Bratton v. Shiffrin
| Decision Date | 11 August 1977 |
| Docket Number | No. 76 C 4282,76 C 4707 and 77 C 284.,76 C 4282 |
| Parties | Earl BRATTON et al., Plaintiffs, v. Joel SHIFFRIN et al., Defendants. HEMISPHERE TRAVEL, INC., et al., Plaintiffs, v. FIRST NATIONAL BANK OF HIGHLAND PARK et al., Defendants. Roger CHAPMAN et al., Plaintiffs, v. FIRST NATIONAL BANK OF HIGHLAND PARK, Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
Christopher A. Bloom, Green & Brandwein, Chicago, Ill., for Roger Chapman, et al. and Earl Bratton, et al.
Marvin Green, Law Offices of Marvin Green, Chicago, Ill., for Roger Chapman, et al.
Lloyd S. Kupferberg, Martin W. Salzman, David N. Missner, Schwartz, Cooper, Kolb & Gaynor, Chicago, Ill., for First National Bank of Highland Park and Joel Shiffrin.
Rappaport & Meyer, Robert L. Berkover, McCracken & Walsh, Chicago, Ill., for Hemisphere Travel, Inc. and Victoria Travel, Ltd.
Dannen, Crane, Heyman & Haas, Chicago, Ill., for Gerald Mann, Richard Tauber, Sunshine Travel of Nevada, Inc., Sunshine Travel Agency, Inc. and Tour Travel Enterprises, Inc.
Kenneth F. Levin, Beatty, Levin & Holland, Thomas R. Meites, Chicago, Ill., Thomas P. Sullivan, U. S. Atty., and Thomas Dent, Asst. U. S. Atty., for Earl Bratton, et al.
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 dealing in tours organized by Tour Travel; Gerald Mann and Richard Tauber, owners and officers of the three travel companies; and the First National Bank of Highland Park and its vice president, Joel Shiffrin. The Bank and Shiffrin held accounts for the other defendants, including special escrow accounts 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 proceedings were initiated against Tour Travel Enterprises, Sunshine Travel and Sunshine Travel of Nevada.2 The scheduled tours never occurred and the deposits made by the plaintiff tour participants have not been refunded. Some of these deposits 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 concerning the deposits it holds. On March 17, 1977, the bankruptcy 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.3 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 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 agreement with the First National Bank inuring to the benefit of the tour participants.4 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.
Defendants First National Bank and Shiffrin challenge plaintiffs' claim of jurisdiction based on the Federal Aviation Act of 1958, 49 U.S.C. §§ 1301 et 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 v. 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 thereunder provide for a private right of action on their behalf, we have jurisdiction under Section 1337 to determine whether a federal claim has been stated.6 Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946); Enders v. American Patent Search Co., 535 F.2d 1085, 1087-88 (9th Cir. 1976), cert. denied, 429 U.S. 888, 97 S.Ct. 242, 50 L.Ed.2d 170 (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 authorizing 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 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),7 this finding alone would not make the agent liable for possible statutory violations by the principal.8 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.9 Accordingly, the provisions of Section 1487(a) do not provide them with an explicit statutory remedy of a private nature.
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. regulations 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 promulgated. An administrative agency cannot create a federal private right of action by enacting regulations; the right must be implied from the underlying statutory authority.
Plaintiffs have provided us little assistance, citing the entire Federal Aviation Act of 1958 as their jurisdictional base.10 After reviewing the statutory authority cited in 12 C.F.R. Part 378 (1977),11 we have concluded that the regulations establishing security arrangements for charter tour deposits were promulgated 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...
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