# Opposition Brief — Carbaugh v. Telco Communications, Inc.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1990
- **Citation:** 495 U.S. 904

## Text

No. 89-1911

In The

SUPREME COURT OF THE UNITED STATES

October Term, 1989
—

S. MASON CARBAUGH, as he is
Commissioner of the Department
of Agriculture and Consumer Services
Petitioner,
v.

TELCO COMMUNICATIONS, INC.

Respondent.
——@—

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT
a

BRIEF IN OPPOSITION
—@—.

PETER S. BROOKS

. Telco Communications, Inc.
21 Industrial Court
Seekonk, MA 02771
508-336-6633

JOHN G. DOUGLASS

Wright, Robinson, McCammom,
Osthimer & Tatum

411 East Franklin Street

Richmond, VA 23219

804-783-1100

*LOUIS J. SCERRA, JR.
Goldstein & Manello
265 Franklin Street
Boston, MA 02110
617-439-8900

*Counsel cf Record

BEST AVAILABLE COPY” Eee

QUESTION PRESENTED

Where a state agency has commenced an investigation and has held
one informal meeting with a party, but has not commenced a formal
administrative proceeding, should a federal court abstain from exer-
cising jurisdiction in a suit by the target of that investigation?

TABLE OF CONTENTS
Page
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TULIP ATTN assis ctw nescence iii
STATENIRIET OP THR CAUEE oasis ete sket
SUMMARY OF ARGUMENT .........ssssssssssssssssssssssssssssssssssssssee 4
SIE osssicinssstrnrierssicmag 5

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TABLE OF AUTHORITIES
Page
Cases
City of Houston, Texas v. Hill, U.S._ 107 S.Ct. 2502
IIT ili Latta acacdendancbendiiadbatu\eubisunaiidbsntasvndenvessaesuesinian 8
Colorado River Water Conservation v. United States, 424
I cand ndachcnchsanniaanindidrtahanceniniaeseenseonabs 8
County of Allegheny v. Frank Mashuda Co., 360 U.S. 185,
sc snasataensbnennnnbnnpiiabebases 8
Doran v. Salem Inn, Inc., 422 U.S. 922 (1975) woe eceeeeeeeeeeee 9
Hawaii Housing Authority v. Midkiff, 467 U.S. 299, 237
iain ch hnhacclabmieahd nc obihincintnivensesaesesbrenssess 8
Hicks v. Miranda, 422 U.S. 332, 349 (1975) ..........ccccssssrrresesees 9
Lake Carriers Association v. MacMullan, 406 U.S. 498,
a aihattcaddiacacichdbinicaninindduiloastasstunsaviubtaneness 5
Middlesex County Ethics Committee v. Garden State Bar
Association, 457 U.S. 423, 433-34 (1982) 00.0... ccceeeeeeeeeee 6
Ohio Civil Rights Commission v. Dayton Christian Schools,
as ccdwesbunsmbensuayneiaceunnnss 6
Steffel v. Thompson, 415 U.S. 452 (1974) won. ccccceeeeeeneeeeees me
Wulp v. Corcoran, F.2d 826, 831 (1st Cir. 1972) oo... eeeeees 7

POET F. TEMPER, SOL UD. BT (IGT) .cccessccrsssssevesssesscccccnsnsnsee 5

STATEMENT OF THE CASE

Telco is a Rhode Island corporation engaged in the business of
providing professional fund raising services to civic organizations
and labor unions for a fee. Telco publishes a series of handbooks
relating to public health and safety and arranges for the sale of
advertising to be included in these handbooks. The proceeds from the
sale of advertising are divided among Telco, its sales representatives,
and Telco's clients.

In March of 1988, Telco was advised by the Office of Consumer
Affairs of the Commonwealth of Virginia ("OCA") of an investiga-
tion of its fund raising activities in Virginia. Specifically, the OCA
advised Telco that it appeared that Telco had failed to disclose to
potential advertisers the percentage of the gross receipts to be paid to
the organizations for whom Telco was selling advertising, in viola-
tion of Virginia Code Section 57-55.1. (R.App.7)! In response,
Telco's counsel requested a meeting with the OCA to discuss the
issues raised by its letter and the enforceability of the disclosure
requirement. (R.App. 4-5).

In addition to charging Telco with failing to disclose the division
of the advertising revenues, the OCA also charged Telco with failing
to submit accurate scripts of the sales presentations made by its sales
representatives. The OCA claimed to have evidence that sales
representatives made statements to potential advertisers that were at
variance with the scripts of the presentations that Telco was required
to and did submit to the OCA (App.11-15). After several further
requests by Telco for a meeting to discuss the charges of the OCA, the
OCA finally agreed to such a meeting in June of 1988. An informal
conference was held in early July of 1988 to discuss the charges by the
OCA and Telco and the OCA stipulated that the meeting was to be
"settlement negotiations" and the parties agreed that any statements
made could not be used as evidence or admissions. (R.App. 8). No
settlement of the dispute was accomplished and Telco thereafter filed
suit in the federal court.

' Reference is to the appendix of the Respondent set forth herein. Respondent shall
refer to the appendix contained in the Petition as “App”.

2

—_

Telco challenged four provisions of the charitable solicitation
law under the First and Fourteenth Amendments to the United States
Constitution. First, Telco claimed that Section 57-55.1 of the
Virginia Code, which requires the disclosure of the percentage of the
gross revenue to be remitted to a charitable or civic organization, was
unconstitutional under the First Amendment. Second, Telco chal-
lenged Section 57-55.2 (iii), which requires a paid solicitor todisclose
the availability of a financial statement to each contributor. Third,
Telco challenged the requirement that it submit the text of its oral
solicitation to the OCA. Finally, Telco challenged the right of the
Commonwealth of Virginia to suspend or revoke a paid solicitor's
license.

The OCA took no administrative action after the meeting in July
and after Telco filed suit. The OCA simply chose not to commence
an administrative action, but rather to await the outcome of the
litigation. (R.App. 10-12) The OCA did not even pursue an admin-
istrative action for the alleged violations of the Virginia Code that
were not challenged by Telco in the federal court .?

The petition of the OCA to this Court completely fails to disclose
that the District Court below invited the OCA to commence an
administrative action and the OCA declined the invitation. The
District Court below issued an order directing the OCA to state,
within fifteen days, “whether the Office of Consumer Affairs has
initiated a formal hearing under the Virginia Administrative Process
Act...for the revocation or suspension of plaintiff's registration"
(R.App. 9) In response, the OCA admitted that no administrative
action had been taken since the filing of Teico's complaint and that it
had no plans to commence such action. (R.App.10-12) The District
Court then denied the OCA's motion, holding that there was no
pending administrative proceeding to which it could or should defer.
(App. 19-26)

2 Telco was charged with failing to identify itself and failing to state that it was a
paid solicitor. A Telco solicitor was also charged with falsely stating that he was
a volunteer and Telco was cited for failing to timely file a financial statement. The
consututionality of these provisions of the Virginia Code allegedly violated by
Telco was not challenged by Telco.

The District Court granted Telco's motion for summary judg-
ment and declared each of the four challenged provisions to be uncon-
stitutional under the First Amendment. The Court of Appeals for the
Fourth Circuit affirmed the decision of the District Court in part and
reversed in part. The Court of Appeals ruled that the District Court
correctly declined to abstain and correctly determined the script
requirement to be unconstitutional. However, the Court of Appeals
held Telco's challenge to Section 57-55. i to be moot and its challenge
to the license revocation provisions to be non-justiciable. The Court
of Appeals reversed the decision of the District Court as to the
constitutionality of Virginia Code Section 57-55.2 (iii). The Com-
monwealth sought rehearing and rehearing in banc with respect to the
Court of Appeals’ decision that abstention was not required. The
motion for rehearing and for rehearing in banc was denied.

In affirming the District Court's denial of the OCA's motion to
dismiss on the ground of abstention, the Court of Appeals correctly
noted that there was no ongoing state proceeding disrupted by Telco's
suit. (App. 32) The "informal fact finding conference" held by the
OCA on July 6, 1988 did not constitute the commencement of a state
administrative proceeding, according to the Court of Appeals, be-
cause there was no further proceeding that necessarily follows from
that informal conference. The Court of Appeals also noted that nearly
four months had passed from the initial notice of investigation from
the OCA until the first settlement conference and there was no
provision under the Administrative Process Act to ensure that Telco's
constitutional challenge could be promptly adjudicated through the
administrative process. (App.32) Thus, Telco was faced with a
continuing infringement of its First Amendment rights by the OCA
yet was provided with no forum in which to contest the administrative
charges except by proceeding with an action in federal court.

The Court of Appeals also noted that the informal fact finding
provisions of the Virginia Administrative Code are net sufficiently
"judicial in nature" so as to invoke the principles of Younger absten-
tion. Specifically, the Court of Appeals noted that the participants
were not swom, nor was a record maintained of the proceeding. There
was nO opportunity to examine or cross-examine witnesses: "(t]he
meeting was simply a settlement conference to see if the dispute could

be consensually resolved." (App.32) Asa result, the Court of Appeals
concluded that the administrative process had not reached the level
where Younger abstention required a federal court to abstain.

-—-@—-—
SUMMARY OF ARGUMENT

The petition for certiorari should be denied because the decision
of the Court of Appeals is consistant with the prior decisions of this
Court and other decisions of the courts of appeals. The principle of
abstention enunciated in Younger v. Harris and its progeny only
applies when there is an ongoing state proceeding that is judicial in
nature and the commencement of suit in the federal court disrupts that
ongoing state proceeding. In the instant case, the OCA had only
commenced an investigation and held one, "off the record", settle-
ment conference at the time Telco filed suit in the federal court.
Nothing further was scheduled to occur and the informal fact finding
under Virginia Code Section 9-6.14:11 had been concluded. More-
over, there was no pending state proceeding that was "judicial in
nature" that would warrant federal court deference. There was no
opportunity to subpoena and examine or cross-examine witnesses.
No record of the settlement conference was maintained. The partici-
pants were not swom and there was no neutral arbitrator to hear and
resolve the dispute. The action of the OCA simply never advanced
beyond a preliminary investigation and Younger does not require
abstention in deference to a mere investigation by a state agency.
(pp.5-8)

The OCA completely ignores the fact that it could have pro-
ceeded with an administrative action against Telco after suit was filed
and then moved for abstention. Indeed, the District Court invited the
OCA to proceed with a formal administrative complaint against Telco
but the OCA refused. Accordingly, the suit by Telco did not disrupt
orinterfere with any pending state administrative proceeding because
the OCA could have proceeded with the commencement of a formal
action against Telco but failed to do so. (p.9)

ARGUMENT

I. No Administrative Action Was
Pending That Warranted Abstention.

The OCA asserts that the July meeting with Telco constituted the
commencement of a proceeding under the Administrative Process
Act. The OCA further contends that Telco's suit disrupted that state
proceeding and, consequently, the District Court and the Court of
Appeals erred in refusing to abstain. The OCA concludes that the
decisions of the District Court and the Court of Appeals conflict with
the decision of this Courtin Younger v. Harris and should be reviewed
by this Court.

The fundamental flaw with the position of the OCA is that no
administrative proceeding was pending at the time Telco filed suit in
the federal court that would require abstention under Younger v.
Harris, 401 U.S. 37 (1971). In Younger, this Court, based on the
principles of comity and federalism, held that injunctive relief in the
federal court is not normally available to halt a state criminal
prosecution. Two years later, however, in Steffel v. Thompson, 415
U.S. 452 (1974), this Court emphasized that "the relevant principles
of equity, comity and federalism ‘have little force in the absence of a
pending state proceeding."" Id. at 462, quoting Lake Carriers Associ-
ation v. MacMullan, 406 U.S. 498, 509 (1972). "Federal declaratory
relief is not precluded when no state prosecution is pending and a
federal plaintiff demonstrates a genuine threat of enforcement of a
disputed state criminal statute, whether an attack is made on the
constitutionality of the statute on its face or as applied." Steffel v.
Thompson, supra, 415 U.S. at 475. Notions of federalism are simply
inapposite where no interruption of orintervention in an ongoing state
proceeding by a federal court occurs.

No action was pending before the OCA or any other agency or
court of the Commonwealth of Virginia at the time the complaint was _
filed or at anytime thereafter. Even if one accepts the OCA's charac-
terization of the July settlement conference as “informal :act finding"
under Virginia Code Section 9-6.14:11, that conference was con-
cluded. Nothing further was ever commenced. The OCA has not

cited a single decision of this Court or any other court where
abstention has been held appropriate in deference to a mere state
investigation and potential future administrative action.

Even where a state proceeding is pending it is only those state
proceedings that are "judicial in nature" that are "of a character to
warrant federal court deference." Middlesex County Ethics Commit-
tee v. Garden State Bar Association, 457 U.S. 423, 433-34 (1982).
The meeting between the OCA and Telco hardly amounted to a
judicial proceeding. The only participants were Telco, the OCA, and
their respective counsel. No record was maintained of the proceeding,
nor were any of the participants swom. There was no opportunity to
subpoena and examine and cross-examine witnesses. The meeting
was nothing more than a settlement conference to determine if the
dispute could be resolved and falls far short of the requirement that the
administrative proceeding be "judicial in nature" to warrant absten-
non.

The recent decisions of this Court finding abstention to be ap-
propriate all involved cases where a federal plaintiff was faced with
a formal administrative proceeding at the time suit was commenced
in the federal court. For example, in Ohio Civil Rights Commission
v. Dayton Christian Schools, 477 U.S. 619 (1986), a complaint had
been filed with the Civil Rights Commission. The Commission had
completed its investigation of that complaint and made a determina-
tion of probable cause to find that discrimination had occurred.
Thereafter, the commission filed a complaint initiating formal admin-
istrative proceedings. It was at that stage of the administrative process
that the subject of the administrative complaint brought suit in the
federal court.

Similarly, in Middlesex County Ethics Committee v. Garden
State Bar Association, 457 U.S. 423 (1982) an attomey, prior to the
commencement of the federal court action, had received a formal
statement of charges from the Ethics Committee and was required to
file an answer to those charges within ten days. The statement of
charges followed from an investigation and a report and recommen-
dation to the District Ethics Committee. It was clear that, at the time
the suit was commenced, a proceeding that was judicial in nature was
pending.

The requirement that a judicial proceeding be pending before ab-
stention is required is premised not only on principles
of comity and federalism, but also on the theory that, once such a
proceeding has been commenced, it is likely that there will be a
prompt determination of the issues. As the Court of Appeals stated
in Wulp v. Corcoran, 454 F.2d 826, 831 (1st Cir. 1972):

Once the state has initiated its processes, it can be
expected in the great majority of cases to press the
matter with some expedition. When no prosecution
is pending, there is no guarantee that prosecution and
a chance for ultimate vindication of constitutional
claims will quickly follow on the heels of a violation
of the state's statute.

If a court were to defer to a mere investigation by a state agency,
parties who claim that the state's actions violated important constitu-
tional rights would have no assurance that their claim would be
promptly adjudicated through the administrative or state proceeding.
In the matter sub judice, four months had passed from the beginning
of the state's investigation until the time suit was filed and no
administrative proceeding had been commenced. There was certainly
no assurance to Telco that its constitutional claims would be promptly
determined through the state administrative process and any subse-
quent judicial review.

The OCA's position that abstention is required whenever a state
agency commences an investigation would result in the untenable
conclusion that state agencies could never be sued in federal court for
an adjudication of the constitutionality of their actions. A party
claiming to be deprived of its civil rights is not entitled to relief in a
federal court unless there has been an actual threat of enforcement of
an unconstitutional statute. See, e.g. Steffel v. Thompson, 415 U.S.
452 (1974). But, according to the OCA, once that threat of enforce-
ment is made, an administrative proceeding is then pending and a
federal court must abstain from exercising its jurisdiction. Thus, a
plaintiff claiming to be aggrieved by a deprivation of its constitutional
rights would be barred from the federal courts and relegated to the

State administrative process and state judicial review of that admin-
istrative process. This result is contrary to the well accepted rule that
“the doctrine of abstention...is an extraordinary and narrow exception
to the duty of a district court to adjudicate a controversy properly
before it." Colorado River Water Conservation v. United States, 424
U.S. 800, 812 (1976), quoting County of Allegheny v. Frank Mashuda
Co., 360 U.S. 185, 188-189. See also City of Houston, Texas v. Hill,
_U.S._, 107S.Ct. 2502 (1987); Hawaii Housing Authority v. Midkiff,
467 U.S. 229, 237 (1984).

The District Court and the Court of Appeals in this case correctly
balanced the competing interests of a state in the administration of its
own judicial proceedings and the interests of a private litigant in
access to the federal courts for the prompt adjudication of its consti-
tutional rights. If the District Court had abstained, there would have
been no assurance that Telco's rights would have been promptly
determined in an administrative proceeding or subsequent state court
review. Indeed, under the Virginia Administrative Process Act, the
OCA could have waited years before proceeding with a formal admin-
istrative complaint against Telco that would have triggered the
judicial- like proceeding in which Telco's rights could be determined.
The First Amendment rights of Telco and its clients, which both the
District Court and the Court of Appeals determined to have been
violated by the OCA, would have continued impaired while the OCA
considered proceeding with an administrative action against Telco.
Under these circumstances, the District Court and the Court of
Appeals correctly determined that there was no pending proceeding
to which the federal courts should defer and certainly the decision of
the Court of Appeals does not conflict with any prior decision of this
Court or another court of appeals.

II. The Action Commenced By
Telco Did Not Disrupt
Any Administrative Proceeding

The OCA asserts that Telco's suit disrupted their ongoing admin-
istrative proceeding. However, the OCA does not explain or substan-
tiate how Telco's suit interfered in any way with any administrative
action contemplated by the OCA. No preliminary injunction to
restrain an administrative proceeding was requested or issued. The
OCA was free to continue its investigation and to proceed with an
administrative action to suspend or revoke Telco's license. In fact, the
District Court invited the OCA to proceed with an administrative
action against Telco and the OCA declined to do so. (R.App. 9-10).
When the OCA declined to proceed, neither Telco nor the District
Court had any assurance that Telco's constitutional challenge to the
charitable solicitation law would be promptly resolved. The OCA
should not now be heard to complain that the District Court erred in
refusing to abstain where the Court's action was founded on the OCA's
own refusal to proceed expeditiously with its administrative process.

Itis well established that a federal court may abstain in deference
to a subsequently commenced administrative proceeding where the
federal action is in its early stages and there has been no proceedings
of substance on the merits. Hicks v. Miranda, 422 U.S. 332, 349
(1975); Doran v. Salem Inn, Inc., 422 U.S. 922 (1975). Hence, the
OCA's fear of a “race to the court house” after informal fact finding
has been initiated is completely baseless. Even if the subject of an
administrative investigation wins the race to the court house, the
Commonwealth may simply proceed with its administrative action
and then seek to stay or dismiss the suit based on Younger.

Younger and its progeny are founded on the tenet that a federal
court should not interfere with a pending proceeding established
under state law. If there is no disruption of a state proceeding, the
principles of federalism upon which Younger and its progeny rely
have no application and abstention is inappropriate. In this case, the
OCA has simply failed todemonstrate how the suit by Telco disrupted
any action taken or contemplated by the OCA and, therefore, both the
District Court and the Court of Appeals correctly determined that
abstention was not required.

10

CONCLUSION

For the reasons stated above, the respondent respectfully re-
quests that the petition for a writ of certiorari be denied.

Respectfully Submitted,

Peter S. Brooks

Telco Communications, Inc.
21 Industrial Court
Seekonk, MA 02771
508-336-6633

John G. Douglass

Wright, Robinson, McCammom,
Osthimer & Tatum

411 East Franklin Street

Richmond, VA 23219

804-783-1100

*Louis J. Scerra, Jr.
Goldstein & Manello
265 Franklin Street
Boston, MA 02110
617-439-8900

*Counsel of Record

R.App. 1

COMMONWEALTH OF VIRGINIA
Office of the Attorney General
March 24, 1988

VIA CERTIFIED MAIL

Mr. Jeff Springer, Phone Room Manager
Telco Communications

950 S. Sycamore Street, Bldg.D.
Petersburg, VA 23803

RE: F.O.P. #16, Show Date: April 30, 1988
Dear Mr. Springer:

We are in receipt of the Notice of Solicitation from Telco Com-
munications which identifies you as the phone room manager for the
above referenced campaign. Please be aware that the Virginia
Solicitation of Contribution Law (copy enclosed) contains disclosure
and reporting requirements, some of which are detailed below.
Specifically:

Section 57-55.1 requires that you disclose to the con-
sumer at the time of solicitation the minimum per-
centage of any contribution which the charitable or
civic Organization will receive for its own use.

Section 57-55.2 requires also that each solicitor
disclose his or her name; the name of the company
whichemploys them; that they are paid solicitors and
further, shall disclose in writing that financial state-
ments (of the sponsor) are available from the Vir-
ginia Office of Consumer Affairs.

Section 57-61 (h) states that any change in informa-
tion shall be filed with this office within seven days.

R.App.2

If the campaign involves the selling of tickets to events and these
tickets may be donated for use by a third party, you must comply with
Sections 57-61 (e) and 57-61 (g) requiring the following:

For not less than three years, the solicitor shall
maintain the name and addresses of contributors
donating tickets and the number of tickets donated
by each, as well as the names and addressed of all
organizations receiving donated tickets for use by
others, including the number of tickets received by
each organization. (Section 57-61 (e) 2.)

Also, you may not represent that tickets to events
may be donated for the use of others unless: 1)
commitments have been obtained in writing from
persons, charitable or civic organizations stating that
they will accept donated tickets and the number of
tickets they will accept, and 2) the solicitor has
solicited and accepted no more contributions for
donated tickets than the number of written ticket
commitments it has received from persons, chari-
table or civic organizations. Once the number of
commitments has been fulfilled, the solicitor must
begin using a straight sales script.

Please be aware, Mr. Springer, that failure to comply with these
and other provisions not outlined in this correspondence may result
in the state seeking legal remedies against you individually as well as
against youremployer. We respectfully suggest that you make your
employees and agents aware of these responsibilities and we trust that

R.App.3

you will contact this Office if you should have questions or we may
be of service.

Sincerely,

s/
Larry Roberts
Coordinator

Charitable Solicitations Section

Enclosure

R.App.4

GOLDSTEIN & MANELLO
Counsellors at Law
April 28, 1988

Mr. Larry A. Roberts
Coordinator

State Office of Consumer Affairs
Department of Agriculture and
Consumer Services

Post Office Box 1163
Richmond, Virginia 23209

Dear Mr. Roberts:

I have repeatedly requested a meeting with the Office of Con-
sumer Affairs, both in writing and in discussions with Mr. Wright and
the Attorney General's office. I was assured several weeks ago that
such a meeting would be arranged and that the request for information
submitted by your office and by me would be put on hold until that
meeting.

At this point, I have still not received any response to my request
for a meeting with your office and with the Attomey General's office.
Instead, I get a request for further information. We will obviously
provide whatever information to which your office is entitled. However,
there are substantial issues as to whether or not the laws cited in your
letter apply to the activity of my client and issues as to whether the
disclosure laws are constitutional. Once those issues are resolved, we
will then address your specific request for information from us.

I have previously advised Mr. Wright, as well as representatives
from the Attorney General's office, that a refusal to meet and discuss
the issues of concem to Telco will leave us with no alternative but to
file suit. It is not our desire to take that route, and we firmly believe
that a resolution of the pending issues can be accomplished by

R.App.5

negotiation and compromise. However, unless I receive some
response to my request for a meeting, I will assume that you wish to
have these issues resolved by a court.

Very truly yours,
s/
Peter S. Brooks
PSB/ms

cc Mark D. Hayes
John G. Douglass, Esquire

R.App.6

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF VIRGINIA

TELCO COMMUNICATIONS, INC.,
Plaintiff
v.

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

Ne ee Ne ee ee ee es ee ee es Se “Se”

AFFIDAVIT OF MARK D. HAYES

Mark D. Hayes, under oath, deposes and says:

1. I am the president of the plaintiff, Telco Communications,
Inc., and I am making this affidavit in connection with the motion for
summary judgment filed by the defendant. This affidavit is made as
to facts of my own personal knowledge.

2. Telco is a publisher of a series of publications relating to
public health and safety. For example, Telco publishes a handbook
on drug and alcohol awareness, fire prevention, children's safety, and
consumer fraud.

3. Telcohas contracted with several local police and fire organi-
zations to publish one or more of these books on their behalf. In
addition, Telco has arranged for telephone solicitors to be engaged by
the local police or fire organizations to solicit advertising to be
included in the books. The proceeds of the advertising revenue are
divided among Telco, the telephone solicitors, and the local police or
fire organization.

4. The funds generated from the advertising that are retained by
the police or fire organization have, to date, been used for the general

R.App.7

business purposes of the organization and not for any charitable
purpose. In addition, no charitable appeal is used by the telephone
solicitors. As a result, the revenues generated for the organization
benefit only the members of that organization and not the public at
large. However, Telco also engages in fund raising for charitable
Organizations in other states and intends to do so at some point in time
in Virginia. The investigation by the Department and its interpreta-
tion of the charitable solicitation laws in Virginia have dissuaded
Telco from pursuing such charitable fund raising.

5. In March of 1988, the Department advised Telco that it had
received a tape recording of an alleged conversation between a
telephone solicitor and a prospective advertiser. The Department
claimed that the tape revealed a failure by Telco to comply with the
disclosure requirements under the charitable solicitation laws in
Virginia. A subsequent investigation of the tape by Telco revealed
that a competitor of Telco's in Virginia supplied the recording to the
Department and the tape's authenticity could not be verified.

6. Following the Department's receipt of the tape recording, a
campaign was then commenced by the Department to harass and
intimidate the telephone solicitors and Telco's clients. For example,
investigators from the Department entered the premises of the tele-
phone solicitors without notice and demanded that documents and
information be supplied immediately. The Department communi-
cated with clients of Telco on repeated occasions seeking information
as to the advertising solicitation and interfered with the relationship
that Telco has established with its clients. The Department also
communicated with the managers of the telephone solicitors and
threatened the managers with civil and criminal penalties for any non-
compliance with the charitable solicitation laws.

7. Inresponse to the action of the Department, counsel for Telco
requested a meeting with representatives of the Department to discuss
their jurisdiction in view of the fact that Telco had not contracted with
charitable organizations or made any charitable appeal for funds.
Telco also asked for an opportunity to discuss the enforceability of the
charitable solicitation laws in view of recent decisions of the United
States Supreme Court. After repeated requests for such a meeting, the
Department finally acceded to the request and a meeting was held in

R.App.8

early July of 1988. See Exhibit "]" annexed hereto.

8. Atnotime priorto or during the meeting was Telco informed
that the meeting was being held pursuant to the provisions of the
Virginia Administrative Process Act. Indeed, no notice has been
received by Telco as of this date of any administrative proceedings,
under the Administrative Process Act or otherwise. It has expressly
agreed during the meeting that the discussions would be considered
"settlement negotiations" and would not be used as evidence or
admissions.

9. Telco and the Department discussed the constitutionality of
certain provisions of the charitable solicitation law during the meeting
and also discussed whether or not the sale of advertising by independ-
ent telephone solicitors on behalf of organizations that benefit only
their members subjected Telco, the publisher, to the charitable
solicitation laws. The Department maintained that Telco was subject
to those laws and that the disclosure requirements remained in effect
notwithstanding the recent Supreme Court ruling that invalidated
substantially all mandated disclosures by professional fund raisers.
Since the Department was threatening to enforce the charitable
solicitation laws, Telco then commenced this action for a judicial
determination of the constitutional issue and the scope of the chari-
table solicitation laws.

Signed under the penalties of perjury this day of August,
1988. .
s/

MARK D. HAYES
Telco Communications, Inc.

Subscribed and swom to before me this___ day of August,
1988.

s/

NOTARY PUBLIC
My Commission Expires:

R.App.9

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
RICHMOND DIVISION

TELCO COMMUNICATIONS, INC.
Plaintifi,

V.

CIVIL ACTION

S. MASON CARBAUGH, as he is NO. 88-0471-R

Commissioner of the Department

of Agriculture and Consumer Services

of the Commonwealth of Virginia,
Defendant.

Nm ee ee a ee ee ee ee ee ee ee”

ORDER

The Court is in receipt of defendant's motion for summary
judgment and supporting memorandum, plaintiffs memorandum in
opposition, and defendant's rebuttal memorandum. Deeming it just
and proper so to do, it is hereby ADJUDGED and ORDERED as
follows:

1. Defendant must, within fifteen (15) days of this date, notify
the Court whether the Office of Consumer Affairs has initiated a
formal hearing under the Virginia Administrative Process Act, Va.
Code s 9-6.14:12 (1985 & 1988 Supp.) for the revocation or suspen-
sion of plaintiff's registration.

2. Hearing on the motion for summary judgment, previously
scheduled for September 26, 1988 at 1:00 p.m. will be continued until
further order of the Court. ;

Let the Clerk send a copy of this order to all counsel of record.

s/
UNITED STATES DISTRICT JUDGE

R.App.10

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
RICHMOND DIVISION

TELCO COMMUNICATIONS, INC.,
Plaintiff,

Vv.

CIVIL ACTION

S. MASON CARBAUGH, as he is NO. 88-0471-R

Commissioner of the Department of

Agriculture and Consumer Services

of the Commonwealth of Virgina,
Defendant.

a ee ee ee, ee, ee ee

DEFENDANT'S RESPONSE TO COURT'S ORDER

NOW COMES defendant S. Mason Carbaugh, by counsel, and
in response to this Court's Order of September 15, 1988, submits the
following:

1. By its Order of September 15,1988, this Court ordered defen-
dant to notify the Court "whether the Office of Consumer Affairs has
initiated a formal hearing under the Virginia Administrative Process
Act, Va. Code s 9-6.14:12 (1985 & 1988 Supp.), for the revocation or
suspension of plaintiff's registration.”

2. Defendant, by affidavit of Larry Roberts dated August 8,
1988, attached to his motion for summary judgment, stated, in part, the
following:

a. Following an initial investigation of complaints
against TELCO, an informal conference was sched-
uled pursuant to the Administration Process Act
between the Office of Consumer Affairs, TELCO
and their respective counsel. The conference was
held on July 6, 1988.

R.App.11

b. Following that meeting, the Office of Consumer
Affairs requested further documents from TELCO.
The next step would have been for the Office of
Consumer Affairs to serve notice upon TELCO for
a formal administrative hearing under the APA.

c. At that point, TELCO filed suit and defendant did
not initiate any formal administrative hearing be-
cause of that filing. 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.

WHEREFORE, having responded to this Court's order, defen-
dant renews its request that its motion for summary judgment seeking
abstention from this Court be granted because of the pendency of
proceedings under the Virginia Administrative Process Act.

Respectfully submitted,
S. MASON CARBAUGH

By: s/

Mary Sue Terry
Attomey General of Virginia

Gail Starling Marshall
Deputy Attomey General

Guy W. Horsley, Jr.
Senior Assistant Attorney General

Edward P. Nolde
James P. Wheeler
Assistant Attomeys General

R.App.12

Office of the Attomey General
101 North Eighth Street
Supreme Court Building
Richmond, VA 23219

(804) 786-6563

(804) 786-2115

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385020_1096%3A2. Public record. Not legal advice.