Kirkconnell v. United States

• Decision Date: 11 June 1965
• Docket Number: 142-62.,No. 31-62,31-62
• Citation: 171 Ct. Cl. 43,347 F.2d 260
• Parties: O. A. KIRKCONNELL, Jr., and W. J. Godfrey, d/b/a Kirkconnell & Godfrey v. The UNITED STATES. Harris FALGOUT, Harris Falgout, Jr., Louella F. Lemkowitz and M. F. Callais, t/a Grande Valley Boat Company v. The UNITED STATES.
• Court: U.S. Claims Court

171 Ct. Cl. 43, 347 F.2d 260 (1965)

O. A. KIRKCONNELL, Jr., and W. J. Godfrey, d/b/a Kirkconnell & Godfrey v. The UNITED STATES.

Harris FALGOUT, Harris Falgout, Jr., Louella F. Lemkowitz and M. F. Callais, t/a Grande Valley Boat Company v. The UNITED STATES.

Nos. 31-62, 142-62.

United States Court of Claims.

June 11, 1965.

Joseph J. Lyman, Washington, D. C., for plaintiffs.

Mitchell Samuelson, Washington, D. C., with whom was Asst. Atty. Gen., Louis F. Oberdorfer for defendant. C. Moxley Featherston, Lyle M. Turner and Philip R. Miller, Washington, D. C., were on the brief.

Before LARAMORE, Acting Chief Judge, DURFEE, DAVIS and COLLINS, Judges, and JONES, Senior Judge.

DURFEE, Judge.

These tax refund cases involve similar questions of law and fact, and were therefore consolidated by agreement of the parties. Plaintiffs have brought these actions to recover taxes alleged to have been erroneously paid under the Federal Insurance Contributions Act (FICA), 26 U.S.C. § 3101 et seq., and the Federal Unemployment Tax Act (FUTA), 26 U.S.C. § 3301 et seq., for the quarter ending March 31, 1957, through March 31, 1960. Only that portion of the FICA taxes, an excise tax paid by plaintiffs, is sought to be refunded. No part of the fishermen's FICA taxes, an income tax, is sought to be refunded here. The FUTA tax, an excise tax paid by plaintiffs without contribution by the fishermen, is also sought to be refunded for the years 1957, 1958, and 1959.

Plaintiffs in each case are separate and distinct partnerships.¹ Both plaintiffs were engaged in the period involved here in the business of fishing for shrimp in the Gulf of Mexico, and their headquarters were in Brownsville, Texas. Plaintiffs were the owners of small fleets of fishing boats. The boats were manned by a captain and a small crew of deckhands who also performed fishing services on the boats. The sole issue involved in this case is whether these latter individuals, the captains and deckhands, were employees of plaintiffs under Sections 3121(d) and 3306(i) of the Internal Revenue Code of 1954, 26 U.S.C. §§ 3121(d) and 3306(i), (Supp. V, 1952),² or whether they were independent contractors. If the captains and deckhands were employees within the meaning of the applicable sections of the 1954 Code, then plaintiffs rightfully paid the taxes in issue and they are not entitled to a refund. If, on the other hand, these captains and deckhands were independent contractors, then the FICA and FUTA taxes were erroneously assessed against plaintiffs, and plaintiffs are entitled to a tax refund.

Plaintiffs' shrimp boats were quite expensive commodities, costing about $40,000.00 each. The boats were specifically equipped and were owned and operated solely for shrimp fishing. Maintenance workers, whose status is not in issue here, were hired by plaintiffs to keep the vessels and fishing gear in operating condition between trips. These workers were paid regular wages and worked under the direct supervision of plaintiffs' managers.

After a boat had been outfitted and equipped, plaintiffs selected an experienced fisherman who was placed in command of the boat as captain. The captains so selected were those in whose ability, production records, and integrity plaintiffs had confidence. It was understood by plaintiffs and the captains that the captains were to be in full charge of the fishing operations. Plaintiff in No. 31-62 had a written agreement setting out the working conditions with its captains. The specifics of the agreement are outlined in Finding 12. This agreement resulted from negotiations between the owners and the Rio Grande Shrimp Fishermen's Association, the authorized representative of the fishermen and the captains for a number of years prior to the time the agreement was adopted. Not all the captains signed the agreement; this factor is insignificant, however, as many of the provisions of the agreement were rarely enforced, and the general practice of the trade governed. The actual manner in which both plaintiff partnerships conducted business was similar for all practical purposes.

Plaintiffs did not allow the captains to have or permit intoxicating liquor aboard the vessels. The captains were instructed by the owners to avoid any violation of Mexican territorial waters, and to refrain from entering Mexican ports except in emergencies. When a vessel was at sea, the crew of the boat was under the direct and sole control of the captain. The captains usually made the decisions where to fish and in what direction to go, but if a boat was not in safe mechanical condition for long distance fishing, the owner would tell the captain to fish "just off the bar." In addition, the owners passed on to the captains information obtained as to where fish were being caught. However, the captains were not called in, nor interrupted during their fishing operations. The captains were in complete charge of the boats concerning all matters of operation and maintenance from the time of departure until the boats returned. Once the boats left port the captains were not required nor expected to communicate with plaintiffs with any degree of frequency. Contact between the captains and plaintiffs was infrequent and usually limited to emergencies.

The arrangement between the boat owners and the captains did not specify a term during which a captain would remain in command of a vessel. The parties understood that a captain would be in command of the vessel on a trip to trip basis, and the arrangement could be terminated by either party at the conclusion of any trip or prior to the commencement of another. There was nothing in the arrangement that prohibited a captain from taking a vessel belonging to another owner and thereafter returning to plaintiffs for a boat, and in fact, some captains did just that. However, the relationship was customarily continued for an extended time, and a number of captains made many consecutive trips in command of the same boats for the same plaintiffs. Plaintiffs attempted to keep their vessels in operation as often as was consistent with the condition of the vessel. Usually two or three days elapsed between trips.³ If a captain was not ready or available to ship out when the boat was equipped to go, plaintiffs would select another captain to take over command of the vessel. The captains so replaced could and thereafter often did take out other boats owned by plaintiffs.

Under the agreement between plaintiffs and the captains, the latter worked or fished the boats on the lay or share basis in accordance with the custom of the fishing industry. In the early portion of the period herein involved, the proceeds from the sale of shrimp from each trip were divided equally between plaintiffs and the captains. During the latter portion of the period each catch was divided 60 percent to plaintiffs and 40 percent to the captains. The captains paid the deckhands on a share basis out of their portion of the share of the catch.

The deckhands were hired and fired by the captains, who determined the length of time they would work and their duties. However, the owners could request that certain individuals not be hired, which requests were complied with. Plaintiffs themselves had no direct relationship with the deckhands. Generally, prior to sailing, however, plaintiffs knew the names of the crew.

Various expenses were incurred in connection with a fishing trip. Some were paid by plaintiffs, and some by the captains and crew. The crew paid for groceries, one-half of the ice, and all personal items. In addition, the crew paid for shoveling the shrimp out of the holds and the expense of employing a guard to protect the catch when the boat was not to be immediately unloaded. The cost of processing the shrimp was deducted from the gross price before the shares were disbursed. All other expenses, including fuel, were paid by plaintiffs.

The captains decided how much fuel and ice to take aboard. The captains, when placed in command of a boat, customarily asked plaintiffs where to obtain the fuel and ice. Plaintiffs told the captains to purchase from Valley Fuel and Ice Company. In all instances, the cost of both the fuel and the ice was charged to plaintiffs. However, the cost of one-half the ice was later deducted from the captain's share.

The captains, on the other hand, could purchase groceries from stores of their choice. However, in most instances the groceries were bought on credit at stores where plaintiffs had credit. The cost of the groceries was then later deducted by plaintiffs from the captain's share.

Each trip was considered by the parties as a separate transaction for purposes of settlement. The amount received by the captain and crew depended entirely on the proceeds of the shrimp catch. There was no guarantee of any kind made by plaintiffs to the captain regardless of the time and effort expended in fishing. If a trip was unsuccessful, it was known in the trade as a "broker." If the value of the captain's share of a catch would not cover his share of the expenses, the remainder would be taken out of the captain's share from subsequent trips. When a captain, owing unpaid expenses, failed to ship out for plaintiffs on subsequent trips, the unpaid expenses of the "broker" were borne by plaintiffs.

Plaintiffs and the captains had an understanding that the shrimp would be unloaded by Basin Seafood Company, a Brownsville, Texas company partially owned by another Brownsville company, Western Shell Fish Company, Inc. Western would then purchase the unloaded catch. One member of each of the two partnerships held substantial interests in Western. Sometimes necessity dictated that the captain go to another port along the Texas or Louisiana coast. However, when the shrimp were unloaded at a port other than Brownsville, they were sold to fish houses which had been designated by plaintiffs prior to the beginning of the trip, and with whom plaintiffs had...