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Marine Transport Lines Inc. v. International Organization of Masters

decided: June 13, 1989.


Appeal from a judgment of the United States District Court for the Southern District of New York, Kenneth Conboy, Judge, holding that the parties had modified certain terms of their collective bargaining agreement, including its expiration date, with respect to the "Sealift" tankers operated by marine Transport Lines. 696 F. Supp. 1 (S.D.N.Y. 1988). Judgment affirmed.

Oakes, Chief Judge, and Meskill, Circuit Judge.*fn*

Author: Oakes

OAKES, Chief Judge

The parties in this contract dispute are Marine Transport Lines, Inc. (MTL), a shipowner, and the International Organization of Masters, Mates & Pilots (MM & P), which represents deck officers in the merchant marine. In 1981, MTL and MM & P signed a collective bargaining agreement covering the deck officers employed by MTL. The agreement, called the Master Agreement, ran for three years and was scheduled to expire on June 15, 1984. It would be renewed automatically from year to year unless either party gave notice at least sixty days before the expiration date of an intention to modify, amend, or terminate the agreement.

Halfway through the term of the Master Agreement, MTL sought concessions from MM & P in order to obtain the renewal of a contract under which MTL operated nine "Sealift" tankers for the United States Navy. In November 1982, MTL and MM & P agreed to modify certain terms of their Master Agreement as it applied to the Sealift tankers. In this so-called Sealift Agreement, the union accepted reductions in wages and other benefits from January 1, 1983 through May 6, 1985, which covered the term of the new contract that MTL hoped to conclude with the Navy.

The controversy between these parties arose in 1984. On April 8, MM & P informed MTL that the union intended to modify and amend the Master Agreement when it expired in June, 1984. Then, on June 15, MTL announced that the Master Agreement had expired and that the company no longer recognized MM & P as the representative of its deck officers. The following day, MTL sued for a declaratory judgment that, because of MM & P's April 8th communication, the Master Agreement had terminated on June 15, 1984. MM & P asserted four counterclaims. The late Judge Edward Weinfeld granted summary judgment to MTL on three of those counterclaims, including MM & P's assertion that the Master Agreement had been automatically renewed. He found, however, that there was a factual dispute between the parties concerning the scope of the Sealift Agreement. Hence, MM & P's counterclaim alleging that the Sealift Agreement had extended the term of the Master Agreement with respect to the nine tankers could not be resolved by summary judgment. Marine Transp. Lines, Inc. v. International Org. of Masters, Mates & Pilots, 636 F. Supp. 384 (S.D.N.Y. 1986).

The case came to trial on MM & P's remaining counterclaim before Judge Kenneth Conboy, sitting without a jury. MTL's position was that the Sealift Agreement existed independently of the Master Agreement and did not change the expiration date of the Master Agreement. MM & P argued that, when the parties concluded the Sealift Agreement, they intended that it should extend the term of the Master Agreement with respect to the Sealift tankers. Judge Conboy ruled in favor of MM & P, Marine Transp. Lines, Inc. v. International Org. of Masters, Mates & Pilots, 696 F. Supp. 1 (S.D.N.Y. 1988), and MTL filed this appeal. We agree with the district court that the Sealift Agreement modified the terms of the Master Agreement and extended its term until May 7, 1985, with respect to the Sealift tankers. We therefore affirm Judge Conboy's decision.


Judge Conboy presented a detailed narrative of the facts in this case. See Marine Transp. Lines, 696 F. Supp. at 1-14. We will summarize the events here and refer the curious reader to the district court opinion for additional details. We will also eschew an extensive analysis of the legal issues, for we agree with most of what Judge Conboy wrote. See id. at 14-28. In our discussion below, we will focus instead upon the issues that, in our opinion, merit further discussion.

The deck officers represented by MM & P are supervisory personnel under section 2(11) of the National Labor Relations Act, 29 U.S.C. § 152(11) (1982). MTL is therefore not obliged to recognize or bargain with a representative of its captains and mates. See 29 U.S.C. § 164(a); Marine Transp. Lines, 636 F. Supp. at 386 & n. 2, 388. Nevertheless, MTL and MM & P have, since at least the 1960s, concluded a series of collective bargaining agreements. The 1981 Master Agreement was the last in this series.

Meanwhile, in 1974, MTL had concluded a five-year contract with the Navy to operate its nine Sealift tankers. The Navy reimbursed MTL for its labor costs, which MTL documented by submitting a "Schedule A." Schedule A enumerated "total wages," defined by the contract to include wages, pension and welfare payments, vacation benefits, etc. The contract included an escalation clause which committed the Navy to reimburse MTL for increased labor costs. Whenever MTL's labor costs changed, the company sent the Navy a revised Schedule A.

MTL secured two-year renewals of its Navy contract in 1979 and 1981. In the early 1980s, however, the American merchant marine was continuing to suffer hard times. Competition intensified. In 1982, MTL faced a crisis: It had failed in three recent attempts to win new contracts with the Navy. As the time for renewing the Sealift tanker contract approached, MTL feared that the Navy would open that contract to competitive bidding. The company calculated that it could not bid successfully for the contract (or persuade the Navy to renew the contract without soliciting additional bids) unless it drastically reduced its labor costs. Moreover, MTL's corporate survival depended upon continuing to operate the Sealift tankers. If MTL lost the Navy contract, it would probably fail to obtain loans that it needed to purchase a new ship, and it risked being liquidated by its parent company, GATX Corp.*fn1

Hoping to reduce its labor costs, MTL turned to its unions and sought modifications in its collective bargaining agreements. MTL asked MM & P for four concessions that would apply only to deck officers working on the Sealift tankers: (1) the reduction of wages to their level of June 16, 1981, with wages frozen at that level for the duration of the upcoming extension of MTL's contract with the Navy (i.e., until May 7, 1985); (2) elimination of the "diesel and automation allowance"; (3) reductions in vacation entitlements; (4) job-related travel in economy class, rather than first class. There were discussions between Thomas Murphy, MTL's personnel manager, and Robert Lowen, MM & P's international president, in which Murphy asserted that the deck officers' jobs depended upon agreeing to the concessions. Finally, on November 15, 1982, officials of MTL and MM & P met and agreed orally upon the changes proposed by MTL. This was the parties' Sealift Agreement. It included one concession to MM & P: The union would have the right to shift costs, so long as the total, reduced compensation remained unchanged.*fn2

MTL negotiated with the Navy during this period and described the concessions that it sought from its unions. It submitted a revised Schedule A showing projected reductions in "total costs," and it estimated that the concessions would reduce annual operating costs by almost one million dollars per vessel. On November 12, 1982, MTL stated that it already had its unions' agreement to the lower wages; it submitted additional revised Schedule A's and assured the Navy that the figures would remain firm during the 1983-85 option period. Immediately after the November 15th meeting with the MM & P officials, MTL informed the Navy that the unions had agreed to implement ...

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