Petitioners Brief — Sondock v. Walling

11

BRIEF IN SUPPORT OF PETITION

Opinions Below

The District Court’s opinion, with findings and conclu-

sions (R. 219-236), is reported in 43 F. Supp. at page 339.

The opinion of the Circuit Court of Appeals (R. 242-244)

is not yet reported.

Jurisdiction

The decision of the Circuit Court of Appeals below was

filed December 12, 1942 (R. 242-244). No petition for re-

hearing was filed. Jurisdiction to issue the writ rests on Sec-

tion 240(a) of the Judicial Code (28 U.S.C., Sec. 347) as

amended by the Act of February 13, 1925.

Statement

The facts and rulings material to the consideration of the

questions presented are fully stated in the foregoing petition.

Unless otherwise indicated, all emphasis appearing herein is

petitioners’.

Summary of Argument

The points of argument follow the specification of errors

and the reasons relied upon for the allowance of the writ of

certiorari.

ARGUMENT

I.

The Circuit Court of Appeals erred in holding that

Petitioners’ employees are not engaged in a service es-

tablishment the greater part of whose servicing is in

12

Intrastate Commerce withing the meaning of Section

13(a) (2) of the Act.

Section 13(a) (2) of the Act provides:

“The provisions of Sections 6 and 7 (pertaining to

wages and hours) shall not apply with respect to * * *

any employee engaged in any retail or service establish-

ment the greater part of whose selling or servicing is

in intrastate Commerce.”

The Act neither defines the term “service establishment”

nor directs or authorizes the Administrator, respondent herein,

to do so.

Without discussing the matter, the court below simply

held that petitioners’ business did not constitute a service

establishment. The only reason assigned for this decision was

KirnscHBAUM v. WALLING, supra, and “analogous reasoning.”

A careful study of the KirnscHBaum decision fails to disclose

its applicability to this point or what the analogous reasoning

was or could have been. The facts in this case are readily dis-

tinguishable from those in the KirscHBAUM case. Further-

more, in deciding that case this court merely held, so far as

the claimed exemption is concerned, that “selling space in a

loft building is not the equivalent of selling services to con-

sumers, and, in any event, the ‘greater part’ of the ‘servicing’

done by the petitioners here is not in intrastate commerce.”

This court has not rendered any decision with reference to the

application of the service establishment exemption to a busi-

ness devoted exclusively to the sale and rendition of service,

the greater part of which is in intrastate commerce; nor does

this court now have pending before it, so far as petitioners

have been able to learn, a case requiring such a decision.

In the absence of proof to the contrary, it is proper to as-

sume that Congress used the term “service establishment” in-

tending that it should have its usual and customary meaning.

Re EMIT POMS PIS MEY eet atanetzagiteY _

13

We can think of no more descriptive phrase to apply to peti-

tioners’ business than that of “service establishment.” The

whole business is predicated upon the rendition of a class of

service to ultimate consumers thereof. The watchman and

patrol service performed for clients is complete in itself; it

is not necessary for any service to either precede or follow

it in order to accomplish fully the result said service is de-

signed to produce. The word “establishment” is defined in

Funk & Wagnall’s Standard Dictionary as “something estab-

lished, as a body of employees, a military organization, or a

state church.” If the exemption in question means anything

at all, it must include “bodies of employees” whose work is the

rendition of some specialized form of service, such as the

night watch and patrol service here involved.

Respondent has heretofore contended, as outlined in his

Interpretative Bulletin No. 6, that the service establishment

exemption should be limited to businesses such as barber shops,

beauty parlors, public baths, scalp-treatment establishments,

masseur establishments, funeral homes, crematories, home

laundries, shoe-shining parlors, etc. To sustain this contention

would convict Congress of inserting a meaningless and nuga-

tory exemption. Surely these activities are purely local in their

nature and need no exemption.

Respondent has heretofore argued that, if the exemption is

not confined as contended by him, then the expressed exemp-

tions applying to stockyards handling livestock, carriers by

air, railroads, motor carriers, etc., are superfluous because en-

compassed within the terms of Section 13 (a) (2). This argu-

ment is unsound. The service establishment exemption applies

only to those establishments the greater part of whose ser-

vicing is in intrastate commerce. The exemption of stockyards,

carriers by air, railroads, motor carriers, etc., is applicable

regardless of the extent of their interstate activities. The error

in respondent’s reasoning is further illustrated by Section

RAE ADEE MN EP EEN LE NES ERT EE a ee

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13(a) (9), 29 U.S.C., 213 (a) (9), which exempts “any em-

ployee of a street, suburban or interurban electric railway, or

local trolley or motorbus carrier, not included in any other

exemption contained in this section.” The words “not in-

cluded in any other exemption contained in this section”

have, and can have, reference only to the service establish-

ment exemption included in the same section of the Act.

No other exemption in the same section can possibly apply.

These words clearly show that Congress understood that

employees of a street, suburban or interurban electric rail-

way, local trolley or motor carrier were already exempt as

engaged in a service establishment provided the greater part

of their employer’s servicing was in intrastate commerce.

Congress desired to make the exemption absolute as to such

employees and consequently Section 13(a) (9) was included

for this purpose.

A number of the lower federal courts have repudiated the

narrow construction which has been placed upon “retail or

service establishments” by the Administrator in Interpreta-

tive Bulletin No. 6. In said bulletin it is stated that a linen ser-

vice company is not a service establishment because it renders

a substantial portion of its service to commercial clients. In

Lonas v. NaTIONAL LINEN SeERvicE Corp. (U.S.D.C.,

Tenn.) 5 W.H.R. 533, the court held directly to the contrary

and said:

“In actuality this motion of defendant to dismiss the

proceedings turns on whether departmental interpreta-

tive bulletin is in fact an interpretation and application

of Section 13 (a) (2) of the Fair Labor Standards Act of

1938, or is merely a misconstruction of clear and unam-

biguous language.

“The court is aware of the respect to which the con-

struction and opinions of administrators are entitled

where the language is such that from it more than one

congressional intent can be spelled, and where the ad-

ministrative construction has been acquiesced in until

aca J ee

Balas tS)

15

it is more than a mere opinion as to what Congress may

have intended outside and beyond what the words they

employed are usually taken to mean.

“The exemption created by Section 13(a) (2) is not

subject to the narrow coverage contended for by the

plaintiffs, in my opinion. A service establishment to be

entitled to the exemption need not bring itself within

the qualifying test of the interpretative bulletin. The

exemption in the Act does not limit its customers nor re-

quire them to sell at retail.

“In argument it was plainly the purpose of plaintiff

to recover solely upon the theory of the exemption set

out in Administrator’s Bulletin No. 6. With the bulle-

tin, I find myself in disagreement * * *

+ % %

“T see no application of the Arsenal and Kirschbaum

cases here, as the particular reference therein to service

establishments sheds no light on the view the Supreme

Court entertained as to the soundness of Bulletin No. 6.”

This decision was rendered thirty days after the Supreme

Court’s decision in the KirscHBAUM case.

The court below on two occasions has announced its dis-

agreement with Interpretative Bulletin No. 6. In SuPER-

Cop SouTHWEST CoMPANY v. McBrivg, 124 F. (2d) 90

(5th C.C.A.), Jupce HutcHEsoN, in commenting upon

the Administrator’s narrow definition of “retail establish-

ment,” said:

“The Act is unambiguous and operates to exempt all

those coming within its terms and those terms cannot be

enlarged or diminished by rulings of the Administrator,

such as that, because sales are made to commercial in-

stead of to private users they are not sales at retail. If,

therefore, defendant were otherwise a retail dealer, we

should hold it exempt though the retail sales were made

to commercial rather than to private users.”

16

In WurrE Motor Company V. LITTLETON, 124 F. (2d)

92 (Sth C.C.A.), Jupce Hoimes likewise repudiated the

crippling definition of “retail” advocated by the Adminis-

trator. He said:

“The word retail is not defined by the Act. Given its

common and ordinary acceptation when used in sales

parlance, it means a sale in small quantity or direct to the

consumer, as distinguished from the word wholesale,

meaning a sale in large quantity to one who intends to

resell. The character of the sale is not altered by the use

to which the consumer may put the purchased commod-

ity. These sales were predominantly retail although the

products sold were subsequently for commercial pur-

poses.” (Emphasis supplied by the court).

Petitioners have nothing but service to sell and that is all

sold within a single state to ultimate consumers. The service

that they sell is no different whether rendered at a private

residence or at a plant engaged in the production of goods for

interstate commerce. In fact two of petitioners’ employees

are regularly assigned to watch only one residence each, and

another is assigned to watch only a dance hall (R. 35-36). If

all of the watchman service consisted only of watching resi-

dences, then even respondent would concede that the em-

ployees are engaged in a service establishment. Now, if the

Fifth Circuit Court of Appeals is correct in holding a sale

may still be a retail sale although made to a commercial rather

than a private user, then it must be equally true that petition-

ers’ business is just as much a service establishment when it

performs service for an industrial or commercial client as

when it performs exactly the same kind of service for an

individual client at his residence. The principles announced

by the Fifth Circuit Court of Appeals in the two cases last

quoted from above and in this case cannot be reconciled.

In Hunt v. NATIONAL LINEN SERVICE CoxpP., 157 S.W.

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17

(2d) 608 (Tenn.), the Supreme Court of Tennessee held

that a linen service company is a service establishment exempt

under the Act even though some of its customers were in-

dustrial or commercial concerns, as distinguished from pri-

vate families. The corporation leased its linen to clients and

for a specified price kept it laundered. The court said:

“We do not consider either the fact that defendant

manufactures the linens and other supplies which it

uses in some other state, or that some of defendant’s

customers are industrial or commercial business firms,

as distinguished from private families, of controlling

importance. This appears to have been given some sig-

nificance through certain bulletins released by the Wage

and Hour Administrator.”

While the decisions are by no means uniform, and for this

reason the question should be settled by an authoritive decision

of this court, there are a number of cases which sustain the

conclusion of the trial court that petitioners’ employees are

engaged in a service establishment within the meaning of the

Act.

In Wa.urnc v. SANpDERS, (U.S.D.C., Tenn.) 5 W.H.R.

710, it appeared that the employer sold automatic phono-

graphs to operators and likewise maintained a’ department for

servicing the machines and installing “remote control” equip-

ment on them. The machines were serviced both in the repair

shop of the employer and on location, and the installation of

the equipment was generally made on location. Approxi-

mately 90% of the sales and installations were within the

State of Tennessee where the business was located. The court

held that the business of selling, repairing and making in-

stallations on the automatic phonographs was exempt as con-

stituting a retail and service establishment.

In Burke v. Brown BaccacE Co., (U.S.D.C., Tenn.),

5 W.H.R. 700, it was held that a taxicab company is a ser-

nt ce SNe aA

: - — PLE OA EERIE LER IOS AIDA OCL NL, SOLVER TEE

2 ERR EAI I ETD ADELAIDE AIOE eoest -

18

vice establishment. The particular employees who brought

suit for alleged unpaid compensation under the Act were en-

gaged in driving a truck which was used to carry baggage to

and from railroad stations. This part of the business consti-

tuted only about 2% of the total business of the company,

and at least 98% of the servicing was in intrastate commerce.

In CorBETT Vv. SCHLUMBERGER WELL SURVEYING CorpP.,

43 F. Supp. 605 (U.S.D.C., Tex.) , it appeared that defendant

was “engaged, with crews of men and patented mechanism

belonging to it, in the business of logging wells and in the

business of perforating the casing of wells drilled for the

production of oil or gas, not for itself, but for others upon

the leases of others. Plaintiff Corbett was * * * from time to

time a member of one of its crews. Defendant had no interest

in the wells upon which it and the plaintiff and its other em-

ployees worked, nor in the land or leases upon which the

wells were located.” The court held:

“That defendant is a service establishment within the

quoted provision, I entertain no doubt. It did not sell

goods. It sold service. The service sold was service it was

able to render because of patents owned by it and which

presumably could not be rendered by any other person.”

In GREEN v. East Texas Motor Freicut Lines, 1 W.H.

Cases 1169 (Tex.), it was held that an employee of one per-

forming pickup and delivery service for a common carrier

motor freight line was not covered by the Act because em-

ployed in a service establishment.

In the court below, respondent also contended against the

application of the service establishment exemption because

petitioners’ employees do not perform all of their work within

the physical boundaries of petitioners’ office. It was argued that

“engaged in any * * * service establishment” refers only to

employees who perform all of their service at the:r employer’s

place of business. Here again, respondent was insisting upon

Pei

19

too narrow a construction, and one which, if adopted, would

lead to absurd results.

In his Interpretative Bulletin No. 6, respondent cites a home

laundry as a typical example of a service establishment com-

ing within the exemption. It is well known that a large per-

centage of the employees of most laundries consist of truck

drivers who pick up dirty laundry from the customers and

deliver clean laundry to them. These drivers spent only a

small fraction of their time on the premises of the laundry

building. If we follow respondent’s argument, they would

not be exempt because they are not employed exclusively

within the physical boundaries of the laundry.

If respondent’s argument is sound, then it applies equally

to employees of a retail establishment. It would exclude from

the exemption delivery truck drivers and outside buyers of

every large retail store. It has often been held that these out-

side employees are exempt as being employees of a retail es-

tablishment.

In PrREscRIPTION House, INc., v. ANDERSON, 42 F. Supp.

874 (U.S.D.C., Tex.), it was held that the employer consti-

tuted a retail establishment and hence certain employees who

spent practically all of their time in making outside deliveries

were exempt under the Act. i

The decisions clearly show that the words “engaged in any

* * * service establishment” mean engaged in the work of

any service establishment. They do not mean that the em-

ployees must be engaged within the physical boundaries of a

particular office, shop or plant owned and operated by the

employer. Otherwise the employees who service automatic

phonographs on location in WALLING v. SANDERS, supra, the

drivers of taxicabs and baggage trucks in BuRKE v. BRowN

BacGaGE CoMPANY, supra, the crew members in CorBETT

v. SCHLUMBERGER WELL SURVEYING CORPORATION, supra,

the truck drivers in Lonas v. NATIONAL LINEN SERVICE Cor-

BPRS EE LSD OR SEIT AOE LSAT EIGN Leh POI, NNR PR LN PRR I NN Ce ELIE 3 a tao Sune wee ——

RTM DAIS REA DO

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PORATION, supra, and the employees engaged in the freight

pick-up and delivery service in GREEN v. East Texas Mo-

TOR FREIGHT LINES, supra, could not have been, as they were

held to be, exempt as employees of service establishments.

Petitioners respectfully submit that the court below erred

in holding that their employees were not engaged in a service

establishment exempt under the Act.

II.

The Circuit Court of Appeals, irrespective of the

application of the service establishment exemption,

erred in holding that any of petitioners’ employees

were covered by the Act; and this conclusion applies

particularly to those employees whose service in

watching the premises of one or more clients engaged

in the production of goods for interstate commerce is

but a small portion of the patrol service rendered by

each such employee on each tour of duty.

The employees whom the court below held are subject to

the Act fall into two groups:

(a) Those who devote their time exclusively to watching

the premises of one client which is engaged in the pro-

duction of goods for interstate commerce; and

(b) Those who serve from 16 to 29 clients on a single

“beat,” one or more of which clients are engaged in

the production of goods for interstate commerce; but

in no instance are more than 36 per cent of the

clients on any beat engaged in such production, and

in one instance the percentage is as low as 4.2 per cent.

The applicable provisions of the Act are:

Ry MAE WS Lots BP TEL ATL DPR SPAS LEY — ay

_

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21

“Section 3(j): ‘Produced’ means produced, manu-

factured, mined, handled, or in any other manner worked

on in any state; and for the purposes of this act an em-

ployee shall be deemed to have been engaged in the pro-

duction of goods if such employee was employed in pro-

ducing, manufacturing, mining, handling, transport-

ing, or in any other manner working on such goods, or

in any process or occupation necessary to the production

thereof in any state.

“Section 6(a): Every employer shall pay to each of

his employees who is engaged in (interstate) commerce

or in the production of goods for (interstate) commerce

wages at the following rates (here follows the specifica-

tion of minimum rates) .”

“Section 7 (a): No employer shall, except as otherwise

provided in this section, employ any of his employees who

is engaged in (interstate) commerce or in the produc-

tion of goods for (interstate) commerce (here follows

specification of hours) .”

APO DERE t

—

RS er ee ee

eee

The court below predicated the application of the Act

to any of petitioners’ employees solely upon the basis that

they were engaged in a “process or occupation necessary

to the production” of goods for interstate commerce. No

other basis could possibly apply because it is obvious that the

watchmen are engaged neither in interstate commerce nor in

actual production of goods as they perform no service other

than a night watching or patrol service.

While there are many decisions holding that watchmen

employed directly by a concern engaged in the production of

goods for commerce are covered by the Act, many of these

cases can be distinguished on the ground that the watchmen

performed some service other than merely watching, such as

firing a boiler, and keeping up steam (Woop v. CENTRAL

SAND & GRAVEL Co., 33 F. Supp. 40 [U.S.D.C., Tenn.]),

etc. Other decisions, dealing exclusively with watchmen who

are engaged solely in watching the premises of their em-

oo ae SORE ra OR Se BETIS SOLE EI LEI OL TEP ROR LP eal

22

ployer, hold that such watchmen, regardless of the business

of the employer, are not covered by the Act. RocErs v.

GLAZER, 32 F. Supp. 990 (U.S.D.C., Mo.) ; Hart v. Grec-

ory, 10 S.E. (2d) 644 (N.C.).

The only cases involving employees of an independent

agency, rendering solely night watch and patrol services,

have held that such employees are not covered by the Act,

irrespective of the interstate activities conducted at the

places watched. Farr v. SMITH DETECTIVE AGENCY AND

NicHt Watcu Service, 38 F. Supp. 105 (U.S.D.C., Tex.) ;

SCHRIEVER V. KANE ServicE, I W.H. Cases 381 (U.S.D.C.,

Ill.); BARTHOLOME, ET AL., v. BALTIMORE FirE Patroi

& DespatcH Co., 6 W.H.R. 21 (U.S.D.C., Md.).

The Circuit Court of Appeals felt that the decision of this

Court in KirscHBAUM v, WALLING, supra, compelled a de-

cision in this case that the Act applied to any employee who

spent any part of his time watching the premises of a client

engaged in the production of goods for interstate commerce.

Petitioners submit that the KirscHBAUM case does not compel

such a result. That case involved the owners of loft buildings.

In addition to watchmen, they employed engineers, firemen,

electricians, elevator operators, carpenters and porters. Prac-

tically all of the tenants were engaged within the building in

producing goods for commerce. The activities of the em-

ployees of the two buildings are described by this Court as

follows:

“The engineer and fireman produce heat, hot water

and steam necessary to the manufacturing operation.

They kept elevators, radiators, and fire sprinkling sys-

tems in repair. The electrician maintained the system

which furnishes the tenant with light and power. The

elevator operators run both the freight elevators which

start and finish the interstate journeys of goods going

from and coming to the tenant, and the passenger ele-

vators which carry employees, customers, salesmen and

23

visitors. The watchmen protect the buildings from fire

and theft. The carpenters repair the halls and stairways

and other parts of the building commonly used by the

tenant. The porters keep the building clean and habit-

able.”

Thus it is readily apparent that the owners of the buildings,

through their employees, contributed in large measure to the

production of goods for commerce. A substantial part of this

contribution was absolutely essential; without it, production

would have been impossible. The case was defended on the

ground that none of the employees were covered by the Act;

no contention was made that, if some of the employees were

covered, nevertheless others were not. The watchman service

was but part of the total function performed by the build-

ing owners which included selling and maintaining space in

the buildings, furnishing heat, light, steam, elevator service,

etc. This Court treated the employees in each building as a

unit making necessary, and in part indispensable, contribu-

tions to the production of goods for interstate commerce.

This decision is a far-cry from holding that a watchman,

employed, directed and paid by an independent agency and

performing only a watching service for a concern engaged

in the production of goods, is himself engaged in an occupa-

tion necessary for such production so as to be covered by the

Act. This Court issued a clear warning in the KirscHBAUM

case that its decision must not be misconstrued as we believe

the court below has misconstrued it in this case. Among

other things this Court said:

“The lower court in No. 924 met the petitioners’

argument by finding the act applicable to these em-

ployees because their work was ‘in kind substantially

the same as it would be if the manufacturers employed

them directly.’ In the immediate situation, the answer

may be adequate; but as a guiding criterion it may prove

TE 5 BOO FEISS IE LE ER FOREN RES DED 1 TERT LY RP OTE TAS ARES a OTN MN A me

Ch Saale Base,

24

too much, ‘Necessary’ is colored by the context not only

of the terms of the legislation but of its implication in

the relation between state and national authority. We

cannot, in construing the word ‘necessary,’ escape an

inquiry into the relationship of the particular employees

to the production of goods for commerce. If the work of

the employees has only the most tenuous relationship to,

and is not in any fitting sense ‘necessary’ to, the pro-

duction, it is immaterial that their activities would be

substantially the same if the employees worked directly

for the producers of goods for commerce.”

Petitioners submit that the work of its employees in pro-

viding exclusively a night watch and patrol service “has only

the most tenuous relationship to, and is not in any fitting

sense ‘necessary’ to, the production” of goods. To hold other-

wise would be equivalent to bringing under the Act every

employee, regardless of by whom employed, who had any

remote, indirect connection with the production of goods.

Such a decision would produce a reductio ad absurdum, such

as is warned against in WARREN-BRADSHAW DRILLING Co.

v. Hat, 124 F. (2d) 42, affirmed 63 S.C. Rep. 125, and

JOHNSON v. Fitstow, INc., 43 F. Supp. 920 (U.S.D.C.,

Fla.).

The foregoing applies to all of petitioners’ employees, but

it is particularly applicable to those who patrol “beats,” each

of which covers a large number of clients, only a very few of

which are engaged in the production of goods for interstate

commerce. The inapplicability of the KirscHBAUM case to

such a situation is clearly pointed out in BARTHOLOME, ET

AL., V. BALTIMORE FirE Patror & DespatcH Co. (U.S.D.C.,

Md.), 6 W.H.R. 21. In that case the employer, an independ-

ent agency, furnished night patrolmen to contract cus-

tomers. Each patrolman was placed on a “post” containing

from 28 to 92 places to be watched. The tri2i judge com-

25

mented upon the similarity between our case and the case be-

fore him. After discussing and extensively quoting from the

KiRsSCHBAUM decision, the court said:

“If this service rendered by the plaintiff is properly

to be called watchman service at all, it is apparent that

it is greatly lesser in degree than that of such a watch-

man as was referred to in the Kirschbaum case. A differ-

ence in degree may amount to a difference in kind. The

services performed by the plaintiffs were substantially

only supplemental to the ordinary activities of the public

police on night duty. It would seem to be an extreme

contention that the ordinary ‘policemen on the beat’ is

engaged in the production of goods for interstate com-

merce.

“* * * T do not think it can be fairly said that the

plaintiffs’ services were ‘necessary’ in the production of

goods for commerce, even if we could find that some of

the defendants’ customers were in fact producing goods

for interstate commerce.

+ + %

“Therefore here the word ‘necessary’ should at least

connote ‘substantially’ necessary. The limited nature of

the patrolman service given the buildings of the defend-

ants’ subscribers cannot fairly be said to be ‘substantially’

necessary to their business. It is common knowledge that

thousands, and doubtless the great majority, of such

business buildings do not have this special patrolman

service, but rely on the ordinary public police protec-

tion.”

Conclusion

For the reasons assigned, the court below erroneously de-

cided questions of Federal law which have not been, but

should be, settled by this Court. Petitioners respectfully pray

that a writ of certiorari be issued herein to the end that said

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26

errors may be corrected and the questions of Federal law set-

tled by this court.

Respectfully submitted,

Brapy CoLe,

Counsel for Petitioners

January, 1943,

Houston, Texas