
Justice Byron R. White: Even though the seaman later says, here I got the hundred dollars, but you owe it to me anyway?
Mr. Eric J. Schmidt: Yes, I think that is correct and the historical explanation of it is obvious.
It is very easy for knowledgeable people like masters and ship's agents and paymasters to either procure a seaman’s genuine consent wrongfully and it happens in daily life, where consent to frauds happens regularly and seamen are notoriously ill-equipped to deal with these things.
On the other hand, consent need not to have been given by the seaman at all.
He can have been exceedingly angry about it and for purposes of litigation, he is lost because the captain, the company will provide affidavits from abroad, they will provide letters, they will muster witnesses, ship’s officers have to keep in mind the relationship with the company and a seaman attempting to prove that he did not consent to a wage deduction, does not have much of a chance.
Unknown Speaker: Well, I suppose the lack of rule.
You cannot hold the seaman as having received wages unless he has signed the logbook stating that he has received wages?
Mr. Eric J. Schmidt: I think that is completely correct, Your Honor.
Unknown Speaker: (Voice Overlap) Well, I have you interrupted.
I gather there is a second question here and that is assuming now that the payment for the airline ticket was not wages, nevertheless, under the statute that is under 596, the shipowner has a defense if the refusal or neglect to make payment of the $510.00 as wages was without sufficient cause, right?
That is what the statute says.
Now, what interpretation do you give without sufficient cause?
Only those things which are, by statute, expressly permitted as deductions?
Mr. Eric J. Schmidt: That is not entirely correct, Your Honor.
The case is --
Unknown Speaker: How far would you go then?
Mr. Eric J. Schmidt: That is the principle point here this morning.
The statute absolutely forbids a shipowner to repay itself for unilaterally asserted claims.
It is a denial of due process, but there are other situations, and the cases described for example, Collie against Fergusson, where the shipowner was insolvent.
Justice William H. Rehnquist: You do not assert any due process claim here, do you?
I mean the due process provisions apply to the Federal Government, the State Government, the Local Government.
The shipowner is not a part of the United States or part of any State, is he?
Mr. Eric J. Schmidt: I believe that the due process and I could be wrong about this, I believe that a person who is deprived of his property in this manner can properly say that his right under the constitution with respect to due process have been invaded and ignored.
Justice Thurgood Marshall: But he (Voice Overlap) a person has lost money and the shipowner, he loans the 510 bucks?
Mr. Eric J. Schmidt: Well, Your Honor that is not true --
Justice Thurgood Marshall: He needs a little due process, does he?
Mr. Eric J. Schmidt: The Court has been deceived on this particular thing.
With respect to repatriation, there has been an assumption throughout that there is a duty to repatriate the seaman.
The seaman has no duty to be repatriated or to repatriate himself, he does not in most cases want to be and until shipowners introduced the practice in fairly recent times of always bringing men home whom they discharge or leave abroad whether for illness or for cause, shipowners now engage in the practice of always brining these seamen home.
In past years --
Justice Thurgood Marshall: Is that for the benefit of the shipowner?
Mr. Eric J. Schmidt: The shipowner, wherever he lands a person --
Justice Thurgood Marshall: When a shipowner brings a sick seaman home to his family, that is for the benefit of whom?
Mr. Eric J. Schmidt: The shipowner has a legal duty to perform it and he is doing it as part his -- the duties owed to his crew members.
The law has imposed that duty for a long time.
The seaman is definitely the beneficiary of that, but when a shipowner takes back to the United States a seaman who is left abroad he is performing an inescapable duty that is imposed upon him by that Local Government.
Justice Potter Stewart: But the Local Government could not require anything anymore than the shipowner get him out of Vietnam?
Mr. Eric J. Schmidt: That is right.
Justice Potter Stewart: He could not require the destination to which he was removed?
Mr. Eric J. Schmidt: That is true, Your Honor, but if he takes him to Manila, he simply creates the same situation again.
Justice Potter Stewart: Well, maybe so, but the Local Government could not require anything more than removal from that country?
Mr. Eric J. Schmidt: That is correct.
Justice Potter Stewart: Could not require it all that he would be taken back to the United States?
Unknown Speaker: Mr. Eric J. Schmidt, I do not think I heard you say what it is without sufficient cause, includes as a defense to the shipowner beyond deductions explicitly authorized by these statutes?
Mr. Eric J. Schmidt: Sufficient cause has been found to exist, Your Honor by the Court in situations where performance of payment were made impossible.
Collie against Fergusson was the first of those.
Unknown Speaker: That is bankruptcy?
Mr. Eric J. Schmidt: Yes.
Sufficient cause has been found to exist in a great many cases, more than insolvency where it has been determined and decided by the Court that there was a good faith dispute concerning whether or not the wages in question had ever been earned by the seaman.
Whether the shipowner in good faith says, you did not ever earn them, but where the --
Justice Harry A. Blackmun: How you distinguish this case from Coley and McCray? You had started mentioning these.
I would like to have you follow through on it?
Mr. Eric J. Schmidt: I would be glad to Your Honor.
In Coley, the excuse was based upon impossibility of performance.
In McCray, the Court did not label it in that way, but its ruling clearly indicates it was also impossibility for the reason that the seaman made his application for wages.
He was told by the captain to appear at the consulate the following day.
The seaman appeared at the consulate before the time that he was supposed to.
He was not there when the captain arrived and on the third day after his discharge he disappeared entirely and the Court said this made it impossible.
Justice Harry A. Blackmun: I know what the facts are.
I am just curious as to whether there is an element of impossibility of performance here also?
Mr. Eric J. Schmidt: Your Honor the only -- the seaman probably would have stayed out there if he had been given the opportunity.
Seamen go to the bottom of the shipping list when they are brought home.
If they stay on a foreign port, they are in a very good position to go immediately to work.
Justice Harry A. Blackmun: Was not there an impossibility of his staying in the foreign port here due to local law?
Mr. Eric J. Schmidt: There were thousands of Americans there and if the consul had not been prevailed upon to take an antagonistic attitude toward the seamen, as an American seaman, he had a right to stay there.
There were thousands of Americans and many, many American seamen in the hospital there.
The circumstances of currency regulations is totally irrelevant here.
If the shipowner wanted to send him home and the man did not object, then the shipowner was acting within its rights, but who should pay the bill is still not a relevant issue before this Court now because --
Chief Justice Warren E. Burger: At least to the finding of the fact -- you are faced to the finding of fact in the District Court that he consented to this whole procedure.
Now, you have just stated that he was prevailed upon by the consul in answer to Justice Blackmun’s question.
What in the record does support your statement, is there?
Mr. Eric J. Schmidt: Yes, there is.
The captain's deposition was taken at Norfolk and in it he made a remark, the seaman had no one present at the deposition, but even so the captain made the remark that the coast guard had informed him that after five loggings, a seaman could be forced to spend his money to send him home which I think is a clear implication, a clear insight into the existing relationships.
Justice Harry A. Blackmun: Is it not true that, correct me if I am wrong, by treaty and by Sovereign Vietnam Law, was not there an obligation on the part of the owner to remove all persons he had brought to South Vietnam?
Mr. Eric J. Schmidt: I think that is absolutely correct, Your Honor.
Justice Harry A. Blackmun: Well then, is not there an impossibility of performance here that equates with Coley and McCray in the impossibilities of performance there?
Mr. Eric J. Schmidt: Well, the logical thing to do with a man in Mr. Matise's position was to keep him on the ship, dis-rate him and keep him aboard the vessel, at least until the port that did not offer financial problems, but bring him home.
He could have been imprisoned aboard the vessel.
He certainly could have been denied his wages, but there was no requirement to put him off the vessel.
Chief Justice Warren E. Burger: What you are saying that having bought an airplane ticket for him and send back to San Francisco, the shipowner has to be penalized because he could have put him in a brig and carried him back in the brig.
Mr. Eric J. Schmidt: Well, he could have, I think it would have been an abuse of the captain’s power.
Chief Justice Warren E. Burger: I thought you just said that that was one of the options?
Mr. Eric J. Schmidt: To keep him aboard the vessel, but not necessarily in confinement when a man’s misconduct was simply a failure to perform his duty from drinking.
He could have -- there used to be many times when seamen were brought home aboard vessels in a work-away status or a dis-rated.
The practice has simply been adopted by shipowners to fly a man home immediately.
It satisfies the local government’s requirements.
They prefer to handle the money, the pay-off in San Francisco or in their home office and it satisfies the requirements of Section 596.
But it is definitely something that the shipowner wants done.
You can see it from the Schwartz case where the seaman did not have enough money to pay for the ticket and the shipowner added its own money.
It is a clear benefit to the shipowner and I think based upon an inescapable duty to the local government to get that man out and practically speaking, taking him out means bringing him to the United States.
But the validity of the claim for the cost of the air fare is not an issue here.
Justice Byron R. White: And it is irrelevant?
Mr. Eric J. Schmidt: It is irrelevant.
Chief Justice Warren E. Burger: Very well.
Do you have anything further Counsel?
Rebuttal of Francis L. Tetreault
Mr. Francis L. Tetreault: Mr. Chief Justice, if the Court please.
I am at -- simply on a couple of technical things that may possibly cause a little confusion.
There was considerable discussion on exploration of the subject of advances and logging and how one handles advances and all in the general context of the complex problems that one has when one pays a seaman.
We have on pages 4 and 5 of the appendix a reproduction of the pay voucher.
Now, this is the document which was worked up, which was under consideration by the vice-consul, the two coast guard people, Mr. Matise, and the master in Vietnam.
The technical thing that I wish to mention for the possible assistance of the Court is that the statutory routine for the recording and the making of advances against wages which counsel -- to which counsel adverted relates to advances against earned wages made during that time that the seaman is a member of the crew.
Unknown Speaker: Can the shipowner legally make an advance before wages are earned?
Mr. Francis L. Tetreault: No, no.
Unknown Speaker: I though Mr. Schmidt said, he may if -- can actually the -- seaman signs the logbook?
Mr. Francis L. Tetreault: There may -- I first --
Unknown Speaker: There is a statute.
There is a section which indicates it is a crime to make payment of wages before they are earned?
Mr. Francis L. Tetreault: It is my understanding that they cannot be made before they are earned.
The word advance means advance against earned wages.
Justice Potter Stewart: (Voice Overlap) credit, the slop chest is --
Mr. Francis L. Tetreault: Well, the slop chest is, I think there is no statutory authority whatsoever for the advancing of credit on that.
Justice Potter Stewart: There is a statutory requirement that a slop chest be maintained?
Mr. Francis L. Tetreault: That is correct and it requires that sales be made to the seaman from the slop chest that can just as well be read as cash sales.
Justice Potter Stewart: But it is at law in standing -- conventional practice to (Voice Overlap) you take credit from the slop chest and the credit might be extended on the first day of the cruise?
Mr. Francis L. Tetreault: This is -- this one -- it usually is extended. [Laughter]
Justice Potter Stewart: Especially before any wages have been earned?
Mr. Francis L. Tetreault: Exactly.
Justice Potter Stewart: And that is done all the time?
Mr. Francis L. Tetreault: I certainly assume so, yes, and counsel certainly presses the point.
Justice Byron R. White: So if you can -- if the seaman signs on and he goes to the captain and says, I need some money, I am just broke, I know I have not earned them yet, and he says all right I will give you $200.00.
He has committed a crime and then when the seaman earns the money and the shipowner is going to pay him off and he purports to deduct the $200.00, the seaman can say.
well, I know you gave me the two hundred, but you have to pay me again under the statute?
Mr. Francis L. Tetreault: This is my understanding, Your Honor.
Justice Byron R. White: The statute says just in plain language that he still got to pay him?
Mr. Francis L. Tetreault: This is my understanding.
Justice Byron R. White: Yes.
Justice William H. Rehnquist: Do you think 599 says that?
599 certainly as I read it makes it a crime to advance against unearned wages, but do you think it also says that they have to be paid again?
Mr. Francis L. Tetreault: In the sense that the deduction for those unlawful advances is, since all shipowners understand this by this time, you would have a serious problem in presenting a good faith defense on that particular one and then you would have penalties.
Justice Byron R. White: And it says these advances shall be no defense to a liable suit or an action for the recovery of the wages?
Mr. Francis L. Tetreault: Yes and that is pretty clear so then one comes into 596 and one would have a very difficult situation in presenting it.
Chief Justice Warren E. Burger: Are we dealing with any unearned wages here?
Mr. Francis L. Tetreault: No, no.
This is exactly the point I wish to mention to the Court.
The wage advances that counsel was mentioning were those to a member, to person that is still a member of the crew.
In this case, the plaintiff had been discharged, was no longer on the crew, he no longer was a party to the articles or to the -- he no longer was a working member to whom the official log would be a normal working document.
He had been discharged and that is set forth in this document, which is four and five, and what we have here is a question of whether he was paid the wages that he was entitled to following discharge.
May I suggest that his signature on this form which is a wage voucher that the counsel is required to administer is certainly as far as anybody could have gone to accomplish the equivalent of the signature in the logbook.
Unknown Speaker: And he found the second one, did he not, when (Inaudible)
Mr. Francis L. Tetreault: And the second one, may I point out is done before the shipping commissioner here, signed by the shipping commissioner, signed by the man himself and is the government form which is the mutual lease which a statute requires to be signed before wages are paid.
Unless there are further questions.
Chief Justice Warren E. Burger: Thank you very much gentlemen.
The case is submitted.