Hodgson v. Prophet Company

Decision Date10 January 1973
Docket NumberNo. 72-1138.,72-1138.
Citation472 F.2d 196
PartiesJames D. HODGSON, Secretary of Labor, United States Department of Labor, Plaintiff-Appellant, v. The PROPHET COMPANY, a corporation, Defendant-Appellee.
CourtU.S. Court of Appeals — Tenth Circuit

Carin Ann Clauss, Associate Sol. (Richard F. Schubert, Sol. of Labor, Donald S. Shire, Sylvia S. Ellison, Holloway Wooten, Attys., and Major J. Parmenter, Regional Sol., on brief) for plaintiff-appellant.

A. P. Murrah, Jr., Oklahoma City, Okl., for defendant-appellee.

Alexander E. Wilson, Jr., Alexander E. Wilson III, and Wilson, Wilcox & Wilson, Atlanta, Ga., on brief for National Restaurant Assn., as amicus curiae.

Before PHILLIPS, HILL and HOLLOWAY, Circuit Judges.

ORIE L. PHILLIPS, Circuit Judge.

James D. Hodgson, as United States Secretary of Labor,1 brought this action under § 17 of the Fair Labor Standards Act of 1938,2 as amended,3 to enjoin The Prophet Company4 from violating §§ 6 and 7 of such Act, as amended.5

From an adverse judgment, the Secretary has appealed.

Northern Oklahoma College, a State-owned junior college, is located in Tonkawa, Oklahoma. The number of students enrolled in the summer of 1968 was 299; in the fall of 1968-1969, 1202; in the spring of 1968-1969, 1108; in the summer of 1969, 250; in the fall of 1969-1970, 1338; in the spring of 1969-1970, 1134; in the summer of 1970, 208; in the fall of 1970-1971, 1325; and in the spring of 1970-1971, 1266.

Prophet is a corporation. Its corporate name is Prophet Foods Company. At all times here pertinent, it engaged in the business of managing and operating institutional and industrial cafeterias and food dispensing services at many locations throughout the United States.

For a number of years prior to June 24, 1966, until the time the college, on that date, entered into the contract hereinafter referred to with Prophet, the college had maintained and operated in one of its buildings a cafeteria where its students, faculty members, guests, and others could purchase and eat meals. It also maintained and operated in the building a snack bar where items usually carried by snack bars were sold for cash.

About seven years before the date of the trial, on June 22, 1971, the college had constructed on its campus a new building, and thereafter used it for the operation of the cafeteria and snack bar, for banquets, dances, and as a gathering place for students and for other purposes.

In order to insure patronage of its cafeteria in sufficient amount to warrant its maintenance and operation, the college had adopted the following plan. At the beginning of each four-month semester of the school year, it required students who lived in dormitories or in other college-owned rooming facilities, if they lived on the campus seven days per week, to pay a stated amount per day for 20 meals per week, only two meals being served on Sunday; and if they went home over weekends, a stated amount per day for 15 meals per week. Such students were permitted, if they so desired, to pay such amounts at the beginning of each month of a semester. Such plan was referred to as the "contract boarding plan," and will so be referred to hereinafter.

On June 24, 1966, the college entered into a contract with Prophet, by the terms of which Prophet was to maintain, "manage and operate" as "an independent contractor" and "upon its own credit," the "food services, snack bar, special functions and any and all food service, as required by the college" and to do so "in the space allotted to it" in such new building. And Prophet "was to obtain in its own name and at its expense * * * all necessary permits, insurance, and licenses for the conduct of the business." In addition thereto, by the terms of the contract Prophet was to furnish all foods, beverages, materials of every kind "and all management and labor necessary for the efficient operation of said catering service; to furnish all routine janitor service in the dining areas, kitchen, storeroom"; to "be responsible at its own expense for the replacement of expendable items such as glassware, flatware and chinaware"; to keep "the catering service open and maintain adequate service * * * at such hours as College and Prophet" might from time to time mutually determine, and to "submit menus for approval at least one week in advance of service to such person as the College may designate."

By the terms of the contract, Prophet agreed to "use necessary student help" at the regular campus student wage scale, and "pay" such "students" directly and to use "only employees acceptable to the College"; that it would not hire employees of "the College during the period of the contract and for one year thereafter without the specific consent of the College"; that at the expiration of the contract it would return the food service premises and all equipment furnished to Prophet by the college in the condition in which they were received, except for ordinary wear and tear.

And by the terms of such contract, the college agreed to furnish space in the new building for the preparation and serving of food to its "students, staff and guests." Parenthetically, we may here observe that while the contract does not specifically mention the furnishing of food service to the public, Prophet solicited patronage by the public by advertisements and otherwise, which advertisements were submitted to and approved by the president of the college before their publication, and it served members of the general public who sought food service at its establishment. Moreover, Olin Walcher, director of finance of the college, testified that Prophet's establishment had "the privilege of providing meals, banquets and so on for outsiders. That is a part of the standing operating agreement between the College and Prophet."

The college further agreed to furnish all facilities, completely equipped and ready to operate. Such facilities included all means, utensils and containers for cooking or otherwise preparing food for serving to customers, cutlery, dishes, glassware, and means for dispensing and serving such food to customers.

It further agreed at its own expense to furnish all heat, fuel, refrigeration, utilities, and hot and cold water reasonably required for efficient operation. It further agreed, at its own expense, to clean the windows, walls, ceilings, and light fixtures, and to maintain the building and keep all mechanical cafeteria equipment in good operating condition. It further agreed to deliver any food which Prophet provided to students, school employees, or faculty members in the infirmary.

It further agreed to require all of its students living in dormitories or other college-owned rooming facilities to be on the contract boarding plan and to provide them with an identification card. The college retained the privilege of using the cafeteria dining area at times when it would not interfere with the food service operation. Prophet's resident manager and the college were to mutually agree upon the times such facilities would be available for college use.

And the college agreed that when dances or other such events were held in cafeteria dining facilities, it would at its own expense perform necessary janitor service and return the facilities in a sanitary and satisfactory manner to Prophet.

The college agreed to require that all students living in college dormitories or other college-owned rooming facilities should be on the contract boarding plan.

The contract provided that all monies received by Prophet from sales from the snack bar and all monies received by Prophet from sales of food at the cafeteria, other than those received from boarding students, and all monies received by Prophet from sales of food at special events, such as banquets, club meetings and the like, should belong to Prophet, and that it should pay to the college 10 per cent thereof. Such 10 per cent included monies received from general public patrons.

It provided that Prophet should charge boarding plan students requiring a maximum of 20 meals per week, or fraction thereof (two meals on Sunday), $1.68 each per day; that it should charge boarding plan students requiring a maximum of 15 meals per week, Monday through Friday, $1.75 each per day, and that the college should remit the aggregate of such charges collected by it from boarding plan students monthly to Prophet. No deductions were to be made for meals missed by a contract boarding student.

And it further provided the prices that Prophet should charge all nonboarding students, faculty members, and guests for weekday breakfasts, lunches, dinners, and Sunday dinners, and special meals like buffets, chuck wagon suppers, steak dinners, and banquets. Such meals were to be sold on a cash basis and Prophet was to remit 10 per cent thereof to the college. No prices were specified for meals sold to public patrons, but Prophet also remitted 10 per cent of the amounts received therefor to the college.

It was stipulated that Prophet's annual dollar sales volume of goods and services by its establishment at the college was less than $250,000; and the trial court found that more than 50 per cent of the business of such establishment was done in Oklahoma, the state in which it was located.

The trial court found the facts substantially as we have stated them, and its findings are sustained by the evidence and are not clearly erroneous.

The Act of Congress fixing minimum wages and maximum hours for persons "engaged in commerce or in the production of goods for commerce" was enacted in 1938, and may be cited as the "Fair Labor Standards Act of 1938." See § 1, 52 Stat. 1060; § 6, 52 Stat. 1069; § 7, 52 Stat. 1063. It was amended several times, but we will refer to and consider only the amendments pertinent to questions presented on this appeal.

The first of such amendments was enacted in 1949, 63 Stat. 910 et seq. On October 5,...

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