Walling v. Mutual Wholesale Food & Supply Co.

• Decision Date: 25 August 1942
• Docket Number: No. 548.,548.
• Citation: Walling v. Mutual Wholesale Food & Supply Co., 46 F. Supp. 939 (D. Minn. 1942)
• Parties: WALLING, Administrator of Wage and Hour Division, United States Department of Labor, v. MUTUAL WHOLESALE FOOD & SUPPLY CO. et al.
• Court: U.S. District Court — District of Minnesota

46 F. Supp. 939

WALLING, Administrator of Wage and Hour Division, United States Department of Labor, v. MUTUAL WHOLESALE FOOD & SUPPLY CO. et al.

No. 548.

District Court, D. Minnesota, Fourth Division.

August 25, 1942.

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Donald M. Murtha and James M. Miller, both of Minneapolis, Minn., and Roy C. Frank, of Washington, D. C. (Warner W. Gardner, Irving J. Levy, Mortimer B. Wolf, and Edward J. Fruchtman, all of Washington, D. C., of counsel), for plaintiff.

R. H. Fryberger, of Minneapolis, Minn. (George M. Burditt, of Chicago, Ill., of counsel), for defendants.

NORDBYE, District Judge.

While the facts are not particularly involved, a detailed summary seems necessary. Some years ago, a so-called chain stores operation under the name of C. Thomas Stores Sales System, Inc., was organized. Shortly prior to the commencement of this action, the corporate name was changed by amendment to C. Thomas Stores, Inc., and at the trial hereof, it was agreed that the pleadings might be amended accordingly. Therefore, the title herein has been changed to comply with the amendment agreed upon by the parties. During the early years of its existence, the company did its own wholesale buying. However, on or about January 1, 1935, the Mutual Wholesale Food and Supply Company (hereinafter referred to as Mutual) was organized to take care of the buying and distributing of merchandise handled by the Thomas Stores. It appears from the evidence that the primary purpose of organizing Mutual was to better the buying facilities of the Thomas Stores, in that some manufacturers were hesitant about selling direct to a chain system. At the time Mutual was organized, the C. Thomas Stores was operating its wholesale department at 311 Fifth Avenue North in Minneapolis. When Mutual was organized, it took over this wholesale space, and later purchased the adjoining building at 401 North Third Street. Briefly, it may be stated that Mutual's business is primarily devoted to the purchase of merchandise which in turn is sold to the Thomas Stores, some fifty-seven in number, all located in Minnesota. Mutual handles a general line of staple foods and groceries. About 90% of the goods handled is distributed to the C. Thomas Stores, the balance is distributed to other retail stores in the State. In 1941, Mutual's gross sales approximated four million dollars, and it has some 50 employees, including warehouse men, truck drivers, and office employees. Mutual is divided into two departments — dry groceries and produce — the former representing approximately 75% and the latter 25% of the total volume of business. Shipments arrive at the warehouse by interstate rail and truck carriers. Some shipments arrive in pool cars consigned to the Merchandise Terminal Warehouse, Inc., the dock and unloading facilities of Mutual being used when the Merchandise Terminal is the consignee. Under such circumstances, the portion of the pool car belonging to Mutual is unloaded and moved directly into Mutual's part of the warehouse. Where pool cars are spotted at railroad team tracks, or the tracks of another wholesaler or broker, Mutual's truck drivers, or at times independent trucks, transport Mutual's portion to the warehouse. Goods coming directly to Mutual's warehouse by freight cars or trucks are generally unloaded by Mutual's employees, the merchandise placed on flats or warehouse trucks and moved into the warehouse. Records of incoming goods are kept by the receiving clerk.

Merchandise Terminal Warehouse, Inc. (hereinafter referred to as Merchandise Terminal), is a licensed warehouse company and has space in Mutual's warehouse. It pays rent for the space so occupied. The service it performs consists largely of the storage of sugar and other staple commodities, and for such services on behalf of Mutual it charges a certain stipulated warehouse rate. It also repackages goods for Mutual in its "Cello" department; that is, where goods are received by Mutual in units or packages too large for sale by the retail stores, the employees of Merchandise Terminal repackage and relabel the same in smaller units. They are then turned over to Mutual for distribution to local stores in the customary manner. As a public warehouse, Merchandise Terminal receives one or two pool car shipments per week. At least half of the pool cars contain goods billed to Mutual. The goods thus billed to Mutual are unloaded and stored in Mutual's warehouse, and the goods billed to other Minneapolis wholesalers are placed in the space allotted to the Merchandise Terminal until picked up by such wholesaler. The unloading of such shipments is generally taken care of by Mutual's employees. At times, Merchandise Terminal makes shipments to points outside of the State on orders from those who have stored goods or merchandise in its warehouse.

C. Thomas Stores, Inc. (hereinafter referred to as C. Thomas), employs some 12 people in the space occupied by it in Mutual's warehouse building. All requisitions from the retail stores are received by this central office so that they are informed as to the goods which the various retail stores desire to have Mutual send to them. These employees of C. Thomas make up the payroll for the employees of Mutual, Merchandise Terminal, Lawrence Warehouse, and of their own staff. Furthermore, the clerical work necessary to the keeping of records and accounts as between C. Thomas and Mutual is performed by C. Thomas' employees. The local stores from time to time do considerable local advertising, and all such advertising is handled through C. Thomas. Such advertising refers to products of manufacturers from both within and outside the State.

Lawrence Warehouse Company (hereinafter referred to as Lawrence) is a national concern engaged in so-called "field warehousing," a system devised to facilitate bank borrowings by wholesalers. Under this system, a three-party contract is entered into among and between Mutual, Lawrence, and a Minneapolis bank. Mutual is the pledgor and the bank is the pledgee. Lawrence is the pledge holder for the bank, taking physical possession of the pledged merchandise in a space or bay in Mutual's warehouse allocated to Lawrence. Goods valued not less than 133% of the loan received by Mutual from the bank are required to remain in Lawrence's possession. Additions and withdrawals are made as the loan increases or decreases. About 60% of all of the goods handled by Mutual is pledged and stored in Lawrence's bay. When goods are not available for filling requisitions of the local stores from Mutual's stock, the orders are filled from any available goods in Lawrence's stock. Under these circumstances, however, other goods must be substituted for the goods withdrawn so that the merchandise which Lawrence holds will not be less than 133% of the outstanding loan. Lawrence receives a certain monthly remuneration for its services, and in addition Mutual reimburses Lawrence for all its labor costs and expenses. There are some five or six employees on Lawrence's payroll. They are principally engaged in checking the goods moving in and out of Lawrence's bay. They handle such merchandise as may from time to time be necessary and keep the clerical records. In that all such labor costs are paid by Mutual, a practice has grown up whereby the employees on Lawrence's payroll are frequently used to perform work for Mutual under the direction of Mutual's warehouse foreman.

The Bailey Food Merchandise Company (hereinafter referred to as Bailey Food) furnishes management service to the Mutual, C. Thomas, and Merchandise Terminal. It has no employees on its payrolls other than its officers and directors.

The Boards of Directors of the defendants Mutual, C. Thomas, Merchandise Terminal and Bailey Food are closely interlocked. L. W. Bailey holds the stock control of Bailey Food Merchandise Company; Bailey Food in turn controls Mutual, Merchandise Terminal, and C. Thomas.

In order to facilitate the movement of merchandise ordered by the local stores, each store manager is provided with a catalog and requisition sheets covering each item of goods handled by Mutual. These orders or requisitions are routed or handled through the office of C. Thomas, and then delivered to Mutual. When the necessary clerical work has been performed, the warehousemen are given the requisition lists and orders are filled from the stock in the so-called "line-up." The merchandise to be sent out is placed on flats or trucks and moved to the loading platform where it is loaded on Mutual trucks and moved by Mutual truck drivers to the local stores. Orders are sent in from the local stores, one to three times a week and the merchandise is usually sent out the following day. Ofttimes there are so-called "back-orders", that is, orders which have remained unfilled because of the absence of the required items of merchandise. At times, these back orders may be filled out of the incoming freight car or truck, or from the flats on to which goods have been recently unloaded. Where there are perishable items to be sent to the stores, it is not uncommon to load the trucks with the required items out of the incoming cars and trucks. It fairly appears that it is Mutual's policy to keep a supply of merchandise on hand to comply with needs of the local stores for approximately ten days. A relatively rapid turn-over is sought. The average turn-over for groceries is about fifteen times annually and for produce items about forty-five times annually.

The parties are in accord that the primary question presented is whether employees engaged in unloading and warehousing goods arriving from points outside the State and in the distribution of such goods to retail stores throughout the State of Minnesota are engaged in commerce within the purview of the Fair Labor Standards Act, 29 U.S.C.A. § 201 et seq. The Act applies to all employees "engaged in commerce". At the...