Bratton v. Shiffrin

440 F. Supp. 1257, 1977 U.S. Dist. LEXIS 14519
CourtDistrict Court, N.D. Illinois
DecidedAugust 11, 1977
Docket76 C 4282, 76 C 4707 and 77 C 284
StatusPublished
Cited by5 cases

This text of 440 F. Supp. 1257 (Bratton v. Shiffrin) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bratton v. Shiffrin, 440 F. Supp. 1257, 1977 U.S. Dist. LEXIS 14519 (N.D. Ill. 1977).

Opinion

MEMORANDUM OPINION

GRADY, District Judge.

Plaintiffs are individual travelers and retail travel agencies who made deposits to reserve places on numerous charter tours to such places as Mexico, Hawaii, and Las Vegas. The tours were organized and sold *1259 by the defendant travel companies. Defendants include Tour Travel Enterprises, the wholesale tour operator which organized the trips; Sunshine Travel Agency and Sunshine Travel of Nevada, two retail travel agencies dealing in tours organized by Tour Travel; Gerald Mann and Richard Tauber, owners and officers of the three travel companies; and the First National Bank of Highland Park and its vice president, Joel Shiffrin. The Bank and Shiffrin held accounts for the other defendants, including special escrow accounts required by regulation for charter tour deposits.

The tours were scheduled to depart after October 15, 1976. On that date or shortly thereafter, involuntary bankruptcy proceedings were initiated against Tour Travel Enterprises, Sunshine Travel and Sunshine Travel of Nevada. 2 The scheduled tours never occurred and the deposits made by the plaintiff tour participants have not been refunded. Some of these deposits were made to the travel companies, others were deposited directly with the Bank.

Plaintiffs have requested that the Bank refund their monies. Apparently the funds on deposit in the special escrow accounts are insufficient to reimburse all disappointed tour participants. The Bank filed an interpleader action in bankruptcy court concerning the deposits it holds. On March 17, 1977, the bankruptcy judge dismissed the interpleader, ruling the court lacked summary jurisdiction over the escrow funds. In re Tour Travel Enterprises, Inc., No. 76 B 8014 (N.D.Ill., March 17, 1977).

Plaintiffs allege that defendants violated certain C.A.B. regulations governing these charter tour deposits. In particular they claim that defendants First National Bank of Highland Park and Joel Shiffrin violated the regulations dealing with special escrow accounts for tour deposits. Under 14 C.F.R. §§ 378.16 and 378a.31 (1977), all deposits made by tour participants to operators or retail travel agents must be deposited in a special escrow account with a federally insured bank or savings and loan association. The bank is to maintain a separate accounting for each tour. The depository bank, the tour operators and the participating air carriers are to enter into a depository agreement governing the deposits. 3 Under the regulations, disbursements may be made from the accounts only under certain circumstances. The bank may pay the direct air carrier, hotels, sightseeing and other surface accommodations up to a fixed per cent of the total deposits received by the bank. If a tour is cancelled, the bank is to make refunds directly to the tour participants. Regulations 14 C.F.R. §§ 378.18 and 378a.32 (1977) forbid the bank or the tour operator from making disbursements from tour-participant deposits except in accordance with these regulations. In addition, the tour operator must furnish a surety bond or other security arrangement to insure the financial responsibility of the tour operator and the performance of tour services in accordance with the contract between the operator and the tour participants. In this case, in lieu of a bond, Tour Travel entered into a surety trust agreement with the First National Bank inuring to the benefit of the tour participants. 4 Plaintiffs further allege that the Bank breached its duties and obligations under the escrow and surety trust agreements.

Defendants First National Bank and Joel Shiffrin have moved to dismiss the complaints for lack of subject matter jurisdiction, failure to state a claim, and failure to *1260 join an indispensable party (the trustee in bankruptcy). 5 We grant the motions to dismiss for failure to state a claim.

Jurisdictional Allegations

Defendants First National Bank and Shiffrin challenge plaintiffs’ claim of jurisdiction based on the Federal Aviation Act of 1958, 49 U.S.C. §§ 1301 et seq. (1970), and 28 U.S.C. §§ 1331(a) and 1337 (1970). 28 U.S.C. § 1337 (1970) gives this court jurisdiction over cases arising under statutes enacted pursuant to Congress’ authority to regulate interstate commerce, regardless of the amount in controversy. Clearly the Federal Aviation Act of 1958 is an act regulating commerce. Rauch v. United Instruments, Inc., 548 F.2d 452, 455 (3d Cir. 1976). Because plaintiffs assert that the provisions of the Federal Aviation Act and the regulations promulgated thereunder provide for a private right of action on their behalf; we have jurisdiction under Section 1337 to determine whether a federal claim has been stated. 6 Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946); Enders v. American Patent Search Co., 535 F.2d 1085, 1087-88 (9th Cir. 1976), cert. denied, 429 U.S. 888, 97 S.Ct. 242, 50 L.Ed.2d 170 (1977).

Explicit Provisions of 49 U.S.C. § 1487(a)

There are two possible routes to establishing a private remedy under the Federal Aviation Act; the first is by reliance on the explicit provisions of the Act, the second is by implying a private right of action from those provisions. Section 1487 of the Act gives the Civil Aeronautics Board the authority to enforce the statute, rules and regulations. Further, under that provision “any party in interest” may seek injunctive relief in the district court for a violation of Section 1371(a). 49 U.S.C. § 1487(a) (1970). Thus, if a violation of Section 1371(a) were involved, plaintiffs could rely on the explicit grant of Section 1487(a). See generally An-not., 19 A.L.R. Fed. 951 (1974).

There are several reasons why this provision does not apply to the Bank or its officer.

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Bluebook (online)
440 F. Supp. 1257, 1977 U.S. Dist. LEXIS 14519, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bratton-v-shiffrin-ilnd-1977.