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May 7, 1960


The opinion of the court was delivered by: John E. Miller, Chief Judge.


This is an action by the Secretary of Labor to recover wages for five employees of the defendants allegedly due under provisions of the Fair Labor Standards Act of 1938, as amended. 29 U.S.C.A. § 201 et seq. Jurisdiction of this action is conferred upon the court by Section 16(c) of the Act and by 28 U.S.C.A. 1337 and 1345.

The complaint was filed October 14, 1959, and includes claims for wages due under both the minimum wage and the overtime provisions of the Act. The Secretary seeks to recover such wages for the period from July 1957 to July 1959. The case was tried to the court without a jury on January 22 and 23, 1960. Briefs have been received from the parties and have been considered along with the testimony and exhibits thereto. The court now files its Findings of Fact and Conclusions of Law, separately stated.

Findings of Fact


The individual defendants, M.L. Birkett and J.M. Birkett, are brothers, and prior to 1949 became interested in photography. During 1949 Fort Chaffee, a United States Army installation on the outskirts of Fort Smith, Arkansas, was reactivated. The defendants submitted a bid to the Post Exchange for the right to operate the photography concession on the Post. This bid was accepted, and the defendants opened and began the operation in strict accordance with the terms of such a concession. After a few months, Fort Chaffee was deactivated by the Army and the concession was closed. Shortly after the start of the Korean conflict in 1950 the Post was again reactivated and the defendants reopened their photography concession.

The business of the concession was confined to taking pictures of military groups, making portraits of soldiers, and receiving exposed film for processing and printing. The defendants did not have facilities in their shop for developing and printing roll film, and accordingly sent such film to a concern in Memphis, Tennessee, for processing. In 1953, the Post Exchange Officer demanded that the defendants provide one-day service in processing roll film for the soldiers. This necessitated the defendants' acquiring photo-finishing equipment. The quarters provided by the Army on the Post were not large enough to house such equipment and additional space on the Post was not available. Therefore, in 1953 the defendants rented additional space in the City of Fort Smith and installed the required photo-finishing equipment therein. In addition, the Fort Smith location stocked cameras and camera equipment which the Fort Chaffee concession was prohibited from selling. Both locations operated under the name "The Photo Shop," and both were owned and operated by the defendants as partners. The Fort Smith operation has always been located in retail shopping areas and is open for business to the general public.

All roll film turned in at the Fort Chaffee concession by soldiers was processed in the Fort Smith shop. Film was also processed there for the general public. In addition, film was processed on a wholesale basis for some 50 drug stores located in and around Fort Smith and including some stores in Oklahoma. The drug stores so involved collected exposed roll film from its customers and delivered it to the Fort Smith shop where it was processed and returned to the drug stores. The drug stores received a discount from the shop and were thereby able to make a profit on the transaction. Such sales to drug store accounts constituted sales for resale.


The photo concession located at Fort Chaffee was managed by J.M. Birkett while M.L. (Milton) Birkett managed the Fort Smith shop. As an added convenience to military personnel on the Post, boxes for exposed film were placed in each Post Exchange. The soldiers could place exposed roll film, along with a designated developing charge, in sacks provided by the defendants and then deposit the sacks in the locked boxes. The film was picked up daily and processed at the Fort Smith location and returned the following day to the individual soldiers. This type sale is designated on the sales analysis hereafter discussed as "Fort Chaffee Sales (PX)." Such sales were not sales for resale.

Financial records of the Fort Chaffee concession were kept separate from the Fort Smith shop, and the Fort Chaffee concession was charged monthly for the film processed by the Fort Smith shop. This was required by the provisions of the defendants' contract with the Post Exchange under which the Post Exchange received a specified percentage of the gross profits of the concession as rent on the building and for the license to do business on the Post. Also, all records concerning the consession operation were required to be available for Government audit.

During the period in question, July 1957 to July 1959, the major portion of the income of the defendant partnership was derived from the operation of the concession at Fort Chaffee. The sales made by the Fort Chaffee concession were ...

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