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HERMAN v. FASHION HEADQUARTERS

February 5, 1998

ALEXIS M. HERMAN, Secretary of Labor, United States Department of Labor, Plaintiff, against FASHION HEADQUARTERS, INC. and PAUL CASCIO, Individually and as President of FASHION HEADQUARTERS, INC., Defendants.


The opinion of the court was delivered by: STEIN

 SIDNEY H. STEIN, U.S. District Judge.

 The Secretary of Labor has brought this action seeking injunctive relief restraining defendant Fashion Headquarters and its President, Paul Cascio, from violating section 215(a)(1) of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 215(a)(1). Fashion Headquarters is a women's garment manufacturer which, at least in certain instances, contracts its production requirements to other entities. Section 215(a)(1) of the FLSA prohibits anyone from transporting or selling "hot goods," which are goods produced in violation of the minimum wage or overtime provisions of the FLSA, 29 U.S.C. §§ 206 and 207. Section 217 of the FLSA provides that the "district courts . . . shall have jurisdiction, for cause shown, to restrain violations of section 215 of this title." 29 U.S.C. § 217.

 The Secretary of Labor also seeks to require defendants to take affirmative steps to ensure future compliance with the FLSA, including conducting unannounced monitoring visits to every contractor that produces goods for Fashion Headquarters, keeping and maintaining records of all monitoring activities by defendants of their contractors, and requiring each contractor to execute an Employer Compliance Program ("ECP") designed by the Department of Labor.

 Plaintiff, seeking both the prohibitory and mandatory relief described above, has now moved for a preliminary injunction. Defendants contend that no preliminary injunction should issue because the Secretary has not shown irreparable harm and because the equities and the balance of hardships weigh against injunctive relief. Defendants also maintain that the injunction sought by the Secretary of Labor is overbroad, and that the heightened standard for the granting of mandatory relief cannot be met.

 The Standard To Be Applied

 Plaintiff has established her entitlement to a preliminary injunction. Pursuant to Jackson Dairy v. H.P. Hood & Sons, 596 F.2d 70 (2d Cir. 1979), a party seeking injunctive relief must demonstrate that it will suffer irreparable harm in the absence of injunctive relief, and either a likelihood of success on the merits or sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the preliminary relief. Id. at 72.

 Defendants have cited authority that a heightened showing is required when the relief sought is mandatory in nature, i.e. when "the relief sought is more than the preservation of the status quo." SEC v. Unifund SAL, 910 F.2d 1028, 1039 (2d Cir. 1990). Pursuant to such a heightened standard, the Secretary "should be obliged to make a more persuasive showing of [her] entitlement to a preliminary injunction the more onerous are the burdens of the injunction [she] seeks." Id. The Court, in such a case, "should require a more substantial showing of likelihood of success, both as to violation and risk of recurrence" whenever mandatory relief is sought. Id. More recently, the Second Circuit has characterized this heightened standard as requiring a "clear showing that the moving party is entitled to the relief requested" or a showing that "extreme or very serious damage will result from a denial of preliminary relief." Malkentzos v. DeBuono, 102 F.3d 50, 54 (2d Cir. 1996) (quoting Abdul Wali v. Coughlin, 754 F.2d 1015, 1025 (2d Cir. 1985)). *fn1"

 Irreparable Harm

 The Secretary has very much made a "clear showing" that irreparable harm will ensue if her motion is not granted. One of the purposes of the FLSA is to prevent the introduction of hot goods into the stream of commerce. See Citicorp Industrial Credit v. Brock, 483 U.S. 27, 36-37, 97 L. Ed. 2d 23, 107 S. Ct. 2694 (1987). Because hot goods are produced more cheaply, they provide a competitive advantage to those who violate the FLSA, and a comparative disadvantage to law-abiding manufacturers and distributors. Moreover, Congress has found that the trade in hot goods is "detrimental to the maintenance of the minimum standard living necessary for health, efficiency, and general well-being of workers." 29 U.S.C. § 202(a). The U.S. Supreme Court has quoted President Franklin D. Roosevelt's statement that hot goods "pollute the channels of interstate trade." Citicorp, 483 U.S. at 36 n.8. In sum, once such goods are introduced into the stream of commerce, the harm to both workers and the "free flow" and "fair marketing of goods in commerce" cannot be undone. See 29 U.S.C. § 202(a).

 Likelihood of Success On The Merits

 The Secretary has also shown a clear likelihood of success on the merits of her suit. The court, in deciding whether to grant an injunction, may consider the defendants' past noncompliance with the FLSA, the defendants' "moral and business responsibility," and the dependability of defendants' promises of future compliance. Wirtz v. Harper Buffing Machine, 280 F. Supp. 376 (D. Conn. 1968); see also Brock v. Wackenhut, 662 F. Supp. 1482, 1488 (S.D.N.Y. 1987) (court must evaluate previous conduct of employer and dependability of promises of future compliance) (citations omitted). Present compliance with the FLSA does not preclude injunctive relief. Brennan v. Carl Roessler, Inc., 361 F. Supp. 229, 235 (D. Conn. 1973); Walling v. J. Friedman & Co., Inc., 61 F. Supp. 325, 326 (S.D.N.Y. 1945). In determining whether there have been past violations of the FLSA, and the extent to which those violations counsel in favor of injunctive relief, this Court is mindful that knowledge by the defendants that goods they shipped were in fact produced in violation of the minimum wage and overtime provisions FLSA is not necessary to find a violation of section 215(a) of the Act. Walling v. J. Friedman & Co., 61 F. Supp. 325, 326 (S.D.N.Y. 1945); see also Mitchell v. Mormando Bros. Co., 134 F. Supp. 707, 709 (S.D.N.Y. 1955) ("the element of 'good faith' is immaterial in proceedings under the [FLSA]").

 The Secretary has established Fashion Headquarters' past non-compliance and past failure to respond to Department of Labor notices. In April of 1997, a Department of Labor investigator repeatedly notified Fashion Headquarters that one of its contractors, High Quality Fashion, had violated minimum wage and overtime provisions of the FLSA, and asked Fashion Headquarters not to ship any garments produced by High Quality Fashion in violation of the FLSA. The investigator received no response. (Declaration of Johanna Bauer, P 4). In June of 1997, another Department of Labor investigator notified Fashion Headquarters that another of its contractors, O.K. Group Corp., was violating the FLSA, and requested that Fashion Headquarters not ship any hot goods produced by O.K. Group. Again, the investigator received no response. (Bauer Decl., P 5). In addition, Fashion Headquarters was specifically notified, in late October of 1997, that MSL Sportswear and Laura & Sarah Sportswear, two more of defendants' contractors, were producing hot goods and that the Department had reason to believe that Fashion Headquarters had shipped some of these hot goods. (Bauer Decl., PP 9-17). *fn2" The underlying FLSA violations consisted of MSL's and Laura & Sarah's alleged failure to pay their employees any wages for eight weeks during September, October and November of 1997, and their failure to pay overtime wages since at least May 1, 1997. (Bauer Decl., P 7). Defendants, in their opposition papers, do not address plaintiff's likelihood of success on the merits and do not contest the allegations described above.

 Shipment of goods produced by employees who went unpaid for eight workweeks is a substantial violation of the FLSA. Defendants have submitted an affidavit by Paul Cascio stating that defendants "have not knowingly violated § 15 (a)(1) of the [Fair Labor Standards] Act and have no intention to do so," but conceding that "it now appears there may have been inadvertent limited shipment of goods made by MSL and Laura & Sarah Sportswear, Inc. on or before November 5, due in part to the fact that plaintiff did not initially make clear that Laura & Sarah Sportswear, Inc. made goods we had listed under the name 'L&S.'" (Affidavit of Paul Cascio, PP 3, 5). Defendants do not contest that they are currently in possession of goods manufactured by MSL and Laura & Sarah in violation of the FLSA or that they did, in the past, ship goods produced in violation of the FLSA. Defendant Cascio's statement that defendants do not intend to violate knowingly section 15(a)(1) of the FLSA, given the admission that violations have occurred, does not provide the Court with adequate assurance of future compliance. Defendants' statement that any violation of the FLSA by the shipping of goods manufactured by Laura & Sarah Sportswear was inadvertent is unavailing; as discussed above, knowledge that goods were manufactured in violation of the Act is not a prerequisite for finding a violation of the "hot goods" provision of ...


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