General Tobacco & Grocery Co. v. Fleming

• Decision Date: 05 February 1942
• Docket Number: No. 8872.,8872.
• Citation: 125 F.2d 596
• Parties: GENERAL TOBACCO & GROCERY CO. v. FLEMING, Administrator of Wage and Hour Division.
• Court: U.S. Court of Appeals — Sixth Circuit

125 F.2d 596 (1942)

GENERAL TOBACCO & GROCERY CO. v. FLEMING, Administrator of Wage and Hour Division.

No. 8872.

Circuit Court of Appeals, Sixth Circuit.

February 5, 1942.

Victor W. Klein, of Detroit, Mich. (Butzel, Eaman, Long, Gust & Bills, Victor W. Klein, and J. Burgess Book, III, all of Detroit, Mich., on the brief), for appellant.

Abner Brodie, of Washington, D. C. (Gerard D. Reilly, Irving J. Levy, Robert S. Erdahl, and David Persinger, all of Washington, D. C., and Aaron A. Cohen, of Cleveland, Ohio, on the brief), for appellee.

Before SIMONS, ALLEN, and MARTIN, Circuit Judges.

MARTIN, Circuit Judge.

The Administrator of the Wage and Hour Division of the United States Department of Labor applied to a United States District Court for an order directing appellant, General Tobacco and Grocery Co., of Detroit, Michigan, to show cause why a court order should not issue requiring appellant to produce books, records, documents and papers demanded by subpoena duces tecum, upon allegation of the previous refusal of appellant to produce its books and records at a designated time and place in obedience to an order of a duly qualified representative of the Administrator who was investigating the alleged violation by appellant of the Fair Labor Standards Act of 1938. U.S.C.A., Title 29, Sec. 201, 52 Stat. 1060.

The petitioning Administrator averred, on information and belief, that appellant was engaged in interstate commerce.

In response to the show-cause order issued by the district court, appellant appeared "for the purpose of objecting to the jurisdiction of the court over the subject matter of the controversy" upon the ground that appellant is not engaged in interstate commerce, or in the production of goods for interstate commerce; and that, under the Fair Labor Standards Act, the Administrator lacks power or authority to investigate or inspect the records and books of employers not so engaged. The positive averment was made that appellant "and its employees are engaged solely in the business of selling and distributing groceries, candies, tobaccos, and food products at wholesale to retailers, all of which sales and distribution are made by the respondent and its employees wholly within the State of Michigan, principally within the metropolitan area of the City of Detroit, Wayne County, Michigan."

The appellant further answered that "the major portion of goods purchased by it for subsequent re-sale and distribution is purchased from manufacturers or sellers who operate within the State of Michigan and who deliver such goods to the warehouse of this respondent from places of business operated by such sellers located within the State of Michigan and that with respect to the remaining small portion of the goods purchased by this respondent such goods are shipped from without the State directly to the warehouse of this respondent in the State of Michigan and commingled with other goods owned by the respondent and come to rest at the warehouse of this respondent before they are re-sold to respondent's customers or are shipped to such other point in Michigan designated by respondent."

The answer asserted that, inasmuch as appellant is not subject to the provisions of the Fair Labor Standards Act, there were no reasonable grounds upon which the Regional Director, acting in behalf of the Administrator, could base her order for investigation and taking testimony, or base her belief that the appellant had violated the provisions of an Act to which it was not subject under the express limitations of the law.

Prior to the issuance of the administrative order and subpoena duces tecum, appellant's attorney addressed to the Wage and Hour Division of the Department of Labor a letter, which is incorporated in its answer, in which the intrastate and local character of appellant's business was urged. The letter concluded:

"We understand that it is your contention, notwithstanding the United States Supreme Court decision in the N. R. A. — Schechter decision and other Supreme Court decisions on the subject, that the wholesalers are subject to the Act even though they sell and distribute goods wholly within a state if any part of the goods purchased by the wholesaler is shipped to them from outside of the state. We are cited no authority or other decision on this point, and I have been unable to find a single court decision on this subject which would sustain this view.

"Our clients are now, and at all times have been, willing and desirous of complying with any laws applicable to it. On the other hand, our client should not be requested to comply with laws which are not applicable to it.

"Would you be good enough to furnish us with any citation of authority upon which the Wage and Hour Division might rely which would support the conclusion that our client, a wholesaler who sells no goods outside of the state, is subject to the Wage and Hour Law? If and when such citation is made available to us, we would be pleased to again review the subject and advise you accordingly."

The answer of respondent asserts that no citation of authority was furnished by the Wage and Hour Administrator, "and respondent verily believes that said Administrator is unable so to do because there is no such authority."

Appellant prayed that the District Court enter an order dismissing the application of the Administrator of the Wage and Hour Division and denying the relief sought therein.

The averment of appellee, on information and belief, that appellant was engaged in interstate commerce was not subsequently supported by the introduction of any evidence. Appellant's answer, specifically denying engagement in interstate commerce by appellant and its employees, described the conduct of its business as exclusively intrastate commerce. A fact question upon the jurisdictional issue of interstate commerce was thus tendered by the pleadings in the district court.

But the court declined to try this issue. Reciting that "upon consideration of the application of the petitioner, the answer of the respondent thereto, and after hearing argument of counsel on behalf of the parties and on all of the proceedings herein and it appearing that the jurisdiction of the court is established by the petitioner's application and respondent's answer and it further appearing to the court that the issuance of this order does not require a determination as to whether or not respondent is within the coverage of the Fair Labor Standards Act which finding is not made" (italics ours), the district court entered an order directing appellant to appear before the Administrator at a definite time and place and, then and there, to produce the demanded books and records. Appellant obtained a stay of the district court order, pending appeal.

In his brief, the appellee-administrator broadly asserts that "the whole purpose of the administrative investigation and the subpoena in question here is to secure information to enable him to determine, in the first instance, whether the Act is applicable and, if so, whether appellant has violated the Act," and that "the question whether appellant is within the purview of the substantive provisions of the Act is not properly before the court in this summary proceedings to enforce the subpoena."

The rejoinder is made by appellant that the Fair Labor Standards Act applies in express terms only to employers and employees who are "engaged in commerce or in the production of goods for commerce;" 29 U.S.C.A. § 202(a); that an employer not subject to the Act is not required to submit to the investigation and inspection by the Administrator of his books and records; and that where essential jurisdictional allegations of fact are controverted, the district court lacks power to assume jurisdiction, without hearing proof and determining the questions of fact upon which jurisdiction must rest.

That Congress was exercising its constitutional power to regulate commerce among the several states, in the enactment of the Fair Labor Standards Act of 1938, was recited in the declaration of policy in Section 2(b) of the Act. Section 3(b) of the Act defined commerce as meaning "trade, commerce, transportation, transmission, or communication among the several States or from any State to any place outside thereof." Section 6 of the Act provides that "every employer shall pay to each of his employees who is engaged in commerce or in the production of goods for commerce" prescribed minimum wages; and Section 7 provides that "no employer shall, except as otherwise provided in this section, employ any of his employees who is engaged in commerce or in the production of goods for commerce" for a longer workweek than provided therein. Section 8 applies to "each industry engaged in commerce or in the production of goods for commerce."

Section 9 makes the provisions of the Federal Trade Commission Act, 38 Stat. 717-722, U.S.C.A., Title 15, §§ 41-49, relating to the attendance of witnesses and the production of books, papers and documents, applicable to the jurisdiction, powers and duties of the Administrator of the Wage and Hour Division of the Department of Labor, for the purpose of any hearing or investigation provided for in the Fair Labor Standards Act. The provisions of the Federal Trade Commission Act thus incorporated in the Fair Labor Standards Act supply the aid of any court of the United States to the Administrator in procuring the attendance and testimony of witnesses, and the production of documentary evidence, by conferring jurisdiction upon the district courts to issue an order requiring the appearance of witnesses and the production of evidence before the administrator, where his subpoena has been disobeyed.

Section 10 of the Fair Labor Standards Act prescribes review in the Circuit Courts of Appeal of wage orders against any aggrieved person, but the review is expressly "limited to questions of law, and findings of fact by the Administrator when...