College Savings Bank v. Florida Prepaid Post-Secondary Education Expense Board

PETITIONER: College Savings Bank
RESPONDENT: Florida Prepaid Post-Secondary Education Expense Board
LOCATION: Kimberley Thompson's Apartment

DOCKET NO.: 98-149
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Third Circuit

CITATION: 527 US 666 (1999)
ARGUED: Apr 20, 1999
DECIDED: Jun 23, 1999

ADVOCATES:
David C. Todd - Argued the cause for the petitioner
Seth P. Waxman - Argued the cause for the United States as respondent
William B. Mallin - on behalf of the Respondents Florida Prepaid Postsecondary Education Expense Board, et al

Facts of the case

This case is the second tier of a patent infringement action. College Savings Bank, a New Jersey chartered bank, markets and sells certificates of deposit designed to finance college costs. Florida Prepaid Postsecondary Education Expense Board (Florida Prepaid), a Florida state entity, administers a tuition prepayment program. In addition to its original patent infringement action, College Savings filed an action alleging that Florida Prepaid violated section 43 of the Lanham Act by making misstatements about its tuition savings plans in its brochures and annual reports. The Trademark Remedy Clarification Act (TRCA) subjects states to suits brought under section 43(a) of the Lanham Act for false and misleading advertising. The District Court granted Florida Prepaid's motion to dismiss on sovereign immunity grounds. The court rejected arguments from College Savings and the United States that Florida Prepaid had waived its sovereign immunity by engaging in interstate marketing and administration of its program after the TRCA made clear that such activity would subject it to suit; and that Congress's abrogation of sovereign immunity in the TRCA was effective, since it was enacted to enforce the Fourteenth Amendment's Due Process Clause. The Court of Appeals affirmed.

Question

Does the Trademark Remedy Clarification Act (TRCA) permit suits against states for alleged misrepresentations of their own products by providing a constitutionally permissible abrogation of state sovereign immunity? Does the TRCA permit suits against states for alleged misrepresentations of their own products by operating as a waiver of sovereign immunity when a state engages in activities regulated by the Lanham Act?

Media for College Savings Bank v. Florida Prepaid Post-Secondary Education Expense Board

Audio Transcription for Oral Argument - April 20, 1999 in College Savings Bank v. Florida Prepaid Post-Secondary Education Expense Board

Audio Transcription for Opinion Announcement - June 23, 1999 in College Savings Bank v. Florida Prepaid Post-Secondary Education Expense Board

William H. Rehnquist:

The opinion of the Court in No. 98-149, College Savings Bank versus Florida Prepaid Postsecondary Education Expense Board will be announced by Justice Scalia.

Antonin Scalia:

This case comes to us on writ of certiorari to the United States Court of Appeals for the Third Circuit.

Petitioner, College Savings Bank, is a New Jersey bank that markets and sells certificates of deposit designed to finance the costs of college education.

Respondent, Florida Prepaid Postsecondary Education Expense Board (FPPEEB), is an arm of the State of Florida that also administers a tuition fee payment program designed to provide individuals with sufficient funds to cover future college expenses.

College Savings, the private bank, filed this lawsuit in United States District Court in New Jersey, alleging that Florida Prepaid, the state institution, violated Section 43(a) of the Lanham Act by making misstatements about its own tuition savings plan in its brochures and in its annual reports.

Florida Prepaid moved to dismiss the action on the ground that it was barred by sovereign immunity.

The United States intervened on the side of College Savings to defend the constitutionality of the Federal Legislation that permitted the suit.

The District Court granted Florida Prepaid’s motion to dismiss, and the Court of Appeals for the Third Circuit affirmed.

We granted certiorari, and in an opinion filed with the Clerk today, we affirm the Third Circuit.

Section 43(a) of the Lanham Act creates a private right of action against the person who uses false descriptions or makes false representations in commerce.

The Trademark Remedy Clarification Act of 1992, which I shall refer to as TRCA, subjects the states to suits brought under 43(a) of the Lanham Act.

By virtue of their sovereign immunity however, states cannot be sued by individuals unless they have consented or unless their immunity has been validly abrogated.

Thus, the question presented in this case is whether TRCA is effective to permit suit against the State for its alleged misrepresentation of its own product?

Either because TRCA affects a constitutionally permissible abrogation of state sovereign immunity, or because TRCA operates as an invitation to waiver of sovereign immunity, which is automatically accepted by states engaging in the activities in commerce that are regulated by the Lanham Act.

We turn first to the contention that Florida’s sovereign immunity was validly abrogated.

Our decisions in Seminole Tribe and Fitzpatrick versus Bitzer make clear that Congress can abrogate state sovereign immunity when it legislates to enforce the Fourteenth Amendment, but that it cannot do so when it legislates pursuant to its power to regulate commerce.

Thus, this first issue turns on whether TRCA enforces the Fourteenth Amendment.

College Savings asserts that it does, because it enforces that provision of the Fourteenth Amendment which says that no state shall deprive any person of property without due process of law.

Their argument is that Congress enacted TRCA to remedy and prevent state deprivations without due process of two species of "property" rights: First, a right to be free from a business competitor's false advertising about its own product; and second, a more generalized right to be secure in one's business interests.

We conclude that neither of these qualifies as a property right protected by the Due Process Clause.

As to the first: the hallmark of a protected property interest is the right to exclude others.

The Lanham Act's false advertising provisions, however, bear no relationship to any right to exclude, and Florida Prepaid's alleged misrepresentation concerning its own products intruded upon no interest over which petitioner had exclusive dominion.

As to the more generalized right to be secure in one’s business interests, while a business assets are property, and any state taking of those assets is a "deprivation of property".

Business in the sense of the activity of doing business or the activity of making a profit is not property at all, and it is only that which is impinged upon by a competitor's false advertising.

The second and more substantial question in the case is whether Florida Prepaid's sovereign immunity has been waived?

There is no suggestion here that Florida Prepaid expressly consented to being sued in Federal Court.

Petitioner and the United States maintain, however, that Florida has "impliedly" or "constructively" waived its immunity from Lanham Act suit.

They make this assertion on the authority of a case called Parden Versus Terminal Railroad Co. of Alabama Docks Department, which we decided in 1964.

In Parden we permitted employees of a railroad owned and operated by Alabama to bring an action under the Federal Employees' Liability Act against their employer.

We held that Alabama had waived its immunity from FELA suit, even though Alabama law expressly disavowed any such waiver.