Decision Date27 April 1964
Docket Number15189.,No. 15188,15188
Citation330 F.2d 804
PartiesW. Willard WIRTZ, Secretary, United States Department of Labor, Plaintiff-Appellant and Cross-Appellee, v. STEEPLETON GENERAL TIRE COMPANY, Inc. and A. E. Steepleton, Defendants-Appellees and Cross-Appellants.
CourtU.S. Court of Appeals — Sixth Circuit

Bessie Margolin, Associate Sol., Dept. of Labor, Washington, D. C. (Charles Donahue, Sol. of Labor, Beate Bloch, Atty., Dept. of Labor, Washington, D. C., Jeter S. Ray, Regional Atty., Dept. of Labor, Marvin M. Tincher, Nashville, Tenn., on the brief), for Secretary of Labor.

Lucius E. Burch, Jr., Memphis, Tenn. (Tom Mitchell, Jr., Memphis, Tenn., on the brief), for Steepleton General Tire Co., Inc., and A. E. Steepleton.

Before WEICK, Chief Judge, and KALBFLEISCH and PECK, District Judges.

WEICK, Chief Judge.

The two appeals present questions of coverage and exemption under the Fair Labor Standards Act, as amended. 29 U. S.C. § 201 et seq.

The action in the District Court was to enjoin the defendants from violating the minimum wage, overtime and record keeping provisions of the Act. It was conceded by defendants that they had not complied with the requirements of the Act, but they contended that it did not apply to their employees.

The District Judge heard the evidence and adopted findings of fact and conclusions of law. He held that the defendants' employees were engaged in commerce or in the production of goods for commerce within the meaning of the Act, and were covered by its provisions, but that their business was exempt from the requirements of the Act as a "retail or service establishment" under Sections 13 (a) (2) and 13(a) (4) of the amended Act.1 He dismissed the complaint. The Secretary of Labor appealed from the dismissal of his complaint. The defendants filed a cross-appeal from that part of the judgment which determined that they were engaged in interstate commerce and were covered by the Act.

Steepleton General Tire Company, Inc., a Tennessee corporation, was engaged in the sale and distribution of tires and tubes in the Memphis, Tennessee area, which included parts of the adjoining states of Arkansas and Mississippi. It was a franchised dealer of The General Tire & Rubber Company, an Ohio corporation manufacturing tires, tubes and other products. Steepleton provided tire recapping and repair service in its place of business in Memphis. Its customers consisted of individuals, who purchased tires for their own personal use, and commercial users including industrial and transportation companies. Commercial accounts comprised over 50% of its business some of which purchased at discounts. Steepleton made sales to federal, state and local governments on competitive bidding. It made delivery of tires out of its inventory to national accounts sold by The General Tire & Rubber Company. In 1960, which was selected by the parties as a typical year, Steepleton's annual sales of tires amounted to about $903,520 of which $86,000 was to out of state customers and about $58,000 to customers for resale. Its salesmen made regular calls upon customers located in parts of Arkansas and Mississippi.

In our opinion, Steepleton was covered by the Act. Its employees handled, transported and worked on tires destined for these customers outside of Tennessee. The employees removed, recapped, repaired and mounted tires for use on vehicles which operated in interstate commerce. Steepleton maintained accounting records with respect to its out of state sales. This was sufficient under the law to impose coverage. Mitchell v. Kentucky Finance Co., 359 U.S. 290, 79 S.Ct. 756, 3 L.Ed.2d 815; Walling v. Jacksonville Paper Co., 317 U.S. 564, 63 S.Ct. 332, 87 L.Ed. 460; West Kentucky Coal Co. v. Walling, 153 F.2d 582 (C.A. 6).

There is left for our consideration only the question whether Steepleton was exempted from the requirements of the Act as a "retail or service establishment" under Section 13(a) (2) and 13(a) (4) of the amended Act.

It was the contention of Steepleton that the tire industry recognized only two classifications of sales. The sales to dealers who purchased for resale were claimed to be classified in the tire industry as wholesale. All other sales to ultimate consumers or users were recognized as retail irrespective of price, quantity, discounts, or commercial or industrial character. The Secretary, on the other hand, contended that the sales to commercial or industrial users were classified in the industry as wholesale sales. These included (1) sales and services to "fleet" accounts (customers operating five or more trucks or autos for business purposes at discount prices), (2) sales to national accounts and (3) sales made in competitive bidding to federal, state or local governments.

The Act, as originally passed in 1938, provided an exemption in Section 13(a) for "(2) any employee engaged in any retail or service establishment the greater part of whose selling or servicing is in intrastate commerce." 52 Stat. 1060, 1067, 29 U.S.C. § 213(a) (2).

The 1938 Act was construed by the Supreme Court to reach "employees of only such retail or service establishments as are comparable to the local merchant, corner grocer or filling station operator who sells to or serves ultimate consumers who are at the end of, or beyond, that `flow of goods in commerce' which it is the purpose of the Act to reach." Roland Electrical Co. v. Walling, 326 U.S. 657, 666, 66 S.Ct. 413, 417, 90 L.Ed. 383. In order to be considered "retail sales," the sales or services had to be to an ultimate consumer for his personal use. No sales or services for business uses or purposes were considered retail. Roland Electrical Co. v. Walling, supra; West Kentucky Coal Co. v. Walling, supra. Under the 1938 Act, Steepleton's commercial sales would be considered as wholesale.

But Congress amended the Act in 1949. Footnote 1 herein sets forth the 1949 Amendment. The Conference Report was clear that "any sale or service, regardless of the type of customer, will have to be treated by the Administrator and courts as a retail sale or service, so long as such sale or service is recognized in the particular industry as a retail sale or service." 95 Cong.Rec. 14,932, 2 U.S. Code, Congressional Service, pp. 2241, 2264 (1949). See also 95 Cong.Rec. 11,003-11,004. The Supreme Court, in Mitchell v. Kentucky Finance Co., 359 U. S. 290, 79 S.Ct. 756, 3 L.Ed.2d 815 construed the amended Act. Mr. Justice Harlan, who wrote the unanimous opinion of the Court, reviewed the legislative history of the 1949 amendment. He stated that it was the purpose of the amendment to reject the so-called "business use" test which had been adopted by the Administrator and approved by the Court in Roland "and to substitute a more flexible test, under which selling transactions would qualify as retail if they (1) did not involve `resale,' and (2) were recognized in the particular industry as retail." Id., 359 U.S. p. 294, 79 S. Ct. p. 759, 3 L.Ed.2d 815

The only question in this case, therefore, is whether the sale of tires to commercial users were recognized in the tire industry as retail. Most of the evidence offered in the District Court related to this issue.

A. E. Steepleton, president of the defendant company, had been in the tire business since 1938. He testified that sales for resale were recognized in the industry as wholesale whereas sales to the ultimate consumer were retail. Mr. Steepleton was corroborated by testimony of representatives of the four largest rubber companies in Akron — Goodyear, Firestone, Goodrich and General. These representatives of the "Big Four" related the customary practices and habits in the tire industry as far back as 1934 and they all agreed that the two part classification of tire sales in the industry was traditional. Where the sale was made to an ultimate consumer it was regarded as retail whether made to an individual for his personal use, to a business, industrial firm, trucking or bus company and irrespective of quantity, price or discounts.

Steepleton was further corroborated by the testimony of Winston W. Marsh, Executive Secretary and General Manager of National Tire Dealers and Retreaders Association which had a membership of 3200 tire dealers and Reuben E. Hedlund, Executive Secretary of the Chicago Tire Dealers Association and editor and publisher of "This Week in Tires," a trade media.

Dr. Warren W. Leigh, who was Dean of the College of Business Administration of the University of Akron and Professor in business administration, testified as to his familiarity with the sales practices in the tire industry. He confirmed the recognition in the tire industry of...

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    ...statements, accounts and correspondence) constitute "goods" under the FLSA. 20 C.F.R. § 776.20(b); see, e.g., Wirtz v. Steepleton General Tire Co., Inc., 330 F.2d 804 (6th Cir.) (holding that employees who handled, transported, and worked on truck and automobile tires destined for customers......
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