Knudson v. M/V American Spirit et al

Filing 140

ORDER granting 133 plaintiff's Motion for Partial Summary Judgment regarding enforceability of contractual maintenance rate. Signed by District Judge George Caram Steeh. (MBea)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
JEFFREY TODD KNUDSON,
Plaintiff,
Case No. 14-CV-14854
vs.
HON. GEORGE CARAM STEEH
M/V AMERICAN SPIRIT, et al.,
Defendants.
_____________________________/
ORDER GRANTING PLAINTIFF’S MOTION FOR PARTIAL
SUMMARY JUDGMENT REGARDING ENFORCEABILITY
OF CONTRACTUAL MAINTENANCE RATE [ECF NO. 133]
This matter arises out of personal injuries allegedly sustained by
Plaintiff Jeffrey Todd Knudson in the service of his employer, defendant
Liberty Steamship Company (“Liberty”), while serving aboard a Great
Lakes freighter owned by defendant American Steamship Company
(“American”). The case is before the court on plaintiff’s motion for partial
summary judgment regarding enforceability of the contractual maintenance
rate of $8 per day. The court heard oral argument on plaintiff’s motion on
January 9, 2019. For the reasons given below, plaintiff’s motion for partial
summary judgment is GRANTED.

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FACTUAL BACKGROUND
Mr. Knudson was hired by Liberty as a permanent replacement
worker on March 10, 2011 after Liberty’s negotiations with the union
representing Liberty’s unlicensed seamen failed to reach a collective
bargaining agreement. Knudson was not a member of any union. The
terms of Knudson’s employment were stated in a letter (“Employment
Offer”), which referred to the terms and conditions contained in a document
entitled “ASC American Steamship Company Liberty Steamship Company
Implemented Terms and Conditions of Employment” (“Terms & Conditions
of Employment”). In accepting the Employment Offer, Knudson
acknowledged that Liberty explained the Terms & Conditions of
Employment, that he understood such terms, and that he accepted the
offer of employment. (Employment Offer, p. 2)
The Terms & Conditions of Employment is a 111 page document. It
is a revised version of a previous collective bargaining agreement between
United Steel Workers Local 5000 and defendant Liberty from 2006. (“2006
CBA”) The 2006 CBA was a modified version of the 2004 CBA, which itself
was a modified version of the 1999 CBA. Liberty and the union were not
able to agree on a new collective bargaining agreement once the prior one

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expired on August 1, 2009. The union and Liberty reached an impasse in
their negotiations, and as a result, Liberty hired non-union permanent
replacement workers, including plaintiff. The Terms & Conditions of
Employment in Mr. Knudson’s Employment Offer were purportedly based
on the last offer Liberty made to the union.
Section 21 of the Terms & Conditions of Employment, addressing
“Medical Examinations”, provides:
B. Maintenance and cure, when payable under maritime law,
shall be paid, at the rate of Eight Dollars ($8.00) per day, upon
application by the employee and submission of medical
evidence of disability.
(Section 21, p. 78) By comparison, Section 9 of the Terms & Conditions of
Employment, addressing “Allowances and Subsistence”, provides that
uninjured employees who are not provided with room and board on the
vessel where they are working are paid $77.25 per day. (Section 9, p. 23)
On January 11, 2012, Mr. Knudson was serving as a General Vessel
Utility, or deckhand, aboard M/V AMERICAN INTEGRITY. While
performing his duties of employment, Knudson was accidentally dropped
30 feet in a lowering chair from the deck to the paved surface of a pier at
the Soo Locks. One of the issues in this litigation is whether defendants

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have fulfilled their legal obligation to pay Mr. Kundson a reasonable
maintenance during his period of recuperation from his injuries.
After the incident, American paid Knudson at the rate of $8 per day,
as provided in the Employment Offer. When Mr. Knudson complained that
$8 was not enough to live on, defendants offered him a Claims Arbitration
Agreement (“CAA”) whereby defendants would increase his maintenance
payment by $88.59 per day as an advance on an eventual settlement if
Knudson relinquished his right to a jury trial. (Montante dep. pp. 72-75)
Mr. Knudson refused to sign the CAA.
Knudson lived with his father both before and after his injury. After
receiving the $8 per day maintenance and cure for two years, Knudson
supplied defendants with proof of his shared living expenses and
demanded a maintenance rate of $45 per day. Defendants agreed to pay
$45 per day, retroactive to the date of the incident.
American’s chief operating officer, Kevin McGonagle, acknowledged
that the Terms & Conditions of Employment were not approved or agreed
upon by any union representing Mr. Knudson. (McGonagle dep. pp. 3334). He further stated that he did not believe a person could secure clean,
safe and wholesome room and board for $8 a day (id. at p. 43). Mr.

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McGonagle agreed that an allowance of $77.25 per day was a reasonable
allowance for room and board (id. at pp. 36-37). Defendant’s claims
representative handling Knudson’s claims, Laurie Montante, assumed that
one could not secure room and board for $8 per day. (Montante dep. pp.
10, 15, 62, 63)
LEGAL STANDARD
Federal Rule of Civil Procedure 56(c) empowers the court to render
summary judgment "forthwith if the pleadings, depositions, answers to
interrogatories and admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material fact and that the
moving party is entitled to judgment as a matter of law." See Redding v. St.
Eward, 241 F.3d 530, 532 (6th Cir. 2001). The Supreme Court has
affirmed the court's use of summary judgment as an integral part of the fair
and efficient administration of justice. The procedure is not a disfavored
procedural shortcut. Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986);
see also Cox v. Kentucky Dept. of Transp., 53 F.3d 146, 149 (6th Cir.
1995).
The standard for determining whether summary judgment is
appropriate is "'whether the evidence presents a sufficient disagreement to

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require submission to a jury or whether it is so one-sided that one party
must prevail as a matter of law.'" Amway Distributors Benefits Ass’n v.
Northfield Ins. Co., 323 F.3d 386, 390 (6th Cir. 2003) (quoting Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986)). The evidence and all
reasonable inferences must be construed in the light most favorable to the
non-moving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp.,
475 U.S. 574, 587 (1986); Redding, 241 F.3d at 532 (6th Cir. 2001). "[T]he
mere existence of some alleged factual dispute between the parties will not
defeat an otherwise properly supported motion for summary judgment; the
requirement is that there be no genuine issue of material fact." Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original);
see also National Satellite Sports, Inc. v. Eliadis, Inc., 253 F.3d 900, 907
(6th Cir. 2001).
If the movant establishes by use of the material specified in Rule
56(c) that there is no genuine issue of material fact and that it is entitled to
judgment as a matter of law, the opposing party must come forward with
"specific facts showing that there is a genuine issue for trial." First Nat'l
Bank v. Cities Serv. Co., 391 U.S. 253, 270 (1968); see also McLean v.
988011 Ontario, Ltd., 224 F.3d 797, 800 (6th Cir. 2000). Mere allegations

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or denials in the non-movant's pleadings will not meet this burden, nor will
a mere scintilla of evidence supporting the non-moving party. Anderson,
477 U.S. at 248, 252. Rather, there must be evidence on which a jury
could reasonably find for the non-movant. McLean, 224 F.3d at 800 (citing
Anderson, 477 U.S. at 252).
ANALYSIS
United States maritime law provides that the shipowner has the duty
to provide “maintenance” to a seaman who becomes ill or injured while in
the service of the ship. Vaughan v. Atkinson, 369 U.S. 527, 531 (1962).
The right to maintenance includes food and lodging of the kind and quality
which the seaman would receive aboard the ship. Calmar S.S. Corp. v.
Taylor, 303 U.S. 525, 528 (1938). The duty to provide maintenance is thus
imposed by common law and the right cannot be abrogated by contract.
Cortes v. Baltimore Insular Line, 287 U.S. 367, 371 (1932); Al-Zawkari v.
American S.S. Co., 871 F.2d 585, 588 (6th Cir. 1989). The rate of
maintenance, however, can be “defined by contract.” Al-Zawkari, 871 F.2d
at 588 (citing Gardiner v. Sea-Land Service, Inc., 786 F.2d 943, 949 (9th
Cir. 1986)).

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All the maintenance rate cases relied on by the parties involve either
union employees covered by CBAs, or non-union employees where there is
no contractual maintenance rate. Therefore, when the opinions discuss a
rate of maintenance being defined by contract, they are referring to bona
fide collective bargaining agreements arrived at through genuine collective
bargaining. See, e.g., Skowronek v. American Steamship Co., 505 F.3d
482, 485-86 (6th Cir. 2007); Gardiner, 786 F.2d at 949.
In this case, Mr, Knudson was not a member of any union, nor was
he represented by any union. Mr. Knudson was hired because Liberty was
at an impasse with the union and the parties could not agree to the terms of
a new collective bargaining agreement. Liberty implemented the Terms &
Conditions of Employment, which was the last offer it made to the union,
and unilaterally made them part of the Employment Offer it extended to Mr.
Knudson. Consequently, Mr. Knudson is not a union employee with a CBA
negotiated by the union on his behalf, nor is he a non-union employee
operating without a contractual maintenance term. Rather, Mr. Knudson is
a non-union employee with an employment contract that contains a
maintenance term. That maintenance provision has its origin in a CBA that
was previously negotiated between a union and shipowner in a bona fide,

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genuine fashion. Whether these circumstances are a sufficient basis to
render the contract provision enforceable has not been the subject of any
known caselaw to date.
The Ninth Circuit considered the issue of whether an $8 per day
maintenance rate in a CBA was enforceable when challenged by union
seamen who were covered by the CBA but sought a higher maintenance
rate under general maritime law. Gardiner, 786 F.2d at 945. The Ninth
Circuit held that general maritime law is not preempted by federal labor
legislation regarding maintenance because “it does not appear that
Congress has ‘spoken directly’ to the question of a seaman’s traditional
right to maintenance through the federal labor laws.” Id. at 948. That is,
the policies underlying federal labor laws, such as “the policy of enforcing a
collective bargaining agreement in order to promote stability in labormanagement relations, the policy that the terms of agreements are to be
determined by the free play of economic forces, [and] the principle of selfgovernment by employees and the democratic process of union
representation”, do not conflict with the common law requirement that a
shipowner provide maintenance to a seaman who becomes ill or injured
while in the service of the ship. Id. at 947-48 (internal citations omitted).

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The Gardiner court nevertheless concluded that “the broad polices
which undergrid the labor laws, as well as the nature of the collective
bargaining process, require . . . that the maintenance rate expressed in the
collective bargaining agreement be enforced.” Id. Where a CBA includes
an explicit rate of maintenance as one of its terms, and there is no reason
to conclude that the rate was not a consequence of the normal give and
take of collective bargaining, that term will be enforceable. Id. at 949.
Where there is no allegation that the collective bargaining process was
unfair or inadequate, the court cannot consider the rate of maintenance, or
any other term of the CBA, in isolation. The court recognized that the CBA
must be considered as a whole because the process of negotiating benefits
is a “give and take” process and 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 that contract.” Id.
It is even possible that an expired collective bargaining agreement
will still control the maintenance rate as to union seamen so long as the
employer still largely honors its terms. In Macedo v. F/V Paul & Michelle,
868 F.2d 519 (1st Cir. 1989), the district court found that the contractual
maintenance rate was no longer enforceable solely because the CBA had

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expired. Id. at 521. The Court of Appeals held that the district court’s view
was “oversimplistic.” Id. The court recognized that the terms of the CBA
were interrelated, with the maintenance rate being just one part of a
comprehensive wage and benefit agreement. Where the employer still
followed the general interrelated terms, the maintenance rate set by the
expired CBA was found to be enforceable.
The preceding discussion involves seamen who are represented by
unions that negotiated and agreed to a rate of maintenance on the
seamen’s behalf. In such instances courts presume that the maintenance
rate was arrived at by negotiation. “[T]he burden properly rests with the
plaintiff to produce evidence that a bona fide negotiation did not take place,
that the CBA was unfair, or that he was not adequately represented.”
Skowronek, 505 F.3d at 486 (quoting Al-Zawkari, 871 F.2d at 588). Absent
a finding of an unfair collective bargaining process, courts decline to view
one term in isolation and instead view all terms as a union-negotiated
package of compensation and benefits that should be accorded deference.
Several circuit courts have considered whether $8 per day in
maintenance is adequate for nonunion seamen. The Second Circuit held
that a seaman makes out prima facie case of a reasonable maintenance

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rate by providing proof of his actual living expenses necessarily incurred
during his recovery period. Incandela v. American Dredging Co., 659 F.2d
11, 14 (2d Cir. 1981). The employer may introduce rebuttal evidence
showing that the seaman’s expenditures were excessive. Id. Other circuit
courts have adopted the burden-shifting test, further discussing how the
district court should calculate reasonable maintenance:
In determining the reasonable costs of food and lodging, the
court may consider evidence in the form of the seaman's actual
costs, evidence of reasonable costs in the locality or region,
union contracts stipulating a rate of maintenance or per diem
payments for shoreside food or lodging while in the service of a
vessel, and maintenance rates awarded in other cases for
seamen in the same region.
Barnes v. Sea Hawaii Rafting, LLC, 889 F.3d 517, 540 (9th Cir. 2018)
(quoting Hall v. Noble Drilling (U.S.) Inc., 242 F.3d 582, 590 (5th Cir.
2001)1).

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The Fifth Circuit establishing a three step test to determine a maintenance award:
First, the court estimates the seaman’s actual costs of food and lodging and the
reasonable cost in the locality of the plaintiff. Second, the court compares the two
figures. The general rule is that seamen are entitled to maintenance in the amount of
their actual expenses up to the reasonable amount for their locality. Third, if the court
concludes that plaintiff’s actual expenses were inadequate to provide him with
reasonable food and lodging, the plaintiff is entitled to the reasonable cost of food and
lodging. This insures that the plaintiff's inability to pay for food and lodging in the
absence of maintenance payments does not prevent him from recovering enough to
afford himself reasonable sustenance and shelter. Hall, 242 F.3d at 590.

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This case does not involve a union seaman who himself was
represented in bona fide negotiations with his employer. Furthermore,
although the contract terms came from the last offer the employer made to
the union, the union did not accept those terms. As such, labor law policies
which promote stability in labor-management relations and self-government
by employees are not furthered by enforcing the maintenance term
contained in the Terms and Conditions of Employment that make up Mr.
Knudson’s Employment Offer. Of course, Mr. Knudson accepted the
Terms and Conditions of Employment, but there is no presumption that the
maintenance rate was arrived at by bona fide negotiation.
What this case does involve is a non-union seaman working under a
contract that included a maintenance rate of $8 per day. As discussed
above, general maritime law provides that parties may agree to a rate of
maintenance, but that rate must be reasonable. The burden shifting test
employed by the Second, Fifth and Ninth Circuits provides the court with a
method for determining a reasonable rate of maintenance when a seaman
is not covered under a collective bargaining act. The burden is initially on
the seaman to document his actual living expenses reasonably and

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necessarily incurred during his convalescence, or to provide other evidence
demonstrating reasonable costs in the location at issue.
In this case we know that Mr. Knudson informed his employer that $8
a day was insufficient maintenance and that he was offered a daily rate of
$96.59 on the condition that he waive his right to a jury trial. We also know
that Knudson’s contract provided that uninjured seamen received $77.25 a
day for room and board when not provided on the vessel. After receiving
$8 a day for two years, Mr. Knudson supplied defendants with evidence
showing that his living expenses were $45 a day and defendants agreed to
pay that amount, retroactive to the date of his injury. Finally, plaintiff offers
the testimony of American’s chief operating officer and a claim’s
representative who both agreed that a person could not secure room and
board for $8 a day.
Mr. Knudson has met his burden of proving his prima facie case that
$8 a day is an unreasonable rate of maintenance and that $45 a day is
reasonable. Defendants have not submitted any evidence to rebut this
proposition. Therefore, the court finds that the $8 per day maintenance
rate stated in the Terms & Conditions of Employment is unenforceable as
to Mr. Knudson.

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At oral argument plaintiff’s counsel agreed that once his maintenance
payment was increased to $45 a day, he was no longer entitled to seek
punitive damages based on the payment of unreasonable maintenance
under general maritime law. Therefore, the potential availability of punitive
damages is limited to the two-year period beginning immediately following
plaintiff’s accident and ending when defendants began paying plaintiff $45
a day.
CONCLUSION
For the reasons stated above, plaintiff’s motion for partial summary
judgment regarding enforceability of the contractual maintenance rate is
GRANTED.
Dated: January 17, 2019
s/George Caram Steeh
GEORGE CARAM STEEH
UNITED STATES DISTRICT JUDGE
CERTIFICATE OF SERVICE
Copies of this Order were served upon attorneys of record on
January 17, 2019, by electronic and/or ordinary mail.
s/Marcia Beauchemin
Deputy Clerk

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