AMERICAN CONSUMER PUBLISHING ASSOCIATION, INC.; Dennis L. Simpson; I.C. Marketing Inc.; and Publishers Services Exchange, Plaintiffs-Appellants,
v.
Jan MARGOSIAN; Elizabeth Gordon; and Geoff Darling, Defendants-Appellees.
No. 01-36113.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted September 9, 2003.
Filed November 18, 2003.
COPYRIGHT MATERIAL OMITTED Alan R. Herson, Jacksonville, Oregon, for plaintiffs-appellants.
Brendan C. Dunn, Assistant Attorney General, Salem, Oregon, for defendants-appellees.
Appeal from the United States District Court for the District of Oregon; John P. Cooney, Magistrate Judge, Presiding. D.C. No. CV-01-03057-CO.
Before: Cynthia Holcomb HALL, Susan P. GRABER, and Ronald M. GOULD, Circuit Judges.
OPINION
GRABER, Circuit Judge:
The Attornеy General of Oregon served a Notice of Unlawful Trade Practices on Plaintiffs American Consumer Publishing Association, Inc., Dennis L. Simpson, I.C. Marketing, and Publishers Services Exchange, advising them that a civil enforcement action for violations of several state statutes was imminent. Before the state proceedings were complete, Plaintiffs filed this action in federal court. Plaintiffs seek both damages and a declaration that the stаte statutes they allegedly violated are unconstitutional. The district court dismissed Plaintiffs' claims based on the abstention doctrine of Younger v. Harris,
We affirm, in part on different grounds. First, we hold that Defendants were entitled to summary judgment on Plaintiffs' claim for damages for defamation under 42 U.S.C. § 1983, because Plaintiffs presented no evidence that Defendants deprived them of a constitutionally protected liberty or property interest.
Second, we hold thаt the remainder of Plaintiffs' claims properly were dismissed under the principles of Younger abstention. Plaintiffs' claims for declaratory relief present a textbook case for Younger abstention and dismissal. Application of Younger to Plaintiffs' remaining claims for § 1983 damages, however, raises difficult issues of unsettled law. Today, viewing our other precedents in the light of our en banc approach in Green v. City of Tucson,
FACTS AND PROCEDURAL HISTORY
Plaintiffs' nationwide direct-mail marketing company came under the scrutiny of the State of Oregon after the state's Attorney General received more than 120 consumer complaints about Plaintiffs' solicitations for magazine subscriptions. Consumers complained that the solicitations appeared to be bills and misleadingly implied that Plaintiffs were associated with the publishers of the magazines. The Attorney General found probable cause to believe that Plaintiffs' solicitations violated state statutes that prohibit using a "simulated invoice" that reasonably could be mistaken for an actual invoice, see Or.Rev. Stat. § 646.293; creating a likelihood of confusion about one's affiliation with another company, see id. § 646.608(1)(c); and employing an "unconscionable tactic" (here, knowingly permitting a customer to enter a transaction from which the customer will derive no material benefit), see id. § 646.607(1).
On June 26, 2001, the Attorney General served a Notiсe of Unlawful Trade Practices on Plaintiffs' lawyer. The Notice listed the alleged unlawful trade practices and advised Plaintiffs that, unless they delivered an Assurance of Voluntary Compliance within 10 days, the Attorney General would file an action against Plaintiffs in state court. Negotiations with the Attorney General failed, and Plaintiffs did not deliver the Assurance of Voluntary Compliance.
Instead, on July 6, 2001, Plaintiffs filed this action in federal district court agаinst Defendants Jan Margosian, Elizabeth Gordon, and Geoff Darling, who are officials of the Attorney General's office. Plaintiffs asked the court to (1) declare unconstitutional the Oregon statutes that the Attorney General was trying to enforce, (2) declare that Oregon lacks "jurisdiction" to enforce its trade practices laws because of federal preemption, and (3) award compensatory and punitive damages undеr 42 U.S.C. § 1983 for violations of Plaintiffs' constitutional rights. On September 13, 2001, Defendants moved for summary judgment. Meanwhile, on September 11, 2001, the Attorney General had filed a civil complaint against Plaintiffs in state court.
Thereafter, the district court granted Defendants' motion for summary judgment. Applying the Younger abstention doctrine, the court dismissed all of Plaintiffs' claims. This timely appeal followed.
STANDARD OF REVIEW
We review de novo a district court's decision to dismiss a claim on the basis оf Younger abstention. Green,
DISCUSSION
As to Plaintiffs' claim for § 1983 damages for defamation, we affirm the summary judgment for Defendants because of Plaintiffs' failure to satisfy the "stigma-plus" test for § 1983 defamation claims. As to Plaintiffs' claims for declaratory relief, as well their remaining § 1983 claims for damages, we affirm the district court's dismissal under Younger.
A. Plaintiffs failed to satisfy the "stigma-plus" test for defamation claims brought under § 1983.
To recover damages for defamation under § 1983, a plaintiff must satisfy what has become known as the "stigma-plus" test. Cooper v. Dupnik,
Plaintiffs allege that Defendant Margosian, a consumer information coordinator with the Oregon Attorney General's office, made defamatory statements to the media during the Attorney General's investigation of Plaintiffs' business activities. Plaintiffs claim that, after Margosian told a reporter that Plaintiffs' solicitations were deceptive, "misleading," and "phony," Plaintiffs suffered an "appreciable disruption of business" because Plaintiffs' employees were worried about their job security and "at least one cancelled order."
Even if we assume the truth of Plaintiffs' factual allegations, they fail to satisfy the "stigma-plus" test. As to the first claim of damages, Plaintiffs have no constitutionally protected interest in maintaining a positive state of mind among their employees. As to the second claim of damages, even if Plaintiffs had a protected property interest in their existing orders, they allege only that a customer cancelled an order in reaction to Margosian's statements. Plaintiffs do not allege that Margosian's defamatory statements directly caused any injury to a constitutionally protected liberty or property interest. See WMX Techs.,
B. The district court properly dismissed Plaintiffs' claim for declaratory relief based on Younger abstention.
Younger abstention is a "circumscribed exception to mandatory federal jurisdiction." Green,
(1) The nature of the state proceedings in order to determine whether the proceedings implicate important state interests, (2) the timing of the request for federal relief in order to determine whether there are ongoing state proceedings, and (3) the ability of the federal plaintiff to litigate its federal constitutional claims in the state proceedings.
Kenneally v. Lungren,
The declaratory relief that Plaintiffs seek in this case — invalidation of the trade practices statutes and a declaration that the state lacks "jurisdiction" to enforce them — would interfere with the state enforcement proceeding exactly as we contemplated in Green. As we said there,
much as a federal injunction against an ongoing state enforcement proceeding effectively stops that proceeding cold, so too may a declaratory judgment. The Supreme Court thus held that Younger barred a suit for declaratory relief against the operation of a state criminal statute under which the plaintiff was being prosecuted in state court because declaratory relief, the Court determined, would "result in precisely the same interference with and disruption of state proceedings that the long-standing policy limiting injunctions was designed to avoid." Samuels v. Mackell,
Green,
Moving to the three-factor abstention analysis described in Kenneally, it is clear that the district court properly abstained from entertaining Plaintiffs' claims for declaratory relief. (1) The parties do not dispute, and we agree, that Oregon has a strong interest in protecting its consumers from fraud and in administering its consumer-fraud statutes smoothly. (2) Nor do the parties dispute that the state proceedings are ongoing2 and hаve been pending since the Attorney General sent the Notice of Unlawful Trade Practices. (3) Finally, Plaintiffs can raise their federal claims as defenses in the state proceeding. Federal courts presume that a state court is competent to determine issues of federal law, even if those issues involve federal constitutional claims. See Baffert v. Cal. Horse Racing Bd.,
In short, Plaintiffs' claim for declaratory reliеf falls squarely within the Younger abstention doctrine. The district court did not err in dismissing that claim.
C. Dismissal of Plaintiffs' remaining claims for § 1983 damages was an appropriate application of the Younger abstention doctrine.
Whether Younger abstention should apply to claims for damages is a more complicated question under our precedents. Today, viewing our other precedents in the light of our en banc approach in Green, we hold that Younger abstention principles are properly invoked when a claim for damages interferes directly with a pending state proceeding.
1. Younger abstention is appropriate when granting monetary relief would interfere directly with a pending state proceeding.
The Supreme Court has not decided whether Younger applies to claims for money damages. See Deakins v. Monaghan,
A majority of other circuits have permitted some application of Younger abstention principles to claims for damages.3 Courts have reasoned that a federal court's ruling on damages may be as "substantially disruptive" of state proceedings as would an injunction or a declaratory judgment. Guerro v. Mulhearn,
A review of our own precedents on the issue convinces us that a similar rulе governs in this circuit, albeit not a rule that has been expressed clearly. In Mann v. Jett,
These cases have bred confusion about whether, in general, Younger abstention applies to claims for damages in this circuit.7 We believe that there is a recognizable thread running through our published precedents. Abstention is disfavored, but not forbidden, in cases involving § 1983 damages. The cases support a rule consistent with the en banc holding in Green-namely, that Younger abstention is appropriate in actions for money damages in those rare cases in which an adjudication of damages would interfere directly with a pending state proceeding. That is, courts must abstain when (but only when) a necessary predicate of the claim for damages undermines a necessary element in the pending state proceeding.
In many cases, that test will not be met. As the First Circuit has noted:
A denial of constitutionally protected rights may have occurred in the course of the events leading up to trial, yet may only be marginally relevant, or may even be entirely irrelevant, to the trial and appeal. For example, a false arrest, or an illegal search and seizure, or wiretap, may constitute a compensable wrong while not undergirding the validity of the criminal conviction to which it might be related.
Guerro,
Similarly, in neither Lebbos nor Martinez did the сlaims for damages seek "to enjoin, declare invalid, or otherwise involve the federal courts in terminating or truncating the state court proceedings." Green,
By contrast, although the Mann court's reasoning is not detailed, the court found that deciding the plaintiff's § 1983 claims for Sixth Amendment violations during the pendency of his state-сourt criminal prosecution would result in "`obvious'" potential for "`federal-state friction.'"
We emphasize that Younger abstention in § 1983 cases is warranted only in the rare situation in which adjudication of the claim for damages would interfere directly with a pending state proceeding. This limitation recognizes the "non-exhaustion rule." See Edwards v. Balisok,
2. Plaintiffs' remaining claims for damages warrant abstention under the principles of Younger.
Consideration of Plaintiffs' remaining claims for damages would require the district court to decidе issues that would be dispositive in the ongoing state civil enforcement proceeding. The claims involve (1) a claim of selective enforcement of the trade practices laws, in violation of the Equal Protection Clause; and (2) a claim that the state officials' plan to seek higher penalties in court if Plaintiffs did not submit the Assurance of Voluntary Compliance was retaliation for Plaintiffs' exercise of their First and Fourteenth Amendment rights to a court hearing. A ruling that the civil enforcement proceeding violates either the Equal Protection Clause or the First or Fourteenth Amendment would declare the ongoing state proceeding to be constitutionally invalid. Consequently, the threshold "interference" test for abstention is met in this case.
Turning to the three-factor Kenneally test, our analysis of the first and second factors is identical to that for Plaintiffs' claims for declaratory relief. Under faсtor three, the district court found that Plaintiffs made no showing that state procedural bars prevent them from pursuing their constitutional claims in the state proceeding. See Pennzoil Co. v. Texaco, Inc.,
3. Dismissal of Plaintiffs' remaining § 1983 сlaims for damages was appropriate under the Younger abstention doctrine.
The final question concerns whether the district court properly dismissed Plaintiffs' remaining claims for damages, rather than staying those claims pending the conclusion of the state proceeding The Supreme Court has said that courts invoking abstention principles may not dismiss claims for damages when monetary relief is unavailable in the pending state proceeding. See Deakins,
The Supreme Court has suggested that, in general, when abstention principles are invoked in actions for damages, courts must stay the claims for damages rather than dismissing them. See Quackenbush,
Even assuming that Quackenbush states a definite rule against dismissal, we have recognized that, by preserving the holding of Fair Assessment in Real Estate Ass'n v. McNary,
From the face of the complaint in this case, it is clear that Plaintiffs' claims for damages for selective enforcеment and retaliation are merely "incidental" to their claims for declaratory relief. For example, their pleading is entitled a "Complaint for Declaratory Relief." And, as discussed earlier, awarding damages on the sole basis that the state proceeding violates the Equal Protection Clause or the First Amendment would require a declaration that the state proceeding is unconstitutional. Thus, these claims plainly аre appropriate for dismissal under the Fair Assessment exception.
AFFIRMED.
Notes:
Notes
Plaintiffs do not contend that any exception toYounger abstention would bar its application in this case. Cf. Kenneally,
At oral argument, counsel reported that the state court had entered summary judgment in favor of Plaintiff American Consumer Publishing Association, Inc., although that order had not yet been reduced to a judgment. If and when the state proceedings against that Plaintiff are reduced to a judgment in its favor,Younger abstention no longer would apply to it.
See Carroll v. City of Mount Clemens,
Lebbos distinguished Mann because, in Lebbos, (1) the § 1983 claims could not be adjudicated adequately in the state proceeding and (2) the claims for damages would not interfere with the state proceeding.
Other courts have disputed this characterization of pre-Martinez precedent. See Korean Buddhist Dae Won Sa Temple of Haw. v. City of Honolulu,
The court inAdam did not definitively rule on whether Younger abstention applied. Instead, the court simply assumed that the criteria for abstention were met, but held that the district court nevertheless erred in dismissing, rather than staying, the claim for damages.
Our review of the numerous unpublished dispositions on this issue reveals that confusion in applying our precedents. Some panels rely onMartinez' "clear circuit precedent" and hold that abstention in actions for money damages is inappropriate. See, e.g., Bullock v. Town of Woodside, No. 99-15444,
Compare Bridges v. Kelly,
See, e.g., DeMauro v. DeMauro,
See Martinez,
See, e.g., Majors v. Engelbrecht,
Consumer protection is a "matter firmly committed to the states" under their police powersCf. California v. ARC Am. Corp.,
