Opinion
CASE NO. CV 03-3104 DT (JTLx)
July 14, 2003
ORDER DENYING DEFENDANT, HCI DIRECT INC.'S MOTION TO DISMISS THE COMPLAINT.
I. Background
A. Introduction
This case was brought by Teri Paul, acting Individually and purportedly as Class Representative ("Plaintiff"), against HCI Direct Inc. ("Defendant") concerning the marketing of pantyhose in violation of 39 U.S.C. § 3009: Mailing of Unordered Merchandise and 28 U.S.C. § 2001 request for Declaratory Relief. Defendant now brings the current Motion to Dismiss under F.R.C.P. 12(b)(6) for failure to state a claim. Defendant is a corporation organized and existing under the laws of the State of Delaware with its principal place of business located in Bensalem, Pennsylvania. Plaintiff is a citizen of California.
B. Factual Summary
The following facts are alleged in Plaintiffs Complaint:
In or around October 2002, Defendant, the manufacturer of "Silkies" brand pantyhose, mailed to Plaintiff a package which contained at least two pairs of pantyhose. Plaintiff did not ask for or consent to receive the pantyhose from Defendant. (Plaintiff's Class Action Complaint for Equitable Relief ("Complaint"), ¶ 1.) Subsequently, Defendant sent two collection letters threatening to report Plaintiff as a delinquent creditor if the pantyhose were not paid for immediately. (Id.) Plaintiff outlines a program by which Defendant, following a similar pattern, acquires customers and extracts payment from thousands of consumers for unordered pantyhose.
Based on the above, Plaintiff alleges that Defendant is in violation of 39 U.S.C. § 3009 by mailing unordered merchandise within the meaning of the section and then demanding payment of said merchandise. (Id. at ¶¶ 14, 26-30) Plaintiff relies on Kipperman v. Academy Life Ins. Co., 554 F.2d 377 (9th Cir. 1977), to invoke federal question jurisdiction by reading a limited private remedy into § 3009. (Id. at ¶ 25.)
C. Procedural History
On May 2, 2003, Plaintiff filed her Class Action Complaint and demand for jury trial with this Court.
On May 27, 2003, Defendant filed a Notice of Motion, and Motion of to Dismiss the Complaint, which is presently before this Court.
II. Discussion
A. Standard of Review for F.R.C.P. 12(b)(6) Motion to Dismiss for Failure a State a Claim
Rule 12(b)(6) of the Federal Rules of Civil Procedure provides that a defendant may seek to dismiss a complaint for "failure to state a claim upon which relief can be granted." Pursuant to Rule 12(b)(6), the court may only dismiss a plaintiffs complaint if it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. See Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Russel v. Landireu, 621 F.2d 1037, 1039 (9th Cir. 1980). The question presented by a motion to dismiss is not whether a plaintiff will prevail in the action, but whether a plaintiff is entitled to offer evidence in support of his claim. See Cabo Distributing Co., Inc. v. Brady, 821 F. Supp. 601 (N.D. Cal. 1992). Dismissal is proper under Rule 12(b)(6) Only where there is a lack of a coguizable legal theory, or an absence of sufficient facts alleged under a cognizable legal theory. See Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1988). In testing the sufficiency of a complaint, the court must assume that all of the plaintiffs allegations are true, and must construe the complaint in a light most favorable to the plaintiff. See United States v. city f Redewood cit. 640 F.2d 607, 614 (9th Cir. 1977); McKinney v. DeBord, 507 F.2d 501, 503 (9th Cir. 1974). Therefore, it is only the extraordinary case in which dismissal is proper. See Corsican Productions v. Pitchess, 338 F.2d 441, 442 (9th Cir. 1964).
Generally, orders granting motions to dismiss are without prejudice unless "allegations of other facts consistent with the challenged pleading could not possibly cure the defect." See Schreiber Dist. v. Serv-Well Furniture, 806 F.2d 1393, 1401 (9th Cir. 1986).
B. Analysis
Under 39 U.S.C. § 3009 (a), the mailing of unordered merchandise is an unfair trade practice in violation of 15 U.S.C.A. § 45, except for (1) free samples clearly and conspicuously marked as such, and (2) merchandise mailed by a charitable organization soliciting contributions. 39 U.S.C. § 3009 (b) states in part, with regard to all unordered merchandise, even free samples and merchandise mailed by charities the recipients may treat it as a gift and may dispose of it in any manner that the recipient sees fit, without any obligation whatsoever to the sender.
Plaintiff seeks a declaratory judgment that all unordered merchandise mailed from Defendant may be treated as a gift by the recipient, and she seeks restitution for all monies acquired by Defendant under the program described in her Complaint.
Defendant seeks to dismiss this action and contends that Plaintiff does not have a private right of action because 1) no such right is expressly provided for in 39 U.S.C. § 3009; 2) the Ninth Circuit case that established a limited private right of action has been repudiated by subsequent rulings and is no longer valid; and 3) there is no evidence of Congressional intent that would allow this Court to imply a private right of action for § 3009. This Court addresses each of these arguments.
1. Section 3009 Does not Expressly Provide for a Private Federal Action
Both parties agree that Congress did not expressly give aggrieved persons who received "unordered merchandise" a private right of action to enforce § 3009 in federal court. (See Motion to Dismiss ("Motion"), p. 5; Opposition to Motion to Dismiss ("Opp."), p. 6). Therefore, this Court does not need to address this first argument. Furthermore, Plaintiff stipulates to striking the prayer for injunctive relief included in the Complaint. (Opp. at 8).
2. Under Stare Decisis this Court is Compelled to Follow Kipperman
Defendant states that in the thirty-two years since enactment of 39 U.S.C. § 3009, only two federal courts have published opinions on whether small monetary claims by consumers over allegedly unordered merchandise can be brought before a federal court. It claims thatKipperman v. Academy Life Ins. Co., 554 F.2d 377 (9th Cir. 1977) is the only case "to divine the existence of a private action" under § 3009, despite the fact that Congress chose not to invest such a right when it adopted the statute.
In Kipperman, the Ninth Circuit held that a limited private right of action was available under § 3009. Kipperman 554 F.2d at 380. In order to make its ruling, the Court first looked at Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975). Id. The Cort factors used by Kipperman were:
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 . . .Id.The Court found the first factor was "clearly satisfied" because § 3009 is specifically designed to protect the recipients of unordered merchandise. Id. The Court also found the second factor was satisfied even though Congress did not consider the question of a private right. Id. It stated that in normal cases a violation of § 3009 would be "self executing . . . if you receive merchandise that was not asked for, you will keep it." Id. However, the Court acknowledged that there may be times where application of § 3009 requires "interpretation before a recipient's rights can be determined." Id. It went on to explain that Congress was only thinking about the self-executing procedure and did not address the unusual case where a right must be defined by the courts, which is why it "neither explicitly permitted nor barred private suits." Id. As to the third factor, the Court stated that a limited private right of action for declaratory and restitutionary relief was consistent with the purpose of the statute, in order to protect a person's rights and secure relief Id. However, the court ruled injunctive relief would interfere with the Federal Trade Commission's power to enforce § 3009 pursuant to subsection (a). Id. As to the fourth factor, the Court held that § 3009 was within Congress' power to enact and finding a limited private right will further the "purposes Congress sought to serve." Id.
Defendant argues that since Kipperman in 1977, subsequent holdings in the United States Supreme Court and the Ninth Circuit involving the very same analytical issues arising out of different statutes dictate a contrary result. It contends that the doctrine of stare decisis requires that federal district courts adhere to the controlling decisions of the United States Supreme Court and that when a district court is faced with a decision of the Supreme Court that contradicts a decision by the court of appeals for that circuit, it is compelled to follow the Supreme Court decision.
Specifically, Defendant argues that Kipperman is outmoded and erroneous jurisprudence that has been implicitly overruled, because the underlying test that was used to decide the case has been modified by subsequent Supreme Court and Ninth Circuit decisions. It claims that the Kipperman Court based its holding on the first and third Cort factors: that the recipient-plaintiff was within the class of persons Congress sought to protect when enacting § 3009 and that the proposed private remedy was consistent with the statutory purposes. It asserts that the Ninth Circuit made a leap when it inferred that had Congress thought about the situation where a plaintiff would need to assert its rights it would have been its intent to allow a private right of action. Rather, Defendant argues, Congressional silence weighs heavily against the existence of a private right of action. It claims that after Kipperman, the Ninth Circuit has held that the Cort factors are not given equal weight, but that the critical inquiry for a court is to ascertain Congressional intent. Therefore, Defendant argues, the Supreme Court and the Ninth Circuit have impliedly overruled Kipperman, and this Court is bound to apply the Cort factors as modified by the subsequent decisions.
Defendant relies on Vukasovich, Inc. v. Commissioner of Internal Revenue, 790 F.2d 1409 (9th Cir. 1986), as authority for a lower court to recognize when parallel authority has implicitly overruled a precedent. In Vukasovich, a taxpayer had prevailed in a lower court because that court had felt it was bound by a 1926 Supreme Court decision. The Ninth Circuit overturned the lower court case and held that the Supreme Court had implicitly overruled the 1926 holding. Id. It stated precedent that is contradicted by subsequent developments in Supreme Court jurisprudence need not be followed;
[T]he taxpayer argues that we must follow [the 1926 holding] in the absence of a Supreme Court decision specifically overruling it. However, the Supreme Court has long held that "a later decision in conflict with prior ones [has] the effect to overrule them, whether mentioned or not." . . . We conclude that the courts of appeal should decide cases according to their reasoned view of the way the Supreme Court would decide the pending case today.Vukasovich, 790 F.2d at 1416. Applied here, Defendant argues that whileKipperman has not been explicitly overruled (primarily because no cases have arisen out the Ninth Circuit so that it may correct its early mistake), it has been implicitly overruled.
Plaintiff argues that Defendant is trying to evade the consequences of stare decisis by stating Kipperman is outmoded and erroneous jurisprudence, and she asserts that under stare decisis, a district court must follow precedent set by the court of appeals for its district. Therefore, Plaintiff argues, this Court is bound by the Kipperman holding that there is an implied private right of action for declaratory and restitutionary relief under § 3009. Plaintiff further argues Defendant is trying to focus this Court's attention on the rationale of the Kipperman case but that under stare decisis, it is the holding of an appellate court that is binding on a district court, and not the underlying rationale. Therefore, she contends that this Court is bound by the Kipperman holding that there is a limited private right of action for declaratory and restitutionary relief under § 3009.
In this instance, this Court has been asked to recognize that theKipperman holding is no longer valid and that a private right of action does not exist under § 3009. This Court declines to do so. This Court is not aware of any authority that permits a district court to disregard the ruling of its circuit and apply its own conclusions. Rather, this Court is bound by the doctrine of stare decisis regardless of this Court's personal opinions. To do otherwise would be judicial arrogance.
Stare decisis is the policy of the court to stand by precedent; the term is but an abbreviation of stare decisis et non quieta movere — `to stand by and adhere to decisions and not disturb what is settled. . . . Under the doctrine of stare decisis a case is important only for what it decides — for the `what,' not for the `why,' and not for the `how.' Insofar as precedent is concerned, stare decisis is important only for the decision, for the detailed legal consequence following a detailed set of facts.In re Osborne, 76 F.3d 306, 309 (9th Cir. 1996). The Ninth Circuit determined in Kipperman that a limited private right of action exists under § 3009. As such Kipperman is precedent for this case. A judicial precedent attaches a specific legal consequence to a detailed set of facts in an adjudged case or judicial decision, which is then considered as furnishing the rule for the determination of a subsequent case involving identical or similar material facts and arising in the same court or a lower in the judicial hierarchy. Id. "A district judge may not respectfully disagree with . . . his own court of appeals who have ruled on a controlling legal issue . . . case law on point is the law . . . it must be followed unless and until overruled by a body competent to do so." Id. Thus, this Court finds that Plaintiff may bring a private right of action under § 3009.
Defendant's reliance on Vukasovich is unpersuasive. In Vukasovich, the issue before the appellate court was whether discharge of indebtedness ("DOI") should be treated as ordinary income in the tax year in which it occurred. Vukasovich, 790 F.2d at 1414. The taxpayer relied on a previous holding by the Supreme Court that had two prongs: the first defining income in a specific manner, which did not apply to DOI at the time; the second — providing for a transactional approach to taxation which prohibited treating DOI as income where the cancellation occurs in a different year from the underlying transaction. Id. at 1415. Later Supreme Court decisions gave a broader definition of income, which encompassed DOI, and completely did away with the second prong, without specifically overturning the earlier rule. Id. As such, in Vukasovich, the issue before the Court was a narrow one, i.e., can a taxpayer rely on a previous Supreme Court holding concerning DOI that, while not expressly overruled by later Supreme Court decisions, was implicitly overruled.Id. The Vukasovich Court, in holding against the taxpayer, pointed to the Supreme Court's long standing view that its "later decision in conflict with prior ones [has] the effect to overrule them, whether mentioned and commented on or not." Id. at 1416. Here, unlike Vukasovich, the implied private right of action under § 3009 has been addressed by only four courts in thirty years, and the only court in the Ninth Circuit to speak on point about this issue is Kipperman, which this Court is obligated to follow under the doctrine of stare decisis. Defendant has offered no authority on point which has overruled Kipperman.
Defendant also relies on Olson v. Paine, Weber, Jackson Curtis, Inc., 806 F.2d 731, 734 (7th Cir. 1986), to argue that this Court may anticipatorily overrule Kipperman because, as discussed above, later holdings by the Supreme Court and the Ninth Circuit make it almost certain that a higher court would repudiate the doctrine if given a chance to do so. This Court finds Defendant's argument is unpersuasive. Defendant's theory is that if the case were before the Ninth Circuit today, that body would, based on its current interpretation of theCort factors, overrule Kipperman itself. It claims that in anticipating such a ruling, this Court would be promoting judicial economy. However, after Olson was decided, the Supreme Court dismissed the concept of anticipatory overruling in Rodriguez de Quijas v. Shearson/American Express, 490 U.S. 477, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989). InRodriguez, a previous Supreme Court decision held that a pre-dispute agreement to arbitrate claims under the Securities Act of 1933 ("1933 Act") was unenforceable under a section of that act. Rodriguez de Quijas, 490 U.S. at 479-481. A later Supreme Court decision held that a similar anti-waiver provision found within the Securities and Exchange Act of 1934 ("1934 Act") did not prevent the enforcement of pre-dispute agreements to arbitrate claims. Id. A split ensued among the circuit courts with some following the earlier ruling, finding the pre-dispute agreements unenforceable, and with other courts, including district courts, finding the agreements enforceable because the subsequent decision reduced the prior one to "obsolescence". Id. The Court ultimately held that pre-dispute agreements were enforceable and reversed its earlier opinion, but it also commented "[wle do not suggest that the Court of Appeals on its own authority should have taken the step of renouncing [the earlier decision]. If a precedent of this Court has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the Court of Appeals should follow the case which directly controls, leaving to this Court the prerogative of overruling its own decisions." Id. at 484; See also Agostini v. Felton, 52 U.S. 203, 237, 117 S.Ct. 1997, 138 L.Ed.2d 391 (1997) ("We do not acknowledge, and we do not hold, that other courts should conclude our more recent cases have, by implication, overruled an earlier precedent."). The Ninth Circuit has adopted the language of Rodriguez. See Pizzuto v. Arave, 280 F.3d 949, 976 (9th 2002); Nonnette v. Small, 316 F.3d 872, 877 (9th Cir. 2002).
Body is the appropriate term here in that a panel may not overrule a decision by a previous panel; only a court in banc has such authority.In re Osborne, 76 F.3d at 309.
Applying Rodriguez, this Court must be presented with authority that either the Supreme Court or the Ninth Circuit has overturned theKipperman holding. In this instance, Defendant cites to cases where the Supreme Court and the Ninth Circuit have shifted the weight of the Cort factors from an even distribution, as first applied in Cort andKipperman, to one where much more weight is given to one factor — Congressional intent. However, none of the cases cited by Defendant dispositively addresses the finding of an implied right of action under § 3009. For example, in the case relied on by Defendant, Stupy v. United States Postal Service, 951 F.2d 1079, 1081 (9th Cir. 1991), the issue before the court was whether a private right of action could be found in 39 U.S.C. § 1006. The Stupy Court, after reviewing the evidence, ruled that "it would be improper to hold that Congress intended to confer a private right of action" under § 1006. Id. at 1082. However, the Stupy Court's analysis was limited to how other circuits had interpreted § 1006 and its own interpretation of the legislation. Even though other courts have used a modified version of the Cort test subsequent to Kipperman, this Court does not have the authority to overrule the specific holding of Kipperman because those courts were interpreting different statutes. The issue before this Court is whether a limited private right of action can be implied under § 3009, and it has been decided in Kipperman.
Finally, Defendant relies on another district circuit case, Howe v. Reader's Digest Association, Inc., 686 F. Supp. 461, 466 (S.D.N.Y. 1988), and argues that in Howe, the District Court rejected an implied private right of action under § 3009. However, Defendant's reliance on this case is misplaced because it does not provide this Court with authority to ignore Kipperman. As correctly stated by Plaintiff, the District Court in Howe ruled that (1) there was no express private right of action for damages or injunctive relief under § 3009 and (2) plaintiff did not show any damage or continuing misconduct to justify the Court's consideration of whether an implied right of action for damages or injunctive relief existed. The District Court in Howe cited to the holding in Kipperman and noted that a claim for declaratory or restitutionary relief could be pursued, while a claim for injunctive relief could not. Howe 686 F. Supp. at 466. Furthermore, even if Howe was directly on point, a case from the Southern District of New York is not binding on this Court; rather, Kipperman remains the binding precedent. Therefore, where Defendant allegedly mailed unordered merchandise to Plaintiff and then sought payment for such merchandise, Plaintiff may maintain an action in this Court under 39 U.S.C. § 3009 to obtain declaratory and restitutionary relief.
3. This Court will not Rule on Whether a Limited Private Federal Action can be Implied in Section 3009
Based on this Court's determination that this Court is bound by the decision in Kipperman, this Court need not address Defendant's third contention that there is no evidence of Congressional intent to imply a private right of action under § 3009. Absent the decision reached inKipperman this Court cannot and should not second guess binding Ninth Circuit authority and substitute its own opinion as to judicial interpretation of Congressional intent.
III. Conclusion
This Court denies Defendant's Motion to Dismiss the Complaint for Failure to State a Claim.