McDaniel v. University of Chicago

• Decision Date: 21 January 1977
• Docket Number: No. 73-1438,73-1438
• Citation: 548 F.2d 689
• Parties: 23 Wage & Hour Cas. (BN 43, 80 Lab.Cas. P 33,473 Louis Allen McDANIEL, Jr., Plaintiff-Appellant, v. The UNIVERSITY OF CHICAGO and Argonne, a corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 689

548 F.2d 689

23 Wage & Hour Cas. (BN 43, 80 Lab.Cas. P 33,473

Louis Allen McDANIEL, Jr., Plaintiff-Appellant, v. The UNIVERSITY OF CHICAGO and Argonne, a corporation Defendants-Appellees.

No. 73-1438.

United States Court of Appeals Seventh Circuit.

Submitted Jan. 30, 1976.

Decided Jan. 21, 1977.

Daniel N. Kadjan, Hugh B. Arnold, Robert J. Nye, Chicago, Ill., for plaintiff-appellant.

Gerald D. Skoning, Wilfred F. Rice, Jr., Chicago, Ill., for defendants-appellees.

Before FAIRCHILD, Chief Judge, and SWYGERT and SPRECHER, Circuit Judges.

FAIRCHILD, Chief Judge.

The question before us is whether, in light of Securities Investor Protection Corp. v. Barbour, 421 U.S. 412, 95 S.Ct. 1733, 44 L.Ed.2d 263 (1975), and Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975), Section 1 of the Davis-Bacon Act, 40 U.S.C. § 276a, contains an implied private right of action for the benefit of laborers and mechanics who are not paid the prevailing wage in their locality. The facts and history of the case are reported at 512 F.2d 583 (7th Cir. 1975), where we held that the Davis-Bacon Act did contain an implied private cause of action, and that jurisdiction rested on 28 U.S.C. § 1337. The Supreme Court of the United States granted certiorari, vacated the judgment and remanded for consideration in light of the two above-mentioned cases, which were decided subsequent to our decision in McDaniel. 423 U.S. 810, 96 S.Ct. 20, 46 L.Ed.2d 30.

In Cort v. Ash, supra, 422 U.S. at 78, 95 S.Ct. at 2087 the Supreme Court specified the relevant factors to be considered by any court in determining whether a private remedy is implicit in a federal statute.

"First, is the plaintiff 'one of the class for whose especial benefit the statute was enacted' . . . , (citation omitted, emphasis supplied by Supreme Court) . . . that is, does the statute create a federal right in favor of the plaintiff? Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one? (Citation omitted.) Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff? (Citation omitted.) And finally, is the cause of action one traditionally relegated to state law, in an area basically the concern of the States, so that it would be inappropriate to infer a cause of action based solely on federal law?"

At issue in Cort was a criminal statute, 18 U.S.C. § 610, prohibiting corporations from making "a contribution or expenditure in connection with any election at which Presidential and Vice Presidential electors . . . are to be voted for." Considering the factors set out above, the Supreme Court held first that complainant citizens or stockholders were barred from enjoining alleged violations of § 610 in future elections because a statute passed after the filing of the suit, but prior to the Supreme Court's review, established an administrative procedure for processing complaints of § 610 violations; and that as far as an implied private right of action for damages was concerned, the primary congressional goals in passing § 610 had been eliminating corporate influence over elections and preventing corporate officials from contributing corporate funds without the consent of the stockholders. The statute had not been passed for the "especial" benefit of the shareholders.

Second, the Court noted that nothing in the legislative history of § 610 suggested a congressional intention to confer on shareholders a federal right to damages for violation of § 610. In examining the legislative history, the Court stated that in a case where the statute clearly granted a class of persons certain rights, it is not necessary to show an explicit congressional intention to create a private cause of action, although an explicit purpose to deny a private cause of action would be controlling. But in a case like Cort, where it was at best doubtful that Congress intended to vest rights in the plaintiff class, the Supreme Court concluded that absence of a suggestion in § 610's legislative history of a suit for damages strongly suggested a congressional intention to the contrary.

Third, the remedy of damages would not have served the purposes of the primary congressional goals. Repayment by corporate officials of funds contributed to political campaigns would not remedy the evil legislated against (corporate political influence), and would have had a minimal, if any, deterrent effect. Thus, concluded the Supreme Court, no private right of action was implicit in the criminal statute. ¹

Fourth, the Court deemed it appropriate to relegate stockholders similarly situated to whatever remedy is created by state law. The fact that there might be no remedy under the law of some states would not hinder the primary goal.

Similar reasoning is apparent in Securities Investor Protection v. Barbour, 421 U.S. 412, 95 S.Ct. 1733, 44 L.Ed.2d 263 (1975), and in Passenger Corp. v. Passenger Assn., 414 U.S. 453, 457-58, 94 S.Ct. 690, 38 L.Ed.2d 646 (1974), (hereafter "Amtrak"), on which Securities Investor heavily relies. In Securities Investor, the question was whether customers of failing broker-dealers had an implied private right of action under the Securities Investor Protection Act of 1970 (SIPA), 15 U.S.C. § 78aaa et seq., to compel the Securities Investor Protection Corporation (SIPC) to exercise its statutory authority for their benefit. The SIPC was a non-profit corporation designed by Congress to afford limited financial relief for losses suffered by customers of failing broker-dealers.

In holding that no private right of action was implicit in 15 U.S.C. § 78aaa et seq., the Court stressed several factors. First, the very structure of the SIPC and SEC yielded a strong inference against private causes of action. The SIPC is a non-profit, corporate entity, designed to deal with a public problem, and is substantially supervised by the SEC. The SIPC's practice was to defer intervention, if at all possible, to enable endangered firms to avoid collapse by infusion of new capital or merger. Securities Investor, supra, 421 U.S. at 421, fn. 4, 95 S.Ct. 1733. In this respect, suit for liquidation at the whim of the individual investor might be antithetical to the whole thrust of the statute. Securities Investor, supra, 421 U.S. at 422-23, 95 S.Ct. 1733; Cort v. Ash, supra, 422 at 78, 84, 95 S.Ct. 2080.

Second, a private cause of action would have been inconsistent with the very terms of the statute at issue. The respondent in Securities Investor argued that since 15 U.S.C. § 78ccc(b)(1) provided that since the SIPC can "sue and be sued, complain and defend, in its corporate name and through its own counsel, in any court, State, or Federal," Congress must have intended that an aggrieved customer of a member firm would be able to sue. However, 15 U.S.C. § 78ggg(b) limits SEC actions "to the district court of the United States in which the principal office of SIPC is located." As the Supreme Court pointed out, "It would be anomalous for Congress to have centralized SEC suits for the apparent convenience of the SIPC while exposing the corporation to substantively identical suits by investors 'in any court, State or Federal.' " 421 U.S. at 420, fn. 3, 95 S.Ct. at 1738.

Finally, conceding that Congress' primary purpose in enacting the SIPA and creating the SIPC was the protection of individual investors, Securities Investor, 421 U.S. at 421, 95 S.Ct. 1733, the Court held that the other two factors, set out in Cort as well, of congressional intent and the consonance of the remedy with the purposes of the statute, were predominant.

Before turning to the facts of the case before us, we must also consider Amtrak, supra, 414 U.S. 453, 94 S.Ct. 690, 38 L.Ed.2d 646. Although not explicitly cited in the remand from the Supreme Court, Amtrak was heavily relied on by the Court in Securities Investor, and for that reason commands our attention. The question in Amtrak was whether a private right of action was implied in the Amtrak Act, 45 U.S.C. § 501 et seq. The respondent National Association of Railroad Passengers (NARP) sought to enjoin the announced discontinuance of certain passenger trains that had previously been operated by the petitioner Central of Georgia Railway. The Court of Appeals for the District of Columbia held that the Amtrak Act contained an implied private right of action. Potomac Passengers Ass'n v. Chesapeake & Ohio Ry. Co., 154 U.S.App.D.C. 214, 475 F.2d 325, 340 (1973), reversed sub nom. Passenger Corp. v. Passenger Assn., 414 U.S. 453, 94 S.Ct. 690, 38 L.Ed.2d 646 (1974). In reversing, the Supreme Court apparently assumed for the sake of argument that railroad passengers were the intended beneficiaries of the Amtrak Act; Amtrak, supra, 414 U.S. at 457-58, 94 S.Ct. 690. Cf. Cort v. Ash, supra, 422 U.S. at 80-82, 95 S.Ct. 2080. However, with regard to the other two important concerns, i. e., whether such a remedy would serve the underlying purpose of the statute, the Court found against NARP. Specifically, there was extensive evidence in the legislative history that the Congress contemplated no private right of action, and implication of a private right of action would have been at odds with the underlying purposes of the statute. As the Court noted, a holding that the Amtrak Act contained a private right of action would have been merely to substitute the federal district courts for the various administrative bodies formerly used to pass on proposed discontinuances, and " . . . would completely undercut the efficient apparatus that Congress sought to provide for Amtrak to use in the 'paring of uneconomic routes.' " Amtrak, supra, 414 U.S. at 463, 94 S.Ct. at 696.

Thus, in the light of Cort and Securities Investor, our inquiry in the case before us is in four parts. First, we must determine whether a laborer like the members of the plaintiff class is the "especial...