Marshall v. McAlester Corp., 75-117-C.

• Decision Date: 19 May 1977
• Docket Number: No. 75-117-C.,75-117-C.
• Citation: 438 F. Supp. 1005
• Parties: Ray MARSHALL, Secretary of Labor, United States Department of Labor, Plaintiff, v. McALESTER CORPORATION, a corporation, doing business as Aldridge Hotel, Hotels Service Company, a corporation, Tulsa Apartments Corporation, a corporation, Charles H. Alberding, an Individual, and J. E. Scally, an Individual, Defendants.
• Court: U.S. District Court — Eastern District of Oklahoma

438 F. Supp. 1005

Ray MARSHALL, Secretary of Labor, United States Department of Labor, Plaintiff, v. McALESTER CORPORATION, a corporation, doing business as Aldridge Hotel, Hotels Service Company, a corporation, Tulsa Apartments Corporation, a corporation, Charles H. Alberding, an Individual, and J. E. Scally, an Individual, Defendants.

No. 75-117-C.

United States District Court, E. D. Oklahoma.

March 31, 1977.

As Amended May 19, 1977.

William J. Kilberg, Sol. of Labor, Washington, D. C., Ronald Gaswirth, Regional Sol., William E. Everheart, Robert Maris, Dallas, Tex., for Ray Marshall, Secretary of Labor, U. S. Dept. of Labor.

Phil Frazier, Tulsa, Okl., for defendants.

MEMORANDUM OPINION

MORRIS, Chief Judge.

I. Introduction.

This is a civil action brought by the Secretary of Labor, United States Department of Labor, pursuant to section 17 of the Fair Labor Standards Act of 1938, 29 U.S.C. § 217 (1970), hereinafter referred to as the Act, to enjoin defendants from violating the minimum wage and recordkeeping provisions of the Act, and to restrain the withholding by defendants of payment of any unpaid minimum wages found by the court to be due defendants' employees under the Act, together with interest thereon at the rate of 6 percent per annum from the dates such amounts became due. Trial was had to the court, sitting without a jury, on November 11, 1976.

Plaintiff claims that the defendants, together with certain other hotel corporations owned or controlled by the individual defendants, constitute an enterprise engaged in commerce or in the production of goods for commerce, 29 U.S.C. §§ 203(r), 203(s) (Supp. V, 1975), and are therefore subject to the minimum wage and recordkeeping provisions of the Act. 29 U.S.C. §§ 206, 211(c), 215 (1970). Plaintiff seeks an order restraining the withholding by defendants of payment of minimum wages which accrued within three years prior to the commencement of this action, since, according to plaintiff, defendants willfully violated the Act and are therefore subject to the three year statute of limitations of section 6(a) of the Portal-to-Portal Act, 29 U.S.C. § 255(a) (1970).

Defendants contend that the enterprise provisions of the Fair Labor Standards Act do not bring them within the coverage of the Act, since they do not perform related activities through unified operation or common control for a common business purpose. See 29 U.S.C. § 203(r) (Supp. V, 1975). Alternatively, defendants contend that the two year statute of limitations applies, since they did not willfully violate the Act, if at all.

Upon consideration of all the evidence adduced at trial the court makes the following findings of facts and conclusions of law:

II. Findings of Fact.

1. Defendant, McAlester Corporation, during the period since January 1, 1974, has been a corporation authorized to do business in the state of Oklahoma, having an office and place of business at 2nd and Carl Albert Parkway, McAlester, Oklahoma, within the jurisdiction of this court, where it is doing business as the Aldridge Hotel.

2. Defendant, Tulsa Apartments Corporation, at all times material to this action,¹ has been a corporation authorized to do business in the state of Oklahoma having its principal place of business at 9 West 9th Street, Tulsa, Oklahoma, within the jurisdiction of this court. Tulsa Apartments Corporation owned the Aldridge Hotel until December 31, 1973,² before it was sold to defendant McAlester Corporation on January 1, 1974. See Fact No. 1, supra.

3. Defendant, Hotels Service Company, at all times material to this action, has been a corporation authorized to do business in the state of Oklahoma, having an office and place of business at 820 South Main, Tulsa, Oklahoma, within the jurisdiction of this court.

4. Defendant, Charles H. Alberding, is a resident of the city of Chicago, Illinois, and maintains an office at 9 East Huron, Chicago, Illinois. Defendant Alberding, at all times material to this action, has been an officer of defendants, McAlester Corporation, Hotels Service Company, and Tulsa Apartments Corporation.

5. Defendant, J. E. Scally, currently residing in the state of Missouri, was at all times material to this action an officer of defendants, McAlester Corporation, Hotels Service Company and Tulsa Apartments Corporation, and maintained an office at 820 South Main, Tulsa, Oklahoma.

6. The Aldridge Hotel at McAlester, Oklahoma, has been doing business as a hotel at all times material to this action.

7. Defendant Alberding, together with his wife and daughters, own controlling interests in at least 33 of the 36 corporations listed on Schedule A to Plaintiff's Exhibit No. 47.³ By defendant Alberding's own admission, all the corporations set forth in Plaintiff's Exhibit No. 47 in which he, his wife and daughters own a controlling interest operate hotels with the exception of the Tulsa Apartments Corporation.

8. Defendant Alberding's wife, B. W. Alberding, and defendant Scally each own 50 shares of the outstanding 100 shares in defendant Hotels Service Company. Plaintiff's Exhibit No. 49. Defendant Alberding is the president of this corporation.

9. Defendant Alberding, at all times material to this action, was the president of the 33 corporations listed in Plaintiff's Exhibit No. 47, in which he and his family admittedly own a controlling interest. See Fact No. 7, supra. Defendant Scally, at all times material to this action, was the vice-president of these corporations, and together with the defendant Alberding and Alberding's wife constituted the boards of directors of these corporations. See Plaintiff's Exhibits Nos. 47, 48, 49, 50, 51.

10. The majority of the 33 corporations contained in Plaintiff's Exhibit No. 47, in which defendant Alberding and his family own a controlling interest, Fact No. 7, supra, own hotels which appear on a list entitled "Alsonett Hotels — Tulsa Office," Plaintiff's Exhibit No. 3, and are listed as accounts receivable on defendant Hotels Service Company's balance sheet of September, 1975. Plaintiff's Exhibit No. 5.

11. The list entitled "Alsonett Hotels — Tulsa Office" was sent from the Chicago or the Tulsa office to the managers of the hotels in which defendant Alberding owned an interest.⁴

12. "Alsonett Hotels" is not a legal entity of any kind. The name "Alsonett" is derived from the last names of the three men whose combined idea it was 30 years ago to try to get into the hotel business. The names are: Alberding, Gibson and Connett. Each Alsonett Hotel is owned by a separate corporation. From a financial point of view each must stand or fall on its own. Some have failed and others have succeeded. One purpose in so organizing was to avoid inter-hotel FICA liabilities. To organize in this fashion was also conceived to be better from a business and tax point of view. "Alsonett" is simply a banner as to those properties in which defendant Alberding has an interest. "Alsonett" has never had a bank account, the name is not used in the name of any property in which defendant Alberding has purchased an interest and it has no "800" long-distance telephone number. There is no common bank account for Alsonett Hotels and losses from one Alsonett Hotel have never been offset against gains from another Alsonett Hotel. The manager of each Alsonett Hotel is charged with the responsibility of running the hotel. He hires, fires, and determines the wage scales for the employees. Books and records are kept at each hotel and local bank accounts are maintained in the city in which the hotel is situated. Revenues from each operation are deposited in the local bank account.

13. Defendant Alberding hires and fires most of the managers of the Alsonett Hotels. Defendant Scally hired and fired some of the managers usually after consultation with Alberding. Alberding sets the salaries of the managers and they consult with him on most things. When loans are made Alberding usually signs the loan papers.

14. Defendant Alberding caused Mrs. Gladys Hyde (formerly Lockhart), manager of the Aldridge Hotel at McAlester from September 1967 until April 1974, to be transferred between Alsonett Hotels. She managed 3 Alsonett Hotels before coming to the Aldridge.

15. It is defendant Alberding's policy to provide rooms free of charge in the Alsonett Hotels to certain employees of the corporations in which he and his family own an interest. This is limited to persons who have an ownership interest, are part of the management or are key employees. Furnishing rooms under the circumstances described is a recognized industry policy.

16. Now and again furniture has been transferred between Alsonett Hotels.

17. Defendant Alberding's signature appears on the bank account signature cards for all of the corporations in which he has an interest.

18. Defendant Hotels Service Company provides a wide variety of services on a fee basis to hotels, some of which are Alsonett Hotels and some of which are not. However, 85 to 90 percent of Hotels Service Company's business consists of providing services to Alsonett Hotels and other corporations in which defendant Alberding and his family own an interest. The remainder of its business is directed towards hotels in which defendant Alberding does not have any interest.⁵ A cut-rate fee is charged for services rendered to Alsonett Hotels as compared to the fee charged to other hotels. The fee is based on a percentage of income. If the company is making nothing it owes nothing for the service rendered.

19. Defendant Hotels Service Company provides engineering services for Alsonett Hotels in connection with the selection of equipment for laundries, construction of new wings, and procurement of elevators. In connection with improvements it handles such matters as design, studies, layouts, type of equipment, specifications, bidding, awarding of contracts, inspection and performance. It may or may not procure the finances needed for improvements....