Marshall v. Hanioti Hotel Corp., Civ.A. No. 79-1939.

Citation490 F. Supp. 1020
Decision Date11 June 1980
Docket NumberCiv.A. No. 79-1939.
PartiesRay MARSHALL, Secretary of Labor, United States Department of Labor, Plaintiff, v. HANIOTI HOTEL CORPORATION; Hanioti Properties, Inc., and Lee D. Arms, Individually, Defendants.
CourtU.S. District Court — Northern District of Georgia

Carin Ann Clauss, Sol. of Labor, Bobbye D. Spears, Regional Sol., James H. Woodson, Bobbye D. Spears, U.S. Dept. of Labor, Atlanta, Ga., for plaintiff.

Leon L. Rice, III, Walter O. Lambeth, Robert H. Buckler, Elarbee, Clark & Paul, Atlanta, Ga., for defendants.

ORDER

ROBERT H. HALL, District Judge.

The Secretary of Labor brought this action against Hanioti Hotel Corporation and the other defendants for violations of the minimum wage and overtime compensation provisions of the Fair Labor Standards Act (FLSA). 29 U.S.C. §§ 201-219. Now pending before the court is the Secretary's motion to amend the complaint. Fed.R.Civ.P. 15(a). The Secretary seeks to add an additional basis for this court's jurisdiction and allege that jurisdiction is founded on Section 16 of the FLSA, 29 U.S.C. § 216(c), and 28 U.S.C. § 1345. The Secretary seeks to add the allegation that defendants' violations of the Act were willful. The court heard oral argument from the parties on these issues and will now consider these amendments separately.

JURISDICTIONAL ALLEGATIONS

The sole issue posed by the plaintiff's motion to amend the jurisdictional allegations is whether the Secretary's attempt to try all issues to the court in a suit for liquidated damages under Section 16(c) of the Act and for injunctive relief, including restitution of back wages,1 under Section 17 of the Act denies the employer his right to a jury trial protected by Section 16(c) and the Seventh Amendment.

In order to understand how the issue of the employer's right to a jury trial arises in this litigation, it is necessary to refer to the court's order of February 27, 1980. In the original complaint, the Secretary alleged that this court's jurisdiction was based on Section 17 of the FLSA.2 In the prayer for relief, the Secretary asked the court to enjoin defendants from violating the reporting provisions of FLSA, and from continuing to withhold minimum wages and overtime compensation due employees under the FLSA and to grant "such other and further relief as may be necessary and appropriate including an additional equal amount as liquidated damages in accordance with § 16(c) of the Act 29 U.S.C. 216(c)."

The defendants in their answer to the original complaint demanded a jury trial, and the Secretary filed a motion to strike that demand. When defendants responded to the motion to strike the jury demand, they asked the court either to grant a jury trial or to strike plaintiff's demand for liquidated damages.

In the order of February 27, the court ruled that the Secretary had brought the complaint under Section 17 of the Act, that Section 17 actions are equitable in nature and that the employer had no right to a jury trial, even though he must pay money if enjoined from continuing to withhold wages due under the FLSA, citing Wirtz v. Jones, 340 F.2d 901 (5th Cir. 1965).

The court also stated that while it would not strike any part of the Secretary's prayer for relief, it would also not consider an award of liquidated damages in the case. The court noted that the Secretary can recover liquidated damages in actions brought under Section 16(c) of the Act and that Section 16(c) actions are legal in nature.3 The employer has a right to a jury trial on the issue of back wages in Section 16(c) actions although Section 11 of the Portal-to-Portal Act, 29 U.S.C. § 260, provides that the issue of liquidated damages is tried to the court. The court stated in its order that there was no authority for the court to award liquidated damages in a suit brought under Section 17 but that such authority existed under Section 16(c) and the Secretary could seek leave to amend the complaint.4

Evidently in response to this suggestion from the court, the Secretary has now moved to amend the complaint and allege that this court's jurisdiction is based on Section 16 of the Act. But the Secretary still argues that the employer is not entitled to a jury trial on any issue. The employer has opposed the motion on the ground that the Secretary misinterpreted the court's earlier order.

The Secretary's proposed complaint is entitled, "Amended Complaint (Injunctive Relief Sought)." The amended complaint states that "plaintiff brings this action to enjoin defendants from violating the FLSA . . . and to restrain said defendants from withholding payment of back wages due employees under the Act, pursuant to Section 17 of the Act and further to award an equal additional amount as liquidated damages pursuant to Section 16(c) of the Act." The Secretary alleges that jurisdiction of the injunctive action is conferred by Section 17 of the Act and that jurisdiction to award an additional equal amount in liquidated damages is conferred by Section 16(c) of the Act. Since the issue of liquidated damages in a suit brought under Section 16(c) is triable to the court, and since a suit brought under Section 17 is a suit in equity and triable to the court, Wirtz v. Jones, supra, the Secretary argues that the amendment to the complaint should be allowed and that all issues are triable solely to the court.

The FLSA establishes three separate statutory causes of action: (1) under Section 16(b), 29 U.S.C. § 216(b), an employee may sue his employer for unpaid overtime compensation, unpaid minimum wages, and an additional equal amount in liquidated damages; (2) under Section 16(c) the Secretary may sue on behalf of an employee or employees to recover unpaid overtime, unpaid minimum wages, and an additional equal amount as liquidated damages; and (3) under Section 17 the Secretary may seek to enjoin violations of the FLSA and to restrain the withholding of payment of minimum wages and overtime compensation which are due employees under the Act.

Wirtz v. Jones, 340 F.2d 901, 905 (5th Cir. 1965), is the leading case on the right to a jury trial in a Section 17 suit. That case holds that an action brought pursuant to Section 17 is equitable in nature and that no right to a jury trial exists, even though an employer must make payments of wages if the court enjoins the employer from continuing to withhold wages that the FLSA requires to be paid. The court reasoned that restitution is an equitable remedy, and no right to a jury trial exists in an equity action.

Actions brought under Section 16(c) by the Secretary or under Section 16(b) by an employee have been consistently recognized as analogous to actions at law. A party in those actions has the right to a jury trial. Lewis v. Times Publishing Co., 185 F.2d 457 (5th Cir. 1950); 5 Moore's Federal Practice ¶ 38.27, p. 213-14. Section 11 of the Portal-to-Portal Act provides, however, that the issue of liquidated damages is triable to the court.5 McClanahan v. Matthews, 440 F.2d 320 (6th Cir. 1971).

Both Sections 16(c) and 17 afford the Secretary a means of recovering unpaid minimum wages and overtime compensation for employees. In addition to recovery of back wages, Section 16(c) offers the possibility of recovery of liquidated damages while Section 17 authorizes the court to award full injunctive relief. If the Secretary can split his two causes of action and couple Section 17 back wages with Section 16(c) liquidated damages, then the practical effect is to deny the defendants a jury trial on back wages which they would have if the Secretary were forced to proceed solely under Section 16(c) for both back wages and liquidated damages.

An examination of the legislative history of the FLSA supports the conclusion that Congress has never authorized the Secretary to seek liquidated damages in a Section 17 suit. The court finds that it would be contrary to the congressional intent for the Secretary to have the option of splitting his causes of action so as to deny the employer a jury trial on back wages where liquidated damages are also sought.

When the FLSA was originally adopted in 1938, Fair Labor Standards Act of 1938, ch. 676, 52 Stat. 1060 et seq., Section 16(b) permitted an employee to sue his employer for unpaid minimum wages, overtime compensation and an additional equal amount in liquidated damages. Section 17 of the original act provided that the Secretary of Labor could file suit and that "the district courts . . . shall have jurisdiction, for cause shown, to restrain violations of § 15." The original act contained nothing comparable to the current Section 16(c); the Secretary was not authorized to bring legal actions to recover back wages for employees.

Section 17 was interpreted as a grant of equitable jurisdiction. The circuit courts of appeal divided on the question whether the district courts had the equitable power to order an employer to make reparation or restitution of unpaid minimum wages or unpaid overtime compensation. The Second Circuit appeared to have carried the field in favor of equitable power to restrain wrongful withholding of unpaid minimum wages and overtime compensation. McComb v. Frank Scerbo & Sons, 177 F.2d 137, 139 (2d Cir. 1949).

Immediately after this decision and expressly to overrule it, 1949 U.S. Code Cong. Serv. pp. 2241, 2273, Congress amended Section 17 to provide that "no court shall have jurisdiction in any action brought by the Secretary of Labor to restrain such violations, to order the payment to employees of unpaid minimum wages or unpaid overtime compensation or an additional equal amount as liquidated damages in such action." Fair Labor Standards Amendments of 1949, Pub.L. No. 81-393, § 15, 63 Stat. 919. Thus in a suit for injunctive relief which would be tried without a jury, the court could not award back wages or liquidated damages.

However, in the same bill which amended Section 17, Congress adopted Section 16(c) which...

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    ...issue by pleading, alternatively, for back pay damages under § 216(c) and injunctive relief under § 217. See Marshall v. Hanioti Hotel Corp., 490 F.Supp. 1020, 1025 (N.D.Ga.1980). In the face of repeated warnings that the Secretary cannot do what he sought to do here--append a liquidated da......
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    ...580 & n. 7, 98 S.Ct. 866, 870 & n. 7 (1978); E.E.O.C. v. Corry Jamestown Corp., 719 F.2d 1219, 1221 (3d Cir.1983); Marshall v. Hanioti Hotel Corp., supra, 490 F.Supp. at 1023; 5 Moore's Federal Practice p 38.27, at 38-220 to 38-221 (2d ed. 1986). However, since an award of liquidated damage......
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    ...issue of liquidated damages is triable to the court. McClanahan v. Mathews, 440 F.2d 320 (6th Cir.1971).Marshall v. Hanioti Hotel Corp., 490 F.Supp. 1020, 1022 & 1023 (N.D.Ga.1980) (footnote omitted).12 Although the substantial line of authority in this Circuit has held that the question of......
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