Reynolds v. Salt River Valley Water Users Ass'n

• Decision Date: 19 July 1944
• Docket Number: No. 10618.,10618.
• Citation: 143 F.2d 863
• Parties: REYNOLDS et al. v. SALT RIVER VALLEY WATER USERS ASS'N.
• Court: U.S. Court of Appeals — Ninth Circuit

143 F.2d 863 (1944)

REYNOLDS et al. v. SALT RIVER VALLEY WATER USERS ASS'N.

No. 10618.

Circuit Court of Appeals, Ninth Circuit.

June 30, 1944.

Concurring Opinion July 19, 1944.

Langmade & Langmade, of Phoenix, Ariz., for appellants.

Sloan, Scott & Green and Greig Scott, all of Phoenix, Ariz., for appellee.

Douglas B. Maggs, Sol., Archibald Cox, Association Sol., Bessie Margolin, Asst. Sol., Dept. of Labor, all of Washington, D. C., and Dorothy M. Williams, Regional Atty. and Willard S. Johnston, Atty., Dept. of Labor, both of San Francisco, Cal., for Administrator of Wage and Hour Division, U. S. Dept. of Labor, as amicus curiae.

Before DENMAN, MATHEWS, and STEPHENS, Circuit Judges.

DENMAN, Circuit Judge.

Appellants, plaintiffs below, are employed in Arizona by appellee corporation, in one or another of the capacities of conducting through irrigation canals and ditches, which they also maintain, and distributing and delivering water for the irrigation of appellee's shareholders' otherwise unproductive lands for the production of vegetables and other agricultural products largely shipped in interstate commerce and of pumping part of the water for such irrigation. They claimed they were paid less than the minimum wage and worked more than the maximum hours required by Sections 6 and 7 of the Fair Labor Standards Act of 1938, 29 U.S.C.A. §§ 206, 207, hereinafter called the Act, and sued below for the additional compensation and an equal amount of liquidated damages as provided in that Act. They appeal from a judgment based upon the following conclusions of law:

"1. That in the performance by plaintiffs, and each of them, of the services for defendant Association, mentioned in their complaint herein, and as shown by the evidence, none of said plaintiffs, during said period of time, were engaged in commerce, or the production of goods for commerce, or in any occupation necessary to the production thereof, within the meaning of said Act.

"2. That in the carrying on of its said business and operations, as aforesaid, defendant Association was a service establishment, the greater part of whose service is in intrastate commerce, and by reason thereof plaintiffs, and each of them, are exempted from the provisions and benefits of said Act.

"3. That the plaintiffs employed by defendant Association in the capacity of zanjeros are outside salesmen within the meaning of said act, and exempted from the provisions and benefits of said Act."

We do not agree with any of these conclusions of law from the facts adduced, upon which there is no substantial conflict. (A) Appellee corporation is not a service establishment within section 13(a) 2 of the Act, 29 U.S.C.A. § 213(a) (2); (B) appellant employees were engaged in the production of products for interstate commerce within sections 6 and 7 of the Act; and (C) the zanjeros, acting under the requisition of appellee's shareholders in the distribution and delivery to the latter of water serving their lands, are not "outside salesmen" within the exemption of section 13(a) (1) of the Act and no sales of water are made or aided by them.

A. Appellee is not a service establishment.

Appellee operates a water and electric system for the supply of irrigation water and power in central Arizona, which consists of five large storage dams, two diversion dams, eight hydroelectric plants, one steam plant, one Diesel plant, 1400 miles of canals and laterals, hundreds of miles of power lines, two hundred deep well pumps, and other plant and equipment necessary for the operation of a water and electric utility. These works extend over a great area; the lands served by appellee's water themselves comprise approximately 250,000 acres. Appellee's investment in power plants approximates $23,000,000. During the twelve months' period involved in this case appellee generated at its power plants 408,779,430 kilowatt-hours of electricity. The water is supplied to farms. Forty percent of the power is supplied to copper mining companies for use in their mines.

Appellee obtains the bulk of its water both for irrigation and for the generation of power from the Salt and Verde Rivers. Its shareholders are farmers in the Salt River Valley. They or their predecessors in interest appropriated and so became entitled to the use of the water in the Salt and Verde Rivers for the irrigation of their lands which would otherwise be arid and unproductive. Prior to the organization of appellee, this water was distributed to the farmers by a number of canal companies.

Appellee was organized for the purpose of unifying these projects and thus conserving all possible water and distributing it to the farmers more effectively than before. One share of appellee's stock was issued for each acre of land in the project. The stock is appurtenant to the land and passes therewith.

With federal assistance and in furtherance of its purposes, appellee has augmented its work and, to harness the water power, has constructed hydroelectric plants for the generation of electricity. The right to the use of the water, however, remains in appellee's shareholders — the farmers in the Salt River Valley who require and are by law entitled to it for the irrigation of their lands — and appellee is charged with the obligation to hold this water for, and deliver it to them in proportion to their interests subject only to their paying assessments in advance of delivery in order to defray appellee's costs and expenses.

The water, therefore, is allowed to flow only in accordance with the demands of the shareholders, and appellee makes no independent disposition of it. As the water is called for by the shareholders, appellee guides its flow from the rivers and reservoirs through its hydroelectric plants (thereby generating electricity) and on down through the network of canals, laterals and ditches to the shareholders. Thus the demand for, and distribution of, water also determines the production of electricity; in other words, the electricity is generated at the hydroelectric plants only as appellee delivers water to its shareholders. Appellee's water and electric system constitutes a single coordinated enterprise based primarily upon the use of the water of the Salt and Verde Rivers.

To augment this supply, however, appellee pumps underground water into its canals and laterals, and distributes it to the shareholders for irrigation. Appellee's pumps are operated by electricity, a portion of which it receives from out of the state, and the remainder of which it generates.

Appellee claims and the district court held that in the performance of the above functions appellee is a "service establishment" within section 13(a) (2) of the Act exempting from the minimum wage and hours provisions (sections 6 and 7) of the Act "(2) any employee engaged in any retail or service establishment the greater part of whose selling or servicing is in intrastate commerce."

This court has considered the legislative history of this exemption. Its purpose is to exempt neighborhood merchants serving the consuming public who might otherwise be covered due to their location near a state line. Walling v. Block, 9 Cir., 139 F.2d 268, Cf. Walling v. Jacksonville Paper Co., 317 U.S. 564, 571, 63 S.Ct. 332, 87 L.Ed. 460; Walling v. American Stores Co., 3 Cir., 133 F.2d 840; Fleming v. A. B. Kirschbaum Co., 3 Cir., 124 F.2d 567. The courts have held uniformly that the exemption applies only to establishments of a retail character engaged in selling goods or services or both, such as grocery stores, filling stations, barber shops, and beauty parlors; and that the exemption is inapplicable to water and electric companies such as appellee. Walling v. A. B. Kirschbaum Co., 3 Cir., 124 F.2d 567; Bracey v. Luray, 4 Cir., 138 F.2d 8; Guess v. Montague, 4 Cir., 140 F.2d 500; Collins v. Kidd Dairy & Ice Co., 5 Cir., 132 F.2d 79; Sun Publishing Co. v. Walling, 6 Cir., 140 F.2d 445; Schmidt v. Peoples Telephone Union of Marysville, 8 Cir., 138 F.2d 13; Walling v. Peoples Packing Co., 10 Cir., 132 F. 2d 236; Wood v. Central Sand & Gravel Co., D.C.Tenn., 33 F.Supp. 40, 47.

Appellee with its 1400 miles of canals and laterals, 5 storage dams, 2 diversion dams, 8 hydroelectric plants, steam plant, Diesel plant, hundreds of miles of power lines, 200 deep well pumps, and other plants and equipment is not a "service establishment."

B. Appellee's employees engaged in pumping and directing the flow of water for the irrigation of its stockholders' lands are "engaged in the production of goods" for interstate commerce, since such supplying of water is a "process" and an "occupation necessary to the production" of such goods as defined in section 3(j) of the Act, 29 U.S.C.A. § 203(j).¹ More particularly, appellee's maintenance employees are engaged in maintaining, cleaning, and repairing the canals, laterals, and ditches through which the water flows to irrigate the farms. These employees mow and burn noxious grasses and weeds which, if permitted to grow without restraint, would clog the canals, laterals and ditches and stop the vital flow of water. In their work they operate draglines, bull dozers, dredges, shovels, mowers, burners and other necessary machines. They also perform repair work upon the head gates, weirs, and other physical equipment which controls the flow of the water through appellee's works.

The pump men operate and service the electric pumps which draw from underground the water to be delivered to appellee's shareholders in addition to the water obtained from the Salt and Verde Rivers. Whenever these employees switch on the pumps they cause electricity, including electricity originating ouside the State of Arizona, to flow through appellee's lines. Thus these employees, in addition to supplying water to appellee's shareholders, are engaged in bringing electricity into the state.

This court takes judicial notice of the fact that the rainfall in the area irrigated by...