The opinion of the court was delivered by: RIFKIND
This action under the Fair Labor Standards Act, 29 U.S.C.A. § 201 et seq., has already had a long career. It appears now to be well launched on another of perhaps equal duration.
The action was commenced on December 10, 1943. On November 20, 1944, fourteen days after the decision in Walling v. Helmerich & Payne, 1944, 323 U.S. 37, 65 S. Ct. 11, 89 L. Ed. 29 and by the light of that opinion, plaintiffs filed an amended complaint alleging claims under the Act for the period April 21, 1942 to December 10, 1943. These are the claims presently in issue.
Judge Bondy filed his opinion directing judgment in favor of plaintiffs on December 31, 1945. It is reported at 65 F.Supp. 385. On March 8, 1946, judgment for the plaintiffs was entered.
On review, the judgment was affirmed by the Court of Appeals, 156 F.2d 139, on June 17, 1946, and by the Supreme Court, 331 U.S. 199, 67 S. Ct. 1178, 91 L. Ed. 1432, 169 A.L.R. 1293, on May 5, 1947. Nine days later, on May 14, 1947, Congress enacted the Portal-to-Portal Act, 29 U.S.C.A. 251 et seq. Thereupon, in response to defendants' petition, the Supreme Court made an order modifying the judgment of affirmance and remanding the cause to the District Court with authority in that court to consider Portal-to-Portal Act defenses. June 16, 1947, 331 U.S. 795, 67 S. Ct. 1726, 91 L. Ed. 1822.
Proceedings were then had in the District Court which culminated in Judge Bondy's opinion filed July 1, 1948 and reported in 79 F.Supp. 413.
On May 19, 1949, defendants served a supplemental answer pleading the defenses indicated in Sections 9 and 11 of the Portal-to-Portal Act.
The issues so presented have been tried to the court and now call for decision.
So much for the procedural history which is the prologue to the pending litigation. A brief chronology will now be presented in an effort to summarize the events from which the inferences are to be drawn which will sustain or overrule the defenses.
The plaintiffs were building service employees working in a loft building located at 149 Madison Avenue, New York City, owned by defendant 149 Madison Avenue Corporation and managed by defendant Williams & Co., Inc. Since the entry of the original judgment plaintiffs Manne and Torra have died and their representatives have been substituted. In all negotiations relating to rate of pay, hours of work, and working conditions plaintiffs were represented by a collective bargaining agent, Local 32B, Building Service Employees International Union, A.F.L. (hereinafter called Union), and defendants by Realty Advisory Board on Labor Relations, Inc. (hereinafter called R.A.B.). It is undisputed that in resolving the issues developed upon the trial, the good or bad faith, the reliance or lack of reliance, of R.A.B. is to be attributed to defendants. Nor is there any doubt that throughout the period under consideration, Mr. Walter Gordon Merritt was attorney for R.A.B. and that the latter relied upon her advice as to all legal matters.
The critical events really began on December 30, 1941. On that day the Circuit Court of Appeals for the 2nd Circuit handed down its decision in the Arsenal Building case. Fleming v. Arsenal Bldg. Corp., 2 Cir., 1941, 125 F.2d 278. Owners of loft buildings in New York City suddenly realized that many of them were subject to a very large liability for overtime compensation and liquidated damages under the Fair Labor Standards Act. The decision was announced in the very midst of the negotiations between representatives of the loft building owners and the Union, representing the service employees. Mr. Merritt appeared for the owners. These negotiations were being facilitated by the intervention of Hon. Arthur S. Meyer, Chairman of the N.Y. State Board of Mediation.
Among the employer representatives on the negotiating committee was Leon Spear, one of the defendants in the Arsenal case. When the 'Meyer formula'
was presented as a solution of the problem presented by the Arsenal decision, he said, 'Now, gentlemen, this formula may be all right, but unless you go to the Wage and Hour Department here and get an approval of it, I for one will not go along with anyone that has to do with it.' The context of this statement appears in the margin.
Spear testified that at the very next meeting of the negotiating committees, Mr. Meyer reported that he had visited the Wage and Hour Division and that he had received its 'go-ahead'. Mr. Meyer's status was, at some point during the negotiations, changed from that of mediator to arbitrator and the agreement finally arrived at, which I shall call the Meyer agreement, was reduced to the form of an arbitration award. It contained the Meyer formula.
It should be underscored that plaintiffs were not employed under this agreement, which related chiefly to buildings in the garment center in New York, but under a later agreement relating to other loft buildings, including the one owned and managed by defendants. The above events relating to the Meyer agreement are relevant because substantially the same negotiating parties were involved in the later agreement under which plaintiffs were employed, which I shall call the National War Labor Board (N.W.L.B.) agreement, and because the Meyer formula was incorporated into that later agreement.
The background of the N.W.L.B. agreement is as follows: On May 1, 1942 the Secretary of Labor certified to the N.W.L.B. that a dispute which warranted its attention had broken out between R.A.B. and the Union. The plaintiffs and defendants in this action were involved in that dispute. The N.W.L.B., which had been created by Executive Order No. 9017, 50 U.S.C.A.Appendix, § 1507, note, designated a Panel which held hearings and made recommendations ...