United States v. Stocks Lincoln-Mercury, Inc., 6843.

• Decision Date: 02 July 1962
• Docket Number: No. 6843.,6843.
• Citation: 307 F.2d 266
• Parties: UNITED STATES of America, Appellant, v. STOCKS LINCOLN-MERCURY, INC., Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

307 F.2d 266 (1962)

UNITED STATES of America, Appellant, v. STOCKS LINCOLN-MERCURY, INC., Appellee.

No. 6843.

United States Court of Appeals Tenth Circuit.

July 2, 1962.

David L. Rose, Atty., Dept. of Justice (William H. Orrick, Jr., Asst. Atty. Gen., William T. Thurman, U. S. Atty., and John G. Laughlin, Atty., Dept. of Justice, on the brief), for the United States.

Mark K. Boyle, Salt Lake City, Utah, for appellee.

Before PHILLIPS, PICKETT and LEWIS, Circuit Judges.

PHILLIPS, Circuit Judge.

On July 22, 1958, Stocks Lincoln-Mercury, Inc.,¹ a Utah corporation, was awarded a contract by the United States for furnishing certain motor vehicle parts, materials, supplies and services.

The contract contained the representations and stipulations required by the Walsh-Healey Public Contracts Act, 49 Stat. 2036, 41 U.S.C.A. §§ 35-45.

The United States brought this action against Stocks to recover as liquidated damages an amount alleged to be due by reason of the alleged failure of Stocks to pay overtime pay due its employees engaged in the performance of such contract, as required by the Walsh-Healey Act and the regulations promulgated thereunder.

Theretofore, an administrative complaint had been filed against Stocks by the Under Secretary of Labor, charging violation of the overtime pay provisions of § 6 of the Walsh-Healey Act and the regulations promulgated thereunder. At the administrative hearing Stocks admitted it had not paid time and one-half due its employees engaged in the performance of such contract, but asserted as a defense to the claim that the contract was one for services and therefore was not covered by the Walsh-Healey Act, as construed by § 16(a) of Rulings and Interpretations No. 3, issued by the Administrator of the Wage and Hour and Public Contracts Divisions, United States Department of Labor, and in the alternative that its failure to comply with such Act was in good faith and in conformity with and in reliance on a ruling or interpretation of an agency of the United States, specified in subsection (b) (2) of § 10 of the Portal to Portal Act of 1947, 61 Stat. 84, 29 U.S.C.A. § 251 et seq. The administrative complaint was heard by a hearing examiner. After a full hearing, the examiner entered an order that Stocks pay the United States $4,690.62, as liquidated damages.

Upon Stocks's petition for review, the Administrator of the Wage and Hour and Public Contracts Divisions of the Department of Labor affirmed the examiner's findings and order. In the instant action, Stocks asserted the same defenses it had asserted in the administrative hearing. The United States moved for summary judgment, based on the pleadings and the certified record of the administrative hearing. Following a hearing thereon, the trial court denied the motion and entered an order dismissing the action. The United States has appealed.

The facts disclosed by the pleadings and the administrative proceedings record are these:

In July, 1958, Stocks entered into negotiations with the Air Force with respect to a contract for the general maintenance of automobiles, station wagons and trucks operated by the Air Force at Hill Air Force Base, near Salt Lake City, Utah, and the furnishing of plant facilities, equipment, labor, replacement parts, materials and supplies required to accomplish the work. In such negotiations the Air Force was represented by Solomon Kasarsky and Stocks by R. J. Krone, who was then its General Manager.

In the course of the negotiations and before the contract was awarded, a meeting took place at which Krone, Kasarsky and Frank J. Vause, contracting officer of the Air Force, were present. During that meeting the applicability of the Walsh-Healey Act to the proposed Stocks contract was discussed and Kasarsky advised Krone that the Department of Labor had determined that the Walsh-Healey Act did not apply to an earlier contract between the Air Force and the Preece Motor Company for the maintenance of the automotive equipment of the Air Force by Preece. The terms of the Preece contract were not materially different from the proposed Stocks contract. Kasarsky based such advice on a letter dated April 22, 1958, written to counsel for Preece by the Salt Lake City Field Office Supervisor of the Wage and Hour and Public Contracts Divisions of the Department of Labor. Such letter reads:

"This is to confirm Mr. Adams\' recent conversation with you relative to the application of the Walsh-Healey Public Contracts Act to the operations of Preece Motor Company under contracts with the Hill Air Force Base.

"Our study made relative to the performance on the contracts already awarded indicates that they fall within the definition of service contracts under Section 16(a) of Rulings and Interpretations No. 3, a copy enclosed, and are not subject to the Act.

"If questions arise on future contracts awarded, you might wish to correspond with Acting Regional Director G. J. Mitchell, 630 Sansome Street, San Francisco 11, California.

"Very truly yours /s/ Donal D. Drew DONALD D. DREW Field Office Supervisor"

There was introduced as an exhibit in the administrative hearing a letter dated February 14, 1958, addressed to John R. Dille, Regional Director, U. S. Department of Labor, Wage and Hour and Public Contracts Division, San Francisco, California, and signed by counsel for the Preece Motor Company, in which it was claimed that the Preece contract was not covered by the Walsh-Healey Act and in which certain "references" were set forth in support of that claim.

Counsel for Stocks states in his brief, "It was stipulated that this letter (the letter of February 14, 1958) was in answer to a formal request submitted to the Regional Director of the United States Department of Labor, Wage and Hour Public Contracts Division, San Francisco, California," a factual assumption apparently made by the trial court. The record does not support the statement made in the brief. At the inception of the administrative hearing, counsel for Preece asked counsel for the Department of Labor if he would stipulate "that pursuant to a complaint filed by the government, I contacted the local supervisor, then Mr. John M. Ekeberg, and submitted certain letters and references to him, and Mr. John R. Dille, Regional Director, U. S. Department of Labor, Wage and Hour and Public Contracts Division, at San Francisco, California; that pursuant to such communication I was advised on April 22, 1958 by letter signed by Mr. Drew, Field Office Supervisor, that the service contract was not subject to the Act." To that, counsel for the Department of Labor stated: "I will stipulate to the correspondence to which you have referred, and I believe under such a stipulation that the correspondence might well go into the record as evidence in this proceeding." (Emphasis supplied.)

The record makes it abundantly clear that counsel for Stocks was referring to the letter of February 14, 1958, and since it states that he "submitted certain letters" to Ekeberg and to Dille, it is a reasonable construction of his statement that one copy of the letter of February 14, 1958, was delivered to Ekeberg and one was transmitted to Dille. There is nothing in the stipulation to warrant the factual conclusion that the letter of April 22, 1958, signed by Drew as "Field Office Supervisor," was sent at the direction of Dille or in his behalf. We think it clear that counsel for the Department of Labor did not intend to stipulate and did not in fact stipulate that the letter of April 22, 1958, was sent at Dille's direction or in his behalf. On its face, the letter of April 22, 1958, does not purport to be anything more than a letter from the Field Office Supervisor at Salt Lake City. It refers to Mr. Adams, who was an investigator for the local field office. There is nothing in the letter to indicate that the phrase "our study" appearing therein referred to a study by Drew and the Regional Director. On the contrary, the reasonable deduction from the context of the letter is that it refers to a study by Drew and Adams. There is nothing in the letter from which it could be reasonably inferred that it was written pursuant to instructions from the Regional Director or in his behalf. Accordingly, we conclude that on this record it cannot be said that the letter of April 22, 1958, was a response by the Regional Director to the letter of February 14, 1958, or a ruling or interpretation by such Regional Director. Moreover, as we shall more fully hereinafter show, the Regional Director was without authority to issue rulings or interpretations on the Walsh-Healey Act and the regulations promulgated thereunder and therefore the presumption is that he did not undertake so to do.

In the course of its performance of such contract, Stocks required and permitted certain of its employees engaged in the performance of such contract to work in excess of eight hours per day and 40 hours per week and paid such employees only their basic hourly rate of pay for overtime, rather than the one and one-half times the basic rate of pay required by the Walsh-Healey Act and regulations promulgated thereunder.

On February 28, 1959, Mr. Krone's employment by Stocks terminated and he was succeeded as General Manager by Don Richards, who continued the conditions of employment and basis of pay set up by Mr. Krone. There was no other evidence of a reliance by Stocks on the alleged ruling or interpretation.

The hearing examiner found that a study of approximately one-half of the work order invoices under the Stocks contract selected at random, aggregating $34,585.90, showed $20,263.90 charged for parts and materials and $14,322 charged for labor and that approximately 58 per cent of the total amount paid to Stocks under the contract represented charges for parts and materials and 42 per cent represented charges for labor.

Moreover, it was stipulated by the parties in the administrative hearing that approximately...