SMITH & WESSON BRANDS, INC.; SMITH & WESSON SALES COMPANY; SMITH & WESSON INC., Appellants v. ATTORNEY GENERAL OF THE STATE OF NEW JERSEY; NEW JERSEY DIVISION OF CONSUMER AFFAIRS
No. 21-2492
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
March 10, 2022
PRECEDENTIAL. On Appeal from the United States District Court for the District of New Jersey (D.C. No. 2-20-cv-19047). District Judge: Honorable Julien X. Neals. Argued on November 9, 2021. Before: HARDIMAN, MATEY, and SCIRICA, Circuit Judges.
Courtney G. Saleski [Argued]
DLA Piper
1650 Market Street
One Liberty Place, Suite 5000
Philadelphia, PA 19103
Joseph A. Turzi
Edward S. Scheideman
DLA Piper
500 Eighth Street, NW
Washington, DC 20004
Christopher M. Strongosky
DLA Piper
51 John F. Kennedy Parkway
Suite 120
Short Hills, NJ 07078
Counsel for Appellants
Andrew J. Bruck
Jeremy M. Feigenbaum
Angela Cai [Argued]
Stephanie J. Cohen
Robert J. McGuire
Michael T. Moran
Tim Sheehan
John T. Passante
Office of Attorney General of New Jersey
25 Market Street
Richard J. Hughes Justice Complex
Trenton, NJ 08625
Counsel for Appellees
HARDIMAN, Circuit Judge.
Smith & Wesson appeals an order of the District Court dismissing its federal civil rights complaint in view of a subpoena enforcement action pending in the New Jersey state courts. Because the District Court violated its “virtually unflagging obligation . . . to exercise the jurisdiction given,” Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976), we will vacate and remand.
The New Jersey Attorney General is investigating Smith & Wesson for possible violations of the New Jersey Consumer Fraud Act. See
In October 2020, the New Jersey Attorney General issued a subpoena under the Act seeking documents from Smith & Wesson related to the company‘s advertisements in New Jersey. The subpoena first made a general demand that Smith & Wesson produce copies of and supporting documentation for “all advertisements for [Smith & Wesson‘s] [m]erchandise that are or were available or accessible in New Jersey [c]oncerning home safety, concealed carry, personal protection, personal defense, personal safety, or home defense benefits of a [f]irearm.” App. 25. The subpoena then specifically demanded all documents related to topics of special concern to the Attorney General:
- Whether Smith & Wesson‘s [f]irearms can be legally carried and concealed by any [c]onsumer, [i]ncluding by New Jersey [c]onsumers, while in New Jersey;
- Whether the concealed carry of a [f]irearm enhances one‘s lifestyle;
- Whether it is safer to confront a perceived threat by drawing a [f]irearm rather than seeking to move away from and avoid the source of the perceived threat;
- Whether having a Smith & Wesson [f]irearm or other [f]irearm makes a home safer;
- Whether Smith & Wesson [f]irearms are designed to be more safe, reliable, accurate, or effective than [f]irearms made by other [f]irearm manufacturers for use in personal or home defense or other activities; and
- Whether novice, untrained [c]onsumers could successfully and effectively use a Smith & Wesson [f]irearm for personal or home defense.
Id. The Attorney General‘s focus included questions especially concerning Smith & Wesson‘s comparative claims, such as whether its firearms are “[p]recision built to be the most accurate and reliable.” See Archive: M&P 9 No Thumb Safety, Smith & Wesson, https://www.smith-wesson.com/firearms/archive-mp-9-no-thumb-safety-0 (last visited Feb. 4, 2022).
Instead of producing the documents when due under the subpoena, Smith & Wesson filed a complaint in the District of New Jersey under
Meanwhile, in federal court, Smith & Wesson amended its complaint to add claims that the Attorney General‘s suit was “retaliation for Smith & Wesson‘s exercise of its First Amendment-protected right to petition [the District] Court for redress.” App. 83. The Attorney General then moved to dismiss that complaint, claiming abstention was required under Younger v. Harris, 401 U.S. 37 (1971). The District Court agreed and dismissed Smith & Wesson‘s amended complaint. Smith & Wesson Brands, Inc. v. Grewal, 2021 WL 3287072, at *3 (D.N.J. Aug. 2, 2021) (holding that abstention under Younger was necessary because “the subpoena-enforcement action involves orders in the furtherance of state court judicial function“). Smith & Wesson eventually produced the subpoenaed documents under a protective order, which requires the Attorney General to return the documents if the subpoena is later held unlawful. Smith & Wesson appeals the District Court‘s order dismissing its amended complaint.
II
The District Court had jurisdiction under
III
“To promote comity between the national and state governments, Younger requires federal courts to abstain from deciding cases that would interfere with certain ongoing state proceedings.” Malhan v. Sec‘y U.S. Dep‘t of State, 938 F.3d 453, 461 (3d Cir. 2019) (citations omitted). Younger involved a pending state criminal prosecution, 401 U.S. at 40–41, but the Supreme Court later extended the doctrine to some state civil proceedings, see Huffman v. Pursue, Ltd., 420 U.S. 592, 607 (1975). In the years that followed, federal courts expanded Younger and abstained too frequently, so the Supreme Court reined in that expansion. ACRA Turf Club, LLC v. Zanzuccki, 748 F.3d 127, 135–36 (3d Cir. 2014); see Sprint Commc‘ns, Inc. v. Jacobs, 571 U.S. 69, 81–82 (2013). The Supreme Court has since consistently narrowed abstention doctrines, including Younger, because they “conflict[] with federal courts’ ‘virtually unflagging’ obligation to exercise their jurisdiction.” Malhan, 938 F.3d at 462 (quoting Sprint, 571 U.S. at 77); see also id. at 458 (citing Colo. River, 424 U.S. at 817).
The Court‘s most recent guidance in Sprint explains that ”Younger extends . . . no further” than three “exceptional circumstances“: (1) “state criminal prosecutions“; (2) “civil enforcement proceedings“; and (3) “civil proceedings involving certain orders uniquely in furtherance of the state courts’ ability to perform their judicial functions.” 571 U.S. at 78, 82 (cleaned up).2 The Court clarified that “[a]bstention is not in order simply because a pending state-court proceeding involves the same subject matter.” Id. at 72. In doing so, ”Sprint narrowed Younger‘s domain.” Malhan, 938 F.3d at 462.
This appeal does not involve a pending state criminal prosecution, so the first Younger category is inapplicable. The District Court invoked the third category, holding that the state proceedings involve “orders in the furtherance of state court judicial function.” Smith & Wesson, 2021 WL 3287072, at *3. In response to Smith & Wesson‘s arguments in this appeal, the Attorney General argues that abstention is also appropriate under the second Younger category because the subpoena enforcement action is a civil enforcement proceeding akin to a criminal prosecution.
A
We first consider whether the subpoena enforcement action falls within the second Younger category—is it a “civil enforcement proceeding“? To qualify as such, the underlying state action must be “akin to a criminal prosecution in important respects.” Sprint, 571 U.S. at 79 (cleaned up). In other words, “the state civil enforcement proceeding must be ‘quasi-criminal’ in nature.” ACRA Turf, 748 F.3d at 138 (quoting Sprint, 571 U.S. at 81). Three factors guide this inquiry: “whether (1) the action was commenced by the State in its sovereign capacity, (2) the proceeding was initiated to sanction the federal plaintiff for some wrongful act, and (3) there are other similarities to criminal actions, such as a preliminary investigation that culminated with the filing of formal charges.” Id. (citing Sprint, 571 U.S. at 79–80). Pre-Sprint caselaw provides another consideration: “whether the State could have alternatively sought to enforce a parallel criminal statute.” Id. (gleaning this factor from Huffman, 420 U.S. at 604, and Trainor v. Hernandez, 431 U.S. 434, 444 (1977)).
There is no dispute about the first factor; New Jersey brought the subpoena enforcement action in its sovereign capacity. And although the Attorney General maintains the third factor—whether there was a preliminary investigation “culminating in the filing of a formal complaint or charges,” Sprint, 571 U.S. at 80 (citations omitted)—is met, he concedes that his investigation into Smith & Wesson‘s alleged subpoena violation was limited. That distinguishes this case from those where more robust preliminary investigations
We must consider just one more factor—whether Smith & Wesson has been charged with wrongdoing for which it can be sanctioned—to determine whether the state action is “quasi-criminal.” See ACRA Turf, 748 F.3d at 138. We agree with Smith & Wesson that the subpoena enforcement action is not a suit initiated to punish wrongdoing.
Sprint teaches that a suit is meant to punish wrongdoing where the state court defendant (the federal plaintiff) violated a legal right or duty. 571 U.S. at 79 (listing examples of cases that satisfy this factor, like disciplinary proceedings against lawyers, actions to recover fraudulently obtained welfare payments, and suits to enforce obscenity laws). We have likewise held that a suit was initiated to punish wrongdoing where the State sought unpaid taxes for the misclassification of employees. PDX N., Inc. v. Comm‘r N.J. Dep‘t of Lab. & Workforce Dev., 978 F.3d 871, 883–84 (3d Cir. 2020), cert. denied 142 S. Ct. 69 (2021). But in the case most like this one, we recently held that a subpoena enforcement action did not punish wrongdoing. TitleMax of Del., Inc. v. Weissmann, 24 F.4th 230, 236–37 (3d Cir. 2022).
The subpoena enforcement action here differs in at least two significant respects from suits that punish wrongdoing. First, the Attorney General did not allege that Smith & Wesson violated any substantive legal duty. To date, he has not accused the company of violating the Consumer Fraud Act; he is investigating possible violations. That fact distinguishes the subpoena enforcement action from PDX, as well as the examples of civil enforcement actions the Supreme Court listed in Sprint. In PDX, the employers underpaid taxes after misclassifying their employees. 978 F.3d at 883–84. Likewise, in Sprint‘s examples of wrongdoing, the state defendants violated substantive legal rights or duties. 571 U.S. at 79. Here, in contrast, Smith & Wesson is alleged to have violated a procedural rule related to the production of documents. Where procedure is at issue, the third Younger category—“civil proceedings involving certain orders uniquely in furtherance of the state courts’ ability to perform their judicial functions,” id. at 78 (cleaned up)—is a more natural fit than the second Younger category.
Second, and most importantly, Smith & Wesson did nothing wrong, so the suit cannot be one “initiated to sanction [it] for some wrongful act.” Id. at 79. Instead of producing the documents on the date specified on the subpoena, it petitioned a federal court to adjudicate its rights and obligations. Federal law authorizes just such a civil action (i.e., one alleging that the Attorney General violated the
The Attorney General responds that Smith & Wesson committed wrongdoing when it failed to respond to the subpoena by the date specified. The structure of the Consumer Fraud Act supports this reasoning. If an entity violates a subpoena issued by the Attorney General in a consumer fraud investigation, it may be subject to contempt, as well as a complete prohibition on “the sale or advertisement of any merchandise” and suspension of its corporate charter.
But those penalties are not self-executing; a court will impose them only after the subpoenaed party violates a court order. Grewal v. 22Mods4ALL, Inc., No. ESX-C-244-19, slip op. at *17 (N.J. Super. Ct. Ch. Div. May 24, 2021) (“[T]he failure to obey [a subpoena issued by the Attorney General may be] addressed by the court to compel compliance but it is not treated as a violation of the [Consumer Fraud Act].“). This case is a perfect example of that reality. Even after the Attorney General filed suit, the state court did not hold Smith & Wesson in contempt for failing to produce the subpoenaed documents. Smith & Wesson would be in contempt only by violating the state court‘s order, which never happened.
Although not mentioned in Sprint, we may also consider whether the statute being enforced has a criminal counterpart to help us decide whether an action is quasi-criminal. ACRA Turf, 748 F.3d at 138 (citations omitted). The Attorney General asserts that New Jersey‘s general criminal contempt statute is analogous. See
For all these reasons, we hold that the subpoena enforcement action was not quasi-criminal under Sprint.
B
We next consider whether the District Court correctly abstained because the subpoena enforcement action “involves orders in the furtherance of state court judicial function.” Smith & Wesson, 2021 WL 3287072, at *3. A review of the Supreme Court‘s holdings reveals that the District Court erred.
The Supreme Court has clarified that not all state court orders trigger abstention; they must be ”uniquely in furtherance of the state courts’ ability to perform their judicial functions.” Sprint, 571 U.S. at 78 (emphasis added) (quoting New Orleans Pub. Serv., Inc. v. Council of New Orleans (NOPSI), 491 U.S. 350, 368 (1989)). The two leading cases that involved such orders are Juidice v. Vail, 430 U.S. 327 (1977) and Pennzoil Co. v. Texaco, Inc., 481 U.S. 1 (1987).
Juidice is closely analogous to this case. The two plaintiffs there—Ward and Rabasco—asked the federal court to enjoin state contempt proceedings as unconstitutional. Juidice, 430 U.S. at 328–29, 332. Ward had already been held in contempt. Id. at 332. Rabasco had not yet been sanctioned, but contempt was imminent because he had failed to comply with a court order to show cause. Id. The Court abstained from adjudicating the dispute because the plaintiffs “had an opportunity to present their federal claims in the state proceedings.” Id. at 337. The Court wanted to avoid any action that could “readily be interpreted as reflecting negatively upon the state court‘s ability to enforce constitutional principles.” Id. at 336 (cleaned up). The Court sought not to infringe upon the State‘s ability to pursue its interests. Id. (“[F]ederal-court interference with the State‘s contempt process is ‘an offense to the State‘s interest . . . likely to be every bit as great as it would be were this a criminal proceeding.‘” (quoting Huffman, 420 U.S. at 604)). But the Court also noted the significance of judicial process. The subpoenas in Juidice were “court-sanctioned,” id. at 335, not administrative subpoenas, like the one at issue here. And both plaintiffs had violated court orders. Id. at 332.
Pennzoil is further afield from this case, so it is less instructive. Pennzoil held that federal courts should abstain from deciding the constitutionality of Texas‘s procedure for transferring property pursuant to a state court judgment. 481 U.S. at 3, 17. The Court provided two justifications: (1) “comity between the States and the National Government;” and (2) “to avoid unwarranted determination of federal constitutional questions.” Id. at 11. According to the Court, Juidice dictated this result because both cases “involve[d] challenges to the processes by which the State compels compliance with the judgments of its courts.” Id. at 13–14.
The key thread linking Juidice and Pennzoil is the certainty of the state court‘s action. In Juidice, the plaintiffs had already violated court orders, so they faced imminent imprisonment. 430 U.S. at 332. In Pennzoil, the state court merely had to enter judgment on the jury‘s verdict. 481 U.S. at 6. In both cases, the substantive outcome had occurred; only enforcement remained, and the Supreme Court refused to impede that enforcement.
Here, by contrast, when Smith & Wesson went to federal court there was much more for the state court to do than merely implement a predetermined outcome. New Jersey courts still had to adjudicate Smith & Wesson‘s constitutional arguments; and even if those arguments were resolved against Smith & Wesson, the state courts still had to give the company an opportunity to produce the required documents before holding it in contempt. Ultimately, Smith & Wesson complied, so the state courts never sanctioned the company. So this appeal differs materially from Juidice and Pennzoil, where the state courts merely had to enforce orders.
Our recent cases on this subject also weigh against the District Court‘s decision to abstain. In TitleMax, we held that a subpoena enforcement action did not involve orders uniquely in furtherance of the
If a threat of contempt were all that was required to trigger abstention, we would have to abstain whenever there was a pending civil proceeding since the contempt power is generally available to enforce court orders. See, e.g.,
Similarly, in Malhan we held that none of the three orders challenged by the federal plaintiff met the Supreme Court‘s criteria for abstention. 938 F.3d at 462–65. First, we held the means by which the State collected non-final judgments “further[ed] family court enforcement—but not uniquely so.” Id. at 463. In doing so, we distinguished the State‘s collection method from “a process, such as civil contempt, that is separate from the merits and that ends when the defendant complies.” Id. Second, we held that state court orders that required the plaintiff to pay child and spousal support “d[id] not ensure that family courts can perform their functions—they [we]re merely the output of those functions.” Id. Finally, we held that a threat to garnish wages did not furnish a basis for abstention because no proceedings were “pending.” Id. at 463–64 (quoting Sprint, 571 U.S. at 78). Those holdings are instructive here. Like the orders in Malhan, the document production order and threatened contempt orders in this case are neither collateral to other proceedings nor totally “separate from the merits.” Id. at 463. Instead, they resemble the “output of [state judicial] functions.” Id. (citation omitted). Thus, Malhan‘s first two holdings counsel against abstention in this case.
Malhan‘s third holding—reciting the rule that abstention is appropriate only if state court proceedings are “pending,” id. at 463–64 (quoting Sprint, 571 U.S. at 78)—is less helpful. Even assuming that the state court proceedings here were pending, abstention would still be inappropriate. The Supreme Court has held that courts should consider whether a state judicial proceeding is ongoing only if it fits within one of the three Sprint categories. 571 U.S. at 81; see PDX, 978 F.3d at 882–83. Because we have already concluded that this case does not meet Sprint‘s criteria, we need not consider whether the state proceedings were ongoing.
In sum, we hold that abstention was not warranted in this case because the document
* * *
Federal courts owe due respect to state courts. Yet the Supreme Court has cautioned that abstention is appropriate only in “exceptional” cases. Id. at 73 (quoting NOPSI, 491 U.S. at 368). This case does not meet the carefully delineated criteria for abstention established in Sprint. We will therefore vacate the District Court‘s order dismissing the case and remand for further proceedings consistent with this opinion.
Smith & Wesson Brands Inc, et al. v. Attorney General New Jersey, et al.
No. 21-2492
MATEY, Circuit Judge, concurring.
I join in holding that the District Court must wrestle with the perplexing facts of this case. I write separately to note that those facts present novel questions at the crossroads between the guarantees in the First and Second Amendments. For more than sixty years, New Jersey‘s Attorney General enjoyed the powers of the Consumer Fraud Act to protect the public from misleading advertising. New Jersey has also regulated firearms for more than three centuries. E.g., An Act Against Wearing Swords 1686 N.J. Laws at 289–90; § 1, 1797 N.J. Laws at 179; § 2, 1799 N.J. Laws at 562; 2 Compiled Stats. of N.J. 1759 (1911);
Now, for the first time, the State seeks to apply the Consumer Fraud Act to supplement these specific restrictions, waving aside concerns about the protections of the First and Second Amendment rights of New Jersey residents in, as always, the name of “safety.” It is a well-traveled road in the Garden State, where long-dormant regulatory powers suddenly spring forth to address circumstances that have not changed. See Ass‘n of New Jersey Rifle & Pistol Clubs Inc. v. Att‘y Gen. New Jersey, 974 F.3d 237, 258 (3d Cir. 2020) (Matey, J., dissenting) (discussing New Jersey‘s inconsistent restrictions on magazine capacity). Consider where this new highway will take us.2 Future firearms instructors, fearing the arrival of subpoenas, might decide it is not worth advertising their services for “safety” training. Maybe range operators, sporting clubs, or hunting lodges, recalling some dusty pamphlet mentioning their attention to “safety” will weigh waiting for investigators against early retirement. And almost certainly, every shop-owner stocking firearms for “self-defense” or personal “safety” can begin planning for periodic advertising inspections from the Attorney General. Perhaps publishers will be punished too, with outdoor magazines
Pointed questions that are all appropriately considered by the District Court on remand. New Jersey is free to experiment with the enforcement of its laws. But the liberties reserved to the states by the Tenth Amendment do not negate the privileges reserved to the people, including “the widely accepted principle at the Founding that the right to self-defense derived directly from the natural right to life, giving the people predictable protections for securing the ‘Blessings of Liberty.‘” See Ass‘n of New Jersey Rifle & Pistol Clubs Inc., 974 F.3d at 258 (Matey, J., dissenting) (citing