McClanahan v. Mathews

• Decision Date: 08 April 1971
• Docket Number: No. 20592.,20592.
• Citation: 440 F.2d 320
• Parties: George McCLANAHAN and William Clinger, Plaintiffs-Appellants, v. William B. MATHEWS, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

440 F.2d 320 (1971)

George McCLANAHAN and William Clinger, Plaintiffs-Appellants, v. William B. MATHEWS, Defendant-Appellee.

No. 20592.

United States Court of Appeals, Sixth Circuit.

April 8, 1971.

Charles L. Kirk, Maysville, Ky., for plaintiffs-appellants; Charles L. Kirk, Robert G. Zweigart, Royse, Zweigart & Kirk, Maysville, Ky., on brief.

Woodson T. Wood, Maysville, Ky., for defendant-appellee; Woodson T. Wood, Fox, Wood & Wood, Maysville, Ky., on brief.

Peter G. Nash, Sol. of Labor, Bessie Margolin, Associate Sol., Carin Ann Clauss, Donald S. Shire, W. Scott Railton, Attys., United States Dept. of Labor, Washington, D. C., Marvin Tincher, Regional Atty., on brief as amicus curiae for the Secretary of Labor.

Before CELEBREZZE, PECK, and BROOKS, Circuit Judges.

CELEBREZZE, Circuit Judge.

This action was instituted by George McClanahan and William Clinger to recover from their employer, William B. Mathews, damages for wages withheld in violation of the minimum wage and maximum hour provisions of the Fair Labor Standards Act of 1938, 29 U.S.C. § 201 et seq. (1964). The action was tried to a jury, which found that Mathews had underpaid Clinger and McClanahan in the amounts of $3,200 and $6,445.43, respectively, and judgments were entered accordingly. Thereafter, the District Court refused to award Clinger and McClanahan liquidated damages or pre-judgment interest on the back-pay award. Clinger and McClanahan appealed, asserting that the District Court erred in denying their claims for liquidated damages and pre-judgment interest. The Secretary of Labor has filed a brief as amicus curiae on these issues.

I.

Prior to the enactment of the Portal-to-Portal Act of 1947, an employer was without exception liable to his employees for liquidated damages equal to, and in addition to, any minimum or overtime wages withheld in violation of the Fair Labor Standards Act of 1938.

"Any employer who violates the provisions of section 206 or section 207 of this title the minimum wage and maximum hour provisions shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages." emphasis added. 29 U.S.C. § 216(b) (1964).

Overnight Motor Company v. Missel, 316 U.S. 572, 581-584, 62 S.Ct. 1216, 86 L. Ed. 1682 (1942). Section 11 of the Portal-to-Portal Act, 29 U.S.C. § 260 (1964), provides a dispensation from the mandatory liability for liquidated damages under certain circumstances. Under section 11, where an employer "shows to the satisfaction of the court" that his violation was "in good faith and that he had reasonable grounds for believing that his act or omission was not a violation of the Fair Labor Standards Act," then the court "may, in its sound discretion," award a lesser amount or no liquidated damages at all.¹ Since an award of liquidated damages is left to the "sound discretion" of the court, it is to be granted, or denied, by the court, as opposed to the jury. Martin v. Detroit Marine Terminals, Inc., 189 F.Supp. 579 (E.D.Mich.1960). For the court's discretion to be invoked, however, the delinquent employer must sustain a "plain and substantial burden of persuading the court by proof that his failure to obey the statute was both in good faith and predicated upon such reasonable grounds that it would be unfair to impose upon him more than a compensatory verdict." Rothman v. Publicker Industries, Inc., 201 F.2d 618, 620 (3d Cir. 1953); Wright v. Carrigg, 275 F.2d 448, 449 (4th Cir. 1960); Caserta v. Home Lines Agency, Inc., 273 F.2d 943, 947 (2d Cir. 1959). In the absence of such proof a District Court has no power or discretion to reduce an employer's liability for the equivalent of double unpaid wages. See 29 C.F.R. §§ 790.15, 790.22(c) (Jan. 1, 1970 ed.).

After the jury rendered its verdict for the Appellants in the amounts of their unpaid back wages, the Appellants moved the District Court to award them liquidated damages. The motion was denied.

Appellants' first assignment of error is that the District Court applied the wrong legal standard in its determination of whether they were entitled to liquidated damages. In its memorandum and order, the District Court held that an employer's failure to pay the minimum wage is "only punishable via liquidated damages when it is malicious and knowingly oppressive." Elaborating, the court stated:

"It is the court\'s abiding conviction that liquidated damages should only be granted where a recalcitrant employer retains fair compensation out of malice."

It is well established that "liquidated damages for failure to pay the minimum wages under sections 6(a) and 7(a) are compensation, not a penalty or punishment." Overnight Motor Company v. Missel, 316 U.S. 572, 583, 62 S.Ct. 1216, 86 L.Ed. 1682 (1942). As we have indicated, where an employer sustains a substantial burden of proving not only that his violation was in "good faith," but also that he had "reasonable grounds" for believing that he was not violating the Act, the District Court nevertheless may award full liquidated damages equal to, and in addition to, the unpaid back wages. We find the District Court erred in stating that liquidated damages are to be awarded only where the violation is "malicious and knowingly oppressive" and "only * * * against the most outrageous violators of the Act."

Appellants have not included in the record on appeal, a transcript of the evidence before the District Court. We are therefore unable to review their arguments based on prejudice resulting from the District Court's application of the wrong legal standard.² Rule 10, Federal Rules of Appellate Procedure; Drybrough v. Ware, 111 F.2d 548, 550 (6th Cir. 1940). See Palmer v. Hoffman, 318 U.S. 109, 116, 63 S.Ct. 477, 87 L.Ed. 645 (1943). See generally, 9 Moore, Federal Practice, Par. 210.05 (2d ed. 1970). Appellants argue that a transcript of the evidence is unnecessary because a particular inconsistency between the jury's response to interrogatories and the District Court's judgment shows error as a matter of law in refusing to award liquidated damages. For the following reasons, we disagree.

The complaint in this case sought damages for three years' unpaid back wages. Under the applicable statute of limitations, Section 6(a) of the Portal-to-Portal Act of 1947, 29 U.S.C. § 255(a), as amended (1966), an employee may not recover damages for more than two years' unpaid wages unless his employer's violation was "willful."³ Where the employer's violation was "willful," the employee may recover for three years' back wages. The issue of the Appellee's willfulness was presented to the jury by means of the following interrogatories:

1. Do you believe that the defendant, Mathews, underpaid the plaintiff either for straight time or overtime?

Answer Yes---- No----

"2. If your answer to the above interrogatory, No. 1, is `yes,\' do you believe that the underpayment of the plaintiff was wilful sic?

Answer Yes---- No----

The jury answered each interrogatory in the affirmative, indicating its finding that the Appellants were willfully underpaid by the Appellee. The Appellants argue that in view of the jury finding of "willfulness," the District Court erred as a matter of law in refusing to award liquidated damages, 29 U.S.C. § 260 (1964). The Appellee argues, on the other hand, that the jury finding of willfulness was totally contrary to the evidence, that the District Court erred in allowing the finding — and the three-year award — to stand, and that the District Court's refusal to award liquidated damages was consistent with the evidence.

The record before us does not disclose, as the Appellants suggest, that the District Court erred as a matter of law in refusing to award liquidated damages. We have no transcript of evidence, or adequate record thereof, Rule 10, Federal Rules of Appellate Procedure, and the findings of the District Court do not state facts that undermine its refusal to award liquidated damages as a matter of law. Nor does the record contain facts to support the Appellee's contention that the judgment of the District Court was supported by sufficient evidence and in accordance with law. Having applied the wrong legal standard, the District Court made no findings with regard to the relevant issues, i. e., "good faith" and "reasonable grounds." Finding "nothing in the evidence or the record that shows that he the Appellee withheld minimum and overtime compensation with a black heart and tyrannical hand," the District Court summarily dismissed the Appellants' claims for liquidated damages, without probing into the facts to determine whether the proper statutory basis for doing so existed.

With a record so incomplete, we are unable to determine whether, as the Appellants argue, the District Court was wrong in not awarding liquidated damages and correct in not ruling as a matter of law that the period of limitations was two years. Logically it might be just as true that, as the Appellee argues, the court was correct in not awarding liquidated damages, and wrong in not granting the Appellee judgment notwithstanding the verdict on the limitations issue. Lacking an adequate transcript, and relevant findings by the trial judge, we have no alternative but to vacate the District Court's judgment on this issue, and remand the cause for relevant and appropriate findings. See Hatahley v. United States, 351 U.S. 173, 182, 76 S.Ct. 745, 100 L.Ed. 1065 (1956); United States v. Claycraft Company, 408 F. 2d 366 (6th Cir. 1969); United States v. Tuschman, 405 F.2d 688, 690-691 (6th Cir. 1969); Traylor v. United States, 396 F.2d 837, 840 (6th Cir. 1968); S. S. Silverblatt, Inc. v. United States, 353 F.2d 545, 549-550 (5th Cir. 1965). See generally 5 Moore, Federal Practice, Par. 52.061 & 2 (2d ed. 1968. If, upon a review of the record in its entirety, or after such proceedings as it...