Opinion ID: 3010320
Heading Depth: 2
Heading Rank: 2

Heading: The TRCA's Abrogation of

Text: Eleventh Amendment Immunity One of the main purposes of section 43 of the Lanham Act is to protect persons engaged in interstate commerce against unfair competition caused by false or misleading representations or advertising about goods, services, or commercial activities. See 15 U.S.C. S 1125(a)(1). Congress amended the Act in 1992 when it enacted the TRCA to clarify its intent to abrogate the Eleventh Amendment immunity of states in actions under the Lanham Act. See 15 U.S.C. S 1125(a). Congress passed the TRCA in response to Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 246, 105 S.Ct. 3142, 3149 (1985), which required Congress to give an explicit and unambiguous statement in a statute to 7 manifest an intent to abrogate the states' immunity under the Eleventh Amendment. See S. Rep. No. 102-280, at 4-7 (1992), reprinted in 1992 U.S.C.C.A.N. 3087, 3090-93. By enacting the TRCA, Congress intended to place states on an equal footing with commercial competitors. See id. at 3093, 3095. Inasmuch as Florida Prepaid is an arm of the State of Florida, the TRCA by its terms, if valid, would abrogate Florida Prepaid's Eleventh Amendment immunity. See College Sav. Bank, 948 F. Supp. at 413. However, Florida Prepaid argues that the Seminole Tribe decision limiting the scope of Congress' powers to abrogate a state's Eleventh Amendment immunity renders the TRCA unconstitutional as applied in this case. We agree with this contention.
In Seminole Tribe, the Court set forth a clear two-part standard of how Congress could abrogate the Eleventh Amendment immunity of states. See id. at 1123. The Court said that to find if there has been an abrogation a court must answer two questions affirmatively: first, whether Congress has `unequivocally expresse[d] its intent to abrogate the immunity,' and second, whether Congress has acted `pursuant to a valid exercise of power.'  Id. (citations omitted).
Under the first question posed by Seminole Tribe, Congress must evidence an intent to abrogate the states' immunity from suit in federal court through a clear legislative statement. Id. (quoting Blatchford v. Native Village of Noatak, 501 U.S. 775, 786, 111 S.Ct. 2578, 2584 (1991)). The TRCA surely manifests that intent. Section 1122, entitled Liability of States, instrumentalities of States and State officials provides: (a) Any State, instrumentality of a State or any officer or employee of a State or instrumentality of a State acting in his or her official capacity, shall not be immune, under the eleventh amendment of the Constitution of the United States or under any other doctrine of sovereign immunity, from suit in Federal 8 court by any person, including any governmental or nongovernmental entity for any violation under this chapter. (b) In a suit described in subsection (a) of this section for a violation described in that subsection, remedies (including remedies both at law and in equity) are available for the violation to the same extent as such remedies are available for such a violation in a suit against any person other than a State, instrumentality of a State, or officer or employee of a State or instrumentality of a State acting in his or her official capacity. . . . 15 U.S.C. S 1122. This language manifests Congress' unambiguous intent to abrogate the states' immunity. Therefore, the TRCA meets the first requirement of Seminole Tribe to find that Congress has abrogated the states' immunity.
The second prong of Seminole Tribe requires that Congress act pursuant to a valid exercise of power. Prior to Seminole Tribe, the Supreme Court had determined that there were only two constitutional bases for Congress validly to abrogate the states' Eleventh Amendment immunity. First, in Fitzpatrick v. Bitzer, 427 U.S. 445, 96 S.Ct. 2666 (1976), the Court found that Congress could act pursuant to section five of the Fourteenth Amendment to abrogate states' immunity under the Eleventh Amendment. The Court reasoned that Congress had this power because the Fourteenth Amendment had fundamentally altered the balance of state and federal power struck by the Constitution. Seminole Tribe, 116 S.Ct. at 1125. Second, in Pennsylvania v. Union Gas Co., 491 U.S. 1, 109 S.Ct. 2273 (1989), a plurality of the Court found that the Interstate Commerce Clause, Art. I, S 8, cl. 3, granted Congress the power to abrogate state sovereign immunity. Seminole Tribe, 116 S.Ct. at 1125. In Seminole Tribe, the Court was asked to find a third basis of authority for Congress to abrogate the states' Eleventh Amendment immunity -- the Indian Commerce Clause. See U.S. Const. 9 Art. 1, S 8, cl. 3. The Court held that the Indian Commerce Clause did not provide a basis for Congress to exercise that power. In fact, the Court overruled Union Gas by determining that the Commerce Clause itself did not provide a basis for Congress to abrogate the states' immunity under the Eleventh Amendment. See Seminole Tribe, 116 S.Ct. at 1128. Thus, since Seminole Tribe section five of the Fourteenth Amendment has been the sole basis for Congress to abrogate the states' immunity under the Eleventh Amendment. Accordingly, to meet the second prong of the Seminole Tribe test, the TRCA must have been enacted pursuant to this power.
The legislative history of the TRCA does not delineate conclusively the constitutional basis for its enactment. The only mention of Fourteenth Amendment authority is found in a brief notation in a Senate Report. See S. Rep. No. 102280, at 8 (1992), reprinted in 1992 U.S.C.C.A.N. 3087, 3094 (stating that the TRCA is justified under the Commerce Clause and the Fourteenth Amendment.). Yet this failure to explain fully the constitutional justification for its enactment does not invalidate the TRCA, for Congress is not required to discuss or explain explicitly the constitutional basis for laws that it enacts. See, e.g., FCC v. Beach Communications, Inc., 508 U.S. 307, 315, 113 S.Ct. 2096, 2102 (1993) (holding that a legislature isnever require[d] . . . to articulate its reasons for enacting a statute); EEOC v. Wyoming, 460 U.S. 226, 243-44 n.18, 103 S.Ct. 1054, 1064 n.18 (1983).3 _________________________________________________________________
It is in the nature of our review of congressional legislation defended on the basis of Congress' powers under S 5 of the Fourteenth Amendment that we be able to discern some legislative purpose or factual predicate that supports the exercise of that power. That does not mean, however, that Congress need anywhere recite the words `section 5' or `Fourteenth Amendment' or `equal protection' for `[t]he . . . constitutionality of action taken by Congress does not depend on recitals of the power which it undertakes to exercise.' 460 U.S. at 243-44 n.18, 103 S.Ct. at 1064 n.18 (citations omitted) (quoting Woods v. Cloyd W. Miller Co., 333 U.S. 138, 144, 68 S.Ct. 421, 424 (1948)). 10 Furthermore, as the Court recently has stated, congressional enactments are accorded a presumption of validity, because [i]t is for Congress in the first instance to `determin[e] whether and what legislation is needed to secure the guarantees of the Fourteenth Amendment,' and its conclusions are entitled to much deference. City of Boerne v. Flores, 117 S.Ct. 2157, 2172 (1997) (quoting Katzenbach v. Morgan, 384 U.S. 641, 651, 86 S.Ct. 1717, 1723-24 (1966)). However, Congress' discretion is not unlimited and courts must ensure that congressional acts do not overstep the boundaries of the Fourteenth Amendment. Id. at 2172. Therefore, while the brief statement of the constitutional foundation for the TRCA in the Senate Report is entitled to deference, it does not establish that the TRCA is constitutional. Consequently, we are obliged to examine the scope of the Fourteenth Amendment and determine whether the TRCA is valid under the amendment's enforcement section. The Due Process Clause of Fourteenth Amendment provides that no state shall deprive any person of life, liberty, or property, without due process of law. U.S. CONST. amend. 14, S 1. Sectionfive of the Fourteenth Amendment gives Congress the power to enforce, by appropriate legislation, the provisions of this article. U.S. CONST. amend. 14, S 5. The Court long has recognized that Congress' power to legislate under section five is quite broad: Whatever legislation is appropriate, that is, adapted to carry out the objects the amendments have in view, whatever tends to enforce submission to the prohibitions they contain, and to secure to all persons the enjoyment of perfect equality of civil rights and the equal protection of the laws against State denial or invasion, if not prohibited, is brought within the domain of congressional power. Ex Parte Virginia, 100 U.S. 339, 345-46 (1879). However, Congress' power under section five of the Fourteenth Amendment is not without boundaries. As the Court held in Oregon v. Mitchell, 400 U.S. 112, 91 S.Ct. 260 (1970): As broad as the congressional enforcement power is, it is not unlimited. Specifically, there are at least three 11 limitations upon Congress' power to enforce the guarantees of the Civil War Amendments. First, Congress may not by legislation repeal other provisions of the Constitution. Second, the power granted to Congress was not intended to strip the States of their power to govern themselves . . . . Third, Congress may only `enforce' the provisions of the amendments and may only do so by `appropriate legislation.' 400 U.S. at 128-29, 91 S.Ct. at 266-67. The Court also recently has cautioned that Congress does not enforce a constitutional right by changing what the right is. It has been given the power `to enforce,' not the power to determine what constitutes a constitutional violation. City of Boerne, 117 S.Ct. at 2164. Therefore, while Congress has broad remedial power under the Fourteenth Amendment, it does not have a basis for enacting substantive, nonremedial measures. Because of this limitation, for a law to be a valid mechanism to enforce the Due Process Clause, it must not create new substantive rights, but instead must provide a method of protecting against violations of those rights already extant. The Due Process Clause itself sets out the boundaries of what rights it protects: the conduct must involve action by a state; it must deprive an individual of life, liberty or property; and the deprivation must occur without due process of law. These three requirements are at the core of what the TRCA must remedy to be valid under the Fourteenth Amendment. However, for the TRCA to be a valid enforcement of the Due Process Clause under section five, it does not need to protect only against constitutional violations. Rather, the TRCA can serve the broader purposes of the Due Process Clause. The Court in City of Boerne, reiterated this notion: Legislation [enacted under section five of the Fourteenth Amendment] which deters or remedies constitutional violations can fall within the sweep of Congress' enforcement power even if in the process it prohibits conduct which is not itself unconstitutional and intrudes into `legislative spheres of autonomy previously reserved to the States.'  Id. at 2163 (quoting Fitzpatrick v. Bitzer, 427 U.S. at 455, 96 S.Ct. at 2671). Yet even though the 12 violations against which it protects do not have to rise to the level of constitutional violations, the TRCA must further the goals of protecting property from state action undertaken without due process of law, because the congressional enforcement power under the Fourteenth Amendment is not unlimited. See City of Boerne, 117 S.Ct. at 2163. In deciding that the TRCA is not valid as applied in this case under the Fourteenth Amendment, the district court concluded that the case did not involve a property right; therefore, the TRCA did not further the purposes of the Fourteenth Amendment. See College Sav. Bank, 948 F. Supp. at 426-28. The district court first determined that the false advertising prong of the Lanham Act invoked by CSB essentially protects the `right to be free from false advertising.'  Id. at 426. This right, according to the district court, was not property for purposes of the Fourteenth Amendment; in fact, the district court could notfind any precedent even discussing whether the right to be free of unfair competition is `property.'  Id. at 426-27 n.27. The district court indicated that we are unaware of any authority suggesting that Congress may, by simplefiat, abruptly declare that a simple statutory cause of action, which traditionally has not been understood to involve any kind of property, now encompasses a `property right' to which the Fourteenth Amendment applies. Id. at 427. Therefore, according to the district court, because a property right was not involved, Congress did not have the power under the Fourteenth Amendment to enact the TRCA as it applied to this case. In our examination of the TRCA, we, too, focus on the question of whether the TRCA protects a property right recognized under the Fourteenth Amendment. The tort of unfair competition created by the Lanham Act protects against certain harms involving improper interference with business prospects. See 15 U.S.C. S 1127; see also AT & T Co. v. Winback and Conserve Program, Inc., 42 F.2d 1421, 1428 (3d Cir. 1994) (noting that the Lanham Act contains language that  `creates a federal cause of action for unfair competition.' ) (citations omitted). CSB contends that this tort of unfair competition protects intangible property 13 rights; therefore, the TRCA should be seen to protect property as defined under the Fourteenth Amendment. The tort of unfair competition found in the Lanham Act does protect some intangible property rights, but no such intangible property is involved in the present case. See W. Page Keeton et al., Prosser and Keeton on the Law of Torts S 130, at 1015 (5th ed. 1984) (citing trade marks, copyrights, and patents as intangible property rights that the tort of unfair competition involves). Instead, CSB's Lanham Act claim concerns allegedly false statements about a competitor's own product. The only cognizable property right that could be involved would be a right to be free of false advertising, a right that is not an intangible property right protected under the Fourteenth Amendment. The Supreme Court has recognized that the Fourteenth Amendment protects some categories of intangible property rights. See, e.g., Tulsa Prof 'l Collection Serv. v. Pope, 485 U.S. 478, 485, 108 S.Ct. 1340, 1345 (1988) (in recognizing an unsecured claim against the estate, the Court wrote: Little doubt remains that such an intangible interest is protected by the Fourteenth Amendment.); Logan v. Zimmerman Brush Co., 455 U.S. 422, 430, 102 S.Ct. 1148, 1155 (1982) ([T]he types of interests protected as `property' are varied and, as often as not, intangible, relating `to the whole domain of social and economic fact.' ) (citations omitted); Paul v. Davis, 424 U.S. 693, 710, 96 S.Ct. 1155, 1165 (1976) ([T]here exists a variety of interests which are difficult of definition but are nevertheless comprehended within the meaning of either `liberty' or `property' as meant in the Due Process Clause.). However, not all intangible rights have been deemed to be property under the Fourteenth Amendment, see Paul v. Davis, 424 U.S. at 712, 96 S.Ct. at 1166 (holding that a person's reputation was not intangible property covered by Fourteenth Amendment), and the right to be free from unfair advertising is not one of the protected property interests. While infringement on such a right might give rise to a cause of action, the right does not amount to property within the meaning of the Fourteenth Amendment.4 _________________________________________________________________ 4. CSB asserts that the Supreme Court recognized that the tort of unfair competition involved protected intangible property rights in International 14 We also reject CSB's contention that the TRCA necessarily involves a protected property right under the Fourteenth Amendment on the basis that it attempts to protect businesses from harm. Clearly, a business is an established property right entitled to protection under the Fourteenth Amendment. See, e.g., Duplex Printing Press Co. v. Deering, 254 U.S. 443, 465, 41 S.Ct. 172, 176 (1920) (finding that a business . . . is a property right, entitled to protection against unlawful injury or interference .. .); United States v. Tropiano, 418 F.2d 1069, 1076 (2d Cir. 1969) (The right to pursue a lawful business including the solicitation of customers necessary to the conduct of such business has long been recognized as a property right within the protection of the Fifth and Fourteenth Amendments to the Constitution.) (citations omitted); Small v. United States, 333 F.2d 702, 704 (3d Cir. 1964) (The right to pursue a lawful business or occupation is a right of property which the law protects against intentional and unjustifiable interference. A cause of action based upon such an interference is analogous to one based upon unlawful interference with existing contracts, and is governed by the same principles.) (citations omitted). Nevertheless, while a business is a property right, the fact that CSB operates a business does not lead necessarily to the conclusion that the TRCA as applied in this case protects property rights. For instance, in Gentry v. Howard, 365 F. Supp. 567 (W.D. La. 1973), an operator of an ambulance service sued _________________________________________________________________ News Serv. v. Associated Press, 248 U.S. 215, 236, 39 S.Ct. 68, 71 (1918) ([T]he right to acquire property by honest labor or the conduct of a lawful business is as much entitled to protection as the right to guard property already acquired. . . . It is this right that furnishes the basis of the jurisdiction in the ordinary case of unfair competition.) (citations omitted). However, the quoted language concerned the question of whether the courts should exercise equity jurisdiction over the dispute; the Court needed to determine if a right sufficient to sustain such jurisdiction had been violated and if a harm had occurred. Thus, while the opinion does discuss property rights and the tort of unfair competition, the Court did not determine whether the tortious actions injured a property right worthy of protection under the Fourteenth Amendment. The Court merely determined that an injury to a specific right had occurred. 15 the mayor of the City of Monroe in part on due process grounds, because the city began operating a competing ambulance service. The district court held that this action by the city did not amount to a due process violation, because no deprivation of property had occurred, within the meaning of the Fourteenth Amendment. Even though the city clearly was competing with the private business which suffered from this competition, this harm did not rise to the level of a deprivation of property under the Fourteenth Amendment. See also Hegeman Farms Corp. v. Baldwin, 293 U.S. 163, 170, 55 S.Ct. 7, 9 (1934) (The Fourteenth Amendment does not protect a business against the hazards of competition.); cf. Reich v. Beharry, 883 F.2d 239, 242 (3d Cir. 1989) (Every breach of contract by someone acting under color of state law [does not] constitute[ ] a deprivation of property for procedural due process purposes.). As Gentry illustrates, just because the state's actions impact on a private business does not mean that this action somehow infringes on the Fourteenth Amendment rights of the private individual. If a state's conduct impacting on a business always implicated the Fourteenth Amendment, Congress would have almost unrestricted power to subject states to suit through the exercise of its abrogation power. Congress could pass any law that tangentially affected the ability of businesses to operate and then create causes of action against the states in federal court if they infringed on those federally created rights. This result would be unacceptable and would conflict directly with the strict limits on Congress' powers to abrogate a state's Eleventh Amendment immunity. Thus, because this case does not involve a property interest protected by the Fourteenth Amendment, the TRCA, as applied in this case, is an unconstitutional exercise of Congress' powers. We carefully have confined our discussion by holding that the TRCA is unconstitutional as applied in this case. We have done so for two reasons. First, as the district court correctly noted, the false advertising prong of the Lanham Act implicated in this litigation is separate and distinct from the trademark infringement prong. College Sav. Bank, 948 F. Supp. at 426 n.25. Second, the false advertising 16 prong of the Lanham Act not only proscribes misrepresentations regarding a person's own goods or services, but it also forbids misrepresentations about a competitor's goods or services. 11 U.S.C. S 1125 (a)(1)(B). Since the present case only involves allegations that Florida Prepaid misrepresented its own product, the second part of the false advertising prong is not implicated. Therefore, because the scope of the allegations in this case is so narrow, we express no opinion as to whether the TCRA may be applied constitutionally in a case involving a trademark infringement or involving a misrepresentation about a competitor's goods or services.