Marshall v. Coach House Restaurant, Inc.

Decision Date02 October 1978
Docket NumberNo. 77 Civ. 3297-CSH.,77 Civ. 3297-CSH.
Citation457 F. Supp. 946
PartiesRay MARSHALL, Secretary of Labor, United States Department of Labor, Plaintiff, v. COACH HOUSE RESTAURANT, INC., a corporation, and Leon Lianides, Individually and as President, Defendants.
CourtU.S. District Court — Southern District of New York


Francis V. LaRuffa, Regional Sol., U.S. Dept. of Labor, New York City, for plaintiff; Carin Ann Clauss, Washington, D.C., of counsel.

Aberman & Greene and Louis Charles Fink, New York City, for defendants.


HAIGHT, District Judge:

This motion for summary judgment, pursuant to Rule 56, Fed.R.Civ.P., raises an unsettled question of law under the Fair Labor Standards Act of 1938 ("FLSA"), as amended, 29 U.S.C. § 201 et seq. Before addressing the legal issue involved, a brief review of the facts, undisputed for the purpose of this motion, is appropriate.


During the period of October 1976 through December 1976, an employee of the Wage and Hour Division, Employment Standards Administration, of the United States Department of Labor, conducted an investigation of the defendant, Coach House Restaurant, the asserted purpose of which was to make a routine check for compliance with FLSA. This investigation allegedly unearthed violations of the overtime compensation provisions1 and record keeping requirements2 of FLSA.

Shortly after the conclusion of the Department's investigation, the union representing defendants' employees filed a grievance with respect to defendants' payment of overtime wages, thereby triggering the arbitration machinery of the collective bargaining agreement between the workers and the restaurant.3 The issues to be arbitrated were stipulated as follows:

"Has the Employer made proper overtime payments to its employees under the collective bargaining agreement between the parties and under any applicable wage and hour law? If not, what shall the remedy be?"4

After the parties had "presented their respective cases in full" the arbitrator found "from all of the evidence adduced at the hearing and from an examination of payroll records" that the employer had paid more than the minimum wage for forty hours per week and more than time and one-half for work in excess of forty hours per week.5 The following award was rendered:

"The Coachhouse Restaurant Inc. has made proper overtime payments to its employees under the Collective Bargaining Agreement and under applicable wage and hour requirements from January 1, 1974 to March 29, 1977."6

Subsequent to the arbitral award, the Secretary of Labor filed the instant complaint on July 7, 1977, charging the defendants, inter alia,7 with violations of sections 7 and 15(a)(2) of FLSA, 29 U.S.C. §§ 207, 215(a)(2), to wit: failure to pay the statutorily required overtime compensation. The Secretary seeks injunctive relief under section 17 of FLSA, 29 U.S.C. § 217, restraining defendants from withholding such payments. Defendants on this motion assert that, as a matter of law, the Secretary is precluded from raising the issue of overtime payments since it was previously resolved by final and binding arbitration between the defendant and the employees' union. The Secretary contends that there is a disputed issue of fact as to whether he, his designees or attorneys, were ever "vouched in" to the arbitration proceeding. For the purposes of this discussion, however, the Court will assume that the Secretary neither received notice of the arbitration, nor actually participated or consented to be represented in that proceeding.8


Before examining what little precedent is available on the issue raised, it is helpful to have some understanding of the scheme of FLSA. In pertinent part, FLSA mandates payment of certain overtime compensation to covered employees, 29 U.S.C. § 207 (see note 4, supra), and creates a cause of action in favor of aggrieved employees to recover from their employer any unpaid overtime and an additional equal amount as liquidated damages. FLSA § 16(b), 29 U.S.C. § 216(b). Suit may be brought "in any Federal or State court of competent jurisdiction . . ." Id. The Secretary of Labor is given a corresponding right to maintain an action on behalf of the employees to recover such unpaid overtime. Id. § 16(c), 29 U.S.C. § 216(c). Additionally, the Secretary alone is authorized to institute an injunctive proceeding in federal district court to restrain "any withholding of payment of minimum wages or overtime compensation found by the court to be due to employees under FLSA." Id. §§ 17, 11(a), 29 U.S.C. §§ 217, 211(a). The employees' right to sue directly under section 16(b) terminates when and if the Secretary elects to file a complaint under either section 16(c) or section 17. Id. § 16(b), (c), 29 U.S.C. § 216(b), (c).


Turning now to the question of the preclusive effect of an arbitral award, the first precedent to be addressed is the Supreme Court's decision in Alexander v. Gardner-Denver Co., 415 U.S. 36, 94 S.Ct. 1011, 39 L.Ed.2d 147 (1974). Gardner-Denver held that the submission to arbitration of a racial discrimination claim does not preclude that claim in a subsequent lawsuit by the employee under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. If that holding is applicable to a wage claim such as is at issue here, then defendants' motion must be denied. If the employee is not foreclosed from litigating his wage claim by the prior arbitration to which he was a party, then, a fortiori, the Secretary of Labor, who was not a party to the arbitration, is not precluded from raising the issue anew in a FLSA suit.

Broadly speaking, four considerations prompted the Gardner-Denver decision: (1) the paramount national interest in preventing racial discrimination in employment; (2) the investment of plenary powers in the federal courts to secure Title VII compliance; (3) the inappropriateness of the arbitral forum for determining Title VII rights; and (4) the Court's perception that relatively little interference with the federal policy favoring arbitration of labor disputes would ensue. This balance of factors is necessarily different when a FLSA wage claim, as opposed to a racial discrimination claim, is at issue.

Although there is authority for the proposition that Gardner-Denver does apply to FLSA suits, Leone v. Mobil Oil Corp., 173 U.S.App.D.C. 204, 209-210, 523 F.2d 1153, 1158-59 (1975), I am persuaded by the analysis of the court in Satterwhite v. United Parcel Service, Inc., 496 F.2d 448 (10th Cir.), cert. denied, 419 U.S. 1079, 95 S.Ct. 668, 42 L.Ed.2d 674 (1974), which was decided shortly after Gardner-Denver was handed down. Satterwhite held that when an employee submits a wage claim to binding arbitration he may not thereafter litigate the same claim in a section 16(b) FLSA action.9 Id. at 452. Accord, Atterburg v. Anchor Motor Freight, Inc., 425 F.Supp. 841 (D.N.J.1977). Cf. Union de Tronquistas de Puerto Rico v. Flagship Hotel Corp., 554 F.2d 8 (1st Cir. 1977).

In distinguishing Gardner-Denver, the Tenth Circuit reasoned that FLSA wage rights do not enjoy the same "high priority" as do Title VII rights; that rate of pay issues, although statutory in origin, neither require nor lend themselves to "public law considerations;" and that Congress had manifested no preference for the resolution of wage disputes in the judicial forum. Satterwhite, supra, 496 F.2d at 451. Most tellingly, the court recognized that because "wages and hours are at the heart of the collective-bargaining process," to allow the reassertion in court of wage claims previously resolved by binding arbitration would frustrate federal labor policy and "hinder rather than promote industrial peace . . .." Id. at 451-52. Because I agree with the Satterwhite court that, in the wage claim context, the national policy favoring arbitration assumes greater significance than when Title VII rights are at issue, I find that Gardner-Denver is not controlling on the question raised herein.


The foregoing analysis does not, however, resolve the issue before me. The Satterwhite and Gardner-Denver decisions arose out of private lawsuits instituted by employees; the instant suit is brought by the Secretary of Labor. Research by the parties and this Court has failed to unearth a single decision dealing with the question whether an arbitral award forecloses the Secretary's § 16(c) or § 17 remedies.10 The relevant legislative history is likewise silent.11

Were this a § 16(c) suit, it might be urged that since the Secretary sues and recovers "on behalf of the employees," 29 U.S.C. § 216(c), they are the real parties in interest and are bound by the arbitral decision. But see Mitchell v. Stewart Bros. Construction Co., 184 F.Supp. 886 (D.Neb.1960). This is, however, an injunctive proceeding under § 17. But regardless of whether suit is brought under § 16(c) or § 17, the monetary recovery, if any, inures to the employees' benefit, and the Secretary's action under either section terminates the employees' private right of action under § 16(b). Sections 16(c) and 17, therefore, seem to create overlapping remedies for the recovery of overtime compensation by the Secretary.12

A review of the legislative history of both sections 16 and 17 reveals that Congress was indeed concerned with securing to employees restitution of statutorily mandated wages. Wirtz v. Harper Buffing Mach. Co., 280 F.Supp. 376 (D.Conn.1968); Fleming v. Miller (D.Minn.), 47 F.Supp. 1004, mod. on other grounds, 138 F.2d 629, cert. denied, 321 U.S. 784, 64 S.Ct. 781, 88 L.Ed. 1076. At the time § 17 was amended in 1961 (Pub.L.No. 87-30, § 12, 75 Stat. 74), the Secretary's authority to sue under § 16(c) was conditioned upon a written request by an employee. Act of Oct. 26, 1949, ch. 736, § 14, 63 Stat. 919. Private suits under § 16(b) were found to be few and "of the few that had been brought most were initiated by individuals no longer in the...

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