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RIEGEL TEXTILE CORP. v. CELANESE CORP.

July 9, 1980

RIEGEL TEXTILE CORPORATION, Plaintiff, against CELANESE CORPORATION, Defendant.


The opinion of the court was delivered by: CONNER

OPINION AND ORDER

Defendant Celanese Corporation ("Celanese") has moved to dismiss the complaint in this action for lack of subject matter jurisdiction and failure to state a claim upon which relief can be granted pursuant to Rules 12(b)(1) and 12(b)(6), F.R.Civ.P. For the reasons discussed below, this motion is granted.

Background

 This is an action for lost profits, loss of good will, other damages incurred due to idling of manufacturing facilities, further related actual damages, and punitive damages in connection with plaintiff Riegel Textile Corporation's purchase, processing and sale of fabric woven from a certain fiber manufactured by Celanese. Plaintiff (hereafter "Riegel") alleges that the fiber in question, a blend of Arnel triacetate and Fortrel polyester treated with the flame retardant Tris (2, 3 dibromopropyl) phosphate ("Tris"), contains a known carcinogen and "other chemical compounds also contained in known carcinogens," Complaint, P 10. Riegel states that in 1972, when Celanese first marketed the fiber, Celanese knew or should have been aware that Tris contained this carcinogen, as well as the other potentially carcinogenic compounds, but had failed to conduct tests to determine the carcinogenicity of Tris-treated fiber. Complaint, P 11.

 According to plaintiff, Celanese solicited Riegel's purchase of Tris-treated fiber by representing to Riegel that fabric made from the fiber would be suitable for the making of children's sleepwear, which is required by federal law to meet certain flame-retardant standards. After testing fabric made from the fiber for flammability and color-fastness, Riegel requested Swift Spinning Mills, Riegel's usual yarn supplier, to purchase Tris-treated fiber from Celanese; requested Piedmont Knitting Company, Riegel's usual fabric supplier, to purchase 1,000,000 pounds of yarn made from Tris-treated fiber from Swift; and ordered 1,000,000 pounds of fabric woven from this yarn from Piedmont. Riegel then manufactured and delivered children's sleepwear garments made from this fabric to a number of purchasers. Complaint, PP 13-19.

 On April 8, 1977, the Consumer Product Safety Commission ("Commission") declared that any children's clothing containing Tris was a banned hazardous substance within the meaning of the Federal Hazardous Substances Act, 15 U.S.C. § 1261 et seq. ("Federal Hazardous Substances Act," "Hazardous Substances Act" or "the Act") since the clothing was intended for use by children and could cause substantial illness because of its toxicity. 42 Fed.Reg. 18850. This order specified that the sleepwear should be repurchased by clothing manufacturers under 15 U.S.C. § 1274. The Commission expanded the ban and extended the repurchase requirement to cover Tris-treated fabric and yarn on May 5, 1977, see 42 Fed.Reg. 28060 (republishing the May 5 determination).

 On June 23, 1977, in Springs Mills, Inc. v. Consumer Product Safety Commission, 434 F. Supp. 416 (D.C.S.C.1977), Judge Chapman of the United States District Court for South Carolina ruled that the Commission's ban on Tris-treated sleepwear and fabric was null and void, since the Commission had failed to follow the rulemaking procedures required under the Act in promulgating the ban, id. at 435. Judge Chapman further ruled that the repurchase obligations of Section 1274 would not be triggered until the Commission had conducted a full due process hearing on the issue of whether Tris was a "hazardous substance" within the meaning of the Act, and enjoined the Commission from reinstituting its ban until the Commission held appropriate hearings.

 The Commission has not issued any further regulations banning garments containing Tris-treated fiber. The Commission has, however, continued to interpret the Act as requiring classification of Tris-treated fiber and garments made from such fiber as banned hazardous substances, and has issued a Statement of Policy indicating that the Commission intends to enforce this interpretation by bringing individual actions in federal district court to "prevent the sale and to require the statutory repurchase of such products." 42 Fed.Reg. 61621, reprinted at 3 Consumer Product Safety Guide (CCH) P 26,650. See generally 1 Consumer Product Safety Guide (CCH) P 2312.

 Riegel alleges that under these various orders, it has repurchased children's sleepwear garments valued at $ 689,141 from its customers; and that the Commission's actions have "effectively prevented the further sale by Riegel of its children's sleepwear containing Tris-treated Arnel Fortrel fiber." Complaint, P 28.

 Contentions

 Plaintiff's first claim is based on an asserted implied cause of action for damages arising under 15 U.S.C. § 1263. Plaintiff further claims damages under state law theories of strict liability, fraud, implied warranties of merchantability and fitness for a particular purpose, express warranty, negligence per se, and negligence, and contends that the Court has jurisdiction over the latter claims under the doctrine of pendent jurisdiction (there being no diversity jurisdiction, since both plaintiff and defendant are Delaware corporations).

 Defendant contends that, with respect to plaintiff's first claim, 15 U.S.C. § 1263 should not be construed to create an implied private cause of action for damages. In support of this position, defendant points out that the Federal Hazardous Substances Act, of which Section 1263 is a part, specifically creates criminal, seizure and injunctive penalties, all to be brought in the name of the United States, and specifically provides for repurchase by manufacturers under Section 1274, all without mentioning a further private remedy for damages caused by violation of the Act's provisions. Defendant asserts that plaintiff has no remedy on these facts under the express provisions of Section 1274 of the Act, or under the related provisions of 15 U.S.C. § 2072, the statute creating a private cause of action for damages for violation of regulations issued by the Consumer Product Safety Commission under the Consumer Product Safety Act. Defendant further notes that limitation of remedies under the Federal Hazardous Substances Act to the relief specifically provided for in the statute is consistent with the Act's underlying purpose of achieving nationwide regulatory uniformity with respect to precautions to be taken as to certain dangerous items, rather than as to remedies for injuries caused by such items; that analogous regulatory provisions such as those of the Food, Drug and Cosmetic Act, 21 U.S.C. § 301 et seq., and the Flammable Fabrics Act, 15 U.S.C. § 1191 et seq., have not been construed to create a private cause of action for damages; and that Riegel's theory, if adopted, would "effect a wholesale transfer of product liability litigation to the Federal courts," Defendant's Reply Brief at 6, without clear Congressional authority.

 Defendant then argues that, since dismissal of the first cause of action is proper, the Court should not retain jurisdiction over plaintiff's state law claims as (1) pendent jurisdiction should only be exercised when a plaintiff states a federal claim sufficiently substantial to withstand a motion to dismiss for failure to state a claim, and (2) state law issues will predominate in resolving the remaining claims, making retention of those claims unadvisable as a matter of discretion.

 Plaintiff replies that Celanese has, by definition, violated the Act; *fn1" that the case law under the Act indicates that a private cause of action exists under Section 1263 for violation of the Act; that this interpretation is supported by the broad purposes of the Act to prevent the introduction of dangerous articles intended for use by children into interstate commerce, as well as by the 1969 addition of Section 1274, creating a private right of rescission in favor of a buyer of a substance banned under the Act against his immediate seller, which section, the legislative history shows, was intended to place liability for economic loss due to recall of an unsafe product on the manufacturer; and that the 1972 Consumer Product Safety Act, giving the Commission jurisdiction over administration of the Federal Hazardous Substances Act, and creating a private cause of action for any person injured by any knowing violation of any consumer product safety rule, reinforces the conclusion that a private cause of action exists under the Act. Plaintiff further asserts that it and those of its employees working with hazardous substances fall within the class of members of the public intended to be protected from damaging substances and to be enabled to shift economic losses associated with such substances to the manufacturing party; and that plaintiff's recovery is a matter of federal concern rather than one of concern to the states.

 Discussion

 A. Plaintiff's claim under the Federal Hazardous Substances Act

 1. Statutory Provisions

 Section 1263 of the Federal Hazardous Substances Act, under which plaintiff asks the Court to imply a private cause of action, provides, in relevant part, that:

 
"(t)he following acts and the causing thereof are prohibited:
 
"(a) The introduction or delivery for introduction into interstate commerce of any misbranded hazardous substance or banned hazardous substance."

 Section 1261(q)(1) defines the term "banned hazardous substance" as:

 
"(A) any toy, or other article intended for use by children, which is a hazardous substance, or which bears or contains a hazardous substance in such manner as to be susceptible of access by a ...

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