Petition — Shiffrin v. Bratton
Supreme Court brief1981
Ask Donna
What actually matters in this document.
Text
- 7
a
"Lourt, U.
No. ALED
IN THE JUL 30 1989
Supreme Court of the United! DAK, dni
OCTOBER TERM, 1979.
JOEL SHIFFRIN, ET AL.,
Petitioners,
vs.
EARL BRATTON, ET AL.,
Respondents.
FIRST NATIONAL BANK OF HIGHLAND PARK,
A NATIONAL BANKING ASSOCIATION,
Petitioner,
VS.
ROGER CHAPMAN anp JEANNE CHAPMAN, INDIVID-
UALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
Respondents.
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR
THE SEVENTH CIRCUIT COURT.
IRA S. Kors,
LLoyp S. KUPFERBERG, -
DAVID N. MIssNER,
MARTIN W. SALZMAN,
33 North LaSalle Street,
Chicago, Illinois 60602,
Attorneys for Petitioners, First
National Bank of Highland
Park and Joel Shiffrin.
Of Counsel:
SCHWARTZ, CooPER, KOLB
& GAYNOR, CHARTERED,
33 North LaSalle Street,
Chicago, Illinois 60602.
See sesssssssssssssssssssssssssssssssusssssssssnsnssssssss
Gunthorp-Warren Printing Company, Chicago e Financial 6-6565
IN THE
Supreme Court of the United States
OCTOBER TERM, 1979.
JOEL SHIFFRIN, ET AL.,
Petitioners,
VS.
EARL BRATTON, ET AL.,
Respondents.
FIRST NATIONAL BANK OF HIGHLAND PARK,
A NATIONAL BANKING ASSOCIATION,
Petitioner,
VS.
ROGER CHAPMAN anpd JEANNE CHAPMAN, npivip-
UALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
Respondents.
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR
THE SEVENTH CIRCUIT COURT.
QUESTION PRESENTED.
Where Congress has created a limited express private right
of action for violations of one section of the Federal Aviation
Act (49 U.S.C. 1487(a)), and has created an agency to
enforce compliance with the Federal Aviation Act (49 U.S.C.
§ 1301 et seq.) (“Act”), and where legislative history is silent,
can a private right of action for damages be implied against
Petitioners’ purported violations of 49 U.S.C. 1371(n) (2)
and the special charter regulations promulgated thereunder by
the agency.
Petitioners, First National Bank of Highland Park and Joel
Shiffrin, pray that a writ of certiorari issue to review the deci-
sion and judgment of the United States Court of Appeals for
the Seventh Circuit entered on March 10, 1980.
PARTIES INVOLVED.
The parties involved are identified in the caption of the case
in this Court except in Shiffrin v. Bratton, the Co-Plaintiffs were
Earl Bratton, Creative Tours and Travel, Inc., Gausepohl Travel
Services, Inc. and Chicago Society of Association Executives.
The Co-Defendants were Joe] Shiffrin, First National Bank of
Highland Park, Gerald Mann, Richard Tauber, Sunshine Travel
of Nevada, Incorporated, Sunshine Travel Agency, Inc. and
Tour Travel Enterprises, Inc.
Question Presented ....... WR a aN 4 ies Voit S eects et
Parties Involved........ Le pd oho please Siesta’ obs
ss: toy cadhaty graph CaN TTC OD nee
Jurisdiction
a eS Se OOO OOOO ORG Data eM 6 Oe wie
I. The Majority in Its Second Opinion Disregarded
the Decisions of This Court in Touche Ross &
Co. v. Redington and Transamerica v. Lewis...
II. The Majority Reaffirmed the Error Committed in
Il.
RO NS ks 6 ong o Sen ee ee
A. The Majority Declined to Follow This
Court’s Decision in Reaching Its Conclusion
That Cort’s Second Test Was Met........
B. The Court Below in Its First Opinion
Changed the Language of the Third Cort
Test to Reach Its Decision......... aes
C. The Majority in Its First Opinion Incorrectly
Applied the Fourth Cort Test..........-
The Opinions of the Court Below Are in Direct
Conflict with Opinions of Other Circuits and of
sp thers sicuBbscasrincal hE TEE Oe ON ED
TRE on PR te ee ee ee ee Oe Gh alere, We Wat dre (ore
11
13
15
17
iv,
TABLE OF AUTHORITIES CITED.
Cases.
Cannon v. University of Chicago, 441 U. S. 677, 60 L. Ed.
20 560, 99 S. Ct. 1946:(19979) -ccin ec cccccee ee. 6
City of Evansville, Ind. v. Kentucky Liquid Recycling,
Inc., 604 F. 2d 2008 (7th Cir. 1979), cert. denied
te Spiele. Dc caches tsee Bucci.) MOO Der 5, 18
Cort v. Ash, 422 U.S. 66 (1975)............ 12, 13, 15, 16
National Railroad Passenger Corp. v. National Association
of Railroad Passengers, 414 U.S. 453 Ce i.) i ee ee 4
Polansky v. TransWorld Airlines, Inc., 523 F. 2d 332 (3d
soca deelegiiud dL. x ENOL CE PROT ee TOE 18
Rauch v. United Instruments, Inc., 548 F. 2d 452 (3d Cir.
1975) rev’g on other grounds 405 F. Supp. 435 (E. D.
hci bic ss inh hE Coe eUrer er ve ree eae 18
Securities Investor Protection Corp. v. Barbour, 421 U.S.
FEE ROPER a aah SUN bees Ketek ch hen 4
Touche Ross & Co. v. Redington, 442 U. S. 560, 99 S. Ct.
Pte EOE EN i pb Lied Ah wink’ loin) bu eo 4,6, 7,9
Transamerica v, Lewis, ........ i a Seana , 62 L. Ed. 2d 146
i aad MRT ae OTE Ce AORN” Tia 4, 10, 14, 15
Wolf v. Trans World Airlines, Inc., 544 F, 2d 134 (3d Cir.
1976) cert. denied 430 U.S, 915 Sag § SON RS vere 18
Statutes.
ve Dita te ie So og 1) QPONMSROY Aare OS go i rE
wy dy dpb sctae es Ao Gf Ee RET a aR RR es
=” wo. Ww Ww
Vv
etn: ROTIMMROOE oo 655k so chee kccbbden ved. 3
SD We ANTROUNEEY ode 6 ois ver dee cdtuke eek. 1,3
sep Sotecdhomatin SS Bancscip | LOE LLG EI Dita eT 1
Federal Regulations.
Special Charter Regulations 14 C. F. R. Swe ae ewan
Rule 19(1)(b) of the Supreme Court of the United States 4
OPINIONS BELOW.
The decision and order of the District Court for the Northern
District of Illinois, resulting in a dismissal of the action against
First National Bank of Highland Park and Joel Shiffrin is re-
ported at 440 F. Supp. 1275 (N. D. Ill. 1977), Appendix A,,
pp. Al-A16. The first opinion of the Court of Appeals revers-
ing the District Court is reported at 585 F.2d 223 (7th Cir.
1978), Appendix A, pp. A16-A34. On June 25, 1979, this
Court at 443 U.S. 903 (1979) entered an order vacating the
decision of the Court of Appeals and remanded the case for
further consideration in light of Touche Ross & Co. Vv. Redington,
442 U.S. 560, 99 S.Ct. 2479 (1979). On March 10, 1980,
the Court of Appeals compounded its prior error and again
reversed the District Court. The second opinion is reported at
ps La F, 2d .......... (7th Cir. 1980), Appendix B, pp. A37-A52.
JURISDICTION.
The second judgment of the Court of Appeals was entered
on March 10, 1980. A timely petition for rehearing and sug-
gestion of en banc rehearing was denied on June 12, 1980, by
an evenly divided panel of the eight active judges. (Appendix
C, pp. A53-A54). Jurisdiction is conferred in this court by
28 U.S.C. Section 1254(1).
STATUTES INVOLVED.
The pertinent sections of the Act are 49 U.S.C. 137 l(a),
49 U.S.C. 1371(n)(2) and 49 U.S.C. 1487(a). They are
set forth in Appendix D, pages A55-A56.
STATEMENT OF THE CASE.
Tour Travel Enterprises (“TTE”) was a tour operator, as
defined in 14 CFR § 378. A tour operator is any person who
is authorized by the Civil Aeronautics Board (“CAB”) pur-
EU RS ak i a a a
2
suant to § 378 to engage in the formation of groups for trans-
portation on inclusive tours (14 CFR § 378.2(6) (d) (Ap-
pendix E, p. A59)). An inclusive tour is defined as a round
trip tour which combines air transportation, hotel accommoda-
tions and land services (14 CFR § 378.2(b) (Appendix E,
pp. A57-A59)). They are sometimes referred to as OTC and
ITC programs. Persons who are members of OTC or ITC
groups are known as tour participants.
In order to qualify as a tour operator, one must, among
other things, file with the CAB a depository agreement entered
into and executed by a federally insured bank (14 CFR
§§ 378.10, 378.13) (Appendix E, pp. A61-A63). In this
particular case, TTE entered into a depository agreement with
the Petitioner, First National Bank of Highland Park (“Bank”).
The depository agreement executed by the Bank and ap-
proved by the CAB creates a contractual relationship between
the Bank, Tour Operator and an air carrier (such as American
Airlines). In accordance with the provisions of the depository
agreement, the Bank agrees to establish a special account into
which tour participants or the Tour Operator would make de-
posits of tour participants’ funds (Section 1.1); to account for
monies deposited by the Tour Operator and tour participants
(Section 1.3, 1.4, 4.1); and to disburse monies in accordance
with the previsions of said agreement.
On October 19, 1976, Tour Travel Enterprises, Inc. was
adjudicated a bankrupt, and, by operation of Rules 401 and
601 of the Bankruptcy Act, the Bank believed that it was
automatically restrained from taking any action against the
bankrupt or the property of, or in the possession of, the bank-
rupt, thus prohibiting the Bank from refunding money pursuant
to the terms of the depository agreement.
On or about November 19, 1976, Earl Bratton (“Bratton”)
filed the instant lawsuit purporting to represent himself as
well as other tour participants, groups and persons.
3
On or about December 2, 1976, the CAB brought an action
against the Tour Operator and Petitioners, alleging violations
of various CAB regulations and requesting as relief, in part,
full refunds for tour participants.
On or about January 26, 1977, Roger Chapman (“Chap-
man”) et al. filed their complaint alleging therein essentially
the same facts as contained iu the Bratton complaint. The
action brought by Bratton and Chapman allege, inter alia, the
shortage of monies resulting from the Bank’s purported viola-
tions of CAB regulations, aiding and abetting, conspiracy, fraud,
breach of contract and breach of fiduciary relationship. As their
sole basis for subject matter jurisdiction over the Petitioners,
Bratton and Chapman relied upon 28 U.S.C. § 1331(a)
(1970) and 28 U.S.C. § 1337 (1970) asserting that their
claims arose under the Federal Aviation Act (“Act” or “FAA”)
of 1958, 49 U.S.C. §§ 1301-1542 (1970).
Neither Bratton nor Chapman alleged the specific section
of the Federal Aviation Act upon which he relied as the basis
for his action. Petitioners filed a motion to dismiss each action
alleging, inter alia, that there was neither an express nor an
implied private right of action arising from violations of regula-
tions promulgated by the CAB. The District Court, after con-
solidating the cases for the purpose of deciding Petitioners’
motion to dismiss, held that no private right of action existed
and entered judgment in favor of Petitioners.
In the Court of Appeals, the cases were consolidated for
argument, and Chapman and Bratton argued that the Federal
Aviation Act granted an express private right of action and
an implied right of action, citing, as their authority, Sections
1371(n)(2) and 1371(e)(6). The Court of Appeals, Bauer, J.
dissenting, ruled, in its first decision (September 18, 1978)
that although no express private right of action exists, a private
right of action is implied under Section 1371(n) (2).
Petitioners filed their first Petition for a Writ of Certiorari
on March 5, 1979, and on June 25, 1979, this Court entered
4
an order granting the Petition, vacated the judgment and re-
manded the case for further consideration in light of Touche
Ross v. Redington, 442. U.S. 560, 99 S. Ct. 2479 (1979).
On March 10, 1980, the Court of Appeals, Bauer J. again
dissenting, issued its. second opinion, reaffirming its original
decision. |
REASONS FOR GRANTING TBE WRIT.
This case is of importance in determining whether the Court
of Appeals can disregard the clear language of Touche Ross in
order to justify its prior decision and to usurp the power of
Congress by creating, where none exists, a private cause of
action for purported violations of federal statutes and regulations
promulgated thereunder.
Basic to the issues here presented is whether the decisions
of this Court in Touche Ross v. Redington, supra, and Cort v.
Ash, 422 U.S. 66 ( 1975) are to be followed as controlling
precedent or whether those decisions may be avoided by the
tortuous application thereof, and whether courts can ignore the
familiar maxim of expressio unius est exclusio alterius, which
has consistently been applied by this Court in National Rail-
road Passenger Corp. v. National Association of Railroad Pas-
sengers (Amtrak), 414 U.S. 453 (1972), Securities Investor
Protection Corporation v. Barbour (SIPC), 421 U.§. 412
(1975), and Transamerica v. Lewis, ............ Sa pitts + 62 L. Ed.
2d 146 (1979). The Court of Appeals, in failing to apply these
decisions to this case, has twice decided a federal question in a
way in conflict with the applicable decisions of this Court
(Supreme Court Rule 19(1)(b)).
In addition, the two opinions of the Court of Appeals for
the Seventh Circuit are in conflict with the cases decided by
the Third Circuit of the Court of Appeals (Supreme Court
Rule 19(1)(b)) which have heretofore determined that the
legislative scheme of the Federal Aviation Act dictates against
5
the implication of a private right of action, and is in direct con-
flict with its own recent opinion in City of Evansille, Ind. v.
Kentucky Liquid Recycling, Inc., 604 F.2d 2008 (7th Cir.
1979), cert. den. ........... U.S. ....2.., 100 S. Ct, 689 (1980).
Finally, the Court of Appeals, as to its.second opinion, was
evenly divided on the denial of the petition for rehearing en banc.
Thus, the Court below is divisive as to whether correct consider-
ation has been given upon remand of this Court to the instant
case in the light of Touche Ross v. Redington, supra.
ARGUMENT.
I.
THE MAJORITY IN ITS SECOND OPINION DISREGARDED
THE DECISIONS OF THIS COURT IN TOUCHE ROSS y.
REDINGTON AND TRANSAMERICA y. LEWIS.
In Touche Ross v. Redington, supra, at 442 U.S. page 568,
this Court stated:
“The question of the existence of a Statutory cause of
action is, of course, one of Statutory construction. SIPC’s
argument in favor of implication of a private right of action
based on tort principles, therefore, is entirely misplaced. As
we recently have emphasized, ‘the fact that a federal statute
has been violated and some person harmed does not auto-
matically give rise to a private cause of action in favor of
that person.’ Instead, our task is limited solely to determin-
ing whether Congress intended to create the private right of
action asserted by SIPC and the Trustee. And as with any
case involving the interpretation of a statute, our analysis
must begin with the language of the statute itself.” (Cita-
tions omitted. )
In the interpretation of a statute, this Court has made it clear
in Touche Ross v. Redington, supra, that in those cases in which
a private right of action has been implied in a statute not
expressly providing one, that statute in question at least pro-
hibited certain conduct or created federal rights in favor of
private parties. Nowhere in the second majority opinion of the
Court below, did that Court follow the aforesaid guidelines
promulgated by the Court. This Omission is made clear by
Judge Bauer in his second dissent where he succinctly states
that only in certain limited circumstances will a private right
of action be implied in a statute not expressly providing one,
i.e. where the statute in question at least prohibited certain
conduct or created federal rights in favor of private parties,
thus distinguishing the majority’s reliance on Cannon v. Univer-
7
sity of Chicago, 441 U.S. 677, 60 L.Ed.2d 560, 99
S. Ct. 1946 (1979); and J. I. Case Co. v. Borak, 377 U.S.
426, 12 L. Ed. 2d 423, 84 S.Ct. 1555 (1964). Judge Bauer,
in his second dissent correctly points out that this statute
neither prohibits certain conduct nor creates federal rights in
favor of private parties, stating that it does aot follow from a
plain reading of Section 401(n)(2) that the Congress evinced
an intent to create a private remedy for damages, and that the
relief sought by Section 401(n)(2) would be actionable in state
court on a breach of contract claim, rather than a federal statu-
tory cause of action impliedly cognizable under said Section.
(Appendix B, p. A48.)
The majority recognized that a review of legislative history
was another criterion in determining whether or not Congress
intended to create a private cause of action; however, the majority
departed from the realm of reality and from the specific mandate
of Touche Ross v. Redington, supra, when it stated:
“Although the legislative history is scarce, there is nothing
in the statute that explicitly creates or denies a private
remedy. From the congressional silence, however, we have
read a positive implication in favor of a private cause of
action.” (Emphasis supplied.) (Appendix B, p. A41.)
In Touche Ross v. Redington, supra, at page 571, this Court
held that implying a private cause of action on the basis of
congressional silence is a hazardous enterprise at best. Judge
Bauer, in his second dissent, states:
“The majority concedes that ‘the legislative history is
scarce,’ ante at 5, but reasons that because the statute
neither explicitly creates nor denies a private remedy, it is
free to infer one. Accordingly, the majority concludes that
‘[f]rom the congressional silence, however, we have read a
positive implication in favor of a private cause of action.’
Id. It seems to me that this conclusion Ought to have been
reached by circumspection rather than conjecture.” (Ap-
pendix B, pp. A46-A47)
“The paucity of legislative history on this question com-
pels the conclusion that no private remedy should be im-
plied in this case either, and it is simply a non sequitur to
‘read’ a contrary conclusion from this deafening legislative
silence.” (Appendix B, p. A47.)
As additional justification in an attempt to support its second
erroneous decision, the majority states:
“Second, even if there was no indication at all of congres-
sional intent to create a private remedy that factor is not
conclusive when the remedy is needed to effectuate a stated
fundamental congressiona. purpose in enacting the amen-
datory provision.” ( Appendix B, pp. A41-A42.)
There is nothing in the second majority opinion or in the
Tecord which supports the conclusion of the majority that the
remedy is needed to effectuate a stated congressional purpose.
This portion of the majority opinion, much like its clairvoyant
vision of congressional intent, clearly indicates the majority’s de-
termined effort to legislate a cause of action where none exists.
As a final purported justification for its second decision, the
majority states:
“Finally, this court’s conclusion that the presence of an
express private remedy in section 1007 did not indicate a
congressional intent to exclude other private remedies is
supported by the Supreme Court's reasoning in both Can-
non and Touche Ross. The reasoning of these two cases
plainly indicates that more is required to infer that Con-
gress did not intend to create a particular private right than
one fact that elsewhere in the same Statute congress has
explicitly granted a private cause of action. For example,
in Touche Ross the Supreme Court concluded that the
record keeping provision under review was not intended to
create private rights when other provisions which flanked
that provision contained expressly-created remedies, and
when one of those provisions specifically concerned false
statements in reports and was enacted contemporaneously
with the record keeping provision. 99 S. Ct. at 2487-2488.
With respect to the case under review, sections 1007 and
401(n)(2) were not created contemporaneously nor did
9
Congress refer to section 1007 when delimiting the scope
of the right created in section 401(n)(2). In sum, con-
siderations which the Supreme Court in Touche Ross
treated as relevant in concluding that Congress did not
intend to infer a private right of action do not exist in the
present case.” (Appendix B, pp. A42-A43.)
Judge Bauer, in his dissent, answers:
“The majority attempts to distinguish the applicability
of Touche Ross to this case on the basis that the Supreme
Court found further justification for not implying a private
right of action under § 17(a) of the Securities Exchange
Act of 1934 because other sections flanking § 17(a) pro-
vided private rights of action. Ante at 6-7. But the Congress
also provided explicit remedies for violations of the FAA
which, in my view, compel the conclusion that these ex-
plicit remedies are the exclusive means of enforcement
for a violation of the duties and obligations imposed by the
Act (footnote omitted). See, e.g., 49 U.S.C. §§ 1471,
1472, 1482, 1487. The mere fact that the Congress did not
enact the remedial provisions of the FAA contem-
poraneously with Section 401(n)(2) nor refer to these
remedial provisions when delimiting the scope of the right
created in that section does not extinguish the vitality of
Touche Ross in the context of this appeal. As stated in
Touche Ross:
“ ‘Further justification for our decision not to imply
the private remedy that SIPC and the Trustee seek to
establish may be found in the statutory scheme of
which § 17(a) is a part. First, § 17(a) is flanked by
provisions of the 1934 Act that explicitly grant private
causes of actiop. § 16(b), 15 U.S.C. § 78p(b);
§ 18(a), 15 U.S.C. § 78r(a). Section 9(e) of the
1934 Act also expressly provides a private right of
action. 15 U.S. C. § 78i(e). See also § 20, 15 U. S. C.
§ 78t. Obviously, then, when Congress wished to pro-
vide a private remedy, it knew how to do so and did
so expressly.’” (Citations omitted.) (Emphasis sup-
plied. )
“Similarly, in this case the Congress provided express
remedies for a violation of the Act. See e.g., 49 U.S.C.
* >
10
§§ 1471, 1472, 1482, 1487. If the Congress wished to
provide a private remedy for damages under Section
401(n) (2), it is well aware of how it may effectuate that
intent.” (Appendix B pp. A48-A50.)
In Transamerica v. Lewis, ......... U.S sa , 62 L. Ed. 2d
146 (1979), this Court, at pages 154-155, stated that it is an
elemental canon of statutory construction that where a statute
expressly provides a particular remedy or remedies, a court
must be chary of reading others into it and when a statute
limits a thing to be done in a particular mode, it includes the
negative of any other mode.
There, this Court reviewed the judicial and administrative
means of enforcing compliance with Section 206 of the In-
vestment Advisors Act of 1940 (15 U.S.C. §§ 80b-1, et seq.)
and determined that in view of the express provision for en-
forcement by the SEC of the duties imposed by Section 206 it
was highly improbable that Congress absent-mindedly forgot to
mention an intended private action. Paraphrasing the language
of Transamerica and substituting the section numbers of ap-
plicable enforcement provisions of the Federal Aviation Act,
the opinion in Transamerica would read as follows:
“Congress expressly provided both judicial and administra-
tive means for enforcing compliance with *§ 1371.’ First,
under ‘§ 1482’ willful violations of the Act are criminal
Offenses, punishable by fine or imprisonment, or both.
Second, ‘§ 1487’ authorizes the Commission to bring civil
actions in federal courts to enjoin compliance with the Act,
including, of course, ‘§ 1371(n)(2).’ Third, the Commis-
sion is authorized by ‘§ 1487’ to impose various administra-
tive sanctions on persons who violate the Act, including
‘§ 1371(n)(2).’ In view of these express provisions for
enforcing the duties imposed by ‘§ 1371 (n) (2)’ it is highiy
improbable that ‘Congress absentmindedly forgot to men-
tion an intended private action.’ ”
In summary, the majority disregarded this Court’s rulings
in an effort to “improve” upon the statutory scheme which
11
Congress enacted into law. As Judge Bauer, in his second
dissent, concludes:
“In this case, the statute by its terms grants no private
rights in favor of any party, proscribes no conduct as un-
lawful, and the legislative history is similarly silent on the
issue of the availability of private remedies under Section
401(n) (2) of the FAA. In my view, for these same reasons
found dispositive in Touche Ross, our inquiry should also
end there, and ‘[i]f there is to be a federal damage remedy
under these circumstances, Congress must provide it.’”
99 §.Ct., at 2490. (Appendix B p. A52.)
From the foregoing, the following controlling and salient
principles are thus distilled from the pronouncements of this
Court:
(a) When Congress wished to provide a private damage
remedy, it knew how to do so and did so expressly;
(b) It is highly improbable in the absence of a statutory
private remedy, that Congress absent-mindedly forgot
to mention an intended private action; and
(c) The absence of an express statutory private action
strongly suggests that Congress was simply unwilling
to impose any potential monetary liability in favor of
a private suitor.
Accordingly, it is respectfully submitted that no private remedy
should be implied with respect to the instant statute.
II.
THE MAJORITY REAFFIRMED THE ERROR
COMMITTED IN ITS FIRST DECISION.
In its second opinion, the Court below observed that this
Court in Touche Ross v. Redington, supra, reaffirmed that the
four indicia identified in Court v. Ash, supra, are useful guides
in determining whether or not a private right of action exists.
However, the Court of Appeals, in addition to misconstruing
Touche Ross v. Redington, supra, reaffirmed its prior decision,
12
thereby committing again the same errors contained in its first
decision, es ane | |
As a result, Petitioners are required to analyze both opinions
of the Court below, pointing out where the first opinion is
inconsistent with Cort v. Ash and Touche Ross v. Redington,
and that the second opinion continues such error,
In Cort v. Ash, supra, at page 78, this Court set forth the four
relevant criteria in determining whether a private remedy is
implicit in a statute not expressly providing.one. They are:
1. Is the plaintiff one of the class for whose especial
benefit the statute was enacted, that is, does the statute
create a federal right in favor of the plaintiff?
2. Is there any indication of legislative intent, explicit
or implicit, either to create such a remedy or to deny one?
3. Is it consistent with the underlying purposes of the
legislative scheme to imply such a remedy for the plaintiff?
4. Is the cause of action one traditionally relegated to
State law, in an area basically the concern of the States,
so that it would be inappropriate to infer a cause of action
based solely on federal law?
The majority of the Court of Appeals in its first decision held
that plaintiffs had satisfied all tests. Judge Bauer, in his first
dissent, held that plaintiff had failed to meet the second, third,
and fourth tests. It is patently clear that the majority distorted
the Cort tests in order to reach, its. conclusion.
In discussing the Cort tests, it is necessary that we refer to the
first opinion of the Court below since it was there they were
considered, albeit erroneously, which error without discussion
was Carried over to the second Opinion,
13
A. The Majority Declined to Follow This Court’s Decisions in
Reaching its Conclusion That Cort’s Second Test Was
Met. 4
In considering the application of the second factor in Cort,
the Court below, in its first opinion, acknowledged that neither
Section 1371(n)(2) of the Act, nor its legislative history
revealed Congressional intent. The Court then continued.
“On this basis, appellees argued below, and the district
court agreed, that since section 1487(a) of the FAA expli-
citly provides for agency (CAB) enforcement of all provi-
sions of the FAA, and since it also provides for limited
private enforcement of one provision of the Act (i.e.,
enforcement § 1371 (a) by ‘parties in interest’), an inference
arises that those expressly created remedies exclude all
others, especially since no clear evidence of legislative in-
tent can be shown. This line of reasoning reflects the
familiar doctrine of expressio unius est exclusio alterius,
which has recently been applied by the Supreme Court in
National Railroad Passenger Corp. v. National Association
of Railroad Passengers (Amtrak) 414 U.S, 453 (1974),
and SIPC v. Barbour, 421 U.S, 412 (1975 ). Though the
argument has some force in relation to this case, we do not
believe it determinative.” (Emphasis supplied.) (Appendix
A, pp. A25-A26. )
The majority, in its first opinion, then held that the “applica-
tion of expressio unius in this context would serve only to
frustrate the goal of assuring adequate security for travelers’
compensation” and that the implication’ of a private remedy
would be consistent with the underlying. purposes of the statute
in dispute. (Appendix A, p. A26.)
The first minority opinion answers the' majority’s effotts to
brush aside the expressio unius doctrine. J udge Bauer stated:
“Similarly, in the case at hand, Congress has provided a
private remedy for violation of section 1371(a) of the
FAA, but has not done soTor section 1371(n). It seems
quite apparent, therefore, that, in this case, too, the prin-
ciple of expressio unius compels the conclusion that the
14
remedies created in [§ 1371(n)] are the exclusive means to
enforce the duties and obligations imposed by the Act.’”
(Appendix A, p. A32.)
In his dissent, Judge Bauer also stated:
“Such an approach, however, misconceives the essential
nature of the inquiry in deciding whether or not the
expressio unius doctrine applies; for, as the Supreme Court
has made clear,
[an] express statutory provision for one form of pro-
ceeding ordinarily implies that no other means of
enforcement was intended by the legislature, That
implication would yield, however, to “clear contrary
evidence of legislative intent,” for which we [turn] to
the legislative history and the overall structure of the
. . + Act.’ (Emphasis by the court.)
“Securities Investor Protection Corp. v. Barbour, 421 U.S.
412, 419 (1974) (emphasis supplied ) (citations omitted).
Thus, in determining the applicability of the expressio unius
doctrine, the central question is not whether a private right
of action is ‘consistent’ with the purposes or goals of the
statute, but rather, whether the overall Structure of the
Act, or its legislative history, furnish ‘clear evidence’ of a
Congressional intent to create a private remedy. This dis-
tinction is crucial, for, as the majority itself apparently
concludes, ‘there is no indication’ of such an intent in either
the legislative history or the structure of the FAA. It
follows from the majority’s own conclusion, therefore, that
expressio unius should apply and that the second of the
four Cort tests is not met in this case.” (Emphasis sup-
plied.) (Appendix A, pp. A32-A33.)
The opinion of the Court below, when reviewed in light of
the minority opinion and the opinion rendered in Transamerica
Vv. Lewis, supra, Touche Ross vy. Redington, supra, and City of
Evansville vy. Kentucky, supra, results in an inconsistent appli-
cation of law.
In Transamerica, supra, at 62 L. Ed. 2d 154-155, this Court
stated:
15
“. . « Yet it is an elemental canon of statutory construc-
tion that where a statute expressly provides a particular
remedy or remedies, a court must be chary of reading
others into it. ‘When a statute limits a thing to be done in
a particular mode, it includes the negative of any other
mode.’” (Citations omitted. )
And at pages 155-156, this Court stated:
“Obviously, then, when Congress wished to provide a pri-
vate damages remedy, it knew how to do so and did so
expressly.” (Citations omitted.) “The fact that it enacted
no analogous provisions in the legislation here at issue
strongly suggests that Congress was simply unwilling to
impose any potential monetary liability to a private suitor.”
(sic)
In the instant case, the Court below, without explanation,
indicated that the underlying principles of Amtrak and SIPC
are only of “some force” and not determinative here (Appen-
dix A, p. A26). It is respectfully submitted that the issues in
those cases, as well as Touche Ross, are identical to those in the
case at bar and the expressio unius doctrine should have been
consistently applied.
B. The Court Below in Its First Opinion Changed the Lang-
wage of the Third Cort Test to Reach Its Decision.
The Court below, in considering the third Cort test, stated:
“. . » the extent of the agency’s enforcement powers must
be carefully considered before deciding whether expressio
unius is to apply, and whether the implication of a private
remedy would be ‘consistent’ with the underlying purposes
of the statute in dispute, which is the third Cort factor to
be considered.” . . . (Emphasis supplied.) (Appendix A,
pp. A26-A27.)
The third Cort test is not whether the implication of a private
remedy would be consistent with the purposes of the statute
in dispute, but, rather, whether the overall structure and legisla-
tive scheme of the entire FAA furnishes clear evidence of a
16
Congressional intent to create a private remedy. Cort y. Ash,
supra, at 422 U.S. at page 78. It is respectfully submitted that
the first majority opinion’s conclusion, as reaffirmed by the
second opinion, no longer requires a court to determine the
legislative scheme and overall structure Of an Act as required
by Cort. The opinion allows a court merely to determine from
a small phrase in a statute that a private right of action may
be implied. Following the reasoning set forth in the majority
opinion, an implied cause of action will exist for every viola-
tion of a federal statute and regulation, since every statute and
each regulation promulgated by the various agencies of the
United States serve to protect the public.
Paraphrasing the language of Cort, it can be here said:
“Every [regulation] is designed to protect some individual,
public, or social interest * * *, To find an implied civil
cause of action for the plaintiff in this case is to find an
implied civil right of action for every iadividual, social,
or public interest which might be invaded by violation of
any [regulation].” * * * 422 U.S. at page 79,
Judge Bauer’s first dissent answers the majority’s conclusion
that the third Cort test was met:
“Moreover, I cannot agree that a private right of action is
even ‘consistent’ with the structure and goals of the FAA.
On this point, the majority appears to suggest that private
remedial measures are necessary to further the Congress-
ional purpose of protecting travelers from ‘losses due to
violations of the Charter Regulations.’ But even if a major
purpose of the Act is to protect travelers from such losses
(and even if the majority is correct in Claiming that the
CAB may not be able to sue for a refund of tour deposits ) ,
it does not follow that a private remedy is consistent with
the statutory scheme.” (Emphasis by the Court.) (Appen-
dix A, p. A33.)
17
C. The Majority in Its First Opinion Incorrectly Applied the
Fourth Cort Test.
The majority stated that the issue is the Petitioners’ alleged
willful violation of fiduciary obligations specifically imposed by
voluntary agreement to adhere to’ federal regulations; that it
is necessary to construe the federal regulations to determine the
nature of the fiduciary obligations; and that there is a need
for uniformity in construing federal regulations,
It is urged that the opinion of the Court below fails to make
any determination regarding whether or not the allegations con-
tained in the Bratton and Chapman complaints are matters
traditionally relegated to state law. Instead, the Court below
decided the fourth Cort test solely upon the purported need for
uniformity in the application of federal regulations.
Judge Bauer speaks to the failure to satisfy the fourth require-
ment of Cort as follows:
“Finally, it seems to me that this cause of action is a
matter ‘traditionally relegated to state law,’ and thus fails
to satisfy the fourth requirement of Cort. The majority
reaches the opposite conclusion on the grounds, apparently,
that there is a need for ‘uniformity’ in construing federal
regulations. What the opinion fails to make clear, how-
ever, is precisely what an adjudication of the plaintiffs’ com-
mon law claims of fraud, breach of contract, conversion,
and breach of fiduciary duty, would ‘necessarily have to
refer to the federal regulations subsumed in the agreements
between the principals.’ To say that federal regulations re-
quired the bank to assume certain legal obligations to the
tour operator (and hence the tour participants) is one
thing. To say that the regulations defined those obligations
is quite another. And for my part, I can see no reason why
a determination of the plaintiffs’ non-federal claims would
require anything other than the application of familiar
principals of common law contracts and oe I must con-
clude, therefore, that the fourth element of the Cort test,
like the second and third, furnishes no support for the
plaintiffs’ position.” (Appendix A. pp. A33-A34.)
18
The Court below effectively eliminated the fourth Cort test
when it reached the conclusion that such test is satisfied by the
need for uniformity in construing federal regulations. It is re-
spectfully submitted that there is always a need for uniform inter-
pretation of law, but the application of such need to the fourth
Cort test begs the question and renders meaningless such test.
Il.
THE OPINIONS OF THE COURT BELOW ARE IN DIRECT
CONFLICT WITH OPINIONS OF OTHER CIRCUITS AND
OF THE SAME CIRCUIT.
The two opinions of the Court below also are in direct con-
flict with the cases decided by the Court of Appeals for the
Third Circuit which has heretofore determined that the legisla-
tive scheme of the Act dictates against the implication of a
private right of action. Rauch v. United Instruments, Inc., 548
F.2d 452 (3rd Cir. 1976), Polansky v. T ransworld Airlines,
Inc., 523 F. 2d 332 (3rd Cir. 1975), Wolf v. Trans World Air-
lines Inc., 544 F. 2d 134 (3rd Cir. 1976), cert. denied, 430 U. S.
915 (1977). Although each case arose out of a purported vio-
lation of different sections of the Federal Aviation Act, the
Court of Appeals for the Third Circuit, in each case, held that
the statutory scheme of the Act does not contemplate a private
right of action for violations which result in economic loss to
the aggrieved party.
Additionally, the Opinions of the Court below are in direct
conflict with its recent opinion rendered in City of Evansville v.
Kentucky Liquid Recycling, Inc., supra.
The cases cited herein demonstrate the Court of Appeals’
errors. If the decisions are upheld, it is foreseeable that the
federal court system could be inundated with claims arising out
of miscellaneous minor Passenger inconveniences, which the
legislature clearly never intended.
19
CONCLUSION.
In summary, the opinions of the Court below avoided the
clear and controlling holdings of this Court in Touche Ross v.
Redington, Transamerica v. Lewis, Amtrak, SIPC and Cort
Vv. Ash, supra, to reach its conclusions. By doing so, it has er-
roneously created an unnecessary federal cause of action which
will potentially burden the federal court dockets with hundreds
of small claims and has opened the door for causes of action to
be judicially created for violations of federal regulations. As
Judge Bauer has stated in his first dissent, “. . . the opening of
new vistas in private causes of action ought to be approached
rather fearfully and with more tender regard for the acts of
Congress and the limitation of the federal bench” (Appendix A.
p. A31), so that “[rJegulatory agencies, and the rules they func-
tion under should not, . . . be the launching pads for new
judicial journeys that add more ballast to an overburdened
federal system of dispensing justice.” (Appendix A. p. A34.)
For the reasons stated above, this Honorable Court should
grant this second petition for certiorari brought herein,
reverse the decision of the Court of Appeals, and affirm the
District Court.
Respectfully submitted,
IRA S. Kos,
LLoyp S. KUPFERBERG,
Davip N. MIssNER,
MaRrTIN W. SALZMAN,
33 North LaSalle Street,
Chicago, Illinois 60602,
Attorneys for Petitioners, First
National Bank of Highland
Park and Joel Shiffrin.
Of Counsel:
SCHWARTZ, CooPpER, KOLB
& GAYNOR, CHARTERED,
33 North LaSalle Street,
Chicago, Illinois 60602.
~~
APPENDIX
APPENDIX A.
_—_—_—_———
IN THE UNITED STATES Disrrict Court
For the Northern District of Illinois
Eastern Division
EaRL BRATTON, RT AL., :
Plaintiffs,
vs.
> No. 76 C 4282
JOEL SHIFFRIN, ET AL.,
Defendants.
‘
HEMISPHERE TRAVEL, INC., ET =
Plaintiffs,
vs.
First NATIONAL BANK OF r No. 76 C 4707
HIGHLAND PARK, ET AL.,
Defendants.
;
ROGER CHAPMAN, ET AL., 7
Plaintiffs,
VS.
> No. 77 C 284!
First NATIONAL BANK OF
HIGHLAND Park,
Defendant. |
1. Thus far four separate lawsuits have been filed as a result of
these incidents. The three actions brought by private plaintiffs are
consolidated here for the purpose of ruling on the motions to dismiss
by the defendants First National Bank and Joel Shiffrin. Fed. R. Civ.
P. 42(a).
(Footnote continued on next page. )
A2
MEMORANDUM OPINION.
Plaintiffs are individual travelers and retail travel agencies
who made deposits to reserve places on numerous charter tours
to such places as Mexico, Hawaii, and Las Vegas. The tours
were organized and sold by the defendant travel] companies,
Defendants include Tour Travel Enterprises, the wholesale tour
operator which organized the trips; Sunshine Travel Agency
and Sunshine Travel of Nevada, two retail travel agencies deal-
ing in tours organized by Tour Travel; Gerald Mann and
Richard Tauber, owners and Officers of the three travel com-
panies; and the First National Bank of Highland Park and its
vice president, Joel Shiffrin. The Bank and Shiffrin held ac-
counts for the other defendants, including special escrow ac-
counts required by regulation for charter tour deposits,
The tours were scheduled ‘to depart after October 15, 1976.
On that date or shortly thereafter, involuntary bankruptcy pro-
ceedings were initiated against Tour Travel Enterprises, Sun-
Shine Travel and Sunshine Travel of Nevada.? The scheduled
tours never occurred and the deposits made by the plaintiff tour
participants have not been refunded. Some of these deposits
(Footnote continued from Preceding page.)
The fourth action was commenced by the Civil Aeronautics Board
pursuant to its general enforcement powers under the Federal
Aviation Act. For a full understanding of this opinion, reference
should be made to the C. A. B. case as well. C. A. B. v. Tour Travel
Enterprises, Inc., ........ F. SUD. ceccoces » No. 76 C 4693 (N.D. I.
1977).
2. Tour Travel Enterprises and Sunshine Travel Agency were
Tour Travel Enterprises, Inc., No. 76 B 8014 (N. D. Tl. 1976);
In re Sunshine Travel Agency, Inc., No. 76 B 8015 (N.D. Ill.
A3
were made to the travel companies, others were deposited directly
with the Bank.
Plaintiffs have requested that the Bank refund their monies.
Apparently the funds on deposit in the special escrow accounts
are insufficient to reimburse all disappointed tour participants.
The Bank filed an interpleader action in bankruptcy court con-
cerning the deposits it holds. On March 17, 1977, the bank-
ruptcy judge dismissed the interpleader, ruling the court lacked
summary jurisdiction over the escrow funds. In re Tour Travel
Enterprises, Inc., No. 76 B 8014 (N. D. Ill. March 17, 1977).
Plaintiffs allege that defendants violated certain C. A.B.
regulations governing these charter tour deposits. In particular
they claim that defendants First National Bank of Highland
Park and Joel Shiffrin violated the regulations dealing with
special escrow accounts for tour deposits. Under 14 C. F. R.
§§ 378.16 and 378a.31 (1977), all deposits made by tour
participants to operators or retail travel agents must be deposited
in a special escrow account with a federally insured bank
or savings and loan association. The bank is to maintain a
separate accounting for each tour. The depository bank, the
tour operators and the participating air carriers are to enter
into a depository agreement governing the deposits.* Under the
regulations, disbursements may be made from the accounts only
under certain circumstances. The bank may pay the direct air
carrier, hotels, sightseeing and other surface accommodations
up to a fixed per cent of the total deposits received by the bank.
If a tour is cancelled, the bank is to make refunds directly to
the tour participants. Regulations 14 C.F.R. §§ 378.18 and
378a.32 (1977) forbid the bank or the tour operator from
making disbursements from tour-participant deposits except in
accordance with these regulations. In addition, the tour operator
3. Tour Travel Enterprises and First National Bank of Highland
Park were party to such an agreement. See Exhibit A of the First
Amended Complaint in Bratton v. Shiffrin, No. 76 C 4282 (N. D.
Ill., filed January 3, 1977).
A4
must furnish a surety bond or other security arrangement to
insure the financial responsibility of the tour operator and the
performance of tour services in accordance with the contract
between the operator and the tour Participants. In this case,
in lieu of a bond, Tour Travel entered into a surety trust agree-
ment with the First National Bank inuring to the benefit of the
tour participants.‘ Plaintiffs further allege that the Bank breached
its duties and obligations under the escrow and surety trust
agreements,
Defendants First National Bank and Joel Shiffrin have moved
to dismiss the complaints for lack of subject matter jurisdiction,
failure to state a Claim, and failure to jOin an indispensable
party (the trustee in bankruptcy).5 We grant the motions to
dismiss for failure to state a claim.
Jurisdictional Allegations
Defendants First National Bank and Shiffrin challenge plain-
tiffs’ claim of jurisdiction based on the Federal Aviation Act
of 1958, 49 U.S.C. §§ 1301 ef seq. (1970), and 28 U.S.C.
§§ 1331(a) and 1337 (1970). 28 U.S.C. § 1337 (1970)
gives this court jurisdiction over cases arising under statutes
enacted pursuant to Congress’ authority to regulate interstate
commerce, regardless of the amount in controversy. Clearly the
Federal Aviation Act of 1958 is an act regulating commerce.
Rauch vy. United Instruments, Inc., 548 F.2d 452, 455 (3d
Cir. 1976). Because plaintiffs assert that the provisions of the
Federal Aviation Act and the regulations promulgated there-
under provide for a private right of action on their behalf, we
have jurisdiction under Section 1337 to determine whether a
4. See Exhibit B of the First Amended Complaint in Bratton V.
Shiffrin, No. 76 C 4282 (N. D. IIL, filed January 3, 1977).
5. Defendants also claim these actions must be Stayed under
Rules 401 and 601, Fed. R. Bank. P. 401, 601.
AS
federal claim has been statea.® Bell v. Hood, 327 U. S. 678
(1946); Enders vy. American Patent Search Co., 535 F.2d
1085, 1087-88 (9th Cir. 1976), cert. denied, ............ i We Ragone
(1977).
Explicit Provisions of 49 U.S. C. § 1487(a)
There are two possible routes to establishing a private remedy
under the Federal Aviation Act; the first is by reliance on the
explicit provisions of the Act, the second is by implying a
private right of action from those provisions. Section 1487 of
the Act gives the Civil Aeronautics Board the authority to
enforce the statute, rules and regulations. Further, under that
provision “any party in interest? may seek injunctive relief in
the district court for a violation of Section 1371(a). 49 U.S.C.
§ 1487(a) (1970). Thus, if a violation of Section 1371(a)
were involved, plaintiffs could rely on the explicit grant of
Section 1487(a). See generally Annot., 19 A. L.R. Fed. 951
(1974).
There are several reasons why this provision does not apply
to the Bank or its officer. Initially, one need only read the
language of Section 1371 (a):
No air carrier shall engage in any air transportation unless
there is in force a certificate issued by the Board authoriz-
ing such air carrier to engage in such transportation.
The definition of “air carrier” includes anyone who directly or
indirectly engages in air transportation. 49 U.S.C. § 1301(3).
The concept of an indirect air carrier is broad enough to include
a tour operator who arranges charter flights. C. A. B. v. Carefree
Travel, Inc., 513 F. 2d 375, 387 (2d Cir. 1975). However, we
6. Where a complaint claims invasion of a federal right, the
court has jurisdiction to determine whether a claim has been stated.
Thus a dismissal should be made on the merits under Rule 12(b) (6)
for failure to state a claim, and not for want of subject matter
jurisdiction. 1 J. MooRE, FEDERAL PRACTICE § 0.62[2.-2], at 664
(2d ed. 1977).
A6
do not feel justified in extending the definition to encompass the
Bank. While it is possible the Bank is an agent of an air carrier
(at least for some purposes),” this finding alone would not make
the agent liable for possible statutory violations by the principal.*
Plaintiffs’ allegations do not support a claim of a breach of
Section 1371 (a) by the Bank or Shiffrin.
Secondly, the loss of the tour deposits was not caused by the
failure of anyone to be certified as an air carrier, so Section
1371 (a) is simply not involved in this case.
Finally, Section 1487(a) is a provision for injunctive relief,
Any additional relief must be ancillary to the equitable remedy
provided for in the statute. The private plaintiffs have not
specifically requested injunctive relief; their prayer for relief
seeks money damages,”° Accordingly, the provisions of Section
1487(a) do not provide them with an explicit statutory remedy
of a private nature.
Implied Private Right of Action
The next course of inquiry is to determine whether plaintiffs
have an implied private right of action under the statute and the
regulations. Plaintiffs allege violations of certain C. A. B. regu-
lations governing charter tour deposits. 14 C. F.R. §§ 378.16,
378.18, 378a.31, 378a.32 (1977). In order to decide whether
a private right of action exists under these regulations, we must
examine the statutory provisions under which they were promul-
gated. An administrative agency cannot create a federal private
right of action by enacting regulations; the right must be implied
from the underlying statutory authority.
7. The Bank as escrowee may be a “special” agent for both
parties, with the terms of the agency relationship defined by the
escrow agreement.
8. We do not mean to imply a finding of violation of § 1371(a)
by any of the travel companies at this time.
9. The plaintiffs in Bratton v. Shiffrin requested “such other and
further relief as may be just and equitable.”
A7
Plaintiffs have provided us little assistance, citing the entire
Federal Aviation Act of 1958 as their jurisdictional base.’
After reviewing the statutory authority cited in 12 C. F. R. Part
378 (1977)," we have concluded that the regulations establish-
ing security arrangements for charter tour deposits were promul-
gated pursuant to the authority of 49 U.S.C. § 1371(n) (2)
(1970). That provision reads:
In order to protect travelers and shippers by aircraft
operated by supplemental air carriers, the Board may
require any supplemental air carrier to file a performance
bond or equivalent security arrangement, in such amount
and upon such terms as the Board shall prescribe, to be
conditioned upon such supplemental air carrier’s making
appropriate compensation to such travelers and shippers, as
prescribed by the Board, for failure on the part of such
carrier to perform air transportation services in accordance
with agreements therefor.
A supplemental air carrier is defined as a carrier engaged in
providing charter'tifps. 49 U. S.C. § 1301 (35) and (36). Tour
operators, such as Tour Travel Enterprises, who arrange charter
tours are properly within the mandate of this statutory provision.
Section 1324(a) grants the Board the general power to make
such regulations as it deems necessary to carry out the provisions
of the Federal Aviation Act. 49 U.S. C. § 1324(a) (1979). In
light of this broad statutory authority, we find that Regulations
378.16, 378.18, 378a.31, 378a.32 are valid promulgations
10. The only specific allegation is that of a violation of 49
U.S.C. § 1485(e), which reads:
It shall be the duty of every person subject to this chapter, and
its agents and employees, to observe and comply with any order,
rule, regulation, or certificate issued by the Administrator or the
Board under this chapter affecting such person so long as the
same shall remain in effect.
11. 14 C.F.R. Part 378 states that the provisions of that part
are issued under the authority of 49 U.S.C. §§ 1301, 1324, 1371,
1372, 1379 and 1384.
A8
implementing 49 U. S..C. § 1371(n)(2) (1970). It appears this
is a case of first impression on implying a private right of action
under this provision, although the question has arisen regarding
other sections of the Act.'*
In determining whether a private right of action should lie
under the statutory provision and regulations, we are aware of
the directive that it is “the duty of the courts to be alert to
provide such remedies as are necessary to make effective the
congressional purpose.” J, J, Case Co. v. Borak, 377 U.S. 426,
433 (1964). However, a private remedy is not to be implied for
every statutory violation. We must test this action according to
the guidelines established by the Supreme Court in Cort v. Ash,
422 U.S. 66, 78 (1975), for the judicial implication of private
remedies, The Court set out four relevant factors to be weighed
in determining whether a private remedy is implicit in a statute
not expressly providing one. ‘First, is the plaintiff ‘one of the
class for whose especial benefit the statute was enacted’. . .?
Second, is there any indication of legislative intent, explicit or
implicit, either to create such a remedy or to deny one? Third, is
it consistent with the underlying purposes of the legislative
scheme to imply such a remedy for for plaintiff? And finally, is
the cause of action one traditionally relegated to state law, in an
area basically the concern of the States, so that it would be
inappropriate to infer a cause of action based solely on federal
law?” 422 U.S. at 78 (citations omitted).
12. See, e.g., Rauch v. United Instruments, Inc., 548 F. 2d 452
(3d Cir. 1976) (Section 1421); Wolf v. Trans World Airlines, 544
F, 2d 134 (3d Cir. 1976) (Sections 1381, 1373(b)), cert. denied,
cbiab U.S. ........ (1977); Polansky v. Trans World Airlines, 523
F, 2d 332 (3d Cir. 1975) (Sections 1374(b) and 1381); Nader v.
Allegheny Airlines, Inc., 512 F.2d 527 (D.C. Cir. 1975) (Section
1374(b) ), rev’d on other grounds, 426 U.S. 290 (1976); Fitzgerald
Vv. Pan American Airway, 229 F. 2d 499 (2d Cir. 1956) (Section
1374(b)); and Gabel v. Hughes Air Corp., 350 F. Supp. 612 (C. D.
Cal. 1972).
A9
Applying these factors to the case at bar, we find that the
individual plaintiff tour participants are within the class for
whose benefit the statute was passed and the regulations promul-
gated. The explicit language of 49U.S.C. § 1371(n) (2)
(1970) reads “[iJn order to protect travelers,” the Board may
require supplemental air carriers to file a security arrangement
to insure compensation to travelers for failure to perform agreed
upon services. The individual plaintiffs became tour participants
once their deposits were made; they are clearly within the class
for whose “especial” benefit this statutory provisions was en-
acted.’* The legislative history of the regulations further verifies
the individual plaintiffs’ status as members of the protected
class. The regulations were proposed “to insure the financial
responsibility of the tour operator to the traveling public.”
Notice of Proposed Rule Making, 30 Fed. Reg. 281, 282
(1965) (explanatory statement issued by the C. A. B.)'* How-
ever, it is equally clear that the plaintiff travel agencies are not
within the class for whose “especial” benefit the statute and
regulations were enacted. Travel agencies are not members of
the traveling public. Thus, the plaintiff agencies fail to meet the
threshold requirement for implying a private right of action.
The mere fact the individual tour participants fall within the
protected class is insufficient in itself to warrant implying a
private right of action on their behalf. “[T]he inference of such
a private cause of action not othewise authorized by the statute
must be consistent with the evident legislative intent and, of
13. See H.R. Rep. No. 1950, 87th Cong., 2d Sess. (1962),
reprinted in 1962 U.S. Code Cong. and Admin. News 1844,
1866-67.
14. See also Inclusive Tours by Supplemental Air Carriers,
Certain Foreign Air Carriers, and Tour Operators: Modification of
Surety Bond Requirements for Tour Operators, 36 Fed. Reg. 6586
(1971) (Preamble to regulations amending the surety bond require-
ments “to provide better protection to the public from defalcations
by tour operators or breach of the contract between the tour operator
and the tour participant.”)
|
Al0
course, with the effectuation of the purposes intended to be
served by the Act.” National Railroad Passenger Corp. v. Na-
tional Association of Railroad Passengers, 414 U.S. 453, 458
(1974) (“Amtrak”). Plaintiffs’ claim must be tested against the
additional criteria established in Cort V. Ash, supra.®
The next inquiry is whether there is any indication of legis-
lative intent either to create or deny a private remedy. The
legislative history of the Federal Aviation Act provides little
guidance. Plaintiffs’ briefs are devoid of any reference to legis-
lative history which would support a private right of action, and
the court’s own review of the relevant documents has revealed
none."® The statute itself provides for C. A. B. enforcement of
all statutory provisions and regulations and private enforcement
of violations of Section 1371 (a).49U.S.C. § 1487(a) (1970).
This does not necessarily mean that these enforcement methods
preclude private actions under other provisions.'* However, this
15. Courts vary in their interpretation of whether all four factors
must be considered in a given case. Compare Rauch v. United Instru-
ments, Inc., 548 F.2d 452, 460 (3d Cir. 1976) with People’s
Housing Development Corp. v. City of Poughkeepsie, 425 F. Supp.
482, 490 (S.D.N. Y. 1976). The Supreme Court’s application of
Cort has likewise varied. Compare Piper v. Chris-Craft Industries,
FOR asieins BIRO okbiats » 45 U.S. L. W. 4182, 4192-93 (1977) with
Santa Fe Industries, Inc. v. CONS cchestis GiB, a. .icsy 45 U, BL. W;
4317, 4321 (1977). It is apparent that the criteria established in
Cort are flexible; the analysis of the factors is qualitative, not purely
quantitative.
16. See S. Rep. No. 688, 87th Cong., 2d Sess. (1962) and H.R.
Rep. No. 1950, 87th Cong., 2d Sess. (1962) (conference report),
1962 U.S. Code Cong. & Admin. News 1844; S. Rep. No. 1811,
85th Cong., 2d Sess. (1958), H.R. Rep. No. 2360, 85th Cong., 2d
Sess. (1958), H.R. Rep. No. 2556, 85th Cong., 2d Sess. (1958)
(conference report), 1958 U.S. Code Cong. & Admin. News 3741-
72; S. Rep. No. 1661, 75th Cong., 3d Sess. (1938), H.R. Rep.
No. 2254, 75th Cong., 3d Sess. (1938), H.R. Rep. No. 2635, 75th
Cong., 3d Sess. (1938) (conference report).
17. See J. I. Case Co. v. Borak, 377 U.S. 426 (1964),
All
case falls within the Supreme Court’s reasoning in Amtrak,
supra:
[W]hen legislation expressly provides a particular remedy
or remedies, courts should not expand the coverage of the
statute to subsume other remedies. . . . This principle of
statutory construction reflects an ancient maxim—expressio
unius est exclusio alterius. Since the Act creates a public
cause of action for the enforcement of its provisions and a
private cause of action only under very limited circum-
stances, this maximum would clearly compel the conclusion
that the remedies created in § 307(a) are the exclusive
means to enforce the duties and obligations imposed by
the Act.
414 U. S. at 458. Congress provided a private remedy for viola-
tions of Section 1371(a), but not Section 1371(n), another
provision of the same statutory section.’® Section 1371(n) was
added in 1962, and Section 1487(a) was not amended to
provide for private enforcement of the new subsections of
Section 1371.
The Court in Amtrak notes that “even the most basic general
principles of statutory construction must yield to clear contrary
evidence of legislative intent.” 414 U.S. at 458. As we have
already stated, there is no evidence of legislative intent to
Support implying a private cause of action under Section
1371(n) (2). Furthermore, where Congress has provided for an
elaborate system of agency enforcement of a statute, that is some
indication that a parallel system of private enforcement was not
18. In Cort v. Ash, 422 U.S. at 82-83 n. 14, the Supreme Court
refused to infer from the fact a private remedy was provided in one
title of the act in question an intention to deny a private remedy with
regard to a different title. The Court distinguished Amtrak on this
point, noting that in Amtrak an express private remedy was provided
in favor of certain plaintiffs concerning the particular provision at
issue. The statutory provisions involved in the instant case more
closely approximate those in Amtrak. Here we are concerned with
different subsections of the same statutory section, not two entirely
separate titles of the Act.
Al2
intended. Securities Investor Protection Corp. v. Barbour, 421
U.S. 412, 423 (1975); National Railroad Passenger Corp. v.
National Association Of Railroad Passengers, 414 U.S. 453
(1974),
We must next ascertain whether it is “consistent with the
underlying purposes of the legislative scheme to imply such a
remedy for the plaintiff?” Cort V. Ash, 422 U.S. at 78. The
Court refers us to three cases for guidance, Amtrak, supra;
Securities Inve-¢or Protection Corp. v. Barbour, 421 U.S. 412,
423 (1975); and Calhoon V. Harvey, 379 U.S. 134 (1964). In
all three cases, a Private remedy was denied, with the Court
concluding such remedy would be inconsistent with a statutory
scheme which provided for agency enforcement. We agree with
the analysis of Judge Haight in interpreting this third factor:
“Where Congress vests enforcement responsibilities in the gov-
ernment agency with expertise in the particular area, the Court
is inclined to regard agency enforcement as exclusive,” People’s
Housing Development Corp. v. City of Poughkeepsie, 425 F,
Supp. 482, 492 (S. D.N. Y. 1976).
It is this factor which most forcefully militates against imply-
ing a private right of action in favor of private plaintiffs to en-
sions.” Piper y. Chris-Craft Industries, Wee ke , 45
U.S. L. w, 4182, 4188 (1977), citing Justice rankfurter
*
Al3
in Scripps-Howard Radio v. F.C. C., 316 U.S. 4, 11 (1964).
Where a government agency can provide private parties with
the relief necessary to effectuate the congressional purposes,
where there is no express provision for a private remedy and
the legislative history is bereft of any indication that such a
remedy should be implied, courts should be hesitant to add
to the burden of the judicial system. Particularly in a case such
as this where the C. A.B. has filed an action against the
defendants to enjoin further violations of the Act and recover
the deposits made by the private plaintiffs, it is unnecessary to
imply a private remedy to protect the interests of the plaintiff
class.*® Not only will judicial time be conserved, but the mem-
bers of the protected class will be saved the legal fees inherent
in prosecuting a private suit.
Under these circumstances, we find that unlike J. J. Case v.
Borak, judicially creating a private right of action under these
regulations is “unnecessary to ensure the fulfillment of Con-
gress’ purposes” in enacting the Federal Aviation Act. See
Piper v. Chris-Craft Industries, .......... Ui Oe i , 45 U.S. L. W.
4182, 4193 (1977). The C. A.B. has the authority to ade-
19. The C. A. B. filed an affidavit with its Reply Memorandum
in C. A.B. v. Tour Travel Enterprises, ........ F. Supp. ......... , No.
76 C 4693 (N.D. Ill. 1977) noting the voluminous number of
filings received by the agency on charter flights. This fact has little
relevance in a case where the C. A. B. has taken action. Moreover,
the Supreme Court has stated that practical limitations on an agency
do not alone lead to the conclusion that any interested party should
have a cause of action. Piper v. Chris-Craft Industries, Inc., ........
os ye , 45 U.S. L. W. 4182, 4193 (1977).
20. In deciding this question, our primary focus was on Congress’
purposes in enacting the particular statutory provision in question.
Section 1371(n) was passed in 1962 to provide for the increased
availability and regulation of supplemental air carriers (charters).
See 1962 U.S. Code Cong. and Admin. News 1844. Reference to
other sections of the Federal Aviation Act indicates a general purpose
to promote “adequate, economical, and efficient service by air
(Footnote continued on next page.)
Al4
quately protect the interests of the plaintiff charter tour partici-
pants, and the agency has taken action to protect those interests
in this case. Accordingly, the third factor joins the second in
weighing against implying a private right of action in this case.
The final factor for review is whether “the cause of action
[is] one traditionally relegated to state law, . . . so that it would
be inappropriate to infer a cause of action based solely on
federal law?” Cort v. Ash, 422 U. S. at 78. Where we have
found an adequate federal remedy in the agency charged with
enforcing the statute, it seems anomalous to inquire into the
availability of state remedies. Nonetheless we stop short of the
approach taken by those courts which find the fourth factor
to be inapplicable." There are state remedies available to the
plaintiffs. Indeed, their complaints include counts based on
breach of fiduciary duty under the escrow and Surety agree-
ments, fraud, conversion and breach of contract.** Other courts
construing provisions of the Federal Aviation Act have found
the existence of such remedies sufficient to warrant denial of
a private right of action.” Thus, the fourth factor, like the
(Footnote continued from preceding page.)
carriers at reasonable charges, without unjust discriminations, undue
preferences or advantages, or unfair or destructive competitive prac-
tices,” 49 U.S.C. § 1302(c) (1970), and to assure “the highest
degree of safety in, and foster sound economic conditions in” air
transportation. 49 U.S. C. § 1302(b) (1970).
21. See, e.g., People’s Housing Development Corp. v. City of
Poughkeepsie, 425 F. Supp. 482, 4901-91 (S.D.N. Y. 1976).
National Bank of Highland Park, No. 77 C 284 (N.D. Ill., filed
23. See, e.g., Rauch v. United Instruments, Inc., 548 F. 2d 452
(3d Cir. 1976); Wolf v. Trans World Airlines, 544 F. 2d 134 (3d
Cir. 1976), cert. denied, ........ CD ica (1977); and Polansky v.
Trans World Airlines, 523 F. 2d 332 (3d Cir. 1975).
Al5
second and third, fails to support plaintiffs’ claim for an implied
private right of action in this case.
Conclusion
The court concludes that plaintiffs do not have a private
remedy in federal court. Initially, plaintiffs have not brought
themselves within the explicit remedy provided private parties
in 49 U.S. C. § 1487(a) of the Federal Aviation Act of 1958.
Further, we hold that the C. A.B. Regulations upon which
plaintiffs rely for jurisdiction, 14 C. F.R. §§ 378.16, 378.18,
378a.31 and 378a.32, and the statutory provisions under which
these regulations were promulgated, in particular 49 U.S. C.
§ 1371(n) (2), do not confer an implied private right of action
upon these plaintiffs.
Even though the individual plaintiffs are within the class for
whose benefit the statute was enacted, they fail to meet the
additional requirements established in Cort v. Ash, supra, to
support the implication of a private right of action under
Section 1371(n)(2) and the regulations promulgated there-
under.
Accordingly, we hold that plaintiffs do not have an explicit
or implied private right of action under the regulations or statu-
tory provisions involved in these cases and we dismiss the cases
for failure to state a claim under Rule 12(b) (6). The plaintiffs
must rely on the C. A. B. to vindicate their interests in federal
court,** or they must resort to the remedies available to them
in state court.
24. The C. A. B.’s action in seeking relief for the private plaintiffs
in this case was a fact of great importance to the court’s decision.
Had the agency failed to act, or to seek to remedy the losses of these
private plaintiffs, the result may well have been different.
Al6
Having dismissed the federal claims, we also dismiss plaintiffs’
pendent state claims for lack of subject matter jurisdiction.
United Mine Workers v. Gibbs, 383 U.S. 715 (1966).
Dated: August 11, 1977
* Enter:
/s/ JOHN F. GRaApy
United States District Judge
IN THE UNITED STATES Court OF APPEALS
For the Seventh Circuit
No. 77-2037 :
EARL BRATTON, ET AL.,
ie Plaintiffs-A ppellants,
JOEL SHIFFRIN, ET AL.,
Defendants-A ppellees.
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 76 C-4282—John F. Grady, Judge.
No. 77-2023 ) :
ROGER CHAPMAN and JEANNE CHAPMAN, individually and on
behalf of all others similarly situated,
ter Plaintiffs-A ppellants,
FirsT NATIONAL BANK OF HIGHLAND PARK, a National Banking
Association,
Defendant-Appellee.
Appeal from the United States District Court for the
Northern District of Wlinois, Eastern Division.
No, 77 C-284—John F. Grady, Judge.
Al7
ARGUED ApriL 19, 1978—DeEciEp SEPTEMBER 18, 1978
Before SwyGERT, Circuit Judge, Moore, Senior Circuit
Judge,* and BAUER, Circuit Judge.
Moore, Circuit Judge. This appeal presents the question
whether a private cause of action exists, either express or im-
plied, under the Federal Aviation Act ( FAA), 49 U.S.C.
§ 1301 et seq., against a bank that allegedly violated regulations
of the Civil Aeronautics Board (CAB) governing charter tour
deposits, and the officer of the bank who was to personally
handle deposited funds. Contrary to the district court, 440 F.
Supp. 1257 (N.D. Ill. 1977) (Grady, J.), we conclude that
plaintiff-travelers, who have allegedly lost their prepayments for
charter tours which, due to the insolvency of their organizer,
never occurred, impliedly have a remedy for damages under
section 1371(n)(2) of the FAA, 49 U.S.C. § 1371(n) (2).
I.
The two actions now before us were commenced by a group
of persons! consisting of individual travelers (and, in Bratton,
some retail travel agencies) who made deposits and/or prepay-
ments to reserve places on numerous charter tours to foreign and
* Senior Circuit Judge Leonard P. Moore of the United States
Court of Appeals for the Second Circuit is sitting by designation.
1. Bratton v. Shiffrin (No. 77-2037) was commenced on Novem-
ber 18, 1976. On January 4, 1977, plaintiffs moved to have the
matter maintained as a class action. Chapman v. First National Bank
of Highland Park (No. 77-2023), commenced on January 26, 1977,
was originally brought as a class action., All decisions on class status
were deferred until decision of the Present appellees’ motion to
dismiss. 7
A third lawsuit raising similar claims against the appellees herein
was decided below along with those before us. Hemisphere Travel,
Inc. et al. v. First National Bank of Highland Park et al., No.
76 C 4707 (N.D. fll). Apparently there has been no appeal in
that action.
*
Al8
domestic locations. These tours were organized and marketed by
Tour Travel Enterprises, Inc. (TTE), a wholesale tour operator,
through, inter alia, its affiliated retail travel agencies, Sunshine
Travel Agency, Inc., and Sunshine Travel of Nevada, Inc., all of
whom are defendants. The other defendants are Gerald Mann
and Richard Tauber, owners and officers of the three travel
companies. The defendant-appellees are First National Bank of
Highland Park (FNB), a depository which, pursuant to CAB
regulations, had agreed with TTE to hold travelers’ prepayments
in special escrow accounts and to act as surety for TTE tours,
and Joel Shiffrin, vice-president of FNB, who personally handled
the tour funds,
Charter tour operators such as TTE have been the subject of
recent congressional concern. Since its enactment in 1958, the
FFA (sic) was twice amended by provisions designed to afford
greater protection against financially irresponsible charter orga-
nizers who too often had left travelers stranded and helpless. In
1962, Congress added section 1371(n) (2), Pub. L. No. 87-528,
which, in order to effectuate its announced aim of “protect[ing]
travelers”, directed the CAB to promulgate regulations requiring
supplemental air carriers engaged in charter tours to make
appropriate security arrangements for the purposes of providing
adequate compensation should the tours not proceed as sched-
uled.* Pursuant to its statutory authority, the CAB did, in fact,
carry out its duties by prescribing an extensive regulatory scheme
for the conduct of the charter tour industry. See Special Charter
Regulations, 14 C. F. R. Part 378 (1977). In order to better
elucidate our reasons for concluding that plaintiffs are properly
before the federal courts to enforce these regulations, we set
forth a summary of the rules designed by the CAB to implement
Congress’ directive to assure proper financial management of
charter tour monies, see House Committee Report, H. R. 1639,
2. In 1968, section 1371(e)(6) was amended, Pub. L. No. 90-
514, to permit regularly scheduled carriers to engage in charters
provided they deal with wholesalers that meet CAB regulations.
Al9
1968 U.S. Code Cong. & Admin. News 3594, 3597, 30 Fed.
Reg. 281, 282 (1965), the interpretation of which will be
involved in the resolution of this dispute.
To qualify as a “tour operator” permitted to make charter
arrangements, the CAB has required the fulfillment of certain
filing prerequisites: One must file a prospectus, a surety bond,
and a depository agreement executed by a federally insured bank.
14 C.F.R. §§ 378.10, 378.13 (1977). In this case, TTE
“qualified” by filing the required prospectus and depository
agreement between it and FNB as escrowee; TTE was permitted
to file, and did file, a trust agreement, with FNB as trustee, in
the amount of $200,000, in lieu of the surety bond.
The regulations also require a prescribed contract between the
tour operator and the tour participants; this contract requires
prepayment into an escrow account for transportation and
ground accommodations, see 14 C.F.R. § 378.17. The tour
operator must give notice to the participants of how to make
checks payable to the depositary bank and how to make claims
against the surety should a tour be cancelled. See 14 C. F.R.
§§ 378.16(b) (2) (iv), 378.17(b).
The depository agreement must conform with the regulations
governing their form and content. Under the agreement, which
creates a contractual relationship between the bank (here FNB),
the tour operator (here TTE), and an air carrier, the bank is
to establish and maintain separate accounts for each tour, see
14 C.F.R. §§ 378.16(b) (2) (vii), 378a.31(b) (2) (vii), into
which, presumably, the tour operator is to deposit prepayments.
(The depository agreement between TTE and FNB is appended
to Bratton’s First Amended Complaint as Exhibit A). Under the
same regulations, a tour participant who deals with the tour
operator is to make his payment directly to the bank’s escrow
account; on sales made by retail travel agents, the agent may
deduct his commission from the prepayment offered by the cus-
tomer, and then is to remit the balance to the designated deposi-
tory bank. Pursuant to 14 C. F. R. §§ 378.18 and 378a.32, the
A20
bank is prohibited from “mak[ing] disbursements or payments
from deposits except in accordance with the [other] provisions
of this part”. Thus, to greatly simplify matters, the bank may
only pay the direct air carrier, hotels, sightseeing operators, and
other surface accommodations up to a fixed percent of the total
deposits received by the bank for the particular tour, and only
at fixed times. See 14 C. F. R. §§ 378.16(b) (2), 378a.31(b)
(2). Furthermore, the rules provide that, if the bank is notified
of a tour cancellation, “the bank shall make applicable refunds
directly to tour participants”, 14 C. F. R. §§ 378.16(b) (2) (iv),
378a.31(b) (2) (iv).
In the case at bar, FNB assumed the duties not only as
escrowee, but also as trustee. (The Trust Agreement between
FNB and TTE is appended to Bratton’s First Amended Com-
plaint as Exhibit B). The trust, according to the bonding regu-
lations, is to inure to the benefit of tour participants, and is to
“continue in effect until completion of the tour”. 14 C.F.R.
§§ 378.16(b) (1), 378.a31(b) (1).
Against the backdrop of this rather complex regulatory scheme
established “to protect travelers”, 49 U.S.C. § 1371(n) (2),
unfolds the story of the plaintiffs in this case. Although all of the
Chapman and Bratton plaintiffs allegedly prepaid for TTE-
organized charter tours scheduled to depart after October 15,
1976, none was successful in obtaining a refund after the tours
were cancelled. Shortly before the scheduled departure dates, it
became apparent to their creditors that TTE and its affiliated
retail travel agencies were hopelessly insolvent, and, after an
involuntary bankruptcy petition was filed, bankruptcy adjudica-
tions followed. Plaintiffs allegedly requested that FNB return
3. TTE and Sunshine Travel Agency, Inc., were adjudicated
bankrupts on October 19, 1976. In re Your Travel Enterprises, Inc.,
No. 76 B 8014 (N. D. Ill. 1976); In re Sunshine Travel Agency, Inc.,
No. 76 B 8015 (N. D. Il. 1976). Sunshine Travel of Nevada, Inc.,
was adjudicated a bankrupt on October 26, 1976. In re Sunshine
Travel of Nevada, Inc., No. 76 B 8075 (N.D. Itl. 1976).
A21
the prepayments which, plaintiffs thought, would be available
from the escrow accounts, FNB failed to refund any of the
monies claimed by the plaintiffs; though over $740,000 was
claimed by plaintiffs, the total in the escrow accounts for TTE
tours is only about $391,000.‘
These lawsuits ensued. In one cause of action, plaintiffs alleged
that FNB and its officer, Shiffrin, violated the FAA and the
Special Charter Regulations thereunder by having mismanaged
the funds.® Specifically, plaintiffs allege that FNB acted out of
self-interest to help TTE avoid its impending bankruptcy so that
outstanding loans made by the bank to TTE would be repaid
and so that the surety obligations would not be triggered. Fur-
ther, plaintiffs aver that FNB made payments out of the escrow
accounts pursuant to TTE’s wrongful instructions, while fully
cognizant that the regulations permitted only designated pay-
ments. The complaints also allege that the bank qua trustee
violated its duties under the FAA. Finally, aside from the federal
claims, plaintiffs also interposed pendent claims of fraud, breach
of contract, and breach of fiduciary duty.
FNB and Shiffrin have denied, both on appeal and in their
memoranda in support of their motions below, that any checks
duly designated for the escrow accounts were diverted; further,
they have taken the position that plaintiffs have no cause of
action at all against them, asserting, in essence, that their duties
ran only to TTE, with whom they contracted, and that under the
4. Soon after TTE’s bankruptcy, FNB filed an action in the
nature of an interpleader in an attempt to foreclose the rights to the
escrow account. The Bankruptcy Court ruled that the court lacked
summary jurisdiction over the escrow funds. In re Tour Travel
Enterprises, Inc., No. 76 B 8014 (N. D. Ill. March 17, 1977).
5. Jurisdiction was alleged under 28 U. S. C. § 1331(a) (federal
question), and 28 U.S.C. § 1337, which grants jurisdiction over
cases arising under statutes enacted pursuant to Congress’ authority
to regulate commerce, regardless of the amount in controversy. We
find jurisdiction proper under § 1337 since violations of the FAA
are at issue.
A22
agreement, plaintiffs who dealt only indirectly with them may not
recover directly. Since discovery was stayed pending resolution
of appellees’ motion to dismiss, the circumstances of the dis-
appearance of funds are not clear. It has not been determined
which plaintiffs made checks payable to the bank, and which
paid travel agencies. What is clear is that the bank has woefully
insufficient funds in its accounts to refund monies to the many
individuals, travel agents, associations, and social clubs who
claim to have prepaid for cancelled TTE tours, and that serious
allegations of wrongdoing have been made.
Under the circumstances, and for the reasons that follow, we
reverse the order of the district court, and we hold that plaintiffs
have stated a claim for relief under the FAA.®
II.
Although we believe that plaintiffs are properly before the
court, we agree with the district court that no explicit cause
of action was provided by Congress to remedy violations of
the nature here alleged. Plaintiffs’ argument was that section
1007(a) of the FAA, 49 U.S.C. § 1487(a) (hereinafter “sec-
tion 1487(a)”), could be read to provide express authorization
for a remedy in their case. That section provides for injunctive
relief as follows:
“If any person violates any provision of this chapter, or
any rule, regulation, requirement, or order thereunder, .. .
the [CAB]... , or, in the case of a violation of section
1371(a) of this title, any party in interest, may apply to
the district court . . . for the enforcement of such provision
. .5 and such court shall have jurisdiction to enforce
6. Appellees’ motion to dismiss was also predicated on the
absence of an allegedly indispensable party (the trustee in bank-
ruptcy). Appellees also claimed that these federal actions must be
stayed under Fed. R. Bank. 401, 601. With the dismissal of the
federal claims, the pendent claims were dismissed for lack of subject
matter jurisdiction. Since we hold that the complaint should be
restored, so, too, should the pendent claims.
A23
obedience thereto by a writ of injunction or other process,
mandatory or otherwise, restraining such person... from
further violation . . . and requiring their obedience, . . .”
Although plaintiffs argue that they are “parties in interest” and
that their losses were caused by defendants’ conduct which,
allegediy, violates section 1371(a), we must disagree with their
unduly strained reading of section 1487(a). Although there are
many barriers to holding that an express cause of action exists
under this section, the most compelling is that private persons
are limited, under the section, to suits for violations of section
1371(a), which provides, in essence, that no “air carrier” may
operate without CAB certification. Absent a violation of certifi-
cation requirements by an “air carrier”, no private enforcement
is contemplated under this provision for injunctive relief.
The definition of “air carrier”, it is true, includes one who
undertakes “indirectly” to engage in air transportation, 49
U.S.C. § 1301(3), and has been deemed broad enough to
encompass the activities of a tour operator who arranges
charter flights. See CAB v Carefree Travel, Inc., 513 F.2d
375, 387-388 (2d Cir. 1975). However, we agree with the
district court that, in this matter of Statutory construction,
even assuming that section 1487(a) could otherwise be deemed
satisfied, a depository bank cannot be included in the definition
of “air carrier”.
Nonetheless, we think that plaintiffs may enforce compliance
by implication under 49 U.S.C. § 1371(n)(2) [FAA
§ 401(n)], which provides:
“In order to protect travelers and Shippers by aircraft
operated by supplemental air carriers, the Board may re-
quire any supplemental air carrier to file a performance
bond or equivalent security arrangement, in such amount
and upon such terms as the Board shall prescribe, to be
conditioned upon such supplemental air carrier’s making
appropriate compensation to such travelers . . ., as pre-
scribed by the Board, for failure on the part of such car-
A24
rier to perform air transportation services in accordance
with agreements therefor.”
In reaching our conclusion that this quoted section provides
a ground for private enforcement of the Special Charter Regu-
lations, we have considered the four factors enunciated in Cort
Vv. Ash, 422 U.S. 66 (1975), which we now discuss,
The first Cort “test” is whether plaintiffs belong to the class
for whose “especial benefit” the statute in question was enacted.
In our view, there is little doubt as to this factor. The statute
itself was enacted “to protect travelers”, Further, it was designed
to protect against a specific wrong—the inability to obtain
compensation when tour plans collapse. To meet the stated ob-
jective, Congress saw fit to empower the CAB to require sup-
plemental air carriers (and “indirect” supplemental Carriers) to
provide adequate security arrangements so that travelers would
receive their just compensation should a financially irresponsible
carrier fail to perform agreed upon services. We think it safe
to say that the plaintiffs are clearly within the protected class
that section 1371(n) (2) was specifically designed to deal with.’
Insofar as the plaintiff travel agencies are not, as the district
court stated, “members of the traveling public”, their status as
7. The Special Charter regulations of the CAB make clear the
extent to which plaintiffs are members of this new federally protected
class. Those regulations were proposed “to insure the financial
responsibility of the tour operator to the traveling public”, Notice of
Proposed Rule Making, 30 Fed. Reg. 281, 282 (1965), and “to
provide better: protection to the public from defalcations by tour
operators or breach of the contract between the tour Operator and
the tour participant”. Modification of Surety Bond Requirements for
Tour Operators, 36 Fed. Reg. 6586 (1971).
Given the regulatory scheme, under which supposedly responsible
institutions such as FNB were invited to agree to safeguard any funds
that may be owing upon a tour operator’s inability to perform, it
becomes clear that plaintiffs’ travails with the bank are exactly those
as to which the federal scheme was to afford protection. See also
H.R. Rep. No. 1950, 87th Cong., 2d Sess. (1962), reprinted. in
1962 U.S. Code Cong. & Admin. News 1844, 1866-67.
A25
proper plaintiffs derives from their having made good their
customers’ losses. Hence, those agencies which have done so
should be permitted to take over the claims of their customers
as subrogees,
Despite Congress’ clear intention to provide protection to
plaintiffs in this case, appellees argue that, regardless of whether
or not plaintiffs are members of a protected class under the
statute, the provision only relates to “supplemental air carriers”,
and since none of the appellees has such status (even if other
defendants fit the definition), this suit is improper. We are not
dealing here, however, with a question of construction of ex-
pressly granted remedial provisions, as above, but are rather
attempting to discern the parties bound by the statutorily author-
ized regulations at issue. It is clear from a reading of both the
statute and the Special Charter Regulations that the use of a
depository bank, such as FNB, was a contemplated and neces-
sary element in effectuating the stated purpose of providing for
proper security under strict controls. If implication of a cause
of action is otherwise appropriate, FNB cannot escape its fed-
erally enforceable duties on the ground that it was not specially
mentioned in the statute which enabled the CAB to regulate
as it did. Because Congress envisioned that plaintiffs were to
be protected from air travel abuses by means of the bank’s ad-
herence to federal requirements, we think that Cort’s first test
is met.
The second factor in Cort is whether there is any indication
of legislative intent, explicit or implicit, either to create a private
remedy or to deny one. Not surprisingly, neither section
1371(n)(2) nor its legislative history reveals congressional
intent. On this basis, appellees argued below, and the district
court agreed, that since section 1487(a) of the FAA explicitly
provides for agency (CAB) enforcement of all provisions of the
FAA, and since it also provides for limited private enforcement
of one provision of the Act (i.e., enforcement of § 1371(a) by
“parties in interest”), an inference arises that those expressly
A26
created remedies exclude all others, especially since no clear
contrary evidence of legislative intent can be shown. This line
of reasoning reflects the familiar maxim of expressio unius est
exclusio alterius, which has recently been applied by the Supreme
Court in National Railroad Passenger Corp. Vv. National As-
sociation of Railroad Passengers (Amtrak), 414 U.S. 453
(1974), and SIPC v. Barbour, 421 U.S. 412 (1975). Though
the argument has some force in relation to this case, we do not
believe it determinative. While we are aware that the doctrine
was applied by the Supreme Court to deny the implication of
a remedy in the cases it decided, we are mindful, too, of the
Court’s admonition that “it is the duty of the courts to be alert
to provide such remedies as are necessary to make effective the
congressional purpose”. J, 1. Case Co. v. Borak, 377 U.S. 426,
433 (1964). We do not believe that the intervening cases since
Borak in any way detract from the validity of that admonition;
indeed, as recently as Cort, 422 U.S. at 84, we were reminded
that effectuation of the congressional purpose is paramount.
In this case, we think that Congress’ recent concern with the
plight of uncompensated travelers, which resulted in two en-
actments that postdated the enactment of section 1487(a), the
general remedial provision, indicates that if Congress did not
expressly consider the issue of private enforcement of the Char-
ter Regulations, nor did it intend to deny a remedy. The ap-
plication of expressio unius in this context would serve only
to frustrate the goal of assuring adequate security for travelers’
compensation.
In any case such as this, where there is no indication of con-
gressional intent to create or deny a private remedy, and where
there is, under the statute in question, provision for agency
enforcement, the extent of the agency’s enforcement powers
must be carefully considered before deciding whether expressio
unius is to apply, and whether the implication of a private
remedy would be “consistent” with the underlying purposes of
the statute in dispute, which is the third Cort factor to be con-
A27
sidered. The two “tests”—the second and third Cort factors—
interrelate in a case such as this, We think that the district
judge relied unduly on the theoretical availability of CAB en-
forcement powers when he determined that the availability of
such powers militated against plaintiffs’ position. We are dealing
here with the enforcement of only one small part of the FAA
which, though small, has spawned a vast regulatory scheme,
the single goal of which is to assure relief to a traveler whose
travel plans are thwarted.
Although the CAB may enforce the regulations by suing to
enjoin violations, the agency has admitted that it cannot single-
handedly police the administration of the Special Charter Regu-
lations to prevent violations from occurring.* We recognize, as
did the district court, that practical limitations on agency capa-
bilities do not alone lead to the conclusion that any interested
party should have a private remedy to enforce those matters
within the agency’s purview. See Piper v. Chris-Craft Industries,
Inc., 430 U.S. 1, 41 (1977). However, in a case such as this,
where practical limitations are combined with a clear possibility
that agency action may never be adequate to remedy the precise
8. The CAB commenced its own action under section 1487(a)
of the FAA in November 1976, against Mann, Tauber, FNB, and
Shiffrin. CAB v. TTE, 440 F., Supp. 1265 (N.D. Ill. 1977) (No.
76 C 4693). The CAB alleged that these defendants violated the
regulations, and the complaint asked that they be restrained. The
court was also asked to appoint a trustee to act on behalf of the tour
Participants to prosecute claims and to collect and distribute any
monies due to TTE’s prospective travelers.
In a Memorandum of Law addressed to the court, the CAB con-
fessed that the finding and proving of violations of its regulations on
the basis of the voluminous charter filings it received would require
full-scale investigation and numerous field audits—an operation it
was ill-equipped to handle. Even if it were to discover violations,
“[i]t is axiomatic that such efforts are frequently, as here, too late for
a simple injunction to foreclose harm; they [investigations and audits]
are expensive; and they are also necessarily selective”. Bratton and
Chapman Joint Appendix at 50, Memorandum of CAB.
A28
wrong which Congress sought to prevent, we think that a
federal court must be willing to permit private remedial meas-
ures to better effectuate compliance with federal goals. The
district court realized, in the case at bar, that CAB action would
undoubtedly come too late to prevent travelers from sustaining
losses due to violation of the Charter Regulations; however,
Yudge Grady relied on the supposed fact that, even if loss may
not be prevented, once it is suffered, the CAB, though lacking
the power to itself order refunds, may sue to obtain an order
for the refund of tour deposits by means of the appointment of
a trustee. The one case cited for this proposition was the dis-
trict court decision in CAB vy. Scottish-American Association,
Inc., 411 F. Supp. 883, 888 (E. D.N. Y. 1976). With all due
respect, we think that some question may still exist as to the
CAB’s authority under section 1487(a) to obtain refunds for
travelers. Though the Scottish-American decision, resting on
equitable principles, has force, there is authority, perhaps over-
looked below, to the contrary. See Fitzgerald v. Pan American
World Airways, 229 F.2d 499, 502 (2d Cir. 1956); Wills v.
Trans World Airlines, Inc., 200 F. Supp. 360, 364 (S. D. Cal.
1961). We believe that an issue may still exist as to the scope
of the CAB’s enforcement powers under the FAA in a context
such as this. We do not, of course, decide the issue, but point
it out merely to indicate our concern that private enforcement
of the right to a refund is certainly consistent with the goal
of the legislation—to protect travelers—and is, indeed, critical
in a case where agency enforcement may be inadequate, if not
tardy.
This is not a case where agency expertise is needed for the
resolution of the dispute. Nor is this a case, like Cort itself,
where the plaintiffs sought to enforce but a secondary “goal” of
the statute in question, if a goal at all. (There, the primary
goal was to insure against election abuse by curbing the undue
influence that could be exerted by large corporate expenditures;
plaintiffs sought a remedy to make the corporation “whole”,
A29
which, as the Court noted, would not aid in the enforcement
of the primary goal of the criminal statute there in issue).
Here, plaintiffs seek a remedy for the very wrong the statute was
designed to prevent, by the very means contemplated to protect
them.
Although this factor is not controlling, we would note that
other courts have not hesitated to imply private remedies under
the FAA when deemed necessary to effectuate its purpose.°
Under the circumstances at bar, we believe a private remedy is
also necessary. Defendant-appellees in this case have, in es-
sence, denied all liability to many of the plaintiffs (i.e., those
who did not directly make checks payable to the bank, but who
dealt through travel agencies). They have set up “defenses”, by
way of appellate argument, which suggest that some conflict in
the regulations will have to be reconciled, and the bank’s duties
9. Private rights of action have been implied under the FAA in a
variety of contexts. See, e.g., Nader v. Allegheny Airlines, Inc., 512
F. 2d 527 (D.C. Cir. 1975), rev’d on other grounds, 426 U.S. 290
(1976) (“bumping” of passenger; action available under FAA
§ 404(b), 49 U.S.C. § 1374(b)); Fitzgerald v. Pan American
World Airways, 229 F. 2d 499 (2d Cir. 1956) (refusal to transport
because of race); Aircraft Owners & Pilots Ass’n v. Port Authority
of New York, 305 F. Supp. 93, 103-04 (E. D.N. Y. 1969) (section
308 (a), 49 U.S.C. § 1349(a), provides action insofar as it assures
equal access to airports); Mortimer v. Delta Airlines, 308 F. Supp.
276 (N. D. Ill. 1969) (“bumping”) ; Town of East Haven v. Eastern
Airlines, Inc., 282 F. Supp. 507 (D. Conn. 1968) (action available
to enforce operating and landing regulations to prevent undue noise
pollution ).
We are aware, of course, that private rights of action have been
denied under other sections of the FAA, in other contexts. However,
we do not believe, as appellees suggest, that implied actions must be
limited to two areas of supposed “compelling national interest”, i.e.,
discrimination or “bumping” cases, and cases involving safety regu-
lations. Rather, it is the court’s function to imply a remedy under any
Act of Congress when one is necessary to effectuate the purposes of
the Act in question. Each case must be decided on its own merits.
We think that a remedy is entirely appropriate in this case.
A30
to the travelers explicated. The very fact that the regulations
will require interpretation is a factor which militates in favor of
upholding plaintiffs’ right to sue in federal court—and is the
fourth Cort factor to be considered.
This final factor requires a determination of whether the
matter before the court is one traditionally relegated to state
law so that it would constitute inappropriate interference to
imply federal power in the area. The district court was satisfied
that plaintiffs had available to them state remedies since they
had interposed claims sounding in fraud, breach of contract,
conversion, and breach of fiduciary duty. We do not agree,
however, that the availability of these state causes of action
should, or can, preclude a federal remedy under the circum-
stances,
At issue here is the bank’s alleged willful violation of fiduciary
obligations specifically imposed by its voluntary agreement to
adhere to federal regulations. State courts attempting to define
the duties arising in this case will necessarily have to refer to
the federal regulations subsumed in the agreements between the
principals. It would be highly undesirable and inappropriate for
the federal court to permit inconsistent interpretations of the
provisions by relegating plaintiffs to the courts of the various
states, the rules of which, perhaps, could even be applied to de-
feat congressional goals. We believe that uniformity is required
in this area which, as can be seen from the brief description of
the regulatory scheme given above, is quite complex. If the duty
of the depository bank is governed—indeed, created—by federal
law, then the interpretation of the law creating the duty should
surely be undertaken by the federal courts. FNB’s “defenses”,
which perhaps would be availing absent the federal regulations
by which it agreed to be bound, must be determined in accord-
ance with those regulations, not state law. Thus, this factor in
the Cort test also militates in favor of providing a federal forum.
In sum, we believe that plaintiffs have satisfied Cort’s “tests”
for determining whether a federally implied remedy is appro-
A31
priate. Though, as the district court noted, Cort’s tests were
applied in that case to deny a private remedy, the factors to be
considered require a qualitative analysis. Here, plaintiffs are
unquestionably members of a class sought to be protected by
congressional enactment, and the wrong which they suffered was
the specific concern of the statute and the regulations there-
under, Where, as here, the federal right is so clearly defined,
and where resolution of the dispute will depend on interpreta-
tion of the regulations in question, we will not deny a remedy.
We reverse the order dismissing the complaint. Since the
federal claims are restored, the district court should also con-
sider the pendent claims as well.
Reversed and remanded for further proceedings.
BAUER, Circuit Judge, dissenting. I must respectfully dissent.
It seems to me that the opening of new vistas in private causes
of action ought to be approached rather fearfully and with a
more tender regard for the acts of Congress and the limitations
of the federal bench. The four-factor test of Cort v. Ash has
been rather “adjusted” to reach the conclusions the majority
pronounces. The trial court concluded that the plaintiffs have
failed to meet the second, third and fourth tests of Cort—and
with that opinion I agree.
To begin with, on the question of Congressional intent, I am
not at all persuaded by the majority’s efforts to brush aside the
“expressio unius” doctrine that has figured so prominently in
the Supreme Court’s most recent efforts to determine whether an
implied right of action exists under federal statutes. In National
Railroad Passenger Corp. v. National Association of Railroad
Passengers, the Court declared that
“when legislation expressly provides a particular remedy
or remedies, courts should not expand the coverage of the
statute to subsume other remedies. . . . This principle of
statutory construction reflects an ancient maxim—expressio
unius est exclusio alterius. Since the Act creates a public
cause of action for the enforcement of its provisions and a
A32
private cause of action only under very limited circum-
stances, this maxim would clearly compel the conclusion
that the remedies created in § 307( a) are the exclusive
means to enforce the duties and obligations imposed by the
Act.”
414 U.S. 453, 458 (1974). Similarly, in the case at hand,
Congress has provided a private remedy for violation of section
1371(a) of the FAA, but has not done so for section 1371(n).
It seems quite apparent, therefore, that in this case, too, the
principle of expressio unius “compels the conclusion that the
remedies created in [§ 1371(n)] are the exclusive means to en-
force the duties and obligations imposed by the Act.”
While finding the argument to be of “some force,” the ma-
jority nevertheless insists that expressio unius does not apply,
apparently because a private right of action is “consistent” with
the underlying purposes of the statute. In this manner, the
majority incorporates elements of the third Cort “test” into the
second, reasoning that “the two ‘tests’. . . interrelate in a case
such as this.” Such an approach, however, misconceives the
essential nature of the inquiry in deciding whether or not the
expressio unius doctrine applies; for, as the Supreme Court has
made clear,
“[an] express statutory provision for one form of proceeding
ordinarily implies that no other means of enforcement was
intended by the legislature. That implication would yield,
however, to ‘clear contrary evidence of legislative intent,’
for which we [turn] to the legislative history and the over-
all structure of the . . . Act.”
Securities Investor Protection Corp. v. Barbour, 421 U.S. 412,
419 (1974) (emphasis supplied) (citations omitted). Thus, in
determining the applicability of the expressio unius doctrine,
the central question is not whether a private right of action is
“consistent” with the purposes or goals of the statute, but
rather, whether the overall structure of the Act, or its legislative
history, furnish “clear evidence” of a Congressional intent to
A33
create a private remedy. This distinction is crucial, for, as the
majority itself apparently concludes, “there is no indication”
of such an intent in either the legislative history or the structure
of the FAA. It follows from the majority’s own conclusion,
therefore, that expressio unius should apply and that the second
of the four Cort tests is not met in this case.
Moreover, I cannot agree that a private right of action is
even “consistent” with the structure and goals of the FAA. On
this point, the majority appears to suggest that private remedial
measures are necessary to further the Congressional purpose of
protecting travelers from “losses due to violations of the Charter
Regulations.” But even if a major purpose of the Act is to
protect travelers from such losses (and even if the majority is
correct in claiming the the CAB may not be able to sue for a
refund of tour deposits), it does not follow that a private
remedy is consistent with the statutory scheme. In Securities
Investor Protection, supra, the Court noted that
“Congress’ primary purpose in enacting the SIPA and
creating the SIPC was, of course, the protection of in-
vestors. It does not follow, however, that an implied right
of action by investors who deem themselves to be in need
of the Act’s protection, is either necessary to or indeed
capable of furthering that purpose.”
421 U.S. at 421. In this case, Congress has explicitly granted
to the CAB the authority to enforce the statute and regulations
at issue, and to seek an injunction against any further violations.
49 U.S.C. § 1487(a). Moreover, as was noted above, there
is no extrinsic evidence that Congress contemplated the agency
enforcement to be anything other than exclusive. I therefore
find no basis for the majority’s conclusion that a private right
of action is “consistent” with the Statutory scheme.
Finally, it seems to me that this cause of action is a matter
“traditionally relegated to state law,” and thus fails to satisfy
the fourth requirement of Cort. The majority reaches the op-
A34
posite conclusion on the grounds, apparently, that there is a
need for “uniformity” in construing federal regulations. What
the opinion fails to make clear, however, is precisely why an
adjudication of the plaintiffs’ common law claims of fraud,
breach of contract, conversion, and breach of fiduciary duty,
would “necessarily have to refer to the federal regulations sub-
sumed in the agreements between the principals.” To say that
federal regulations required the bank to assume certain legal
obligations to the tour operator (and hence the tour participants )
is one thing. To say that the regulations defined those obligations
is quite another. And for my part, I can sge no reason why
a determination of the plaintiffs’ non-federal claims would re-
quire anything other than the application of familar principles
of common law contracts and torts. I must conclude, therefore,
that the fourth element of the Cort test, like the second and third,
furnishes no support for the plaintiffs’ position.
Regulatory agencies, and the rules they function under should
not, it seems to me, be the launching pads for new judicial
journeys that add more ballast to an already overburdened
federal system of dispensing justice.
I would affirm the trial court’s decision that found no private
cause of action exists under the regulations in question.
A true Copy:
Teste:
Clerk of the United States Court of
Appeals for the Seventh Circuit
A35
UNITED STATES CourT OF APPEALS
For the Seventh Circuit
Chicago, Illinois 60604
January 11, 1979
Before
Hon. THomMas E. FAIRCHILD, Chief Judge
Hon. LEONARD P. Moore, SR. Circuit Judge*
Hon. LUTHER M. SWYGERT, Circuit Judge
Hon. WALTER J. CUMMINGS, Circuit Judge
Hon. WILBUR F. PELL, Jr., Circuit Judge
Hon. RoBERT A. SPRECHER, Circuit Judge
Hon. Puitie W. Tone, Circuit Judge
Hon. WILLIAM J. BAUER, Circuit Judge
Hon. HARLINGTON Woon, Jr., Circuit Judge
ROGER CHAPMAN and JEANNE CHApP- .
MAN, individually and on behalf of
all others similarly situated,
Plaintiffs-Appellants, | Appeals from the
United States Dis-
No. 77-2023 vs. trict Court for the
FirsT NATIONAL BANK OF HIGHLAND Northern District of
PARK, Illinois, Eastern Di-
Defendant-A ppellee. vision.
Nos. 77-C-284 and
EARL BRATTON, ET AL., 76-C-4282
Plaintiffs-A ppellants, John F. Grady,
No. 77-2037 vs. Judge
JOEL SHIFFRIN, ET AL.,
Defendants-A ppellees. J
On consideration of the petition for rehearing and suggestion
for rehearing in banc filed in the above-entitled causes by coun-
* Hon. Leonard P. Moore, Sr. Circuit J udge for the U. S. Court of
Appeals for the Second Circuit, is sitting by designation.
A36
sel for the appellees, a vote of the active members of the court
was requested, and a majority of the active members of the
court have voted to deny a rehearing in banc.** A majority of
the judges on the original panel have voted to deny the peti-
tion for rehearing. Accordingly,
It Is ORDERED that the aforesaid petition for rehearing be,
and the same is hereby, DENIED.
** Hon. Philip W. Tone and Hon. William J. Bauer, Circuit
Judges voted to grant the petition for rehearing and suggestion for
rehearing in banc.
A37
APPENDIX B.
IN THE UNITED STATES CouRT OF APPEALS
For the Seventh Circuit
No. 77-2037
EARL BRATTON, et al., Plaintiffs-A ppellants,
VS.
JOEL SHIFFRIN, et al., Defendants-A ppellees.
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 76 C-4282—John F. Grady, Judge.
No. 77-2023
ROGER CHAPMAN and JEANNE CHAPMAN, individually and on
behalf of all others similarly situated,
ie Plaintiffs-A ppellants,
First NATIONAL BANK OF HIGHLAND PARK, A National Bank-
ing Association,
Defendant-Appellee.
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 77 C-284—John F. Grady, Judge.
On Remand from the United States Supreme Court
DECIDED MARCH 10, 1980
Before SwyGERT, Circuit Judge, Moore, Senior Circuit
Judge,* and BAuER, Circuit Judge.
* Senior Circuit Judge Leonard P. Moore of the United States
Court of Appeals for the Second Circuit is sitting by designation.
a
A38
SwyGErT, Circuit Judge. This case is now before the court
on remand from the Supreme Court which ordered the court
to further consider our earlier decision in light of Touche Ross
& Co. v. Redington, 442 U.S. ........ » 99 S. Ct. 2479 (1979).
In our decision, reported at 585 F. 2d 223,’ we held that charter
air travelers have an implied right to sue under section 401 (n)
(2) of the Federal Aviation Act (Act)? for violations of the
Civil Aeronautics Board (CAB) regulations governing charter
security arrangements. Having given further consideration to
both Touche Ross and our earlier Opinion in this case, we ad-
here to our decision to reverse the judgment of the district court
which dismissed plaintiffs’ complaint for the following reasons.
» In Touche Ross the Supreme Court construed section 17(a)
of the Securities Exchange Act of 1934? which requires broker-
dealers and others to keep and file records and reports as
prescribed by the Securities & Exchange Commission (SEC).
Plaintiffs, customers of an insolvent brokerage firm, by court-
appointed trustee and the Securities Investor Protection Corpo-
ration sued Touche Ross & Co., the brokerage house’s account-
ants on the ground that the brokerage house’s customers did not
receive the benefit of federal agency enforcement because
Touche Ross’s filings pursuant to section 17(a) on behalf of
the firm were inaccurate, Based on the set of factors set forth
in Cort v, Ash, 422 U.S. 66 (1975), the Supreme Court held
that no private remedy could be inferred from section 17(a)
1. On January 11, 1979, petitions for rehearing en banc were
denied by this Court and a petition for writ of certiorari followed. . -
2. Section 401(n)(2) of the Act authorizes the CAB to pre-
scribe security arrangements to protect air charter travelers. 49
U.S.C. § 1371(n) (2).
3. Section 17(a) reads in pertinent part:
every broker or dealer registered pursuant to . . . this title, shall
make, keep and preserve for such periods, such accounts,
correspondence .. . and other records .. .
15 U.S.C. § 78q(a).
A39
because that section was merely a recordkeeping provision
designed to assist the SEC in performing its regulatory func-
tions and did not confer rights on private parties. In its analysis,
the Supreme Court found that the statute did not purport to
create a private action (99 S.Ct. at 2486), did not prohibit
“certain conduct” (99 S.Ct. at 2489), did not create “federal
rights in favor of private parties” (99 S. Ct. at 2489), and that
there was no legislative history indicating an intent of Con-
gress to provide a private remedy (99 S.Ct. at 2486-88).
For these reasons the Court held that no private remedy could
be inferred.®
Unlike the statutory provision reviewed in Touche Ross this
court found that section 401(n) of the Act was designed spe-
cifically to provide an enforceable remedy to individual air
charter travelers against insolvent tour operators by providing
compensation for their loss from a financially responsible third
party. 585 F. 2d at 232. In so holding, we looked to the express
4. The Court indicated that the central inquiry in the case was
the congressional intent to create a private cause of action.
Here, the statute by its terms grants no private rights to any
identifiable class and proscribes no conduct as unlawful. And
the parties as well as the Court of Appeals agree that the
legislative history of the 1934 Act simply does not speak to the
issue of private remedies under Section 17(a). At least in such
a case as this, the inquiry ends there. The question whether
Congress, either expressly or by implication, intended to create
a private right of action has been definitely answered in the
negative.
5. Justice Brennan concurred with the majority noting that two
of the four factors of Cort v. Ash were present but that no cause of
action could be inferred because the plaintiff is not “one of the class
for whose especial benefit the statute was enacted” and because there
is no legislative history, explicit or implicit, indicating an intent to
create a private remedy. (99 S. Ct. at 2491). Justice Marshall dis-
sented, stating: “I am unwilling to assume that ‘Congress simul-
taneously sought to protect a class and deprived [it] of the means of
protection.”” (99 S.Ct. at 2491-2492).
A40
language of section 401(n) which required supplemental air
carriers® to post a performance bond or equivalent security
arrangement “in order to protect travelers * * * by aircraft
* * *."T against the inability to obtain compensation when tour
plans collapse. As we earlier concluded, “there is little doubt”
that plaintiffs belong to the class for whose benefit the statute
was enacted,
With respect to the existence of legislative intent to create
or deny a private remedy and whether the implication of a
private remedy is consistent with the underlying purposes of the
act, the second and third factors of Cort, this court found that
in enacting section 401(n) (2) Congress intended to provide
a remedy against a third party for travelers when agreements
for air transportation were breached. 585 F.2d at 229. The
provision declares that the purpose of the security arrangements
is to provide “appropriate compensation to such travelers and
6. “Supplemental air carriers” are carriers which operate only
charters. In 1966 the Board interpreted the 1962 legislation quoted
in part in note 7, infra, as authorizing it to permit charters to be
organized and sold by independent tour operators as well as supple-
mental air carriers and adopted regulations which required these
independent tour operators to provide surety bonds for the per-
formance of their agreements with charter passengers. 14 C. F.C.
§ 378.16, 31 Fed. Reg. at 4781.
7. As it read at the time of the relevant events of this case,
§ 401(n)(2) provided:
In order to protect travelers and shippers by aircraft operated
by supplemental air carriers, the Board may require any supple-
mental air carrier to file a performance bond or equivalent
security arrangement, in such amount and upon such terms as
the Board shall prescribe, to be conditioned upon such supple-
mental air carrier’s making appropriate compensation to such
travelers and shippers as prescribed by the Board, for failure on
the part of such carrier to perform air transportation services in
accordance with agreements therefor.
49 U.S.C. § 137(n) (2); emphasis added.
A41
shippers.” Congress had been shown the evils which had arisen
in the travel agent business and the consequences of agency
insolvency, namely, cancelled trips after payment had been
made, the stranding of passengers in foreign countries, and the
failure to supply guaranteed accommodations, and had enacted
a security provision to compensate aggrieved travelers and
shippers.
Although the legislative history is scarce. there is nothing
in the statute that explicitly creates or denies a private remedy.
From the congressional silence, however, we have read a posi-
tive implication in favor of a private cause of action. First, Mr.
Halaby, the Administrator of the Federal Aviation Agency in
testifying before the Senate subcommittee on the performance
bond amendment to the Aviation Act stated that:
By requiring a supplemental air carrier to furnish a per-
formance bond, a desirable specific review of the carrier’s
financial responsibility will have to be made—and inci-
dentally, outside of the government-—and when the bond
is issued, some recourse will have been supplied to those
who are otherwise helpless.®
This intent to provide “some recourse to those who are
otherwise helpless” through a vond provision is the indication
of congressional intent which the Supreme Court found wanting
in the general bookkeeping and record keeping provisions re-
viewed in Touche Ross. Second, even if there was no indication
at all of congressional intent to create a private remedy that
factor is not conclusive when the remedy is needed to effectuate
a stated fundamental congressional purpose in enacting the
8. Senate Hearings on proposed amendments to the House Sub-
stitute Amendment to S. 1969, before the Aviation Subcommittee of
the Senate Committee on Commerce, 87th Cong. 2nd Sess. 103 at
34-35 (March 5, 1962) quoted at page 9 of the CAB’s amicus
position statement.
Mr. Halaby’s comments were not brought to our attention until the
CAB filed a position statement as amicus curiae on remand from the
Supreme Court.
¢%
A42
amendatory provision, (J. J. Case Co. v. Borak, 377 U.S. 426,
433 (1964), and Santa Fe Indus., Inc. v. Green, 430 U. S. 462
(1977) ) and when there is no evidence that Congress intended
to exclude a private remedy. Touche Ross, supra, 99 §. Ct.
2479 (1979); Cannon v. University of Chicago, 99 S. Ct. 1946,
1953 (1979). As the Supreme Court stated in Cannon (99
S. Ct. at 1956):
We must recognize, however, that the legislative history
of a statute that does not expressly create or deny a private
remedy will typically be equally silent or ambiguous on
the question. Therefore, in situations such as the present
one “in which it is clear that federal law has granted a class
of persons certain rights, it is not necessary to show an
intention to create a private cause of action, although an
explicit purpose to deny such cause of action would be
controlling.”
Finally, this court’s conclusion that the presence of an express
private remedy in section 1007 did not indicate a congressional
intent to exclude other private remedies is Supported by the
Supreme Court’s reasoning in both Cannon® and Touche Ross.
The reasoning of these two cases plainly indicates that more
is required to infer that Congress did not intend to create a
particular private right than one fact that elsewhere in the
same statute Congress has explicitly granted a private cause
of action. For example, in Touche Ross the Supreme Court
concluded that the record keeping provision under review was
not intended to create private rights when other provisions
which flanked that provision contained expressly-created rem-
edies, and when one of those provisions specifically concerned
false statements in reports and was enacted contemporaneously
9. In Cannon the Supreme Court stated:
The fact that other provisions of a complex statutory scheme
create express remedies has not been accepted as a sufficient
reason for refusing to imply an otherwise appropriate remedy
under separate section.
99 S. Ct. at 1965.
A43
with the record keeping provision. 99 S.Ct. at 2487-2488.
With respect to the case under review, sections 1007 and
401(n)(2) were not created contemporaneously nor did Con-
gress refer to section 1007 when delimiting the scope of the
right created in section 401 (n)(2). In sum, considerations
which the Supreme Court in Touche Ross treated as relevant
in concluding that Congress did not intend to infer a private
right of action do not exist in the present case.°
The Supreme Court in Touche Ross reaffirmed that the four
indicia identified in Cort are useful guides to determining
whether or not a private right of action exists. Further, the
Court focused in particular on the language and legislative
history of the statute in order to determine the legislative intent
to create a private right of action. Although the result reached
here is different from the one reached in Touche Ross, the
analysis is consistent with that used in Touche Ross and Cannon
and the result is compelled by the entirely different factual
situation presented. Congress was shown the problems which
had been caused by the insolvency of travel agents and enacted
a provision to give rights to specific individuals. Accordingly,
our decision to reverse the judgment of the district court and
remand for further consideration of plaintiffs’ complaint is re-
affirmed. In addition, the First National Bank of Highland
Park’s motion to strike appellants’ statement of position is
denied and the CAB’s motion to file an amicus brief is hereby
granted.
BAUER, Circuit Judge, dissenting. I adhere to the view that
Section 401(n)(2) of the FAA does not create a private right
of action for damages arising from an alleged violation of the
CAB regulations governing air charter security arrangements.
Bratton v. Shiffrin, 585 F. 2d 223, 232 (7th Cir. 1978) (Bauer,
J., dissenting). I regard the majority's conclusion to the con-
trary to be inconsistent with a principled application of Cort
10. Our earlier discussion on the fourth factor in the Cort test
requires no further amplification at this time.
A44
Vv. Ash, 422 U.S. 66 (1975), and its progeny, the most recent
of which is Touche Ross & Co. Vv. Redington, 422 U.S. ;
99 S. Ct. 2479 (1979). Nor can I agree that Touche Ross is
factually or analytically inapposite to the case at bar. In my
view, Touche Ross is dispositive of the issue before us and
mandates affirmance of the judgment entered by the district
court. I therefore respectfully dissent.
The sole inquiry presented by this appeal is whether or not
the Congress intended Section 401 (n)(2) of the Act to pro-
vide a private remedy for a violation of its terms and the CAB
regulations promulgated thereunder. The resolution of this
question is, quite simply, a matter of Statutory construction, and
it is axiomatic that the judicial construction of a statute begin
with the language itself. As the Supreme Court stated in Touche
Ross:
The question of the existence of a statutory cause of
action is, of course, one of statutory construction .. .
SIPC’s argument in favor of implication of a private right
of action based on tort principles, therefore, is entirely
misplaced. Brief for SIPC 22-23. As we recently have
emphasized, “the fact that a federal statute has been vio-
lated and some person harmed does not automatically
give rise to a private cause of action in favor of that
person.” Cannon vy. University of Chicago, SUPTA,® ............
CE 6 ka , 99 S.Ct., at 1953. Instead, our task is
limited solely to determining whether Congress intended
to create the private right of action asserted by SIPC and
the Trustee. And as with any case involving the inter-
pretation of a statute, our analysis must begin with the
language of the statute itself.
99 S.Ct. 2479, 2485 (1979) (citations omitted).
In applying this standard of analysis to the statute before
us, it is necessary to examine the express language of Section
401(n)(2) of the Act. At the time pertinent to this case, the
Statute reads as follows:
In order to protect travelers and shippers by aircraft
operated by supplemental air carriers, the Board may
A45
require any supplemental air carrier to file a performance
bond or equivalent security arrangement, in such amount
and upon such terms as the Board shall prescribe, to be
conditioned upon such supplemental air carrier's making
appropriate compensation to such travelers and shippers,
as prescribed by the Board, for failure on the part of such
carrier to perform air transportation services in accordance
with agreements therefor.
49 U.S. C. § 1371(n) (2). Thus, by its terms, Section 401 (n)(2)
merely provides that the CAB may require supplemental air
carriers to file a performance bond in such amount and upon
such terms as the Board may prescribe. It does not, by its
terms, purport to create a private right of action in favor of
anyone. The majority concedes, as they must, that on its face
Section 401(n) (2) fails to provide an express private remedy for
a violation of its terms, and is therefore constrained to finding
an implied private right of action in favor of the plaintiffs.
It is true that in certain circumstances a private right of
action may be implied in a statute not expressly providing one.
But as the Supreme Court noted in Touche Ross:
[{I]n those cases finding such implied private remedies, the
statute in question at least prohibited certain conduct or
created federal rights in favor of private parties. E.g.,
Cannon Vv. University of Chicago, supra (20 U.S.C.
§ 1681); Johnson v. Railway Express Agency, Inc., 421
U.S. 454 (1975) (42 U.S.C. § 1981); Superintendent
of Ins. v. Bankers Life & Cas. Co., 404 U.S. 6 (1971)
(15 U.S.C. § 78-j(b)); Sullivai: v. Little Hunting Park,
Inc., 396 U.S. 229 (1969) (42 U.S.C. § 1982); Allen
v. State Board of Elections, 393 U.S. 544 (1969) (42
U. S. C. § 1973c); Jones v. Alfred H. Mayer Co., 392 U.S.
409 (1968) (42 U.S.C. § 1982); J. I. Case Co. v. Borak,
377 U.S. 426 (1964) (15 U.S.C. § 78n(a))
99 S.Ct., at 2485 (citations omitted). By contrast, Section
401(n)(2) neither confers rights on private parties nor pro-
scribes any conduct as unlawful. For these reasons, the majority’s
A46
reliance on Cannon and Borak to sustain its finding of an im-
plied private remedy under Section 401(n) ( 2) is misplaced.
In this case, as in Touche Ross vis-a-vis § 17(a) of the
Securities Exchange Act of 1934, the intent of Section 401 (n) (2)
of the FAA is evident from its face. Section 401 (n)(2) simply
requires supplemental air carriers to post a performance bond
or other equivalent security arrangement in order to protect
charter air travelers against the inability to obtain compensa-
tion when tour plans collapse. This section parallels the other
sections of the Economic Regulations of the Act, namely to
provide a measure of protection in the event of liability arising
from a failure to perform the underlying contract between the
charter air carrier and traveler. See, e.g., 49 U.S. C. §§ 1371(a)
though (n). But the language of Section 401(n)(2) does not
purport to confer a private damage remedy in the event that the
objective of this economic regulation is not met and the carrier
becomes insolvent before other remedial action by the CAB
may be taken. By its terms, Section 401(n)(2) seeks to pro-
vide protection by a security agreement independent of CAB
remedial measures and, in the event of insolvency, to provide
recompense to charter air travelers in a state court action on
the performance bond contract. In other words, there is no basis
in the language of Section 401(n)(2) for inferring that a
federal civil cause of action for damages exists in favor of
anyone. Touche Ross, supra at 2486.
The majority relies on the legislative history of Section
401(n)(2) to substantiate its conclusion that the Congress
intended an implied private remedy, but the legislative history
of the Act is entirely silent on whether a private right of action
for damages should or should not be available under § 401 (n)(2)
in the circumstances of this case. See, e.g., Senate Report No.
688, House Report No. 1177, Conference Report No. 1950,
87th Cong., 2d Sess., reprinted in [1962] U.S. Cope Conc. &
Ap. NEws 1844, 1844-1872. The majority concedes that “the
legislative history is scarce,” ante at 5, but reasons that because
A47
the statute neither explicitly creates nor denies a private remedy,
it is free to infer one. Accordingly, the majority concludes that
“[f]rom the congressional silence, however, we have read a
positive implication in favor of a private cause of action.” Id.
It seems to me that this conclusion ought to have been reached
by circumspection rather than conjecture. The Supreme Court
responded to the same contention in Touche Ross when it
stated:
As the Court of Appeals recognized, the legislative
history of the 1934 Act is entirely silent on the question
whether a private right of action for damages should or
should not be available under § 17( a) in the circumstances
of this case. App. 198. SIPC and the Trustee nevertheless
argue that because Congress did not express an intent to
deny a private cause of action under § 17(a), this Court
should infer one. But implying a private right of action
on the basis of congressional silence is a hazardous enter-
prise, at best. See Santa Clara Pueblo v. Martinez, 436
U.S. 49, 64, 98 S.Ct. 1670, 1680, 56 L. Ed. 2d 106
(1978). And where, as here, the plain language of the
provision weighs against implication of a private remedy,
the fact that there is no suggestion whatsoever in the
legislative history that § 17(a) may give rise to suits for
damages reinforces our decision not to find such a right
of action implicit within the section.
99 S.Ct. at 2486-2487.
The paucity of legislative history on this question compels
the conclusion that no private remedy should be implied in this
case either, and it is simply a non sequitur to “read” a contrary
conclusion from this deafening legislative silence. The sole
support cited by the majority for its conclusions are the com-
ments of Mr. Halaby. But his testimony hardly qualifies as an
expression of legislative intent to create such a remedy. Mr.
Halaby testified:
By requiring a supplemental air carrier to furnish a
performance bond, a desirable specific review of the carrier’s
financial responsibility will have to be made—and inciden-
A48
tally, outside of the government—and when the bond is
issued, some recourse will have been supplied to those who
are otherwise helpless,
Ante at 5, n.8. Even assuming that this testimony reflects
the Congressional intent underlying the enactment of Section
401(n)(2), it does not follow from a plain reading of the
quoted passage that in enacting Section 401(n)(2) the Con-
gress evinced an intent to create a private remedy for damages.
On the contrary, Mr. Halaby’s comments appear to reflect that
the relief sought by this section would be actionable in state
court on a breach of contract claim, rather than a federal statu-
tory cause of action impliedly cognizable under Section
401(n) (2).
The majority attempts to distinguish the applicability of
Touche Ross to this case on the basis that the Supreme Court
found further justification for not implying a private right of
action under § 17(a) of the Securities Exchange Act of 1934
because other sections flanking § 17(a) provided private rights
of action. Ante at 6-7. But the Congress also provided explicit
remedies for violations of the FAA which, in my view, compel
the conclusion that these explicit remedies are the exclusive
means of enforcement for a violation of the duties and obliga-
tions imposed by the Act. See, e.g., 49 U.S.C. §§ 1471, 1472,
1. Indeed, the legislative history that is available regarding Sec-
tion 401(n)(2) further Supports the conclusion that these express
remedies are the exclusive means of enforcement under the Act. As
stated in the Senate Report to §. 1969, which was ultimately enacted
by the Congress:
THE ENFORCEMENT PROBLEM
One cause for apprehension as to the possible adverse impact
on the scheduled industry of the supplemental carriers, which
was reflected in the committee’s hearings, was the difficulties
which have been encountered by the Board in effectively en-
forcing ‘the limitations on supplemental operations which it has
imposed in past orders. There have been rather notorious
(Footnote continued on next page. )
A49
1482, 1487. The mere fact that the Congress did not enact the
remedial provisions of the FAA contemporaneously with Section
401(n)(2) nor refer to these remedial provisions when delimit-
ing the scope of the right created in that section does not extin-
guish the vitality of Touche Ross in the context of this appeal.
As stated in Touche Ross:
(Footnote continued from preceding page. )
examples of supplemental carriers entering into illegal combina-
tions resulting in a de facto pooling of their operating rights to
provide scheduled service of far greater frequency and regularity
than had been authorized by the Board. Efforts uf the Board to
end such practices by cease-and-desist orders or revocations of
authority have been frustrated by protracted appeals to the court
during which the Board’s orders have been stayed. This has
permitted the continuation of palpably illegal but highly profit-
able operations by carriers using every conceivable means to
delay the inevitable legal sanction.
Such operations have never been conducted by more than a
handful of supplemental carriers. The vast number of such
carriers have probably suffered more from such activities than
have the scheduled carriers, for they have found it impossible
to compete on a legal basis, offering a severely limited number
of trips, with carriers who have illegally combined.o provide
daily scheduled service. Unfortunately, they have probably suf-
fered even more from the less tangible damage done by such
operations to the reputation of the supplemental industry. It is
implicit in the committee’s action on this bill that it regards the
vast majority of supplemental air carriers as responsible, safe,
and useful operators who have made and will continue to make
a major contribution to the development of air transportation,
and particularly to national defense. The committee is deter-
mined that the supplemental industry, as well as the scheduled
industry, be more effectively protected from the depredations of
illegal operators.
In recommending the means to accomplish this end the com-
mittee has accepted the recommendations of the Civil Aero-
nautics Board, made continually over several years, that the civil
penalties now provided in the Federal Aviation Act for viola-
tions of safety and other provisions of the act be made appli-
(Footnote continued on next page. )
A50
Further justification for our decision not to imply the
private remedy that SIPC and the Trustee seek to establish
may be found in the statutory scheme of which § 17(a) is
a part. First, § 17(a) is flanked by provisions of the 1934
Act that explicitly grant private cause of action. § 16(b),
15 U.S.C. § 78p(b); § 18(a), 15 U.S.C. § 78r(a). Section
9(e) of the 1934 Act also expressly provides a private right
of action. 15 U.S.C. § 78i(e). See also § 20, 15 U.S.C.
§ 78t. Obviously, then, when Congress wished to provide a
private damage remedy, it knew how to do so and did so
expressly. Blue Chip Stamps v. Manor Drug Stores, 421
U.S. 723, 734 (1975); see Amtrak, 414 US. at 458;
T.1.M.E., Inc. v. United States, supra, at 471,
99 S. Ct., at 2487 (citations omitted),
Similarly, in this case the Congress provided express remedies
for a violation of the Act. E.g., 49 U.S.C. §§ 1471, 1472,
1482, 1487. If the Congress wished to provide a private remedy
for damages under Section 401 (n)(2), it is well aware of how
it may effectuate that intent. Moreover, the import of the fact
that in Touche Ross § 17(a) was flanked by other remedial
provisions is merely that it provided a “further justification” not
to imply a private Temet under~§ 17(a) of the Securities Ex-
change Act of 1934,
(Footnote continued from preceding page. )
cable to violation of the economic provisions under title IV and
of certificates issued thereunder. Section 901 of the act now
provides a civil penalty not to exceed $1,000 for each violation
and provides that in the case of a continuing violation each day
shall constitute a separate offense subject to the $1,000 penalty.
The committee bill would amend this section to make it appli-
cable to the provisions of title IV and certificates issued there-
under, and would thus provide the Board with the weapon it has
lacked—the ability to take the profit out of illegal operations
performed over a long period of time under a judicial stay.
Senate Report No. 688, 87th Cong., 2d Sess., reprinted in [1962]
U.S. Cope Conc. & Ap. News 1844, 1855-1856 (emphasis
supplied).
AS1
In this case, as in Touche Ross, the plaintiffs contend that an
analysis of the standards set forth in Cort v. Ash, 422 U.S. 66
(1975), requires a finding that Section 401(n)(2) creates an
implied private right of action for damages, On remand, the
majority today reaffirms its holding of an implied private cause
of action as consistent with Cort. My dissent to the original
decision of the Court adequately addresses what I regard to be
the salient defects in the majority’s analysis under Cort v. Ash,
supra. Bratton v, Shiffrin, 585 F. 2d 223, 232 (7th Cir. 1978)
(Bauer, J., dissenting). It is accordingly unnecessary to further
explicate my views on this point, with the exception of one final
comment. In Touche Ross, the Supreme Court found it unneces-
sary to undertake the analysis outlined in Cort v. Ash, supra,
with respect to whether a private right of action arises under
§ 17(a) of the 1934 Act. In that connection, the Supreme
Court stated:
We need not reach the merits of the arguments concern-
ing the “necessity” of implying a private remedy and the
proper forum for enforcement of the rights asserted by
SIPC and the Trustee, for we believe such inquiries have
little relevance to the decision of this case. It is true that in
Cort v. Ash, supra, the Court : ¢ forth four factors that it
considered “relevant” in determining whether a private
remedy is implicit in a statute not expressly providing one.
But the Court did not decide that each of these factors is
entitled to equal weight. The central inquiry remains
whether Congress intended to create, either expressly or by
implication, a private cause of action. Indeed, the first three
factors discussed in Cort—the language and focus of the
statute, its legislative history, and its purpose, see 422 U.S.,
at 78, 95 S.Ct., at 2088—are ones traditionally relied upon
in determining legislative intent. Here, the statute by its
terms grants no private rights to any identifiable class and
proscribes no conduct as unlawful. And the parties as well
as the Court of Appeals agree that the legislative history of
the 1934 Act simply does not speak to the issue of private
remedies under § 17(a). At least in such a case as this, the
inquiry ends there: The question whether Congress, either
AS52
expressly or by implication, intended to create a private
right of action, has been definitely answered in the negative.
99 S. Ct., at 2489,
In this case, the statute by its terms grants no private rights in
favor of any party, proscribes no conduct as unlawful, and the
legislative history is similarly silent on the issue of the availability
of private remedies under Section 401(n)(2) of the FAA, In
my view, for these same reasons found dispositive in Touche
Ross, our inquiry should also end there, and “[iJf there is to be
a federal damage remedy under these circumstances, Congress
must provide it.” 99 §. Ct., at 2490.
A true Copy:
Teste:
Clerk of the United States Court of
Appeals for the Seventh Circuit
AS3
APPENDIX C.
UNITED STATES CourRT oF APPEALS
For the Seventh Circuit
Chicago, Illinois 60604
June 12, 1980,
Before
Hon. Thomas E. Fairchild, Chief Judge
Hon. Luther M. Swygert, Circuit Judge
Hon. Walter J. Cummings, Circuit Judge
Hon. Wilbur F. Pell, Jr., Circuit Judge
Hon. Robert A. Sprecher, Circuit Judge
Hon. William J. Bauer, Circuit Judge
Hon. Harlington Wood, Jr., Circuit Judge
Hon. Richard D. Cudahy, Circuit Judge
ROGER CHAPMAN and JEANNE .
CHAPMAN et al.,
Plaintiffs-A ppellants,
No. 77-2023 vs.
First NATIONAL BANK oF HIGHLAND
PARK,
Defendant-Appellee.
EARL BRATTON, et al.,
Plaintiffs-A ppellants,
No. 77-2037 vs.
—~-
JOEL SHIFFRIN, et al.,
Defendants-A ppellees. :
Appeals from the
United States Dis-
trict Court for the
Northern District of
Illinois, Eastern Di-
vision.
-__ee
Nos. 77-C-284 and
76-C-4282
John F, Grady
Judge
Circuit Judges Cummings, Pell, Bauer, and Wood voted to grant
petition for rehearing en banc.
AS4
On consideration of the petition for rehearing and suggestion
for rehearing en banc filed in the above-entitled matters by
counsel for defendants-appellees, and the response filed thereto
by counsel for plaintiffs-appellants, a vote of the active mem-
bers of the court was requested, and less than a majority of the
active members of the court having voted to grant a rehearing
en banc,
Accordingly, IT is ORDERED “that the aforesaid petition for
rehearing be and the same is hereby DENIED.
ASS |
APPENDIX D.
Statutory Appendix
FEDERAL AVIATION ACT oF 1958
49 U.S.C, 1371 (a)
No air carrier shall engage in any air transportation unless
there is in force a certificate issued by the Board authorizing
such air carrier to engage in such transportation.
49 U.S.C. 1371(n) (2)
In order to protect travelers and shippers by aircraft operated
by supplemental air carriers, the Board may require any supple-
mental air carrier to file a performance bond or equivalent
security arrangement, in such amount and upon such terms as
the Board shall prescribe, to be conditioned upon such supple-
mental air carrier’s making appropriate compensation to such
travelers and shippers, as prescribed by the Board, for failure
on the part of such carrier to perform air transportation services
in accordance with agreements therefor,
49 U.S.C. 1487(a)
If any person violates any provision of this chapter, or any
rule, regulation, requirement, or order thereunder, or any term,
condition, or limitation of any certificate or permit issued under
this chapter, the Board or Administrator, as the case may be,
their duly authorized agents, or, in the case of a violation of
section 1514 of this title, the Attorney General, or, in the case
of a violation of section 1371(a) of this title, any party in
interest, may apply to the district court of the United States,
for any district wherein such person carries on his business or
wherein the violation occurred, for the enforcement of such pro-
vision of this chapter, or of such rule, regulation, requirement,
order, term, condition, or limitation; and such court shall have
jurisdiction to enforce obedience thereto by a writ of injunction
AS6
or other process, mandatory or otherwise, restraining such per-
son, his officers, agents, employees, and representatives, from
further violation of such provision of this chapter or of such
rule, regulation, requirement, order, term, condition, or limita-
tion, and requiring their obedience thereto.
A57
APPENDIX E.
Civit AERONAUTICS BOARD REGULATIONS
14 C. F.R. § 378.2 Definitions.
As used in this part unless the context otherwise requires:
(a) “Inclusive tour charter’ means the charter of the entire
capacity of an aircraft or of less than the entire capacity of an
aircraft (provided that the remaining capacity of the aircraft is
under charter by a person or persons authorized to charter
aircraft under §§ 207.11(c), 208.6(c), or 212.8(b), respec-
tively, of this chapter) by a tour operator or, with respect to
tours which originate in a foreign country, by a foreign tour
operator for the carriage by a direct air carrier of persons travel-
ing in air transportation on inclusive tours.
(b) “Inclusive tour” means a roundtrip tour which combines
air transportation pursuant to an inclusive tour charter and land
services, and which meets all of the following requirements:
(1) A minimum of seven (7) days must elapse between de-
parture and return;
(2) The land portion of the tour must provide overnight
hotel accommodations at a minimum of three places other than
the point of origin, such places to be no less than 50 air miles
from each other: Provided, That, in the case of an “air/sea
tour,” overnight accommodations provided aboard a ship, while
in port or at sea, may be regarded as “hotel” accommodations;
And provided further, That, for any night on which accommo-
dations are provided aboard a ship at sea, either the first
port at which the ship stops following such night, or the
last port at which the ship stops preceding such night, may be
regarded as the “place” at which the overnight accommodations
were provided.
~
A58
(3) The tour price shall include, at a minimum, all hotel
accommodations and necessary air or surface transportation
between all places » ‘he itinerary, including transportation to
and trom air and surface carrier terminals utilized at such places
other than the point of origin;
(4) The charge to the passengers for the tour, as set forth
in the tour prospectus, shall be not less than 110 percent of any
available fare or fares, embodied in a tariff on file with the
Board, charged by a route carrier, or combination of such car-
riers (including charge for stopovers) for individually ticketed
service on the circle route beginning at the point of origin, to
the various points where stopovers are made, and return to the
point of origin: Provided, That the tour shall be subject to the
terms and conditions which are applicable to such fare or fares,
as set forth in the tariff of the route carrier or carriers. For
purposes of this provision, (i) the term “route carrier” shall
mean a certified route air carrier or foreign route air carrier
authorized under section 401 or 402 of the Federal Aviation
Act of 1958, as amended, respectively, to transport persons;
and (ii) the term “available fare” includes promotional or dis-
count fares, such as family fares, children’s fares, excursion fares,
fares applicable to special classes of persons, group fares, etc.
Where similar promotional or discount fares are offered on both
jet and propeller aircraft, the available fare shall be that charged
for jet services. Where no regularly scheduled service is pro-
vided between the points involved, the available fare shall be
based on the fares to the nearest point served by a route carrier:
and
(5) An aircraft under charter to one tour operator or for-
eign tour operator may carry any number of tour groups:
Provided, That, if more than one group is carried, the charter
contract for each of the groups shall be for 40 or more seats.
(6) The tour shall be arranged and sold by a tour operator
acting solely as an independent principal with respect to the air
AS9
transportation included in the inclusive tour charter and not as
an agent for direct air carriers.
(c) An “inclusive tour group” means an aggregate of persons
who are assembled by a tour operator or a foreign tour operator
for the purpose of participation as a single unit in an inclusive
tour: Provided, however, That nothing contained herein shall
preclude a tour operator or a foreign tour operator from utilizing
any unused space on an aircraft chartered by it for an inclusive
tour, for the transportation, on a free or reduced-rate basis, of
such tour operator’s or foreign tour operator’s employees,
directors, and officers, and the parents and immediate families
of such persons, subject to the provisions of Part 223 of this
chapter.
(d) “Tour operator” means any citizen of the United States
(other than a direct U. S. air carrier), authorized hereunder to
engage in the formation of groups for transportation on
inclusive tours.
(d-1) “Foreign tour operator” means any person who is not a
U. S. citizen (other than a direct foreign air carrier):
(i) Who is engaged in the formation of groups for transpor-
tation on inclusive tours which originate in a foreign country
and over whom the board by § 378.3a has declined to exercise
its jurisdiction; and/or
(ii) Who is engaged in the formation of groups for trans-
portation on inclusive tours which originate in the United States
and who holds a permit issued pursuant to section 402 of the
Act authorizing such transportation. “Foreign tour operator” as
used in §§ 378.7, 378.10-378.14, 378.16, 378.16a, 378.17,
378.18, and 378.20 is confined to the meaning set forth in this
subparagraph.
(e) “Tour participant” means a member of the inclusive tour
group.
(f) [Reserved]
A60
(g) “Tour price” means the total amount of money paid by
the tour participant to the tour operator for the inclusive tour.
(h) “Direct air carrier” means (1) a route air carrier holding
a certificate of public convenience and necessity issued under
section 401(d)(1) of the Act; (2) a supplemental air carrier
holding a certificate of public convenience and necessity issued
under section 401(d)(3) of the Act to perform inclusive
tour charters; (3) a foreign route air carrier holding a permit
issued under section 402 of the Act authorizing it to engage in
foreign air transportation on an individually ticketed or indi-
vidually waybilled basis; and (4) a foreign air carrier which
holds a permit issued under section 402 of the Act authorizing
it to perform inclusive tour charters, but only to the extent
that such tours are to be performed subject to the provisions of
this regulation.
(i) “Itinerary” means all the components of a tour package,
as described in the tour prospectus, including not only the points
named therein but also all hotels, and other grounds accommo-
dations and services described therein.
(j) “Citizen of the United States” means (1) an individual
who is a citizen of the United States or of one of its possessions
or (2) a partnership of which each member is such an indi-
vidual, or (3) a corporation or association created or organized
under the laws of the United States or of any State, Territory, or
possession of the United States, of which the president and two-
thirds or more of the board of directors and other managing
officers thereof are such individuals and in which at least 75
per centum of the voting interest is owned or controlled by
persons who are citizens of the United States or of one of its
possessions,
(Secs. 101(3), 101(33), 204(a), 401, 402, 407, and 416(a),
Federal Aviation Act of 1958, as amended. 72 Stat. 737 (as
amended by 75 Stat. 467, 76 Stat. 143, 82 Stat. 867, 84 Stat.
921), 743, 754, 757, 766, 771; 49 U.S.C. 1301, 1324, 1371,
1372, 1377, 1386)
A61
{SPR-40, 35 F. R. 14613, Sept. 18, 1970, as amended by SPR-
42, 36 F. R. 2505, Feb. 5, 1971; SPR-47, 36 F. R. 8726, May
12, 1971; SPR-62, 37 F. R. 22853, Oct. 26, 1972; SPR-67, 38
F.R. 7219, Mar. 19, 1973; SPR-70, 378 F. R. 19680, July 23,
1973; SPR-100, 41 FR 7744, Feb. 20, 1976; SPR-103, 41 FR
20161, May 17, 1976; SPR-108, 41 FR 35160, Aug. 20, 1976]
14C. F. R. § 378.10 Procedure.
(a) No inclusive tour or series of tours shall be operated, nor
shall any tour operator or foreign tour operator sell, or offer
to sell, or solicit persons to participate in, or otherwise advertise
such tour or tours, or receive any money from any prospective
participant in connection therewith, until at least 15 days
after he and the direct air carrier have jointly filed with
the Board (Supplementary Services Division, Bureau of Operat-
ing Rights), in duplicate, a Tour Prospectus satisfying the re-
quirements of § 378.13: Provided, however, That if during the
15-day period following filing hereunder the tour operator or
foreign tour operator has been notified that the Board has re-
jected such statement for noncompliance with this part, then he
shall not sell, or offer to sell, solicit, or advertise such tour or
tours until he has subsequently been notified by the Board that
such filing has been accepted. If a series of tours is to be per-
formed for one tour operator or foreign tour operator pursuant
to one charter contract, the Prospectus may cover the entire
series, provided the elapsed time between the commencement of
the first tour and the departure of the last tour shall not exceed
one year,
(b) Except as specified in paragraph (c) of this section, no
change in the facts reflected in a filed Prospectus shall become
effective until at least 15 days after the tour operator or foreign
tour operator and the direct air carrier have jointly filed with the
Board (Supplementary Services Division, Bureau of Operating
Rights), in duplicate, an amended Prospectus reflecting such
change, unless he has been notified by the Board that such
change may become effective sooner: Provided, however, That
A62
if during the 15-day period following filing of an amended
Prospectus hereunder, the tour operator or foreign tour opera-
tor has been notified that the Board has rejected such amended
Prospectus for noncompliance with this part, then such change
shall not become effective until he has subsequently been notified
by the Board that such filing has been accepted: And provided
further, That the direct air carrier need not join in the filing of
an amended Prospectus which reflects only such change or
changes as do not involve air transportation or services in con-
nection therewith which are to be provided by such direct air
carrier, Deviations from the Prospectus may not be made except
where they are beyond the control of the carrier or the operator,
and there is insufficient time to file an amended Prospectus.
(c) The 15-day waiting period specified in paragraph (b) of
this section shall not apply to tour price increases, changes in
hotel accommodations, sightseeing arrangements, meal plans,
and the order in which cities are visited, but such changes shall
be filed no later than five (5) days following such changes.
[SPR-76, 39 FR 21125, June 19, 1974, as amended by SPR-114,
41 FR 42941, Sept. 29, 1976]
14 C. F.R. § 378.13, Tour prospectus,
The prospectus shall be filed in duplicate and shall include
two copies of the following: The charter contract, the contract
between the tour operator or foreign tour Operator and tour
participants, the tour operator’s or foreign tour operator’s surety
bond (an original bond and a copy thereof) and, where appli-
cable, two copies of the depository agreement with a bank as
provided in § 378.16(b) (2). It shall also contain the following
information:
(a) Name and address of the tour operator or the foreign
tour operator;
(b) The proposed date and time of each flight;
(c) Equipment to be used, including the aggregate num-
ber of each type of aircraft and capacity;
— A63
(d) The tour itinerary, including hotels (name and
length of stay at each), and sightseeing or other arrange-
ments, if any;
(e) The tour price per passenger;
(f) The number of persons expected to participate in
the tour;
(g) Charter price of the aircraft;
(h) The individually ticketed air fare, computed as pro-
vided in § 378.2(b) (4), specifically identifying each fare
used in the computation and each tariff citation.
(i) Samples of solicitation material proposed by the tour
operator or foreign tour operator (all sales advertising and
solicitation material employed by the tour operator or
foreign tour operator shall state the name of the direct air
carrier to be utilized).
[SPR-47, 36 F. R. 8726, May 12, 1971, as amended by SPR-62,
37 F. R. 22853, Oct. 26, 1972; SPR-70, 38 F. R. 19680, July
23, 1973)
14 C. F.R. § 378.16 Surety bond.
(a) Except as provided in paragraph (b) of this section, the
tour operator or foreign tour operator shall furnish a surety bond
in one of the following amounts, dependent upon the length of
the tour or series of tours: (1) For a tour or series of tours of
2 weeks or less, a bond in an amount of not less than the charter
price for the air transportation to be furnished in connection
with such tour or series of tours; (2) for a tour or series of tours
of more than 2 weeks but less than 4 weeks, a bond in an
amount of not less than twice the charter price; and (3) for a
tour or series of tours of 4 weeks or more, and a bond in an
amount of not less than three times the charter price: Provided,
however, That the liability of the surety to any tour participant
shall not exceed the tour price.
(b) The direct air carrier and the prospective tour operator
or foreign tour operator may elect, in lieu of furnishing a surety
A64
bond as provided under paragraph (a) of this section, to comply
with the requirements of paragraphs (b) (1) and (2) of this
section as follows:
(1) The tour operator or foreign tour operator shall
furnish a surety bond in a minimum amount of $10,000
per flight up to a maximum amount of $200,000 for a series
of 20 or more flights, for the protecti
This text is long and has been trimmed here. Open the source document for the complete record.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.