IDAHO METAL WORKS v. WIRTZ
Legal provision: Fair Labor Standards
Argument of Eli A. Weston
Chief Justice Earl Warren: Number 30, Idaho Sheet Metal Works, Incorporated, Petitioner, versus W. Willard Wirtz, Secretary of Labor.
Mr. Eli A. Weston: Mr. Chief Justice Warren, may it please the Court.
The sole issue in this case is whether or not the petitioner is entitled to the retail establishment exemption, provided in Section 13 (a) of the Fair Labor Standards Act.
The case was tried in the Southern District of Idaho before the Honorable Fred Taylor after a pretrial stipulation with which it was agreed the sole issues of whether or not the petitioner's establishment was considered a retail establishment within the industry.
A second issue was in the stipulation as to whether or not it was a mixed issue of fact and law as to whether or not the petitioner's establishment complied with the so-called retail concept.
After a two-day of trial in which seven or eight witnesses were introduced, the Court made findings of fact which among other things stated as follows, the defendant is engaged in the City of Burley, a small farming community in the State of Idaho in the making, selling and installing, and repairing of sheet metal products including the sale of Southern Sheet Metal, waterspouts, elbows, and similar items.
And that during the years 1959 and 1960 and 1961, the defendant's products and services were sold concede no processors engaged in interstate commerce.
The sale and services for the most part made and rendered intermittently enduring the down seasons.
That the defendant's business was established with a purpose of serving the City of Burley and the surrounding community making sales and rendering services to a variety of customers predominantly in number of sales to farmers, ranchers, and local individuals and businesses.
All of the defendant's sales of services were in the State of Idaho and on a retail basis.
The defendant's business is local in its nature, was established for the purpose of serving the Burley area, and it's not closely related to nor directly essential to the production of goods for or in commerce but for the primary purpose of serving local needs.
That the products sold and services rendered to the processing communities where for the most part similar to items which could be and sometimes are fabricated by the processing companies in their in-plant shops.
The products produced by the defendant do not enter the channels of interstate commerce.
The defendant's prices per services and product are computed on the same basis for all customers.
Fabricated parts are uniformly priced on the basis of material operating cost and its profit.
The defendant's non-fabricated products such as steels, solder, and other items are displayed on racks or shelves and are similar in this respect to what is described a tin shop.
The defendant's establishment is recognized as a retail establishment by the defendant and salesmen within the industry and none of the sales made by the defendant were for resale.
Based on this pretrial stipulation and the evidence in the case, the Court found that the petitioner's establishment was not closely related to or directly essential to interstate commerce.
And I believe the finding was based somewhat on the decision by this Court in Zachry versus Mitchell which the late immanent jurist, Justice Frankfurter in the opinion in which there were three or four dissenters ruled that it was perhaps time that we examined the question of how far the Government should go in regulating or encroaching upon what is in effect a purely local business set up to regulate or set up to serve a local community.
Justice Hugo L. Black: I didn't understand to which case you refer.
Mr. Eli A. Weston: Zachry versus -- Mitchell versus Zachry.
Justice Hugo L. Black: What?
Mr. Eli A. Weston: Mitchell versus Zachry case.
Justice Hugo L. Black: Mitchell versus Zachry.
Mr. Eli A. Weston: In Mitchell versus Zachry case, a city had built a dam or impounded water and it developed that the water from this dam was being used by people who were engaged to producing goods for commerce.
There's a very similar and there's a great deal of similarity between the two cases because in that case, this Court held that the purpose of the dam or the purpose of the impounding of the water was to serve the local community and that 50% or more of the sales of this water was to the community and in point of number, I think this is what then goes to the Court somewhat.
In point of number of sales, not the total volume, this establishment had maybe a thousand sales to what the record shows versus six or seven sales to producers who were in the interstate commerce in the point of number.
The Court also found of course that we were a retail establishment as defined by the 1949 Amendment of the Fair Labor Standard Act.
The case was appealed to the Ninth Circuit and the Ninth Circuit Court reversed the District Court on both counts.
And we're here now on certiorari on the one question of whether or not we are a retail establishment.
Unless the Court has some question in mind that I could more or less direct my attention to, I believe that the case before this Court involves two rather serious questions.
Number one, the question of whether or not based on the facts which I've proposed to enlarge upon, a fact-finding tribunal or a District Court after hearing all the testimonies and after examining the pretrial stipulation and far as in this case, there was only one witness for the Government which was a professor who had graduated from Washington University and who admitted that he had no experience whatsoever in the retail sheet metal industry or tin shops, and where he admitted that his own experience was with trading stamps and items of that kind.
Whether or not under that record is proper for this Court to brush it aside or for the Ninth Circuit Court to brush it inside and we say, “We pay no attention to those findings of fact”.
Most of those findings of fact, if the Court please, were undisputed.
There wasn't any question about it.
The stipulation, the pretrial stipulation, specifically provides that the only issue before that court was whether or not this establishment was considered a retail establishment within the industry.
Justice John M. Harlan: I want to ask if the complicated statute or provisions in the making of potential do you think is the pivotal aspect.
Mr. Eli A. Weston: I think the pivotable aspect, put it that way, Justice Harlan, I believe that question of whether or not this establishment having been set up to serve a community, it was serving a community with the great -- largest majority of the sales and the small sales to the ultimate consumer and not for resale that that should enjoy or should have the retail establishment exemption under Section 13 (a) (2), if I understand your question.
I think we're involved here now in, number one, an interpretation of the 1949 Amendment.
Does it mean what it says?
I frankly am much concerned about the constant use of this term “retail concept”.
I don't know how you got into my case.
I don't know how you got into the law.
But I do know that that is the thing that the Administrator or the Secretary is now hanging on to for all the other facts indicated.
It would may even be isolated from the production of commerce or it would may have all of the other qualifications of a retail establishment.
Now, I think the 1949 Amendment either means exactly what it says, or it doesn't and I think it's time frankly that we give the interpretation that the Congress intended as I read the amendment.
Part of 1949, the Administrator was given the authority to interpret the question of what was or was not paid and what was or what was not a retail establishment.
And in those interpretative bulletins which were numerous went into the very many facets of this question.
Did it look like a retail store?
Did it have shelves?
Did it have a cash register?
Did it sell in small items like a box of matches or a bunch of bananas?
Was it to the ultimate consumer?
And in his first interpretative bulletins and in his first regulations, he limited the retail establishment to -- almost to the corner stores who have so heavily stated in the Kentucky Finance case.
The Congress apparently because even in those definitions, he used the business use test and he used the fleet test, all of these various items that the Administrator used to determine what was or was not a retail establishment.
In my opinion were considered too restrictive because as the Courts -- I believe the congressional record shows one of the senators made the illustrations.
He said, “If I go to a store and buy two towels for my home, that's the retail sale but if a hotel goes and buy as a gross of towels, that's under your interpretation is considered nonretail.
If I happened to have a store and I buy fleeted cars to deliver my goods you say that's nonretail because of the size.
If I give one customer a reduction because he buys more than another, you say that's nonretail.
And I honestly believe that the Congress in the 1949 Amendment said to the Administrator, “Now let's understand, there's only two tests that you're allowed to apply.
One is, are these sales for a resale?
And two is, is this considered a retail establishment within the industry?
Now, that 1949 Amendment was intended in my opinion to permit this Court or any reviewing body to determine whether or not the Administrator had prior to 1949 determined whether the particular establishment in question was nonretail or not.
Now, if the Administrator had held as we found in the Kentucky Finance case that this was a nonretail establishment because they determined that financial institutions of that kind dealing in finance were not considered to be a retail establishment.
Then under the 1949 Amendment, they could not claim to be a retail establishment and that's what was established in my opinion in the retail, in the Kentucky Finance case.
Justice John M. Harlan: So this pivotal aspect of the (Inaudible) establish the fact of the case is 75%?
Mr. Eli A. Weston: Yes, all of the sales in our case are for retail and none of them we're selling for resale.
Justice Abe Fortas: But there is a question as if they're certain about the third standard as set forth in your brief and there's whether 75% of the annual total volume of your sales are recognized in a particular industry as retail sales.
Mr. Eli A. Weston: Yes.
Now, we met that requirement because we -- all of the witnesses have testified on what we are recognized in the industry testified if all of our sales were retail sales.
Justice Abe Fortas: Which I guess is that there's no testimony in the record to that come from.
Mr. Eli A. Weston: No.
Now, in this case, actually, I believe we are now in the position of deciding these cases on a case-by-case basis because of the 1949 Amendment.
And in this case, there was no determination prior to 1949.
In this type of an establishment, there was no determination that we were nonretail and there was no determination that we were retail.
And the reason for that, if the Court please, is probably because this particular establishment is the evolution for the growing up of the old time tin shop which we found either in the seller or the backroom of the hardware store.
These establishments feel as the -- one of the witnesses said the hiatus which was left when the manufacturing companies decided to manufacture the tin items that you or I might go in and purchase from the old tin shop in the back of the retail hardware store.
The manufacturing companies deciding to furnish those items to the hardware store had left the hardware store going one way and the old style of tin shop going the other.
Now, the testimony in this case shows that we use the same machines.
We do exactly the same thing as we did in the tin shop.
We sell these items at retail.
A man comes into the store and wants his spout.
The woman may want a sides of the dish pan, a farmer may want a watering trough or I may want -- a store, may want something in the instance of the processing companies which are used here as the interstate users.
Our cert suggested the Court that those processing companies are not what is generally termed a big manufacturing company, processing companies as the Court will take judicial notice of.
I'll assume at least it's in the record that the processing company came to bury after our establishment was setup.
And contrary to what the Government would suggest in the brief, the processing and the freezing of potatoes is not what you might term a substantial type of manufacturing.
It's a simple process and the machinery -- and the fabricating materials furnished to these companies were first, number one, furnished during the down period.
Number two, there were items which would consist of guards where the motors are, and ventilators are, and one of these statements made what they called an endless belt which was simply a leather belt with pleats on it which would carry the potatoes along until they are sorted, washed, and cooked, and frozen.
The item -- the articles of the -- the testimony shows that this same company had an establishment in Boise which was a 180 miles from Burley.
And the president of the company testified that in the Boise plant, they did make large equipment from manufacturing plants.
And the one item that was referred to here, quite often by the Government in their brief and at that the time of the trial was a vent which was built which is that I believe seven or eight feet long and 23 feet high.
But the testimony shows that that was vent and manufactured at the Boise Plant which was a different type of operation tariff.
Justice Abe Fortas: Mr. Eberle, excuse me sir.
I note that your argument is and perhaps it has to be that our decision in Roland against Walling in 326 U.S. was modified by the 1949 Amendments through the Fair Labor Standards Act.
That's right, isn't it?
Mr. Eli A. Weston: Yes.
Justice Abe Fortas: Now, these are -- I don't see anything in your brief, perhaps I missed it, pointing to any part of the legislative history that indicates the intention on Congress' part and they do that with respect to the definition of -- with respect to the concept of retailers, what it is within the concept of a retail store.
Is there anything that you'd been pointing through in that respect?
Mr. Eli A. Weston: I'm sorry Justice Fortas, I cannot give anything specific by way of the records.
I can give my views on it for what they were.
It's my opinion that the retail concept crept into this thing during the congressional debates and at which time I think Senator Pepper made the suggestion that it had -- it could have a retail concept in the sales to the manufactures, the manufacturing items would not to be considered retail sales.
Justice Abe Fortas: Senator Pepper said that sales to manufacturing companies were not to be considered retail sales?
Mr. Eli A. Weston: It we would not have the retail concept.
Justice Abe Fortas: Yes.
Mr. Eli A. Weston: It would take away the retail concept.
This suggestion, however, by Senator Pepper which is found in 1950 Congressional Record was refuted by Senator Taft as I recall it from which he stated.
I believe Senator Wherry and I think that Senator Pepper asked the unanimous consent if that the gist of what is a retail concept.
And I think that Senator Wherry objected to the unanimous consent and was joined in I believe with Senator Taft said that they were permitted to agree with the record but not if it was to be used by the Administrator in determining what was a retail concept.
Now, I don't know whether I have answered your question or not but it is my opinion that the 1949 Amendment, in effect, said to the Secretary the retail concept is to be determined in the light of whether or not these are sales for resale.
We're not interested at all of these other tests that you have applied including the retail concept.
From now on, and this is in the law, this is not a question in which the Administrator can interpret.
The law now says Mr. Secretary, “If you find a retail establishment that does not sale for a resale and if you find a retail establishment that is considered as retail within his own industry then we think that it has the retail concept.”
And that is it.
Now, that is my opinion of what the 1949 Amendment was intended to do.
Justice John M. Harlan: May I ask these questions because identifying the reference, the legislative history in your brief and the Government has agreed upon.
Mr. Eli A. Weston: Yes.
Justice John M. Harlan: And I take it that you take issue with the Government's summary of the --
Mr. Eli A. Weston: Yes, I do.
Justice John M. Harlan: -- fact by the legislative history.
Mr. Eli A. Weston: The copies -- the reason I have mentioned, the Zachry case and the reason why I have mentioned this issue which is actually not before the Court is because the Government seems to take into position, if I understand their brief, that where we have an establishment that has been considered or has been determined to be in the production of goods for commerce that it automatically cannot have a retail establishment exemption and I believe Justice Harlan in the Kentucky Finance case or in the Roland Electric case made the statement that it was rare not impossible for the establishment to be engaged in interstate commerce on the production of goods for commerce and at the same time claim the retail establishment exemption.
And I call attention to the fact that this opinion was written before the 1949 Amendment.
It is written before the amendment which required the original law provided that only the establishment had to do was to be necessary to the production of commerce which is a very loose termalmost anything could be necessary for the production of the items for commerce.
But in 1949, they amended the law of the state that it must be closely related to and this is what Justice Frankfurter seems to discuss at length in the Zachry case which says it must be closely related to the production of goods for commerce, and I submit to the Court that in this case, we are related to the services of the community.
We are related in furnishing the products to individual purchasers in the community, the farmer, the merchants, and the individual housewife.
We were set up for that purpose.
Unfortunately, the processing companies came in after we were established and we did furnish them some materials.
But I still think it's important that those materials according to the record are furnished when the plants were down.
They were furnished on an emergency basis to a great extent.
The services that we rendered to those companies could have been performed by the companies themselves and as one witness said, they are very frequently were.
Now, the question that arises, how closely connected are we to a potato processing company under those circumstances?
We feel that the -- the record shows that we were not closely connected to or directly essential to the operation of those plants.
Now, that's what the court below felt.
The court felt we were set up to serve a community and we were not set up to service or to render necessary or essential machinery to a processing plant.
On the question of whether we are a retail establishment or not, I would like to just briefly go over the evidence of the president of the company.
And I'll hit it just very briefly, the president of the company stated that he'd been in the tin manu -- the tin processing business for many years, I think 39 years.
He testified they have a store license.
He testified that they did the manufacturing in Boise not in Burley.
He testified that the services are rendered as an emergency.
He testified that the same machinery is used in his tin shop, now it was used 39 years ago and in fact one of the same machines preferably is in the present shop.
He testified that the number of sales to the individuals were greater than the sales being numbered to the processing companies.
He testified that they have a stock on the shelves that you could in the place of business to see what you want to buy is right there in displaying on the shelves.
That they were considered retail within the industry and someone asked whether -- the government attorney asked if he had any counters, and he said “Yes, we have six counters.”
He said, “If you come in to our establishment and you see something on the place that you want and made in to a particular item, a custom-built item, we have six tables and we have six salesmen and they can tell you or ask you what you want, you can tell them what it was and they'll build it for you and sell it to you at retail.”
He compared it to a woman going into a store and buying a bowl of cloth.
He testified that they were a retail custom shop and under their sales for -- were for retail.
And he testified as to the types of customers and I haven't much time where I would read that these customers are variety of farmers and ranchers and housewives and grocery stores and other stores.
Justice John M. Harlan: How -- how many employees are there in a store?
Mr. Eli A. Weston: He had -- his occupation or in his establishment or similarly some respect to the processes, it was seasonal.
He testified that he only had what he considered two or three employees the year round what he called regular.
Now, during the down season and when these processes barely need some extra work then he has a crew augmented I think to at highest 17 or 18.
But the president's testimony which is undisputed of course was that he was to some extent a seasonal operator himself.
Justice Hugo L. Black: What's the population of the tenants?
Mr. Eli A. Weston: I think it's about 8,000.
Before my time is up, I would like to comment just briefly on the testimony of Mr. Coffin.
Mr. Coffin is the secretary and the attorney for the company.
He's a retired attorney.
But he very vividly pointed out why he considered this retail establishment and he suggested even he was a boy of 13 that his father had a hardware store and that he very often visited the tin shop because he was intrigued by the way the tin shop operated.
And this witness who again had been familiar with the industry for 35 or 40 years testified that the establishment in question here was simply the evolution or the filling in of the gap between the old time tin shop and the present custom metal shop.
In other words, he testified that the customers were the same.
The articles that were molded and made were the same.
And the only difference was that there were larger customers and they were using perhaps a different metal than they did in the old tin shop days.
And he also testified that there's no place else, if the Court please, and I think this is important.
There was no place else where an individual customer could go and get this particular item except of this type of an establishment.
Now, the testimony was a reference to other, we were considered a retail establishment and then the industry was furnished to us by salesmen, both wholesale salesmen and manufacturing salesmen who testified without contradiction that we are at the end of the line, that we were considered the retailer in the industry, that all of the others up from us were considered wholesalers or manufacturers.
The testimony of the professor was very interesting but on cross-examination, the -- practically every point made by the professor could be eliminated by the 1949 Amendment.
For example, he stressed the size of the sale.
He stressed the price of the sale.
I think he stressed the fact that it was the -- it went back to the old business use test which in our opinion was definitely eliminated by the 1949 Amendment.
Chief Justice Earl Warren: Mr. Donahue.
Argument of Charles Donahue
Mr. Charles Donahue: Mr. Chief Justice, and may it please the Court.
I believe in this case that my brother here is apparently asking this Court to reverse itself in the position which he took in the Kentucky Finance case, opinion written by Mr. Justice Harlan.
To the effect that there exists in the statute what has become in familiar terms to be known as a retail concept and I would like further to say at the outset that the issue here is limited to the proper interpretation and application of the retail and service to establishment exemption at it is contained in 13 (a) (2) of the Fair Labor Standards Act.
The issue before this Court is not whether or not the activities of the petitioner in this case are essential to production.
That question was laid at rest by the Court of Appeals in this case.
Certiorari was limited in this case to the question of whether or not the petitioner was within the retail exemption.
I wish to emphasize that because it has already been found and determined by the Court of Appeals and is not questioned here that this petitioner was engaged in activities necessary to production for interstate commerce.
Now, I think that Mr. Justice Harlan asked a pivotal question here, rather, he said, what is the pivotal aspect of the retail and the service establishment exemption here.
And I think the pivotal aspect of it is that we are not here in this case, none of the facts, which I will briefly explain.
We are not here at the end of the flow of commerce.
We are not involved with the sale of groceries in a local store to an ultimate consumer, but instead, we are in the midstream of interstate commerce.
We have a firm here which is manufacturing goods which is assisting and doing work which is necessary to production of goods for interstate commerce by large sizable processing companies.
Now, we believe that this case and the following case Number 31, the Steepleton case are both controlled by this Court's decisions in Mitchell versus the Kentucky Finance Company and in the Roland Electric Company.
These two cases combined, stands squarely for the proposition that sales and services of the Idaho Sheet Metal Works in this case are predominantly and clearly outside what is known as the retail concept actually first having its formation in the Roland Electric case in 1946 and strongly reaffirmed by this Court in the Kentucky Finance case to such an extent that the sales and services and the establishment in question cannot in any sense be considered as within the retail and service establishment exemption of 13 (a) (2) of the Fair Labor Standards Acts.
Now, involved here, we have a sheet metal firm, and not just a tin shop.
We cannot look at this as it was at the turn of the century or is it maybe even at this moment we have to look at what this firm as shown by the record to be, one the Court of Appeals found it to be during the years 1959 to 1961 which are the years involved in this case.
During that three-year period, we have affirmed which the Court of Appeals found as manufacturing, installing, maintaining, and repairing sheet metal equipment for five large potato processors producing goods for interstate commerce.
83% of the defendant's gross income was derived from these customers and I think the total amount was something in excess of a total valid volume of $500,000.
Justice Hugo L. Black: What did they make for them?
Mr. Charles Donahue: Sir?
Justice Hugo L. Black: What did they do for them?
Mr. Charles Donahue: They repaired and maintained potato processing equipment which in turn was used to dehydrate or prepare potatoes for shipment in interstate commerce.
Chief Justice Earl Warren: Did they not manufacture the articles too?
Mr. Charles Donahue: They fabricated the articles, as I understand it, in the shop or on the job depending upon the needs of the particular situation.
Chief Justice Earl Warren: But it was a manufacturing process?
Mr. Charles Donahue: It was a manufacturing process as found by the Court of Appeals.
Chief Justice Earl Warren: And what were the items that they manufactured?
Mr. Charles Donahue: The items which they manufactured, Mr. Chief Justice, were hoods for carrying of steel, tanks, some as large as to hold 5000 pounds of peeled potatoes, elevator buckets and shoots for transferring items within the plant from one place to the other.
And as the -- as my brother says, there was considerable work during the down periods when the constant improvement was attempted to be made in the -- and greater efficiency assured in the manufacturing process.
Those largely are the facts which we face here.
We -- turning to the law have also involved in 13 (a) (2) a provision which requires that there should be an exemption from the minimum wage and overtime provisions of the Fair Labor Standards Act for retail and service establishments.
A retail and service establishment is defined in the statute.
It is defined as an establishment 75% whose annual dollar volume of sales is not for resale and is recognized as retail sales of services in the industry.
Now, despite the -- I think that it rather affirms the -- my brother's request in effect that the Court reverse itself in this case in that he cites in his brief and seems to agree that there does exist in the law a retail concept which is a hurdle one must get over before reaching the words of the definition.
He says, and I quote, “The support -- the Court in Kentucky Finance has interpreted the Act in such a way as to impose what he calls an additional requirement namely; that the industry under consideration to be considered retail under traditional concepts.
Now, it is of course our position based upon the Roland Electric case and the legislative history that this statutory retail concept both existed before and was affirmed by the 1949 Amendments to the retail exemptions.
Justice Potter Stewart: What do you think motivated the 1949 Amendment?
Wasn't it the Roland Electric case?
Mr. Charles Donahue: It was --
Justice Potter Stewart: What do you think?
Mr. Charles Donahue: -- a part of the Roland Electric case, Mr. Justice Stewart.
The part that concerned the Congress was really dicta in that case and unnecessary to the decision.
It was that part of the case which affirmed the administrators of the interpretative bulletin which said that any sale for a business use was a nonretail sale and that got down to the absurdity in the minds of congressmen in practice -- quite rightly so of a bell boy from a hotel going around the corner to a retail shop and buy some towels because he needs to put them in the bathroom, being called a nonretail sale and a housewife going in and buying the same towel and would be called a retail sale.
This is what Congress sought to correct.
Chief Justice Earl Warren: Is it material to our case here where the materials came from that went into these manufacturing products?
Mr. Charles Donahue: I would not regard it as material here that the sheet metal for example which was used in the fabricating plant of the petitioner came from either inside of Idaho or outside of Idaho.
The point is it was necessary for the production of goods for commerce in the potato processing plants.
Now, the Roland --
Justice Hugo L. Black: Is that the sole thing on which you rely?
Mr. Charles Donahue: Sir?
Justice Hugo L. Black: Is that the sole transaction that type of transaction in which you rely?
Mr. Charles Donahue: In this case, it is that type of transaction constituting approximately about 86% of the business during this three-year period we're talking about.
The holding in the Roland Electric case as distinguished from the dicta which I was just questioned about by Mr. Justice Stewart was that where affirms are doing precisely that namely; they're doing work which is necessary to production.
Then in this case, in the Roland case, it happened to be repairing, fixing, and furnishing electric generators and motors to many different customers who in turn were producing and manufacturing for interstate commerce.
And the Court said that the keywords that the Court used here are that the Act does not exempt this retail and I quote, "The multitude of employees were engaged in establishments which supply the materials and services currently needed for the maintenance of productive machinery used by those who produced goods for interstate commerce."
Now, the Court added to that that these employees are in the middle of the flow of goods in commerce.
It commented that it would take the heart out of the Act, to fail to reach these employees engaged in these activities.
And they concluded that the exemption reaches employees only of such retail or service establishments as a comparable to the local merchants of the opponent grocer or the filling station operator who sells their services ultimate to consumers and work of that sought.
Now, this case, this Roland Electric case, is very much alive today and the principal reason why I believe it is alive is the Kentucky Finance case which in effect affirmed the existence of his retail concept that Roland in substance established.
Now, in Kentucky Finance, this Court was considering the continuing vitality of this traditional retail concept.
After, mind you, after the 1949 Amendments had added the so-called industry recognition test to the statute.
And the Court correctly emphasized again that the sole purpose of Congress in amending of the statute was to overrule the so-called business use test that is any sales for business use is a nonretail sale which was generally approved in dicta in the Roland case and as to which this Court said, “We find nothing in the debates or the reports which suggest that Congress intended by the amendment to broaden the fields of business enterprise to which the exemption would apply.
And thus, at the very least where Congress ruled the Senate and House reports explicitly stated that certain business activities were not exempted by the 1949 Amendments.
Such businesses are clearly outside the retail concept regardless of what the industry thinks or says or recognizes.
Now, Kentucky Finance was dealing with credit companies.
And these were found by Congress to be expressly excluded from any continuing retail concept.
And now, on this case --
Justice John M. Harlan: That revert the essence of that decision.
Mr. Charles Donahue: That's correct, Your Honor.
Now, in --
Justice Potter Stewart: The committee report was very explicit.
Mr. Charles Donahue: I believe that it is to --
Justice Potter Stewart: With respect to the credit companies, was it not?
Mr. Charles Donahue: It was very explicit.
It pointed them out specifically as one of the -- a host of different activities and types of businesses that should not possess the retail concept --
Justice Potter Stewart: And was -- it explicitly mentioned a credit company that --
Mr. Charles Donahue: It explicitly mentioned the credit company.
Justice Potter Stewart: And that was relied upon as either (Voice Overlap) by the Court.
Mr. Charles Donahue: Now in this case --
Justice John M. Harlan: What you're saying, I take it, is that the Kentucky Finance control this case but you are suffering to the extent of saying there's something by targeting this (Inaudible).
Mr. Charles Donahue: Well, I believe Your Honors that despite the understating our position I'm really saying that Roland has full force and vigor and the Congress in the legislative history expressly preserved the Roland area, not only by name of the case itself but also by saying as I was about to say here that Congress expressly declared as outside the retail concept any business which is engaged in the sale and I'm quoting the exact words, "The sale and servicing of manufactured equipment used in the production of goods."
And in this case, as in the Roland case which I wanted to emphasize again was expressly saved by the Congress, was preserved by the legislative history.
We have sales and servicing of manufactured equipment used in the production of goods and that therefore this case is governed by the combination of Kentucky Finance and for Roland.
Now, there are two cases which have been decided by my brother which I'd like to refer to briefly before concluding.
The first is the Modern Trashmoval case decided in the Fourth Circuit a couple of years ago.
Now, in this case, the Fourth Circuit held among other things that trash removal services were not outside the traditional retail concept.
Now, in so doing, the Court referred to the Kentucky Finance decision and recognized as held in that case that there are fields which completely lack a retail concept such as finance and there are business activities which had been specifically mentioned by Congress as being ineligible where an exemption for a retail of service establishments.
The Court noted that trash removal held in either one of these categories and ultimately decided that it was within the retail concept and the retail activity.
The truck contrast of course with this case is obvious.
Now, here in this case, the business activity of Idaho Sheet Metal Works fell precisely within those specifically mentioned by Congress as being ineligible for exemption as retail or service establishments.
There is one further case which deserves to be called in the attention of the Court --
Chief Justice Earl Warren: We'll recess now.
It's our time for our --
-- your argument.
Mr. Charles Donahue: Thank you, Mr. Chief Justice.
I would like to -- perhaps as my concluding remarks simply by further reference to the question I think Mr. Justice Stewart asked concerning their being involved in Kentucky Finance, a credit company which fell in a list of those companies outside the retail concept as expressly stated by the Congress and in re-referring myself to that case, I reassure myself that the court in that case, and I quote said, and repeat from four, "We find nothing in the debates or reports which suggest that Congress intended by the amendment to broaden the fields of business enterprise to which the exemption would apply, meaning that if it applied before 1949 as expressly so determined at that time or if it fell in a class that was -- of a type which was mentioned before 1949, then it was of the kind not necessarily of the exact type mentioned but of the kind which the Congress and the Administrator intended to continue to be entitled to or ineligible for the exemption.
To emphasize that point, I wish to also to indicate that the Court in that case merely referred to the expressed mentioning by Congress of credit companies to remove what it called any residual doubt.
It was expressly mentioned, therefore doubly, it was outside the retail exemption.
Another point, in order to remove any residual doubt in my case, so far as the Roland Electric Company is concerned, I would like to call the Court's attention to a colloquy of questions and answers put by Senator Spessard Holland in Florida, who was the sponsor of this retail amendment in 1949.
The question is, and I quote from it, from the record, "In Roland Electric Company versus Walling, the Supreme Court held that a company engaged in selling industrial goods and services to manufacturers engaged in the production of goods for interstate commerce and to other industrial and business customers were not a retail service establishment.
Would that case be decided any differently under the proposed amendment?
The answer, definitely from --
Justice Potter Stewart: The answer from whom?
Mr. Charles Donahue: The answer is given by Senator Holland himself to a question which he asked himself on this floor.
It's the answer to his own question.
His answer is, "Definitely not.
The sale and servicing of manufacturing machinery and manufacturing equipment used in the production of goods is not regarded as retail servicing or selling in the industry which distributes self services that type of equipment.
Now, turning to the case which I was about to discuss ever so briefly before we recess for lunch, it is Wirtz versus the English Oil Service decided in April of this past year.
The Court as attention is called to this case by the petitioner apparently to be relied upon in support of his position.
But far from supporting his position, the Court ruled quite the opposite and held that an enterprise whose primary business is the holding away and disposing in saltwater and basic sediment from producing oil wells services closely related and directly essential to production for interstate commerce could not qualify for the retail and service exemption even though such services are considered retail within the oil industry.
It is interesting to note that this case distinguished Modern Trashmoval because the Fourth Circuit answered the initial inquiry which the Court said was important here as to the retail concept.
In the affirmative, in the case at bar as in the English Oil Company, plainly, the initial inquiry must be answered in the negative here as a matter of law.
Now, since over 80% of the petitioner's gross annual income is derived from sales and services probably outside the statutory retail and service establishment concept, we submit, that the petitioner cannot qualify for this exemption.
Chief Justice Earl Warren: What was that citation of that case Wirtz versus someone?
Mr. Charles Donahue: That sir is -- (Voice Overlap) -- in the District Court of Kansas, April 29, 1965, 16 WH Cases 867.
Chief Justice Earl Warren: Who was against Wirtz against whom?
Mr. Charles Donahue: Wirtz against the English Oil Service.Wirtz against English doing business as English Oil Service.
Chief Justice Earl Warren: Very well.
Mr. Charles Donahue: Thank you.
Chief Justice Earl Warren: Number 31, W. Willard Wirtz, Secretary of Labor, Petitioner, versus Steepleton General Tire Company, Incorporated.
Argument of Bessie Margolin
Ms Bessie Margolin: Mr. Chief Justice, Your Honors.
This case also presents the question of the application of the retail and service establishment exemption of the Fair Labor Standards Act.
And it raises the question with respect to a business of a tire dealer and retailer, a large tire dealer and retailer engaged very substantially in selling and servicing tires to commercial trucking companies, construction contractors and other industrial companies operating fleets of trucks or commercial vehicles.
It admitted that over -- over half of the daily volume of business of the Roland -- of the Steepleton Company is derived from the servicing -- selling and servicing of tires or commercial customers of this type.
This type -- this business, of course, differs from the one in the Idaho Sheet Metal Company in the sense that this business was not expressly and specifically by name mentioned in the legislative reports and debates and it wasn't expressly stated like it was as to street credit companies and the servicing manufacturing equipment that those activities would remain outside of the scope of the exemption.
But our position is that the same principles must necessarily apply in determining what is recognized in a particular industry as retail.
That otherwise that phrase in the 1949 Amendments becomes meaningless as we think is very well demonstrated by the record in this particular case.
Now, the Court of Appeals below recognized and stated that this business, Steepleton's business, would not be exempt prior to the 1949 Amendment.
The Court put it on the basis that across these commercial sales were for business use and that would have disqualified it from the exemption.
The Court then went on to say that the repudiation of the business use test changed that and changed that in such a way that now, any and all sales, any and all sales, to commercial users could now qualify as retail.
Our position is particularly on basis of the evidence in this case that if any in all commercial sales can be classified as retail simply by reference to word usage in the industry then the clause recognized in the particular industry as retail is wholly meaningless and self-defeating because any -- any industry can adopt the same type of definition.
If the Court will look at the definition in relation to the statutory language, you will see that the definition, “all sales not to resale are retail” which is the definition which was held attended to the exemption here.
It was in effect putting a period after being phrase, the first phrase in that clause "not for resale" and just eliminating the industry recognition language.
Now, this sweeping definition, of course, is very simple and easy for any not too unsophisticated businessman to adopt and they could bring in the same type of the evidence that they brought in here to prove that this was traditionally a -- used as a definition of retail in the industry.
Now, the -- in effect then, the court below held that the industry's word usage evidence, a mere showing of the industries word usage that everything not for resale is retail is sufficient to meet the condition of the statute.
That that's purely a factual question the Court has only to inquire what is the definition in the industry and there are no standards, no concepts and no legal question to determine at all.
It affirmed the District Court on the grounds that there was substantial evidence to support its findings of fact that the industry recognized this definition of retail.
Now, I think it will help some to see what the industry included in this definition.Alright --
Justice John M. Harlan: But were you at some point to explain what content should you use what part of the Act this fellow (Inaudible).
Ms Bessie Margolin: That's what I hope to direct myself to, primarily, Mr. Justice Harlan.
But I think to understand -- to get the legal principles and prospective, I think we should look at some of the sales which the industry representatives, witnesses testified were retail sales in their book.
Now, they -- there's a big record here.
I don't think there's too much except certainly by the industry representatives, the witnesses.
It's a cumulative repetition that regardless of any other consideration or factor, they had always used the word retail to mean sales not for resale and in the -- they didn't give -- they were reluctant to state what purposes they use that definition for but as I shall point out later, the only explanation they gave was that was the state sales tax definition.
And as I shall point out later that state sales tax definition clearly has no fresh, no relationship or relevance to any statutory purpose of the Fair Labor Standards Act.
Now, the -- after adopting this -- of course, it is the broadest conceivable definition they could adopt.
And the witness, Marsh, who was the Executive Director of the Tire Dealers Association testified at length not only about what he regarded as retail sales but also testified at length to show that the industry did make a definite distinction between ordinary retail passenger car sales and commercial sales.
And that they have a generally recognized system of discounts of the commercial sales that were quite different from those passenger car sales, that they had different commercial salesmen and they handled these sales in quite different ways.
They had sales -- special commercial salesman who went out and solicited the business from the common carriers and the big construction companies.
They sent special workmen out to work at the terminals of these transportation companies who were their big customer.
And they had people continuously servicing, and repairing, and maintaining their tires for continuous operation of their trucks and vehicles in interstate commerce.
But all of these, though that the industry witnesses said, was wholly irrelevant to their definition of retail.
The witness Marsh testified that the sales of tires specially fitted for use on heavy commercial equipment even if sold in quantities of a thousand unit lots at a 30% discount off the commercial pricelist would be as much a retail sale as sale of four-passenger car tires to an individual at the least price without a discount.
And the same witness testified that the purchasers stopped of a whole stock of earth moving tires for heavy construction equipment for use on a big contracting job would be a retail sale or the sale of $25,000 at a time to a common carrier fleet operator would be a retail sale.
Another industry trade association official testified that not only that quantity sales at 50 to a 100 are more of a commercial -- to commercial fleet operators for retail sales but that the sale of specialized three trailer jet airplane tires to commercial airlines was a retail sale in his book notwithstanding his description that this business was highly specialized big business.
Respondent Steepleton himself testified that the sale that as many of -- 50 to a 100 of the largest size truck tire designed to hold anywhere from 20,000 to 30,000 pounds payload and used only on the over the -- over the road truck to trailer transports to a customer like Garden Transport, another common carrier of, one of the largest customers Southwestern Transportation Company that that sale was also a resale -- retail in his book.
Now, the basis on which the explanation or the purpose for such a classification, the witnesses insisted was wholly irrelevant.
It came out though in their cross-examination and came out very clearly that the only purpose, the only explanation for any such definition as this -- was that they have to pay the state sales tax.
And that naturally they kept records designating sales that they have to pay the sales tax on as consumer or retail sales.
And some of the witnesses testified they didn't use the word retail, they used the word consumer.
The five witnesses said that they hadn't used the word retail to describe any sizeable commercial sale in ten years.
Marsh when he explained why he would classify earthmover tires, a sale of -- a lot of earthmover tires as retail said, “Well, if that sale occurred in Ohio, he would have to pay sales tax on it.”
And Steepleton himself said that this definition -- this definition which he said the industry recognized was exactly like the one in the Tennessee State sales tax.
The point I'm making is if the state sales tax or if the industry is simply saying that they adopt, they follow the state sales tax definition of retail.
If that is to be determinative of the application of this condition of the exemption, then we just as well read the exemption of how the Act is meaningless.
In the first place, the state -- the state sales tax has no relation to any particular industry so that it's really contrary to the -- it's directly contrary to even the language, the statutory language to say that the state sales tax definition is the one to be applied.
That's a general state definition.
It is certainly not a definition of any particular industry.
It's general for every industry.
And presumably, I feel quite sure that every industry keeps the type of records which these witnesses in this case, the industry witnesses produced in abundance.
We have a mass of exhibits on file here in the Court, a mass of documents which I don't think the Court needs to read and I don't think we find very interesting.
But what they are since the whole mass of documents is just a document showing that they classified the sales as consumer, a dealer, a retail sales, and for all and it's pretty clearly from these documents that this was done solely for sales tax purposes.
Now, that type of document could be produced in any industry, I assume.
I assume some kind of record is kept in the payment of state sales taxes.
So I think we can count on, and as a matter of fact, as a practical matter, this definition has become very popular generally in most every industry that we bring an action against now that claims the exemption comes in with the same definition.
Now, we say that to read the statute is permitting that thought of word usage and just turning merely on word usage without any legal standards or any concepts to read the statute that way as to deprive it of any rational content and to make it depend solely on the will of the industry representatives themselves.
Nothing was more vehemently denied in the debates of the sponsors then that this was the intent of Congress.
Senator Holland repeatedly disavowed any such intent to permit the industry members themselves to determine what should be regarded as retail sales, the purposes of the exemption.
Justice Abe Fortas: Ms. Margolin, do we have somewhere and do you recall what the Tennessee -- how the Tennessee sales tax law is phrased?
Does it use the word retail or does it --?
Ms Bessie Margolin: It uses the word retail.
Justice Fortas, most of the sales tax statutes do use that word.
Justice Abe Fortas: Oh --
Ms Bessie Margolin: I might point out that our witness -- our expert witness and it's -- this becomes the battle of the experts too when we get into a question of what the industry, how it labeled it and why.
Our expert witness said who is an expert witness on state sale taxes and in fact was retained to rewrite the Tennessee sales tax.
But he said, they decided not to rewrite it because there's more revenue the way they had it written.
And he said that nobody that he knew of would ever argue, of course, it was argued in this case.
He didn't think anyone would argue suppose he was referring to marketing experts and economist.
Anyone would argue that the state sales taxes are limited exclusively to retail sale.
Justice Abe Fortas: Did the Tennessee sales tax use that as an example?
Ms Bessie Margolin: I think maybe -- I think it is quoted in the record somewhere.
Justice Abe Fortas: It is.
Ms Bessie Margolin: And we -- did we quote it in our Supreme Court brief?
I know we had it in our Court of Appeals brief --
Chief Justice Earl Warren: Just point it out (Inaudible).
Ms Bessie Margolin: That the definition is any transfer of title or possession or both exchanged in any manner by any means whatsoever of tangible personal property for consideration.
And defined sale at retail is a sale to a consumer to any person for any purpose other than resale.
Justice Abe Fortas: Is that in your petition for certiorari?
Ms Bessie Margolin: This is and I don't know whether we put it in our Supreme Court brief.
We took the rule more of general approach in the Supreme Court brief and did not emphasize the tax statutes the way we did in the Court of Appeals without rebuttal right over down there.
Justice Abe Fortas: Thank you.
Ms Bessie Margolin: We have felt that the fact that this -- the only explanation for this definition was that the state sales tax though is conclusive evidence that this is a wholly meaningless definition.
Of course any acceptance of mere word usage, we think, would be irrational in this context but we think it's particularly well demonstrated here by the fact that they resorted to the word ‘usage' in the state sales tax which has absolutely no relevance or meaning in the context of this statute.
Now, we say and to get any rational meaning or to give a rational meaning to this clause of exemption and we realized it's a troublesome clause and understand that on the face of it, it does appear to simply leave it to the recognition of particular industry.
We think it's clear though that the recognition need not to be interpreted as definition of word ‘usage' that recognition in the particular industry has to be judged in the light of the legislative intent just as every other phrase in the statute must be judged.
And that there is ample evidence in the legislative debates and reports to support a rational interpretation which would provide some legal standards in determining which, if any, of these commercial sales are recognized as retail, are treated as a retail or of such a nature as to be eligible to be recognize as retail.
And we think that in the Kentucky Finance case, this Court limited the very -- carefully pointed out the limited effect of the 1949 Amendment that it was to eliminate the business use tests in the sense that that was the sole criterion that was -- that the Congress thought have been previously used, that sales had been held not retail solely on the basis that they were for business use.
Now, I think Congress made it perfectly clear that they didn't intend to eliminate -- to eliminate all business use sales from classification as the nonretail.
The specific examples it gave make it quite clear that it did not intend.
And that in these two areas that are applicable to this case, in at least two areas are applicable to this case, Congress intended the Court to make a -- to reach a legal conclusion.
The first area, we think, is the area that the first inquiry is the initial inquiry, the same inquiry which Kentucky Finance recognized must be made.
And that is whether the particular sales, whether the sale or earthmover tires to construction company to -- for a bigger improvement contract whether can be eligible can ever be recognized as a retail sale.
Whether the sales of these heavy truck tires to a big trans -- interstate transportation carrier can ever be and that this is an equipment designed solely for that type of truck or bus, whether that can ever be recognized as retail.
And then the second area, an inquiry, is assuming that you have the type of tires and we admit that some business -- some business sales Congress apparently did want to leave open for a recognition as retail and we say those sales are limited to sales which are comparable to the type of sales previously -- commonly understood as retail and the sales that are treated like retail sales not to sales that are simply called retail sales regardless of how their functional aspects --
Justice Abe Fortas: I know it's quite --
Ms Bessie Margolin: -- regardless of any functional features.
Justice Abe Fortas: Ms. Margolin, I don't quite understand your illustration of the sale of large tire for earthmover tractor, if there were just one sale by an establishment to a particular company engaged in that business, and that one sale consisted of one tire, do I correctly understand that your position that that nevertheless could not be a retail sale because it is a sale made to someone who's engaged in business?
Ms Bessie Margolin: Well, I would say it's not solely, because it's for business use.
What I'm saying is there is a concept, a traditional statutory concept that is not dependent on the business use test.
And that is that it's limited to the kind of goods and the kind of services that are sold to -- sold locally to consumers at the end of the flow of the interstate commerce and that does not take in heavy equipment, a specialized business services that are designed and adopted typically to serve interstate producers of goods for commerce or interstate transportation commerce.
Justice Abe Fortas: Well, indulge me if I'm not because I try to get your theory.
Let's suppose that a tire company sold one tire to a factory engaged in production for interstate commerce, is it your theory that that tire could not be included in the definition of retail sales either for purposes of computing the 75% or for purposes of determining whether this is a retail establishment?
Ms Bessie Margolin: I think the particular example you gave, Mr. Justice Fortas, may be the type of sale that the Congress intended might be recognized as retail.
Because it is so -- it is so likely a retail sale.
But where it's obviously designed for the purpose of supplying the materials to produce goods, I think it's the difference between that incidentally they purchased along with everybody else.
But when you have the type of tire that's designed for production, the commerce and interstate commerce and -- or some industrial purpose specifically designed for that purpose, then that type of sale is not eligible anymore than the production as in the servicing of manufacturing equipment.
Justice Abe Fortas: Is there anything in the statute that you regard as supporting rep?
Ms Bessie Margolin: Well, we cite one thing in the statute which I suppose officially cut both ways.
And that is the laundry exemption.
I think that actually it does support our position which expressly states that sales to transportation communications and some other interest in manufacturing business sales shall not be considered retail.
It expressly excludes them in the laundry exemption.
Now, we have a discussion of that exemption in our brief.
And our opponents argued that that Congress would have put that in 13 (a) (2) if they didn't intend there because they knew how to say it, it's that within 13 (a) (3).
Our position is that that laundry exemption pretty much came in as an addendum and also that Senator Holland made it very clear that he thought he was doing no more there for laundry as he was giving them the same relief from Roland than everybody else, that all of the other retailers were getting.
And he made this quite clear that that's all he was doing, giving the laundries, putting them in the same position as the other retailers would be in.
So I think the intent is implicit there.
And there's also I think some explicit statements in the legislative debates that all -- that supports that somewhat too.
Justice Abe Fortas: Please forgive me for taking so much of your time but I do want to ask you one more question.
I take it that that your argument is that where the statute says that requires that the establishment quote “is recognized as retail sales of services in a particular industry” that your argument that is recognized as retail sales in a particular industry does not mean the classification or the category or the conceptual description in the particular industry but it does project that we have to look at the general practices in the industry, is that your argument?
Ms Bessie Margolin: Well, I think there is some language in the legislative history that says you look at a lot of criteria in the general practices.
And we think though that before you even get to the general practices, that some of these sales, some of this business is just ineligible just as the business in Kentucky Finance was and as we argue that the business in Idaho Sheet Metal that some of these sales and services are just ineligible --
Justice Abe Fortas: Which you do in --
Ms Bessie Margolin: As to -- as to the rest, you would have to look to the practices in the industry and make the determination in the light of what the Congress said it intended to accomplish.
Justice Abe Fortas: You have to do something of those words, don't you?
It is recognized as retail sales in the industry.
Ms Bessie Margolin: You have to do something with them and there is an area, as I say, there is an area.
Obviously, the Congress did intend that some business use sales should be susceptible or eligible to be recognized as retail.
Now, it gave -- it's not unusual -- the legislative history isn't entirely clear as to just what this area of business sales was.
They did make it clear -- the debates do make it clear, they certainly didn't intend to go as far as the industry here went to classify everything, every commercial sale is right.
And they did specify certain types of sales, which they said were not, could not be recognized as retail.
But there is an area in there where the industry recognition would operate.
Now, just what that area is, is not entirely clear but we think it's clear enough to show that what Steepleton was doing here was far -- it's more than -- more than 25%, well over 25% was not within that area where the retail concept might operate and where the recognition clause would come into play.
I haven't had taken -- I would like to reserve a few minutes for rebuttal and at that time, go into the quantity discount feature.
Chief Justice Earl Warren: You may, Ms. Margolin.
Argument of Lucius E. Burch, Jr.
Mr. Lucius E. Burch, Jr.: Mr. Chief Justice, may it please the Court.
I believe that the problem that is brought before the Court by the issuance of its writ is not as broad as the Court might gather from the argument of my friend.
It seems to me that the problem before the Court is composed of two ingredients; one being no more than 12 words of the statute, and the other, a conclusion of fact made by the District Court that could cut in by the unanimous circuit of the Sixth Circuit.
The 12 words of the statute are these, and I will read it and the Court will perceive that the statute contains no words of art, it contains nothing that is obscure, it contains nothing that requires anything except reading, “is not for resale and it is recognized as retail sales or services in the particular industry”.
That is what the Congress said that to me is clear.
And unless area something obscure, unclear or ambiguous, I know of no basis for leaping behind the statute into the frequently cloudy language of congressional debate to see what it means.
Now, as to the facts, the facts I won't state them because it's tedious and it's unnecessary because I have the language of Chief Judge White.
In our opinion, this was the only conclusion the Court could properly reach from the overwhelming evidence in this case.
Now, the question that immediately occurs to the Court is that clearly erroneous.
I don't have to argue that because my friend here in a very able brief on page 20 concedes.
We do not dispute the finding that the word ‘retail' has been used in the industry most often to label all sales not for retail.
So what else is there to the case?
A clear statute, any finding of fact concurred in by the appellate court.
Now, it probably would be the better part of advocacy for me to sit down now and go out and get a proper lunch and then go home.
But I'm not.
I'm going to follow my friend through this rather tedious maze of legislative history.
And I do it constant that I am not distracting the Court from the virtues of a solid point.
And I know that the conclusion which I'm going to reach sustains the position that I take.
This all started back in 1949 on August 30th when Senator Holland introduced his amendment.
It's quite an interesting speech.
It has a good deal to do with Mr. Justice Black, then Senator Black's remarks when the original bill was introduced in 1937.
This is what Senator Holland said that they were trying to accomplish by the legislation.
Mr. President that that arose because the Administrator in the courts including the United States Supreme Court rule that the sales of goods and service for business use is distinguished from family or household use was not retail.
I cite at several cases and I should read into the record at this time though I do not propose to worry in the Senate by quoting the same, Roland Electric Company, Boutell against Walling and McComb against Diebert.
And then he puts out -- sets out examples of what it means.
These rulings on a few decisions which have been based upon them together with the most strained rulings had resulted from these decisions have brought about the present situation which I think compels the Congress to pass clarifying legislation.
Now, what did they intend to do?
The area is one sentence in the conference report.
Under this test, any sale or service regardless of the type of customer will have to be treated by the Administrator and courts as a retail sale or service so long as such sale or service is recognized in the particular industry as a retail sale or service.
Well now, where do we get this cloudiness that comes from my adversary's brief?
She brings it in commencing on -- in her brief at the bottom of page 33 in which she quotes from a report that was brought in to the congressional record by Senator Pepper.
I will go into that for a minute not because I think it's important but because she lays great stress on it and it is somewhat more interesting that many questions of this type are.
Senator Pepper sought unanimous consent to put it in to the record and they let him put it in the record, they granted him unanimous consent because Senator Pepper had stated that it had been concurred in by all the conferees.
Then somebody got the idea that Senator Pepper was not as careful with his facts as he should have been.
So they began to query among the floor of the Senate.
He then was able to remember that Mr. Shroyer who was Mr. Taft's representative had not concurred in it and that the other senator, I believe, Mr. Donnell, had not concurred in it whereupon Mr. Wherry rose and said, “Mr. President I ask unanimous consent that that part of the action which the Senate took in granting unanimous consent to the senator from Florida to instate the statement in the record along with the conference report be rescinded.
So that the senators may be given ample time to study the statement.
Overnight is sufficient time for me.
Then, if the Senator will renew his request after members of the Committee on Labor and Public Welfare, they have had an opportunity to examine it.
I think there will be no problem at all.
Mr. Pepper very well just rescinded.”
Then Senator Pepper comes in again with the statement that my friend see -- sets up as the touchstone of the argument about this retail concept in re-establishing Roland and he now comes back, Senator Pepper, “Now, I read often the state not on behalf of all of the conferees because two of the conferees would speak for themselves if they care to do so or through their representatives and through their chosen spokesman.
Let it be clearly understood that the statement only expresses the views of the named three senators as to what the meaning of the language adopted by it and by the Congress.”
I say that it's not only because the record contains no statement on behalf of the Senate conferees whereas the House conferees submitted a rather lengthy statement on the part of the House members.
And now here's the way it got in the record.
Mr. Wherry rose -- Mr. Pepper sought to interrupt him, “Mr. Wherry, just a moment.
I have not finished, let me conclude.
I do not want to grant unanimous consent if the statement is offered by any other purpose on the part of the Senate conferees, or with the idea that it is to be a guide for those who may later interpret the Act.
If it is offered on the basis of being merely a statement by individual senators, I shall not object.”
And that's how it got in the record.
Senator Taft's comment, “I won't worry the Court with it.”
Justice Abe Fortas: Mr. Burch, did you did you say page 33 of the Government's brief?
Mr. Lucius E. Burch, Jr.: I believe it's 33 at the bottom.
Justice Abe Fortas: Whereas the record here as to Senator Holland --
Mr. Lucius E. Burch, Jr.: Senator?
Justice Abe Fortas: Holland.
Senator Spessard Holland.
Mr. Lucius E. Burch, Jr.: If Your Honor please, the --
Justice Abe Fortas: Perhaps I'm misreading it.
Mr. Lucius E. Burch, Jr.: I believe it's --
Justice William O. Douglas: You're referring to the footnote on page 33, I think.
Mr. Lucius E. Burch, Jr.: I'm ashamed to say I haven't got the brief.
Before me is a not that I made.
But I've believe it was 33, if Your Honor please.
It is -- it refers to the Senate Conference Report which is in these words, this P, P as in Page 14877 of the congressional record.
The conference agreed for the exemption of establishments which it's traditional regarded as retail, establishments which are not ordinarily available to general consuming public such affiliates conceded in Boutell against Walling and the establishments which do not have the exemption because the selling of services which they are engaged in is not considered to be retail such as banks, insurance companies, credit companies, newspapers, telephone companies, gas, utility companies, telegraph companies, et cetera, will not become retail or service establishments under the provisions of the conference agreement nor does the conference agreement change the status or change the warehouses or central offices such as those held nonexempt in Philips against Walling.
All of the establishments selling industrial goods and services that manufacturers engaged in the production of goods for interstate commerce of the industrial and business customers, such as the establishment held nonexempt in Roland Electric Company against Walling.
That is the section that came in, in the way in which I have -- it is 33, if Your Honor please, I know this is correct.
95 Congressional Record, 14877 statement of the majority of Senate conferees, it's the last thing at the bottom and that is what is being referred to in the remarks for Senator Wherry that I referred to --
Justice Hugo L. Black: Who was the chairman of the committee?
Mr. Lucius E. Burch, Jr.: The House committee, I believe, if Your Honor please is Losinski, I believe is --
Justice Hugo L. Black: That's in your brief.
Mr. Lucius E. Burch, Jr.: That's correct sir.
So, if Your Honors please, there is no legislative pieces for that even if the statute was ambiguous which is not.
Now, I come to part of the argument which he makes to which I have a somewhat visual reaction and this she refers to, I say, she, my friendly solicitor and this -- she had written an expert brief and made a good argument and I've heard this argument two courts before so I'm not unfair for it.
But she characterized, is this out of Lewis—Carol page 21 of the brief, businessmen are no less entitled in humpty dumpty to make words mean what they want them to mean.
And if the statute was intended to turn solely on word usage, there's no reason why they should not take advantage of it and adopt whatever usage entitles them to profit benefit.
And if that is so, the statute is reduced to the absurdity of saying that every industry selling goods not for resale shall pay minimum wages, but if not, would only if the industry is willing.
Now, Judge White answered that by saying, “these habits and practices in the tire industry were not of recent origin nor were they adopted to avoid the provisions of the Act but what traditional and had existed for many years before the amendment was enacted.
The same concept of retail in this industry was adopted by the industry and it's shown by the record back in the early 30s at which time under the authority of the Congress the NRA Code was drawn.
And that definition continued until this Court shut on the Blue Eagle in the Schechter case.
Then the same definition was adopted in the industry and was in the OPA Code, continued in the OPA Code as long as the OPA was alive.
And it is the concept adopted not only in the State of Tennessee but if my memory is correct in 33 others states that all the plan of retail just exactly the way it has been defined in this industry.
So there is not the slightest basis in this record, not one word that indicates that this definition was adopted for the purposes of this litigation or any litigation.
But the plain -- the inference is that the people who pass this legislation knew what had been the traditional accepted concept of retail in the industry at the time the legislation was passed.
Now, one word about --
Justice Byron R. White: You don't disagree -- you don't disagree with the Kentucky Finance, I take it, do you?
Mr. Lucius E. Burch, Jr.: I was just about to say effective from (Voice Overlap) please and I do not disagree with Kentucky Finance.Here is what the Kentucky Finance held.
It held first that the 1949 Amendment was passed to get away from the dicta in Roland.
And it said that the finance industry was not included within the retail exemption for two reasons.
First that you do not resell finance, there is no such thing as a resale of your borrowings.
Justice John M. Harlan: But certainly, you didn't rest on that very hardly that because of an argument with the sale of the service.
Mr. Lucius E. Burch, Jr.: No sir.
I mentioned it but I would say that that's the main point of case and that prior to the 1949 Amendment that there had been no concept of retail selling in the industry.
That is what I've introduced with Kentucky Finance --
Justice Byron R. White: Well, would you agree then with the Solicitor that in any -- in any of these cases we must at the outset, go through a course of the -- or answer of a question of whether or not there is any retail sale as traditionally recognized or take -- take the court as you do -- that the court did in Kentucky Finance.
Mr. Lucius E. Burch, Jr.: No, if Your Honor please, I would not.
My answer to the Court's question is first, that if the industry has a definition which preexisted the mitigation that the Court is bound to accept the definition of the industry.
Justice Byron R. White: Well, we go through the question -- we ask the question but what you say automatically answers it I think.
Mr. Lucius E. Burch, Jr.: It answers it and then I wished to answer it further by saying that if the test was as the Solicitor suggests that you have to show a historical retail concept but the proof is in this case that it did exist.
And that it is consistent with the adjudication of both courts.
I find nothing --
Justice John M. Harlan: Do you think that is traditional and characteristic to treat quantity discounted sales are not for resale as retail sale.
Mr. Lucius E. Burch, Jr.: Yes, I do, if Your Honor please.
Under the facts in this case, that the sole criteria is whether or not it is for resale.
If it is not for resale, it is retail.
That is the definition of the industry, that was the definition of the sales tax, that had been the definition of the OPA --
Justice Byron R. White: Well, what is it if it isn't -- what is it if it's not for resale that the industry doesn't think it's for retail than it's a retail, what about that?
Mr. Lucius E. Burch, Jr.: If Your Honor please, run that at me again because I'm not quite --
Justice Byron R. White: What if it's -- what if it's not for resale?
The sale is not for resale but the industry does treat it as a retail sale.
Mr. Lucius E. Burch, Jr.: It is not for resale and the industry does not treat it as retail.
Justice Byron R. White: What is it then?
Mr. Lucius E. Burch, Jr.: I know of nothing in this record that fits that category but I would say that it was not retail.
I would say --
Justice Byron R. White: But it's not -- it's not -- it's not retail.
Mr. Lucius E. Burch, Jr.: No sir.
It would not be under the exemption but again, I say under this -- under this record, I know of nothing that comes in that category.
Justice John M. Harlan: So there can be sales and there can be sales anyway that are not for resale but are retail?
Mr. Lucius E. Burch, Jr.: Oh yes, Your Honor.
Yes, Your Honor.
I think that's easily conceivable.
Now, applying the doctrine of common sense which is something else again that I don't think I'm forced to do anymore than the question of legislative history but the way they presented this case if it is not for personal use and consumption, it is not retail.
If it something that you buy, do use in connection with your business, it is not retail.
You take a young college professor that goes into the bookstore.
He buys something of high promise to inform himself to lecture his economics class the next day.
That to them is not retail.
On the same, it goes in -- in the same day, it is read in the -- in the paper that the Court has read Fannie Hill and the next time he goes in he may have to get it under the table instead and he finds that to take home and edify himself with, that's retail.
Same transaction made by the same clerk in the same store.
It's a perfectly nonsensical classification.
Now, any classification must be sufficiently objective for an Administrator to have something other than what is in his head or what is in the head of the user to regulate the sale.
Now, the Congress has said if the industry has classified it, we can find out what the industry has done because if Senator Taft said in the course of the debate, "What is retail in any particular industry as a question of fact that has been settled for many years."
We respectfully submit that on all bases, on the limited basis which this case comes before the Court what the clear statute and with the finding of fact that is not clearly erroneous that the court below should be affirmed.
But if it were not that way, if there were some doubt as to what the statute were, what it meant, that the legislative history clearly shows that transactions of this type were intended to be exempt.
Justice Abe Fortas: Mr. Burch, suppose that -- in the oil company sold its entire output to industrial companies and that oil were used in the generating heat and energy in their operations.
Now, that is a sale, it's not for resale.
If the oil industry had a practice of referring to this as retail, would that bring it within the statutory exemption in your opinion?
Mr. Lucius E. Burch, Jr.: Oh, that's designedly, if Your Honor please, a hard question.
In my opinion it would but I'd say I know of no circumstance where anything like that exists.
One of the criteria that were mentioned by the Congress, one of these discussions was that to be a retail establishment, the establishment must be available to the general public.
Now, this establishment is available to the general public, it is widely patronized by the general public.
Anybody can go in there and buy tire.
It is full of people going in there to get tires.
People go in there and buy one tire, two tires, four tires.
There is nothing in this record that shows this to be other than a progressive prosperous, active place that sells tires to the general public.
Justice Tom C. Clark: Do they have different provisions in your business, whether it's a wholesale, resale and --
Mr. Lucius E. Burch, Jr.: No.
Justice Tom C. Clark: It's all one place.
Mr. Lucius E. Burch, Jr.: All one place.
Chief Justice Earl Warren: Do you have differ -- do you have price differentials?
Mr. Lucius E. Burch, Jr.: Yes sir.
We have price differentials.
Some people buy, if they buy large quality, they buy for less than they would charge me if I went in to buy a tire.
And that was one of the -- one of the arguments that has been made by my friend, made below and made in our brief here that if you get a price discount that it can't be -- it can't be retail.
Of course, that's not what the Congress said and again you could see what happens.
If I go in and buy a cartoon of cigarettes and get them at a lower price than if I bought one pack of cigarettes under that definition it would not be on retail sale.
I'm quite sure that that was never what the Congress intended.
Chief Justice Earl Warren: Well, the private individual bought one of these big truck tires, would you pay the same price as a big trucking company?
Mr. Lucius E. Burch, Jr.: It would depend, if Your Honor, please on the quantity.
Chief Justice Earl Warren: Well, let's say they both bought one.
Mr. Lucius E. Burch, Jr.: If they both bought one, they both pay the same.
Chief Justice Earl Warren: Same price.
Mr. Lucius E. Burch, Jr.: Yes sir.
But if the big trucking company had bought 20, he might get it cheaper than the man who bought one.
Chief Justice Earl Warren: I see.
Rebuttal of Bessie Margolin
Ms Bessie Margolin: I just like to make some comments on these last two questions.
I'm not entirely satisfied with Mr. Burch's answers.
I think Justice Clark you asked if there were a different divisions.
We described in our brief the testimony of one of the industry representatives which shows that -- which was to the effect that large tire dealers such as Steepleton do maintain separate divisions for what they call retail, the separate division of wholesale in which they classified sales not for resale and a third division which they classified as a commercial division.
And Steepleton himself testified as to the divisions in his own plant.
He has a passenger tire salesman, a passenger tire division where you can go into the plant and you can buy your passenger tires there and a retail salesman to wait on you.
Now, the commercial salesman in a separate step and they go out and solicit this industrial and commercial business.
And most of these services, the repair and maintenance services rent at a place of business of these large industrial customers.
The plant on Monroe Street is used essentially for passenger car servicing south.
In fact, I think they -- one of them testified they didn't have much room in there for the trucks; they couldn't do much of it in that plant on Monroe Street.
Then Mr. Chief Justice, I think you asked about the discounts.
May I take to deal with them?
Chief Justice Earl Warren: Yes, yes you may.
Ms Bessie Margolin: Marsh, who was the Executive Director of the Trade Association testified at length about the recognized scale of discounts which got larger as the potential or actual purchase of tires for the quantity group.
And he also mentioned that this depends to a great extent on how -- on the fleet accounts.
They have what they called fleet accounts which then -- which most of the witnesses -- the industry witnesses testified and then they operate more than five commercial vehicles and they have special discounts.
And of course there's room for bargaining but this is a scale of discounts that they start bargaining from.
There is considerable competition in this business and great deal of bargaining.
And one thing I learned, never buy a tire without bargaining.
Justice Byron R. White: Ms. Margolin, aside from the specific reference to the legislative history, do you really see any difference between this case and the Sheet Metal case?
It doesn't -- it's one that --
Ms Bessie Margolin: Well, this case has the additional aspect that some -- we have some sales and it really overlaps.
Some of the sales are of the type that we'd say were ineligible for our recognition is -- of a retail.
Justice Byron R. White: Yes.
Ms Bessie Margolin: But there's a large -- there's a large area in here where their sales to fleet accounts that's there -- as they recognized this --
Justice Byron R. White: But in that -- isn't that part of the business?
Is there any real difference between this case and the other one?
Ms Bessie Margolin: In the first part of the business insofar as the retail concept applies no, I would say no.
Justice Byron R. White: One -- one case ought to be decided like the other.
Ms Bessie Margolin: I would say this certainly has been our position that the retail concept, the traditional statutory retail concept should be applied in determining whether sales transactions are -- can be recognized as retail are eligible as much so as determining whether a whole business.
May I just take a moment to try to represent this?
Suppose Kentucky Finance Company had opened an appliance shop and run it along with its long business, it certainly would not have made the lending of the loan business eligible for the recognition as retail.
And we think that's what we have here.
There's a small amount of retail business going along here with a great big amount of business that is -- that we say is not eligible.
Justice Hugo L. Black: What is the -- what's the division in the amount?
Ms Bessie Margolin: What is -- I beg your pardon Mr. --
Justice Hugo L. Black: The percentages.
Ms Bessie Margolin: The percentages here were not as precisely true because of the sleeping position our opponents -- the respondent took in this case.
We did put on and investigated to show that at least more than 25% of it was in this category.
But he had pretty incomplete information and we got -- we got no evidence from the respondents, from the defendant, to help us to determine how much of this was of that ineligible type.
We know that we have enough that was at the quantity discount to fleet account sales, to bring it well over 25%.
Now, they did -- they did admit that from 75% of their maintenance and recapping in repair business was for these commercial accounts and that comprised 35% to 40% of the business of the total dollar volume business alone.
That is significant in the -- on the record.
So that we -- we think the record is clear that there's no doubt that in those two areas, it would be well over 25% that would no be retail.
And I don't believe it -- were -- our opponents have denied that.