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Rauch v. United Instruments Inc.

argued: October 7, 1976.

JOHN RAUCH, GERALD MIKLOSH AND ABBEY ALAN KRAMER, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED,
v.
UNITED INSTRUMENTS, INC. AND TOKYO AIRCRAFT INSTRUMENT COMPANY, APPELLANTS



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (District Court Civil Action No. 75-61)

Maris, Kalodner and Weis, Circuit Judges.

Author: Maris

Opinion OF THE COURT

By MARIS, Circuit Judge

This is an appeal by the defendants from an order of the District Court for the Eastern District of Pennsylvania denying their motion to dismiss the complaint and granting plaintiffs' motion for leave to file an amended complaint. The order being interlocutory, the appeal was brought under 28 U.S.C. § 1292(b). The order was entered in an alleged class suit brought by the three plaintiffs, as joint owners of a Cessna aircraft, on behalf of themselves and all others similarly situated, against United Instruments, Inc. (herein United Instruments) and Tokyo Aircraft Instrument Company (herein Tokyo Aircraft) as defendants.

The complaint alleged that the plaintiffs' Cessna aircraft was equipped with an altimeter manufactured by Tokyo Aircraft and distributed by United Instruments which, by a directive issued by the Federal Aviation Administrator (herein the Administrator) on December 6, 1974,*fn1 they had been required to replace or modify to conform with the Administrator's safety standards. It was to recover the cost of removing, repairing and reinstalling this defective altimeter, approximately $75.00, as well as consequential damages, that the suit was brought. Liability was asserted in three counts under theories of breach of warranty of merchantability and fitness for a particular purpose, of strict liability in tort and ordinary negligence, and violations of the Federal Aviation Act respectively. The complaint predicated jurisdiction upon 28 U.S.C. §§ 1331 and 1337 contending that the cause of action arose under the Federal Aviation Act, the injury having resulted from the defendants' alleged violation of § 610(a)(7) of the Act, 49 U.S.C.A. § 1430(a)(7), and the Federal Aviation Regulations promulgated thereunder.

In order to add a fourth count alleging fraud and requesting punitive damages in the amount of $15,000,000, the plaintiffs moved for leave to file an amended complaint. In their proposed amended complaint, the plaintiffs set forth with greater particularity the provisions of the Act and the Federal Aviation Regulations upon which they relied. They cited §§ 313(a) and 601(a)(2) and (6) of the Act, 49 U.S.C.A. §§ 1354(a) and 1421(a)(2) and (6), which authorize the Federal Aviation Administrator to prescribe such minimum standards governing aircraft appliances and to issue such regulations as may be needed in the interest of safety in air commerce. The plaintiffs alleged that the defendants violated the regulations which require manufacturers of aircraft appliances to adhere to minimum standards, to use accepted type designs and materials and to provide for production quality controls. 14 C.F.R. §§ 21.3(b), 21.95, 21.125(b)(5) and (7), 37.3, 37.7, 37.9, 37.17, 37.120 and 145.63.

The defendants opposed the plaintiffs' motion to amend the complaint on the ground that leave to amend should be denied where it appears that the proposed amendment cannot withstand a motion to dismiss. The defendants argued that the $10,000 minimum jurisdictional amount required by 28 U.S.C. § 1331 had not been met and that the Federal Aviation Act does not provide a private cause of action in favor of the plaintiffs. They urged, therefore, that the court lacked jurisdiction of both the original complaint and the proposed amended complaint.

The district court decided that a federal tort remedy could be implied in favor of the plaintiffs for violations by the defendants of the Federal Aviation Act and the regulations promulgated under it and that it had jurisdiction to hear the plaintiffs' claims. It accordingly entered the order appealed from, granting the plaintiffs leave to amend their complaint and denying the defendants' motion to dismiss. The district court's decision was made without reference to this court's opinion in Polansky v. Trans World Airlines, Inc., 523 F.2d 332 (1975), which was filed shortly before the entry of the order of the district court. At the suggestion of the district court, the defendants filed a motion for reconsideration of the court's order or, in the alternative, for certification of the order for purposes of an interlocutory appeal pursuant to 28 U.S.C. § 1292(b). After considering the effect of the Polansky decision upon the issues before it, the district court denied the defendants' motion for reconsideration but directed that its prior order be amended to include the statement required by 28 U.S.C. § 1292(b) for an interlocutory appeal. Permission for the appeal was thereafter granted by this court.

As has been stated, the plaintiffs' complaint asserted that jurisdiction over their suit was conferred upon the district court by 28 U.S.C. §§ 1331 and 1337. The district court properly held that § 1331 did not confer such jurisdiction since the plaintiffs' claim did not reach the jurisdictional amount of $10,000 required by that section and this could not be cured by aggregating their claim with those of other members of the class for whom they sued.*fn2 The court held, however, that jurisdiction was conferred by § 1337, which gives the district courts jurisdiction of civil actions arising under an Act of Congress regulating commerce, since the Federal Aviation Act is such an act and it confers upon the plaintiffs by implication a right of action against the defendants for damages for violation of the Act. We agree that the Federal Aviation Act is an act regulating commerce. Whether the Act confers upon the plaintiffs, by implication, a right of action against the defendants is the question which the present appeal presents. As we have seen, the district court thought that it did. We hold that it does not and reverse.

The right of a private person who has been injured by a violation of a federal statute to sue under the authority of the statute, even though it does not expressly provide for a private remedy, was stated and its limits indicated by the Supreme Court in Texas & Pacific Ry. v. Rigsby, 241 U.S. 33, 39, 60 L. Ed. 874, 36 S. Ct. 482 (1916), as follows: "A disregard of the command of the statute is a wrongful act, and where it results in damage to one of the class for whose especial benefit the statute was enacted, the right to recover the damages from the party in default is implied."*fn3 Accordingly, the federal courts have not hesitated, in appropriate instances, to find an implied remedy under a statute not expressly providing one. Thus, construing the Railway Labor Act of 1926 as impliedly authorizing the district court to grant to railroad employees injunctive relief from prohibited employer interference in their selection of union representatives, the Supreme Court stated, "As the prohibition was appropriate to the aim of Congress, and is capable of enforcement, the conclusion must be that enforcement was contemplated." Texas & New Orleans RR. v. Brotherhood of Railway & Steamship Clerks, 281 U.S. 548, 569, 74 L. Ed. 1034, 50 S. Ct. 427 (1930). Referring to a violation of § 14(a) of the Securities Exchange Act of 1934 which did not expressly provide for the relief sought by an injured plaintiff, the Court stated that ". . . under the circumstances here it is the duty of the courts to be alert to provide such remedies as are necessary to make effective the congressional purpose." J.I. Case Co. v. Borak, 377 U.S. 426, 433, 12 L. Ed. 2d 423, 84 S. Ct. 1555 (1964).*fn4

A private cause of action will not be implied, however, to create a remedy for every violation of a statute. See Cort v. Ash, 422 U.S. 66, 45 L. Ed. 2d 26, 95 S. Ct. 2080 (1975); Polansky v. Trans World Airlines, Inc., 523 F.2d 332 (3d Cir. 1975). This court in the Polansky case refused to imply a private breach of contract remedy under §§ 404 and 411 of the Federal Aviation Act, 49 U.S.C.A. §§ 1374(b) and 1381. Those provisions of the Act are not in issue here, however. And in Wolf v. Trans World Airlines, Inc., 523 F.2d 332 (1976), we followed our Polansky decision in rejecting another claim to a private federal remedy under § 411 of the Federal Aviation Act and additionally refused to infer a private cause of action under § 403(b) of the Act. 49 U.S.C.A. § 1373(b). In deciding both Polansky and Wolf we carefully adhered to the guidelines which the Supreme Court had set forth in Cort v. Ash, 422 U.S. 66, 78, 45 L. Ed. 2d 26, 95 S. Ct. 2080 (1975), in this regard. In that case the Supreme Court rejected a stockholder's claim to a right to derivative damage relief to be implied under 18 U.S.C. § 610 which prohibits monetary contributions by corporations in connection with federal elections. The Court concluded that ". . . implication of such a federal cause of action is not suggested by the legislative context of § 610 or required to accomplish Congress' purposes in enacting the statute." 422 U.S. at p. 69. In reaching its decision the Court enunciated as guidelines four relevant factors which we applied in the Polansky and Wolf cases and which must govern the decision here. See Polansky v. Trans World Airlines, Inc., 523 F.2d 332, 334 (3d Cir. 1975).

The first of the four questions to be considered in the process of deciding whether a cause of action is implied under a statute is whether the plaintiff is " . . . 'one of the class for whose especial*fn5 benefit the statute was enacted.'" The second question for consideration is whether there is any indication of congressional intent to create or deny a private remedy? The third is whether the implication of a private remedy is consistent with the underlying purpose of the legislative scheme? And the fourth is whether it would be inappropriate to infer a cause of action based solely on federal law in that the matter is one traditionally of state concern and the remedy ordinarily relegated to the states?

The first consideration to which we are directed by Cort v. Ash requires an examination of the statute under which a private remedy is sought to be implied and its legislative history in order to determine what were the congressional objectives in enacting the statute and ...


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