Garcia v. San Antonio Metropolitan Transit Authority, 87-5526

• Decision Date: 09 March 1988
• Docket Number: No. 87-5526,87-5526
• Citation: 838 F.2d 1411
• Parties: 28 Wage & Hour Cas. (BN 857, 56 USLW 2547, 108 Lab.Cas. P 35,038 Joe G. GARCIA, On Behalf of Himself and Others Similarly Situated, Plaintiffs-Appellants, v. SAN ANTONIO METROPOLITAN TRANSIT AUTHORITY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1411

838 F.2d 1411

28 Wage & Hour Cas. (BN 857, 56 USLW 2547,

108 Lab.Cas. P 35,038

Joe G. GARCIA, On Behalf of Himself and Others Similarly Situated, Plaintiffs-Appellants, v. SAN ANTONIO METROPOLITAN TRANSIT AUTHORITY, Defendant-Appellee.

No. 87-5526.

United States Court of Appeals, Fifth Circuit.

March 9, 1988.

Les Mendelsohn, Mendelsohn, Heidelberg & Beer, San Antonio, Tex., Kalman David Resnick, John Peter Dowd, Dowd & Resnick, Jacobs, Burns, Sugarman & Orlove, Charles Orlove, Chicago, Ill., for plaintiffs-appellants.

George P. Parker, Jr., Judy K. Lytle, Matthews & Branscomb, San Antonio, Tex., for defendant-appellee.

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

Before THORNBERRY, POLITZ and JOLLY, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

Joe G. Garcia appeals the district court's decision granting the motion of the San Antonio Metropolitan Transit Authority ("SAMTA") for summary judgment and denying his own. For the following reasons, we affirm the judgment of the district court.

I

SAMTA is the governmental body that runs the public transit system in San Antonio, Texas. The plaintiffs (collectively, "Garcia"), employees of SAMTA, brought this action in 1979 for back pay and liquidated damages attributable to SAMTA's violation of the Fair Labor Standards Act ("FLSA"). The historical context for the current appeal is unusually complex.

In 1974, Congress amended the FLSA to repeal the exemption from the minimum wage and overtime provisions for all state and local government employees. In 1976, however, the Supreme Court curtailed the application of the FLSA to state and local governments, holding that principles of federalism prevented Congress under the commerce clause from regulating "integral operations in areas of traditional governmental functions." National League of Cities v. Usery, 426 U.S. 833, 96 S.Ct. 2465, 2474, 49 L.Ed.2d 245 (1976). The Court did not attempt, however, to enumerate all the governmental activities that were exempt from federal regulation. Instead, the Court merely listed "fire prevention, police protection, sanitation, public health, and parks and recreation" as examples of protected functions. The Court did not address the status of government-owned mass transit systems.

After the 1976 decision in National League of Cities, SAMTA notified its employees that it would no longer abide by the FLSA's maximum hours and overtime provisions. The Department of Labor, which was charged with the enforcement of the FLSA, made no attempt to enforce the overtime provisions against any public transit system until September 17, 1979, when it informed SAMTA that it did not consider the operation of a public transit system a "traditional governmental function" protected under National League of Cities. Shortly afterward, SAMTA filed a declaratory judgment action against the Secretary of Labor, seeking reversal of the Department's decision. The same day and in the same district court, Garcia brought the case now on appeal, an action for back pay and liquidated damages because of SAMTA's claimed violation of the FLSA. ¹

The district court stayed Garcia's case while the parties litigated SAMTA I. In 1981, the district court rendered summary judgment for SAMTA against the Secretary, holding that SAMTA's operation of a public mass transit system was protected from federal regulation under National League of Cities. The Supreme Court, however, vacated the judgment and remanded the case for reconsideration in the light of the intervening decision of UTU v. Long Island Railroad, 455 U.S. 678, 102 S.Ct. 1349, 71 L.Ed.2d 547 (1982), which held that a railroad that carries passengers and freight is not protected by National League of Cities. In February 1983, however, the district court again ruled for SAMTA, adhering to its view that mass transit was a traditional governmental function and distinguishing Long Island Railroad. On appeal, the Supreme Court reversed, overruling National League of Cities and holding that Congress could constitutionally apply the FLSA to all state and local government employees. Garcia v. SAMTA , 469 U.S. 528, 105 S.Ct. 1005, 83 L.Ed.2d 1016 (1985). On remand to the district court, the parties agreed to dismiss SAMTA I and to litigate SAMTA II, which had been stayed during the entire litigation of SAMTA I. The dismissal allowed the Secretary of Labor to exit the dispute.

With SAMTA I dismissed by agreement in the district court, both parties moved for summary judgment in Garcia's original action. SAMTA argued that the Supreme Court's decision in SAMTA I should not be applied retroactively under the facts of the case; therefore, the court should apply the old National League of Cities test to exempt SAMTA from liability. Garcia argued that SAMTA I should be applied, and that therefore SAMTA was liable for back pay and liquidated damages because of its violation of the FLSA. The district court granted SAMTA's motion and denied Garcia's.

II

In National League of Cities v. Usery, 426 U.S. 833, 96 S.Ct. 2465, 2474, 49 L.Ed.2d 245 (1976), the Supreme Court held that "insofar as the challenged [FLSA] amendments operate to directly displace the States' freedom to structure integral operations in areas of traditional governmental functions, they are not within the authority granted Congress" by the commerce clause. As examples of traditional state functions exempt from federal regulation, the Court listed "fire prevention, police protection, sanitation, public health, and parks and recreation." Id. The Court noted, however, that the examples it suggested were "obviously not an exhaustive catalogue of the numerous line and support activities which are well within the area of traditional operations of state and local governments." Id. n. 16.

It soon became apparent, however, that courts would have difficulty in applying National League of Cities consistently in deciding which state functions were "integral operations in areas of traditional [state] governmental functions." As the Court later noted,

Just how troublesome the task has been is revealed by the results reached in other federal cases. Thus, courts have held that regulating ambulance services, licensing automobile drivers, operating a municipal airport; performing solid waste disposal, and operating a highway authority, are functions protected under National League of Cities. At the same time, courts have held that issuance of industrial development bonds, regulation of intrastate natural gas sales, regulation of traffic on public roads, regulation of air transportation, operation of a telephone system, leasing and sale of natural gas, operation of a mental health facility, and provision of in-house domestic services for the aged and handicapped, are not entitled to immunity. We find it difficult, if not impossible, to identify an organizing principle that places each of the cases in the first group on one side of a line and each of the cases in the second group on the other side.

Garcia v. SAMTA, 469 U.S. 528, 105 S.Ct. 1005, 1011, 83 L.Ed.2d 1016 (1985). Based in part on the practical difficulty in applying National League of Cities, the court in SAMTA I overruled that decision, holding instead that the states were adequately protected against unreasonable federal interference by their substantial role in constituting the federal government. Id. 105 S.Ct. at 1016-20. Congress reacted to the overturning of National League of Cities by amending the FLSA to eliminate retroactive liability for functions already categorized as "traditional," but did not take a position on retroactivity as to other government functions such as the transportation function presented in this case. Fair Labor Standards Amendments of 1985, Pub.L. No. 99-150, 99 Stat. 787 (1985), Secs. 2(c), 7. See also S.Rep. 159, 99th Cong., 1st Sess. 15 (1985); H.R.Rep. No. 331, 99th Cong., 1st Sess. 27-28 (1985), U.S. Code Cong. & Admin.News 1985, p. 651.

In the present case, the district court refused to apply SAMTA I retroactively. Instead, using the analysis of Chevron Oil Co. v. Huson, 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296 (1971), the court concluded that SAMTA I should be applied prospectively only. Chevron identified three factors which courts should consider in deciding whether to recognize an exception to the general rule that the applicable law is that in effect at the time of the decision:

First, the decision to be applied nonretroactively must establish a new principle of law, ... by overruling clear past precedent on which litigants may have relied.... Second, it has been stressed that "we must * * * weigh the merits and demerits in each case by looking to the prior history of the rule in question, its purpose and effect, and whether retrospective operation will further or retard its operation." Finally, we have weighed the inequity imposed by retroactive application, for "[w]here a decision of this Court could produce substantial inequitable results if applied retroactively, there is ample basis in our cases for avoiding the 'injustice or hardship' by a holding of nonretroactivity."

Id. 92 S.Ct. at 355.

In applying the Chevron analysis, the district court found that the first factor favored nonretroactivity, because SAMTA I had overruled a clear past precedent upon which SAMTA had "reasonably relied." The second factor favored neither, because SAMTA I would be fully enforced in the future regardless of the outcome of the decision to apply it retroactively. The third factor strongly favored nonretroactivity, as SAMTA had "structured its conduct based on the reasonable belief that its employees performed a traditional government function. Wage rates and benefit packages were negotiated based on this premise." The complete Chevron test therefore led the district court to conclude that SAMTA I should not be applied retroactively.

Garcia attacks the district court's decision on...