Young America Corp. v. Affiliated Computer Services (ACS), Inc.

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 04-3674
___________
Young America Corporation, *
a Minnesota Corporation, *
*
Appellant, *
*
v. *
*
Affiliated Computer Services (ACS), *
Inc., a Nevada corporation, in its *
capacity as agent for the States of *
Alabama, Alaska, Arizona, Arkansas, * Appeal from the United States
California, Colorado, Connecticut, * District Court for the
Delaware, Florida, Georgia, Hawaii, * District of Minnesota.
Idaho, Illinois, Indiana, Iowa, Kansas, *
Maine, Maryland, Massachusetts, *
Michigan, Mississippi, Montana, *
Nebraska, Nevada, New Hampshire, *
New Jersey, New Mexico, North *
Carolina, Oklahoma, Oregon, Rhode *
Island, South Carolina, South Dakota, *
Tennessee, Utah, Vermont, Virginia, *
Washington, West Virginia, Wisconsin, *
and Wyoming (the “States”); David *
Epstein, in his capacity as agent for the *
States, *
*
Appellees. *
___________
Submitted: June 23, 2005
Filed: September 29, 2005
___________
Before RILEY, BRIGHT, and JOHN R. GIBSON, Circuit Judges.
___________
RILEY, Circuit Judge.
Young America Corporation (Young America) brought this action against
Affiliated Computer Services, Inc. (ACS) and David Epstein (Epstein), an individual
affiliated with ACS, seeking declaratory and injunctive relief to prevent ACS from
auditing Young America’s business records. The district court1 dismissed the action
for lack of subject matter jurisdiction. Young America appeals, and we affirm.
I. BACKGROUND
Young America is engaged in the rebate “fulfillment” business. Young
America processes rebates offered by sellers of consumer goods and mails rebate
checks to qualifying consumers. When consumers fail to cash the rebate checks, an
accumulation of unclaimed property results.
Forty-one states have authorized ACS to audit Young America’s records. The
purpose of the audit is to determine whether Young America is complying with the
states’ unclaimed property laws and whether Young America is holding unclaimed
property over which the states claim rights.2
1
The Honorable David S. Doty, United States District Judge for the District of
Minnesota.
2
The majority of states have adopted variations of the Uniform Disposition of
Unclaimed Property Act, which provides unclaimed property is subject to escheat by
the state. See Uniform Disposition of Unclaimed Property Act § 4 (1995).
-2-
Each of the forty-one states sent Young America a letter advising each state
had authorized ACS to perform an audit. Six of these states also advised Young
America that state law provides for assessments, including interest, penalties, fines,
and examination costs, for failing to perform certain duties under the statute, or for
failing to report or deliver property within the prescribed time.
Young America refused to submit to an audit and filed this action against ACS
and Epstein, seeking declaratory and injunctive relief. In its second amended
complaint (complaint), Young America alleges the proposed audit violates the
Commerce Clause and the Due Process Clause of the Fourteenth Amendment (Count
I); the audit is an unreasonable search and seizure, in violation of the Fourth and
Fourteenth Amendments (Count II); and Young America is not a “holder” of
unclaimed property, and therefore is not subject to an audit (Count III).
ACS and Epstein moved to dismiss the complaint, arguing the district court
lacked (1) subject matter jurisdiction because Young America failed to allege
standing sufficiently, and (2) personal jurisdiction over Epstein.3 The district court
referred the motion to dismiss to the magistrate judge,4 who recommended granting
the motion.
Overruling Young America’s objections to the magistrate judge’s report and
recommendation, the district court adopted the magistrate judge’s recommendation
and granted ACS’s motion to dismiss. Because the district court dismissed Young
3
Alternatively, ACS and Epstein argued Young America failed to state a claim.
The district court did not address whether Young America failed to state a claim,
concluding such argument was moot. Given our affirmance of the district court’s
dismissal for lack of subject matter jurisdiction, we express no opinion regarding
whether Young America failed to state a claim.
4
The Honorable Susan Richard Nelson, United States Magistrate Judge for the
District of Minnesota.
-3-
America’s complaint for lack of subject matter jurisdiction, it did not address the
issue of personal jurisdiction over Epstein. The district court also denied Young
America’s request for leave to file a third amended complaint, in which Young
America would have included allegations the audit demands caused injury to Young
America by casting a “pall” on its business. Young America appeals the dismissal
of its case, contending it sufficiently alleged standing.
II. DISCUSSION
“[I]f a plaintiff lacks standing, the district court has no subject matter
jurisdiction.” Faibisch v. Univ. of Minn., 304 F.3d 797, 801 (8th Cir. 2002). To
show standing under Article III of the U.S. Constitution, a plaintiff must demonstrate
(1) injury in fact, (2) a causal connection between that injury and the challenged
conduct, and (3) the likelihood that a favorable decision by the court will redress the
alleged injury. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). “The
party invoking federal jurisdiction bears the burden of establishing these elements.”
Id. at 561. This court reviews de novo a district court’s decision to grant a motion to
dismiss for lack of subject matter jurisdiction. Metzger v. Village of Cedar Creek,
Neb., 370 F.3d 822, 823 (8th Cir. 2004).
A. Injury
The district court concluded Young America failed to allege an imminent
injury sufficiently, because (1) the state statutes do not authorize penalties if Young
America refuses to submit to an audit, (2) ACS has not threatened to penalize Young
America for refusing to submit to an audit, and (3) ACS does not have the authority
to enforce the state statutes. The district court also noted Young America failed to
make minimum factual allegations of injury as to how the audit demand constitutes
an actual or imminent injury.
For purposes of standing, a plaintiff’s injury must consist of “an invasion of a
legally protected interest which is (a) concrete and particularized, and (b) actual or
-4-
imminent, not conjectural or hypothetical.” Lujan, 504 U.S. at 560 (internal citations
and quotations omitted). A complaint need not make a large number of allegations
relating to the injury suffered: “general factual allegations of injury resulting from the
defendant’s conduct may suffice” to establish standing. Id. at 561. If the plaintiff
offers no factual allegations, specific or general, demonstrating an injury in fact, the
court should dismiss the claim. See Burton v. Cent. Interstate Low-Level Radioactive
Waste Compact Comm’n, 23 F.3d 208, 209 (8th Cir. 1994) (holding the plaintiffs
failed to allege injury, for purposes of standing, where the plaintiffs did not explain
how the challenged tax affected the plaintiffs’ rights).
In assessing whether the plaintiff has alleged a sufficiently particularized and
concrete injury, the court must accept all factual allegations in the complaint as true
and draw all inferences in the plaintiff’s favor. Lujan, 504 U.S. at 561 (stating “[a]t
the pleading stage . . . on a motion to dismiss we presume that general allegations
embrace those specific facts that are necessary to support the claim”) (internal
punctuation and quotation omitted); Titus v. Sullivan, 4 F.3d 590, 593 (8th Cir. 1993)
(holding in a facial challenge to jurisdiction, the court presumes all of the factual
allegations concerning jurisdiction to be true and will grant the motion only if the
plaintiff fails to allege an element necessary for subject matter jurisdiction).
Young America contends its alleged injury is not hypothetical because the
audit demand letters attached to the complaint threaten to enforce ACS’s examination
demand. The letters simply authorize an audit. They do not threaten enforcement
action if Young America refuses to submit to an audit. Even if the letters threatened
enforcement action, Young America’s complaint contains no allegation ACS itself
has attempted or intends to attempt to seek enforcement of its audit demand. ACS has
-5-
neither issued any subpoenas to compel the production of records nor sought judicial
enforcement of its audit demand.5
Young America also has failed to demonstrate ACS has the authority to bring
an enforcement suit on behalf of the states. Young America contends “[i]t is only fair
for Young America to assume . . . enforcement powers were . . . delegated [to ACS].”
The letters authorizing ACS to act on behalf of the states clearly limit ACS’s
authority merely to conducting an audit. The letters do not authorize ACS to litigate
on the states’ behalf. Without any indication ACS has the authority to force Young
America to submit to an audit, Young America’s alleged threat of enforcement is
insufficient to establish an injury in fact.
On appeal, Young America alleges the audit demands have “cast a pall on
Young America’s relationships with its customers.” Young America concedes its
complaint did not set forth this alleged injury. Apparently recognizing this deficiency
in the complaint, Young America sought to file a third amended complaint, which
would have included the allegation the audit demands themselves caused injury to
Young America by casting a “pall” on its business. Young America’s second
amended complaint failed to state this claim, or even make general factual allegations
of imminent injury. Therefore, the district court correctly dismissed this action for
lack of subject matter jurisdiction.
In sum, we conclude Young America failed sufficiently to allege the first
element of standing, i.e., an injury in fact. Therefore, this court may affirm the
district court on that basis, and we need not reach the other two standing
requirements. See Delorme v. United States, 354 F.3d 810, 816 (8th Cir. 2004)
(stating “[b]ecause [the plaintiff] has not shown an injury in fact, we need not discuss
5
Nothing in our holding forecloses Young America’s ability to challenge the
audits, if and when the states initiate action to enforce their audit demand.
-6-
the other Lujan standing requirements of causation or redressability”). Nevertheless,
we conclude Young America has failed to establish causation and redressability.
B. Causation
The district court correctly held Young America failed to establish causation.
As explained above, the audit demand letters do not threaten suit if Young America
refuses to submit to an audit, and even if the states can penalize Young America for
failing to submit to an audit, Young America failed to allege ACS has the authority
to litigate on the states’ behalf.
C. Redressability
Finally, the district court held Young America failed to establish redressability,
because it is “at best speculative” whether a judgment against ACS would control the
states’ ability to enforce their unclaimed property statutes. Without citing any
authority, Young America contends the states would be bound by the determination
of the issues litigated in this action, because ACS is their authorized agent.
To establish redressability, “it must be more than merely speculative that the
relief requested would have any effect to redress the harm to the plaintiff.” Hall v.
LHACO, Inc., 140 F.3d 1190, 1196 (8th Cir. 1998). We agree with the district
court’s conclusion that it is speculative, at best, whether a judgment in this case
would bind the states, because there is no indication ACS has authority to represent
and bind the states in this action. See Headley v. Bacon, 828 F.2d 1272, 1277 (8th
Cir. 1987) (stating “[t]he crucial point is whether or not in the earlier litigation the
representative of the [third party] had authority to represent its interests in a final
adjudication of the issue in controversy”) (quotation omitted).
-7-
III. CONCLUSION
We affirm the district court’s dismissal of this action for lack of subject matter
jurisdiction.
______________________________
-8-