Walling v. Block

• Decision Date: 19 November 1943
• Docket Number: No. 10281.,10281.
• Parties: WALLING, Administrator of Wage and Hour Division, United States Department of Labor, v. BLOCK.
• Court: U.S. Court of Appeals — Ninth Circuit

139 F.2d 268 (1943)

WALLING, Administrator of Wage and Hour Division, United States Department of Labor, v. BLOCK.

No. 10281.

Circuit Court of Appeals, Ninth Circuit.

November 19, 1943.

Irving J. Levy, Acting Sol., and Bessie Margolin, Asst. Sol., Wage and Hour Division, United States Department of Labor, both of Washington, D. C., Dorothy M. Williams, Regional Atty., of San Francisco, Cal., Morton Liftin, of Washington, D. C., and George L. Clarke, of Baltimore, Md., Attys., Wage and Hour Division, United States Department of Labor, for appellant.

Bogle, Bogle & Gates and Edward G. Dobrin, all of Seattle, Wash., for appellee.

Before GARRECHT, STEPHENS, and HEALY, Circuit Judges.

HEALY, Circuit Judge.

The Administrator sued to restrain violations of the Fair Labor Standards Act, 29 U.S.C.A. § 201 et seq. After hearing proof the court dismissed the suit, and the Administrator appeals. It is conceded that the Act, if applicable, was not complied with.

Appellee owns and operates a chain of nineteen retail shoe stores, fourteen of which are in Washington, three in Oregon, and two in Idaho. He maintains at Seattle a central office and warehouse or floor space¹ where the great bulk of the merchandise dealt in is received from out-state suppliers and from which it is distributed to the several stores, a minor part being shipped directly to the stores by the suppliers. After arrival in Seattle the goods are transported by a local transfer company to the warehouse where they are weighed, checked, unpacked, sorted, and repacked for distribution, about 30% being distributed to the stores in Oregon and Idaho, the balance to those in Washington. Except for a small reserve stock, the goods shipped to the Seattle warehouse are kept there only long enough to be prepared for transmission to the stores. The employees involved are those working in the central office and warehouse, namely, shipping and receiving clerks, and clerical, bookkeeping and maintenance employees.

Appellee's business is controlled from the Seattle office, the local store managers making daily sales reports and weekly stock reports, but having no authority over prices; and they purchase no merchandise. All financial transactions of the chain, such as the negotiation of advertising, leasing and insurance contracts, and the payment of wages and salaries, are handled from the Seattle office. Appellee sells only at retail, and he neither produces nor processes goods of any sort.

The trial court found as a fact that the receipt of the goods and their subsequent distribution through the Seattle warehouse did not involve interstate commerce, that is to say, that the employees there are not engaged in commerce. However, for purposes of decision we assume the contrary. Walling v. Jacksonville Paper Co., 317 U. S. 564, 63 S.Ct. 332, 87 L.Ed. 460; Kirschbaum Co. v. Walling, 316 U.S. 517, 519, 62 S.Ct. 1116, 86 L.Ed. 1638. Certainly those persons employed in and about the distribution of merchandise to the Oregon and Idaho stores were so engaged. But the court rested its judgment primarily on the proposition that the employees are excluded from the benefits of the Act by virtue of § 13(a) (2), which exempts "any employee engaged in any retail or service establishment the greater part of whose selling or servicing is in intrastate commerce."

The Administrator concedes, or, to put it more accurately, insists, that each separate store in the chain is a "retail establishment" of the type excluded by this provision. His point is that the system as a whole is not such an establishment, more particularly that the central office and warehouse constitute a separate unit or establishment where no retailing is done. He likens that unit to a wholesale house in that the functions performed there are comparable, he says, with those performed by the wholesaler.

Aside from some District Court decisions, there are but few cases dealing immediately with the point. The Court of Appeals of the Sixth Circuit in Allesandro v. C. F. Smith Co., 136 F.2d 75,² has held that employees engaged in comparable services for a grocery chain are excluded from coverage by § 13(a) (2). The Third Circuit in Walling v. American Stores Co., 133 F.2d 840, reached a contrary conclusion in respect of a somewhat similar chain store activity, but in that case the chain store operator produced or processed goods at its warehouses on an extensive scale. The services performed were thus related to the production of goods for commerce as well as to retailing. The two holdings are not necessarily in conflict. The point was present in Walling v. Goldblatt Bros., 7 Cir., 128 F.2d 778, but was not distinctly ruled upon. The Administrator attempts to distinguish the holding in Allesandro v. C. F. Smith Co., supra, on the ground that there the distribution center and the stores were all located in the same state; but for present purposes we see no relevancy in the distinction. Even if the warehouse employees be regarded as in interstate commerce, the court nevertheless thought they were excluded by force of § 13(a) (2).

It appears to us that the work of the employees in the present case is plainly incidental to the operation of a retail business. While in some respects the functions performed at the central warehouse are comparable with those performed by the traditional wholesaler, yet obviously the analogy is superficial and incomplete. Large retail department stores have central business offices and maintain warehouses or stock rooms where goods are received and from which they are distributed to the various departments. These may be in the same building as the selling departments or in a separate building. The mere physical separation of appellee's warehouse from the stores themselves can hardly be regarded as a controlling factor.

Whether appellee's stores constitute a single establishment or whether each, in appropriate circumstances, is to be regarded as a separate establishment, is a question we need not consider. All we decide is that the services involved were a mere incident to and an integral part of the operation of each store in the group. Since the selling of no store was substantially interstate, the employees in question are excluded from coverage by § 13(a) (2) of the Act.

Affirmed.

GARRECHT, Circuit Judge (dissenting).

Both on reason and authority, I believe that the judgment should be reversed.

There is no "dependable touchstone" by which the applicability of the statute in question can be determined. Kirschbaum v. Walling, 316 U.S. 517, 520, 62 S.Ct. 1116, 86 L.Ed. 1638. "The question of the Act's coverage depends on the special facts pertaining to the particular business." Walling v. Jacksonville Paper Co., 317 U. S. 564, 572, 63 S.Ct. 332, 337, 87 L.Ed. 460.

This being so, we must be careful to keep before us all the significant facts pertaining to the business of Block's Shoe Stores. While the majority opinion's statement of facts may be correct as far as it goes, there have been omitted a number of relevant bits that help make up the complex mosaic of the appellee's farflung chain system.

In the year ending July, 1941, the appellee's nineteen stores did more than a million dollars worth of business. The merchandise was shipped in chiefly from outside of the state manufacturers and from 88 to 90 per cent of the total goods purchased were shipped by rail to the Seattle warehouse and the rest to the stores directly. Shoes were shipped to the appellee's stores from the Seattle warehouse 80 miles north to Bellingham, Washington, 340 miles south to Eugene, Oregon, 650 miles east to Boise, Idaho, and 100 miles southwest to Aberdeen, Washington, as well as to many other distant points. Although the lower court found as a fact that the receipt of the goods and their subsequent distribution through the Seattle warehouse did not involve interstate commerce, the majority opinion properly holds otherwise, and rules that the warehouse employees were engaged in such commerce. I am assuming that when the majority opinion refers to the "warehouse" employees it includes also the employees in the central office, located in the same building. There has been no attempt in this case to distinguish between these two types of employees, who are the only ones to whom the present controversy relates.

The appellee concedes that he does not regard the central office and warehouse "as a retail store". While the nineteen retail stores are directed by the central office, which controls purchases, pay roll and personnel, each individual store is under the direction of a manager with authority to hire and discharge employees. The central office keeps a perpetual inventory for each store, and each store keeps its own perpetual inventory. Each store has a separate ledger for sales.

In 1941, a payment was made on a wholesale distribution tax levied by the State of Washington for a part of the business carried on at the warehouse.

The appellee contends that this business "is operated as one unified enterprise and is in its entirety a `retail establishment', within the letter and spirit of section 13 (a) (2)", providing that the Fair Labor Standards Act shall not apply to any employee engaged in any retail establishment doing chiefly an intrastate business. Since the central office and warehouse is a necessary part of this "retail establishment", appellee claims that it too shares the same exemption that is enjoyed by the individual "outlets" or retail stores.

The appellant, on the other hand, while unreservedly agreeing that each of the appellee's stores is a "retail establishment", earnestly maintains that "the entire chainstore system is not a single establishment", and that, therefore, the office and warehouse employees, performing as they do "non-retail" functions, are not within the exemptive provisions of section 13 (a) (2).

This case should be considered in its proper "moral climate". That moral...