Mаrio NIEMAN, Plaintiff-Appellee, v. DRYCLEAN U.S.A. FRANCHISE COMPANY, INC., Defendant-Appellant.
No. 97-4745.
United States Court of Appeals, Eleventh Circuit.
June 21, 1999.
178 F.3d 1126
In deciding otherwise, the mаjority views this case as though plaintiffs are required to start and end each shift at the city garage and to use the shuttle system as their sole means of transportation between the garage and relief points. Further, the majority creates a false distinction between drivers who ride the shuttle and drivers who choose to perform other activities during the split shift period (e.g., walking or driving back to the garage, shopping, going to a library, etc.). Under the majority opinion, although all drivers have discretion concerning how they spend their split shift period, only those drivers who ride the shuttle are entitled to extra compensation. Not even drivers who choose to return directly to the garage by other means are entitled to extra compensation even though their commute time is virtually indistinguishable from drivers who return to the garage by shuttle. In my opinion, the majority has created an incentive for all drivers to use the shuttle system because a driver who opts to take the shuttle will accumulate more compensable hours each week and will be entitled to mоre pay. The majority has also created an incentive for the City to completely eliminate the shuttle system to reduce the size of its payroll. Lastly, the majority decision creates as many questions as it answers. What about a driver who, after completing his or her first shift, chooses to shop for an hour and then return to the garage by shuttle? Is that shuttle timе compensable under the FLSA? Or a driver who, after completing his or her first shift, visits a library for several hours and then rides the shuttle directly to his or her next relief point?
I would affirm all of the district court‘s rulings except its conclusion that shuttle time occurring during the split shift period is compensable.
Kenneth R. Hartmann, Kozyak Tropin & Throckmorton, P.A., Miami, FL, Terry W. Schackmann, Patrick J. Whalen, Spencer, Fane, Britt & Browne, LLP, Kansas City, MO, for Defendant-Appellant.
John J. Dwyer, Rudnick, Wolfe, Epstien & Zeidman, Washington, DC, for Amicus Curiae.
Jоnathan David, Miami, FL, Arnold R. Ginsberg, Todd R. Schwartz, Ginsberg & Schwartz, Miami, FL, Lawrence D. Silverman, Akerman, Senterfitt & Eidson, P.A., Miami, FL, for Plaintiff-Appellee.
SMITH, Senior Circuit Judge:
Dryclean U.S.A. Franchise Company, Inc. (DUSA) appeals the March 26, 1997 decision of the U.S. District Court for the Southern District of Florida, granting summary judgment to Mario Nieman,1 Nieman sued DUSA for return of a $50,000 nonrefundable deposit, on the basis that DUSA failed to make certain disclosures required by the Federal Trade Commission‘s Franchise Rule,
Facts and Proceedings Below
This case arises out of negotiations between DUSA and Nieman, an Argentine citizen,2 concerning the possible opening of drycleaning franchises in Argentina. Nieman sought a master franchise agreement which would give him the right to sell franchises throughout Argentina. In February 1994, the parties executed a letter agreement. Nieman signed the agreemеnt in Argentina, then mailed it back to DUSA in Florida, where DUSA‘s representative signed it. Under the terms of the agreement, Nieman gave DUSA a $50,000 nonrefundable deposit in exchange for DUSA‘s agreement not to negotiate with others regarding the Argentine master franchise agreement for sixty days. In effect, Nieman bought a sixty-day option to purchase the master franchisе agreement.
Nieman intended to use the sixty-day period to arrange financing, but ultimately failed to raise the necessary capital. DUSA kept the nonrefundable deposit and Nieman sued for its return under the Florida Deceptive and Unfair Trade Practices Act (DUTPA),
Both parties moved for summary judgment. On March 26, 1997, the District Court for the Southern District of Florida granted summary judgment to Nieman. The court held that the DUTPA applied to this transaction because “Congress has the power to prevent unfair trade practices in foreign commerce by citizens of the United States, although some acts are done outside the territorial limits of the United States.” The cоurt ordered DUSA to refund the full amount of Nieman‘s $50,000 deposit. DUSA appeals.
Standard of Review
Our review of a trial court‘s grant of summary judgment is plenary. Hale v. Tallapoosa County, 50 F.3d 1579, 1581 (11th Cir. 1995). We apply the same standard applied by the district court. Rodgers v. Singletary, 142 F.3d 1252 (11th Cir. 1998).
Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material faсt and that the moving party is entitled to a judgment as a matter of law.”
Extraterritorial Application of the FTC Franchise Rule
The Florida DUTPA defines a violation of that law to include violations of rules promulgated pursuant to the Federal
However, in order to provide a basis for a foreign franchisee to sue in regard to a foreign franchise deal, the Franchise Rule would have to apply extraterritorially.4 An agency regulation has the force and effect of law only if it is authorized by congressional grant of authority; it is therefore subject to limitations imposed by Congress. Chrysler Corp. v. Brown, 441 U.S. 281, 302, 99 S. Ct. 1705, 60 L. Ed. 2d 208 (1979). The Franchise Rule was promulgated by the FTC under the authority of the Fеderal Trade Commission Act. Thus, for the Franchise Rule to have extraterritorial application, Congress must have intended the FTC Act to apply extraterritorially.
It is undisputed that Congress has the power to regulate the extraterritorial acts of U.S. citizens. Whether Congress has chosen to exercise that authority, however, is an issue of statutory construction. “It is a longstanding principle of American law ‘that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States.‘” EEOC v. Arabian Am. Oil Co., 499 U.S. 244, 248, 111 S. Ct. 1227, 113 L. Ed. 2d 274 (1991) (quoting Foley Bros., Inc. v. Filardo, 336 U.S. 281, 285, 69 S. Ct. 575, 93 L. Ed. 680 (1949)). This presumption “is based on the assumption that Congress is primarily concerned with domestic conditions.” Foley Bros., 336 U.S. at 285, 69 S. Ct. 575. It also “serves to proteсt against unintended clashes between our laws and those of other nations which could result in international discord.” Arabian Am. Oil Co., 499 U.S. at 248, 111 S. Ct. 1227 (citing McCulloch v. Sociedad Nacional de Marineros de Honduras, 372 U.S. 10, 20-22, 83 S. Ct. 671, 9 L. Ed. 2d 547 (1963)).
Mere boilerplate language in a statute is insufficient to overcome this presumption. The Supreme Court has “repeatedly held that even statutes that contain brоad language in their definitions of ‘commerce’ that expressly refer to ‘foreign commerce’ do not apply abroad.” Arabian Am. Oil Co., 499 U.S. at 251, 111 S. Ct. 1227. The presumption against extraterritoriality can be overcome only by clear expression of Congress’ intention to extend the reach of the relevant Act beyond those places where the United States has sovereignty or has some measure of legislative control. See id. at 248, 111 S. Ct. 1227.
The courts “assume that Congress legislates against the backdrop of the presumption against extraterritoriality.” Id. Congress’ awareness of the need to make a clear statement of extraterritorial effect is confirmed by the many statutes that explicitly refer to extraterritorial application. See, e.g., the Biological Weapons Anti-Terrorism Act of 1989,
Nieman cites Branch v. FTC, 141 F.2d 31 (7th Cir. 1944), to support his position. In Branch, the Seventh Circuit held that the FTC Act authorized the Federal Trade Commission to exercise jurisdiction over a U.S. correspondence school that made fraudulent representations to its Latin American customers. Id. at 35.
Branch does not support the exercise of authority by the FTC in this case. The court in Branch concluded that the FTC had jurisdiction to regulate thе school‘s conduct with respect to foreign customers based on the effect on domestic competition. See id. at 34-35 (“The action of the Federal Trade Commission was aimed at compelling the petitioner to use fair methods in competing with his fellow countrymen. It was an attempt to eliminate the unfair, fraudulent, and deceptive practices of the petitioner from a field already occupied by several firms and potentially open to more.... The Federal Trade Commission does not assume to protect the petitioner‘s customers in Latin America. It seeks to protect the petitioner‘s competitors from his unfair practices.“).
Thus, the Branch court found a basis for FTC jurisdiсtion based on the effect of the unfair trade practices on domestic competition, not on foreign customers. Here, by contrast, there is no evidence that DUSA‘s non-disclosure affected domestic competition in any way.
It is true that the Branch court concluded that the FTC Act authorizes extraterritorial exercise of the FTC‘s unfair competition jurisdiction, which includes the Franchise Rule. However, Branch is not the law of this circuit and is therefore persuasive authority at best. In view of subsequent Supreme Court decisions, we disagree with the Branch court‘s statutory analysis.
Rather, we agree with DUSA that the language of the FTC Act does not clearly indicate that Congress intended the Act to apply extraterritorially. The provisions in the FTC Act that Nieman points to as supporting extraterritorial application of the Act are at best ambiguous and, more importantly, are virtually identical to those that the Supreme Court found not to support extraterritorial application of Title VII of the Civil Rights Act of 1964. See Arabian Am. Oil Co., 499 U.S. at 249-251, 111 S. Ct. 1227: Title VII stated that it applied to employers “engaged in an industry affecting commerce;” “commerce” being defined as “trade ... among the several States; or between a State and any place outside thereof.” The Court rejected the argument that these definitions were broad enough to support extraterritorial application. “The language relied upon by petitioners—and it is they who must make the affirmative showing—is ambiguous, and does not speak directly to the question presented here. The intent of Congress as to the extraterritorial application of this statute must be deduced by inference from boilerplate language which can be found in any number of congressional Acts, none of which have ever been held to apply overseas.” Id. at 250-251, 111 S. Ct. 1227.
Title VII applied to employers “engaged in an industry affecting commerce,” 499 U.S. at 249, 111 S. Ct. 1227, while the FTC Act declares unlawful unfair practices “in or affecting commerce,”
Further, even if Congress intended the unfair trade provisions of the FTC Act to give the FTC the authority to apply regulations extraterritorially, the evidence does not suggest that the FTC exercised such authority. Rather, the evidence shows that the FTC did not intend its Franchise Rule to apply to a U.S. franchisor in its dealings with foreign franchisees with respect to franchises to be located in a foreign country.
First, the Franchise Rule was not intended to protect franchisees in foreign countries. When it was promulgated, the Rule was accompanied by a Statement of Basis and Purpose that reviewed the history of franchising in the United States and discussed measures that had been taken by various U.S. fеderal agencies and state governments to address unfair franchising practices. See 43 Fed. Reg. 59,621, 59,623-59,624 (1978). The Statement of Basis and Purpose is silent regarding the history or problems of franchising in other countries.
Second, the provisions of the Rule itself reveal a purely domestic focus. For example, the rule addresses potential conflicts with state law but does not mention foreign law. See, e.g.,
Third, the FTC has never indicated that the Franchise Rule was intended to apply to foreign franchisees. For example, the Final Interpretive Guides devote a section to potential conflicts bеtween the Franchise Rule and state and local laws, but are silent with regard to foreign laws. 44 Fed. Reg. 49,966, 49,971 (1979).
Finally, the FTC recently issued an Advance Notice of Proposed Rulemaking, proposing to modify the Rule to “clarify” that it does not apply to the sale of franchises to be located outside the United States. See 62 Fed. Reg. 9115, 9119 (1997); 62 Fed. Reg. 28,822, 28,823 (1997). Although the FTC has not issued a formal modification of the Franchise Rule, the Federal Register notices are evidence that extraterritorial application of the Rule was not contemplated at the time it was promulgated.
Conclusion
We have considered Appellee‘s other arguments for extraterritorial application of the Franchise Rule but find them tо be without merit. For the reasons explained above, the Franchise Rule does not apply to the transaction between DUSA and Nieman. Therefore, DUSA‘s failure to comply with the disclosure requirements of the Franchise Rule does not provide Nieman with a cause of action to seek refund of his non-refundable deposit. Nieman asserted no other basis on which to recover his deposit. The district court therefore erred in granting summary judgment to Nieman. The judgment of the district court is reversed.
REVERSED.