Nationwide Biweekly Administration, Inc. v. Owen
873 F.3d 716
9th Cir.2017Background
- Nationwide BiWeekly Administration, an Ohio corporation, sent mail solicitations offering a “biweekly interest savings” program that accelerates mortgage payoff; solicitations omitted clear fee disclosure and used lenders’ names and loan details.
- California district attorneys investigated and alleged violations of California Business & Professions Code §§ 14701(a), 14702 (disclosure requirements about lender names and loan info) and California Financial Code § 12200 (prorater licensing), which restricts prorater licenses to corporations organized under California law.
- Nationwide filed two federal suits in Northern District of California seeking preliminary injunctions and declaratory relief: (1) First Amendment challenge to disclosure requirements; (2) Dormant Commerce Clause challenge to the in-state incorporation requirement for prorater licensure.
- The district court denied both preliminary injunctions on the merits and later dismissed both federal suits under Younger abstention after state enforcement suits were filed; Nationwide appealed.
- Ninth Circuit reversed the Younger dismissals (finding federal proceedings had progressed beyond the “embryonic stage”), affirmed denial of preliminary injunction on the First Amendment claim (applying Zauderer), and vacated denial of preliminary injunction on the Dormant Commerce Clause claim (holding the in-state incorporation requirement is facially discriminatory).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Younger abstention barred federal suits after state enforcement was filed | Federal suits had progressed beyond embryonic stage (preliminary-injunction briefing/orders), so Younger inapplicable | State proceedings invoked Younger; federal cases still embryonic | Reversed Younger dismissals — federal proceedings had been of substance before state suit |
| Whether California may compel disclosures about lack of lender authorization under First Amendment | Mandated disclosures are content-based and/or misleading; Reed requires strict scrutiny | Disclosures are factual, uncontroversial, and reasonably related to preventing consumer deception (Zauderer) | Affirmed denial of injunction — Nationwide unlikely to succeed; Zauderer applies |
| Whether disclosure requirements are unduly burdensome or misleading | Disclosures effectively suppress speech or are ambiguous ("authorized" vs "approved") | Disclosures are brief, factual, not controversial, and reasonably tailored to prevent deception | Held not unduly burdensome or misleading; statute survives Zauderer review |
| Whether California’s prorater licensure requirement violates Dormant Commerce Clause | Requiring in-state incorporation discriminates against interstate commerce and is unconstitutional | Statute non-discriminatory because out-of-state firms can form in-state subsidiaries to comply | Vacated denial of injunction — statute facially discriminates; Nationwide likely to succeed on Dormant Commerce Clause claim |
Key Cases Cited
- Younger v. Harris, 401 U.S. 37 (1971) (federal courts should generally abstain from enjoining ongoing state criminal or certain civil enforcement proceedings)
- Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio, 471 U.S. 626 (1985) (states may compel factual, noncontroversial commercial disclosures reasonably related to preventing consumer deception)
- Central Hudson Gas & Elec. Corp. v. Public Serv. Comm’n of N.Y., 447 U.S. 557 (1980) (intermediate scrutiny framework for restrictions on commercial speech)
- Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7 (2008) (four-factor test for preliminary injunctions)
- Granholm v. Heald, 544 U.S. 460 (2005) (state laws that discriminate in favor of in-state economic interests against out-of-state interests violate the Dormant Commerce Clause)
- Hughes v. Oklahoma, 441 U.S. 322 (1979) (states cannot enact protectionist measures against interstate commerce)