Altice USA Inc v. New Jersey Board of Public Uty

PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

______________

No. 21-1791

______________

ALTICE USA, INC.

v.

NEW JERSEY BOARD OF PUBLIC UTILITIES;

JOSEPH FIORDALISO,

in his official capacity as President of the New Jersey Board

of Public Utilities; COMMISSIONER MARY-ANNA

HOLDEN; DIANE SOLOMON;

UPENDRA J. CHIVUKULA; BOB M. GORDON,

Appellants

______________

Appeal from the United States District Court

for the District of New Jersey

(D.C. No. 3-19-cv-21371)

U.S. District Judge: Honorable Brian R. Martinotti

______________

Argued January 27, 2022

______________

Before: HARDIMAN, SHWARTZ, and SMITH, Circuit

Judges.

(Filed: February 24, 2022)

______________

Alec Schierenbeck [ARGUED]

Meliha Arnautovic

Office of Attorney General of New Jersey

Division of Law

7th Fl, West Wing

25 Market Street

Richard J. Hughes Justice Complex

Trenton, NJ 08625

Counsel for Appellants

Matthew Hellman [ARGUED]

Howard J. Symons

Jenner & Block

1099 New York Avenue, N.W.

Suite 900

Washington, DC 20001

Thomas N. Gamarello

Jeffrey T. LaRosa

Schenck Price Smith & King

220 Park Avenue

P.O. Box 991

Florham Park, NJ 07932

Counsel for Appellee

2

______________

OPINION OF THE COURT

______________

SHWARTZ, Circuit Judge.

The New Jersey Board of Public Utilities (“BPU”)

ordered Altice USA, Inc. (“Altice”), a cable service provider,

to prorate its bills for the month in which a cable customer

cancels his service, as required by New Jersey law (“Proration

Requirement”). Altice asserts that the Proration Requirement

is preempted by the Cable Communications Policy Act of 1984

(“Cable Act”). The District Court agreed and granted Altice’s

motion for judgment on the pleadings, concluding that

abstention under Younger v. Harris, 401 U.S. 37 (1971), was

not warranted and that the Proration Requirement was

preempted. Because the Younger ruling was incorrect, we will

vacate and remand.

I

A

Under N.J.A.C. § 14:18-16.7, a cable television

company may seek relief from, among other things, N.J.A.C.

§ 14:18-3.8(c)’s requirement that, “[u]nless otherwise

provided for . . . , initial and final bills . . . be prorated as of the

date of the initial establishment and final termination of

service.” See also N.J.A.C. § 14:18-3.8(a). Relief from the

Proration Requirement may be granted “provided that the cable

television company provides a sample bill to be utilized in lieu

of compliance with [the] section.” N.J.A.C. § 14:18-

3

16.7(a)(1).

In 2011, Cablevision petitioned the BPU for relief from

N.J.A.C. § 14:18-3.8 and provided sample bills. The BPU

accepted Cablevision’s assertion that “its sample bill

demonstrate[d] that the company [wa]s billing in a proper

manner and show[ed] how [it] will prorate its bills pursuant to

the requirements of this section,” J.A. 123, and granted its

request for relief.

In 2016, Altice received the BPU’s approval to acquire

Cablevision. As part of the approval, Altice agreed to

abide by applicable customer service

standards, performance standards, and service

metrics as delineated under N.J.A.C. Title 14,

including but not limited to Chapters 3, 10 and

18, and N.J.S.A. 48:5A, including, but not

limited to, requirements related to billing

practices and termination.

J.A. 144.

Despite this agreement, and unlike Cablevision, Altice

chose not to prorate its monthly bills absent “extraordinary

circumstances.” J.A. 82 ¶ 2. As a result, “customers who . . .

seek to cancel service continue to receive service and are billed

through the end of their monthly billing cycle.” J.A. 82 ¶ 2.

B

The BPU received numerous customer complaints

about Altice’s failure to prorate bills. N.J.S.A. § 48:5A-9

4

empowers the BPU to investigate complaints of alleged

violations of the New Jersey Cable Television Act and render

decisions necessary to enforce its terms. Pursuant to that

authority, the BPU issued a Show Cause Order, directing

Altice to explain why its failure to prorate its bills was not a

violation of the order Cablevision obtained and the order

approving the merger.

Altice filed an answer to the Show Cause Order,

asserting that the Proration Requirement was preempted by

federal law and that, in any event, it need not comply with the

Proration Requirement based upon the relief Cablevision

secured in 2011.

The BPU disagreed, found that Altice violated the

Proration Requirement, and issued a cease and desist order that

directed Altice to (1) prorate bills, (2) issue refunds to

customers whose bills were not prorated, (3) pay $10,000 to

the Altice Advantage Internet program, which “provide[s] low

cost internet service” to eligible customers, and (4) conduct an

audit to determine which customers were not given prorated

bills and provide the BPU with the names and account numbers

of those customers. J.A. 230–31. Altice then filed an appeal

with the New Jersey Superior Court. See In re Altice USA,

Inc., No. A-1269-19, 2021 WL 4808399 (N.J. Super. Ct. App.

Div. Oct. 15, 2021), petition for cert. filed, No. 086408 (N.J.

Nov. 23, 2021).

C

While its state court appeal was pending, Altice filed a

complaint in the United States District Court for the District of

New Jersey. In its amended complaint, Altice asserted that (1)

5

the Proration Requirement is preempted by the Cable Act; (2)

enforcing the Proration Requirement deprives Altice of its

rights under the Cable Act; (3) the BPU failed to obey Federal

Communications Commission orders that determined

Cablevision, and Altice by extension, is subject to effective

competition; and (4) the BPU’s actions violate New Jersey law.

The District Court granted Altice a preliminary

injunction on federal preemption grounds alone, enjoining

enforcement of the BPU’s order. See Altice USA, Inc. v. N.J.

Bd. of Pub. Utils., No. 3:19-CV-21371-BRM-ZNQ, 2020 WL

359398, at *1 (D.N.J. Jan. 22, 2020), reconsideration denied,

2020 WL 1151045 (D.N.J. Mar. 10, 2020). The Court

concluded that (1) abstention under Younger was not

warranted; and (2) Altice had shown, among other things, a

likelihood of success in establishing that the Proration

Requirement is a rate regulation preempted by the Cable Act.

See id. at *6–8. The BPU appealed the preliminary injunction

ruling but later withdrew that appeal.

After the District Court granted the preliminary

injunction, Altice moved for judgment on the pleadings, and

the BPU cross-moved to dismiss. The District Court granted

Altice’s motion and denied the BPU’s cross-motion. See

Altice USA, Inc. v. Fiordaliso, No. 3:19-CV-21371-BRM-

ZNQ, 2021 WL 1138152 (D.N.J. Mar. 23, 2021). The District

Court again declined to abstain under Younger, holding that

the underlying proceeding was not “quasi-criminal” in nature

and noting that the purported absence of a criminal analog was,

in its view, dispositive. Id. at *2–3. As to the merits, the

District Court held that the Proration Requirement was

preempted as a rate regulation because it has “the effect of

prescribing a daily rate for the service that was provided before

6

the cancellation,” id. at *4 (quotation marks and citation

omitted), and that the Cable Act’s savings clauses “do not

affect the Cable Act’s express preemption over N.J.A.C.

14:18-3.8(c),” id. at *7.

The BPU appeals.

II1

A2

In general, “federal courts are obliged to decide cases

within the scope of federal jurisdiction.” Sprint Commc’ns,

1

The District Court had jurisdiction pursuant to 28

U.S.C. §§ 1331, 1332, and 1367. We have jurisdiction

pursuant to 28 U.S.C. § 1291. We review the Younger ruling

and the order granting judgment on the pleadings under Rule

12(c) de novo. PDX N., Inc. v. Comm’r N.J. Dep’t of Lab. &

Workforce Dev., 978 F.3d 871, 881 n.11 (3d Cir. 2020), cert.

denied sub nom. PDX N., Inc. v. Asaro-Angelo, 142 S. Ct. 69

(2021); In re Fosamax (Alendronate Sodium) Prods. Liab.

Litig. (No. II), 751 F.3d 150, 156 n.11 (3d Cir. 2014). In

reviewing a Rule 12(c) motion, “we must ‘view the facts

presented in the pleadings and the inferences to be drawn

therefrom in the light most favorable to the nonmoving party,’

and we may not affirm the grant of such a motion ‘unless the

movant clearly establishes that no material issue of fact

remains to be resolved and that he is entitled to judgment as a

matter of law.’” PDX N., 978 F.3d at 881 n.11 (quoting

Wolfington v. Reconstructive Orthopaedic Assocs. II PC, 935

F.3d 187, 195 (3d Cir. 2019) (quotation marks omitted)).

2

Altice claims that the BPU forfeited its Younger

7

Inc. v. Jacobs, 571 U.S. 69, 72 (2013). In certain limited

circumstances, however, “the prospect of undue interference

with state proceedings counsels against federal relief.” Id.

Under the Younger abstention doctrine, federal courts must

refrain from interfering with three types of state proceedings:

(1) “state criminal prosecutions,” (2) “civil enforcement

proceedings,” and (3) “civil proceedings involving certain

orders . . . uniquely in furtherance of the state courts’ ability to

perform their judicial functions.” Id. at 73. The BPU argues

that the District Court should have abstained under Younger

argument by failing to raise it in its withdrawn appeal from the

District Court’s order granting Altice’s motion for a

preliminary injunction. In its motion for judgment on the

pleadings, Altice informed the District Court that the BPU did

not raise Younger in its withdrawn appeal, but it did not make

a specific forfeiture argument. Cf. In re Ins. Brokerage

Antitrust Litig., 579 F.3d 241, 262 (3d Cir. 2009) (“A fleeting

reference or vague allusion to an issue will not suffice to

preserve it for appeal.”). “Whether an argument remains fair

game on appeal is determined by the degree of particularity

with which it was raised in the trial court . . . and parties must

do so with exacting specificity.” Spireas v. Comm’r, 886 F.3d

315, 321 (3d Cir. 2018) (quotation marks and citations

omitted). Accordingly, Altice forfeited its forfeiture argument,

and “we will not reach a forfeited issue in civil cases absent

truly ‘exceptional circumstances.’” Barna v. Bd. of Sch. Dirs.,

877 F.3d 136, 147 (3d Cir. 2017) (quoting Brown v. Philip

Morris Inc., 250 F.3d 789, 799 (3d Cir. 2001)). In any event,

a court may raise Younger abstention sua sponte. O’Neill v.

City of Phila., 32 F.3d 785, 786 n.1 (3d Cir. 1994).

8

because the administrative proceeding before the BPU is a civil

enforcement proceeding.

A “civil enforcement proceeding” warrants Younger

abstention where the proceeding is “akin to a criminal

prosecution” in “important respects.” Sprint, 571 U.S. at 79

(quoting Huffman v. Pursue, Ltd., 420 U.S. 592, 604 (1975)).

To determine if a civil enforcement proceeding is quasi-

criminal in nature, courts may consider whether (1) “the action

was commenced by the State in its sovereign capacity,” (2) the

action was “initiated to sanction the federal plaintiff for some

wrongful act,” (3) “there are other similarities to criminal

actions, such as a preliminary investigation that culminated

with the filing of formal charges,” and (4) “the State could have

alternatively sought to enforce a parallel criminal statute.”

ACRA Turf Club, LLC v. Zanzuccki, 748 F.3d 127, 138 (3d

Cir. 2014); see also Sprint, 571 U.S. at 79–80 (enumerating the

first three factors). If these considerations demonstrate that the

civil proceeding is quasi-criminal in nature, then we consider

whether abstention is warranted under the factors set forth in

Middlesex County Ethics Committee v. Garden State Bar

Association, 457 U.S. 423 (1982). PDX N., Inc. v. Comm’r

N.J. Dep’t of Lab. & Workforce Dev., 978 F.3d 871, 883 (3d

Cir. 2020), cert. denied sub nom. PDX N., Inc. v. Asaro-

Angelo, 142 S. Ct. 69 (2021). We will first examine whether

the BPU Show Cause proceeding is a civil enforcement

proceeding.

B

The BPU, a New Jersey regulatory agency, initiated the

administrative action in its sovereign capacity. See In re RCN

of NY, 892 A.2d 636, 637, 640 (N.J. 2006). The proceeding

9

began when the BPU issued a Show Cause Order pursuant to

its authority under “the Cable Television Act and the BPU’s

implementing rules and regulations.” J.A. 95 ¶ 46. Thus, the

BPU commenced the action against Altice by filing a formal

complaint—the Show Cause Order—and did so in its

sovereign capacity.

We disagree with Altice’s assertion that the Show

Cause Order was an extension of Cablevision’s 2011 petition

for relief from certain provisions of the New Jersey

Administrative Code. The Cablevision proceeding concluded

in 2011 and the record does not show that either party sought

to reopen it. Further, although Altice views the BPU’s action

as modifying the 2011 order, the record shows that the BPU

used the Show Cause Order to start a new proceeding based on

recent customer complaints about Altice’s conduct, and it

assigned the matter a new name and docket number, examined

complaints about that conduct, and granted relief that did not

impact the 2011 order Cablevision secured based on its

prorated bills. Accordingly, the BPU commenced a

proceeding in its sovereign capacity that had attributes similar

to the filing of formal charges.

The action was also initiated to sanction the federal

plaintiff for a wrongful act. The failure to prorate bills is

wrongful conduct because it violates duly promulgated BPU

regulations. A violation of the Cable Television Act, or any

rule, regulation, or order promulgated under it, carries the

possibility of an injunction and “penalt[ies]” of up to $10,000

“for a third and every subsequent offense.” N.J.S.A. § 48:5A-

51(b)–(c). “Penalties are, by their very nature, retributive: a

sanction for wrongful conduct,” PDX N., 978 F.3d at 884, and

the BPU imposed penalties here. Among other things, the

10

BPU ordered Altice to cease its non-proration practice. Cease

and desist orders qualify as sanctions that support Younger

abstention. See Minn. Living Assistance, Inc. v. Peterson, 899

F.3d 548, 553 (8th Cir. 2018). The BPU also assessed a

$10,000 penalty. Altice asserts that this $10,000 penalty was

not a sanction for Younger purposes because the BPU directed

that the fine go towards Altice’s Advantage Program, but how

the government chooses to allocate the proceeds of a fine does

not change its character as a sanction. See also PDX N., 978

F.3d at 884 (holding that monetary penalties constitute

sanctions even when they are directed to a special government

fund). Accordingly, the BPU’s directives for noncompliance

with the Proration Requirement go beyond “incentiv[es]” to

comply, or mere “negative consequences,” ACRA Turf Club,

LLC, 748 F.3d at 140 (emphasis omitted), and instead

constitute penalties for Younger purposes. We therefore

conclude that the action was initiated to—and did—sanction

the federal plaintiff, Altice, for a wrongful act.

The Show Cause Order and sanctions followed an

investigation into customer complaints. See Minn. Living

Assistance, Inc., 899 F.3d at 552–53 (concluding an

“underlying proceeding [bore] the first and third characteristics

of a civil proceeding akin to a criminal prosecution” “even

though the investigation was triggered by an employee

complaint” (citing Ohio Civ. Rts. Comm’n v. Dayton Christian

Schs., Inc., 477 U.S. 619, 623–24 (1986))). The BPU is

empowered to investigate violations of the Cable Television

Act. See N.J.S.A. § 48:5A-9 (“The [B]oard . . . shall have full

right, power, authority and jurisdiction to: . . . (c) institute all

. . . investigations . . . necessary to enforce the provisions of

[the Cable Television Act], [and] of the rules and regulations

adopted thereunder[.]”). In response to more than 100

11

complaints concerning Altice’s billing practices, the BPU

examined those practices, reviewed documents, and spoke with

Altice representatives. Based upon this information, the BPU

found that Altice violated New Jersey law and imposed

sanctions.

Finally, the lack of a criminal analog is not a

prerequisite to Younger abstention. See, e.g., Sirva

Relocation, LLC v. Richie, 794 F.3d 185, 194 (1st Cir. 2015).

Indeed, the Supreme Court has sustained Younger abstention

in cases where no criminal analog existed. See Ohio Civ. Rts.

Comm’n, 477 U.S. at 627–28 (civil rights proceeding

regarding workplace sex discrimination); Middlesex Cnty.

Ethics Comm., 457 U.S. at 428–29 (attorney disciplinary

hearing).

Even if a criminal analog were required, however, New

Jersey law criminalizes some violations of the Cable

Television Act. See ACRA Turf Club, LLC, 748 F.3d at 139

(considering whether “the policies implicated in the state

proceeding could have been vindicated through enforcement of

a parallel criminal statute”). Under N.J.S.A. § 48:5A-51(a),

“any person” who “knowingly violate[s]” the Cable Television

Act “is guilty of a misdemeanor.” The Cable Television Act

provides that every cable company “shall obey and comply

with every rule and regulation and order adopted or issued by”

the Director of the Office of Cable Television. N.J.S.A.

§ 48:5A-36(c). One such regulation is the Proration

Requirement. N.J.A.C. § 14:18-3.8. Moreover, N.J.S.A.

§ 48:5A-39 forbids cable companies from “adopt[ing],

maintain[ing,] or enfor[ing] . . . [a] practice . . . which shall be

unjust, unreasonable, . . . or otherwise in violation of law.” Cf.

N.J.S.A. § 48:5A-11a(a) (requiring the Director to promulgate

12

rules and regulations regarding prorated credits or rebates

during certain outages). Thus, if a cable company violates

provisions of the Cable Television Act, it may be subject to

prosecution, which is enough to show that there is a criminal

analog to the civil proceeding here. See PDX N., 978 F.3d at

884; Minn. Living Assistance, Inc., 899 F.3d at 553 (rejecting

the contention that no criminal analog existed where the

Minnesota Fair Labor Standards Act “provide[d] for criminal

penalties in addition to . . . civil penalties”).

Altice’s assertion that the state authorities could not

have proven Altice violated a criminal statute is irrelevant.

“[T]he question is not whether the current action is criminal or

whether criminal charges are warranted.” PDX N., 978 F.3d at

884. The relevant “question is whether there is a criminal

analog.” Id. A court need not evaluate the evidence and decide

whether a criminal case against the party would succeed. See

Bristol-Myers Squibb Co. v. Connors, 979 F.3d 732, 737–38

(9th Cir. 2020) (“[W]hen evaluating whether the

characteristics of actions entitled to Younger abstention are

present, the Supreme Court has considered the nature of a

State’s interest in different classes of proceedings, not its

interest in specific cases.”). We therefore conclude that, while

a criminal analog is not required, one does exist here.

For these reasons, the BPU’s civil enforcement

proceeding was quasi-criminal in nature and, thus, the type of

proceeding to which Younger applies.

C

To determine whether the District Court should have

abstained pursuant to Younger, we next examine the

13

Middlesex factors. See PDX N., 978 F.3d at 883. We will

therefore now consider whether: (1) there are “ongoing . . .

judicial proceeding[s];” (2) the “proceedings implicate

important state interests;” and (3) the party against whom

abstention is asserted has “an adequate opportunity in the state

proceeding[] to raise constitutional challenges.” Middlesex,

457 U.S. at 432. Each factor supports Younger abstention

here.

First, the proceeding was judicial in nature and ongoing

when the federal complaint was filed. “[P]roceedings may be

judicial in nature if,” for example, judicial review is available,

“they are initiated by a complaint, adjudicative in nature,

governed by court rules or rules of procedure, or employ legal

burdens of proof.” Kendall v. Russell, 572 F.3d 126, 131 (3d

Cir. 2009).3 Here, the BPU initiated proceedings with the

Show Cause Order; Altice answered; the New Jersey Rate

Counsel responded; the BPU considered evidence, made

factual determinations and ordered relief; and the BPU’s

“ultimate decision . . . [was then] appealed to an undeniably

judicial forum—the New Jersey Superior Court, Appellate

Division.” Gonzalez v. Waterfront Comm’n of N.Y. Harbor,

755 F.3d 176, 183 (3d Cir. 2014); see also N.J.A.C. § 14:18-

16.8 (listing procedures to be followed in enforcement

actions); N.J.S.A. § 48:5A-51(b)-(c) (noting procedures when

3

“[W]hen confronted with administrative matters

appealable to the state courts, ‘[w]e will assume . . . that an

administrative adjudication and the subsequent state court’s

review of it count as a unitary process’ for Younger purposes.”

Gonzalez v. Waterfront Comm’n of N.Y. Harbor, 755 F.3d

176, 183 (3d Cir. 2014) (alteration in original) (quoting Sprint,

571 U.S. at 78).

14

BPU seeks an injunction or a penalty). Moreover, the state

court appeal was pending when Altice filed its federal

complaint. “‘[S]tate proceedings are ongoing for Younger

abstention purposes’ . . . if the state proceeding ‘was pending

at the time [the plaintiff] filed its initial complaint in federal

court.’” PDX N., 978 F.3d at 885 (second alteration in

original) (quoting Addiction Specialists, Inc. v. Twp. of

Hampton, 411 F.3d 399, 408–09 (3d Cir. 2005)). Altice was,

therefore, subject to an ongoing judicial proceeding when it

filed its federal complaint.

Second, the proceeding here implicates important state

interests. Altice does not dispute that the state has an important

interest in ensuring compliance with the Cable Television Act,

particularly its consumer-oriented provisions. See, e.g., New

Orleans Pub. Serv., Inc. v. Council of City of New Orleans,

491 U.S. 350, 365 (1989) (“[W]hen we inquire into the

substantiality of the State’s interest in its proceedings we do

not look narrowly to its interest in the outcome of the particular

case . . . . , [r]ather, what we look to is the importance of the

generic proceedings to the State.”).

Third, Altice has an adequate opportunity to raise its

federal claims in the state proceeding. See, e.g., Gonzalez, 755

F.3d at 184 (concluding that the ability to appeal an

Administrative Law Judge determination to the New Jersey

Superior Court, Appellate Division, was sufficient for Younger

purposes). In fact, Altice raised with the Appellate Division its

assertion that the Proration Requirement is preempted by the

Cable Act. In re Altice USA, Inc., 2021 WL 4808399, at *2.

Because the Middlesex factors support abstaining in

favor of the quasi-criminal proceeding, we will abstain.

15

III

For the foregoing reasons, we will vacate the District

Court’s order and remand for it to dismiss the amended

complaint.

16