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July 9, 2003


The opinion of the court was delivered by: Robert Patterson, United States District Senior Judge



Appellants-Adversary Plaintiffs, Maritime Transport Workers Union of Russia ("MTWU") and the individual Crew Members formerly employed by Millenium Seacarriers, Inc., ("Crew Members") (collectively "Wage Claimants" or "Appellants"), appeal pursuant to 28 U.S.C. § 158 from an order entered on August 1, 2002, by the Honorable Cornelius Blackshear, United States Bankruptcy Judge, granting the Motion for Partial Summary Judgment on behalf of the Appellees-Adversary Defendants, Allfirst Bank ("Allfirst") and Wayland Investment Funds, L.L.C. ("Wayland") (collectively "Foreign Mortgagees" or "Appellees") and holding that the Foreign Mortgagees were not liable to pay the Wage Claimants penalty wages pursuant to subsection (g) of 46 U.S.C. § 10313.

46 U.S.C. § 10313 provides in pertinent part:

(e) After the beginning of the voyage, a seaman is entitled to receive from the master, on demand, one-half of the balance of wages earned and unpaid at each port at which the vessel loads or delivers cargo during the voyage. . . . If a master does not comply with this subsection, the seaman is released from the agreement and is entitled to payment of all wages earned . . .
(f) At the end of a voyage, the master shall pay each seaman the balance of wages due the seaman within 24 hours after the cargo has been discharged or within 4 days after the seaman is discharged, whichever is earlier . . .
(g) When Payment is not made as provided under subsection (f) of this section without sufficient cause, the master or owner shall pay to the seaman 2 days' wages for each day payment is delayed.
(i) This section applies to a seaman of a foreign vessel when in a harbor of the United States. The courts are available to the seaman for the enforcement of this section.
46 U.S.C. § 10313 (e)-(g), (i).


This matter arises from the Chapter 11 filing on January 15, 2002, of Millenium Seacarriers, Inc. ("Millenium") and its wholly-owned subsidiary companies (the "Subsidiaries") (collectively "the Debtors"), owners and operators of nineteen ocean-going merchant vessels. Each of the vessels was separately owned by one of the Subsidiaries and was subject to a foreign preferred ship mortgage in favor of the Foreign Mortgagees from whom Millenium had received financing.*fn1 The Crew members, were employed by the Debtors, or its agents, to serve as members of the crew on the Debtors' vessels by virtue of collective bargaining agreements entered into between the MTWU and management companies or agencies contracted by the vessel owners. (Appellants' Record, Exhibit F, Declaration of Richard J. Dodson, ¶ 3.)

On February 28, 2002, the Debtors filed an amended motion pursuant to Section 363 of the Bankruptcy Code to: (a) sell substantially all of the assets of the Debtors (the vessels) free and clear of liens, claims and interests; and (b) assume and assign contracts and leases also in connection with such sale. ("Adversary Complaint," ¶ 9.)*fn2 On February 28, 2002, the Bankruptcy Court granted the Debtors' motion to establish bidding, notice and objection procedures pursuant to which all objections to the Sale Motion were due by March 22, 2002. (id. at T 10.)

On March 21, 2002 Debtors filed, on behalf of the Crew Members, a maritime lien claim for wages. (Appellants' Record, Exhibit D, Assertion of Maritime Liens by the Debtors on Behalf of the Crew Members.) On March 22, 2002, the Wage Claimants filed an objection to the Sale Motion and asserted a maritime lien for unpaid wages and delay (penalty) wages pursuant to 46 U.S.C. § 10313. (Id.; Appellants' Record, Exhibit E, Objection to Sale and Notice of Preferred and Priority Claims.) On March 27, 2002, a hearing on the Sale Motion was held before the Bankruptcy Court. (See March 27, 2002 Bankruptcy Hearing Transcript "March 27 Hearing.") Allfirst was the successful (and only) bidder for eighteen of the vessels.*fn3 (Adversary Complaint, ¶ 11.) At the conclusion of that hearing, the Bankruptcy Court granted the Sale Motion (Hearing Transcript at 257) and issued the Sale Order which, inter alia, ordered the sale of the Debtors' vessels to the purchasers free and clear of all mortgages, liens and encumbrances, arising prior to the closing, "provided, however, that the Assets shall be transferred subject to such Lien and related Claim, if any, held by any party listed on Schedule A attached hereto (each an "Objecting Lien party") that the Court finds, after due notice and a hearing, is superior in right to the Lien and related Claim of the Indenture Trustee . . ." (Appellees' Counter-Designations, D.1, Order Signed on 3/27/02 listed as Item #136 on the docket sheet for the original bankruptcy proceeding ("Sale Order") ¶ 7.)*fn4

On April 4, 2002, the Debtors filed an Adversary Complaint which named each of the Maritime Lien claimants as Plaintiffs and the Foreign Mortgagees as Defendants and sought a determination of the priority and validity of the liens and claims asserted by Plaintiffs and determining the amount of cure payments, if any, required in order for the Debtors' contracts to be assumed or assigned. (Adversary Complaint.)

On May 31, 2002, the Foreign Mortgagees filed a Motion for Summary Judgment seeking a determination by the court that, under the facts of this case and the law, the claims of the Wage Claimants for penalty wages under 46 U.S.C. § 10313, were not entitled to a superior lien to those of the Foreign Mortgagees. (See Appellants' Record, Exhibits I, J & K, Defendant's Motion for Partial Summary Judgment against Maritime Transport Workers Union of Russia and Crew.)

In their Local Rule 56.1(a) statement, the Foreign Mortgagees stated that: (a) at all pertinent times the vessels involved in this adversary proceeding were all registered in jurisdictions other than the United States and were all subject to mortgages in favor of Allfirst (Appellants' Record, Exhibit J, ¶ 2); (b) on March 21, 2002, Millenium filed, on behalf of the union crews, a maritime lien claim for wages. "This filing establishes Millenium's inability to pay the basic wages owed the crews" (id. at ¶ 3); (c) the Wage Claimants have prospectively asserted a claim for penalty wages dated March 21, 2002 (id. at ¶ 4; see Appellants' Record Exhibit F, Declaration, ¶ 7.); (d) "[f]or the purposes of this motion only, it is assumed that certain of the vessels of the Millenium Fleet may have been within the United States harbors and thus certain of the Wage Claimants may assert a claim for penalty wages (Appellants' Record, Exhibit J, at ¶ 5) and; (e) at the time Wage Claimants penalty wages accrued, Defendants did not own or operate the vessels of the Millenium Fleet (id. at ¶ 6.)

In their Counter Statement of Facts pursuant to Local Rule 56.1 the Wage Claimants basically accepted the Foreign Mortgagees statement of material facts but, with respect to item (b) Millenium's insolvency on March 21, 2002, the date Millenium filed the Wage Claimants maritime lien claim, the wage claimants asserted, without citation to any documentation or affidavit meeting the requirements of Federal Rule of Civil Procedure 56(e), that "there exists genuine issues of material fact with regard to Millenium's inability to pay the basic wages owed the crews."*fn5 (Appellants' Record, Exhibit M, ¶ 3.) The Appellants' "Counter Statement of Facts" included a "Statement of Contested Material Facts," in which Appellants asserted 1) that wage demands had been made in July and October, 2001, when several vessels were in U.S. ports without citation to the record and 2) that Millenium had paid expenses other than wages during July to October 2001 with citation to Debtors' schedules and statement of Financial Affairs. (Id.)

On the return date for the motion, July 10, 2002, no argument was heard. Instead, the Bankruptcy Court issued an opinion granting judgment to the Foreign Mortgagees and dismissing the claims of the Wage Claimants under 46 U.S.C. ยง 10313. (Appellants' Record Exhibit P, Memorandum Decision on Motion For Summary Judgment Wayland Investment Fund and Allfirst Bank (movants) and Maritime Transport Workers' Union of Russia and Crew.) On August 1, 2002, the Bankruptcy Court entered an Order Dismissing the Claims of the Wage Claimants for penalty wages. (Appellants' Record, Exhibit R, Order Granting Partial Summary Judgment ...

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