Donovan v. United States Postal Service, Civ. A. No. 78-0602

• Decision Date: 22 May 1981
• Docket Number: Civ. A. No. 78-0602,79-1808.
• Citation: 530 F. Supp. 872
• Parties: Raymond J. DONOVAN, Secretary of Labor, et al., Plaintiffs, v. UNITED STATES POSTAL SERVICE, Defendant. Regis T. ATWOOD, et al., Plaintiffs, v. UNITED STATES POSTAL SERVICE, Defendant.
• Court: U.S. District Court — District of Columbia

530 F. Supp. 872

Raymond J. DONOVAN, Secretary of Labor, et al., Plaintiffs, v. UNITED STATES POSTAL SERVICE, Defendant.

Regis T. ATWOOD, et al., Plaintiffs, v. UNITED STATES POSTAL SERVICE, Defendant.

Civ. A. Nos. 78-0602, 79-1808.

United States District Court, District of Columbia.

May 22, 1981.

Sue Ann Wolff, Douglas N. White, Peter B. Dolan, Counsel for Trial Litigation, U. S. Dept. of Labor, Bruce H. Simon, Jani K. Rachelson, Mozart G. Ratner, David M. Ermer, James R. Barnett, Kenneth J. Simon-Rose, Donald M. Murtha & Associates, Washington, D. C., for plaintiffs.

Edward F. Ward, Jr., Stephen E. Alpern, Donald F. Gilmore, Jr., Washington, D. C., James S. Petrie, Chicago, Ill., Milton C. Denbo, Eugene B. Granof, C. Richard Miscerendino, Vedder, Price, Kaufman, Kammholz & Day, Washington, D. C., for defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

AUBREY E. ROBINSON, Jr., District Judge.

The lead case in this consolidated group of cases, Donovan v. United States Postal Service, No. 78-602, was filed on April 4, 1978, as a suit by the Department of Labor (DOL), against the United States Postal Service (USPS). DOL alleged that USPS violated the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., said violations falling into two distinct categories, to wit: (1) Smith/Kaplan,¹ and (2) Elia violations.² Subsequent to the filing of the original complaint, private litigants Evans, et al.,³ sued USPS for further alleged violations of the FLSA. Thereafter, DOL amended its complaint to include all but one of the Evans allegations.

DOL does not sue employers for alleged FLSA violations in a vacuum. Ordinarily, it conducts a thorough investigation of the employer's actions prior to initiation of litigation. The instant case was brought under unique circumstances, however. The two categories of FLSA violations incorporated in the original complaint had already been resolved in litigation brought by various private parties, and issues had either been resolved adversely to the USPS,⁴ or submitted to the Secretary of Labor for arbitration.⁵ Damages in excess of $66 million were awarded to Plaintiffs in those cases, and their attorneys were paid in excess of $3 million by USPS for attorneys fees and costs. Because of the procedural restrictions in the FLSA, however,⁶ only party plaintiffs were compensated. This left over 400,000 USPS employees devoid of remedy for the FLSA violations.

DOL had three motives for initiating this lawsuit prior to a thorough investigation: (1) only it could sue in a class action on behalf of the remaining employees⁷ (hereinafter referred to as non-plaintiffs), toll the statute of limitations against them, and insure that they were compensated for the FLSA violations, (2) the facts underlying the violations alleged in Smith/Kaplan and Elia were virtually unrefutable, and the alleged violations were indigenous to USPS' payroll and timekeeping system, and thus potentially affected all non-exempt USPS employees⁸ and (3) Postmaster General Bolger specifically requested that DOL bring suit, and thus preclude further private lawsuits with accompanying attorneys fees.⁹

Subsequent to the filing of the lead case and the Evans litigation, a procedural quagmire developed. On February 12, 1979, the National Association of Letter Carriers (NALC) and certain named letter carriers moved to intervene in Donovan, alleging that USPS had entered into an oral "non-plaintiff agreement"¹⁰ when it settled the Smith/Kaplan case. On February 16, 1979, Mozart G. Ratner, the attorney for the Kaplan plaintiffs,¹¹ moved to intervene in Donovan, on behalf of himself and four non-plaintiff letter carriers, also alleging the existence of a "non-plaintiff agreement." On July 10, 1979, Atwood v. USPS, No. 79-1808, was filed on behalf of the attorneys in Smith¹² and all non-plaintiffs, seeking specific performance of the alleged non-plaintiff agreement. On July 27, 1979, DOL moved to intervene in Atwood; on October 18, 1979, Ratner, et al. sought intervention in Atwood.

Rather than resolve the FLSA legal questions, which undoubtedly would have provided for more expeditious compensation to non-plaintiffs, all parties, with the exception of USPS, sought instead to litigate the existence vel non of the alleged non-plaintiff agreement. This Court initially denied the motions to intervene,¹³ but was reversed on appeal.¹⁴ Thus, on June 4, 1980, the existence vel non of the alleged non-plaintiff agreement was brought to the forefront of the instant case. Immediately thereafter, the parties commenced discovery.

Because of the unique circumstances presented in this litigation,¹⁵ this Court maintained close scrutiny on discovery,¹⁶ consolidated all related litigation,¹⁷ stayed resolution of the FLSA and related issues,¹⁸ and clearly delineated the issue to be presented at trial.¹⁹ Trial on the existence vel non of the alleged non-plaintiff agreement commenced on February 23, 1981, and concluded on March 18, 1981. This Court's Findings of Fact and Conclusions of Law in accordance with Rule 52(a) of the Federal Rules of Civil Procedure follow.

FINDINGS OF FACT

I. Background

The FLSA was amended and became applicable to the USPS as an employer of covered employees, effective May 1, 1974. 29 U.S.C. § 203(d). At that time, USPS felt that the FLSA would have little impact on its day-to-day operations, and USPS' general counsel offered no objection in Congress to the application of the FLSA to USPS. In fact, however, USPS' personnel practices were subtly but substantially out of compliance with the FLSA. The seriousness of these violations was apparently not realized by USPS until it was faced with defending a series of lawsuits alleging the violations in question.

These lawsuits fell into two categories, viz., the Smith/Kaplan cases and the Elia cases. Plaintiffs in the Smith/Kaplan litigation contended that USPS violated the FLSA by (a) failing to include as hours worked time "suffered or permitted" by USPS management, and (b) failing to include certain required premiums in regular rate of pay calculations. Plaintiffs in the Elia litigation contended that USPS violated the FLSA by failing to include as hours worked time spent in certain study, travel, and training activities. An understanding of the principal actors in the Smith/Kaplan and Elia litigation, the disposition of Smith/Kaplan and Elia issues by the trial court, and the roles of the Department of Justice (DOJ) and DOL is imperative in order to scrutinize the operative facts presented in the instant case.

A. The Principal Actors (Private Plaintiffs)

Gerald M. Feder and Jules Bernstein are private attorneys practicing in Washington, D. C. Feder was intimately involved with the enactment of the FLSA amendments mentioned above. Bernstein was at all times herein relevant counsel to the Mail Handlers Division of the Laborers' International Union of North America. Both are partners in a law firm devoted to the practice of labor law, and unions are their primary clientele. Feder and Bernstein were responsible for filing Smith, Elia, and various related cases.²⁰ It is undisputed that, at least until March 27, 1978, they vehemently insisted that all non-exempt USPS employees be accorded equal treatment in any prospective settlement agreement. There were three motives underlying this insistence; namely, (1) as counsel for an employees' union, they viewed all employees as their clients, (2) they understood that significant labor strife might result if similarly situated employees were treated differently, and (3) the amount they could demand from USPS for attorney's fees would increase significantly if they represented all employees.²¹

Mozart G. Ratner is an attorney in private practice in Washington, D.C., and from 1970 through January 12, 1979, was general counsel to the NALC. He, too, is primarily devoted to the practice of labor law, and unions and/or employees are his primary clientele. Ratner was responsible for filing Kaplan and another related case.²² It is undisputed that, at least until March 27, 1978, he vehemently insisted that all non-plaintiff letter carriers be accorded equal treatment in any prospective settlement agreement, and that letter carriers be compensated at a higher rate than other USPS employees. Ratner tenaciously pursued these goals because (1) he was general counsel for the NALC and Joseph Vacca, then president of NALC, insisted that all letter carriers be treated equally, (2) he believed that the FLSA violations impacted harsher on letter carriers than on other USPS employees, and (3) the amount he could demand for attorney's fees was proportionate to the number of individuals he represented.²³

B. Principal Actors (USPS)

Four individuals played predominant roles in handling USPS' approach to the Smith/Kaplan and Elia cases: Postmaster General Bolger, Deputy Postmaster General Benson, Harvey Letter, and Joel Trosch. Bolger assumed the duties of PMG on March 15, 1978; at all relevant times prior to that date Bolger served as Deputy PMG. Benson assumed the duties of Deputy PMG on July 1, 1980; at all relevant times prior to that date Benson was Chief Postal Inspector. Harvey Letter served as USPS Associate General Counsel, Office of Labor Law, from 1972 through July of 1978. Joel Trosch has been an Assistant General Counsel in the Office of Labor Law since July, 1977. He was the chief litigation attorney in the Smith/Kaplan and Elia cases, and reported directly to the Associate General Counsel.

From the outset of the FLSA litigation, USPS was beset with countervaling policy considerations that impacted on its handling of the FLSA issues. These considerations may be summarized as follows:²⁴

(a) USPS recognized its responsibility to comply with the FLSA and treat its employees "fairly and equitably;"

(b) USPS further acknowledged that it had a broad responsibility to the rate-paying public to minimize its costs;

(c) USPS...