Petition for Writ of Certiorari — Anderson v. United States

IN THE

Supreme Court of the be United States

OCTOBER TERM, 1971 .

CHARLES F.; MICHAEL L. and L.M. ANDERSON —

- t/a ANDERSON SEAFOOD COMPANY, et al,

. Petitioners, |

UNITED STATES OF AMERICA,

Respondent. -

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS —

FOR THE FIFTH CIRCUIT ©

JOSEPH.J. LYMAN —

1200, 18th Street, N.W.

' Washington, D.C. 20036-

Attorney for Petitioners —

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‘TABLE OF CONTENTS 4

OPINIONS WE ss. tee a vee Ree ee

JURISDICTION .. ...: 2... .0005. epee vate eee oe

~ QUESTIONS PRESENTED Reng hoes ee ete eaG aeaees oe

CONSTITUTION, STATUTES AND REGULATIONS ....:.. 3

SR io, eo vue hae penal eern ie re

REASONS FOR GRANTING THE WRIT .............-. 1

a a ES MELE et wear ee

MNENA 3 oe: Pieieies Peres a

APPENDIXB ............ Dy ee OTSA | a

APPENDIXC: ......... Negra pe eae ory 13a

APPENDIXD .......... Beep Oa ee eM 3: is

TABLE OF CITATIONS ©

Cases: | ,

Comiognliten Es Co. v. McAllister, 337 US. 783 fe

re ee nee Ant a 11°

Enochs v. Williams Packing Co., 370 U.S. 1 (1964). .8,9,11,12:16 -

Guzman v. Pichirilo, 369 U.S. 698 (1962) ......2..0020000. 14

Helvering v. Davis, 301 U.S. 619 (1937) . eiamiaeuss vases 15

McAllister y.-United States, 348 U.S. 19 (1954) ...:........ ee ee

NLRB y. Hearst Publications, 322 U.S. 111 (1943) 02.020. il _

_ Stevens v. Seacoast Co., 41-4 F.2d 1032 (CA-5, 1969) *....... 14 .

: Steward Machine Co. v. Davis, 301 U.S. 548 (1937) eee as Ree ety | |

United States v. Crawford Packing Co., 330.24 ~ eee

I ag in, eee ee Peete ere 9,10 ..

. United States v. Webb, 397 U.S. 179 ‘og es % 9, 10, it, 12, 15 4

United States v. Webb, 402 F.2d 956 (CA-S, 9a). See et 12 a e

Williams Packing Co. v. Enochs, 176 F. Supp. 168, 170, i

(SD Miss., 1959) aff'd. 291 F.2d 412 (CA-5) rev'd on 7

jurisdictional grounds 370 US. Neveusseden teteees seme 16 z

spapbiner Munch eae Sac A

. Ls a

Miscellaneous:

(iW

oe

@

Statutes: oak Leg

Internal Reyenue Code’ of 1954 (026 U. S. C. ) 1952 ed.)):

Sec. 3100 et eqs jesse eee cence ence rere eens ere

We EES) can sca cae so) Senet yy rene we. Bee eas

» Sec.-3300 et seq.” . we. eee eee cece rere rr rire ee

"Sec. 3306 ©, .-.... eg aroma trae Se ery ee =

ak Fe | oe eee eg ree rake Teer

Sec, 3},3306 (i-1 ......---. Pe ene ae PR ey ear

Ri WO os ch ncdcss srs sanewee es ieeevaaaea soe

uM hn a oe ice wecr ees se enon ansee en l

USC. Gee. 12SK1) . 5.5. = FP AR ene: ie ala .

46 U.S.C. Sec. 688... 5.0. + ee ese Ri, Fotea eI Tee 3,14.

ia

ie)

NA AWWWN WN

7 s tatutes-a t-large:

41°Stat. 988 ° patna ks ETN PTY Sree eye i

United States Constitution, Article a

pen Se Gee eres err re ere ee 3,14

S. Rep. No. 1255, 80th Cong., 2nd Sess. a 7

(1948) reprinted at 2 U. S. Code Cong. ;

= and cme News (1948) EMR Pee ere 10

" 2

2

- + IN THE

; Supreme Court of the United States.

OCTOBER TERM, 1971

‘

‘CHARLES F., MICHAEL L. “i L.M. ANDERSON’ |

t/a ANDERSON SEAFOOD COMPANY, et.al,

Petitioners,

S

Vv.

. 3

sf UNITED STATES OF AMERICA,

Respondent. ..

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS.

FOR THY FIFTH CIRCUIT

The petitioners, Charles F., Michael L. and L.M. Ander-

son, petition for a writ of certiorari to review the judg-'

“ments of the Court of oe for the Fifth Circuit in

this case. = (

eye wee

2

‘OPINIONS BELOW .

: The opinion of the Court of Appeals, reversing the Dis- -

trict Court, (App. A, pp. la-11a) is reported at’450 F.2d

r $67 (1971). The findings of fact and conclusions of law,

: of, the District Court (App. C; pp. 13a-24a) are not offi- é

| cially reported: ; fs

JURISDICTION

.. The judgment of the Court of — was entered on

October 27,,1971. (App. B, p. 12a) On January 11;

1972, Mr. Justice Pqwell extended. the time for. filing a-

_ petition for. writ of certiorari to and including February.

25, 1972. The jurisdiction of this Court is invoked under

* 98: Soe Line

"QUESTIONS PRESENTED

" The —" Insurance Contributions. Act (FICA)!

d the Federal Unemployment Tax Act (FUTA)? impose

excise taxes on employers measured by the compensation .

paid to “employees.”” Where an employer-employee rela-

. tionship exists the einployer is liable for the taxes; if the

relationship does not exist no tax is imposed. 26 U.S.C.

§ 3121(d) and 3306(i) define both what an “employee” is

and what he is not. The term excludes as “employees” all

persons except—“‘any individual, who under the usual com-

mon law rules applicable in determining employer- -employee : |

relationships, has t!.e status of an employee.” In this case

the District Cour., sitting without a jury, fonnd ~,

captains and crewmen using the petitioners’ commercial ~

fishing vessels were not the petitioners’ employees within

the meaning of the Acts. The question presented is

‘whether, in setting aside this determination, the Court of

126 US.C.A. $8 3100 et seq.

226 U.S.C.A. 893300 ét seq. =”

§ etesdadans cin P ELF

3

“Appeals overstépped the proper bounds of appellate review

and. applied erroneous legal principles.

fa Employer-employee relationships ‘which determine

maritime employers’ ¢Xti¢e. tax obligationis under the FICA

and FUTA are judged ‘agaihst standards o he general mari-

time law. In the case on review, aa of Appeals

argues that’ the boatowners’ ‘excise tax ctpseicat to the.

government is détermined by testing the “employee}

status of the captains and crewmen against the provisions.

of the Jones Act (46 U.S.C. 8 688), a maritime negligence

statute, rather than the provisions of the FICA and FUTA

which prescribe the légal test of excise tax liability for

employers generally. ‘The question presented is whether

a determination of the boatowners’ tax liability by ref-

erence to a negligence statute, rather than the tax statutes

.

‘Congress’ provided for that purpose, violates the ° ‘uniform- — .

ity” provisions of Article I, Section 8 of the’ Constitution.

Ptitee STATUTES and REGULAT JONS

United Sites Constitution, : hrticle 7 Section 8, Ae

| “The Congress shall have power to lay and col-

lect taxes, duties and imposts and excises * * *

but all duties, imposts and excises shall be uniform

' throughout the United States.”

Pertinent portions of §§ 3121 and 3306 of, the Intetnal

Reveriue Code of 1954, and §§31.3121(d)-1 and 31.3306(i)-1

of the Treasury Regulations on Employment Tax are

printed at App. D, p. 25a. A pertinent portion of the Mer-

chant Marine Act of 1920, c. 250, 41 Stat. 988, Sec. 33;

46 U.S.C. $688 (the Jones Act) is printed at App. D, p. 29a.

~

* 4 —-

STATEMENT

The jurisdiction -of ,the. District’ Court was invoked

- because a question’ arises under the application of the

. Internal Revenue laws of the United States. The peti-

-tieners commenced this suit against the United States in

the District Court seeking a refund of FICA and. FUTA |

taxes erroneously paid and unlawfully collected.

The. petitioners, (herein called “owners”) are individuals

engaged. in the seafood business. This included: the pur-

chase of snapper, an edible ‘fish; from boat captains to

whom the petitioners let their commercial fishing boats,

together with the subsequent sale of the fish to others

——on—the-open—market—(App. C, p. 14a-15a.)_ The vessels -

involved were owned by the petitioners and operated out

of docking facilities leased by them at Panama City,

‘Florida. (App. C, p. 14a.)

The petitioners contracted ‘with experienced fishermen

to whom their boats were let for engaging in commercial

snapper fishing. (App. C, p. 15a.) In consideration for

letting the boats to the captains in was understood that

they would sell the entire catch to the owners at an agreed

_ price, after bi-lateral negotiations. for delivery at Panama

City, Florida. (App. C, pp. 15a, 16a, 20a.) The captains

and crewmen .were paid nothing by the owners unless

shapper were caught and. delivered, irrespective of the time

or effort exerted or the amount of money expended by

them.in the venture. (App: C, pp. 15a, 17a, 19a.)

The fishing operations were conducted by the captains

without interference by the owners. E%ch ‘trip. was con-

idered_ a separate and S%Smplete. undertaking and was -

ted by the parties as such. (App. C, pp. 15a, 16a, 18a.)

The owners relinquished all control over the manning of ©

the’ vessel to the captain, who hired and organized the _.

entire crew. It was solely the captains’ prerogative to

determine the crew size (usually eight or nine members),

their qualifications, their duties and working ‘conditions,-.

" - conducting the fishing and accomplishing’ the results

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the amount of money they. would be paid, and all other

. matters incident to’ manning and operating the vessel. ‘\ :

(App.-C, pp. 15a, 16a-17a.) , :

The owners relinquished to the csotaial? control, com- © -

mand and navigation of the vessels including—when to es \

"depart on a trip, where to ‘fish, when to return, how to - |

‘fish (the actual mechanical. processes for use’ of the gear)

- and all Other matters relative to the operation and main-—

tenance of the vessel from ths, time of departure until .

‘the fish’ were. returned, , unloaded and sold.. (App. C,

. 1$a.) Without resetvation, the owners. relinquished all .

pines to direct and control. the manner and method of

desired. The owners’ primary interest -was to obtain

. and market ‘the largest catch of snapper ‘possible. (App. a

pp. 16a, 20a). There was no express agreement specifying the

extent to which control may be exercised by the owners

- over the fishermen nor was there any actual control exer-

It was understood between the owners and captains that

each could terminate their relations after completion of a

trip and prior to commencing another one for any reason,

but not while a trip was in progress. Termination by an

owner may result where a captain’s action could cause,

destruction of the vessel, endanger life or dispose of a

catch to others in breach of the parties’ agreement, or . &

where profitable catches were~ os wagers

p. 15a) Custom and practice dictated that separate trips w were :

made over an extended time and rarely for a single trip. (App.

“= C, p..15a) Some captains, by choice, came and wentaftera_ :

few trips; others continued a series of trips over a period of

several years. (App. C, pp. 1 Sa-16a.) 2

It was part of the captain’s function to unload the fish

for sale and to keep the vessel clean. and ship-shape I

ish

by them. (App.C,p.l6a). © ‘ |

:

~.

;

:

in port. The fishermen received no additional pay

these functions apart from the sale price of the to

-

Nae RAP Gb

as a

”

‘the owners. If the crew failed to perform the unload-

ing or cleaning and others were hired for the work, such.

individuals were paid out of the absent fishermen’s earn- ©

-ings.. The owners-had no responsibility for defraying the -

costs of these functions. (App. C, p. 16a)

The actual fishing activities and compensation arrange-

ments between the captains and crewmen: were negotiated

between them to the complete exclusion of the owners. .

Each fisherman (exclusive of the captain) separately caught, 4

boxed and tallied his separate: catch of fish, and his com-

pensation was measured by the weight of his: particular

catch. No other payment was made to him irrespective

of his individual success or failure. A captain’s earnings

were based on an agfeed -percentage of the collective

Three crew members received an extra amount for special ser-

vices above the earnings from their own catch. This additional

amount ranged from 4 cent to | cent per pound of the entire

catch. The function of the “icer” was to Place the indivi-

dual catches of the other crewmen in the ice compartments __

of the ship’s hold. The cook performed all the required

galley services and the engineer was recognized for his

unique ability. All of these arrangements were under-.

taken without interference from the owners. (App. C, .

p- 17a) | :

All trip expensés were the obligation of the adicomen

and were paid by them without reimbursement by the

owners for each trip. They paid for all food, groceries

and tobacco consumed, all ice necessary for the trip and

all diese] oil and fuel used in the operation. In addition,

they furtiished and paid for all fishing tackle necessary for

miaking fish catches, together with all the bait required.

They paid for all cooking bottled gas, as well as cooking.

utensils, bedding, laundry, knives, gloves, foul weather

gear and the like, and even the chart papér used in the

depth recorders. They were cHargedsfor the cost of a

food freezer aboard the vessel used to preserve their food

during a trip and made rental payments for the use of radar

* _ - =

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equipment. All of the foregoing were paid for in cash or :

charged against the proceeds of the sale of the fish when :

purchased on.the vessels’ or owners’ credit. (App. C,. #

pp. 17a, 1 8a-19a) Since the captains were liable for the cost _.

; of ice and fuel, it was solely ‘within their discretion to deter-

mine the quantity of each to take aboard. (App. C, p. 18a)

.- After each trip the owners and captains worked out a

_ Settlement of the monies.involved in the purchase and sale

of the fish together with the amounts to be charged against

: the sale price for trip expenses and any advances made to

the captains against the catch. (App. C, p. 18a) The captain _

kept a.daily tally sheet recording the weight of each crewman’s

catch. At the conclusion of a.trip the captain's tally sheet was

used as the basis for the sale negotiations between him and the

on : owners.{App.-C, pp. 18a-19a)—

. Ordinarily a trip would last from one to two weeks for

successful fishing, but it was the captain’s decision, to the |

exclusion of the owners, to fish a shorter time. If a captain

WEP IOS AOS ESR aa Pee

. , °

_ decided to continue : __

City to unload the catch, he would put into a convenient *

port and unload the fish catch onto refrigerated trucks for .

transport to the owners at Panama City, Florida. (App. C, '

p. 19a.) It was the captain’s choice and discretion that de a.

termined how long they and the crews remained ashore be- e

tween trips before commencing another one. (App. C,

p. 19a.) .

If a trip was unsuccessful and the value‘of the catch ;

—-was-iasufficient ‘to cover the trip expenses incurred, such | r

expenses, if charged to the credit of the owners, were

carried over to a succeeding trip and charged against the

sale proceeds of a subsequent catch. Any unpaid expenses q

charged to the vessel were the ‘personal. debts and obli- . |

gations of the captain. (App. C, p.19a) -

Although the vessels: were equipped with radios which

permitted contact wifh-the owners enly through a marine

Operator, there was literally no communication between

the captains and the owners while the vessels were at: sea.

i.

7 .

Communication with an owner, if any, usually originated

with the captain respecting emergency repairs or to arrange

for unloading facilities in anticipation of the vessel’s returri

to the docks. (App. C, pp. 19a-20a.) All repairs to the vessel,

_ and insurance, if any, were pas by the owners. (App. CS pp.

14a, 17a-1 8a.)

The owners had’ no _controi over the ‘crewmen, nor

attempted to exercise any control over their activities |

through the: captains, nor did the owners intend to reserve

such exercise of control over them. (App. C, pp. 16a, 20a.)

Clearly, the owners relinquished command, management

and navigation of the vessels to the captains, save as to

the results of the venture, embracing the right to purchase

the entire catch for delivery at Panama City, Florida.

(App. C, pp. 16a, 20a.) © t

ainkl CLIO REA, i) oe

-The District Court, sais in mind agency principles

under general maritime law, concluded there was nearly

a total relinquishment of control of the vessels to the

captains implying the creation of demise charter arrange-

‘ SARIS AOE ERIN A SR 15 SEAN TIL GSO OLE GFR OA Heres ig OD ersten

. C, pp. 2Ta-22a, 23a,

24a.) The Court of Appeals reversed, contending that the re-

lationships did not create demise charter arrangements mea-

sured according to the liberal and humanitarian criteria of

the Jones Act and maritime tort decisional rules, and the

captains and crewmen were, therefore, the owners’ employ-

REASONS FOR GRANTING THE WRIT

1. The court of appeals’ decision misconstrues the guide-

lines for determining employer-employee relationships under

the FICA and FUTA involving fishermen in the only two

cases decided by this Court, i.e., United States v. Webb,

397 U.S. 179 (1970) and Enochs v. Williams Packing Co.,

370 U.S. 1 (1964). The court’s ruling also, we submit,

conflicts with the purposes of the FICA and FUTA. The

ruling in the case under review is important not only to

the Andersons and their: captains but to all commercial

~

oft

Qa

a.

fishing ‘whan ‘and their eniine: and beyond that,

‘to all commercial vessef owners of every- kind whose char-

ter arrangements will affect their FICA-and FUTA tax

‘ liabilities which have grown rapidly over the past few years.

United States y. Webb, and Enochs vy, Williams Packing

_ Co., supra, held that both Acts “specifically adopt the com- =

mon law test -for ascertaining the employer-employee rela- * |

tionship.” (370 U.S. 1, 3) Lending support to the require- .

ment. for the application of agency principles, Webb, supra, .

observed that when defining who were employees, there was . 3

-no rule of thumb “displacing the complex of common law

‘rules Congress so carefully tried to preserve.” (Webb, 397

U.S. 194) Webb added that in the maritime field the via-

bility of the common law rules dictated that the status of -

PEUIEG fares egeeer eT te ec Qiysey

.

fishermen_was-to-be-judged-“against the standards Of Mari-

time law’’, (/d., 397 U.S. at 194), and that they would be

considered employees “except where there is nearly a total

relinquishment of control through a bareboat or demise

charter” arrangement. (/d., 397 U.S. 192)

Cory

___ The court of appeals agreed that the district ~court’s

findings were supported. by ‘the evidence (App. A, p. ZA.

4a, ftn. 4), and that maritime standards were applied in

reaching the conclusion that the fishermen were not the

petitioners’ employees. (App. A, p. Sa, ftn. 5). The :

7 rae [reersrerenemerarg ey ete ong vent

point of divergence, leading to reversal, was the district .

court’s refusal to consider cases involving personal injuries :

under the Jones Act and maintenance and cure which were :

adopted by the court of appeals as the

law when determining “employee” status under the FICA .

and FUTA. (App. A, pp. 8a-9a, ftn. 11, 12) a

The significance of thé court of appeals’ decision, unless | f

corrected, will result in deficiencies -in- employment taxes 4

retrospectively assessed by the Revenue Service affecting .

the lives, businesses and aspirations of numerous fishing

boatowners who, until now, followed the Fifth Circuit’s rt

guide-lines for fixing employment tax liabilities set out in “t

PR Per

United States v. Crawford Packing Co.,. 330 F.2d 196

(C.A.-5, 1964). It held that shrimp fishermen’ were not |

the vessel owners’ employees under principles of common >

~ law agency. The court-of appeals’ enlarged standards of the

~ Jones Act for determining employer-employee relationships,

were considered inapposite and unnecessary to a tax case de-

cision in Crawford Packing Co., supra.

The district court’s application of common Iiw agency \

- . principles is supported by the legislative history of the

FICA. and the FUTA and the interpreting Treasury Regu-

lations* which represent Congressional disapproval of the

so-called “‘economic reality” test as a primary tool to

determine the presence or meenee of an emp/oyer-employee

’ relationship for tax purposes.*

San dieses cnets-cinelied egnnnyinttat-wntine-tha-qnerel—

maritime law giving primacy to “control, (which) is prob-

ably the most important factor under maritime law * * *”

for determining “employee” status (Webl,. 397 US. at

192), implying the existence of a demise charter within

a commercial Context. (App. C, p. 21a) Once this rela-

tionship is found to exist, the petitioners cannot be the

employers of the: fishermen and be required to meet the

tax obligations under the FICA and FUTA.

Keeping in mind that-Congress discarded the “economic

reality” test of “employee” for FICA and FUTA purposes,

Congress did intend, however, that the purposes of the

Jones Act should not be constricted by ‘the common-law

_ concepts of control so as to bar from its benefits, as

" La 4 . t » :

saad ehhh hones awaadial I, | pasnacatcneedeienan04 Pe meme deaiicrer ees Peet

independent contractors, those, who were as a matter

economic reality, dependent upon the business to which

they rendered services. Cosmopolitan Shipping Co: v.

3See text in App. D, pp. 26a-28a.

“This Court provided a concise account of the development of the

concept of “economic reality” and its legislative rejection in United»

States v. Webb, 397 US. at 182-188. See also, S. Rep. No. 1255, °

80th Cong. 2nd Sess., (1948), reprinted at 2 U.S. Code ei at

. Service and Administrative News (1943) pp. 1752-1775.

yf

LP NES 8 hI PAP RES ETE EE SEE AN BRITS cll Pt eh dri en g%

bar |

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McAllister, 337 U.S. 783, 790 (1949). Cety3 the

"agency standards favoring a “demise in a commercial con-

text here were far afield from the humanitarian policies

in the Jones Act cases, cited by the court of appeals, dis-

favoring a demise in a personal: injury context in order to

preserve seamens’ traditional rights to recover ‘against vessel

owners for fatal and non-fatal injuries. (App. A, pp. 8a,

- 9a) This comparison tends to strengthen the proposition that

within a commercial context, as opposed to a personal i injury

context, the district court properly implied the existence of

_ a demise under the facts here. (App..C, pp. 21a, 23a, 24a):

The court of appeals was under the erroneous impression

that this Court, in Webb, barred it from applying the common-

law_rules simply because it was a maritime case-5 The

court below erred: in concluding that it was: required to

apply the free-wheeling definition of “employee” found

in Jones Act decisional rules as the measure of the peti-

tioners’ tax obligations, without regard to agency prin-

ciptes under the “Benerar maritime law.

Implicit in both Webb and Williams Packing’ Co., supra,

a demise may exist in a commercial context according to

‘the principles of general maritime law, which in a personal

injury context, by maritime standards deviating from the

i eeeenalld

_FUTA from a demise under the Jones Act. corse:

general maritime law, may result in an employer-employee |

relationship. There is no anomaly in such’ a result. . The

dual role of “employee”’ status in our complex economic .

society is not uncommon in land-based affairs.6 No logi-

~ cal reason appears for its nonexistence in the maritime

field. This Court should clarify the separate legal tests

distinguishing. demise charter status under the FECA and

“ reversing our first Webb decision the Supreme Court made it

unmistakably clear that we committed error in applying common-law

principles vsti Mase (App. A, p. 7a)

©NLRB vy. Hearst Publications, 322 U.S. 111, 122 (1943) held that

one may be an independent contractor under the common law con-

trol test and also be an employee for purposes of workman’s com-

pensation.

PR ARE: PR LS AMR AS: tae TI AS RS Rn WE. 0 MERI RARE BL ND ieee ¥,

— FEE ees eae aoa <a a ; 12

Whether a demise would exist by the application of the

. enlarged- standard for determining employer-employee rela-

tionships under the Jones Act is unnecessary to-a decision

.in a tax case. - This is so becduse when deciding issues of

FICA and FUTA tax. obligations, only the vessel owners

and the United States are parties. Under the Jones Act,

the United: States is not a party nor are taxes in issue, __

Instead the parties are injured seamen and vessel owners. '

Jones Act issues concern compensation for personal injuries,

not taxes. Thus Courts have deviated from the general mari-

time law in personal injury cases requiring, for humanitarian

reasons, that seamen, the wards of the admiralty court, not be

a ae ipso facto from recovery simply by the construc- '

tion of an implied demise. It was error for the court below to

attempt to-fashroratrimaritime standards to fit the, PrO-

crustean bed. of the Jones Act. Although common factors—

employee status—may emerge under the tax Acts and the

Jones Act, nevertheless, independent consideration and

resolution is possible. Disregard for the common law

a agency rules, emphasizing control, required by this Court

- in both Webb and Williams Packing Co., supra, and making de-

cisive instead the irrelevant criteria of the Jones Act—the

apparent logic of the court of appeals—is to curtail the appli-

_cation of the FICA and FUTA radically. The propriety- of the

; approach by the Fifth Circuit’ is a qyestion warranting review

. by this Court.

a a This is is not the first: time that the Fifth Circuit followed such an |

—* approach. Following -reversal-of United-States v—Webb, 462 F.2¢—_ —_

' 956 (C.A.-5, 1968) by this Court at 397 U.S. 179 (1970), the Cir-

cuit Court, on remand, followed a dictum. previously written in the

1968 case to the effect that the only maritime standards it recog-

nized in FICA and FUTA tax eases were the decisional rules under

the Jones Act and for maintenance and cure. 402 F.2d at. 959.

The dictum was repeated in the case under review. (App. A, p. 6a

and ftn. 8) ~

NRL NESSES, Lainey Ae a

13

___ =i The ¢ Court committed serious error by overstepping

the proper bounds of appellate review. The. sundisputed

- facts show: that the owners actually relinquished command,

navigation, and control over their vessels to the captains in

consideration for the entire catch of fish at er

: prices. All fishing was done by.-the captains without’

scrutiny, naggy or control by the owners except as

to the results, , the sale and delivery of the catch to

the owners at bande City, Florida. The fishermen were

paid solely on the basis of their individual catches. As a

result some would prosper and others would lose.on the.

same trip: There were no guaranteed earnings of any kind

from the owners. The fishermen bore a substantial risk.

of loss by virtue of their obligation to defray all the costs

.of the Trip. Whether there was a profit or loss depended

upon how the captain, as any other businessman, com-

bined efficiency and seonomy in operating his vessel. - ——_

_Independence among fishermen jis traditional. Tite factors

of controt tere are virtually nonexistent. To regard these =

captains as common law employees strains reality. Applica-

. tion of the statutory concept of employment in the context

of a particular industry involves an exercise of judgment that,

” stress, is pectliarly within the € province _ oa ftoder: of- | |

| mination required by the statute, a multitude of rel

all of the incidents of the relationship—must be assessed.

-and weighed, and there is no hard-and-fast rule to guide

decisions—_A-determination-by—a_triat judge in the capa-

city of jury and judge should be accorded the highest

j deference by a reviewing court.. This was not a purely

| factual finding by the trial judge, but_involved the appli——_——-—

cation of law to the facts—what do the facts establish

under the common law of agericy applied “to the sea:

employee or independent contractor? Such a determina-

tion should not be set aside just because the court of ae

appeals would, as an original. matter, decide the case the

other way: Here the district. court madé a choice between

Sara

er Rie RAS sh a

Lis two. fairly conflicting views. The “clearly errofieous”’ rule

of civil actions-is applicable to suits in admiralty in

_ ‘*geheral,® and to the existence of operative facts of a demise

-’ = charter. in ‘particular. ‘Guzman v. Pichirilo, 369 U.S. 698,

: 702. (1962). The court of appeals should have upheld the

aan trial court. The error should be corrected by this Court

- in the interest of sound administration of the tax provi-

sions under. the FICA and FUTA. a

| 3. . The Fifth Circuit's imposition of the dimensionless

=~. and amorphous concept of employer-employeé: relation- |

ships, peculiar to the Jones Act (46 U.S.C. § 688) as the -

« “ - méasure,of petitioners’ excise tax liability, violates the *'uni-

formity” requirements of Article I, Section 8, Cl. 1. of the

United States Constitution.: . ;

Petitioners, and boatowners similarly situated through-

. out the country, become obligated to the United States ;

4. for these taxes only in the absence of demise charters

- between the owners and the boat captains. The sole ques- |

= __ tion, therefore, is whether the captains are “employees ,

or, in maritime parlance, “demisees” ‘(indgpendent con-

‘ tractors), within the meaning of the federal tax statutes

(FICA and FUTA). This question ‘cannot ‘be determined

___. by whether or_not they may be “employees” within the —

-. ‘

>

as required by the court of appeals. Article }, Section

oe

8, Cl. 1 of the United States Constitution, supra, -p. 3.-_¢

$$ requires that tiability Tor excise taxes shall be uniform

,.- =

-

< a wa :

“© “SMeallister v. United States, 348 US. 19, 20 (1954)

9Citing Stevens v. Seacoast Co., 414 F.2d 1032 (CA-5, 1969) the -

Fifth Citcuit said: “We * * * held the demise: charter test to be

_. the proper standard for defining the relationship between vessel

owners and seamen under admiralty law—the Jones Act.” (App.-A,

p. 9a) : é

eae

- cise tax obligations by a negligence statute (Jones Act) while

throughout the United States. The employment taxes here in-

volved are excise taxes. Steward Machine Co. v. Davis, 301 -

ee S. 548, 583 (1937) and Helvering v. Davis, 301 U. S..619,

645 (1937). Under the Fifth Circuit’ s decision, the Andersons

and all boatowners in the Fifth Circuit must measure their ex-

other employers, everywhere, measure their obligations by the .

tax Acts Congress legislated for that purpose. Gauging identi-

- cal tax burdens by different legal standards is. clearly discrim-

- inatory: According to settled doctrine, “[tJhe rule of

‘(excise tax) liability shall.be the -same in all parts of the:

United States.”” Steward Machine Co. v. Davis,.301 U.S.

at 583. Although the Equal Protection clause is not a

limitation upon the powers of the national government,

nevertheless a Brass discrimination would probably _vio-

late due process.’ -.. : -

Unless ital by this” Court, the Fifth Circuit’s

~- error may tend-to-adversely_affect. the fishing industry. —— a

other coastal areas and impair the efficient administration ,

field.. If there is to be a digression from the uniform igposi-

tion of excise taxes by the FICA and FUTA, it should be

allowed only after full review by this Court.

‘4° ~-Inherent-in-the Fifth Cizcuit’s opinion is.the implica-—— —

of employers’ tax obligations generally in the maritime E

,

. ats « —» ~

;

—______*——__——"Fon-that-vesset-owners_rather-than—eaptains -would—be—a- :

’ ~ —_

nee sepensible-souree”s upon-whom the fiability for col- 4

a 7 lecting these taxes should fall. Assuming, arguendo, this ; |

to be true. to hold ‘these seamen were employees on these’:

facts in order ‘to provide the tax collector with a more

-responsible collection source will require a change in. estab-

lished maritime: doctrine under this Court’s Webb deci--

sion'' —a change the courts Should leave to the Con-

TP RWC pn hen

10D Jiscrimination, if gross enough, is equivalent to confiscation .

and subject under the Fifth Amendment to challenge and annul-

ment. * “Steward Machine Co. v. Davis, 301 U.S. at S85. ~ -— 5

‘This Court said the .standards to be applied for determining |=

“empjoyee” status are those found in the FICA, FUTA and Treasuy

Regulations. Webb, 397 U.S. at 182-188, 196. Neither ‘the. Jones Act

nor maritime tort rationale were mentioned in Webb.

6. j P

7

16

gress. As a basis for reversal, the Fifth Circuit was

much persuaded by the concept that ‘petitioners’ pay-

ment of the taxes involved constituted evidence that

the seamen were employees.'? Common’ sense dictates

that a court must first reach & conclusion that the boat-

owner is an employer before considering whether or not

employment taxes are owed, not the other way around.

The court’s opinion below, if allowed to starid, will pose-

a dilemma for all taxpayers litigating employment tax refund

suits. If the mere payment of a tax is an admission that

it is legally due, then the adversary process in tax refund

litigation will become frustrated and theaningless. Had

petitioners failed to make such withholdings and pay-

ments they would have been subjected to assessments

and penalties’? and=to possible criminal-sanctions. See,’

26 U.S.C: $7202. Nor could petitioners have enjoined

- the enforcement of the tax, Enochs v. Williams Packing

Co., 370 US. 1, nor challenged-the deficiency in the

Tax Court."* To suggest, as the Fifth Circuit implies,

that’ petitioners should not have paid the taxes if they

. believed the fishermen were not employees would be to

approve snares and traps for the unwary. In addition, the

payment of the taxes was a jurisdictional prerequisite to ©

the filing of this suit. It would be a strange law, indeed,

. which first required the ar of the tax as a basis for

1 Satis ail denis euaiis tow eunsitign of the Ghat det income tax

_ payments ‘were withheld from payments made to the captains and in-"

dividual crew members.” (App. A, p. 4a, ftn. 4) Also, at App. A,

p. 3a: "esp ena platen cnt alae ames serniaeeaeed dal

em Packing Co. v. Enochs, 176 F. Supp. 168, 170,

(SD Miss., 1959) aff'd. 291 F.2d 412 (CA-5), rev'd on jurisdictional

grounds 370 US: 1. Failure to withhold taxes resulted in large

deficiencies and seizure of the vessels.

“The Tax Court hai no jurisdiction in respect of FICA and

FUTA taxes. Jurisdiction is confined to income, estate and gift

_ tates. 26 USL. $7442.

17

the filing of nie suit for 4ax refund, and hen permit its pay-

ment to be a ground for defense against the claim. Unless this

Court corrects the ruling below, the mere payment of a tax in

the Fifth Circuit, and ey beyond, will panteate a claim —

for - refund. .

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted,

JOSEPH J. LYMAN -

1200 18th Street, N.W.

Washington, D.C. 20036

, | ” . Attorney for Petitioners —

February, 1972

la |

United States Court of Appeals

FOR THE FIFTH CIRCUIT

No. 71-1332

CHARLES F., MICHAEL L. and L. M. ANDERSON

t/a ANDERSON SEAFOOD COMPANY, ET AL.,

versus

UNITED STATES OF AMERICA,

ee

Appeal from the United States District Court for the

Northern District of Florida

(October 27, 1971)

Before GEWIN, GOLDBERG and DYER,

Circuit Judges.

GEWIN, Circuit Judge: This is a tax refund case.

Under federal law' an employer is responsible for the

‘Federal Insurance Contributions -Act, 26 US.C.A, § 3101 et seq.;

Federal Unemployment Tax Act, 26 U.S.C.A. § 3301 et seq.

In both of. the cited statutes “employee” is defined to in-

cjude “any individual who, under the usual common law

rules applicable in determining the employer-employee rela-

_ tionship has the status of an employee.”

?

RS ee

payment of a specified portion of social security and

- unemployment taxes on the earnings of his employees.

In this case the district court granted taxpayers,”

- owners of commercial. snapper fishing boats, a refund

of such taxes which had been paid on behalf of the

captains and crews who manned taxpayers’ boats.

While it is our. Opinion that the essential and critical

findings of fact by the district court are supported by

substantial evidence, we reverse because we do not

believe that the legal conclusions reached are sup-

portee by the facts found.

Taxpayers owned boats used in commercial fishing

in the Gulf of Mexico. Oral contractual arrangements

in accordance with long established customs of the in-

dustry. were made with captains who were selected

from applicants in the community. Each captain was

furnished with an equipped vessel by the owner. The

captains were to staff the boats with crewmen and to

fish for snapper to be sold to the boat owners at an

agreed price. In many cases the captains served on the -

same vessel for a substantial length of time, although

the oral agreements permitted either the taxpayers

or the captains to terminate the rélationship at the end

_ of any fishing trip. In addition, the taxpayers reserved

- the right to'terminate relations with captains if their

actions endangered personnel or destroyed property,

if the catch was sold to others without the consent of the

‘taxpayers, or ohare failed to make a profitable catch

of fish. The captains usually determined the duration

of fishing trips which varied according to ane

The taxpayers-appellees are: Charles F., Michael L. and J. M.

‘Anderson t/a Anderson Seafood Company, et al.

circumstances, but agreed to return the catches to the

home port and docking facilities leased at the expense

of taxpayers without a guarantee of any earnings if

they failed to catch fish. Unless the taxpayers gave

their consent the catches were delivered only to them

at a negotiated price per pound agreed upon prior to

_ the commencement of the trip. The captains managed

the details of the operation of the boats and the manner |

of fishing. - |

While the captains were free to establish their own

standard of compensation, it was the general practice

to fix the wage rates by agreement between the cap-

tain and the crew based upon the weight of their catch.

The earnings of the captains depended entirely upon.

the total volume of the catches. At the conclusion of a

fishing trip the captains delivered a tally sheet to the

taxpayers who then performed certain bookkeeping ©

_ Services and computations and issued individual checks

to the captains and the members of the crews. Income

‘taxes were withheld by the taxpayers from such pay-

ments.

It was clearly understood that the boats were to be

operated exclusively for the purpose of snapper fish-

_ ing. In some circumstances, depending upon market. .

conditions, the taxpayers would receive from the cap-

tains and the crews other types of fish at an agreed

price. The amounts of fish, other than snapper, which

the taxpayers were -willing to receive were limited,

and any excess was accepted with the understanding

that it would be sold on consignment and whatever

“

"

4a

price was obtained would be divided between the tax-

payers and the fishermen on a — basis.

Boat repairs and maintenance costs were paid for by

taxpayers,? who were also responsible . for property

damage to the vessel and for personal injuries to crew-

- men that resulted from defects in the vessels. Insurance

premiums, if any, were paid by taxpayers. Expenses

immediately incidental to each fishing trip such as —

the cost of foori, ice, fuel, tackle and bait were borne

- by the captains and their crews. Supplies were usually

- purchased at places where the taxpayers maintained

credit. At tirnes money was advanced to the captains

by the taxpeyers against anticipated earnings. .The

boats were equipped with radios which were used to

- communicate with taxpayers in case of emergency,

or when repairs were needed, and to give-approxi- _

mately 24 hours notice before returning to the home

port at Panama City, Florida, designated by the tax-

payers as the usual place of unloading the catch. The

taxpayers reserved the right to control the results of

the fishing venture and they interfered in the precess

to the degree necessary to assure a proper result.‘

3In finding of fact number 5 the district Judge stated, “All repairs _

wer: made by and paid for by the plaintiffs.” In finding num- -

ber 20 he stated, “Boat repairs and maintenance costs, which

wee substantial, were the expense of plaintiffs.”

4The facts herein outlined are without material dispute and are

besed upon the facts found by the trial court. The trial co

rade no mention of the fact that income tax payments

withheld from payments made to the captains and individual

crew members. The government also calis attention to its

‘Exhibit 8 which reflects that in a personal injury case under

’ the Jones Act, two of the taxpayer partners-conceded the em-

ployee status of an injured crew member in litigation which

arose in the Nogthern District of,Florida in 1967. ,

~_—~

Sa

With the foregoing facts in mind we must determine

whether taxpayers are entitled to the refund allowed |

by the district court. The answer to that question turns

upon whether the taxpayers were employers of the

captains and the crew members. The- government con-

tends that the employer-employee relationship does -

exist. On the other hand, the taxpayers urgently. con-

tend that the district court correctly decided that the -

captains and crewmen who operated the fishing boats

were not employees of the taxpayers within the. pur-:

‘view. of the above mentioned acts.

Taxpayers argue for the application of a sort of *

brackish form of land-based common law principles.®

We must reject this contention. This case cannot be

decided according to land-based common law or upon

theories thet are a mixture of common law and mari-

8In its brief the taxpayers characterize“ the ruling of the district -

court as follows:

- ‘The District Court determined that an insufficient

degree of control was exercised by the taxpayer-boat-

owners over the captains and crewmen to create an

employer-employee relationship under the common

law rules in the context of a fishing operation.

At other points in the brief it is stated:

The faetors comprising the “usual common law rules”

defining “employees” became integrated = existing

general maritime law.

It was obvious from the findings that the District

* Court had the common law test clearly in mind.

While. we do not agree with the district court’s application

of the standards of maritime law, it is obvious to us that the

court felt bound by maritime law rather than common law

standards. Nevertheless, in its application of maritime law the

court excluded consideration of cases involving the Jones Act

and cases involving maintenance and cure.

6a

time law. We must move entirely away from the shore

to the wide, open sea. Justice Harlan aptly stated the

rule when‘he concluded tersely that maritime law is

“the common law of seafaring men.”¢

The issue with which we deal here is not new to this

court. When Webb v. United States? made its first ap-

pearance in this court, under facts not greatly dis-

similar from those involved in the instant case, we |

applied common-law rules because we considered that

the tax, statutes, there discussed and here involved,

compelled a decision on the basis of common-law

standards. At that time we emphasized the fact that if

- the court were free to apply maritime law as a test of

the employer-employee relationship, tHe district court’s

decision could not stand. ~~

6In United States v. Webb, 397 US. 179 at 191, 25 LEd.2d 207 at

215 (1970) Justice Harlan stated:

Maritime law, the common.law of seafaring men, pro-

’ vides an established network of rules and distinctions

that are practically suited to the necessities.of the sea,

just as land-based decisional law provides a body of

rules adapted to the various forms of domestic employ-.

ment. The goal of minimizing uncertainty can be ac-

complished, in the maritime field, by resort to the

“usual” rules‘ of maritime jurisprudence. (footnote ~

omitted).

7402 F.2¢ 956 (5th Cir. 1968).

eIn our first Webb decision we stated:

_ The “ ‘ancient solicitude of courts of admiralty - [sic]

for those who labor at sea’ continues unchanged de-

spite the progress from canvas sails to diesel engines.”

In nontax context when courts are asked to determine .

whether seamen are employees of the vessel’s owner,

all ambiguities or doubts are resolved in favor of the

seaman. Today, the law is clear that in both categories

of cases — Jones Act, and maintenance and cure —

the owner of the vessel is the employer unless the

ar

J

In reversing our first Webb decision the Supreme

Court mace is unmistakably clear that we committed

error in applying common-law principles and in de-

clining to determine the status of the captains and

crewmen against standards of maritime law. The

Court squarely rejected the argument that the legis-

lative history and the applicable tax statutes indicat- _

ed a congressional intent to apply land-based stand-

ards to maritime activities. The Court could not ac-

cept the thought that Congress intended “‘the anomal- :

ous result” of judging maritime activities by standards

which are not relevayit to seafaring enterprises. Pro-

ceeding a step further, the Court strongly indicated

that.under maritime law control is the most important

factor. Succinctly stated, the Court concluded that:

[E]xcept where there is nearby total relin-

quishment of. control through a bareboat or

demise, charter, the owner may nevertheless ~

be considered, under maritime law, to have

_ sufficient control to be Names with the duties

of an employer.®

Upon remand we followed the seivctntnal “analysis

_of the Supreme Court’s Saetae. in Webb. We recogniz-

¢

vessel is held under a demise charter. The arrange-

ments here certainly did not constitute demise charters.

If we were free to apply maritime law as a test of

the employer-employee relationship,..we would re-

verse the decision of the district court. This is so be-

cause it is clear that under maritime law the captain .

is the agent of the owner (on the facts here) and the -

crew hands are employees. ‘

9397 U.S. at 192, 27 LEd.2d at 216. eo

s

ae

|

|

CBA abs; ‘eda sides

8a

a

ed the ‘crucial legal issue to be whether under mari-

time law the captains and crewmen were employees

of the shipowner within the meaning of the Federal

_ Insurance Contributions Act and the Federal Un-

employment Tax Act. Applying maritime law we de-

cided that the relationship was that of: employer-em-

ployee. We ordered the complaints of the taxpayers

dismissed and concluded:

The Supreme Court held that this Court “err-

ed in declining to judge the status of the cap-

tains and crewmen against the standards of

, = £ sa ‘ —

ea ee OT ge er See ee

. _

maritime law.” This holding, coupled with our

earlier conclusion that under maritime law/the

Captain is the agent of the owner and the crew

hands are employees, leaves no room for fur-

. ther argument as to the appropriate disposi-

tion of this case.'°

. Moreover, prior to the Supreme Court decision in

Webb this court had occasion to consider the validity ©

‘of.a seaman’s claim in an action to recover from the

owner of a fishing Vessel for personal injuries sus- .

tained during oyster dredging operations."' In Stevens

v. Seacoast Company we considered the seaman’s

__ Claim against the shipowner’s contention that the

master of the fishing vessel was the bareboat char-

terer or ,“a sort of seagoing independent contractor

10424 F.2d 1070 at 1071.

Stevens v.. Seacoast Co., 414 F.2d 1032 (5th Cir. 1969). The first

Webb decision was decided November 6, 1968, the Supreme

Court decision March 3, 1970, Stevens was decided on August -

- 13, 1969, ee ee ee

1970.

carrying on a joint venture with fellow crew mem-

bers.” The shipowner argued that this arrangement

madé the seaman an employee of the master and not

the owner of the ship. We rejected this co tention and

found that the seaman was dn employed of the ship

owner. We discussed the matter of control and held the |

demise charter test to be the proper standard for de-

fining the relationship between vessel Owners and

Seamen, under admiralty law — the Jones Act. We

expressly emphasized the Congressional policy to as-

_ sure day-by-day Protection to seamen.12.

The case sub judice is not one “where there is near-

ly. total relinquishment of control through 1 bareboat -

or demise charter.” Under the facts disclosed by the

Tecord we are compelled to reach the conc usion that

_ the agreements here involved between the boat owners

and the captains resulted in an employer-employee

e

-'2We concluded: _ os | ra

‘(T]he fact that there is no tenure or substantial dura-

tion in point of time to the arrangement between Ship-

Owner and Master so that at the first moment the ©

“independent” contractor displeases the shipowner the

agreement can be revoked at will, it demonstrates that

no real possessory rights are invested in the

voyage charters and the like. . - 4.

At 1036. :

lessen or avoid the strict responsibilities imposed by

Co: upon the employers of seamen.

At 1038 3

(footnotes omitted) —

relationship between the taxpayers on the one hand

and the captains and the crewmen on the other. The

_arrangements between the shipowners and the ‘cap- -

tains did not constitute a bareboat or demise charter.

We-do not find it necessary to define in precise, tech~

nical terms the meaning of bareboat or demise chaste”

in all ‘circumstances and under other conccivahle

facts. It is sufficient to say that such charters are

erent

|

Uli 3a] Heo

i

‘iit a 1

mand and navigation and. almost total relinquishment

characterized by a relinquishment of possession, com-

of control.**

i2a

APPENDIX B

JUDGMENT OF THE UNITED STATES COURT

OF APPEALS FOR THE FIFTH CIRCUIT

[Filed Nov. 22, 1971]

JUDGMENT

This cause came on to be heard on the transcript of the

record from the United States District Court for the North-

ern District of Florida, and was argued by counsel

OF CONSIDERATION WHEREOF, It was now here or-

_dered and adjudged by this Court that the judgment of the

said District Court in this cause be, and the same is here-

by, reversed with directions in accordance with the opinion 3

of this Court;

tt & further ordered that plaintiffs-appellees pay to de-

- fendant-appeliant the costs.on appeal to be taxed by the

Clerk of this Court.

; October 27, 1971

issued as Mandate: Nov. 19, 1971

+ a :

F APPENDIX C_

OPINION AND ORDER OF THE UNITED STATES

DISTRICT COURT FOR THE NORTHERN DISTRICT

-OF F LORIDA—MARIANNA DIVISION

[Filed Sep. 30, 1970]

OPINION-ORDER

This is an action under the Internal Revenue Laws of the

_ United States for the recovery of taxes paid pursuant to .

the Federal Insurance Contributions Act, 26 USCA, Sec-

tions 3101 et seq. and the Federal Unemployment Tax

Act, 26 USCA, Sections 3301 et seq. for the period Jan-

uary 1, 1965, through June 30, 1968. .

The issue to be decided is whether fishermen comprised

of captains and crewmen who performed fishing services

on plaintiffs’ commercial fishing boats, were or were not

employees of the plaintiffs under Sections 3121 (d) (2)

and 3306 (i), Internal Revenue Code, Title 26, United

States Code. The plaintiffs seek to have refunded that

portion of Federal Insurance Contributions Act. taxes and

Federal Unemployment Tax Act taxes paid by plaintiffs.

Under Section 3121 (d) (2), Title 26, United States

Code, “employee” means—

“2. Any individual who, under the usual com-

mon law rules applicable in determining the em-

ployer-employee relationship, has the status of an

= a

employee; or . . .

‘Section 3306, Title 26, UMted Stétes Code, provides

os follows: .

“ti) Employee.—For purposes of this chapter, the

term ‘employee’ includes an officer of a corporation,

but such term does not include—

“(1) any individual who, under the usual com-

mon law rules applicable in determining the em-

ployer-employee relationship, has the status of an

independent contractor, or _

“(2) any individual (except an officer of a cer .

poration) who is not an employee under such com-

mon law rules.” -

v

14a

This Court has jurisdiction of this cause under Sections

1340 and 1346 (a), Title 28, United States Code.

‘The Court having considered the pleadings, stipulations

and evidence and briefs of counsel, enters the following

findings. of fact and conclusions of law in accordance

with Rule 52 of the Federal Rules of Civil Procedure:

FINDINGS OF FACT -

1. The plaintiffs Charles F., Michael L., and L. M.

Anderson are individuals, t/a Anderson Seafood Com-

pany. The plaintiffs Charles F. and Michael .L. Anderson

are individuals in a separate partnership. The plaintiff

_ Lambert M. -Anderson is an individual. ur

2: The plaintiffs were engaged in the business of com-

mercially fishing for snapper, an edible fish. Their’ busi-

ness activity embraced (a) the ownership of commercial

fishing boats, (b) the gathering of snapper fish under oral

arrangements with boat.captains on the terms and, con-

itions and pursuant to the customs, policies and usages -

in these findings, and (c) the sale of the fish to

others on the open markt.

3. Each plaintiff owned one or more snapper fishing

boats which operated in the Gulf of Mexico off the coast

of Louisiana, Texas and Mexico. Each boat was purchased

at a cost of from $34,000.00 to $45,000.00. The fish

caught by the boats were returned and sold in markets

throughout the United States.

- 4. The plaintiffs’, boats were registered annually with

the United States Customs Service in Panama City, Florida.

5. The ‘plaintiffs’ boats operated chiefly from docking

facilities leased by the plaintiffs.

6. The plaintiffs’ boats were intended to be operated

solely for snapper fishing. All repairs were made by and

paid for by the plaintiffs.

7. After the plaintiffs provided a boat for snapper fish-

ing plaintiffs would select from the fishermen in the com-

munity making application therefor, a captain for the pur-

pose of fishing for snapper in the Gulf of Mexico. -

1Sa

8. After an individual! was selected as Captain, the arrange-

ments between the plaintiffs and Captain were concluded and

the boat was turned over to him by the plaintiffs. The Cap-

tain would take the boat identification papers to the Bureau

of Customs and would there register with the Bureau as Cap-

aa

tain of the boat as required by federal law.

. 9. Each captain selected and determined (a) the number

Of fishermen to comprise his crew (usually eight or nine

members), (b) their qualifications, (c) their working con-

_ ditions, and (d) agreed with them how much they would

be paid. _ tens | : sade

10. Each captain had charge of his crew and determined

_ (a) when to depart on a fishing trip, (b) when to return, -

(c) when to fish, (d) how to fish (ie., the-actual mechan-

ical process of operating fishing gear) and (e) all “other

ing the operation, maintenance and fish-

ing of the boat from the time of departure from plain-

tiffs’ docks until the return of the boat from a Partic-

ular trip. The crewmen looked to the Captains for their

orders.

11. The captain agreed without a guarantee of any

kind, to make fishing trips and return the catches to -

the home port for Sale to the plaintiffs at a negoti-

ated Price per pound arrived at prior to the commencement

Party could terminate -the arrangement at the conclusion

of any trip, custom and Practice was for it to be con-

L 6a

over a period of several years. Others came and went

elsewhere after making a few trips. The captains were

free to perform similar services for other boat owners

and did so without recrimination by the plaintiffs.

- 13. The fishing operations were conducted and treated

by. the parties as separate undertakings on-a trip to trip

basis. In the foregoing respect the plaintiff-owners did

not direct or control the operations of the boats as ‘to

when they would leave port, where they would go to

fish or when they would return. All the boats were Op-

erated in substantially the same manner and the arrange-

ments and undertakings between the plaintiffs and all the

captains were the same. |

14. The plaintiffs did not undertake to instruct the

captains concerning their methods of conducting fishing

operations, nor did the plaintiffs have or reserve the

right to control or direct their work or how to ac

complish it. The plaintiffs’ primary interest was to ob-

tain and market the largest possible catches of snapper.

There was no express agreement specifying the extent

to which control may be exercised by the plaintiffs, but

no actual control was exercised over the details and

methods employed by the captains and crews. -

15. The captain was responsible for unloading the fish

after completion of a trip and for keeping the boat clean

‘while in port after a trip. Neither the captain nor the

crew was paid any additional amount for unloading or ~

the cleaning work, except as such payment was part of

the sale price of the fish to the plaintiffs. If a crew-

individual was hired to perform this work, it was paid for

by the absent fisherman or the captain. The plaintiffs had

fo responsibility for payment for such work.

16. Under the arrangement between the plaintiffs and

the captains, consistent with the long-standing custom

among snapper fishermen, the plaintiffs would purchase

the collective catches of fish at a negotiated price per

17. The plaintiffs had no direct relationship with the

crewmen. The captain selected them and under their

own sharing arrangement negotiated the amount the captain

17a

and each fisherman would be paid out of the fisherman’s

separate catch of fish. Out-of the unit price per pound

paid by the plaintiffs to the captain for the fish, the cap-

- tain retained a percentage of the sale price aS compen- —

sation for leading the venture and the balance was paid -

to the individual crewman based ‘upon the volume of his

particular catch. The plaintiffs had no voice in these ar-

' rangements.

18. Each fisherman tallied his catch sepanstiliy. ‘ His

compensation was measured by the weight of his partic-

ular catch. No ther payments were made to him irres-

pective of the time or effort expended. A captain’s

_ earnings were based upon the success or failure of each

individual fisherman’s catch.

19. Three crew members were paid an extra amount

for special services performed. The “icer” was paid one

cent per pound based on the entire catch, over and above

the proceeds from his own catch, for icing the fish in the

hold. On the same basis the .cook (also a fisherman in

his own right) was paid one cent per pound, and the ves-

sel’s engineer was paid one-half cent per pound. These

arrangements were solely between the captains and ¢rew-

men.

20. Various expenses were incurred by the captains and

crewmen in connection with each fishing trip. The captain

and crew paid for (a) all food, groceries and tobacco con-

sumed, (b) all ice necessary for the trip, (c) all the diesel

oil and fuel used in the operation, (d) furnished and paid

‘for all fishing tackle necessary for making the catches, (e)

all the bait carried by the boat, (f) all cooking bottled gas,

as well as cookirg utensils, bedding, laundry, knives, gloves,

foul weather gear and the like and (g) chart paper used in

depth recorders. They were also charged for the cost of a

food freezer used to preserve their food during the trip

as well as rental payments for use of the radar equipment.

All of the foregoing were against the proceeds from .

the sale of their catches to the Alaintiffs. Boat repairs and

maintenance costs, which wére substantial, were the ex-

pense of plaintiffs.

18a

: 46 4 .

21. The owner -of the vessel was responsible to crew-

men for defects in the vesse! and was responsible for

property damage to the vessel. | In addition, insurance,

if any, was paid for by. the plaintiffs. /

22. After completion of a fishing trip the plaintiffs

purchased the fish the same day they were unloaded.

- Following the sale a complete statement of settlenient

in writing was made ‘between plaintiffs and the captain

and crew. Checks were drawn by plaintiffs and ‘the: captain

~ and crew members were paid by plaintiffs. The settlement

* statement/ indicated the gross amount of the proceeds from

the sale of the. fish. . The amount due ‘each fisherman

and ‘ke captain was shown. The cost of the aforemen-

tioned items purchased by the fishermen and paid for

by the plaintiffs was reimbursed. to’ the plaintiffs.

23. The captain decided how much fuel and ice to

take aboard. These items could be purchased any where

but were usually purchased where plaintiffs had. credit. .

These expenses were, the obligation of the captain for

each trip.

24. Each time a boat returned to port, the trip was

considered’ completed and the work of fishing on .that

trip concluded. A complete settlement of: all monies in-

volved in the purchase. and sale of the fish together with

amounts to be deducted as charges against’ the fishermen

for trip expenses was considered a separate trarfSaction.

The amount paid to each crewman differed depending upon ~

the volume of his particular catch. The earnings of the

captain depended solely upon the, collective volume of

the crewmen’s catches. During the course of the trip

each fisherman would segregate his own ¢atch, weigh it

and report his volume to the captain. The “icer” would

place the crewmen’s tallied fish catch in the refrigerated

hold with the other catches. The captain kept his ‘own

tally-sheet disclosing the weight of each catch reported

by the crewmen and recorded the total volume in weight

caught by each man each day. At the conclusion of the

trip, the ‘captain’s tally-sheet was turned in to plaintiffs’ -

office for a computation of the total volume of each crew-

19a

man’s catch and a determination of the gross s2!< price

for the collective catch for the particula.. trip.

25. Normally a trip would last from one to two weeks.

However, it was within the captain’s discretion to fish

a shorter time if he so desired. - If the captain decided

_ to remain near the fishing grounds and not return to

. Panama City, he would. arrange to come into a nearby

port and unload the catch on trucks for delivery to

_ the plaintiffs. .

26. The length of a captain’s trip from- the home

port depended upon many factors such as the capacity

of the boat, the fuel and ice supply, the weather, the

_ presence of the fish, and failure of the vessel’s machinery

- and equipment. Whether the trip could continue or ter-

minate in the light of these factors was left to the cap-

tain’s discretion. While it was to the interest of all par-

ties to. fish the boats as often as possible, the captain

decided how long he would remain ashore between trips.

' 27. There was no guaranteed compensation of any kind

to the captain and crewmen regardless of the time and

effort expended in attempting to catch fish. Plaintiffs

paid no bonuses to the captains. In some instances, de- .

pending upon market conditions, plaintiffs limited the

amount of croaker fish and baby Snapper they would a

purchase at the agreed price. However, plaintiffs accepted

the excess croaker and baby snapper with the under-

standing that the fish would be sold on consignment

and whatever price was obtained would be divided be-*

tween the plaintiffs and fishermen on a negotiated . basis.

28. If a. trip was’ unsuccessful (known as a “broker’’)-

and the value of the catch was insufficient to pay for

the trip expenses incurred, such expenses were carried -

over to a succeeding trip and deducted from the pro-

ceéds of a subsequent catch. The unpaid expenses be-

+. tame the personal obligation of the captain.

29. The plaintiffs’ boats were not equipped with ship-

to-shore telephones. They were equipped with radios

which permitted contact with the boats only through

the marine operator. The communications between the

_ Plaintiffs and the boats during fishing were infrequent, usu-

20a

ally only in cases of emergency. The. captain would call the

plaintiffs in the event -of a breakdown requiring repairs. —

It was the custom for a captain to call the plaintiffs

about twenty-four hours before returning to port to-

unload. The purpose of the, call was to have the

unloading facilities ready when the boat arrived.

: 30. It was agreed that the captains would bring their

éatches to Panama City, Florida, if possible, and sell them

to the plaintiffs at an agreed price per pound. While

the plaintiffs did not guarantee any captain a profit from

his fishing, plaintiffs did guarantee each captain a market

for his catch at the agreed price.

31. A captain could and did often obtain advances of

‘money from the plaintiffs against anticipated earnings.

_ Advances to’ crewmen were made only at the direction

of the captain who assumed personal liability for their

repayment if not paid by the crewmen. All advances

were considered debts owing from the captains to the

plaintiffs. ihe a

32. The arrangements between the plaintiffs and the

captains contemplated a right reserved by the plaintiffs to

control the results of the fishing venture and they inter- -

fered in the process to some degree to assume a proper

result. The plaintiffs’ primary interest was to obtain the

‘largest catches of marketable fish possible. The manner,

methods and details of conducting the fishing operations

_ being the sole prerogatives of the captains, were conducted

without interference by the plaintiffs.

_ 33. The plaintiffs had no control over the crewmen, nor

did they attempt to exercise any control over their -ac-

tivities through. the captains, nor did plaintiffs intend to

reserve such exercise of control over them.

34. Plaintiffs filed a claim for refund of their portion

of the Federal Insurance Contributions taxes and the Fed-

eral Unemployment taxes paid on the earnings of the cap-

tains and crewmen. The claim was disallowed by the

Commissioner of Internal Revenue and this action, which

followed, was timely filed. |

«

| 21a”

CONCLUSIONS OF LAW _

‘1. The provisions of ‘Sections 3121 (d) and 3306 (i),;

Title 26, United States Code, provide that the common |

law rules are applicable in determining who are employees

under the Federal Insurance Contributions Act and the

-Federal Unemployment Tax Act. ~ Ter

2. In determining whether the fishermen who worked on

the vessels of the plaintiffs were employees it is neces-

Sary to apply the standards of maritime law. The stan-

dards of the common law applicable to land-based activities

cannot be applied in determining whether the fishermen

are employees within the meaning jof ‘the Acts. United

States v. Webb, Inc., 397 U.S. 179 (1969). °

3. As was stated by the Supreme Court in Webb, supra,

at page 192: = oe

“Control is probably the most important factor under

mgritime law, just as it is under the test of land-based -

employment. It may be true that, in most maritime

relationships, the workers enjoy discretion that is yn-

usually broad if measured by land-based standards—a

discretion dictated by the seafaring nature of the

activity, However, except where there is nearly total

relinquishment of control through a bare-boat, or

demise, charter, the owner may nevertheless be con-

sidered, under maritime law, to have sufficient con- .

trol to be charged with the duties of employer...”

‘(Emphasis added)

It is argued by the United States that in the absence

of a demise charter it is clear that the seamen are em-

ployees under the rules sét forth in Webb y. United

States, 402 F. 2d 956 (Sth Cir. 1968) and by the

decision of the Fifth Circuit Court of Appeals on re-

mand in United States v. Webb, —__._ F.2d ___— (1970). ‘In

this connection it should be pointed out that the Court

in United States v. Webb, 402 F.2d 956, 959, states:

“This is so because it is clear that \under maritime

law the captain is the agegt of the owner (on ‘the

facts here) and the crew liands are employees.”

(Emphasis added)

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Judgment shall be entered in favor of the plaintiffs.

This order entered this 30th day of September, 1970,

' 25a

APPENDIX D

STATUTE AND REGULATIONS INVOLVED

Internal Revenue Code of 1954:

_ Sec. 3121, Dermrrions.

(a) *--e @€

(d) Employee.—For purposes of this chapter, the

term “employee” means—

law rules applicable in determining the’ employer-

, employee relationship, has the status of an employee; :

(26 U.S.C. (1952 Supp. II) 3121.)

Sec. 3306 [as amended by Sec. 1, Act-of September

1, 1954, c. 1212, 68 Stat. 1130). DEFINITIONS.

Ellie

- (i) Employee—For purposes of this chapter, the

* term “employee” includes an officer of a corporation,

law rules applicable in determining the employer-

employee relationship, has the status of an independ-

ent contractor, or q

(2) any ‘individual (except an officer of a corpo-

ope who-is not an employee under such common

(26 U.S.C. 1964 ed., Sec. 3306.)

26a

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Treasury Regulations on Employment Tax

Code) :

(1954

§ 31.3121 (a)-1

§ 31.3121(d)-1 WHO ARE EMPLOYEES.

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(26 CFR. 31.3121 (d)-1.)

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[26 C.F.R. 31.3306(i)-1.]

29a

[46 U.S.C.A. § 688 (Jones Act)):

Ҥ 688. RECOVERY FOR INJURY TO OR DEATH OF

SEAMAN.

“Any seaman who shall sdffer personal injury in the

course of his employment may, at his election, main-

tain an action for damages at law, with the right of

trial by jury, and in such action all statutes of the

United States modifying or extending the common-

~ law right or remedy in cases of personal injury to rail-

way employees shall apply; and in case of the death

of any seaman as a result of such personal injury

the personal representative of ch, seaman may main-

tain an action for damages at law with the right of trial

by jury, and in such action all statutes of the United

States conferring or regulating the right of action for

death in the case of railway employees, shall be appli-

cable. - Jurisdiction in such actions shall be under the

court of the district in which the defendant employer

resides or in which his principal office is located.”

(Merchant Marine Act of 1920, ch. 250, 41 Stat. 988,

Sec. 33)