Musson Theatrical, Inc. v. Federal Exp. Corp.

• Decision Date: 15 January 1998
• Docket Number: No. 95-5120,95-5120
• Citation: 89 F.3d 1244
• Parties: MUSSON THEATRICAL, INC., and Modernage Photo Service, Inc., for themselves and all others similarly situated, Plaintiffs-Appellants, v. FEDERAL EXPRESS CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1244

89 F.3d 1244

MUSSON THEATRICAL, INC., and Modernage Photo Service, Inc for themselves and all others similarly situated Plaintiffs-Appellants, v. FEDERAL EXPRESS CORPORATION, Defendant-Appellee.

No. 95-5120.

United States Court of Appeals Sixth Circuit.

Argued March 11, 1996.

Decided July 19, 1996.

As Amended on Denial of Rehearing and Rehearing En Banc Jan. 15, 1998.

Cornish F. Hitchcock (argued), Public Citizen Litigation Group, Washington, DC, William L. Gibbons, Evans & Petree, Memphis, TN, Lisa M. Mezzetti (briefed), Herbert E. Milstein, Cyrus Mehri (briefed), Cohen, Milstein, Hausfeld & Toll, Washington, DC, Alan R. Markizon, Coeur D'Alene, ID, David J. Guin, Hogan, Smith & Alspaugh, Birmingham, AL, for Musson Theatrical, Inc., Modernage Photo Service, Inc.

Earle J. Schwarz, Waring Cox, Memphis, TN, Clifford P. Johnson, Federal Express Corp., Memphis, TN, Lee Ann Huntington, Robert B. Mullen (briefed), Eliot S. Jubelirer (argued), Morgenstein & Jubelirer, San Francisco, CA, for Federal Express Corp.

Before: JONES, BOGGS, and BATCHELDER, Circuit Judges.

BOGGS, Circuit Judge.

The plaintiffs ("Musson") appeal the dismissal of federal common law claims of fraud and misrepresentation against Federal Express. Musson also appeals the district court's ruling that state common law claims against Federal Express, pending in a simultaneous state court proceeding, are preempted by the Airline Deregulation Act of 1978. We affirm the district court's dismissal of Musson's federal claims for lack of subject matter jurisdiction, but vacate its ruling concerning Musson's state law claims and direct that the district court dismiss these claims without prejudice.

I

Musson claims that it purchased "FedEx Economy Two-Day Service" rather than "Standard Overnight Service" because Federal Express represented that the former was cheaper. In fact, says Musson, "Standard Overnight Service" is cheaper, and Musson ended up paying a higher price for slower delivery. Musson filed a complaint in the district court alleging that these facts entitle it to damages for "common law fraud" and "negligent misrepresentation."

Musson did not try to find a basis for federal subject matter jurisdiction in the extensive statutory scheme that regulates the rates and advertising practices of air carriers. In fact, Musson conceded that there is no express or implied right of action against an air carrier for deceptive advertising under the relevant statutes. Musson Brief at 7. Accord Statland v. American Airlines, 998 F.2d 539 (7th Cir.1993) (no private right of action for deceptive advertising action against airline under the Airline Deregulation Act of 1978). Instead, Musson pled subject matter jurisdiction under "the federal common law." Musson Brief at 7. Federal Express filed a motion to dismiss under Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction, and under Rule 12(b)(6) for failure to state a claim. The district court held that the federal common law does not contain a right of action for fraud against an air carrier, and dismissed Musson's federal claims under Rule 12(b)(1) for lack of subject matter jurisdiction.

II

We must first decide, reviewing de novo, if the dismissal of Musson's claims under Rule 12(b)(1) was proper. Musson contends that the court should have dismissed its claims, if at all, under 12(b)(6) for failure to state a claim upon which relief can be granted. Musson argues that a federal court always has jurisdiction to decide if a claim exists under federal common law and, if such a claim exists, a federal court certainly has jurisdiction over it. See Illinois v. City of Milwaukee, 406 U.S. 91, 100, 92 S.Ct. 1385, 1391, 31 L.Ed.2d 712 (1972) (federal question jurisdiction exists for claims under federal common law).

When a 12(b)(1) motion attacks the face of a complaint, the plaintiff's burden to prove federal question subject matter jurisdiction is not onerous. RMI Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1134 (6th Cir.1996) (discussing 12(b)(1) motions that attack jurisdictional facts, the standard of review of such motions, and when they should be converted to motions for summary judgment). The plaintiff must show only that the complaint alleges a claim under federal law, and that the claim is "substantial." A federal claim is substantial unless " 'prior decisions inescapably render [it] frivolous.' " Transcontinental Leasing, Inc. v. Michigan National Bank of Detroit, 738 F.2d 163, 165 (6th Cir.1984). ¹ In short, when faced with a 12(b)(1) challenge to the face of a complaint, the plaintiff can survive the motion by showing any arguable basis in law for the claim made.

In the present case, Musson's argument is novel, but not frivolous. No case has ever recognized a federal common law action for fraud against an air carrier. However, the law is hardly static--and a federal court has jurisdiction to hear claims on the margins of reasonable possibility. Federal courts have created other common law rules to regulate the relationship between air carriers and their customers, as discussed below. Furthermore, Musson argues that a cause of action is necessary because of the relatively new preemption provision of the Airline Deregulation Act of 1978. An accurate understanding of the meaning of this preemption provision requires careful analysis. For these reasons, the dismissal of Musson's federal common law claim for lack of federal question jurisdiction on the face of the complaint was an error. We caution that a litigant cannot achieve federal jurisdiction merely by writing "federal common law" on a complaint--but in this case Musson offers reasoned arguments why a cause of action should exist, and these arguments warrant a careful response. As the Supreme Court has held, a non-frivolous claim "confers power to decide that it has no merit, as well as to decide that it has." Montana-Dakota Utils. Co. v. Northwestern Pub. Serv. Co., 341 U.S. 246, 249, 71 S.Ct. 692, 694, 95 L.Ed. 912 (1951).

III

As it does not make any difference to the outcome of this case, we shall construe the district court's dismissal of Musson's federal claims as a dismissal under Rule 12(b)(6) for failure to state a claim upon which relief can be granted. ² We review de novo a district court's dismissal under 12(b)(6). Wright v. MetroHealth Medical Ctr., 58 F.3d 1130, 1138 (6th Cir.1995). The only dispute is whether a shipper that alleges it was injured by the fraud and deceptive advertising of an air carrier states a claim under federal common law.

The usual source of authority for federal common law rules governing a suit between private parties is a federal statute. The plaintiffs, however, concede that the relevant statutory framework provides no cause of action. Another source of authority is the Constitution. E.g., Bivens v. Six Unknown Federal Narcotics Agents, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971). The plaintiffs, however, have not argued that the logic of our Constitutional structure requires the federal right of action they seek.

Sometimes federal courts have created federal common law to govern a suit between private parties without explicit reference to either a statute or the Constitution. In these cases, however, the federal common law rule has been necessary to "protect a uniquely federal interest." Texas Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 640, 101 S.Ct. 2061, 2067, 68 L.Ed.2d 500 (1981) (earlier sources omitted). We have held that the authority to create a federal common law rule without reference to a statute or the Constitution exists only "in such narrow areas as those concerned with the rights and obligations of the United States, interstate or international disputes implicating the conflicting rights of the States or relations with foreign nations, and admiralty cases." Smith v. Dearborn Financial Servs., Inc., 982 F.2d 976, 981 (6th Cir.1993). See Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 84 S.Ct. 923, 11 L.Ed.2d 804 (1964) (applying "act of state" doctrine to Cuban nationalization of industry); Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838 (1943) (duty of United States in regard to commercial paper issued by it).

Musson contends that we should create a federal common law action here because "[c]arrier-shipper relations, the topic of this case, [are] one such enclave where there is a body of federal common law that controls the respective liabilities of interstate air carriers and shippers." Musson Brief at 17. In one respect, Musson is correct. There are a variety of federal common law rules that govern certain aspects of the relationship between shippers and air carriers. For example, a federal common law rule allows air carriers to limit by contract their liability for losses, Hampton v. Federal Express Corp., 917 F.2d 1119, 1121 (8th Cir.1990), and a federal common law rule determines carrier liability to persons travelling on a free pass, Thompson v. National R.R. Passenger Corp., 621 F.2d 814, 819-20 (6th Cir.), cert. denied, 449 U.S. 1035, 101 S.Ct. 611, 66 L.Ed.2d 497 (1980). These cases indicate that there is some federal interest in uniform rules regulating the pricing practices of air carriers. Assuming that this federal interest is substantial enough, a federal court could create a federal common law rule (even an entirely new federal common law cause of action) to serve these articulated federal interests without violating principles of federalism. ³ Cf. Wallis v. Pan American Petroleum Corp., 384 U.S. 63, 68, 86 S.Ct. 1301, 1304, 16 L.Ed.2d 369 (1966) (federal common law should supplement or replace state common law only when there is a "significant conflict" between the state law and federal policy).

What Musson misses, however, is that it is not the role of federal courts to articulate federal interests--but to enforce the federal interests identified by Congress. When a ...