Petition for Writ of Certiorari — Carbaugh v. Telco Communications, Inc.
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In The JOSEPH F. SPANIOL, JR.
CLERK
Supreme Court of the United (5
October Term, 1989
a
4
S. MASON CARBAUGH,
Petitioner,
TELCO COMMUNICATIONS, INC.,
Respondent.
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4
PETITION FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
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Mary Sue TERRY
Attorney General of Virginia
H. LANE KNEEDLER
Chief Deputy Attorney General
Gait STARLING MARSHALL
Deputy Attorney General
FRANK SEALES, JR.
*Guy W. Hors ey, Jr.
Senior Assistant Attorneys
General
Epwarp P. Nope
Assistant Attorney General
Office of the Attorney General
101 North Eighth Street
Supreme Court Building
Richmond, Virginia 23219
(804) 786-6563
*Counsel of Record
Dated: February 7, 1990
COCKLE LAW BRIEF PRINTING CO,, (800) 225-6964
OR CALL COLLECT (402) 342-2831
¥Y VA
QUESTION PRESENTED FOR REVIEW
Whether a federal court must abstain under Younger from
accepting jurisdiction of a constitutional challenge to
state laws after administrative charges have been issued
under those laws but before adjudication in the state
courts.
ii
PARTIES
The only parties to this proceeding are listed in the
caption. Petitioner is S. Mason Carbaugh, Commissioner
of the Virginia Department of Agriculture and Consumer
Services. Respondent is Telco Communications, Inc.
ili
TABLE OF CONTENTS
Page
QUESTION PRESENTED FOR REVIEW ............ i
EE ee ee ii
9 | | V
EE i sec ete eens es asetseves 1
a hae yk sos sn dabis sad siswseercees 1
gn 1
emeemeee SP BESO CASE... 2.2... cece cece ees 2
ee A a a eee 2
B. The Virginia Administrative Process Act ..... 2
C. Virginia’s Charitable Solicitation Laws....... ;
D. OCA Enforcement Actions Against Telco..... 4
BASIS FOR FEDERAL JURISDICTION ............. 5
REASONS FOR GRANTING THE WRIT ........... 5
I. The Fourth Circuit’s Ruling Reflects a Funda-
mental Misunderstanding of Younger Absten-
tion and Threatens the Tenets of Federalism
Safeguarded by That Doctrine ............... 5
66s esha 54 ct scansed nese 5
B. Telco’s Federal Suit Interrupted An Ongo-
ing State Judicial Proceeding............. 7
C. The Lower Courts’ Refusal to Abstain
Shows Disrespect for the Commonwealth
of Virginia as a Sovereign............... 10
iv
TABLE OF CONTENTS - Continued
Page
D. The Denial of Abstention Threatens the
Effectiveness of the Adjudicative Process
RE SO GEE Wises va gkecdavncecesveceyens 11
II. Telco Creates a Conflict Among the Circuits
Concerning the Definition of “Ongoing State
Proceeding” For Purposes of Younger Absten-
ee rer rr ere ees Pere e re Ts ee ee Tee 13
STE Sica Sone koe Kes Oka se ce be CON nn eae 14
APPENDIX
A. Excerpts from Code of Virginia (1950), as
NG oa 4 hah eae enes Teeaasees.. A-1
B. Letter to Telco’s Counsel from Larry Roberts,
Office of Consumer Affairs, Dated June 3,
SE Ee ee eee ee see ae re ey A-11
C. Letter to Telco’s Counsel from Petitioner’s
Counsel, Dated fume 3, 1966..............5. A-16
D. Order and Memorandum of District Court Deny-
ing Abstention, Dated October 13, 1988........ A-18
E. Opinion of the United States Court of Appeals,
4th Circuit, Dated September 20, 1989....... A-27
F. Fourth Circuit’s Denial of Petition for Rehear-
ing, Dated November 9, 1989................ A-62
TABLE OF AUTHORITIES
Page
CASES
American Civil Liberties Union v. Bozardt, 539 F.2d
340 (4th Cir. 1976), cert. denied, 429 U.S. 1022
CERF oie hind av ca nwa tines en aagiens iene Cee a ealn 14 ©
Atascadero State Hospital v. Scanlon, 473 U.S. 234 .
(1985), reh’g denied, 473 U.S. 926 (1985) ........... 11
Middlesex County Ethics Comm. v. Garden State Bar
Asem, S57 Us Sao CUP i os cee or eekaw cues > 6,9
New Orleans Pub. Serv., Inc. v. Council of New
Ortenns, 198 Sit. ZO CIRC GP nas cv ce cucasesvnes 9, 10
Ohio Civil Rights Comm’n v. Dayton Christian
schoo, inc., 77 US. GID CISRS) 6.2 cxwnes a % To
Prentis v. Atlantic Coast Line Co., 211 U.S. 210
CPOE 6k oc nu oscan sav neasnees sO eRe ean eee eee 9
Riley v. National Federation of the Blind of N.C., 108
SAA. BRON Gee <x dass innstusdaneneee pee eeeeras 7
Telco Communications, Inc. v. Carbaugh, 885 F.2d
Rae CORR RAE, Ween cis si cunt erenseue sees eee passim
University Club v. City of New York, 842 F.2d 37
se Pe ey reer rer eee re ry 13
Virginia Alcoholic Beverage Control Comm'n v. York
State Inn, 220 Va. 310, 257 S.E.2d 851 (1979) ....... 9
Younger v. Harris, 401 U.S. 37 (1971)... 2.2... .05: passim
STATUTES
STATE
§§ 9-6.14:1 et seq. of the Virginia Code.............
§ 9-6.14:11 of the Virginia Code........... 2 ¢.:7, 9 00
vi
TABLE OF AUTHORITIES - Continued
Page
§ 9-6.14:12 of the Virginia Code. ...........-+++++5: 2, 8
§ 9-6.14:13 of the Virginia Code.......-...-+ees seers 3
§ 9-6.14:14.1 of the Virginia Code.......-.-..--25+505 3
§ 9-6.14:16 of the Virginia Code. ..........-.ees eee eee 3
§ 9-6.14:17 of the Virginia Code...........-+-. ee
§§ 57-48 et seq. of the Virginia Code..........----. i,:2
FEDERAL
MO AFSC. © TDSG1). eee cance sewers 1
i tem Be Sonerrrnrrgr rent sry Tr co eccs cs 5
OPINIONS BELOW
The opinion of the Fourth Circuit Court of Appeals is
reproduced in Petitioner’s Appendix at pages 27-61,
reported as Telco Communications, Inc. v. Carbaugh, 885
F.2d 1225 (4th Cir. 1989). The opinion of the trial court on
the abstention issue is reproduced at Petitioner’s Appen-
dix at pages 19-26. References to the Appendix shall be
designated as “(App. __.).”
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JURISDICTION
The judgment of the Fourth Circuit was issued on
September 20, 1989. Petitioner filed a timely petition for
rehearing on October 3, 1989. On November 9, 1989, the
Fourth Circuit denied the petition for rehearing by a 2-1
vote.
Petitioner invokes this Court’s jurisdiction under 28
U.S.C. § 1254(1).
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STATUTORY PROVISIONS
Excerpts from the Virginia Administrative Process
Act (§ 9.6.14:1 et seq. of the Virginia Code) and the Vir-
ginia Charitable Solicitation Laws (§ 57-48 et seq.) are
reproduced at App. 1-10. -
>
STATEMENT OF THE CASE
A. Introduction
The sole issue raised herein is whether the lower
courts erred under Younger v. Harris, 401 U.S. 37 (1971), in
failing to abstain from resolving a corporation’s constitu-
tional challenges to state laws while a state regulatory
agency was engaged in enforcement actions against that
corporation under those laws. To understand the signifi-
cance of the abstention ruling, it is necessary to appreci-
ate the nature of the enforcement action and the state’s
interest in preserving the integrity of the process.
B. The Virginia Administrative Process Act
Virginia law provides uniform procedures governing
the administrative actions of its regulatory agencies,
including both rule-making and enforcement functions,
codified as the Virginia Administrative Process Act,
§ 9-6.14:1 et seq. of the Code of Virginia (the “APA”).
Article 3 of the APA governs “case decisions” for state
agencies in pursuing alleged violations of state law.
Under the APA, a state agency may use the informal fact-
finding conference authorized by § 9-6.14:11 as a means
of adjudicating alleged violations of laws or regulations.
If charges are not resolved at that level, the agency may
proceed to the more formal hearing contemplated by
§ 9-6.14:12. For informal conferences under § 9-6.14:11,
the parties have a right to reasonable notice, to appear in
person or by counsel and to receive notice of information
in the possession of the agency upon which an adverse
decision can be made. For formal hearings under
§ 9-6.14:12, the parties have the right to reasonable notice,
representation by counsel, cross examination, oral argu-
ment, and other safeguards associated with a formal
adjudicatory proceeding. Upon request of a party, the
agency must subpoena witnesses. § 9-6.14:13. Formal
hearings are conducted by independent hearing officers,
who are private attorneys. § 9-6.14:14.1.
Any party aggrieved by a case decision has a right to
state court review of the agency action. § 9-6.14:16. The
issues to be considered upon state court review include
whether the agency action was in accordance with“...
constitutional right, power, privileges, or immunity .. . ”
§ 9-6.14:17.
C. Virginia’s Charitable Solicitation Laws
In 1974, the Commonwealth of Virginia enacted com-
prehensive legislation regulating the solicitation of chari-
table contributions by professional solicitors and others
(the “solicitation laws”), codified as §§ 57-48 et seq. of the
Virginia Code. Petitioner S. Mason Carbaugh (“Car-
baugh” or “Petitioner”), as Commissioner of the Virginia
Department of Agriculture and Consumer Services, has
responsibility for enforcement of these laws. He has dele-
gated that responsibility to the Office of Consumer
Affairs (now the Division of Consumer Affairs) (“OCA”).
The solicitation laws require yearly registration (not
licensure) of professional solicitors, who must comply
with certain minimum standards as a condition to engag-
ing in solicitation of funds in Virginia. Respondent Telco
Communications, Inc. (“Telco”) is a professional solicitor
engaged in the business of raising funds for police orga-
nizations and firefighter unions; it registered under the
solicitation laws with OCA before beginning fundraising
in Virginia.
D. OCA Enforcement Actions Against Telco
In March of 1988, following receipt of a complaint
that Telco was violating the solicitation laws, OCA
informed Telco that it was investigating Telco’s activities
in Virginia. On June 3, 1988, OCA served specific written
charges of violations of the solicitation laws upon Telco’s
counsel, detailing the nature and dates of the alleged
violations and suggesting that an informal fact-finding
conference (pursuant to § 9-6.14:11 of the Virginia Code)
be scheduled (App. 11-15). OCA’s counsel sent a separate
letter to Telco’s counsel explaining the purpose of the
proposed conference (App. 16-17). That letter advised
Telco that if the facts determined at the informal confer-
ence appeared to justify a suspension or revocation of its
registration, a formal hearing would be necessary absent
Telco’s acceptance of OCA’s action.
Telco’s president and attorneys agreed to the confer-
ence, which was held on July 6, 1988. Following the
conference (which did not resolve the charges), OCA
continued its enforcement activity by requesting certain
records of Telco.
By its counsel’s letter dated July 19, 1988, Telco
denied OCA’s charge, contested the jurisdiction of OCA
over it and asserted a First Amendment constitutional
challenge to the statutes upon which OCA relied in issu-
ing the charges. Telco filed suit on July 21, 1988, in federal
court against Carbaugh, seeking to enjoin OCA’s enforce-
ment actions. Carbaugh moved for dismissal under the
Younger abstention doctrine as applicable to administra-
tive proceedings under Ohio Civil Rights Comm’n v. Day-
ton Christian Schools, Inc., 477 U.S. 619 (1986), and
Middlesex County Ethics Comm. v. Garden State Bar Ass‘n,
457 U.S. 423 (1982). The motion was denied and the case
was subsequently resolved by the district court’s granting
summary judgment to Telco on all issues. Petitioner
appealed to the Fourth Circuit Court of Appeals, which
affirmed the lower court’s abstention ruling, while
reversing three out of four of the issues concerning the
merits of the First Amendment challenge to the solicita-
tion laws.
,.
_
BASIS FOR FEDERAL JURISDICTION
The District Court had jurisdiction over this case
pursuant to 28 U.S.C. § 1331.
"=
ad
REASONS FOR GRANTING THE WRIT
I. The Fourth Circuit’s Ruling Reflects a Funda-
mental Misunderstanding of Younger Abstention
and Threatens the Tenets of Federalism Safe-
guarded By That Doctrine
A. Introduction
Rule 10.1(a) of this Court gives as one example war-
ranting review on writ of certiorari a decision of a circuit
court which
has so far departed from the accepted and usual
course of judicial proceedings, or sanctioned
such a departure by a lower court, as to call for
an exercise of this Court’s power of supervision.
The decision in Telco represents such a departure from the
important principles of Younger abstention. This depar-
ture deserves review and reversal by this Court because
of the importance of a correct application of Younger
abstention to maintain the appropriate delicate balance of
state and federal roles fundamental to our system of
federalism.
Judge Hall, in dissenting from the Fourth Circuit's
ruling below, stated as follows:
The majority believes this is a First Amendment
case. It is not. The majority believes that “we
must determine” the constitutionality of several
provisions of Virginia’s charitable solicitation
laws [citation omitted]. We do not. As a matter
of comity, we must not. This is an abstention
case. It is about federal-state relations in our
system of government and a proper respect for
the important role of informal procedures in the
administrative process.
(App. 49). These comments echo Petitioner’s position
taken consistently throughout the course of this litigation,
a position which is sustained by precedent of this Court
and the principles underlying the abstention doctrine.
A federal court must abstain under Younger when
confronted with a constitutional challenge to a state law
to avoid interfering with (1) an ongoing state judicial
procedure (2) involving an important state interest where
(3) there is an opportunity to raise constitutional chal-
lenges. Middlesex at 432. There is no contest that the last
two criteria have been met by the APA enforcement pro-
ceedings against Telco.' The abstention ruling was prem-
ised on the erroneous premise that those proceedings do
not constitute an ongoing state judicial procedure.
B. Telco’s Federal Suit Interrupted An Ongoing
State Judicial Proceeding
The majority in Telco characterized the informal con-
ference between OCA and Telco convened pursuant to
§ 9-6.14:11 of the APA as “not remotely” judicial (App.
32). This observation ignores the significance of the infor-
mal conference as an integral part of the APA judicial
process?, justifying Younger abstention.
The Virginia legislature, in enacting Article 3 of the
APA (titled “Case Decisions”), intended that the informal
conference be part of a unitary system of state judicial
review of administrative charges brought by regulatory
agencies. The official Revisor’s Note to § 9-6.14:11 charac-
terizes the informal fact-finding conference as part of the
' It cannot be seriously argued that the enforcement of
Virginia’s laws governing charitable solicitation is not an
important state interest. See Riley v. National Federation of the
Blind of N.C., 108 S.Ct. 2667, 2675 (1988). Moreover, § 9-6.14:17
of the APA expressly provides for review by state court of any
constitutional claim.
2 The majority’s statement is also technically erroneous.
Informal conferences do include some, but not all, of the indi-
cia of a formal judicial process. Specifically, § 9-6.14:11 requires
advance notice of the conference and opportunity to be heard
by the agency or hearing officer, to be represented by counsel,
to be apprised of the facts relied upon by the accuser and to
receive a prompt decision by the agency.
“judicial operation” of state agencies in applying state
law to particular cases, stating that these conferences
[a]ccount for by far the greater bulk of adminis-
trative operations of a regulatory nature. To
exclude them would be to ignore the larger part
of the subject. To prevent or seem to prevent
them would radically alter, if not impair, an
important tool of today’s governance. But on the
other hand, and for those very reasons, these so-
called “informal” agency methods of adjudica-
tion should be defined and given substance.
(App. 2). The Revisor’s Note further states that
[w]hile this section is designed as the primary
provision respecting case decisions where basic
laws do not require an agency hearing, it may
also serve, in the discretion of agencies con-
cerned and upon consent of the private parties,
as a preliminary or pre-trial method of settling
or simplifying cases in which there is a statutory
right to a trial-like agency hearing.
(App. 2-3). The clear expression of legislative intent that
the informal conference is part of an agency’s adjudica-
tory process, coupled with the trial-like procedural trap-
pings of the conference required by the statute, compel
the conclusion that these proceedings are due the defer-
ence accorded by the abstention doctrine, contrary to the
rulings of the lower courts.
3 The importance of the informal conference process is
underscored by the fact that the APA does not require formal
hearings under § 9-6.14:12 in all instances after an unsuccessful
informal conference. See § 9-6.14:12(A). (“The agency shall
afford opportunity for the formal taking of evidence... in any
case in which the basic laws provide expressly for decisions upon or
(Continued on following page)
ee
In New Orleans Pub. Serv., Inc. v. Council of New
Orleans, 109 S.Ct. 2506 (1989), this Court determined that
Younger abstention is not required for rate making pro-
ceedings which are not part of a unitary and incomplete
legislative or judicial process. The Court distinguished
the Dayton and Middlesex cases which involved ongoing
proceedings of a judicial nature (and which ultimately
provided for state court review). The state process from
which Telco extracted itself by filing its federal suit is
“judicial,” because it involves an inquiry which “investi-
gates, declares and enforces liabilities as they stand on
present or past facts and under laws supposed already to
exist.” Prentis v. Atlantic Coast Line Co., 211 U.S. 210, 226
(1908).
That the informal conference in which Telco partici-
pated before filing suit was not a formal adversary hear-
ing is irrelevant for the purpose of the Younger abstention.
Both Middlesex and Dayton make it clear that state admin-
istrative hearings are judicial under Younger if there is an
opportunity for judicial review during the process. This
Court’s rulings in Middlesex and Dayton did not turn on
whether a full blown judicial hearing had been completed
or scheduled at the time federal suit was filed, but
(Continued from previous page)
after hearing and may do so in any case to the extent that informal
conference procedures under § 9-6.14:11 have not been had or
have failed to dispose of the case by consent.”) (emphasis sup-
plied.) Many agencies rely totally on informal conferences for
reaching their case decisions, and the right to judicial review of
such decisions attaches at that juncture. See, e.g. Virginia Alco-
holic Beverage Control Comm'n v. York State Inn, 220 Va. 310, 313,
257 S.E.2d 851, 853 (1979).
10
whether plaintiff would have the opportunity to raise his
constitutional claims in state court as part of that process.
Similarly, the lower courts’ conclusion that the APA
proceeding against Telco was not “ongoing” at the time
Telco filed suit in federal court ignores the significance of
the APA procedure as a unitary system (and not a series
of separable administrative actions). There was no ongo-
ing proceeding against Telco only in the technical sense
that the informal conference had not resoived the
charges. Yet OCA had informed Telco by letter prior to
the informal conference that, absent a settlement, a for-
mal hearing under the APA further would be scheduled
(App. 16-17). Telco filed suit seeking to enjoin further
OCA enforcement actions within two days of informing
OCA of its decision not to accept a settlement of the
charges. Only the intervening filing of the federal suit
and the trial court’s refusal to abstain avoided further
APA procedures.
C. The Lower Courts’ Refusal to Abstain
Shows Disrespect for the Commonwealth of
Virginia as a Sovereign
This Court in New Orleans Pub. Serv., Inc. recognized
that under Younger abstention a federal court should not
disrupt the integrity of a state’s trial-and-appeals process
because it is a unitary system and “by intervening in mid-
process would demonstrate a lack of respect for the State
as sovereign.” 109 S.Ct. 2518. The majority opinion in
Telco evidences such disrespect. It presumes that Telco
cannot receive a meaningful review of its constitutional
claims as part of the state judicial review guaranteed by
11
the APA. One of the principles of federalism recognized
by the doctrine of Younger abstention is that state courts
are just as competent as federal courts to adjudicate fed-
eral constitutional issues. As this Court noted in
Atascadero State Hospital v. Scanlon, 473 U.S. 234 (1985),
reh’g denied, 473 U.S. 926 (1985):
It denigrates the judges who serve the state
courts to suggest that they will not enforce the
supreme law of the land.
Id. at 238, n. 2. Despite this strong statement, the Fourth
Circuit based its decision, in part, upon the observation
that without federal intervention in Telco’s administra-
tive proceeding “any opportunity for federal adjudication
of federal rights Will be lost.” (App. 34).
Telco undeniably has a right to have its constitutional
claims judicially resolved. Under circumstances such as
are presented herein, however, Younger abstention
demands that Telco first exhaust its remedies within the
adjudicatory process provided by state law.
D. The Denial of Abstention Threatens the
Effectiveness of the Adjudicative Process
Under the APA
The Telco decision not only fails to respect state sov-
ereignty, it also seriously threatens the effectiveness of
the APA process. As pointed out in the Revisor’s Note to
§ 9-6.14:11, the informal fact-finding conference stage of
the APA serves the laudable purpose of encouraging
quick and efficient resolution of administrative charges.
In allowing Telco to circumvent further APA proceed-
ings by filing a federal suit, the lower courts have sent a
12
clear message to state agencies: they must schedule for-
mal adversarial hearings under the APA in lieu of the
informal conference hearing to avoid federal interven-
tion. That result can only realize the concern expressed in
the Revisor’s Note that the avoidance of the informal
procedures would “radically alter, if not disastrously
impair, an important tool of today’s governance... .”
(App. 2). Again, the dissent recognizes this problem with
the majority opinion:
Consequently, to hold that no state enforcement
proceeding is ongoing after one of these pretrial
conferences has been held, makes no sense.
Under the majority’s reasoning, only if a formal
hearing were scheduled would there be an
ongoing proceeding. This view completely
ignores the continuous nature of administrative
proceedings and disregards this “important
tool” of Virginia governance.
(App. 54).
Petitioner suggests that, as a result of the Telco deci-
sion, agencies will avoid the less expensive, quicker infor-
mal conference and instead go directly to the formal
hearing. The increased costs in time and money will be
borne not only by the regulators, but also by those who
are regulated. Individuals who might successfully defend
themselves in informal conferences will likely retain
counsel, for example, to represent them at the formal
hearings. Thus, the Fourth Circuit has upset the careful
balancing of interests — informality and efficiency versus
formality and expense - crafted by the Virginia legisla-
ture in the APA.
a
13
II. Telco Creates a Conflict Among The Circuits
Concerning the Definition of “Ongoing State
Proceeding” For Purposes of Younger
Abstention
The Fourth Circuit’s holding that Telco was not
engaged in an ongoing state judicial proceeding when it
filed suit in federal court cannot be reconciled with the
contrary holding of the Second Circuit in University Club
v. City of New York, 842 F.2d 37 (2nd Cir. 1988). In that
case, two private clubs sued a city commission which had
begun an investigation of the clubs’ alleged discrimina-
tory practices. The suit was filed after the agency had
_issued charges but before it had scheduled a conciliation
meeting. The court found these facts indistinguishable
from those in Dayton for purposes of Younger abstention:
In both cases the administrative posture was the
same: the commissions were proceeding with
conciliation efforts and adjudication of the
charges, when the targets of the investigation
brought suit in federal district court to halt the
administrative actions because of alleged
infringement of constitutional rights.
Id. at 40. The progress of the proceeding against Telco had
extended beyond the conciliation stage; scheduling of a
formal APA hearing was imminent when suit was filed.
Although Petitioner cited University Club to the
Fourth Circuit in support of his appeal, the majority
opinion did not address that case. The dissent recognized
the obvious conflict, and observed that proceedings in
University Club had not progressed as far as those in Telco
(App. 56).4
4 The dissent also agreed with Petitioner’s argument that
the Telco ruling conflicts with an earlier opinion of the Fourth
(Continued on following page)
| |
14
That there is a conflict between the rulings of the
Second and Fourth Circuits is apparent. Rule 10.1(a) of
this Court cites such a conflict as an appropriate justifica-
tion for granting a petition for a writ of certiorari. Peti-
tioner respectfully submits that this conflict provides an
independent justification for review in addition to the
more compelling reasons stated in Part I of this petition.
,™
vv
CONCLUSION
There are three reasons for the Court’s accepting
review of this petition for certiorari, any one of which is
sufficient by itself. First, the Telco opinion creates a con-
flict among the circuits concerning what constitutes an
ongoing state adjudicatory proceeding warranting Youn-
ger abstention. Secondly, the refusal of the lower courts to
abstain despite the fact that administrative charges had
been issued but not resolved in the state system is an
unwarranted slap at state sovereignty. Thirdly, and most
importantly for Petitioner, is the fact that the Telco deci-
sion threatens to impair one of the most useful means of
dispute resolution under the APA - the informal fact-
finding conference.
(Continued from previous page)
Circuit in American Civil Liberties Union v. Bozardt, 539 F.2d 340
(4th Cir. 1976), cert. denied, 429 U.S. 1022 (1976). In Bozardt, the
court approved federal abstention in a suit challenging a disci-
plinary bar investigation of an attorney before a formal hearing
had been scheduled. /d. at 345.
SE
15
After Telco, the only means by which a state agency
can assure the continuity and integrity of APA enforce-
ment procedures against federal intervention is to issue
charges and immediately schedule a formal adversarial
hearing, bypassing the informal conference. The exten-
sion of Younger to civil administrative hearings is
designed to prevent such races to the courthouse, and
only a review and reversal by this Court can undo the
damage dene to the APA process by the Telco decision.
Respectfully submitted,
Mary Sue TERRY
Attorney General of Virginia
H. LANE KNEEDLER
Chief Deputy Attorney General
Gait STARLING MARSHALL
Deputy Attorney General
FRANK SEALES, JR.
*Guy W. Hors ey, Jr., Esquire
Senior Assistant Attorneys
General
EpwarpD P. Notpe
Assistant Attorney General
Office of the Attorney General
101 North Eighth Street
Supreme Court Building
Richmond, Virginia 23219
(804) 786-6563
*Counsel of Record
Dated: February 7, 1990
A-1
EXCERPTS FROM THE VIRGINIA
ADMINISTRATIVE PROCESS ACT,
§§ 9-6.14:1 et seq.
§ 9-6.14:3. Policy. - The purpose of this chapter is to
supplement present and future basic laws conferring
authority on agencies either to make regulations or
decide cases as well as to standardize court review
thereof save as laws hereafter enacted may otherwise
expressly provide. This chapter does not supersede or
repeal additional procedural requirements in such basic
laws.
ARTICLE 3.
Case Decisions.
§ 9-6.14:11. Informal fact finding. - Save to the
extent that case decisions are made as provided by
§ 9-6.14:12, agencies shall, unless the parties consent,
ascertain the fact basis for their decisions of cases
through informal conference or consultation proceedings.
Such conference-consultation procedures include rights
of parties to the case (i) to have reasonable notice thereof,
(ii) to appear in person or by counsel! or other qualified
representative before the agency or its subordinates, or
before a hearing officer as provided by subsection A of
§ 9-6.14:14.1, for the informal presentation of factual data,
argument, or proof in connection with any case, (iii) to
have notice of any contrary fact basis or information in
the possession of the agency which can be relied upon in
making an adverse decision, (iv) to receive a prompt
decision of any application for a license, benefit, or
A-2
renewal thereof, and (v) to be informed, briefly and gen-
erally in writing, of the factual or procedural basis for an
adverse decision in any Case.
REVISOR’S NOTE
Unlike the “legislative” functions hereinbefore dealt
with in Article 2, Article 3 is concerned with the “judi-
cial” operations of agencies, that is, the case by case
application of law by agencies.
This section, as contrasted with § 9-6.14:12 which
follows, deals with adjudications agencies are authorized
to make without any of the formalities of trial-like pro-
cedure. They account for by far the greater bulk of
administrative operations of a regulatory nature. To
exclude them would be to ignore the larger part of the
subject. To prevent or seem to prevent them would radi-
cally alter, if not disastrously impair, an important tool of
today’s governance. But on the other hand, and for those
very reasons, these so-called “informal” agency methods
of adjudication should be defined and given substance.
Hence this section states the main form such process
usually takes, that is, conferences or consultations. To the
extent that basic laws permit, agencies may also proceed
on the basis of inspections, tests, or elections followed by
such conference-consultation procedure as the case issues
may require. Initial licensing, for example, is a vital part
of state administration and proceeds on the basis of tests
or the informal submittal of data designed to show that
the applicant meets requirements.
But, while this section is designed as the primary
provision respecting case decisions where basic laws do
A-3
not require an agency hearing, it may also serve, in the
discretion of agencies concerned and upon consent of the
private parties as a preliminary or pre-trial method of
settling or simplifying cases in which there is a statutory
right to a trial-like agency hearing. The latter type of
process is governed by § 9-6.14:12 hereinafter, in which
detailed evidential and decisional procedure is stated.
The first sentence having defined the subject, the
second sentence completes the section by stating require-
ments for this form of adjudicatory process. Notice of
proceedings is obviously necessary; but a distinction
should be made in connection with applications for a
license, in which case the applicant has the burden of
approaching the agency in the first instance as provided
in the second paragraph of § 9-6.14:12 hereinafter. Right
to appear in person or to have counsel or representation
is equally obvious. Prompt decision is particularly desir-
able in the case of licensing since delay in agency action
upon applications amounts to a denial thereof pro tem.
However, the heart of the matter relates to the presenta-
tion and determination of facts. Where the conference-
consultation process is utilized, that means rights to pre-
sent “factual data, argument, or proof” to the agency or a
subordinate designated by the agency to act in its behalf
for the purpose; to have notice of any contrary fact basis
or information upon which the agency proposes to rely;
and to be informed of the factual basis for an adverse
decision made by the agency. Such rights of notice or
information are, of course, particularly necessary in the
case of adverse decisions. Note also that, whether or not
private parties appear and submit proofs in such cases,
agencies should take care to record in some suitable
A-4
fashion the factual basis for their adverse decisions which
are not subject to further administrative process under
§ 9-6.14:12 - because, in case of court review of such
otherwise final informal decisions, agencies may be
called upon to demonstrate the factual basis upon which
they have relied (as explained in the notes to § 9-6.14:17
hereinafter).
§ 9-6.14:12. Litigated issues. - A. The agency shall
afford opportunity for the formal taking of evidence upon
relevant fact issues in any case in which the basic laws
provide expressly for decisions upon or after hearing and
may do so in any case to the extent that informal pro-
cedures under § 9-6.14:11 have not been had or have
failed to dispose of a case by consent.
B. Parties to such formal proceedings shall be given
reasonable notice of (i) the time, place, and nature
thereof, (ii) the basic law or laws under which the agency
contemplates its possible exercise of authority, and (iii)
the matters of fact and law asserted or questioned by the
agency. Applicants for licenses, rights, benefits, or
renewals thereof have the burden of approaching the
agency concerned without such prior notice but they
shall be similarly informed thereafter in the further
course of the proceedings whether pursuant to this sec-
tion or to § 9-6.14:11.
C. In all such formal proceedings the parties shall
be entitled to be accompanied by and represented by
counsel, to submit oral and documentary evidence and
rebuttal proofs, to conduct such cross-examination as
may elicit a full and fair disclosure of the facts, and to
have the proceedings completed and a decision made
A-5
with dispatch. The burden of proof shall be upon the
proponent or applicant. The presiding officers at such
proceedings are empowered to (i) administer oaths and
affirmations, (ii) receive probative evidence, exclude
irrelevant, immaterial, insubstantial, privileged, or repeti-
tive proofs, rebuttal, or cross-examination, rule upon
offers of proof, and oversee an accurate verbatim record-
ing of the evidence, (iii) hold conferences for the settle-
ment or simplification of issues by consent, (iv) dispose
of procedural requests, and (v) regulate and expedite the
course of the hearing. Where a hearing officer presides,
or where a subordinate designated for that purpose pre-
sides in hearings specified in subsection E of § 9-6.14:14.1,
he shall recommend findings and a decision unless the
agency shall by its procedural regulations provide for the
making of findings and an initial decision by such presid-
ing officers subject to review and reconsideration by the
agency on appeal to it as of right or on its own motion.
D. Prior to the recommendations or decisions of
subordinates, the parties concerned shall be given oppor-
tunity, on request, to submit in writing for the record (i)
proposed findings and conclusions and (ii) statements of
reasons therefor. In all cases, on request, opportunity
shall be afforded for oral argument (i) to hearing officers
or subordinate presiding officers, as the case may be, in
all cases in which they make such recommendations or
decisions or (ii) to the agency in cases in which it makes
the original decision without such prior recommendation
and otherwise as it may permit in its discretion or pro-
vide by general rule. Where hearing officers or subordi-
nate presiding officers, as the case may be, make
A-6
recommendations or decisions, the agency shall receive
and act on exceptions thereto.
E. All decisions or recommended decisions shall be
served upon the parties, become a part of the record, and
briefly state or recommend the findings, conclusions, rea-
sons, or basis therefor upon the evidence presented by
the record and relevant to the basic law under which the
agency is operating together with the appropriate order,
license, grant of benefits, sanction, relief, or denial
thereof.
REVISOR’S NOTE
A. As distinguished from the prior section, this one
deals with fact issues determined by agencies through a
trial-like process — but such procedures are required only
“where the basic laws provide expressly for decisions
upon or after hearing.” Note that, when used in a basic
law, the word “hearing” in such cases does not have the
different meanings met with in Article 2 relating to regu-
lations. Here the word signals only one type of formal
fact finding. However, where this form of process is
required, the agency may, and often should, first attempt
to resolve controversies by consent through the informal
methods described in § 9-6.14:11. Conversely, where
agencies are not required to use formal trial-like pro-
cedures pursuant to this section, they may nevertheless
choose to do so for purposes of the record.
B. Here, unlike the general publication of notice
usual in connection with the making of regulations under
Article 2, notices must be brought to the attention of
parties to an adjudication personally. This provision, in
» er wt ae ob
te RO wer
a A-7
its reference to applicants for licenses, modifies the last
sentence of § 9-6.14:11 as mentioned in the note thereto.
C. Subsection C. of this section is a simplified state-
ment of the usual incidents of formal administrative adju-
dicatory process. It is similar to the listing in the federal
Administrative Procedure Act. But one feature may add
something to some State practice, that is, the use of
subordinates. In addition to presiding at hearings, they
may, but only subject to appeal to or review by the
agency itself, also either make or recommend findings
and a decision as the agency may direct - an obvious
necessity if some agencies are to cope with growing case
loads and if private parties are to be allowed meaningful
contact with personnel upon whom much of the burden
rests in any event. See § 9-6.14:4 G and note.
D. Subsection D of this section deals with the so-
called post-hearing procedure of administrative agencies.
It is designed to bridge the gap between the hearing by a
subordinate and the exercise of final decision by the
agency, for which purpose provisions such as these are
common and borrow heavily from the practice of courts
when they delegate fact finding to masters in chancery.
E. The core of any agency adjudication following
upon formal procedure is the finding of facts, upon which
court review largely depends as indicated in § 9-6.14:17
hereinafter.
§ 9-6.14:13. Subpoenas, depositions and requests
for admissions. —- The agency or its designated subordi-
nates shall have power to, and on request of any party to
a case shall, issue subpoenas requiring testimony or the
A-8
production of books, papers, and physical or other evi-
dence. Any person so subpoenaed who objects may, if the
agency does not quash or modify the subpoena at his
timely request as illegally or improvidently granted,
immediately thereupon procure by petition a decision on
the validity thereof in the circuit court as provided in
§ 9-6.14:5; and otherwise in any case of refusal or neglect
to comply with an agency subpoena, unless the basic law
under which the agency is operating provides some other
recourse, enforcement, or penalty, the agency may pro-
cure an order of enforcement from such court. Deposi-
tions de bene esse and requests for admissions may be
directed, issued, and taken on order of the agency for
good cause shown; and orders or authorizations therefor
may be challenged or enforced in the same manner as
subpoenas. Nothing in this section shall be taken to
authorize discovery proceedings.
§ 9-6.14:14.1. Hearing officers. - A. In all hearings
conducted in accordance with § 9-6.14:12, the hearing
shall be presided over by a hearing officer selected from a
list prepared by the Executive Secretary of the Supreme
Court and maintained in the Office of Executive Secretary
of the Supreme Court. Parties to proceedings conducted
pursuant to § 9-6.14:11 may agree at the outset of the
proceeding to have a hearing officer preside at the pro-
ceeding, such agreement to be revoked only by mutual
consent. The Executive Secretary shall have the power to
promulgate rules necessary for the administration of the
hearing officer system.
All hearing officers shall meet the following mini-
mum standards: |
A-9
1. Active membership in good standing in the Vir-
ginia State Bar;
2. Active practice of law for at least five years;
3. Completion of a course of training approved by
the Executive Secretary of the Supreme Court. In order to
comply with the demonstrated requirements of the
agency requesting a hearing officer, the Executive Secre-
tary may require additional training before a hearing
officer will be assigned to a proceeding before that
agency.
* * *
§ 9-6.14:16. Right, forms, venue. — Any person
affected by and claiming the unlawfulness of any regula-
tion, or party aggrieved by and claiming unlawfulness of
a case decision, as the same are defined in § 9-6.14:4 of
this chapter and whether or not excluded from the pro-
cedural requirements of Article 2 (§ 9-6.14:7.1 et seq.) or 3
(§ 9-6.14:11 et seq.) hereof, shall have a right to the direct
review thereof by an appropriate and timely court action
against the agency as such or its officers or agents in the
manner provided by the rules of the Supreme Court of
Virginia. Such actions may be instituted in any court of
competent jurisdiction as provided in § 9-6.14:5; and the
judgments of such courts of original jurisdictions shall be
subject to appeal to or review by higher courts as in other
cases unless otherwise provided by law. In addition,
when any such regulation or case decision is the subject
of an enforcement action in court, the same shall also be
reviewable by the court as a defense to the action; and the
judgment or decree therein shall be appealable as in other
cases.
A-10
§ 9-6.14:17. Issues on review. — The burden shall be
upon the party complaining of agency action to designate
and demonstrate an error of law subject to review by the
court. Such issues of law include: (1) accordance with
constitutional right, power, privilege, or immunity, (2)
compliance with statutory authority, jurisdiction limita-
tions, or right as provided in the basic laws as to subject
matter, the stated objectives for which regulations may be
made, and the factual showing respecting violations or
entitlement in connection with case decisions, (3) obser-
vance of required procedure where any failure therein is
not mere harmless error, and (4) the substantially of the
evidential support for findings of fact.
* * *
EXCERPT FROM VIRGINIA
CHARITABLE SOLICITATION LAWS,
§§ 57-48 et seq.
§ 57-67. Application to court for relief. - Any person
aggrieved by any final order of the Commissioner is
entitled to judicial review in accordance with the provi-
sions of the Administrative Process Act (§ 9-6.14:1 et
seq.). Either party may appeal any final order of such
court to the Court of Appeals in the same manner as
provided by law in cases of appeals of right.
A-11
COMMONWEALTH of VIRGINIA
DEPARTMENT OF AGRICULTURE
AND CONSUMER SERVICES
Office of Consumer Affairs
June 3, 1988
John G. Douglass, Esquire
Wright, Robinson, McCammon,
Osthimer & Tatum
629 E. Main Street
Richmond, Virginia 23219
Peter S. Brooks, Esquire
Goldstein & Manella
265 Franklin Street
Boston, Massachusetts 02110
RE: Telco Communications, Inc.
Dear Mr. Douglass and Mr. Brooks:
After consultation with the attorney representing this
Office, I would like to invite you to meet with me to
discuss severai apparent violations of the Virginia stat-
utes by Telco, and to attempt to agree on a satisfactory
solution.
The particular violations of which | am currently
aware are these:
1. With reference to the February, 1988 solicita-
tion for the Martinsville-Henry County Fra-
ternal Order of Police (“FOP”):
A. Telco failed to file with this Office a
copy of all sales scripts, particularly any
scripts relating to the sale of tickets, in
violation of Section 57-61(d).
A-12
B. Telco failed to file with this Office
amended information relating to the
notice of solicitation. More particularly,
Telco apparently changed its phone
room manager after three days without
notifying this Office, in violation of Sec-
tion 57-61(h); and
C. Telco failed to obtain in advance written
commitments from persons willing to
accept donated tickets for the hand-
icapped, in violation of Section 57-61(g).
2. With reference to the February, 1988 Falls
Church Police Association campaign:
A. In at least some solicitations, Telco
failed to inform the public of the name
of the employer of the solicitors, and
further failed to inform the public that
the solicitors were paid, in violation of
Section 57-55.2 of the Code.
B. Telco used a script which referred to
“our death and disability drive”, which,
especially in connection with the above
failure to inform that the solicitor was a
paid employee, was a device or scheme
to misrepresent the identity of the solic-
itor, in violation of Section 57-57(1); and
C. Telco failed to file a final accounting
with this Office within ninety days after
the completion of the solicitation cam-
paign in violation of Section 57-61(a) of
the Code. |
3. With reference to the 1988 Portsmouth FOP
campaign:
A. At least one of Telco’s solicitors
employed a device or scheme to
defraud by misrepresenting to a poten-
tial donor that he was a volunteer,
YY
4.
A-13
rather than a paid employee, in viola-
tion of Section 57-57(1).
In at least one instance, Telco failed to
inform the potential donor that the
solicitor was paid and failed to inform
the potential donor of the name of the
employer of the solicitor, in violation of
Section 57-55.2; and
Telco failed to file a final accounting
with this Office within ninety days after
the completion of the Solicitation cam-
paign in violation of Section 57-61(a) of
the Code.
In connection with the April, 1988
Petersburg FOP campaign:
A.
Telco used scripts which failed to
inform the public of the name of the
employer of the solicitor and that the
solicitor was in fact paid, in violation of
Section 57-55.2 of the Code;
Telco failed and has continued to fail to
file or provide to my Office a copy of all
sales scripts utilized, in that, in particu-
lar, no script has been provided which
mentions the sale of tickets, in violation
of Section 57-61(d):
Telco failed to obtain written commit-
ments in advance from persons willing
to accept donated tickets for the hand-
icapped, in violation of Section 57-61(g);
Telco has failed to file with my Office
amended information about the change
in the solicitation for the sale of adver-
tisements. More particularly, Telco
failed to provide all scripts to my Office
which were used, in violation of Section
57-61(h); and
A-14
E. Telco failed to provide information to
my Office in response to its request, in
violation of Section 57-57(m) of the
Code. More particularly, this informa-
tion was requested in person of Telco
supervisor Jeff Springer as an agent of
the corporation, on or about July 12,
and 13, 1988, and requested by phone
and again in my letter of April 21, 1988
to Mr. Brooks.
. realize that there may be more than one side to this
story. The information which I have so far, however,
would justify the suspension or revocation of Telco’s
registration to solicit charitable contributions in Virginia.
I propose that we meet to discuss the appropriateness of
a revocation or at least a six month suspension.
I invite Telco to-appear with or without you to
explain its side of the story and to offer any evidence
which it may have. I will indeed give you and Telco every
appropriate opportunity to be heard.
Upon appropriate arrangements as to time, you may
even review all information in the possession of this
Office which we might rely upon in revoking or suspend-
ing Telco’s registration. Of course I am talking about
facts, and not such things as memoranda exchanged
between this Office and the Office of the Attorney
General.
I suggest that we meet on June 22, 1988 or June 23,
1988 at 11:00 a.m. in my Office. To confirm the date and
time, or to arrange a different time if necessary, or to
arrange to review any facts in the possession of this
Office, please call me at (804) 786-1343.
A-15
I do hope you will accept this invitation to appear
and participate in this informal fact finding conference.
Sincerely,
Larry Roberts
Coordinator
Charitable Solicitation Section
Office of Consumer Affairs
LR/kak
A-16
COMMONWEALTH of VIRGINIA
Office of the Attorney General
June 3, 1988
John G. Douglass, Esquire
Wright, Robinson, McCammon,
Osthimer & Tatum
629 E. Main Street
Richmond, Virginia 23219-2412
Peter S. Brooks, Esquire
Goldstein & Manella
265 Franklin Street
Boston, Massachusetts 02110
Re: Telco Communications, Inc.
Gentlemen:
The Office of Consumer Affairs and my Office are
ready to meet with you, as reflected in the enclosed
correspondence from Larry Roberts to you. I asked Larry
to put together this letter detailing the problems with
Telco to give you that notice which you requested.
Informal fact finding conferences such as that pro-
posed by Mr. Roberts are designed to identify issues,
agree on facts, if possible, and to reach some agreement
on the appropriate disposition of the concerns of the
Office of Consumer Affairs. Any final resolution of the
matter can occur in connection with an informal fact
finding conference only with Telco’s agreement. In other
words, if the facts appear to justify a suspension or
revocation, that can occur as a result of the informal fact
finding conference only if Telco agrees. If Telco does not
agree, then, absent some emergency situation, a formal
A-17
hearing would be necessary to proceed further to a sus-
pension or revocation.
If Telco and you would like to meet, please call Mr.
Roberts at 786-1343, as 1 will be out of town for most of
the next week.
Very truly yours,
/s/ Edward P. Nolde
Edward P. Nolde
Assistant Attorney General
2:37 /268
Enclosure
A-18
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
RICHMOND DIVISION
TELCO COMMUNICATIONS, INC.,_ )
Plaintiff, ) Civil Action
a ) No.
, ) 88-0471-R
S. MASON CARBAUGH, as he is
Commissioner of the Department of
Agriculture and Consumer Services
of the Commonwealth of Virginia,
Defendant.
~~ Ne Nee ee ee
ORDER
For the reasons stated in the accompanying Mem-
orandum and deeming it proper so to do, it is
ADJUDGED and ORDERED that Defendant’s motion for
summary judgment pursuant to Fed.R.Civ.P. 56 be, and
the same is hereby DENIED.
Let the Clerk send a copy of this Order and the
Memorandum to all counsel of record.
/s/ Robert R. Merhige, Jr.
UNITED STATES DISTRICT
JUDGE
Date 13 OCT 1988
A-19
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
RICHMOND DIVISION
TELCO COMMUNICATIONS, INC.,
Plaintiff, Civil Action
. No.
, 88-0471-R
S. MASON CARBAUGH, as he is
Commissioner of the Department of
Agriculture and Consumer Services
of the Commonwealth of Virginia,
Defendant.
MEMORANDUM
This matter is before the Court on defendant’s
motion for summary judgment pursuant to Fed.R.Civ.P.
56. The parties have waived oral argument, but the issues
have been fully briefed and the matter is ripe for disposi-
tion. Jurisdiction is based on 28 U.S.C. §§ 1331 and 1343,
and the doctrine of pendent jurisdiction.
Given the issues raised in defendant’s papers, the
Court finds that the motion should have been framed as a
motion to dismiss, and the Court treats it as such. For the
reasons stated below, defendant’s motion will be denied.
The present pleadings and briefs reflect the follow-
ing: Plaintiff, Telco Communications, Inc. (“Telco”), is a
Rhode Island corporation engaged in the business of
providing fundraising services to charitable organiza-
tions and labor unions for a fee. Telco also publishes
handbooks on topics relating to public health and safety.
Telco has contracted with local police fraternal organiza-
tions in the Commonwealth of Virginia to publish and
distribute a pamphlet on their behalf and to solicit adver-
tisements to appear in the publication.
A-20
In March, 1988, the Charitable Solicitation Section of
the Virginia Office of Consumer Affairs (a division of the
Virginia Department of Agriculture and Consumer Ser-
vices) began an investigation of Telco in response to a
complaint that Telco was engaged in telephone solicita-
tion activities in Petersburg, Virginia, in violation of
Chapter 5 of Title 57 of the Virginia Code regulating the
conduct of professional solicitors. On June 3, 1988, Larry
Roberts, Coordinator of the Charitable Solicitation Sec-
tion, sent a letter to Telco’s attorneys detailing “apparent
violations” of the Code that appeared to warrant revoca-
tion or suspension of Telco’s registration to solicit charita-
ble contributions in Virginia. The letter went on to
suggest that Telco meet with Roberts on June 22, 1988, “to
participate in [an] informal fact finding conference.”
The meeting took place on July 6, 1988. At that meet-
ing Telco asserted that its activities on behalf of the
fraternal orders of police and fire fighters were not chari-
table solicitations within the meaning of the Virginia
Code, and thus Telco was not subject to the Code’s
requirements. Telco also asserted that sections of the
solicitation law requiring the filing of telephone scripts
and the disclosure of certain information during the solic-
itation are unconstitutional in light of the Supreme
Court’s ruling in Riley v. National Federation of the Blind of
North Carolina, Inc., __U.S.___, 108 S. Ct. 2667 (1988).
According to the defendant, no agreement was reached at
the meeting concerning the suspension or revocation of
Telco’s registration.
On July 21, 1988, Telco filed suit in this Court seeking
declaratory and injunctive relief pursuant to 42 U.S.C.
§ 1983. In its complaint, Telco seeks a declaration that
ee
2 OWN ee Seed Le oe Sey
A-21
certain sections of Virginia’s charitable solicitation law
violate the first and fourteenth amendments to the U.S.
Constitution, and asks this Court to enjoin the Office of
Consumer Affairs from enforcing these provisions of the
Code. In addition, Telco seeks a declaration that its past
activities in Virginia are not subject to regulation under
Title 57.
Prior to Telco’s commencement of the instant action,
the Officer of Consumer Affairs had not initiated a formal
hearing in conformance with the state Administrative
Process Act, Va. Code § 9-6.14:1 et seq. (“APA”), to revoke
or suspend Telco’s registration. Since the filing of this
suit, the state has taken no administrative action on the
matter.
Instead, the defendant filed a motion requesting that
the Court abstain from exercising jurisdiction over the
case. The defendant argues that there is a pending state
administrative proceeding that will provide the plaintiff
with an opportunity to present its constitutional claims
and that there is a realistic possibility that Telco’s consti-
tutional challenge will be rendered moot by a state deter-
mination that its activities do not fall within the Virginia
Code’s definition of charitable solicitation. This mem-
orandum addresses each of these arguments in turn.
Discussion
Defendant first argues that the Court should abstain
from adjudicating the case under Younger v. Harris, 401
U.S. 37 (1971), and its progeny. In Younger the Supreme
A-22
Court held that a federal court should not enjoin a pend-
ing state criminal proceeding except in the unusual situa-
tion that an injunction is necessary to prevent great and
immediate irreparable injury. The Court justified its hold-
ing on the principle that courts of equity should not
interfere with criminal prosecutions, and on the “more
vital consideration[s]” of comity and federalism. Id. at 44.
Since 1971, the Court has concluded that the concerns
espoused in Younger are equally applicable to pending
civil proceedings, see, e.g., Huffman v. Pursue, Ltd., 420
U.S. 592 (1975), and to pending state administrative pro-
ceedings, see, e.g., Middlesex County Ethics Committee v.
Garden State Bar Assn., 457 U.S. 423 (1982); Ohio Civil
Rights Comm’v v. Dayton Schools, 477 U.S. 619 (1986). The
law does not require, however, that a federal court abs-
tain when there are no pending state proceedings. See
Zablocki v. Redhail, 434 U.S. 374, 379 n.5 (1978).
For cases such as the instant one, involving state
administrative proceedings, the Supreme Court has set
out a three-part analysis to determine whether abstention
is appropriate. See Middlesex County, 457 U.S. at 432. The
first, and most obvious requirement is that there be a
pending state proceeding that is judicial in nature to
which the court can defer.! Because the Court finds that
this first requirement is not met, Younger abstention in
this case is wholly inappropriate. There simply is no
pending state administrative proceeding to which the
Court can or should defer.
1 The remaining issues are whether the proceedings impli-
cate an important state interest and whether they present an
adequate opportunity to raise constitutional challenges.
R
ay. 1) Se
A-23
In response to a request for clarification from the
Court, the defendant stated that after the informal confer-
ence between the parties on July 6, 1988, “the next step
would have been for the Office of Consumer Affairs to
serve notice upon Telco for a formal administrative hear-
ing under the APA... . At that point, Telco filed suit and
defendant did not initiate any formal administrative
hearing because of that filing. The defendant has not taken
any further action to initiate a formal hearing and has no
present plans to do so until this litigation has been completed.”
(Defendant’s Response to Court Order at 2) (emphasis
added). In essence, the defendant asks the Court to defer
to a state proceeding, while at the same time refusing to
initiate a state proceeding to which the Court can prop-
erly defer. While the state administrative proceedings
should be given due deference, this Court will not delay a
justicable issue simply because the state chose not to
proceed with a formal administrative hearing. The Court,
though sympathetic to the doctrine of abstention, will not
stand idly by while litigants properly invoking this
Court’s jurisdiction await a bureaucratic decision as to
whether their issue will or will not be administratively
handled.
Defendant argues that the informal conference held
on July 6, 1988, constituted the commencement of an
administrative proceeding to suspend or revoke Telco’s
registration to operate as a professional solicitor of chari-
table contributions in Virginia. Thus, an administrative
proceeding was ongoing at the time Telco filed its action
in federal court.
This argument is contradicted by both the facts and
the applicable law. The acknowledged purposes of the
A-24
meeting that took place on July 6, 1988, was to resolve the
issue Of Telco’s alleged violations by consent. The meet-
ing was a settlement conference, not a judicial proceeding
that would warrant federal court deference. Nor did the
conference signal the commencement of an ongoing
administrative proceeding. The State may or may not
choose to follow up an informal conference with the
institution of formal proceedings. See Va. Code
§ 9-6.14:12. The fact that an informal conference has been
held is not indicative of whether administrative proceed-
ings will continue.
Further, even a brief comparison with other cases in
which federal courts have deferred to pending state
administrative proceedings reveals that the mere conven-
ing of an informal settlement conference without more
does not constitute the initiation of judicial proceedings
for Younger abstention purposes. See, e.g., Ohio Civil Rights
Comm'n v. Dayton Christian Schools, Inc., 477 U.S. 619
(1986) (state commission had initiated administrative pro-
ceedings against plaintiff by filing a complaint); Middlesex
Ethics Committee v. Garden State Bar Ass'n, 457 U.S. 423
(1982) (disciplinary committee has served a formal state-
ment of charges on plaintiff); Brach’s Meat Market, Inc. v.
Abrams, 668 F.Supp. 275 (S.D.N.Y. 1987) (State Depart-
ment of Agriculture had assessed fines against plaintiff
and then commenced as action in state court for violation
of labeling requirements); Crazy Eddie, Inc. v. Cotter, 666 F.
Supp. 503 (S.D.N.Y. 1987) (state attorney general issued
notice of proposed action against plaintiff and then filed
suit in state court to enjoin activities of plaintiff). Thus,
the defendant’s first argument is without merit.
ee he ee
———————
A-25
Defendant’s second argument is that the Court
should abstain from adjudicating the case under Railroad
Comm'n of Texas v. Pullman Co., 312 U.S. 496 (1941). In
Pullman, the Supreme Court held that a federal court may
abstain from deciding a case in which the state court’s
resolution of unsettled questions of state law would moot
the need for deciding the federal issues.
The defendant argues that in this case, “a determina-
tion in the state administrative proceedings that Telco’s
activities do not fall within the definition of ‘charitable
solicitation’ as defined by Virginia statutes would moot
Telco’s challenge to the constitutionality of those stat-
utes.” (Defendant’s Memorandum at 7). What the defen-
dant overlooks, however, is that Telco seeks a
determination of the constitutionality of the charitable
solicitation laws as applied to future charitable solicita-
tions. Telco claims that its future charitable solicitation
activities in Virginia are chilled by the existence of the
Virginia statute. Thus, even if the state procceedings
determined that Telco’s past activities were not charitable
solicitation, such a determination would have no effect on
the present federal challenge.
Further, even if the state proceedings were to deter-
mine that Telco’s activities constituted charitable solicita-
tion and Telco had an opportunity to challenge the
constitutionality of the law, abstention is still not appro-
priate. Pullman abstention is not used merely to give a
state court the opportunity to hold that a statute violates
the federal Constitution. See Hawaii Housing Authority v.
Midkiff, 467 U.S. 229 (1984). As recently stated by the
Eleventh Circuit Court of Appeals, “[i]f the state proceed-
ing will merely apply federal constitutional law, then the
A-26
state construction will not moot or modify the constitu-
tional question.” Duke v. James, 713 F.2d 1506, 1510 (11th
Cir. 1983). Thus, the Pullman doctrine simply does not
apply.
Conclusion
For the reasons stated, the Court will deny defen-
dant’s motion for summary judgment.
An appropriate Order shall issue.
/s/ Robert R. Merhige, Jr.
UNITED STATES DISTRICT
JUDGE
Date 13 OCT 1988
A-27
PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 88-2668
TELCO COMMUNICATIONS, INC.,
Plaintiff - Appellee,
versus
S. MASON CARBAUGH, as he is Commissioner of
the Department of Agriculture and Consumer
Services of the Commonwealth of Virginia,
Defendant — Appellant,
STATE OF CONNECTICUT; STATE OF MARYLAND;
STATE OF NORTH CAROLINA; STATE OF WEST
VIRGINIA
Amici Curiae,
VIRGINIA STATE LODGE, FRATERNAL ORDER OF
POLICE,
Amicus Curiae.
Appeal from the United States District Court for the
Eastern District of Virginia, at Richmond. Robert R. Mer-
hige, Jr., Senior District Judge. (CA-88-471-R).
Argued: May 11, 1989 Decided: September 20, 1989
Before HALL and WILKINSON, Circuit Judges, and WIL-
LIAMS, Senior United States District Judge for the West-
ern District of Virginia, sittia#g by designation.
WILKINSON, Circuit Judge:
A-28
In this case we must determine if four provisions of
the Virginia charitable solicitation laws, Va. Code Ann.
§§ 57-48 et seq., are constitutional. The first provision
states that a professional solicitor must disclose to poten-
tial donors the percentage amount of a contribution that
will go to the charitable organization for its own use. Va.
Code Ann. § 57-55.1. The second requires professional
solicitors to disclose in writing to potential donors that
their financial statements for the last fiscal year are avail-
able from the Virginia Office of Consumer Affairs. Id. at
§ 57-55.2. The third provision mandates that a solicitor
file with the Office of Consumer Affairs a copy of the
script of any oral solicitation at least ten days prior to the
commencement of the solicitation campaign. Id. at
§ 57-61D. Finally, § 57-61.1B of the Virginia Code permits
the Commissioner of the Officer of Consumer Services to
suspend or revoke the registration of a solicitor if certain
provisions of the Act are violated.
The district court held that each of the four chal-
lenged provisions impermissibly infringed on First
Amendment freedoms. Telco Communications, Inc. v. Car-
baugh, 700 F. Supp. 294 (E.D. Va. 1988). We find Telco’s
challenge to the percentage disclosure requirement to be
moot. We likewise find the challenge to the suspension
and revocation provisions in § 57-61.B non-justiciable. We
affirm the district court with respect to the prior submis-
sion of solicitation scripts. We reverse, however, with
regard to the required disclosure of financial statements
on file with the state.
Plaintiff Telco Communications, Inc. is engaged in
the business of providing fund raising services to police
organizations and fire fighter unions. Plaintiff publishes a
series of handbooks relating to public health and safety.
Topics for the handbooks have included drug and alcohol
abuse awareness and crime prevention. The client on
whose behalf Telco conducts a fund raising campaign
receives a percentage of the gross advertising revenue of
these handbooks, and Telco is responsible for the prepa-
ration, printing, and distribution of the handbooks. Plain-
tiff contracted with local police fraternal organizations in
the Commonwealth of Virginia to publish and distribute
a pamphlet on their behalf and to solicit advertisements
for the publication.
Following a complaint that Telco had violated Vir-
ginia solicitation laws, the Virginia Office of Consumer
Affairs (OCA) advised plaintiff in March 1988, that it was
investigating plaintiff’s fund raising activities in Virginia.
Thereafter, on June 3, 1988, OCA informed plaintiff’s
attorneys of the specific violations which Telco had
allegedly committed and invited plaintiff to an informal
fact-finding conference. The conference was held on July
6, 1988. No resolution of the charges was reached, how-
ever, and OCA continued its investigation.
On July 21, 1988, Telco filed suit in the Eastern Dis-
trict of Virginia seeking to enjoin the OCA from enforcing
certain provisions of the Virginia charitable solicitation
laws. Count I of the complaint alleged that four provi-
sions of the Virginia charitable solicitation laws, see Va.
Code Ann. §§ 57-55.1; 57-55.2; 57-61D; 57-61.1B and C,
A-30
infringed on Telco’s rights to free speech, in violation of
the First and Fourteenth Amendments. Count II was a
pendent state claim alleging that the charitable solicita-
tion provisions at issue did not apply to plaintiff's
operations.
Through a motion for summary judgment, defendant
Mason Carbaugh, Commissioner of the Department of
Agriculture and Consumer Services of the Common-
wealth of Virginia, requested the district court to abstain
from exercising jurisdiction because of the ongoing state
administrative proceedings against Telco. The district
court denied defendant's motion.
On September 26, 1988, plaintiff moved for partial
summary judgment on Count | of its complaint. Defen-
dant cross-moved for partial summary judgment. After
oral argument the district court granted summary judg-
ment in Telco’s favor on all issued raised in Count I. Telco
Communications, Inc. v. Carbaugh, 700 F.Supp. 294 (E.D. Va.
1988). Plaintiff then stipulated to a dismissal without
prejudice of Count II.
Defendant appeals.
II.
The Commonwealth contends the district court
should have abstained from hearing Telco’s constitutional
claims. It asserts that administrative proceedings had
been instituted against Telco on June 3, 1988, by a letter to
Telco’s attorneys specifying violations of state law and
inviting them to attend a fact-finding conference. Since
such procedures were still pending when Telco filed suit
A-31
on July 21, 1988, it argues that abstention was proper.
Younger v. Harris, 401 U.S. 37 (1971). We hold, however,
that the district court did not err in declining to abstain
where state proceedings were in a preliminary stage and
where the state had imposed a prior restraint upon pro-
tected speech.
Abstention is the exception, “not the rule.” Colorado
River Water Conservation District v. United States, 424 U.S.
800, 813 (1976); Cox v. Planning Dist. 1 Community Mental
Health and Mental Retardation Services Bd., 669 F.2d 940,
942 (4th Cir. 1982). Under Younger v. Harris, 401 U.S. 37
(1971), federal courts should abstain “whenever federal
claims have been or could be presented in ongoing state
judicial proceedings that concern important state inter-
ests.” Hawaii Housing Authority v. Midkiff, 467 U.S. 229,
237-38 (1984); Middlesex County Ethics Committee v. Garden
State Bar Ass'n, 457 U.S. 423, 432-37 (1982). Important to
Younger abstention is the existence of an ongoing state
proceeding. If such a proceeding exists, “reinstituting the
action in the federal courts” is impermissible; indeed to
do so would involve a loss of time and duplication of
effort. Wulp v. Corcoran, 454 F.2d 826, 831 (1st Cir. 1972). If
no state proceeding is pending, however, a federal action
may be permissible because it guarantees a party which
has violated state law “a chance for ultimate vindication
of constitutional claims.” Id. If the ongoing state proceed-
ing is “judicial in nature,” Younger abstention plainly
applies. Middlesex, 457 U.S. at 433-34. Administrative pro-
ceedings are not judicial in nature, however, if state law
expressly indicates that the proceeding is not a judicial
proceeding or part of one, Midkiff, 467 U.S. at 238-39, or if
the proceeding lacks trial-like trappings.
A-32
Here Telco’s action did not disrupt any ongoing state
proceeding. Upon learning that the OCA was investigat-
ing its activities in Virginia, Telco requested a meeting
with OCA. After several months, an “informal fact-find-
ing conference” was held on July 6, 1988. The OCA,
however, never initiated a formal hearing in conformance
with the Commonwealth’s Administrative Process Act,
Va. Code Ann. § 9-6.14:1 et seq. Nor did the OCA request
a formal prosecution against Telco. An informal confer-
ence need not be followed by the institution of formal
proceedings. See Va. Code Ann. § 9-6.14:12. As such, it is
not indicative of whether administrative proceedings will
continue. While Telco’s filing of the federal action on July
21, 1988, may or may not have led the state to refrain
from filing formal charges, that in no way diminishes the
uncertain prospects that plaintiff was facing. Indeed,
after learning of the investigation of its activities, Telco
had to wait months before any meaningful response to its
request for a meeting with state officials was received.
Likewise, the July 6 meeting with those officials was
not remotely “judicial in nature.” Only Telco, the OCA,
and their respective counsel participated at the meeting.
The participants were not sworn nor was a record main-
tained. No opportunity was provided to examine or
cross-examine. The meeting was simply a settlement con-
ference to see if the dispute could be consensually
resolved. The Virginia Administrative Process Act care-
fully distinguishes between informal and formal proceed-
ings. Only at the latter are the safeguards of subpoenas of
witnesses, cross-examination, and an impartial hearing
officer provided. See Va. Code Ann. §§ 9-6.14:12;
9-6.14:13; 9-6.14:14.1.
“eo
:
-
:
:
7
;
A-33
Recent cases applying Younger abstention support
this conclusion. In each of them, the court abstained from
exercising jurisdiction because of the existence of formal,
ongoing state proceedings. In Ohio Civil Rights Commis-
sion v. Dayton Christian Schools, 477 U.S. 619 (1986), for
example, the Supreme Court found abstention proper
because the subject of an administrative complaint
brought suit in federal court after the Ohio Civil rights
Commission had initiated formal administrative proceed-
ings. In Middlesex County Ethics Committee v. Garden State
Bar Ass‘n, 457 U.S. 423 (1983), the Court abstained where
it found an attorney, prior to the commencement of the
federal action, had received a formal statement of charges
from the ethics committee and was required to file an
answer within ten days. This circuit, in Simopoulos v.
Virginia State Board of Medicine, 644 F.2d 321 (4th Cir.
1981), moreover, found abstention appropriate because a
state criminal proceeding was underway before the plain-
tiff initiated his federal action. Finally, in American Civil
Liberties Union v. Bozardt, 539 F.2d 340 (4th Cir. 1976), the
court did not entertain jurisdiction because a bar disci-
plinary complaint had been filed.
Younger abstention represents an accommodation
between a state’s pursuit of important interests in its own
forum and the federal interest in federai adjudication of
federal rights. We decline to hold that Younger abstention
is required whenever a state bureaucracy has initiated
contact with a putative federal plaintiff. Where no formal
enforcement action has been undertaken, any disruption
of state process will be slight. While important state
interests are present in connection with this or any state
statute, the strength of those interests will be respected
A-34
by any court assessing a plaintiff's constitutional claims.
Appellant’s contention - that abstention is required
whenever enforcement is threatened —- would leave a
party’s constitutional rights in limbo while an agency
contemplates enforcement but does not undertake it.
Wulp, 454 F.2d at 831. A federal plaintiff would be placed
“between the Scylla of intentionally flouting state law
and the Charybdis of forgoing what [it] believes to be
constitutionally protected activity in order to avoid
becoming enmeshed” in enforcement proceedings. Steffel
v. Thompson, 415 U.S. 452, 462 (1974). The prospect of such
prolonged uncertainty cannot but chill a party’s First
Amendment freedoms. See Zwickler v. Koota, 389 U.S. 241,
252 (1967). See also Houston v. Hill, 482 U.S. 451, 467 (1987)
(Court “particularly reluctant to abstain in cases involv-
ing facial challenges based on the First Amendment”). We
hold, therefore, that the period between the threat of
enforcement and the onset of formal enforcement pro-
ceedings may be an appropriate time for a litigant to
bring its First Amendment challenges in federal court.
Indeed, if this time is never appropriate, any opportunity
for federal adjudication of federal rights will be lost.!
1 While there may be some theoretical concern that a state
would prematurely institute formal enforcement proceedings
in order to retain state jurisdiction, this danger has always
been inherent in Younger’s requirement of abstention in the face
of an ongoing state proceeding. The natural advantages to both
parties of amicable settlements, however, operates as a disin-
centive both to federal suits and to premature formal enforce-
ment on the part of the state.
If, however, one is disposed to posit dangers from the
timing of Younger abstention, then the danger of requiring
abstention at the onset of informal contacts is that plaintiffs
may rush to federal court before seeking to settle a case.
a ee
A-35
It is this last point that underscores our disagreement
with the dissenting opinion which steadfastly insists that
this is not a First Amendment case. The dissenting opin-
ion holds that Younger abstention is flatly compelled
whenever the administrative process is even prelimi-
narily underway. No matter how egregious the state’s
infringement of constitutional rights or how incipient the
stage of administrative proceedings, the dissent would
mandate abstention. This converts a doctrine of comity
into a blanket permission for the prolonged commission
of unconstitutional acts. It would allow any state agency
to persist in conduct that is patently unconstitutional. In
this case, as we shall show in section IIIC, infra, the state
agency was engaged in a prior restraint of protected
speech. The dissent, in its insistence upon Younger absten-
tion, offers no defense of the state’s practice; nor is there
one. Absent from the dissenting opinion is an apprecia-
tion for the role of federal courts in protecting from plain
constitutional infringement the rights and liberties of citi-
zens who properly invoke their jurisdiction. Younger itself
recognized a role for the court in such cases. The doctrine
has always involved some interplay between concepts of
comity and the need for protection vf constitutional
rights. Younger, 401 U.S. at 44.
We do not hold as a general matter that district
courts are justified in entertaining jurisdiction simply
because state proceedings have not reached a more for-
mal stage. The doctrine of Younger abstention has pro-
gressed over the past two decades to protect state
criminal proceedings, Younger, 401 U.S. 37, state civil
cases, Juidice v. Vail, 430 U.S. 327 (1977), and state
A-36
administrative process, Dayton, 477 U.S. 619 (1986), from
premature federal interference. To follow the doctrine,
however, as one would a pied piper, is to forsake the
Supreme Court’s rulings on constitutional rights. We hold
that the district court did not err in entertaining jurisdic-
tion in the facts of the clear constitutional violation in this
case.
Ill.
“{C)haritable solicitations are so intertwined with
speech that they are entitled to the protections of the First
Amendment.” Secretary of State of Maryland v. Joseph H.
Munson Co., 467 U.S. 947, 959 (1984). See also Riley v.
National Federation of the Blind of N.C., 108 S. Ct. 2672-73
(1988). Charitable solicitations inform the public about
the charity’s existence and goals. A donor’s contribution
in response “to a request for funds functions as a general
expression of support” for the charity and its purposes.
Cornelius v. NAACP Legal Defense and Educational Fund,
472 U.S. 788, 799 (1985). First Amendment protections
extend as well to the paid professional solicitor: “A
speaker’s rights are not lost merely because compensa-
tion is received; a speaker is no less a speaker because he
or she is paid to speak.” Riley, 108 S. Ct. at 2680. While
“soliciting financial support is undoubtedly subject to
reasonable regulation,” Village of Schaumburg v. Citizens
for a Better Environment, 444 U.S. 620, 632 (1980), such
regulation must not unduly intrude upon the rights of
free speech. Id. at 637. That is, the state bears the burden
of showing that its regulation is narrowly tailored to
further a strong, subordinating interest that the state is
entitled to protect. Munson, 467 U.S. at 960-61; Village of
Schaumburg, 444 U.S. at 637.
Ee
——————————<—— Se
PR cee RR ee ttn le a li EES
On ee ate
A-37
The district court held that the four challenged provi-
sions of the Virginia charitable solicitation laws imper-
missibly infringed on Telco’s First Amendment rights. We
address the challenged provisions in turn.
A.
Section 57-55.1 of the Virginia Code provides that a
professional solicitor must disclose to potential donors
the percentage of their contribution which will be
received by the charitable organization for its own use:
It shall be a violation of this chapter for a
professional solicitor to solicit contributions
from a potential donor in this Commonwealth
without clearly and conspicuous] disclosing to
the potential donor prior to orally requesting a
contribution, or contemporaneously with a writ-
ten request for a contribution, at the point of
solicitation, the minimum percentage of any
amount contributed which will be received by
the charitable or civic organization for its own
use.
Telco’s challenge to the constitutionality of this section is
moot.
“[A] case is moot when the issues presented are no
longer ‘live’ or the parties lack a legally cognizable inter-
est in the outcome.” Powell v. McCormack, 395 U.S. 486,
496 (1969); Commonwealth of Virginia v. Califano, 631 F.2d
324, 326 (4th Cir. 1980). Generally, the “voluntary cessa-
tion of allegedly illegal conduct does not deprive the
tribunal of power to hear and determine the case.” United
States v. W. T. Grant Co., 345 U.S. 629, 632 (1953). Jurisdic-
tion, however, may abate if there is no reasonable expec-
tation that the alleged violation will recur and “interim
A-38
events have completely and irrevocably eradicated the
effects of the alleged violation.” County of Los Angeles v.
Davis, 440 U.S. 625, 631 (1979); Califano, 631 F.2d at 326.
Here no reasonable expectation exists that Virginia
will seek to enforce the statute. Subsequent to Riley v.
National Federation of the Blind of N.C., 108 S. Ct. 2667
(1988), where the Supreme Court struck down a North
Carolina statute similar to § 57-55.1, the OCA has not
threatened Telco or any other professional solicitor with
any action for violation of § 57-55.1. OCA, moreover, has
not asserted its right to enforce § 57-55.1 at any future
time. In effect, OCA has conceded the unconstitutionality
of the statute. While Telco points to a July 14, 1988, letter
from the Attorney General as an indication that Riley will
not affect the OCA’s § 57-55.1 charges, that letter noted
only that Riley will not affect the charges in the June 3,
1988 letter - a letter which omitted any mention of
§ 57-55.1. The only OCA letters mentioning § 57-55.1 were
sent in March, 1988, prior to the Supreme Court’s Riley
decision.
We believe that respect for the role of the states and
for the limits of the federal adjudicative function to live
cases and controversies counsels against the issuance of
unnecessary injunctions against state officials. “To slap
injunctions on state officials who have never violated the
law or shown any intention to violate the law would
exceed the proper bounds of equitable discretion.” Blood-
good v. Garraghty, 783 F.2d 470, 476 (4th Cir. 1986). State
officials have shown no inclination to enforce this statute
since Riley and we decline to indulge any presumption
with respect to their conduct other than one of good faith.
EE
A-39
B.
Virginia Code § 57-55.2 requires professional solici-
tors to disclose in writing that financial statements for the
last fiscal year are available from the Virginia Office of
Consumer Affairs. It provides:
Every professional solicitor who solicits
contributions from a prospective contributor in
this Commonwealth: . . . (iii) shall further dis-
close, in writing, the fact that a financial state-
ment for the last fiscal year is available from the
State Office of Consumer Affairs.
The OCA argues that this section promotes the Common-
wealth’s interest in public education regarding charitable
organizations and prevents fraud and harassment. It con-
tends also that the requirement is narrowly tailored to
further such interests. We agree.
Informing the public, see Village of Schaumburg, 444
U.S. at 637-38; International Society for Krishna Consctous-
ness v. City of Houston, Texas, 689 F.2d 541, 547-48 (5th Cir.
1982), and preventing fraud, see Riley, 108 S.Ct. at 2676;
Village of Schaumburg, 444 U.S. at 636-37, are substantial
state interests, both fostered by § 57-55.2. While there are
distinct limits on the extent to which private entities may
be enlisted by the state in this educative function, Miami
Herald Publishing Co. v. Tornillo, 418 U.S. 241 (1974), the
state interest in adding to the public knowledge of pro-
fessional solicitations is not one that is inherently incom-
patible with the First Amendment. The requirement of
§ 57-55.2 educates the public generally about the avail-
ability of financial information on solicitors. It informs a
donor that information on the soliciting entity is available
from the OCA, and that, by implication, information
A-40
about other solicitors is also available. The information
contained in the financial statements, moreover, is invalu-
able. A donor can use this information to determine if a
particular solicitation is bona fide by ascertaining
whether the solicitor is registered. A donor might also
use this information to learn further about a solicitor’s
operations. Additionally, this section assists in preventing
fraud. When comparative information is available, inac-
curacies in inducements are less likely to occur. If they do
occur, they are more likely to be discovered.
Section 57-55.2, moreover, is narrowly tailored. The
statute requires that the disclosure be made in writing to
prospective contributors. With respect to written solicita-
tions, a brief notation of this nature is not a burdensome
requirement. With respect to oral solicitations, such as
those conducted by Telco, the requirement of a written
disclosure can be easily met through notation on the
donor’s receipt. Because the donation will have already
been made in such a case, the disclosure will discourage
donations only if donors read that financial statements
are available and then stop payment on their checks — an
unlikely event. Finally, while Telco suggests the state
could accomplish its purposes by publishing the informa-
tion itself, the requirement that the disclosure be made to
charitable contributors is tailored to that group which
would most desire the information and make an informed
decision on the basis of it.
In Meese v. Keene, 481 U.S. 465 (1987), a member of the
California State Senate challenged as unconstitutional the
Foreign Agents Registration Act, 22 U.S.C. §§ 611 ef seq.,
which required several Canadian documentary films to
LS
A-41
carry the label “political propaganda” along with a stan-
dard form disclosure about the availability from the gov-
ernment of reports about the films. The Court upheld
both the “political propaganda” label and the standard
form disclosures, noting that “[d]isseminators of propa-
ganda may go beyond the disclosures required by statute
and add any further information they think germane to
the public’s viewing of the materials.” Id. at 481. While
the dissent objected to use of the label “political propa-
ganda,” it did not object to the standard form disclosure,
and even argued that this truly neutral instruction was a
sufficient alternative to the objectionable term. Id. at 494
(Blackmun, J., dissenting). Section 57-55.2 simply requires
a similar, neutral disclosure about the availability of
reports from the government. It affords “more speech” to
the public, but does not silence the solicitor. See generally,
Id. at 481, quoting Whitney v. California, 274 U.S. 357, 377
(1927) (Brandeis, J., concurring).
Riley is also instructive. Unlike the compelled dis-
closure of the percentage collected that will go to a char-
ity struck down in Riley, the brief, bland, and non-
pejorative disclosure required here is unlikely to discour-
age donations. Moreover, unlike the percentage donation
requirement which the Riley Court indicated might have
an unequal effect upon campaigns “with high costs and
expenses,” 108 S. Ct. at 2679, Va. Code Ann. § 57-55.2 is a
boilerplate requirement which will affect all solicitors
equally. Finally, the Riley Court explicitly approved a
requirement that a solicitor disclose to potential donor.
his professional status, including his employer’s name
and address, a neutral requirement similar to § 57-55.2.
108 S. Ct. at 2679 n.11.
A-42
Telco’s receipt stated the following: “A financial
statement can be obtained by contacting the Office of
Consumer Affairs Division in Richmond.” Requiring such
a statement is a permissible exercise of state authority,
and we reverse the judgment of the district court to the
contrary.
c.
Section 57-61D requires solicitors to submit the script
of an oral solicitation to the Commissioner at least ten
days prior to the commencement of solicitation. It pro-
vides that:
At least ten days prior to the commence-
ment of each solicitation campaign, the solicitor
shall file with the Commissioner a copy of the
contract entered into with any charitable or civic
organization and shall file a completed ‘Solicita-
tion Notice’ on forms prescribed by the Com-
missioner. . . .Copies of all campaign solicitation
literature, including the text of any solicitation
to be made orally, shall be attached to the Solic-
itation Notice. The charitable or civic organiza-
tion on whose behalf the solicitor is acting shall
certify that the Solicitation Notice and accom-
panying materials are true and complete.
The OCA contends that this section promotes the state’s
interest in the prevention of fraud and misrepresentation
in solicitation. Moreover, OCA argues that this require-
ment is the only effective regulation of telephone solicita-
tion and is not unduly burdensome. We, however, find
§ 57-61D an unconstitutional prior restraint.
“[P]rior restraints on speech and publication are the
most serious and the least tolerable infringement on First
A-43
Amendment rights.” Nebraska Press Ass'n. v. Stuart, 427
U.S. 539, 559 (1976). A threat of criminal or civil sanctions
chills speech, but a “prior restraint ‘freezes’ it at least for
the time.” Id., quoting A. Bickel, The Morality of Consent
61 (1975). Any system of prior restraints of expression
thus bears “a heavy presumption against its constitu-
tional validity.” Bantam Books, Inc. v. Sullivan, 372 U.S. 58,
70 (1963).
The Commonwealth fails to carry this “heavy bur-
den.” Organization for a Better Austin v. Keefe, 402 U.S. 415,
419 (1971). Although the Commonwealth has a legitimate
interest in preventing fraud and misrepresentation, there
is a thin line between reviewing a script for misrepresen-
tations and reviewing it for content. Section 57-61D pro-
vides no guidelines for OCA review and thus permits
OCA officials to recast solicitation scripts so as to reflect
their judgment as to how a solicitation can be made.
Without guidelines, unpopular or controversial organiza-
tions may be subject to stricter scrutiny. Moreover, the
requirement might dissuade some organizations from
soliciting in Virginia, see Riley, 108 S. Ct. at 2676, and
discourage others from submitting scripts which,
although accurate, may risk the displeasure of state
officials.
While § 57-61D may be the most effective means of
monitoring telephone solicitation, “the First Amendment
does not permit the State to sacrifice speech for effi-
ciency.” Riley, 108 S. Ct. at 2676; Village of Schaumburg, 444
U.S. at 639; Schneider v. State, 308 U.S. 147, 164 (1939).
Potential donors may be protected against fraud and
misrepresentation by vigorous enforcement of the Com-
monwealth’s anti-fraud and misrepresentation statutes.
A-44
Riley, 108 S. Ct. at 2676. Notification that a fundraiser’s
financial statements are available, as required by
§ 57-55.2, will facilitate the Commonwealth's enforcement
of these provisions by ensuring that donors are aware of
and have the opportunity to use comparative informa-
tion. Such enforcement “punishles] the few who abuse
rights of speech after they break the law” rather than
“throttle them and all others beforehand.” Southeastern
Promotions, Ltd. v. Conrad, 420 U.S. 546, 559 (1975)
(emphasis in original).
Appellant contends that the practical application of
this section is not burdensome: that the Commissioner
does not review the script for content but only checks for
potential misrepresentations; that the Commissioner
relies only on his powers of persuasion to get a solicitor
to alter a possible misrepresentation; that the Commis-
sioner tolerates deviations from the script; that the Com-
missioner does not absolutely require a script (but only
an outline), and that the maximum period of approval for
scripts is ten days and is often much shorter.
None of these assurances, however, persuades us that
bureaucratic review of solicitation scripts is not rife with
the potentiai for abuse. The Commissioner’s power to
suspend or revoke a license under § 57-61.1B provides
him substantial leverage over charitable solicitations.
While the OCA may only “request” script alterations
before approval is given to begin solicitations, the practi-
cal effect of such a “request” is likely to go beyond
persuasion. In fact, the record suggests a solicitor has
never refused such a request. Scripts, moreover, are
required. A “solicitation notice” must be filed with the
OCA, and a copy of all solicitation literature and the text
A-45
of any solicitation to be made orally must be attached to
the solicitation notice. Va. Code Ann. § 57-61D. Finally, an
OCA representative testified that a script is required and
if none exists, the solicitor must reduce to writing the
proposed set presentation. Monitoring devices, such as
that in Va. Code Ann. § 57-61D, are a powerful induce-
ment toward orthodox presentation of charitable solicita-
tions -a result which the variety in character of charitable
organizations belies and which the commitment to div-
erse expression in the First Amendment forbids.
Appellant’s reliance on Times Film Corp. v. Chicago,
365 U.S. 43 (1961), is misplaced. Although Times Film
upheld an ordinance requiring the prior submission of
motion pictures to a censorship board, the Supreme Court
substantially modified this decision so as to permit the
prior submission of motion pictures only if there are
adequate procedural safeguards, which are conspicuously
absent here. Freedman v. Maryland, 380 U.S. 51 (1965).
Appellant also relies on Shapero v. Kentucky Bar Asso-
ciation, 108 S. Ct. 1916 (1988), which permits states to
require lawyers to file a copy of solicitation letters with a
state agency. Shapero, however, has no application to
restrictions on charitable solicitations. Unlike charitable
solicitations, solicitation by lawyers is commercial
speech, Ohralik v. Ohio State Bar Association, 436 U.S. 447,
455-56 (1978), and hence not subject to the exacting scru-
tiny required here.
D.
Section 57-61.1B of the Virginia Code permits the
Commissioner of the Office of Consumer Services to
A-46
suspend or revoke the registration of a solicitor if certain
provisions of the Act are violated. It provides:
If the Commissioner at any time determines
that (i) the requirements of § 57-49 or § 57-61
have not been met, or (ii) the registrant has
violated, within the preceding twelve months,
any requirement of §§ 57-54, 57-55.2 or 57-57 or
any regulations adopted pursuant to 57-66, then
the Commissioner may suspend or revoke the
registration by a written case decision made in
conformance with the Administrative Process
Act (§ 9-6.14 1 et seq.)
Telco contends that § 57-61.1B operates as a prior
restraint upon speech by permitting the state to silence
charitable speech on the basis of violations, either unre-
lated to speech or of minimal consequence. The Common-
wealth, on the other hand, asserts that § 57-61.15
embodies its entire scheme of regulatory enforcement
without which it would be left helpless to sanction wide-
spread fraud and abuse. In the abstract, these are both
powerful contentions. We find the records and pleadings
inadequate, however, to determine the precise operation
of § 57-61.1B in this case and therefore dismiss plaintiff's
claim. Likewise, § 57-61.1C, which sets forth the pro-
cedures by which the sanctions are applied, was not
discussed by the parties and need not be addressed in
this case.
Jurisdiction should only be exercised when “the case
‘tenders the underlying constitutional issues in clean-cut
and concrete form.’ ” Socialist Labor Party v. Gilligan, 406
U.S. 583, 588 (1972), quoting Rescue Army v. Municipal
Court, 331 US. 549, 584 (1947). See also Keystone Bit-
uminous Coal Ass’n. v. DeBenedictis, 480 U.S. 470, 494-95
A-47
(1987); Hodel v. Virginia Surface Mining & Reclamation
Ass'n., 452 U.S. 264, 294-95 (1981). Here, “we know very
little more about the operation of the [Virginia procedure}
as a result of this lawsuit than we would if a prospective
plaintiff who had never set foot in [Virginia] had simply
picked this” off the statute books and filed this lawsuit.
Gilligan 406 U.S. at 588. While some grounds for suspen-
sion or revocation may be permissible, others may not.
Uneven enforcement of sanctions for trivial reasons
might implicate First Amendment concerns; sanctions for
gross fraud would not. The state and district courts have
also taken divergent views of the statute’s meaning-views
which might bear upon the section’s constitutionality.
The state, for example, contends that the maximum
period of revocation pursuant to § 57-61.B is 12 months,
while the district court notes that this section does not
“limit revocation to a period of only 12 months.” To
permit state courts to construe this state statute may
therefore prove useful. See Rescue Army, 331 U.S. at 584.
In short, while Telco may meet the minimal requirements
of standing, and may be a party to a case or controversy,
its case “has not given any particularity” to the effect
upon it of § 57-61.1B. Gilligan, 406 U.S. at 588.
As can readily be seen from the cross-references in
§ 57-61.1B, the sanctions challenged in this section also
cover a spectrum of activities, from the filing of a regis-
tration statement with the Commonwealth to the mislead-
ing of the public with regard to the status of the solicitor.
The sanctions, however, have never been applied to Telco.
We have no idea whether Telco has violated, or is accused
of violating, any of the underlying provisions to which
the sanctions would apply. The record is so sparse and
A-48
the challenge to this section so generalized as to give it all
the earmarks of unripeness. We do not, on this account,
foreclose facial challenges to state statutes in federal
court. We do, however, require that the party bringing
such a challenge present a more particularized view as to
the impact of the challenged provision upon its own
activities.
The dissent maintains that Younger abstention would
have been a more appropriate means of avoiding prema-
ture adjudication. We disagree. It would have been
improper for the district court to abstain from the case
entirely to avoid discrete issues not yet ripe for review.
The Article III doctrines of justiciability do serve, how-
ever, as a supplementary guarantee that federal courts
will not engage in premature interference with state pro-
ceedings. Indeed, there is nothing to prevent the state
from pursuing the proceedings against Telco free of the
singular constitutional taint of the prior restraint.
IV.
In summary, we find Telco’s challenge to the percent-
age disclosure requirement in Va. Code Ann. § 57-55.1 to
be moot. Likewise, we find no justiciable controversy
with respect to the suspension and revocation require-
ments in Va. Code Ann. § 57-61.1B and C. We thus vacate
the judgment of the district court and remand with direc-
tions to dismiss without prejudice this section of plain-
tiff’s complaint. We hold that Va. Code Ann. § 57-55.2,
which requires notification to potential donors of finan-
cial statements on file with the state, is a permissible
A-49
exercise of Virginia’s power to regulate professional solic-
itations. We thus reverse the judgment of the district
court as to this claim. Finally, we affirm the district
court’s judgment that the submission of solicitation
scripts required by Va. Code Ann. § 57-61.1D is an uncon-
stitutional prior restraint upon First Amendment
freedoms.
AFFIRMED IN PART,
REVERSED IN PART,
AND REMANDED.
HALL, Circuit Judge, dissenting:
The majority believes that this is a First Amendment
case. It is not. The majority believes that “we must deter-
mine” the constitutionality of several provisions of Vir-
ginia’s charitable solicitation laws. Slip op. p. 3. We do
not. As a matter of comity, we must not. This is an
abstention case. It is about federal-state relations in our
system of government and a proper respect for the
important role of informal procedures in the administra-
tive process. Because the majority fails to recognize that
we must abstain, I respectfully dissent.
I.
As the majority points out, the doctrine of Younger
abstention stands as an exception to the rule that federal!
courts must decide cases within their jurisdiction. Slip
Op. at 6; see also New Orleans Public Service, Inc. v. Council
of City of New Orleans, _ U.S. __, 109 S.Ct. 2506, 2512-13
(1989). However, this doctrine also stands in recognition
of the important considerations of comity and respect for
A-50
state government that are so fundamental to our federal
system. Younger v. Harris, 401 U.S. 37, 43-45 (1971)
(known as “Our Federalism”). Thus, Younger abstention
serves as a mechanism to reconcile two competing policy
considerations — the federal courts’ duty to respect ongo-
ing state proceedings and their mission to ensure that
federal rights are vindicated. Slip Op. p. 9. When these
two considerations come into conflict, as they do in this
case, Younger routinely requires that federal courts must
abstain:
Because of our concerns for comity and federal-
ism, we thought that it was “perfectly natural
for our cases to repeat time and time again that
the normal thing to do when federal courts are
asked to enjoin pending proceedings in state
courts is not to issue such injunctions.”
Ohio Civ. Rights Comm. v. Dayton Christian Schools, Inc.,
477 US. 619, 627 (1986) (emphasis in original, citation
omitted). As Dayton itself held, the same considerations
are controlling for requests to enjoin ongoing administra-
tive proceedings. As long as administrative litigants are
given an opportunity to raise their constitutional con-
cerns, the respect accorded to state administrative pro-
ceedings must be similar to that given to state court
proceedings. It is easy to see why this is so. States must
be left free to enforce their laws either administratively or
judicially as they see fit. Any other result would under-
mine the very foundations of Younger:
a proper respect for state functions, a recogni-
tion of the fact that the entire country is made
up of a Union of separate state governments,
and a continuance of the belief that the National
Government will fare best if the States and their
A-51
institutions are left free to perform their sepa-
rate functions in their separate ways.
Younger, 401 U.S. at 44, cited in City of New Orleans, 109
S.Ct. at 2516. Thus, although abstention is an exception to
the general rule that federal courts must exercise their
jurisdiction, Younger and its progeny require that ongoing
state administrative proceedings be given deference by
the federal courts.
II.
In Middlesex Co. Ethics Committee v. Garden State Bar
Ass'n, 457 U.S. 423, 432 (1983), the Supreme Court fash-
ioned a threefold inquiry to determine when abstention is
necessary:
first, do [the state proceedings] constitute an
ongoing state judicial proceeding; second, do the
proceedings implicate important state interests;
and third, is there an adequate opportunity in
the state proceedings to raise constitutional
challenges.
(emphasis in original). As applied to this case, I believe
that the majority would agree with me that the last two
prongs of the inquiry have been met. Virginia’s interest in
protecting its citizenry from fraud through adminis-
tratively enforced charitable solicitation laws is certainly
important. Slip Op. p. 14. Likewise, Telco’s opportunity to
raise its constitutional concerns both before OCA and on
direct appeal in the Virginia Commonwealth courts (pur-
suant to Va. Code Ann. §§ 9-6.14:16, 57-67) clearly satisfies
the third prong. See Middlesex, 457 U.S. at 436; Dayton, 477
U.S. at 629. Thus, we are in disagreement only as to
whether there is an ongoing state proceeding to which we
A-52
should defer and whether that proceeding is sufficiently
“judicial” in nature to merit abstention.! I address these
issues in turn.
A.
“Ongoing” means “being actually in process” or
“continuously moving forward.” Webster’s New Collegi-
ate Dictionary, 802 (5th Ed. 1977). Here, there can be no
question that OCA enforcement proceeding was actually
in process prior to Telco’s filing in district court. The facts
surrounding this proceeding conclusively prove this
point.
After receiving a complaint about Telco’s operation,
OCA began an investigation in late March, 1988. On June
3, at the request of Telco, OCA sent a four-page letter to
Telco’s counsel which detailed the nature of the alleged
1 Telco has not argued and the record does not show the
presence of any of the exceptions to Younger abstention, such as
bad faith or harassment on the part of OCA. Further, contrary
to the majority’s protestations, these statutes are not plainly
unconstitutional so that abstention is unnecessary. The Younger
court itself carved such an exception to its rule of abstention,
but it did so very narrowly:
It is of course conceivable that a statute iright be
flagrantly and patently violative of express constitu-
tional prohibitions in every clause, sentence and
paragraph, and in whatever manner and against
whomever an effort might be made to apply it. Id. at
54-55, quoting Watson v. Buck, 313 U.S. 387, 402 (1941)
(emphasis added). ;
One need look no further than the majority’s holding on the
merits to see that the Younger doctrine does apply in this case.
A-53
violations under investigation, as well as the dates and
particular solicitation campaigns during which they sup-
posedly occurred. The letter concluded by proposing that
an informal fact-finding conference be held to resolve the
allegations. A separate cover letter advised Telco of the
purpose of the proposed conference. On July 6, an unsuc-
cessful conference was held. Afterwards, OCA continued
its enforcement activities by requesting, through counsel,
certain Telco records. As it became clear that OCA was
about to instigate formal revocation proceedings, Telco
filed this action in federal court on July 21. At that time,
OCA ceased its enforcement efforts pending its request to
the district court to abstain. This request was denied.
The majority seems to base its conclusion that there
was not an ongoing proceeding on the fact that OCA had
not yet commenced a formal revocation hearing. Such a
treeze-frame perspective of OCA enforcement, however,
ignores the reality of administrative process.
Suspension or revocation of a solicitor’s registration
under Va. Code Ann. § 57-61.1 is accomplished through
the procedures of the Virginia Administrative Process Act
(“APA”) Va. Code Ann. § 9-6.14:1 et seq. After a complaint
is filed with and investigated by OCA, an informal fact-
finding conference is held between the agency and the
suspect registrant. Va. Code Ann. § 9-6.14:11. If this confer-
ence does not produce a consensual resolution of the
problem, a formal, trial-like proceeding is convened to
decide the dispute. § 9-6.14:12. Thus, APA contemplates a
two-step decision-making procedure in which the infor-
mal conference plays an integral role. The conference
serves as a mechanism through which an agency can use
its persuasive power to resolve a dispute quickly and
A-54
inexpensively, obviating the need for a formal hearing.
The Virginia General Assembly clearly intended as much.
The Revisor’s Notes to § 9-6.14:11 sketch the fact-
finding conference’s place in the administrative process:
They [informal conferences] account for by far
the greater bulk of administrative operations of
a regulatory nature. To exclude them would be
to ignore the larger part of the subject. To pre-
vent or seem to prevent them would radically
alter, if not disastrously impair, an important
tool of today’s governance... .
But, while this section is designed as the
primary provision respecting case decisions
where basic laws do not require an agency hear-
ing, it may also serve, in the discretion of agen-
cies concerned and upon consent of the private
parties, as a preliminary or pretrial method of
settling or simplifying cases in which there is a
statutory right to a trial-like agency hearing.
Thus, it is evident that these conferences are an
important step in APA process as well as in OCA’s
scheme of enforcement. Consequently, to hold that no
state enforcement proceeding is ongoing after one of these
pretrial conferences has been held, makes no sense.
Under the majority’s reasoning, only if a formal hearing
were scheduled would there be an ongoing proceeding.
This view completely ignores the continuous nature of
administrative proceedings and disregards this “impor-
tant tool” of Virginia governance. While in some situa-
tions it may be difficult to determine when a case is
“ongoing” before a state administrative agency, I have no
trouble in concluding that after this enforcement proceed-
ing progressed past the informal conference stage, it was
A-55
ongoing for Younger abstention purposes. The case law on
point supports this conclusion.
The majority’s contention that Dayton and Middlesex
support its determination that there was no ongoing state
proceeding has been soundly rejected by another circuit.
In University Club v. City of New York, 842 F.2d 37 (2d Cir.
1988), the New York City Human Rights Commission was
sued by two of the City’s private clubs. The Commission
had begun an investigation into alleged discriminatory
practices at several private clubs. In January, 1986, the
Commission filed a complaint against two of the clubs
which initiated a formal investigatory period. This inves-
tigation culminated in a probable cause determination in
July, 1986, at which time the Commission sought to sched-
ule a conciliation meeting. In the meantime, several
months earlier in March, the federal plaintiffs filed suit to
enjoin the pending administrative proceedings. Id. at 39.
In finding abstention the only appropriate course, the
Second Circuit saw no conflict with Middlesex and found
its case and Dayton indistinguishable:
In both cases the administrative posture was the
same: the commissions were proceeding with
conciliation efforts and adjudication of the
charges, when the targets of the investigations
brought suit in federal district court to halt the
administrative actions because of alleged
infringement of constitutional rights.
Id. at 40. The court had little trouble in concluding that a
state proceeding was ongoing. It reasoned that “the
administrative agency in this case has not yet conducted
its formal hearing or imposed any sanctions; hence, an
A-56
ongoing state proceeding exists.” Id. at 40 (citation omit-
ted). This is the exact, common sense reasoning that
should control this case.
Not only has the majority’s decision brought us in
conflict with the Second Circuit, but it is clearly at odds
with one of our own prior decisions. In American Civil
Liberties Union v. Bozardt, 539 F.2d 340 (4th Cir.), cert.
denied, 429 U.S. 1022 (1976), we upheld a district court’s
decision to abstain from enjoining the Board of Commis-
sioners on Grievances and Discipline of the South Caro-
lina Bar from investigating a complaint filed against one
of the state’s attorneys. There, the federal plaintiff filed
her suit at the investigation stage of the proceedings, long
before any formal hearing was held. Id. at 342. We held
then, as | would hold now, that “principles of comity and
federalism require that the federal courts not be permit-
ted to interfere in the ongoing state proceedings.” Id. We
emphasized that the plaintiff's opportunity to have her
constitutional challenges addressed in state court (and
eventually in the United States Supreme Court) justified
the decision to abstain. Id.
The reasoning of these cases squarely controls this
case, especially in regard to the majority’s assertion that
these proceedings have not advanced far enough to merit
federal deference. Here, a complaint was filed with OCA
months before this federal action was filed and the
agency had investigated the complaint and had held an
informal fact-finding conference. The proceedings in Unt-
versity Club and Bozardt had not progressed nearly as far
and both courts found abstention necessary. I would do
the same.
A-57
Most importantly, and most unfortunately, the major-
ity’s decision has the practical effect of eviscerating
OCA’s ability to efficiently enforce Virginia’s charitable
solicitation laws. Now, if the agency wants to retain juris-
diction to investigate and enforce the Commonwealth's
laws, to avoid the potential of federal interference it will
likely skip the cost-effective informal conference stage of
the state’s administrative process and go straight to a
formal hearing. This unfortunate result seems to flow
from the district court’s and the majority’s misconception
that Telco was a party caught in limbo awaiting an arbi-
trary state agency’s decision whether or not to prosecute.
Nothing could have been further from the truth. The
decision to prosecute had been made and this was an
ongoing enforcement action which was proceeding at a
respectable pace.? But for Telco’s request to enjoin that
prosecution, it is undisputed that the second stage of the
APA enforcement process, formal proceedings, would
have been held. Telco has attempted to, and has appar-
ently succeeded in, making an end-run arcund the state
administrative process and into the federal courts. This is
just the type of disruption of ongoing state administrative
proceedings that a developed sense of comity cannot
allow.
* This is also why there was no “chilling effect” to Telco’s
First Amendment rights. Regardless, even if Telco’s First
Amendment rights were slightly chilled, this is certainly not
enough to justify federal intervention. Younger, 401 U.S. at
5051.
B.
The majority’s failure to recognize the continuous
nature of administrative process leads it to a second
erroneous conclusion, that OCA’s proceecing was not
“judicial” in character. By focusing on the procedures of
the informal fact-finding conference alone, it ignores the
fact that the conference is only the first step of a two-part
enforcement scheme which culminates in a formal trial-
like hearing that even the majority would find “judicial.”°
However, the majority’s conclusion is flawed in another,
equally fundamental, respect. By requiring the presence
of formal, trial-like procedures before a proceeding can
be considered “judicial,” the majority again fails to recog-
nize administrative reality
As Middlesex and Dayton made clear, state adminis-
trative proceedings can be sufficiently “judicial” in nature
warrant Younger abstention. Middlesex, 457 U.S. at
132-34; Dayton, 477 US. at 627. In neither case did the
Supreme Court make its conclusion dependant on the
presence or absence of formal procedural trappings.* In
The majority also ignores the many procedural safe
-uards that informal fact-finding conferences have — notice of
the conference, right to appear in person or by counsel, notice
f all adverse information in possession of the agency, and a
prompt decision made in writing if adverse to the litigant
le Ann. § 9-6.14:02
+ This lack of emphasis on procedure is no accident. The
soreme Court has not emploved such an analysis for very
? » J
bvious and very persuasive reasons In the interest of eft
y and economy, administrative agencies frequently mak«
idicial decisions,” without employing formal legal pr
jures. The majority's opinion w wld undermine the benefit
(¢ ontir st j on 1 | winy page
A-59
Middlesex, the court did not scrutinize the procedures
used by the local bar District Ethics Committees. The fact
that the agency had or had not gotten to the formal
hearing stage was irrelevant because “[fjrom the very
beginning a disciplinary proceeding is ‘adicial in nature,
initiated by filing a complaint.” Id. at 433 (citation omit-
ted). Thus, filing of the complaint was the controlling
factor for abstention purposes in Middlesex; an act which
occurred months before Telco filed this suit. In Dayton,
the court stressed the fact of eventual state court review
in concluding that the Ohio Civil Rights Commission
proceedings were judicial. Id. at 619-20. In the case at bar,
Telco unquestionably has the opportunity for the Virginia
Commonwealth courts to review its claims.
Thus, although I think that it is wrong to analyze it as
such, even the informal fact-finding conference standing
alone, divorced from the second step of the APA process,
is a judicial proceeding worthy of our abstention
Unquestionably, the entire APA process of which this
conference is only a part is a judicial undertaking. In sum,
| think that the OCA’s enforcement proceedings were
ongoing at the time Telco filed this suit and were “judi-
cial” in nature for purposes of Younger abstention.®
(Continued from previous page)
f administrative efficiency and lead to increased formalism by
not according informal agency actions the deference they are
duc. It will also lead to an erosion of the deference due to the
administrative workings of Virginia's sovereign Common
wealth government
> The Dayton court did allude to two situations wher
ibstention in favor of state administrative proceedings might
,
(Continued on following page
A-60
IL.
Having determined that OCA’s enforcement effort
was an ongoing judicial proceeding for purposes of Youn-
ger, 1 believe that both the district court and the panel
erred in not abstaining from the case. | would reverse on
this point and would not reach the merits of this appeal.
Consequently, I do not express any opinion on the major-
ity’s First Amendment analysis other than to make one
observation.
It seems to me that the mootness and ripeness prob-
lems encountered by the majority are a direct conse-
quence of taking this case before judicial review was
appropriate. If the majority would have abstained, the
Virginia courts would not face the problem of determin-
ing whether the challenge to § 57-55.1 is actually moot
and which of the suspension and revocation provisions of
57-61.1B are constitutionally suspect. This is so because
(Continued from previous page)
not be appropriate; neither is applicable here. The first ts 1
state law expressly indicates that the proceedings are not “judt-
cial in nature.” A variant of this exception was recently found
controlling in City of New Orleans, where the Supreme Court
found abstention inappropriate when a plaintiff sought to
enjoin an agency’s rate-making proceedings - a clearly legisla-
tive (rule-making) act. Id. at 2519-2520. Here, the Revisor 's
Note to § 9-6.14:11 plainly states that the provision is con-
cerned with the “judicial” operations of agencies. The second
exception is if the proceedings are remedial rather than coer-
cive in nature. Of course, these enforcement proceedings,
which were intended to revoke or suspend Telco’s registration
if violations were proven, were coercive. See University Club
842 F.2d at 42 (potential of civil penalties makes proceeding
coercive).
A-61
the Virginia courts would have had before them a fully-
developed administrative record that would reveal
exactly how the revocation provisions were applied and
whether or not OCA relied upon § 57-55.1. Thus, the best
argument for Younger abstention is the most obvious. This
case is simply not ready for judicial review.
A sense of respect for Virginia’s right to adminis-
tratively enforce its laws, and a sense of awareness of the
importance of informal procedures in the administrative
process demand that we abstain in this case. Accordingly,
| would reverse the district court and remand with
instructions to abstain until the culmination of the admin-
istrative process and any subsequent Commonwealth
court appellate review. Because the majority has not cho-
sen this course, I respectfully dissent.
A-62
UNITED STATES COURT OF APPE
FOR THE FOURTH CIRCUI!I
No. 88-2668
rELCO COMMUNICATIONS, ING
1
‘llee
Plaintiff Appr
¥
S MASON CARBAUGH, as he is om
missioner of the Department of Agri
r tre
ulture and Consumer Services Oo!
aheaal
T . A»
Defendant ADDeE
A-63
Williams, United States District ludge, sitting by designa-
tion, voted to deny.
In a requested poll of the Court on the suggestion for
rehearing in banc, Judges Widener, Hall, Murnaghan, and
Chapman voted to grant rehearing in banc; and Chief
Judge Ervin and Judges Winter, Russell, Phillips, Sprouse,
Wilkinson, and Wilkins voted to deny rehearing in banc.
As the panel considered the petition for rehearing
and is of the opinion that it should be denied, and as a
majority of the active circuit judges voted to deny rehear-
ing in banc,
IT IS ADJUDGED AND ORDERED that the petition
for rehearing and suggestion for rehearing in banc are
denied.
Entered at the direction of Judge Wilkinson.
For the Court,
John M. Greacen
CLERK
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