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gress. Extensive hearings have been held before various committees of Congress to determine what should be done about this basing-point system of pricing. When the Robinson-Patman Act was before this committee, it contained a provision defining price to mean the f. o. b. price, the mill price, ignoring any allowance or charge for transportation. That provision was interpreted as outlawing all basing-point and delivered-price methods.
That section was stricken from the bill, and, when it was discussed on the floor, on the basis of the conference report, Mr. Patman, who was the sponsor of the bill, indicated that he was perfectly satisfied that that definition go out, and that basing points and delivered-price systems be permitted.
Now, along come cases before the Supreme Court this term (Corn Products Refining Co., and Staley Manufacturing Co.), and in the first of these cases the Court held that the basing-point system as developed in that case was outlawed by the Robinson-Patman Act. The Federal Trade Commission, which instituted the suit, maintained throughout that the Robinson-Patman Act outlawed all forms of delivered prices, not merely basing points. The Supreme Court did not go that far, but it did indicate that the legality of any one of these methods depended upon the facts of each case. So that today any form of basing-point or delivered-price system is subject to being questioned under the Robinson-Patman Act. That opens a realm of uncertainty and potential liability. While the basing-point system may be more closely identified with the steel industry, delivered-price systems are utilized by a wide variety of industries throughout the country, either a Nation-wide delivered price, or a zoning price method. It is conceivable that any company using any variety of that pricing system will at some future date be subject to these treble damage suits, and the only limitation period will be found in the applicable State law.
Another case came up before the Supreme Court, and I mention it merely because it illustrates the point-that was the Hartford-Empire case, where the Department of Justice endeavored to establish the principle that the nonuse of a patent was a violation of the Sherman Act, and where they got a decree from the lower court in effect incorporating the idea of compulsory licensing of patents.
That, again, is a matter that has been before the Congress for years. In almost every session there has been at least one bill to require compulsory licensing of patents. So far that is not the law, and the Supreme Court rejected that doctrine. But, on the other hand, if it had been sustained, there would have been multiple suits presumably throughout the country, wherever it could be demonstrated that a patent had not been used immediately upon issuance.
What are some of the consequences of these decisions? In the insurance case, I think the committee recognized them in passing the Insurance Act. Under the basing-point cases, as I have mentioned, you have the possibility of heavy damage suits in any case where a court may find that the delivered price method resulted in some injury to a competitor or to some customer.
In addition to providing treble damages, the Sherman Act also provides that successful prosecution by the Government in any antitrust suit constitutes prima facie evidence in any private action, so that in
addition to a showing of damage, all you have to show is successful prosecution by the Government and a prima facie case is established.
I should point out, too, that this liability does not result because the act is unlawful when committed. As in the case of insurance, the basing point system, and even this patent licensing, at the time the conduct was done, it was not unlawful; it became unlawful merely because of a decision of the Supreme Court, and in becoming unlawful the illegality attached retroactively.
May I just refer for a moment to the variety in State laws affecting private antitrust cases.
In Virginia, for example, a 5-year statute of limitations governs actions for tort. That has been applied in antitrust cases. In Maryland the courts have applied a 3-year statute governing "actions on the case." In Texas 4-year statute has been applied which governs "all causes of action not otherwise specifically provided for." Just a blanket, basket-type statute of limitation. In Massachusetts a 6-year statute has been applied, and in Tennessee a 10-year statute governing "all other cases not expressly provided for."
In regard to the Tennessee statute, the Court held that while there was a 1-year statute governing statute penalties, and a 3-year statute covering injury to real or personal property, it preferred to apply this broad statute covering "all other cases not expressly provided for."
The courts have applied a 3-year statute in the State of Washington, governing an action upon a statute for a penalty or forfeiture. One result of this variety in State statutes was revealed in the case of Bluefield Steamship Company v. United Fruit Company, where the defendant first sued in the District Court for Louisiana, and discovering that the 1-year statute would be applied, asked for leave to remove the case to Pennsylvania, because Pennsylvania had a 5-year statute of limitations.
That case is reported in 243 Federal 1.
Mr. FEIGHAN. What is the page?
Mr. SMETHURST. Page 1.
Another important and widely applicable Federal statute is the Fair Labor Standards Act of 1938. Section 16 (b), in addition to permitting employee suits to recover any underpayment of wages, permits recovery of double that amount in the form of liquidated damages, plus a reasonable attorney's fee.
Let me cite just two or three startling examples:
In 1942, in June, the Supreme Court held that the operators of a building in which goods were produced for interstate commerce were subject to the act with respect to their service employees, on the theory that they were engaged in an operation necessary to the production of goods for interstate commerce.
In September 1942, the Brooklyn Savings Bank computed the amount due its employees engaged in servicing its buildings, and paid an adjustment in wages which they would have been entitled to had the Brooklyn Savings Bank considered itself under the law from
They made that payment in wages and I presume it was done either upon the instigation, or certainly with the approval, of the Administrator of the Fair Labor Standards Act. Their employees signed a waiver accepting this payment in settlement of their claim. Later
suit was filed to recover liquidated damages, and that suit was decided in the Supreme Court at this term, by a 6-to-3 decision. The Court held the waivers were null and void, that the right of an individual employee to recover liquidated damages was a right conferred to encourage and assist in the enforcement of the Fair Labor Standards Act. It was, in substance, a public right, conferred upon individuals to carry out the public interest in having the Fair Labor Standards Act enforced.
So the Court cast aside these waivers and held the employees were entitled to recover a double amount as liquidated damages, plus a reasonable attorney's fee.
That meant that the Brooklyn Savings Bank, which had made the adjustment in September 1942, was now liable back as far toward 1938 as they could go without some State statute intervening, and were now liable for these liquidated damages, plus a reasonable attorney's fee.
That was not the only, and perhaps not even the most startling, effect of that case. For a number of years thousands and thousands of employers have made the same type of settlement, and, I say again, initiated and encouraged by the administrator of the law, they have signed these waivers, they have made payments in complete settlement, without thought of future liability. Now the Court says that these individual agreements in the settlement of a lawsuit are null and void, against public policy, and the individual can now turn around and recover that double liability.
There is another very important point bearing on that recovery, because in an earlier decision the Supreme Court held that where an action is brought the Court has no discretion whatever in the award of these liquidated damages. That was in the Missel case. But I want to call attention to an excerpt from the dissenting opinion filed in the Supreme Court referring to this liquidated-damages provision. This is in Missel v. Overnight Transportation Co.:
Is this provision of law as to liquidated damages mandatory or discretionary? Since the act has been violated in good faith in this case, we would indeed like to hold that it is discretionary. It seems a keen injustice for employers, bewildered by strange legislation and confused by divergent authority in the courts, to be subjected to such a measure. Yet no matter how much we lament its harshness, the section appears to be mandatory, and virtually all the courts have so construed it.
So, you see, in casting aside these waivers, these settlements, and in opening up this broad area of retroactive liability, the law is already settled in saying there is no discretion in the court to do anything about it, the liability must be assessed where the violation is proved, even thought the violation arose by a retroactive interpretation.
In the Brooklyn Savings Bank case the Court said the individual contracts were of no validity. In a later case, the Jewell Ridge Coal case, the Court, in effect, held that collective-bargaining agreements, even though initiated by a Cabinet officer-in this case Mr. Ickes-and approved by the National War Labor Board in settlement of this uncertain liability for travel time in the mines, that even that kind of an agreement would not stand up in the face of this provision for liquidated damages or for wage-hour violations.
But I think there are other witnesses who are directly involved in that matter, and I am not going to discuss it.
But there is a case which brings to a focus the unfair situation, the hardship resulting from this peculiar and unusual situation connected with the wage-hour law. That is the case of Holly Hill Fruit Products Co., involving the area of production regulations of the Administrator of the wage-hour law.
Under that law an exemption is granted to those engaged in the first processing of agricultural commodities when engaged in an area of production as that term is to be defined by the Administrator. The Administrator defined that term, among other things saying that it applied only to producers with seven or less employees. That particular provision in the regulations was attacked, and in a decision of the Supreme Court was declared invalid in June 1944. The Court invalidated the regulation because it said that provision restricting the exemption to employers of seven or less was outside the area of discretion given the Administrator.
But then the Court went beyond that, and in directing the district court as to how these cases should be disposed of, it ordered the district court to hold these cases until the Administrator should formulate a new regulation which would take the place of the old, and under the new regulation, yet to be announced, the question of exemption or nonexemption would be determined.
That was in June 1944. It is my understanding the regulation has not yet been issued, but in any event, when and if it is issued, then it presumably relates back to 1938 and the exemption or nonexemption is then determined retroactively under this new regulation. Let me read just briefly from some of the language of Mr. Justice Rutledge in his dissent in that case:
Moreover, it is not remedies but rights which are thus refashioned. And not equity but law remolds them. Who knows, before the redefinition what persons might be included in its coverage, or whether it may not have to be made again? The same persons cannot be included. Otherwise there would be no point to this decision. The innovation would be serious if confined to this case or this act. It is beyond prediction what the consequences may be, of uncertainty, of hardship, of injustice in deprivation of rights, in windfalls of rights to others, in laying on new and wholly unexpected liabilities, and in relieving from anticipated ones if retroactive refashioning becomes the general practice.
Now, one or two others:
Another important regulation of the Administrator is that defining persons employed in an executive or administrative capacity. Those individuals are exempted. So far there has not been a Supreme Court decision determining the validity of these regulations. If, for any reason, those regulations should be cast aside, it opens up a tremendous area of liability.
The question of what constitutes work time. One controversial aspect of that was the travel-time question decided in these coal mining and ore mining cases.
Another important one is the question of what constitutes overtime pay, and there is a case pending now in Rhode Island which has an extremely important bearing on the question of what is overtime pay provided by collective bargaining agreements; whether amounts paid at time-and-a-half for work at specified periods can be set off against statutory overtime for work after 8 hours in a day or 40 in a week.
Now, what is the situation regarding these Fair Labor Standards Act cases. As I said, there is no statute of limitations in the Fair Labor Standards Act. So again we are forced to resort to State law, and I have here a tabulation of what these various State laws provide. Recently several States have enacted separate statutes to cover wage-hour claims. For example, Alabama has 1 year; Colorado, 1 year; Florida, 1; Georgia, 2; Iowa, 2-I might say Iowa had a 6-month statute before it was invalidated-Louisiana, 1; Maryland, 3 -Maryland had a 12-year statute before enacting this recent one approved in April of this year-Minnesota, 2; North Carolina, 3; North Dakota, 1; Ohio, 3; Oregon, 6 months.
In the States where they have not enacted a separate and special statute to cover wage-hour actions, they have even a greater range. For instance, Colorado and California have 3; Mississippi and New York have 6; Texas has 2.
I would like to file this tabulation for the record, Mr. Chairman, if I may.
Mr. FEIGHAN. You may do so.
(The tabulation referred to is as follows:)
STATE STATUTES OF LIMITATION
I. The States listed below are those which have determined by statute a maximum period of time within which claims under the Fair Labor Standards Act must be brought.
1. States where the period has been determined by statute:
Colorado (approved Apr. 23, 1945)
Iowa (approved Mar. 29, 1945)
Maryland (approved Apr. 4, 1945)
North Carolina (ratified Mar. 19, 1945).
2. States where the period has been determined by court decision:
Mississippi. New York Oklahoma.
II. In the balance of the States the period of limitation within which actions under the Fair Labor Standards Act must be filed has not been definitely fixed. Courts have considered such actions as coming under limitation statutes governing (1) statutory liabilities other than penalty or forfeiture or (2) oral or written, express or implied contracts. Courts might also consider employee suits for unpaid overtime as (3) actions not otherwise provided for or (4) as claims for statutory penalty or forfeiture. The statutes of limitation of the various States as they apply to these particular types of action are set forth below.