Dunlop v. Ashy

Decision Date13 July 1977
Docket NumberNo. 75-3405,75-3405
Citation555 F.2d 1228
Parties23 Wage & Hour Cas. (BN 376, 82 Lab.Cas. P 33,550 John T. DUNLOP, Secretary of Labor, United States Department of Labor, Plaintiff-Appellant, v. Mitchell N. ASHY et al., Defendants-Appellees.
CourtU.S. Court of Appeals — Fifth Circuit

William J. Kilberg, Sol. of Labor, Donald S. Shire, Atty., Carin Ann Clauss, Associate Sol., Paul D. Brenner, Atty., Jacob I. Karro, U. S. Dept. of Labor, Washington, D. C., Ronald M. Gaswirth, Reg. Sol., U. S. Dept. of Labor, Dallas, Tex., for plaintiff-appellant.

John G. Torian, II, Lafayette, La., for defendants-appellees.

Appeal from the United States District Court for the Western District of Louisiana.

Before GEWIN, RONEY and HILL, Circuit Judges.

GEWIN, Circuit Judge:

This is an appeal by the Secretary of Labor from the district court's decision that the Downtowner Motor Inn in Opelousas, Louisiana and the Inn Restaurants, Inc. are not a single "enterprise" within the meaning of the Fair Labor Standards Act (FLSA or the Act), 29 U.S.C. §§ 201 et seq., 203(r). Brennan v. Ashy, 397 F.Supp. 1347 (W.D.La.1975). The Secretary contends that the district court's opinion is erroneous as a matter of law and is, therefore, unshielded by the "clearly erroneous" standard of Rule 52, Fed.R.Civ.P. Brennan v. Plaza Shoe Store, Inc., 522 F.2d 843, 846 (8th Cir. 1975). We agree with the Secretary's characterization of the question on appeal as a legal one, but conclude that the evidence fails to support at least one of the essential requirements of enterprise coverage and the judgment of the court below must, therefore, be affirmed.

In 1971 the Downtowner Motor Inn in Opelousas, Louisiana was bought by a partnership composed of Mitchell N. Ashy and Charles M. Waters. The motor inn is located in a four story building with motel rooms, a swimming pool, parking areas, two cocktail lounges, two banquet rooms and a restaurant. The partnership, known as Mitchell N. Ashy and Associates, operated both the motel and the restaurant for the first three or four months after the purchase. On June 30, 1971, however, the restaurant was leased to Inn Restaurants, Inc. which is wholly owned by Kenneth Howard. At the time of the lease Howard was employed as manager of another motel owned by Ashy in Lafayette, Louisiana. Ashy testified that he always tried to lease out the food service operation in his motels and, with the idea of increasing his earnings, Howard approached him about entering into such an arrangement. When the opportunity arose in Opelousas, Howard formed Inn Restaurants, Inc. and executed the lease five days later. 1 Several important aspects of the relationship between the motor inn and the restaurant were noted in the district court opinion:

Inn Restaurants, Inc. leases the restaurant facilities and equipment from Mitchell N. Ashy and Associates. The restaurant has one entrance onto the lobby of the motel and one outside entrance onto the parking lot. Under the terms of the lease the restaurant must provide meals (room service) which are delivered by the motel to the rooms of its guests; motel guests may charge the costs of restaurant services on their motel bill, with the motel paying the restaurant for these charges and then collecting one bill from the customer; any such charges which later prove not collectible are billed back to the restaurant; and the motel is responsible for maintaining the structure of the building, while the restaurant is responsible for maintaining the fixtures and equipment in the restaurant.

Brennan v. Ashy, 397 F.Supp. 1347, 1349 (W.D.La.1975). Generally, the facts are not in dispute and have been stipulated by the parties. As necessary, additional facts will be presented in the course of this opinion. As noted by the Eighth Circuit, "The question of whether several businesses constitute an 'enterprise' is a question to be resolved in each case on the basis of all the particular facts of the case." Brennan v. Plaza Shoe Store, Inc., 522 F.2d 843, 846 (8th Cir. 1975). This court has been advised of three other district court opinions dealing with fact situations virtually identical with this one. Usery v. Fort Payne Motels, Inc., 432 F.Supp. 1079 (N.D.Ala. Dec. 16, 1976), appeal docketed sub nom. Marshall v. Fort Payne Motels, Inc., No. 77-1356 (5th Cir. Feb. 15, 1977) (no enterprise coverage); Usery v. Mohs Realty Corp., 424 F.Supp. 20 (W.D.Wis.1976) (enterprise coverage); Brennan v. Western Lands Motel d/b/a Holiday Inn of Paris, 21 WH Cas. 254, 71 CCH Labor Cas. P 32,899 (E.D.Tex.1973) (not otherwise reported, enterprise coverage). Cf. Wirtz v. Mod. Builders, Inc., 288 F.Supp. 338 (M.D.Ga.1968).

In bringing this action the Secretary of Labor sought to enjoin violation of the minimum wage, overtime, child labor, and record keeping requirements of the Act by the defendants. 29 U.S.C. §§ 206, 207, 211, 212, and 215(a)(2, 4, and 5). The complaint also sought to restrain defendants from further withholding of minimum wages due under the Act and interest thereon. It is alleged that the amount of these improperly withheld wages and the interest thereon is in excess of $87,000. The parties stipulated at trial that neither the motor inn nor the restaurant had gross annual sales of $250,000 or more as required for coverage under the Act by 29 U.S.C. § 203(s), but that the gross annual sales of the combined operations would exceed this statutorily-set jurisdictional amount. Until such time as the individual gross annual sales of the motor inn and restaurant bring them individually within the ambit of the FLSA, coverage by that Act must be grounded upon a finding that the two operations constitute a single enterprise within the meaning of 29 U.S.C. § 203(r):

(r) "Enterprise" means the related activities performed (either through unified operation or common control) by any person or persons for a common business purpose, and includes all such activities whether performed in one or more establishments or by one or more corporate or other organizational units including departments, . . . but shall not include the related activities performed for such enterprise by an independent contractor: . . . .

As specified in the statute, three elements must coexist for there to be enterprise coverage under the FLSA: (1) related activities; (2) unified operation or common control; and (3) a common business purpose. Brennan v. Arnheim & Neely, 410 U.S. 512, 518, 93 S.Ct. 1138, 1142, 35 L.Ed.2d 463, 470 (1970); Brennan v. Plaza Shoe Store, Inc., 522 F.2d 843, 846 (8th Cir. 1974); Brennan v. Veternas Cleaning Service, Inc., 482 F.2d 1362, 1366 (5th Cir. 1973). The district court found that none of the three elements were present in this case.

It is unquestioned that in everyday parlance the motor inn and restaurant are "related." They are housed in the same building, they often provide complementary services to the guests and patrons of each other, and they cooperate with each other in various activities. Related activities in the generic sense of that term, however, is not the same as related activities within the statutory meaning of the term. Similarly, we are not convinced that a common business purpose has been shown. It may be that both of these elements do exist here, but we find it unnecessary to decide that question. The record evidences a substantial degree of cooperation between the motor inn and the restaurant, but not the unified operation or common control contended by the Secretary. The unmistakable absence of this necessary element requires affirmance of the district court's dismissal of the complaint.

To establish enterprise coverage under the Act, it is incumbent upon the plaintiff to prove only one of the two alternative requirements of "unified operation" or "common control." Dunlop v. Lourub Pharmacy, Inc., 525 F.2d 235, 236 (6th Cir. 1975); Wirtz v. Barnes Grocer Co., 398 F.2d 718, 721 (8th Cir. 1968). The question of common control was properly disposed of we think in the district court's opinion:

2. COMMON CONTROL. As we noted above, the businesses are separately owned; the owners of neither entity have any ownership interest in the other. However, the test of common control is not ownership, but rather whether there is a common control center with the ultimate power to make binding policy decisions for all units of the enterprise. Shultz v. Mack Farland, 413 F.2d 1296 (5th Cir. 1969); Shultz v. Morris, 315 F.Supp. 558 (M.D.Ala.1970).

The evidence clearly established that Mr. Howard and Mrs. Hattie Powell, the manager of the restaurant, make all policy decisions regarding the restaurant. They determine the items on the menu, the prices charged, hiring and firing of restaurant personnel, opening and closing hours, and other aspects of the restaurant's business. Mr. J. C. Sharp, the motel manager, makes all of the policy decisions for the motel.

From the evidence, it is clear that there is no common control center which makes decisions binding on both operations. Mrs. Powell testified that she works closely with Mr. Sharp and that on occasion he makes suggestions about the restaurant which she often follows. Nevertheless, she made it clear that the decision is always hers and that Mr. Sharp's suggestions are only advice. Mr. Sharp testified that he makes frequent trips to Lafayette, Louisiana and that when he does he often takes along checks for Mr. Howard, who is manager of a Lafayette motel, to sign. This was done as a courtesy, however, and was not regarded as part of his duties. When the restaurant closes at night, the daily receipts are placed in the motel safe until the next morning. However, the money is kept in a separate container, and is not mingled with the motel's money. All of these facts show that the two businesses work closely together, as a matter of convenience. There is no common control over the two operations; there is no unified operation.

Brennan v. Ashy, 397...

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