# Time Warner Cable v. Doyle

> Court of Appeals for the Seventh Circuit · September 25, 1995 · 66 F.3d 867

URL: https://www.frixlaw.com/law-library/cases/6936335

## Case

- **Full name:** TIME WARNER CABLE, a division of Time Warner Entertainment Company, L.P. v. James E. DOYLE, in his capacity as Attorney General of the State of Wisconsin, and Alan T. Tracy, in his capacity as Secretary of the Wisconsin Department of Agriculture, Trade and Consumer Protection
- **Court:** Court of Appeals for the Seventh Circuit
- **Decided:** September 25, 1995
- **Citations:** 66 F.3d 867; 1995 WL 562283
- **Precedential status:** Published
- **Opinion:** Dissent by Ferguson
- **Judges:** Ferguson, Ripple, Rovner
- **Cited by:** 58 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/6936335

## How later opinions describe it (automated extraction)

- holding that the FCC regulation promulgated under Cable Act preempts state administrative enforcement action to prohibit negative option billing
- noting authority from the Supreme Court and the Fourth and Third Circuits holding that Burford abstention is inappropriate when preemption issues are present in a case

## Opinion text

FERGUSON, Circuit Judge,
dissenting.
I dissent from the majority opinion for two reasons. First, the district court and the majority should have abstained from deciding this ease, and second, even if the abstention doctrine did not apply, the majority erred in its preemption analysis.
I.
The dispute between the parties began with an enforcement action filed by the State before the Wisconsin Department of Agriculture, Trade and Consumer Protection. The State charged plaintiff Time Warner with violation of Wis.Stat. § 100.20 (1995), a state consumer protection law which provides in part:
(1) Methods of competition in business and trade practices in business shall be fair. Unfair methods of competition in business and unfair trade practices in business are hereby prohibited.
Wis.Stat. § 100.20(1). The State sought to enforce this unfair trade practice statute through an injunction prohibiting Time Warner from continuing its practice of charging existing customers for a la carte channels by a method that the state alleged amounted to negative option billing. Time Warner then filed suit in federal district court to enjoin the state administrative proceeding. In federal court, Time Warner argued that the Wisconsin statute was preempted by a Federal Communications Commission (“FCC”) regulation and that Wisconsin’s attempt to regulate Time Warner’s conduct violated the federal 1992 Cable Television Consumer Protection and Competition Act.
Under these circumstances, the district court was required to abstain from deciding *883 Time Warner’s claim pursuant to Younger v. Harris, 401 U.S. 37 , 91 S.Ct. 746 , 27 L.Ed.2d 669 (1971). This Court recently described the importance of the Younger abstention doctrine in Trust & Investment Advisers, Inc. v. Hogsett, 43 F.3d 290 (7th Cir.1994), when it stated that the most important reasons for applying the Younger abstention doctrine are “the notions of comity and federalism at the heart of our nation’s delicate balancing act.” Id. at 294. The Younger abstention doctrine requires a federal court to pay careful attention to the interests of the state in order to protect those interests.
Comity may even require a federal court to recognize the state’s interest sua sponte and to apply abstention principles, including a Younger abstention, when the attorney general may not have recognized the need to do so. Bellotti v. Baird, 428 U.S. 132 , 143 n. 10, 96 S.Ct. 2857 , 2864 n. 10, 49 L.Ed.2d 844 (1976) (“[I]t would appear that abstention may be raised by the court sua sponte.”); Waldron v. McAtee, 723 F.2d 1348, 1350 (7th Cir.1983) (abstaining pursuant to Pullman, stating “the court has the power and in an appropriate case the duty to order abstention, if necessary for the first time at the appellate level, even though no party is asking for it.”); O’Neill v. City of Philadelphia, 32 F.3d 785 , 786 n. 1 (3d Cir.1994) (citing Bellotti in support of its statement that “[e]ven though the question of Younger abstention was not raised by the parties on appeal, we may consider it sua sponte.”), cert. denied, — U.S. -, 115 S.Ct. 1355 , 131 L.Ed.2d 213 (1995). Unlike other forms of abstention, which vest the district court with discretion to decline jurisdiction, a Younger case proscribes discretion and requires the district court to abstain. Hogsett, 43 F.3d at 294 .
The Younger abstention doctrine applies equally to state administrative proceedings that are judicial in nature and that implicate important state interests. See Middlesex County Ethics Comm. v. Garden State Bar Assoc., 457 U.S. 423 , 102 S.Ct. 2515 , 73 L.Ed.2d 116 (1982) (Younger abstention applied in light of a state lawyer disciplinary proceeding); Ohio Civil Rights Comm’n v. Dayton Christian Sch., Inc., 477 U.S. 619, 106 S.Ct. 2718 , 91 L.Ed.2d 512 (1986) (Younger abstention applied in fight of a proceeding before a state civil rights commission); New Orleans Public Service, Inc. v. Council of City of New Orleans, 491 U.S. 350, 367-68 , 109 S.Ct. 2506, 2517-18 , 105 L.Ed.2d 298 (1989) (Younger abstention appropriate where an important state interest is implicated).
In Hogsett , this Court adopted a three-part test to determine the applicability of the Younger abstention doctrine: 1) are there ongoing state judicial proceedings; 2) do the proceedings implicate an important state interest; and 3) is there an adequate opportunity in the state proceeding to raise constitutional challenges? Hogsett, 43 F.3d at 295 . If so, the district court must abstain from deciding the controversy. Id. at 294 .
The first part of the test is easily satisfied here. The state proceedings have not been resolved before the Wisconsin state agency, nor have they been reviewed by the state courts. As for the second part of the test, there are few state interests that are more important or more clearly within the proper control of the state than consumer protection. See, e.g., California v. ARC America Corp., 490 U.S. 93, 101 , 109 S.Ct. 1661, 1665 , 104 L.Ed.2d 86 (1989) (“Given the long history of state common-law and statutory remedies against monopolies and unfair business practices, it is plain that this is an area traditionally regulated by the states.”). In contrast to free speech and other cases involving federal rights, the protection of consumers falls within the traditional police power of the state. Id. One indicator of the importance of the state interest in protecting consumers is the fact that the state’s attorney general instituted the state proceeding and was the named defendant in the federal suit. See Middlesex County Ethics Comm., 457 U.S. at 434-35 , 102 S.Ct. at 2522-23 . The district court and the majority have failed to consider the substantiality of the state’s interest in the generic proceedings in this ease.
In addition to the substantial impact on consumer protection caused by Time Warner’s practice of billing its customers for a la carte services, this practice also strongly im *884 plicates traditional contract law. When Time Warner agrees to provide cable television services to a customer, Time Warner forms a contract with the customer to provide enumerated services. Time Warner’s alteration of its billing scheme is potentially a violation of the contract and the terms as provided therein. These basic contract considerations are also best protected by the state in its protection of consumers as well as in its regulation of the enforcement of contracts formed within its jurisdiction.
Important considerations of comity and federalism are raised in this case, but the district court and the majority fail to consider them. The state’s broad interest in protecting consumers by enjoining what it adjudicates to be unfair trade practices should not be so easily limited by the federal courts, particularly when that interest is being developed in an ongoing proceeding. As this Court has acknowledged, “ ‘the National Government, anxious though it may be to vindicate and protect federal rights and federal interests, always [must] endeavor[] to do so in ways that will not unduly interfere with the legitimate activities of the States.’ ” American Federation of State, County, and Municipal Employees v. Tristano, 898 F.2d 1302, 1304 (7th Cir.1990) (quoting Younger, 401 U.S. at 44 , 91 S.Ct. at 750-51 ). In this case, the district court should have balanced the state’s interest in protecting its consumers through enforcement of its consumer protection statute against the federal interest in determining the preemptive effect of a federal regulation. Had the district court properly weighed these interests, it would have understood that the state’s interest clearly can, and in this ease, does outweigh the federal interest in resolving the potential preemption question. See New Orleans Public Service, 491 U.S. at 365 , 109 S.Ct. at 2516-17 (holding that the federal interest in enforcing the Supremacy Clause did not outweigh the state’s interest in regulating its utilities).
Finally, the third part of the Younger test is also resolved in favor of abstention in this case. Whether the Wisconsin Department of Agriculture, Trade & Consumer Protection will be able to or will chose to decide the constitutional issues that may arise in this case has yet to be determined. However, the critical fact for the purposes of the Younger abstention doctrine is whether a party has an adequate opportunity to raise constitutional challenges. The Wisconsin statute itself provides for judicial review of the Wisconsin agency’s actions. Wis.Stat. § 100.20(4) (citing the Wisconsin Administrative Procedure Act, Wis.Stat. § 227 (1995)) (section 227.52 provides for judicial review of administrative decisions adversely affecting the substantial interest of any party). Therefore, the third prong of the Younger test is satisfied.
Even were the district court to have found that it was not required to abstain in this case pursuant to Younger , the district court nevertheless had the discretion to abstain. The district court should have exercised its discretion and abstained on the basis of Railroad Comm’n v. Pullman Co., 312 U.S. 496 , 61 S.Ct. 643 , 85 L.Ed. 971 (1941). As this Court has previously held, “[t]he main purpose of the Pullman doctrine is to avoid, if possible, declaring a state statute unconstitutional, by giving the state courts a chance to interpret it narrowly.” Mazanec v. North Judson-San Pierre School Corp., 763 F.2d 845, 847 (7th Cir.1985). Pullman abstention may be applied so long as two requirements are met: 1) there is some risk that the state statute will be found unconstitutional unless narrowed;, and 2) there is some reasonable chance that the state statute can be narrowed through interpretation. Id. The Supreme Court has applied Pullman abstention where the preemptive effect of a federal law could have been avoided or limited by a narrow interpretation of the state statute. Lake Carriers’ Ass’n v. MacMullan, 406 U.S. 498, 512 , 92 S.Ct. 1749, 1758 , 32 L.Ed.2d 257 (1972) (holding that the district court should have abstained pursuant to Pullman in order to allow the state courts to resolve ambiguities in the state law that were sufficiently likely to modify the federal questions, including preemption, raised by the appellants).
Indeed, in this case the Pullman abstention is clearly applicable precisely because the FCC regulation will have no preemptive effect if the Wisconsin agency interprets the state statute narrowly. Thus both of the *885 Pullman requirements are satisfied. First, there is some risk that the Wisconsin consumer protection statute will be found to be unconstitutional if the state applies it in the face of a preemptive FCC regulation. See MacMullan, 406 U.S. at 512 , 92 S.Ct. at 1758 . Second, there is a reasonable chance that the Wisconsin Department of Agriculture, Trade & Consumer Protection will interpret the consumer protection statute narrowly enough that it will have no impact on cable rate-setting or on the other subject matter of the 1992 Cable Television Consumer Protection and Competition Act or the FCC regulation.
Moreover, the Wisconsin agency may determine that the Wisconsin statute is either invalid or that it is not violated in this particular circumstance. Just as in MacMullan , the state agency’s determinations in this matter could completely modify or render moot the federal questions raised by Time Warner. MacMullan, 406 U.S. at 512 , 92 S.Ct. at 1758 . The district court should have abstained in order to allow the state proceedings to resolve this controversy through its interpretation of the state statute.
II.
In addition to failing to abstain in this case, the majority have also erred in holding that the Wisconsin consumer protection statute is preempted by the 1992 Cable' Act and its derivative FCC regulations.
The majority conclude that the Wisconsin law is preempted because the consumer protection law in issue will affect the rate structure of cable services. This argument is not only contrary to.established law, but it also elevates form over substance.
The Supreme Court has consistently imposed a strong presumption against preemption.
Consideration of issues arising under the Supremacy Clause ‘start with the assumption that the historie police powers of the States [are] not to be superseded by ... Federal Act unless that [is] the clear and manifest purpose of Congress.’
Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516 , 112 S.Ct. 2608, 2617 , 120 L.Ed.2d 407 (1992) (quoting Rice v. Santa Fe Elevartor Corp., 381 U.S. 218 , 230, 67 S.Ct. 1146, 1152 , 91 L.Ed. 1447 (1947)). In its most recent decision on preemption, the Supreme Court rejected a broad reading of the seemingly expansive term “relate[s] to” as potentially unbounded. N.Y. State Conference of Blue Cross v. Travelers Ins., — U.S. -, -, 115 S.Ct. 1671, 1677 , 131 L.Ed.2d 695 (1995). Nevertheless, the majority here argues that “the transaction costs involved in complying with a state negative billing prohibition [will] impact on the rate rules by discouraging the provision of new services at a reasonable cost,” supra at 882. This reasoning, taken to its logical end, is also potentially unbounded as it results in all state consumer laws being classified as “rate structures.” Such an interpretation would require all consumer protection laws to be preempted since all such regulation potentially affects cable rates — albeit indirectly. Such an expansive interpretation has already been rejected under the Cable Communications Policy Act of 1984 and need not be revived. See Cable Television Ass’n v. Finneran, 954 F.2d 91 (2d Cir.1992) (holding that a statute that preempts “regulation of rates” does not preempt state regulation of matters that may affect cable rates indirectly).
Here, the federal preemption question is resolved by the terms of the statute. The Act provides that:
[a] cable operator shall not charge a subscriber for any service or equipment that the subscriber has not affirmatively requested by name.
47 U.S.C. § 543 (f). There is no dispute that the term “service” includes each of the individual channels that were “unbundled” in this case. Despite the plaintiffs claim that the subscriber “affirmatively requested” the a la carte channels by agreeing to the original cable package, the fact remains that the subscriber never requested the “unbundled” channels “by name,” as the statute requires. The Cable Act provides that before any subscriber receives any individual channel, the subscriber must affirmatively request that channel “by name.” Subscribing to a general package of cable channels is not requesting each of those channels “by name.”
*886 The statutory language is unambiguous and, as a result, there is no need to examine the reasonableness of the interpretation given to the statute by the FCC. The plain meaning of the language of the 1992 Cable Act establishes that the Wisconsin consumer protection law is not preempted.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/6936335. Public record. Not legal advice.