Marshall v. Hills Bros., C-76-1738-CBR.

• Decision Date: 17 June 1977
• Docket Number: No. C-76-1738-CBR.,C-76-1738-CBR.
• Citation: 432 F. Supp. 1320
• Court: U.S. District Court — Northern District of California
• Parties: Ray MARSHALL, Secretary of Labor, United States Department of Labor, Plaintiff, v. HILLS BROS., a corporation, Defendant.

432 F. Supp. 1320

Ray MARSHALL, Secretary of Labor, United States Department of Labor, Plaintiff, v. HILLS BROS., a corporation, Defendant.

No. C-76-1738-CBR.

United States District Court, N. D. California.

June 17, 1977.

Daniel W. Teehan, Regional Sol., Malcolm R. Trifon, Atty., U. S. Dept. of Labor, San Francisco, Cal., for plaintiff.

Pettit, Evers & Martin, Robert M. Cassel, Phyllis E. Andelin, San Francisco, Cal., for defendant.

MEMORANDUM OF OPINION

RENFREW, District Judge.

This is an action brought by the Secretary of Labor ("Secretary") to enjoin Hills Bros. Coffee, Inc. ("Hills Brothers"), from violating the Age Discrimination in Employment Act of 1967 ("Age Discrimination Act"), 29 U.S.C. §§ 621 et seq., and the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. §§ 201 et seq. Plaintiff alleges in his amended complaint that Hills Brothers, a corporation engaged in the processing and distribution of coffee, discharged "certain Management employees employed at its * * * facilities in San Francisco, California and Edgewater, New Jersey because such individuals were between the age of 40 and 65." Plaintiff also alleges that Hills Brothers has violated the Fair Labor Standards Act by failing to pay minimum wages and overtime pay to the discharged employees. The latter claim is predicated on a finding that the employees were wrongfully discharged in violation of the Age Discrimination Act. Defendant has moved to dismiss or, in the alternative, for summary judgment.

Plaintiff does not specify in his complaint which employees were allegedly discriminated against. Section 7(b) of the Age Discrimination Act, however, provides that the Secretary may institute a court action only after attempting "to eliminate the discriminatory practice or practices alleged, and to effect voluntary compliance with the requirements of this chapter through informal methods of conciliation, conference, and persuasion." 29 U.S.C. § 626(b). Plaintiff and defendant agree that the conciliation efforts contemplated in § 7(b) were conducted with respect to only nine Hills Brothers employees. As a result, this action must be limited to those nine individuals. The employees who are the subjects of this suit, therefore, and their respective dates of termination are John G. McChesney —February 28, 1973; Charles F. Loeffler —April 27, 1973; Joseph M. Ennis— April 27, 1973; Richard A. Schwarting— May 31, 1973; Allen T. Vadnais—August 17, 1973; Joseph J. LaCorte—April 30, 1974; Stanley T. Hamilton—June 11, 1974; John A. Nyire—June 14, 1974; and Donald D. Morton—September 1, 1974.

I. STATUTE OF LIMITATIONS

The statute of limitations for bringing an action under the Age Discrimination Act allows, at most, three years to pass after the alleged act of discrimination. 29 U.S.C. § 626(e) (incorporating by reference 29 U.S.C. § 255(a)). This action was filed on August 17, 1976. As the result, the terminations of McChesney, Loeffler, Ennis, and Schwarting may not be challenged in this suit. Plaintiff appears to agree, conceding that these claims are "moot." They are not moot; they are barred by the statute of limitations and will be dismissed accordingly.

Section 7 of the Age Discrimination Act, 29 U.S.C. § 626(e), incorporates the statute of limitations section (§ 6) of the Portal to Portal Pay Act, 29 U.S.C. § 255. When it was enacted in 1947, § 6 allowed individuals two years in which to bring an action for unpaid minimum wages or overtime compensation or for liquidated damages under the Fair Labor Standards Act. The section was amended in 1966 to extend the time period to three years for "a cause of action arising out of a willful violation." If defendant committed willful violations in this case, the statute of limitations will not bar the claims of Vadnais, LaCorte, Hamilton, Morton and Nyire.¹ If the alleged violations were not willful, only Morton's claims may be pursued.

Plaintiff and defendant disagree as to what is the proper standard for willfulness. Plaintiff contends that an employer willfully violates the Age Discrimination Act if it "had knowledge of the Act or knew that the Act `was in the picture.'" Plaintiff's Memorandum of Points and Authorities in Opposition to Defendant's Motions to Dismiss and/or for Summary Judgment 5 (filed December 22, 1976). See Coleman v. Jiffy June Farms, Inc., 458 F.2d 1139, 1142 (5 Cir. 1971), cert. denied, 409 U.S. 948, 93 S.Ct. 292, 34 L.Ed.2d 219 (1972); Brennan v. Heard, 491 F.2d 1, 3 (5 Cir. 1974). Defendant, on the other hand, insists that willful violations are "intentional, knowing or voluntary as distinguished from accidental, and * * * conduct marked by careless disregard whether or not one has the right to so act." Hodgson v. Hyatt, 318 F.Supp. 390, 392-393 (N.D.Fla.1970).

The Court will not reach the question of exactly what conduct constitutes a willful violation, however, because the issue is not appropriate for summary judgment. Defendant, the moving party, has the burden of convincing the Court that there is no genuine issue of material fact as to whether Hills Brothers willfully violated the Age Discrimination Act. See Cameron v. Vancouver Plywood Corp., 266 F.2d 535, 539-540 (9 Cir. 1959). Assuming that there is a difference in standards and that the more stringent willfulness standard is applied, defendant still has not convinced the Court that Hills Brothers did not have actual knowledge of the statute.

II. EVIDENCE OF AGE DISCRIMINATION

In order to prevail in this action, the Secretary has the burden of proving that the five employees in question were dismissed because of their age. Plaintiff has presented no evidence that this was the case. Indeed, with the exception of the bare conclusory allegations contained in his complaint, plaintiff has not even alleged any specific facts to support a finding of age discrimination.

Plaintiff argues that he has established a prima facie case of age discrimination by "(1) the evidence that eleven supervisory employees were involuntarily terminated and that nine were in the protected age group and eight of these nine were replaced by younger individuals; (2) the evidence that when there was a choice between which of two or more employees to terminate, Hills chose the oldest (LaCorte, Schwarting, Loeffler); (3) the evidence of pretext in Hamilton's termination and the reference to age mentioned to one of his subordinates by company officials prior to his termination; and (4) the evidence of a prima facie case of age discrimination considering LaCorte's case on an individual basis." Plaintiff's Post-Hearing Memorandum in Opposition to Defendant's Motion for Summary Judgment 2 (filed April 29, 1977). While such evidence may establish a prima facie case of age discrimination under some circumstances, it fails to do so in this case.

In order to view the five terminations at issue in context, it is necessary to understand the business position of Hills Brothers during the relevant time period. During 1973 and 1974, Hills Brothers was in the midst of an economic crisis of the greatest magnitude. Beginning in 1969, Hills Brothers' sales and market percentage dropped sharply each year, its marginal costs increased sharply each year, and its profits steadily declined from a $2.3 million profit in 1968 to an $8.4 million loss in 1974. Defendant has thoroughly documented the emergency measures that were taken in an attempt to restore the company to a profit-making status.

Hills Brothers took its first steps in November 1970 to trim overhead costs substantially and to freeze all new hiring in an attempt to reduce the work force through attrition. The company requested each employee to describe specifically his actual job functions, detailing each activity and the amount spent on it. Hills Brothers then used the job survey to evaluate each position and eliminate unnecessary functions. The following criteria were used in the evaluation:

(a) Were the duties involved in the position necessary to the function of that department?

(b) Could the department get along without the position entirely?

(c) Could the duties of the position be absorbed into another position and done by one person?

(d) Could the department itself be consolidated with other departments doing similar or related work?

Between 1971 and 1975, Hills Brothers reduced its work force by 17.9%, with 341 terminations throughout the company. Plant employment dropped from 255 persons in 1971 to 219 in 1975, primarily in the San Francisco plant. Forty-eight positions were eliminated in the nonexempt² and sales categories; 150 exempt employees terminated during that period and were replaced only when the position was crucial to operations.

Other overhead costs were also severely cut. Hills Brothers approved pay raises only if absolutely justified by exceptional performance, eliminated recruiting, dropped its membership in several trade associations, cancelled subscriptions to trade publications, froze fringe benefits unless mandated by collective bargaining agreements, and carefully reexamined all departmental budgets.

Hills Brothers' officers concluded, however, that reduction of personnel and overhead costs alone would not reverse Hills Brothers' downhill slide and could not increase production and sales. Hills Brothers' steadily declining economic position, spiraling costs, and simultaneous loss of market share convinced them that there were severe inadequacies in the management of the company's operations, and that the lack of direction and failure to reverse losses effectively made the upgrading of management vital. In the opinion of the top management, Hills Brothers' losses in market share were attributable not only to external conditions but also to poor planning and inadequate management in sales and distribution. They felt that the overall poor performance at Edgewater and the failure to keep costs reasonably proportional pointed to poor administration at that...