Riegel Textile Corp. v. Celanese Corp.

• Citation: 649 F.2d 894
• Decision Date: 06 May 1981
• Docket Number: D,No. 530,530
• Parties: RIEGEL TEXTILE CORPORATION, Plaintiff-Appellant, v. CELANESE CORPORATION, Defendant-Appellee. ocket 80-7697.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 894

649 F.2d 894

RIEGEL TEXTILE CORPORATION, Plaintiff-Appellant, v. CELANESE CORPORATION, Defendant-Appellee.

No. 530, Docket 80-7697.

United States Court of Appeals Second Circuit.

Argued Dec. 17, 1980.

Decided May 6, 1981.

Charles L. Stewart, New York City (Windels, Marx, Davies & Ives, Anthony A. Dean, Yvette Harmon, New York City, of counsel), for plaintiff-appellant.

Frank H. Wohl, New York City (Rosenman Colin, Freund, Lewis & Cohen, Joseph Zuckerman, Rodney E. Gould, Jay A. Segal, New York City, of counsel), for defendant-appellee.

Andrew S. Krulwich, Gen. Counsel, Washington, D. C. (Mana L. Jennings, Associate Gen. Counsel, Daniel L. Jennings, Atty., Consumer Product Safety Commission, Sanford M. Litvack, Asst. Atty. Gen., Robert B. Nicholson, Mark C. Del Bianco, Attys., Dept. of Justice, Washington, D. C., of counsel), for the Consumer Product Safety Commission as amicus curiae.

Before FEINBERG, Chief Judge, KEARSE, Circuit Judge, and EDELSTEIN, District Judge. ^*

EDELSTEIN, District Judge:

This is an appeal from an order of the Hon. William C. Conner, dismissing plaintiff's complaint, based upon federal and state law claims, for failure to state a claim upon which relief can be granted. We affirm.

Plaintiff Riegel is in the business of manufacturing and processing fabrics and garments including children's sleepwear. Defendant Celanese manufactures synthetic fibers.

In 1972, Celanese advised Riegel that it had developed a flame-retardant synthetic fiber (treated with TRIS), suitable for the manufacture of children's sleepwear. ¹ After conducting its own tests for color-fastness and flammability, Riegel, between 1972 and 1976, issued to Piedmont Knitting Co. orders to purchase TRIS-treated yarn from Swift Spinning Mill, Inc. for knitting into fabric. Upon Riegel's instruction, Swift purchased sufficient TRIS-treated fiber from Celanese to make the yarn which Piedmont ordered. ²

In March 1976, a petition was submitted to the Consumer Product Safety Commission (CPSC) by the Environmental Defense Fund (EDF), seeking an order requiring labeling on TRIS-treated garments, directing that the garments be washed three times before they are worn. The basis of the petition was that TRIS might be a carcinogen. The CPSC did not hold hearings as required by 21 U.S.C. § 371(e) of the Food, Drug and Cosmetic Act, see 15 U.S.C. § 1262(a)(2), although it did solicit information from selected sources. In February, 1977, the EDF filed an additional petition with the CPSC seeking a ban on all TRIS-treated garments. Again, hearings were not held.

On April 8, 1977, the CPSC, acting under the provisions of the Federal Hazardous Substances Act (FHSA), announced that all children's clothing containing TRIS was a "banned hazardous substance" under 15 U.S.C. § 1261(q) (1)(A), and therefore was banned from interstate commerce. The CPSC also specified that the affected clothing must be repurchased pursuant to 15 U.S.C. § 1274.

On May 3, 1977, Judge George Hart, in deciding a motion for preliminary injunction in American Apparel Manufacturer's Association v. CPSC, No. 77-682 (D.D.C.), ordered the CPSC to expand its ban to include not only TRIS-treated apparel used or intended for use in children's clothing, but also TRIS-treated fabric, yarn and fiber. The purpose of the order was to broaden the economic burden of repurchase from manufacturers of children's apparel to include fabric manufacturers. ³ On June 1, 1977, the CPSC reissued an expanded ban on TRIS-treated material. The CPSC did not order repurchase, as it had done in its April 8 announcement, stating that it needed to clarify a number of questions concerning repurchase due to the existence of a "multiple manufacturer situation." The agency noted several types of manufacturers were involved, including manufacturers of the affected chemical, fiber, fabric, yarn, and garments.

Before such a clarification was issued, Judge Robert F. Chapman, in ruling on a motion for a permanent injunction in Springs Mills, Inc. v. Consumer Product Safety Commission, held that the CPSC ban on TRIS-treated materials was null and void because the CPSC had failed to follow the rule-making procedures required under the FHSA. 434 F.Supp. 416, 435 (D.S.C.1977). Judge Chapman held that (1) the CPSC must follow the rule-making procedures set forth in the Food, Drug and Cosmetic Act, 21 U.S.C. § 371(e), to declare an article a "banned hazardous substance"; (2) even where children are involved, the CPSC must first find an article to be a "hazardous substance" before declaring it a "banned hazardous substance"; (3) action banning TRIS was not an "interpretative rule" or "statement of policy" within the exemption from rule-making provided by the Administrative Procedure Act; and (4) the CPSC's failure to follow the procedural safeguards of a full rule-making hearing deprived plaintiff of due process. On the basis of these findings, the court ruled that the § 1274 repurchase obligations could not be triggered until the CPSC had conducted a hearing to decide whether TRIS was a "hazardous substance" within the meaning of the Act. Id. at 435.

The CPSC, rather than attempting to ban TRIS through rule-making, on December 6, 1977, issued a "Statement of Policy" to the effect that the CPSC intended to enforce its belief that TRIS was a hazardous substance by bringing individual enforcement actions in federal courts "to prevent the sale and to require the statutory repurchase of such products."

The CPSC then undertook to prohibit the sale of TRIS-treated material through the seizure procedures of 15 U.S.C. § 1265. This use of the seizure procedures, without prior agency rule-making, was upheld in United States v. Articles of Hazardous Substance, 588 F.2d 39, 42 (4th Cir. 1978), rev'g 444 F.Supp. 1260 (M.D.N.C.1978). The Fourth Circuit found that the hearing required by due process on the issue whether TRIS-treated material is a "banned hazardous substance" would take place in a subsequent hearing on the merits of the condemnation proceeding.

In the case at bar, Riegel repurchased from its customers TRIS-treated pajamas pursuant to the CPSC's April 8 "interpretation." Riegel in turn sought to have Celanese repurchase from Riegel. After negotiations with Celanese failed, Riegel filed this action in the Southern District of New York. The district court, William C. Conner, J., dismissed the complaint for failure to state a claim, holding that under the criteria set forth in Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975), neither § 1263 nor § 1274 of the Federal Hazardous Substances Act created an implied right of action. The court then dismissed plaintiff's seven state law claims, based on product liability, warranty and negligence, finding the exercise of pendent jurisdiction to be inappropriate. Riegel Textile Corp. v. Celanese Corp., 493 F.Supp. 511 (S.D.N.Y. 1980).

DISCUSSION

A. Introduction

This case presents a question of first impression: whether a private right of action should be implied under sections 1263 or 1274 of the Federal Hazardous Substances Act. ⁴ Cort v. Ash, 422 U.S. 66, 78, 95 S.Ct. at 2087 (1975), establishes the criteria which must be examined to determine whether a private remedy is implicit in a statute not expressly providing one:

First, is the plaintiff "one of the class for whose especial benefit the statute was enacted," 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? Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff? 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? (Citations omitted.)

Recent Supreme Court decisions have stressed that courts should be reluctant to imply private rights of action. See Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 100 S.Ct. 242, 62 L.Ed.2d 146 (1979); Touche Ross & Co. v. Redington, 442 U.S. 560, 99 S.Ct. 2479, 61 L.Ed.2d 82 (1979); Piper v. Chris-Craft Industries, Inc., 430 U.S. 1, 97 S.Ct. 926, 51 L.Ed.2d 124 (1977). ⁵ "(T)he fact that a federal statute has been violated and some person harmed does not automatically give rise to a private cause of action in favor of that person." Cannon v. University of Chicago, 441 U.S. 677, 688, 99 S.Ct. 1946, 1953, 60 L.Ed.2d 560 (1979). The Cort factors are not necessarily to be accorded equal weight. "The central inquiry remains whether Congress intended to create, either expressly or by implication, a private cause of action." Touche Ross & Co. v. Redington, supra, 442 U.S. at 575, 99 S.Ct. at 2489.

B. The Statutory Scheme

Before proceeding to the analysis under Cort v. Ash, it is useful to outline the history of the relevant statutes. The Federal Hazardous Substances Labeling Act, 15 U.S.C. §§ 1261 et seq., enacted in 1960, was essentially a labeling law and applied only to products packaged in containers intended for household use. The Act defined certain categories of "hazardous substances" and then prohibited their delivery and receipt in interstate commerce if "misbranded"; i. e., if they did not carry an appropriate warning label. Administration of the Act was vested in the Secretary of Health, Education and Welfare.

This Act was amended by the Child Protection Act of 1966, and the word "Labeling" deleted from its title. The coverage of the FHSA was extended to include any "hazardous substance" intended for household use or use by children. The 1966 amendments also permitted the administrative agency to ban from interstate commerce products which are so dangerous that no warnings could make the product safe for use.

Congress, finding inadequate the existing laws...