Asselta v. 149 MADISON AVENUE CORPORATION

• Decision Date: 09 May 1950
• Citation: 90 F. Supp. 442
• Parties: ASSELTA et al. v. 149 MADISON AVENUE CORPORATION et al.
• Court: U.S. District Court — Southern District of New York

90 F. Supp. 442

ASSELTA et al. v. 149 MADISON AVENUE CORPORATION et al.

United States District Court S. D. New York.

May 9, 1950.

Duberstein & Nimkoff, New York City (Frederick E. Weinberg, Wilbur Duberstein, New York City, of counsel), for plaintiffs.

Joseph Caine, McLanahan, Merritt & Ingraham, New York City (Robert R. Bruce, John B. Tittmann, John J. Boyle, New York City, of counsel), for defendants.

RIFKIND, District Judge.

This action under the Fair Labor Standards Act, 29 U.S.C.A. § 201 et seq., has already had a long career. It appears now to be well launched on another of perhaps equal duration.

The action was commenced on December 10, 1943. On November 20, 1944, fourteen days after the decision in Walling v. Helmerich & Payne, 1944, 323 U.S. 37, 65 S.Ct. 11, 89 L.Ed. 29 and by the light of that opinion, plaintiffs filed an amended complaint alleging claims under the Act for the period April 21, 1942 to December 10, 1943. These are the claims presently in issue.

Judge Bondy filed his opinion directing judgment in favor of plaintiffs on December 31, 1945. It is reported at 65 F.Supp. 385. On March 8, 1946, judgment for the plaintiffs was entered.

On review, the judgment was affirmed by the Court of Appeals, 156 F.2d 139, on June 17, 1946, and by the Supreme Court, 331 U.S. 199, 67 S.Ct. 1178, 91 L.Ed. 1432, 169 A.L.R. 1293, on May 5, 1947. Nine days later, on May 14, 1947, Congress enacted the Portal-to-Portal Act, 29 U.S.C.A. § 251 et seq. Thereupon, in response to defendants' petition, the Supreme Court made an order modifying the judgment of affirmance and remanding the cause to the District Court with authority in that court to consider Portal-to-Portal Act defenses. June 16, 1947, 331 U.S. 795, 67 S.Ct. 1726, 91 L.Ed. 1822.

Proceedings were then had in the District Court which culminated in Judge Bondy's opinion filed July 1, 1948 and reported in 79 F.Supp. 413.

On May 19, 1949, defendants served a supplemental answer pleading the defenses indicated in Sections 9 and 11 of the Portal-to-Portal Act.

The issues so presented have been tried to the court and now call for decision.

So much for the procedural history which is the prologue to the pending litigation. A brief chronology will now be presented in an effort to summarize the events from which the inferences are to be drawn which will sustain or overrule the defenses.

The plaintiffs were building service employees working in a loft building located at 149 Madison Avenue, New York City, owned by defendant 149 Madison Avenue Corporation and managed by defendant Williams & Co., Inc. Since the entry of the original judgment plaintiffs Manne and Torra have died and their representatives have been substituted. In all negotiations relating to rate of pay, hours of work, and working conditions plaintiffs were represented by a collective bargaining agent, Local 32B, Building Service Employees International Union, A.F.L. (hereinafter called Union), and defendants by Realty Advisory Board on Labor Relations, Inc. (hereinafter called R.A.B.). It is undisputed that in resolving the issues developed upon the trial, the good or bad faith, the reliance or lack of reliance, of R.A.B. is to be attributed to defendants. Nor is there any doubt that, throughout the period under consideration, Mr. Walter Gordon Merritt was attorney for R.A.B. and that the latter relied upon his advice as to all legal matters.

The critical events really began on December 30, 1941. On that day the Circuit Court of Appeals for the 2nd Circuit handed down its decision in the Arsenal Building case. Fleming v. Arsenal Bldg. Corp., 2 Cir., 1941, 125 F.2d 278. Owners of loft buildings in New York City suddenly realized that many of them were subject to a very large liability for overtime compensation and liquidated damages under the Fair Labor Standards Act. The decision was announced in the very midst of the negotiations between representatives of the loft building owners and the Union, representing the service employees. Mr. Merritt appeared for the owners. These negotiations were being facilitated by the intervention of Hon. Arthur S. Meyer, Chairman of the N. Y. State Board of Mediation.

Among the employer representatives on the negotiating committee was Leon Spear, one of the defendants in the Arsenal case. When the "Meyer formula"¹ was presented as a solution of the problem presented by the Arsenal decision, he said, "Now, gentlemen, this formula may be all right, but unless you go to the Wage and Hour Department here and get an approval of it, I for one will not go along with anyone that has to do with it." The context of this statement appears in the margin.²

Spear testified that at the very next meeting of the negotiating committees, Mr. Meyer reported that he had visited the Wage and Hour Division and that he had received its "go-ahead". Mr. Meyer's status was, at some point during the negotiations, changed from that of mediator to arbitrator and the agreement finally arrived at, which I shall call the Meyer agreement, was reduced to the form of an arbitration award. It contained the Meyer formula.

It should be underscored that plaintiffs were not employed under this agreement, which related chiefly to buildings in the garment center in New York, but under a later agreement relating to other loft buildings, including the one owned and managed by defendants. The above events relating to the Meyer agreement are relevant because substantially the same negotiating parties were involved in the later agreement under which plaintiffs were employed, which I shall call the National War Labor Board (N.W.L.B.) agreement, and because the Meyer formula was incorporated into that later agreement.

The background of the N.W.L.B. agreement is as follows: On May 1, 1942 the Secretary of Labor certified to the N.W. L.B. that a dispute which warranted its attention had broken out between R.A.B. and the Union. The plaintiffs and defendants in this action were involved in that dispute. The N.W.L.B., which had been created by Executive Order No. 9017, 50 U.S.C.A.Appendix, § 1507, note, designated a Panel which held hearings and made recommendations to the N.W.L.B. The latter made an order on July 29, 1942 which substantially adopted the Panel's recommendations.

On the basis of that order the R.A.B. and the Union entered into an agreement on September 1, 1942 — the N.W.L.B. agreement — covering the period April 21, 1942 to April 20, 1945. In due time (September 26, 1942), the defendants herein adhered thereto. It is established that the payments made to plaintiffs were in compliance with that agreement.

A few additional entries relating to the activity of Government agencies subsequent to the agreement may be added to our chronology: During the summer and fall of 1942 the Wage and Hour Division was inspecting loft buildings in New York to secure enforcement of the Fair Labor Standards Act in the light of the Arsenal decision. On November 10, 1942 the injunction decree in the Arsenal case was entered.

On December 3, 1942 N.W.L.B. issued a supplementary wage authorization in the case involving the R.A.B. and the Union, on which the order of July 29, 1942 had issued. This supplementary authorization was conditioned so as to comply with Executive Order 9250, made on October 3, 1942, 50 U.S.C.A.Appendix, § 901 note, which prohibited wage increases except as therein provided.

On February 16, 1943 an arbitrator authorized an increase of $1.50 a week under the Meyer agreement. This was reduced by the Regional W.L.B. to $1.40.

On June 21, 1943, an arbitrator awarded an increase of $1.40 a week under the N.W. L.B. agreement and that was approved by the Regional W.L.B.

The Wage and Hour Division did not attempt to collect any additional compensation under the Arsenal decision for the period after April 20, 1942, the effective date of the N.W.L.B. agreement. Nor did the Division ever attempt to enforce payment of additional wages from the Arsenal building itself through use of the contempt power which it could invoke under the injunction decree.

1. Section 11

I have concluded that defendants have established "to the satisfaction of the court" that the omission to pay the additional compensation was in good faith and that they "had reasonable grounds for believing" that the omission was not a violation of the Fair Labor Standards Act. A defense under Section 11 of the Portal-to-Portal Act is therefore established. 29 U.S.C.A. § 260.

The uncontradicted evidence leads almost irresistibly to this conclusion. The employers had just had their fingers badly burned by their wrong guess concerning the applicability of the Fair Labor Standards Act to their employees. They faced a very large liability not only for additional compensation but for liquidated damages and counsel fees. They were negotiating a new contract. It was but natural that they would be deeply anxious to avoid that kind of pitfall again. Spear's testimony, referred to earlier in this opinion, has, therefore, the hallmark of the true and sincere. It has not been contradicted. Moreover, the best evidence of what Meyer reported to the negotiating committee is that they adopted the Meyer formula. Unless he had reported that he had been given the "go ahead" signal, it is most unlikely that the employers would have accepted the risk — certainly not without further and different pressures which do not appear to have been applied.

From this point of view, it matters little that the advice given to Meyer by the representative of the Wage and Hour Division may have contained some cautionary language.

I base my finding of good faith much more on the Meyer incident than on Merritt's earlier conversation with Dorsey, an employee of the Wage and Hour Administration in Philadelphia, concerning a similar formula used in the anthracite coal dispute.

Plaintiffs' attack on defendants' good faith and on the reasonableness of defendants'...