Persson v. Scotia Prince Cruises, Ltd., 02-1590.

• Decision Date: 27 May 2003
• Docket Number: No. 02-1591.,No. 02-1590.,02-1590.,02-1591.
• Citation: 330 F.3d 28
• Court: U.S. Court of Appeals — First Circuit
• Parties: Kenth PERSSON and Hartmut Rathje, Plaintiffs, Appellants/Cross-Appellees, and Rolf Sjöström, Plaintiff, Cross-Appellee, v. SCOTIA PRINCE CRUISES, LTD. f/n/a Prince of Fundy Cruises, Ltd., Defendant, Appellee/Cross-Appellant.

Page 28

330 F.3d 28

Kenth PERSSON and Hartmut Rathje, Plaintiffs, Appellants/Cross-Appellees, and Rolf Sjöström, Plaintiff, Cross-Appellee, v. SCOTIA PRINCE CRUISES, LTD. f/n/a Prince of Fundy Cruises, Ltd., Defendant, Appellee/Cross-Appellant.

No. 02-1590.

No. 02-1591.

United States Court of Appeals, First Circuit.

Heard February 5, 2003.

Decided May 27, 2003.

Michael X. Savasuk, on brief, for plaintiffs/appellants/cross-appellees.

Leonard W. Langer, with whom Marshall J. Tinkle and Tompkins, Clough, Hirshon & Langer, P.A., were on brief, for defendant/appellee/cross-appellant.

Before TORRUELLA, LYNCH and HOWARD, Circuit Judges.

TORRUELLA, Circuit Judge.

Hartmut Rathje, Kenth Persson, and Rolf Sjöström, (collectively, the "Officers") were the captain, chief engineer, and chief engineer/consulting superintendent, respectively, of the M/S SCOTIA PRINCE. The SCOTIA PRINCE is a cargo and passenger ferry operated by Scotia Prince Cruises, Ltd. ("SPC") between Portland, Maine and Yarmouth, Nova Scotia. Claiming they were fired in April 2001, the Officers brought suit under the federal court's admiralty jurisdiction against SPC for breach of their employment contracts. SPC raised as a defense that the Officers had resigned and counterclaimed, alleging that the Officers had breached a fiduciary duty by failing to maintain the vessel.

A bench trial was held by consent before a magistrate judge, who held that (a) Rathje and Persson resigned without giving prior notice pursuant to their employment contracts and therefore were not entitled to wages following their departure from the vessel; (b) SPC terminated Sjöström's employment as consulting superintendent (though not as chief engineer) without permitting him to work his "notice period" of nine months and therefore owed Sjöström nine months of superintendent pay; and (c) the Officers were not liable to SPC for any negligent maintenance of the vessel. All issues are appealed: Rathje and Persson appeal the decision that they are not entitled to wages and vacation pay; SPC appeals the decision that it is liable to Sjöström for damages and that its former employees are not liable for damage to the ship. After reviewing the record, we affirm.

I. Background Facts

We recount only the facts relevant to our decision; a more complete description of the facts can be found in the district court's opinion. See Rathje v. Scotia Prince Cruises, Ltd., 2002 WL 389303 at *1-12, No. 01-123-P-DMC, 2002 U.S. Dist. LEXIS 4078, at *5-38 (D.Me. Mar. 13, 2002).

The Officers began working aboard the M/S SCOTIA PRINCE in the late 1980s. Each Officer had an employment contract with Prince of Fundy Cruises, Ltd. ("POF"), SPC's predecessor. Notice time for termination under Rathje's employment contract was three months; under Persson's contract, sixty days notice was required. Sjöström's contract stated: "[Nine] months notice of termination required by both parties." Sjöström worked in Sweden; POF contracted first with the Swedish company Marine Trading and then with Plus 2 Ferryconsultation AB ("Plus 2") to pay Sjöström's salary in Swedish kronas.

At the beginning of the 2001 season, SPC's Chairman, Matthew Hudson, met with the Officers and advised them that he was contemplating the engagement of International Shipping Partners, Inc. ("ISP"), a manning/purchasing contractor. Although several top managers had been fired, Hudson assured the Officers that this would not affect their contracts, which were "ring-fenced."¹ Hudson also stated that the employees who had been terminated would receive a severance package of one week's pay for each year of service with the company.

Hudson engaged ISP the next morning, April 5, 2001, to take over the complete management of the vessel. ISP met with the Officers and presented a budget showing Rathje and Persson to be receiving significantly less compensation than provided in their current contracts, and Sjöström to be receiving no compensation at all as superintendent (because ISP assumed those duties). The Officers were upset, and the meeting ended with the Officers telling ISP, "Basically it's either you or us."

Over the course of the next few days, several email messages and facsimiles were sent between the Officers and Hudson. In their first message, the Officers wrote:

As it stand[s] now, we see only two options. We stick to the agreement you presented last night, i.e. ISP serves as a manning agency only and the current contracts and conditions are maintained, possible new conditions only applying to new hires. Alternatively, if ISP takes over both complete manning and technical management, we ([Rathje and Persson]) accept the standard severance package (one week for every year of service) and [Sjöström] gives the 9-month notice in accordance with his contract.

When Hudson responded that their contracts were "ring-fenced," the Officers asked Hudson to focus on the statement beginning "As it stands now ..." so they could "concentrate on [their] jobs or go home." In response, Hudson stated, "I consider that the [Officers] have effectively resigned and I accept those resignations on behalf of [SPC]."

The Officers' last day was April 20; Rathje and Persson acknowledge payment in full up to that date and Sjöström acknowledges payment in full to April 30. They filed this lawsuit seeking payment for the termination periods provided for in their contracts.

After the Officers were replaced, SPC discovered various problems with the up-keep of the ship including damage to the wood. SPC alleged that the Officers were responsible, and cross-claimed for more than one million dollars. The bench trial was held on February 11-15, 2002, and a decision was issued on March 13, 2002. This appeal followed.

II. Standard of Review

We review the district court's legal conclusions de novo. Watson v. Deaconess Waltham Hosp., 298 F.3d 102, 108 (1st Cir.2002). We review factual determinations for clear error. Fed.R.Civ.P. 52(a) (2003). Our job is to determine whether the decision below is reasonable in light of the entire record. See Portland Natural Gas Transmission Sys. v. 19.2 Acres of Land, 318 F.3d 279, 281 (1st Cir.2003). We give great respect to the district court's "opportunity to hear the testimony, observe the witnesses' demeanor, and evaluate the facts at first hand," United States v. Nee, 261 F.3d 79, 84 (1st Cir.2001) (internal quotation omitted), and defer to the trial court's findings unless "we form a strong, unyielding belief that a mistake has been made." Windsor Mount Joy Mut. Ins. Co. v. Giragosian, 57 F.3d 50, 53 (1st Cir.1995) (internal quotation omitted). Even then, we may affirm the judgment on any grounds revealed by the record. United States v. Puerto Rico, 287 F.3d 212, 218 (1st Cir.2002).

III. Discussion

We have jurisdiction over this dispute, which arises out of employment contracts aboard a vessel. See U.S. Const Art. III, § 2; 28 U.S.C. § 1333(2003); 7A J.W. Moore, Moore's Federal Practice § 0.225, at 2701, § 0.230, at 2783 (2d ed.1996) (hereinafter Moore's Federal Practice). The Federal Rules of Civil Procedure apply to admiralty cases. Fed. R.Civ.P. 1 (2003). The substantive matter is governed, in hierarchical order, by federal statutes and treaties, general maritime law developed by the Supreme Court, state statutes, and finally common law decisions of the state courts. 1A Moore's Federal Practice § 0.326, at 3233-35. "State law may supplement maritime law where maritime law is silent ..., but state law may not be applied where it is materially different than maritime law, or where it would defeat the reasonably settled expectations of maritime actors." Windsor Mount Joy Mut. Ins. Co. v. Giragosian, 57 F.3d 50, 54 (1st Cir.1995).

A. Rathje and Persson

Rathje and Persson appeal from the district court's determination that they resigned and were therefore not entitled to termination pay under their employment contracts. They attack several findings of fact made by the district court, asserting that it was clear error for the court to find that neither Officer (1) could have reasonably believed he was being terminated, (2) could have reasonably believed that he was entitled to severance pay that was not mentioned in his contract, (3) could have reasonably believed that he was relieved from his obligation to give notice to SPC before quitting, and (4) was entitled to termination pay. We find that the district court's findings are not clearly erroneous.

First, the record shows that Rathje and Persson wrote to Hudson, acknowledging that they were "fenced-in and protected, meaning that nobody could touch our contracts." Their claim that Hudson effectively terminated them by contracting with ISP (whose numbers showed their pay reduced by thirty percent) thus fails because the Officers understood that their contracts were unalterable. The Officers never sought clarification from Hudson, the chairman, about ISP's new role, and Hudson never told the Officers anything to suggest that their contracts were not protected.

As evidence of their mindset at the time and support for their belief that they, too, were being terminated, Rathje and Persson point to the fact that several other long-time employees were fired by Hudson. This is not persuasive, however, because none of the other employees were fired by email message, and Hudson had reassured Rathje and Persson both orally and in writing that their contracts were secure. The record shows that the Officers were treated differently than other employees. It was therefore not clearly erroneous for the district court to find that Rathje and Persson could not reasonably believe that they were implicitly terminated by email message.

Second, while Hudson mentioned to Rathje and Persson that it would be good for them to "know about" a severance plan for employees, he did not specifically state that it applied to them. Each officer had a written contract stating "I cannot claim any...