Earl Warren: Number 122, James P. Mitchell, Secretary of Labor, versus Bekins Van & Storage Company. Ms. Margolin.
Bessie Margolin: May it please the Court. This is a Fair Labor Standards Act case instituted by the Secretary of Labor to enjoin violations of the overtime and record keeping provisions of the Act. The issue presented is a fairly simple one but highly important because upon it depends the application of three exemptions from the provisions of this Act, and exemptions which are from both the minimum wage and the overtime requirements of the Act. I refer to the exemptions relating to the retail or service establishment, retail or service establishments of which there are three related exemptions. The particular exemption involved here is the one in Section 13 (a) (2) which is -- has been in the Act since its original enactment. A new -- two new exemptions were added in 1949 which also turn on the same key term which is retail or service establishment. The establishment -- retail or service establishment exemption is for retail or service establishment whose sales of goods or services are local or intrastate and are retail in nature in certain prescribed degrees. That is more than 50% intrastate and at least 75% retail. The key term in these exemptions is the word establishment which, of course, must be identified before the percentage tests and the other conditions of these exemptions can be applied. The sole issue in this case is what is the meaning of the term establishment as used in these exemptions? This is not an -- a novel an issue. We believe that it was settled by this Court 12 years ago in the decision of Phillips Company v. Walling. And until the decision -- the decisions below in the instant case it was generally assumed that at least this aspect of this -- of these exemptions and of Section 13 (a) (2) which has other complicated features about it, but that at least this basic aspect that has been assumed was settled 12 years ago and assumed not merely by -- by the administrative officials but by the Court and by Congress in 1949 when it amended this Section in certain respects. The Phillips case, if I might just remind the Court before giving the facts of this particular case -- of the facts of the Phillips case, that case involved a chain of retail grocery stores in New England. There were 49 separate retail grocery stores and a central warehouse and office. And this Court, after a very thorough analysis of this exemption and its intent and purpose, ruled that the term establishment refer to each physically distinct unit or place of business and not to the business enterprise or the chain system as a whole. And it specifically said that the 49 retails stores were separate establishments as were -- as were the central warehouse and office building. And it held -- it held this even though it expressly recognized that the separate units were functionally and organizationally completely meshed and integrated. The Court pointed out that this was usually the case in a chain enterprise, that the very purpose of the chain enterprise was to integrate and -- and operate more economically by integrated and functional organization. For -- for some 10 years subsequent to the Phillips decision that decision has been assumed to have settled the meaning of this Act -- of -- of this term in particular relation to multi-unit, multi-function chain organizations. The courts below, however, decline to recognize the Phillips decision as controlling in the instant case on the ground that the ruling in the Phillips decision as to the meaning of the term establishment was merely obiter dictum. And that other factors distinguishable from the facts in this particular case determined that decision. Now, we submit that the decisions below in so disregarding or so treating the specific thing on the meaning of the term establishment plainly misapprehended the -- the basic ruling of that decision and misunderstood the reasoning on which that particular ruling rested.
Speaker: You -- your position on Phillips, as I understand it, Ms. Margolin, is its physical separateness. That's all it's about.
Bessie Margolin: That the physically distinct unit is the establishment to which you then apply the other conditions of the exemption.
Speaker: Functional aspect of it has no bearing, at least no adverse bearing to your position (Voice Overlap) --
Bessie Margolin: The functional aspect of -- has no bearing. I should say this about it. I think that the decision, the opinion recognizes that there is actually some functional identity in any of these chain organizations, that there is a functional identity to each separate unit. That's a realistic fact which is just as present in this case as it was in Phillips. But the emphasis was on the -- on the practical test of the physically distinct unit because it is a -- a realistic problem. As the Court said the -- this exemption has a limited objective. It was intended to exempt the small retailer and local retailer. And the problem presented by these chain organizations is how to carry out that limited objective, give the chain organization the benefit of that objective and be sure that it gets the exemption for its local retailing but not to -- not to do violence to the exemption and the purpose of it by giving this whole harbored organization a complete exemption from the Act, simply because it combines its retail functions with a lot of other functions. Now, the facts in this particular case, I think, well illustrate that realistic problem and illustrate the reason. The Court said that the key, the essential key to meeting that problem was the physically distinct unit standard. Respondent in this case is the Bekins Van & Storage Company of California. It is a large multi-million dollar chain organization of storage warehouses. It also does extensive moving where -- which is not involved in this particular case. We're concerned here with their storage warehouse business. It has a large chain of -- of warehouses, 36 in the State of California. It is the largest storage warehouse business in the country according to its own statements. It -- it has admittedly engaged very extensively in interstate commerce as well as in intrastate household storage. And it is also admittedly engaged quite extensively in non-retail business, as well as in the storage of household furniture which is considered to be retail. The facts are -- are largely stipulated and are not in dispute. It was stipulated after considerable negotiation and conferences, and I'll make a point of that because of -- of the fact that the respondent has -- seek to inject some doubt as to the facts into the case which I think the stipulation was expressly foreclosed. It was stipulated that if the Alameda warehouse, which is one of the warehouses, which is the one warehouse concerned in this particular suit, that if the Alameda warehouse was considered as a separate unit, for purposes of this exemption, it did not meet the percentage requirements of the statute. In other words, more than 50% of its business was interstate and more than 25% of it, that is, at least 75% of it, was not -- was not retail. Now, the factor that -- the point that respondent has sought to raise is a question as to whether or not all of the -- whether or not 75% of its business was retail. That fact was expressly stipulated away because -- undoubtedly because respondent realized that the burden would be on the respondent to prove that it was retail. And it was expressly agreed, therefore, that it did not meet the retail sales requirements if it was a single establishment. Now, it was also expressly agreed that if the division comprised of five large warehouses including a central office and which served all of the warehouses that if the five warehouses into which respondent classified -- classified Alameda as a part of a division if -- if that whole division were regarded as the establishment, then the requirements, the percentage requirements would be met. In other words, 75% of their business was of the household storage character.
Speaker: So that if the division here or what you call the division, it had to get a large office building where it could carry on all its functions physically it would not be within the Act but it would have to because of locality it went five separate buildings, that you can look at each one separately?
Bessie Margolin: Well, that -- that is in effect what it is. It's not quite in its -- it's a little more realistic than it sounds because there are a variety of reasons why one of these chain organizations developed. Undoubtedly it's -- there's some --
Speaker: This isn't a chain --
Bessie Margolin: -- business advantage in --
Speaker: This isn't a chain organization.
Bessie Margolin: This isn't a chain organization.
Speaker: It isn't.
Bessie Margolin: It isn't a chain organization if it's carried on all in one -- in one building. It becomes a chain organization because it does -- spreads out and acquires a -- a lot of different places of business, and operates at various places of business and there are obviously business advantages to -- to placing your -- your business in various parts of a State or various parts of a country. And the -- the various warehouses here, admittedly most of them, do carry on some of this commercial warehousing. And I might say in regard to the non-retail business here, it's admittedly quite extensive even though it doesn't constitute as much as 25% of the total of the divisions of -- of the division's business. This is a pretty huge outfit. They do several million dollars worth of storage business a year of various kinds and 25% of their business being commercial means a -- quite a substantial amount of commercial warehousing business. They -- the -- the -- in -- in fact, it's -- it's more than most single unit general merchandising warehouses do standing alone, the -- the total amount of -- of commercial warehousing by Bekins Company is admittedly a substantial business in and of itself. It is -- it does distribute this commercial warehousing among several of its warehouses. I think most of them have a little but it varies in degree. Some of the -- some of the warehouses have very little of the commercial. Alameda was chosen and I should say that the emphasis that -- that respondent places on the fact that only Alameda was claimed to be exempt should not be taken too literally because Alameda was chosen as being one that was clearly -- clearly performing so much commercial and so much interstate storage business that it could be definitely identified as not meeting the requirements of the exemption. As to the other warehouses, I understand only one or two of them were even inspected. There are, of course, practical limitations and limitations of appropriations that make it impossible to investigate it -- every unit of -- of a large chain. Alameda was obviously, outstandingly devoted more to the commercial warehousing than the others. There are facts in the record though that show that this is a fast-changing business, and that other of the warehouses were increasing their commercial warehousing. And the investigation of this -- this last investigation occurred are now almost four years ago. I guess a little over four years now. And it may well be that other of the warehouses and they have now become so much more commercial that they would no longer meet the requirements of the exemptions.
Speaker: Is there any claim that the business from a bookkeeping standpoint was allocated among these various houses -- various warehouses in order to bring them within or without the exemption of the Act.
Bessie Margolin: No, I think the facts show that they did keep their books according to the division. They kept the books for the division. They kept their -- their payrolls that their -- it's admitted that organizationally --
Speaker: (Voice Overlap)
Bessie Margolin: -- they operated the division as a unit. Our position is that what the -- what the company does for its own managerial convenience for them a chain does for its own managerial convenience can't determine whether or not the retail establishment exemption applies, that that is an aid to depend upon the purpose of the exemption which this Court has already construed and which Congress approved at the time of the 1949 amendments to be the single unit, single physically separate unit. And --
Harold Burton: Do you expect to say something on the question of mootness as to whether or not they -- they've got knowledge on that sort of thing?
Bessie Margolin: I was coming and some of the facts I've mentioned have some bearing on the mootness question. I thought that since respondent treats that as a subsidiary issue, and that I might come to the point which we think is the main point in the case, and we'll deal with that a little later. If the Court prefers me to talk about the mootness point first (Voice Overlap) --
Earl Warren: That's all right, go ahead.
Speaker: (Inaudible)
Bessie Margolin: I will come to it and some of the facts I mentioned have some relation on the mootness point. The -- the question then was whether Alameda should be the -- it is the establishment to which the percentage test apply or whether all five of the -- of the warehouses including a central warehouse and -- and office, a central office building, should be a single establishment for purposes of determining the application of this exemption. The Alameda warehouse on -- is -- that is admittedly a set -- physically separate warehouse and it's admittedly in the heart of the industrial and commercial area of Los Angeles. It's unlike some of the other warehouses in the division which are in largely residential areas. It has some 60,000 square feet of space and there's no question, as I've said, that standing alone more than 25% of the storage is not retail. There's no question either that the interstate business carried on by the warehouses in this division including Alameda as they get -- it's more than 50% in Alameda by stipulation. These warehouses, these five warehouses are scattered over an area of some six miles in Los Angeles. Respondent has set up two divisions in the Los Angeles area -- area, the East Los Angeles and the West Los Angeles. And these five warehouses in the East Los Angeles Division is the one -- is the one involved here. They cover an area of six miles, as I say, and each warehouse is at least a mile and three quarters, that is about two miles apart, distant from one another. Each one has its own separate storing space and its own separate equipment, the Alameda has a-- is right beside a spur track of the Southern Pacific Rail -- Railroad and it -- each warehouse has its own working foreman -- its own foreman rather and its own working crew. Now, respondent makes much of the fact that there's some interchange in the employees and the stipulation, I think, so agree. But there's no question but that the employees were -- were generally identified with one particular warehouse. In this warehouse, for example, there were 11 employees. Now, it is true that when needed they were sometimes sent for a day or two to another warehouse but their identification was in the particular Alameda warehouse. And that's assuming that that factor would have any bearing on it, we don't think it does, but the fact is that -- that each of these warehouses does operate functionally, independently to a large degree although, organizationally and managerially and for purposes of -- of finance, their financial arrangements, the company operates it as a -- as an organizational integrated unit. The -- the location of the warehouses, undoubtedly, has something to do with -- with the nature of the functions performed there. Originally, Alameda was in a residential section and most of its warehousing was of household storage type. It -- it later became surrounded with the industrial and commercial area, and it was natural for the type of its business to change. And there's no question but that location itself has some bearing on the -- on the character, the retailing and non-retail character of -- of the individual unit. Now, the -- it -- it seem to us that -- it seems to us that the Phillips case is so clearly decisive in this respect that we find it difficult to -- to know how to treat the reasoning of the court below. In effect, what the court below says is that establishment -- you -- establishment is something vague and variable depending on what the particular chain organization -- to how that the particular chain organization decides to run its business. The -- it emphasizes that the Phillips case was dealing with the -- a wholesaler function, a kind of wholesaler function which is different from the function here. The fact of the matter is that -- that the function here is very -- very close -- very much alike to the function of the warehouse in the Phillips case. It is a wholesaler function. In the books in the standard authorities on general merchandise warehousing, they point out that the type of warehousing for dealers and manufacturers is a link in the service chain between the producer and the distributor and the consumer. That's precisely the -- the type of function that the Phillips, the chain store warehouse serves, and the independent wholesaler warehouse serves. So we don't believe there's any factual distinction possible there without searching and trying to ferret out some insignificant factual difference. I think it -- it might be pointed out with the -- with due respect to the Ninth Circuit that it has not had a case under this particular exemption since the Philipps decision. The Ninth Circuit was one of the Courts of Appeals that had held contrary to the Phillips case prior to this Court's decision. It was one of the cases that was a -- a reason for the conflict that -- that brought about the grant of certiorari. And it seems that the Ninth Circuit unconsciously or instinctively was reverting back to its -- its previous reluctance to accept the Phillips decision. The effect of it has been to revive all of the uncertainty that -- that previously existed prior to the Phillips decision when there was a great variety of opinions and conflicts among four or five circuits, and -- and the -- this -- this Court finally resolved it in the Phillips decision. The Ninth Circuit's decision is of -- of particular importance because it seems to revive most of that uncertainty and that's the one -- one of the main reasons why we were concerned to have this Court consider it.
Speaker: Without regard to the interstate aspect of this problem, what is the difference between the character of the business carried on in this Alameda warehouse as against that carried on in the other (Inaudible)
Bessie Margolin: Well, much more of the commercial warehousing, warehousing storage of goods for dealers and manufacturers as done in the -- in the Alameda warehouse than in the others. It does also carry on some household storage, too. But the -- the -- it carries on so much of the commercial storage that that what is what characterizes it under the test of the exemption rather than the household storage.
Speaker: As being non-retail?
Bessie Margolin: As being non-retail.
Speaker: If you store it for a commercial outfit, it's non-retail. If you store it for a household there is (Voice Overlap) --
Bessie Margolin: Well, this -- this kind of commercial storage it was agreed, it was stipulated that this was not retail. Now, I appreciate and I'm reluctant to get into that difficult problem because I appreciate there is a problem as to whether a -- a service for commercial -- for a business or commercial consumer is always non-retail. That is a -- a problem which has given us some difficulty in other cases. That question is not involved here, although, respondent has -- has cryptically suggested it might be because we deliberately stipulated that the commercial storage here was not retail, was very deliberately done. And I think there's enough in the record to support that but if there weren't, there's -- if it hadn't been stipulated, there's a great deal of other evidence which respondent well knows that they brought in to show that it is not recognized as retail in the industry. There's a great deal of U.S. bonded storage, for example, at this warehouse which is the storage for customs on exports, the dealers and importers bring in. And respondent well knows there was a great deal of evidence that could have been introduced if this had not been stipulated specifically to avoid having to get into that. So that question is not involved here. This is definitely not retail. Our -- we'll -- we'll leave -- oh, I will -- I wanted to point out that the 1949 amendments, if there were ever any reasonable doubt about the Phillips decision having ruled that its this -- the individual separate physically distinct unit that's the establishment. The 1949 amendments and what Congress said in the legislative history about the -- those amendments, I think, dispelled any possible doubt. The -- the reports of the -- in the first place, no -- nothing was changed about the term retail establishment. That term was retained and throughout the debates it was assumed that the term establishment was -- was to be given the same meaning that it'd been given all along. And it was expressly so stated several times in this -- in the report of the majority of the Senate conferees and in the debates by the sponsors of the amendments. And we quote those statements where the -- where it's -- it's expressly stated that the Phillips decision, similar question and Congress was satisfied with the Phillips definition of it, and they didn't intend to change the Phillips ruling on the -- what the term establishment meant in any respect.
Hugo L. Black: What page is that on your brief?
Bessie Margolin: Now, we quote that from the -- the report of the Senate conferees on page --
Hugo L. Black: 21? No.
Bessie Margolin: I think it's 30 -- 21. No, that's Senator Holland's statement. On page 19, top of page 19, the report of the Senate -- the majority of the Senate conferees states, "Under the present law, Phillips v. Walling, a retail establishment needs a physically separate place of business which possesses the characteristics of a retailer and does not mean an entire business enterprise. The conference agreement in no way changes the meaning of the term establishment." Now, that -- that statement is merely a -- a restatement of the same point which Senator George made and Senator Holland made during the course of the debates. I think that respondent attacks that on the grounds that the Senate conferees' report was never read to -- to send it before they passed the amendment. I might take issue, although I -- I think, that there's no doubt of its importance to the legislative history to take issue with this statement that that makes the report of the -- the majority of the Senate conferees have no use whatsoever. But in this particular case, it doesn't matter because that was simply a restatement of what, during the debates, the sponsors of the amendment themselves told the Senate. Senator George, for example, stated, I wish to say that the word establishment has been very well defined in the Wage and Hour Act. It means now a single physically separate place of business which possesses the characteristics of a retailer, and it does not mean an entire business enterprise. And Senator Holland emphasized the same point when he was asked specifically what effect would this amendment have upon chain stores and he answered, "It leaves them in exactly the same position as they are today." This was the holding in the United States Supreme Court in Phillips v. Walling and there's no intent in the proposed amendment to -- to change such holding. Now, that's quoted on page 21 of our brief, too. There were -- respondent quotes out of context a -- an excerpt from the house managers -- statement of the house managers which with some reluctance I say is flagrantly out of context because as we point out in our brief the preceding sentences, I think, show precisely what was intended by that. What the respondent seeks to do is just -- just to argue that the word "buy" the -- originally the amendment read any employee engaged in a retail establishment. And respondent takes the quote which standing alone might be construed to -- to read that the establishment is no longer important, it's -- it's by the business now. Well --
Speaker: But in my point of view if I am correct in this understanding under your view of the exempts, do you agree that a separate business establishment is something more than a separate building? In other words, it does treat a building which is a business establishment. The physical structure is not enough.
Bessie Margolin: Well, it's a building which is a place of business.
Speaker: Place of business?
Bessie Margolin: That's right.
Speaker: Now, this outfit, this Alameda outfit was not run on that fashion at all. It was run as a -- a physical -- separate physical part that is part of a single business run by this division --
Bessie Margolin: Oh, we say it's a --
Speaker: -- wasn't it?
Bessie Margolin: -- it's a separate place of business where there it is carrying on all this -- all this storage.
Speaker: (Voice Overlap) -- this is a physical building, except that physically --
Bessie Margolin: Well, we say it's something more than a physical building. Ordinarily, in these chain organizations and that's what this is, in a chain organization ordinarily each separate building is a -- a separate place of business.
Speaker: And that's why it's a fact.
Bessie Margolin: And we say these buildings, two miles apart with their own facilities, their own group of employees, thus are physically distinct places of business within the meaning of the Phillips case.
Speaker: The Court of Appeals here didn't hold that the exemption ever applied to multiple units it just said that on the facts here we don't find this as a separate business establishment.
Bessie Margolin: Oh, what the Court here has said, "I don't know how you would go about applying it because it just says that depends on how the employer decides to run its business." The simplicity as well as the realism of the Phillips decision, it may not always work out in or always work out fairly and equitably and it does leave some leeway for evasion concededly. But on the whole it is the only practical standard for getting any certainty into this exemption at all. And -- and if you depart from that standard the whole thing is completely vague. You've got to know what the establishment is and it has to be something tangible. If it's left to depend just on the managerial choice of how the employer operates his business for his own convenience, that the purpose is wholly irrelevant to the exemption then the -- it -- it can disrupt the -- the entire organization back. And I might say that this exemption is so -- is so widespread in its -- in its impact. It affects not only this industry but it has an impact on virtually every industry within the -- within the coverage -- the general coverage of the Act. And it can cause the utmost disruption. This particular exemption can cause the greatest disruption in the application of the Act if -- if it's thrown into uncertainty again on that score. Now, there is uncertainty on some other scores but if that particular aspect of it is again thrown into uncertainty we've got to start all over again. I might point out that the Congress, a number of them, took occasion to say we don't want to upset this exemption to such an extent. It's been litigated for 10 or 11 years and the Supreme Court has come down with some pretty realistic practical decisions. We don't want to reopen all that for litigation again. This occurred during legislative history. Now, it was that -- that was said about some of the things that actually went in. But on the term establishment, they all made it clear that they weren't -- didn't expect any further litigation on that because that was settled by Phillips. That -- that's the one thing that was made clear and some legislative history which is not in our brief --
William J. Brennan, Jr.: Ms. Margolin, may I ask. Would we have the same case if all five of these buildings were in the same block or the same group at the same location?
Bessie Margolin: Well, of course, that's the -- that's the parade of parables that's usually given. If they were all operated as a physical unit (Voice Overlap) --
William J. Brennan, Jr.: No, they're operated precisely as they are now. The only difference --
Bessie Margolin: I would say --
William J. Brennan, Jr.: -- is that they'd all be in (Inaudible)
Bessie Margolin: I would say they would -- would still be separate. Now, why we don't have that practical problem is because when they are usually at -- when they are operated that contiguously, they usually are all retail.
William J. Brennan, Jr.: So geographic consideration --
Bessie Margolin: So it isn't --
William J. Brennan, Jr.: -- then in your argument is not the control?
Bessie Margolin: Geographical is not the controlling -- it is -- it is one aspect. But when they are all operated we've found as a practical matter when they are all in the same location and just in a series of buildings, they usually are all retail. So you don't have the practical problem. But here you do have some of them are predominantly retail and -- and some aren't. And in that situation as they were doing different kinds of business, we would treat them as -- as each a separate establishment. I might just say a word of moot -- about the mootness point which, however, I think, since has been raised at this late date by respondent that I would prefer to treat in rebuttal because I don't know to what extent he really intends to press it. He made all of the same arguments in response to the -- in our position to the petition of a certiorari. Although, he refrained from claiming that the case was moot. He claimed that this showed that the case was no longer of sufficient importance to warrant review by the Court. But he didn't assert it was moot and we thought that the reason he didn't was that it was so clearly not moot under all of the decisions of this Court. Now, for the first time in his brief, respondent does assert that the case is technically moot placing main reliance on the W.T. Grant case. Well, the W.T. Grant case did not or it was not a ruling on -- on mootness. It was a ruling on the question of the discretion of the trial court to grant or to deny a relief where before the decision -- before the decision of the trial court it was -- there was admittedly a -- a cessation of the challenged conduct. There was no decision in the Grant case on the merits. The Court -- the trial court simply held that since violations had admittedly ceased and there was no threat or no contention that they would be resumed, then in its discretion it denied an injunctive relief. It was not outstanding, any decision on the merits which was claimed to be a -- a -- an authoritative decision as there is here. And the Court specific -- this Court specifically held that that case was not moot. It affirmed on the grounds that it was a proper exercise of discretion. There's no question in this case as to the exercise of discretion. Admittedly, the violations here of the non-compliance were continuing at the time of the trial. Admittedly, they were still going on all through the appellate stage. It's claimed only that the union agreement after the Court of Appeals decision puts a stop to the threat of violation. Meanwhile, we've -- had continued -- we've had all this litigation, and respondent is still vehemently contending that his -- this conduct is legal. And as I pointed out this has significance not only with respect to this particular warehouse but with respect to put potentially for other warehouses of respondent's own, as well as to establishments in virtually every other industry within the general coverage of this Act. And there being that public interest in having it settled under this Court's decision it's -- it's plainly not moot.
Earl Warren: Mr. Smith.
William French Smith: If the Court please. Respondent in this case is primarily engaged in the business of moving and storing household goods. We've been referred to here as a multi-unit, multi-function business and I suppose in one sense we are but we certainly are not with respect to the -- the manner in which petitioner is referring to it. We do move commercial businesses, we move stores, we handle and store office equipment, used furniture and that sort of thing. We are organized into 12 divisions in and about the Los Angeles area, 19 throughout the State. We are not contending here that the entire business is an establishment as was done in the case of Phillips. We are perfectly willing to concede that each one of those 19 divisions constitutes an establishment. In this particular case, out of the 12 divisions in the Los Angeles area, there is one, the East Los Angeles Division that has 5 warehouses. It is that division which is an issue here. It is one building, the Alameda building, which is questioned here by petitioner. I was a little surprised to find for the first time that she is creating the implication possibly that the Government contends that any of these other warehouses or divisions is not exempt by this Act because the findings of fact themselves specifically state the first finding, as a matter of fact, that plaintiff does not contend, the plaintiff being the Government, that any of defendant's warehouses either in the Los Angeles area or elsewhere failed to meet such test. And as a matter of fact at the trial it was specifically stated by counsel for the Government that there was no contention. They conceded in effect that each one of these other divisions was exempt as a retail and service establishment. We have proceeded on that basis. I think it's quite clearly of the case. So we are talking about just one building. I would say that despite the constant use of the petitioner in their brief to such terms as huge enterprise, a large interstate multi-function, multi-unit business, that those terms would equally apply to anyone of the other divisions and anyone of the other warehouses which are not contended to be non-exempt. If those contingents were -- contentions were relevant to the determination with respect to Alameda, they would be equally relevant with respect to every one of the other divisions, the way we see it. Now, with respect to the stipulation, we take strong exception to the fact that we have admitted that there are any retail or any wholesale sales at Alameda. What we stipulated to was that we failed to meet the test proscribed by Section 13 (a) (2) to meet the exemption. Now, one of those tests is the fact that we have to have less than 50% of our sales within the State. Well, it so happens that -- at Alameda we have a good many sales or services. However, this can be designated which go out of State. Well, now merely because they go across state lines doesn't mean that they are wholesale certainly and I might also say this with respect to one or two matters that we've referred to in the brief that Congress has specifically stated, referring to Roland Electric Company that a sale to a business user doesn't lose its characteristic of being a retail sale merely because it's to a business user. And I would be delighted if the Court would look at -- look at some of the legislative history was -- with respect to that point. It's replete.
Speaker: Where is the portion of the stipulation that you referred to, Mr. Smith?
William French Smith: The stipulation is in the transcript, Your Honor. And on page 34.
Speaker: Thank you.
William French Smith: You'll note that at the end of the second finding we state that such tests are not met in the case of the Alameda warehouse considered separately, but I would like to hasten to add, if I may, that I think the whole question is immaterial anyway for this simple reason. The question of our size, our interstate activity, whether we engage in wholesale or retail functions has to do either with coverage, and that's not the question here, or it has to do with whether or not these tests are met. That is not an issue here because we have stipulated that the tests are met. If the division is the establishment, they are not in the case of the Alameda warehouse so all of these considerations are totally, in our opinion, irrelevant to the determination of this issue. Size, interstate activity, wholesale versus retail, they have nothing to do with this case if I may say so. One other item which is referred to and I -- I'm using this approach because I think it's necessary to point out what is not an issue in order to get to what is an issue. Petitioner has in other cases and in our opinion correctly referred to the humanitarian nature of this Act and concludes from that as has this Court that the Act should be liberally extended insofar as coverage is concerned and that the exemptions should be strictly construed. We can agree and concede with that position. I'd like to point out here, however, that I know -- I'd know -- and I would be very much surprised if petitioner knows whether or not more employees would be covered if petitioner's position were accepted or if our position were accepted. We have a simple question of defining a naked word "establishment." There are no humanitarian considerations involved in that case at all. And I might point out as an example referring to a case that I will get to later, Tobin versus Aibel, where the Government itself, that is the Wage and Hour Division, with respect to interpreting this very word "establishment" which it had used in one of its orders took the position that the word included two separate physical locations in one unit. Now, that position was adopted which is our position here. The result of the adopting of that position there was that those employees were included within the coverage of the Act. It so happens that here it's the same position which the Government took there were adopted they would not be. Now, how many Tobin versus Aibel situations there are and how many Bekins Van and Storage situations there are, I don't think anybody knows. So, we don't know whether the position that the Government is taking here would include more employees or fewer employees. It's quite possible that the position that we are taking here would be the one which would include more employees countrywide. Our position with respect to the very simple question involved here what does establishment mean, is simply this, we say that in deciding that question we have to look at all of the factors that are involved, all the facts in the case. There are many factors which bear upon that question. We say that not the least among those factors is customary in an ordinary business, organization, operation, and practice. We say that an establishment must be a unit which has some operational or functional identity and significance. It has to be, in our opinion, something more than just a plain physical location. We say the Government denies it. At least I assume that they deny it that their position is based upon physical location alone. We say that they are taking that one factor, which is certainly relevant to this determination, out, separating it from all of the other factors and saying this alone must control. We say that is not a practical test at all and we think that the facts in this case amply demonstrate that. Here we have a building in which 11 employees work. The top classification of employee is the working foreman. They do work which is directly related to on-the-spot storing and directly related incidental activities, paperwork and so on. All of the management, executive, and administrative functions are performed on a division not a building basis. For example, all records are kept on a division basis including payroll records. There is no one who is responsible for the operation of the Alameda warehouse alone. All responsibility is on a division basis. All the dispatching, all of the orders are done on a division basis, all the sales functions. There's no territory that's divided up with respect to each separate warehouse or building, nor is there a -- an area of division with respect to storage assignments. This is just a plain building. The Alameda warehouse doesn't sell anything to anybody. That is all done on a division basis. Now, there are some occasional exemptions as we're presuming when somebody walks down the street and they have something to store they drop in and say, "Will you do it?" Well, naturally the answer is yes but then it is properly referred down to the division office where everything else is handled the dispatching and so on. There's a single system of accounts. One financial statement, one bank statement, supplies and purchases, all on a division basis, repairs and maintenance, all on a division basis. Contrary to what petitioner has stated, the working force is interchangeable. There's nothing in the record which would support the idea that a crew has an identity with respect to each individual building. The record shows this and nothing more that they are regularly and frequently transferred from one building to another. Very often when they have a big job, they will pull everybody out of all of the warehouses and they'll do a particular function here, there or someone at somewhere else. There's a single union contract that covers everybody. The senior -- the seniority provisions of that contract are equally applicable on a division-wide basis or larger. Now, I submit that on the basis of those facts, the facts in this case, that it is very difficult to contend that Alameda has any other identity except as a separate physical location. It has no significance as a separate business unit of any kind. As a matter of fact, the findings of fact specifically state that the business could be carried on as well or better if all of the warehouses were in one single location. Now, I might point out that the petitioner, in response to a question by Mr. Justice Brennan with respect to the five buildings side-by-side, answered that question by saying that they would be separate establishments but why? Because in the cases that she has in mind, they refer to retail situations. Well, if we had a retail situation at this building at Alameda then I doubt very much that we would be here but we don't have. And you will note that all of the judges below had pointed out but we doubt very much that the Government would take this position that all five warehouses were lined up side-by-side. In -- in sum and substance, the division is the only retailing entity which we have here. The findings of fact again point out that although the company has considered decentralizing, and that is their policy to decentralize as far as possible, they cannot decentralize this East Los Angeles Division without sacrificing efficiency, cost, and flexibility which they have to have in order to operate that division. So, petitioner's position, we feel, has to be considered as stating that physical location alone must control this question. As a matter of fact, in the court below it was specifically stated that since the Phillips case, organizational structure is immaterial. Now, in our opinion this is totally an impractical (Inaudible). For example, if we had the typical situation where there was one plant, everybody working on the same floor under one room. We have various groups of employees headed by a working foreman, as it's true in this case, same records and so on. We just physically lifted for one reason or another lack of space. That group of employees in one corner of the building, lifted them out, moved them outside, put them down, put the same -- put another roof over their heads, everything else is exactly the same. I don't see how petitioner, considering the position that it's taken in this case, to say anything other than that that group thereby becomes a separate establishment, the position which we think is untenable. Then to complicate saying, where would the line be drawn? Say we have five buildings right next to each other, do they become each a separate establishment or say we move a building across the street, does that make it a separate establishment? It's because as the city puts through one-way streets and takes three blocks to get to the building across the street, does that make any difference and so on. We say that under the circumstances that cannot be any practical test at all.
William J. Brennan, Jr.: Is there any stated reason in the stipulation why the units are located as they are?
William French Smith: Yes, Your Honor.
William J. Brennan, Jr.: (Voice Overlap) --
William French Smith: Would you like to hear them now or --
William J. Brennan, Jr.: Oh, are there many of them?
William French Smith: Well, basically it's this. I -- I'm -- I'm going to cover that point. It's this. This particular building, Alameda, was built over 50 years ago in 1898. At that time in Los Angeles it was a residential area. During the intervening half century it has completely changed and now the Alameda area is surrounded by industrial -- an industrial area, an industrial zone entirely. Now, we brought that out to ourselves to show the change. The reasons for -- for the change in our operation has nothing to do with Alameda as such. I think that petitioner in our brief and otherwise has come to the conclusion that that change means that the type of people that are served in Alameda are now commercial. That isn't the case at all. In the early days, the -- the Alameda warehouse would have served the people in the immediate area, but that has changed now. The result is that at the present time Alameda is nothing more than space. It has no significance to its local surroundings at all except that - that there's a railway -- railroad track to it but there's also railroad tracks to one other in this Los Angeles Division (Inaudible) in the system, so that the change is significant because it has changed the nature of the business in the East Los Angeles area. For example, we now move a --a law office let's say. Well, we can't move a law office with just the people at one warehouse. We may have to take a few from here, a few from there and so on. And the change in the type of business that the division does requires the flexibility and fluidity which we have here, that we -- that we have to have in East Los Angeles Division. We couldn't do it, for example, if Alameda alone were the establishment or the unit. We wouldn't have enough -- it wouldn't have enough flexibility. So, the change in the surroundings has nothing to do with the type of business that Alameda as such conducts, nor the type of customers. But as I say again, I -- we will define the wholesale versus retail function as being entirely irrelevant to the -- the decision in this case. The only test we think is -- which is a reasonable one is one which is -- the one that we had found in the law frequently, namely, we look at the whole picture. All of the facts and then come to the conclusion. That's done into any number of instances in determining whether or not that person is an independent contractor or an employee. All of where the facts fall as in every case differ. You have to look at everything, decide after looking at the whole picture what is the right answer. Now, we're not without legislative aids in this respect. I think that Section 13 (a) (2), the Section in question, contains within itself the answer to this question, if nothing else to it, that Section talks about, any employee employed by any retail or service establishment. Well, I submit that employees are not employed by buildings. They're employed by business units. I think when it uses that term "by" it must have some reference to a customary or ordinary business unit. Again and perhaps even more telling is the term in that Section which says, establishments, it referred to establishment's annual dollar volume of sales of goods or services. Well now, how can that figure be determined on the basis of a building? We don't even have records for the Alameda building that would talk about annual dollar volumes of sales. I doubt very much if we could determine exactly what the annual dollar volumes of sales were with respect to that building. We have no records. The records are in no way broken down to refer to one building or another building that's distinguished from the whole division. Secondly or thirdly rather, it refers to sales of goods or services. We don't have sales at Alameda. There's no retailing function carried on there at all. The retailing unit, the -- the point where customer contact is made is at the division office itself. Now again, with respect to the legislative history, the reference was made that I have taken out a quotation rather seriously out of context. I feel this is the quotation on page 24 which is in the legislative history with respect to Section 13 (a) (2). I would say first that I think this quotation stands on its own feet quite aside from context, but I would go one step beyond that and say that I would be delighted if the Court would refer to the entire legislative history dealing with this Section.
Earl Warren: We'll recess now, Mr. Smith.
William French Smith: Thank you, sir.