Ellis v. Glover & Gardner Const. Co., 80-3726.

• Citation: 562 F. Supp. 1054
• Decision Date: 28 March 1983
• Docket Number: No. 80-3726.,80-3726.
• Parties: Clarence J. ELLIS v. GLOVER & GARDNER CONSTRUCTION COMPANY.
• Court: U.S. District Court — Middle District of Tennessee

562 F. Supp. 1054

Clarence J. ELLIS v. GLOVER & GARDNER CONSTRUCTION COMPANY.

No. 80-3726.

United States District Court, M.D. Tennessee, Nashville Division.

March 28, 1983.

Margaret Behm, Nashville, for plaintiff.

Allen D. Lentz, Nashville, for defendant.

MEMORANDUM

JOHN T. NIXON, District Judge.

The plaintiff Clarence J. Ellis brought this case pursuant to Sections 1331 and 1337 of Title 28 U.S.C. and the Consumer Credit Protection Act, Title 15 United Code Sections 1671, et seq. He is fifty-two years of age and from August 1979 until June 18, 1980, he was employed by the defendant as a laborer/carpenter. On June 18, 1980, Charles R. Gardner, President and owner of the defendant company, received a notice of garnishment of plaintiff's wages. On that date Gardner dismissed the plaintiff because of the garnishment. Ellis' earnings from the defendant company had not been previously garnisheed; therefore, the June 18, 1980 garnishment was for a single indebtedness.

The defendant maintains that it terminated Ellis because of alcoholism, poor job performance, insubordination, and dishonesty. However, the Separation Notice signed by Charles Gardner and transmitted to the Tennessee Department of Employment Security stated:

This man was discharged do (sic) to his wages being garnishee (sic) — it is a company policy to discharge any employee this happens to.

On the date that Ellis was terminated, Gardner called him into his office immediately after receiving notice of the garnishment. Ellis was told of the garnishment and was also informed that company policy dictated that any employee receiving a garnishment would be discharged. Defendant introduced no credible evidence to indicate that plaintiff was discharged for any reason other than the garnishment, but the proof does not show that the defendant's actions toward the plaintiff were malicious or in bad faith.

Despite efforts to find work, the plaintiff was unemployed from June 18, 1980 until June 30, 1981. He applied for unemployment benefits with the Tennessee Department of Employment Security on September 22, 1980 and began drawing benefits of $95.00 per week on October 11, 1980. He drew $95.00 a week for twenty-five weeks, and $10.00 on the twenty-sixth week. He sold various items of personal property and liquidated his savings in order to come up with living expenses.

At the time plaintiff was discharged by the defendant, he was being paid $6.00 per hour. Since June 30, 1981, he has held temporary jobs. In the fifty-nine week period between his discharge and the trial of this case, plaintiff's only compensation was unemployment insurance which amounted to $2,385.00. The wages the plaintiff would have earned during that fifty-nine week period amount to $14,160.00.

The plaintiff seeks reinstatement, backpay, and other relief, claiming that his discharge was in violation of 15 U.S.C. § 1674, which contains restrictions on discharge from employment by reason of garnishment. For the reasons that follow, judgment will be entered for the plaintiff.

I.

Defendant argues that the plaintiff's claim must fail because no private right of action exists under Subchapter II of the Consumer Credit Protection Act of 1968 (CCPA), 15 U.S.C. §§ 1671-1677.¹ Subchapter II of the Act pertains to restrictions on garnishment. Section 1674(a) thereof prohibits the discharge of employees whose earnings have become subject to garnishment for a single indebtedness. Pursuant to Section 1676, the Secretary of Labor is given the power to enforce Subchapter II. As there is no express provision for private remedies, unless the statute creates an implied private right of action, the plaintiff will indeed be left solely with an administrative remedy for his employer's alleged violation of Section 1674(a).

The CCPA was enacted on May 29, 1968 after seven years of Congressional hearings on the need for consumer credit protection legislation. Subchapter II reflects Congress' particular concern over the economic hardship and disruptions brought about by the unrestricted garnishment of wages. See H.R.Rep. No. 1040, 90th Cong., 2d Sess., reprinted in 1968 U.S.Code Cong. & Ad. News 1962, 1964 (hereinafter cited as H.R. Rep. No. 1040). The "overall purpose" of the Act is to curb predatory extensions of credit and to "provide greater debtor protections." Smith v. Cotton Bros. Baking Co., 609 F.2d 738, 742 (5th Cir.), cert. denied, 449 U.S. 821, 101 S.Ct. 79, 66 L.Ed.2d 23 (1980).

Consistent with this underlying purpose, Congress acted in Subchapter II principally not to protect the rights of creditors, but to limit the ills flowing from unrestricted wage garnishments. Long Island Trust Co. v. U.S. Postal Serv., 647 F.2d 336 (2d Cir. 1981). By enacting Subchapter II, Congress sought particularly to prevent consumers from entering bankruptcy. Kokoszka v. Belford, 417 U.S. 642, 651, 94 S.Ct. 2431, 2436, 41 L.Ed.2d 374 (1974).

Levels of personal bankruptcies have risen at truly alarming rates. While such bankruptcies were at a level of 18,000 per year in 1950, for the fiscal year ending June 30, 1967, personal bankruptcies had risen to 208,000 .... Testimony and evidence received by the Committee on Banking and Currency clearly established a causal connection between harsh garnishment laws and high levels of personal bankruptcies.

H.R.Rep. No. 1040, supra, at 1978. In support of Section 1674, Congresswoman Sullivan, Chairperson of the House Subcommittee on Consumer Affairs, stated:

What we know from our study of this problem is that in a vast number of cases the debt is a fraudulent one, saddled on a poor ignorant person who is trapped in an easy credit nightmare, in which he is charged double for something he could not pay for even if the proper price was called for, and then hounded into giving up his pound of flesh, and being fired besides.

114 Cong.Rec. 1832 (Feb. 1, 1968).

A related problem of concern to Congress, expressed in both the statute itself and the legislative history, involved the disparities among state laws dealing with restrictions on garnishment and the resultant unevenness in the application of the bankruptcy laws. See 15 U.S.C. § 1641; H.R. Rep. No. 1040, supra. Congress therefore sought to devise a new "national standard ... for the garnishment of wages," 114 Cong.Rec. 1840 (Feb. 1, 1968) (Remarks of Rep. Hanna), that would

relieve countless honest debtors driven by economic desperation from plunging into bankruptcy in order to preserve their employment and insure a continued means of support for themselves and their families.

H.R.Rep. No. 1040, supra, at 1979.

The question whether a private remedy is implicit in Section 1674(a) has not been determined by the Supreme Court and is a matter of conflict between various federal courts. The Court of Appeals for the Ninth Circuit, Stewart v. Travelers Corp., 503 F.2d 108 (9th Cir.1974), decided that the provision does give rise to a private right of action, while the Courts of Appeals for the Fifth Circuit, Smith v. Cotton Bros. Baking Co., 609 F.2d at 743, and the Eighth Circuit, McCabe v. City of Eureka, Mo., 664 F.2d 680 (8th Cir.1981), determined that there can be no private remedy based on Section 1674(a). A district court in Oklahoma has followed the Ninth Circuit decision while district courts in West Virginia, Louisiana, Iowa and Kansas have held that there is no private cause of action.²

The Sixth Circuit has at least tacitly recognized a private right of action in remanding for further factual findings an action instituted by a plaintiff who sought reinstatement and other relief for wrongful discharge in violation of 15 U.S.C. §§ 1671, et seq. Nunn v. City of Paducah, 71 L.C. § 32,890 (6th Cir.1972). Upon remand, the district court in Nunn decided in favor of the plaintiff and denied, citing without discussion J.I. Case Co. v. Borak, 377 U.S. 426, 84 S.Ct. 1555, 12 L.Ed.2d 423 (1964), a motion to dismiss by the defendant who argued that the plaintiff lacked capacity to bring the action in his own behalf. Nunn v. City of Paducah, 72 L.C. ¶ 32,954 (W.D.Ky. 1973). The decision was not again appealed and thus stands, evidently the only case within this Circuit addressing the question, as a judicial recognition of an implied private right of action under Section 1674(a).

Because of the division of opinion among the federal courts and because the Nunn case was decided prior to Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975), and its progeny, this Court has devoted some study to the implication question and finds itself in agreement with those courts holding that there is a private right of action under Section 1674(a).³

Under recent Supreme Court cases, the implication of a private right of action is a matter of statutory construction, and judicial inquiry should focus upon the intent of Congress. Universities Research Ass'n v. Coutu, 450 U.S. 754, 767, 101 S.Ct. 1451, 1459, 67 L.Ed.2d 662 (1981); Transamerica, 444 U.S. at 15, 100 S.Ct. at 245 (1979). The Supreme Court's approach to the question has "changed significantly" with Cort v. Ash, which reflected its view that the "increased complexity of federal legislation and the increased volume of federal litigation strongly supported the desirability of a more careful scrutiny of legislative intent." Merrill Lynch, Pierce, Fenner & Smith v. Curran, 456 U.S. 353, 377 102 S.Ct. 1825, 1838-39, 72 L.Ed.2d 182 (1982). "The key to this case", therefore, is this Court's "understanding of the intent of Congress" in 1968 when it enacted the consumer credit protection legislation establishing the restriction on garnishment at issue. Id.

In Cort v. Ash, the Supreme Court set forth four factors relevant to such an inquiry.⁴ Since Cort v. Ash, the Court has further refined the proper approach making clear that the Cort factors should be treated as guidelines only and are not necessarily entitled to equal weight. See Transamerica, 444 U.S. at 15, 100 S.Ct. at...