United States of America, Plaintiff-appellant, v. Gulf States Asphalt Company, Inc., Defendant-appellee, 472 F.2d 933 (5th Cir. 1973)

This is an appeal from a judgment for the defendant, Gulf States Asphalt, in a suit brought by the government seeking damages for alleged violations of the Walsh-Healey Public Contracts Act, 41 U.S.C.A. Sec. 35 et seq. The basis for the suit was that Gulf States failed to pay certain of its employees overtime for work performed under a government contract. The district court ruled for defendant on stipulated facts and issues. We affirm.

Gulf States is a Texas corporation which manufactures asphalt and other petroleum products at plants in South Houston and Beaumont, Texas. In 1967, Gulf States was awarded a government contract for the manufacture and delivery of asphalt products.¹  The contract was subject to the requirements imposed by the Walsh-Healey Act and the regulations issued pursuant thereto. 41 U.S. C.A. Sec. 35; 41 CFR Sec. 50-201.1.

Deliveries under the contract were to be made in 55 gallon steel drums from the Beaumont plant. At the Beaumont plant Gulf States kept a stockpile of 55 gallon steel drums for use in making such deliveries. During the performance of the contract Gulf States purchased new and used drums which were delivered to the Beaumont plant by others. It also purchased drums which were transported from suppliers to its South Houston plant by its own employees. After being reconditioned, some of these drums were transported by its employees to the Beaumont plant where they were put in the stockpile which was used in fulfilling the requirements of the government contract in issue. The Gulf States' employees who transported these drums to the South Houston plant and between the South Houston and Beaumont plants were not paid overtime wages for their work: hence the controversy.

Contending that these employees should have been paid overtime, the Department of Labor filed an administrative complaint against Gulf States on August 29, 1969. Because the administrative proceedings in the Department of Labor do not toll the statute of limitations and because the Walsh-Healey Act also provides for judicial proceedings to remedy a violation of its provisions, the government on September 19, 1969, filed the action which is the subject matter of this appeal. This action was stayed in 1969 and again in 1970, pending the administrative determination by the Department of Labor. At the time of the second stay, on November 2, 1970, the district court was advised that the administrative proceedings would be completed within 120 days. In May of 1971, the United States informed the district court that the administrative proceedings would not be terminated until the end of that summer. Acting on this information, the district court continued the stay until September 20, 1971, when it learned that the administrative proceedings would not be finished until January of 1972. At this point, two years after the suit had been filed, the district court denied plaintiff's motion for a further continuance and the case subsequently went to trial.² 

At the trial the district judge found that the work performed by Gulf States employees in transporting the drums to the South Houston plant was not activity falling within the coverage of the Walsh-Healey Act. However, the district judge did find that the work of the employees who transported the drums between the South Houston and Beaumont plants was within the coverage of the Act.

Once this determination was made, it was necessary for the district court to reach the issue which forms the primary basis for this appeal, whether the employee activity in question was in any event exempt from the requirements of the Act by virtue of the Secretary's stockpile rule, to be hereinafter discussed. The district court concluded that the stockpile exemption was applicable and this appeal followed.

The United States now advances three arguments. The first is that the district court should have stayed the suit pending the completion of administrative proceedings in the Department of Labor. Second, it is argued that the Gulf States employees who transported the steel drums from the suppliers to the South Houston plant where they were reconditioned before being taken to Beaumont were performing activities within the coverage of the Act. The third contention is that the district court erred in its application of the stockpile rule. Because of our view that the stockpile rule absolved Gulf States, we reach only the first and third assignments of error.

In regard to the question of a further stay, it must be noted that the district court stayed the lawsuit for over two years while waiting for the Department of Labor to act. Under 41 U.S.C. A. Sec. 36, the district court had original jurisdiction of the suit and was not required to wait for an administrative determination to be made. In United States v. Winegar, 254 F.2d 693 (10 Cir., 1958), this precise question, whether to wait for an administrative determination or to proceed with the lawsuit under the Act, was discussed by the Tenth Circuit. In holding that the lawsuit could proceed, the court stated:

"Where the action is instituted during the pendency of the administrative proceeding but before the making of findings of fact therein, the question whether the judicial action should be stayed for a reasonable time to await completion of the administrative proceeding is a question addressed to the sound judicial discretion of the court. It may well be that in the ordinary case of that kind, appropriate procedure would be to stay the judicial proceeding for a reasonable time to await the making of administrative findings of fact, but that is a matter committed to the sound judicial discretion of the court." 254 F.2d at 696.

In the present case the district court waited two years for the Department of Labor to complete the administrative proceedings and we do not feel that the failure of the district court to continue to stay the lawsuit can be termed an abuse of discretion.

Moreover, the principal purpose of a stay would have been to afford the court the benefit of an administrative construction of the stockpile rule. As will be seen, in the narrow confines of the stipulation of facts and issues, the answer to the question presented was one of law based on the construction of the contract and the application thereof to only a single portion of the rule. In addition, the Administrator had previously construed the stockpile rule to the extent that it is drawn in issue in this litigation. See In re Funsten, PC-611, 13 WH Cases 819 (1958).

The district court did not err in denying the stay.

We come then to the stockpile rule issue. The rule is printed in the margin.³ 

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To qualify under the stockpile rule for exemption from coverage, Gulf States must have had a stockpile of drums sufficient to meet the requirements of the government contract at the time of the award of the contract. The contract itself was an indefinite amount requirements contract. It contained a general estimate of the number of drums that the government considered it needed under the contract, 300,000 drums. However, according to the language of the contract, the general estimate was expressly stated not to be binding upon the government.

In addition to the general estimate, the contract contained more specific requirements. It provided that: "Delivery is required to be made in accordance with the schedule set forth below." The specific delivery schedule provided for delivery of up to 6,000 drums in the first 30 days, between 6,000 and 15,000 drums within 45 days, and for each additional 15,000 drums an additional 15 day period. The parties stipulated that Gulf States Asphalt had a sufficient number of drums in stock during the duration of the contract to meet the specified delivery schedule but not the general estimate of 300,000 drums. In order to avail itself of the stockpile exemption, the government contractor must have a stockpile which is "at the time of the award and at all times while the contract is in effect, sufficient to fulfill the remaining demands" of the contract, Rulings and Interpretations No. 3, Sec. 24(b), fn. 3, supra. Thus the issue before the district court was whether the stockpile maintained by Gulf States was sufficient to meet the "remaining demands" of the contract. The district court answered in the affirmative. The district court arrived at this conclusion by construing the contract against the drafter, the government, and holding that the specific delivery schedule controlled over the general estimate.

According to the government the term "remaining demands" means the general estimate, 300,000 drums, but no authority is cited which supports this position. The government relies on In re Funsten, supra. There the Administrator held that where the amount of goods is "for all practical purposes, not ascertainable prior to the receipt of orders, the 'remaining demands' of the Government within the stockpile rule . . . can only be the orders the contractor has then received but not filled." The contract in issue in the Funsten case contained neither a general estimate nor a specific delivery schedule. The Administrator stated that testing the "application of the 'stockpile rule' by facts which cannot be known until the work under the contract has been completed would deny to the contractor, during the performance of the work, the very information which he must have in order to determine whether he is complying with the Act's stipulations."

By a parity of reasoning, In re Funsten is applicable here. The government was expressly not obligated to purchase the 300,000 drums. It was obligated to purchase only under the specific schedule. Gulf States could only have known of its obligation under the Act and the stockpile rule from the government's obligation under the contract as that obligation arose from orders filed in accordance with the specific schedule.

The district court was faced within an either-or situation. Under the stipulations, it was agreed that the stockpile was sufficient under the rule if the amounts of the specific schedule constituted the remaining demands but insufficient if the estimate of 300,000 drums was controlling. We agree with the district court that the remaining demands under the contract were those amounts contained in the specific schedule.⁴ 

Given the stipulation, we also agree with the district court that the rule absolved Gulf States from paying overtime.⁵ 

Affirmed.