Cruz v. Chesapeake Shipping, Inc.

Decision Date29 April 1991
Docket NumberNo. 90-3390,90-3390
Parties30 Wage & Hour Cas. (BN 455, 1991 A.M.C. 2017, 59 USLW 2687, 118 Lab.Cas. P 35,475 Ernesto C. CRUZ, Victorino A. Domingo, Zaldy N. Bantilian, Leonardo J. Espiritu, Wilfredo D. Jequinto, Juan S. Terencio, Severiano S. Gasataya, Jr., Roberto A. Alejado, Vicente B. Solano, Cesar B. Del Rosario, Renato M. Santiago, Erlito R. Vistar, Richard B. Celoso, Cirilo R. Pacheco, Antonio T. Tanio-An, Armando C. Erediano, Pascualito R. Amistoso, Romeo D. Bardalo, Jose C. Concha, Miguel A. Gomez, Jr., Romeo B. Enriquez, Jaime M. Inovejas, Moreno T. Jesus, Raymundo B. Arvesu, Faustino T. Piedad, Jr., Renato O. Canafranca, Ricardo D. Bobis, Angel L. Bonotan, Antonio V. Soriano, Celso A. Torno, Benjamin G. Punzalan, Rufino M. Castillo, George P. Alarcon, Wilfredo G. Pasoquin, Beato V. Bautista, Fernando O. Legarejos, Jennifer M. Ofelas, Alfred L. Bricia, Eliodoro C. Alojado, Felicisimo D. Abubo, Wilfredo T. Dela Pena, Romeo A. Alimodo, Jr., Fernando D. Mabutas, Isabelito J. Borja, Magpuri H. Ramos, Jr., Rodolfo A. Francisco, Manolito R. Galang, Gloreto A. Aquino, Mervin Villanueva, Dandy D. Cabalo, Ronilo J. Perez, Rodito G. Nacional, Juan C. Isles, Arturo M. Lontajo, Romeo D. Dimalanta, Daniel J. Maceda, Ronald P. Gamo, Jacob Quirante II, Robert C. Alamar, Vincente Silan, Antonio O. Montemayor, Zosimo E. Duque, Eliserio Parohinog, Alex P. Oblefias, Arthur A. Navarro, Maximilliano S. Paraiso, Alexander A. San Gabriel, Mario Lee V. Imbong, Rene D. Ayukil, Rosseler B. Vergara, Edgar B. Villarante, Jimmy G. Haresco, Godofredo C. Oliver, Jr., Danilo R. Roco, Pedro Tiongzon, Ruben A. Datingaling, Teodoro S. Bernal, Victorio L. Aguilar, Mario S. Manosca, Eduardo F. De Los Santos, Jaime N. Macativo, Jr., Erwin L. Oyao, Melquiades L. Galloso, Jr., Efren B. Gavino, Tirso R. Racza, Jr., Jose M. Sagana, Modesto T. Banogon, Teddy C. Tefora, Henrito S. Alonsagay, Luis J. Ortiz, Rogelio R. Ortiz, Carlito Maprangala, Charlie T. Sansaet, Ernesto B. Javier, Reynaldo A. Cabacungan, Manuel D. Olivo, Ill
CourtU.S. Court of Appeals — Third Circuit

Joseph E. Mayer (argued) and Stephen M. Koslow, Quasha Wessely & Schneider, Washington, D.C., for appellants.

T.S.L. Perlman (argued) and Eugene P. Miler, Fort & Schlefer, Washington, D.C., for Chesapeake Shipping, Inc., Gleneagle Ship Management Co., Inc., and Kuwait Oil Tanker Co. S.A.K.

Michael M. Johnson (argued), Baker & Hostetler, McCutchen Black, Los Angeles, Cal. and Michael B. McCauley, Palmer, Biezup & Henderson, Wilmington, Del., for Kuwait Petroleum Corp. and Santa Fe Intern. Corp.

Before COWEN, ALITO, and ROSENN, Circuit Judges.

OPINION ANNOUNCING THE JUDGMENT OF THE COURT

ROSENN, Circuit Judge.

This appeal, arising in the context of the unanticipated juxtaposition of foreign policy decisions with domestic regulation of The United States District Court for the District of Delaware granted defendants' motion for summary judgment, holding that under choice of law principles, United States law did not apply to these seamen, or alternatively, that these seamen were not engaged "in commerce" as required by FLSA and that the vessels came under the foreign territory exemption of FLSA. Plaintiffs appealed. We affirm the judgment of the district court because Judge Cowen believes that under choice of law principles United States law did not apply to the plaintiffs and I believe that the plaintiffs were not engaged in commerce nor employed by an enterprise engaged in commerce under the terms of FLSA.

employee working conditions, presents the novel question of whether the temporary reflagging of former Kuwaiti oil tankers under the United States flag renders the Fair Labor Standards Act, 29 U.S.C. Sec. 201, et seq. ("FLSA" or "the Act"), applicable to foreign seamen employed on ships operating entirely outside the United States. In 1987, as a result of the hazards the Iran-Iraq war posed to neutral shipping operations in the Persian Gulf, eleven Kuwaiti vessels were reflagged to gain the protection of the United States. The plaintiffs, 228 Philippine seamen employed on these vessels, claim that the reflagging, which required compliance with extensive United States maritime statutes, entitled them to minimum wages and benefits under FLSA. 1

I.
A. Reflagging Requirements

By 1986, the Iran-Iraq war, which began in 1980, was threatening to disrupt neutral shipping operations in the Persian Gulf. Ironically, in light of the recent Iraqi invasion of Kuwait, Kuwait's assistance to Iraq in its war with Iran placed their shipping operations particularly at risk. The Iranian Government had intensified its efforts to intimidate Kuwait in an attempt to prevent Kuwait from supporting Iraq through financial assistance and use of its ports.

To gain the protection of the United States Navy while transporting oil and oil products in and from the Persian Gulf, Kuwait approached the United States and proposed that eleven Kuwaiti tankers be reflagged under the United States flag. The President, after consulting with the Secretary of Defense, the Secretary of State, and the National Security Advisor, granted Kuwait's request. Kuwaiti Tankers: Hearings before the House Committee on Merchant Marine and Fisheries, 100th Cong., 1st Sess., 40 (1987) (hereinafter Hearings).

Three issues arose with regard to the reflagging: compliance with United States maritime laws requiring American ownership, adherence to safety regulations, and fulfillment of manning requirements. Congress required that American-flag vessels be owned by an entity such as

a corporation established under the laws of the United States or of a State, whose president or other chief executive officer and chairman of its board of directors are citizens of the United States and no more of its directors are noncitizens than a minority of the number necessary to constitute a quorum....

46 U.S.C. Sec. 12102. Upon reflagging, the law required that ownership of the vessels be transferred to a United States entity. The defendant, Chesapeake Shipping Inc., was chartered on May 15, 1987, under the laws of Delaware for the specific purpose of satisfying this statutory requirement.

United States maritime laws also required that the reflagged tankers be brought into compliance with marine safety laws and regulations. The Coast Guard granted a one-year grace period to comply with Coast Guard safety regulations and a two-year grace period to meet dry-docking requirements.

Finally, 46 U.S.C. Sec. 8103 compelled that the reflagged vessels satisfy certain manning requirements. Section 8103 required that the ship's master and radio officers be United States citizens. Presently, section 8103(b)(1) also requires that each unlicensed seaman be a United States citizen or an alien lawfully admitted to the United States for permanent residence with a limitation of twenty-five percent placed on the Pursuant to this foreign-to-foreign port exception to the manning requirements and the agreement between Kuwait and the United States that the reflagged tankers would not call at United States ports, the vessels were permitted to retain...

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