Marshall v. New Hampshire Jockey Club, Inc.

• Decision Date: 09 September 1977
• Docket Number: No. 77-1037,77-1037
• Parties: 23 Wage & Hour Cas. (BN 507, 82 Lab.Cas. P 33,581 F. Ray MARSHALL, etc., Plaintiff, Appellee, v. The NEW HAMPSHIRE JOCKEY CLUB, INC., et al., Defendants, Appellants.
• Court: U.S. Court of Appeals — First Circuit

Page 1323

562 F.2d 1323

23 Wage & Hour Cas. (BN 507, 82 Lab.Cas. P 33,581

F. Ray MARSHALL, etc., Plaintiff, Appellee, v. The NEW HAMPSHIRE JOCKEY CLUB, INC., et al., Defendants, Appellants.

No. 77-1037.

United States Court of Appeals, First Circuit.

Argued May 2, 1977.

Decided Sept. 9, 1977.

Jack B. Middleton, Manchester, N. H., with whom Richard S. Snierson and McLane, Graf, Greene, Raulerson & Middleton, Professional Association, Manchester, N. H., were on brief, for appellants.

John K. Light, Jr., Washington, D. C., with whom Carin Ann Clauss, Sol. of Labor, Carl W. Gerig, Jr., Acting Associate Sol., Washington, D. C., Albert H. Ross, Regional Sol., Boston, Mass., and Jacob I. Karro, Washington, D. C., were on brief, for appellee.

Before COFFIN, Chief Judge, CAMPBELL, Circuit Judge, DOOLING, District Judge. ^*

LEVIN H. CAMPBELL, Circuit Judge.

In this appeal from a district court decision favorable to the Secretary of Labor, ¹ appellants assert that in 1973 and 1974 they were both exempt from the overtime provisions of the Fair Labor Standards Act (the "Act") by virtue of section 13(a)(3) which exempts,

"any employee employed by an establishment which is an amusement or recreational establishment, if (A) it does not operate for more than seven months in any calendar year, or (B) during the preceding calendar year, its average receipts for any six months of such year were not more than 331/3 per centum of its average receipts for the other six months of such year . . . ."

29 U.S.C. § 213(a)(3).

One of the appellants, The New Hampshire Jockey Club, Inc. (Jockey), owns Rockingham Park in Salem, New Hampshire, where it conducts thoroughbred flat racing during the summer months. The other appellant, New Hampshire Trotting and Breeding Association, Inc. (Trotting), rents portions of Rockingham Park from Jockey during the spring and fall to conduct harness races. Both companies employ many of the same individuals as security guards during their respective seasons; the overtime wages of these common employees are in issue. The question on appeal is whether the district court was correct in ruling that Jockey and Trotting were a single "establishment" within section 13(a)(3) during the relevant period, 1973 and 1974. If so neither was then exempt, since their combined operations extended over more than seven months, and their combined average receipts were not distributed in those two years so as to meet part (B) of the exemption. ²

I.

We state the facts, which are undisputed, in some detail. Jockey was organized in 1936 to take over thoroughbred racing at Rockingham from a prior operator. In 1957 various persons contemplated opening a harness racing track in Massachusetts, which would have competed with Rockingham. These persons, represented by a Boston attorney, contacted representatives of Jockey to explore the possibility of running harness races at Rockingham. Negotiations culminated in the organization of Trotting, a separate corporation, and the signing of a lease agreement between the two companies. Jockey obtained a fifty percent participation in Trotting at the time of its creation. Members of the Sullivan family, who collectively owned approximately ten percent of Jockey's stock, obtained a five percent interest in Trotting. The Sullivan firm provides printing services to race tracks on the East Coast and has investments in numerous tracks. No other common ownership of Jockey and Trotting exists.

During 1973 and 1974, the years in question, Jockey's season ran from June 16 until September 22 and June 29 until September 22. In 1973 Trotting ran races from January 5 to May 7 and October 4 to December 1. The following year Trotting operated from January 3 to May 6 and October 2 to November 30. Jockey conducts thoroughbred races on a one mile oval track with a sandy loam surface. The harness races run by Trotting take place on a half-mile oval track interior to that used by Jockey but contiguous along the eighth-mile homestretch facing the grandstand. Because harness racing requires a track surface of clay and stone dust, Jockey must dig up the homestretch at the beginning and end of its season and make alterations, for which Trotting pays. Because of the different surfaces, the remainder of the respective tracks can be used only by the one sport.

The thoroughbred racing conducted by Jockey and the harness races conducted by Trotting differ in other respects. A different breed of horse and different horsemen participate in each kind of race. Thoroughbred races take place during the day, harness races at night. Separate licenses are required by the State of New Hampshire. Control of thoroughbred races is in the hands of three stewards approved by the State of New Hampshire Horse Racing Commission. Three judges approved by the Commission run the harness races. Stewards and judges are completely separate individuals who operate under different systems of rules and regulations.

The economics of the two forms of racing also differ significantly. The average daily total of wagers for thoroughbred racing at Rockingham was $705,823 in 1973 and $736,384 in 1974. Average daily attendance for the two years was 8,394 and 8,664, and the average wager per customer was $84.09 and $84.99 respectively. For harness racing, the average daily total of wages was $347,461 and $304,213, the average daily attendance was 5,194 and 4,431, and the average daily wager per person was $66.90 and $68.66. New Hampshire collects different commissions on wagers and levies different taxes for the two sports.

Although different tracks are used, there is a substantial overlap in the facilities employed by the two companies. Both use the same grandstand, clubhouse, administrative building, parking lots, barns and stable areas, although Trotting's administrative offices are arranged somewhat differently. Because of the relatively smaller scale of harness racing at Rockingham, however, Trotting uses less of the parking facilities and fewer stables and barns. Jockey operates a cafeteria during its season, while Trotting maintains only a lunch counter. The harness racing drivers use different facilities than the thoroughbred racing jockeys enjoy. Trotting installs lights and poles and removes them at the end of its season. Different paddocks are used in the two forms of racing.

During 1973 and 1974, substantial overlap also existed in the employment practices of the two companies. Jockey employed 679 persons in 1973 and 588 in 1974; Trotting employed 644 and 504 respectively. Of these employees, 394 appeared on both companies' payrolls in 1973 and 397 in 1974. Most of those employed by both were laid off at the end of one season and hired at the start of the succeeding season by the other company, but without any automatic right of continuous employment. Most of the employees of the two companies are unionized, and the unions have separate contracts and seniority rosters with the companies. Fourteen clerical or support workers were employed throughout the year by either Jockey or Trotting, and Jockey maintained one painter on its payroll continuously through 1973 and 1974. In addition, certain key administrative employees, including the Stall Superintendent, Director of Mutuels, Director of Publicity, Director of Admissions and Track Veterinarian each worked for both companies during this period.

The fifty-eight persons whose overtime wages are at issue in this suit were hired through separate contracts with Special Agents Consultants, Inc., to provide security at Rockingham during the different seasons. Jockey and Trotting each had final authority to hire and fire the applicants recommended to it by Special Agents. These particular employees were not unionized.

The district court found as a matter of fact that "Jockey effectively controls Trotting's operation." 420 F.Supp. at 420. This conclusion is supported. Jockey shareholders participate in a voting trust agreement, dated as of February 15, 1965, which controls eighty-eight percent of its outstanding shares. Trotting shareholders participate in another voting trust agreement, dated as of August 17, 1970, which controls ninety-six percent of its stock. Each trust has three trustees, two of whom are the same. All of Trotting's trustees are Jockey directors. Pursuant to the Trotting voting trust, one trustee is appointed by Jockey, one by non-Jockey interests, and one by the two other trustees. The "neutral" trustee appointed by the others is Kenneth F. Graf, President and Chairman of the Board of Jockey and the person who represented Jockey in its original negotiations with Trotting concerning the lease. Until October 1973 four of Jockey's seven directors also served on Trotting's six-man board. After that date three of Jockey's six directors sat on Trotting's five-man board. Graf, the president of Jockey, also was president of Trotting, and his assistant at Jockey was director of operations for Trotting. The secretary of each corporation was the same person, and one of Trotting's two vice-president was a Jockey director.

Despite Jockey's substantial control, however, significant aspects of the relationship between the two companies are governed by the lease of Rockingham they have signed. These aspects include Trotting's basic right of access to Rockingham, the cost of this right, and the distribution of the costs of maintenance between the two parties. The lease does not contain any provision permitting Jockey unilaterally to escape its obligations. Trotting has a series of options to renew the lease on the same terms until 1993.

Jockey and Trotting have scrupulously maintained their separate corporate identities. The companies file separate reports with New Hampshire regulatory authorities; maintain separate insurance policies with some variations in coverage; contract separately with suppliers of services and materials; file separate tax returns; maintain separate...