A case more particularly in point, which I would like to comment on, is National Carloading Corporation v. Phoenix Express, Inc., decided by the Supreme Court of the State of Texas in January 1944 (142 Texas 141). Certiorari was later denied by the Supreme Court of the United States.

This case arose under section 217 (b) of the Interstate Commerce Act. It involved a suit by a motor carrier to recover certain undercharges from a freight forwarder. The undercharges resulted from services performed by the carrier under a schedule of rates and tariffs published by the freight forwarder, on the assumption that the latter was a common carrier and therefore permitted by law to enter into contracts for carrying freight pursuant to such published schedules.

After the transaction occurred, the Interstate Commerce Commis-. sion ruled that the freight forwarder was not a carrier within the meaning of the Motor Carrier Act, was not entitled to a certificate of public convenience, and ordered the schedule of tariffs filed by the forwarder stricken from the files.

The plaintiff's suit was founded on the theory that at the time the shipments were made the defendant was not authorized to file tariffs and that the merchandise carried for the freight forwarder was subject to a schedule of rates higher than those unlawfully published by the forwarder. Because of the decision of the Interstate Commerce Commission holding that freight forwarders were not common carriers, Congress in 1942 added part IV to the Interstate Commerce Act to deal exclusively with the operations of freight forwarders and provided that no person should be subject to any punishment or liability on account of acts done or omitted to be done in connection with the establishment, charge, collection, receipt of payment of rates. prior to the effective date of these new amendments.

This immunity clause was cited as a defense to the action to recover the undercharges referred to above.

There was directly involved, therefore, an act of Congress, which in substance canceled an existing liability brought about by prior interpretation of the Interstate Commerce Act. The validity of the immunity clause was challenged.

The court overruled the contention that in giving retroactive effect to the immunity clause, Congress was interfering with any property rights protected by the fifth amendment. The court stated:

We are dealing with the exercise by Congress of a power conferred by the Federal Constitution to regulate interstate commerce. The provisions of the fifth amendment may not be invoked to obstruct a national policy which Congress has the power to adopt.

The Court cited the case of Norman v. B. & O. Railroad (294 U. S. 240), the Gold Clause cases.

The Court discussed further the distinction between a right of action and a "vested right" protected by the fifth amendment. Speaking of a vested right, the Court said:

Such a right must be something more than a mere expectation based upon an anticipated continuance of an existing law. It must have become a title, legal or equitable, to the present or future enjoyment of property, or to the present or future enforcement of a demand, or a legal exemption from the demand of another. If, before rights become vested in particular individuals, the convenience of the State induces amendment or repeal of the laws upon which they are based, those individuals are left without any remedy at law to enforce their claims, and if final relief has not been granted before the repeal goes into effect, it cannot be granted

thereafter, even if a judgment has been entered and the cause is pending upon appeal.

The significance of this decision cannot be minimized. Here the cause of action arose under a Federal statute. After the action arose Congress amended the law and granted immunity for acts done prior to the effective date of the amendment, thus retrospectively taking away an existing right of action. The power of Congress to do this was sustained by the supreme court of the State of Texas, and certiorari was denied by the Supreme Court of the United States.

This statute and the court decision indicate rather clearly that, in dealing with rights created by statute, Congress can successfully destroy the cause of action by repealing or amending the statute, or by providing retroactively an absolute defense to a cause of action which had previously accrued. It would seem, therefore, that Congress likewise would have the constitutional power to enact a general statute of limitations which would bear with the same effect on existing or accrued causes of action arising under other Federal statutes.

For the reasons I have outlined, I believe that consideration should be given particularly as to those cases where the right of action and the damages, liability, springs from a retroactive administrative or court decision-in those cases particular consideration should be given to absolutely cutting off the right and the liability.

Mr. SPRINGER. Will you permit a question?

Mr. SMETHURST. Yes.

Mr. SPRINGER. In cases where this right does not rest upon the retroactive provisions of some order, do you think those persons should be cut off without having any opportunity to bring suit in the future?

Mr. SMETHURST. No, sir; I do not. I realize there is difficulty in making a distinction between the two types of action, and I feel, too, that it depends a lot on the law, the particular statue under which the right accrues. Every one of these laws with which I am at all familiar we have a law that has been on the books 8, 10, or more years-I think of the wage-hour law, for example. That has been in effect since 1938. Even the administrator has said the violations are not the intentional kind. People are not deliberately, or to any large degree, refusing to pay 40 cents an hour, or time and a half for overtime, if they know what the rules or regulations are. Basic compliance, seems to me, not to be the problem today; it is the fringe, side issues, the fine points, the technicalities, the new developments. That is where the real liability is. Now, for refusing to pay the minimum, if that is because the industry, for the first time is brought under the law, then I think the same rule or same reasons exist for cutting off the right.

Mr. MAGGS. Mr. Chairman, I represent the Administrator. I wonder if Mr. Smethurst could give me the citation to that statement of the Administrator to which he has referred.

Mr. SMETHURST. The Administrator of the Wage and Hour Division has also publicly recognized the uncertainties of attempting to operate under the Fair Labor Standards Act of 1938. He admits in his annual report for 1941 that even the experts of his division do not know in many cases whether the wage-hour law is applicable. The report reads in part:

Since many violations of the Fair Labor Standards Act are found to be due to misunderstanding of the requirements of the act, or are merely technical in

nature, the administrator has proceeded on the assumption that the vast majority of employers subject to its terms are willing to comply and do comply when they understand the requirements.

That misunderstanding often is unavoidable is due to the complexity of economic activities broadly subject to the act. While it applies to employees engaged in interstate commerce or in the production of goods for interstate commerce there are many border-line cases of coverage which present difficulties not only to employers but to the division itself.

Mr. MAGGS. That was a majority of all employers, or a majority of those found in violation?

Mr. SMETHURST. I wouldn't undertake to interpret his language, but it seems to me he is talking about all employees subject to the act. Mr. MAGGS. But not the majority of those found in violation. It is rather different.

Mr. SMETHURST. I wouldn't want to interpret that.

Mr. FEIGHAN. What is your disposition with reference to cutting off from the employees recovery of wages which are justly due, apart from any additional damages?

Mr. SMETHURST. Let me divide that into two parts. Let us take a case where either an establishment or an industry has not been held to be under the law. Let us take the Holly Hill case, where you had those engaged in the first processing of agricultural commodities in the area of production. Under the regulation originally issued, an establishment employing seven or fewer employees was exempted, under certain other conditions. That regulation was invalidated, and presumably sometime a new one will be issued. Until it is, and until it is litigated, no one in the first processing of agricultural commodities knows what his liability is. He doesn't even know whether he is exempted. Let us assume that the new regulation narrows that exemption to five, so that persons who thought they were previously exempt now find they are not. I say, in that case, an employee who benefits from that retroactive interpretation does not suffer any loss because of the technical difference of meaning or interpretation of what the law means, when neither the Administrator nor Congress seem to agree on it.

Chief Justice Stone, dissenting, I think in the Brooklyn Savings Bank case, called attention to the fact that the recovery in many in-. stances is far in excess of any actual damage. However, if you weigh the equities, and that is really what you are faced with, if you have on one side an employee who has been paid up to what the standards were, if he was not under the law-maybe he was not getting his 40 cents, but he had no legal right to the 40 cents. But if that right comes into being by some judicial or administrative decision which makes it retroactive, it seems to me it is almost a case of windfall, such as Mr. Justice Rutledge referred to in his dissenting opinion in the Holly Hill case.

Now, on the other hand, if we have an employer who has been clearly and unequivocally under the law and has failed to pay the minimum, then I think the right of action is right and clear and should not be cut off.

Mr. FEIGHAN. I am glad to hear you say that.

Mr. SMETHURST. The difficulty is in framing a statute that draws distinction.

Mr. Chairman, I have already taken too long.

Mr. FEIGHAN. You are not claiming this legislation would apply to cases of fraud also?

Mr. SMETHURST. No, sir. First of all, there is a standard provision in the code dealing with fraud cases. Those certainly are in the category of criminal proceedings, and not civil actions for the recovery of damages.

Chairman SUMNERS. I beg your pardon for coming in at the moment, but I would like to have some expression here as to the operation of this bill as against the Government.

Mr. HOLTZOFF. Mr. Chairman, I am very glad to have this opportunity, because I am very much perturbed and perplexed by the broad phraseology of the first proviso of the bill. Now, I am not quite clear as to what is meant by "public action" but if it is meant actions brought by the United States, then this proviso would create or result in a drastic and almost revolutionary change in laws that have existed since the early days of the Republic. The statute of limitations does not run against the United States, unless it is expressly specified. For instance, there are provisions of certain tax laws which expressly are applicable to the United States. It has frequently happened that the Government may discover that a payment has been fraudulently made, or that a payment has been erroneously made, and the Government had a cause of action to recover back the payment so made, and frequently the facts are not discovered until some years after the payment is made. That is a very practical situation. Now, to cut off the rights of the Government would be a very serious matter. I don't know just who the draftsman of this bill is

Chairman SUMNERS. It would be very serious, particularly in a situation where we hope we are getting ready to emerge from a war condition where contracts have been made very hastily, and where they have not been scrutinized as closely as might be, because there isn't enough personnel to check on all the things that have been done. Mr. HOLTZOFF. Exactly.

Chairman SUMNERS. I didn't mean to be breaking in on this presentation, but those are things that ought to be put in the record.

Mr. HOLTZOFF. I really came here for the purpose of bringing this point to the attention of the committee, and I am very glad, Mr. Chairman, that you have brought it up.

Mr. GWYNNE. Mr. Chairman, I had no intention, in drafting the bill, to interfere with those rights of the Government. I understand that Mr. Holtzoff, before the hearings are concluded, will offer some amendments to clarify the bill.

Mr. HOLTZOFF. I take no position for or against the bill generally, but I want to call attention to the necessity, if I may call it such, of protecting the rights of the Government.

Mr. SPRINGER. In other words, you want that point clarified.

Mr. HOLTZOFF. Yes. If I may make an additional comment, the witness who is now testifying referred to the fact that that point is taken care of by existing statute. But the difficulty is this is a later statute, and if there is any inconsistency between an earlier and a later statute, the later statute prevails.

Chairman SUMNERS. That is right.

Mr. GWYNNE. I understand, Mr. Holtzoff, you will appear later and suggest some amendments.

Mr. HOLTZOFF. I shall be very glad to do so if the committee wishes. Mr. SMETHURST. Mr. Chairman, I had concluded, unless there are some additional questions.

Mr. GWYNNE. I would like to suggest, Mr. Chairman, that Mr. Smethurst made some reference to cases. I wonder if those citations could be included in the record.

Mr. SMETHURST. I might insert this statement in the record at this time.

Mr. GWYNNE. If you will.

(The statement referred to is as follows:)

STATEMENT OF RAYMOND S. SMETHURST, COUNSEL, NATIONAL ASSOCIATION OF MANUFACTURERS, ON H. R. 2788 BEFORE SUBCOMMITTEE No. IV OF THE COMMITTEE ON THE JUDICIARY, HOUSE OF REPRESENTATIVES

My name is Raymond S. Smethurst. I am counsel of the National Association of Manufacturers, an organization of manufacturers having more than 13,000 members. Of this number, more than 70 percent employ 500 or fewer workers. I make this point in order that this committee will understand that by far the greater number of NAM members are members of that class of industry ordinarily referred to as "small."

At the outset, I would like to comment on the importance of the mill upon which these hearings are being held. According to its sponsor, Mr. Gwynne, of Iowa, there are 7 different laws which would be affected because those laws grant public or private rights of action but do not contain any period of limitation within which the actions must be brought. I have not had an opportunity to review the statutes at large, or for that matter, to review the code to determine whether this number represents all of the Federal laws establishing public or private rights of action which are unaffected by any Federal statute of limitation. When one considers that these laws establish contingent but unforeseeable liabilities upon one or all segments of industry, I can assure you that the number 17 is large indeed.

I shall not take the time of the committee to refer to each of the laws identified by Congressman Gwynne. However, I would like to point out which of these laws have widespread application and scope. Because of this, contingent liabilities assume staggering proportions.

The laws of wide application include (1) the Sherman Antitrust Act, (2) the Webb Export Act, (3) the Federal Trade Commission Act, (4) the Securities Exchange Act of 1934, (5) the Fair Labor Standards Act of 1938, (6) the Public Contracts Act of 1936, and (7) the Surplus Property Act of 1934. It is not my intention to discuss these laws in detail. Contingent liabilities under the Sherman Act arise from the private right of action created by that act to recover threefold damages, costs, and attorney's fees for any person whose property or business is injured "by reason of anything forbidden in the antitrust laws." Contingent liability under this act alone is tremendous.

The Fair Labor Standards Act of 1938 is another law which has been so materially expanded by court decisions and by administrative action. I make this comment because the rules which expand the act are, under a legal fiction, applied back to 1938. Employees may recover wages, double damages, and attorney fees back that far unless barred by a State statute of limitations. Two cases which forcefully illustrate the effect of expansion of the law and of the operation of the legal fiction are typical.

For 4 years after the wage-hour law was passed building operators who rented space to persons or companies for the production of goods for commerce assumed that their own employees who did not produce any goods were not subject to the act. In June 1942 the Supreme Court decided that the employees of building operators were engaged in occupations necessary to production and conseanently subject to the act. In September of that year, the Brooklyn Savings Bank, after having recalculated the wages that should have been paid its buildingservice employees paid the amount and obtained a release waiving any further rights under the wage-and-hour law.

A few weeks ago the Supreme Court determined that such waivers or private agreements in settlement of employee claims under the wage-and-hour law were null and void and that employees agreeing to such settlements and waivers may thereafter recover the double damages provided for in section 16 (b) of that act.