# Opposition Brief — Grim Hotel Co. v. Brock > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_2467%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Opposition Brief - **Published:** January 1, 1985 - **Citation:** 471 U.S. 1124 ## Text ¢ “Supreme Court, U.S. ~ pases * E D Y het? 85 No. 84-1376~ wAY 6 ESAS |. STEVAS, CLERK In the Supreme Court of the Hnited-States OCTOBER TERM, 1984 GRIM HOTEL COMPANY, ET AL., PETITIONERS Vv. WILLIAM E. Brock, SECRETARY OF LABOR, ET AL. ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT BRIEF FOR THE RESPONDENTS IN OPPOSITION Rex E. LEE Solicitor General Department of Justice Washington, D.C. 20530 (202) 633-2217 FRANCIS X. LILLY Solicitor of Labor KAREN I. WARD Associate Solicitor . Caro A. De DEo Counsel for Appellate Litigation JAMES Y. CALLEAR Attorney Department of Labor Washington, D.C. 20210 QUESTIONS PRESENTED 1. Whether five corporations, all engaged in the hotel business and controlled by the same individual, are an “enterprise” within the meaning of Section 3(r) of the Fair Labor Standards Act, 29 U.S.C. 203(r). 2. Whether a corporate officer who exercises significant day-to-day control over the affairs of a business, including decisions over wages, is an “employer” within the meaning of Section 3(d) of the Fair Labor Standards Act, 29 U.S.C. 203(d). 3. Whether the district court properly exercised jurisdic- tion, under a state long-arm statute, over a non-resident corporate officer who was engaged in substantial in-state activities. (I) TABLE OF CONTENTS Page EE 505 one noth eee cn 0d5enb enaer secene | ee oe nd see ous eb eiaedeweds l Ne ae ee eh kee baaeae 1 cai ce La Rw Ath WN OOA0b O0608 404560008006 4 ee Se eat an ein de eadin's 66a na cies sees & TABLE OF AUTHORITIES Cases: Brennan v. Plaza Shoe Store, Inc., ed ol sc ee enesec's 5 Brennan v. Veterans Cleaning Service, Inc., Ae US cw eens wees neees's 5 Calder v. Jones, No. 82-1401 eet hehbse Cheek eeensees 8 DeMelo v. Touche Marine, Inc., eke beneses 8 Donovan v. Agnew, 712 F.2d 1509 .......... 6,7 Donovan v. Janitorial Services, Inc., ewe weeeetsbe 5 Donovan v. Sabine Irrigation Co., 531 F. Supp. 923, aff'd, 695 F.2d 190, cert. denied, 463 U.S. 1207 .............. 4, 6,7 Donovan v. Sideris, 688 F.2d 74 ............4.. 6 Falk v. Brennan, 414 U.S. 190 .................. 6 Goldberg v. Whitaker House Cooperative, Oe Ae Wicd OE hve nce des Sieeowekeesa se vaae 6 IV Cases—Continued: Hodgson v. University Club Towers, Inc., DP ch baknsrddiekudesehGbiesseness 5 Marshall v. McAlester Corp., No. 78-1303 (10th Cir. Mar. 7, 1980), cert. denied, 449 Ca NE SSbN SARE NDNE EES Rdg dn ese cen seccces 4 Schultz v. Mack Farland & Sons Roofing Ci See EE Reached Kade cdnadenccces 6 Tony & Susan Alamo Foundation v. Secretary of Labor, No. 83-1935 (Apr. 23, 1985) ........ 6 Statutes: Fair Labor Standards Act, 29 U.S.C. 201 et seq. : Oe Ws ODS ewdne nt ceeweneens 3 es Ee ND een ccdcccccccasde 2,3 SD a Ga MEE ‘uve cagasnccacssecas 3 aM Meds 6 oceans snnnessecees 2 at SR ME. oti cenwancaess caneccecs 2 § 1Gfe), 2D U.S.C. ZIGf]) oc nscccsccccecesss 2 Ee a netdacbusiccekece vas 2 Tex. Rev. Civ. Stat. Ann. (Vernon 1964): PR D Swdsclececsusecvccunsteasic tas 2 Bebe BOG oni aang at eden Wer 7-8 Iu the Supreme Court of the Hunited States OCTOBER TERM, 1984 No. 84-1376 GriIM HOTEL COMPANY, ET AL., PETITIONERS Vv. WILLIAM E. Brock, SECRETARY OF LABOR, ET AL. ON PETITION FORA WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT BRIEF FOR THE RESPONDENTS IN OPPOSITION OPINIONS BELOW The opinion of the court of appeals (Pet. App. E1-E20) is reported at 747 F.2d 966. The district court’s opinions (Pet. App. Cl1-C22 and D1-D4) are unreported. JURISDICTION The judgment of the court of appeals was entered on December 3, 1984, and the petition for a writ of certiorari was filed on March 1, 1985. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). STATEMENT The Secretary of Labor brought suit against five hotels and their president, alleging that the hotels failed to pay the minimum wage and overtime compensation to their employ- ees, as required by the Fair Labor Standards Act (FLSA). The district court rejected petitioners’ arguments that the hotels are not an “enterprise”covered by the Act, that the (1) 2 president is not an “employer” under the Act, and that the court lacked jurisdiction over the president. It held that petitioners had violated the Act (Pet. App. C1-C22, Di- D4). The court of appeals affirmed (Pet. App. E1-E20). Petitioner Charles Alberding, a resident of Chicago, IIli- nois, is founder and president of the five petitioner corpora- tions, each of which owns a hotel located in Texas (Pet. App. E7). The Secretary of Labor brought suit in the United States District Court for the Eastern District of Texas, under Sections 16(c) and 17 of the Act, 29 U.S.C. 216(c) and 217, to enjoin the hotels and Alberding from violating the minimum wage and overtime provisions of the FLSA and to obtain damages (Pet. App. E5-E6). The hotels admit- tedly failed to comply with the minimum wage and overtime provisions of the FLSA.' Alberding moved to dismiss the complaint for lack of personal jurisdiction under the Texas long-arm statute, Tex. Rev. Civ. Stat. Ann. art. 2031b (Vernon 1964). The court denied the motion in 1981. It found that Alberding was “clearly ‘doing business’ in Texas” for purposes of personal jurisdiction under the long-arm statute and that he had “purposefully availed himself of the benefits and pro- tections of Texas law.” Therefore, the court held that the exercise of “personal jurisdiction over him * * * does not offend the constitutional requirement of due process of law.” Pet. App. D3-D4. A trial on the issue of liability followed. The hotels argued that they are not an “enterprise” under Section 3(r) of FLSA, 29 U.S.C. 203(r). The Act applies to enterprises 'The hotels paid employees working as desk clerks and maids any- where from $1.30 to $2.30 per hour, significantly less than the minimum wage rate in effect. The hotels did not pay a premium for overtime work, so employees who worked over 40 hours per week did not receive one and one-half times their normal rate of pay as required by the Act. Pet. App. C1-C2, E6; 29 U.S.C. 206, 207. 3 with an annual gross volume of business of at least the amount specified in Section 3(s), 29 U.S.C. 203(s). The parties stipulated that each of the hotels, individually, had an annual gross of less than the jurisdictional amount but that, cumulatively, their annual gross exceeded that amount. Pet. App. E8. The district court held, in 1983, that the five hotels constituted an enterprise because they engaged in related activities (Pet. App. C9-C13), they shared a com- mon business purpose (id. at C13-C15), and they were subject to centralized control (id. at C15-C17). The district court also held that Alberding was an “employer” under Section 3(d) of the FLSA, 29 U.S.C. 203(d), finding that he “exercised ultimate control” over the business activities of the hotels. Pet. App. C17-C20. The court held that petition- ers had violated the Act willfully and were therefore liable for three years’ back pay (id. at C20-C21). It enjoined future violations as well (id. at B1-B2). The court of appeals affirmed (Pet. App. E1-E20). It found that the “hotels were centrally directed, connected, and interdependent” (id. at Ell). The court noted that separate incorporation of the hotels did not exclude them from coverage under the FLSA. Because, in fact, they “operated as a single enterprise performing related activities through a common control,” the court held that they were an enterprise under Section 3(r) of the FLSA, 29 U.S.C. 203(r) (Pet. App. E12). On the issue of whether Alberding was an “employer” under the FLSA, the court of appeals found that he con- trolled the hotels and their purse-strings, guided their poli- cies, personally selected their managers, and traveled to Texas to inspect them and resolve major problems. The court concluded that “the hotels, speaking pragmatically, 4 were Alberding’s and functioned for the profit of his fam- ily.” Pet. App. E13-E14.? The court of appeals also rejected Alberding’s contention that the district court erred in denying his motion to dismiss for lack of personal jurisdiction, noting that Alberding’s personal presence in Texas and his personal acts in connec- tion with the hotels “were not insubstantial” (Pet. App. 14-E16), so that exercise of jurisdiction over Alberding under the Texas long-arm statute comported with due pro- cess (id. at E17-E18). ARGUMENT The court of appeals correctly applied well-settled legal principles to the facts of this case. Its decision ¢s not conflict with any decision of this Court or of another court of appeals. Petitioners’ arguments that the hotels are not an “enterprise” and that Alberding is not an “employer” are based largely on their disagreement with the district court's factual findings, which the court of appeals concluded were correct, and do not warrant further review. Alberding's argument that the district court lacked jurisdiction over him is without merit. 1. Petitioners argue (Pet. 12-13) that the hotels are not an enterprise because they are not engaged in “related activi- ties.” Petitioners argue, primarily, that the hotels are not related because the ratio of long-term guests to short-term ?The court noted (Pet. App. E7-E8 n.3) that it had, in a prior case, found Alberding to be an employer responsible for minimum wage and overtime pay violaticas of a Louisiana corporation that he controlled. Donovan v. Sabine érvigation Co., 695 F.2d 190, 195 (Sth Cir.), cert. denied, 463 U.S. 1207 (1983). In addition, the Tenth Circuit has found Alberding responsible for minimum wage and overtime pay violations at Oklahoma hotels that he controlled. Marshall v. McAlester Corp., No. 78-1303 (Mar. 7, 1980) (unpublished), cert. denied, 449 U.S. 828 (1980). 5 guests differs among the hotels. As the court of appeals concluded (Pet. App. E9), this does not change the essential nature of the hotels’ business. 7*.2 court properly found that “businesses, calling themselves hotels and operating as hotels, whether their guests stay a short or long while, are engaged in related activities for the purpose of the Act” (Pet. App. E9). See Donovan v. Janitorial Services, Inc., 672 F.2d 528, 529-530 {Sth Cir. 1982); Brennan v. Plaza Shoe Store, Inc., 522 F.2d 843, 847-848 (8th Cir. 1975). See also Brennan v. Veterans Cleaning Service, Inc., 482 F.2d 1362, 1366-1367 (Sth Cir. 1973).° Contrary to petitioners’ further contention (Pet. 13-14), the hotels were clearly “commonly controlled,” since they “were centrally directed, connected, and interdependent” (Pet. App. Ell). Petitioners argue with the court's factual conclusions in this regard by pointing to the separate incor- poration of each of the hotels and the Albercing family's hypothetical control over the hotels by virtue of its stock ownership. But corporate fragmentation of the businesses that make up an enterprise does not exclude coverage under the FLSA. As the court of appeals concluded, the separate incorporation of each of the hotels and their stock owner- ship were a “formality” and in practice the hotels were “centrally controlled by and operated as a singie group” 4 ‘Contrary to petitioners’ assertion (Pet. 12), there is no conflict between bus case and Hodgson v. University Club Towers, Inc., 466 F.2d 745 (i0th Cir. Cir. 1972). The court in Hodgson held that the activities of a corporation engaged exclusively in the operation of a hotel and those of a corporation engaged exclusively in the operat.on of apartment houses were not “related” within the meaning of the FLSA (id. at 746). Here, in contrast, petitioners made no showing that the units at any of the hotels were under lease to permanent residents for extended periods. Furthermore, in Hodgson, there was a lack of other factors that would have led to a finding of enterprise coverage, such as employee interchange, common bookkeeping, and unified manage- ment — factors thai are all present in this case. 6 (Pet. App. Ell). See Donovan v. Sideris, 688 F.2d 74, 75-76 (8th Cir. 1982); Donovan v. Sabine Irrigation Co., 695 F.2d at 194-195; Schultz v. Mack Farland & Sons Roofing Co., 413 F.2d 1296, 1299-1301 (Sth Cir. 1969). In any event, this factual issue does not warrant the Court’s attention. 2. Petitioners also assert (Pet. 6-8) that Alberding was not an “employer” within the meaning of 29 U.S.C. 203(d). Once again, petitioners’ argument is based largely on their disagreement with the factual findings made by the district court and affirmed by the court of appeals. In determining whether the evidence established that Alberding was an employer, the courts properly examined the “economic realities of employment.” Donovan v. Agnew, 712 F.2d 1509, 1510 (Ist Cir. 1983); Donovan v. Sabine Irrigation Co., 695 F.2d at 193. See also Tony & Susan Alamo Foundation v. Secretary of Labor, No. 83- 1935 (Apr. 23, 1985), slip op. 10; Goldberg v. Whitaker House Cooperative, Inc., 366 U.S. 28, 33 (1961). An indi- vidual is deemed to be an “employer” under the FLSA when he has “substantial control of the terms and conditions of the work of * * * employees” (Falk v. Brennan, 414 U.S. 190, 195 (1973)). As the district court stated (Pet. App. C19, quoting Donovan v. Sabine Irrigation Co., 695 F.2d at 194-195), the definition of “employer” in the FLSA is “suf- ficiently broad to encompass an individual who, though lacking a possessory interest in the ‘employer’ corporation, effectively dominates or otherwise acts, or has the power to act, on behalf of the corporation vis-a-vis its employees.” Here, Alberding controlled the hotels’ purse-strings, guided their policies, chose their managers, and traveled to Texas to inspect them and solve their major problems. Only he could have authorized compliance with the minimum wage 7 and overtime compensation provisions of the FLSA.‘ The court of appeals concluded that it could not “imagine firmer proof of Alberding’s ‘employer’ status” (Pet. App. E13 & n.7). Contrary to petitioner’s assertion (Pet. 6), the court did not apply a “strict liability” test for corporate officers for FLSA violations, nor is that the effect of the court’s deci- sion. Rather, the court fully examined Alberding’s relation- ship to the hotels in accord with settled legal principles before concluding that he was an employer within the mean- ing of the FLSA. See Donovan v. Sabine Irrigation Co., 695 F.2d 190, 194-195 (Sth Cir. 1983), affg 531 F. Supp. 923, 928-929 (W.D. La. 1981), cert. denied, 463 U.S. 1207 (1983).° Further review of these factual issues is clearly unwarranted. 3. As the court of appeals held (Pet. App. E14), petition- ers’ argument that the district court had no personal juris- diction over Alberding “is patently without merit.” There is no doubt that Alberding was doing business in Texas, as ‘The court of appeals noted (Pet. Apo. E13 n.7) that petitioners dispute the finding that Alberding controlled employees’ wages, but concluded that the district court’s finding, based on credited testimony regarding Alberding’s ultimate control of major expenditures, was “far from clearly erroneous.” The court of appeals also noted that, even if the district court e in admitting the hearsay evidence that wage increases required rding’s approval, the error was harmless (Pet. App. E7 n.2). 5 onovan v. Agnew, 712 F.2d 1509, 1513 (Ist Cir. 1983), cited by petitioners to support their argument that the court improperly found Alberding to be an “employer,” actually supports the decision of the court of appeals in this case. The court of appeals in Agnew found two corporate officers to be personally liable for FLSA violations where the officers “had operational control of significant aspects of the corpora- tion’s day to day functions, including compensation of employees” (712 F.2d at 1514). The similar factual findings in this case support the conclusion that Alberding is an “employer.” 8 required by the Texas long-arm statute, Tex. Rev. Civ. Stat. Ann. art. 2031b $ 4 (Vernon 1964). He hired the hotel managers, regularly traveled to Texas in connection with operation of the hotels, and made loans to the hotels (Pet. App. E15). Nor were these actions taken solely by Alber- ding in his corporate capacity, since he was an “employer” under the FLSA, personally had control of the terms and conditions of employment of Texas employees, and was personally present in Texas (Pet. App. E16). Contrary to petitioners’ contention (Pet. 9), there is nothing “fundamen- tally unfair” about the court’s assertion of jurisdiction over a corporate officer because of actions outside of the state that directly affect empioyees in the state where jurisdiction is asserted. See Calder v. Jones, No. 82-1401 (Mar. 20, 1984). See also DeMelo v. Touche Marine, Inc., 711 F.2d 1260, 1272 (Sth Cir. 1983). CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted. Rex E. Lee Solicitor General FRANCIS X. LILLY Solicitor of Labor KAREN I. WARD Associate Solicitor CaroL A. DE DEo Counsel for Appellate Litigation JAMES Y. CALLEAR Attorney Department of Labor May 1985 DO}J-1985-05 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_2467%3A2. Public record. Not legal advice.