Mitchell v. Pidcock

WISDOM, Circuit Judge.

The Secretary of Labor brought three suits, consolidated for this appeal, to require certain tobacco warehousemen to comply with the Fair Labor Standards Act, 29 U.S.C.A. § 201 et seq. In two of the suits the Secretary sued Frank R. Pidcock, III, and J. E. Ladson, Jr., under Section 17 of the Act, to enjoin the defendants from violating provisions of the Act relating to minimum wage and record-keeping requirements. In the third suit he sued Pidcock, under Section 16(c), to recover unpaid minimum wages on behalf of an employee, Dewitt Harrell. The trial judge held that the defendants had violated the Act. He denied an injunction on the ground that it was not necessary to prevent future violations. He granted recovery in the suit for the unpaid back wages. Both sides appealed. We affirm the holding as to the violation of the Act and the award of back wages. We hold that the trial judge exceeded the bounds of discretion in failing to grant an injunction, since there was no reasonable basis for the defendants to refuse to comply with the Act.

Pidcock and Ladson operate tobacco warehouses in Moultrie, Georgia. During the operating season of three to four weeks each in July and August the warehouses provide facilities for the local tobacco growers to market their tobacco. The defendants’ employees receive and unload the tobacco at the warehouse; weigh, ticket, and arrange the lots on the warehouse floor in preparation for the auction; guard the tobacco while it awaits sale; assist in the auction operations ; retrieve floor scrapings to be put up for sale; move the lots out of the warehouse and onto the purchasers’ trucks; and take receipts from the purchasers. Substantial portions of it are shipped after sale to points outside the state.

Before 1958 the defendants paid their employees wages equal to those prescibed by the minimum wage law.1 They testified, however, that although they had paid those wages they were not sure of the coverage of the Act. In 1958 they consulted attorneys to inquire whether the Act applied to their operations. The attorneys advised them that “the employees of a tobacco warehouseman are not engaged in commerce or in the production of goods for commerce *283within the meaning of the Act”. Acting on this advice, so they contend, the defendants reduced the wages of certain employees from $1.00 an hour to 75 cents an hour.2 Investigators for the Wage and Hour Division made several efforts to obtain voluntary compliance.3 After these efforts failed, the Secretary of Labor filed the instant suits against the defendants to obtain legal enforcement of the Act.

I.

The section basically involved in this appeal, Section 6 of the Fair Labor Standards Act, 29 U.S.C.A. § 206, provides that “[e]very employer shall pay to each of his employees who is engaged in commerce or in the production of goods for commerce wages at” the prescribed minimum rate.4 “Commerce” is defined in Section 3(b), 29 U.S.C.A. § 203(b), as “trade, commerce, transportation, transmission, or communication among the several States or between any State and any place outside thereof”. The defendants argue that their tobacco warehouse operations do not constitute "commerce or the production of goods for commerce,” a contention we find untenable. The gist of their argument is that they handle the tobacco after it has been produced and before it has entered commerce, while it is in transit to the point where it begins its trip in interstate commerce. This argument ignores the fact that the marketing process is as integral a stage in the interstate movement of the goods as other stages concededly within the coverage of the Act. The auctioning of the tobacco is an indispensable step in the overall process. Moreover, there is no basis for believing that commerce does not begin until a point after production of the goods is completed. “Commerce” is a broad term. It overlaps stages of production. It encompasses preliminary steps necessary in the preparation of goods for sale in commerce. Mitchell v. Pilgrim Holiness Church Corp., 7 Cir., 1954, 210 F.2d 879; Walling v. Mutual Wholesale Food & Supply Co., 8 Cir., 1944, 141 F.2d 331; Atlantic Co. v. Walling, 5 Cir., 1942, 131 F.2d 518. When production ends, commerce has already begun; there is no interval in between the two in which a function so important as marketing can be performed outside the reach of the statute.

These general considerations lead us to the specific authority supporting the Secretary’s position. The abundance of such authority raises the question whether, against the factual backdrop of this case, the court should accept the defendants’ excuse that they relied on advice of counsel.

II.

The defendants assert their good faith and resist any injunction. They *284rely on their attorney’s opinion of July 18, 1958, given in response to their question whether the Act applied to employees of a tobacco warehouseman. In pertinent part, the opinion reads:

“You have requested an opinion from us as to whether or not the provisions of the Fair Labor Standards Act, commonly known as the Wage and Hour Law, is applicable to the operator of a tobacco warehouse selling bright leaf tobacco during the tobacco marketing season, i. e., whether the employees of such warehouse operator come within the coverage of the Act. * * * While we have found no case in which the courts have ruled on the status of the employees of a tobacco warehouseman, and the Administrator of the Act has promulgated no regulation directly applicable thereto, it is our opinion that the employees of a tobacco warehouseman are not engaged in commerce or in the production of goods for commerce within the meaning of the Act * * * [I]f the employees of the tobacco warehouseman should be held to be otherwise within the coverage of the Act, their employer would not be required to pay them for any overtime except the number of hours worked in excess of fifty-six hours in any one workweek * * * Finally, if it should at long last be held and determined that a warehouseman is subject to the provisions of this law, all that could be required of him would be that he should pay his employees the amount, if any, by which their regular compensation was less than $1.00 an hour and one and one-half times the minimum wage for such hours, if any, as any of them worked in excess of 56 hours in any workweek.” (Emphasis supplied).

We observe, in passing, that the last paragraph is not without significance. We read it as advising the defendants: take a chance; you cannot get hurt; at worst, you may have to pay what the law requires you to pay.

If even a half-hearted attempt to research the law had been made in the summer of 1958, it would have shown’ that there were four decisions squarely holding that the Act covers employees of tobacco warehousemen. Reliance Storage & Inspection Co. v. Hubbard, W.D. Va., 50 F.Supp. 1012; Walling v. Home Loose Leaf Tobacco Warehouse Co., E.D. Ky., 1943, 51 F.Supp. 914; Walling v.. Lincoln Looseleaf Warehouse Co., E.D.. Tenn., 1942, 59 F.Supp. 601; Fleming v. Kenton Loose Leaf Tobacco Warehouse Co., E.D.Ky., 1941, 41 F.Supp. 255. Although these are district court cases, they have never been questioned, distinguished, or overruled by later authority.

From the earliest days of enforcement,, the Wage and Hour Division has consistently asserted that the Act applies to’ tobacco warehouse auctions and employees of tobacco warehousemen. The Secretary of Labor’s Interpretative Bulletin on coverage (admitted in evidence by stipulation) specifically cites one of the four cases, Walling v. Home Loose Leaf Tobacco Warehouse Co., as authority for the principle:

“employees in * * * warehouses * * * who sort, screen, grade, store, pack, label, address or otherwise handle or work on goods in preparation for shipment of the goods out of the state are engaged in the production of goods for commerce within the meaning of the Act.” (Bulletin No. 776, Section 776.16, published as far back as May 1950 in the Code of Federal Regulations, Title 29, Chapter IV, Section 776.16. )

The attorney who prepared the opinion for Pidcock testified that he did not recall examining this bulletin. The bulletin was published in the Code of Federal Regulations, however, and in his opinion the attorney made reference to the Administrator’s favorable determination on seasonal exemptions. This determination appeared in the same place in the Code in another section.

Thanks to the proliferation of decisions these days, one almost may find a *285case for or against any legal notion. A determined lawyer, therefore, would be expected to extend his research to situations analogous to the situation here. Any lawyer informed in the field of warehousing would have to say that, on the point at issue, if there is a distinction between tobacco auctions and livestock auctions, the difference is that tobacco auctions have a more obvious connection with the Act than have livestock auctions, since the processing and distribution of tobacco is more nearly certain t'o move the tobacco in interstate commerce. Employees of livestock auctioneers and commission firms receive and handle goods passing through their employer’s premises, as do employees of a tobacco warehouseman. The cases uniformly apply the Act to these employees. In Walling v. Friend, 8 Cir., 1946, 156 F.2d 429 the Court held that clerical employees who prepared statements for the sellers were covered. In Mitchell v. Hunt, 5 Cir., 1959, 263 F.2d 913, on which two members of this panel of the Court sat,5 we held that the Act covered employees of a farmer-employer engaged for the most part in activities relating to the operation of livestock auctions. See also Mitchell v. Bowman, M.D.Ala., 1954, 131 F.Supp. 520; Mitchell v. Carter d. b. a. Home Base Auction Co., D.N.D., 1958, 35 Lab. Cases, para. 71,904,13 WH Cases 861; and Mitchell v. Valdosta Livestock Co., M.D.Ga., 1953, 24 Lab. Cases, para. 67,917, 11 WH Cases 674.

In May 1959, before discussions in August 1959 between the Department’s representatives and the defendants’ counsel and long before the December discussions, this Court held, in an antitrust suit, as a matter of law, that tobacco warehouse auctions “are a part of, in, and themselves constitute, interstate commerce”. Rogers v. Douglas Tobacco Board of Trade, Inc., 5 Cir., 1959, 266 F.2d 636, cert. denied, 361 U.S. 833, 80 S.Ct. 85, 4 L.Ed.2d 75. Rogers cites Currin v. Wallace, 1939, 306 U.S. 1, 9, 59 S.Ct. 379, 83 L.Ed. 441, holding “untenable” the contention that in a warehouse auction the tobacco is not in interstate commerce until sale and delivery to the customer. Rogers cites also Asheville Tobacco Board of Trade, Inc. v. F. T. C., 4 Cir., 1959, 263 F.2d 502, holding that “tobacco auctions are an integral and indispensable part of interstate commerce in tobacco”. In Mulford v. Smith, 1938, 307 U.S. 38, 59 S.Ct. 648, 83 L.Ed. 1092, the Supreme Court described tobacco warehouses as “the throat where tobacco enters the stream of commerce”.

In Western Union Tel. Co. v. Lenroot, 1945, 323 U.S. 490, 65 S.Ct. 335, 89 L.Ed. 414, the Supreme Court said that “in the production of goods for commerce within the meaning of the Act” the term “production” includes “every kind of incidental operation preparatory to putting goods into the stream of commerce”. There are many, many analogous cases holding that duties preparatory to distribution come with the Act’s coverage. This Court has held that separating scrap from wrecked cars, storing it, and moving it, in preparation for sale is within the Act. Mitchell v. Jaffe, 5 Cir., 1958, 261 F.2d 883. We have held that the Act covers washing bottles for a dairy. Foremost Dairies v. Ivey, 5 Cir., 1953, 204 F.2d 186.

In the light of the massive authority against the defendants, it stretches the imagination beyond the breaking point to believe that the opinion was the result of serious research. This is not a case where counsel, aware of an adverse line of authorities and having a reasonable basis for his considered opinion, takes the position that a careful re-examination of the authorities justifies the belief that they may be distinguished or overruled. The opinion unequivocally states that counsel “found no case in which the courts have ruled on the status of the employees of a tobacco warehouseman, and * * * it is our opinion that [they] are not engaged in commerce or the production of goods for commerce”. The attorney was an experienced, re*286spected lawyer. He testified that he had one of the largest law libraries in Georgia. It passes understanding that, in the loose leaf tobacco country of Colquitt County, in Moultrie where there are six tobacco auction warehouses, one of the ablest lawyers in the region was unable to find a case ruling “on the status of the employees of a tobacco warehouseman” and that he should reach the conclusion that such employees are not within the Act.

Pidcock was twenty-eight years old at the time of the trial. His father had been operating the business for eighteen years. When his father died in 1952, Pidcock took over. He was graduated from college in 1953, spent one year in law school, went into the Army in September 1954, and was discharged in June 1956. In 1955 he had thirty days accumulated leave which he took during the tobacco season, arriving in Moultrie from Korea the day before the market opened and leaving the day before it closed. At the time, his operations were being investigated for violations of the Act. As a result of the investigation, Pidcock made restitution of unpaid back wages to fifteen employees. Pidcock, however, had only brief conversations with the investigator and, of course, after his return to Korea it was not practical for him to contest the coverage.

Pidcock was not an ingenuous innocent ; he was an experienced, knowledgeable, informed tobacco warehouseman who had cut his eye-teeth on tobacco. Such persons often are as sophisticated on the legal aspects of trade practices as their lawyers. During his college years he conducted his business during the summer; the tobacco auction season coincided with the summer. In 1958 he was President of the Board of Trade, a group composed of the local tobacco warehouse operators, the large companies which purchase tobacco, independent buyers, speculators, and some farmers. Ladson testified that at Board of Trade meetings the members “discuss all matters pertaining to the market with relation to the companies, to the warehouse-men, and to our employees”. The “terrific” induction in tobacco acreage in 1957 brought about frequent discussion of how to cut costs,6 and after Pidcock received the favorable opinion from his attorney, members of the Board of Trade “decided to go ahead and go on the 75 cents * * * paid before”. Ladson, who has been in the business since 1939, operates two tobacco warehouses.

The appellees’ brief on appeal demonstrates that the result reached in the opinion of July 18 was not for lack of competency of the attorney’s firm. In the appellees’ brief, counsel argue ably, eloquently, and resourcefully, cite numerous authorities, and distinguish adverse decisions ingeniously, showing the complete familiarity with the subject one would expect of competent lawyers handling a matter right down their alley. It is a forceful, effective brief that would be more persuasive, if the issue were novel. The contrast with the opinion of July 18 is startling, even after making allowance for the difference between an opinion to a client and an appellate brief. The opinion of July 18 sends the defendants forth with a blessing but without benefit of expounded thesis or scriptural authority. Our natural inclination is to afford respected lawyers the full measure of respect. We must say, however, that the facts in this case leave us with the inescapable impression that the opinion was an off-the-cuff conclusion based on insufficient research.

III.

When a violation of the Fair Labor Standards Act is established, the decision whether to issue an injunction against further violations rests primarily in the discretion — judicial discretion — of the trial court. We have issued a warning, however, that when the reason for the employer’s not seeing is that his head is buried in the sand, assurances by the employer of future compliance do not *287justify denial of an injunction against future violations. In Mitchell v. Hausman, 5 Cir., 1958, 261 F.2d 778, 780, we said:

“We do not think that Hausman’s ostrichlike attitude of self-delusion should be accepted as establishing a good faith belief on his part that the Act did not apply to him and his business. ‘If he did not know, it was because he did not look, or looking, did not see, or want to see what was so plainly there.’ Mitchell v. Raines, 5 Cir., 1956, 238 F.2d 186, 188. The personal belief of the trial judge that an employer will comply with the Act in the future may not be, in the light of the facts, a sufficient reason for denying an injunction. Lenroot v. Kemp, 5 Cir., 1946, 153 F.2d 153.”

Reliance on an attorney’s opinion, “even in good faith, is not to be considered a safe harbor in every storm”. Mitchell v. Blanchard, 5 Cir., 1959, 272 F.2d 574, 577. Stated negatively, and with no intention to extend the principle beyond this type of proceeding, we formulate the principle: reliance on a lawyer’s opinion is not a safe harbor if a reasonable man would know that the opinion does not reflect a prudent lawyer’s serious efforts to ascertain the applicable law on the subject of the opinion. The accent is on the client, because he is the defendant asserting that he relied on his lawyer. Here, the subject of the requested opinion was a settled point of law, obvious after the most cursory research. Here, repeated requests for compliance, involving discussions with representatives of the Department, put the attorney and employer on notice that they were persisting in ignoring the obvious. We find it incredible that in 1958 an informed, knowledgeable, experienced tobacco warehouseman would have accepted the opinion of July 18 and continued to rely on it. The defendants do protest too much.

In reaching the conclusion that an injunction should issue, we are influenced by the objectives of statute and the nature of the proceedings. This proceeding is not comparable with a criminal proceeding in which reliance on the opinion of an attorney is asserted as a defense. The presumption of innocence weights the scales of justice so heavily in favor of a defendant that evidence sufficient to justify an injunction under the Fair Labor Standards Law might be insufficient to support a criminal conviction. And, this proceeding is only superficially related to a suit in equity for an injunction to protect interests jeopardized in a private controversy. The public interest is jeopardized here. The injunctive processes are a means of effecting general compliance with national policy as expressed by Congress, a public policy judges too must carry out—actuated by the spirit of the law and not begrudgingly as if it were a newly imposed fiat of a presidium.

The injunction subjects the defendants to no penalty, to no hardship. It requires the defendants to do what the Act requires anyway—to comply with the law. True, it subjects them to correction by contempt proceedings. If this is a hardship, they may avoid it by respecting the law. If they choose to take their chances, they would in contempt proceedings still be able to raise questions of law and of good faith as freely as in the original suit for an injunction. We do not say or imply that injunctions should be issued freely, without regard for the facts, simply because it is the Government asking for the injunction. We say that the manifest difficulty of the Government’s inspecting, investigating, and litigating every complaint of a violation weighs heavily in favor of enforcement by injunction—after the court has found an unquestionable violation of the Act.

We do not say or imply anything reflecting on the able, experienced, respected district judge; we say only that, as we view it, he exceeded the bounds of judicial discretion in denying the injunction. The trial judge showed what he thought of the defendants’ arguments and underscored his evaluation of their lawyers’ opinion when he disregarded the *288challenge to his jurisdiction and granted judgment for the Secretary in the back-pay suit: Under the Act, the court has no jurisdiction if the point at issue is not u settled issue of law.

Implicit in the defendants’ non-compliance, as we read the briefs and the record, is a certain underlying, not unnatural, Actonian distaste for national legislation affecting local activities. But the Fair Labor Standards Law has been on the books for twenty-three years. The Act establishes a policy for all of the country, and for the courts as well as for the agency required to administer the law. As Mr. Justice Stone said:

“ * * * in construing a statute setting up an administrative agency and providing for judicial review of its action, court and agency are not to be regarded as wholly independent and unrelated instrumentalities of justice, each acting in the performance of its prescribed statutory duty without regard to the appropriate function of the other in securing the plainly indicated objects of the statute. Court and agency are the means adopted to attain the prescribed end, and so far as their duties are defined by the words of the statute, those words should be construed so as to attain that end through co-ordinated action. Neither body should repeat in this day the mistake made by the courts of law when equity was struggling for recognition as an ameliorating system of justice; neither can rightly be regarded by the other as an alien intruder, to be tolerated if must be, but never to be encouraged or aided by the other in the attainment of the common aim.” United States v. Morgan, 1939, 307 U.S. 183, 191, 59 S.Ct. 795, 799, 83 L.Ed. 1211.

The finding of a violation of the act is AFFIRMED. The award of unpaid minimum wages is AFFIRMED. The denial of the injunction is REVERSED, and the case REMANDED with instructions to grant the injunction.

. In 1955 Pidcock’s operations were investigated by a Wage and Hour investigator, who found that Pidcock was violating the Act by not paying overtime rates. As a result, the management made restitution to fifteen employees of back wages amounting to $277. In early 1956 Pidcock checked with the Wage-Hour Division as to whether a change in the statutory minimum wage rate limited the number of hours his employees could work and was informed that it did not.

. The wages of unloaders, buggy boys, scalemen, watchmen, and check-out men, who were principally high school boys, were cut back to 75 cents an hour. The wages of specialized high paid employees were also cut.

. In August 1959, an investigator, John Sedberry, conferred with Pidcock and the attorney who had signed the opinion, concerning the employer’s failure to comply with the Act. Sedberry referred the attorney to three tobacco warehouse cases settled by consent decrees which Sedberry was familiar with because of his having had a part in handling the files. According to Sedberry’s testimony, the attorney, speaking for Pidcock and Ladson, “would not say for sure whether they would comply in the future,” and asked for “time to . think it over,” promising to reply by letter by September 8 to Sedberry’s Supervisor in Columbus. No letter was received. Sedberry again, on December 22, 1959, saw the lawyer, who again would not say whether the employers would comply or not in the future. This testimony was not contradicted, nor was there any explanation why the promised letter was not sent, although both Pidcoek and the attorney testified after Sedberry. The injunction suits were thereafter filed on March 30 and April 2, 1960, and the back-pay suit on April 26.

. Section 11(c) of the Act, 29 U.S.C.A. § 211(c) requires employers subject to the overtime and minimum wage regulations to keep accurate records of the hours and wages of their employees. Coverage under this provision therefore depends on coverage under the overtime and minimum wage provisions.

. The organ of the Court in the instant case joined in the majority opinion in Mitchell v. Hunt. Judge Cameron dissented.

. The total yield for Colquitt County increased, however.