Court Opinion

ID: 9431062
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:31:15.640105+00
Date Added: 2024-06-11T17:23:26.893392
License: Public Domain

Justice Stevens,
with whom
Justice White joins, dissenting.
The statute that the Court construes today was enacted during the Great Depression. Although business failures were an everyday occurrence in 1938, nothing in the language or history of the Fair Labor Standards Act (FLSA or Act) suggests that Congress intended that Act to address the unfortunate situation that arises when an employer is unable to pay his employees for the final days of work that produced the inventory at hand when the plant was forced to close.
Indeed, if there is one conclusion that both parties before us, and every court that has ever considered this matter, agree upon, it is that Congress did not “actually conside[r] application of the ‘hot goods’ provision to secured creditors when it enacted the FLSA.” Ante, at 34-35. This historical fact carries much weight in this case. The subjects of bankruptcy and secured transactions constitute discrete bodies of law, which are generally governed by the Federal Bankruptcy Code and by state law, respectively.1 Instead of in*41terpreting Congress’ silence as evincing intent to invade these areas with an Act whose purposes do not fit nicely into these contexts,21 would interpret Congress’ utter silence as showing that Congress never intended to apply the FLSA to these unique areas of the law.3 See Kelly v. Robinson, 479 U. S. 36, 47 (1986).
*42Even were I not confident in that conclusion, however, I certainly believe that the arguments in favor of petitioner’s construction are substantial enough to warrant our adherence to settled precedent. During the 28 years from the enactment of the FLSA through 1966 it appears that no Secretary of Labor ever sought an injunction against the sale of “hot goods” in circumstances such as these. See Wirtz v. Powell Knitting Mills Co., 360 F. 2d 730, 733 (CA2 1966). When a Secretary did attempt to use the statute in this novel way, the Court of Appeals for the Second Circuit summarily rejected his interpretation, explaining:
“We believe that there was no Congressional intent that concerns in [the creditor’s] position be within § 15. The purpose of forcing payment of wages should not apply to the creditor who advanced funds long before the default in wages, and who merely forecloses his lien, at least where the value of the goods acquired does not exceed the debt left unpaid. Since [the creditor] is not giving present consideration, it can neither force [the employer] to make payment nor withhold wages from its payment and pay the wage earners itself. It already provided [the employer] with cash, part of which no doubt went for wages that were paid. Since the only reason to give effect to § 15 would be to force [the creditor] to pay the wages, § 15 ought not apply to it, in a backhanded way of attacking its secured position.
“The Secretary stresses the point that when the Congress desired to protect bona fide purchasers from the strict wording of the Act it found it easy to do so by *43amending the Act with appropriate safeguards. This would indeed be persuasive if there were indications that the present problem of the foreclosing secured creditor had been brought to the attention of the Congress. The argument loses force because this was apparently never done, and the Secretary’s present contention is much weakened by the fact that since thé enactment of the Act in 1938 neither he nor his predecessors appear to have so read the Act, in spite of the myriad of instances in which similar security titles must have been enforced.” Id., at 733.
I would have subscribed to this reasoning in 1966, and certainly do now. In the more than 20 years since the Second Circuit’s decision, its construction of the statute has not been called into question by the courts that have addressed the issue, except in the decisions now on review. See Shultz v. Factors, Inc., 65 CCH LC ¶ 32,487 (CA4 1971); Dunlop v. Sportsmasters, Inc., 77 CCH LC ¶ 33,293 (ED Tenn. 1975). Given the Secretary’s practice prior to the Powell Knitting decision, the judicial acceptance of that decision, and the fact that Congress has not seen fit to amend the statute in light of these decisions,41 believe that the Powell Knitting construction should be retained until Congress rejects it. See Commissioner v. Fink, post, at 102-103 (Stevens, J., dissenting); Shearson/American Express Inc. v. McMahon, 482 U. S. 220, 268 (1987) (Stevens, J., dissenting).
I respectfully dissent.

 The FLSA was enacted to prevent employers from paying substandard wages. Section 15 (a)(1) is designed to prevent employers from producing goods at such low cost that they could undersell competitors who paid what Congress deemed to be a decent wage. The concern of the statute was the *41ongoing business with its continuing impact on both the labor market and the commercial market. It was not remotely concerned with the perennial problem of distress sales that follow in the wake of a business failure. Under the Court’s novel reading of the Act, any such sale — whether by a secured creditor, a trustee in bankruptcy, or even by a creditor’s committee trying to raise funds to meet a shortage in the final payroll — would be a sale of “hot goods” and therefore illegal.

 As Judge Engel explained in dissent from the Court of Appeals’ decision:
“The practical effect of the majority’s decision is not to remove any tainted goods from competition for, as happened here, almost always the result will be that the goods are sold, if not in foreclosure, then in bankruptcy, or by other attaching creditors. As here, the goods will go out in the market, but whether they are sold for competitively destructive prices will not depend on the cost of their production but upon the manner of their sale in any event. The real effect of the majority’s interpretation is simply to create a judicial lien superior to the otherwise lawful lien which Citicorp possessed in the goods. In my view, this kind of pressure is the only motivation in the government in its present construction of the Act. Had it intended to create a federal lien law, Congress no doubt could, have done so, but it did not. State laws governing creditors’ rights, state laws protecting employees from non-payment of wages and bankruptcy laws generally, provide a great deal of relief for the protection of employees of defunct and insolvent corporations. It seems to me that in this special area of concern, the operation of these more traditional sources of law was intended by Congress to be sufficient. It is my opinion, therefore, that under a common sense application of section 15(a)(1), Congress was looking instead at application of the Act in the course of the ongoing production of goods and not at the situation obtaining here and in the like cases in the Second and Fourth Circuits.” Brock v. Ely Group, Inc., 788 P. 2d 1200, 1207 (1986).

 Aside from my conclusion that secured creditors such as Citicorp are not barred from selling “hot goods,” I also have doubts about whether the employees who participated in the production of the goods at issue in this case were “employed in violation of [the FLSA]” within the meaning of *42§ 15(a)(1) of the Act at the time the goods were produced. See ante, at 30, n. 1. The terms of their employment complied with the statute and when they performed their services everyone expected and intended that they would be paid in full. It may well be true that the employer committed a violation of the Act when it was subsequently unable to meet its payroll, but I am not sure the inventory can be branded “hot goods” because of that subsequent event.

 The FLSA has been amended on at least four occasions since the Powell Knitting decision. See, e. g., Pub. L. 99-150, 99 Stat. 787 (1985); Pub. L. 95-151, 91 Stat. 1245 (1977); Pub. L. 93-259, 88 Stat. 55 (1974); Pub. L. 89-601, 80 Stat. 830 (1966).