Court Opinion

ID: 9460460
Source: CourtListenerOpinion
Date Created: 2023-08-04 21:50:46.842162+00
Date Added: 2024-06-11T17:36:37.442676
License: Public Domain

GIBSON, Circuit Judge
(dissenting).
I respectfully dissent. I think the majority takes the final step in adopting an all-encompassing rationale of what constitutes interstate commerce. While recent cases in this field lend support to the majority in the broad language employed, the facts of those cases do not support the absolute denigration of State sovereignty that this case accomplishes. Admittedly, many prior decisions have taken great liberty with the concept of interstate commerce, but surely the framers of our Constitution never thought it would be so expansively construed as to reach the sovereign activities of a state. States engaged in performing their necessary, proper and sovereign governmental functions are now enmeshed within the concept’s all-inclusive tentacles.
The concept of interstate commerce is now expanded to nullify the constitutional and sovereign rights of States, not only in the handling of their business activities, but in the conduct of their manifest governmental activities as well. The time has come when courts should take a realistic approach and accord to the states their remaining vestiges of sovereignty, presently being ground to ashes under the expansive interpretations now in vogue as to what constitutes interstate commerce. The result here can only be justified if we accept a premise that everyone employed in these United States is engaged in interstate commerce.
It is a fiction, albeit a legal fiction widely accepted, to hold that the State of Iowa, by its operation of these nine institutions as part of its sovereign power to provide for the general welfare of its citizens, is engaged in interstate commerce. Moreover, the resultant effect of our decision is so disruptive of and harmful to legitimate state interests1 that the courts should not require compliance by a state as an employer with the Fair Labor Standards Act (FLSA) unless clearly mandated to do so. I do not believe the result reached by the majority is mandated by the FLSA.
First, I disagree with the majority’s conclusion that the institutions involved are not the ultimate consumers of the goods allegedly a part of interstate commerce. If the institution is the ultimate comsumer, then it has no employees engaged in handling goods that have moved in interstate commerce.2
As support for its conclusion that an institution is not the ultimate consumer, the majority relies upon Brennan v. Dillion, 483 F.2d 1334 (10th Cir. 1973) and Wirtz v. Melos Construction Corp., 408 F.2d 626 (2d Cir. 1969). Neither of these cases involved institutions, state or private. In Dillion, the defendant was an individual who operated three apartment complexes. The court held that maintenance employees using various supplies were covered by FLSA as the tenants were said to be the ultimate consumers of the supplies, not the defendant, relying inter alia upon the rationale that there was a resale of the supplies because their cost was passed on to the tenants as part of their rental.3 The *106existence of a resale has been an important factor in the courts’ determination of who is the ultimate consumer for purposes of 29 U.S.C. § 203(i). Brennan v. Dillion, supra; see also, Goldberg v. Furman Beauty Supply, Inc., 300 F.2d 16, 19 (3rd Cir. 1962); Mitchell v. Sherry Corine Corp., 264 F.2d 831 (4th Cir. 1959), cert, denied, 360 U.S. 934, 79 S. Ct. 1453, 3 L.Ed.2d 1546 (1959).
Melos, which involved the coverage of a building contractor’s employees, makes no mention at all of 29 U.S.C. § 203 (i) and the “ultimate consumer” exemption contained therein. It seems obvious that a building contractor is not an institution. Further, he may well be considered an ultimate consumer. In Barbe v. Cummins Const. Co., 49 F.Supp. 168 (D.Md.), aff’d 138 F.2d 667 (4th Cir: 1943), the court held that a building contractor was the ultimate consumer of building materials, not the purchaser of the building in which the materials were incorporated.
I would hold that these State institutions are ultimate consumers. A contrary holding necessarily implies that the patients of these State-operated and State-financed institutions are the ultimate consumers. This conclusion is untenable when talking about the use of cleaning supplies, laundry items, office supplies and medical equipment. The State is the user of these items, not the patient, and its employees using these items thus are not handling “goods” as defined in § 203(i).4
It is possible to consider the patient as the ultimate consumer of the drugs, medicines and food supplies, but in the circumstances of this case I believe it erroneous to do so. “Ultimate consumer” is employed in the Act as a means of determining when articles have ceased their movement in interstate commerce. The concept provides protection from the “hot goods” liability provisions contained in 29 U.S.C. § 215(a)(1).5 The drugs and medicines are dispensed by State employees in the course of State treatment of State patients residing in State institutions. These drugs and medicines have ceased their movement in commerce upon delivery to the State and the State is entitled to the benefit of the ultimate consumer exception.
The same rationale is equally applicable to those food items served to patients. However, it was stipulated that in two of the institutions canteens were operated which for a charge served visitors. This is not enough to find that interstate commerce is involved. As the State of Iowa correctly argues, such activities must be related to the business purpose of the enterprise.6 This service, provided only as a convenience to visitors, is not related to the primary purpose of the institutions. Cf., Shultz v. Travis Edwards, Inc., supra, 320 F. Supp. at 839-840.
*107Nor do I think that the second part of the enterprise test, whether there are any employees engaged in commerce, is met by these institutions. It is stipulated that employees at all of these institutions did make use of interstate facilities in carrying out their duties. This alone is not enough. The operation of these institutions by the State of Iowa is a purely local operation, a service provided for its residents out of purely local, not interstate considerations. The mere use of interstate facilities by employees as an incident of carrying out a purely local business does not constitute engaging in commerce. Stevens v. Welcome Wagon International, Inc., 390 F. 2d 75, 77 (3rd Cir. 1968); Chambers Const. Co. v. Mitchell, 233 F.2d 717, 722 (8th Cir. 1956); Hodgson v. Hyatt Realty, 353 F.Supp. 1363, 1373-1374 (M.D.N.C.1973), aff’d sub nom. Brennan v. Hyatt Realty, 489 F.2d 754 (4th Cir. 1974); Wirtz v. Sherman Enterprises, Inc., 229 F.Supp. 746, 752 (D.Md.1964).
The test is whether the work is directly and vitally related to the functioning of an instrumentality or facility of interstate commerce as to be, in practical effect, a part of it, rather than isolated local activity.
Mitchell v. C. W. Vollmer & Co., Inc., 349 U.S. 427, 429, 75 S.Ct. 860, 862, 99 L.Ed. 1196 (1955).
It is only when engaging in interstate communication is a material portion of an employer’s business activity that the employee engaging in the communication should be considered to be engaging in interstate commerce.
If the actions of the State in providing food, shelter, and treatment for its public charges constitutes interstate commerce, then nothing is left of a state’s sovereignty. The heavy hand of the federal government, with its gigantic bureaucracy practicing suffocating paternalism, reaches all things and all people.
While recognizing the remedial purpose of the Act and the number of cases holding that the Act should be liberally construed to effectuate its beneficent purpose,7 the remedial purpose of the Act should not be utilized to emasculate the sovereign rights of the states unless there is a clear constitutional basis for imposition of federal control on a state’s sovereignty.
I would reverse the decision of the District Court and hold that the State of Iowa is not subject to the provisions of the Fair Labor Standards Act, 29 U.S. C. § 201 et seq., in its operation of these nine institutions.

. There can be no doubt that the import of this decision will require an adjustment in the State’s fiscal policy, either by forcing a reduction of services in this or other areas or an increase in its citizens’ tax burden.
“It is one thing to force a state to purchase safety equipment for its railroad and another to force it to spend several million more dollars on hospitals and schools or substantially reduce services in these areas.”
Maryland v. Wirtz, 392 U.S. 183, 203, 88 S. Ct. 2027, 20 L.Ed.2d 1020 (1968) [Douglas, J. dissenting].

. 29 U.S.C. § 203 (i).

. But see, Shultz v. Travis Edwards, Inc., 320 F.Supp. 834 (W.D.La.1970), rev’d on *106other grounds sub nom. Hodgson v. Travis Edwards, Inc., 465 F.2d 1050 (5th Cir.), cert, denied, 409 U.S. 1076, 93 S.Ct. 685, 34 L.Ed.2d 665 (1973); Shultz v. Arnheim & Neely, Inc., 324 F.Supp. 987 (W.D.Pa.1969), rev’d on other grounds sub nom. Hodgson v. Arnheim & Neely, Inc., 444 F.2d 609 (3rd Cir. 1971), rev’d 410 U.S. 512, 93 S.Ct. 1138, 35 L.Ed.2d 463 (1973); and Shultz v. Wilson Building, Inc., 320 F.Supp. 664, 669 (S.D.Tex.1970), aff’d sub nom. Brennan v. Wilson Building, Inc., 478 F.2d 1090 (5th Cir. 1973), where the owners of rental space were found to be the ultimate consumers of supplies used in their business.

. This has been recognized in the regulations promulgated by the Secretary of Labor. See, 29 C.F.R.. § 779.240(a) (1970) which provided in part :
However, the mere fact that employees in conducting the business of the enterprise or establishment, are using machinery, equipment, work tools, and the like, which may have been moved in or produced for commerce, does not mean that they are handling, selling; or otherwise working on “goods” that have been moved in or produced for commerce within the meaning of section 3(s).

. See 29 C.F.R.. § 776.21 (1973) which in essence provides that the “hot goods” provision creates a liability for anyone transporting, delivering or selling in commerce, goods in the production of which the minimum wage and overtime provisions of the Act were violated.

. 29 U.S.C. § 203(r).

. See, e. g., Stevens v. Welcome Wagon International, Inc., 390 F.2d 75 (3rd Cir. 1968); Wirtz v. First State Abstract & Ins. Co., 362 F.2d 83 (8th Cir. 1966).