Summary
holding that a release was not valid even where there would typically be an accord and satisfaction
Summary of this case from Martinez v. Bohls Bearing Equipment Co.Opinion
No. 125.
December 14, 1944.
Appeal from the District Court of the United States for the Southern District of New York.
Suit under the Fair Labor Standards Act by John A. Fleming and others against W. Kintzing Post, individually and as trustee under the will of Elizabeth W. Perkins, and others, for the recovery of liquidated damages equal to the amount received in payment of back wages due under the act. Judgment for plaintiffs, and defendant named appeals.
Modified and, as modified, affirmed.
This is a suit under § 16(b) of the Fair Labor Standards Act, 29 U.S.C.A. § 216(b), for the recovery of liquidated damages equal to the amount received in payment of back wages due under § 7 of the Act, 29 U.S.C.A. § 207. The plaintiffs are building service employees in a building owned by the defendants. Post, the appellant, is involved in two capacities. Individually, he admits, he is an employer of the plaintiffs as defined in § 2 of the Act, 29 U.S.C.A. § 202. As a trustee, he was the legal owner with two co-trustees of a 1/5 share as tenant in common. The trust was terminated on August 12, 1939. Thereafter, Post continued to collect the rents and supervised the management of the building.
The building was occupied by the following tenants:
(1) The store, the basement, and the sub-basement were occupied by the firms of Richman and East Coast whose business consisted of receiving a major portion of the dry goods, in which they dealt, from outside the state and shipping a major portion of those goods outside the state. From 1938 through 1942 they occupied 22,000 of the 62,000 square feet in the building and between 25 and 50% of their business was interstate.
(2) The second floor was occupied by a manufacturer who shipped between 60 and 70% of his product in interstate commerce. From 1938 through 1942 he occupied 8,000 of the 62,000 square feet in the building.
(3) The third floor was occupied from 1938 through January of 1939 by a manufacturer who shipped 90% of his product in interstate commerce. From then through 1942 another manufacturer rented the premises but shipped only 5% of his goods in interstate commerce. The third floor similarly contains 8,000 square feet.
(4) The fourth floor was occupied throughout this period by a jobber of cotton goods none of which was shipped in interstate commerce until May of 1941 and thereafter but 15% was shipped in interstate commerce.
(5) There was no proof as to the business of the tenant on the fifth floor.
(6) The sixth floor was tenanted by a manufacturer. During 1938 and 1939 only 10% to 15% of his product was shipped in interstate commerce. From 1940 through 1942, from 25% to 40% of the product was shipped in interstate commerce.
From October 24, 1938, the effective date of the Act, until April 20, 1942 (July 5, in the case of Fleming), the plaintiffs were not paid the overtime compensation required by § 7 of the Act. After the decision of the Supreme Court in Kirschbaum Co. v. Walling, 316 U.S. 517, 62 S.Ct. 1116, 86 L.Ed. 1638, the defendants' agent requested from the plaintiffs' agent a statement as to the amount of the statutory overtime pay due them. The defendants' agent discussed the matter with the plaintiffs and several months later, after frequent prodding by the employees, informed them that the defendants had agreed to pay the overtime compensation. The defendants did not contest the accuracy of the schedules of pay due the employees which was submitted. At no time did the defendant's agent suggest the reason for the delay in payment.
The employees were paid by check on January 20, 1943, after each had signed a release which the agent presented to him for signature. Thereafter they brought suit to recover the liquidated damages. The defendants contested on the ground that there had been an accord and satisfaction between the plaintiffs and defendants after a bona fide dispute as to their right to collect the money; that the release barred the recovery of the statutory liquidated damages; that the employees were not covered by the Act; and that the defendant Post was not liable as trustee after the date of the cessation of the trust.
The district court found that there had been no bona fide dispute either as to coverage or the amount of the recovery due and held that the plaintiffs were entitled to a judgment for liquidated damages in an amount equal to the amount already paid as overtime wages. It held the defendant Post liable as trustee for the entire period.
Julian S. Bush, of New York City (W. Kintzing Post, of New York City, of counsel), for appellant.
Henry Albert, of Astoria, N.Y. (Max R. Simon, of Brooklyn, N Y, of counsel), for appellees.
Douglas B. Maggs and Bessie Margolin, both of Washington, D.C., Irving Rozen, of New York City, George M. Szabad, of Washington, D.C., and Albert A. Spiegel, of McKeesport, Pa., for United States Department of Labor.
Before L. HAND, AUGUSTUS N. HAND, and FRANK, Circuit Judges.
1. We think there can be no valid release of the right to the payment of the back minimum and overtime wages. O'Neil v. Brooklyn Savings Bank, 293 N.Y. 666, 56 N.E.2d 259; Fleming v. Warshawsky Co., 7 Cir., 123 F.2d 622, 626; we do not agree with Guess v. Montague, 4 Cir., 140 F.2d 500. And Congress and the courts have considered the claim for back wages and liquidated damages as a single right. See 83 Cong.Rec. 9255 (1938) (conference agreement); Rigopoulos v. Kervan, 2 Cir., 140 F.2d 506, 151 A.L.R. 1126. It would seem clear, therefore, that the same principle should govern the ability to release a claim for liquidated damages. Strand v. Garden Valley Tel. Co., D.C., 51 F. Supp. 898, 904; cf. United States ex rel. Johnson v. Morley Construction Co., 2 Cir., 98 F.2d 781.
"In any case, Congress probably did did not intend any right created by the FLSA for the employee's benefit to be negotiable in a market where bargaining power is unequal." (1943) 57 Harv. L.Rev. 257, 258.
2. We should reach the same result if there were here an accord and satisfaction. In fact there was not. A condition precedent to a valid accord and satisfaction is the establishment of a bona fide dispute over liability. The record would seem to reveal no "actual and substantial difference of opinion" as to liability asserted and denied by the opposing parties. Schuttinger v. Woodruff, 259 N.Y. 212, 226, 181 N.E. 361; Strand v. Garden Valley Tel. Co., supra. Moreover, the district judge found as a matter of fact that there was no dispute between the parties. Since his finding is supported by substantial evidence we must accept it.
3. In determining whether a substantial portion of the building is occupied by tenants engaged in the production of goods for interstate commerce, we have adopted the measure of 20% suggested by the Administrator. See Callus v. 10 East 40th Street Building, Inc., 2 Cir., 146 F.2d 438. In fact, during the years 1938, 1940, 1941, and 1942, about 25% of the building was occupied by tenants engaged in manufacturing goods for interstate commerce.
In deciding which of the occupants may be considered as engaged in the production of goods for interstate commerce, where any of them is so engaged but also in production for intra-state commerce, we are again faced with the necessity of discovering a quantitative standard. On this question we have no interpretation by the Administrator to assist us. The Supreme Court has indicated only that the tenants must be "substantially" engaged in the production of goods for interstate commerce. Walton v. Southern Package Corp., 320 U.S. 540, 64 S.Ct. 320. Once again we equate the term "substantial" with the figure of 20%. We fully appreciate that under these criteria it is possible (although not so in this case) for building employees to be brought under the Act when but 4% of the activity of all the tenants may be categorized as production of goods for interstate commerce. But we feel that the decisions of the Supreme Court indicate such a result, and we must follow what seem to us the implications of these decisions; "we are merely a reflector, serving as a judicial moon."
Choate v. Commissioner, 2 Cir., 129 F.2d 684, 686.
That maintenance employees of a building in which the tenants are engaged in the manufacture of goods for interstate commerce are within the Act is too well established for dispute. Kirschbaum Co. v. Walling, supra. And during the entire period in question, one-third of the building was rented by tenants whose business consisted of receiving goods from outside the state and shipping goods outside the state. This business would clearly seem to come with the Act's definition of "production" which includes "handling." Cf. Callus v. 10 East 40th St. Bldg., Inc., supra. This brings the total space rented by tenants engaged in the production of goods for interstate commerce to 48% for 1939 and 61% for each of the other years in question.
4. Appellant, insofar as he was a trustee, should not be liable for the period after August 12, 1939, when the trust terminated. After that time he appears to have acted as attorney and agent for the owners and appears to have made the payment to the employees on that basis. Up to that time, the liability as trustee should be limited to the one-fifth interest in the property that the trust owned.
5. The plaintiffs' attorneys should receive $400 for the services rendered on this appeal.
Affirmed with modification as to the extent of the liability of the appellant in his capacity as trustee.