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.
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
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 ...