Israel Aircraft Industries Ltd. v. Sanwa Business Credit Corp.

• Decision Date: 08 February 1994
• Docket Number: No. 93-1949,93-1949
• Citation: 16 F.3d 198
• Parties: ISRAEL AIRCRAFT INDUSTRIES LTD., Plaintiff-Appellant, v. SANWA BUSINESS CREDIT CORPORATION and the Sanwa Bank, Limited, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 198

16 F.3d 198

62 USLW 2506

ISRAEL AIRCRAFT INDUSTRIES LTD., Plaintiff-Appellant, v. SANWA BUSINESS CREDIT CORPORATION and the Sanwa Bank Limited, Defendants-Appellees.

No. 93-1949.

United States Court of Appeals Seventh Circuit.

Argued Dec. 1, 1993.

Decided Feb. 8, 1994.

Gregory A. Adamski, Adamski & Conti, Chicago, IL, Stephen Wagner, Madeleine M. Plasencia, and Andrew P. Brozman (argued), Zellermayer, Gratch & Jacobs, New York City, for plaintiff-appellant.

Lowell E. Sachnoff (argued), Arnold A. Pagniucci, and Christine Bodewes, Sachnoff & Weaver, Chicago, IL, for defendants-appellees.

Dale M. Cohen, Donald P. Horwitz, Sonnenschein, Nath & Rosenthal; Steven M. Freeman, Michael A. Sandberg, Ruth L. Lansner, Anti-Defamation League, Chicago, IL, and Nathan Lewin, Miller, Cassidy, Larroca & Lewin, Washington, DC, for amici curiae.

Before WOOD, Jr., EASTERBROOK, and RIPPLE, Circuit Judges.

EASTERBROOK, Circuit Judge.

Sanwa Business Credit Corporation, the principal lender to Fairchild Aircraft Corporation, is the American subsidiary of a Japanese bank. After Fairchild entered bankruptcy, Israel Aircraft Industries, Ltd. (an Israeli corporation) and Quadrant Management, Inc., formed a joint venture to acquire Fairchild. They were unwilling to pay off Fairchild's debts at face value and asked Sanwa to accept the joint venture in lieu of Fairchild as the borrower under a revised credit arrangement. According to the complaint Sanwa said no, on instructions of its parent, for the sole reason that Sanwa Bank will not deal with any Israeli corporation so long as the League of Arab States maintains its boycott of Israel. The district court dismissed the complaint under Fed.R.Civ.P. 12(b)(6), holding that Sec. 8 of the Export Administration Act, 50 U.S.C.App. Sec. 2407, does not create a private right of action in favor of victims of foreign boycotts.

Section 8(a)(1) provides that "the President shall issue regulations prohibiting any United States person ... from taking or knowingly agreeing to take any of the following actions with intent to comply with, further or support any boycott fostered or imposed by a foreign country against a country which is friendly with the United States". Sanwa is a "United States person"; Israel is "friendly with the United States"; a refusal to lend with the motivation alleged in the complaint offends the regulations the Secretary of Commerce (the President's delegate) duly issued. See Executive Order No. 12214 (May 2, 1980) (delegating functions); 15 C.F.R. Sec. 769.2 (defining forbidden practices). Israel Aircraft does not complain that the President violated his statutory obligation to promulgate regulations. The statute does not itself regulate private conduct, and it does not authorize private litigation. Instead it preempts claims under state law, Sec. 8(c), 50 U.S.C.App. Sec. 2407(c), without authorizing any substitute under federal law. What is more, Israel Aircraft does not contend that the Secretary of Commerce has failed to discharge his duties under the regulations. The norm of prosecutorial discretion, as vital in administrative as in criminal law, would make such a contention untenable. See Heckler v. Chaney, 470 U.S. 821, 105 S.Ct. 1649, 84 L.Ed.2d 714 (1985); Vaca v. Sipes, 386 U.S. 171, 182, 87 S.Ct. 903, 912, 17 L.Ed.2d 842 (1967). Finally, Israel Aircraft does not pursue defendants under the APA, which governs the conduct of federal agencies but not of private persons subject to federal rules.

Because this suit against Sanwa is not authorized by the statute, by the regulations, or by the APA, Israel Aircraft asks us to imply--which is to say, invent--a private right of action for damages. Creating a private right of action in a field in which private actions under state law are routine, for example, securities fraud, is problematic enough. See Virginia Bankshares, Inc. v. Sandberg, --- U.S. ----, ---- - ----, 111 S.Ct. 2749, 2763-65, 115 L.Ed.2d 929 (1991). Creating such a right of action to evade principles (including an express preemption clause) that commit to official rather than private hands the decision whether to litigate would be unseemly. Express provisions for criminal prosecution and administrative enforcement, see 50 U.S.C.App. Sec. 2410, without a corresponding provision for private enforcement, generally establish that private enforcement is inappropriate. Karahalios v. National Federation of Federal Employees, 489 U.S. 527, 533, 109 S.Ct. 1282, 1287, 103 L.Ed.2d 539 (1989); Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 19, 100 S.Ct. 242, 247, 62 L.Ed.2d 146 (1979). See also Statland v. American Airlines, Inc., 998 F.2d 539 (7th Cir.1993); Spicer v. Chicago Board of Options Exchange, Inc., 977 F.2d 255 (7th Cir.1992). Federal courts exercise only those powers created by statute or the Constitution itself. Accordingly, we must use the traditional tools of statutory interpretation to determine whether Sec. 8 creates the right of action Israel Aircraft seeks to pursue. Touche Ross & Co. v. Redington, 442 U.S. 560, 575-76, 99 S.Ct. 2479, 2489, 61 L.Ed.2d 82 (1979); Cannon v. University of Chicago, 441 U.S. 677, 688, 99 S.Ct. 1946, 1953, 60 L.Ed.2d 560 (1979); cf. Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975). What we have already said about the statute's language and structure covers most of the traditional instruments of statutory interpretation. Remaining clues do no better for Israel Aircraft.

Statutes creating private entitlements often come with private enforcement. Cannon said that a statute granting special rights to a defined class implies a corresponding right of private enforcement by that class. 441 U.S. at 689-90, 99 S.Ct. at 1953-54. See also Franklin v. Gwinnett County Public Schools, --- U.S. ----, 112 S.Ct. 1028, 117 L.Ed.2d 208 (1992). By contrast, a statute proscribing particular conduct but not identifying specific beneficiaries--for example, a statute forbidding murder or burglary--generally is enforced by public prosecutors, with private enforcement only if the statute creates an express right of action. Cannon, 441 U.S. at 690-91, 99 S.Ct. at 1954-55; Karahalios, 489 U.S. at 533-34, 109 S.Ct. at 1286-87. See also Thompson v. Thompson, 484 U.S. 174, 108 S.Ct. 513, 98 L.Ed.2d 512 (1988). Section 8 tells the President to establish certain regulations; it does not mention any particular class of beneficiaries. True enough, potential beneficiaries may be inferred, but that is equally true of laws proscribing murder and theft. No case during the last generation creates a private right of action to enforce a statute cast in the form of a criminal prohibition; and Sec. 8, which does not itself regulate private action but only calls for regulations to do so, is one step farther removed.

A look beneath the surface of this legislation reinforces the inferences from its text and structure. When Congress enacted the statute in 1977, it recognized that there would be no private enforcement. See S.Rep. No. 104, 95th Cong., 1st Sess. 22 (1977) ("The danger of unwarranted allegations in this highly sensitive area has prompted the committee to leave enforcement in the hands of the Executive Branch instead of creating a private right of action.") Many members of Congress were dissatisfied with that approach and proposed the authorization of private remedies; indeed, the House passed a bill providing for private suits with treble damages and attorneys' fees. H.R. 15377, 94th Cong., 2d Sess., Sec. 6(g) (1976). These provisions were deleted when the anti-boycott provisions were added--much to the displeasure of some Members of the House, who continued sponsoring bills that would have established private actions. E.g., H.R. 11488, 94th Cong., 2d Sess. (1976) (Rep. Hutchinson); H.R. 418, 95th Cong., 1st Sess., Sec. 246 (1977) (Rep. Holtzman). Early enforcement of the anti-boycott rules was unsatisfactory to Congress, which rewrote Sec. 8 in 1979. See 93 Stat. 521 (1979). Again Congress considered, and did not enact, proposals to authorize private litigation. Bulk Oil (Zug) A.G. v. Sun Co., 583 F.Supp. 1134 (S.D.N.Y.1983), affirmed without opinion, 742 F.2d 1431 (2d Cir.1984), describes these events. Several groups have filed a brief as amici curiae contending that enforcement by the Executive Branch remains deficient, but our view of the President's performance is irrelevant; this case depends on the statute Congress enacted (and the amendment it refused to enact) rather than on anyone's assessment of the way in which that statute has been implemented.

Notice that these amendments occurred after cases such as Touche Ross all but slammed the door on the creation of new private rights of action by the judicial branch. Instead of authorizing private remedies in the wake of the Supreme Court's decisions, Congress gave the Department of Commerce additional enforcement tools. In Karahalios the Supreme Court concluded that a single...