451 F.3d 424 (7th Cir. 2006), 04-3829, Gaffney v. Riverboat Services of Indiana, Inc.

Docket Nº:04-3829, 04-3900.
Citation:451 F.3d 424
Party Name:Michael P. GAFFNEY, Thomas Bell, Edward Anderson, et al., Plaintiffs-Appellees, Cross-Appellants, v. RIVERBOAT SERVICES OF INDIANA, Incorporated, Riverboat Services, Incorporated, Robert Heitmeier, et al., Defendants-Appellants, Cross-Appellees, v. Showboat Marina Casino Partnership, Showboat, Incorporated, Showboat Indiana, Incorporated, et al., D
Case Date:June 16, 2006
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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451 F.3d 424 (7th Cir. 2006)

Michael P. GAFFNEY, Thomas Bell, Edward Anderson, et al., Plaintiffs-Appellees, Cross-Appellants,


RIVERBOAT SERVICES OF INDIANA, Incorporated, Riverboat Services, Incorporated, Robert Heitmeier, et al., Defendants-Appellants, Cross-Appellees,


Showboat Marina Casino Partnership, Showboat, Incorporated, Showboat Indiana, Incorporated, et al., Defendants-Appellees.

Nos. 04-3829, 04-3900.

United States Court of Appeals, Seventh Circuit.

June 16, 2006

Argued Sept. 19, 2005.

Appeals from the United States District Court for the Northern District of Indiana, Hammond Division. No. 98 C 10—Andrew P. Rodovich, Magistrate Judge.

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Edward M. Gleason, Jr. (argued), Beins, Axelrod, Kraft, Gleason & Gibson, Washington, DC, for Plaintiffs-Appellees.

Julia D. Mannix (argued), Davis, Mannix & McGrath, Ungaretti & Harris, Chicago, IL, for Defendants-Appellants.

Nicholas Anaclerio, Jr., (argued), Ungaretti & Harris, Chicago, IL, for Defendant-Appellee.

Before Ripple, Wood and Williams, Circuit Judges.

Ripple, Circuit Judge.

the plaintiffs, who are licensed merchant marine officers, 1 brought this whistleblower action under 46 U.S.C. § 2114 against Showboat Marina Casino Partnership, Showboat, Inc., Showboat Indiana, Inc., Showboat Mardi Gras Casino and M/V Showboat (collectively "Showboat"), Riverboat Services, Inc. and Riverboat Services of Indiana, Inc. (collectively "Riverboat"), and Robert Heitmeier and Thomas Gourguechon in their individual capacities. See Pub.L. No. 98-557, § 13(a), 98 Stat. 2863 (1984) (current version at 46 U.S.C. § 2114 (2002)).2 The plaintiffs claim that they were discharged in retaliation for engaging in statutorily protected correspondence with the United States Coast Guard ("Coast Guard") about a change in hiring guidelines on the vessel on which they were employed, the M/V Showboat . After a bench trial on the plaintiffs' claims against Riverboat and the individual defendants, the United States District Court for the Northern District of Indiana entered judgment in favor of all but two plaintiffs and awarded back pay, expenses and punitive damages. Those defendants now appeal, contending that the district court erred in holding that the plaintiffs established the requisite causation between their correspondence with the Coast Guard and their subsequent terminations. These defendants also submit that the plaintiffs did not prove that they are entitled to whistleblower protection

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under § 2114: according to the defendants, the plaintiffs did not act in "good faith," did not make a "report[]" to the Coast Guard, and did not have a reasonable belief that a violation of safety laws and regulations had occurred at the time of the correspondence. Id. Further, the individual defendants contend that they are not subject to § 2114 liability because they do not qualify as "individual[s] in charge of a vessel." Id. The two plaintiffs who did not obtain relief3 cross-appeal the district court's ruling denying them relief. All ten plaintiffs appeal the denial of attorneys' fees. Finally, Riverboat appeals the district court's judgment granting partial summary judgment to Showboat. Riverboat contends that Showboat was required to obtain insurance for the plaintiffs' claims and, thus, it is entitled to indemnification from Showboat. For the reasons set forth in the following opinion, we affirm in part and reverse in part the judgment of the district court.



A. Facts

This appeal involves the claims of ten4 licensed merchant marine officers, formerly employed as captains, chief engineers, assistant engineers or deck officers on the M/V Showboat, a large gaming vessel that carried passengers on excursions on Lake Michigan.5 They allege that they were terminated in retaliation for reporting the violation of safety regulations to the United States Coast Guard and that their terminations violate 46 U.S.C. § 2114(a).6 See § 13(a), 98 Stat. at 2863. The plaintiffs filed suit in 1998 against Showboat, the registered owner of the M/V Showboat, and Riverboat, the operator and manager of the vessel. The plaintiffs also named two individual defendants: Robert Heitmeier, the President, member of the Board of Directors and sole shareholder of both Riverboat Services, Inc. and Riverboat Services of Indiana, Inc.; and Thomas Gourguechon, who during the events in this case was both the Director of Marine Operations for Riverboat and the Director of Project Management for Showboat.

1. The M/V Showboat

The M/V Showboat, the ship on which the plaintiffs were employed, is one of the largest casino vessels currently operating in the United States; it weighs 2,803 gross

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tons, is 332-feet long and can carry up to 4,250 passengers and crew at a time. During the period at issue in this litigation, the M/V Showboat operated on a daily basis gambling excursions on Lake Michigan that departed from, and returned to, East Chicago, Indiana.

The vessel's operation is governed by a Marine Management Services Agreement (the "Agreement") between Riverboat and Showboat. See R.37, Ex.A. This Agreement gives Riverboat the "exclusive right and obligation to manage and operate the marine aspects of the [M/V Showboat]." Id. § 3.01. Specifically, Riverboat is responsible for ensuring that the vessel's operation complies with applicable state and federal laws, including United States Coast Guard regulations, see id. ; employing and training the vessel's crew in a manner consistent with generally accepted standards of the riverboat gaming industry, see id. §§ 3.01, 3.02(I); monitoring the qualifications of the vessel's staff, as well as assuring that the maritime staff is properly licensed, see id. § 3.02(iv); and the hiring, firing, promotion and supervision of all executive and service employees, see id. § 3.04.1. In turn, the Agreement obligates Showboat to obtain insurance and to name Riverboat as the insured party. Section 5.01.1 specifies that Showboat should obtain insurance covering all "acts, omissions and injuries to persons or property" caused by Riverboat or its agents, in the amount of not less than five million dollars. See id. § 5.01.1. Section then lists five types of insurance coverage required: worker's compensation insurance; comprehensive general liability insurance for accidents and property damage; full form protection and liability insurance on all vessels and floating equipment; hull and machinery insurance; and collision liability insurance for damage to vessels and floating objects. In addition, the Agreement mandates that Showboat obtain coverage for liabilities arising under the Jones Act. See id.

The operation of the M/V Showboat also is required to abide by federal statutes and regulations. In pertinent part, applicable Coast Guard regulations provide that a limited engineer license permits a chief or assistant engineer to "serve within any horsepower limitations on vessels of any gross tons on inland waters," but not on vessels of "more than 1600 gross tons in . . . Great Lakes service." 46 C.F.R. § 10.501(b); see also id. § 15.915(b)-(d). At 2,803 gross tons, the M/V Showboat falls into the latter category. Fearing that the Coast Guard under these regulations would require the M/V Showboat to hire exclusively engineers with unlimited licenses, on August 27, 1996, Mr. Heitmeier wrote to Lieutenant Commander Rich Brundrett at the Regional Examination Center of the United States Coast Guard in Toledo, Ohio. See R.81, Ex.6. He requested that the Coast Guard amend M/V Showboat' s Certificate of Inspection ("COI")7 to permit the employment of engineers with limited engineer licenses. In support of his request, Mr. Heitmeier submitted that the M/V Showboat was similar in terms of installed machinery, route and length of voyage to vessels operated by Riverboat on rivers and inland waters; in short, he contended that, because of its limited use as a sailing vessel, the M/V Showboat should not be characterized as a vessel in Great Lakes service and should

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be permitted to employ engineers with limited licenses. Riverboat's request was granted. The Coast Guard issued the M/V Showboat 's first COI in April 1997; it provided that "[a]n individual holding a license as chief engineer limited or assistant engineer limited may serve as chief engineer or assistant engineer respectively." R.34, Ex.1. Shortly thereafter, the COI was posted and the vessel was opened to the public.

2. The Communications with the Coast Guard

Shortly after the amended COI was posted, the plaintiffs initiated contact with the Coast Guard. On August 11, 1997, a group of twelve officers, including six plaintiffs—Messrs. Gaffney, Goodridge, Palmer, Reilly, Horton and Doncet— sent a letter to the Commandant of the Coast Guard, Admiral Robert E. Kramek. Mr. Gaffney authored this letter and obtained the signatures of the other officers. In the letter, the officers expressed concern that "the relaxation of licensing requirements for the engineers on the M/V Showboat . . . substantially reduces passenger safety by not requiring experienced personnel to crew the vessel." R.34, Ex.2. The plaintiffs concluded the letter by requesting information from the Coast Guard about the amended COI. Mr. Gaffney testified that this letter was sent to obtain clarification about licensing requirements because the COI did not specify "what [the change] actually meant." Tr.I at 113. The Coast Guard responded with two separate letters that, according to Mr. Gaffney, did not...

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