Goldberg v. Sorvas, No. 13371.

CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)
Writing for the CourtGOODRICH, McLAUGHLIN and FORMAN, Circuit
Citation294 F.2d 841
PartiesArthur J. GOLDBERG, Secretary of Labor, United States Department of Labor, Appellant, v. Harry SORVAS, Individually and Doing Business as Merit Protective Service, Appellee.
Docket NumberNo. 13371.
Decision Date01 September 1961

294 F.2d 841 (1961)

Arthur J. GOLDBERG, Secretary of Labor, United States Department of Labor, Appellant,
v.
Harry SORVAS, Individually and Doing Business as Merit Protective Service, Appellee.

No. 13371.

United States Court of Appeals Third Circuit.

Argued March 7, 1961.

Decided September 1, 1961.


294 F.2d 842

Bessie Margolin, Washington, D. C. (Harold C. Nystrom, Acting Sol. of Labor, Beate Bloch, Attorney, United States Department of Labor, Washington, D. C., Ernest N. Votaw, Regional Attorney, Chambersburg, Pa., on the brief), for appellant.

Gustav W. Wilde, Pittsburgh, Pa. (Burgwin, Ruffin, Perry & Pohl, by Paul G. Perry, Pittsburgh, Pa., on the brief), for appellee.

Before GOODRICH, McLAUGHLIN and FORMAN, Circuit Judges.

FORMAN, Circuit Judge.

This is an appeal from an order of the United States District Court for the Western District of Pennsylvania1 refusing a motion (and a judgment dismissing the complaint) of the appellant, James P. Mitchell, Secretary of Labor (the Secretary),2 in which he sought a permanent injunction to enjoin defendant Harry Sorvas, individually and doing business as Merit Protective Service (Sorvas), from violating the minimum wage, overtime and record-keeping provisions of the Fair Labor Standards Act, 29 U.S.C.A. § 201 et seq.3 (Act).

294 F.2d 843

The facts are simple and undisputed. The appellee, Harry Sorvas, maintains an office in Pittsburgh where he does business under the trade name of Merit Protective Service, chiefly in the western part of Pennsylvania and on occasion in certain cities in Ohio, West Virginia, Kentucky and other states. He is engaged in what is called a "shopping service" consisting of reporting to retail establishments on the qualities of their clerks and salesmen. The means by which he accomplishes this is through his employees who visit the establishments of his clients in crews of usually two or three. They pretend to be customers and independent of each other observe the general conditions of the establishment, make purchases from the sales people and report on their honesty, efficiency and other attitudes to the crew supervisor on forms provided for the purpose. He in turn transmits the reports by mail or delivers them personally to the Pittsburgh office, where they are checked and mailed to the clients. In the event that merchandise has been purchased during an investigation it is returned to the client and Sorvas is reimbursed therefor.

Sorvas renders other services in the way of business surveys when requested but he is principally concerned in the so-called "shopping service".

There are a number of concerns trading under the same name, Merit Protective Service,4 throughout the country, but they are completely disassociated from each other except that they exchange information and unite in such mutual matters as promulgating report forms and payment for advertising. When other Merit concerns have accounts in his territory Sorvas has serviced them, sending his reports to the forwarder who submits them to his client and pays Sorvas. This type of forwarding business did not amount to more than 10 percent of the annual dollar volume of Sorvas's gross business.

If the investigation is to be conducted locally or nearby the employee reports to the Pittsburgh office and from there goes to the store where the testing is to be done, customarily filing the report immediately after the test has been made. Stores are visited all during the day until their closing time usually at five or six o'clock. Visits are also made to stores that remain open evenings.

When trips are made out of town, sometimes for as long as a week, the crew is transported in the automobile of the supervisor. A schedule of towns and the stores in them which are to be worked is prepared beforehand and trips between the towns are usually made in the evenings after the inspections are completed so as to be ready to work when the stores open in the next town. Sorvas pays for the lodging and food for the crew.

On occasion all inspections might be completed before the close of the day and the employee would have some free time to do as he pleased. Between 20 percent and 25 percent of Sorvas's gross annual receipts came from out of state clients.

Full and part time crew members were employed on a basis of five days to the week, Monday through Friday, receiving wages beginning at $8.00 per day. They received no overtime as provided under Section 7 of the Act (29 U.S.C.A. § 207) except that if they worked the sixth day, Saturday, they were paid at the rate of time and a half.

At the trial Mr. Sorvas testified, among other things, that his business was regarded in the "shopping service industry" as retail. He based this conclusion on the ground that he dealt with retail concerns and that he sold nothing except his service. A witness called on his behalf, George C. Krohe, manager of Isalys Dairy Stores, a client of Sorvas, testified that he had dealt with two other firms rendering the same type of service as Sorvas and he considered the service to be retail in nature since it was not

294 F.2d 844
resold and that, in his opinion, the "shopping service industry" considered itself to be retail

The Secretary called several of Sorvas's employees to establish working conditions, a government investigator and Dr. Robert Entenberg, as an expert in retailing. Dr. Entenberg gave his opinion that the shopping service furnished by Sorvas would not fall within the definition of a "retail sale or service".

The District Court held that Sorvas was engaged in interstate commerce but denied the relief requested in the complaint upon the ground that Sorvas was exempt from the Act's requirements under Section 13(a) (2) as amended in 1949.5 No question is raised as to the correctness of the ruling on commerce. The District Court found that Sorvas was obliged to meet three tests imposed by Section 13(a) (2) to be entitled to exemption namely:

"1. More than one-half of the annual dollar volume of sales of goods or services must be made within the state where the business is located.
"2. At least 75 percent of the gross volume of sales of goods or services must not be for resale.
"3. At least 75 percent of sales of goods or services must be recognized as retail sales or services in the industry." 182 F.Supp. 802.

It concluded that all three conditions were fulfilled by Sorvas, in that:

First, it was undisputed that less than 25 percent of his gross volume of business is earned outside of Pennsylvania.

Second, the total received from services which might be considered for resale was under ten percent of his gross volume.

Third, Sorvas sustained the burden of showing that recognition exists in the industry that his "sales are retail".

The sole issue on this appeal is whether the District Court was correct in its ruling that Sorvas's employees are engaged in a retail or service establishment and therefore are exempt under the Act.

The Secretary contends principally that Sorvas's business is an establishment outside the scope of the Section 13(a) (2) exemption provision of the Act because the pre-1949 amendment non-exempt status of comparable establishments was not changed by the 1949 amendment.

In brief, Sorvas submits that he has met his burden of substantiating through credible testimony that his business was plainly and unmistakably within the exemption; that the Secretary may not have this case reviewed on a new theory not raised before the District Court — namely — that a non-exempt status for the business was determined by the Administrator of the Wage and Hour Division of the United States Department of Labor and that such determination was not changed by the 1949 amendment — and that the Secretary's position in regard to the 1949 amendment is based upon a misrepresentation of the effects of the rulings of the Supreme Court in Mitchell v. Bekins Van & Storage Co., 1957, 352 U.S. 1027, 77 S.Ct. 593, 1 L.Ed.

294 F.2d 845
2d 589; Mitchell v. Kentucky Finance Co., 1959, 359 U.S. 290, 79 S.Ct. 756, 3 L.Ed.2d 815 and Arnold v. Ben Kanowsky, Inc., 1960, 361 U.S. 388, 80 S.Ct. 453, 4 L.Ed.2d 393

In Mitchell v. Kentucky Finance Co., supra, the Court considered whether making small personal loans and purchasing conditional sales contracts from dealers in furniture and appliances constituted services by a "retail or service establishment" within the meaning of Section 13(a) (2) of the Act. The Court noted:

"The legislative history of the 1949 amendment to § 13(a) (2) demonstrates beyond doubt that Congress was acting in implementation of a specific and particularized purpose. Before 1949 the Administrator, in interpreting the term `retail or service establishment,\' then nowhere defined in the statute, had, in addition to excluding from the coverage of the exemption personal loan companies and other financial institutions, ruled that a business enterprise generally would not qualify as such an establishment unless 75 percent of its receipts were derived from the sale of goods or services `to private persons to satisfy their personal wants,\' on the theory that sales for business were `non-retail.\' This administratively announced `business use\' test was generally approved by this Court in Roland Electrical Co. v. Walling, 326 U.S. 657 66 S.Ct. 413, 90 L.Ed. 383.
"Congress was dissatisfied with this construction of the statute, and over the objection of the Administrator, who sought to have his `business use\' test legislatively confirmed, passed the 1949 amendment to § 13(a) (2) to do away with the rule that sales to other than individual consumers could not qualify as retail in deciding whether a particular business enterprise was a `retail or service establishment,\' and to substitute a more flexible test, under which selling transactions would qualify as retail if they (1) did not involve `resale,\' and (2) were recognized in the particular industry as retail. We find nothing in the
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17 practice notes
  • United States v. Jefferson County Board of Education, No. 23345
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • December 29, 1966
    ...States v. American Trucking Association, 1940, 310 U.S. 534, 543, 549, 60 S.Ct. 1059, 84 L.Ed. 134; Goldberg v. Sorvas, 1 Cir. 1961, 294 F.2d 841, It is evident to anyone that the Guidelines were carefully formulated by educational authorities anxious to be faithful to the objectives of the......
  • Dunlop v. State of N.J., No. 74-1289
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • September 3, 1975
    ...Irwin v. Clark, 400 F.2d 882, 884 (9th Cir. 1968), cert. denied 393 U.S. 1062, 89 S.Ct. 715, 21 L.Ed.2d 706 (1969); Goldberg v. Sorvas, 294 F.2d 841, 847 (3d Cir. The Wage-Hour Administrator has considered the question of compensatory time off as a form of overtime compensation. In Opinion ......
  • Futrell v. Columbia Club, Inc., No. IP 69-C-176
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Southern District of Indiana)
    • August 2, 1971
    ...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 The question for the Court then is whether the Club fits within the "retail concept" ......
  • Industrial Development Bd. of Town of Section, Ala. v. Fuqua Industries, Inc., No. 74-2336
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • November 24, 1975
    ...400 U.S. 927, 91 S.Ct. 189, 27 L.Ed.2d 186; Schenfeld v. Norton Co., 10 Cir. 1968, 391 F.2d 420, 424-25; Goldberg v. Sorvas, 3 Cir. 1961, 294 F.2d 841; Massachusetts Bonding & Ins. Co. v. New York, 2 Cir. 1958, 259 F.2d 33; Matarese v. Moore-McCormack Lines, 2 Cir. 1946, 158 F.2d 631, 6......
  • Request a trial to view additional results
17 cases
  • United States v. Jefferson County Board of Education, No. 23345
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • December 29, 1966
    ...States v. American Trucking Association, 1940, 310 U.S. 534, 543, 549, 60 S.Ct. 1059, 84 L.Ed. 134; Goldberg v. Sorvas, 1 Cir. 1961, 294 F.2d 841, It is evident to anyone that the Guidelines were carefully formulated by educational authorities anxious to be faithful to the objectives of the......
  • Dunlop v. State of N.J., No. 74-1289
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • September 3, 1975
    ...Irwin v. Clark, 400 F.2d 882, 884 (9th Cir. 1968), cert. denied 393 U.S. 1062, 89 S.Ct. 715, 21 L.Ed.2d 706 (1969); Goldberg v. Sorvas, 294 F.2d 841, 847 (3d Cir. The Wage-Hour Administrator has considered the question of compensatory time off as a form of overtime compensation. In Opinion ......
  • Futrell v. Columbia Club, Inc., No. IP 69-C-176
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Southern District of Indiana)
    • August 2, 1971
    ...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 The question for the Court then is whether the Club fits within the "retail concept" ......
  • Industrial Development Bd. of Town of Section, Ala. v. Fuqua Industries, Inc., No. 74-2336
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • November 24, 1975
    ...400 U.S. 927, 91 S.Ct. 189, 27 L.Ed.2d 186; Schenfeld v. Norton Co., 10 Cir. 1968, 391 F.2d 420, 424-25; Goldberg v. Sorvas, 3 Cir. 1961, 294 F.2d 841; Massachusetts Bonding & Ins. Co. v. New York, 2 Cir. 1958, 259 F.2d 33; Matarese v. Moore-McCormack Lines, 2 Cir. 1946, 158 F.2d 631, 6......
  • Request a trial to view additional results

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