Anthony Collins v. Heritage Wine Cellars Ltd.

In the
United States Court of Appeals
For the Seventh Circuit
No. 09-1181
A NTHONY C OLLINS, et al.,
Plaintiffs-Appellants,
v.
H ERITAGE W INE C ELLARS, L TD. and S TEVEN H IRSCH,
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.
A RGUED S EPTEMBER 24, 2009—D ECIDED D ECEMBER 21, 2009
Before P OSNER, M ANION, and T INDER, Circuit Judges.
P OSNER, Circuit Judge. Collins and his fellow plain-
tiffs—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 plain-
2 No. 09-1181
tiffs 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 em-
ployees are employed by Heritage, unlike the plaintiffs.
But Heritage controls the wine and directs its move-
ments 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 never-
theless 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 signifi-
cance 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 “prop-
erty . . . [is] transported by [the] motor carrier between
a place in a State and a place in another State,” 49 U.S.C.
No. 09-1181 3
§§ 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 trans-
portation 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 trans-
port 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 6704 No. 09-1181
(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 dis-
tributor’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 ware-
house 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 cumula-
tively 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.
No. 09-1181 5
2008). They substitute for uninterrupted interstate ship-
ments 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 con-
gressional intention of regulating a purely intrastate
shipment merely because of its effect on interstate com-
merce. 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-con-
trolled journey to the retail outlet is of no greater conse-
quence 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 cus-
tomer 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,
6 No. 09-1181
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 destina-
tion 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 Com-
merce 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
No. 09-1181 7
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 per-
sisting 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 destina-
tion 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 fur-
therance 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 in-
tended 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 ware-
house on projections of demand calculated from cus-
tomers’ 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
8 No. 09-1181
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 intra-
state 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 ware-
house 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 regulation of truckers’ hours from
the Labor Department to the Department of Trans-
portation if the truckers participate in interstate trans-
portation, and what has that to do with where title to
the warehouse resides? And no weighting of the criteria
is suggested.
At least four of the criteria listed, however, make
sense, and they are sufficient to enable us to dispose of
this case without getting deeper into the regulation and
the policy statement. The four are that (1) the shipper,
although it doesn’t have to have lined up its ultimate
customers when the product arrives at the warehouse,
“bases its determination of the total volume to be
shipped through the warehouse on projections of
customer demand that have some factual basis”; (2) “no
processing or substantial product modification of sub-
stance occurs at the warehouse”; (3) “while in the ware-
No. 09-1181 9
house, the merchandise is subject to the shipper’s control
and direction as to the subsequent transportation”; and
(4) “the shipper or consignee must bear the ultimate
payment for transportation charges even if the ware-
house or distribution center directly pays the transporta-
tion charges to the carrier” (this goes to the shipper’s
responsibility for the original interstate journey). If
these conditions are satisfied, the intrastate leg at the
end of the shipment should be deemed part of an inter-
state shipment.
Antiquarians will note at least a faint resemblance
between our suggested approach and the “original pack-
age” doctrine of Low v. Austin, 80 U.S. (13 Wall.) 29 (1872),
overruled by Michelin Tire Corp. v. Wages, 423 U.S. 276(1976). Article I, § 10, cl. 2 of the Constitution forbids a
state to tax imports or exports, and the Supreme Court
had held in Low that until an imported good was
removed from the package in which it had been shipped
to the United States it could not be taxed. Removal
from the original package, which the Court thought
ended the importation phase of the good’s journey from
foreign origin to ultimate U.S. destination, would corre-
spond in the present case to processing wine at
Heritage’s warehouse. Both events are interruptions
usable to demarcate foreign (or in this case foreign and
interstate) commerce from domestic (in this case intra-
state) commerce. The particular demarcation in Low was
rejected in Michelin, which held that a state ad valorem
property tax (a tax based on the assessed value of prop-
erty) that did not discriminate against imported
goods—the tax applied to goods inventoried in the
10 No. 09-1181
state regardless of their origin—did not offend against
the policy of the import-export clause.
The Court had earlier rejected the use of the “original
package” doctrine to decide whether shipments are in
interstate commerce, Sonneborn Bros. v. Cureton, 262 U.S.
506 (1923), because, as in Michelin, the challenged state
tax did not discriminate against goods from out of state.
But in our case, as in other cases in which the question
is not whether a transaction burdens or otherwise
affects interstate commerce but whether it is “in”
interstate commerce, there is no alternative to deciding
at what point a good should no longer be said to have
been transported from a point in one state to a point in
another. A point must be chosen at which the good may
be said to “come to rest”—to have ceased to be “in practi-
cal continuity with a larger interstate journey,” Packard v.
Pittsburgh Transportation Co., 418 F.3d 246, 258 (3d Cir.
2005)—to have left the “stream of interstate [or foreign]
commerce,” United States v. Yellow Cab Co., 332 U.S. 218,
228-29 (1947), overruled on other grounds by Copperweld
Corp. v. Independence Tube Corp., 467 U.S. 752 (1984); see
also Western Oil Refining Co. v. Lipscomb, 244 U.S. 346, 349
(1917)—so that its further journey is outside the scope
of the Motor Carrier Act. The point must be chosen,
however inescapably arbitrary the process of choice, in
order to decide the case, because before that point is
reached the journey is subject to the Motor Carrier Act
and after it is not.
Attempting to base decision on seventeen unweighted
technical criteria to be applied by generalist judges who
No. 09-1181 11
are not told what the relevance of any of the criteria is
but have to figure it out for themselves is unlikely to
improve the prospects for objectively deciding whether
a particular intrastate shipment should be deemed to be
“in commerce.” The multicriteria approach is likely to
condemn the judges to wander forlornly in the
untracked wilderness named “the totality of the circum-
stances,” a phrase found in many of the cases involving
the Motor Carrier Act’s exemption for interstate transpor-
tation. The present case can be decided by using an ap-
proach that is simpler to apply than the multicriteria test
yet maintains consistency with most of the cases and
official texts. Other cases may require a more complex
approach, and if so, fine; this case does not.
We end with the plaintiffs’ back-up argument for rever-
sal. Between 2005 and 2008 the Motor Carrier Act
limited the definition of “motor carriers” to carriers that
provide transportation by (so far as bears on this case) a
truck that weighs at least 10,001 pounds. 49 U.S.C.
§ 31132(1)(A). Some of the plaintiffs occasionally drove
lighter trucks, and they argue that when they were
doing that they were covered by the Fair Labor
Standards Act. But to divide jurisdiction in this way
would be contrary to the Supreme Court’s sensible
decision in Morris v. McComb, 332 U.S. 422 (1947),
which held that the employer of a driver who may some-
times be required to deliver goods in interstate com-
merce is subject to the Motor Carrier Act even if most of
his driving is intrastate. Cf. Levinson v. Spector Motor
Service, supra; 29 C.F.R. § 782.2(b)(3). Dividing juris-
diction over the same drivers, with the result that their
12 No. 09-1181
employer would be regulated under the Motor Carrier
Act when they were driving the big trucks and under
the Fair Labor Standards Act when they were driving
trucks that might weigh only a pound less, would require
burdensome record-keeping, create confusion, and give
rise to mistakes and disputes.
A FFIRMED.
12-21-09