Opinion ID: 390844
Heading Depth: 2
Heading Rank: 3

Heading: Implied Rights of Action

Text: 24 Section 1263 of the Federal Hazardous Substances Act provides, in relevant part, that: 25 (t)he following acts and the causing thereof are prohibited: 26 (a) the introduction or delivery for introduction into interstate commerce of any misbranded hazardous substances or banned hazardous substance. 27 Plaintiff argues that certain substances, including TRIS, are by definition banned hazardous substances under § 1261(q)(1)(A), 8 and thus no agency action defining the substance as such is required. Plaintiff argues that without a private right of action under § 1263, there would be a private remedy for products banned by agency action, see 15 U.S.C. § 2072, 9 but not for products banned by definition, without agency action. Therefore, a private right of action must necessarily be implied under § 1263 in order to fulfill the statutory purpose evidenced by the private remedy which § 2072 provides for violation of a prohibition established by CPSC rule or order. 10 28 The threshold inquiry under Cort v. Ash is whether the plaintiff is one of the class for whose especial benefit the statute was enacted. Recent Supreme Court decisions make clear this question is answerable by looking to the language of the statute itself. Cannon v. University of Chicago, supra, 441 U.S. at 689, 99 S.Ct. at 1953; see Transamerica Mortgage Advisors v. Lewis, supra, 444 U.S. at 16, 100 S.Ct. at 245. By its terms, § 1263 does not provide a private judicial remedy to a party injured by the introduction into interstate commerce of a banned or misbranded hazardous substance. The language simply prohibits such introduction. Thus, the language of section 1263 contrasts markedly with that of other statutes which the Supreme Court has stated expressly identify the classes Congress intended to benefit. See Cannon v. University of Chicago, supra, 441 U.S. at 690 n.13, 99 S.Ct. at 1954 n.13. However, recognizing that there is no talismanic incantation necessary to create a private right of action, we note that other sections of the FHSA, particularly section 1261(q) (1), which defines a banned hazardous substance, evince an intent to benefit the buyers of household products, and especially children for whom toys are purchased. Riegel, however, is clearly not within such a class. 11 We therefore find the first Cort inquiry weighs against implying a private right of action under section 1263. 29 The second inquiry under Cort requires an examination of the legislative history to determine whether Congress intended either to create or deny a private remedy. Cannon v. University of Chicago, supra, 441 U.S. at 694, 99 S.Ct. at 1956. Recent cases state this inquiry is the most important. 12 See Touche Ross & Co. v. Redington, supra, 442 U.S. at 575, 99 S.Ct. at 2489. 30 The legislative history of the FHSA and the CPSA 13 offers little illumination on whether or not Congress intended to create a private right of action under section 1263. 14 The underlying purpose of these Acts, as indicated by their history, was to achieve nationwide uniformity in the regulation of certain hazardous products. To this end, the emphasis of the FHSA and the CPSA was preventive, not remedial. The Acts focus on the prevention of injury, and not the recompense of injury after it has occurred. To fulfill this purpose, Congress created the CPSC as an independent regulatory agency, giving it primary responsibility for enforcement of the statutes, and provided limited private remedies for situations in which the CPSC fails to act upon or denies a petition, or when a rule or order of the CPSC is violated. 31 The history of the Acts demonstrates Congress' intent that the FHSA enforcement provisions parallel those of the Food, Drug and Cosmetic Act. Section 1263, which specifies that certain acts are prohibited, is largely patterned after the corresponding section of the Federal Food, Drug and Cosmetic Act. H.R.Rep.No.1861, 86th Cong., 2d Sess. (1960), reprinted in (1960) U.S.Code Cong. & Ad.News 2833, 2840. The FHSA, as originally enacted, focused on the labeling of certain products, with enforcement solely through agency action, as in the Food, Drug and Cosmetic Act. In expanding the FHSA to allow for a direct ban on certain products where a cautionary label would not suffice to protect consumers, the legislative history does not indicate a change in the Congressional intent that enforcement be by the agency. 32 The third Cort inquiry is whether a private cause of action is consistent with the underlying purposes of the legislative scheme. To be sure, implication of a private right of action would provide an additional enforcement tool; however, it is not our role to legislate. The ultimate question is one of congressional intent, not one of whether this Court thinks it can improve upon the statutory scheme that Congress enacted into law. Touche Ross & Co. v. Redington, supra, 442 U.S. at 578, 99 S.Ct. at 2490; Rogers v. Frito-Lay, Inc., 611 F.2d 1074, 1085 (5th Cir.), cert. denied, -- U.S. -- 101 S.Ct. 246, 66 L.Ed.2d 115 (1980) (To determine the message to be found in the void of express Congressional statement, we resort neither to our own notions of sound policy nor to our concept of what best suits the public weal.). 33 The Federal Hazardous Substances Act and the Consumer Product Safety Act contain a comprehensive set of administrative and judicial remedies. Section 1264 provides for criminal penalties for violation of the FHSA. Section 1265 provides for a seizure action, and section 1267 provides for injunctive proceedings. Section 1268 provides that all criminal, seizure and injunctive actions be brought by and in the name of the United States. Section 2059 provides for petitions to the CPSC for a product safety rule, and for a civil action if the CPSC fails to act on or denies the petition. Section 2069 grants the CPSC the authority to proceed administratively for the purpose of assessing civil penalties. Advance Machine Co. v. Consumer Product Safety Commission, 3-80 Civ. 372 (D.Minn. March 6, 1981). Section 2070 provides for criminal penalties for violation of the CPSA, and section 2071 provides for injunctive enforcement and seizure actions under the CPSA. Section 2072 provides for private suits for damages due to the violation of any CPSC rule or order. Section 2073 provides for private suits to enforce any CPSC rule or order by injunction. 34 The Acts give the CPSC a broad range of enforcement powers to implement the statutory purposes. Implicit in this enforcement scheme is the need of the CPSC to evaluate the exercise of its enforcement power in light of a broad range of policy considerations, particularly the development of a coordinated regulatory program. Because litigants in pursuit of a private remedy are unconstrained by institutional policies of uniformity, they could, by instituting multiple lawsuits, undermine the Acts' goal of a coordinated regulatory program. Private litigation could deprive the CPSC of an opportunity to build upon the foundation provided by the FHSA and the CPSA in establishing a sound and strong federal regulatory policy governing hazardous substances. Specifically, such litigation would diminish the discretion of the CPSC to decide whether a substance can be made safe merely through cautionary labeling or must be banned from the marketplace. Thus, we conclude that the agency should determine whether a substance is a banned hazardous substance for purposes of prohibition under section 1263. 35 As was stated by this circuit in denying a private right of action under section 404(b) of the Federal Aviation Act, 49 U.S.C. § 1374(b): 36 The implication of a private right to sue for damages does not inevitably complement the work of the agency charged by Congress with the enforcement of a statute. Private litigation tends to transfer regulatory interpretation and discretion from the agency to the courts, which are ill-equipped to undertake the burdens thus imposed upon them. Inconsistency in enforcement may well ensue. Moreover, the deterrent effect of damage litigation is largely incidental, and Congress may conclude that statutory compliance will be better achieved by more efficient and less expensive means. 37 Caceres Agency, Inc. v. Trans World Airways, Inc., 594 F.2d 932, 934 (2d Cir. 1979) (citations omitted). 38 We note that over the last decade rule-making has been increasingly substituted for adjudication as a regulatory technique, with the support and encouragement of courts, at least where the regulation involves specialized scientific knowledge. National Nutritional Foods Association v. Weinberger, 512 F.2d 688, 698 (2d Cir.), cert. denied, 423 U.S. 827, 96 S.Ct. 44, 46 L.Ed.2d 445 (1975); see NLRB v. Wyman-Gordon Co., 394 U.S. 759, 89 S.Ct. 1426, 22 L.Ed.2d 709 (1969); National Association of Pharmaceutical Manufacturers and National Pharmaceutical Alliance v. Food and Drug Administration, 637 F.2d 877, at 881 (2d Cir. 1981). This preference for rule-making results from a recognition of the value of agency expertise. Here, regulation of hazardous substances is a subject which benefits greatly from the specialized knowledge of the CPSC by virtue of its sophistication and experience in this area. As this circuit has pointed out: 39 the case-by-case adversary proceeding has frequently proved to be an unsuitable method of enforcing the law, since it often resolves narrow issues of importance only to the immediate adversaries rather than broad questions of interest to the industry or the public. The rule-making proceeding, on the other hand, provides the agency with an opportunity first to receive a wide spectrum of views proffered by all segments affected by the proposed rule (e. g., manufacturers, vendors, consumers) and then in a legislative fashion to consider and choose from several alternatives or options rather than limit its decisions to narrow issues controlling a particular case. 40 National Nutritional Foods Association v. Weinberger, supra, 512 F.2d at 698. 41 Moreover, implying a private right of action under § 1263 would be inconsistent with the statutory scheme as evidenced by sections 2058, 2072 and 2073. A suit directly under section 1263 would allow a consumer to bypass the CPSC, a result not intended by Congress in light of the detailed consumer petition provisions of section 2058 and the private remedies under sections 2072 and 2073 for failure to comply with a CPSC rule or order. 42 Recently, Congress amended 28 U.S.C. § 1331 to eliminate the $10,000 amount in controversy requirement for all cases aris(ing) under the Constitution, laws, or treaties of the United States. However, Congress specifically retained the $10,000 amount in controversy requirement for suits under § 2072. See note 9 supra. Implying a private right of action under § 1263 may allow plaintiff to defeat this jurisdictional requirement, thus frustrating the intent of Congress that only private damage suits under the CPSA which involve more than $10,000 in controversy be litigated in federal court. 43 Finally, under the fourth Cort inquiry, plaintiff's claims, grounded in product liability, negligence and breach of warranty, are traditionally the concern of state law. Plaintiff's state remedies are no less viable because the products may also be regulated under the FHSA or the CPSA. See 15 U.S.C. § 2072(b). Nor will relegation of plaintiff to state law remedies frustrate any statutory purpose or national interest. Compare J. I. Case v. Borak, 377 U.S. 426, 84 S.Ct. 1555, 12 L.Ed.2d 423 (1964) (private cause of actions implied when relegating the litigants to a state remedy would frustrate the purpose of § 14(a) of the Securities and Exchange Act of 1934, 15 U.S.C. § 78n(a)). Therefore, the fourth Cort factor militates against implying a private cause of action under section 1263. 15 44 Thus, under the Cort analysis, we conclude that it would be inappropriate to imply a private right of action under § 1263 in favor of plaintiff.
45 Plaintiff also argues that a private right of action should be implied under section 1274 to compel defendant to repurchase the TRIS-treated material sold to plaintiff. 46 Section 1274 provides, in relevant part, that: 47 (a) In the case of any article or substance sold by its manufacturer, distributor, or dealer which is a banned hazardous substance (whether or not it was such at the time of its sale), such article or substance shall, in accordance with regulations of the Secretary, be repurchased as follows: 48 (1) The manufacturer of any such article or substance shall repurchase it from the person to whom he sold it 49 (2) The distributor of any such article or substance shall repurchase it from the person to whom he sold it 50 (3) In the case of any such article or substance sold at retail by a dealer, if the person who purchased it from the dealer returns it to him, the dealer shall refund the purchaser the purchase price paid for it and reimburse him for any reasonable and necessary transportation charges incurred in its return. 51 In deciding whether a private party can proceed directly under section 1274 to enforce repurchase, much of the analysis of whether a private cause of action should be implied under section 1263 is also applicable here. 16 52 Plaintiff is a member of the class for whose especial benefit section 1274 was enacted. In enacting this section, Congress was primarily concerned with the allocation of the economic burden which would result from the banning of a product. 17 Congress intended that the party responsible for introducing the product into commerce bear the ultimate loss, thus providing an incentive to manufacturers to produce safe goods. 53 Unlike section 1263, section 1274 is not a general prohibition of conduct. Rather, this section sets forth the chain of repurchase to be followed once a product is determined to be a banned hazardous substance. Thus, section 1274 specifies a well-defined class of persons to which it applies. Plaintiff, by falling within this chain of repurchase, is therefore a member of the class for whose benefit the statute was enacted. 54 We turn next to a determination whether Congress intended to create or deny a private remedy. The legislative history of section 1274 indicates the concern of Congress regarding who should bear the cost for the losses incurred by the removal of those defective products which happen to get into the stream of commerce before they are detected. Remarks of Senator Prouty, 115 Cong.Rec. 17761 (1969). 55 Plaintiff argues that the following statements evidence an intent on the part of Congress to create a private right of action. 56 The bill also provides that in the case of a banned item, the manufacturer would have to repurchase the items from the retailers. This protects the retail store owner from being stuck with unsellable stock, and places the loss where it properly belongs on the manufacturer of the dangerous toy. 57 Remarks of Rep. Keith, 115 Cong.Rec. 24347 (1969). 58 Another feature of this bill which should have a dampening effect on those who would knowingly sell dangerous products is the requirement for repurchase. It starts at the top and extends down to the ultimate purchaser. The buyer of the article may return it to his retailer who must repurchase it. The retailer then may do the same with his distributor, who may in turn make his appropriate claim on the manufacturer. 59 Remarks of Rep. Springer, 115 Cong.Rec. 24347 (1969). These statements, and those of Senator Prouty, 18 do no more than point out the scope of the repurchase obligation. 60 Although the scope of the repurchase obligation is clear, the legislative history does not indicate who may enforce this provision. As originally proposed, section 1274 appears to have been self-executing, such that it would take effect immediately upon a finding by the secretary that an article was a banned hazardous substance. 19 In enacting section 1274, however, Congress deleted the word immediately and provided that repurchase be in accordance with regulations of the secretary. While no reason is stated for the change, given the complexity of relationships between manufacturers, distributors, and retailers, it appears Congress believed a self-executing repurchase provision would prove unworkable. Thus, Congress intended that the repurchase obligation be initiated only upon action by the Secretary. This is wholly consistent with the statutory purpose that enforcement of the Acts commence with agency action. Congress intended that the agency responsible for determining whether a substance is hazardous and enforcing any ban, would also define and order any repurchase. 61 Moreover, in sections 2072 and 2073 Congress expressly provided private parties with the right to sue in federal court once a CPSC order requiring repurchase is violated. Thus, the existence of private suits under sections 2072 and 2073 and the change in the language of the section 1274 indicate an intent to deny direct suits under section 1274. 62 Plaintiff suggests a number of policy reasons to support its argument that a private right of action under § 1274 is consistent with the underlying purpose of the legislative scheme. Plaintiff argues that a private remedy will encourage a manufacturer to comply with its obligation to repurchase, deter the sale of dangerous products by making it unprofitable to do so, and place the economic loss on the party responsible for its introduction into commerce. However, these goals can be accomplished through the express remedies of the FHSA and the CPSA. The commission's criminal, civil penalty, seizure, and injunctive powers, the consumer petition provisions, as well as the private remedy and injunctive provisions for a knowing violation of a CPSC rule or order all serve to encourage repurchase, to deter the sale of dangerous products, and to place the economic loss on the responsible party. Moreover, private actions directly under section 1274 may lead to the imposition of inconsistent repurchase obligations. 63 Plaintiff also asserts that CPSC's limited resources make necessary a private remedy under § 1274 because it would be impossible for the CPSC to commence enough suits on behalf of private parties to enforce this section in a fair or consistent manner. This section, however, can be enforced by private parties under sections 2072 and 2073 once the CPSC issues a rule or order finding a product to be a banned hazardous substance and orders repurchase. And, as Judge Mulligan has stated: 64 Whatever force this argument might once have had, see J. I. Case Co. v. Borak, supra, 377 U.S. at 432, 84 S.Ct. 1555, (at 1559) is seriously undermined by the Court's observation in Piper that institutional limitations alone do not lead to the conclusion that any party should have a cause of action for damages. 430 U.S. at 41, 97 S.Ct. at 949. The argument that a regulatory agency is confessedly unable properly to regulate as charged by Congress and detailed by its own regulations, and that therefore the federal courts should find a damage remedy implicit in an act which studiously avoided giving one to the class sought to be represented here, is simply unpersuasive. 65 Redington v. Touche Ross & Co., 592 F.2d 617, 633-34 (2d Cir. 1978) (Mulligan, J., dissenting), rev'd, 442 U.S. 560, 99 S.Ct. 2479, 61 L.Ed.2d 82 (1979) (footnote omitted). Therefore, private suits under section 1274 to enforce repurchase would be inconsistent with the statutory scheme. 66 The analysis of the fourth Cort inquiry under section 1263 is equally applicable here. Plaintiff's claims are of the type traditionally the concern of state law. 67 Finally, when Congress has intended that there be private enforcement of a repurchase provision, it has explicitly so stated. For example, in the National Traffic and Motor Vehicle Safety Act of 1966, 15 U.S.C. §§ 1381 et seq., Congress explicitly provided distributors and dealers with a private right of action if a manufacturer or distributor refused to comply with the repurchase or repair provisions of the Act. See 15 U.S.C. § 1400(b). 20 68 Thus, under the Cort analysis, we conclude that it would be inappropriate to imply a private right of action under § 1274.