Petition — Spacefone Corp. v. Johnston

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83-631 Pe eat US

No. $0 1983

EV,

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1983 ' >

SPACEFONE CORPORATION,

Petitioner,

vs.

WILLIAM J. JOHNSTON,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

ROBERT S. JONES, ESO.

COFER, BEAUCHAMP & HAWES

SUITE 200

PEACHTREE & BROAD BUILDING

ATLANTA, GEORGIA 30043

(404) 577-6200

ATTORNEY FOR PETITIONER

September 28, 1983

QUESTIONS PRESENTED

1. Whether provisions of the Fair

Labor Standards Act are applicable to a

company, formed solely for the development

and eventual manufacture of a single prod-

uct, which never successfully develops and

sells any product?

2. Whether a single unperfected proto-

type produced by a company can be considered

"goods" within the Fair Labor Standards

Act provision of “Production of goods for

commerce” when the company has no other

business other than the unsuccessful de-

velopment of the prototype?

3. Whether the movement of a single

prototype, which was shown to _ investors

out of state who elected not to invest in

the further development of the prototype,

falls within the Fair Labor Standards Act's

(i)

definition of “production of goods for com-

merce"?

PARTIES

Spacefone Corporation ("Spacefone") ap-

peared as a defendant-appellee before the

United States Court of Appeals for the Elev-

enth Circuit. William J. Johnston ("“John-

ston") appeared as the plaintiff-appellant

before the Eleventh Circuit.

(ii)

TABLE OF CONTENTS

PAGE

QUESTIONS PRESENTE ee ]@&.6 © 8 20 @.@ 8 6 8 eee & ee i

NGL Dé. & 006 6.0:6.0% 0 00:6. 6.460:659 686.0 666.0068 ii

TABLE OF CA REE EOS 6. © 60:60 bine 6 00 6000 64:8 set

TABLE OF AUTHORITIES. .....00scccccees iv

OPINIONS BELOW. +++ +eeeeueseeseeeeeees 1

I ee re ey pou lct way hee 2

CONSTITUTIONAL PROVISIONS AND

STATUTES INVOLVED.......cccccccsscces 2

STATEMENT OF THE CASE....cccccccccees 3

REASONS FOR GRANTING THE WRIT........ 7

I. The Writ Should Be Granted

Because The Eleventh Cir-

cuit's Expansive Interpreta-

tion of “Production Of Goods

For Commerce" Oversteps Pre-

viously Established Limits of

This Court.ccccccccseccccccere 7

II. The Writ Should Be Granted

In Order To Resolve The Con-

flict Below On The Issue Of

Whether Research On A Prod-

uct Never Produced Amounts

SO BR "“PEOGUCCIOR 6c bese eeece 15

CRs 6 6p 4 a 0060 0t06 beens ote eene 16

(iii)

TABLE OF AUTHORITIES

Cases

Kirschbaum v. Walling, 316 U.S.

517 i \ ) rr nr ey or eee

Krill v. Arma Corp., 76 F.Supp. 14

(Bo DeNeLe DS 6s one ane beamecaeks

Mabee v. White Plains Publishing

Co., 327 U.S. 178 (1964)... 2eee

Shultz v. Merriman, 425 F.2d 228

(lst Cir. Et a na a oS

10 E. 40th St. Bldg., Inc. v.

Callus, 325 U.S. 578 (1945)......

Tormey v. Kiekhaefer Corp., 76

F.Supp. 557 (E.D. Wisc. 1948)....

0.8. ¥, Darby, 312 U.S. 100

BS!) re eres er ee ee ye

Walling v. Jacksonville Paper, 317

U.S. 564 [Lee ahecsaaene dee eeewnes

Wirtz v. A. S. Giometti & Associ-

ates, Inc., 399 F.2d 738, (5th

Git: EO Té ats 00064 b eae ou ae

Statutes and Others

29 U.S.C. §$ 201 et. seg. (1974) .ccee

(iv)

Page

13,

12,

14,

ll,

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1983

NO.

SPACEFONE CORPORATION,

Petitioner,

Vv.

WILLIAM J. JOHNSTON,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

Petitioner Spacefone Corporation

("Spacefone") prays that a writ of certio-

rari issue to review the judgment of the

United States Court of Appeals for the

Eleventh Circuit in this case.

OPINIONS BELOW

The opinion of the Court of Appeals as

amended on rehearing is contained in the

accompanying Appendix and is reported at

706 F.2d 1178 (llth Cir. 1983). The opin-

ion of the United States Court for the

Northern District of Georgia is contained

in the accompanying Appendix.

JURISDICTION

The judgment of the United States Court

of Appeals for the Eleventh Circuit reversed

the Order of the United States District

Court for the Northern District of Georgia

dismissing this case for lack of jurisdic-

tion over the subject matter. Jurisdiction

was predicated under the Fair Labor Stan-

dards Act, 29 U.S.C. § 216(b).

CONSTITUTIONAL PROVISIONS AND

STATUTES INVOLVED

The Fair Labor Standard Act, 29 U.S.C.

§ 206(a) provides in pertinent part:

Every employer shall pay to each of

his employees who in any workweek is

engaged in commerce or in the produc-

tion of goods for commerce, or is

employed in an enterprise engaged in

commerce or in the production of goods

for commerce, wages at the following

rates.

STATEMENT OF THE CASE

A. FACTS

Spacefone was incorporated for the pur-

pose of doing research and development work

on a state of the art cordless telephone

with the eventual plan of marketing and

manufacturing this product. The work be-

gan in February, 1980, and has continued

to date, with no cordless telephone unit

having been produced or sold anywhere.

Spacefone has never manufactured, produced

or sold products of any kind, and is cur-

rently continuing in its attempts to final-

ize development of an experimental cordless

extension telephone. It has no other busi-

ness other than the attempted development

of this product. 4

Johnston was hired by Spacefone to work

as a designer and draftsman toward the even-

tual creating of a package in which to

house the Spacefone cordless telephone.

Pursuant to these duties, he was required

to build dyes for the vacuum form machine,

to trim plastic, and to do some testing of

materials and circuit boards.

Johnston was infrequently called upon

to order sample parts for an experimental

prototype; these interstate telephone calls

were not part of his regular duties, were

incidental to his primary employment, and

did not constitute a substantial portion

of appellant's time.

No products of any kind were ever pro-

duced, sold, or moved in interstate commerce

a“

o4-

while Johnston worked with Spacefone. One

unperfected prototype was twice taken out

of state to show potential investors, but

none of the investors ever invested funds

in the company.

B. OPINIONS RELOW

This suit instituted by Johnston a-

gainst Spacefone to recover wages allegedly

due by reason of Spacefone's failure to

pay him the minimum wage and premium pay of

time and one-half his regular rate for hours

he worked in excess of forty hours pursuant

to the provisions of the Fair Labor Stan-

dards Act of 1938, as amended (29 U.S.C.

§ 201 et seq.).

The case was tried in the District

Court for the Northern District of Georgia,

Newnan Division, the Honorable G. Ernest

Tidwell presiding without a jury. The trial

court elected to hear initially only evi-

dence relating to the question of the sub-

ject matter jurisdiction of the court. Af-

ter the close of the evidence of this is-

sue, the trial court granted Spacefone's

Motion to Dismiss for Lack of Jurisdiction

Over the Subject Matter.

Johnston appealed to the Eleventh Cir-

cuit Court of Appeals. The Eleventh Circuit

reversed (Judge Roney dissenting) finding

that the facts showed that Johnston had

been engaged in the production of goods for

commerce, thereby subjecting Spacefone to

the application of the Fair Labor Standards

Act.

REASONS FOR GRANTING THE WRIT.

I. The Writ Should Be Granted Because The

Eleventh Circuit's Expansive Interpre-

tation of “Production Of Goods For Com-

merce" Oversteps Previously Established

Limits of This Court.

A. THE “FOR COMMERCE” REQUIREMENT

Johnston had the burden of proving that

he had a role in “producing goods", and

that these “goods” had to be “for commerce",

Yet the evidence was undisputed that while

Spacefone had hopes and dreams of eventually

marketing and manufacturing a cordless tele-

phone, it had failed in its attempts to do

so. No phones were ever made or sold by

Spacefone. Spacefone never got into busi-

ness and thus never entered “commerce”.

The Eleventh Circuit found that the

two unsuccessful attempts to solicit in-

vestors interstate combined with Spacefone's

eventual intent to market the product was

sufficient to meet the “for commerce" re-

quirement. This interpretation conflicts

with the Supreme Court's opinion in Mabee

v. White Plains Publishing Co., 327 U.S. 178

(1946). After first reviewing the first

legislative history of the Act, the Supreme

Court in Mabee observed:

By § 15(a)(1) it had made unlawful the

shipment in commerce of “any goods in

the production of which any employee

was employed in violation of" the over-

time and minimum wage requirements of

the Act. Though we assume that sporad-

dic or occasional shipments of insub-

Stantial amounts of goods were not

intended to be included in that prohi-

bition, there is no warrant for assum-

ing that regular shipments in commerce

are to be included or excluded depend-

ing on their size.

327 U.S. at 181, 182 (emphasis added). Un-

der this interpretation of legislative in-

tent, a court must look to “regularity”

and not size to determine if the "commerce"

provision is fulfilled. In the present

case, two trips in twelve months to unsuc-

cessfully demonstrate an unperfected proto-

type can hardly be called “regular ship-

ments". Moreover, the evidence clearly sup-

ports a finding that if the prototype it-

self could be classified as "“goods", its

limited movement interstate was an "“occa-

sional” shipment of an “insubstantial a-

mount of goods".

The Eleventh Circuit's reliance on

Spacefone's eventual intent to manufacture

and market the product is the result of an

overly broad reading of what this Court

said in U.S. v. Darby, 312 U.S. 100 (1940).

There the Court's analysis of the legisla-

tive history of the Act was:

[T]hat the “production for commerce"

intended includes at least production

of goods, which, at the time of produc-

tion, the employer, according to the

normal course of his business, intends

Or expects to move in interstate com-

merce, although, through the exigencies

of the business, all of the goods may

-9-

not thereafter actually enter inter-

state commerce,

312 U.S. at 118 (emphasis added). While

this standard may have an application to

an on-going multiproduct manufacturing con-

cern, it can not be applied to a company

in the embryonic stage of Spacefone. How

can one judge Spacefone's intent according

to its "normal course of its business", when

Spacefone has never been in business? What

Standards does a Court use to analyze the

"exigencies of the business" when the busi-

ness is non-existent? Unless the Eleventh

Circuit's decision is reversed, future

courts must engage in unwarranted specula-

tion.

This Court has recognized numerous

times that Congress did not intend to go

to the full limits of its commerce power

in the Fair Labor Standards Act. E.g., 10

E. 40th St. Bldg., Inc. v. Callus, 325 U.S.

-10-

578 (1945); Kirschbaum v. Walling, 316 U.S.

517 (1942); Walling v. Jacksonville Paper,

317 U.S. 564 (1943). By necessity linedraw-

ing on a case-by-case basis is required of

the trial court. After hearing the evi-

dence, the district court below drew the

line in favor of Spacefone. This Court is

asked to consider the Eleventh Circuit's

analysis of the commerce requirement in

light of the Supreme Court's guidelines in

this regard and to adopt Judge Roney's

dissenting opinion and the district court's

conclusion on this issue.

B. THE REQUIREMENT OF "GOODS"

Since Spacefone never manufactured a

finished product, the Eleventh Circuit had

to rely on the one unperfected prototype

as “goods” within the meaning of the Act.

Citing Wirtz v. A. S. Giometti & Associates,

lle

Inc., 399 F.2d 738, 739 (Sth Cir. 1968)

and Shultz v. Merriman, 425 F.2d 228 (lst

Cir. 1970), the decision below classifies

the one prototype as "goods". Even ignor-

ing the grammatical problem with plurality

in the statute, this Court should grant a

writ of certiorari to review the conclusion

below on this issue in light of the evidence

of Spacefone's intent for use of this proto-

type. The prototype was an experimental

model. Even though unperfected, the proto-

type was shown to two potential investors,

but it was never Spacefone's intent to sell

the prototype to the investors. Spacefone

was tying to induce the investors to buy

stock in the company to finance an eventual

manufacturing plan. There is no evidence

to suggest that Spacefone was in the busi-

ness of selling prototypes as "goods". Even

the Eleventh Circuit's opinion recognizes

-12-

that Spacefone's intent was to be a manufac-

turer.

The evidence is vastly different from

that in the Giometti and Merriman cases as

those companies were surveying companies

which were in the business of selling maps

as their “goods".

Upon reconsideration the Court is. ask-

ed to review the undisputed evidence below

as to Spacefone's intent for the use of

the prototype, and to conclude that because

of this intent the prototype could not be

Classified as “goods”.

C. THE “PRODUCTION” REQUIREMENT

In order to decide this case, it was

not necessary for the Court to resolve the

conflict between the two district court de-

cisions in Krill v. Arma Corp., 76 F.Supp.

-13-

14, 17 (E.D.N.Y. 1948) and Tormey v. Kiek=-

haefer Corp., 76 F.Supp. 557, 559 (E.D.

Wis. 1948), as to the issue of whether

research on products never making the pro-

duction line was part of the production

process. Unlike the present case, both of

those cases dealt with companies that were

already in production with numerous prod-

ucts.

The Tormey decision is not persuasive

on the more narrow issue of whether a

single product company who wishes to get

into the manufacturing of a product but

fails to even get through the product de-

velopment stage, can be said to have been

in "production". In other words, if the

company's goal is to manufacture a cordless

telephone and no product is ever manufac-

tured and the company is never in business,

can the company be classified as being in

@l4e

"production"? Judge Roney's dissenting

opinion provides the most reasoned answer

to these questions, and should be adopted

by the Court.

II. The Writ Should Be Granted In Order To

Resolve The Conflict Below On The Issue

Of Whether Research On A Product Never

Produced Amounts To A “Production”.

Assuming arguendo that this Court

should find the Tormey decision not to be

distinguishable on its facts, this Court

should take this opportunity to resolve

the conflict between the Krill and Tormey

decisions. This Court ‘is urged to adopt

the Krill rationale and to accept the more

limited interpretation of "production" con-

tained in Judge Roney's dissenting opinion

below.

-15=

CONCLUSION

For all of the within and foregoing

reasons the Petition for Writ of Certiorari

should be grented.

Respectfully submitted,

COFER, BEAYCH & HAWES

1 ROBERT Ss. J NES

ATTORNEY F PETITIONER

Suite 200

Peachtree & Broad Building

Atlanta, Georgia 30043

(404) 577-6200

-16-

IN THE UNITED STATES orstareeresten®

FOR THE NORTHERN DISTRICT OF GZORGIA

NEWNAN DIVISION

iWILLIAM J. JSOmNSTON

Plaintif?

v. CIVIL ACTION PILE O. CS1-35N

SPACEFONE CORPORATION

Defendant

—~—~ ~~ ewe

ORDER OISMISSING ACTION FOR LACK OF

Plaintiff brought this action pursuant to the provisions

lof the Pair Labor Standards Act of 1938, as amended (29 0.S.¢.

6 201 et seq.), seeking to recover wages he alleged vere due to

him by reason of the failure.of defendant to pay him the sinisuz

wage for each hour he worked and the premium pay of time and cne-hali

his regular rate of pay for hours he worked in excess of 40 hours.

Defendant contends that plaintiff was not covered sy she

provisions of the Pair Labor Standards Act, and that the case

should be dismissed fur lack of jurisdiction cover the subject satter.

At the nson-jury trial of the satter, the court elected

first to hear evidence only as to the question of coverage under

the Pair Labor Standards Act. At the close of the evidence the

defendant aoved for dismissal for lack of jurisdiction over the

subject satter arguing that plaintiff did not carry his burden of

proof as to the question of coverage under the Fair Labor Stancards

Act. The court hereby grants defendant's aotion and dismisses

this action for lack of jurisdiction over the subject matter.

Pindings of Pact

Spacefone Corporation was incorporated for the surpose

of doing research and development work on a state of the art cord-

‘less telephone. This work began in Pebruary, 1980, and has con-

tinued to date, with no cordless telephone unit having been pro-

duced cor sold. The company has never sanufactured, produced,

er sold products of any kind, but continues the development sf an

experimental cordless extension telephone.

Plainctif’ was hired by defendant to work as a desicner

and draftsman toward the eventual creation of a package in which

to house the Spacefone cordless telephone.

Plaintiff's primary duties with defendant consisted of

designing plastic housing for a prototype telephone, drafting

lay-outs of electronic schematics and some printed circuit Soard

\ay~outs. in conmection with these duties he was called upon to

build dyes for the vacuum form machine, to trim plastic, and to

@o some testing of the product and printed circuit boards ‘from

negatives.

While plaintiff! was infrequently called upon to order

sample parts for an experimental prototype. such interstate ctele-

phone calls were not part of his regular duties, were incidential

to his primary employment, and did not constitute a substantial

portion of plaintiff's time.

Conclusions of Law

Plaintiff has the burden of proving that he is covered

under the Pair Labor Standards Act.

Defendant is not an enterprise gaged in sce or ia

the production of goods for commerce within the meaning cf 29 U.S$.C.a.

$8 203(s) since it has never sold any products whatsoever.

| 3.

: Plaintiff’ failed to carry his burden of proving that he

je engaged in commerce or in the production of goods {for commerce:

jconsequently, this court finds it has no jurisdiction over the sub-

{ject matter of this action.

o2e

i i le ll sl

Based upon the foregoing, the court finds that there is

mo jurisdiction over the subiect matter in this case, and the

defendant's sotion to dismiss is granted with prejudice with all

costs to be taxed to the plaintif!.

SO ORDERED, this l { day of February, 1982.

OF Bh ocmacrmend

Saas. Gees tae UNITED STATES OLISTRICT COURT

706 FEDERAL REPORTER, 2d SERIES

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7. Labor Relations e= 1122

Although Fair Labor Standards Act re-

quires ion of “goods,” Act would not

be interpreted literally to require produc-

tion of “goods” as opposed to “good,” and

employer was within Act though it produc-

ed only one Fair Labor Stan-

dards Act of 1938, § Xi), @ USCA

§ 2%i).

Word, Cook & Word, Reuben M. Word,

James F. McNamara, Carroilton, Ga, for

plaintiff-eppeilant.

Cofer, Beauchamp, Hawes & Brown, Rob-

ert S. Jones, Atlanta, Ga, for defendant-ap-

peilee.

Appeal from the United States District

Court for the Northern District of Georgia

Before GODBOLD, Chief Judge, RO-

NEY, Circuit Judge, and PITTMAN *, Dis-

trict Judge.

GODBOLD, Chief Judge:

Virgil

for the Southern District of Alabama, sitting by

706 FEDERAL REPORTER, 24 SERIES

interstate in an attempt to solicit investors

for the project, it had not yet begun mass

production of a finished product. Whether

such production will ever occur is a matter

of uncertainty.

as a part-time employee but he soon began

to work full-time. Despite the absence of a

formal written contract, the parties agreed

that Johnston was to receive $250 per week

for his services. While Johnston sometimes

now seeks to invoke FLSA to recover mini-

mum wages and overtime pay. The only

issué on appeal is whether Johnston meets

the FLSA’s jurisdictional requirements be-

cause he was either “engaged in production

of goods for commerce” or “engaged in

commerce” while employed by Spacefone.

{1} As the statute's language suggests,

Johnston can demonstrate FLSA's applica

bility by showing that he was engaged in

(1) “production” of (2) “goods” (3) “for com-

merce.” In determining whether Johnston

(1959).

According to the Act, an employee

shall be deemed to have been engaged in

the production of goods if such employee

was employed in producing, manufactur-

ing, mining, handling, transporting; or in

any other manner working on such goods,

or in any closely related process or occu-

process” that it “directly essential to” actu-

al production.

(2] Equating actual production with

physical work on the employer's final prod-

dengnation.

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1182

did not mearure up to expectations and

was eventually abandoned before any of

the product designed was shipped across

State lines.