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BURHANS v. MONTGOMERY WARD & CO.

November 24, 1952

BURHANS et al.
v.
MONTGOMERY WARD & CO., Inc.



The opinion of the court was delivered by: LEIBELL

The plaintiffs, six former employees of defendant Montgomery-Ward, have brought this action under the Fair Labor Standards Act of 1938, 29 U.S.C.A. §§ 201-219, to recover unpaid overtime compensation, liquidated damages, and attorneys' fees. While originally alleged to have been commenced by the six named plaintiffs for themselves and other employees similarly situated, later, by stipulation, the action was continued only on behalf of these six men.

Solely for the purposes of this litigation both parties waived a formal trial and submitted the controversy on a stipulation of facts. The stipulation includes the amount of overtime compensation to be awarded to each employee, if he is found to be entitled to a judgment herein. The amount of any liquidated damages and attorneys' fees would, of course, rest with the Court.

 Plaintiffs allege that defendant, as owner of over 600 retail stores throughout the United States, several mail order houses and factories, and numerous warehouses, is engaged in interstate commerce; that defendant is an Illinois corporation and has a place of business at 75 Varick Street, New York City; that plaintiffs were employed by the defendant in an Albany warehouse at 1275 Broadway (the A. P. W. building) in that city; that the Albany warehouse has been occupied by defendant and various subsidiary and affiliated companies for the warehousing and storage of merchandise and for the manufacture, refinishing, rebuilding, repair and packing of furniture and for related clerical and office work; that substantial quantities of the merchandise in the building were purchased, received and unloaded at the building in interstate commerce and substantial quantities have been sold, shipped and distributed in various states outside the State of New York; that employees of defendant have worked in and about the building in various capacities which were closely, immediately and essentially related to the interstate aspects of defendant's business; that plaintiffs were so employed and worked over forty hours per week but were not paid overtime compensation as prescribed by the Act.

 Defendant's answer admits employing the plaintiffs but denies many of the allegations of the complaint, and alleges that the warehouse was used solely as part of defendant's Albany retail store, for the storage of goods to be sold in said store and for the delivery of purchases to customers of said store. The extent of the denials need not be discussed because the parties later entered into a very detailed stipulation of facts, set forth in eighty-four paragraphs.

 The answer and amended answer of the defendant plead three complete and two partial defenses. The first complete defense is that each plaintiff was engaged in the defendant's retail establishment at Albany, New York, *fn1" the greater part of whose selling was in intrastate commerce within the meaning of the Fair Labor Standards Act of 1938 and that the provisions of the Act do not apply to plaintiffs. § 13(a)(2) of the Act. The second complete defense is that each plaintiff's employment at defendant's Albany retail store, was in a bona fide local retailing capacity, as delimited by the Administrator of the Wage and Hour Division of the United States Department of Labor, and that Section 7 of the Act, providing for overtime compensation, does not apply to plaintiffs because of the exemption set forth in Section 13(a)(1) of the Act. The third complete defense is that Section 7 of the Act applies only to employees engaged in interstate commerce or in the production of goods for such commerce, and that plaintiffs were not so engaged.

 The fourth defense (pleaded as a partial defense) alleges that assuming that some or all of the plaintiffs are entitled to a recovery, parts of their claims, which accrued prior to December 18, 1939, are barred by the Statute of Limitations. This defense has been eliminated from the case by a stipulation of the unpaid overtime due each plaintiff, if he is covered by the Act.

 The fifth defense, also a partial defense, relates to the claim for liquidated damages and alleges that defendant's failure to pay overtime compensation, if any, was in good faith, and that defendant had reasonable grounds for believing that such failure was not a violation of the Act, and that under Section 11 of the Portal to Portal Act of 1947, 29 U.S.C.A. § 260, the claim of the plaintiffs for liquidated damages in addition to any overtime compensation awarded, should be denied.

 These special defenses thus raise two main issues as to each plaintiff's claim: (1) Was the nature of plaintiff's employment such that the overtime provisions of the Act do not apply to plaintiff because of the exemptions set forth in § 13(a)(1) or § 13(a)(2) of the Fair Labor Standards Act? (2) If plaintiff is covered by the Act, is he entitled to any liquidated damages under § 16(b) of the Act, as amended by § 11 of the Portal to Portal Act of 1947, and if so how much?

 The stipulation of facts herein describes the employment of plaintiffs, that they were recorded as employees of defendant's Albany retail store; the hours for which they were actually paid overtime compensation during certain periods (pars. 1 to 3); the general business of the defendant (pars. 4 to 8); the factories of the defendant (pars. 9 and 10); the wholesale activities performed by defendant (pars. 11 to 22); the relation between the Albany retail store and the Albany mail order house (pars. 23 to 33); the method of receiving, storing and displaying merchandise of the Albany retail store (pars. 34 to 47); the organization, records, and accounts of the Albany retail store (pars. 42 to 57); the sales and operating procedure of the Albany retail store (pars. 58 to 64); the activities carried on in the A.P.W. building (pars. 65 to 71); the warehousing or stocking of merchandise for the Albany store (pars. 72 to 74); the furniture repair and refinishing activities of the Albany store (pars. 75 to 78); and the specific work performed by each of the individual plaintiffs (pars. 79 to 84). Many of these eighty-four paragraphs may be briefly summarized or are not of sufficient importance to require any quotation thereof; from others I have quoted the parts most pertinent to the issues, and in some instances the entire paragraph is quoted.

 The defendant, Montgomery Ward & Co., was an Illinois corporation, duly qualified to do business in all forty-eight states, and was engaged in the business of distributing general merchandise at retail through ten mail order houses and 632 retail stores. The central offices of the defendant were located in Chicago and New York City. The business of operating the mail order houses was conducted through a mail order division; and that of the retail stores through a retail division. The divisions were independent of each other and each division was supervised by a separate manager or Vice-President. One of the mail order houses was located at Albany, New York, and one of defendant's retail stores was also located in Albany. Defendant operated four factories; two in Illinois (paints and farm equipment); one in Maryland (closed August 31, 1942) and one in Iowa (wire fencing). The products manufactured or produced at the factories constituted approximately 2% of the total goods sold by defendant. Each factory operated as a separate, independent unit and had its own manager, who was under the general supervision of the General Manager of factories, at Chicago.

 Defendant's wholesale activities were conducted through pool warehouses; one was in New York City, another in Chicago, a third in Baltimore and still others in other parts of the country.

 The employees of defendant in its central offices in Chicago and New York City, the employees in its factories and the employees in its pool warehouses were paid wages and overtime in accordance with the provisions of the Fair Labor Standards Act.

 Defendant's Albany retail store was opened in 1929 at 150 North Broadway, Menands, New York, a suburb of Albany. The Albany mail order house was also located in this building. Defendant owned the land and building. The mail order house was charged with all the taxes, insurance and structural maintenance. The retail store occupied a defined space in the building and was charged a monthly occupancy charge, in the nature of rent, for the space assigned to it. The amount of the charge was credited to the Albany mail order house on defendant's books. The retail store was located on the first four floors of the front wing of 150 North Broadway building and was kept within its own defined space. The mail order house was operated independently of the retail store. No interchange of employees took place between the mail order house and the retail store at Albany. All employees of the mail order house were paid in accordance with the provisions of the Fair Labor Standards Act.

 Paragraph (34) of the stipulation states:

 
'(34) On the first floor of the 150 North Broadway building, more than three-quarters of the space occupied by the retail store was used for the display of merchandise. The remaining portion of the retail store's first floor space was used for alteration, receiving and stock room, boiler room, elevators and stairways.
 
'More than eighty per cent (80%) of the second floor space occupied by the retail store was used for the display of merchandise. The remaining portion of the second floor was used for a display fixture room, stock rooms, stairways, and the customer and employee rest rooms.
 
'More than three-quarters of the third floor space occupied by the retail store was used for the display of merchandise. The remaining portion of the third floor was used for the store's general offices, credit offices, will-call room, stairways, and employees' check room.
 
'On the fourth floor space occupied by the retail store were the advertising office, a receiving room, a stock room, a making room, a wrapping and packing room, carpenter shops, stairways, elevators, and rest rooms.'

 The equipment of the Albany store, the stock it carried and the general practices in conducting its operation were similar to those of other retail stores in Albany and elsewhere.

 The practices of the Albany retail store were:

 
'37. * * *
 
'(a) To deliver over the counter to customers from display stocks small items easily carried by the customer and which the customer wished to take with him;
 
'(b) To keep on display several of the identical items when no additional floor space would be required to do so;
 
'(c) To maintain in immediately adjacent storerooms reserve stocks or advance reserve stocks of merchandise customarily deliverable over the counter;
 
'(d) To maintain further reserve stocks of merchandise customarily deliverable over the counter in storerooms located as close as possible to the space where the merchandise is displayed;
 
'(e) To display single samples of heavy or bulky merchandise and to make deliveries to the customer of identical articles taken from reserve stocks;
 
'(f) To maintain reserve stocks of heavy or bulky merchandise not customarily deliverable over the counter in warehouse space adjacent to the points used for the purpose of delivery to customers;
 
'(g) To provide a delivery service to the homes of customers living in Albany or in adjacent areas within the normal retail trade area of Albany;
 
'(h) To make alterations in garments and other merchandise sold to customers;
 
'(i) To assemble for the customer merchandise received in a knocked-down or unassembled condition;
 
'(j) To install mechanical merchandise in the homes of customers;
 
'(k) To repair and service merchandise previously sold to customers;
 
'(l) To inspect and to prepare for customer approval merchandise to be delivered to the customer.'

 The business of the Albany retail store expanded, and by May 1, 1938, additional space was needed. No more space was available to the retail store in the 150 North Broadway building or in any adjacent building.

 To meet this situation the defendant in 1938 leased a warehouse in the nearby City of Troy, solely for the Albany retail store, for the storage of heavy and bulky merchandise. The Troy building proved to be inadequate and a further change was made in January 1941 to secure more satisfactory warehouse space for the Albany retail store. No more space was available to the retail store at that time in the 150 North Broadway building or in any adjacent building. Thereupon:

 
'(42) The defendant, on January 1, 1941, leased substantially all of the first or ground floor of a building located at 1275 Broadway, Albany, New York, approximately one mile from the 150 North Broadway building. (The space leased in this building will be hereinafter inafter referred to as the 'A.P.W. building.') This building was owned by William K. Sanford and Carroll Kiernan. The amount of the rent for this building was charged to the Albany retail store in the same manner as the occupancy charge for the store's space in the 150 North Broadway building. All of the functions performed in this building had, prior to May 1, 1938, been performed in the 150 North Broadway building in the space allocated to the Albany retail store. The A.P.W. building was used exclusively by the retail store. The A.P.W. building was located on a railroad siding and had platforms available for the loading and unloading of motor trucks.'

 The space in the A.P.W. building would not have been leased had the same amount of space been available in the 150 North Broadway building or in a contiguous building.

 The A.P.W. building was used (a) for the storage of heavy, bulky and space consuming articles; (b) for the handling of all delivery activities of the Albany retail store; and (c) for the repairing and refinishing of furniture prior to sale or delivery to the customer or returned by the customer for such repair or refinishing.

 The manner in which A.P.W. building was used by the Albany retail store was as follows:

 
'(45) The merchandise comprising the lines which were stored in the A.P.W. building was generally shipped directly to that building. In some cases, however, the merchandise would be received at the 150 North Broadway building and would be moved to the A.P.W. building in a truck known as a shuttle truck. A large majority of the merchandise comprising the lines of which reserve stocks were carried at the 150 North Broadway building were shipped directly to the latter building. Shipments were received by rail, motor truck, and by mail. ...

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