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Collins v. Heritage Wine Cellars

December 21, 2009

ANTHONY COLLINS, ET AL., PLAINTIFFS-APPELLANTS,
v.
HERITAGE WINE CELLARS, LTD. AND STEVEN HIRSCH, DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 07 C 1246-Robert M. Dow, Jr., Judge.

The opinion of the court was delivered by: Posner, Circuit Judge.

ARGUED SEPTEMBER 24, 2009

Before POSNER, MANION, and TINDER, Circuit Judges.

Collins and his fellow plaintiffs-truck drivers employed by Heritage Wine Cellars, a wholesale importer and distributor of wine-sued Heritage and its chief executive officer under the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq. The Act requires employers to pay overtime (one-and-a-half times the hourly wage) to employees who work more than 40 hours a week, 29 U.S.C. § 207(a)(1), which the plaintiffs sometimes did; yet until 2007 they were not paid overtime.

The plaintiffs transport wine from a warehouse in the Chicago area, owned by Heritage, to retail stores in Chicago and elsewhere in Illinois. To get the wine to the warehouse from the states and foreign countries in which it's produced (none of it is produced in Illinois), Heritage hires truck companies and other carriers. They are independent contractors. Neither they nor their employees are employed by Heritage, unlike the plaintiffs. But Heritage controls the wine and directs its movements on the entire journey from the state or country of origin of the wine to the retail stores in Illinois to which the plaintiffs transport the wine from the warehouse.

The principal question is whether the portion of the transportation that is entirely within Illinois is nevertheless interstate commerce within the meaning of the Motor Carrier Act, 49 U.S.C. §§ 502-07, 522-23, 525-26, 31502-04. The district court ruled that it was. The significance of the ruling is that the Fair Labor Standards Act exempts from its overtime provisions "any employee with respect to whom the Secretary of Transportation has power to establish qualifications and maximum hours of service pursuant to the provisions of section 31502 of title 49." 29 U.S.C. § 213(b)(1). The reference is to a section of the Motor Carrier Act that authorizes the Secretary to establish qualifications and maximum hours of service for employees of a motor carrier if "property . . . [is] transported by [the] motor carrier between a place in a State and a place in another State," 49 U.S.C. §§ 13501(1)(A), 31502(b), provided that the employees "engage in activities of a character directly affecting the safety of operation of motor vehicles in the transportation on the public highways of passengers or property in interstate or foreign commerce within the meaning of the Motor Carrier Act." 29 C.F.R. §§ 782.2(a); Levinson v. Spector Motor Service, 330 U.S. 649, 670-72 (1947); Walters v. American Coach Lines of Miami, Inc., 575 F.3d 1221, 1227-28 (11th Cir. 2009) (per curiam).

An employer subject to the Secretary's jurisdiction is required to register with the Department of Transportation. 49 C.F.R. § 385.301. Heritage, for reasons unexplained-for it claims to be subject to that jurisdiction, as otherwise it could not claim the exemption for truckers engaged in interstate commerce-has not registered. But it points out that the exemption depends on the Secretary's "power to establish qualifications and maximum hours of service" (emphasis added) and not on whether the power has been exercised. See Bilyou v. Dutchess Beer Distributors, Inc., 300 F.3d 217, 229 (2d Cir. 2002), and cases cited there.

If Heritage bought wine from a vineyard in Indiana, made a contract to sell it to a retail store in Chicago, shipped the wine by rail to a freight yard in Chicago, and from there truck drivers employed by it just to transport wine from the freight yard to the store did so, it would be subject to the exemption even though the drivers had not crossed a state line themselves. E.g., id. at 224-25; Klitzke v. Steiner Corp., 110 F.3d 1465, 1469-70 (9th Cir. 1997); Foxworthy v. Hiland Dairy Co., 997 F.2d 670 (10th Cir. 1993); Galbreath v. Gulf Oil Corp., 413 F.2d 941 (5th Cir. 1969); see also Walling v. Jacksonville Paper Co., 317 U.S. 564, 567-69 (1943). The entire shipment would be deemed a single interstate shipment. The fact that in the course of its journey the wine had been unloaded from one carrier and loaded onto another would be as incon-sequential as the fact that en route to the store the truck had stopped for a red light.

But suppose instead that Heritage shipped its wine to a wholesale distributor in a Chicago suburb, title passed to the distributor when the wine arrived at the distributor's warehouse, and the distributor contracted to sell the wine to retail stores and delivered it to them in his own trucks. The carriage of the wine from the warehouse to the stores would be classified as an intrastate shipment under the Motor Carrier Act even though the property shipped had originated outside the state. See McLeod v. Threlkeld, 319 U.S. 491, 494 (1943); Higgins v. Carr Bros. Co., 317 U.S. 572, 573-74 (1943); Atlantic Coast Line R.R. v. Standard Oil Co., 275 U.S. 257, 262-63, 267-70 (1927); Missouri ex rel. Barrett v. Kansas Natural Gas Co., 265 U.S. 298, 306, 308 (1924); Chicago, Milwaukee & St. Paul Ry. v. Iowa, 233 U.S. 334, 342-43 (1914); Schultz v. National Electric Co., 414 F.2d 1225, 1226-28 (10th Cir. 1969).

Congress could still regulate such a shipment if it wanted to. Such intrastate shipments have a cumulatively substantial effect on interstate commerce. North Alabama Express, Inc. v. ICC, 971 F.2d 661, 666-67 (11th Cir. 1992); see also Gonzales v. Raich, 545 U.S. 1, 15-22 (2005); United States v. Blum, 534 F.3d 608, 610-12 (7th Cir. 2008). They substitute for uninterrupted interstate shipments to the destination of the intrastate shipments, and they use the same highways and other transportation facilities. But the language of the Motor Carrier Act-"transported . . . between a place in a State and a place in another State"-does not indicate a congressional intention of regulating a purely intrastate shipment merely because of its effect on interstate commerce. The shipment itself must be in some sense interstate commerce (transportation between a place in a state and a place in another state).

This case falls in between our two examples but closer to the first. About a fourth of the wine that Heritage ships to its warehouse in Illinois has been ordered in advance by the retail stores. That wine stays in the ware-house only briefly because Heritage has an order in hand. The fact that the wine pauses in its Heritage-controlled journey to the retail outlet is of no greater consequence than the unloading and reloading of the shipped goods in our first example. The other three-fourths of the wine sits in the warehouse until Heritage has found a buyer. But it appears that most of that wine turns over approximately every month, having been purchased and shipped by Heritage on the basis of its estimates of customer demand. And none of the wine undergoes any alteration on its trip from the vineyard to a retail store in Illinois. So far as appears, there is no processing (or even any deliberate aging of the wine in the warehouse), no addition of additives, no incorporation into another product, not even relabeling as a private-label (house-brand) product. When the wine arrives at the warehouse, it is taken off the shrink-wrapped pallets on which it is delivered and shelved in the warehouse, period.

It seems to us that when a shipper transports his product across state lines for sale by him to customers in the destination state, and the product undergoes no alteration during its journey to the shipper's customer, and interruptions in the journey that occur in the destination state are no more than the normal stops or stages that are common in interstate sales, such as temporary warehousing, the entire journey should be regarded as having taken place in interstate commerce within the meaning of the Motor Carrier Act's exemption from the Fair Labor Standards Act. We'll defend this conclusion, but we first note that although it is consistent with the results in most cases, see Merchants Fast Motor Lines, Inc. v. ICC, 5 F.3d 911, 916-19 (5th Cir. 1993); Central Freight Lines v. ICC, 899 F.2d 413, 420-23 (5th Cir. 1990); Roberts v. Levine, 921 F.2d 804, 810-14 (8th Cir. 1990); Walling v. American Stores Co., 133 F.2d 840, 845-46 (3d Cir. 1943); but see Baird v. Wagoner Transportation Co., 425 F.2d 407, 410-12 (6th Cir. 1970), many courts, influenced by a regulation promulgated by the Department of Labor and policy statements and decisions of the Department of Transportation (and its predecessor as enforcer of the Motor Carrier Act, the now-defunct Interstate Commerce Commission), would reach the result by a more complicated analysis than we.

The regulation, which codifies a ruling that the Interstate Commerce Commission had made in 1957, states that intrastate transportation from a storage terminal is not interstate commerce "if the shipper has no fixed and persisting transportation intent beyond the terminal storage point at the time of shipment," 29 C.F.R. § 782.7(b)(2) (1971), and that there is no "fixed and persisting intent" if "(i) at the time of shipment there is no specific order being filled for a specific quantity of a given product to be moved through to a specific destination beyond the terminal storage, and (ii) the terminal storage is a distribution point or local marketing facility from which specific amounts of the product are sold or allocated, and (iii) transportation in the furtherance of this distribution within the single State is specifically arranged only after sale or allocation from storage." The applicability of clauses (i) and (iii) to this case is unclear. Some intrastate shipments were arranged after a sale was made, while others occurred pursuant to orders received by Heritage before the wine had been shipped from its place of origin far from Illinois. But it would be odd to conclude that Heritage had "no fixed and persisting transportation intent beyond the terminal storage point at the time of shipment" even with respect to those wines for which it had no order in hand. It intended that they would remain in its warehouse only as long as it took to find a customer, and it compressed the time to find one by basing deliveries to the warehouse on projections of demand calculated from customers' purchase histories.

The Interstate Commerce Commission had offered an alternative elaboration of "fixed and persisting intent" in a 1992 policy statement, ICC Policy Statement, Motor Carrier Interstate Transportation-From Out-of-State Through Warehouses to Points in Same State, 57 Fed. Reg. 19812 (May 8, 1992). The statement lists seven criteria that the Commission thought favored characterizing an intrastate journey as part of interstate commerce and ten more criteria that it believed did not detract from that characterization. So for example the fact that the warehouse was owned by the shipper was said to support characterizing the intrastate journey as part of interstate commerce but the fact that the warehouse was not owned by the shipper was said not to detract from that characterization. Are those two criteria or one? We don't know; and we can't see the relevance of whether the warehouse is owned, leased, shared, or for that matter stolen, given that the object of the statutory exemption is to shift ...


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