Montalvo v. Tower Life Building

• Decision Date: 15 May 1970
• Docket Number: No. 27501.,27501.
• Parties: Raul C. MONTALVO et al., Plaintiffs-Appellees, v. TOWER LIFE BUILDING and Tower Life Insurance Company, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

426 F.2d 1135 (1970)

Raul C. MONTALVO et al., Plaintiffs-Appellees, v. TOWER LIFE BUILDING and Tower Life Insurance Company, Defendants-Appellants.

No. 27501.

United States Court of Appeals, Fifth Circuit.

April 21, 1970.

Rehearing Denied May 15, 1970.

COPYRIGHT MATERIAL OMITTED

Chester H. Johnson, George W. Krog, San Antonio, Tex., for defendants-appellants.

L. H. Silberman, Sol. of Labor, U. S. Dept. of Labor, Bobbye O. Spears, Atty., Dept. of Labor, Washington, D. C., amicus curiae.

Arthur Gochman, John J. Felthaus, Jr., Victor A. Speert, San Antonio, Tex., for plaintiffs-appellees.

Before RIVES, GOLDBERG and GODBOLD, Circuit Judges.

GOLDBERG, Circuit Judge.

More than two dozen maids and janitors employed in an office building seek habitation within the "enterprise" coverage erected by the 1961 Amendments to the Fair Labor Standards Act of 1938. The court below found the blueprint of coverage adequate to encompass these plaintiffs, and we agree with the lower court's reading of the statutory specifications.

The defendants in this action are the Tower Life Insurance Company (hereinafter referred to as the Company) and the Tower Life Building (hereinafter referred to as the Building). The Building, a general office building in San Antonio, Texas, is owned by the Company, a corporation writing policies of life, health, and accident insurance in the state of Texas. The offices of the Company are located in the Building, occupying approximately five percent of the available office space. The remaining office space is leased to a miscellany of tenants.

The Building is operated as a division of the Company. The records and accounts of the Building are maintained separately from those of the Company's insurance operations, although they are maintained by Company personnel in the Company's offices. In addition, the Company pays rent and expenses to the Building in the same manner as other tenants of the Building. The Manager of the Building is appointed by the Board of Directors of the Company, to whom he reports periodically. The Company has delegated to him the authority to execute leases for office space in the Building, to remodel and otherwise maintain the Building, and to hire and fire Building employees.

During the periods for which the plaintiffs seek recovery — periods during the years 1965, 1966, and 1967 — the plaintiffs worked as maids, janitors, and maintenance employees in the Building. They worked under the direction and control of the Building Manager, and they were paid with Tower Life Building checks. In the course of their employment they furnished custodial and maintenance services to the offices of the Company and to the other offices in the Building.

The history of the present litigation began in March of 1967, when the Wage and Hour Division of the Department of Labor instituted an investigation of the Tower Life Building. As a result of this investigation, the Division concluded that the Building employees had been covered under the Fair Labor Standards Act prior to the 1966 Amendments (which became effective on February 1, 1967). Accordingly, in August of 1967 the defendants were advised by letter that unless specified payments for unpaid minimum wages and overtime compensation were made by September 9, 1967, the employees involved would be advised of their rights under the Act. Because the payments were not made, letters were sent to all employees of the Building in October of 1967.

Apparently as a result of these letters, four lawsuits — involving a total of twenty-five plaintiffs — were instituted in the district court. These actions were brought under section 16(b) of the Act, 29 U.S.C.A. § 216(b), to recover unpaid minimum wages and overtime compensation, together with liquidated damages and attorneys' fees. The actions were consolidated and submitted for decision on the basis of interrogatories, depositions, summaries of testimony, exhibits, and briefs.

On the basis of the record thus compiled, the district court concluded that the plaintiffs were entitled to recover under the relevant provisions of the Act.¹ Accordingly, judgment was entered awarding the twenty-five plaintiffs recoveries in varying amounts totaling $29,711.35, and attorneys' fees were awarded in a sum equal to fifteen percent of the amounts recovered by the plaintiffs. The court declined, however, to award liquidated damages.²

Defendants appeal from this adverse judgment,³ asserting (1) that the plaintiffs were not covered by the provisions of the Act upon which they rely, (2) that one of the four actions consolidated in this case was barred by limitations, and (3) that the trial court committed error in its award of attorneys' fees. Defendants' contentions on appeal are contested both by the plaintiffs and by the Secretary of Labor, who has submitted a brief to this court as amicus curiae. Because we conclude that each of the contested issues was correctly resolved against the defendants, we affirm the judgment of the district court.

I.

The initial issue presented by this case is the question of coverage.⁴ Plaintiffs ground their contentions regarding coverage in the "enterprise" coverage concept, which came into the law by way of the 1961 Amendments to the Fair Labor Standards Act. Prior to 1961 coverage under the Act was determined exclusively on an employee-by-employee basis. The Act's coverage extended "only to those individual employees who could be proved to be personally engaged in interstate commerce or in the production of goods for interstate commerce." Senate Report No. 145, 87th Cong., 1st Sess. (1961), 2 U.S.Code Cong. & Admin. News 1620, 1626 (1961). Although the employee-by-employee concept of coverage was retained in 1961, a new type of coverage was added. Under this new type of coverage, known as "enterprise" coverage, if a particular unit of employment falls within the ambit of the Act, all of the employees in that employment unit are covered. The Congressional purpose underlying this type of coverage was "to eliminate fragmentation of coverage in the establishments of certain large enterprises and prevent continuance of a situation in which some of the employees in such an establishment had the protection of the act while others who worked side by side with them did not." Id. at 1650.

The Act was amended in 1966 to further extend the scope of coverage, but the 1966 Amendments are not involved in the present case. Plaintiffs seek to recover as employees who were within the Act's coverage prior to the passage of the 1966 Amendments. Consequently, in deciding this case we must look to the statute as it existed after the 1961 Amendments but before the 1966 Amendments.

As amended in 1961, section 3(s) of the Act, 29 U.S.C.A. § 203(s),⁵ provided several alternative definitions of "enterprise engaged in commerce or in the production of goods for commerce," i. e., an employment unit to which "enterprise" coverage was extended. The definition upon which plaintiffs rely in the present case was found in section 3(s) (3):

"any establishment of any such enterprise, except establishments and enterprises referred to in other paragraphs of this subsection, which has employees engaged in commerce or in the production of goods for commerce if the annual gross volume of sales of such enterprise is not less than $1,000,000." (Emphasis added.)

It is readily apparent that the plaintiffs, to establish coverage under section 3(s) (3), are obliged to show that they were employed by an establishment which had "employees engaged in commerce or in the production of goods for commerce" and that "the annual gross volume of sales" of the enterprise was not less than one million dollars. They have attempted to meet this burden by proffering what is essentially a four-part argument. First, they contend that the Company's insurance activities and building operations, taken together, constituted an "enterprise" within the meaning of the Act. Second, they maintain that the "annual gross volume of sales" of this enterprise during the years in question was not less than one million dollars. Third, they assert that the Company had insurance office employees "engaged in commerce or in the production of goods for commerce." Fourth, they argue that the building employees were in the same "establishment" as the insurance office employees because the Company's insurance activities and its building operations took place within a single "establishment."

Defendants do not take issue with the plaintiffs' contention that the Company's insurance activities and its building operations together constituted an "enterprise." Defendants do, however, contest each of the three remaining contentions. On each of these contentions the trial court found in favor of the plaintiffs. For the reasons hereinafter given, we conclude that the trial court's findings were correct.

A.

We turn first to the statutory requirement that the "annual gross volume of sales" of the enterprise be at least one million dollars. Although it is undisputed that the annual gross receipts of defendants' enterprise during the years in question — income from the receipt of insurance premiums, from investments, and from rentals of office space — were in excess of one million dollars, defendants argue that two portions of their premium income should not be included in the computation of their gross volume of "sales." If these portions are excluded, the resulting figure falls below the coverage level.

We note at the outset that defendants' arguments in this regard are so unique that defendants have been unable to cite a single Fair Labor Standards Act case in their support. In addition, we consider it important to note that defendants do not take the position that premium payments received by an insurance company can never be included in the computation of "gross volume of sales"⁶; they merely argue that two specific portions of their premium income should be...