Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_05-cv-02125/USCOURTS-casd-3_05-cv-02125-0/pdf.json

Nature of Suit Code: 710
Nature of Suit: Fair Labor Standards Act
Cause of Action: 29:0201fl FLSA: Fair Labor Standards Act (FLSA)

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1

 Kmart Corp. and Sears, Roebuck and Co. merged to become Sears Holding. See

Inwood Depo. at 5:17-20. Because, for purposes of this motion, the court need not distinguish

between Sears, Roebuck and Co. and Sears Holding, the court will use the term “Sears” to

- 1 - 05CV2125

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

FERNANDO RUIZ, individually and on

behalf of all others similarly situated,

Plaintiff,

CASE NO. 05CV2125 R (CAB)

ORDER GRANTING MOTION FOR

PARTIAL SUMMARY JUDGMENT

vs.

AFFINITY LOGISTICS CORPORATION,

Defendant.

I. Introduction

Defendant Affinity Logistics (“Affinity”) moves for summary judgment as to Count I

of the complaint filed by plaintiff Fernando Ruiz (“Mr. Ruiz”), an employee of Affinity.

Count I alleges that Affinity has violated the Fair Labor Standards Act (“FLSA”) by failing

to pay Mr. Ruiz for overtime worked. For the reasons set forth below, the motion for partial

summary judgment is granted. 

II. Statement of Facts 

Affinity “is a motor carrier engaged in the business of providing regulated, for-hire

transportation services in interstate commerce operating under the authority of the Federal

Motor Carrier Safety Administration.” Affinity’s Ex. 1, Hitt Decl. ¶ 2. Affinity hauls and

delivers a variety of products, including appliances, for companies such as Sears.1

 Hitt Decl.

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refer to both entities. 

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¶ 3. Mr. Ruiz was, at all relevant times, a driver for Affinity. See Affinity’s Ex. 2, House

Decl. ¶ 5. As such, Mr. Ruiz would deliver appliances to Sears’ customers. 

Greg Inwood, formerly the Divisional Vice President, Inventory Management, for

Sears, Roebuck and Co. and currently a Divisional Merchandise manager with Sears, orders

the appliances that are sold at Sears’ retail outlets. See Affinity’s Ex. 3, Inwood Decl. ¶¶ 1,

5; Inwood Depo. 5:15-24. According to Mr. Inwood, “[t]he orders are based on the forecasting

of sales that will be made by the stores.” Inwood Decl. ¶ 5. “The forecasts are based on

historical sales information and anticipated appliance promotions.” Id. The objective of the

forecasts is to have enough appliances available to fill all customer orders without running out

of appliances while, at the same time, not stocking any excess inventory.” Id. Forecasts “are

reviewed and adjusted as needed on a weekly basis.” Id. 

Appliances sold by Sears are manufactured at various locations throughout the United

States, including Iowa, Indiana, Ohio, Kentucky, Arkansas, and Minnesota, as well as Mexico.

Id. ¶ 4. “Sears takes title to and control of the appliances from the manufacturers through to

home delivery.” Id. ¶ 7. Sears is responsible for the shipment of these appliances although

Sears’ wholly-owned subsidiary, SLS, assists Sears in arranging for the shipment of the

appliances. See Id. ¶¶ 4, 7; Affinity’s Ex. 4, Miranda Decl. ¶ 9. In most cases, appliances are

shipped from the manufacturers’ locations to Sears’ Direct Distribution Centers (“DDCs”),

which are located through the United States and Canada. Miranda Decl. ¶ 6. Then the

appliances are shipped from the DDCs to local “MDOs” for delivery to Sears’ customers’

homes. Id. However, special orders are shipped directly from the manufacturer to the MDO,

from which they are delivered to the customer’s home. Inwood Depo. at 31:3-13; 108:15-22.

 When appliances arrive at the Ontario, California DDC from the manufacturing plant,

they are checked in. Christina Miranda, the General Manager of the Ontario, California DDC

that supplies the San Diego MDO, explains in her declaration that when appliances have

already been sold, the turnaround time between the arrival of the appliances at the DDC and

delivery to the MDO is generally between one and three days. Miranda Decl. ¶ 6. When

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appliances have not been sold by the time they reach the DDC, they are offloaded and “stored

in the warehouse temporarily until the appliances are sold.” Id. ¶ 7. “The appliances that have

not already been sold remain at the Ontario DDC for generally no longer than two to three

weeks before they are sold, delivered to one of the Sears retails stores or the MDOS and then

delivered to the Sears retail customer.” Id. It is undisputed that Mr. Ruiz delivered appliances

from the San Diego Market Delivery Operation (“MDO”) in San Diego, California, to Sears’

customers within California. 

According to Mr. Inwood, it is Sears’ intent “that the appliances move from the

manufacturers’ facilities. . . . to its DDCs and then to its MDOs for delivery to Sears retail

customers while stopping only long enough to maintain control over the inventory.” Inwood

Decl. at ¶ 8.

III. Analysis

Whether Mr. Ruiz is exempt from the FLSA overtime provision is a question of law.

See Jones v. Giles, 741 F.2d 245, 248 (9th Cir. 1984) (“The district court's holding on the

applicability of the 29 U.S.C. § 213(b)(1) exemption is a question of law and therefore we

review de novo.”).

A. Independent Contractor Exception to the FLSA

Affinity argues in a conclusory fashion that Mr. Ruiz is not covered by the FLSA

because he is an independent contractor, as supposedly evidenced by the fact that Mr. Ruiz

signed an “Independent Truckman’s Agreement” in which he acknowledges he is an

independent contractor. “[C]ontractual language, however, is not conclusive . . . . Economic

realities, not contractual labels, determine employment status for the remedial purposes of the

FLSA.” Real v. Driscoll Strawberry Associates, Inc., 603 F.2d 748, 755 (9th Cir. 1979). As

explained in Real, 

The courts have identified a number of factors which may be useful in

distinguishing employees from independent contractors for purposes of social

legislation such as the FLSA. Some of those factors are:

1) the degree of the alleged employer's right to control the manner in which the

work is to be performed;

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2) the alleged employee's opportunity for profit or loss depending upon his

managerial skill;

3) the alleged employee's investment in equipment or materials required for his

task, or his employment of helpers;

4) whether the service rendered requires a special skill;

5) the degree of permanence of the working relationship; and

6) whether the service rendered is an integral part of the alleged employer's business.

Id. at 754. “The presence of any individual factor is not dispositive of whether an

employee/employer relationship exists.” Id. “Such a determination depends “upon the

circumstances of the whole activity.” Id. (quoting Rutherford Food Corp. v. McComb, 331

U.S. 722, 730 (1947)). 

Because Affinity does not undertake to explain why, as a matter of law, these factors

establish that Mr. Ruiz is an independent contractor, the court concludes that Affinity has not

met its burden of demonstrating it is entitled to summary judgment on this ground.

B. Motor Carrier Exemption

Affinity also argues that it is entitled to summary judgment because, as a driver in

interstate commerce, Mr. Ruiz falls under Section 13(b)(1) of the FLSA (known as the “motor

carrier exemption”) and, therefore, is not entitled to overtime compensation. Mr. Ruiz, on the

other hand, contends that because he does not cross state lines when he delivers Sears

appliances from the San Diego MDO to customers’ homes, he is not engaged in interstate

transportation, and, therefore, the motor carrier exemption does not apply. 

Section 7 of the FLSA, codified at 29 U.S.C. § 207, requires employers to pay overtime

wages to certain employees who work more than forty hours in a week. However, pursuant to

§ 13(b)(1) of the FLSA, codified at 29 U.S.C. § 213(b)(1), this overtime provision does not

apply to employees for whom the Secretary of Transportation may prescribe requirements for

qualifications and maximum hours of service under the Motor Carrier Act of 1935, 49 U.S.C.

§ 31502. See 29 U.S.C. § 213(b)(1). As set forth in 29 C.F.R. § 782.2, an employee’s

exemption pursuant to FLSA § 13(b)(1) “depends on both the class to which his employer

belongs and on the class of work involved in the employees’s job.” For the “motor carrier

exemption” to apply, (1) the employee must be employed by an employer subject to the

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jurisdiction of the Secretary of Transportation (which it is agreed that Affinity is), and (2) the

employee must be “engaged in activities of a character directly affecting the safety of

operations of motor vehicles in the interstate transportation of passengers and property.” 29

C.F.R. § 782.2. 

As for the second requirement, a “driver” is expressly identified in the federal

regulations as an occupation that directly affects the safety of motor vehicles, see 29 C.F.R.

§ 782.2(b)(1), and “driver” is defined for Motor Carrier Act jurisdiction as “an individual who

drives a motor vehicle in transportation which is, within the meaning of the Motor Carrier Act,

in interstate or foreign commerce.” 29 C.F.R. § 782.3(1). As the parties recognize, the sole

issue confronting the court is whether Mr. Ruiz is an individual who drives a motor vehicle in

interstate transportation when he delivers appliances from the San Diego MDO to Sears’

customers without traveling across state lines. 

The motor carrier exemption “is construed narrowly, and the employer seeking the

exemption has the burden of proving entitlement.” Klitzke v. Steiner Corp., 110 F.3d 1465,

1468 (9th Cir. 1997) (internal citation omitted). “Whether any particular shipment is interstate

is determined on an ad hoc basis . . . .” Klitzke, 110 F.3d at 1469. “‘Whether transportation

is interstate or intrastate is determined by the essential character of the commerce, manifested

by shipper's fixed and persisting transportation intent at the time of the shipment, and is

ascertained from all of the facts and circumstances surrounding the transportation.’” Id.

(quoting Southern Pac. Trans. Co. v. ICC, 565 F.2d 615, 617 (9th Cir.1977) (citation omitted)

(emphasis in original)). Importantly, the in-state transportation of goods after the goods have

come to rest in a warehouse may be deemed interstate commerce where the in-state

transportation is but a leg of an interstate journey. As explained in Walling v. Jacksonville

Paper, Co., 317 U.S. 564 (1943)

The entry of the goods into the warehouse interrupts but does not necessarily

terminate their interstate journey. A temporary pause in their transit does not

mean that they are no longer ‘in commerce’ within the meaning of the Act . . . .

if the halt in the movement of the goods is a convenient intermediate step in the

process of getting them to their final destinations, they remain ‘in commerce’

until they reach those points.

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2

 Public Law 89-670 transferred to and vested in the Secretary of Transportation all

functions, powers, and duties of the Interstate Commerce Commission under § 204(a)(1) and

(a)(2) of the Motor Carrier Act of 1935 related to qualifications and maximum hours of service

of employees and safety of operations and equipment.

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Id. at 568. Finally, as explained in Reich v. American Driver Service, Inc., 33 F.3d 1153, (9th

Cir. 1994):

Although many motor carriers engage in both interstate and intrastate commerce,

a motor carrier cannot be subject to the jurisdiction of both the Secretary of

Labor and the Secretary of Transportation. When determining to which

Secretary's jurisdiction such a motor carrier's employees are subject, courts have

consistently looked to the Supreme Court's decision in Morris v. McComb, 332

U.S. 422, 68 S.Ct. 131, 92 L.Ed. 44 (1947). Under Morris, even a minor

involvement in interstate commerce as a regular part of an employee's duties

can subject that employee to the Secretary of Transportation's jurisdiction.

Id. at 1155 (internal citations omitted). 

In determining whether Mr. Ruiz is a driver transporting goods in interstate commerce,

the court looks to the 1992 Interstate Commerce Commission (“ICC”) Policy Statement

regarding motor carrier transportation from out-of-state locations through warehouses to points

within the same state. As the Supreme Court has explained:

[I]t is important to recognize that, by virtue of the unique provisions of § 13(b)

(1) of the Fair Labor Standards Act, we are not dealing with an exception to that

Act which is to be measured by regulations which Congress has authorized to

be made by the Administrator of the Wage and Hour Division, United States

Department of Labor. Instead, we are dealing here with the interpretation of the

scope of the safety program of the Interstate Commerce Commission,2

 under

§ 204 of the Motor Carrier Act, which in turn is to be interpreted in the light of

the regulations made by the Interstate Commerce Commission pursuant to that

Act.” Id. 

Levinson v. Spector Motor Service, 330 U.S. 649, 676-677 (1947). The 1992 ICC Policy

Statement, which is derived from “an unbroken string of Commission, Federal Court and

Supreme Court decisions,” is the most recent and relevant statement by the ICC regarding “the

difference between interstate and intrastate trucking services provided within a single State.”

1992 MCC Lexis 50, * 1. As explained in the 1992 ICC Policy Statement, where goods are

transported intrastate after coming to rest, the “essential and controlling element in determining

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3

 See Ex Parte No. MC-48, Determination of Jurisdiction Over Transportation of

Petroleum and Petroleum Products by Motor Carriers Within a Single State, 71 M.C.C. 17, 29

(1957).

- 7 - 05CV2125

whether the traffic is properly characterized as interstate is whether the shipper has a ‘fixed and

persistent intent’ to have the shipment continue in interstate commerce to its ultimate

destination.” Id. at *3. The 1992 ICC Policy Statement sets forth seven factors that suggest

a shipper has such an intent. 

 Mr. Ruiz contends that the court should apply the “Petroleum Products test”3

 rather than

the 1992 ICC Policy Statement in order to determine the essential nature of the commerce in

which he is engaged. “Pursuant to the Petroleum Products test, the ICC examines three

particular indicators of a shipper's intent: (1) the absence of a specific order being filled for a

specific quantity at the time of shipment; (2) the status of the terminal storage as a distribution

point or local marketing facility; and (3) the arrangement of further transportation only after

sale or allocation from storage.” International Broth. of Teamsters, Chauffeurs, Warehousemen

and Helpers of America and Teamsters Joint Council No. 7 v. I.C.C., 921 F.2d 904, 908 (9th

Cir. 1990). However, as the Ninth Circuit has noted, “‘[e]ven though the ICC has never

explicitly stated that it was abandoning the more structured [Petroleum Products] test, it

appears that its use of that standard has been refined, if not phased out.’” Id. (quoting

California Trucking Ass'n v. I.C.C., 900 F.2d 208, 213 (9th Cir. 1990)). Thus, the Ninth

Circuit has concluded that “where the ICC applies the fixed and persisting intent rule to

determine the essential nature of commerce, it need not apply the Petroleum Products test.”

Id. (quoting California Trucking, 900 F.2d at 212). In light of the foregoing, the court will

determine Sears’ fixed and persisting intent by applying the 1992 ICC Policy Statement rather

than the Petroleum Products test. The court now turns to the relevant factors, as set forth in

the 1992 ICC Policy Statement, for determining the essential nature of the commerce at issue

here.

First, according to the 1992 Policy Statement, in-state transportation is a part of a

continuing movement in interstate commerce where, “[a]lthough the shipper does not know

in advance the ultimate destination of specific shipments, it bases its determination of the total

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4

 Mr. Ruiz takes issue with the fact that neither Mr. Inwood’s nor Ms. Miranda’s

declaration is accompanied by supporting documentation. However, Mr. Ruiz has failed to cite

a single case holding that a defendant seeking summary judgment must accompany

declarations with supporting documentation, and the court is not aware of any authority so

holding. In fact, it has long been the rule that a defendant need not file any evidence in support

of a motion for summary judgment. See Rule 56(a) (explaining that party may move for

summary judgment “with or without supporting affidavits”); Celotex Corp. v. Catrett, 477 U.S.

317, 323 (1986) (“[W]e find no express or implied requirement in Rule 56 that the moving

party support its motion with affidavits or other similar materials negating the opponent's

claim.”). Moreover, if Mr. Ruiz’s objection is that Affinity has failed to establish a foundation

for this testimony, such an objection is not well-taken given that a review of their declarations

establishes that both declarants have sufficient on-the-job experience with Sears’ procedures

and the procedures at the DDC to render an opinion regarding the topics on which they opine.

5

 Mr. Ruiz contends that “Affinity has not offered a scintilla of evidence that a specific

customer order exists for the product when SLS picks up the merchandise from the vendor’s

manufacturing facility.” Opposition at 10:2-4. However, Mr. Inwood’s and Ms. Miranda’s

testimony is such evidence. 

- 8 - 05CV2125

volume to be shipped through the warehouse on projections of customer demand that have

some factual basis, rather than a mere plan to solicit future sales within the State.” Id. at *4.

“The factual basis for projecting customer demand may include but is not limited to, historic

sales in the State, actual present orders, [and] relevant market surveys of need.” Id. Here,

according to the declaration of Mr. Inwood, Sears’ orders “ are based on the forecasting of

sales that will be made by the stores.”4

 Inwood Decl. ¶ 5. “The forecasts are based on

historical sales information and anticipated appliance promotions.” Id. This first factor weighs

in favor of a finding that the appliances delivered by Mr. Ruiz were delivered as part of a

continuous movement in interstate commerce. 

Moreover, even though a shipper need not know the ultimate destination of specific

shipments, Sears does, in fact, know the ultimate destination of at least some of the appliances

at the time they are shipped from the manufacturer. As explained by Mr. Inwood in his

declaration,5

 sales occur on appliances that “have a release date but are still on the

manufacturers’ production line . . . .” Id. ¶ 6. Moreover, approximately 2 to 31⁄2 percent of

Sears product is special orders. Inwood Depo. at 30:25-31:13. If something is a special order,

it comes directly from the manufacturer and goes directly to the MDO for delivery to the

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customer. Inwood Depo. at 31:3-13; 108:15-22. Clearly, at the time of shipment from the

manufacturer, Sears has a fixed intent regarding the destination of appliances that are special

orders. 

Mr. Ruiz contends that when Sears places its firm orders with the manufacturers, it

cannot have the intent to ship to a specific customer because a customer cannot order an

appliance for which there is not a firm order. However, this argument ignores the fact that

Sears’ intent at the time of shipment, not at the time of placing its order, is the relevant intent.

See Klitzke, 110 F.3d at 1468. To the extent that Watkins v. Ameripride Services, 375 F.3d

821, 826 (9th Cir. 2004) suggests otherwise, it does so in dicta and without considering the

1992 ICC Policy Statement and the authority upon which it relies. Moreover, one Ninth

Circuit panel cannot overrule another panel. See In re Smith, 305 F.3d 1078, 1085 (9th

Cir.2002). 

Mr. Ruiz also contends that because, on average, appliances stay at the DDC for

between 21 and 28 days, this demonstrates that “there is no customer order for the product

even when it arrives at the DDC.” Opposition at 10:13-15. However, it does not follow from

the fact that there is no outstanding order for certain products that sit at the DDC for several

weeks that there is never a customer order for an appliance at the time it is shipped from the

manufacturer. 

The second factor identified in the 1992 ICC Policy Statement as demonstrating that

in-state transportation is simply a continuation of interstate commerce is that “[n]o processing

or substantial product modification of substances occurs at the warehouse or distribution

center.” 1992 MCC Lexis at *4. Here, it is undisputed that no processing, repackaging or

product modification occurs at the Ontario DDC. Miranda Decl. ¶ 8. Moreover, there is no

evidence that the appliances are processed, repackaged or modified at the San Diego MDO.

Thus, this factor weighs in favor of a finding that the appliances delivered by Mr. Ruiz were

delivered as part of a continuous movement in interstate commerce. 

The third factor identified in the 1992 ICC Policy Statements is that “[w]hile in the

warehouse, the merchandise is subject to the shipper’s control and direction as to the

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subsequent transportation.” 1992 MCC Lexis at *5. Here, both Mr. Inwood and Ms. Miranda

represent that “Sears takes title to and control of the appliances” from the manufacturing

facility to its customers’ homes. Inwood Decl. ¶ 7; Miranda Decl. ¶ 9. Thus, this factor also

weighs in favor a finding that the appliances delivered by Mr. Ruiz were delivered as part of

a continuous movement in interstate commerce. 

The fourth factor identified in the 1992 ICC Policy Statement as demonstrating that the

movement of goods through a warehouse does not break the continuity of the transportation

is that “[m]odern systems allow tracking and documentation of most, if not all, of the

shipments coming in and going out of the warehouse or distribution center.” According to Mr.

Inwood, “Sears tracks the shipments of the appliances from the time the manufacturer gives

Sears a release date for the appliances to be shipped through the DDCsand the MDos and then

on through the deliverty to its customers.” Inwood Decl. ¶ 8. Thus, this factor also weighs in

favor of a finding that the appliances delivered by Mr. Ruiz were delivered as part of a

continuous movement in interstate commerce. 

The fifth factor identified in the 1992 ICC Policy Statement as demonstrating that the

movement of goods through a warehouse does not break the continuity of the interstate nature

of the transportation is that the shipper “bear[s] the ultimate payment for transportation charges

even if the warehouse or distribution center directly pays the transportation charges to the

carrier.” 1992 MCC Lexis at *5. Here, although SLS hires the carriers to transport the

appliances, Sears pays SLS, its wholly-owned subsidiary, for the services it provides in

distributing the appliances. Miranda Decl. ¶ 9. Thus, this factor also weighs in favor of a

finding that the appliances delivered by Mr. Ruiz were delivered as part of a continuous

movement in interstate commerce. 

The sixth factor identified in the 1992 Policy Statement as establishing that the in-state

transportation of goods constitutes the continuation of an interstate journey is that “[t]he

warehouse utilized is owned by the shipper.” 1992 MCC Lexis at * 5. Here, SLS, a whollyowned subsidiary of Sears, owns the San Diego MDO and either SLS or Sears leases the

Ontario DDC. See House Decl. ¶ 3; Miranda Depo. at 10-15. Thus, this factor also weighs

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in favor of a finding that the appliances delivered by Mr. Ruiz were delivered as part of a

continuous movement in interstate commerce. 

The final factor identified in the 1992 ICC Policy Statement – that the shipments move

through the warehouse pursuant to a storage in transit tariff provision – is not addressed by the

parties and, therefore, does not appear to weigh in favor of either parties’ position.

In summary, all of the relevant factors point to the conclusion that Mr. Ruiz’s in-state

transportation of appliances from the San Diego MDO to the homes of Sears’ customers was,

as a matter of law, transportation in interstate commerce. This is so because the transportation

of the appliances from the MDOs to customers’ homes was the last leg of what Sears, at the

time of the shipment from the manufacturer, intended to be a journey of the appliances in

interstate commerce. A review of the factors relied upon by Mr. Ruiz does not alter this

conclusion.

 Mr. Ruiz contends that, because the DDC is a warehouse that is “designed, in part, to

hold inventory,” Miranda Depo. at 103:8-10, Sears does not have a fixed and persistent intent

that the appliances move beyond the DDC. However, as the ICC Policy Statement notes,

“[t]he case law establishes that the absence of time limitations on storage and the absence of

storage-in-transit receipts issued by the warehouse or distribution center are not sufficient to

establish that the continuity of interstate commerce is broken at the warehouse.” 1992 MCC

Lexis at *5; see also Roberts v. Levine, 921 F.2d 804, 810-11 (8th Cir. 1990) (concluding that

intrastate shipment of urea after storage in warehouse constituted a continuation of the urea’s

interstate journey, where urea could remain at warehouse for as long as six months); Merchants

Fast Motor Lines, Inc. v. I.C.C., 5 F.3d 911, 917 (5th Cir. 1993). Thus, that some appliances

are temporarily stored at the DDC does not alter the conclusion that Sears possesses the

requisite “fixed and persistent intent” that the appliances “continue in interstate commerce”

past the DDC to their “ultimate destination.” 1992 MCC Lexis at *3.

Mr. Ruiz also contends that even though certain appliances may be designated for a

customer at the time of shipping, Sears does not possess the requisite “fixed and persistent

intent” because it retains the ability to divert the products to another customer prior to delivery.

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See Ruiz Ex. E, House Depo. at Ex. p.200:1-201:7 (explaining that if a customer requests a

different delivery date, depending on the new date, the appliance originally designated for that

customer may be re-designated for a different customer). For this proposition, Mr. Ruiz relies

on Burlington Northern, Inc. v. Weyerhaeuser Co., 719 F.2d 304 (9th Cir. 1983); however,

Burlington Northern is distinguishable on its facts.

Burlington Northern transported logs for Weyerhaeuser. The logs were transported from

Weyerhaeuser's inland sort yards throughout Washington to its Tacoma, Washington sort yard

(TSY). Burlington Northern initially billed Weyerhaeuser at intrastate tariff rates, but, upon

learning that the Interstate Commerce Commission (ICC) was investigating the shipments,

Burlington Northern rebilled Weyerhaeuser at the interstate tariff rates. Weyerhaeuser refused

to pay the additional amount and litigation ensued. 

On appeal, the Ninth Circuit affirmed the district court’s conclusion that the logs were

not moving in interstate commerce pursuant to the Interstate Commerce Act. The Ninth

Circuit concluded that “the intrastate transportation of logs from the inland sort yards to TSY

was merely an interior movement, separate and distinct from the ultimate transportation to a

final destination, undertaken for the purpose of preparing the logs for final disposition.” Id. at

310. It explained:

While Weyerhaeuser generally expected to export most of the logs delivered to

TSY, it also expected to transship some of them to other Weyerhaeuser facilities

intrastate. Weyerhaeuser could not designate with certainty at the inland sort

yards which logs would eventually be exported because independent Puget

Sound Bureau scalers made the final determination based on quality standards. Therefore, when the logs left the inland sort yards their ultimate destination was

still unknown.

Id. (emphasis added). It concluded that 

[u]nder these circumstances, the principles set forth in Southern Pacific govern

our determination. The only intent manifested by Weyerhaeuser at the time of

shipment from the inland sort yards was to deliver the logs to TSY for eventual

reshipment to an as yet unknown destination. At that point, the logs had not yet

embarked on a journey in interstate or foreign commerce. Accordingly, the

essential character of the transportation was intrastate and Weyerhaeuser was

initially billed at the proper intrastate tariff rates.

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Id. (emphasis added). 

The key difference between Burlington Northern and the present case is that in

Burlington Northern, the shipper could not have an intent to ship the goods to a specific

destination past its sort yards because an independent party always made the ultimate

determination regarding where the goods would be shipped once they reached the sort yard.

Here, in contrast, at the time certain appliances are shipped from the manufacturer, Sears has

an intent to ship them to a specific destination. Although in certain instances the appliances

are ultimately rerouted to a different consumer (where, for example, a customer requests a

different delivery date), that does not negate the fact that Sears has the requisite intent at the

time of shipment – an intent that the shipper in Burlington Northern did not, and could not,

have. 

Besides the fact that Burlington Northern is not on point, as recognized in Galbreath v.

Gulf Oil Corp., 413 F.2d 941 (5th Cir. 1969), there is no relevant distinction between fungible

and non-fungible goods for purposes of determining the nature of their transportation.

Therefore, the fact that Sears can “divert” an appliance from one customer to another at any

time prior to delivery does not change the conclusion that, with respect to certain appliances,

Sears does have an intent at the time of shipment to ship the appliances to a specific

destination. See Id. at 946 (concluding that the transportation of gasoline after being delivered

to a plant from which it was distributed was interstate in nature even though gasoline is a

fungible product). 

Finally, as noted in the 1992 ICC Policy Statement, the requisite “fixed and persisting

intent” is not an intent that the appliance be delivered to the specific customer for whom it was

originally designated but, rather, an intent that the appliance “continue in interstate commerce

to its ultimate destination.” 1992 MCC Lexis at *3. Even if one customer is substituted for

another after shipment, this does not change Sears’ intent that the appliance not stop its journey

at the DDC or the MDO but rather that it continue in interstate commerce to a customer’s

home. 

Mr. Ruiz, citing Foxworthy v. Hiland Dairy Co., 997 F.2d 670, 673 (10th Cir. 1993),

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also makes much of the fact the Sears appliances that are designated for specific customers are

“commingled” with other Sears appliances for which there is not a specific customer. While

it is true that the Tenth Circuit in Foxworthy noted that the goods at issue had not been

commingled, the court did not explain the relevant analysis with respect to commingling.

Moreover, a review of the cases cited by Foxworthy reveals that the appliances in the present

care not “commingled” in any manner that would suggest their transportation from the San

Diego MDO to California customers is intrastate in nature. 

For example, the Fifth Circuit in Galbreath v. Gulf Oil Corp., 413 F.2d 941, 946 (5th

Cir. 1969), cited by Foxworthy, distinguished an ICC ruling finding the transportation of

petroleum products to be intrastate commerce on the ground that in that case petroleum product

was commingled with the petroleum products of other companies. Here, Sears’ appliances are

not commingled with the appliances of other companies. 

Moreover, State of Texas v. United States, 866 F.2d 1546, 1559 (5th Cir. 1989), also

cited by Foxworthy, is authority for the proposition that the commingling of goods in a

warehouse after the interstate shipment of the goods does not necessarily transform the

subsequent intrastate transportation of the goods into shipment in intrastate commerce.

Moreover, its holding is not helpful to Ruiz. State of Texas involved the shipment of carpet

manufactured by a single manufacturer. The carpet was shipped from Georgia and Tennessee

to a “service center” in Arlington, Texas. Id. at 1549. At the time of shipment from the

manufacturer, 30% of the carpet was designated for particular customers while the remaining

carpet was not. The carpet designated for particular customers was referred to as “sidemarked”

carpet, and the parties agreed that the sidemarked carpet was moving in interstate commerce

until it reached the consumer even if the consumer was located in Texas. 

The remaining carpet was designated as “non-sidemarked carpet.” It usually remained

at the service center for two to three months before being shipped to a customer. Over 90%

of the non-sidemarked carpet was ultimately delivered to a customer in Texas. The nonsidemarked carpet was shipped from Georgia to Texas “on the basis of E & B's projections

from its past dealing with its ‘major customers,’” who accounted for 80% its overall sales. Id.

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at 1549. The ICC concluded that the shipments of the non-sidemarked carpet were interstate

in nature. The Fifth Circuit affirmed. 

The Fifth Circuit explained that commingling is an issue because there is a concern that

shippers might commingle products in order to use cheaper interstate rates to ship goods that

are never intended to move out of the state. See State of Tex., 866 F.2d at 1560. However,

the Fifth Circuit concluded that the fact that the sidemarked and non-sidemarked carpet was

commingled at the Texas service center did not transform the shipments of the non-sidemarked

carpet from the service center to Texas customers into intrastate shipments. As the court

explained in State of Texas: 

Shipments that move from a factory in state A to a warehouse in state A, when

some of it is never shipped out of that state, are not analogous to shipments from

state A to a warehouse in state B, when some of it later moves to final

destinations within state B. In the former case, goods bound for local markets

are commingled with goods bound for interstate markets, with the potential for

deviously using interstate storage-in-transit privileges on the initial part of the

trip. In the later case, all goods are bound for interstate markets, and there is no

potential for manipulative commingling. 

Id. at 1559. Noting that “[t]he market for all of the carpet shipped by E & B from Georgia is

in another state, Texas” and that the carpet moved in interstate commerce before coming to rest

at the service center, the Fifth Circuit concluded that the non-sidemarked carpet traveled in

interstate commerce to Texas customers despite the commingling. Given the factual similarity

between State of Texas and the present case, State of Texas supports Affinity’s position that

all of the appliances Ruiz delivers are delivered in interstate commerce. 

 Mr. Ruiz also takes issue with Ms. Miranda’s statement regarding the percentage of

appliances that are earmarked for customers. Although a question from Mr. Ruiz’s counsel

during Ms. Miranda’s deposition suggested that Ms. Miranda testified that 30-40% of the

appliances arriving at the DDC are earmarked for particular customers, see Miranda Depo. at

103: 11-104:3, a close review of Ms. Miranda’s testimony reveals that she actually testified

that in her experience 60% of the appliances coming into the DDCs goes to the MDO’s and

that 30-40% of the appliances going to the MDOs would be earmarked for customers, see

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Miranda Depo. 100:16-101:18, which would suggest that 18-24% (30-40% of 60%) of the

appliances coming into the DDC are earmarked for customers. However, any discrepancy in

Ms. Miranda’s testimony is not material to the present analysis. First, because appliances can

be sold between the time they leave the manufacturer and the time the arrive at the DDC, and

because special orders do not pass through the DDCs on their way to the MDOs, the

percentage of appliances destined for customers at the time the appliances arrive at the DDC

is not the relevant inquiry. Second, and perhaps most importantly, as recognized in the 1992

ICC Policy Statement, a shipper need not know in advance the ultimate destination of a

shipment of goods in order for the intrastate transportation of the goods from a warehouse to

consumers to be deemed a continuation of the goods’ interstate journey. See 1992 MCC Lexis

at *4. Third, even if there were a requirement that Sears know in advance the ultimate

destination of its appliances at the time they are shipped from the manufacturer, the undisputed

evidence reveals that, at a minimum, 2 to 3 1⁄2 % of the appliances are specifically destined for

customers at the time they leave the manufacture. Under Morris v. McComb, 332 U.S. 422,

423-424 (1947), this is clearly sufficient to trigger application of the motor carrier exemption.

In Morris, the Court was confronted with two questions: whether the ICC “has the

power, under § 204 of the Motor Carrier Act, 1935, to establish qualifications and maximum

hours of service with respect to” full-time drivers employed by a common carrier by motor

vehicle when only 3% to 4% of the carrier's total carrier services are in interstate commerce

“and the performance of such services is shared indiscriminately among such employees and

mingled with their performance of other like services for such carrier not in interstate

commerce”; and (2) whether, if the ICC has such power, “the overtime requirements of § 7 of

the Fair Labor Standards Act of 1938 apply to such employees in view of the exemption stated

in § 13(b)(1) of that Act.” Id. at 423-24.

The Supreme Court held that ICC does have such power “and that the overtime

requirements of § 7 of the Fair Labor Standards Act therefore do not apply to such employees.”

Id. at 424. The Court explained that “[u]nder the tests of the Commission's power, as approved

in both the majority and minority opinions in the Levinson case, and, under the analysis of that

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power developed by the Interstate Commerce Commission and cited in that case, it is ‘the

character of the activities rather than the proportion of either the employee's time or of his

activities that determines the actual need for the Commission's power to establish reasonable

requirements with respect to qualifications, maximum hours of service, safety of operation and

equipment.'” Id. at 431-32. 

Since McComb, Congress has vested in the Secretary of Transportation all of the ICC’s

duties, functions and powers regarding the establishment of qualifications and maximum hours

of serve for employees. See Public Law 89-670. However, McComb remains applicable here.

Again, the uncontradicted evidence is that 2 to 31⁄2 % of the shipments from the

manufacturers are special orders so that at the time the appliances leave the manufacturer’s

facilities, Sears intends that the appliances will be shipped in interstate commerce to an

ultimate consumer. Moreover, it is undisputed that other appliances can be, and at times are,

designated for a particular consumer once the firm order has been placed but before the

appliance is shipped from the manufacturer. Pursuant to McComb, a sufficient number of

appliances delivered by Mr. Ruiz are traveling in interstate commerce so as to render him

ineligible for overtime under motor carrier exemption. 

Finally, Mr. Ruiz contends that Ms. Miranda’s and Mr. Inwood’s testimony conflicts;

however, Mr. Ruiz has failed to identify any relevant conflicts in the testimony of these

individuals that changes the conclusion that the transportation of the appliances from the

MDOs to the homes of Sears’ customers is interstate in nature. 

VI. Conclusion

For the reasons set forth above, the motion for summary judgment as to Count I is

granted. 

IT IS SO ORDERED.

DATED: November 6, 2006

John S. Rhoades, Judge

United States District Court

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