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Battaglia v. General Motors Corporation. Holland

CIRCUIT COURT OF APPEALS, SECOND CIRCUIT.


July 8, 1948

BATTAGLIA ET AL.
v.
GENERAL MOTORS CORPORATION. HOLLAND ET AL. V. GENERAL MOTORS CORPORATION. HILGER ET AL. V. GENERAL MOTORS CORPORATION. CASHEBA V. GENERAL MOTORS CORPORATION.

Author: Chase

Before SWAN, AUGUSTUS N. HAND and CHASE, Circuit Judges.

CHASE, Circuit Judge:

Four separate suits were brought against the appellee in the District Court for the Western District of New York by and in behalf of its employees to recover overtime pay in accordance with the provisions of the Fair Labor Standards Act of 1938,*fn1 as interpreted by the Supreme Court in Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 66 S. Ct. 1187, 90 L. Ed. 1515. While these suits were pending without adjudication, Congress enacted the Portal-to-Portal Act of 1947, 61 Stat. 84-90, 29 U.S.C.A. §§ 251-262. The appellee then moved to dismiss each of the complaints, which for present purposes may be treated as identical, on the grounds that no cause of action was alleged and that the court was without jurisdiction by virtue of section 2 of the Portal-to-Portal Act.*fn2 As the appellants then questioned this statute upon constitutional grounds, notice of that was given the Attorney General and he was allowed to intervene in behalf of the government in support of the validity of the Act. The motions to dismiss were granted with leave to amend within a reasonable time fixed. The plaintiffs did not amend their complaints and after the expiration of their time to do so orders were entered granting the motions to dismiss each complaint. Appeals taken by the plaintiffs from each of those orders were consolidated for hearing.

The complaints alleged a cause of action under section 16(b) of the Fair Labor Standards Act, 29 U.S.C.A. § 216(b), for overtime compensation and an additional equal amount as liquidated damages, together with reasonable attorney's fees, for time upon the employer's premises preliminary to, and after engagement in, the principal activities of the employees. This time was spent by the employees in walking to and from their work stations and walking out of their employers' premises when their principal work was done; in changing their clothes on their employer's premises before and after their main activities; in receiving their orders; in obtaining on such premises their tools and other equipment before, and in disposing of them after, their main activities; in washing and cleansing themselves after their principal work was done; and in lunch and rest periods during which their time was not entirely at their own disposal. It was not alleged that the compensation sought was for activities which were compensable by an express provision of a written or nonwritten contract, or by a custom or practice, in effect at the time of the activities and at the place of employment. Consequently, appellants did not meet the conditions of subdivision (a) of section 2 of the Portal-to-Portal Act on showing the employer's liability under the Fair Labor Standards Act, nor did they comply with the jurisdictional requirements of subdivision (d) of that section of the Act.*fn3

In this way the issue of the constitutionality of this section of the Portal-to-Portal Act has been presented by these appeals. Though the appellants do not contend here, as they did below, that the question is premature since there was no trial on the merits, we deem it necessary to determine this point on our own motion, We think that the issue of constitutionality was properly raised by motion in each case before trial. Rule 12(b), Federal Rules of Civil Procedure, 28 U.S.C.A. following § 723c. It was the duty of the court to ascertain whether it had jurisdiction before proceeding to hear and decide the case on the merits. Emmons v. Smitt, 6 Cir., 149 F.2d 869, certiorari denied, 326 U.S. 746, 66 S. Ct. 59, 90 L. Ed. 446; Ex parte McCardle, 7 Wall. 506, 19 L. Ed. 264; see Smith v. McCullough, 270 U.S. 456, 459, 46 S. Ct. 338, 70 L. Ed. 682; Rule 12(h), Federal Rules of Civil Procedure, 28 U.S.C.A. following § 723c. The allegation of facts to show jurisdiction in the district court is a prerequisite to the trial of an action on the merits. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 56 S. Ct. 780, 80 L. Ed. 1135; Donnelly Garment Co. v. International Ladies' Garment Workers' Union, 8 Cir., 99 F.2d 309, 316, certiorari denied, 305 U.S. 662, 59 S. Ct. 364, 83 L. Ed. 430; 28 U.S.C.A. § 380. Unlike the situation in Ward Baking Co. v. Holtzoff, 2 Cir., 164 F.2d 34, 36, where we said that, "It is inexpedient to attempt to decide a constitutional question such as this in vacuo," there were no allegations of fact which if proved would have permitted recovery whether or not the Portal-to-Portal Act were valid. If subdivision (d) of section 2 of that Act is valid the lack of jurisdiction is clear and if subdivisions (a) and (b) of section 2 are valid it is equally apparent that no cause of action on the merits was alleged. We think the dismissal of each cause of action right, for the following reasons.

A few of the district court decisions sustaining section 2 of the Portal-to-Portal Act have done so on the ground that since jurisdiction of federal courts other than the Supreme Court is conferred by Congress, it may at the will of Congress be taken away in whole or in part.E.g., Boehle v. Electro Metallurgical Co., D.C. Or., 72 F.Supp. 21; Story v. Todd Houston Shipbuilding Corp., D.C.S.D. Tex., 72 F.Supp. 690; Johnson v. Park City Consol. Mines Co., D.C.E.D. Mo., 73 F.Supp. 852; Quinn v. California Shipbuilding Corp., D.C.S.D. Cal., 76 F.Supp. 742; Grazeski v. Federal Shipbuildings & Dry Dock Co., D.C. N.J., 76 F.Supp. 845.Relying upon a statement of the Supreme Court in Kline v. Burke Construction Co., 260 U.S. 226, 234, 43 S. Ct. 79, 67 L. Ed. 226, 24 A.L.R. 1077, and on cases like Norris v. Crocker, 13 How. 429, 14 L. Ed. 210; Ex parte McCardle, 7 Wall. 506, 19 L. Ed. 264; and Assessors v. Osbornes, 9 Wall. 567, 19 L. Ed. 748, these district court decisions would, in effect, sustain subdivision (d) of section 2 of the Act regardless of whether subdivisions (a) and (b) were valid. We think, however, that the exercise by Congress of its control over jurisdiction is subject to compliance with at least the requirements of the Fifth Amendment. That is to say, while Congress has the undoubted power to give, withhold, and restrict the jurisdiction of courts other than the Supreme Court,*fn4 it must not so exercise that power as to deprive any person of life, liberty, or property without due process of law or to take private property without just compensation. Graham & Foster v. Goodcell, 282 U.S. 409, 431, 51 S. Ct. 186, 75 L. Ed. 415; cf. Brinkerhoff-Faris Trust & Savings Co. v. Hill, 281 U.S. 673, 682, 50 S. Ct. 451, 74 L. Ed. 1107; see also Lynch v. United States, 292 U.S. 571, 580, 54 S. Ct. 840, 78 L. Ed. 1434; Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555, 589, 55 S. Ct. 854, 79 L. Ed. 1593, 97 A.L.R. 1106. Thus, regardless of whether subdivision (d) of section 2 had an independent end in itself,*fn5 if one of its effects would be to deprive the appellants of property without due process or just compensation, it would be invalid. Under this view, subdivision (d) on the one hand and subdivisions (a) and (b) on the other will stand or fall together. We turn then to a consideration of the question whether the appellants have been unconstitutionally deprived of any substantive rights.

It is contended that, while the employees' rights to overtime compensation*fn6 ultimately flow from the Fair Labor Standards Act, they are also in some sense "contractual" in nature and hence were vested. And it is well settled that contracts made by private parties must necessarily be construed in the light of the applicable law at the time of their execution. See 3 Williston on Contracts (Rev.Ed.) Sec. 615.These appellants' contracts of employment with the appellee were made before the Fair Labor Standards Act was enacted.*fn7 Thus it cannot be said that the contracts were "made," as the appellants put it, with reference to the provisions of that Act. Perhaps it can be argued, however that upon the enactment of that Act, it was adopted by the parties as a part of their agreement. See Roland Electrical Co. v. Black, 4 Cir., 163 F.2d 417, appeal pending. If this be true, then the contracts would, of course, have to be read in connection with, among other provisions, section 7, 29 U.S.C.A. § 207, providing for payment of one and one-half times the regular rate for hours worked in excess of a "work-week" of forty-four hours during the first effective year of the Act, forty-two hours the second year, and forty hours thereafter.

But, assuming the contracts were thus modified, at the time of the modification the decisions in Tennessee Coal, Iron & R. Co. v. Muscoda Local No. 123, 321 U.S. 590, 64 S. Ct. 698, 88 L. Ed. 949, 152 A.L.R. 1014; Jewell Ridge Coal Corp. v. Local No. 6167, U.M.W., 325 U.S. 161, 65 S. Ct. 1063, 89 L. Ed. 1534; and Anderson v. Mt. Clemens Pottery Co., supra - all of them so construing section 7 as to include time spent in so-called portal to portal activities in the "work-week" of employees - had not been handed down. Williston says, in Sec. 615 noted above, "Doubtless law frequently is adopted by the parties as a portion of their agreement. Whether it is or not in any particular case should be determined by the same standard of interpretation as is applied to their expressions in other respects." Congress has found in section 1(a) of the Portal-to-Portal Act that the liabilities created by the Supreme Court decisions above noted were "wholly unexpected" and that under those decisions the "employees would receive windfall payments, including liquidated damages, of sums for activities performed by them without any expectation of reward beyond that included in their agreed rates of pay." And the appellants apparently do not dispute these findings. If we accept them, and consider that at the time the original contracts of employment were modified to take into account the enactment of the Fair Labor Standards Act neither employer nor employee had any reason to believe that portal to portal activities were compensable under it, then it would seem to follow that, at least to the time of those decisions, any rights the employees had to such compensation were not in any sense "contractual."*fn8

At the same time, if it can be said that the contracts of employment were modified upon the enactment of the Fair Labor Standards Act, perhaps it also can be said that when those decisions were made, the contracts of employment were again modified so as to take the judicially established law into consideration. Were this the case, even if the rights of the employees were purely statutory up to the time of those decisions, thereafter they were based upon contract.

Finally, while the liabilities may have been wholly "unexpected" in the sense that neither employer nor employee anticipated that they would accrue, it might be contended that the original contracts were modified in reliance upon section 7, however it might be construed in futuro by the courts.

Thus, there are, we think, three ways in which the employees' rights to compensation for these activities may be viewed: first, as wholly statutory up to the time the Portal-to-Portal Act was enacted; second, as purely statutory up to the time of the Supreme Court decisions*fn9 and contractual thereafter; and finally, as wholly contractual from the beginning. We need not now decide whether to consider the Congressional findings as determinative, or to take some other view of the situation, for we think that however appellants' rights are considered, the Portal-to-Portal Act is constitutional.

This seems plain enough, if we take the view that the claims rested purely on statute up to the time the Portal-to-Portal Act was enacted. Clearly, the general rule is that "powers derived wholly from a statute are extinguished by its repeal." Flanigan v. County of Sierra, 196 U.S. 553, 560, 25 S. Ct. 314, 315, 49 L. Ed. 597. The Supreme Court, moreover, has told us that rights granted to employees under the Fair Labor Standards Act have a "private-public character" and has indicated that they are "charged or colored with the public interest." See Brooklyn Savings Bank v. O'Neil, 324 U.S. 697, 704, 709, 65 S. Ct. 895, 903, 89 L. Ed. 1296. Congress has also found that it "is in the national public interest and for the general welfare, essential to national defense and necessary to aid, protect, and foster commerce" that the Portal-to-Portal Act be enacted. 29 U.S.C.A. § 251(a). This being true, so long as the claims, if they were purely statutory, had not ripened into final judgment, regardless of whether the activities on which they were based had been performed, they were subject to whatever action Congress might take with respect to them. Western Union Tel. Co. v. Louisville & Nashville R. Co., 258 U.S. 13, 42 S. Ct. 258, 66 L. Ed. 437; see also Norris v. Crocker, 13 How. 429, 14 L. Ed. 210; Ewell v. Daggs, 108 U.S. 143, 151, 2 S. Ct. 408, 27 L. Ed. 682; Campbell v. Holt, 115 U.S. 620, 6 S. Ct. 209, 29 L. Ed. 483; Pearsall v. Great Northern R. Co., 161 U.S. 646, 673, 674, 16 S. Ct. 705, 40 L. Ed. 838; West Side Belt. R. Co. v. Pittsburgh Const. Co., 219 U.S. 92, 31 S. Ct. 196, 55 L. Ed. 107; Chase Securities Corp. v. Donaldson, 325 U.S. 304, 65 S. Ct. 1137, 89 L. Ed. 1628; Fleming v. Rhodes, 331 U.S. 100, 109, 67 S. Ct. 1140, 91 L. Ed. 1368; United States ex rel. Rodriguez v. Weekly Publications, 2 Cir., 144 F.2d 186; National Carloading Corp. v. Phoenix-El Paso Express, 142 Tex. 141, 176 S.W.2d 564, 569, 570, certiorari denied, 322 U.S. 747, 64 S. Ct. 1156, 88 L. Ed. 1578.

If however, the rights were statutory up to the time of the Supreme Court decisions and contractual thereafter, or if they were founded upon contract from the time of the enactment of the Fair Labor Standards Act, the problem is not so simple,*fn10 for there are a number of cases holding that it is a violation of due process to deprive an individual of previously vested contractual rights.Lynch v. United States, 292 U.S. 571, 54 S. Ct. 840, 78 L. Ed. 1434; Pacific Mail S.S. Co. v. Joliffe, 2 Wall. 450, 17 L. Ed. 805; Ettor v. City of Tacoma, 228 U.S. 148, 33 S. Ct. 428, 57 L. Ed. 773; Forbes Pioneer Boat Line v. Board of Commissioners of Everglades Drainage District, 258 U.S. 338, 42 S. Ct. 325, 66 L. Ed. 647; Coombes v. Getz, 285 U.S. 434, 52 S. Ct. 435, 76 L. Ed. 866.

But the solution the problem seems quite as clear. The Portal-to-Portal Act, like the Fair Labor Standards Act, was passed as an exercise of the power to regulate commerce from time to time as conditions may require. The Congressional findings,*fn11 made after investigations which disclosed amply supporting facts, show fully why the enactment of the Portal-to-Portal Act was necessary to avoid great injury to interstate commerce.*fn12 In the Act Congress saw fit to change the Fair Labor Standards Act, which might be said previously to have made the appellants' contracts of employment include the right to compensation for portal to portal activities, by doing away with so much of those contracts in that respect as that statute had added tom them. This did not deprive the appellants of any Constitutional right. If the contractual arrangements of these private parties were subject to the Fair Labor Standards Act as it might be interpreted by the courts, or were modified to take into consideration decisions construing that statute, they were also subject to changes made in it by Congress in the exercise of its power to regulate commerce. Very closely in point is Louisville & Nashville R. Co. v. Mottley, 219 U.S. 467, 31 S. Ct. 265, 55 L. Ed. 297, 34 L.R.A.,N.S., 671, where a contract to furnish transportation free of charge - valid when made and based upon adequate consideration - was held un-enforceable when Congress later, in the exercise of its commerce power, made in unlawful for railroads to provide such transportation. The private contract to furnish free transportation was totally destroyed. The Supreme Court there said: "The agreement between the railroad company and the Mottleys must necessarily be regarded as having been made subject to the possibility that, as some future time, Congress might so exert its whole constitutional power in regulating interstate commerce as to render that agreement unenforceable, or to impair its value. That the exercise of such power may be hampered or restricted to any extent by contracts previously made between individuals or corporations is inconceivable. * * * If that principle be not sound, the result would be individuals and corporations could, by contracts between themselves, in anticipation of legislation, render of no avail the exercise by Congress, to the full extent authorized by the Constitution, of its power to regulate commerce. No power of Congress can be thus restricted." 219 U.S. at pages 482, 485, 486, 31 S. Ct. at page 270; Addyston Pipe & Steel Co. v. United States, 175 U.S. 211, 228, 229, 20 S. Ct. 96, 44 L. Ed. 136; Scranton v. Wheeler, 179 U.S. 141, 162, 163, 21 S. Ct. 48, 45 L. Ed. 126; Union Bridge Co. v. United States, 204 U.S. 364, 400, 27 S. Ct. 367, 51 L. Ed. 523; cf. Norman v. Baltimore & Ohio R. Co., 294 U.S. 240, 307, 308, 55 S. Ct. 407, 79 L. Ed. 885, 95 A.L.R. 1352. The controlling principle was said, in Home Building & Loan Ass'n v. Blaisdell, 290 U.S. 398, 435, 54 S. Ct. 231, 239, 78 L. Ed. 413, 88 A.L.R. 1481, to be that: "Not only are existing laws read into contracts in order to fix obligations as between the parties, but the reservation of essential attributes of sovereign power is also read into contracts as a postulate of the legal order."*fn13 And this principle is not limited to cases where the effect of the exercise of Congressional power upon pre-existing contracts is only incidental. Norman v. Baltimore & Ohio R. Co., supra, 294 U.S. at page 309, 55 S. Ct. 407.

It is the fact that here Congress was exercising its commerce power, which, we think, primarily serves to distinguish the cases relied upon by appellants. The Joliffe, Ettor, Forbes Pioneer Boat Line, and Coombes cases, supra, all dealt with state statutes or constitutional provisions repealing prior state laws. And in Lynch v. United States, supra, appellants' only case dealing with a Congressional statute, the principle that the reservation of sovereign powers is read into contracts was, we think, expressly recognized: the court there pointed out that, "The Solicitor General does not suggest either in brief or argument that there were supervening conditions which authorized Congress to abrogate these contracts in the exercise of the police or any other power." 292 U.S. at pages 579, 580, 54 S. Ct. at page 844.

This is not to say, of course, that Congress may exercise its commerce power in a discriminatory or arbitrary manner.We need not go so far. Faced with what it reasonably considered a situation relating to commerce that called for legislative action, Congress, after a thorough investigation, enacted the Portal-to-Portal Act. It cannot be said that, in so doing, Congress acted arbitrarily. It is not even suggested that it acted discriminatorily.*fn14 Clearly the Act did not violate the Fifth Amendment in so far as it may have withdrawn from private individuals, these appellants, any rights they may said to have had which rested upon private contracts they had made.

Nor is the Portal-to-Portal Act a violation of Article III of the Constitution or an encroachment upon the separate power of the judiciary. True enough, decisions of the Supreme Court played their part in creating the conditions Congress undertook to remedy, as it expressly stated in section 1(a) of the Act. But those decisions were construing a previously enacted statute. The regulatory legislation did not attempt to change those decisions in any way, or to impose upon the courts any rule of decision not in conformity with basic legal concepts, as in United States v. Klein, 13 Wall. 128, 20 L. Ed. 219.*fn15 On the contrary, it left express private contracts and those implied in fact, except to the extent that they may be said to have had reference to prior statutory law, untouched and enforceable in the courts as before under the applicable legal principles. It did not require repayment of any money paid in reliance upon the decisions of the Supreme Court. It left valid final judgments for portal-to-portal pay. Since Congress, for the reasons heretofore stated, otherwise had the power to enact the Portal-to-Portal Act, the fact that one of the Act's incidental effects is to prevent the courts from following the Tennessee Coal Iron & R. Co., Jewell Ridge Coal Corp., and Mt. Clemens Pottery cases, is of no importance. See Stockdale v. Atlantic Insurance Co. of New Orleans, 20 Wall. 323, 22 L. Ed. 348; Graham & Foster v. Goodcell, 282 U.S. 409, 51 S. Ct. 186, 75 L. Ed. 415. We find ourselves, then, in agreement wilth the decision of the Circuit Court of Appeals for the Fourth Circuit in Seese v. Bethlehem Steel Co., 4 Cir., 168 F.2d 58.

Judgments affirmed.


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