MEMORANDUM OPINION ON CLAIM FOR UNPAID CONTRIBUTIONS TO VACATION AND RETIREMENT PLANS

RON CLARK, District Judge.

This is an in rem action involving competing claims against the vessel the CAPTAIN H.A. DOWNING. The CAPTAIN H.A. DOWNING was owned by AMERICAN HEAVY LIFT SHIPPING ("AHL"). The United States by and through the Secretary of Transportation, is the mortgagee on a First Preferred Fleet Mortgage dated October 3, 1996, granted by AHL. When AHL defaulted on the mortgage, the United States filed suit for foreclosure on the vessel. The vessel was arrested on September 29, 2010. On June 18, 2010, AHL filed for bankruptcy. On August 23, 2010, the bankruptcy court entered an order abandoning the estate's interest in the SS CAPTAIN H.A. DOWNING.

On August 9, 2011, the United States Marshal's Service, acting on the court's behalf, sold the vessel at auction for $3,300,000.00. The court confirmed the sale on August 30, 2011. Intervenor Plaintiff Captain Timothy A. Brown as Chairman of the Board of Trustees of the Masters, Mates & Pilots Vacation Plan and Masters, Mates & Pilots Individual Retirement Account Plan asserts a claim on behalf of the individual crew members of the CAPTAIN H.A. DOWNING for unpaid contributions to the crew's vacation and individual retirement plans in the amounts of $34,104.33 and $56.045.65 respectively. Brown argues that these unpaid contributions constitute seamen wages and therefore he is entitled to priority.

A bench trial was held on the above claims against the vessel on October 5-7, 2011. After careful consideration of the parties' papers and proposed findings of fact, the testimony and arguments presented during the trial, and the applicable law, the court finds that the unpaid contributions owed to the vacation plan, but not those owed to the individual retirement account plan, are seamen's wages. Pursuant to Federal Rule of Procedure 52(a)(1), the court makes in addition to the findings stated on the record at the trial, the following findings of fact and conclusions of law.

Law Applicable to Wages of the Crew

Wages of seamen are protected

In maritime law, wages is the compensation allowed to seamen for their services on board a vessel during a voyage. Lakos v. Saliaris, 116 F.2d 440, 442 (4th Cir.1940). This includes not only base wages specified in the shipping articles but also overtime, extra wages, and bonuses. Petersen v. Interocean Ships, Inc., 823 F.2d 334, 336 (9th Cir.1987) quoting 1 M. Norris, The Law of Seamen § 12:1 (4th ed. 1985 at 426). The Penalty Wage Statute provides that 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. 46 U.S.C. § 10313(f). The purpose of this statute is to protect seamen from the harsh consequences of the arbitrary and unscrupulous actions of their employers from placing a seaman ashore with little or no money in his pocket and threatening nonpayment as a means to force seamen to release the ship of all claims. American Foreign S.S. Co. v. Matise, 423 U.S. 150, 160, 96 S.Ct. 410, 416, 46 L.Ed.2d 354 (1975); Fanos v. Maersk Line, Ltd., 246 F.Supp.2d 676, 680 (S.D.Tex.2003); Malanos v. Chandris, 181 F.Supp. 189 (N.D.N.Y.1959).

In order to prevail in this priority dispute, Captain Brown must establish that the unpaid contributions owed to the Plans are wages included within the scope of 46 U.S.C. § 10313. In making this determination, the court notes that a court in admiralty must be solicitous of the seaman. Seamen have traditionally been treated as wards of the courts of admiralty and their rights have been zealously protected. Vaughan v. Atkinson, 369 U.S. 527, 532, 82 S.Ct. 997, 1000, 8 L.Ed.2d 88 (1962); Bass v. Phoenix Seadrill/78, Ltd., 749 F.2d 1154, 1160-61 (5th Cir.1985). The laws of admiralty have been structured this way for hundreds of years so that seamen would be willing to undertake a dangerous occupation, which is beneficial and necessary for our country.

Accordingly, claims by seamen for wages have the highest priority over all other preferred liens and claims, subordinate only to the expenses of custodia legis.1 See 46 U.S.C. § 31326; 46 U.S.C. § 31301(5); United States v. One (1) 254 Ft. Freighter, M.V. Andoria, 570 F.Supp. 413, 415 (E.D.La.1983). Thus, wages of seamen occupy a unique status. Brandon v. S.S. Denton, 302 F.2d 404, 416 (5th Cir.1962). Seamen's wages are "sacred liens, and, as long as a plank of the ship remains, the sailor is entitled, against all other persons, to the proceeds as a security for his wages." Id. (quoting The John G. Stevens, 170 U.S. 113, 119, 18 S.Ct. 544, 547, 42 L.Ed. 969 (1898)).

Seamen's compensation packages today, however, include various cash and non-cash benefits in addition to a base wage. Petersen 823 F.2d at 336. Therefore, "It [is] not always easy for courts to determine which of the many payments that the owner or master of a vessel may make to a seaman should properly be classified as wages." Id.

In maintenance and cure cases, courts generally consider paid vacation as part of a seaman's total wages. Morel v. Sabine Towing & Transportation Co., Inc., 669 F.2d 345, 346 (5th Cir.1982). Each day the seaman works he earns compensation payable in the form of a base wage plus an entitlement to paid vacation. Id. Because the seaman earns paid vacation based on his service on the vessel, paid vacation is an "inherent part of the seaman's wages." Id.

Payments to a plan may be distinguished from "wages"

Where contributions owed to seamen for vacation as well as other benefits such as for pension are paid to and commingled in union benefit plans, rather than to the seaman directly, courts have concluded that the contributions are not wages of the crew. The reasoning for these decisions is set out below.

1. There is no showing that the seaman suffered an actual loss from the employer's failure to contribute because the union guaranteed payment regardless of whether the employer contributed. See West Winds, Inc. v. M.V. Resolute, 720 F.2d 1097 (9th Cir.1983); Brandon v. S. S. Denton, 302 F.2d 404 (5th Cir.1962); Citibank v. Vessel American Maine, 865 F.2d 24 (2nd Cir.1988).

2. Administrative fees and expenses of the union plans are borne to an extent out of the wages of the seamen, who do not receive one-hundred percent of the amount claimed as a lien. Irving Trust Co. v. Golden Sail, 197 F.Supp. 777 (D. Oregon 1961); Brandon, 302 F.2d 404.

3. Payments to the plans were based on other factors which do not relate to a seaman's service on the vessel. See Irving Trust, 197 F.Supp. at 777 (holding unpaid vacation, welfare and pension contributions are not wages of the crew because the contributions owed were a flat sum of $8 a day, and were not related to a seaman's hours, wages, or productivity); Citibank, 865 F.2d at 24 (holding seamen's realization of his benefits were dependent upon several factors unrelated to a seaman's actual service including: employee forfeitures, administrative costs of the trust, and trustee discretion and control of the funds).

4. Contributions were due the trustees, not the seaman and the trustees had complete control over the funds. Irving Trust, 197 F.Supp. at 777; Brandon, 302 F.2d at 415.

5. Unpaid contributions to union trust funds are not wages because there is nothing to connect a particular wage paid with a particular employee. Irving Trust, 197 F.Supp. at 777; Brandon, 302 F.2d at 415; Citibank, 865 F.2d at 24.

6. Such unpaid compensation cannot be converted to a cash equivalent. West Winds, 720 F.2d at 1097 (holding contributions are not wages because the value which they may ultimately confer upon a seaman will vary according to uncertain factors such as the accumulation of trust funds, the amount of investment gains or losses, and employees' needs) Citibank, 865 F.2d at 24 (stating a seaman's realization of his Money Purchase Benefit is dependent upon several different factors such as investment losses, administrative costs and expenses of the trust, fees for professional consultants which prevent calculation of the present value of the benefit).

7. Unpaid contributions are not wages because the value of the benefit that the employees will ultimately receive is speculative — it is based on uncertain future events. Prudential Ins. v. U.S. Lines Inc., 915 F.2d 411 (9th Cir.1990).

For the court to hold in this case that the unpaid contributions to the Vacation and Individual Retirement Account Plans are wages, the plans at issue would have to be distinguished from the plans analyzed in previous cases. In addition, to determine whether the contributions to the Union Plans are wages, the court will consider two questions. Fanos v. Maersk Line Ltd., 246 F.Supp.2d 676, 681 (S.D.Tex. 2003) citing Petersen., 823 F.2d at 336.

First, is the payment for services rendered to the ship? Id. Whether vacation pay is compensation for services rendered to the ship depends on when and how the payment is made. Id. (citing Mateo v. M/S KISO, 805 F.Supp. 761, 780-81 for proposition that vacation pay payable during or immediately following the completion of plaintiffs' service was a wage under the Wage Penalty Statute).

Second, does the payment permit practices that the seamen's wage statutes were intended to prevent (placing the seaman ashore without first paying him his base wages earned during the voyage)? Id. In determining whether the payment owed is wages, the "wage statutes are to be liberally construed to maximize protection of seamen." Id.

Findings of Fact Concerning Both Plans

Findings of Fact Concerning the Vacation Plan

Application of law to findings of fact concerning the Vacation Plan

For the reasons set out below, the court finds the MM & P Vacation Plan is distinguishable from the plans analyzed in prior cases and therefore finds that these amounts are entitled to priority as wages of the crew.

Under the collective bargaining agreement, Vacation benefits are payable to the seaman only after contributions are made to the MM & P Vacation Plan by the contributing employer. Therefore, the seamen here will only be paid their vacation pay if AHL makes all of its required payments to the Vacation Plan and/or that amount is recovered from the sale proceeds of the SS CAPTAIN H.A. DOWNING. The fact that the seamen on board the SS CAPTAIN H.A. DOWNING will suffer a direct loss as a result of their employer's failure to contribute distinguishes this Plan from the plans at issue in Brandon, 302 F.2d at 404, and Citibank, 865 F.2d at 24 where the trustees paid the seamen the money owed regardless of whether the employer made the contribution.

Under the MM & P Vacation Plan, payments to the seamen are based entirely on service to the vessel. Such payments are calculated as a set percentage of each individual seaman's wages. This distinguishes the Vacation Plan from the plans at issue in Irving Trust, 197 F.Supp. at 777 and Citibank, 865 F.2d at 24 where payments to the plan were a flat fee or based on other factors such as employee forfeitures and trustee discretion which did not relate to the seaman's service on the vessel. It is also distinguishes this plan from the plan at issue in West Winds, 720 F.2d at 1097 where seamen received health benefits based on whether they fell ill, a factor entirely unrelated to a seaman's service.

Several courts have focused on the fact that the plans pay administrative expenses out of the amount owed to the seamen. In the case of the MM & P Vacation plan, however, there are no administrative fees or expenses of the union's plans deducted from the amounts owed to the seamen for vacation pay. Their employer simply makes an additional contribution to cover FICA taxes as well as the plan's administrative fee. This is different than plans considered by other courts where administrative expenses are deducted from the amounts contributed by the employer. In these plans the seamen did not receive one-hundred percent of the payments they were entitled to receive. Irving Trust, 197 F.Supp. at 777; Brandon, 302 F.2d at 404.

With the MM & P Vacation Plan, the employer is directly liable to the seaman not the trustee. The seaman then has the option of assigning his claim to the MM & P Vacation Plan to collect the delinquent contribution. This distinguishes the plan at issue from the plans in Irving Trust 197 F.Supp. at 777 and Brandon, 302 F.2d at 404 where payments were made directly to the trustees and the seamen had no legal interest in them.

The MM & P Vacation Plans are directly connected to each individual seaman. The plans are paid, identified, and classified by social security number. This distinguishes the MM & P Vacation Plan from the plan at issue in Brandon, 302 F.2d at 404 and Citibank, 865 F.2d at 24 where there was nothing to connect the particular wage paid to a particular employee.

The value owed to the seamen in the MM & P Vacation Plans does not vary by investment. The Vacation Plan funds are invested in very short term, twenty-four hour government securities because the seaman is entitled to withdraw the amount he earned based on his wage regardless of market fluctuations. If the Plan makes a profit with the investment, the profit goes to the plan; however, if the Plan sustains a loss on the investment, the Plan still has to pay the seaman his earned contribution. This distinguishes the MM & P Vacation Plan from the plan in West Winds, 720 F.2d at 1097 where the court held that the unpaid contributions were not wages because the value varied based on investment gains or losses.

There is no uncertainty as to the amounts of earned vacation pay owed to the crew for their service onboard the SS CAPTAIN H.A. DOWNING for March and April 2010. Exhibit 3 lists each crew member's name, social security number, ranking onboard the vessel and the amounts owed to him for vacation benefits. These amounts have been calculated down to the penny by Mr. Ken Ryan, the Benefits Director of the MM & P Plans. This differentiates the MM & P Vacation Plan from the plans at issue in Citibank, 865 F.2d at 24 where the plans were not easily converted to their present-day cash equivalent and Prudential, 915 F.2d at 411 where the value the benefit that the employees would ultimately receive was speculative.

Accordingly, the court finds the MM & P Vacation Plan can be distinguished from plans analyzed by other courts. The court also finds that the MM & P Vacation Plan passes the two part test set forth by the Ninth Circuit in Petersen, 823 F.2d 334 at 336 discussed in Fanos, 246 F.Supp.2d at 676.

In answering the first question posed in Petersen, the court should consider when and how the payment is made. Here, seamen can withdraw their vacation payments immediately upon leaving the ship. The fact that vacation pay is payable immediately following completion of plaintiff's service indicates that such payments are compensation for services rendered. As to the second part of the Petersen test, characterizing the MM & P vacation payments as wages prevents the evil that the wage statutes intended to prevent: placing the seaman ashore without first paying him his wages earned during the voyage.

Accordingly, the court concludes that Captain Brown, on behalf of the individual crew members of the SS CAPTAIN H.A. DOWNING is entitled to a preferred maritime lien for "wages of the crew of the vessel" in the form of unpaid vacation pay in the amount of $34,175.98 ($31,747.59 as unpaid vacation contributions owed to the individual crew members and $2,428.39 in FICA Tax to be paid to the Internal Revenue Service on behalf of each crew member).

The claim of Captain Brown for "wages of the crew of the vessel" outrank in priority the claim of the United States Government for its preferred ship mortgage. See 46 U.S.C. § 31326; 46 U.S.C. § 31301(5); United States v. One (1) 254 Ft. Freighter, M/V. Andoria, 570 F.Supp. 413, 415 (E.D.La.1983).

Findings of Fact Concerning the IRA Plan

Application of law to findings of fact concerning the Individual Retirement Account Plan

For the reasons set out below, the court finds the MM & P IRA Plan is not distinguishable from plans analyzed in prior cases, and therefore the amounts owed to the IRA Plan are not wages of the crew.

With the MM & P IRA Plan, the ultimate benefit will vary based on several factors, including investment and an employee's needs. The ultimate realization of IRA benefits by the seaman is dependent on factors which are unrelated to a seaman's actual service on the vessel. This variance in benefits actually received is similar to the plans discussed in West Winds, 720 F.2d at 1097 and Citibank, 865 F.2d at 24.

With the MM & P IRA Plan, even vested IRA benefits cannot be easily converted to the present day cash equivalent. Although the Benefits Director of the Plans, Ken Ryan, calculated the present value due the Vanguard IRA fund; this value cannot be converted into the benefits employees will actually receive. Some employees may withdraw early based on personal or financial reasons and pay the tax penalties while other employees will wait until retirement before cashing out their IRA benefits. Because the value which will ultimately be received by the seamen is based on uncertain future events, the MM & P IRA Plan is not distinguishable from the plans at issue in Citibank, 865 F.2d at 24 and Prudential, 915 F.2d at 411.

Finally every year the MM & P IRA Plan trustees charge each individual IRA account an administrative fee. Therefore, the seamen do not receive one-hundred percent of their employer's contribution. This makes the MM & P IRA Plan indistinguishable from plans at issue in prior cases. The Fifth Circuit has explicitly held that contributions owed by an employer are not wages of the crew when such contributions may be used for the purpose of paying administrative costs of the operation of the plan. Brandon, 302 F.2d at 416.

The court concludes that contributions owed to the MM & P IRA Plan are not wages of the crew and therefore, are not entitled to a preferred maritime lien.

A separate final judgment which contains the amounts each claimant shall receive will be entered pursuant to Fed. R.Civ.P. 58.