Petition for Writ of Certiorari — IOWA V. DUNLOP (No. 73-1565)

FLLED

er APR 19 1974

MODRAEL ROCAK, JR,

he hays

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1974

No. 43-1565

STATE OF IOWA,

Petitioner,

3 vs.

PETER J. BRENNAN, Secretary of Labor, United States Depart-

ment of Labor, .

Respondent. é

‘a PETITION FOR A WRIT OF CERTIORARI TO THE ;

Wee UNITED STATES COURT OF APPEALS

a FOR THE EIGHTH CIRCUIT

a RICHARD C. TURNER

te Attorney General of Iowa ;

a LORNA LAWHEAD WILLIAMS ;

Special Assistant

: Attorney General

4 State Capitol

Des Moines, lowa 50319

ATTORNEYS FOR PETITIONER

SELIG RES SPSL GS EGO LARS MEL PT LNT NE ARES I 8 TT

INDEX

ae ee

POLLS POEL? 2

Opinion Below ........ 2. ee eee eee eee eee ete reeee

ee re ee eer

Questions Presented ........-- eee eee cree eee teens

Constitutional Provisions and Statutes .......---+++e+e55

Statement of the Case ..... 2.22 ee eee ee ee eee ee eens

Reasons for Granting The Writ ... 2... - eee eee eens

NOP Pa a) APORVE A MAE PE INS 4

PW"

OPO 83

I. THIS CASE RAISES IMPORTANT TENTH AND ELEV-

ENTH AMENDMENT QUESTIONS, NOT ONLY FOR THE SOVER-

EIGN STATE OF IOWA BUT FOR OTHER STATES WHICH

HAVE STATE OWNED AND STATE OPERATED INSTITUTIONS

“PRIMARILY ENGAGED IN THE CARE OF THE SICK, THE

AGED, THE MENTALLY ILL OR DEFECTIVE WHO RESIDE ON

THE PREMISES, OR A SCHOOL FOR MENTALLY OR PHYSI-

CALLY HANDICAPPED OR GIFTED CHILDREN”, 29 USC.

§203 (s) (4), Fair Labor Standards Act. [Such grounds held

sufficient in McGee v. International Life Ins. Co., 355 U.S. 220, 221

oe, § Pere Le Tee Wee a ee ee ee ot .

Il. THE DECISION OF THE CIRCUIT COURT OF APPEALS

IS BASED UPON SUBSTANTIAL CONSTITUTIONAL QUES-

TIONS WHICH THIS COURT EXPRESSLY RESERVED FOR

CONSIDERATION IN AN ACTUAL FACT SITUATION SUCH AS

HERE INVOLVED. [Maryland v. Wirtz, 392 U.S. 183 (1968).]

{Certiorari granted in similar situations: /ckes v. Virginia-Colorado

Development Corp., 295 U.S. 639, (1934); Federal Trade Commis-

sion v. Travelers Health Assn., 362 U.S. 293, 297 (1960).] ......--

Ill, PETITIONER FEELS THAT THE COURT OF APPEALS

HAS MISCONSTRUED, MISAPPLIED OR MISCONCEIVED THE

OPINION IN MARYLAND V. WIRTZ, SUPRA, AND DICTA IN

EMPLOYEES OF THE DEPARTMENT OF PUBLIC HEALTH &

REALE TTL FS LON EIS ? Mao ERIE.

WELFARE V. DEPARTMENT OF PUBLIC HEALTH & WEL-

FARE, 411 U.S. 279, (1973). Review by this Court on such grounds

appear in Upshaw v. United States, 355 U.S. 410 (1948); Wilkinson

v. United States, 365 U.S. 399, 401 (1961); Schlude v. Commis-

sioner, 372 U.S. 128, 130 (1963).] ....---- eee eee erent 7

IV. THERE IS A NEED FOR THIS COURT TO FURTHER

CONSIDER AND REVIEW IMPORTANT CONSTITUTIONAL

LAW QUESTIONS IN A FACTUAL SITUATION SQUARELY

BEFORE IT TO CLARIFY PREVIOUS DECISIONS AND THEIR

IMPLICATIONS, i.e. Maryland v. Wirtz,supra, and Employees of the

Department of Public Health & Welfare v. Department of Public

Health & Welfare, supra. [This court has reviewed prior decisions

and clarified them. Marchetti v. United States, 390 U.S. 39,41

(1968); Afroyim v. Rusk, 387 U.S. 253, 255, 256 (1967); S.E.C. v.

United Benefit Life Ins. Co., 387 U.S. 202, 207 (1967); Edelman v.

Jordan, No. 72-1410, U.S.S.C. March 25, 1974, 42 lta 2. ee 7

cee A Ye pe ee

ee Any ROG TPMT OS aI Rear OK A cpmee a me ect e re wah AB laa dR

iii

Division |

THE “ULTIMATE CONSUMER” ARGUMENT -- THE SOVEREIGN

STATE OF IOWA IS THE ULTIMATE CONSUMER OF “GOODS”. .

Division II

THE STATE OF IOWA IS NOT “ENGAGED IN COMMERCE” OR

“IN THE PRODUCTION OF GOODS FOR COMMERCE” WITHIN

THE MEANING OF THE FAIR LABOR STANDARDS ACT

Division Il

PROTECTION OF FISCAL POLICY ARGUMENT — UNDER THE

TENTH AMENDMENT CONGRESS SHOULD NOT DRAW UP

STATES’ BUDGETS UNDER THE GUISE OF COMMERCE POWER .

Conclusion

ROE, 5 oon 5p wee ae crs Cen er hence ke S650? <* la

{Opinion of the United States Court of Appeals for the

Eighth Circuit, Filed February 26, 1974]

Re Bak sc c a hn ce h ade ee aR Se ese 8s $88 2 8 14a

[Order of the United States Court of Appeals for the

Eighth Circuit staying the issuance of the mandate for 30

days from and after March 21, 1974]

MN Sn ose ksh a eae res eer ens ee ess? 16a

[Constitutional Provisions and Statutes set out]

Pe ARO go eit Be Te Nadia dial ana 22a

[Certificate of Service]

iv

Page

CASES

Afroyim v. Rusk, 387 U.S. 253 (1967) .........+-+005- ae

Brennan v. Dillion, 483 F.2d 1334 (1973) ...........+-- 9,10,

Edelman v. Jordan, No. 72-1410, U.S.S.C. March 25, 1974,

42 L.W. 4119 .. 2... cece ee eee eee eee eens 8,12,13

Employees of the Department of Public Health and

Welfare v. Department of Public Health and Welfare,

411 US. 279 (1978) 2. wb ccc crc ewer reer nn iin nce 7,8

Federal Trade Commission v. Travelers Health Assn., 362

if Sle |) a aaa ae ae ee keine be 7

Ford Motor Co. v. Department of Treasury, 323 U.S. 459 (1945) .13

Hodgson v. Hyatt Realty, 353 F.Supp. 1363 (M.D. N.C.

1973), aff'd sub nom. Brennan v. Hyatt Realty, No.

73-1869 (4th Cir., filed Jan. 10,1974) ........0...--. 10

Hodgson v. Taylor, 439 F.2d 288 (8th Cir. 1971) ........---- 13

Ickes v. Virginia-Colorado Development aie: 295 U.S.

A Se ee See eee ee ee 7

Marchetti v. United States, 390 U.S. 39 (1968) ..........+... 8

Maryland v. Wirtz, 392 U.S. 183 (1968) .......... 7,8,10,11,12

McGee v. International Life Ins. Co., 355 U.S. 220 (1957) ..... 7

New York v. United States, 326 U.S. 578 (1946) ........... 14

Schlude v. Commissioner, 372 U.S. 128 (1963) ..........44. 7

S.E.C. v. United Benefit Life Ins. Co., 387 U.S. 202 (1967) .... 8

Upshaw v. United States, 335 U.S. 410 (1948) ..........--. 7

\

Walling v. Jacksonville Paper Co., 317 U.S. 564 (1943) .... 9,10,11

Wilkinson v. United States, 365 U.S. 399 (1961) pbs ae ie ig 7

Wirtz v. Jones, 340 F.2d 901 (5th Cir. 1965)... 66-2520 13

Wirtz v. Melos Construction Corp., 408 F.2d 626 (1969) ...... 9

re

vi

Page

STATUTES

PPRAUMEUOERD Sec cdi nc ewsgrresnserrececcene 2

29 USC. RRS Pr ee ene a a ee ee ee ee 3,6,8

Sk ee ee a a ee ee ee oe ee 3

ee ee eae en a ee a a ar 3

ak ek | PPE P EET TE ECELORELECE ee 3,7

a Jk eee ee Pee eR ERS ee ee 3,5

oe er Sr ee ee ee ee 3,5

PERE NED Sew ece eked sb bees see wera eeee-oee® 3,5

a Se) PACS eT Pe Cea CRE Coe ee ee 3,4,5

BN ere rere eee ee ee ee ee 3,4

NE 6.6 so Fda cy 84s Wines oe Oka eee hae 3,4

MURR ONE oi Fe eae See 3,4

CONSTITUTIONAL PROVISIONS

Tenth Amendment to United States Constitution ...... *, $,7,12

Eleventh Amendment to United States Constitution ..... 2,3,7,13

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1974

NO.

STATE OF IOWA,

Petitioner,

vs.

PETER J. BRENNAN, Secretary of Labor, United States

Department of Labor,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR TEE EIGHTH CIRCUIT

The Attorney General of the State of Iowa, on behalf of the

Petitioner, the State of lowa, prays that a writ of certiorari issue to

review the judgment and opinion of the United States Court of

Appeals for the Eighth Circuit entered in this proceeding on

February 26, 1974.

OPINION BELOW

a

The opinion below by a divided court of the United States

Court of Appeals for the Eighth Circuit, filed February 26, 1974, is

unreported and appears at Appendix A.

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JURISDICTION

On the 26th day of February, 1974, the Court of Appeals for

the Eighth Circuit filed its Opinion and Judgment. (See Appendix A)

On a motion by Petitioner, the State of Iowa, a Stay of issuance of

the mandate was granted on March 21, 1974, provided that within

thirty (30) days there is filed with the Clerk of the Court for the

Court of Appeals for the Eighth Circuit a certificate of the Clerk of

the Supreme Court of the United States that a petition for writ of

certiorari has been filed. (See Appendix B) The jurisdiction of this

Court is invoked under Title 28 U.S.C. §1254(1).

QUESTIONS PRESENTED

1. In this particular instance, are goods (and activities related

thereto), which are moved in interstate commerce to the State of

lowa for use by it in connection with the operation of its hospitals,

delivered into the actual physical possession of the State of lowa as

the ultimate consumer ‘thereof, thus exempting Iowa from the Fair

Labor Standards Act?

2. In this particular instance, is the State of lowa an

“enterprise engaged in Commerce” within the meaning of the Fair

Labor Standards Act in serving Iowa residents (public charges) in a

purely local operation with only local and not interstate considera-

tions, when it, in isolated and incidental occasions, employs

interstate facilities in carrying out its duties?

3. If the State of Iowa is covered by the Fair Labor Standards

Act, does the Eleventh Amendment bar recovery of retroactive

payments to employees from State biennium appropriations for

current expenditures?

CONSTITUTIONAL PROVISIONS AND STATUTES

The Tenth and Eleventh Amendments to the Constitution of

the United States and the pertinent portions of the Fair Labor —

Standards Act [29 U.S.C. 8§203(i), 203(j), 203(r)(1), 203(s)(4),

206(b), 207(a)(2), 211(c), 215(a)(2), 215(a)(5), 216(c) and 217] are

set forth in Appendix C.

STATEMENT OF THE CASE

The Respondent here, the United States Secretary of Labor,

seeking to enforce the Fair Labor Standards Act, Title 29 U.S.C.

§201 et seq., filed a Complaint in the United States District Court for

the Southern District of lowa against the State of lowa, on October

1, 1971. This action was commenced by the United States Secretary

of Labor against the State of Iowa pursuant to Title 29 U.S.C.

§216(c) and §217 (Fair Labor Standards Act).

On June 8, 1973, in the cause then pending in the United States

District Court for the Southern District of lowa the District Court

held that certain institutions operated by the State of Iowa

constituted enterprises having employees handling, selling, or other-

wise working on goods that have been moved in or produced for

commerce by any person and imposing liability on the State of Iowa

pursuant to the Fair Labor Standards Act of 1938, as amended (29

U.S.C. §201 et seq.), and issuing an injunction enjoining and

restraining the State of Iowa from violation of 29 U.S.C. §§215(a)(2)

and (a)(5).

On June 26, 1973, the State of Iowa filed in the United States

District Court, Southern District of lowa, its notice of appeal to the

United States Court of Appeals for the Eighth Circuit and a Motion

for Stay of Order and Suspension of Injunction.

On August 23, 1973, the United States District Court, Southern

District of Iowa, granted the State of Iowa the requested Stay order

pending the disposition of the cause on appeal.

On February 26, 1974, the United States Court of Appeals for

the Eighth Circuit filed its decision affirming the order of the United

States District Court for the Southern District of lowa.

On March 12, 1974, the State of lowa requested a Stay of

Mandate pending its petition for a writ of certiorari to the United

States Supreme Court. On March 21, 1974, the United States Court

of Appeals for the Eighth Circuit granted a Stay of the Mandate.

The facts relevant to the questions presented by this petition

are undisputed and therefore may be introduced to the Court in a

summary fashion.

SPER ENTS OLIN TILT OS ILE OE LEE

This action was brought by the Secretary of Labor seeking to

enforce the Fair Labor Standards Act (29 U.S.C. §201 et seq.) against

the State of Iowa in the District Court of the United States for the

Southern District of Iowa. The State of lowa, through its Depart-

ment of Social Services, owns and operates nine (9) institutions

which function as hospitals and are institutions primarily engaged in

the care of the sick, the aged, the mentally ill or defective who reside

on the premises or are schools for the mentally or physically

handicapped or gifted children.

The Secretary of Labor of the United States alleges that at said

institutions the State of Iowa has violated or is violating the

minimum wage provisions of 29 U.S.C. §206(b) and §215(a)(2), the

overtime provisions of §207(a)(2) and 8215(a)(2) and the record

keeping provisions of §211(c) of the Fair Labor Standards Act.

Each of the institutions has received and regularly receives,

Le eee

a a ole

roe PA OER?

either directly or indirectly, by purchase or otherwise, substantial :

amounts of medicines, drugs, and other medical supplies, foods, :

cleaning supplies, office supplies, equipment, bedding, linen, towels, :

appliances, therapeutic equipment, clothing and other supplies which :

were manufactured or produced outside of the State of Iowa and

transported into Iowa from other states. Certain categories of

employees at the named institutions regularly handle or work on this

merchandise.

Other employees, in the regular course of their duties, prepare

and/or receive purchase orders, shipment orders, invoices, bills,

checks and other correspondence which is sent to or received from

manufacturers, producers or suppliers located outside the state. The

institutions also have employees who receive deliveries of goods

transported to the State of Iowa from other states and who handle,

store and move within the institution such merchandise after

delivery.

Six institutions have employees who transport or accompany

patients or residents to points outside of lowa for treatment,

diagnosis or other purposes. Approximately twelve (12) times a year —

was the most any institution employees made such a trip.

SEA ASACR OT A EEA WN LEIPER OLE ROSE LEY ELE LEME ELA LEED LLL STOLE PAIL LOLOL EF. ALBEE IOS es |

All but one institution stated that it had employees who, in the

regular course of their duties, place or receive out-of-state telephone

calls.

These above enumerated activities are directly related to

obtaining “goods” which the Petitioner feels are not ‘“‘goods”’ within

the meaning of 29 U.S.C. §203(i) and include other activities which

are so incidental to the primary purpose of the local operation of the

institutions that the sovereign State of Iowa is exempt from the Act.

CEs aca) of Lice ie eas Sata ae eal ee aie Lo Be ae I a Ca Ce i eS

REASONS FOR GRANTING THE WRIT

I. THIS CASE RAISES IMPORTANT TENTH AND

ELEVENTH AMENDMENT QUESTIONS, NOT ONLY FOR THE

SOVEREIGN STATE OF IOWA BUT FOR OTHER STATES

WHICH HAVE STATE OWNED AND STATE OPERATED INSTI-

TUTIONS “PRIMARILY ENGAGED IN THE CARE OF THE SICK,

THE AGED, THE MENTALLY ILL OR DEFECTIVE WHO RESIDE

ON THE PREMISES, OR A SCHOOL FOR MENTALLY OR

PHYSICALLY HANDICAPPED OR GIFTED CHILDREN”, 29

U.S.C. 6203(s) (4), Fair Labor Standards Act. [Such grounds held

sufficient in McGee v. International Life Ins. Co., 355 U.S. 220, 221

(1957).]

Il. THE DECISION OF THE CIRCUIT COURT OF APPEALS

IS BASED UPON SUBSTANTIAL CONSTITUTIONAL QUES-

TIONS WHICH THIS COURT EXPRESSLY RESERVED FOR

CONSIDERATION IN AN ACTUAL FACT SITUATION SUCH AS

HERE INVOLVED. [Maryland v. Wirtz, 392 US. 183 (1968.]

[Certiorari granted in similar situations: /ckes v. Virginia-Colorado

Development Corp., 295 U.S. 639, (1934); Federal Trade Commis-

sion v. Travelers Health Assn., 362 U.S. 293, 297 (1960).]

Ill. PETITIONER FEELS THAT THE COURT OF APPEALS

HAS MISCONSTRUED, MISAPPLIED OR MISCONCEIVED THE

OPINION IN MARYLAND V. WIRTZ, SUPRA, AND DICTA IN

EMPLOYEES OF THE DEPARTMENT OF PUBLIC HEALTH &

WELFARE V. DEPARTMENT OF PUBLIC HEALTH & WELFARE,

411 U.S. 279, (1973). Review by this Court on such grounds appear

in Upshaw v. United States, 335 U.S. 410 (1948); Wilkinson v.

United States, 365 U.S. 399, 401 (1961); Sch/ude v. Commissioner,

372 U.S. 128, 130 (1963).]

IV. THERE IS A NEED FOR THIS COURT TO FURTHER

CONSIDER AND REVIEW IMPORTANT CONSTITUTIONAL LAW

QUESTIONS IN A FACTUAL SITUATION SQUARELY BEFORE

ESS POLIO RANE EPIL OLLIE. VP IILONLE SR ELESE SAE LS ITO G OO OLES TEI LOSE LOLS YE

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IT TO CLARIFY PREVIOUS DECISIONS AND THEIR IMPLICA-

TIONS, i.e. Waryland v. Wirtz, supra, and Employees of the

Department of Public Health & Welfare v. Department of Public

Health & Welfare, supra. [This court has reviewed prior decisions and

clarified them. Marchetti v. United States, 390 U.S. 39, 41 (1968);

Afroyim v. Rusk, 387 U.S. 253, 255, 256 (1967); S.E.C. v. United

Benefit Life Ins. Co., 387 U.S. 202, 207 (1967); Ede/man v. Jordan,

No. 72-1410, U.S.S.C. March 25, 1974, 42 U.S.L.W. 4419.

I. THE “ULTIMATE CONSUMER” ARGUMENT --

THE SOVEREIGN STATE OF IOWA IS THE ULTIMATE

CONSUMER OF “GOODS”.

The issue here is whether “goods’’ delivered to the sovereign

State of Iowa for use in the operation of its state owned hospitals for

its residents and public charges are “goods delivered into the actual

physical possession*of the ultimate consumer” under facts here

presented and thus exempt the State of Iowa from coverage of the

Fair Labor Standards Act. Conceivably some state hospitals could be

utilizing goods as a “producer, manufacturer or processor”’ of goods

and thus be covered by the Act. [29 U.S.C. 6203(i)]

This question was reserved by this Court in Maryland v. Wirtz,

392 U.S. 183, (1968) at 201, which concluded with the words:

“We think the District Court was correct in declining

to decide, in the abstract and in general, whether schools

and hospitals have employees engaged in commerce or

production. Such ° institutions, as a whole, obviously

purchase a vast range of out-of-state commodities. These

are put to a wide variety of uses, presumably ranging from

physical incorporation of building materials into hospital

and school structures, to over-the-counter sale for cash to

patients, visitors, students, and teachers. Whether particu-

lar institutions have émployees handling goods in com-

merce, cf. Walling v. Jacksonville Paper Co., 317 U.S. 564,

87 L.Ed. 460, 63 S.Ct. 332, may be considered as occasion

requires.”

ne meen pieces —

In furnishing food, shelter and treatment, it is true that lowa

utilizes items brought into Iowa or contracted for via interstate

facilities. But, the items, medicines, foods, beds, laundry items,

cleaning supplies, office supplies, building materials, and such are

contracted for by the sovereign State of Iowa, paid for by the State

of Iowa, remain under the control of the State of Iowa, and are

dispensed to the public charges who reside in its institutions under

the direction of the State of Iowa. Thus employees are not handling

goods other than in the course of their employment with the

ultimate consumer. The test is whether the articles have ceased

movement in interstate commerce and reached their ultimate

destination.

In his dissent from the Eighth Circuit Opinion herein, Judge

Gibson distinguishes cases cited by the majority opinion, namely

Wirtz v. Melos Construction Corp., 408 F.2d 626 (1969), and

Brennan v. Dillion, 483 F.2d 1334 (1973). The factual situation in

neither case involved an institution, state or private. Both were

commercial enterprises which performed services and furnished

goods to someone else, i.e., a résale of the items. Me/os involved a

building contractor and Di//ion an apartment house owner and

operator. Obviously, the customer having a house built has some

rights to reject the building or the goods incorporated therein and

likewise the tenant can move if dissatisfied with the goods or services

furnished him via the landlord. Here, resident patients in govern-

mental health institutions have no free choice of personal movement

nor right of selection of the kind, quality nor quantity of goods,

medicines or services.

Applying the principles enunciated in Walling v. Jacksonville

Paper Co., 317 U.S. 564, 87 L.Ed. 460, 63 S.Ct. 332 (1943), these

residents are not the “ultimate consumer”. The test laid down in

Walling is that there must be a factual situation which amounts to “a

practical continuity of movement of the goods until they reach the

customers for whom they are intended”, i.e., shipments to a

wholesaler to fill prior orders or contracts for resale to customers.

Here, there are no employees handling “‘goods” except goods

10

which had ceased movement in interstate commerce as they have

reached the sovereign State of Iowa as “the customer(s) for whom

they are intended” under the Walling v. Jacksonville, supra, test.

II. THE STATE OF IOWA IS NOT “ENGAGED IN

COMMERCE” OR “IN THE PRODUCTION OF GOODS

FOR COMMERCE” WITHIN THE MEANING OF THE

FAIR LABOR STANDARDS ACT.

The purpose of the Act is to prevent unfair competition or

prevent labor strife [Maryland v. Wirtz, supra] and to protect the

retailer [Brennan v. Dillion, supra, so heavily relied upon by

Respondent and in the majority opinion]. Here there is no

competition between the State locally operated institutions with

public funds and interstate businesses. Also, here there is no retailer

to be protected as no retailer is attempting to provide like goods and

services to residents in the institutions in competition with the State.

In Hodgson v. Hyatt Realty, 353 F.Supp. 1363 (M.D. N.C.

1973), aff’d sub nom. Brennan v. Hyatt Realty, No. 73-1869 (4th

Cir., filed Jan. 10, 1974), the State of North Carolina made license

plates but not in competition with interstate businesses nor retailers.

There the Court, at page 1374, said:

“True, some of the items and information acquired

may move interstate. However, such movement is incident-

al to the intra-state activity of tax collection, and not

incidental to an interstate transaction ...”

There is no claim by Respondent that the State is engaged in

the production of goods for commerce. The claim is made, however,

that the State is an enterprise engaged in commerce. The foregoing

division demonstrates that the items which were moved interstate are

not ‘‘goods”’ within the meaning of the Act.

The State is also not an enterprise “engaged in commerce’’. As

stated by Judge Gibson in his dissent herein:

11

“The operation of these institutions by the State of

Iowa is a purely local operation, a service provided for its

residents out of purely local, not interstate considerations.

The mere use of interstate facilities by employees as an

incident of carrying out a purely local business does not

constitute engaging in commerce. Stevens v. Welcome

Wagon International, Inc., 390 F.2d 75, 77 (3rd Cir.

1968); Chambers Const. Co. v. Mitchell, 233 F.2d 717,

722 (8th Cir. 1956); Hodgson v. Hyatt Realty, 353

F.Supp. 1363, 1373-74 (M.D.N.C. 1973), aff’d sub nom.

Brennan v. Hyatt Realty, No. 73-1869 (4th Cir., filed Jan.

10, 1974); Wirtz v. Sherman Enterprises, Inc., 229 F.Supp.

746, 752 (D.Md. 1964).”

This is in keeping with the language in Walling, supra, where at E

317 U.S. 564 at 570 we read:

“The evidence said to support it [a business ‘in

commerce’] is of a wholly general character and lacks that

particularity necessary to show that the goods in question

were different from goods acquired and held by a local

merchant for local disposition.

“In this connection, we cannot be unmindful that

Congress in enacting this statute plainly indicated its

purpose to leave local business to the protection of the

states. [Citations congressional history ]”’

Iowa was not using its institutions to produce goods for

commerce or otherwise support an enterprise engaged in commerce

as stated by Justice Douglas in the dissent in Maryland v. Wirtz, 392

U.S. 183 at 205:

“...Could the Congress virtually draw up each

State’s budget to avoid ‘disruptive effect[s] ... on com-

mercial intercourse.’? Atlanta Motel v. United States, 379

U.S. 241, 257, 13 L.Ed. 2d 258, 268, 85 S.Ct. 348.

“If all this can be done, then the National Govern-

ment could devour the essentials of state sovereignty,

though that sovereignty is attested by the Tenth Amend-

ment. ...

12

“Whether, in a given case, a particular commerce

power regulation by Congress of state activity is permissi-

ble depends on the facts. The Court must draw the |

‘constitutional line between the State as government 2nd —

the State as trader...’ New York v. United States, supra,

at 579, 90 L.Ed. at 332 (opinion of Mr. Justice Frank-

furter). In this case the State as a sovereign power is being

seriously tampered with, potentially crippled.”

III. PROTECTION OF FISCAL POLICY ARGU-

MENT - UNDER THE TENTH AMENDMENT CON-

GRESS SHOULD NOT DRAW UP STATES’ BUDGETS

UNDER THE GUISE OF COMMERCE POWER.

Retroactive payments from public funds of the State treasury

allocated in a biennium appropriation for current needs of the State

owned and operated mental (and other) instituions, may upset and

even wreck the State’s fiscal position in its desire to furnish necessary

and adequate services to its aged, mentally ill and to gifted and

handicapped children.

There would seem little doubt that a judgment against the State

of Iowa, in a federal court, will to some extent now, or in the near

future, force increased taxes, curtail services in this area, reduce

services in other areas or cause hesitation on the part of the State in

expanding services. See Maryland v. Wirtz, supra, 392 U.S. at

202-203, Douglas, J., dissenting.

As recognized by the majority in Ede/man v. Jordan, supra, the

federal constitution protects the States from extractions from States’

treasuries for retroactive payments in the welfare area. As in the

welfare area, it is a severe blow to the State’s treasury to order

retroactive payments in the area of State owned and operated

institutions; the biennium appropriation for current expenses also

warrants constitutional protection. Certainly, in this instance, the

sovereign State of Iowa was acting in good faith in its belief that it .

had constitutional immunity under Maryland v. Wirtz, supra, which

left questions unanswered.

The majority of the Circuit Court in requiring retroactive

_ for its fiscal problems as recognized in Ede/man v. Jordan, supra, --

Gene:al by stipulating to gathering information of employees ‘in an

13

payments states: ‘‘Secondly, we have held that the financial hardship

caused by the order is not a valid basis on which to deny the

employees their remedy...” [Hodgson v. Taylor, 439 F.2d 288,

290 (8th Cir. 1971); Wirte | v. Jones, 340 F.2d 901, 904-905 (5th Cir.

1965)] citing cases against private employees instead of recognizing §

the severe strain upon public funds of a sovereign state and respect

i.e., the majority of the Circuit Court misapplied Hodgson, supra,

and Jones, supra, as being analogous to a state-employer situation

since there is no constitutional protection for private employers.

Even in a Section 1983 action, this Court in Ede/man v. Jordan,

supra, recognized that “... a federal court’s remedial power,

consistent with the Eleventh Amendment, is necessarily limited to

prospective injunctive relief, Ex parte Young, supra, and may not

include a retroactive award which requires the payment of funds

from: the state treasury, Ford Motor Co. v. Department of Treasury,

supra.” [42 U,S.L.W. at 4427] |

The circuit Court in Edelman, such as the Circuit Court here,

refers to the retroactive payments as “equitable restituticn”; but this

court at page 42 L.W. 4424 said:

“While the Court of Appeals described this retroac-

tive award of monetary relief as a form of ‘equitable

restitution’, it is in practical = damages against the

State.”

Whereupon, this court held that the Eleventh Amendment

barred such retroactive payments.

Likewise, the majority of the Court suggests that the Attorney

“attempt to compute and agree on the amount of any unpaid

mirimum wages and overtime compensation” should the question

presented be resolved in favor of the Secretary of Labor, waived the

immunity afforded the soyereign State of Iowa. In Ford Motor Co. v.

14

‘Department of Treasury, 323 U.S. 459 (1945), this Court held that

under, the Indiana constitution only its legislature and not an official

of the executive branch of government could waive state’s rights.

CONCLUSION

Petitioners sincerely believe that the ‘Constitutional line

between the State as government and the State as trader” [New York

v. United States, 326 U.S. 578, 580 (1946)] as it relates to Fair

Labor Standards Act coverage of Sovereign States of the United

States should be re-examined, not in the abstract, but in the concrete

factual setting herein presented. y

Thus, petitioners request that this Honorable Court grant the

petition for Certiorari and upon a hearing ofthe issues, reverse the

majority opinion of the Circuit Court of Appeals.

/

Respectfully submitted,

RICHARD C. TURNER

Attorney General of Iowa

LORNA LAWHEAD WILLIAMS

Special Assistant Attorney General

la

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

NO. 73-1500

Peter J. Brennan, Secretary

of Labor, United States

Department of Labor,

Appellee,

Appeal from the United States

District Court for the

Southern District of lowa.

Vv.

State of Iowa,

&#eeeet &©ete eee 8 &

Appellant.

Submitted: December 12, 1973

Filed: February 26, 1974

Before GIBSON and ROSS. Circuit Judges, and TALBOT SMITH, ~

Senior District Judge.*

ROSS, Circuit Judge.

This action by the Secretary of Labor seeking enforcement of

the Fair Labor Standards Act, 29 U.S.C. §201 et seq. (FLSA), was

.

*The Honorable TALBOT SMITH, Senior District Judge, Eastern District

of Michigan, sitting by designation

2a

filed in the district court for the District of Iowa against the State of

Iowa. Through its agency, the Department of Social Services, the

State of Iowa owns and operates several institutions wheiein persons

are employed at less than the minimum and overtime wages

prescribed by 29 U.S.C. §§206 and 207. Upon stipulated facts the

district court held that the State of 'owa was subject to the

provisions of the Act. This appeal followed.

The undisputed facts show that each of the nine institutions is

either a hospital, an institution primarily engaged in the care of the

sick, the aged, mentally ill or defective who reside on the premises,

or a school for mentally or physically handicapped or gifted children.

Each of the institutions purchases or orders some of its goods and

supplies directly from manufacturers, producers or suppliers located

outside the state. Each institution has employees in the following

categories regularly handling, selling, or otherwise working on, or

with, merchandise and supplies received from out-of-state suppliers:

(1) professional, medical, psychiactric and nursing employees

who, in the treatment of patients, administer medicines and

drugs and use therapeutic equipment and other medical

supplies and equipment, substantial amounts of which are

manufactured or produced outside the state;

(2) nursing service employees, aides, attendants, and orderlies

who, in providing patient care, handle cleaning supplies,

medical supplies and equipment, bedding, linens, towels and

hospital clothing, substantial amounts of which are manufac-

tured or produced outside the state;

(3) food service and dietary service employees who prepare,

serve and dispense food to patients, residents, employees and

visitors, substantial amounts of which foods are grown,

processed or produced outside the state;

(4) housekeeping, maintenance and custodial employees who,

in the regular course of their duties, use cleaning supplies,

equipment and appliances, substantial amounts of which are

manufactured or produced outside the state;

TREE NI MORE ees Siok ieee OPA TES STS ILA LIL OL LEDT FT LEE en

t

3a

(5) laundry employees who use and handle cleaning supplies, ©

bedding, linens, towels and hospital clothing, substantial |

amounts of which are manufactured or produced outside the ;

state;

(6) office and administrative employees who use office supplies ©

and equipment, substantial amounts of which are manufactured |

or produced outside of state. '

Section 6 and Section 7 of the Fair Labor Standards Act, 29 ©

U.S.C. 8206 and 207, provide that every employer shall pay |

minimum and overtime wages to each of his employees who is ©

engaged in commerce or in the production of goods for commerce or

is employed in an enterprise engaged in commerce or in the

production of goods for commerce. An “enterprise engaged in

commerce or in the production of goods for commerce”’ is defined to

be:

[A]n enterprise which has empioyees engaged in commerce or

in the production of goods for commerce, including employees :

handling, selling, or otherwise working on goods that have been |

moved in or produced for commerce by any person, and which :

* * *

primarily engaged in the care of the sick, the aged, the mentally

ill or defective who reside on the premises of such institution, a

school for mentally or physically handicapped or gifted ~

children, a preschool, elementary or secondary school, or an :

institution of higher education (regardless of whether or not

such hospital, institution, or school is public or private or

operated for profit or not for profit).

:

4

(4) is engaged in the operation of a hospital, an institution

29 U.S.C. §203(s).

The adoption of the “enterprise concept” in 1961 by Congress

has been held to be clearly within the power Congress under the

x SEA NRE BET sa

A868 Sie IPR TIMERS LE TIP at ae eS ee

4a

Commerce Clause. Maryland v. Wirtz, 392 U.S. 183, 188-193 (1968).

Similarly, the amendment modifying the definition of “employer” to

remove the exemption of the states with respect to the employees of

certain hospitals, institutions, and schools was upheld. For the

federal government, when acting within a delegated power, may

override countervailing state interests. Maryland v. Wirtz, supra, 392

USS. at 195. See also Sanitary District v. United States, 266 U.S. 405

(1925). Thus, if a state engages in economic activities that are validly

regulated by the federal government when engaged in by private

persons, the state too may be forced to conform its activities to

federal regulation. Maryland v. Wirtz, supra, 392 U.S. at 197. See

also United States v. California, 297 U.S. 175 (1936). Yet a state

may assert its sovereign immunity in suits brought by private

individuals under 29 U.S.C. §216(b) to enforce the Act. Employees

of the Department of Public Health and Welfare of Missouri v.

Department of Public Health and Welfare of Missouri, 411 U.S. 279,

285 (1973) [Employees v. Missouri Public Health Dept.|. The

vehicle to enforce a state’s conformity to the Act is at issue in this

case. Based upon reasons expressed hereafter, we find that the

extension of FLSA coverage to state employees is not made totally

meaningless by the availability of a sovereign immunity claim.

Section 216(c) and Section 217 give the Secretary of Labor the

authority to bring suits for violations of the Act. Cf. Employees v.

Missouri Public Health Dept., supra, 411 U.S. at 285-286. Such suits

by the Secretary of Labor in enforcing the FLSA, though brought

in public interest, are suits by the United States. See Mitchell v.

Robert DeMario Jewelry, 260 F.2d 929, 932 (5th Cir. 1958), rev’d

on other grounds, 361 U.S. 288 (1960) (and cases cited therein).

Suits by the United States against a state are not barred by the

eleventh amendment. United States v. Mississippi, 380 U.S. 128,

140-141 (1965). Thus, this suit against the State of Iowa is not

barred by a claim of sovereign immunity. The only remaining

question here is whether the particular institutions are subject to the

Act. This question must be answered in the affirmative if we can find

il os SSL he OMT at hk PPD OS HP PALS prs IPO Leas tg

BORED LADS ARLE AEA ORIOL. FA a ARIAT, CA EAT

5a

that these institutions are enterprises engaged in commerce or in the

production of goods for commerce, or, more simply put, if these |

institutions employ any employees who are engated in commerce or

in the production of goods for commerce. See 29 U.S.C. §203(s). 7

Under both of the two criteria established by the Act, these ©

institutions must be said to be enterprises within the purview of the ~

Act. First, courts have repeatedly held on previous occasions that

activities of the nature performed by some of the employees of the ©

institutions are activities in interstate commerce. Specifically, the —

activities of employees in sending, preparing, and receiving purchase

orders, shipment orders, invoices, bills, and checks;! in receiving

direct deliveries of goods transported interstate and in handling,

storing and moving such goods after their delivery but before

disposition to the ultimate consumer; 2 in regularly transporting or ©

accompanying patients or residents to points outside the state for

treatment, diagnosis, and other purposes;3 and in placing interstate

telephone calls as a part of a regular course of business? must be held

to be activities performed in interstate commerce. Due to the

interstate nature of the employees’ activities, each of the institutions

is an enterprise engaged in commerce. 29 U.S.C. §203(s).

Fo GPO NOEL TEI IOI

Secondly, as defined by 29 U.S.C. §203(s), an enterprise

engaged in interstate commerce may be one where the employees

simply handle, sell or otherwise work on goods that have moved in

interstate commerce. According to the undisputed facts, many

employees handle articles which have moved in interstate com-

lWirtz v. First State Abstract & Ins. Co., 362 F.2d 83, 87 (8th Cir. 1966).

2Walling v. Jacksonville Paper Co., 317 U.S. 564, 567 (1943): Walling v.

Mutual Wholesale Food & Supply Co., 141 F.2d 331 (8th Cir. 1944).

3Mitchell v. Kroger Co., 248 F.2d 935 (8th Cir. 1957).

4Durkin v. Joyce Agency, 110 F.Supp. 918 (N.D. Ill. 1953), rev‘d, 211

F.2d 241 (7th Cir. 1954), rev’d per curiam, 348 U.S. 945 (1955).

y

WD YE PR oR LOAN RIO G TORI EERE SCORE LLL BEE ILE LI IIOA LD! NG LEP ILL DIC BEE LIES BEF. ALE COE. coos. |

6a

merce.” Those activities bring the particular institutions involved

within the purview of the Act if the articles handled by the

employees can be determined to be “goods” as defined by the Act.

29 U.S.C.8203(i). In other words, if the articles are wares, products,

commodities, merchandise, or articles or subjects of commerce of

any character, or any part or ingredient thereof, that have not

reached their delivery into the actua/ ph ysical possession of the

ultimate consumer thereof, then they are goods within the definition

of the Act and the mere handling of those goods by some institution

employee prior to their delivery to the ultimate consumer renders

the institution an enterprise engaged in commerce. Many cases have

held that the institution itself is not the ultimate consumer of the

articles set forth in the margin above. See, e.g., Brennan v. Dillion,

483 F.2d 1334 (10th Cir. 1973); Wirtz v. Melos Construction Corp.,

408 F.2d 626 (2nd Cir. 1969).§ The constitutionality of 29 U.S.C.

§203(s) was upheld by the Court in Maryland v. Wirtz, supra. Thus,

we conclude that each of the institutions are enterprises engaged in

commerce.

Finally, we review the appropriateness of the relief granted by

the district court. Section 17 of the Act provides:

The district courts... shall have jurisdiction, for cause

shown, to restrain violations of section 215 of this. title,

SFor example, it was agreed that medical employees administer drugs that

have moved interstate, that employees that provide patient care handle cleaning

supplies that have moved interstate, that food service employees dispense food

that has moved interstate, and that housekeeping and laundry employees handle

supplies that have moved interstate.

6The profit-seeking nature of the enterprises at issue in the preceding

authority does not distinguish them from the State of lowa which in some

instances does not impose any additional charge in the delivery of the goods to

the patient or resident. The Act specifically rejects profitability as a criterion for

inclusion under the enterprise concept. 29 U.S.C. § 203(r 1). Thus, the absence

of profitability does not render the State of lowa the ultimate consumer with

respect to the goods.

EEE RL OT INTUTE? ET COST OR AE Ct cesT

Ta

including in the case of violations of section 215(a)(2) of this ©

title the restraint of any withholding of payment of minimum *

wages or overtime compensation found by the court to be due

to employees under this [Act] ...

29 U.S.C. 8217. The State of lowa argued that a restitution award of

the nature described above should not have been awarded by the

district court.

Accordingly, first we note that the State of lowa may not assert F

its sovereign immunity in a suit brought by the United States against ~

the state. United States v. Mississippi, supra. Secondly, we have held ©

that the financial hardship caused by the order is not a valid basis on ©

which to deny the employees their remedy or to allow a wrong

against the public to go uncorrected in a suit brought under the

FLSA. Hodgson v. Taylor, 439 F.2d 288, 290 (8th Cir. 1971). Next,

we find no merit in the argument that this action is, in substance, an ~

action by the employees against the state to which the holding of the

Second Circuit in Rothstein v. Wyman, 467 F.2d 226 (2nd Cir.

1972), cert. denied, 411 U.S. 921 (1973) should be applicable. %

Rather: ‘

peaks a

[T]he purpose of the injunction... is not to collect a debt

owed by an employer to his employee but to correct a

continuing offense against the public interest. It is true that as a

result, money may pass from the employer into the pocket of

the employee or, if he is not available, then into the coffers of

the United States: Treasury, but that enforced payment, which

must be made even if the employee or his representatives or

heirs no longer exist to claim it, is simply a part of a reasonable

and effective means which Congress, after trial and error, found

it necessary to adopt to bring about general compliance with

{the Act].

Wirtz v Jones, 340 F.2D 901, 904-905 (5th Cir. 1965). Finally, we

note that the parties to this suit have entered into a stipulation that

“should the questions presented be resolved in favor of [the

Secretary of Labor], the parties will attempt to compute and agree

>

€

gt ON SAP SGA AS PENIS ETL See RR PEE EE OPEL PEE PES OE LR

8a

upon the amount of any unpaid minimum wages and overtime

compensation due defendant’s employees.” Due to the foregoing

considerations, we find that the restitution order is appropriate.

For the reasons hereinbefore expressed, the judgment of the

district court is affirmed.

GIBSON, Circuit Judge, dissenting.

I respectfully dissent. I think the majority takes the final step in

adopting an all-encompassing rationale of what constitutes interstate

commerce. While recent cases in this field lend support to the

majority in the broad language employed, the facts of those cases do

not support the absolute denigration of State sovereignty that this

case accomplishes. Admittedly, many prior decisions have taken

great liberty with the concept of interstate commerce, but surely the

framers of our Constitution never thought it would be so expansively

construed as to reach the sovereign activities of a state. States

engaged in performing their necessary, proper and sovereign govern-

mental functions are now emmeshed within the concept’s all-inclu-

sive tenacles.

The concept of interstate commerce is now expanded to nullify

the constitutional and sovereign rights of States, not only in the

handling of their business activities, but in the conduct of their

manifest governmental activities as well. The time has come when

courts should take a realistic approach and accord to the states their

remaining vestiges of sovereignty, presently being ground to ashes

under the expansive interpretations now in vogue as to what

constitutes interstate commerce. The result here can only be justified

if we accept a premise that everyone employed in these United States

is engaged in interstate commerce.

It is a fiction, albeit a legal fiction widely accepted, to hold that

the State of lowa, by its operation of these nine institutions as part

of its sovereign power to provide for the general. welfare of its

~

— os . PLEA SPI, SER EES SS IAL LG TE 8 ct SFERR EERE GIT OPEL

LT ROS ALE LAUR LIEGE, POLI SILI POL III EL GE II EE PERE EE OBIS OIG ae ONT, TS EE ATS TN

citizens, is engaged in interstate commerce. Moreover, the resultant

effect of our decision is so disruptive of and harmful to legitimate

state interests! that the courts should not require compliance by a

state as an employer with the Fair Labor Standards Act (FLSA)

unless clearly mandated to do so. I do not believe the result reached

by the majority is mandated by the FLSA.

First, I disagree with the majority’s conclusion that the

institutions involved are not the ultimate consumers of the goods

allegedly a part of interstate commerce. If the institution is the

ultimate consumer, then it has no employees engaged in handling

goods that have moved in interstate commerce.2

As support for its conclusion that an institution is not the

ultimate consumer, the majority relies upon Brennan v. Dillion, 483

F.2d 1334 (10th Cir. 1973) and Wirtz v. Melos Construction Corp.,

408 F.2d 626 (2d Cir. 1969). Neither of these cases involved

institutions, state or private. In Dillion, the defendant was an

individual who operated three apartment complexes. The court held

that maintenance employees using various supplies were covered by

FLSA as che tenants were said to be the ultimate consumers of the

supplies, not the defendant, relying inter a/ia upon the rationale that

there was a resale of the supplies because their cost was passed on to

IThere can be no doubt that the import of this decision will require an

adjustment in the State’s fiscal policy, either by forcing a reduction of services in

this or other areas or an increase in its citizens’ tax burden.

“It is one thing to force a state to purchase safety equipment for its

railroad and another to force it to spend séveral million more dollars on

hospitals and schools or substantially reduce services in these areas.”

Maryland v. Wirtz, 392 U.S. 183, 203 (1968) [Douglas, J. dissenting]

229 U.S.C. § 203(i).

ee

10a

the tenants as part of their rental.2 The existence of a resale has been

an important factor in the courts’ determination of who is the

ultimate consumer for purposes of 29 U.S.C. 8203(i). Brennan v.

Dillion, supra; see also, Goldberg v. Furman Beauty Supply, Inc., 300

F.2d 16, 19 (3rd Cir. 1962); Mitchell v. Sherry Corine Corp., 264

F.2d 831 (4th Cir. 1959), cert. denied, 360 U.S. 934 (1959).

Melos, which involved the coverage of a building contractor’s

employees, makes no mention at all of 29 U.S.C. 8203(i) and the

“ultimate consumer” exemption contained therein. It seems obvious

that a building contractor is not an institution. Further, he may well

be considered an ultimate consumer. In Barbe v. Cummins Const.

Co., 49 F.Supp. 168 (D.Md.), aff’d 138 F.2d 667 (4th Cir. 1943),

the court held that a building contractor was the ultimate consumer

of building materials, not a purchaser of the building in which the

materials are incorporatea.

I would hold that these State institutions are ultimate con-

sumers. A contrary holding necessarily implies that the patients of

these State-operated and State-financed institutions are the ultimate

consumers. This conclusion is untenable when talking about the use

of cleaning supplies, laundry items, office supplies and medical

equipment. The State is the user of these items, not the patient, and

3But see, Shultz v. Travis Edwards, Inc., 320 F.Supp. 834 (W.D.La. 1970), |

rev’d on other grounds sub nom. Hodgson v. Travis Edwards, Inc., 465 F.2d

1050 (Sth Cir.), cert. denied, 409 U.S. 1076 (1973); Shultz v. Arnheim & Neely,

Inc., 324 F. Supp 987 (W.D.Pa. 1969), rev’d on other grounds sub nom.

Hodgson v. Arnheim & Neely, Inc., 444 F.2d 609 (3rd Cir. 1971), rev’d 410 US.

512 (1973); and Shultz v. Wilson Building, Inc., 320 F.Supp. 664, 669 (S.D.Tx.

1970), aff'd sub nom. Brennan v. Wilson Building, Inc., 478 F.2d 1090 (Sth Cir.

1973), where the owners of rental space were found to be the ultimate

consumers of supplies used in their business.

om PLL ETRY EPL GL LN AIO OLS i aiiaaanelllll

lla

its employees using these items thus are not handling “goods” as

defined in 8203(i).4

It is possible to consider the patient as the ultimate consumer of

the drugs, medicines and food supplies, but in the circumstances of

this case I believe it erroneous to do so. “Ultimate consumer” is

employed in the Act as a means of determining when articles have

ceased their movement in interstate commerce. The concept provides

protection from the “hot goods”’ liability provisions contained in 29

U.S.C. §215(a)(1).° The drugs and medicines are dispensed by State

employees in the course of State treatment of State patients residing

in State institutions. These drugs and medicines have ceased their

movement in commerce upon delivery to the State and the State is

entitled to the benefit of the ultimate consumer exception.

The same rationale is equally applicable to those food items

served to patients. However, it was stipulated that in two of the

institutions canteens were operated which for a charge served

visitors. This is not enough to find that interstate commerce is

involved. As the State of Iowa correctly argues, such activities must

be related to the business purpose of the enterprise. This service,

provided only as a convenience to visitors, is not related to the

primary purpose of the institutions. Cf., Shu/tz v. Travis Edwards,

Inc., supra, 320 F.Supp. at 839-40.

4This has been recognized in the regulations promulgated by the Secretary

of Labor. See, 29 C.F.R. § 779.240(a)( 1970) which provided in part:

However, the mere fact that employees in conducting the

business of the enterprise or establishment, are using machinery,

equipment, work tools, and the like, which may have been moved in

or produced for commerce, does not mean that they are handling,

selling, or otherwise working on “goods” that have been moved in or

produced for commerce within the meaning of section 3(s).

SSee 29 C.F.R. §776.21 (1973) which in essence provides that the “hot

goods” provision creates a liability for anyone transporting, delivering or selling

in commerce, goods in the production of which the minimum wage and overtime

provisions of the Act were violated.

629 U.S.C. § 203(r).

:

|

:

;

:

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BFF SE Peay soncaege sey , oar exry Ae CPE LODE EEL INI ETE Tr

12a

Nor do I think that the second part of the enterprise test,

whether there are any employees engaged in commerce, is met by

these institutions. It is stipulated that employees at all of these

institutions did make use of interstate facilities in carrying out their

duties. This alone is not enough. The operation of these institutions

by the State of Iowa is a purely local operation, a service provided

for its residents out of purely local, not interstate considerations.

The mere use ui interstate facilities by employees as an incident of

carrying out a purely Jocal business does not constitute engaging in

commerce. Stevens v. Welcome Wagon International, Inc., 390 F.2d

15, 77 (3rd Cir. 1968); Chambers Const. Co. v. Mitchell, 233 F.2d

717, 722 (8th Cir. 1956); Hodgson v. Hyatt Realty, 353 F.Supp.

1363, 1373-74 (M.D.N.C. 1973); aff’d sub nom. Brennan v. Hyatt

Realty, No. 73-1869 (4th Cir., filed Jan. 10, 1974); Wirtz v. Sherman

Enterprises, Inc., 229 F.Supp. 746, 752 (D.Md. 1964).

The test is whether the work is directly and vitally related

to the functioning of an instrumentality or facility of

interstate commerce as to be, in practical effect, a part of

it, rather than isolated local activity.

Mitchell v. C. W. Vollmer & Co., Inc., 349 U.S. 427, 429 (1955).

It is only when engaging in interstate communication is a

material portion of an employer’s business activity that the

employee engaging in the communication should be considered to be

engaging in interstate commerce.

If the actions of the State in providing food, shelter, and

treatment for its public charges constitutes interstate commerce,

then nothing is left of a state’s sovereignty. The heavy hand of the

federal government, with its gigantic bureaucracy practicing suffocat-

ing paternalism, reaches all things and all people.

While recognizing the remedial purpose of the Act and the

aia, NGL IE FE it

13a

s]

: number of cases holding that the Act should be liberally construed to

' effectuate its beneficent purpose, 7 the remedial purpose of the Act

should not be utilized to emasculate the sovereign rights of the states

unless there is a clear constitutional basis for imposition of federal

control on a state’s sovereignty.

I would reverse the decision of the District Court and hold that

the State of Iowa is not subject to the provisions of the Fair Labor

Standards Act, 29 U.S.C. 6203 et seq., in its operation of these nine

institutions. F

A true copy.

Attest: : Or i

} CLERK, U.S. COURT OF APPEALS,

EIGHTH CIRCUIT

7See, e.g., Stevens v. Welcome Wagon International, Inc., 390 F.2d 75 (3rd

Cir. 1968); Wirtz v. First State Abstract & Ins. Co.,, 362 F.2d 83 (8th Cir. 1966).

. o ~ MNS

ROTO LAE ELIT PAL LE II RT

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14a

APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

No. 73-1500. September Term, 1973

Peter J. Brennan, Secretary of Labor, ‘i

United States Department of Lae , Appeal from the Uni-

bor, x ted States Dis-

Appellee, * trict Court for

vs. . the Northern Dis-

‘ trict of lowa

State of Iowa, Appellant. « ;

On consideration of motion of appellant for stay of the

mandate in this cause pending petition to the Supreme Court of the

United States for writ of certiorari, it is now here ordered that the

issuance of the mandate be, and the same is hereby, stayed for a

period of thirty days from and after this date. If within said period

of time there is filed with the Clerk of this Court a certificate of the

Clerk of the Supreme Court of the United States that a petition for

writ of certiorari has been filed, the stay hereby granted shall

continue until the final disposition of the case by the Supreme

Court.

March 21, 1974

i

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PL LAT ESIC

16a

APPENDIX C

Tenth Amendment, Constitution of the United States:

“The powers not delegated to the United States by the

Constitution, nor prohibited by it to the States, are reserved to

the States respectively, or to the people.”

Eleventh Amendment, Constitution of the United States:

“The Judicial power of the United States shall not be

construed to extend to any suit in law or equity, commenced

or prosecuted against one of the United States by Citizens of

another State, or by Citizens or Subjects of any Foreign State.”

Title 29 U.S.C. §203(i):

(i) ““Goods”” means goods (including ships and marine

equipment), wares, products, commodities, merchandise, or

articles or subjects of commerce of any character, or any part or

ingredient thereof, but does not include goods after their

delivery into the actual physical possession of the ultimate

consumer thereof other thana producer, manufacturer, or

processor thereof.

Title 29 U.S.C. 6§203(j):

(j) ‘*Produced”” means produced, manufactured,

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

State; and for the purposes of this chapter an employee shall be

deemed to have been engaged in the production of goods if such

employee was employed in producing, manufacturing, mining,

handling, transporting, or in any other manner working on such

goods, or in any closely related process or occupation directly

essential to the production thereof, in any State.

Title 29 U.S.C. §203(r)(1):

(r) ‘Enterprise’? means the related activities performed

(either through unified operation or common control) by any

LIENS BPA PEN —

Al

17a

person or persons for a common business purpose, and includes

all such activities whether performed in one or more establish-

ments or by one or more corporate or other organizational units

including departments of an establishment operated through

leasing arrangements, but shall not include the related activities

performed for such enterprise by an independent contractor:

Provided, That, within the meaning of this subsection, a retail

or service establishment which is under independent ownership

shall not be deemed to be so operated or controlled as to be

other than a separate and distinct enterprise by reason of any

arrangement, which includes, but is not necessarily limited to,

an agreement (1) that it will sell, or sell only, certain goods

specified by a particular manufacturer, distributor, or adver-

tiser, or (2) that it will join with other such establishments in

the same industry for the purpose of collective purchasing,

or (3) that it will have the exclusive right to sell the goods or

use the brand name of a manufacturer, distributor, or advertiser

within a specified area, or by reason of the fact that it occupies

premises leased to it by a person who also leases premises to

other retail or service establishments. For purposes of this

subsection, the activities performed by any person or persons”

(1) in connection with the operation of a hospital,

an institution primarily engaged in the care of the sick, the

aged, the mentally ill or defective who reside on the

premises of such institution, a school for mentally or

physically handicapped or gifted children, a preschool,

elementary or secondary school, or an institution of higher

education (regardless of whether or not such hospital,

institution, or school is public or private or operated for

profit or not for profit, or

itle 29 U.S.C. §203(s)(4):

(s) “Enterprise engaged in commerce or in the production

of goods for commerce’’ means any of the following in the

activities of which employees are so engaged, including employ-

ees handling, selling, or otherwise working on goods that have

been moved in or produced for commerce by any person:

(4) any such enterprise which is engaged in the

business of construction or reconstruction, or both, if the

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18a

annual gross volume from the business of such enterprise is

not less than $350,000;

Title 29 U.S.C. § 206(b):

(b) Every employer shall pay to each of his employees

(other than an employee to whom subsection (a) (5) of this

section applies) who in any workweek is engaged in commerce

or in the production of goods for commerce, or is employed i in

an enterprise engaged in commerce or in the production of

goods for commerce, and who in such workweek is brought

within the purview. of this section by the amendments made to

this chapter by the Fair Labor Standards Amendments of 1966,

wages at the following rates:

aS le ie ta

(1) not less than $1 an hour during the first year

from the effective date of such amendments,

(2) not less than $1.15 an hour during the second

year from such date,

(3) not less than $1.30 an hour dune the third year :

from such date,

(4) not less than $1.45 an hour during the fourth

year from such date, and

(5) not less than $1.60 an hour thereafter.

Title 29 U.S.C. 6 207(a)(2):

(a)(2) No employer shall employ any of his employees

who in any workweek is engaged in commerce or in the

production of goods for commerce, or is employed in an

enterprise engaged in commerce or in the production of goods

for commerce, and who in such workweek is brought within the

purview of this subsection by the amendments made to this Act

by the Fair Labor Standards Amendments of 1966—

Title 29 U.S.C. § 211(c):

(c) Every employer subject to any provision of this chapter

or of any order issued under this chapter shall make, keep, and

preserve such records of the persons employed by him and

19a

of the wages, hours, and other conditions and practices of

employment maintained by him, and shall preserve such records

for such periods of time, and shall make such reports therefrom

to the Administrator as he shall prescribe by regulation or order

as necessary or appropriate for the enforcement of the

provisions of this chapter or the regulations or orders there-

under.

Title 29 U.S.C. § 215(a)(2):

(a) After the expiration of one hundred and twenty days

from June 25, 1938, it shall be unlawful for any person—

(2) to violate any of the provisions of section 206 or

section 207 of this title, or any of the provisions of any

regulation or order of the Administrator issued under

section 214 of this title;

9% Title 29 U.S.C. § 215(a)(5):

(a) After the expiration of one hundred and twenty days

from June 25, 1938, it shall be unlawful for any person—

(5) to violate any of the provisions of section 211(c)

of this title, or any regulation or order made or continued

in effect under the provisions of section 211(d) of this

title, or to make any statement, report, or record filed or

kept pursuant to the provisions of such section or of any

regulation or order thereunder, knowing such statement,

report, or record to be false in a material respect.

Title 29 U.S.C. § 216(c):

(c) The Secretary of Labor is authorized to supervise the

payment of the unpaid minimum wages or the unpaid overtime

compensation owing to any employee or employees under

section 206 or 207 of this title, and the agreement of any

employee to accept such payment shall upon payment in full

constitute a waiver by such employee of any right he may have

under subsection (b) of this section to such unpaid minimum

wages or unpaid overtime compensation and an additional equal

amount as liquidated damages. When a written request is filed

by any employee with the Secretary of Labor claiming unpaid

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20a

minimum wages or unpaid overtime compensation under

section 206 or 207 of this title, the Secretary of Labor may

bring an action in any court of competent jurisdiction to

recover the amount of such claim: Provided, That this author-

ity to sue shall not be used by the Secretary of Labor in any

case involving an issue of law which has not been settled finally

by the courts, and in any such case no court shall have

jurisdiction over such action or proceeding initiated or brought

by the Secretary of Labor if it does involve any issue of law not

so finally settled. The consent of any employee to the bringing

of any such action by the Secretary of Labor, unless such action

is dismissed without prejudice on motion of the Secretary of

Labor, shall constitute a waiver by such employee of any right

of action he may have under subsection (b) of this section for

such unpaid minimum wages or unpaid overtime compensation

and an additional equal amount as liquidated damages. Any

sums thus recovered by the Secretary of Labor on behalf of an

employee pursuant to this subsection shall be held in a special

deposit account and shall be paid, on order of the Secretary of

Labor, directly to the employee or employees affected. Any

such sums not paid to an employee because of inability to do so

within a period of three years shall be covered into the Treasury

of the United States as miscellaneous receipts. In determining

when an action is commenced by the Secretary of Labor under

this subsection for the purposes of the statutes of limitations

provided in section 255(a) of this title, it shall be considered to

be commenced in the case of zny individual claimant on the

date when the complaint is filed if he is specifically named as a

party plaintiff in the complaint, or if his name did not so

appear, on the subsequent date on which his name is added as a

party plaintiff in such action.

Title 29 U.S.C. 6 217:

The district courts, together with the United States

District Court for the District of the Canal Zone, the District

Court of the Virgin Islands, and the District Court of Guam

shall have jurisdiction, for cause shown, to restrain violations of

section 215 of this title, including in the case of violations of

section 215(a) (2) of this title the restraint of any withholding

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of payment of minimum wages or overtime compensation ~

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(except sums which employees are barred from recovering, at

the time of the commencement of the action to restrain the

violations, by virtue of the provisions of section 255 of this _

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APPENDIX D

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1974

NO.

STATE OF IOWA,

Petitioner,

vs.

PETER J. BRENNAN, Secretary of Labor, United States Depart-

ment of Labor,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

CERTIFICATE OF SERVICE

I, Lorna Lawhead Williams, Special Assistant Attorney General

of Iowa, hereby certify that on this17th day of April, 1974, three

(3) copies of the Petition For A Writ Of Certiorari were mailed,

correct air mail postage prepaid, to William J. Kilberg, Solicitor of

Labor, United States Department of Labor, Washington, D. C.,

20210, Counsel for Respondent. I further certify that all parties

required to be served have been served.

LORNA LAWHEAD WILLIAMS

Special Assistant Attorney General

State Capitol

Des Moines, Iowa 50319

- Counsel for Petitioner

i

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