United States Court of Appeals
For the First Circuit
Nos. 02-1590
02-1591
KENTH PERSSON and HARTMUT RATHJE,
Plaintiffs, Appellants/Cross-Appellees,
and
ROLF SJÖSTRÖM,
Plaintiff, Cross-Appellee,
v.
SCOTIA PRINCE CRUISES, LTD.
f/n/a PRINCE OF FUNDY CRUISES, LTD.,
Defendant, Appellee/Cross-Appellant.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. David M. Cohen, U.S. Magistrate Judge]
Before
Torruella, Lynch and Howard,
Circuit Judges.
Michael X. Savasuk, on brief, for plaintiffs/appellants/cross-
appellees.
Leonard W. Langer, with whom Marshall J. Tinkle and Tompkins,
Clough, Hirshon & Langer, P.A., were on brief, for
defendant/appellee/cross-appellant.
May 27, 2003
TORRUELLA, Circuit Judge. Hartmut Rathje, Kenth Persson,
and Rolf Sjöström, (collectively, the "Officers") were the captain,
chief engineer, and chief engineer/consulting superintendent,
respectively, of the M/S SCOTIA PRINCE. The SCOTIA PRINCE is a
cargo and passenger ferry operated by Scotia Prince Cruises, Ltd.
("SPC") between Portland, Maine and Yarmouth, Nova Scotia.
Claiming they were fired in April 2001, the Officers brought suit
under the federal court’s admiralty jurisdiction against SPC for
breach of their employment contracts. SPC raised as a defense that
the Officers had resigned and counterclaimed, alleging that the
Officers had breached a fiduciary duty by failing to maintain the
vessel.
A bench trial was held by consent before a magistrate
judge, who held that (a) Rathje and Persson resigned without giving
prior notice pursuant to their employment contracts and therefore
were not entitled to wages following their departure from the
vessel; (b) SPC terminated Sjöström's employment as consulting
superintendent (though not as chief engineer) without permitting
him to work his "notice period" of nine months and therefore owed
Sjöström nine months of superintendent pay; and (c) the Officers
were not liable to SPC for any negligent maintenance of the vessel.
All issues are appealed: Rathje and Persson appeal the decision
that they are not entitled to wages and vacation pay; SPC appeals
the decision that it is liable to Sjöström for damages and that its
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former employees are not liable for damage to the ship. After
reviewing the record, we affirm.
I. Background Facts
We recount only the facts relevant to our decision; a
more complete description of the facts can be found in the district
court's opinion. See Rathje v. Scotia Prince Cruises, Ltd., No.
01-123-P-DMC, 2002 U.S. Dist. LEXIS 4078, at *5-38 (D. Me. Mar. 13,
2002).
The Officers began working aboard the M/S SCOTIA PRINCE
in the late 1980s. Each Officer had an employment contract with
Prince of Fundy Cruises, Ltd. ("POF"), SPC's predecessor. Notice
time for termination under Rathje's employment contract was three
months; under Persson's contract, sixty days notice was required.
Sjöström's contract stated: "[Nine] months notice of termination
required by both parties." Sjöström worked in Sweden; POF
contracted first with the Swedish company Marine Trading and then
with Plus 2 Ferryconsultation AB ("Plus 2") to pay Sjöström's
salary in Swedish kronas.
At the beginning of the 2001 season, SPC's Chairman,
Matthew Hudson, met with the Officers and advised them that he was
contemplating the engagement of International Shipping Partners,
Inc. ("ISP"), a manning/purchasing contractor. Although several
top managers had been fired, Hudson assured the Officers that this
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would not affect their contracts, which were "ring-fenced."1
Hudson also stated that the employees who had been terminated would
receive a severance package of one week's pay for each year of
service with the company.
Hudson engaged ISP the next morning, April 5, 2001, to
take over the complete management of the vessel. ISP met with the
Officers and presented a budget showing Rathje and Persson to be
receiving significantly less compensation than provided in their
current contracts, and Sjöström to be receiving no compensation at
all as superintendent (because ISP assumed those duties). The
Officers were upset, and the meeting ended with the Officers
telling ISP, "Basically it's either you or us."
Over the course of the next few days, several email
messages and facsimiles were sent between the Officers and Hudson.
In their first message, the Officers wrote:
As it stand[s] now, we see only two options.
We stick to the agreement you presented last
night, i.e. ISP serves as a manning agency
only and the current contracts and conditions
are maintained, possible new conditions only
applying to new hires. Alternatively, if ISP
takes over both complete manning and technical
management, we ([Rathje and Persson]) accept
the standard severance package (one week for
every year of service) and [Sjöström] gives
the 9-month notice in accordance with his
contract.
1
The parties understood this to mean that the contracts were
locked-in and would not be altered.
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When Hudson responded that their contracts were "ring-
fenced," the Officers asked Hudson to focus on the statement
beginning "As it stands now . . . " so they could "concentrate on
[their] jobs or go home." In response, Hudson stated, "I consider
that the [Officers] have effectively resigned and I accept those
resignations on behalf of [SPC]."
The Officers' last day was April 20; Rathje and Persson
acknowledge payment in full up to that date and Sjöström
acknowledges payment in full to April 30. They filed this lawsuit
seeking payment for the termination periods provided for in their
contracts.
After the Officers were replaced, SPC discovered various
problems with the upkeep of the ship including damage to the wood.
SPC alleged that the Officers were responsible, and cross-claimed
for more than one million dollars. The bench trial was held on
February 11-15, 2002, and a decision was issued on March 13, 2002.
This appeal followed.
II. Standard of Review
We review the district court's legal conclusions de novo.
Watson v. Deaconess Waltham Hosp., 298 F.3d 102, 108 (1st Cir.
2002). We review factual determinations for clear error. Fed. R.
Civ. P. 52(a) (2003). Our job is to determine whether the decision
below is reasonable in light of the entire record. See Portland
Natural Gas Transmission Sys. v. 19.2 Acres of Land, 318 F.3d 279,
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281 (1st Cir. 2003). We give great respect to the district court's
"opportunity to hear the testimony, observe the witnesses'
demeanor, and evaluate the facts at first hand," United States v.
Nee, 261 F.3d 79, 84 (1st Cir. 2001) (internal quotation omitted),
and defer to the trial court's findings unless "we form a strong,
unyielding belief that a mistake has been made." Windsor Mount Joy
Mut. Ins. Co. v. Giragosian, 57 F.3d 50, 53 (1st Cir. 1995)
(internal quotation omitted). Even then, we may affirm the
judgment on any grounds revealed by the record. United States v.
Puerto Rico, 287 F.3d 212, 218 (1st Cir. 2002).
III. Discussion
We have jurisdiction over this dispute, which arises out
of employment contracts aboard a vessel. See U.S. Const. Art. III,
§ 2; 28 U.S.C. § 1333(2003); 7A J.W. Moore, Moore's Federal
Practice § 0.225, at 2701, § 0.230, at 2783 (2d ed. 1996)
(hereinafter Moore's Federal Practice). The Federal Rules of Civil
Procedure apply to admiralty cases. Fed. R. Civ. P. 1 (2003). The
substantive matter is governed, in hierarchical order, by federal
statutes and treaties, general maritime law developed by the
Supreme Court, state statutes, and finally common law decisions of
the state courts. 1A Moore's Federal Practice § 0.326, at 3233-35.
"State law may supplement maritime law where maritime law is silent
. . ., but state law may not be applied where it is materially
different than maritime law, or where it would defeat the
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reasonably settled expectations of maritime actors." Windsor Mount
Joy Mut. Ins. Co. v. Giragosian, 57 F.3d 50, 54 (1st Cir. 1995).
A. Rathje and Persson
Rathje and Persson appeal from the district court's
determination that they resigned and were therefore not entitled to
termination pay under their employment contracts. They attack
several findings of fact made by the district court, asserting that
it was clear error for the court to find that neither Officer (1)
could have reasonably believed he was being terminated, (2) could
have reasonably believed that he was entitled to severance pay that
was not mentioned in his contract, (3) could have reasonably
believed that he was relieved from his obligation to give notice to
SPC before quitting, and (4) was entitled to termination pay. We
find that the district court's findings are not clearly erroneous.
First, the record shows that Rathje and Persson wrote to
Hudson, acknowledging that they were "fenced-in and protected,
meaning that nobody could touch our contracts." Their claim that
Hudson effectively terminated them by contracting with ISP (whose
numbers showed their pay reduced by thirty percent) thus fails
because the Officers understood that their contracts were
unalterable. The Officers never sought clarification from Hudson,
the chairman, about ISP's new role, and Hudson never told the
Officers anything to suggest that their contracts were not
protected.
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As evidence of their mindset at the time and support for
their belief that they, too, were being terminated, Rathje and
Persson point to the fact that several other long-time employees
were fired by Hudson. This is not persuasive, however, because
none of the other employees were fired by email message, and Hudson
had reassured Rathje and Persson both orally and in writing that
their contracts were secure. The record shows that the Officers
were treated differently than other employees. It was therefore
not clearly erroneous for the district court to find that Rathje
and Persson could not reasonably believe that they were implicitly
terminated by email message.
Second, while Hudson mentioned to Rathje and Persson that
it would be good for them to "know about" a severance plan for
employees, he did not specifically state that it applied to them.
Each officer had a written contract stating "I cannot claim any
additional benefits or wages of any kind (except) those which have
been provided in this contract." It was therefore not clear error
for the district court to find that Rathje and Persson could not
have reasonably believed that they were entitled to a newly-
introduced extrinsic severance package.
Third, it was not clear error for the district court to
find that Rathje and Persson's belief that they did not have to
give notice because Hudson offered to pay them "ex gratia" was
irrelevant to the breach of employment contract. The court found
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that any offer by Hudson (discussed in greater detail in Part
(III)(C), below) was made after the Officers resigned; therefore,
it was too late for Rathje or Persson to give notice in order to
comply with his employment contract. It is irrelevant whether the
Officers no longer believed they had to give notice -- they were no
longer entitled to give notice.
Finally, it was not clearly erroneous for the court to
determine that Rathje and Persson were not entitled to termination
pay because they were unwilling to work their notice period. The
record shows that Rathje and Persson presented an ultimatum to
Hudson -- that he either cancel his (binding) contract with ISP or
the Officers would leave the ship. It was plausible for the court
to find that Rathje and Persson were threatening to quit
immediately and not simply giving notice of their resignations.
To summarize, we affirm the district court's factual
determinations that Rathje and Persson resigned without giving
notice and are therefore not entitled to damages because the
findings are plausible in light of the evidence.2 CEH, Inc. v. F/V
Seafarer, 70 F.3d 694, 698 (1st Cir. 1995).
2
Because we affirm the district court's determination that
Persson is not entitled to damages, we need not decide whether he
is a seaman entitled to double wages. See 46 U.S.C. § 10313(g)
(2003).
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B. Sjöström
SPC challenges the district court's ruling that it is
liable to Sjöström for nine months termination pay in his position
as consulting superintendent. The district court found that
Sjöström's position as consulting superintendent was eliminated as
soon as Hudson contracted with ISP, thereby prohibiting Sjöström
from working his notice period.
SPC first claims that Sjöström was not its employee but
was employed by Plus 2. Testimony supports the district court's
determination that, while Plus 2 handled the administrative aspects
of Sjöström's employment via a contract with SPC (to the benefit of
both Sjöström and SPC), the terms of Sjöström's employment
continued to be dictated by his original contract with SPC's
predecessor, which was renewed annually by the course of dealing of
the parties. Sjöström was not a party to the contract between Plus
2 and SPC, and that contract did not supersede his employment
contract with POF (which was later assumed by SPC). We find
nothing clearly erroneous in the finding that Sjöström was an
employee of SPC.
SPC also asserts that it was entitled to fire Sjöström
because he had disregarded orders to cease making purchases through
Marine Trading. While SPC did argue that Sjöström had breached his
contract by negligently maintaining the SCOTIA PRINCE, it never
before argued that Sjöström was in breach by dealing with Marine
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Trading. This argument was not raised below and is therefore
waived. Brigham v. Sun Life of Can., 317 F.3d 72, 85 (1st Cir.
2003).
Finally, SPC claims that its damages should be reduced
because Sjöström made no effort to mitigate his damages. The
contract provided and the district court found that "Sjöström's
right either to be permitted to work his notice period or to
receive compensation in lieu thereof was absolute." Rathje, 2002
U.S. Dist. LEXIS 4078, at * 43. Sjöström therefore did not have a
duty to mitigate damages.
C. Officers' Alternative Theory
The Officers assert that even if they resigned, they
entered into a later contract with Hudson. In an email message to
the Officers, after Hudson writes that he considers the Officers
resigned, he writes:
As [the Officers] have resigned there seems to
be no requirement to pay termination. On the
other hand I believe the [Rathje] and
[Persson] contracts would normally provide for
termination of two or three months if the
Company had terminated their employment. I am
prepared to pay this sum to each on an ex
gratia basis, given a proper and fully
cooperative handover to the satisfaction of
ISP during the next 14 days.
(Emphasis added.) Asked for clarification by the Officers, Hudson
reiterated his offer in another email message, also noting that
Sjöström was entitled to termination pay in his capacity as chief
engineer.
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The Officers claim that they worked through April 20,
satisfying their obligation under the new contract, but did not
receive any pay for their termination periods. Thus, they assert
that SPC is in breach and liable for damages.
The Officers contend that the court improperly excluded
evidence of this new contract as an inadmissible offer of
settlement. They maintain that the district court should have read
their complaint broadly to incorporate two claims - one for breach
of employment contract, and one for a separate contract formed
after employment had ceased. SPC argues that the district court
did consider both arguments, and implicitly found that no new
contract was formed.
1. Were two claims litigated?
Upon review of the record, we find that the district
court did not consider the issue of whether or not a separate
contract was formed between SPC and the Officers. At trial, the
court stated that it was "clear that this is a claim of breach of
an employment contract." The district court admitted the above
email messages only "for the purpose of completeness of the story
of the parties' ongoing dealings rather than as proof of SPC's
liability for, or the invalidity of, a claim or its amount."
Rathje, 2002 U.S. Dist. LEXIS 4078, at *24, n.13, *26, n.15, *27,
n.16.
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In its findings of fact, the court stated only that
"[n]egotiations between Hudson and the Plaintiffs concerning his
offered 'ex gratia' payments broke down." Id. at *27. In its
conclusions of law, the court considered Hudson's email messages
offering termination pay only for their potential effect on a
breach of employment claim by the Officers -- and found that there
was no effect because the employment had already ceased when the
statements were made. Id. at *45-46. It is therefore clear that
the court read the complaint only to incorporate a breach of
employment claim, and not to also include a breach of a separate
contract between the parties.
2. Was it error to exclude the alternative theory?
We now consider whether it was error for the district
court to exclude the claim. A complaint must include "a short and
plain statement of the claim showing that the pleader is entitled
to relief" and "a demand for judgment for the relief the pleader
seeks." Fed. R. Civ. P. 8(a). This simplified pleading standard
must "give the defendant fair notice of what the plaintiff's claim
is and the grounds upon which it rests." Conley v. Gibson, 355
U.S. 41, 47 (1957). A breach of contract complaint must allege (1)
the existence of a valid and binding contract; (2) that plaintiff
has complied with the contract and performed his own obligations
under it; and (3) breach of the contract causing damages. 5 Wright
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& Miller, Federal Practice and Procedure § 1235, at 268-70 (2d ed.
2002).
The Officers claim that the following language identifies
a claim for breach of a separate contract:
[T]he plaintiffs conferred by facsimile and/or
emails on several occasions resulting in the
wrongful termination of plaintiffs. In any
event, defendants agreed that plaintiff's last
day of work would be April 20, 2001 and that
they would be paid their wages, vacation days
and time off in accordance with their
contracts for that period of time that there
was to be a notice of termination as stated in
their contracts.
(Emphasis added.)
While the Officers' complaint clearly establishes a
breach of employment contract claim, it fails to set forth the
basic elements to show that a separate contract was formed by the
parties after conclusion of the employment relationship. The
complaint states that "defendants agreed" that plaintiffs would
work two weeks and be paid their notice of termination period but
does not explain how this agreement arose, whether it was a binding
contract, whether plaintiffs performed under the contract, and
whether defendants breached the contract. It therefore is
insufficient to establish a claim for breach of a subsequent
contract. The district court properly read the complaint to only
include a breach of employment contract claim.
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D. Maintenance Cross-Appeal
Finally, SPC appeals the decision that the Officers were
not liable for negligent maintenance of the vessel. There was
conflicting testimony about the extent or existence of damage to
the vessel, and the court found only that SPC may incur additional
cost as a result of negligent maintenance of the wood railings,
doors, and deck. There is nothing to suggest that the district
court's findings as to upkeep were clearly erroneous.
It is unclear whether SPC attempts to make a breach of
employment contract claim, a fiduciary duty claim, or a negligence
claim, but it is irrelevant because each claim is meritless.
Nothing in the Officers' employment contracts mentions upkeep of
the vessel, no testimony suggested that the Officers were required
to maintain the vessel, and the record is absent of any discussion
by the parties regarding any such duty. The breach of employment
contract therefore fails.
Both a breach of fiduciary duty and negligence claim are
predicated upon a duty owed by the Officers to the ship owner.
Here, however, SPC claims only to be the operator of the SCOTIA
PRINCE. It introduced no evidence to show that it owned the vessel
and, in fact, the record shows the owner to be Transworld Steamship
Company (Panama), Inc. Even if SPC were somehow analogous to an
owner, SPC's claim for negligent maintenance would fail. While a
seaman has a duty to perform the duties of his position with
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diligence, faithfulness, and reasonable skill, see generally 2
Norton, The Law of Seaman § 25.16 (4th ed. 1985), SPC has not shown
that any of the Officers were responsible for maintaining the
woodwork on the vessel. There is no authority in the lengthy
history of admiralty cases to support the position that, on these
facts, the Officers can be held liable (under a fiduciary or
negligence theory) to the owner of the vessel for non-intentional
negligent maintenance, and we refuse to establish such
jurisprudence here.
IV. Conclusion
The decision of the district court is affirmed. No costs
are awarded to either side.
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