Court Opinion

ID: 26633
Source: CourtListenerOpinion
Date Created: 2010-04-25 08:56:57+00
Date Added: 2024-06-11T14:56:04.511497
License: Public Domain

UNITED STATES COURT OF APPEALS
                      FOR THE FIFTH CIRCUIT
                     _______________________

                          No. 01-40376

                     _______________________

        FRIENDS FOR AMERICAN FREE ENTERPRISE ASSOCIATION,
                                             Plaintiff-Appellant,

                             versus

      WAL-MART STORES, INC., doing business as Sam’s Club,
            a Delaware Corporation; SAM’S WEST, INC.,
                  doing business as Sam’s Club,
                                             Defendants-Appellees.
                     _______________________

                        Consolidated with
                        Case No. 01-40420
                     _______________________

        FRIENDS FOR AMERICAN FREE ENTERPRISE ASSOCIATION,
                                              Plaintiff-Appellee,

                             versus

               WAL-MART STORES, INC., Etc.; Et Al,
                                                      Defendants,

         SAM’S WEST, INC., doing business as Sam’s Club,
                                             Defendant-Appellant.
_________________________________________________________________

          Appeals from the United States District Court
      for the Eastern District of Texas, Marshall Division

________________________________________________________________
                          March 1, 2002

Before JONES, WIENER, and PARKER, Circuit Judges.

EDITH H. JONES, Circuit Judge:
           Friends for American Free Enterprise, an association of

manufacturers’     representatives,         contends       that   Sam’s   Club   is

tortiously interfering with the contractual relationships between

representatives and the manufacturers who supply merchandise to

Sam’s. The district court dismissed the case for lack of standing.

As we agree that the nature of the case requires participation of

the   association’s   individual       members,       we   AFFIRM   the   district

court’s order of dismissal.        In a related appeal, we AFFIRM the

district court’s order denying Sam’s Club’s motion for sanctions

pursuant to Rule 11.

                                  I.    FACTS

           Sam’s Club decided in February 2000 that it would no

longer purchase goods through manufacturers’ representatives but

instead would deal directly with the manufacturers themselves.

Several manufacturers’ representatives affected by this “no-broker”

policy formed a non-profit association, Friends for American Free

Enterprise Association (“Friends”), which filed this action for

injunctive relief on the grounds that Sam’s Club was tortiously

interfering with the representatives’ contractual relationships

with the manufacturers.

           Sam’s   Club   moved    to       dismiss    the   case   for   lack   of

standing. Friends claimed it had “associational standing” to bring

suit on behalf of its members, but the organization refused to

identify its members or to produce the specific contracts that

                                        2
Sam’s Club allegedly was interfering with.                 After conducting

hearings on the motion, the district court dismissed the action for

lack of standing and denied all pending motions, including Sam’s

Club’s motion for sanctions under Rule 11.           In these consolidated

appeals, Friends appeals from the order of dismissal, and Sam’s

Club appeals from the denial of sanctions.

                               II.    DISCUSSION

                                A.    Standing

           An organization can assert “associational standing” to

represent the interests of individuals only if it can show, inter

alia,   that   “the   nature     of    the   case   does   not    require   the

participation of the individual affected members as plaintiffs to

resolve the claims or prayers for relief at issue.”              Friends of the

Earth, Inc. v. Chevron Chemical Co., 129 F.3d 826, 827-28 (5th Cir.

1997)(citing Hunt v. Washington State Apple Advert. Comm’n, 432
U.S. 333 (1977)).

           The individual members of Friends must participate if the

district court is to resolve these tortious interference claims.

As a preliminary matter, individual participation is necessary to

resolve the basic choice-of-law question.           Although Friends seems

to assume that Texas tort law would apply, nothing in the record

indicates that Texas has the most significant relationship to the

                                        3
tortious conduct and the parties.1             See Thomas v. N.A. Chase

Manhattan Bank, 994 F.2d 236, 241 (5th Cir. 1993).             Assuming that

Texas law applies, principles of due process would require that

Sam’s Club be able to obtain sufficient knowledge of the affected

contracts    to    defend   against   the   representatives’    claims   and,

perhaps, to assert the affirmative defense of justification.               See

Prudential Ins. Co. of Am. v. Financial Review Servs., Inc., 29
S.W.3d 74, 77-78, 80-81 (Tex. 2000).          Finally, if Friends were to

prove all the elements of tortious interference, the district court

would    need    individualized   information    about   the   contracts   to

determine the proper scope of an injunction.

            Friends cites Supreme Court and Fifth Circuit precedent

for the proposition that the participation of individual members is

less likely to be required if the association is seeking injunctive

relief only.       What distinguishes this case from prior decisions,

however, is not the relief requested but the nature of the claims

asserted.       Most of the decisions that Friends relies upon involved

pure questions of law.         See, e.g., International Union, UAW v.

Brock, 477 U.S. 274, 287 (1986)(whether an agency’s interpretation

of a statute was correct); Hunt, 432 U.S. at 333 (whether a state

     1
          The court’s decision to apply the substantive law of
Texas (as opposed to Arkansas, for example) could have a
significant effect on what the plaintiff would be required to
prove. Compare Powell Indus., Inc. v. Allen, 985 S.W.2d 455 (Tex.
1998), with Mason v. Wal-Mart Stores, Inc., 969 S.W.2d 160 (Ark.
1998).

                                       4
statute violated the dormant Commerce Clause); Friends of the

Earth, 129 F.3d at 827 (whether a chemical company was violating a

discharge permit); Familias Unidas v. Briscoe, 619 F.2d 391, 394

(5th   Cir.    1980)(whether       a    state   statute    violated    the   First

Amendment).        In this case, on the other hand, Friends alleges that

Sam’s Club’s policy improperly interferes with multiple, specific

contracts       between       individual        representatives       and    their

manufacturers.          We see no way to resolve such fact-specific tort

claims without participation of the individual members of the

association.

                                   B.    Sanctions

              After dismissing Friends’ tortious interference action,

the district court denied Sam’s Club’s motion for sanctions under

Rule 11.      Sam’s Club contends that the district court abused its

discretion in denying its Rule 11 motion.

              Contrary to Friends’ assertion, we have jurisdiction over

this appeal.        See Didie v. Howes, 988 F.2d 1097, 1103 (11th Cir.

1993)(“[A] district court’s postjudgment order denying Rule 11

sanctions     is    a   properly   appealable      final   order.”),    cited   in

Thornton v. General Motors Corp., 136 F.3d 450, 453 (5th Cir.

1998).   We review the district court’s denial of Rule 11 sanctions

for abuse of discretion.               Thomas v. Capital Security Services,

Inc., 836 F.2d 866, 872 (5th Cir. 1988)(en banc).              “‘Generally, an

abuse of discretion only occurs where no reasonable person could

                                           5
take the view adopted by the trial court.’”            Dawson v. United

States, 68 F.3d 886, 896 (5th Cir. 1995)(quoting Lorentzen v.

Anderson Pest Control, 64 F.3d 327, 330 (7th Cir. 1995)).

           Although the district court did not provide reasons for

denying the motion for sanctions, this denial could be an implicit

finding that Friends did not bring this litigation for an improper

purpose and that Friends’ legal arguments were not so frivolous as

to warrant sanctions.     Based on the record before us, the district

court’s conclusion would be reasonable and would not constitute an

abuse of discretion.

           We must note, however, that both parties assert (with

only minimal support from the record) that the district court did

not consider the merits of the Rule 11 motion.         Sam’s Club stated

in its brief on appeal that the district court “operated under the

misapprehension that it was without authority to rule on Sam’s

Club’s motion for sanctions” because the court had dismissed the

underlying action.2    Friends’ position is that the district court

“chose to defer ruling on all motions” until after the standing

issue had been decided on appeal.           In light of both parties’

     2
          “The district court retains power to issue sanctions
under Rule 11 even though the action is no longer pending before
it.” WRIGHT & MILLER, FEDERAL PRACTICE AND PROCEDURE: CIVIL 2D (2001 Supp.)
§ 1336 at 71.     See also Willy v. Coastal Corp., 503 U.S. 131
(1992)(holding that a district court may impose sanctions pursuant
to Rule 11 in a case in which the district court is later
determined to be without subject matter jurisdiction).

                                    6
expectation that the district court would reconsider the Rule 11

motion, we remand the case so that the district court may consider

or reconsider the question of sanctions under Rule 11, either on

the court’s own initiative or on a renewed motion by Sam’s Club.

                               III. CONCLUSION

            For the foregoing reasons, the district court’s order

dismissing Friends’ action for lack of standing and its order

denying Sam’s Club’s motion for sanctions under Rule 11 are both

AFFIRMED,   and   the   case    is   REMANDED    for   further   proceedings

consistent with this opinion.

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