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recognizing United States Magistrate Judge bound to follow prior decision of a District Judge in the same district
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Civil No. SA-01-CA-699-FB
July 18, 2002
REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE
TO: Honorable Fred Biery United States District Judge
Pursuant to the order of referral in the above-styled and numbered cause of action to the undersigned United States Magistrate Judge and consistent with the authority vested in United States Magistrate Judges under the provisions of 28 U.S.C. § 636(b)(I)(B) and rule 1(d) of the Local Rules for the Assignment of Duties to United States Magistrates, effective January 1, 1994, in the Western District of Texas, the following report is submitted for your review and consideration.
Docket no. 20.
I. JURISDICTION
Plaintiff's first amended complaint alleges jurisdiction under 28 U.S.C. § 1331, 1337(a) and 1339.
As noted below, defendant removed this case based on diversity. Thereafter, plaintiff filed a motion for leave to file a first amended complaint or conditional motion to remand. The Court denied the motion to remand and granted the motion to amend. Cf. Sigmon v. Southwest Airlines Co., 110 F.3d 1200, 1202 (5th Cir. 1997), cert. denied 522 U.S. 950, 118 S.Ct. 370 (1997) ("[plaintiff's] decision to `throw in the towel' and amend his complaint to state an `unmistakable federal cause of action' conferred original jurisdiction on the federal court" and waives any argument the case was not properly removed) (citations omitted) (emphasis added)).
II. PROCEDURAL HISTORY
On August 2, 2001, defendant Oxmoor House, Inc. ("Oxmoor") removed this case to this Court from the 166th Judicial District Court of Bexar County Texas alleging that the parties were of diverse citizenship and the amount in controversy exceeds $75,000, exclusive of interests and costs. Plaintiff Mary Ann Randolph ("Randolph") filed her original petition alleging, in sum, that Oxmoor violated Texas Business and Commerce Code § 35.45, California Civil Code § 1584.5, Florida Statutes Annotated § 570.545, New York General Business Law § 396, and the laws of other states when Oxmoor delivered to Randolph a book that she had not ordered "unaccompanied by disclosure that there is no obligation to pay for or return the goods[,] . . . invoicing for the unordered book and initiating a series of dunning letters and collection efforts if the books are not promptly paid for." Plaintiff requested that her action be maintained as a class action and pleaded one cause of action, that for "money had and received — restitution," in which she requested restitution of "all money had and received from residents of Texas, Florida, California and New York" for money paid for books not ordered. Plaintiff seeks restitution for monies paid, an injunction to prohibit defendant from sending unsolicited books and seeking to collect for unsolicited books, pre and post judgment interest, attorney's fees and costs.Prior to the time of removal, defendant filed its answer in the nature of a general denial. Following removal, on August 8, 2001, plaintiff filed a demand for jury trial. On August 31, 2002, plaintiff filed a motion to file a first amended complaint, a conditional motion to remand seeking an Order remanding her case if the District Court denied her leave to file the first amended complaint, and a motion for class certification. On September 12, 2001, defendant filed a combined response to the motion to amend and a motion for an extension of time to respond to the motion for remand and the motion for class certification. In brief, defendant indicated that it "does not oppose plaintiff's motion for leave" to amend, it requested an extension of time to respond to plaintiff's motion to remand which would be mooted by an Order granting leave to amend, and argued that plaintiff's motion for class certification should not be taken up by the Court until defendant has briefed class-wide issues and has been allowed the opportunity to conduct discovery on class certification issues. On October 2, 2001, the District Court denied the motion to remand, granted plaintiff leave to file a first amended complaint, and granted defendant an extension of time to file a response to the motion for class certification until such time as the District Court ruled on the motion to dismiss.
Docket no. 1, answer at 1.
Docket no. 2.
Docket nos. 3, 4 and 5.
Docket no. 6.
Docket no. 6 at 3-6.
Docket no. 9.
Plaintiff's first amended complaint alleges a cause of action under the Federal Unauthorized Merchandise Statute. The first amended complaint alleges, in sum, that Oxmoor has violated the statute "by sending books to people who did not order them and then dunning the people for payment of `debts' they are not obligated to pay," alleges that the certification of a nationwide class under rule 23, FED.R.CIV.P. is merited, and seeks restitution "for the full amount paid by each member of the class for each unordered book paid for by a class member," an injunction restraining Oxmoor "from collecting or attempting to collect debts from the class members who have been sent unordered books," and "such other and additional relief as the Court may deem just and proper."
Docket no. 10 at 1.
Id. at 22.
On October 5, October 9 and October 11, 2001, the parties filed proposed scheduling recommendations and briefing on a proposed discovery plan. In lieu of filing an answer to the first amended complaint, on October 17, 2001, defendant filed a motion to dismiss. On October 22, 2001, plaintiff filed her response to the motion to dismiss. On November 2, 2001, defendant filed its reply in support of its motion to dismiss. On December 13, 2001, the Court granted the parties' unopposed motion to delay the entry of a scheduling Order until such time as the Court rules on the motion to dismiss. On June 20, 2002, the Court referred this case to the undersigned for pretrial management.
Docket nos. 11, 12 and 13.
Docket no. 14.
Docket no. 16.
Docket no. 17.
Docket no. 19.
Docket no. 20.
III. FACTUAL SUMMARY
As will be discussed more completely below, when considering motions to dismiss pursuant to FED.R.CIV.P. 12(b)(1), the Court is required to construe as plaintiffs' factual allegations which pertain to plaintiff. Rule 12(b)(1) motions admit all well-pleaded facts in the complaint which it challenges. Thus, in the spirit of Rules 12(b)(1), the Court sets forth the following narration of facts which are taken as true for the purposes of defendant's motion to dismiss:Plaintiff's first amended complaint, twenty-seven pages long excluding the seven attached exhibits, appears to focus on the class allegations which she wishes to pursue on behalf of others similarly situated. With respect to herself, plaintiff alleges that she ordered her first book from defendant in 1997, but she never agreed to be enrolled in a "pre-notification negative option plan" through which she would be mailed advance notice that she would be mailed a book for 30-day inspection unless she responded within a stated period of time to say she did not wish to receive the book. Plaintiff alleges that under the pre-notification negative option plan, the consumer is billed for the book if the consumer does not indicate that he/she does not wish to receive the book or does not return it within the 30-day inspection period. Plaintiff alleges that after purchasing her first book in 1997, she received "several books" and, thereafter, bills for the books and collection letters regarding un-paid bills. Plaintiff's first amended complaint does not allege that she did not receive advance notice before the books were sent to her, but does allege that when she ordered the first book she did not agree "to be enrolled in a negative option plan operated (illegally) by Oxmoor." Plaintiff alleges that she never received a notice from defendant that she could treat the books (other than the first one she ordered) "as gifts, without legal obligation to pay for the book or even return the books" and she received "bills for the books and shipping and handling charges, and dunning communications if the unordered books are not promptly paid for," in violation of the Federal Unordered Merchandise Statute. Plaintiff alleges that, unaware of her legal rights, she paid for books she did not order based on "express and implied misrepresentations that she had somehow become obligated to pay for the books and that failure to pay for the books would result in harm to her credit or further collection action." Plaintiff seeks "full restitution (refund) of the amount paid for each book the law considers a gift" and a permanent injunction to prevent Oxmoor from collecting for "unordered books."
The attached exhibits, examples of advertisements, solicitations, collection notices, appear to relate to the class allegations; none of the exhibits bear plaintiff's name.
Plaintiff is a licensed attorney. Docket no. 5 at 13.
Docket no. 10 at 12, 19.
Id. at 12, 19.
Id. at 5-8, 12-13.
Id. at 13.
Id. at 12.
Id. at 13.
Id. at 20.
Id. at 21-22.
IV. ISSUE
Whether Randolph has an implied private cause of action to sue defendant under the Federal Unauthorized Merchandise Statute for restitution and an injunction?V. STANDARDS
Motions filed under Rule 12(b)(1) of the Federal Rules of Civil Procedure permit a party to challenge the subject matter jurisdiction of the district court to hear a case. Lack of subject matter jurisdiction may be found in one of three instances: "(1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." The burden of proof for a Rule 12(b)(1) motion to dismiss is on the party asserting jurisdiction. Accordingly, the plaintiff constantly bears the burden of proof that jurisdiction does in fact exist.
Williamson v. Tucker, 645 F.2d 404, 413 (5th Cir.), cert. denied 454 U.S. 897 (1981); see Barrera-Montenegro v. U.S., 74 F.3d 657, 659 (5th Cir. 1996).
McDaniel v. U.S., 899 F. Supp. 305, 307 (E.D. Tex. 1995), aff'd, 102 F.3d 551 (5th Cir. 1996).
Menchaca v. Chrysler Credit Corp., 613 F.2d 507, 511 (5th Cir.),cert. denied 449 U.S. 953 (1980).
A facial attack on subject matter jurisdiction requires the court to decide if the plaintiff has correctly alleged a basis for subject matter jurisdiction. Such an attack is valid if from the face of the pleadings, the court can determine it lacks subject matter jurisdiction. In examining a Rule 12(b)(1) motion, the district court is also empowered to consider undisputed matters of fact reflected in the record. Ultimately, a motion to dismiss for lack of subject matter jurisdiction should be granted only if it appears certain that the plaintiff cannot prove any set of facts in support of his or her claim that would entitle him or her to relief. "A case is properly dismissed for lack of subject matter jurisdiction when the court lacks the statutory or constitutional power to adjudicate the case."
Venture I, Inc. v. Orange County, Tex., 947 F. Supp. 271, 276 n. 7 (E.D. Tex. 1996).
Id.
Williamson, 645 F.2d at 413.
Home Builders Ass'n of Miss., Inc. v. City of Madison, Miss., 143 F.3d 1006, 1010 (5th Cir. 1998).
Id. (quoting Nowak v. Ironworkers Local 6 Pension Fund, 81 F.3d 1182, 1187 (2d Cir. 1996)).
When a Rule 12(b)(1) motion is filed with a Rule 12(b)(6) motion, the court should always consider the Rule 12(b)(1) jurisdictional attack before addressing any attack on the merits. This requirement prevents a court without jurisdiction from prematurely dismissing a case with prejudice. The court's dismissal of a plaintiff's case because the court lacks subject matter jurisdiction is not a determination of the merits and does not prevent the plaintiff from pursuing a claim in a court that does have proper jurisdiction. A motion to dismiss pursuant to Rule 12(b)(1) is analyzed under the same standard as a motion to dismiss under Rule 12(b)(6).
Hitt v. Pasadena, 561 F.2d 606, 608 (5th Cir. 1977) (per curiam).
Id.
Home Builders Ass'n of Miss., 143 F.3d at 1010.
VI. ARGUMENT AND ANALYSIS
A. SUMMARY OF ARGUMENTSOxmoor has moved to dismiss plaintiff's first amended complaint arguing that there is no private right of action under the Federal Unauthorized Merchandise Statute, Title 39, United States Code, section 3009. Oxmoor represents that it operates under a "pre-notification negative option plan," a plan followed by the Book of the Month Club and others and in accordance with an FTC regulation, by which, consumers, at the time they receive and pay for an initial book offering, give their consent to receive periodic announcements identifying merchandise which will be shipped and billed to the consumer unless the consumer declines. Oxmoor argues that this practice is in accordance with section 3009 which requires only that consumers have the option to treat as a gift, and not pay for, any merchandise sent to them which they did not order or consent to receive. Oxmoor argues there is no private right of action which would allow plaintiff or other consumers to sue for reimbursement for the cost of each book for which that consumer paid, regardless of whether the consumer understood Oxmoor's program and wanted to purchase the book, and/or to enjoin Oxmoor from billing for the cost of the book and collecting the cost of book from those consumers who have received a book, even if the consumer wanted the book and would pay for it.
In moving to dismiss, Oxmoor argues that section 3009 provides that the FTC will enforce violations as unfair trade practices and individuals may treat unordered merchandise as a gift, using section 3009 defensively, to defend non-payment. Oxmoor argues that there is no implied private right of action to use section 3009 affirmatively, that is, to sue to enjoin collection efforts or for restitution or for damages. Oxmoor argues that Congress did not expressly create a private right of action when it passed the Federal Unauthorized Merchandise Statute. Oxmoor further argues that it would be inappropriate to imply a private right of action because: (a) there is no evidence Congress intended to create a private right of action; (b) there is an initial presumption that Congress did not intend to create a private right of action and a "heavy burden" on a plaintiff seeking to assert an implied right of action to demonstrate that "Congress affirmatively contemplated private enforcement when it passed" the relevant statute; (c) the Ninth Circuit case which found an implied right of action applied the four-pronged test of Cort v. Ash which, although it may provide guidance, is "no longer the law;" and (d) the decision of a District Judge of this Court which found an implied right of action is "wrong;" although the decision was based on the correct standard, as articulated by the United States Supreme Court in Transamerica Mortgage Advisors, Inc. v. Lewis, ("TAMA"), it failed to adequately consider the differences between the statutory remedial schemes reviewed in TAMA and the Federal Unauthorized Merchandise Statute and incorrectly focused on effectuating a purpose of the Federal Unauthorized Merchandise Statute without adequately considering Congress's remedial scheme through which the FTC had broad enforcement powers and an individual consumer may treat any unordered merchandise as a gift.
Docket no. 14 at 2-10.
Docket no. 14 at 4 (citing Louisiana Landmarks Soc., Inc. v. City of New Orleans, 85 F.3d 119, 1123 (5th Cir. 1996) (internal quotations omitted)).
Kipperman v. Academy Life Ins. Co., 554 F.2d 377 (9th Cir. 1977).
422 U.S. 66, 78-79, 95 S.Ct. 2087-89 (1979).
Noe v. Metropolitan Atlanta Rapid Transit Auth., 644 F.2d 434, 437 (5th Cir.), cert. denied, 454 U.S. 1126, 102 S.Ct. 977 (1981).
Crosley v. Lens Express, Inc., 2001 WL 650728 (W.D.Tex. Feb. 12, 2001).
444 U.S. 11, 24, 100 S.Ct. 242, 249 (1979).
Docket no. 14 at 7-9.
Plaintiff opposes dismissal of her complaint, arguing that there are only two reported cases that address the existence of an implied right of action under section 3009 and both cases have held that a limited private right of action exists belonging to a recipient of unordered merchandise to obtain restitutionary relief. Randolph argues those cases were correctly decided and this Court should follow them. Plaintiff also argues that a determination that a private right of action exists is supported both by the United States Supreme Court's decision in Cort v. Ash and the subsequent decisions of the United States Supreme Court which narrow Cort's four-part test and hold that the intent of Congress when enacting the statue is dispositive. For the same reason that the United States Supreme Court found that a private right of action existed under section 215 of the Investment Advisors Act ("IAA") in TAMA, plaintiff argues the Court must conclude that a private right of action arises under section 3009.
See note 60, below.
Docket no. 16 at 1-10.
422 U.S. 66, 78-79, 95 S.Ct. 2080, 2088-89 (1979).
In the alternative, if the Court were to determine that no private right of action exists, Randolph asks for leave to amend her complaint to assert other causes of action, "including the several state statutes which prohibit the sending of unordered goods, the deceptive trade practice acts of most states, the Federal Fair Debt Collection Practices Act, the unfair debt collection statutes of several states, and the common law claims of money had and received, unjust enrichment and other claims." Finally, in the event that defendant's motion cannot be resolved on the papers, Randolph requests a hearing.
Id. at 10.
Id.
In its reply, Oxmoor reiterates its arguments that Congress' intent is the dispositive factor as to whether a private right of action should be implied; there is a presumption that Congress did not intend to create a private right of action; and plaintiff has not sustained her burden in this case to demonstrate that Congress intended that private individuals be allowed to sue in court to obtain restitution, damages and/or an injunction.
Docket no. 17.
B. IMPLIED PRIVATE RIGHT OF ACTION UNDER SECTION 3009
The Crosley Case
Defendant's motion to dismiss, as it must, focuses on the decision of a District Judge of this Court in Crosley. In Crosley, plaintiff, a local attorney, ordered one supply of contact lens from defendant Lens Express, Inc. When Crosley received a second set of lenses, sent to him under Lens Express' "New and Fresh" program, he called Lens Express to complain and was told that his credit care would be credited "if Crosley returned the lenses, at his expense. Crosley refused and brought this lawsuit, raising state law trade practices claims and a violation of" the Federal Unauthorized Merchandise Statute, seeking "to have a class of Lens Express customers from five states certified." Crosley sought damages for shipping charges that putative plaintiff's may have incurred, overcharges on accounts that may have been made without permission, and damages incurred by one putative plaintiff who was not able to use her charge card to purchase airplane tickets at a reduced rate, apparently because the credit limit had been reached with the Lens Express charge. Lens Express moved to dismiss the federal claim on the ground there is no private right of action under the Federal Unauthorized Merchandise Statute.
As discussed, Crosley relied in part on the Ninth Circuit's decision in Kipperman. There are two other federal cases that touch upon the issue of a private right of action under section 3009. In Howe v. The Reader's Digest Assoc., Inc., 686 F. Supp. 461, 466 (S.D.N.Y. 1988), the District Court held that there was "no private right of action under these sections [sections 3001(d), 3005 and 3009 of Title 39] for damages or injunctive relief" and dismissed the count alleging a claim based on those sections. Subsequently in the decision, the Court stated that it declined "to even consider inferring" a private right of action for damages and injunctive relief under section 3009 "because plaintiff has failed to demonstrate that he suffered any damages or that the objectionable conduct is continuing such as to warrant injunctive relief." In Kashelkar v. Rubin Rothman, et alia., 97 F. Supp.2d 383, 395 (S.D.N.Y. 2000), the District Court held, without addressing jurisdiction, that plaintiff had not pleaded a violation of section 3009 because section 3009 "concerns the mailing of unsolicited merchandise to customers, not unsolicited offers of credit."
2001 WL 650728, at *1.
Id.
Id. at *3 Plaintiff later stipulated that the damages would be limited to "a declaration of the right to keep any unordered lenses and any restitution that may be proved." Id. at *3 n. 2,
The District Court held that "under Cort or the more direct inquiry proposed in Noe, a private cause of action has been created by section 3009" and that "the Supreme Court's reasoning in . . . TAMA . . . compels the conclusion that section 3009 does create such a right." The Court applied the Cort factors "[i]n the interest of caution and completeness . . . to illustrate why this is so."
Id. at *1.
Id.
With respect to the first Cort factor whether plaintiff is one of the class for whose benefit the statute was enacted, the Court held that "[i]t is clear that section 3009, like the Federal Unfair Trade Practices Act that it references is designed to protect consumers from the unfair trade practices." With respect to the second Cort factor, the Court acknowledged "there is no explicit indication, in either section 3009 itself or its legislative history, that Congress intended to create a private cause of action." But, in looking at "the spare language of the provision itself," the Court found that there is "an implicit indication of congressional intent" to create a private right of action, rejecting Lens Express' argument that "the Fifth Circuit requires some `affirmative action' from Congress demonstrating its intent to create a private cause of action." The Court found that when Congress gave recipients "the right to keep" unordered merchandise as gifts, Congress implicitly gave the recipients "the ability to enforce such a right," both defensively, to defend against any suit to collect for the price of the merchandise, but also affirmatively, to sue for damages. The Court relied on the Supreme Court's decision inTAMA which reviewed section 215 of the IAA providing that a contract made in violation of the act "shall be void . . . as regards the rights of any person," and which held that the issue of voidness could be raised both defensively and in a suit for recision and restitution. Citing the Ninth Circuit's decision in Kipperman, the Court held that the "damages caused by an asserted violation of section 3009, may be redressed in federal court," to include the damages alleged by plaintiff and putative class members. The Court acknowledged that: (a) the Act references the Federal Unfair Trade Practices Act and provides that sending unordered merchandise, with noted exceptions, constitutes an unfair trade practice in violation of Title 15, United States Code, section 45(a)(1); and (b) section 45 creates an administrative scheme for FTC enforcement, but does not create a private right of action.
Id. at *2. The Court reiterated that "the primary focus of the inquiry is whether Congress intended to create a private cause of action." Id.
Id.
Id.
Id. at *2 n. 1.
Id. at *2.
Id. at *2-3.
Id. at *2-3.
Id. at *3.
Id. at *2.
With respect to the third Cort factor, the Court found that inferring a private right of action is consistent with the overall legislative scheme. With respect to the fourth Cort factor, the Court followed the approach of TAMA and declined "to adopt the `anomalous' suggestion that Congress created a right that it intended to be enforced only by the states."
Id. at *3.
Id.
In sum, the Court in Crosley denied Lens Express' motion to dismiss, held that "section 3009 creates a limited private right of action that would encompass the claims for damages sought in this lawsuit," and certified a nationwide class. The United States Court of Appeals for the Fifth Circuit denied defendant's request for permission to appeal the class certification decision. Subsequently, the case settled.
Id. at *3 and *6. See also Crosley, SA-00-CA-385-EP, docket no. 68 (Order granting plaintiff's motion to clarify that the Court certified one "nationwide class of individuals who received contact lens from Lens Express pursuant to its `New and Fresh' program (or a substantially similar program) between March 27, 1998, and the present date" and that, in a further Order, the Court might rule that there are five subclasses for Texas, Michigan, California, Florida and New York for damages issues).
Crosley, SA-00-CA-385-EP, docket no. 72.
Further Analysis of Legislative Intent
Plaintiff argues that Crosley controls the disposition of defendant's motion to dismiss. Defendant does not argue that Crosley is distinguishable from this case, but that it is wrongly decided and should not be followed. Although this case was referred to the undersigned by a District Judge, the prior decision of a District Judge of this District in Crosley, which holds that an implied private right of action exists to allow a suit for declaratory judgment and restitution, is precedent which the undersigned United States Magistrate Judge is bound to follow. Just as District Judges (and Magistrate Judges) follow the holdings of Fifth Circuit cases, Magistrate Judges follow the holdings of the decisions of District Judges in this District.
Nevertheless, Oxmoor's arguments that Crosley was not correctly decided are matters which the District Judge to whom this case is assigned may fully consider, since a decision of a District Judge of this Court is persuasive authority, but not necessarily binding precedent, to another District Judge of this Court. "An occasional conflict in decisions may be useful in identifying questions that merit . . . [a higher] . . . Court's attention." In furtherance of the District Judge's referral and in recognition of defendant's challenge to Crosley and request that the Court fashion a different rule, this report considers the central arguments that militate against implying a private right of action to enforce section 3009, in sum: the failure of the statute or the legislative history to expressly provide for a lawsuit filed by a private individual; the FTC's administrative scheme; and the state of federal and state law at the time the law was enacted.
The Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., ___ U.S. ___, 122 So. Ct. 1889, 1897 (June 3, 2002) ((Stevens, J., concurring opinion; referring to splits among circuits on patent issues).
"The question whether a statute creates a cause of action, either expressly or by implication, is basically a matter of statutory construction." The Court must determine "whether Congress intended to create the private remedy," beginning with "the language of the statute itself." The Fifth Circuit "has recognized a presumption that Congress did not intend to create a private right of action. . . . [Plaintiffs] `bear the relatively heavy burden of demonstrating that Congress affirmatively contemplated private enforcement when it passed the relevant statute." Crosley found "no explicit indication, in either section 3009 itself or its legislative history that Congress intended to create a private cause of action." The parties agree that the statute does not expressly create a private right of action and the legislative history does not expressly state whether or not a private right of action is created by the statute. The Fifth Circuit has stated: "The Supreme Court forewarns that in cases where the statutes and legislative history are silent on the question of a private remedy, `implying a private right of action on the basis of congressional silence is a hazardous enterprise at best.'" The portions of the legislative history cited to the Court include the comments of Senator Magnuson at the time of Congress' consideration of section 3009 that "[f]ifteen states have now moved to bring under control the unconscionable practice of persons who ship unordered merchandise to consumers and then trick or bully them into paying for it" Senator Magnuson's remarks indicate that Congress was aware that some states had passed laws to protect consumers from the practice. Senator Magnuson's remarks do not indicate that Congress intended to provide a private individual the right to sue in federal court under section 3009. The Conference Report to the Public Law 91-375 indicates only that the Senate amendment contained a provision not in the original House bill
TAMA, 444 U.S. at 15, 100 S.Ct. at 245.
Id. See also California v. Sierra Club, 451 U.S. 287, 293, 101 S.Ct. 1775, 1781 (1981) ("Cases subsequent to Cort have explained that the ultimate issue is whether Congress intended to create a private right of action"); Sigmon., 110 F.3d at 1205; Hondo Nat'l Bank v. Gill Savings Ass'n, 696 F.2d 1095, 1098 (5th Cir. 1983).
Sigmon, 110 F.3d at 1205 (citations omitted) (emphasis added).
2001 WL 650728 at *2 (emphasis added).
Till, 653 F.2d at 160 (citing Touche Ross Co. v. Redington, 442 U.S. 560, 571, 99 S.Ct. 2479, 2486 (1975)).
116 Cong. Rec. at 22314 (June 30, 1970). Both sides have cited this same portion of legislative history to the Court. Docket no. 14 at 9-10; docket no. 16 at 7.
Defendant states that the statutes in Texas, Florida and Michigan do not provide for any specific private right, but statutes enacted in New York in 1966 and California in 1969 and 1971 specifically created private causes of action for injunctive relief and attorney's fees (docket no. 14 at 9-10 and n. 9).
See also Kaiser v. U.S. Postal Service, 908 F.2d 47, 51 (6th Cir. 1990), cert. denied, 498 U.S. 1025, 111 S.Ct. 673 (1991) (refusing to imply a private right of action based on labor rights in the Postal Reorganization Act, 39 U.S.C. § 3006 titled "right of transfer," because legislative history is devoid of any intent to imply a right of action); Blaze v. Payne, 819 F.2d 128, 130 (5th Cir. 1987) (same); Gaj v. U.S. Postal Service, 800 F.2d 64, 68-69 (3rd Cir. 1986) (same).
providing that mailing of unordered merchandise, with certain exceptions, constitutes an unfair method of competition and an unfair trade practice in violation of the Federal Trade Commission Act and may be treated as a gift by the recipient. The conference substitute adopts the Senate provision.
CONF. REP. Doc. No. 91-1363 (Aug. 3, 1970), reprinted in 1970 U.S.C.C.A.N. at 3721 (91st Cong., 2d Sess.).
This language provides no support for concluding Congress intended to provide a private right of action.
Crosley also found, with reference to `the spare language of' section 3009, that "if section 3009 had ended with subsection (a), it could not be said to create a private cause of action." But, Crosley found that subsection (b) of section 3009 gave recipients of unordered goods "the right to keep those gifts" and that such language "implies the ability to enforce such a right." As noted by the Supreme Court, although "the failure of Congress expressly to consider a private remedy is not inevitably inconsistent with an intent on its part to make a remedy available . . . [s]uch an intent may appear implicitly in the language or structure of the statute or the circumstances of its enactment." Crosley held that there is no intent to imply a private right of action in section 3009(a), but Congress' implicit intent to create a private right of action is found in the language of section 3009(b) which created a "right."
Id. (emphasis added).
Id.
TAMA, 444 U.S. at 18, 100 S.Ct. at 246.
Oxmoor's strongest argument in opposition to implying a private right of action is that, in essence, subsection (a) and (b) of section 3009 should not be considered separately from one another or from the context of related provisions of law. "In determining the legislative intent, we follow the cardinal rule that a statute is to be read as a whole, since the meaning of statutory language depends on context." Defendant argues that when section 3009 is viewed as a whole and in the context of the enforcement powers accorded the FTC to address unfair trade practices, it is improper to infer that Congress intended private suits.
Chair King, Inc. v. Houston Cellular Corp., 131 F.3d 507, 511 (5th Cir. 1997).
Section 3009 was enacted as part of the Postal Reorganization Act, Public Law 91-375, a statute relating to the Postal Service. In addition to promulgating section 3009, Public Law 91-375 authorized the Postal Service and the Attorney General to enforce certain violations of the Act. As noted, section 3009(a) makes, with noted exceptions, sending and attempting to collect payment for unordered merchandise a per se unfair method of competition or an unfair trade practice in violation of Title 15, United States Code, section 45(a)(1)' a portion of the Federal Trade Commission Act.
See e.g., 39 U.S.C. § 3005 (authority for Postmaster to issue orders to regulate obtaining money under fraudulent pretenses), 3008(e) (providing for a civil action by the Attorney General to enforce violations of postal orders by prohibiting pandering advertisements) and 3011 (judicial enforcement by Attorney General of ban on mailing sexually explicit material).
Although "the Supreme Court and this circuit have focused on the `right- or duty-creating language of the statute' as `the most accurate indicator of the propriety of implication of a cause of action," and although subsection (b) of section 3009 affords a consumer the "right" to treat unordered merchandise as a gift, the "focus" of section 3009 appears to be more "on the person regulated rather than the individuals protected," that is, the purpose of the law is to stop the practice of shipping and trying to collect payment for unordered merchandise. Congress' express reference to section 45(a) in section 3009(a) is strong support for the conclusion that Congress understood and intended that section 3009 was to be considered in reference to section to 45(a) and that enforcement of section 3009 would be addressed by the Federal Trade Commission through authorities granted it to address unfair trade practices in violation of section 45(a). Other related statutory provisions accorded the Federal Trade Commission the authority to address unfair methods of competition and unfair trade practices. These "integrated civil enforcement provisions . . . provide strong evidence that Congress did not intend to authorize other remedies that it simply forgot to incorporate expressly."
Hondo Nat'l Bank, 696 F.2d at 1099 (citations omitted).
Alexander v. Sandoval, 532 U.S. 275, ___, 121 S.Ct. 1511, 1521 (2001).
Massachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 134, 146, 105 S.Ct. 3085, 1092 (1985) (no private cause of action by which beneficiary of employee benefit plan could recover extra-contractual compensatory or punitive damages for fiduciary's improper or untimely processing of claim). Sigmon, 110 F.3d at 1206 ("We have held that the `existence of [an] administrative scheme of enforcement is strong evidence that Congress intended the administrative remedy to be exclusive.'") (citations omitted).
The remedial scheme for unfair trade practices in violation of section 45(a) included, at the time of the enactment of section 3009, the power of the Federal Trade Commission to issue cease and desist orders, conduct investigations, act as a master in chancery to report to a federal court the relief to be ordered in an antitrust lawsuit, obtain records and testimony, participate in lawsuits in federal court, and enact rules. "The express provision of one method of enforcing a substantive rule suggests that Congress intended to preclude others." There is no indication from the statutory framework that Congress intended to create any private right of action of any unfair trade practice in violation of section 45(a). At the time of the enactment of section 3009, courts had held that a violation of section 45(a) did not give rise to a private right of action. Congress is presumed to know the state of the law at the time of enactment of section 3009, including that Congress has passed other statutes that gave the FTC significant enforcement powers and that a violation of the Federal Trade Commission Act did not give rise to a private right of action in federal court.
15 U.S.C. § 45, 46, 46a, 47, 48, 49, 50, 56 and 57a.
Alexander, 532 U.S. at ___, 1215 Ct. at 1522.
E.g., FTC v. Klesner, 280 U.S. 19, 50 S.Ct. 1 (1929). Courts continued to maintain that there is no private right of action under section 45. E.g., Holloway v. Bristol-Meyers, Corp., 485 F.2d 986, 998 (D.D.C. 1973) (private enforcement of the FTC Act would interfere with the FTC's enforcement of the act); Fulton v. Hecht, 580 F.2d 1243, 1248 n. 2 (5th Cir. 1978), cert. denied, 440 U.S. 981, 99 S.Ct. 1789 (1979);Whims Appliance Service, Inc. v. General Motors Corp., 1978 WL 1352 (N.D. Ohio, June 8, 1998) (same).
Miles v. Apex Marine, 498 U.S. 19, 32, 111 S.Ct. 317, 325 (1970) (" We assume that Congress is aware of existing law when it passes legislation. See Cannon v. University of Chicago, 441 U.S. 677, 696-697, 99 S.Ct. 1946, 1957, 60 L.Ed.2d 560 (1979). There is no recovery for loss of society in a Jones Act wrongful death action."); Hondo Nat'l Bank, 696 F.2d at 1098.
"It is also an `elemental canon' of statutory construction that where a statute expressly provides a remedy, courts must be especially reluctant to provide additional remedies." The Supreme Court has stated:
131 F.2d at 512.
In determining whether a private cause of action is implicit in a federal regulatory scheme when the statute by its terms is silent on that issue, the initial focus must be on the state of the law at the time the legislation was enacted. More precisely, we must examine Congress' perception of the law that it was shaping or reshaping. When Congress enacts new legislation, the question is whether Congress intended to create a private remedy as a supplement to the expressed enforcement provisions of the statute.
Hondo Nat'l Bank, 696 F.2d at 1098-99, quoting Merrill Lynch, Pierce, Fenner Smith v. Curran, 456 U.S. 353, ___, 102 S.Ct. 1825, 1839 (1982).
As noted, Congress has provided remedies for unfair trade practices in violation of section 45 and the state of the law at the time section 3009 was enacted indicates that there is no private right of action under section 45(a). Congress would be expected to know that collection efforts — legal proceedings to collect bills or to clear credit — generally proceed in state court. For the same reasons that the Supreme Court in TAMA declined to imply a right of action to seek recourse for the "prohibited acts" listed in section 209 of the IAA (such as fraudulent transactions), the Court should decline to imply a right of action to seek recourse under section 3009. In this case, in 1997, when plaintiff alleges she received the first book she ordered, plaintiff could have complained to the Federal Trade Commission, which, under the authority of section 45(a) and related provisions, would have the authority to conduct an investigation, enter a cease and desist order, or file a civil suit to seek "recision or reformation of contracts, the refund of money or return of property, the payment of damages" and other relief."
The Supreme Court in TAMA implied a private right of action under section 215 of the IAA to seek a declaration, recision, restitution and injunction that an "investment advisory contract," as defined by 15 U.S.C. § 80b-5, or investment contract entered into in violation of the subchapter was void under section 215. 444 U.S. at 18-19, 100 S.Ct. at 246-47. "Investment advisors" are required to be registered with the SEC. The Court set out provisions of section 209, which allow only a criminal prosecution by the Department of Justice or a civil suit for injunctive relief by the SEC, finding that the statutory language of section 215 "fairly implies a right to specific and limited relief in federal court" to have "the issue of voidness under its criteria . . . litigated somewhere." 444 U.S. at 18, 100 S.Ct. at 246. At the same time, the Court did not imply a private right of action for money damages under section 206 which would have authorized private suits for a list of prohibited transactions (such as, employing a scheme to defraud a client), finding it "highly improbable that `Congress absentmindedly forgot to mention it intended a private action'" when, in section 209, it limited the remedies to action by the SEC or the Attorney General. 444 U.S. at 20, 100 S.Ct. at 247. Unlike the situation in TAMA, § 3009 reverses the statutory presumption in contact law that one who possesses or exercises dominion over goods is liable to pay for them.
15 U.S.C. § 45, 46, 57b.
A decision of the United States Supreme Court entered after the ruling in Crosley, Alexander v. Sandoval, provides further support for the view that Congress' decision to provide some remedies makes it more difficult to conclude that Congress impliedly intended to provide other remedies. The Court in Alexander considered whether there was a private right of action to enforce disparate impact regulations promulgated under Title VI of the Civil Rights Act of 1964. The Court reviewed the standards for implying private rights of action, reiterating that whether a private right of action is "necessary to make effective the congressional purpose" or is consistent with the congressional purpose are not proper benchmarks. "Raising up causes of action where a statute has not created them may be the proper function for common-law courts, but not for federal tribunals." The Court reiterated that statutory intent "is determinative" and considered the words of the statute at issue as well as the "text and structure of Title VI." The Court recognized that "[t]he express provision of one method of enforcing a substantive rule suggests that Congress intended to preclude others," and held there was no evidence in that case that Congress had intended to create a private right to enforce a regulation promulgated under the statute.
Id.
532 U.S. at ___ 1215 Ct. at 1520 ("Having sworn off the habit of venturing beyond Congress's intent, we will not accept respondents' invitation to have one last drink").
Id.
Id.
532 U.S. at ___, 121 S.Ct. at 1522. To the extent that plaintiff's first amended complaint cites the FTC's regulation regarding "use of prenotification negative option plans," 16 C.F.R. § 425.1, alleges that Oxmoor's conduct "violate[es] section 425.1 . . . of the Negative Option Rule," docket no. 10 at 18-19, and seeks to rely on an administrative rule in pressing this case, plaintiff has not demonstrated that Congress, through the statutory text of section 3009, created a private right of action to enforce any FTC regulation, including section 425.1.
In sum, if the District Court decides not to follow Crosley, it would do so based upon its conclusion that there is no evidence that Congress intended to imply a private right of action, even though such a remedy would be consistent with the general goals of stopping merchants from attempting to collect payment for unordered merchandise.
If the Court were to conclude there was not "affirmative legislative intent" to imply a private right of action, as in Noe, 644 F.2d at 437, the court would not be "required to make such multi-stepped analysis" as addressed in Cort, but it would not make a difference, since without evidence of legislative intent to imply a private right of action, the Court may not imply a private right of action.
With respect to plaintiff's request for injunctive relief to restrain Oxmoor "from collecting or attempting to collet debts from the class members who have been sent unordered books," this Court is acting without precedent directly on point. Defendant argues that a private right of action — whether for restitution or injunctive relief — should not be implied; neither defendant nor plaintiff separately focus on injunctive relief in their briefs to the Court. In Kipperman, the Ninth Circuit held that "[i]njunctive relief . . . possibly would interfere with the Federal Trade Commission's power to enforce section 3009" and that, "[i]n the absence of an expression of the part of Congress indicating a willingness to incur the risk of this interference, we hold that the private right of action does not embrace an injunction which enjoins the sender's activities." Therefore, focusing on legislative intent, the Ninth Circuit found no implied cause of action to sue for injunctive relief.
Kipperman, 554 F.2d at 380. The Court held that "[i]n order to protect fully the recipient's rights, he must be able to bring a suit to obtain a judicial declaration of those rights and, when necessary to secure restitutionary relief." The Court did not explain why possible interference with the FTC's power to enforce section 3009 applied only to limit an injunction but not restitution.
In Crosley, the District Court held that "section 3009 creates a limited right of action that would encompass the claims for damages sought in this lawsuit;" the Court's decision did not address whether it would be appropriate to imply a private right of action for injunctive relief. But, the reasoning of Crosley arguably would support implying a private right of action to allow a private plaintiff the right to sue for an injunction to stop further efforts to collect payment for a "gift." In short, if it is correct that Congress implicitly intended to allow a private lawsuit to seek a declaration that merchandise is unordered and may be considered to be a gift and to seek damages, it could follow that the recipient also has an implied right to enjoin efforts to collect payment for the "gift."
2001 WL 650728 at *3. As noted, plaintiff stipulated he was seeking as "damages" only a declaration that the contact lens were "unordered merchandise" and were a "gift" and restitution.
As noted, Crosley relied on TAMA in which the Supreme Court, when reviewing a different statutory scheme, held that "when Congress declared in § 215 that certain contracts are void, it intended that the customary legal incidents of voidness would follow, including the availability of "a suit for rescission or for an injunction against continued operation of the contract, and for restitution." TAMA, 444 U.S. at 19, 100 S.Ct. at 247.
If the District Court decides to follow the analysis of Crosley, it would deny the portions of defendant's motion to dismiss that seek dismissal of plaintiff's request for an injunction. The entry of an injunction against billing or collection efforts against a particular named plaintiff — as opposed to a request for an injunction against an industry practice — would appear to be part and parcel of protecting the "right" of the recipient of allegedly unordered merchandise.
But, if the District Court decides not to follow the analysis ofCrosley and holds there is no private right of action to sue in federal court under section 3009, then the motion to dismiss plaintiff's request for injunctive relief should be granted. For the same reasons as discussed above and not re-stated here, Congress expressly provided that, with two exceptions, sending "unordered merchandise" is an unfair trade practice in violation of section 45(a). Congress is presumed to know: the scope of the enforcement powers it had granted in the FTC in related provisions, including the power to regulate, investigate, and address unfair trade practices; that it had not provided for a private cause of action to enforce section 45(a); that courts had declined to imply a private right of action to enforce section 45(a). The issue is not whether a private individual's lawsuit to enjoin attempts to collect payment for unordered merchandise considered a "gift" would be consistent with congressional purposes; the issue is whether Congress impliedly intended to create a remedy to allow a private person to seek to enjoin collection efforts in federal court. Plaintiff has not born her "heavy burden" to show that Congress impliedly intended to create a private right of action to seek an injunction. Based on the Supreme Court precedent discussed herein, if a private individual wishes an injunction against an unfair trade practice as defined in section 3009, the individual must seek recourse with the FTC or pursue any other available federal or state court remedies.
C. CONCLUSION
In sum, if the District Court follows Crosley, then those portions of defendant's motion to dismiss that request dismissal of plaintiff's cause of action under the Federal Unauthorized Merchandise Act that request restitution for the full amount paid for allegedly unordered books should be denied. Further, if the District Court follows Crosley, then those portions of defendant's motion to dismiss that request dismissal of plaintiff's request for an injunction against billing or attempting to collect payment for unordered books should be denied since if there is Congressional intent to imply a private right of action to seek restitution for amounts paid for unordered books, then there is Congressional intent to allow both a suit for an injunction against continued attempts to collect payment for the "gift."
Plaintiff's request for a hearing on the motion to dismiss in the event the motion cannot be resolved on the papers should be denied. The legal issue at the heart of the motion to dismiss is able to be addressed in written papers.
Docket no. 16 at 10.
With respect to the scheduling Order, on December 13, 2001, the Court granted plaintiff's motion for relief from the proposed scheduling Order deadlines and provided that, if the motion to dismiss is denied, the Court would advise the parties of the deadline for submitting new, proposed scheduling recommendations. Accordingly, this report provides that, within fourteen (14) days of the District Judge's ruling on this report, unless the District Judge grants defendant's motion to dismiss in all respects, the parties should be required to submit scheduling recommendations. The parties should include recommendations, if any, as to the length of time required for discovery before the Court addresses the question of class certification and a briefing schedule on class certification.
Docket no. 19.
Also pending before the Court is plaintiff's motion for class certification. On October 2, 2001, the District Court entered an order that granted defendant's motion for an extension of time to respond to plaintiff's motion for class certification until the Court has entered its ruling on the motion to dismiss. Defendant had requested an extension of time to respond to the motion for class certification, contending that it is entitled to discovery on class certification issues and that conducting such discovery, as well as responding to the motion, would be best deferred until after the Court had ruled on the motion to dismiss. Plaintiff opposed defendant's request as a "delay tactic." The Court is aware of plaintiff's desire to timely prosecute her case. But, as reflected by plaintiff's later-filed motion for relief from scheduling Order deadlines until such time as the Court rules on the motion to dismiss, it was cost-effective for the parties to delay the pretrial prosecution of the case until the Court resolved the motion to dismiss and determined jurisdiction.
Docket no. 9 at 2.
Id.
This report recommends that plaintiff's motion for class certification filed on August 31, 2001, be denied without prejudice to plaintiff re-filing the motion following limited discovery. This recommendation is made not to delay unnecessarily the consideration of plaintiff's request for certification or to increase unnecessarily plaintiff's litigation costs, but to allow plaintiff the opportunity to re-brief the motion, as may be required, in light of the District Judge's ruling on the instant motion to dismiss and the District Judge's ruling on the further motion to dismiss for failure to state a claim that defendant has represented he will file in the event the District Court finds jurisdiction. Defendant has not yet even filed its answer. The District Court's ruling on the instant motion, as well as any motion to dismiss for failure to state a claim, are likely to affect the nature of the briefing on class certification from both plaintiff and defendant. If plaintiff elects to re-file her motion for class certification without any changes, she may do so by simply filing a brief motion to re-urge, incorporating by reference the earlier motion. In any event, the filing of plaintiff's motion at the same time as seeking leave to file her first amended complaint, and this report, will reflect that plaintiff has satisfied the requirements of the Local Rules and the case law that plaintiff timely indicate her request for class certification. As noted, the Court will enter a scheduling Order that will include deadlines for discovery and briefing relating to class certification.
Docket no. 17 at 4.
Finally, in the event the District Court determines that no private right of action under the Federal Unauthorized Merchandise Statute exists, plaintiff asks for leave to amend her complaint to assert other causes of action, "including the several state statutes which prohibit the sending of unordered goods, the deceptive trade practice acts of most states, the Federal Fair Debt Collection Practices Act, the unfair debt collection statutes of several states, and the common law claims of money had and received, unjust enrichment and other claims." Plaintiff's motion for leave to amend should be denied.
Docket no. 16 at 10.
If the District Court denies any portion of defendant's motion to dismiss, the District Court may deny the request to amend as moot. If the District Court grants defendant's motion to dismiss, the request to amend may be denied on the ground that plaintiff has already amended once as a matter of course as provided by FED.R.CIV.P. 15(a), and, in the current briefing, appears to ask for leave to amend as an aside, without showing sufficient reason to amend again to add a new federal claim. Such a ruling would be without prejudice to plaintiff pursuing any available state remedies in state court.
VII. RECOMMENDATION
It is recommended that:(a) defendant's motion to dismiss should be DENIED as follows: Oxmoor's motion to dismiss plaintiff's request for restitution should bedenied unless the District Court decides not to follow Crosley and Oxmoor's motion to dismiss plaintiff's request for injunctive relief should be denied unless the District Court decides not to followCrosley;
Docket no. 12.
If this Court grants defendant's motion to dismiss in all respects, then this case may be dismissed in its entirety, as plaintiff's first amended complaint includes no other federal or pendent state law claims.
(b) plaintiff's motion for a hearing should be DENIED;
Docket no. 16 at 10.
(c) plaintiff's alternative motion for further leave to amend her complaint should be DENIED;
Id.
See note 120, above.
(d) plaintiff's motion for class certification be DENIED without prejudice to plaintiff renewing the motion to be filed in accordance with a scheduling Order after the District Court has entered a ruling on this report. If plaintiff, at the appropriate time, elects to file a motion to re-urge her motion for class certification, without wishing to re-brief her motion, she may do so; this Order will not require plaintiff to expend additional resources in preparing an initial motion for class certification, but is designed only to address the timing and manner in which the class action issue will be reached. If the District Court grants defendant's motion to dismiss, the motion for class certification may be denied as moot; and
(e) in furtherance of the District Court's December 13, 2001 Order, the parties should be required to submit proposed scheduling recommendations within fourteen (14) days of the District Court's Order on this report, unless the District Court grants defendant's motion to dismiss in all respects. Any other requests for relief should be DENIED.
VIII. INSTRUCTIONS FOR SERVICE AND NOTICE OF RIGHT TO OBJECT/APPEAL
The United States District Clerk shall serve a copy of this Report and Recommendation on each and every party either (1) by certified mail, return receipt requested, or (2) by facsimile if authorization to do so is on file with the Clerk. According to 28 U.S.C. § 636(b)(1) and FED. R. Civ. P. 72(b), any party who desires to object to this report must serve and file written objections to the Report and Recommendation within 10 days after being served with a copy unless this time period is modified by the District Court. A party filing objections must specifically identify those findings, conclusions or recommendations to which objections are being made and the basis for such objections; the district court need not consider frivolous, conclusive or general objections. Such party shall file the objections with the Clerk of the Court, and serve the objections on all other parties and the Magistrate Judge. A party's failure to file written objections to the proposed findings, conclusions and recommendations contained in this report shall bar the party from a de novo determination by the District Court. Additionally, any failure to file written objections to the proposed findings, conclusions and recommendations contained in this Report and Recommendation within 10 days after being served with a copy shall bar the aggrieved party, except upon grounds of plain error, from attacking on appeal the unobjected-to proposed factual findings and legal conclusions accepted by the District Court.
See Thomas v. Arn, 474 U.S. 140, 150, 106 S.Ct. 466, 472 (1985).
Acuna v. Brown Root Inc., 200 F.3d 335, 340 (5th Cir. 2000); Douglass v. United Serv. Auto. Ass'n, 79 F.3d 1415, 1428 (1996).