CEDAR RAPIDS CELLULAR TELEPHONE, L.P.; Dаvenport Cellular Telephone Company, Plaintiffs/Appellants,
WWC License, LLC; Iowa Wireless Services, L.P., Plaintiffs,
v.
Thomas MILLER, Sued as Thomas J. Miller, individually, in his official capacity as Attorney General of Iowa and Administrator of the Iowa Consumer Credit Code, Defendant/Appellee.
Cedar Rapids Cellular Telephone, L.P.; Davenport Cellular Telephone Company, Plaintiffs,
WWC License, LLC, Plaintiff/Appellant,
Iowa Wireless Services, L.P., Plaintiff,
v.
Thomas Miller, Sued as Thomas J. Miller, individually, in his official capacity as Attorney General of Iowa and Administrator of the Iowa Consumer Credit Code, Defendant/Appellee.
No. 00-3727.
No. 00-3728.
United States Court of Appeals, Eighth Circuit.
Submitted: November 14, 2001.
Filed: February 14, 2002.
COPYRIGHT MATERIAL OMITTED Carter G. Phillips (argued), Washington, DC, Bret Alan Dublinske (argued), Des Moines, IA, for Plaintiffs-Appellants.
Julie F. Pottorff, Asst. U.S. Atty. (argued), for Defendant-Appellee.
Before BYE, RICHARD S. ARNOLD, and RILEY, Circuit Judges.
RILEY, Circuit Judge.
Cedar Rapids Cellular Telephone, L.P. (Cedar Rapids Cellular), Davenport Cellular Telephone Company (Davenport Cellular), and WWC License, LLC (WWC), appeal the district court's dismissal of their complaint, which seeks to enjoin the Attorney General of Iowa from еnforcing state consumer protection statutes against them. We affirm in part, reverse in part, and vacate the judgment of dismissal.
I. BACKGROUND
Cedar Rapids Cellular, Davenport Cellular, and WWC all provide wireless telephone service in the State of Iowa. One way they sell wireless service is through "term service agreements" in which customers agree to purchase cellular telephone service for pre-established periods of time, typically from twelve to twenty-four months. Under the term service agreements, a customer who cancels service before the expiration of the term must pay liquidated damages in the form of a cancellation fee. Cancellation fees allegedly range from $300 to over $500.
In January 1998, the Attorney General of the State of Iowa notified several wireless service providers that their business practices violate Iowa law. The comрanies contacted by the Attorney General included appellant WWC and U.S. Cellular Corporation (U.S.Cellular), the parent corporation of appellants Cedar Rapids Cellular and Davenport Cellular. The Attorney General took the position that the liquidated damages provisions of the term service agreements violate the Iowa Consumer Credit Code, Iowa Code Chapter 537, which prohibits charges for default in certain consumer transactions. He also objected, among other things, to the companies' alleged practice of using arbitration clauses in the term service agreements to resolve customer disputes but using small claims court to collect customer debts.
On April 11, 2000, after negotiations between the Attorney General and U.S. Cellular broke down, the appellants1 filed this action in the United States District Court for the Northern District of Iowa. In their complаint, the appellants seek a declaration of the following:
1. The Iowa Consumer Credit Code does not apply to their cellular telephone businesses in general or, in particular, to the cancellation fees in their term service agreements.
2. The Federal Communications Act preempts: (a) application of the Iowa Consumer Credit Code to the term service agreements, (b) any award for money damages under Iowa consumer protection statutes, and (c) any state attempt to regulate wireless service providers in a way that is not "competitively neutral."
3. Enforcement of the Iowa Consumer Credit Code against the term service agreements unlawfully interferes with interstate commerce.
4. The Federal Arbitration Act preempts application of the Iowa Consumer Credit Code to the arbitration clauses in the term service agreements.
5. The рrovisions of the Iowa Consumer Credit Code sought to be enforced against the wireless service providers are void for vagueness under the Due Process Clause of the Fourteenth Amendment.
The appellants also seek to enjoin the Attorney General from "taking any action under or to enforce" the Iowa Consumer Credit Code against them.
On the same day the appellants filed this case, the Attorney General brought a civil enforcement action against U.S. Cellular in state district court in Polk County, Iowa. In the state action, the Attorney General alleges U.S. Cellular is violating numerous provisions of the Iowa Consumer Credit Code and the other provisions of Iowa law. In particular, the Attorney General's enforcement action alleges the following violations of Iowa law:
1. U.S. Cellular has refused to allow customers to cancel term service agreements unless they pay a cancellation fee.
2. U.S. Cellular has misrepresented to customers that they have no right to cancel the term service agreements without paying cancellation fees.
3. U.S. Cellular has refused to cease billing customers under canceled term service agreements without full payment, including payment of cancellation fees.
4. U.S. Cellular has sought to collect attorney fees under the term service agreements or has authorized the collection of such fees by others.
5. U.S. Cellular has misrepresented that customers would receive "free" telephones and "free" minutes while using other fees to recoup the costs of these products and services.
6. U.S. Cellular has misrepresented that customers would receive "free" statewide roaming while assessing roaming charges for some in-state calls.
7. U.S. Cellular advertised and entered into contracts for free weekend hours on Friday evening and Monday morning and then modified its agreements by ending free weekend hours on Friday and Monday.
8. U.S. Cellular invokes the arbitration clauses in its term service agreements when it is sued by customers but uses the courts to collect unpaid accounts, penalties, and attorney fees from its customers.
The Attorney General's action seeks, among other things, injunctive relief against U.S. Cellular and "its partners, officers, employees, agents, successors, and all other persons, corporations and other entities acting in concert or participating with U.S. Cellular."
U.S. Cellular removed the Attorney General's civil enforcement action to the United States District Court for the Southern District of Iowa. That case was subsequently remanded to state court for lack of subject matter jurisdiction.
The Attorney General filed a motion to dismiss this lawsuit. The district court held that it lacked jurisdiction over the appеllants' preemption claims, reasoning that those claims are mere federal defenses that cannot form a basis for federal jurisdiction. The district court ruled that it did have jurisdiction over the appellants' remaining federal claims — those arising under the dormant commerce clause and the due process clause. It also assumed, without deciding, that it had supplemental jurisdiction over the appellants' state law claims. Neverthelеss, citing various abstention doctrines, the district court dismissed the case.
The appellants now appeal the district court's dismissal of their claims. They argue that the district court had subject matter jurisdiction over all of their federal claims and that it erred in abstaining from the federal claims it did not dismiss. Appellants Cedar Rapids Cellular and Davenport Cellular also argue that, even if it was appropriate for the district court to abstain, their claims should have been stayed rather than dismissed.
II. STANDARD OF REVIEW
A district court's ruling on subject matter jurisdiction is reviewed under the de novo standard. Charchenko v. City of Stillwater,
III. JURISDICTION
The district court ruled that the appellants' preemption claims cannot support federal jurisdiction because they are in the nature of federal defenses. The district court's reasoning might have had force if the appellants were only seeking a declaratory judgment. See Public Serv. Comm'n of Utah v. Wycoff Co.,
The Attorney General did not file a cross-appeal, but argues that the district court should have at least dismissed the appellants' state law claims. The general rule is that the Eleventh Amendment bars federal courts frоm enjoining state officers from violating state law. See Pennhurst State Sch. & Hosp. v. Halderman,
IV. ABSTENTION
Our finding that the district court has subject matter jurisdiction over all the appellants' federal claims does not resolve this appeal. We must also decide whether the district court acted properly in abstaining from the appellants' claims. As discussed below, we uphold its decision to abstain from the claims of Cedar Rapids Cellular and Davenport Cellular, but not from the claims of WWC. Although the district court cited three separate abstention doctrines, the only appropriate basis for abstention in this case is Younger v. Harris,
A. Abstention Under Brillhart and Colorado River
Two of the abstention doctrines cited by the district court are inapplicable to this case. The district court did not have discretion to abstain under Brillhart v. Excess Insurance Co. of America,
The district court also lacked discretion to abstain under Colorado River Conservation District v. United States,
B. Abstention Under Younger
The doctrine of Younger abstention, which reflects the principle of comity inherent in our federal system of government, provides much stronger support for abstention in this case. In Younger, the Supreme Court held that a district court erred in enjoining a state criminal prosecution when the plaintiff's federal claim could also have been raised as a defense in the state prosecution. Younger,
The Supreme Court has extended Younger to forbid the injunction of certain state civil enforcement actions. In Huffman v. Pursue, Ltd.,
We have also applied Younger outside the context of state criminal prosecutions. In Fuller v. Ulland,
The State of Iowa has an important interest in enforcing its consumer protection statutes. None of the appellants dispute this general proposition. States have a long history of regulating against unfair business practices. See California v. ARC Am. Corp.,
The appellants nonetheless argue that Iowa lacks an important interest in enforcing these particular statutes against them on the grounds that such enforcement has been preempted by federal law. In the past, we have held that "[t]he legitimate state interest contemplated by Younger does not exist when the state action has been preempted or foreclosed by the Constitution." Middle South Energy,
In New Orleans Public Service, the Supreme Court left open the possibility of an exception to Younger for preemption claims that are "facially conclusive." See New Orleans Pub. Serv.,
Our conclusion that Younger applies despite the appellants' preemption claims finds support in our prior case law. In Fuller, we applied Younger to prevent interference with a civil enforcement proceeding which the Minnesota Commissioner of Commerce brought against the trustee of a workers' compensation plan. The trustee in Fuller argued that Younger did not aрply because the state enforcement action was preempted by the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001-1461. Fuller,
We also reject the appellants' suggestion that Younger abstention is inappropriate becаuse their federal lawsuit involves claims under 42 U.S.C. § 1983. As appellants note, Justice Brennan believed that "Younger is, in general, inapplicable to civil proceedings, especially when a plaintiff brings a § 1983 action alleging violation of federal constitutional rights." Pennzoil Co. v. Texaco, Inc.,
While Younger clearly apрlies despite the nature of the appellants' claims, we must still decide whether it requires abstention in this case. The moving force behind Younger abstention is the promotion of comity between state and federal judicial bodies. See New Orleans Pub. Serv.,
At first glance, it appears that the appellants' request for injunctive relief in this case would not interfere with the action pending in state court. Judging solely from the parties named, the two cases seem to be unrelated. The Attorney General's action in state court names U.S. Cellular as a dеfendant but not any of the appellants. The complaint in this case seeks to enjoin the Attorney General only from proceeding against the federal plaintiffs, a group that does not include U.S. Cellular. A closer look at the two actions, however, reveals a close connection between the state court action against U.S. Cellular and the federal claims of Cedar Rapids Cellular and Davenport Cellular.
It is not a prerequisite to Younger abstention that the federal plaintiffs also be defendants in the action pending in state court. The Supreme Court's decision in Hicks v. Miranda,
Under this standard, the district court was correct in abstaining from the claims of appellants Cedar Rapids Cellular and Davenport Cellular. The Attorney General's state court action seeks an injunction against "all other persons, corporations and other entities acting in concert or participating with" U.S. Cellular. Cedar Rapids Cellular and Davenport Cellular concede that U.S. Cellular has a controlling interest in their operations. If these two appellants obtain a federal injunction against action by the Attorney General, they could use that injunction to obstruct the Attorney General's attempts to enforce any remedy granted by the state courts. This serious possibility of interference warrants abstention from the claims of Cedar Rapids Cellular and Davenport Cellular.
In contrast, the claims of WWC do not seek to interfere with the proceeding in state court. With respect to WWC, this case closely resembles Doran v. Salem Inn, Inc.,
We reject the Attorney General's argument that his аttempts to obtain information from WWC trigger Younger abstention. Administrative proceedings may be judicial for purposes of Younger if they "declare and enforce liabilities" between the parties. Yamaha Motor Corp., U.S.A. v. Stroud,
Appellants Cedar Rapids Cellular and Davenport Cellular also argue that their claims should have been stayed instead of dismissed. A stay is preferred to dismissal in cases where there is a possibility that the parties will return to federal court. Fuller,
V. CONCLUSION
The district court had subject matter jurisdiction over all of the appellants' federal claims. While the district court correctly chose to abstain from the claims of Cedar Rapids Cellular and Davenport Cellular, it should have stayed those claims rather than dismissing them. The district court should not have abstained from the claims of WWC. Accordingly, we vacate the judgment of dismissal and remand to the district court for entry of a stay of the claims brought by Cedar Rapids Cellular and Davenport Cellular. On remand, the district court should hear the federal claims brought by WWC and should determine whether it has jurisdiction over WWC's state law claims.
Notes:
Notes
Another wireless service provider, Iowa Wireless Services, L.P., was a plaintiff below, but is not a party to this appeal
The appellants' main preemption claim is based upon section 332 of the Federal Communications Aсt which prohibits states from regulating "the entry of or the rates charged by any commercial mobile service." 47 U.S.C. § 332(c)(3). We note that the necessity of developing a factual record on the appellants' business practices and rate structure would appear to foreclose any argument of conclusive preemptionSee New Orleans Pub. Serv.,
