Space Age Products, Inc. v. Gilliam

488 F. Supp. 775, 1980 U.S. Dist. LEXIS 11039
CourtDistrict Court, D. Delaware
DecidedApril 17, 1980
DocketCiv. A. 79-225
StatusPublished
Cited by14 cases

This text of 488 F. Supp. 775 (Space Age Products, Inc. v. Gilliam) is published on Counsel Stack Legal Research, covering District Court, D. Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Space Age Products, Inc. v. Gilliam, 488 F. Supp. 775, 1980 U.S. Dist. LEXIS 11039 (D. Del. 1980).

Opinion

OPINION

STAPLETON, District Judge:

Plaintiff, an Ohio corporation, brings this action under 42 U.S.C. § 1983 (1974) against two State officials charged with enforcement of Delaware’s consumer protection laws. Plaintiff markets household products through a distribution scheme which requires the recruitment of Area Representatives who, after an initial investment of $19.50, are entitled to purchase plaintiff’s products at a discount for resale to others. Purchase of $600.00 of Space Age products entitles an Area Representative to Charter Membership in the organization. Charter Members are entitled to a higher discount and are also authorized to sell Charter Memberships, for which they receive a bonus of $150.00. (Opinion of the Consumer Affairs Board, Oct. 15, 1979). The marketing plan is described to potential participants at public recruitment meetings.

Following an investigation of the Space Age organization, the Division of Consumer Affairs (“the Division”) concluded that the marketing scheme employed by plaintiff was a “pyramid or chain distribution scheme” as defined by 6 Del.C. § 2561 (1975). 1 Two representatives of the Divi *778 sion then attended a public recruitment meeting on April 20, 1979. At the conclusion of the meeting, plaintiff’s representatives were arrested for criminal violations of the pyramiding statute, 6 Del.C. § 2563 (1975), and plaintiff and its representatives were served with a Cease and Desist Order issued under the authority of the Division 2 and signed by defendants. The Order directed plaintiff to

*777 As used in this subchapter:
(1) “Pyramid or chain distribution scheme” means a sales device whereby a person, upon a condition that he part with money, property or any other thing of value, is granted a franchise license, distributorship or other right which person may further perpetuate the pyramid or chain of persons who are granted such franchise, license, distribu *778 torship or right upon such condition. A limitation as to the number of persons who may participate, or the presence of additional conditions upon the eligibility for such a franchise, license, distributorship or other right recruit [s/e] or upon the receipt of profits therefrom, does not change the identity of the scheme as a pyramid or chain distribution scheme.
(2) “Person” includes an individual, corporation, trust, estate, partnership, unincorporated association, or any other legal or commercial entity. (6 Del.C.1953, § 2561; 59 Del.Laws, c. 86, § 1.)
immediately cease and desist from engaging in the below enumerated business practice. .
USE OF A PYRAMID OR CHAIN DISTRIBUTION SCHEME in connection with the solicitation of investments of money. The Violators employed a pyramid or chain distribution scheme, as defined by 6 Del.C. § 2561(1), in connection with the solicitation of the investment of six hundred dollars per consumer, for membership in Space Age Products, Inc. Membership in Space Age Products, Inc. entitles consumers to perpetuate the chain of consumers who invest in Space Age Products, Inc. . . .

The above Order is based upon the following:

The Violators personally promoted and attempted to sell participation in Space Age Products, Inc. to Mr. David Byler at the residence of Mr. David Yoger, on April 5, 1979. Space Age Products, Inc., is a pyramid or chain distribution scheme as defined by 6 Del.C. § 2561(1). . . .

Plaintiff then filed this action and appealed the cease and desist order to the Consumer Affairs Board. The Board found that the marketing plan did violate Section 2561 and upheld the Order on October 15, 1979. On the same day, a Superior Court jury found Space Age and a number of its employees guilty of promoting a pyramid scheme. Those decisions are on appeal.

In this case the plaintiff asserts that the issuance under 29 Del.C. § 8612 of the cease and desist order without prior notice and an opportunity to be heard violated its rights under the First and Fourteenth Amendments. It alleges that as a result of that wrongful issuance it was forced to cease all of its business in Delaware and lost substantial revenues.

The defendants have moved to dismiss or for summary judgment on a number of grounds, including sovereign immunity-, official immunity, abstention, and failure to allege a violation of rights protected by the Constitution.

I. SOVEREIGN IMMUNITY.

The defendants have been sued in their official as well as their individual capacities and, as an initial matter, argue that this Court lacks jurisdiction over the claims asserted against them in their official capacities by reason of the Eleventh Amendment. The Eleventh Amendment bars actions against a non-consenting State whether or not the State is a nominal party, so long as the State is a “real, substantial party in interest” in the sense that any damage award could be assessed against the State Treasury. Ford Motor Co. v. Department of Treasury of Indiana, 323 U.S. 459, 65 S.Ct. 347, 89 L.Ed. 389 (1945); Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974). There is no dispute that a judgment against these defendants in their official capacities would be paid by the State, so the question becomes one of consent to suit.

Plaintiff argues that the State has waived its immunity defense by enacting *779 Chapter 40 of Title 10 of the Delaware Code. The first section of that legislation, 10 Del.C. § 4001 (1978 Supp.), provides: § 4001. Limitation On Civil Liability.

Except as otherwise provided by the Constitutions or laws of the United States or of the State, as the same may expressly require or be interpreted as requiring by a court of competent jurisdiction, no claim or cause of action shall arise, and no judgment, damages, penalties, costs or other money entitlement shall be awarded or assessed against the State or any public officer or employee, including the members of any board, commission or agency of the State, whether elected or appointed, and whether now or previously serving as such, in any civil suit or proceeding at law or in equity, or before any administrative tribunal, where the following elements are present:

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Cite This Page — Counsel Stack

Bluebook (online)
488 F. Supp. 775, 1980 U.S. Dist. LEXIS 11039, Counsel Stack Legal Research, https://law.counselstack.com/opinion/space-age-products-inc-v-gilliam-ded-1980.