Mitchell v. Bekins Van & Storage Company – Oral Argument – February 27, 1957

Media for Mitchell v. Bekins Van & Storage Company

Audio Transcription for Oral Argument – February 26, 1957 in Mitchell v. Bekins Van & Storage Company

del

Earl Warren:

Number 122, James P. Mitchell, Secretary of Labor, versus Bekins Van & Storage Company.

Mr. Smith, you may proceed.

William French Smith:

If the Court please, I believe that when we concluded yesterday afternoon that I had stated that this, in our viewpoint, the issue before the Court was simply what is the meaning of the term “establishment” and that was quite divorced from any issue with respect to bigness or littleness, wholesale or retail, or humanitarian considerations.

It’s just a very simple question.

What does this one term mean?

Our position, of course, as I stated, is that we feel there are many factors which bear upon this question not the least of which is the customary and ordinary business practice organization and function, and we feel that an establishment must contain at least some organizational, functional and business identity and significance.

The position of the petitioner, here, is simply as we see it, nothing more that — than that any separate physical location where work is done constitutes an establishment.

We feel that that is — is an entirely impracticable test and could not realistically be applied.

And I would like, if I may, to go into that in some detail.

Take for example a situation where a company may build a 15-story building in which it does its business.

Another company, instead of having 15 stories, has 15 separate buildings ramps all located on one lot or perhaps gathered above the city.

It doesn’t make much difference.

In each of those 15 buildings, there, is work being done and each one, of course, is a separate physical location.

Under the position of the petitioner here, that would mean that one company, otherwise, identical would have one establishment under the petitioner’s regulations.

The other would have 15 establishments, the sole and only difference being the separate physical location.

Or take another example, we have a welder who has — who does welding work and sparks why, therefore, we want to put him out in a shed behind the main building or in the next lot or down the street of ways.

One employee in one shed, separate physical location, the work being done in that shed could have possibly be said that that employee was employed by that shed within the meaning of Section 13 (a) (2).

Could have possibly be said that that shed has annual dollar volumes of sales or services?

We submit that Congress could never have intended any such result as that or we can complicate them out a little further to say that one employee works 49% of the time in the shed and 51% of the time in the main building.

Does that affect the status of a shed being an establishment or we have more than one employee in that shed, three or four?Does the average amount of time determine whether or not the shed or the main building is the establishment?

Or we could have a series of, let’s say, cold storage warehouses, little places that are located about the city with one employee who goes around and makes daily visits to these various storage warehouses.

In each case, we have a separate physical location and work being done there as each one a separate establishment.

If it is, to what establishment does that employee belong?

We could carry these illustrations on and on, but I think they are very important because they show what the Courts are going to be faced with from hereon in if this is the kind of a test which is established.

In addition to Section 13 (a) (2) itself, as providing guideposts to determine this question, we also have some legislative history.

There’s a good deal of legislative history, of course, that preceded the 1949 amendments.

There is some with respect to this particular problem.

And I would like just, if I may, to read because the quotations can express it a lot better than I can.

In the first place, Senator Holland, who was the sponsor of this amendment in the Senate stated among other things.

Earl Warren:

Where —

William French Smith:

This is on page 24.

Earl Warren:

— are you reading — where are you reading from?

William French Smith:

24 of our brief, Your Honor.

Earl Warren:

Of your brief?

Yes.

William French Smith:

24, respondent’s brief.

The Congress used the terms “retail” and “service establishments” in their customary meaning, in their customary application as they were customarily understood in the various industries of the nation.

That certainly shows that the type of business consideration that I am referring to here was in the minds of Congress when this amendment was passed because I think it would have had to have been.

In addition to that, there are indications that simple physical location is not to be a controlling test in the house manager statement.

There is an excerpt that which appears on the same page of this brief which says, since however, the exemption does apply to any employee employed by an exempt retail or service establishment, it is applicable to employees of an exempt retail or service establishment working in a warehouse, operated by and servicing such establishment exclusively, whether or not the warehouse operation is conducted in the same building as the selling or servicing activities.

Now, I submit that that doesn’t require any context in determining its applicability to this situation.

Even if it did, I don’t believe that the context would, at all, change the basic meaning of that quotation.One other thing, which I think is of interest too, and that is that this Court in the Phillips case, in a footnote, referred to the legislative history, originally that is, where it was proposed of the term “industry” be substituted for the term “establishment” really as vice versa.

The original proposal was that instead of having a retail establishment, we have a retail industry.

That term was deleted and the establishment was substituted forth.

That was pointed out in some length in petitioner’s brief before this Court in the Phillips case and as I say it was referred to by the Court in the — its opinion.

Now, that shows certainly that Congress was thinking about the larger side of the term establishment, not the smaller side.

They were talking about some — something, somewhere between industry and the term establishment.

If Congress had been talking about a building or something as — something as detailed and small, you might say is that, certainly, Congress would have found some other words to express themselves than it was done here.

I think it is also interesting to note that petitioner itself has taken a different position in other cases.

I have already referred to the case of Tobin versus Aibel, where the petitioner took the position of two separate locations constituted at one establishment.

In that case, under their own order, issue of pursuant to the Fair Labor Standards Act, they had used the term that there was coverage where goods were partially or completely manufactured in the same establishment because that where the knitting process is performed.

There we had a one physical location where these hair nets, or whatever they were, were made another where they were distributed.

They were two separate legal identities — entities, I should say.

One was the corporation, the other, partnership.

Petitioner, there, took the position that both of those two together should constitute one establishment.

We agreed.

That’s our position here.

We think that in that case, petitioner would have been in a much stronger position to have urged that the one — one separate physical location constituted the establishment rather than both.

We suggest that the position that they took there should be applied here.

I think it is also —

Hugo L. Black:

May I ask how you — on the quotation you have which has been — again, if you didn’t have the previous sum, what do you say about that — those previous two sum supported in the Government’s brief at 18 and 19 — 19 and 20?

William French Smith:

The reference I think there is, Your Honor, to the question of chain stores.

Hugo L. Black:

Yes.

William French Smith:

And I think — and I, as a matter of fact, I will very readily admit and be most happy, too, that the Congress during the time of the 1949 amendment were being considered, specifically approved the Phillips case.

And I think that this particular quotation here, which comes, first talks about regular chain store systems.

We make no contention that that quotation is erroneous in any way.

In other words, we think that what — what Congress was doing here was to say that what this Court said in Phillips was correct.

In other words, where you do have a regular chain store situation and I understand the chain store situation to be where you have a series of outlets, retail outlets, but then, in addition to that, you have manufacturing, processing, and distribution functions which they’re all funneled, of course, ultimately to those retail outlets.

Hugo L. Black:

Do all chain stores have manufacturing functions?

William French Smith:

Some of them do, yes, Your Honor.

And a number of cases have been before this Court have had.Bakeries, for example, manufacturing and processing and I think — I think, as a matter of general knowledge, I will say, I think that a number of the larger chains do — do have manufacturing plants that actually make the goods that are distributed to the retail outlets.

Hugo L. Black:

What distinction do you draw on this — the information that you’re — between the system at your part and the regular chain store system with warehouses?

William French Smith:

Well, we haven’t made any great point out of the factors.

Our organization is not a chain store.

We don’t believe it is.

We have 19 separate divisions.

Each one of those divisions could be independently owned but each one is self-sustaining.

There is nothing that is done by a central warehouse or a central office system at all that has any function or relation to each one of these 19 divisions.

The 19 divisions constitute a warehousing function in and of themselves.

In other words, everything that is done in connection with the warehousing function is done entirely within that division.

There is nothing which is done, let’s say higher up, which is funneled down into, or otherwise, concerns each of these divisions except this one thing and that it’s —

Felix Frankfurter:

Well, are all of these divisions interrelated so that —

William French Smith:

Their only interrelation, Your Honor, is in top management.

In other words, top management has only one interest in each of these divisions and that is results.

Do they or do — do they not make a profit?

That is the one interest.

There is no other — that — sir?

Felix Frankfurter:

I wonder that if in their activity and what they — in the economic function that they serve, are these 19 interrelated so that what one does is dependent upon what another does?

William French Smith:

No, sir.

Felix Frankfurter:

I don’t mean to say that you compare the economic results of these 19.

Felix Frankfurter:

I’m on the brink of saying, units.

Of course, a single owner compares the output, and the intake, and the profit, et cetera, in the course of individual units.

But as I understand it from what you just said, there is no physical, functional, or economic — economical interrelation —

William French Smith:

That is correct.

Felix Frankfurter:

— among those 19 except that you compare the balance sheet of each.

William French Smith:

That is — that is exactly right, Your Honor, and I might say, if there is a certain amount of competition between them, not competition with respect to areas, but competition among the various managers to see who can come out the best, you might say.

Hugo L. Black:

What they have then in regular chain store systems, do they not?

William French Smith:

I — I don’t believe that they would, Your Honor, in the same sense that we’re talking about it here.

Chains —

Hugo L. Black:

Does the money — does the money from all these divisions, which you call divisions, go into the same treasury?

William French Smith:

Well ultimately, ultimately.

Hugo L. Black:

Do they — are there rules that govern them promulgated by the same head group?

The general rules that they have to obey.

William French Smith:

Well, yes.

I think it’s — it is true that the — that the top management, of course, establish its general policies that would govern each one of the divisions.

Hugo L. Black:

That’s before the chain stores do anything.

William French Smith:

Well, I think Your Honor that a chain store does something more than that.

Hugo L. Black:

Me — well, now that’s it.

What are the distinctions?

William French Smith:

Well, I think a chain store, as I say, engages into some extent, an actual manufacturing and to some extent in purchasing, warehousing, handling and then distributing to each one of the retail outlets.

You see, there is a definite — the difference in function.

As a matter of fact, that was what the Phillips case was all about.

In the Phillips case, there was the distinction made by this Court between the wholesaling function and the retailing function.

This Court said, and in my humble opinion correctly, that a wholesale function does not take on the characteristics of a retail function merely because it is operated by the same business.

That is the heart and soul of Phillips versus Walling, just that.

Hugo L. Black:

How many of these so-called divisions are there?

William French Smith:

19.

Hugo L. Black:

Are — are they all warehouses?

William French Smith:

Well, they’re all — there are number of divisions that are comprised of just one warehouse.

As a matter of fact, it appears from the record and I think you probably generally well known that — that, by and large, the warehouse business is a one-warehouse business.Everything is one in one word.

Hugo L. Black:

What are the other agencies in the division?

Institutions or establishments or —

William French Smith:

That’s all there is.

Hugo L. Black:

Nothing but warehouses?

William French Smith:

That’s right.

And of course, the necessary functions for the selling function, dispatching orders and the usual thing, of course.

Hugo L. Black:

They all run under a general plan from above.

William French Smith:

Yes, that’s true.

In other words, it’s all in one company you see, but —

Hugo L. Black:

But these managers work for that one company.

William French Smith:

That’s right.

Yes, Your Honor.

Hugo L. Black:

And you said they never transfer employees from one to another?

William French Smith:

No, sir.

Well, I can’t be too categorical about that.

They transfer and take the East Los Angeles Division.

There is constant fluidity among the employees within that division.

There is not fluidity between that division and any other division.

Hugo L. Black:

Where are the others here?

William French Smith:

Well, there are 12 divisions in the — in the locale of Los Angeles, immediately in that area.

The remaining seven are throughout the state of California.

Hugo L. Black:

Some distance away.

William French Smith:

Yes, they’re all — they’re all in California.

And you might say, in a sense, that California is divided into 19 areas but there are 12.

And of course, we are taking a different position here from the position that was taken in Phillips.

In Phillips, the position was that the whole company, the whole enterprise was one establishment.

We don’t take that position.

We take the position that each one of these divisions, which is a self-sustaining unit, is an establishment.

And as indicated, we’re not — we’re not covering multi-states, we’re just covering, for example, in the Los Angeles alone, there are 12 divisions.

Each one of which, we — we would concede, of course, that it’s an establishment.

Earl Warren:

What do you mean my “self-sustaining establishment,” each — each one of them is self-sustaining?

William French Smith:

Well, I’m —

Earl Warren:

And when I’m losing money, does — they may have to make it up or do they — you just lose money, doesn’t it?

And it goes in to the — the loss is carried in to the — the operations of the entire company?

William French Smith:

Yes, Your Honor.

I meant operationally —

Earl Warren:

Where is the self-sustaining?

William French Smith:

Well, I meant “operationally self-sustaining.”

That’s the term that was used by — in — in the record itself.

By self-sustaining, I mean, if we have a manager, we have assistant manager, dispatcher, sales manager and all that sort of thing for each division.

And each division operates within the general overall policy limitations of the company itself, on its own.

Now, I suspect —

Earl Warren:

Well lately, it’s changed.

Wouldn’t — wouldn’t one of the managers of one of these supermarkets be in much the same position?

William French Smith:

Well, I suppose that if —

Earl Warren:

I don’t know anything about the business but it’s — it’s a pretty sized full operation and I’m just wondering if it wouldn’t be in pretty much the same position as — as one of your units.

William French Smith:

Well, to some extent, it would be.

I mean in certain respects, it would be.

I suppose that if — that if they — the managers say of a retail store was constantly in the red, they’re probably — something would be done about it, one way or the other, and I suspect the same thing would be true with respect to our situation.

There are certain similarities but I don’t think the similarities have any real bearing upon the question that we have here.

The question that we have here is simply this, what is establishment?

Is it a warehouse or is it this division?

Now, the only way, I submit, that you can determine that question is to look at the relationship between the warehouse and the division.

I — I think it’s probably true to say that there’s no real necessity to go outside the division to even decide this question.

That’s the only issue.

In other words, no issue has been raised except, whether or not, Alameda, or the division of which Alameda is a part is the division.

That’s the question.

And we — and our position simply is that in deciding that question, there has to be some relation.

We don’t even have to say how much in this case, there has to be some relation to some operational and functional business identity.

Some business significance, otherwise, the section couldn’t operate.

Hugo L. Black:

The quotation here are — what does make it relevant definitely, as to whether this is like to change door like if you see this robot having its division as a matter and I think they will have a superintendent of all division whether its maybe half a dozen stores, but each one operates separately as you say with a lot of competition among them.

I — I don’t see yet what’s the difference between your place and one like them.

William French Smith:

Well —

Hugo L. Black:

— and the — the statement here as to this does not exempt well as this in the central offices of chain store system.

William French Smith:

Well, Your Honor, you see, we don’t have a central warehouse or a central office.

In the sense that a chain store does, it is just non-existent.

It isn’t there.

In other words, that the — the chain store warehouse —

Hugo L. Black:

It doesn’t say a central warehouse.

It just says exempt warehouses.

William French Smith:

Well, it is talking about, Your Honor, the situation where there is one warehouse which serves a variety of retail stores.

That’s what that quotation is talking about in referring to a chain store situation.

Now, we don’t have that.

We don’t have it at all.

Everything is contained within the division itself, you see.

Now Phillips, again, Phillips — the Phillips case, and this sort of thing was talking about the Phillips case with a situation where there was a wholesale function.

We don’t have a wholesale function here at all in that sense.

There has been some efforts to compare, let’s say, the — the Alameda warehouse —

Hugo L. Black:

Well, the chain stores don’t have wholesale option to do here except as a — as they have goods that they may distribute.

William French Smith:

Well, that’s it, Your Honor.

That’s what this Court has said, it’s wholesale.

Hugo L. Black:

Having the whole history of this act from its beginning then that they made a difference between one retail store intended to make it throughout and a whole system whether you call them chain warehouses or chain, whatever you call them.

William French Smith:

Yes, that — that is certainly true, Your Honor.

But that is he wasn’t involved in this case.

That, as I say, that goes to the question as to whether or not the tests have been met that there are three tests set out in 13 (a) (2) to determine whether or not there is a retail or service establishment, you see.

Now, whether there is wholesale or retail, it goes to that question, but that question isn’t involved in this case, you see.

Hugo L. Black:

Well, has the center idea in their different treatment of the chain stores you’ve indicated, engage in wholesale or has been the fact that they were a large chain system, necessarily had the things moving from state to state.

And they will get the part of — in the Act that — where — where it was most — where it hit it the strongest.

William French Smith:

Well, of course even with respect to chain store systems, Your Honor, there’s no — there’s no controversy about the fact that retail outlets themselves are exempted as retail or service establishments.

Hugo L. Black:

That’s right.

William French Smith:

That’s right.

Now, we — we are saying here, we’re accepting that.

There’s no question about it.

The whole — it’s — it’s only the wholesaling phase of a retail chain that is — that has been determined under this section to be a separate establishment.

Hugo L. Black:

You mean the phase where they have one place where a lot of things are done by people in distributing goods in a large way from chain — from store to store.

William French Smith:

Exactly, exactly.

And what we are saying here, Your Honor, is just this.

We say, that the East Los Angeles Division, which is comprised of five buildings is the same thing as a retail outlet in a chain store system, if you — if that comparison is valid at all.

Say — in other words, say it is valid, say there — there is an appropriate comparison between respondent’s operation here and the chain store system, then the appropriate and valid comparison would be between a regular retail outlet, a retail store and the East Los Angeles Division because it’s the East Los Angeles Division which is the retailing entity, you see.

In other words, there would be as — accepting that comparison, there would be no difference at all, comparison wise if you had a retail store that consisted of five buildings.

Hugo L. Black:

Or Safeway for instance, I’m — I’m trying to get this, what —

William French Smith:

Yes.

Hugo L. Black:

— what’s your argument is, right?

Boat Safeway for instance had several stores in the locality around here, retail as you go in by doing such as this.

But there was one building where they give you more for — or where I think that they are goods that we’re going to be distributed to these stores.

Would this warehouse in your judgment be subject to their act of a chain store system like Safeway?

William French Smith:

Well, of course, there’s no issue here about being subject to the Act, Your Honor, I don’t believe.

In —

Hugo L. Black:

Well, I —

William French Smith:

— in — in the example you gave.

Hugo L. Black:

I know, but they’ll be exempt, that’s what I’m —

William French Smith:

I — I would say in the example which you gave that — that one warehouse would be a separate establishment because it is servicing seven stores, you see?

No question about that.

But I say — I say this that if you have — if you have a retail store that has five buildings, consist of five buildings, it doesn’t mean it’s what they’re used for, they’re just space, five buildings.

Let’s say the store of canned goods prior to being put on the shelf then the comparison here is complete because that one retailing unit is the retailing entity consisting of five stores.

In our case, it’s same thing.

Our retailing entity is this East Los Angeles Division consisting of five buildings.

Now, we have the burns —

Hugo L. Black:

Suppose this — supposed this — the division was the whole of the City of Washington and there are 15 retail stores, probably more than that.

We have one of these types of chain or Safeway had done.

Hugo L. Black:

One of them, they use more for priority purposes and because he came in and out, would you consider it a part or would you say that Safeway could say that the whole thing is just one retial establishment?

William French Smith:

No, sir, we wouldn’t, definitely not.

Earl Warren:

Mr. Smith, may I ask you this question.

Suppose you had — had no districts at all and all of your warehouses were under one management.

And you had one of them that it was like the Alameda, why, would you be subject to the Act in Alameda?

William French Smith:

Well, again, Your Honor if I may say, there’s no — there’s no problem here of being subject to the Act.

We concede that we’re — we’re subject to the Act.

There’s not — that issue wasn’t involved in this case at all, Your Honor.

Earl Warren:

Well, would you have the same — would you have the —

William French Smith:

We have the same situation, in other words, we’d be —

Earl Warren:

And would your position be the same here, in this case —

William French Smith:

Probably not.

Earl Warren:

— if — if you had known this?

Well now, why not?

That’s the thing — that’s the thing that bothers me.

William French Smith:

Well, yes, why not.

For this reason, we are a retailing enterprise.

As a matter of fact, petitioner concedes that as regulations specifically says that moving and storing of household goods is a retail or service enterprise.

That’s — it’s spelled out that clearly.

Now, being a retail enterprise, we have to have contacts with the public, our — our customer, their clients, you might say.

Well now, where do we have those contacts?

A retail store or a chain store system has its contacts, its customer contacts, its retail customer contacts at the various retail locations, retail store, here, there, as has been mentioned — let’s say 15 in the city of Washington.

Each one of those 15 is a separate establishment as far as we’re concerned.

I think that’s quite clear, no problem.

We have 19 retail stores in that sense.

We have 19 places where we have contacts with the public with our — with our customers, where we sell things, 19 places.

When we advertise, we advertise 19 places throughout the State.

If you have something to store, something to move, call such and such a number, that number is always the division office.

So, what we are saying is that we have 19 places where we have customer contacts where we sell things.

Now, we also have 36 warehouses but we don’t have customer contacts.

William French Smith:

We don’t sell things at those warehouses.

There’s no difference between a situation, for example, where you have a retail store and a storeroom behind it.

And in the storeroom, you keep the things that you’re about to sell.

And as you sell things, you go back to the store and you bring them up.

No question in — on the petitioner’s regulations that the whole thing is one establishment.

No question at all about that.

All right, now what happens?

We expand, let’s say, either our sales, one of our 19 divisions or retail store.

The backroom is not big enough.

We have to have more space.

Well, economic considerations as such that we cannot just push the walls out.

We have to get another building somewhere.

So, we get a building down the street of ways, a block, let’s say.

And we store things there and in the storeroom and as things are sold, we go back to the storeroom and to the building down the street, bring them back, put them on the shelves and sell them.

That situation, petitioner does not contend and constitutes two — two establishments.

They say that is one, the Burns case, a Federal District Court case held that.

And as I understand it, both of the trial level and in the — in their brief here, petitioner concedes that under those circumstances there is just one establishment.

Now, the only difference between that situation and this situation is that instead of having a backroom and one subsidiary backroom down the street, we have four.

That is the only difference.

We don’t have pails, bottles and cans.

We don’t have bedroom sets.

And therefore, — dining room sets and that sort of things was not too surprising that we would need four — four or five times as much space as a — as a — an organization would — that handles cans and bottles.

Now, there’s no difference in those situations as far as I can see.

Earl Warren:

Have any divisions where — where you have warehouses in more than one city?

William French Smith:

Warehouses in more than one city —

Earl Warren:

Comprising one district or one division?

William French Smith:

Well, there is none in — in the Los Angeles area, Your Honor.

I’m not too sure about other areas in the State.

I know that there are 12 — there are 12 in — the East Los Angeles Division is the only one that has five warehouses.

In most cases, there’s just one warehouse per division, just one location, you see.

William French Smith:

Now, it may — it may have 15 floors on it, I don’t know.

And a matter of fact, in the East — the Los Angeles Division, we would be tickled to death if we could have the way things they have now developed in downtown Los Angeles, have all of these warehouses piled one on top of the other in the same location.

Now, if that were case, petitioner wouldn’t permit and contend that there was more one establishment.

But because we haven’t been able to do that for economic reasons, that cost of land and that sort of thing, because we haven’t been able to push out the walls and to get our storeroom space to furnish this one retail outlet, not a series of them, not 15 or 8, or 1, because we haven’t been able to have enough storeroom to handle that.

We’ve had to go elsewhere and get it physically removed.

The only difference — in other words, the space at Alameda is nothing more than a storeroom physically removed an extension of space, nothing more than that.

Hugo L. Black:

Physically removed from the four other places?

William French Smith:

Physically removed from the four other places.

Hugo L. Black:

I suppose Safeway had four places located precisely in those (Inaudible) and behind one of them, and a few feet of it, they had a warehouse.

What would you say about that?

William French Smith:

Well, it would depend upon what the warehouse did, Your Honor.

If the warehouse just served that one retail outlet —

Hugo L. Black:

You mean if it served all of those four, four stores?

William French Smith:

Well, you — you see they are.

Hugo L. Black:

— four stores but you were saying that —

William French Smith:

Well, that’s — that’s the difference, Your Honor.

Hugo L. Black:

But you were saying — that — that’s what I have thought I was saying —

William French Smith:

I think that’s the problem.

Hugo L. Black:

— I want to get — I want to get to my mind what’s your argument is if the — if there were four retail stores, you would say there were four different retail outlets.

William French Smith:

And four different establishments.

Hugo L. Black:

And four different establishments?

William French Smith:

Yes.

Hugo L. Black:

But you have four retail stores or the establishment, whatever they are, I gathered from what you said about the regulation to the department.

William French Smith:

No, Your Honor —

Hugo L. Black:

Each one — in each one, a retail place where you let customers come in?

William French Smith:

No, sir, no, sir.

That is the difference.

Hugo L. Black:

How many — how many do the customers have, just one?

William French Smith:

Just one.

Hugo L. Black:

Which one?

William French Smith:

The one on Figueroa.

That is the — that is the major difference in this case.

Hugo L. Black:

That’s — that’s the argument you make.

William French Smith:

Yes.

Well, it’s — it’s not — it’s an argument.

I mean if their decision are facts.

Hugo L. Black:

I mean that’s your — that’s your contention.

William French Smith:

Well, they should see the facts.

Hugo L. Black:

And that’s — that’s the distinction, the basic distinction between here and the Safeway.

William French Smith:

Oh yes, oh yes.

Hugo L. Black:

Yes.

William French Smith:

In other words, the — the analogy here, it wouldn’t be between our five warehouses and five Safeway stores because in each of one of the five Safeway stores, there is customer contact.

They sell things in each one of those five places.

We don’t sell things in each one of those five places.

We only sell things at one.

The other four are simply used to hold things until we’re ready to use them.

That’s the difference.

Earl Warren:

How far apart Mr. Smith are the various warehouses in this particular division?

William French Smith:

They vary from one in three quarters miles which is the Alameda from Figueroa to — I think it’s two and three quarters, three miles or something like that, roughly that.

That, however, is based upon strictly historical considerations.

In other words, at one time and — and this — this again is where I think petitioner has — has perhaps confused something.

At one time, each one of these five was the retail outlet for the simple reason that at that time, 50 years ago, and in some cases more recently, these were residential areas.

When that — when that warehouse was first put up, it was the only warehouse the company has and it served that area.

But since that time, you see, it is no longer a residential area.

It is commercial business and everything else.

But we don’t serve that commercial or business area now because it has changed and because we are principally engaged in a business of moving and storing household goods that the location of that warehouse has entirely lost its significance.

It doesn’t serve that area anymore.

It doesn’t serve any area.

It is strictly a space where we keep things, everything else is handled at the division office.

And it’s as simple as that.

William French Smith:

As I —

Earl Warren:

Let me ask this Mr. Smith, is there no factor of convenience to the public there as to where these warehouses are situated or convenience for your business when they’re situated a mile and a half or two miles and a half apart in a — in a rather extended area?

Or is it just because those are the places you could buy land the cheapest and — and you couldn’t — you couldn’t buy land that’s cheaper around your original warehouse and so you’ve gone to these other places, is that the only factor or — or is it the factor also that — that you’re carrying it to the — to the public so that they don’t have so far to transport their goods if they live in one part of the city and not — not so far as they live in another?

William French Smith:

Your Honor, the only inconvenience is to us.

We —

Earl Warren:

Oh, I’m — I’m not talking about your inconvenience.

I’m talking about the principle on which you establish these — these warehouses in different parts of — of the city of Los Angeles, is — is there a question of convenience to the public and yourselves doing business in addition to the fact of just expanding where you can more easily expand one unit?

William French Smith:

Your Honor, these warehouses are where they are because of historical reasons.

In other words, we could, let’s say build a tremendous building at Figueroa if we wanted to and we would like it better that way.

But they are where they because they have always been there and it’s not economical to tear them down or sell them and build another building, you see.

But there is no — there is no convenience to the public because the public doesn’t deal through that warehouse.

As far as the public is concerned, it wouldn’t make any difference whether that warehouse is where it is or at Figueroa all in one building you see, because the public doesn’t deal with that building.

Earl Warren:

Well, don’t they bring their goods there?

William French Smith:

No.

Earl Warren:

Store them there?

William French Smith:

No.

Earl Warren:

At the warehouse?

William French Smith:

Well, what I should say is this, if they have — if they have goods to be picked up or to be moved, we will send out a truck naturally to pick them up or move them.

Now, if we have a warehouse ourselves, and after we picked them up, of course, the public isn’t concerned where they go.

In some cases, they may be.

They may want to know what warehouse — the particular their goods are being stored at.

But we may, if we have space and probably would, if we had space in that warehouse which was nearest to wherever this was, put them in that warehouse merely because it was a quicker place to go to, you see.

If there was not any space in that warehouse, we might put them any one of the other four or five warehouses, you see.

But the — the customer situation is nothing more than this.

The customer calls in, in most cases on and almost with a very high percentage of the cases to Figueroa.

That’s where we want them to call in.

They have something to store or move.

We send the truck out.

We pick it up.

Now, what happens after that in the great majority of the cases, the customer has nothing to do with?

William French Smith:

The customer isn’t there in the matter of convenience to the customer at all.

The only convenience to the customer is getting his goods picked up, what happens —

Felix Frankfurter:

Is there anything in the record with bearing on the Chief Justice’s question indicating that the customer designates in what warehouse?

William French Smith:

Yes, there is, Your Honor.

There is — there is some testimony from one of the respondent’s witnesses to the effect that on occasion, a customer will designate what warehouse he wants his goods to go into.

Felix Frankfurter:

All right.

William French Smith:

And as —

Felix Frankfurter:

Any quantitative testimony — any testimony giving some quantitative light on this subject?

William French Smith:

No, Your Honor, as a matter fact, I — I — as I recall the testimony was that happens relatively and frequently, but it can happen.

In fact — apparently, it does happen and as a matter of fact, the — the record also shows that the warehouse receipt will show what building it’s in, you see.

But the record also shows, and the fact is, that if all of these buildings were in one building, we could operate our business as well or better which is the finding of facts.

Is there any difference in the charge with the customer depending upon the relationship that this basic business to the particular warehouse which you storage had been?

William French Smith:

No, sir, not at all.

William J. Brennan, Jr.:

Mr. — Mr. Smith, did you say that originally these were separate establishments?

Was that because they’ve been in independent ownerships or other ownerships at one time?

William French Smith:

No, I didn’t mean that, Your Honor.

What I meant was this, when — when this company first started in 1898, they had one building, it was the Alameda building.

And that was all they had, you see.

And at that time, it was in the residential area of Los Angeles and it served that area because that was their business, moving and storing of household goods, you see.

But then as time went on, the residents — the residential area already changed and became a heavily commercial area, you see.

And when it became a commercial area, the building no longer had any function because there wasn’t anybody for it to function on, you might say.

In other words, there was no longer any — any customers in that area that that this warehouse could serve.

And that was a gradual process and it happened more or less with the other four warehouses in the division.

There are still are some warehouses that are in substantial — substantially residential areas.

William J. Brennan, Jr.:

Was each of these other four purposely located where it was, the gold and the source of the business which now had left the Alameda area?

William French Smith:

At the time, yes.

At the time that the building was either built or acquired, it was for the purpose of serving a then growing residential area.

William J. Brennan, Jr.:

Now, wouldn’t that indicate that in each instance as it was established, it was established as a separate establishment?

William French Smith:

Well, as it was — as it was established, I think probably, Your Honor, that’s right.

William J. Brennan, Jr.:

Well now, when did — if that’s the fact, when did it lose its identity for the purposes of the statute that it has a separate establishment?

William French Smith:

It’s — it’s probably a little difficult to say exactly when that happened but the — the East Los Angeles Division has been in its present form for about 20 years.

And the testimony is and the findings in the record are that this change took place with respect to the whole East Los Angeles Division.

Their business still was primarily handling and storing of household goods, and still is, you see.

But because of the change in the overall nature of the division, the fact that there were good many commercial customers, moving is a loss, as that sort of thing which incidentally is retail.

Because of that change, more fluidity was necessary in this area.

It was broken down, you see, about 20 years ago into the East and West Los Angeles areas.

William J. Brennan, Jr.:

Well, was there ever a time when each — although, in the same ownership that these other four was operated as an independent operation?

William French Smith:

Not for the last 20 years, Your Honor.

William J. Brennan, Jr.:

Well, prior to that time, there was?

William French Smith:

Prior to that time, I just don’t know and the record doesn’t reveal it.

I would suspect prior to that time, the record does show this much.

It shows that — that the warehouse as when they were first built or acquired were following the residential area, as you see.

William O. Douglas:

Well, let’s say we’re originally separate establishments, could a mere change in the method by which they were operated or managed or as to their bookkeeping or that the central record keeping with an Alameda and such, could those changes in operations of themselves change the character of each of them, so it’s —

William French Smith:

Well, Your Honor —

William O. Douglas:

–no longer a separate establishment?

William French Smith:

— so far as I know, there had been no change in the manner in which the East Los Angeles Division has been carried on since it has been a division.

It’s been the same.

In other words, everything has been done through Figueroa.

The whole point is even all these warehouses may have followed out and there were some convenience to the company as far as picking goods up and transporting them to a near warehouse, the fact still remains that the retailing outlet, the contact with customers and everything else, bookkeeping and so on, was still carried on to Figueroa.

William O. Douglas:

Well, I — I had the impression.

Did I misunderstand you that each of these new outlets or warehouses was located where it was to put that warehouse where the business was since the business in the sense of residential business had moved away from the Alameda areas?

William French Smith:

Well yes, Your Honor, but there’s a difference between that situation.

I probably shouldn’t have speculated to withstand.I didn’t respect to whether or not at that time they were or not directly having customer contact.

I assume when Alameda was put up, that was the case.

But there is — there is this difference.

There’s a difference between having a building out here where we could take things, too, once we have our customer contacts with Figueroa and actually having a customer contact situation or a retail outlet at that warehouse.

Now, there has never been a retail outlet there while that warehouse has been in the East Los Angeles Division, you see.

It is just been nothing more than a physical location.

Now, I — I suspect that in some cases, it’s convenient to have the warehouse where it is, some cases, it’s not.

But in any case, we would be tickled to death to have everything just in one building, one place, one unit, and so on.

William French Smith:

I think one thing I wanted to point out was the fact that the — the petitioner in this case, in the Phillips case, the one case that they are — they are relying upon took the position very strongly that the policy of the– and — and I’m quoting from a statement in their brief which appears in one form or another or rather frequently, “The policy of the Act as a whole strongly supports the accepted governmental and business meaning of the words.”

Now, that was their position, their contention with respect to what an establishment meant and that was the position which was adopted by this Court in the Phillips case.

And — look at this Court in the Phillips case specifically stated Congress used the word establishment as it is normally used in business and in the Government-as meaning a distinct physical place of business.

Now, it’s that phrase which I think has caused the trouble, but that phrase has had its genesis in the regulations of the petitioner itself where they have stated to use their term physically separated unit or a branch in distinguishing a situation between the overall chain store system and its retail outlet.

Thank you.

Felix Frankfurter:

Before you sit down, may I ask you one question?

William French Smith:

Yes, sir.

Felix Frankfurter:

You and Ms. Margolin, is that enough to indicate that one can take or take measure as to then whether this is or isn’t an establishment that’s clear, isn’t it?

William French Smith:

I think it is.

Felix Frankfurter:

And so I want to ask you, what weight is one to attach to the determination, the finding by the wages in our division that this is “an establishment” although the term establishment is not a term of art, as I understand it.

William French Smith:

Well —

Felix Frankfurter:

Now, if this were — if the Act — if the wages now as that and the kind of machinery for enforcement that it was originally — that was originally proposed, namely, the determination is akin to determinations by Labor Board.

I have one — I have relatively easy found it myself.

Now, that isn’t true but what weight am I to attach to the fact that these people who deal with this kind of business day — day after day and all the complexity and complexities of the problem has found that it is “an establishment.”

William French Smith:

Well, Your Honor, I’d like to answer that this way.

I have gone to some extent into the question of the positions they’ve taken in the past cases with respect to what that word means.

The one case they say that controls this case is the Phillips case, Phillips versus Walling.

Felix Frankfurter:

Well, I can read that as well they do.

William French Smith:

Yes, but in that — in that particular case, the one position that they were taking, of course, was that Government and business practice should control.

That’s what we’re saying here.

I say also that they have taken a position different from the one that they are taking here in other cases.

And furthermore, I say, that I don’t think that the fact that the — the petitioner is taking a position with respect to the meaning of this word here has any great controlling weight for the simple reason that we have a naked word to define that there is not much context and issue.

It is a word —

Felix Frankfurter:

I didn’t mean to imply an abstract definition by them.

I don’t care for that either because I don’t think that’s the way to be disposed of these matters.

What I want to know is whether in the multiplicity on the instances that company for that governmental agents in attributing to it or contentious duty to apply the law with intelligence not with presupposition as to what they would like to have under the law.

What weight am I to give to the practicality they have mentioned, the practicality of administration by that?

William French Smith:

Well, I — I want to answer the question and I’d like to answer it this way if I —

Felix Frankfurter:

I’m sure you do.

William French Smith:

— if I may, Mr. Justice Frankfurter.

William French Smith:

I have no way of knowing what — what considerations that the department has —

Felix Frankfurter:

I don’t mean in this case.

Has there been —

William French Smith:

No.

Well now, that’s what I’m getting to.

In other — in other words, the only thing I know about — the only thing that — the guides that I have is what they have done in other cases.

That’s the only thing I have.

And I say that in the other cases, they have taken in one case at least, their contrary position and in the very case that they rely upon here is being controlling.

They — their basic position —

Felix Frankfurter:

Yes.

William French Smith:

— there is the basic position which I am taking here.

Now, that is — those are the only guides I can go by, you see.

Felix Frankfurter:

You mean in the Phillips case?

William French Smith:

The Phillips case.

Yes, Your Honor.

Felix Frankfurter:

Well, as I say, that — that requires us to read the statute we’ve taken and see what it means in the light of the fact that some of us did — didn’t agree with what was said in that opinion.

William French Smith:

Well, my — my problem of course is, Your Honor, it — it’s perhaps to some extent that certain amount of arbitrariness may be involved in defining this term but —

Felix Frankfurter:

Well —

William French Smith:

— we don’t think so.

We just — we think that — that we are entitled to some extent at least to place some weight upon positions that the petitioner has taken another situation in the case.

Felix Frankfurter:

Differentiations in this realm abound to appear to just examine the two immediate neighbors arbitrarily.

But if there has been a consistent administrative practice exercising or enforcing the judgment of those who deal with this matter, that’s very wages.

William French Smith:

Yes.

Felix Frankfurter:

Although the wages in our division hasn’t, for me, and wasn’t intended to have the function that the Labor Board has in its realm.

William French Smith:

Well, I think that’s too and I’d also like to point out, Your Honor, that there is nothing in the regulations themselves which come any closer to determining this question than the Phillips case does.

So, we’re perfectly willing to stand on the positions that the department has taken.

Felix Frankfurter:

Have you dealt with this phase with my question in your brief?

I don’t mean to specifically that this problem, namely, the extent to which practical instances in the application of the statute swing in the view of wages now at division — division.

This case, within their prior, more or less continuing or weight in practice, have you dealt with that?

William French Smith:

Well, Your Honor, I have —

Felix Frankfurter:

Whatever it is, you say there is no such practice.

William French Smith:

I say there’s a practice to the contrary.

Felix Frankfurter:

All right.

William French Smith:

And as a matter of fact, I deal with that in the brief —

Felix Frankfurter:

All right.

William French Smith:

— but I don’t deal with the question that the mere fact that they have taken the position what weight that is.

Thank you.

Earl Warren:

Ms. Margolin.

Bessie Margolin:

I — I don’t think that the record supports the repeated statement by a counsel that the Bekins Company would be delighted if they could have had all of these based in — in one place.

And this will answer, I think, the questions put by Mr. Justice Brennan and I think and — and place it in — in the Chief Justice’s questions.

These various buildings and there is evidence in — in the record showing how they acquired these various buildings on the record at page 126.

It started out in 1898 when they constructed the Alameda warehouse.

And they operated Alameda, apparently, as the single warehouse until along in 1947, that’s almost 10 years later or nine years later.

Then they found that the residential section was moving and so they — they constructed a warehouse further out in the residential areas several miles away.

That was — that was the Figueroa warehouse.

Then the residential areas start moving from Figueroa.

It’s obvious that they want to hold on to the residential market, as their downtown market was becoming more commercial, they won’t moved out and — and into the residential areas to hold on to the residential market.

Then some 20 years later, they purchased a warehouse.

They purchased some property and built the Crenshaw warehouse, also in a residential area.

That’s 20 years after the — the third one, the second one.

Then in 1931, that’s several years later, they purchased the Wilshire warehouse.

They purchased that from an independent concern that was operating it.

And then in 1942, they purchased another one and now that’s the five warehouses in this area, all purchased years apart and in different areas and obviously to — to follow the market.

They didn’t want all of this — obviously didn’t want all the storage downtown.

They want to get out into the residential area because, admittedly, their main business has been the household storage.

However, although their main business is the household storage, they have held on to these downtown storage warehouses and they have developed a quite extensive commercial warehouse in the U.S. —

William J. Brennan, Jr.:

Well now, Ms. Margolin, is there anything to indicate that the same pattern of following residential development explains the organization of these other divisions in Los Angeles?

Bessie Margolin:

There’s nothing in the record to show why they — how they organized these divisions.

Appear — it appears to be a purely internal management reasons as —

William J. Brennan, Jr.:

Well, what I mean is — is there — as the location, for example, of where the 12 divisions of Los Angeles?

Bessie Margolin:

I thought they were just the two, East Los Angeles and West Los Angeles.

There are some I think in the surrounding area.

William J. Brennan, Jr.:

Oh, I see.

Well, is there anything to show the history of how in the other division, if that’s what it is, —

Bessie Margolin:

No.

William J. Brennan, Jr.:

— the warehouses were established in purchasing?

Bessie Margolin:

No, there is nothing in the record to show why.

I think judging — you can glean from the record that it might be as — as esoterically reason is simply that they have an experienced manager who can handle five warehouses.

Whereas somewhere else where they’re going into a new area, they may — maybe more difficult to get started and so they’ll put one warehouse in the division.

But it seems to be a purely internal management proposition, nothing to do with the purpose of this exemption.

Felix Frankfurter:

Ms. Margolin, not questioning at all the interesting history that you point out, are you in agreeing with Mr. Smith as to the, relatively as I gather from him, — is you — the relatively minor relation from the point of view of customer to the store — customer to warehouse, the customer’s explicit utilization or designation of the warehouse near this —

Bessie Margolin:

No, I do not agree with that.

Felix Frankfurter:

You do not?

Bessie Margolin:

I think they — they have — the record does show that the customer can call any warehouse they want but it has to be there.

Felix Frankfurter:

Because I’m not —

Bessie Margolin:

And it also shows that the tendency is to put storage in the — in the warehouse which is most convenient to him.

Now, the Alameda warehouse is in the telephone directory.

In fact, it’s in East Los Angeles division if not in 1956 telephone directory.

Felix Frankfurter:

What I want to know —

Bessie Margolin:

Alameda is listed as the Alameda District and you can telephone the Alameda warehouse.

They advertised all of these locations.

Felix Frankfurter:

But I didn’t understand Mr. Smith to deny that the customer could, what I asked him and what I asked you is whether in fact a customer goes to one warehouse rather than another, the way my wife goes to the Safeway one rather than another.

Bessie Margolin:

No, a warehouse business just isn’t operated that way.

Now, you call in and — and ask — you’ll call in and ask them to call for your storage and you don’t go in and purchase anything —

Felix Frankfurter:

No, no —

Bessie Margolin:

— of all the selling being done from Figueroa is nonsense.

You’re not purchasing something from Figueroa.

You call in and want just your goods stored.

Or you arrange the commercial user, the industrial user arranges to have his —

Felix Frankfurter:

But do the customers — because the record show that the customers call the warehouse nearest to their residence?

Bessie Margolin:

Well —

Felix Frankfurter:

That’s —

Bessie Margolin:

— no, the evidence doesn’t show really where they call.

They usually group their calls to some other warehouses because they prefer to handle them centrally.

And then they allocated the calling to where it’s most —

Felix Frankfurter:

That’s large in the determination of the concern itself.

Bessie Margolin:

And I’d like to — I think I can illustrate a — a point very clearly and it’s one the Chief Justice gave us by just to turn your example a little bit.

I think it — it confirms that the point I think you were making, you asked — suppose that — there were no divisions and that all of the warehouses were operated as one division.

Would Alameda then be a secret establishment?

Take the converse of that situation, suppose Alameda was the only warehouse that was being operated by — by Bekins, there’s no question at all, no question at all that Alameda would not be exempt because it does not meet the requirements, the percentage requirements.

Now, should this company because it has been able to expand and prosper and acquire 36 more warehouses, is that a reason for saying that Alameda should be exempt, when it would plainly not be exempt if it were the Alameda warehouse being operated by Bekins?

Felix Frankfurter:

That’s an abstract way of seeing the problem, that all depends on a lot of other circumstances.

Bessie Margolin:

Well, it depends on — but I’m — I’m showing the reason why this is a place of business and why it is practical and reasonable to regard it as a separate establishment.

Felix Frankfurter:

But you can’t start out by saying Alameda would be exempt if it stood along, therefore, it must be exempt if it doesn’t stand alone —

Bessie Margolin:

Well —

Felix Frankfurter:

— and you call that good reasoning.

Bessie Margolin:

— this — this warehouse operates like over a thousand above the general merchandizing warehouses which are not exempt because they do not do 75% retail activities.

You can go to this place of business, you can go to Alameda, you can look at the type of storage and — and they have records as to the type of storage down there.

The fact that they don’t assemble them in a central place doesn’t mean they don’t have the records because they have to give — under the California Uniform Warehouse Act, they have to give warehouse receipts as to just where a storage is located.

So they have those records and they know just what kind of storage is that — where — at Alameda and you can go there and look at the type of storage they’re handling there.

And you can see that it operates just as this other single — singly owned general merchandizing warehouses operate.

It’s a — it’s a place where that type of business is carried on.

Now, Mr. Smith mentioned that the thing that — it’s the business significance is the important thing not the location.

We agree with him but we say that this has significance, has business significance by reason of the type a function carried on there as well as by reason of its location.

Now, very little has been said virtually nothing about — by Mr. Smith about the purpose of this exemption.

And I think that to get in perspective the reason for the — for the conclusion that ordinarily and that — only practical solution for this problem is the distinct physical unit.

We have to — to come back to the purpose of this exemption.

And at the time of the enactment of the original act and this was reaffirmed emphatically at the time of 1949 amendments, what Congress had basically in mind was the small local retailer that they put the — kind of grocery store, the retailer shop, the drug store, the department store and the filling station, the barber shop, things of that type.

They repeatedly — the restaurants, cafeterias, repeatedly, they said that’s what they had in mind, the small local retail.

Now, it happens that some local retailers aren’t small.

Bessie Margolin:

But basically, what they had in mind was the small local retailer.

Now, that is the reason you look at what is like a small local retail establishment.

Is this a group of five warehouses with immense amount of storage base located two miles apart?

Is that anything like the — the kind of grocery store or the repair — shoe repair shop?

But if you have to treat them as a — the –the division as a unit while your argument breaks down, isn’t it?

What you admit there exempt —

Bessie Margolin:

Well, we say that they should not treat — that you cannot treat the division as a unit because it’s completely inconsistent with the purpose of the exemption.

But the small corner of grocery store argument doesn’t add anything to your position.

Bessie Margolin:

Well, I’m — I’m explaining why the term establishment was judged to mean as the — the local — the physical place of business.

The — the division really doesn’t mean anything.

They could say that the whole — the whole 36 warehouses of all the warehouses they have all over the country was one division.

It — it has no meaning whatsoever so far as the purpose of this exemption is concerned.

As a matter of fact, all of the warehouses in Los Angeles were operated as one division before 1938.

They just —

Harold Burton:

But if all part of the East were in one building no matter if this one will attach to the same side of his — then be example, is it not?

Bessie Margolin:

No, not necessarily.

And I meant to — I — I was intending to get to that point because we have — we take the position.

The problem here is where you have a — an — a business that’s extensively engaged in other than retail function.

The problem that’s presented is how to apply the purpose of this exemption.

Is there any practical means of breaking down their activities and — and applying it where it was intended to apply but not to apply it to all of — all — all these activities which were clearly intended to be covered and which are covered when carried on by competitors.

Now, even if it were in a single building and courts have held this and we take this position, if it said resemble — if it is as a — factually, physically segregable in the same building even, you would take it as a separate unit.

For example, we have taken automobile dealers in places where they sell automobile and repair parts and — and they have a great deal of over-the-counter sales and then they also supply bus companies, the truckers and do a large wholesale business.

We have permitted them if — if they segregate — if it’s segregated and there’s a petition in the same building, we have said you can take advantage of the retailer establishment exemption for that retail part of the business, if it’s identifiable and — and can be segregated and you don’t have to include the whole thing and see if it’s 75%.

Felix Frankfurter:

It would have to be functionally segregable too, wouldn’t it?

Bessie Margolin:

That’s right.

But physical segregation gives you the most practical means of seeing that it — that the functions are segregated.

In other words, you look for some practical way to breakdown these various activities.

Now, Bekins, probably does more non-retail, commercial storage than any other storage warehouse in the country.

And if — if it were doing that as — as a separate business, it would certainly be covered in the singly operated general merchandise warehouses are covered by this Act.

They are not exempt.

Bessie Margolin:

Bekins does probably more of that type of business than any one of the singly operated and owned warehouses in the country.

Hugo L. Black:

How does that happen?

Bessie Margolin:

Because they — they are such a large outlet.

And they have — they have branched into the commercial business.

Now, they are in a position to get the benefit of taking some of this commercial storage to some of their retail warehouses and we admit that the Act gives them that loophole.

But when you can’t find a warehouse and identify it, it’s being like a general merchandise warehouse which is covered.

Certainly, that is the practical basis for holding that that is a separate establishment.

Felix Frankfurter:

Would you be kind enough to answer more specifically Justice Burton’s question?

Suppose you have these warehouses all in one huge modern village —

Bessie Margolin:

Yes.

Felix Frankfurter:

— will you sketch the segregable nature —

Bessie Margolin:

Well, I’m thinking —

Felix Frankfurter:

— to make them separate —

Bessie Margolin:

It could —

Felix Frankfurter:

— on this very —

Bessie Margolin:

Suppose —

Felix Frankfurter:

— on this record except they’re all under one — all —

Bessie Margolin:

Well, I’ll give you one example as — and I think this is — this isn’t in the record but I think as a practical matter, this is true.

You have abounded custom storage is done on the basis of designating certain floors of certain building.

Now, if they had certain floors and that this distinction, too, the commercial storage is on a different charge than the household storage.

Household storage is usually — is as charged on a poundage basis and a commercial storage is on the cubic of square foot and it’s usually in much larger areas.

Suppose they — they would have a tendency to put the same kinds of goods in the same — in — in a particular location or on particular floor.

Now, the physical location — the physical distinction is important because you need — you need some boundaries for the — to apply the percentages.

But if they had a floor where they use a great deal with the commercial storage, I think you could say that at particular section or if they had one-half of the building used for commercial storage.

I think you could say that portion —

Felix Frankfurter:

Didn’t I follow you entirely that the mere fact that it’s one physical structure doesn’t make it one establishment in the sense of non-segregable business?

Bessie Margolin:

That’s right.

Felix Frankfurter:

But I do not see why, by the same process of reasoning, the fact that you haven’t got one physical location makes them separate establishments.

Bessie Margolin:

Well, I think that that was a practical solution which this Court reached after a great thought and thinking in terms of the type of establishment Congress said it had in mind —

Felix Frankfurter:

Well, that doesn’t get —

Bessie Margolin:

— it goes to the individual unit where you had a multiunit of business.

Felix Frankfurter:

Ms. — Ms. Margolin, this business of the small grocery store, it doesn’t get me very far because Congress had means of dealing with the small problem in a very effective way.

It didn’t do that.

It didn’t say business is having more than six employees or eight or ten, the problem that you and I well know.

Bessie Margolin:

Congress all —

Felix Frankfurter:

It could have dealt —

Bessie Margolin:

— frequently has other problems in mind and doesn’t deal with a particular problem and what seems to be —

Felix Frankfurter:

I know but —

Bessie Margolin:

— the most effective way —

Felix Frankfurter:

— but — but when I have a word by the establishment —

Bessie Margolin:

— so during that in its relations —

Felix Frankfurter:

When I have a word by the establishment, it doesn’t equal a small grocery store.

Bessie Margolin:

Well, it certainly is — is not — doesn’t operate perfectly in that fashion.

But on the whole, and in general, and what we said in our bulletin, in general, ordinarily, the separate physical unit is the most practical basis for applying.

And this — this Court, I think in the Phillips case, accepted that, not as the perfect solution but as the most practical —

Felix Frankfurter:

I don’t think you can say as to that.

That wasn’t — there are other factors in that case.

Bessie Margolin:

Well, then what?

I’ll say, too, there are also other factors.

Felix Frankfurter:

Yes.

Bessie Margolin:

But that is certainly one factor.

We have — we have never — the counsel has represented our position as relying solely on geographical location.

That isn’t true.

Because the fact of the matter is that in this type of varied function enterprise, there are other factors that identify a unit as an establishment.

And it’s almost always so then he might dream up a — a hypothetical case were it isn’t so and they may be actual cases where it isn’t so.

But ordinarily, it is also a functional unit and the fact that bookkeeping is kept one way.

The bookkeeping unit is certainly not the place of business unit.

A company can keep book stuff and all sorts of ways and for a variety of purposes.

It keeps — presents the books for one warehouse where it has one warehouse in the division.

There’s no reason why — why it can’t.

Bessie Margolin:

It says it doesn’t do so because it’s more economical.

It did so when — when Alameda was a single establishment then it should require others establishments, of course, it was more economical as it is in — in other chain organizations to keep the books together.

But its basic to this Act that if — if an employer wants to claim an exemption, the burden is on him to keep the records to show that he’s entitled to it just as a taxpayer who wants to claim exemptions.

He must keep the records to show he is entitled to the exemption.

And if — if the fact that they — maybe a little more expensive to keep those records and troublesome, there’s certainly no reason for saying that — that this is making them breakdown their whole business if we treat this on a unit basis.

Felix Frankfurter:

Ms. Margolin can I ask Mr. Smith one question in order — if possible to avoid the difficulties I have of deciding this kind of a case?

And I’m now asking the reverse question relevant to your side of it, namely, that every predisposition I have would welcome a quantitative text such as on the whole of presumptively you suggest as equal unit.

And my difficulty is that Congress hasn’t quite said that to put in mind.

I ask Mr. Smith what extent I’m to be bound by your determination by the determination of your division.

How much can I rest on that?

As I said, I’ll ask you the reverse question about the complementary question.

Congress said — saw fit not to do, but to my point of view, it would be desired, the determination of these touchy, suckle, illusive questions by a board that would be the determination in which would be final on the courts unless it seems outrageous or unwarranted in reason.

Congress hasn’t done that.

Congress has left the determination to courts.

And in this case, Congress has seem fit to make these issues to a considerably extent to put in mind the judicial questions.

And these are more or less questions, more or less judgment.

And we’ve got two courts holding that this was an establishment.

Now, what weight am I to attach if any — do that mode of determination which Congress has seem fit to choose as the mode of determination?

Bessie Margolin:

Well, my first answer to that is that I don’t think you have the problem now.

Felix Frankfurter:

Pardon me?

Bessie Margolin:

My first answer to it is I don’t think you have the problem now because Congress, I think, has approved the administrators.

Felix Frankfurter:

Have I heard about that before?

Bessie Margolin:

Well, we have in our brief–

Felix Frankfurter:

All right.

Bessie Margolin:

— the Section 16 (c) argument.

We’ve quoted the regulation which says whether —

Felix Frankfurter:

You mean Congress has adopted your reference?

Bessie Margolin:

I — I think Congress has in affect adopted it and moreover — in relation to this specific exemption, Congress said that the administrators — they knew they were opening an area in some aspects of it which was doubtful and a great weight should be attached to the administrator.

But I think the — under Section 16 (c), in — in addition to the explicit legislative history saying, we’re adopting the physical distinct unit and there are some that even talks of it as a single building, Senator — colloquy between Senator George and Senator Pepper.

But the Section 16 (c) of the 1949 amendments adopted as a law, the administrative interpretation then in effect and not in consistent with the terms of the amendments.

Bessie Margolin:

Then in effect and there’s always almost consistently, always in the beginning of the Act and these are quoted in the appendix to our brief.

The administrator said, “Well, there are several units, ordinarily, the — the physical branch or unit, the physically distinct branch or unit will be considered as separate establishment.”

And that was in — in effect at the time of the adoption of the 1949 amendments and we think that the effect of that was to make that — make that the law.

There’s no suggestion anywhere in the legislative history in respondent’s and part to — to nothing, suggesting that there should be any change in the administrative interpretation as to what is meant by the establishment.

The only changes were what it meant by retail as distinguished from a non-retail sale of service.

But there was no suggestion that there should be any change in the administrative interpretation of what the establishment —

Felix Frankfurter:

Well, if you’re — if you’re right about that which I will welcome then I don’t have to bother about anything else.

You, as I understand, that you are right that the administratively — that clear determination that this situation is quoted within the establishment.

Bessie Margolin:

I think so Your Honor.

Felix Frankfurter:

And that Congress said, with his eyes wide open, that proponents of the bill said, “We are aware of this thing.

Are we supposed to be aware of it?

And they adopt it.

That’s the end of the matter.”

And I don’t have to bother about Phillips or anything else.

Bessie Margolin:

I think — I think you’ll find enough there to reach that —

Could you give me the page of the brief that imposes determination in your brief?

Bessie Margolin:

The — the courts regulations?

Yes.

Bessie Margolin:

Its appendix B, Mr. Justice Harlan, on page 35.

The question has been raised as to the scope of the term establishment.

This is the part of 1949 amendments.

Well, just on the face of it, it says in the ordinary case.

It doesn’t say ithis —

Bessie Margolin:

Well —

— without exemption —

Bessie Margolin:

— we — we always try to protect ourselves so we don’t get into utterly impractical situations when he —

Still, if you want unless to interpret it, it at least be rather flexible, isn’t it?

Bessie Margolin:

Well, I think this is pretty clear as it — the Government always tries to be a little cautious and not to state everything completely, flatly.

But on the reverse side of that, the Court of Appeals here shouldn’t or hasn’t held that no case can a — or in every case there’s a multiple unit you regard as a single unit.

Bessie Margolin:

Yes, —

They simply — this is a question of facts.

Bessie Margolin:

— I think the Congress can undertake — undertakes to — the basis on which it undertakes to — to distinguish it doesn’t place it in any extraordinary filings.

There’s — it’s no reason for distinguishing it except it doesn’t accept our view of it.

They — they repudiated this interpretation.

I would like to call Mr. Justice Frankfurter’s attention to — particularly, to some of the legislative history which is cited in our brief but along with other citations.

And I think you’ll find a little more specifically, Congress has — specifically recognizing the single —

Felix Frankfurter:

You’ve got all those reference in your brief, Ms. Margolin, have you?

Bessie Margolin:

This particular thing — in this particular page is not holding.

Felix Frankfurter:

Would you mind giving it, please?

Bessie Margolin:

And it’s in the colloquy between Senator Pepper and Senator George in 95 congressional records on page 12579.

Felix Frankfurter:

125?

Bessie Margolin:

12579.

Felix Frankfurter:

— 79.

Under that.

thank you very much.

Earl Warren:

Thank you, Ms. Margolin.