Kentucky Finance Company v. Mitchell, 13287.

• Decision Date: 15 April 1958
• Docket Number: No. 13287.,13287.
• Parties: KENTUCKY FINANCE COMPANY, Inc. and Kentucky Discount, Inc., Appellants, v. James P. MITCHELL, Secretary of Labor, Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

254 F.2d 8 (1958)

KENTUCKY FINANCE COMPANY, Inc. and Kentucky Discount, Inc., Appellants, v. James P. MITCHELL, Secretary of Labor, Appellee.

No. 13287.

United States Court of Appeals Sixth Circuit.

April 15, 1958.

Harold H. Levin, New York City, Frank A. Logan (of Hensley & Logan), Thomas S. Dawson (of Bullitt, Dawson & Tarrant), Louisville, Ky., Harold H. Levin (of Proskauer, Rose, Goetz & Mendelsohn), New York City, Charles S. Kelly (of Hubachek & Kelly), Chicago, Ill., on brief, for appellants.

Bessie Margolin, Asst. Sol., Washington, D. C., Stuart Rothman, Sol., Sylvia S. Ellison and Lawrence P. Hochberg, Washington, D. C., Jeter S. Ray, Regional Attorney, Nashville, Tenn., on brief, for appellee.

Armin Kusswurm, Chicago, Ill., on brief for National Restaurant Ass'n amicus curiæ.

Before SIMONS, Chief Judge, and ALLEN and MILLER, Circuit Judges.

SIMONS, Chief Judge.

The appeal presents an issue as to the application of the Fair Labor Standards Act to the employees of a small loan office in Louisville, Kentucky, Title 29, Sections 201 et seq. The original Act by section 13(a) (2) exempted from its operation "any employee engaged in any retail or service establishment the greater part of whose selling or servicing is in intrastate commerce. * * *" Dissatisfaction having arisen with the administrative application of the judicially determined test of "consumer use" in deciding what was a "retail or service establishment," section 13(a) (2) was amended in 1949 so that the exemption covers "any employee employed by any retail or service establishment, more than 50 per centum of which establishment's annual dollar volume of sales of goods or services is made within the State in which the establishment is located. A `retail or service establishment' shall mean an establishment 75 per centum of whose annual dollar volume of sales of goods or services (or of both) is not for resale and is recognized as retail sales or services in the particular industry."

The question was presented to the District Court by the Secretary in the third of a series of three test cases by a petition for an injunction which, as granted, permanently enjoins the appellants from violating the Fair Labor Standards Act in their small loan establishment at Louisville. By this action, as in others elsewhere, the Secretary seeks a determination that a small loan establishment of the nature of the appellants is not exempted from the overtime provisions of the Act. There is no dispute as to the facts which by stipulation imported into the case evidence introduced in support of a petition in the first test case in Pennsylvania styled Tobin v. Household Finance Corporation, D. C., 106 F.Supp. 541, reversed by the Court of Appeals of the Third Circuit because the employees there involved were not engaged in commerce within the meaning of the Act and, therefore, not covered by it. Mitchell v. Household Finance Corporation, 208 F.2d 667.

The stipulated facts show that appellants operate a small loan business in Louisville, extending credit to individuals for payment of consumptive goods or services, that the individual accorded credit has consumed, or will consume, and in the purchase at a discount of conditional sales agreements evidencing the purchase of household appliances. Kentucky Finance Company, Inc. is a corporation which carries on the first phase of this operation and Kentucky Discount is a corporation whose activity is in the second phase, though the employees of both corporations being engaged in each of these activities, conducted at one place of business. In the Discount activity, credit was generally extended to the purchaser of household appliances and not to the dealer, although the Discount company had recourse to the dealer in approximately 25% of its discount transactions. Ninety percent or more of the appellants' business was solely with Kentucky residents and in no case was resale contemplated or involved. It may confidently, therefore, be concluded that the two appellants constituted a single business unit engaged in the loaning of money to individuals for their use in paying for goods that they consumed and meets the requirements of the exemption amendment as doing business within the State.

At the outset, two issues were by the petition presented. One was whether the employees of the appellants were engaged in interstate commerce to such degree as called for the application of the Fair Labor Standards Act or, if so, whether their activities are recognized as retail sales or services in the particular industry.

Upon the appellants' concession that some of their employees are engaged in interstate commerce to such degree as to warrant the application of the Act, the first issue disappears and need be given no consideration. The sole question, therefore, on this appeal is whether the appellants are conducting a "retail or service establishment" within the meaning of the 1949 Amendment. In support of their contention, expert witnesses from the financial industry gave evidence that appellants' business therein was recognized as a retail business. The District Judge accepted this evidence as proving an "ultimate fact." The Secretary of Labor, in response, produced evidence that the generally understood definition of "retail" had no application to the financial industry but there was no evidence on his behalf as to how the appellants' business was characterized in the financial industry itself. The District Court concluded that the appellants were not a retail or service establishment and granted the injunction sought. From this determination the case has been brought here for review.

The Secretary's three test cases are Tobin v. Household Finance Corp., 106 F.Supp. 541, Mitchell v. Aetna Finance Co., 144 F.Supp. 528, and the present case Mitchell v. Kentucky Finance Co., Inc., 150 F.Supp. 368. In all three cases in the District Court, the Secretary's contention was sustained. Prior to the present appeal, the Household Finance case, supra, was reversed by the Court of Appeals of the Third Circuit, Mitchell v. Household Finance Corporation, 208 F.2d 667. The Court there did not come to grips with the issue here involved, reversing on...