Brennan v. Keyser, s. 72-2887
| Citation | 507 F.2d 472 |
| Decision Date | 25 November 1974 |
| Docket Number | 72-2888 and 72-2961,Nos. 72-2887,72-2960,s. 72-2887 |
| Parties | 22 Wage & Hour Cas. (BN 46, 75 Lab.Cas. P 33,178 Peter J. BRENNAN, Secretary of Labor, United States Department of Labor, Appellant and Cross-Appellee, v. Thomas E. KEYSER, Individually, and d/b/a Keyser Towing Company, Appellee and Cross-Appellant, and Oscar Shepard, Individually, and Hollenbeck Tow Service, A Corporation, Appellees and Cross-Appellants. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
Donald S. Shire (argued), Counsel for App. Litigation, U.S. Dept. of Labor, Washington, D.C., for appellant.
G. G. Baumen (argued), Los Angeles, Cal., for appellee and cross-appellant.
Before CHAMBERS and CHOY, Circuit Judges, and McNICHOLS, * District judge.
The Secretary of Labor brought these actions to enforce the overtime pay provisions of Section 7, Fair Labor Standards Act, 29 U.S.C. 207. The defendant companies (Keyser and Shepard) operate automobile towing services in the Los Angeles area. The district court dismissed both actions, concluding that although Keyser and Shepard were engaged in interstate commerce and therefore were within the court's jurisdiction under the Act, they were exempt from its overtime regulations. During the years in question, the court found, the companies had met the requirements of the retail sales and services exemption, 29 U.S.C. 213(a)(2). The Secretary appeals from the dismissal, and Keyser and Shepard appeal from the district court's finding that they are engaged in interstate commerce.
The Los Angeles Police Department has designated both towing companies as 'Official Police Garages' (OPG) and official impound stations for prescribed geographic areas of the city. No contractual relationship has ever existed between the Police Department and an OPG. The Department prescribes rules which an OPG must adhere to, however, if it is to retain its OPG designation. The OPG must observe a schedule of maximum rates for towing and storage services performed as a result of police activity, for example. Tow trucks must be of a certain color and bear OPG insignia, and must carry prescribed equipment. Tow truck drivers must wear standard uniforms. Regulations set minimum standards for storage lots, protection and handling of vehicles, and the safeguarding of property inside the vehicles. Each OPG is limited to a prescribed geographic area of operations, within which it has a monopoly on police referrals. An OPG not only benefits from handling police impoundments; when a citizen asks the police for a tow or roadside assistance without specifying a preferred towing company, the police will call the OPG assigned to that area.
A training bulletin of the Los Angeles Police states that an OPG is an agent of the Police Department. Tow truck drivers are commissioned Special Officers and are required to report observed criminal activity without delay. Although an OPG is not restricted to police calls and does accept calls directly from individuals needing assistance, the parties stipulated that 'almost all' of Keyser's calls were police requests. Substantially more than half of Shepard's calls appear to have been from the police.
The towing companies received no compensation from the police for vehicles impounded and stored. The owner of the vehicles paid the towing and storage charges directly to the towing company, the vehicle then being released from impoundment. Unclaimed vehicles were sold to satisfy the serviceman's lien which attached to them.
Portions of two Interstate Highways (I-5 and I-10) pass through Shepard's area of operation. No Interstate Highway passes through Keyser's area, but seven percent of his calls are on a portion of the Harbor Freeway which connects the Long Beach area and I-405 to the south with I-5 and I-10 to the north.
Congress in enacting the Fair Labor Standards Act, established certain standards for payment of overtime compensation by employers of workers engaged in interstate commerce. 29 U.S.C. 207. It exempted, however, retail or service establishments meeting certain requirements. 29 U.S.C. 213(a)(2). A 'retail or service establishment' is defined as an establishment at least 75 percent of whose 'annual dollar volume of sales' is not for resale and is recognized as retail 'in the particular industry'. Such a retail or service establishment is exempt from the Act's standards if its 'annual dollar volume of sales' is less than $250,000, and at least 50 percent of which are in the state where the establishment is located. 1
In their cross-appeal, the towing companies contend that their services are local in character, with no substantial impact on interstate commerce. In Gray v. Swanney-McDonald, Inc., 436 F.2d 652 (9th Cir.) cert. denied, 402 U.S. 995, 91 S.Ct. 2173, 29 L.Ed.2d 161 (1971), we held that tow truck drivers doing a portion of their work on Interstate or U.S. Highways were engaged in interstate commerce, and therefore were within the coverage of the Act. We remain convinced of the soundness of that decision. We observed in Swanney-McDonald that although the contact of any one company with interstate traffic might be small, the cumulative impact of the entire towing industry was substantial. To exempt Keyser from the Act's regulation because the Harbor Freeway is a state highway, but require Shepard's compliance because the Santa Ana Freeway has been designated an Interstate Highway, would be to miss the point of Swanney-McDonald. We were less concerned in that case with the formal designation of a highway than with the reality of its utility to interstate commerce. The towing companies' concern that this test leaves no room for purely local commerce would be better argued in another case; here, we rely on the trial judge's knowledge of local conditions in finding that the Harbor Freeway is so interconnected with the area's interstate highways as to be an instrumentality of interstate commerce.
In arguing that Keyser and Shepard do not fall within the retail sales or service exemption, 29 U.S.C. 213(a)(2), the Secretary contends that they have not met their burden of showing that 75 percent of their services were recognized as retail 'in the particular industry'. One witness, the president of the Official Police Garage Association, testified that towing was recognized as retail by the auto tow service industry.
The district court found that all of the companies' sales and services were recognized as retail in the industry. The Secretary argues that recognition by the industry is not synonymous with recognition in the industry. We agree, but we observe that evidence proving the first also tends to prove the second. The companies were required to show recognition in the industry in order to claim the exemption. Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 393, 80 S.Ct. 453, 4 L.Ed.2d 393 (1960). We cannot say, however, that the testimony offered that towing services are recognized as retail by the industry was not substantial evidence that they are so recognized in the industry, nor that the trial judge's finding was clearly erroneous.
Mitchell v. City Ice Co., 273 F.2d 560 (5th Cir. 1960), cited as authority by the Secretary, actually supports the companies' position. In City Ice, the Fifth Circuit held that uncontested testimony showing recognition by the industry did not entitle the defendants to a directed verdict on the issue of recognition in the industry; instead it remanded the case for a jury trial on the issue: Id. at 562. Similarly, we rely on the findings of the trier of fact in this instance.
Although we accept the findings of the district court that the companies met the statutory requirements of the retail sales or service exemption, we find another barrier to their inclusion within that exemption. The rather broad statutory...
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