author: HAROLD H. GREENE, District Judge.

text:
    [ANONYMOUS], Plaintiff, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant.
    Civ. A. No. 85-2622.
    United States District Court, District of Columbia.
    Aug. 22, 1985.

      Geoffrey J. Vitt, Julie W. Davis, Caplin & Drysdale, Washington, D.C., for plaintiff.
    Ann S. DuRoss, Asst. U.S. Atty., Washington, D.C., for defendant; Ronald R. Glancz, Asst. Gen. Counsel, Ingeborg G. Chaly, Sr. Atty., Federal Deposit Ins. Corp., Washington, D.C., of counsel.
   MEMORANDUM

HAROLD H. GREENE, District Judge.

Plaintiff __has served as an officer or director of several small banks __ Defendant Federal Deposit Insurance Corporation (FDIC) is charged with monitoring the performance of federally insured banks and is empowered to detect, prevent, and remedy violations of federal banking laws and unsafe banking practices. See 12 U.S.C. § 1818(e); First National Bank of Scotia v. United States, 530 F.Supp. 162, 166 (D.D.C.1982). On August 5, 1985, the FDIC served notice on plaintiff that, in the wake of its investigation of __ Bank, of which he had been an officer and director, it was initiating an administrative proceeding pursuant to 12 U.S.C. § 1818(e)(1) and (2) to remove him from office and to prohibit him from further participation in the affairs of other federally insured banks. On that same day, the FDIC notified plaintiff that, pursuant to its authority under 12 U.S.C. § 1818(e)(4) it had issued an interim order immediately suspending plaintiff from office and prohibiting him from participating in any way in the affairs of any federally insured bank pending the outcome of the administrative removal proceedings.

Plaintiff promptly brought suit in this Court seeking a temporary restraining order and/or a stay of the FDIC’s interim suspension order (see 12 U.S.C. § 1818(f)) and a declaratory judgment that the FDIC proscription from participation in the affairs of any federally insured bank was overbroad and beyond the FDIC’s statutory authority. The FDIC has opposed plaintiff’s motions, has moved to transfer venue, and has moved for reconsideration of the Court’s previous order sealing these proceedings. The Court heard oral argument on all of the motions on August 16, 1985, and they are now ripe for decision.

I

The FDIC has moved to transfer this case pursuant to 28 U.S.C. § 1404(a) to _, which is the district in which the home office of the_Bank is located and is therefore the alternative district in which this suit may be brought under 12 U.S.C. § 1818(f). In support of its motion the FDIC argues that at least two of the bank examiners whose testimony might prove useful are located in that district and that other examiners and documents are located in Memphis, Tennessee, which is somewhat closer to that court than to Washington, D.C.

The courts have repeatedly held, however, that unless the balance of conveniences greatly favors the alternative forum, the plaintiffs forum choice should ordinarily be afforded considerable respect. See, e.g., NAACP v. Levi, 418 F.Supp. 1109, 1113-14 (D.D.C.1976); see generally, 15 Wright, Miller & Cooper, Federal Practice and Procedure: Civil § 3848 (1976 and Supp.). Here, the relevant statute explicitly establishes the District of Columbia as an appropriate forum for hearing section 1818(f) stay proceedings. See note 6, supra. The FDIC maintains its main offices here. Although the distance from Memphis to the alternative district may be somewhat less than from Memphis to Washington, air transportation from Memphis to the District can hardly be considered more difficult than transportation to the alternative district. And finally, neither the parties nor the Court contemplate lengthy proceedings in this action. In such circumstances, the Court sees no basis whatever for concluding that the Western District of_would be a significantly more convenient forum for the parties and witnesses and for transferring the case there in derogation of plaintiffs forum choice. Accordingly, the motion to transfer venue will be denied.

II

The FDIC has also requested the Court to reconsider its previous order (per Johnson, J.), granting plaintiffs motion to seal the entire proceeding in this case. In support of this request, the FDIC notes that there is a strong presumption that judicial proceedings should be open to the public unless closure is essential to the interests of justice. See In re Application of National Broadcasting Co. (United States v. Jenrette), 653 F.2d 609, 612-13 (D.C.Cir.1981); 28 C.F.R. § 50.9. At the same time, the FDIC seeks to maintain under seal all copies of the relevant FDIC bank examiners’ reports, which have traditionally been recognized to be confidential and privileged. See Bank of America National Trust & Savings Ass’n v. Douglas, 105 F.2d 100, 104 (D.C.Cir.1939); Denny v. Carey, 78 F.R.D. 370, 373 (E.D.Pa.1978).

The federal courts have recognized that the sealing of court records may be justified when a litigant’s privacy interest outweighs the public’s right to know, and that the balancing of these important interests is a matter committed to the trial court’s sound discretion. See In Re Knoxville News-Sentinel Co., Inc., 723 F.2d 470, 474 (6th Cir.1983). In this case the allegation in plaintiff’s papers, which must be accepted as true for the purpose of deciding this motion, is that disclosure of the pending FDIC administrative proceeding and enforcement of the interim suspension order will irreparably destroy his reputation in the__banking community. Indeed, it is precisely to prevent the injury that would accrue from the publicity attendant to the disclosure of the pending FDIC administrative removal proceedings that plaintiff has initiated the instant suit.

The FDIC’s proposed modification of the sealing order, which would seal the bank examiners’ reports but unseal all other aspects of these proceedings, would frustrate this purpose. The release of some, but not all, of the information brought forward in this proceeding would necessarily create a significant possibility that the publicly available information would create a distorted, misleading impression of the allegations and evidence involved. It would also achieve the perverse result that plaintiff’s § 1818(f) stay application to prevent injury to his reputation would trigger precisely the sort of adverse publicity he has filed this suit to prevent. Finally, and most importantly, unsealing these proceedings might not only harm plaintiff’s reputation but also undermine public confidence in the soundness of the banks which he participates in managing. Such results seem neither necessary nor just.

For these reasons, the Court will deny at this time the motion for reconsideration of its order placing this entire proceeding under seal. However, if the circumstances of this litigation change the balance between plaintiffs privacy interest and the public’s right to know, the Court may reconsider its decision, either upon motion or sua sponte.

Ill

This brings us, finally, to the merits of plaintiff’s motions. In support of his motion for a stay under 12 U.S.C. § 1818(f) of the FDIC’s interim suspension order, plaintiff argues that he clearly satisfies the traditional criteria for preliminary injunctive relief, which are presumably applicable to § 1818(f) stay proceedings. The FDIC counters that he satisfies none of them.

A.

It must be noted at the outset that a proper evaluation of plaintiff’s stay request is rendered considerably more difficult not only by the expedited nature of these proceedings, but also by the vagueness of the relevant statutory language, which the FDIC has done nothing to make clearer. The § 1818(e)(4) interim suspension provision pursuant to which the FDIC issued its order is analogous in a sense to a preventive detention statute: it constrains an individual’s liberty pendente lite on the grounds that the individual poses such a severe threat to the public safety that the extraordinary remedy of a pretrial restraint is justified. Yet unlike such a statute, which typically provides a detailed list of factors to be considered by the court in determining whether pretrial detention is warranted, the interim suspension provision of 12 U.S.C. § 1818(e)(4) vests the FDIC (or other federal banking agency) with extremely broad discretion to suspend bank officials pending the disposition of administrative removal proceedings against them. The statute provides only that:

In respect to any director or officer of an insured bank ... the appropriate banking agency may, if it deems it necessary for the protection of the bank or the interests of its depositors, by written notice to such effect served upon such ... person, suspend him from office or prohibit him from further participation in any manner in the conduct or affairs of the bank ... pending the completion of the administrative [removal] process ____

12 U.S.C. § 1818(e)(4) (emphasis added).

As far as the Court has been able to determine, the FDIC has taken no steps to provide either its own employees or federal courts reviewing interim suspension orders pursuant to 12 U.S.C. § 1818(f) with any guidance concerning the use of the agency’s discretion under § 1818(e)(4). The FDIC has not published regulations or other guidelines setting out standards or criteria to be employed in determining when an interim suspension order is necessary or appropriate. Nor is the suspension order in this case very illuminating: it merely lists a few allegations generally parrotting the statutory language, without in any way explaining the basis for the FDIC’s determination that a § 1818(e)(4) interim suspension is warranted in this case. There is no comparison of this case to other cases or explanation of how and why the FDIC arrived at its decision to issue the interim suspension order (as distinguished from an order under subsection (e)(2) which contemplates removal of the officer after the completion of the administrative proceedings).

One of the most elementary principles of judicial review of discretionary agency action is that the agency must provide a statement of reasons that is sufficiently detailed to permit a reviewing court to determine whether that discretion was exercised properly. See Motor Vehicle Manufacturers Association v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29, 103 S.Ct. 2856, 2866-67, 77 L.Ed.2d 443; International Ladies’ Garment Union v. Donovan, 722 F.2d 795, 814 (D.C.Cir. 1983). It will not do to insist, as the FDIC does, that the statute simply commits interim stay decisions to the agency’s unfettered discretion, which is exercised on the basis of the FDIC’s banking expertise. If that were so, judicial review under 12 U.S.C. § 1818(f) would be little more than a formalistic exercise in which the reviewing court would simply determine that the FDIC had properly performed the ministerial tasks of issuing the required notices and then defer to the FDIC’s discretionary decision to issue the interim suspension order. The Court cannot conclude that Congress enacted § 1818(f), explicitly providing for prompt judicial review of interim suspension orders, to require only the illusion of judicial review and protection of a plaintiff’s due process rights. Congress cannot be presumed to have engaged in a futile gesture in enacting the § 1818(f) stay provision. Cf. United States v. Republic Steel Corp., 362 U.S. 482, 492, 80 S.Ct. 884, 890, 4 L.Ed.2d 903 (1960); Wilderness Society v. Morton, 479 F.2d 842, 877 (D.C.Cir. 1973). Rather, Congress must have intended that the court in a § 1818(f) stay proceeding conduct a meaningful inquiry into the merits of the FDIC’s exercise of its discretion.

The Court intends to fulfill that congressional intent. As noted (and as will become apparent in the discussion, infra), its task has been made significantly more difficult by the FDIC’s failure to provide any basis for determining how and why it exercised its discretion in issuing the § 1818(e)(4) interim suspension order.

B.

Turning to the merits of plaintiff’s stay request, the first requirement in establishing the appropriateness of preliminary injunctive relief is that the plaintiff demonstrate a substantial likelihood of success on the merits. See Virginia Petroleum Jobbers Ass’n v. Federal Power Commission, 259 F.2d 921, 925 (D.C.Cir.1958). In support of his contention that he is likely to prevail on the merits in the pending FDIC administrative proceeding, plaintiff asserts two factual arguments and one legal argument. His first factual argument, which is supported by uncontradicted affidavits, is that the FDIC’s charge that plaintiff improperly approved a $250,000 _Bank loan to an entity known as _in violation of state banking law, must fail because he neither knew nor approved of the loan before it was made and opposed it after he learned it had been made. His second factual argument is that other allegedly improper loans, which the FDIC examiners forced the Bank to write off as losses, in fact were not dangerous to the bank’s financial health and have been substantially repaid, with interest. Finally, plaintiff contends that the FDIC’s notice of intent to conduct administrative proceedings to prevent him from serving as an officer or director of any federally insured bank exceeds its authority under § 1818(e), which speaks of removal proceedings with respect to specific, individual banks.

The FDIC has not proferred specific facts to dispute plaintiff’s factual contentions, although it has noted that the alleged repayments of the loans classified as “losses” may reflect nothing more than the improper shifting of assets, which can be determined during the bank’s upcoming quarterly examination. The FDIC has argued, however, that the alleged “loss” loan repayments are legally irrelevant, and that the broad notice of intent to remove is permissible under the FDIC’s enabling legislation and reflects consistent FDIC practice. Accordingly, the FDIC contends that, even if plaintiff is correct about the AMI loan and the other alleged loan repayments — and it does not concede this — he is unlikely to prevail on the merits and therefore is not entitled to relief.

After carefully considering the submissions of the parties, the Court concludes that, although it is a close case, plaintiff has demonstrated a sufficient probability of success on the merits to satisfy that prerequisite for preliminary injunctive relief. The FDIC is correct that the alleged repayment of the “loss” loans is not dispositive, since the initial classification was presumably made on the basis of objective standards for evaluating the safety of loans and since subsequent partial repayment of an insufficiently secured or collaterialized loan does not vitiate the initial determination that the loan was imprudent when made and that the bank has therefore suffered a significant injury. Cf. United States v. Parke, Davis & Co., 362 U.S. 29, 80 S.Ct. 503, 4 L.Ed.2d 505 (1960). It is also true, however, that the statute grants to the federal banking agency involved broad discretion to determine both the appropriateness of issuing a suspension or removal order and the scope of any such order.

If plaintiff is able to sustain his as yet uncontradicted factual claims that the FDIC is incorrect about the loan and that the other loans have been substantially repaid, the agency might well conclude either that disciplinary action is unwarranted, or that the disciplinary action should be much more limited than the broad ban on participation in banking affairs contemplated by the FDIC notices of removal and interim suspension order. That being so, the Court feels compelled to conclude on the basis of the presently available evidence that plaintiff has demonstrated a sufficient probability of success on the merits to satisfy the prerequisite for injunctive relief.

C.

The second prerequisite for preliminary injunctive relief is a demonstration of a likelihood of irreparable injury. Virginia Petroleum Jobbers Ass’n, 259 F.2d at 925. Plaintiff claims that, unless the FDIC’s interim suspension order is stayed, compliance with that order will require him to forego any bank management activities during the anticipated nine to twelve month duration of the administrative proceedings, and that the result of this unsolicited sabbatical will be the destruction of his professional reputation and the end of a lifelong banking career. In addition to this generalized allegation of irreparable harm, plaintiff claims that he is currently involved in critical and delicate negotiations on behalf of two small banks in precarious financial circumstances, and that compliance with the interim suspension order will result in significant harm to the banks and, concomitantly, to his professional reputation.

The FDIC observes, correctly, that reputational injury generally is not considered to be an irreparable injury sufficient to satisfy the requirement for injunctive relief. See, e.g., Sampson v. Murray, 415 U.S. 61, 89-92, 94 S.Ct. 937, 952-954, 39 L.Ed.2d 166 (1974). It is also obvious that the question whether compliance with the interim suspension order will result in serious harm to the two small banks is more properly considered in the context of the public interest considerations involved in this case.

Nevertheless, the Court concludes that the specific probability of severe and permanent injury to plaintiff’s reputation, and the concomitant destruction of his career in his chosen profession of banking, constitutes an irreparable injury sufficient to satisfy the requirement for injunctive relief. The potential reputational injury here is more permanent and severe than that in Sampson, supra. Moreover, it is hard to imagine what- other sort of injury Congress had in mind in enacting the § 1818(f) stay provision, which presumably was intended to provide affected bank executives with a means of preventing injury to their careers from unwarranted interim suspension orders. The Court therefore concludes that plaintiff’s allegation of irreparable injury is sufficient to satisfy that requirement under the statute.

D.

The third issue to be considered in assessing the appropriateness of preliminary injunctive relief is whether the requested relief will prejudice any of the other parties to the litigation. See Virginia Petroleum Jobbers Ass’n, supra. The FDIC does not contend, nor could it, that a grant of the requested stay would significantly prejudice it in the pending administrative removal proceeding, which is entirely separate from this one. To be sure, the FDIC does contend that the issuance of a stay would prejudice it in that it would prevent the agency from fulfilling its statutory mission of protecting bank depositors and investors from dangerous banking practices. However, such prejudice is not prejudicial to the FDIC’s administrative litigation position, or to the agency itself, and is more properly considered in the evaluation of the public interest implications of the requested stay, to which the Court now turns.

E.

The final, and most crucial, factor to be assessed in determining whether injunctive relief is warranted is whether such relief would be consistent with the public interest. Id. As noted previously, see supra Part III-C, plaintiff claims that compliance with the interim suspension order will prevent him from managing, and completing sensitive negotiations on behalf of, two banks for whose affairs he is primarily responsible, with the result that depositors and shareholders in those banks may consequently suffer significant financial losses. Thus, he claims that the FDIC’s interim suspension order will, paradoxically, cause precisely the sort of injury to the public interest that it is presumably intended to prevent.

Nothing in the FDIC’s interim suspension order, or in its subsequent submissions to the Court, indicates to what extent, if any, the FDIC has considered the possible effect of its order on the interests of depositors and shareholders in these two banks. The interim suspension order broadly bars plaintiff from participation in the affairs of any federally insured bank. It does not indicate that the FDIC has weighed the relative dangers of permitting an individual alleged to have participated in a pattern of unsafe and unsound banking practices to continue to manage banks in delicate financial circumstances against those of leaving such banks without an experienced, knowledgeable manager familiar with their affairs. It may be that the FDIC believes that plaintiff’s record is so egregious that the danger of permitting him to participate in any way in the affairs of any bank far outweighs any benefits of familiarity or expertise he could provide. But on this record it appears more likely that the FDIC simply failed to weigh the potential costs and benefits of permitting plaintiff to continue to participate in the affairs of the various banks with which he is involved pending the outcome of the administrative proceedings against him. Accordingly, the Court has no evident basis for determining whether the FDIC has properly exercised its expert discretion to protect the public interest in maintaining the security and solvency of the banks with which plaintiff is involved.

F.

As the preceding analysis indicates, the FDIC’s failure to provide an explanation of the factors that led it to order plaintiff’s interim suspension from participation in the affairs of federally insured banks pending the outcome of the administrative proceedings against him necessarily precludes the Court from determining even with minimum certainty where the equitable balance lies in this case. In such circumstances, the most appropriate course is a remand to the FDIC to permit it either to explain more fully the rationale for its decision, or even to reconsider the appropriateness of its order in the light of plaintiff’s allegations concerning the critical situation at the two banks in whose affairs he is so deeply involved. This approach properly defers to the FDIC’s acknowledged expertise in banking matters, see Mid America Bancorporation, Inc. v. Board of Governors, 523 F.Supp. 568, 576 (D.Minn. 1980), and it will also achieve the salutary purpose of providing the Court with a reasoned explanation of the FDIC’s decision that will permit the Court to undertake a meaningful review of that decision. See supra Part III-A.

The remaining question is how properly to achieve such a remand. The Court concludes that the purposes of a remand will best be served if the FDIC is permitted to reconsider its interim suspension decision in its entirety, so that it has the maximum possible freedom to tailor precisely any interim suspension order necessary to protect any of the banks with which plaintiff is affiliated or the interests of their depositors. Accordingly, finding that the available evidence warrants at least a temporary stay of the FDIC’s interim suspension order, the Court will issue a temporary restraining order pursuant to 12 U.S.C. § 1818(f) suspending the FDIC’s interim suspension order for ten days. However, nothing in the TRO shall be construed to limit the FDIC’s authority to issue within that period interim suspension orders suspending plaintiff from participation in the affairs of specified banks based upon the FDIC’s determination that such an interim suspension order is necessary to protect those banks or their depositors. Any such new interim suspension orders will, of course, be subject to the stay provisions of § 1818(f), and the Court will retain jurisdiction to review any such orders pursuant to those provisions.

IV

There remains the question whether, as plaintiff contends, the FDIC’s interim suspension order prohibiting plaintiff from participating in the affairs of any federally insured bank exceeds the FDIC’s authority under the statute. It appears that the Court’s issuance of the temporary restraining order described above may well result in the abandonment of the original interim suspension order and in the issuance of new orders involving individual banks, thereby rendering the question of the propriety of the original order moot. Accordingly, rather than issuing what might amount to an advisory opinion, the Court will instead defer resolution of this question to the time when (if ever) it becomes necessary to decide it.

V

The Court has considered defendant’s motions to transfer venue and to modify the Order sealing these proceedings, and plaintiff’s motions for a temporary restraining order and a declaratory judgment. For the reasons stated above, defendant's motions will be denied; plaintiff’s motion for a temporary restraining order will be granted, with the modifications noted by the Court; and the Court will defer decision on plaintiff’s motion for a declaratory judgment. An appropriate Order will be issued simultaneously with this memorandum.

      . To protect confidentiality, see infra Part II, the names of banks and individuals have been redacted.

      . Plaintiff has stated that he served as president of the _ Bank from __ 1981 to _ 1982, when he resigned due to the press of other commitments, and as a director of the bank from March 1981 to_ 1985, when he resigned because the bank had been sold on that date to a new owner. Plaintiff's Affidavit at-1, 7.

      . Sections 1818(e)(1) and (2) of Title 12 of the U.S. Code provide as follows:
      Whenever, in the opinion of the appropriate Federal banking agency, any director or officer of an insured bank has committed any violation of law, rule, or regulation or of a cease-and-desist order which has become final, or has engaged or participated in any unsafe or unsound practice in connection with the bank, or has committed or engaged in any act, omission, or practice which constitutes a breach of his fiduciary duty as such director or officer, and the agency determines that the bank has suffered or will probably suffer substantial financial loss or other damage or that the interests of its depositors could be seriously prejudiced by reason of such violation or practice or breach of fiduciary duty or that the director or officer has received financial gain by reason of such violation or practice or breach of fiduciary duty, and that such violation or practice or breach of fiduciary duty is one involving personal dishonesty on the part of such director or officer, or one which demonstrates a willful or continuing disregard for the safety or soundness of the bank, the agency may serve upon such director or officer a written notice of its intention to remove him from office.
      12 U.S.C. § 1818(e)(1).
      Whenever, in the opinion of the appropriate Federal banking agency, any director or officer of an insured bank, by conduct or practice with respect to another insured bank or other business institution which resulted in substantial financial loss or other damage, has evidenced either his personal dishonesty or a willful or continuing disregard for its safety and soundness, and, in addition, has evidenced his unfitness to continue as a director or officer and, whenever, in the opinion of the appropriate Federal banking agency, any other person participating in the conduct of the affairs of an insured bank, by conduct or practice with respect to such bank or other insured bank or other business institution which resulted in substantial financial loss or other damage, has evidenced either his personal dishonesty or a willful or continuing disregard for its safety and soundness, and, in addition, has evidenced his unfitness to participate in the conduct of the affairs of such insured bank, the agency may serve upon such director, officer, or other person a written notice of its intention to remove him from office or to prohibit his further participation in any manner in the conduct of the affairs of the bank.
      12 U.S.C. § 1818(e)(2).

      . Section 1818(e)(4) of Title 12, U.S. Code, provides that:
      In respect to any director or officer of an insured bank or any other person referred to in paragraph (1), (2), or (3) of this subsection, the appropriate Federal banking agency may, if it deems it necessary for the protection of the bank or the interests of its depositors, by written notice to such effect served upon such director, officer, or other person, suspend him from office or prohibit him from further participation in any manner in the conduct of the affairs of the bank. Such suspension or prohibition shall become effective upon service of such notice and, unless stayed by a court in proceedings authorized by subsection (f) of this section, shall remain in effect pending the completion of the administrative proceedings pursuant to the notice served under paragraph (1), (2), or (3) of this subsection and until such time as the agency shall dismiss the charges specified in such notice, or, if an order of removal or prohibition is issued against the director or officer or other person, until the effective date of any such order. Copies of any such notice shall also be served upon the bank of which he is a director or officer or in the conduct of whose affairs he has participated.

      . Plaintiff received the FDIC’s notice of interim suspension on August 9, 1985 and filed this lawsuit on August 15, well within the statutory ten-day time limit. See 12 U.S.C. § 1818(e)(4), (f).

      . Section 1818© provides that:
      Within ten days after any director, officer, or other person has been suspended from office and/or prohibited from participation in the conduct of the affairs of an insured bank under subsection (e)(4) of this section, such director, officer, or other person may apply to the United States district court for the judicial district in which the home office of the bank is located, or the United States District Court for the District of Columbia, for a stay of such suspension and/or prohibition pending the completion of the administrative proceedings pursuant to the notice served upon such director, officer, or other person under subsection (e)(1), (e)(2), or (e)(3) of this section, and such court shall have jurisdiction to stay such suspension and/or prohibition.

      . Plaintiff's Affidavit at 8-9.

      . To establish that preliminary injunctive relief is appropriate, plaintiff must show: (1) that he enjoys a substantial likelihood of success on the merits; (2) that absent such relief he will suffer irreparable injury; (3) that the requested relief will not substantially harm other parties to the litigation; and (4) that the public interest favors the granting of the requested relief. See Virginia Petroleum Jobbers Ass'n v. Federal Power Commission, 259 F.2d 921, 925 (D.C.Cir.1958). See also, Foundation on Economic Trends v. Heckler, 756 F.2d 143, 151 (D.C.Cir.1985).

      . Neither of the parties has located a § 1818(f) stay case in which the court discussed the applicable standard for granting a stay under that statute. Nor has the Court found such a decision. The parties appear to agree, however, that Virginia Petroleum Jobbers supplies the appropriate test for determining whether the statutory stay remedy is appropriate. The Court agrees, subject to the caveats noted in Section III-C, infra.

      . See, e.g., 18 U.S.C. § 3142(e), (f), (g).

      . In response to the Court’s inquiry at oral argument, neither counsel for plaintiff nor counsel for the FDIC could identify any interpretive regulations or guidelines published by the agency. Nor have the Court’s own researches uncovered such guidelines.

      . It should be noted that the question of when the FDIC should and does seek to issue interim suspension orders is not one committed to the agency’s unreviewable prosecutorial discretion. The § 1818(f) stay procedure clearly contemplates judicial scrutiny of the interim suspension order to determine if its imposition is appropriate.

      . It would obviously be helpful if the FDIC undertook the promulgation of some standards against which it takes steps, so as to provide reviewing courts with a more adequate basis for determining whether the agency has properly exercised its discretion in ordering an interim suspension.

      . Plaintiff contends that all but $37,000 of the $250,000 loan has been repaid; that the so-called _ loan has been repaid in full, with interest; and that the_Bank has since March 1985 collected approximately $950,-000 of the_the FDIC required the bank to write off. Plaintiffs Affidavit at 7-8.

      . See supra notes 3 and 4. As explained infra, the Court has concluded that it need not decide this issue, and it accordingly will not elaborate thereon.

      . Section 1818(e)(5) of Title 12, U.S. Code, provides that if an appropriate federal banking agency "shall find that any of the grounds specified in such notice [of intent to remove] have been established, the agency may issue such orders of suspension or removal from office, or prohibition from participation in the conduct of the affairs of the bank, as it may deem appropriate. " 12 U.S.C. § 1818(e)(5) (emphasis added).

      . It is also possible — although it seems highly unlikely — that the FDIC will conclude that plaintiff is correct that the FDIC lacks the authority to issue a broad order barring plaintiff from participating in the affairs of any federally insured bank.

      . The Court emphasizes that its determination is based on its assessment of the admittedly fragmentary evidence thus far produced in this case. This evidence consists largely of uncontested affidavits by the respective parties and their associates. The introduction of additional, or better, evidence would of course require the Court to re-evaluate its decision in light of any new information that might be brought to its attention.

      . The two banks are the _ Bank _on behalf of the stockholders of which plaintiff is negotiating the sale of the bank, and the_Bank, of which plaintiff is the chief executive officer and for which he is preparing a change of control application.

      . Indeed, in this regard the Court notes that the statute explicitly provides that administrative hearings in cases such as this “shall be private, unless the appropriate federal banking agency, in its discretion, after fully considering the views of the party afforded the hearing, determines that a public hearing is necessary to protect the public interest." 12 U.S.C. § 1818(h)(1). This statutory presumption in favor of private hearings is a further indication of congressional recognition of the extremely sensitive nature of such proceedings and their potential for inflicting severe and possibly unwarranted injury on the affected party’s reputation.

      . It should also be noted that the FDIC does not claim that plaintiff is in any way guilty of personal dishonesty.

      . It should also be noted that, since the FDIC insures depositors’ accounts at federally insured banks, the FDIC would necessarily sustain a substantial portion, if not the lion’s share, of any loss caused by the bank’s failure. Thus, the public interest considerations in this case include the American public’s interest in safeguarding the FDIC insurance fund.

      . For example, FDIC Regional Director _ has indicated in his affidavit that he believes that plaintiff’s allegedly improper loan practices have placed the Bank at the brink of bankruptcy. _Affidavit at 5; see also, _Affidavit at 1-2.

      . At oral argument, counsel for the FDIC indicated in response to the Court’s inquiry that it is the FDIC’s consistent practice to issue blanket interim suspension orders such as that involved here when it issues such orders. This suggests that the FDIC does not engage in consideration of the individual circumstances of each bank in drafting its interim suspension orders.

      . This is consistent with the familiar principle of administrative law that where there is substantial doubt that an agency intended various portions of its decision to be severable, a reviewing court should remand the entire decision so that it may be reconsidered as a whole. See North Carolina v. FERC, 730 F.2d 790, 795-96 (D.C.Cir.1984). The FDIC’s blanket suspension order does not permit the Court to determine whether the FDIC made determinations with respect to specific banks that could properly be considered severable. Accordingly, a remand of the entire order is indicated.


source: Caselaw Access Project

author: LAFFITTE, District Judge.

license: Public Domain

text:
    Hipolito RODRIGUEZ, Plaintiff, v. Nicolas MUÑOZ, et al., Defendants.
    Civ. No. 83-1021 HL.
    United States District Court, D. Puerto Rico.
    Aug. 23, 1985.

      Jesús Hernández Sánchez, Santurce, Puerto Rico, for plaintiff.
    Sec. of Justice, P.R., Edgardo Colón Arrarás, Atty. Fed. Lit. Div., & José Angel Rey, Saldaña, Rey, Moran & Alvarado, Santurce, Puerto Rico, for defendants.
   ORDER

LAFFITTE, District Judge.

Present before this Court is plaintiff’s fee application under the Civil Rights Attorney’s Fees Act, 42 U.S.C. Section 1988, filed pursuant to Local Rule 332, Fed.Proc. Rules Service, District Court for the District of Puerto Rico.

Following a seven-day trial, a jury awarded plaintiff the sum of $60,000 as compensatory damages plus $40,000 in punitive damages. Thereafter, in light of the evidence and the equities involved, defendant’s successor in office was ordered to reinstate plaintiff to his former position in the Right to Work Administration.

In support of the fee application a work time sheet with the description of the services rendered, time spent, and the hourly rate charged was filed. Plaintiff requests compensation in the amount of $12,337.50 plus an upward adjustment of 30% to reflect the significance of the result achieved. Plaintiff values in-court time (36.50 hrs.) at $125 per hour, and 77.75 out-of-court hours at $100 per hour.

Defendant countered by challenging the reasonableness of certain items, the rates requested, and the appropriateness for the 30% bonus. Finally, defendant requests that plaintiff’s fee application be reduced and recalculated.

In determining what is a reasonable attorney’s fee to be allowed to plaintiff as prevailing party in this action, we turn for guidance to Judge Coffin’s words in Grendel’s Den, Inc. v. Larkin, 749 F.2d 945, 950 (1st Cir.1984):

“[T]o determine the number of hours reasonably spent, we must first determine the number of hours actually spent and then substract from that figure hours which were duplicative, unproductive, excessive, or otherwise unnecessary. Hensley, 103 S.Ct. at 1939-40; Wojtkowski v. Cade, 725 F.2d 127, 130 (1st Cir.1984), Furtado [v. Bishop,], 635 F.2d [915] 920 [(1st Cir.1980) ]. In calculating a reasonable hourly rate, one must consider such factors as the type of work performed, who performed it, the expertise that it required, and when it was undertaken ...”

We also take note that in Marek v. Chesny, — U.S.-,-, 105 S.Ct. 3012, 3018, 87 L.Ed.2d 1 (1985), the Supreme Court restated that:

“[I]n Hensley v. Eckerhart, 461 U.S. 424 [103 S.Ct. 1933, 76 L.Ed.2d 40] (1983), we held that ‘the most critical factor’ in determining a reasonable fee ‘is the degree of success obtained’.”

A. COMPENSABLE HOURS

Defendant challenges counsel Hernández-Sánehez’ xk hour charged for a “Motion Requesting Time to Answer Defendant’s Summary Judgment Motion.” The filing of routine motions for extension of time have caused courts to deny attorneys fees, defendant asserts. The Court agrees, and therefore, shall disallow this item. Likewise, the Court shall disallow xk hour charged on September 25, 1985, challenged by defendant and consented to by plaintiff as incorrectly typed on his work time sheet.

Defendant further opposes plaintiff’s claim for one hour per day spent as courtroom time on January 28 and 29,1985, because the Court was not in session. The objection is denied. Even though the undersigned did not preside on said two days because of sudden illness, Magistrate Castellanos held court and selected the jury on January 28, 1985, as scheduled. On January 29th the parties appeared and the jury was excused by the Magistrate on account of the undersigned’s continued illness. Thus, the record belies the defendant’s claim.

As to other items challenged by defendant, such as alleged travelling time, unnecessary or duplicative legal time, the Court having examined the time sheet filed by plaintiff, the nature of the challenge, and plaintiff’s reply thereto, denies the objections and allows said hours as reasonable compensable time. The Court, however, shall reduce from 18 to 10 the hours devoted by plaintiff in researching, drafting, and editing the reply to defendant’s motion for summary judgment.

B. APPROPRIATENESS OF HOURLY RATE

Defendant objects to plaintiff counsel’s hourly rate of $125 and $100 for trial work and other legal work, respectively. Blum v. Stenson, 104 S.Ct. at 1547, N. 11 (1984) mandates that reasonable fees under Section 1988 are to be calculated according to the prevailing market rates in the relevant community for similar services by lawyers or reasonably compared skill, experience, and reputation. Here, plaintiff’s counsel has not informed the Court of his customary billing rate or the prevailing rate in the community. Notwithstanding, and as Chief Judge Campbell pronounced in Wojtkowski v. Cade, 725 F.2d 127, 130 (1st Cir.1984):

“[T]he Court, moreover, may bring to its knowledge and experience concerning both the cost of attorneys in its market area and the time demands of the particular case. If the time and fee claimed by the prevailing party are out of line, the Court may ‘shave’ either or both.”

The application of the aforesaid standards to the instant fee application in light of counsel’s experience, the high quality of his work in this case, the success obtained, and the Court’s knowledge and experience concerning the costs of attorneys practicing before this Court, warrants an allowance of an hourly rate of $100 for trial work and $80 for out-of-court work.

Defendant argues, in opposition to the fee application, that this was not a difficult case; that pursuant to Puerto Rico Supreme Court cases — Clemente Gonzalez v. Depto. de Vivienda, 83 JTS 101 (1983), and Ramos v. Secretario de Hacienda, 112 DPR 514 (1982) — the outcome of this case could be inferred.

The short answer to this self-defeating argument is that to reduce the fee award on the basis that there is a strong likelihood of success makes little sense, for it would penalize the attorney who undertakes a case where the constitutional violation is clear. Perhaps defendant should have settled promptly and would have avoided contesting plaintiff’s claim at every step of the legal process, thereby saving time, efforts, and expenses, including a substantial portion of plaintiff attorney’s fees. Furthermore, since neither complexity nor novelty of the issues is an appropriate factor to increase a fee award, Blum v. Stenson, supra, it follows that simplicity of the issues per se may not be considered as a legitimate factor to reduce an otherwise reasonable fee application.

Finally, plaintiff requests, and defendant opposes, an upward adjustment of 30%. Because plaintiff has not met the requirements for an enhanced award, the request shall be denied. Blum v. Stenson, supra.

CONCLUSION

In line with the foregoing, the Court hereby awards attorneys fees to the plaintiff in the amount of $9,140.00 for 69.25 out-of-court hours at $80.00 per hour, and 36 in-court hours at $100.00 per hour.

IT IS SO ORDERED.

      . In the fee application plaintiff characterized the 30% increase as a “bonus.” The Supreme Court has opted for the term "upward adjustment.” Blum v. Stenson, 465 U.S. 886, 104 S.Ct. 1541 at 1547, 79 L.Ed.2d 891, Note 12 (1984).

      . See Docket Sheet entries for January 28 and 29, 1985.

      . The Court is satisfied that plaintiff did not charge for travelling time.

      . "While there ordinarily should be a hearing, and especially is a motion for fees is opposed, we are not prepared to rule that a hearing must always be held.” Kargman v. Sullivan, 589 F.2d 63, at 67 (1st Cir.1978). See also, Miles v. Sampson, 675 F.2d 5 (1st Cir.1982).

      . See also, Miles v. Sampson, 675 F.2d 5 (1st Cir.1982).


author: BARBOUR, District Judge.

text:
    FOREMOST INSURANCE COMPANY, Plaintiff, v. Jimmy LOWERY, Defendant.
    Civ. A. No. J84-0427(B).
    United States District Court, S.D. Mississippi, Jackson Division.
    Aug. 23, 1985.

      Charles G. Copeland, Jackson, Miss., for plaintiff.
    Calvin R. King, Durant, Miss., for defendant.
   .ORDER

BARBOUR, District Judge.

Presently before the Court for disposition is the Motion of Defendant Jimmy Lowery for Partial Summary Judgment against Plaintiff, Foremost Insurance Company. This diversity action arises from the Complaint of Foremost for a declaratory judgment regarding its liability to Defendant under policies of fire insurance issued in July and October, 1983, for twenty-nine mobile homes. The mobile homes insured by Foremost were totally destroyed by fire on October 27,1983, in Yazoo County. The face amount of the insurance coverage was $381,500.00. Plaintiff submitted a proof of loss with Foremost for the face amount of the insurance. Foremost denied the claim and subsequently filed this declaratory judgment action. In its Complaint, Foremost Insurance alleges that Defendant, or persons acting in concert with him, intentionally burned the mobile homes for the purpose of obtaining the insurance proceeds. Moreover, it further alleges that Defendant intentionally gave Foremost materially false information both at the time the insurance was procured and also at the time he made his presentation of loss. The policies contain a concealment clause which provides that the policies will not pay for “loss or damage intentionally caused by YOU or if YOU intentionally gave US materially false information with intent to deceive in order to obtain this policy or in YOUR presentation of a claim.”

In his Motion for Partial Summary Judgment, Defendant seeks a favorable adjudication on one of Foremost’s theories of non-liability, i.e. that Defendant gave materially false information in the procurement of the policies and in presentation of loss, and also requests the Court to rule as a matter of law that Mississippi’s “valued policy” statute, Miss. Code Ann. § 83-13-5, is applicable and sets the amount of Plaintiff’s recovery at the face amount of the policies — $381,500.00. Defendant does not move the Court for summary judgment with respect to the issue of whether Defendant intentionally caused the fire, and indeed could not do so in light of the issues of fact created by deposition testimony presented by Foremost which directly implicates Defendant in the fire.

Having carefully considered the pleadings, the evidentiary record before us, and the briefs of the parties, the Court is of the opinion that Defendant’s Motion for Partial Summary Judgment should be granted in part and denied in part.

1. With respect to his contention that the valued policy statute applies and sets the amount of recovery at the face value of the policies, Defendant relies upon the deposition testimony of insurance agency John Posey, who took Defendant’s application and placed the insurance with Foremost. In essence, the Posey testimony indicates that at the time of the application, July 1983, Posey questioned Defendant regarding the purchase price of the newly acquired mobile homes and that Defendant avoided these questions, said that he did not know the purchase price or value, and indicated that he was interested only in insuring them for the maximum amount. After checking with Foremost, Posey, as directed by Foremost, made application based on maximum cost-per-square-foot guidelines contained in the rate manual. Defendant paid a quarterly premium at that time, and Foremost issued the policy. Subsequently, when several additional mobile homes were purchased, the same basic scenario between Posey and the Defendant occurred: Posey asked Defendant the purchase price or value of the additional mobile homes and Defendant once again responded that he did not know and wanted to insure them for as much as he could. Once again the amount of coverage was based on the guidelines in the rate manual.

It is undisputed that Defendant had the mobile homes transported to a clearing in a rural area of Yazoo County where they were placed at the time of the fire in late October 1983. Defendant contends that he moved the mobile homes to the clearing for repairs so that they could be utilized as rental units. There is a dispute as to whether the mobile homes had in fact been remodeled by Defendant at the time of the fire. This dispute in fact regarding repairs is not material, however, to the limited issue of whether the valued policy statute sets the amount of recovery at the face value of the policies. As noted above, it is undisputed that the mobile homes were totally destroyed.

In determining the applicability of Mississippi’s “valued policy” statute, Miss. Code Ann. § 83-13-5, a threshold question is whether the destroyed mobile homes were “buildings” or “structures.” The statute provides in pertinent part that:

[w]hen buildings and structures are insured against loss by fire and ... are totally destroyed by fire, the company shall not be permitted to deny that the buildings or structures insured were worth at the time of the issuance of the policy the full value upon which the insurance is calculated, and the measure of damages shall be the amount for which the buildings and structures were insured.

No Mississippi case specifically addresses the issue of whether a mobile home is a “building” or “structure” for purposes of the valued policy statute, nor do the definitions provided in such statutes as Miss. Code Ann. § 75-49-1, et seq. (safety standards for manufactured mobile homes) or Miss. Code Ann. § 27-53-1 (ad valorem taxes on mobile homes), appear to supply conclusive guidance. It is clear that personal property, such as the contents of a building, does not come within the statute. Home Insurance Co. v. Greene, 229 So.2d 576 (Miss.1969).

In the absence of an express inclusion of “mobile homes” in the statute, or a discernible intent on the part of the Mississippi Legislature specifically to exclude mobile homes, we turn to the common meaning of the language used therein. The Mississippi Supreme Court has defined the term “building” for general purposes as follows:

In the usual and ordinary acceptation of the word, a “building” is a structure which is designed for and suitable for the habitation or shelter of human beings or animals, or the shelter or storage of property, or for use and occupation for some purpose of trade or manufacture.

Town of Union v. Ziller, 151 Miss. 467, 118 So. 293, 294 (1928). As a matter of law, we hold that mobile homes generally, and the mobile homes in this case, clearly fall within this broad definition of “buildings.” The mobile homes here were “structures” designed for and suitable for at least some, if not all, of the uses listed in the foregoing definition. Moreover, the term “structure” generally relates to a broad variety of constructed or erected objects, including a wooden “framework.” See Town of Union, supra; American College Dictionary (1961 ed.). “Buildings” comprise a subset of the category of “structures.” Indeed, Mississippi’s valued policy statute speaks broadly in terms of “buildings” and “structures.” There is no showing in this case that the mobile homes did not constitute at least a constructed framework, which would be a “structure” for purposes of the valued policy statute. Accordingly, the provisions of § 83-13-5 have initial applicability to mobile homes as a matter of law.

The salutary purposes of Mississippi’s valued policy statute are to prohibit the writing by insurance companies of excessive fire insurance coverage on property, to require that losses are calculated on the same basis that premiums are received, and to promote reasonable diligence on the part of insurers who issue fire insurance on property in this state. In general, where property is totally destroyed, the Mississippi Supreme Court has noted that

[T]he very life of the [valued policy statute] is that the company shall not receive the premiums on one basis, and pay losses on another.

Hartford Fire Insurance Co. v. Shlenker, 80 Miss. 667, 32 So. 155, 157 (1902). The insuror can protect itself by taking steps to ascertain the value of the property, but, having issued a policy for a certain value, it must pay that amount since it “has received premiums on such agreed value.” Id. Similarly, in Aetna Ins. Co. v. Heidelberg, 112 Miss. 46, 72 So. 852, 854 (1916), the Court noted that the insurance company:

had the right of inspection at the time the insurance was written, and by writing the policy in question, it is concluded, under the terms of our statue, on all questions of valuation and. cannot now be heard to say that the property was ... not worth the amount at which it is insured.

Under the statute, it is the insurer’s ultimate responsibility to ascertain and fix the value of the property. Mississippi Home Ins. Co. v. Barron, 91 Miss. 722, 45 So. 875 (1908).

Based upon the undisputed testimony of insurance agent Posey, the Defendant openly and consistently evaded or refused to answer questions concerning the purchase price or value of the mobile homes, both at the time of the initial application and later when he sought coverage for additional mobile homes. Defendant would state only that he wanted maximum insurance coverage for the mobile homes. Under these particular circumstances, the agent for the insurance company had at least two reasonable alternatives: either to require the applicant to come forward with some reliable evidence of the value of the mobile homes before issuing the policy, or to inspect the mobile homes himself or have them independently appraised for value before issuing the policy.

The agent, however, took neither of these steps. After checking with Foremost, (who, according to the agent, said there was “no problem”) he simply complied with the Defendant’s request for maximum coverage. A commensurate premium was forwarded with the application and the policies were issued. Without question, the circumstances and the consistently noncommittal nature of the Defendant’s responses were sufficient to put the agent and the insuror on notice that some further inquiry as to the value was reasonably required. Posey’s testimony reveals that no such reasonable diligence was exercised or forthcoming. According to Posey, he did request that Defendant deliver photographs of the mobile homes to him. None were ever delivered. Notwithstanding this failure, subsequently purchased mobile homes were insured in early October 1983 in the same fashion as the initial group.

Measured against the plain language and intent of § 83-13-5, the Court is of the opinion that as a matter of law the statute is applicable under these undisputed circumstances and that the value of the destroyed mobile homes, should Foremost Insurance fail on all of its theories of non-liability, would be the face amount of the policies — $381,500.00. Insofar as Defendant’s amount of recovery is concerned, the Plaintiff cannot deny the valuation placed upon the mobile homes in the policy as issued.

2. The Court’s determination that Defendant’s recovery, should he prevail in this declaratory judgment action, is set by the valued policy statute at the face amount of the insurance has certain implications with respect to Foremost Insurance’s theories of non-liability regarding fraud in procurement and fraud in proof of loss.

Foremost’s claim of fraud and misrepresentation in the initial procurement of the fire insurance appears to rest solely upon the valuation of the mobile homes. Such claim is foreclosed by our ruling that the valued policy statute applies under the undisputed factual circumstances. Section 83-13-5 specifically provides that “the company shall not be permitted to deny that the buildings and structures were worth at the time of the issuance of the policy the full value upon which the insurance is calculated— ” (emphasis supplied). The Court’s review of the record reveals no material fact which would support a claim of fraud and material misrepresentation in the procurement of the insurance, independent of the question of the valuation of the property.

Accordingly, the Defendant’s Motion shall be sustained with respect to Foremost’s claim of fraud and material misrepresentation in the initial procurement of the insurance, and this theory of non-liability shall be dismissed.

3. To the extent that Foremost relies upon a “fraudulent” over-valuation of the mobile homes by Defendant with respect to the sworn proof of loss submitted by him subsequent to the fire, the Court is of the opinion that similar principles are controlling. It is undisputed that the mobile homes were totally destroyed. The Court has concluded that the operation of the valued policy statute sets the value of the mobile homes for purposes of recovery at the face amount of the insurance. By virtue of the applicability of the valued policy statute, proof of loss as to the value of totally destroyed property is not essential. Paramount Fire Ins. Co. v. Anderson, 211 Miss. 372, 51 So.2d 763 (1951); Birmingham Fire Ins. Co. v. McKnight, 246 Miss. 578, 151 So.2d 409 (1963). Assuming that Defendant fraudulently overvalued the property in his proof of loss, Foremost could not have been prejudiced or harmed by this fact under these circumstances. Home Ins. Co. of New York v. Lowenthal, 36 So. 1042, 1043 (Miss.1904); see also Annot., 16 A.L.R.3d 744, 811. Defendant’s representations as to the value of the property in the proof of loss is immaterial. Compare, Claxton v. Fidelity and Guaranty Fire Corp., 179 Miss. 556, 175 So. 210 (1937).

It appears, however, that Foremost may not rely exclusively on an overvaluation by Defendant in support of its claim of fraud and misrepresentation regarding Defendant’s presentation of his claim of loss. In its complaint, for example, Foremost contends that in his presentation of loss Defendant gave materially false information regarding “his knowledge of the origin of the fire ...” While Foremost’s contentions in this regard are vague, it is Defendant’s initial burden on a motion for summary judgment to “foreclose the possibility” that facts exist which would support a claim. Adickes v. S.H. Kress and Co., 398 U.S. 144, 157-161, 90 S.Ct. 1598, 1608-1610, 26 L.Ed.2d 142 (1970). As the evidentiary record in this regard is somewhat unclear, and the briefs of the parties are directed primarily to the applicability of the valued policy statute, the Court is reluctant to dismiss Foremost’s claim of fraud and material misrepresentation in the presentation of loss at this juncture. This aspect of Defendant’s Motion will be denied.

In accordance with the foregoing, Defendant’s Motion for Partial Summary Judgment is sustained in part and denied in part, and it is hereby Ordered:

1. That Defendant’s basic amount of recovery, should he prevail on the issue of liability, is set by Mississippi’s valued policy statute, Miss. Code Ann. § 83-13-5, at the face amount of the insurance coverage;

2. That Plaintiff’s claim of fraud and material misrepresentation by Defendant in the initial procurement of the insurance is dismissed; and

3. That Defendant’s Motion is denied insofar as it seeks dismissal of Plaintiff’s claim of fraud and material misrepresentation in his presentation of loss.


author: McMILLAN, District Judge.

text:
    Charles THOMAS, Plaintiff, v. William E. BROCK, Secretary of Labor, United States Department of Labor, Defendant. William E. BROCK, Secretary of Labor, United States Department of Labor, Plaintiff, v. GLOBAL HOME PRODUCTS, INC., a corporation, d/b/a North Carolina Youth Team, Student Aid Program and Junior Opportunities; Fund Raiser Products, Inc., a corporation, d/b/a North Carolina Youth Team, Student Aid Program and Junior Opportunities; Gerald Winters; and Ronald Kelso, Defendants.
    Nos. C-C-84-290-M, C-C-84-444-M.
    United States District Court, W.D. North Carolina, Charlotte Division.
    Aug. 23, 1985.

      Charles R. Brewer, U.S. Atty., Asheville, N.C., Debra J. Stuart, Asst. U.S. Atty., Charlotte, N.C., Francis X. Lilly, Sol. of Labor, Washington, D.C., Bobbye D. Spears, Regional Sol., A.B. Cuviello and William H. Berger, Office of the Solicitor, U.S. Dept, of Labor, Atlanta, Ga., for Department of Labor.
    Gerald A. Smith, Jr., Donald F. Mintmire and David T. Hooper, Barnett & Alagia, Nashville, Tenn., David B. Sentelle, Tucker, Hicks, Sentelle, Moon and Hodge, Charlotte, N.C., for Charles Thomas, Global Home Products, Inc., Fund Raiser Products, Inc., Gerald Winters and Ronald Kelso.
   McMILLAN, District Judge.

These two cases were consolidated for trial by the court on June 18, 1985. The parties have agreed that for the purposes of both actions, William E. Brock, the Secretary of Labor, will be considered as the plaintiff, and Charles Thomas; Global Home Products, Inc.; Fund Raiser Products, Inc.; Gerald Winters and Ronald Kelso will be the defendants.

Plaintiff seeks an injunction against defendants to prevent them from continued alleged violations of child labor laws. Defendants seek a declaratory judgment that these laws do not apply to them and ask that plaintiff be enjoined from attempting to enforce these laws against them.

Based on the evidence submitted at trial and upon consideration of the briefs filed by the parties, the court makes the following

FINDINGS OF FACT
1. The parties have stipulated that:
a) Global Home Products, Inc., Fund Raiser Products, Inc., Processing Sales, Inc., Junior Careers, Inc., Gerald Winters and Ronald Kelso were and are engaged in related business activities performed either through unified operation or common control for a common business purpose and therefore comprise an “enterprise” within the meaning of Section 3(r) of the Fair Labor Standards Act, 29 U.S.C. § 203(r). Such enterprise is hereinafter referred to as the “Global Home Products Enterprise” or “Enterprise.”
b) The Global Home Product Enterprise, having employees engaged in commerce or in the production of goods for commerce, and/or employees handling, selling or otherwise working on goods or materials that have been moved in or produced for commerce; and having annual gross volume of sales made or business done in excess of $250,000 (exclusive of excise taxes at the retail level which are separately stated), constitutes an “enterprise engaged in commerce or in the production of goods for commerce,” within the meaning of § 3(s)(l) of the Act, 29 U.S.C. § 203(s)(l);
c) Since at least January 1, 1982, the Global Home Products Enterprise, which is engaged in the distribution, sale or resale of candy, confectionary and cookie products, has utilized business entities and individuals (commonly referred to as “distributors”), who are engaged in the sale of these products to the consuming public through the use of minors. The Enterprise has also utilized various public, bonded warehouses in different cities, counties and states to store its products pending distribution, sale or resale. With only infrequent exceptions, only the “distributors” receive or purchase such products from such warehouses.
d) Since at least January 1, 1982, the business entities and individuals (“Distributors”) not infrequently utilized, in making sales to the consuming public, minors who are under the age of 14, primarily 12 and 13 year olds, but on an infrequent basis minors as young as nine years old. These minors not infrequently sell the products after 7:00 p.m. on weekdays during the school year, and on an infrequent basis they sell as late as 10:00-10:30 p.m. on weekdays during the school year. The minors not infrequently sell the products more than three hours per day on weekdays and more than 18 hours per week when school is in session and more than eight hours per day on the weekends.
e) Since at least January 1, 1982, the Global Home Products Enterprise and Charles Thomas have failed to make, keep and preserve adequate and accurate records of names, addresses, ages and hours worked as set forth in the Act, and the regulations, of the persons (including minors) engaged in the sale of the aforementioned products.
f) The minors utilized by Charles Thomas in the sale of the aforementioned products are at least employees of Charles Thomas within the meaning of the Act.

2. William Brock is the Secretary of Labor.

3. Charles Thomas is a resident of Charlotte, North Carolina, who sells cookies and candy door-to-door through the employment of local children.

4. The Global Home Products Enterprise (Global) oversees the manufacturing of the cookies and candy and sells them to local groups, retail stores and door-to-door salesmen such as Charles Thomas. The products are manufactured in Georgia, Illinois and New York, with ingredients being imported from abroad. Approximately fifty percent of Global’s sales are to door-to-door salesmen, such as Mr. Thomas.

5. Charles Thomas first became connected with Global in California during, or prior to 1982 when he met Curtis Richardson, who is now a district manager of Global products in the southeast, operating out of Atlanta, Georgia. Charles Thomas signed a contract with Curtis Richardson, which he believes Richardson signed on behalf of Global.

6. Charles Thomas moved to Washington, D.C., in September of 1982, and lived with James Richardson, the brother of Curtis Richardson. James Richardson sold Global products in the District of Columbia. He recruited children to go door-to-door selling the cookies and candy for $3.00 a box. James Richardson held the position of a crew manager, which entailed recruiting children to make the sales, taking them to neighborhoods, supervising them in the sales. He worked under the name of Student Aid Program.

7. After about a month of observation, Charles Thomas became a crew manager in Washington, D.C. He recruited children to sell cookies and candies for him which he purchased from Global. He also instructed his salespeople to charge $3.00 per box. Charles Thomas paid Global $1.65 a box.

8. Curtis Richardson asked Charles Thomas to move to Charlotte, North Carolina, in early 1983 and to sell Global products from this location. He operated at different times first under the name North Carolina Youth Team and then under the name Student Aid Program, the same name used by James Richardson in Washington, D.C.

9. Curtis Richardson “promoted” Charles Thomas to the position of area manager. This meant that in addition to supervising his own crew of children, Charles Thomas could recruit other crew managers who would also supervise groups of children. As an area manager, Charles Thomas would not only receive a portion of the purchase price for each box of cookies and candy that his crew sold, but he would also receive a [smaller] portion of all the sales under his crew managers.

10. At the beginning of his work in Charlotte, Charles Thomas advertised that he wanted to hire children between the ages of twelve and sixteen. After learning of state laws, he later only advertised for children between the ages of fourteen and eighteen.

11. Charles Thomas routinely attempts to talk with the parents of his crew members before they begin work with him. He speaks with most of the parents and has them sign a parent permission form which tells the parents of some of the working conditions. However, he has not spoken with all parents or received parent permission forms from parents of all the children.

12. Charles Thomas instructs his sales force on their responsibility to be ready to work and gives them speech cards to practice their sales pitch to customers. One of the documents given to the children states that “I have too much homework” is not an acceptable excuse for missing work.

13. Charles Thomas drives a van to pick up the children at their homes. He takes them to a neighborhood and assigns them streets on which they are to sell the cookies and candy. The children go door-to-door selling the cookies. They then give Mr. Thomas the checks and cash that they receive for the products. The children are paid $.60 per box sold, out of the purchase price of $3.00 per box.

14. During periods in which school is in session, Charles Thomas has frequently kept children away from home past 7:00 p.m. during the week, often as late as 9:00 p.m. On weekends, he usually takes the Charlotte children out of the Charlotte area and often has not returned them to their homes until 11:30 p.m. or 12:00 midnight. Parents of the children testified that their children would return home tired and hungry. Charles Thomas testified that he would often drive the children to a fast-food restaurant when working late.

15. Charles Thomas runs a program of giving bonuses to children for special performance in sales.

16. He testified that he never “fired” children for not selling enough products. The court does not find this testimony credible. Charles Thomas stated that he would refuse to pick up children if they performed poorly, and one of the documents he gave to the children warned that the children would be “fired” if they were not at home too many times when he came by to pick them up.

17. On several occasions, Charles Thomas took children from North Carolina into South Carolina to sell Global products.

18. Charles Thomas employed children under the age of fourteen at least until late 1983, and probably into 1984.

19. Charles Thomas signed a contract with Global when he moved to North Carolina. Curtis Richardson signed the document, but Charles Thomas testified that he did so only as a witness. Defendants no longer have a copy of this contract. Thomas signed another contract with Global Home Products, Inc. on January 29, 1983. This document is entitled “Independent Contractor’s Agreement” and states in part that

The parties to this Agreement intend that the relationship between them created hereunder is that of a supplier and independent contractor. No agent, employee, sub-contractor or servant of the Second Party [Thomas] shall be or shall be deemed to be the employee, agent, sub-contractor or servant of First Party [Global]. First Party is interested only in the results obtained under this agreement. While First Party may from time to time suggest certain business methods and techniques to Second Party, the manner and means of conducting the work is under the ultimate sole control of Second Party. None of the benefits provided by First Party to its employees, including by way of possible example, but not limited to, pension plans, medical reimbursement plans, unemployment insurance, sick pay and vacation time, are available from First Party to Second Party or Second Party’s employees, agents, servants and sub-contractors during the performance of this Agreement.

Charles Thomas signed in the blank left for the “first” party, but the contract is clear that he is the “second party.” No one signed for Global directly, but Curtis Richardson signed as a witness. The contract also provides that

Either party may cancel this Agreement by giving thirty days written notice to the other. After termination of Second Party’s association with First Party for any cause, Second Party will not directly or indirectly engage in a similar or like-type business within a 100 mile radius from the [left blank ] for a period of two years. Second Party’s violation hereof shall require him to pay either actual damages as awarded by a Court of competent jurisdiction, or liquidated damages of $10,000.00, whichever First Party may elect to request, both to be in addition to attorneys’, fees otherwise due pursuant hereto.

20. Charles Thomas, by himself, was unable to purchase a van to take the children and cookies to neighborhoods. He received a loan from Global to purchase a van which has been registered in the name of Fund Raiser Products, Inc., one of the corporations in the “Global” group. Global arranges such loans for some area and crew managers who can not obtain credit themselves. The crew managers and area managers then pay back the loan to Global. Charles Thomas paid off the loan in June of 1984, but title of the van was not changed to his name until September of 1984.

21. The speech cards and parent permission forms that Charles Thomas used were the same as those used by James Richardson. Thomas also used a form “answer to objections” for the children to use to respond to reasons given for not buying the cookies. Thomas received this form at a seminar for crew and area managers that was sponsored and paid for by Global.

22. At different times, Charles Thomas had his own crew managers working under his supervision. Mr. Thomas engaged David Tate as an “independent contractor” and had him sign a Global contract similar to the one Thomas had signed. Thomas signed it and testified that he represented Global in doing so. Thomas also recruited Estee Bullock as a crew manager for a short period.

23. Global ships cookies and candy to a bonded warehouse in Charlotte in anticipation of the needs of its “customers.” Global does not ship products to fill particular orders. As stated in the stipulations, with a few exceptions only the door-to-door salesmen obtain goods from the warehouses. Mr. Thomas phones Global and requests that a certain number of boxes be made available to him. He then goes to the warehouse, where upon approval of Global he receives the cookies and candy. Thomas delivers to the warehouse officials the checks he has received from the children and a cashier’s check for most, if not all, of the cash received. The warehouse officials then mail the checks to Global. However, Thomas’s delivery of the checks to the warehouse is not a prerequisite to obtaining more candy and cookies if Global has already approved the transfer. Thomas then takes the products and stores them in his own smaller warehouse. The goods are left there until Thomas removes them for the sales trips with the children.

24. Global does all of the bookkeeping for Charles Thomas and Curtis Richardson. After receiving the checks from Charles Thomas, Global sends him back a check for his portion of the sales. He is not charged for bad checks that the children have received. Testimony shows that this bookkeeping arrangement is limited to the operation for Curtis Richardson, who, according to Jerry Winters, one of the corporate officials of Global, has needed some additional help in starting his operation. Global charges Curtis Richardson for this service.

25. Charles Thomas telephones Global two or three times a week and reports his weekly sales to them and gives weekly goals for future sales. In addition, he phones the district manager, Curtis Richardson, once or twice a week.

26. During the early period of Thomas’s work in Charlotte, Curtis Richardson paid part of Thomas’s expenses, including portions of his telephone bills, gasoline costs, and bonuses to the children. There appears to have been no fixed rule to determine which expenses were paid and which were not. Thomas testified that his expenses are no longer paid by others. He explained that some of the payments were part business payments and part personal loans, but no record was kept of the amounts that were personal loans.

27. Global did not directly recruit Thomas as an area manager. Curtis Richardson first encouraged Thomas to become involved.

28. Global did not directly train Thomas or give him sales materials, except for those he received at the Global-sponsored seminars.

29. Global has not paid for the costs of Thomas’s move from Washington, D.C. to Charlotte and has not bought him any equipment other than providing the credit for the van.

30. Global does not control what hours Thomas works or the number of children that he takes out on his sales trips.

31. Charles Thomas collects sales taxes on the cookies and candy and files his own income tax returns on his business activities.

32. Although Thomas has used the same prices for cookies and candy as used by other salesmen, Global does not mandate that this price be set, but only recommends the price.

33. Global runs sales meetings for the salesmen to discuss marketing and other business. Although he often attends, Charles Thomas is not required to be there.

34. Charles Thomas sets his own bonus programs for the children.

35. Global pays for area and crew managers to attend seminars to help their sales. At these seminars, sales materials and motivational literature is given to area and crew managers. Charles Thomas has attended seminars. Jerry Winter testified that the seminars are funded by a charge of a nickel a box for the candy purchased by those attending the seminars. Most of the seminars have been run by Larry Pros-sen, a district manager in Florida. He receives money from Global for organizing and running these seminars.

36. Global is paying all the litigation costs and attorney fees for Charles Thomas in these suits. This includes the costs and fees of the suit brought by Thomas against William Brock, in which the Global enterprise is not a party.

37. Global has written to distributors asking them to pay for one-half of other litigation affecting the enterprise.

38. Upon completion of this litigation, Global expects to sell all of its interest in the door-to-door sales to Miller Candy Sales, Inc., in which Ronald Kelso, Kevin Miller, and Andy Brown will have interests. Jerry Winters expects that the Global Enterprises will then cease to exist, and he will have no personal interest in the door-to-door sales.

CONCLUSIONS OF LAW

1. This court has jurisdiction pursuant to 29 U.S.C. § 217, 28 U.S.C. § 1331.

2. Plaintiff seeks an injunction to prevent defendants from further violation of the following statutes:

29 U.S.C. § 211(c) — Every employer subject to any provision of this chapter shall make, keep, and preserve such records of the persons employed by him and of the wages, hours, and other conditions and practices of employment maintained by him, and shall make such reports therefrom to the Administrator as he shall prescribe by regulation or order as necessary or appropriate for the enforcement of the provisions of this chapter or the regulations or orders thereunder.
29 U.S.C. § 212(c) — No employer shall employ any oppressive child labor in commerce or in the production of goods for commerce or in any enterprise engaged in commerce or in the production of goods for commerce.
29 U.S.C. § 215(a) — After the expiration of one hundred and twenty days from June 25, 1938, it shall be unlawful for any person — ____(4) to violate any of the provisions of section 212 of this title; (5) to violate any of the provisions of section 211(c) of this title or any regulation or order made or continued in effect under the provisions of section 211(d) of this title, or to make any statement, report, or record filed or kept pursuant to the provisions of such section or of any regulation or order thereunder, knowing such statement, report, or record to be false in a material respect.

3. The regulations containing the record-keeping requirements are set forth in great length at 29 C.F.R. §§ 516 et seq.

4. The Fair Labor and Standards Act (FLSA) provides for a general minimum age for employment of 16:

(l) “Oppressive child labor” means a condition of employment under which (1) any employee under the age of sixteen years is employed by an employer (other than a parent or a person standing in place of a parent employing his own child or a child in his custody under the age of sixteen years in an occupation other than manufacturing or mining or an occupation found by the Secretary of Labor to be particularly hazardous for the employment of children between the ages of sixteen and eighteen years or detrimental to their health or well-being) in any occupation,____ The Secretary of Labor shall provide by regulation or by order that the employment of employees between the ages of fourteen and sixteen years in occupations other than manufacturing and mining shall not be deemed to constitute oppressive child labor if and to the extent that the Secretary of Labor determines that such employment is confined to periods which will not interfere with their schooling and to conditions which will not interfere with their health and well-being.

29 U.S.C. § 203(i).

5. Pursuant to 29 U.S.C. § 203(i), the Secretary of Labor has determined that work by children between ages fourteen and sixteen shall be confined to the following periods:

(1) Outside school hours;
(2) Not more than 40 hours in any 1 week when school is not in session;
(3) Not more than 18 hours in any 1 week when school is in session;
(4) Not more than 8 hours in any 1 day when school is not in session;
(5) Not more than 3 hours in any 1 day when school is in session;
(6) Between 7 a.m. and 7 p.m. in any 1 day, except during the summer (June 1 through Labor Day) when the evening hour will be 9 p.m.

29 C.F.R. § 570.35.

6. The FLSA sets forth the following definitions relevant to this case:

§ 203. Definitions
As used in this chapter—
******
(b) “Commerce” means trade, commerce, transportation, transmission, or communication among the several States or between any State and any place outside thereof.
* * * * * *
(d) “Employer” includes any person acting directly or indirectly in the interest of an employer in relation to an employee and includes a public agency, but does not include any labor organization (other than when acting as an employer) or anyone acting in the capacity of officer or agent of such labor organization.
******
(r) “Enterprise” means the related activities performed (either through unified operation or common control) by any person or persons for a common business purpose, and includes all such activities whether performed in one or more establishments or by one or more corporate or other organizational units including departments of an establishment operated through leasing arrangements, but shall not include the related activities performed for such enterprise by an independent contractor; ...
******
(s) “Enterprise engaged in commerce or in the production of goods for commerce” means an enterprise which has employees engaged in commerce or in the production of goods for commerce, or employees handling, selling, or otherwise working on goods or materials that have been moved in or produced for commerce by any person, and which—
(1) ... beginning February 1, 1969, is an enterprise, other than an enterprise which is comprised exclusively of retail or service establishments and which is described in paragraph (2), whose annual gross volume of sales made or business done is not less than $250,000 (exclusive of excise taxes at the retail level which are separately stated);____

7. The parties have stipulated that the Global Home Products Enterprise is both an enterprise as defined in 29 U.S.C. § 203(r) and has sufficient gross volume of sales under 29 U.S.C. § 203(s)(l) to become an “enterprise engaged in commerce or in the production of goods for commerce.” The evidence shows that the local organization of Charles Thomas, by itself, does not have the gross sales to become an “enterprise engaged in commerce or in the production of goods for commerce.”

8. The parties have stipulated that Global and Charles Thomas have failed to maintain “records of names, addresses, ages and hours worked as set forth in the Act, and the regulations, of the persons (including minors) engaged in the sale of the aforementioned products [sale of candy and cookies].”

9. The parties have also stipulated that the business entities and individual distributors have used minors below the age of 14 and children between 14 and 16 outside of the hours permitted by 29 C.F.R. § 570.35. In addition, the testimony at trial shows that Charles Thomas used children below the age of fourteen and employed them for hours outside those permitted in 29 C.F.R. § 570.35.

10. There is no question that the defendants have engaged in conduct that does not conform with the statutes and regulations quoted above. The parties agree that the question before the court is whether the statutes and regulations apply to the defendants.

11. Plaintiff advances three theories in contending that Charles Thomas’s operation is subject to the FLSA. First, plaintiff argues that Charles Thomas is the employee of Global. Therefore the employment of children was made by an “enterprise engaged in commerce or in the production of goods for commerce,” and Global and Charles Thomas are covered by the FLSA. Second, plaintiff submits that Charles Thomas and Global are joint employers of the children. • Finally, plaintiff argues that the children employed are handling goods in commerce and thus fall into the “old” or “traditional” coverage of the FLSA. 29 U.S.C. §§ 203(b), 212(c).

12. Defendants argue that the Charles Thomas organization and those of other distributors are not covered under any of the theories of coverage, and they seek a declaratory judgment to that effect and an injunction against plaintiff prohibiting any enforcement of the statutes against defendants.

13. The definition of an “employee” for purposes of the FLSA is broader than the common law definition. Usery v. Pilgrim Equipment Co., Inc., 527 F.2d 1308 (5th Cir.1976), cert. denied 429 U.S. 826, 97 S.Ct. 52, 50 L.Ed.2d 89 (1976); Brennan v. Gilles & Cotting, Inc., 504 F.2d 1255 (4th Cir.1974). The fact that two parties have styled their relationship as that of a principal and an independent contractor is not dispositive of the inquiry. Robicheaux v. Radcliff Material, Inc., 697 F.2d 662, 667 (5th Cir.1983). See also, Real v. Driscoll Strawberry Associates, Inc., 603 F.2d 748 (9th Cir.1979). A central question in determining “employee” status under the FLSA is whether or not the alleged employees are, as a matter of economic reality, dependent upon the business to which they render service. Usery v. Pilgrim, 527 F.2d at 1311. Courts look not only at the formal structure of an organization but at the underlying reality. Id.

14. Courts have considered the following factors in determining employee status under the FLSA: (a) control; (b) risk of profit and loss; (c) investment; (d) skills required; (e) permanency of relationship; and (f) integral economic relationship. Donovan v. Sureway Cleaners, 656 F.2d 1368 (9th Cir.1981). See also, Usery v. Pilgrim, supra; Real, supra. No one factor is controlling. Based on the foregoing findings of fact, the court makes the following analysis.

15. Control—

Charles Thomas has some freedom in his operation. He sets his own hours, hires his own children, and determines who and how many crew managers he will work with. He fixes the bonuses he will pay to children and has the power to change the price of the cookies and candy that the children sell. Along with these powers he has the control that is outlined in the findings of fact. However, much of the control is illusory. Charles Thomas uses the materials received at Global-sponsored seminars. He has followed the recommended prices of Global on all but a few occasions. He files weekly reports on his sales and relies upon Global for the bookkeeping. Looking at the economic reality and what the agent in fact did instead of what he could have done (Donovan v. Sureway Cleaners, 656 F.2d at 1371), the court concludes that Global in fact controlled, and had the right to exercise considerable control, over Thomas. An important item in this regard is the fact that under the “independent contractor’s” agreement Thomas was prevented from competing with Global within 100 miles for a period of two years.

16. Profit and Loss—

Charles Thomas had little opportunity for a loss of any significance, mainly because he had so little invested in the operation. Although personal initiative is important with regard to the hours he works and how successful his employees are, his income is more dependent on the piecemeal commission for each box. Profits based on a piecemeal basis do not bring Thomas out of the status of an employee. See, e.g., Rutherford Food Corp. v. McComb, 331 U.S. 722, 67 S.Ct. 1473, 91 L.Ed.2d 1772 (1947). Thomas’s potential for loss is limited to his slim investment in the van, his expenses, and his own time.

17. Investment—

Charles Thomas has very little invested in his operation. When he began working, Global gave him a loan in order to buy a van. Some of his expenses were paid for during the early stages of his work in Charlotte. The entire operation has required only modest amounts of capital, and Thomas was helped by Global in making even that small investment.

18. Skills and Initiative—

An important element in this factor is the personal initiative that is required of the alleged employee. Usery v. Pilgrim, 527 F.2d at 1314. The job of crew manager and area manager' did not require any special technical knowledge. Thomas needs only to locate willing children, organize trips to areas for sales, keep a supply of cookies and candy, and motivate the children in their work. Although personal skills are required, the work demands only limited training. However, initiative is an important factor in Thomas’s work. He must locate and motivate children and organize their trips.

This factor does not pull strongly in either direction. His job does not require any special skills, but his initiative is important in the success of his operations.

19. Permanency of Relationship—

Charles Thomas has worked solely as an area and crew manager selling Global products since October of 1982. Under his “independent contractor” agreement he is prevented from engaging either directly or indirectly in a similar business for two years within a hundred mile radius. Such a limitation is inconsistent with the status of a true independent contractor, who would do similar work for many different people in the same area. The evidence shows that Thomas has been a permanent salesman and the relationship is set up to make it difficult for him to pursue the same line of business with any other supplier. Global has even gone to the extent of paying Thomas’s expenses in litigation to which it is not a party.

20. Integral Economic Relationship—

Local distributors like Charles Thomas are a major integrated part of Global’s business. Approximately fifty percent of Global’s sales are to people like Charles Thomas. Global sponsors seminars for the managers, keeps in touch with their sales, and has encouraged the development of the entire distribution structure. Charles Thomas is really the last stage of a major part of Global’s operation. He has been completely integrated in the Global structure.

21. Based on the foregoing analysis, the court concludes that Charles Thomas is an employee of Global for the purposes of the FLSA. Charles Thomas has had the type of relationship with Global that was intended to be covered as an employee relationship under that statute. Among the reasons for this conclusion, in addition to all of those analyzed above, are the dependency of Thomas on Global and the permanency of the relationship and his integration into an economic enterprise.

22. Charles Thomas is an employee of Global. Therefore, both he and the Global enterprise are covered by the FLSA, and Thomas’s actions are attributable to his employers. The parties have stipulated to defendants’ failure to meet the record-keeping provisions of the FLSA, and the evidence shows that Thomas has engaged in oppressive child labor as that term is defined. Therefore, plaintiff is entitled to an injunction against defendants to prevent further violations.

23. Because the court has concluded that Thomas is an employee of Global, it need not reach the alternative grounds for relief asserted by plaintiff. The court makes no rulings on these additional claims.

An injunction will be entered separately.