Citicorp Industrial Credit, Inc. v. Brock

483 U. S. 27

June 22, 1987

The Fair Labor Standards Act (FLSA) prohibited the sale or distribution of goods manufactured by a company which violated minimum wage laws. For many years, Citicorp underwrote a large clothing manufacturer, but that manufacturer ultimately failed in 1985. During the last month of production, the employees were not paid. The Department of Labor then took active steps to prevent Citicorp from attempting to place any of the products manufactured during this last month into commerce. Citicorp argued that a longstanding appeals court ruling exempted creditors from the general FLSA rule.

The Court ruled 7-2 that the FLSA non-distribution rule applied to creditors. Marshall showed that the text of the FLSA was clear and unambiguous. The law made two exceptions to its general rule, but neither one applied to Citicorp. He was unsympathetic to the claim that the FLSA’s rule was not intended to apply to creditors. To the contrary, the law’s purpose was to remove tainted goods from the market, and as to that purpose, it hardly mattered whether a manufacturer or a creditor did the distributing. Scalia’s brief concurrence grumbled about (what else?) the majority’s inquiry into the intent of Congress in passing the law.

Stevens dissented, and was joined by White. He did not see any evidence that Congress had intended the FLSA rule to apply to bankruptcy situations. Furthermore, the court of appeals rule exempting creditors, which the majority rejected, had stood unchallenged by either Congress or other courts for two decades. In light of all this practical, real world experience, Stevens did not believe it was appropriate for the Court to go ultra-textualist, and overturn the prevailing legal understanding of the FLSA.

This case illustrates the contrast between formalism and functionalism better than just about any other case all term. Formalism is frequently disruptive and painful, while the argument Stevens makes is undeniably seductive. In the end though, unswerving fidelity to the text better serves the long term good of a court and a nation. “And why do you break the commandment of God for the sake of your tradition?” – Matthew 15:3.


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