Court Opinion

ID: 2971315
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:32:52.375195+00
Date Added: 2024-06-11T11:40:55.053799
License: Public Domain

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                Pursuant to Sixth Circuit Rule 206                          2     Chao v. Double JJ Resort Ranch, et al.       No. 02-2068
        ELECTRONIC CITATION: 2004 FED App. 0220P (6th Cir.)
                    File Name: 04a0220p.06                                                      _________________
                                                                                                     COUNSEL
UNITED STATES COURT OF APPEALS
                                                                            ARGUED:         Mary J. Rieser, UNITED STATES
                   FOR THE SIXTH CIRCUIT                                    DEPARTMENT OF LABOR, Washington, D.C., for
                     _________________                                      Appellant. Donald A. Van Suilichem, VAN SUILICHEM &
                                                                            ASSOCIATES, Bloomfield Hills, Michigan, for Appellees.
 ELAINE L. CHAO , Secretary of    X                                         ON BRIEF: Mary J. Rieser, Paul Frieden, UNITED
 Labor,                            -                                        STATES DEPARTMENT OF LABOR, Washington, D.C.,
                                   -                                        for Appellant. Donald A. Van Suilichem, VAN SUILICHEM
           Plaintiff-Appellant,                                             & ASSOCIATES, Bloomfield Hills, Michigan, for Appellees.
                                   -   No. 02-2068
                                   -
            v.                      >                                                           _________________
                                   ,
                                   -                                                                OPINION
 DOUBLE JJ RESORT RANCH , et -                                                                  _________________
 al.,                              -
          Defendants-Appellees. -                                              BOYCE F. MARTIN, JR., Circuit Judge. Secretary of
                                   -                                        Labor, Elaine Chao, asks us to overturn the district court's
                                  N                                         grant of summary judgment to Double JJ Resort Ranch, Inc.,
        Appeal from the United States District Court                        et al. She also asks us to reverse the district court's denial of
   for the Western District of Michigan at Grand Rapids.                    her motion for summary judgment. She argues that the
 No. 01-00141—Robert Holmes Bell, Chief District Judge.                     district court erred when it found Double JJ to be exempt
                                                                            from the minimum-wage and overtime-pay guarantees of the
                     Argued: March 10, 2004                                 Fair Labor Standards Act, 29 U.S.C. §§ 206(a), 207(a). We
                                                                            agree in part and REVERSE.
                Decided and Filed: July 9, 2004
                                                                                                           I.
   Before: MARTIN and CLAY, Circuit Judges; MILLS,                            Defendants are a group of corporations doing business as
                   District Judge.*                                         Double JJ Resort. Double JJ is a large western-themed resort
                                                                            near Rothbury, Michigan. The resort includes a variety of
                                                                            lodging and dining facilities, a conference center (for up to
                                                                            250 people), bars, a general store, a gift shop, a gas station, a
                                                                            barbershop, campsites, swimming pools, three lakes, and
                                                                            facilities related to horseback riding. While at Double JJ,
                                                                            resort guests can go canoeing, attend camp fires, shoot
    *
     The Hon orable R ichard M ills, United States District Judge for the   archery, play shuffleboard, climb walls (for fun and in
Central District of Illinois, sitting by designation.

                                   1
No. 02-2068     Chao v. Double JJ Resort Ranch, et al.       3    4      Chao v. Double JJ Resort Ranch, et al.       No. 02-2068

designated areas), fish, go on hay rides, pet farm animals, or      Section 13(a)(3) of the Act provides that the minimum-
ride water slides, among other things. There is also a golf       wage requirements, 29 U.S.C. § 206, and the overtime-pay
course on site, but both parties agree that it is a separate      requirements, 29 U.S.C. § 207, are not applicable with respect
establishment and is not part of this suit. Guests may            to:
purchase a "package deal," or they may purchase their food,
lodging, and recreational activities separately. The great bulk       any employee employed by an establishment which is an
of Double JJ's revenue comes from the sale of food, drink,            amusement or recreational establishment, organized
and lodging, not from the sale of recreational activities.            camp, or religious or non-profit educational center, if (A)
                                                                      it does not operate for more than seven months in any
  Double JJ employs from 300 to 350 employees during the              calendar year, or (B) during the preceding calendar year,
peak season and about 50 employees in the off-season.                 its average receipts for any six months of such year were
Double JJ earns the bulk of its revenue during the peak               not more than 33 1/3 per centum of its average receipts
season, serving up to 300 overnight guests each night and an          for the other six months of such year, except that the
additional 100 daytime visitors. Double JJ pays both hourly           exemption from sections 206 and 207 of this title
wages and salaries, depending on the employee, but no                 provided by this paragraph does not apply with any
employee is paid overtime, and some employees are paid less           respect to any employee of a private entity engaged in
than the minimum wage.                                                providing services or facilities (other than, in the case of
                                                                      the exemption from section 206 of this title, a private
  Secretary Chao brought this enforcement action under                entity engaged in providing services and facilities
section 17 of the Fair Labor Standards Act of 1938, 29 U.S.           directly related to skiing) in a national park or a national
C. § 201 et seq., in the United States District Court for the         forest, or on land in the National Wildlife Refuge
Western District of Michigan. She sought to enjoin Double             System, under a contract with the Secretary of the
JJ from violating the minimum-wage, overtime, and record-             Interior or the Secretary of the Agriculture[.]
keeping requirements of the Act.
                                                                    Both parties filed for partial summary judgment. The
  The Secretary alleged that the since April 4, 1998, and in      district court granted the defendants' motion and dismissed
violation of 29 U.S.C. § 215, Double JJ: failed to pay covered    the case. The court explained:
employees at least minimum wage as required by 29 U.S.C.
§ 206(a); failed to pay covered employees at a rate not less          [w]hile a majority of the Double JJ's revenue is from
than one and one-half times their regular rate of pay for all         food and lodging, only a few guests visit the Double JJ
hours worked in a workweek in excess of the first forty, as           either for food or lodging. Guests' principal reason for
required by 29 U.S.C. § 207(a)(1); and failed to keep records         visiting the Double JJ is to participate in recreational
of employee wages, hours, and conditions of employment as             activities, and food and lodging are secondary to the
required by 29 U.S.C. § 211(c). Double JJ responded,                  principle purpose of enjoying recreational activities.
claiming that it had not violated the Act, because it was             Hence, the Court finds that on the specific facts of this
exempt from the requirements as an "amusement or                      case, Defendant's principal activity is recreational.
recreational facility."
                                                                      Secretary Chao filed this appeal.
No. 02-2068     Chao v. Double JJ Resort Ranch, et al.        5    6     Chao v. Double JJ Resort Ranch, et al.        No. 02-2068

                              II.                                  213(a)(3) test, the Secretary argues that the district court erred
                                                                   in its determination that Double JJ was the type of
  "Whether employees are within an exemption from the              establishment that Congress intended to exempt. We agree.
provisions of the [Fair Labor Standards] Act is primarily a
question of fact. The District Court's finding of fact cannot be     This case centers on the legal definition of the phrase
set aside unless they are clearly erroneous." Brennan v.           "amusement and recreational establishment" as it is used in 29
Southern Prods., Inc., 513 F.2d 740, 744 (6th Cir. 1975).          U.S.C. § 213(a)(3). "When interpreting a statute, this Court
However, where, as here, the facts are not in dispute, but the     must begin with its plain language, and may resort to a review
parties contest the legal application of those facts, we review    of congressional intent or legislative history only when the
the district court's grant of summary judgment de novo. Paul       language of the statute is not clear." Herman v. Fabri-
Revere Life Ins. Co. v. Brock, 28 F.3d 551, 553 (6th Cir.          Centers of Am., Inc., 308 F.3d 580, 585 (6th Cir. 2002).
1994); see also United States v. Brown, 915 F.2d 219, 223
(6th Cir. 1990) (holding a district court's statutory                 Double JJ argues that we need go no further than the
interpretations will be reviewed de novo).                         statute's plain language to affirm the district court. In
                                                                   essence, Double JJ claims that there is a common sense
   It is well settled law in our Circuit that an employer who      definition of "recreational establishment" – which apparently
claims to be exempt from the requirements of the Fair Labor        is being in the "fun business" – and that it clearly qualifies.
Standards Act has the burden of proving it qualifies under the     While we applaud Double JJ’s appeal to common sense, its
terms of a specific exemption. Homemakers Home & Health            argument followed to its logical end would allow the
Care Servs., Inc. v. Carden, 538 F.2d 98, 101 (6th Cir. 1976).     exemption to become the rule. See e.g., Dole v. Mr. W.
"[The Act] was designed to eliminate labor conditions              Fireworks, Inc., 889 F.2d 543, 546 (5th Cir. 1989)
detrimental to the maintenance of the minimum standard of          ("permitting every seaside merchant to claim the exemption
living necessary for the health, efficiency, and general well-     would result in the exemption swallowing the rule").
being of workers." Brock v. Louvers and Dampers, Inc., 817         Arguably, any ice-cream stand or restaurant could qualify
F.2d 1255, 1256 (6th Cir. 1987). "[W]ithin the terms of the        under Double JJ's proposed interpretation. A boat seller could
coverage fashioned by Congress, the Act has been construed         claim that it was derivatively a "recreational establishment,"
liberally to apply to the furthest reaches consistent with         given that its sales enable the fun of sailing. It would
congressional discretion." Mitchell v. Lublin, McGaughy &          certainly not be a laughable claim under Double JJ's
Assocs., 358 U.S. 207, 211 (1959). Thus, "exemptions from          definition that the boat seller is in the "recreation business."
the Act are to be narrowly construed against the party             Most businesses sell something -- a thing, a service, a right to
asserting them and their application limited to those              occupy -- and any number of arguments could be marshaled
establishments plainly and unmistakably within their terms         to connect the remote sale to something fun. Thus, unlike
and spirit." Homemakers, 538 F.2d at 101 (internal citations       Double JJ, we do not believe we can end our analysis with a
omitted).                                                          plain-language interpretation of section 213(a). "Recreational
                                                                   establishment" is an ambiguous phrase. Congress clearly
                              III.                                 meant for there to be a limitation to the exemption, and the
                                                                   words used in the statute do not plainly convey where that
  Secretary Chao makes one argument on appeal. Conceding           boundary lies.
that Double JJ meets the "seasonal" requirement of the section
No. 02-2068     Chao v. Double JJ Resort Ranch, et al.       7    8      Chao v. Double JJ Resort Ranch, et al.        No. 02-2068

   The Secretary turns our attention to both the legislative       We need not stop with the congressional report, however.
history of the Act and the opinions of the Labor Department's     Our conclusion finds support in a 1979 opinion letter from the
Wage and Hour Administrator to support her argument that          Wage and Hour Administrator, which makes clear that:
Double JJ is not exempt. "Because [the Department of
Labor's] Wage and Hour Administrator is the primary federal           hotels, motels and eating places do not have an
authority entrusted with determining the [Act's] scope, these         amusement or recreational character. Nor do . . . gas
interpretations while not controlling upon the courts by reason       stations. . . . The fact that these stores are heavily
of their authority, do constitute a body of experience and            patronized by tourists does not make them recreational or
informed judgment to which the courts and litigants may               amusement establishments any more than restaurants,
properly resort to for guidance." Reich v. Miss Paula's Day           retail stores, and similar establishments at a seaside resort
Care Ctr., Inc., 37 F.3d 1191, 1194 (6th Cir. 1191) (citations        would be considered exempt.
omitted). We treat legislative histories similarly. See, e.g.,
Montgomery v. Huntington Bank, 346 F.3d 693, 699 (6th Cir.        1979 WL 62129. Further, a 1994 Wage and Hour
2003).                                                            Administrator opinion, dealing with a dude ranch, explains:

  The amusement and recreational establishment exemption              [w]hile it appears that your client's operations meet the
was originally enacted in 1961. The Senate Committee                  criteria in section 13(a)(3)(B), it is our opinion that your
Report describing the enactment of the exemption reads:               client's dude ranch is not an "amusement or recreational
                                                                      establishment" within the section of 13(a)(B) of the [Fair
  (c) Amusement and recreational establishments operating             Labor Standards Act]. It is our opinion that the ranch
  on a seasonal basis. – A similar exemption without                  falls within the category of a resort hotel.
  regard to the annual sales volume of the enterprise, is
  provided for employees of amusement and recreational            1994 WL 1004822. Combing this persuasive authority, we
  establishments operating on a seasonal basis. These             do not believe that Congress intended to exempt
  establishments are typically those operated by                  establishments like Double JJ.
  concessionaires at amusement parks and beaches for 6
  months or less than a year.                                       To clarify, unlike the district court below, we do not think
                                                                  that Double JJ's principal activity is selling recreational
S. Rep. No. 145, 87th Cong., 1st Sess., reprinted in 1961 U.S.    activities. Instead, Double JJ is a "resort hotel." It offers
Code Cong. & Admin. News at 1620, 1647-48; see also               recreational activities not because selling recreational
Louvers, 817 F.2d at 1257.                                        activities is its primary end, but as a way to get to people to
                                                                  come to a rather remote spot in Michigan to buy food, to rent
  Reasoning by analogy, we are comfortable with the idea          beds, and to have meetings. The Secretary asks that we adopt
that Double JJ is not the type of establishment that Congress     an "income test" to guide our analysis, but we do not think it
intended to exempt. Selling treats at Disneyland is a far cry     necessary to do so in this case. The legislative history, the
from renting hotel rooms at the Disney Hotel. Riding a roller-    Wage and Hour Administrator's opinions, and common sense
coaster ride is different than buying dinner and renting a        compel our finding that Double JJ is not in the recreation
room. One is recreational and the other is a necessity of life.
No. 02-2068       Chao v. Double JJ Resort Ranch, et al.               9    10    Chao v. Double JJ Resort Ranch, et al.        No. 02-2068

business.1 Its primary purpose is to sell foods and rent beds;                F.2d 25 (9th Cir. 1956). Conversely, different ownership
the recreational activities are just a carrot enticing people to              does not prevent closely integrated departments from
make the trip.                                                                being treated as a single establishment, e.g. separately
                                                                              owned departments in a department store may belong to
                                  IV.                                         one establishment.
   Our analysis thus far has considered Double JJ to be one                 Marshall v. New Hampshire Jockey Club, Inc., 562 F.2d
establishment. As we noted above, Double JJ does not                        1323, 1330 (1st Cir. 1977). Similarly the language defining
contest that it has failed to pay its employees the prevailing              "establishment" in the regulations accompanying the Act,
minimum wage and required overtime pay. Nor does Double                     albeit not the regulations defining the recreational exemption,
JJ contest that it has failed to keep adequate records as                   set out that "two or more physically separated portions of a
required by the Act. Instead, it argues that it was exempt                  business although located on the same premises and even
from the Act's requirements. Having rejected the idea that                  under the same roof in some circumstances may constitute
Double JJ is wholly exempt from the Act's provisions, we are                more than one establishment for purposes of exemptions." 29
nonetheless uncomfortable remanding with instructions to                    C.F.R. § 779.305. Under this authority, Double JJ's facilities
enter judgment for Secretary Chao. While we are certain that                related to horseback riding, for example, might qualify as a
parts of Double JJ are bound by the Act's pay and records                   separate recreational establishment. Then again, it might not.
requirements (for example, the bars, restaurants, dining                    We simply cannot tell from this record.
facilities, conference center, lodging facilities, and gas
station), we cannot, on this record, declare that Double JJ is                On remand, we believe the test the district court should use
one establishment and thus wholly subject to the Act. The                   in determining which parts of Double JJ qualifies for the
Secretary concedes that Double JJ's golf course qualifies as a              exemption is set out in 29 C.F.R. § 779.305. See also 1999
separate establishment that is exempt from the Act, and so too              WL 1788159 (the opinion of the Wage and Hour
may other recreational services offered by Double JJ.                       Administrator incorporating the regulation's test). The
                                                                            regulation explains that for a recreational service, remotely
  The First Circuit, in a case involving the definition of                  connected to a non-qualifying business, to qualify as a
"establishment" as used in the amusement and recreational                   separate establishment it must be: (a) physically separate from
establishment exemption, held that:                                         the other activities; (b) functionally operated as a separate unit
                                                                            having separate records and separate bookkeeping; and
  [s]eparate stores under common ownership may each be                      (c) have dedicated employees that are not shared between
  establishments while other aspects of the total operations                units. 29 C.F.R. § 779.305. If any of Double JJ's recreational
  of the same company may be found to be outside the                        services meet this test, they should be exempt from the Act's
  pertinent establishment. See Mitchell v. Bekins Van &                     requirements.
  Storage Co., 352 U.S. 1027 (1957), summarily rev'g 231
                                                                              Accordingly, we REVERSE the judgment of the district
                                                                            court and remand for proceedings consistent with this
    1
                                                                            opinion.
     W ere Do uble JJ situated in a National Park or National Forest our
analysis would be different. See 29 U.S.C. § 21 3(a)(3); see also Chessin
v. Keystone Resort Mgmt, Inc., 184 F.3d 11 88 (10th Cir. 1999).