AH Phillips, Inc. v. Walling

• Decision Date: 04 December 1944
• Docket Number: No. 3979.,3979.
• Citation: 144 F.2d 102
• Parties: A. H. PHILLIPS, Inc., v. WALLING.
• Court: U.S. Court of Appeals — First Circuit

144 F.2d 102 (1944)

A. H. PHILLIPS, Inc., v. WALLING.

No. 3979.

Circuit Court of Appeals, First Circuit.

July 20, 1944.

Writ of Certiorari Granted December 4, 1944.

Frederick M. Kingsbury, Joseph B. Ely, and Edward T. Collins, all of Springfield, Mass., for appellant.

Archibald Cox, Associate Solicitor, Wage & Hour Div., Dept. of Labor, of Washington, D. C., Douglas B. Maggs, Solicitor, and George B. Searls, Supervising Attorney and George H. Foley, Regional Attorney, United States Department of Labor, of Boston, Mass., for appellee.

Before MAHONEY and WOODBURY, Circuit Judges, and HEALEY, District Judge.

Writ of Certiorari Granted December 4, 1944. See 65 S.Ct. 268.

MAHONEY, Circuit Judge.

This action was brought by the Administrator of the Wage and Hour Division, United States Department of Labor, under § 17 of the Fair Labor Standards Act of 1938. Act of June 25, 1938, 52 Stat. 1060, Ch. 676, 29 U.S.C.A. § 201 et seq., to restrain the defendant, A. H. Phillips, Inc., from violating the provisions of §§ 15(a) (1), 15(a) (2) and 15(a) (5) of the Act. The lower court adopted as its findings of fact those stipulated by the parties and concluded that certain employees of the defendant were exempt from the provisions of the Act, but that its central office and warehouse employees were entitled to its benefits and issued its injunction accordingly. The defendant has appealed.

A. H. Phillips, Inc., is a Massachusetts corporation engaged in the acquisition, handling and distribution of various kinds of merchandise including canned goods, bottled goods, meats, vegetables, groceries, cigarettes, candy, coal and numerous other items to the extent of about $1,500,000 annually. It operates a chain store system with forty retail grocery stores in Massachusetts and nine in Connecticut and a central office and warehouse in Springfield, Massachusetts. The warehouse contains approximately 250,000 square feet of floor space and it has a receiving platform and railroad siding. It is maintained as a place to which the merchandise, about 80% of which comes from outside Massachusetts, is brought and from which it is distributed to its various retail stores. Its usual inventory runs between $175,000 and $200,000. A card index is kept for the purpose of maintaining a record of the supplies in the warehouse and revealing the amount of the stock of any particular commodity on hand. When it appears from the index that a particular item is low more goods are ordered to meet the prospective demand from the stores. Sometimes when the prices in the market are particularly favorable merchandise is bought irrespective of the index. The demand for supplies from the retail stores does not vary to any great extent and the requirements to meet such demand from week to week can be easily anticipated. Most of the merchandise is brought to the warehouse by rail and unloaded from the cars by the warehouse employees. The rest of it comes in by common carrier trucks. A separate record of the business of each store is kept by the defendant and the individual retail store managers prepare requisitions for the merchandise required by their stores. These requisitions are subject to revision by the superintendents at the central office. Each week the merchandise is delivered from the warehouse to the stores to fill such orders and further deliveries are made as required.

The defendant employs its own trucks to make deliveries from the warehouse to its retail stores and the drivers operate interchangeably in such work within and without the State of Massachusetts. All goods handled by the defendant pass through the warehouse except bread, pastry and milk, which are received directly by the retail stores from local sources. The central office negotiates the price and terms of sale of such articles and deliveries of them are made upon requisition of the store manager. The central office receives the invoices for these direct deliveries and makes the payment for them. The average turnover of the goods in the warehouse is about twelve times annually though the turnover of some things is more rapid. Ninety per cent of the goods is shipped from the warehouse in the original unbroken packages. The office employees check invoices, pay bills, and check direct deliveries to the stores. There is no record kept of the amount of time spent by such employees in connection with the order and receipt or shipment of out of state goods and their other duties, and interstate and intrastate shipments are handled indiscriminately by the receiving, shipping and billing clerks. Unloading of incoming shipments of merchandise from outside Massachusetts, and making up of outgoing shipments to the retail stores in Connecticut are all part of the regular duties of the warehousemen and their helpers.

Nowhere does it appear in the case at bar that the appellant denies that its warehouse and central office employees are engaged in interstate commerce. From the stipulated facts it is clear that these employees are engaged in work involving the receipt of merchandise from outside the state and in delivering merchandise from the warehouse to the retail stores in Connecticut. Further these goods come from points outside the state and after passing through the warehouse reach their final destination in the local retail stores. There is present that particularity in the continuity of their movement which shows that their entry in the warehouse was but a temporary pause in their interstate journey and they remain in interstate commerce until they are delivered at the retail stores. Walling v. Jacksonville Paper Co., 317 U.S. 564, 63 S.Ct. 332, 87 L.Ed. 460.

The fact that the warehouse and office employees are engaged in interstate commerce does not dispose of the case, for the appellant maintains that it is a retail establishment, the greater part of whose selling is in intrastate commerce, and that, therefore, its employees are exempted from the operation of the Act under § 13(a) (2). It insists that the word "establishment" means appellant's entire business organization. It finds support for its contention in Walling v. L. Wiemann Co., 7 Cir., 1943, 138 F.2d 602, certiorari denied 321 U.S. 785, 64 S.Ct. 782, and Allesandro et al. v. C. F. Smith Co., 6 Cir., 1943, 136 F.2d 75, 149 A.L.R. 382, and certain district court decisions. We do not agree. We think that the more persuasive authorities support the construction that the word "establishment" means a single place of business.

In Walling v. Goldblatt Bros., 7 Cir., 1942, 128 F.2d 778, 783, the defendant operated three warehouses in Chicago from which it shipped goods to its ten department stores, some of which were outside the State of Illinois, and the court held as to the employees who distributed and delivered goods from the warehouses to the stores in Illinois that they were engaged in intrastate commerce and not covered by the Act. But in speaking of § 13(a) (2) it said:¹ "We think that such elimination of applicability was intended to include, only ordinary retail stores, * * * and not a great establishment shipping goods out of the state to two of its important outlets."

Walling v. American Stores Co., 3 Cir., 1943, 133 F.2d 840, 842, is a case involving a large chain store system operating eleven warehouses, seven bakeries, canneries, and purchasing offices, in various states and approximately twenty-three hundred retail stores. It claimed exemption under § 13 (a) (2) on the ground that its entire enterprise was a retail establishment. The court said: "From the standpoint of business integration, it might conceivably be assumed that this whole enterprise is an `establishment'. However, it is quite another thing to say that it is a retail establishment when it engages in so many important operations other than retailing, even though the retail sale is the event from which the defendant's income is derived."

It gave a full and complete legislative history of...