Citicorp Indus. Credit v. Brock, 483 U.S. 27 (1987)

Citicorp Industrial Credit, Inc. v. Brock

No. 86-88

Argued April 20, 1987
Decided June 22, 1987
483 U.S. 27

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE SIXTH CIRCUIT

Syllabus

Section 15(a)(1) of the Fair Labor Standards Act (FLSA or Act) prohibits "any person" from introducing into interstate commerce goods produced in violation of the minimum wage or overtime pay provisions of §§ 6 and 7 of the Act. Under a financing agreement with manufacturer Ely Group, Inc. (Ely), petitioner perfected a security interest in Ely’s inventory. After Ely began to fail financially, petitioner took possession of the inventory, part of which was manufactured during a period in which Ely’s employees were not paid. Concluding that such items were "hot goods" under § 15(a)(1), the United States Department of Labor filed suits in two Federal District Courts, each of which granted a preliminary injunction prohibiting the transportation or sale of the goods in interstate commerce. The Court of Appeals affirmed the consolidated cases.

Held: Section 15(a)(1) applies to secured creditors who acquire "hot goods" pursuant to a security agreement. Pp. 32-38.

(a) The goods produced during the period when Ely’s employees were not paid were manufactured in violation of § 6 and/or § 7 of the Act, and are "hot goods" for the purposes of § 15(a)(1). Pp. 32-33.

(b) As a corporate entity, petitioner falls within § 15(a)(1)’s plain language, since that section prohibits "any person" from introducing "hot goods" into commerce, while the Act defines "person" to include corporations. Petitioner’s argument that § 15(a)(1)’s exemptions for common carriers and good faith purchasers reflect a congressional intent that the "hot goods" prohibition should apply only to culpable parties, and not to "innocent" secured creditors, is not persuasive. Congress’ limitation of the effects of other FLSA provisions to culpable parties indicates that its failure to do so here was not inadvertent. Rather, § 15(a)(1)’s exemption of only two narrow categories of "innocent" persons suggests that all others, whether innocent or not, are covered. There is no indication that Congress actually considered secured creditors when it enacted § 15(a)(1), but, by claiming a general exemption for them, without any duty to ascertain compliance with the Act, petitioner would put them in a better position than good faith purchasers, whom Congress did specifically act to protect. Detailed and particular FLSA exemptions cannot be enlarged by implication to include persons not plainly and unmistakably within the Act’s terms and spirit. Pp. 33-35.

(c) By excluding tainted goods from interstate commerce, the application of § 15(a)(1) to secured creditors furthers the FLSA’s goal of eliminating the competitive advantage enjoyed by goods produced under substandard labor conditions. Moreover, prohibiting foreclosing creditors from selling "hot goods" also advances the Act’s purpose of establishing decent wages and hours, since such creditors will be encouraged to insist that their debtors comply with the Act’s minimum wage and overtime pay requirements. Pp. 35-38.

(d) Applying § 15(a)(1) to secured creditors does not give employees a "lien" on, or priority in, "hot goods" superior to that of the creditors under state law, since creditors’ rights in the goods as against the employer are unchanged by such application, while the employees acquire no possessory interest in the goods thereby. Such application is simply an exercise of Congress’ power to exclude contraband from interstate commerce. Pp. 38-39.

788 F.2d 1200, affirmed.

MARSHALL, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and BRENNAN, BLACKMUN, POWELL, O’CONNOR, and SCALIA, JJ., joined. SCALIA, J., filed a concurring opinion, post p. 40. STEVENS, J., filed a dissenting opinion, in which WHITE, J., joined, post p. 40.