Futrell v. Columbia Club, Inc.

• Decision Date: 02 August 1971
• Docket Number: No. IP 69-C-176,IP 69-C-498.,IP 69-C-176
• Citation: 338 F. Supp. 566
• Parties: James FUTRELL et al., Plaintiffs, v. The COLUMBIA CLUB, INC., Defendant. Elmer ELLIOTT, Plaintiff, v. The COLUMBIA CLUB, INC., Defendant.
• Court: U.S. District Court — Southern District of Indiana

338 F. Supp. 566

James FUTRELL et al., Plaintiffs, v. The COLUMBIA CLUB, INC., Defendant.

Elmer ELLIOTT, Plaintiff, v. The COLUMBIA CLUB, INC., Defendant.

Nos. IP 69-C-176, IP 69-C-498.

United States District Court, S. D. Indiana, Indianapolis Division.

August 2, 1971.

COPYRIGHT MATERIAL OMITTED

Eskenazi, Mitchell & Yosha, Indianapolis, Ind., for James Futrell and others.

Stewart, Irwin, Gilliom, Fuller & Meyer, Indianapolis, Ind., for Columbia Club.

Virginia D. McCarty, Indianapolis, Ind., for Elmer Elliott.

MEMORANDUM OF DECISION

DILLIN, District Judge.

These consolidated cases come before the Court on what may be treated as cross motions for summary judgment. The defendant moved to dismiss, supporting that motion with affidavits, Federal Rule of Civil Procedure 12(b), while plaintiffs moved for summary judgment. The Court has determined, with the concurrence of the parties, that the case can be advanced by a resolution of all legal questions, leaving for later trial or agreement the remaining disputed questions of fact. Accordingly, the Court now enters partial summary judgment by this memorandum of decision. Federal Rule of Civil Procedure 56(d).

The actions concern the wage and hour claims of forty-three employees of The Columbia Club, Inc. (hereafter "Club"), a private club in downtown Indianapolis. The Club is an institution that provides solely to its members and their guests a variety of services including guest rooms, dining rooms, health facilities, swimming pool, billiard and card rooms, barbershop and social functions, all operated out of a centrally located club building. The plaintiffs are all employees or former employees of the Club employed as elevator operators, maids, laundresses, dishwashers, doormen and the like. They claim to have been paid less than the minimum wage and to have been undercompensated for overtime during the two year period from April, 1967 to April, 1969. There is no dispute about the actual wages paid or hours worked by the plaintiffs; rather, the Club contends it was not required to comply as it was not covered or was within a complete or partial exemption from the Act. These issues of coverage and exemption are the main issues before the Court and are proper for resolution on cross motions for summary judgment.

At the outset, defendant challenges the constitutionality of the 1961 amendments to the Fair Labor Standards Act (hereafter "Act" or "FLSA"). These amendments added the concept of an enterprise engaged in interstate commerce, and extended coverage under the Act to all employees of such an enterprise if certain dollar sales tests are met. The basis of the challenge is that the amendments are unconstitutional on their face and as applied to the Club, which claims to be an ultimate consumer of goods.

The United States Supreme Court has considered the validity of the enterprise concept created by the 1961 amendments and has sustained the validity of this form of coverage. Maryland v. Wirtz, 1968, 392 U.S. 183, 88 S.Ct. 2017, 20 L.Ed.2d 1020. See also Wirtz v. Edisto Farms Dairy, E.D.S.C., 1965, 242 F.Supp. 1. In addition to this approval of the general enterprise concept, the Act has been held constitutional as applied to handlers of goods after they "come to rest" within the state. The modern view is that the Commerce Clause reaches such activity. Wirtz v. Mayer Construction, D.N.J., 1968, 291 F.Supp. 514. Moreover, defendant is not a true ultimate consumer as it resells its food and sundry items. The FLSA amendments are constitutionally applied to the Club.

Having resolved the threshold issue of constitutionality, the Court now takes up the issues of coverage and exemption. In summary, the position of the parties is as follows: Plaintiffs contend the Club was covered prior to the 1966 amendments by then 29 U.S.C. § 203(s) (3)¹ and after 1966 by the present 29 U.S.C. § 203(s) (1).² Defendant contends that it was not covered prior to 1966 by failure to meet then 29 U.S.C. § 203(s) (1)³ and exempt prior to 1966 by then 29 U.S.C. § 213(a) (2) (i), (ii).⁴ Defendant also claims a partial exemption prior to 1966 by virtue of then 29 U.S.C. § 213(a) (20).⁵ Defendant tacitly admits that it has been covered by present 29 U.S.C. § 203(s) (1)⁶ since 1966. However, defendant claims the advantage of the lower rate and higher hours provisions of present 29 U.S.C. §§ 206(b), 207(a) (2) since it claims noncoverage prior to the 1966 amendments.⁷ It also claims partial (overtime only) exemptions under 29 U.S.C. § 213 (b) (8), (18).⁸ The resolution of these statutory claims is the nub of this suit.

Dealing with such a mass of provisions requires the definition of three critical terms that appear throughout the sections at issue. The first of these terms is "retail or service establishment." Originally, such establishments were exempt from the provisions of the Act. In 1949, however, the Congress amended the FLSA to define this phrase as an establishment more than fifty per cent of whose sales are not for resale and more than fifty per cent of whose sales are recognized as retail in the particular industry. The applicability of the retail establishment exemption is a question of law. Boisseau v. Mitchell, 5 Cir., 1955, 218 F.2d 734.

The Supreme Court has held that the industry recognition and not-for-resale tests are not the sole tests for the retail exemption. The Court formulated a prior test to the two referred to as the "retail concept," which may be stated as follows: Regardless of the industry notion, are these sales retail within the contemplation of Congress? Idaho Sheet Metal Works v. Wirtz, 1966, 383 U.S. 190, 86 S.Ct. 737, 15 L.Ed.2d 694; Mitchell v. Kentucky Finance Company, 1959, 359 U.S. 290, 79 S.Ct. 756, 3 L.Ed.2d 815. The presence of the retail concept is likewise a question of law. Wirtz v. Broward Marine, Inc., 5 Cir., 1968, 390 F.2d 788; Rachal v. Allen, 5 Cir., 1967, 376 F.2d 999; Goldberg v. Sorvas, 3 Cir., 1961, 294 F.2d 841; Goldberg v. Roberts, 9 Cir., 1961, 291 F.2d 532.

The question for the Court then is whether the Club fits within the "retail concept" as contemplated by Congress and the Department of Labor. Exemptions to the FLSA are narrowly construed against the party seeking the exemption. Arnold v. Ben Kanowsky, Inc., 1960, 361 U.S. 388, 80 S.Ct. 453, 4 L.Ed. 2d 393. In the case of clubs the Congress has not spoken. However, long before the events complained of, the Department had promulgated 29 CFR §§ 779.318, 779.319, which specify as an element of the retail concept that the establishment be open to the public. More particularly, in an opinion letter the Administrator of the Wage and Hour Division made clear that the Division did not consider private clubs retail because of this lack of public accessibility. Opinion Letter No. 655, September 5, 1967. See also Opinion Letter No. 983, April 23, 1969; Opinion Letter No. 968, March 19, 1969. These interpretive regulations of the Department may be used by the courts for guidance and are entitled to considerable weight. Mabee v. White Plains Publishing Co., 1946, 327 U.S. 178, 66 S.Ct. 511, 90 L.Ed. 607; Skidmore v. Swift & Co., 1944, 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124; Baird v. Wagoner Transportation Co., 6 Cir., 1970, 425 F.2d 407; Wirtz v. Keystone Readers Service, Inc., 5 Cir., 1969, 418 F.2d 249; Goldberg v. Sorvas, 3 Cir., 1961, 294 F.2d 841. Similarly, the opinion letters of the Administrator are entitled to weight in courts' determinations of the retail concept. Kelly v. Ballard, S.D.Cal., 1969, 298 F.Supp. 1301.

In addition to the opinion of the Administrator, the idea that public availability is essential to retailing is persuasive as a matter of common usage. Furthermore, these regulations, 29 CFR § 779.319, have been cited and followed by the courts. Wirtz v. Campus Chefs, Inc., N.D.Ga., 1968, 303 F.Supp. 1112; Jackson v. Airways Parking Co., N.D. Ga., 1969, 297 F.Supp. 1366. Similarly, the courts have recognized that public accessibility is part of the retail concept. These cases stress the distinction between natural and locational restrictions and artificial membership restriction. Shultz v. Crotty Brothers Texas, Inc., E.D.Tex., 1970, 310 F.Supp. 761; Wirtz v. Pickett Food Service, D.N.M., 1968, 304 F.Supp. 784. Most persuasive to the Court is the holding in Shultz v. Deane Hill Country Club, Inc., 6 Cir., 1970, 433 F.2d 1311, aff'g E.D.Tenn., 1969, 310 F. Supp. 272, that the private club there involved was not a retail and service establishment; reliance was placed on the same regulations above cited. Finally, by the 1971 revisions to 29 CFR § 779, the list of establishments to which the retail concept does not apply was expanded to include "clubs and fraternal organizations with a select or restricted membership." 29 CFR § 779.316.

The Court holds that the Club is not a retail and service establishment.

The second key definition within the statute is "hotel, motel, and restaurant." These are also words of exception and should be strictly construed against the defendant. As with the retail exemption, the construction of the Department should be considered. The regulations require that a hotel be open to the public. 29 CFR § 779.383. Opinion Letter No. 767, December 6, 1967, holds squarely that a club does not qualify as a hotel, for want of compliance with this requirement. On the other hand, the Administrator has taken inconsistent positions as to whether a private club may or may not utilize the § 213(b) (8) exemption for its food service personnel. In Opinion Letter No. 773, March 1, 1968, he held that the exemption was available to restaurant employees of a private country club, but in Opinion Letter No. 841, July 24, 1968, having to do with such employees of a club similar to defendant, he declined to take a position.

There are apparently no reported cases dealing with the hotel/motel/restaurant exception. The Court determines that the Administrator's...