Marine Transport Lines, Inc. v. International Organization

• Court: U.S. District Court — Southern District of New York
• Writing for the Court: CONBOY
• Citation: Marine Transport Lines, Inc. v. International Organization, 696 F. Supp. 1 (S.D. N.Y. 1988)
• Decision Date: 29 September 1988
• Docket Number: No. 85 Civ. 1360 (KC).,85 Civ. 1360 (KC).
• Parties: MARINE TRANSPORT LINES, INC., Plaintiff, v. INTERNATIONAL ORGANIZATION OF MASTERS, MATES, & PILOTS, Defendant.

696 F. Supp. 1

MARINE TRANSPORT LINES, INC., Plaintiff, v. INTERNATIONAL ORGANIZATION OF MASTERS, MATES, & PILOTS, Defendant.

No. 85 Civ. 1360 (KC).

United States District Court, S.D. New York.

September 29, 1988.

Charles Calvarusso, Morgan, Lewis and Bockius, New York City, D. Michael Under-hill, Morgan, Lewis and Bockius, Washington, D.C., for plaintiff.

Seymour M. Waldman, Vladeck, Waldman, Elias and Engelhard, P.C., New York City, Michael H. Gottesman, Bred Hoff and Kaiser, Frank Petramalo, Jr., Gordon and Barnett, Washington, D.C., for defendant.

OPINION

CONBOY, District Judge:

In the early 1980s hard times fell upon the American maritime shipping industry. The international market for such services was being increasingly dominated by foreign carriers, principally, it was thought, because labor costs on American vessels made them noncompetitive. In such circumstances, the shipping companies and unions sometimes found themselves in common distress at the prospective loss of contracts and jobs. In extreme circumstances, imminent bankruptcy of the company spurred the union to agree to drastic reductions in the wages and benefits of its members in order to avert the dual disaster of company collapse and discharge of ships' crews. The matter before the court is such a case.

The plaintiff shipper told its unions, including the defendant, that a contract it had with the Navy to manage nine Sealift vessels would not be renewed routinely by the Navy. To secure the renewal, the plaintiff determined that it must offer to the Navy a substantial reduction in labor costs. The defendant union orally agreed to the reductions for a two year period, thereby protecting the jobs of the deck officers on those nine ships, and the shipper consequently managed to secure its contract with the Navy for another two years. At a subsequent date during this two year term, the Master Collective Bargaining Agreement between the shipper and the union, covering all of the shipper's vessels, including the nine Sealift vessels, was by its terms scheduled to expire unless renewed. The shipper declined to negotiate a renewal, and later signed a new collective bargaining agreement with a rival union. On the final day of the Master Collective Bargaining Agreement, the shipper sent a letter to all deck officers on its vessels, including the nine Sealift ships, and advised them that the defendant union was no longer their bargaining agent, and set forth unilateral terms and conditions for continued employment.

The central issue remaining in the trial of this case is whether the oral "Sealift Agreement" modified and extended the "Master Agreement," with respect to the Sealift vessels, as the defendant union contends, or whether the Sealift Agreement merely incorporated necessary terms of the Master Agreement and existed independent of it, as the shipper contends. On this critical question, it should be noted at the outset that a written draft of the oral Sealift Agreement does not explicitly incorporate the Master Agreement, but does explicitly refer to certain of its clauses.

The plaintiff, Marine Transport Lines, Inc. ("MTL" or the "Employer") instituted this action for a declaratory judgment that its collective bargaining agreement with the defendant, International Organization of Masters, Mates, & Pilots, AFL-CIO ("MMP" or the "Union"), terminated at midnight June 15, 1984. In an Opinion filed June 6, 1986, the late Honorable Edward Weinfeld, U.S.D.J., granted MTL summary judgment declaring that the collective bargaining agreement between the parties (the "Master Agreement") expired according to its terms on June 15, 1984. See Marine Transp. Lines v. International Org. of Masters, Mates, & Pilots, 636 F.Supp. 384, 389 (S.D.N.Y.1986). Judge Weinfeld also granted summary judgment to MTL dismissing the Union's first counterclaim, that the Master Agreement was extended for all purposes by its terms, see id., summary judgment dismissing the Union's third counterclaim, that the Union may recover for breach of the Master Agreement on a theory of promissory estoppel, see id. at 391, and judgment on the pleadings dismissing the Union's fourth counterclaim, based on a theory of tortious interference with contract. See id. at 392. Judge Weinfeld refused to grant summary judgment on the Union's second counterclaim. See id. at 390.

The second counterclaim involves the oral agreement entered into between the parties, called the "Sealift Agreement." See id. at 386.

During the effective period of the Master Agreement, in the fall of 1982, MTL requested wage and benefit concessions by Union members working aboard nine vessels operated by MTL under contract with the United States Navy's Marine sic Sealift Command. MTL told the Union that the Navy would not renew its contract with MTL unless the Union agreed to the requested labor cost reductions.

Id.

This court conducted a bench trial of the Union's second counterclaim over eight trial days, from June 20, 1988 to July 1, 1988. This Opinion constitutes the court's findings of fact and conclusions of law, pursuant to Fed.R.Civ.P. 52.

Pursuant to an Order filed December 22, 1986, on the consent of the parties, the court must decide whether the Sealift Agreement extended the entire Master Agreement (as modified by the oral agreement) between June 16, 1984 and May 7, 1985 with respect to the Sealift vessels. If the court decides that question in the Union's favor, all remaining issues (breaches, defenses, remedies) will be submitted to arbitration. If the court decides the initial question in the Employer's favor, the court will decide what breaches of the Sealift Agreement, if any, MTL committed between June 16, 1984 and May 7, 1985. In this latter event, the court will decide also whether MTL has any defenses to any breaches found. The issue of remedies, if appropriate, will be submitted to arbitration. On this question, if reached, the court will determine merely the period between June 16, 1984 and May 7, 1985 for which remedies are appropriate.

BACKGROUND

A. The Original Navy Contract

"The Union ... represents supervisory personnel, who are not covered by the National Labor Relations Act's guarantee of the right to collective bargaining." Marine Transp. Lines, 636 F.Supp. at 388 (citing, inter alia, 29 U.S.C. §§ 152(3), 152(11), & 164(a)). Nevertheless, the Union, which predates the National Labor Relations Act, has had collective bargaining agreements, the Master Agreements, with a substantial number of employers, including MTL, for many years. Although it is unclear when the parties first made a labor agreement, MTL and the Union had had a Master Agreement at least as far back as the middle of the 1960s. MTL and the Union entered into a Master Agreement to run from June 16, 1972 to midnight June 15, 1975. Thereafter, MTL and the Union renewed the Master Agreement in 1975, in 1978, and in 1981. Each renewal covered a three-year period.

During the course of the '72-'75 Master Agreement, MTL learned of the opportunity to bid on a contract to manage a group of nine vessels, the Sealift vessels,¹ for the United States Navy. However, a major impediment existed to MTL's ability to bid on the contract being offered by the Navy. Specifically, in 1965, the Union had struck, seeking employment for a fifth deck officer per ship. At the time, each ship was manned by four MMP members (as well as employees of other unions). The Union won this concession, and all MTL ships were carrying five MMP members in 1974. To secure the contract for the Sealift vessels, MTL had to get MMP to agree to a cap of four Union members per ship.

MTL approached the Union. The Union recognized that accommodation was necessary, for it no longer enjoyed the virtual monopoly position that it had enjoyed for almost one hundred years. See Trial Transcript² at 177-78. The Union agreed to modify the Master Agreement, as it applied to the Sealift vessels, so that MTL could bid on the Sealift vessels, or tankers, in accordance with the Navy's terms.

MTL won the contract, and in 1974, entered into a five-year contract with the Navy (the "Navy Contract") to manage the Sealift tankers. MTL routinely submitted to the Navy a document referred to as "Schedule A," the principal device to identify and control labor costs on the vessels, for which the Navy would be billed. Schedule A enumerates the various items calculated to establish the bulk, if not all, of the Contractor's reimbursable labor costs, what the Navy refers to as "total wages," see Defendant Exhibit³ 15 at Art. 31(b): Non-Watch Allowance, Basic Monthly Wage, Overtime, Pension & Welfare, Vacation, Training Program, Feinberg Award,⁴ and Payroll Taxes. In other words, the usage of Schedule A by the parties to the Navy Contract established each of the enumerated labor cost items as components of the single contract construct, "total wages."

The manning concession made by the Union (four Union members instead of five) continued in force on board the Sealift tankers through the 1975-'78 and 1978-'81 Master Agreements. The court notes parenthetically that MTL secured an extension of the original Navy Contract for two years, from 1979 to 1981. Whenever the Master Agreement created different labor costs, whether wages or fringe benefits, MTL submitted a revised Schedule A to the Navy. See, e.g., Dx 32 (Letter from J.P. Hale, MTL Contract Specialist to Commander, MSC (May 6, 1982)) & Dx 33 (Letter from F.T. Hayden, MSC Director, Chartering and Contract Operating Div. to MTL (undated)); Tr. 963-64 (testimony of James H. Rand, MTL President) ("It was MTL's practice, if not the—a requirement of the contract, to provide Military Sealift Command with a revised schedule or a new Schedule A-1 or A-2 each time there was a material change in our costs. And when I say material change, I'm thinking most keenly of a new contract with our labor unions. Those contracts required approval by the...