# Petition for Writ of Certiorari — Carbaugh v. Telco Communications, Inc. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385020_1096%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1990 - **Citation:** 495 U.S. 904 ## Text % Supreme Court, U.S, 89-1311 Wi? rie Dp +—Fe8—7_~—s«1890 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. y 4 PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT a> vw 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 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 —————————— 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 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385020_1096%3A1. Public record. Not legal advice.