Court Opinion

ID: 2975393
Source: CourtListenerOpinion
Date Created: 2015-09-22 17:33:44.39787+00
Date Added: 2024-06-11T11:43:56.190160
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RECOMMENDED FOR FULL-TEXT PUBLICATION
                                     Pursuant to Sixth Circuit Rule 206
                                              File Name: 07a0265p.06

                        UNITED STATES COURT OF APPEALS
                                         FOR THE SIXTH CIRCUIT
                                           _________________

                                                    X
                              Plaintiff-Appellant, -
 AMERICAN FAMILY PREPAID LEGAL CORPORATION,
                                                     -
                                                     -
                                                     -
                                                         No. 06-3758
         v.
                                                     ,
                                                      >
 COLUMBUS BAR ASSOCIATION,                           -
                             Defendant-Appellee. -
                                                    N
                     Appeal from the United States District Court
                    for the Southern District of Ohio at Columbus.
                   No. 05-00459—Gregory L. Frost, District Judge.
                                            Argued: April 25, 2007
                                     Decided and Filed: July 13, 2007
             Before: SILER and GILMAN, Circuit Judges; ZATKOFF, District Judge.*
                                              _________________
                                                   COUNSEL
ARGUED: Philomena M. Dane, SQUIRE, SANDERS & DEMPSEY, Columbus, Ohio, for
Appellant. Constance M. Greaney, PORTER, WRIGHT, MORRIS & ARTHUR, Columbus, Ohio,
for Appellee. ON BRIEF: Philomena M. Dane, Jessica D. Goldman, Emily E. Root, SQUIRE,
SANDERS & DEMPSEY, Columbus, Ohio, for Appellant. Constance M. Greaney, Joyce D.
Edelman, Jacob H. Huebert, PORTER, WRIGHT, MORRIS & ARTHUR, Columbus, Ohio, for
Appellee. John N. MacKay, SHUMAKER LOOP & KENDRICK, Toledo, Ohio, for Amicus
Curiae.
                                              _________________
                                                  OPINION
                                              _________________
        SILER, Circuit Judge. American Family Prepaid Legal Corporation (“American Family”)
appeals the district court’s dismissal, on abstention grounds, of its constitutional due process
challenge to the Ohio Supreme Court rule governing the unauthorized practice of law. Under Rule
VII, Section 5(a) of the Ohio Supreme Court Rules for the Government of the Bar (the “Rule”), the
unauthorized practice of law committee of any bar association may file a motion for an interim cease
and desist order with the Ohio Supreme Court, pending resolution of whether the party is engaged
in the unauthorized practice of law. Because American Family has not met its burden of showing

         *
         The Honorable Lawrence P. Zatkoff, United States District Judge for the Eastern District of Michigan, sitting
by designation.

                                                          1
No. 06-3758               Am. Family Prepaid Legal Corp. v. Columbus Bar Ass’n                                  Page 2

that its due process challenge to the Rule will not be resolved in the course of the current
proceedings under Ohio law, we AFFIRM the district court’s decision to abstain based on Younger
v. Harris, 401 U.S. 37 (1971).
                                               I. BACKGROUND
        American Family sells memberships in its prepaid legal services plan to residents of Ohio.
In November 2002, the Columbus Bar Association (“CBA”) filed a complaint against American
Family with the Ohio Supreme Court’s Board of Commissioners on the Unauthorized Practice of
Law (the “UPL Board”), pursuant to Rule VII of the Ohio Supreme Court Rules for the Government
of the Bar (“Gov. Bar R. VII”). The complaint was docketed as UPL Case No. 02-10 (“UPL 02-10")
and alleged that American Family was engaging in the unauthorized practice of law by performing
certain services, such as selling, marketing, and/or preparing wills. In March 2003, American
Family and the CBA entered into a Consent Agreement providing that   American Family would alter
its business practices and refrain from the challenged conduct.1 In November 2004, believing
American Family had breached the Consent Agreement by engaging in the challenged conduct, the
CBA filed a motion with the UPL Board to reopen UPL 02-10. The UPL Board denied the CBA’s
motion.
        In March 2005, the CBA filed a motion with the Ohio Supreme Court to enforce the Rule.2
American Family filed a motion in opposition to CBA’s motion to enforce the Rule, pursuant to
Gov. Bar R. VII, § 5(a)(A)(2). However, American Family failed to present its constitutional due
process claims to the Ohio Supreme Court in that motion. Thereafter, on April 12, 2005, the Ohio
Supreme Court granted the CBA’s motion, ordering American Family to “cease and desist engaging
in the unauthorized practice of law” (“Interim Order”), and ordering the UPL Board to “hold a
hearing to consider whether the March 2003 settlement agreement had been violated . . . and file a
report with the Court.”
       On April 18, 2005, pursuant to Gov. Bar R. VII, § 5(a)(C)(1), American Family filed a
Motion to Clarify, Dissolve, Modify and/or Stay the Court’s April 12, 2005 Interim Order (“Motion
to Clarify”). In its Motion to Clarify, American Family included the following due process
challenge:
         Alternatively, the [Interim] Order should be stayed in its entirety and the matter
         remanded to the [UPL] Board for a full hearing to determine whether [American
         Family] [is] engaged in the unauthorized practice of law. Otherwise, [American
         Family] will be placed out of business without [the CBA] having to prove its
         allegations in a hearing on the merits, a classic and unlawful infringement of
         constitutional due process rights. See, e.g., Cleveland Board of Education v.
         Loudermill (1985) 470 U.S. 532, 105 S. Ct. 1487 (holding that the “root
         requirement” of the Due Process Clause is “that an individual be given an
         opportunity for a hearing before he is deprived of any significant property interest.”
         (emphasis in original).

         1
         The Consent Agreement provided that the CBA would dismiss its complaint but reserved the right to enforce
the Consent Agreement by filing a motion to reopen with the UPL Board.
         2
          The Rule permits any regularly organized bar association to file a motion for an interim cease and desist order
with the Ohio Supreme Court when substantial, credible, evidence demonstrates that an individual or entity is engaging
in the unauthorized practice of law. Gov. Bar. R. VII, § 5(a).
No. 06-3758                Am. Family Prepaid Legal Corp. v. Columbus Bar Ass’n                                    Page 3

       The Motion to Clarify was denied without comment by the Ohio Supreme Court on May 20,
2005. The matter of the whether American Family violated the Consent Agreement is currently
pending before the UPL Board as UPL 02-10.
       On June 10, 2005, the CBA filed a second complaint against American Family with the UPL
Board, alleging that it had again engaged in the unauthorized practice of law (“UPL 05-02"). On
September 15, 2005, the Ohio Supreme Court ordered UPL 05-02 held in abeyance pending a formal
hearing in UPL 02-10.
         American Family filed the present action in federal district court on May 11, 2005, alleging
that
         the Rule on its face violates the federal constitutional guarantee of procedural due
         process because the Rule does not provide a sufficient pre-deprivation hearing or an
         adequate post-deprivation remedy to protect [its] liberty and property interests in
         freedom of speech and association, freedom to pursue lawful business and business
         goodwill.
        The CBA moved for dismissal on abstention grounds. During the pendency of American
Family’s lawsuit, however, the CBA agreed not to file a motion with the Ohio Supreme Court to
hold American Family in contempt for failing to comply with the Interim Order. On May 9, 2006,
the district court granted the CBA’s motion to dismiss based on Younger abstention. As a result,
the CBA is no longer bound by the agreement not to bring contempt proceedings against American
Family. American Family filed this timely appeal of the decision of the district court.
                                                   II. ANALYSIS
A. Younger Abstention Criteria
        We have mandated three requirements for a district court to properly invoke Younger
abstention: “1) there must be on-going state judicial proceedings; 2) those proceedings must
implicate important state interests; and 3) there must be an adequate opportunity in the state
proceedings to raise constitutional challenges.” Squire v. Coughlan, 469 F.3d 551, 555 (6th Cir.
2006) (quotation marks and citation omitted). If these prerequisites are satisfied and “so long as
there is no showing of bad faith, harassment, or some other extraordinary  circumstance that would
make abstention inappropriate, the federal courts should abstain.”3 Id. (quoting Middlesex County

         3
           American Family adds a heightened standard for Younger abstention at the outset of its brief–namely, that “the
federal action [must also] seek[] to overturn the result of a state proceeding,” and “that only exceptional circumstances
justify a federal court’s refusal to decide a case in deference to the States.” (emphasis omitted). However, the cases
relied upon by American Family are distinguishable because the proceedings were legislative rather than judicial in
nature. See New Orleans Pub. Serv., Inc. v. Council of the City of New Orleans, 491 U.S. 350, 373 (1989) (“Viewed,
as it should be, as no more than a state-court challenge to completed legislative action, the [] suit comes within none of
the exceptions that Younger and later cases have established.”) (emphasis added); GTE North, Inc. v. Strand, 209 F.3d
909, 920 (6th Cir. 2000) (finding Younger abstention inapplicable because the on-going proceeding was not “‘judicial’
in nature”); Monongahela Power Co. v. Schriber, 322 F. Supp. 2d 902, 915 (S.D. Ohio 2004) (failing to abstain in light
of on-going state court proceedings where the underlying state commission orders were legislative in nature).
          In Middlesex, the Supreme Court held that state bar disciplinary proceedings were of a character to call Younger
abstention into play because of the important state interest in the outcome of those proceedings. See 457 U.S. at 432-35.
“Where vital state interests are involved, a federal court should abstain unless state law clearly bars the interposition of
the constitutional claim.” Id. at 432 (quotation marks and citation omitted). Neither the Supreme Court nor this court
has departed from the standard set forth in Middlesex, where, like here, the state bar proceedings are judicial in nature.
See, e.g., Squire, 469 F.3d at 555-57 (setting forth Middlesex factors as standard for Younger abstention); Fieger v.
Thomas, 74 F.3d 740, 744-50 (6th Cir. 1996) (same); Berger v. Cuyahoga County Bar Ass’n, 983 F.2d 718, 722-24 (6th
Cir. 1993) (same). Therefore, American Family’s reliance on cases that involve federal challenges to legislative, non-bar
related proceedings is misplaced. Wooley v. Maynard, 430 U.S. 705 (1977), also cited by American Family, is
No. 06-3758                 Am. Family Prepaid Legal Corp. v. Columbus Bar Ass’n                                    Page 4

Ethics Comm’n v. Garden State Bar Ass’n, 457 U.S. 423, 435 (1982)). We review de novo a district
court’s decision to invoke Younger abstention. Id. (citing Berger, 983 F.2d at 721).
        In Squire, we considered whether the district court properly invoked Younger abstention to
a constitutional challenge to Rules II and V of the Ohio Supreme Court Rules for the Government
of the Bar (“Gov. Bar R. II and V”).4 Id. at 553. The complaint charged that the Disciplinary
Counsel for the Ohio Supreme Court (“Disciplinary Counsel”), who investigates and prosecutes
judicial grievances filed under Gov. Bar R. II and V, violated the complainant judge’s due process
rights by failing to provide the names of all those contacted by the Disciplinary Counsel in the
course of its investigation against her. Id. at 554.
         1.         Ongoing state judicial proceedings
        As we noted in Squire, “[t]he Ohio state constitution vests its supreme court with original
jurisdiction over the ‘[a]dmission to the practice of law, the discipline of persons so admitted, and
all other matters relating to the practice of law.’” Id. at 555 (quoting Ohio Const. art. IV, § 2(B)
(1)(g)). We also found as relevant that members of the Board of Commissioners on Grievance and
Discipline (“Grievance Board”), with whom the Disciplinary Counsel files its complaint, are
appointed by the Justices of the Ohio Supreme Court. Id. Finally, we considered that the Grievance
Board, with the approval of the Supreme Court, appoints the Disciplinary Counsel to investigate
allegations of judicial misconduct in concluding that such investigations are “an adjudicative, rather
than a legislative function.” Id. at 555-56 (citing Middlesex, 457 U.S. at 432).
        In the instant case, it is beyond dispute that regulating the unauthorized practice of law is a
“matter[] relating to the practice of law” and is therefore within the constitutionally proscribed
jurisdiction of the Ohio Supreme Court. See id. Furthermore, like the Grievance Board and
Disciplinary Counsel in Squire, the UPL Board serves as an arm of the Ohio Supreme Court. Not
only is the UPL Board appointed by the Justices of the Ohio Supreme Court, Gov. Bar R. VII, § 1,
but its final report is subject to review by the Ohio Supreme Court, Gov. Bar R. VII, § 19. See
Berger, 983 F.2d at 723 (noting that the Ohio Supreme Court ultimately decided what discipline
should be given as a factor showing the proceeding was judicial in nature under Younger). Thus,
the Ohio procedures are judicial in nature. See Fieger, 74 F.3d at 744 (holding that state disciplinary
procedures against an attorney are “judicial in nature for purposes of Younger abstention”).
         American Family attempts to distinguish Middlesex and its progeny by pointing out that it
is not seeking to avoid Ohio’s authority to prosecute it for the unauthorized practice of law, but is
only challenging the constitutionality of the Interim Order. However, this argument lacks merit
because it seeks to divide the Interim Order as a distinct judicial action from the underlying
investigation into the unauthorized practice of law. The Interim Order was entered based on
allegations that American Family had breached the Consent Agreement by engaging in the
unauthorized practice of law. Currently pending before the UPL Board are UPL 02-10, addressing
whether American Family violated the Consent Agreement, and UPL 05-02, addressing whether
American family is engaged in the unauthorized practice of law. The Interim Order was a step in
the on-going judicial proceedings against American Family and is necessary to temporarily
safeguard Ohio’s citizens against the unauthorized practice of law pending adjudication of the matter
after a full hearing on the merits.

distinguishable as it involved a state’s interest in its license plate motto, not the regulation of law within its borders–an
interest this circuit has recognized as “compelling.” See Blanton v. United States, 94 F.3d 227, 234 (6th Cir. 1996)
(citation and quotation marks omitted).
         4
             Rules II and V govern disciplinary procedures against Ohio’s state judiciary. See Gov. Bar R. II; Gov. Bar
R. V.
No. 06-3758           Am. Family Prepaid Legal Corp. v. Columbus Bar Ass’n                      Page 5

       2.      Important state interest
        In Squire, we noted the Supreme Court’s holding that “the state ‘has an extremely important
interest in maintaining and assuring the professional conduct of the attorneys it licenses.’” Squire,
469 F.3d at 556 (quoting Middlesex, 457 U.S. at 434). We also reiterated that “‘[t]he policies of
comity and federalism counsel that because [the state] has such an important interest in regulating
its own bar, a state forum should have the first opportunity to review [the state’s] rules of lawyer
conduct and procedures for lawyer discipline.’” Id. (quoting Fieger, 74 F.3d at 745).
        Here, Ohio has an equally important interest in regulating the unauthorized practice of law.
“‘A state’s interest in regulating the practice of law within its borders is compelling, because lawyers
are essential to the primary governmental function of administering justice.’” Blanton, 94 F.3d at
234 (citation omitted). “[C]omity and federalism” mandate that Ohio should have the first
opportunity to decide whether the Rule–a procedure outlined by Ohio’s Bar Rules to safeguard
Ohioans from the unauthorized practice of law–is unconstitutional. Therefore, the present situation
involves precisely the type of important state interest that Younger abstention was intended to cover.
       3.      Adequate opportunity to raise constitutional challenges
        “A plaintiff must have ‘an adequate opportunity in the state proceedings to raise
constitutional challenges’ in order to satisfy the third prong of the Younger abstention test.” Squire,
469 F.3d at 556 (quoting Berger, 983 F.2d at 723). “Abstention is appropriate ‘unless state law
clearly bars the interposition of the constitutional claims.’” Id. (emphasis added) (quoting Fieger,
74 F.3d at 745). The burden is on American Family to show that state law barred presentation of
its constitutional claims. Id.
         In Squire, the plaintiff argued that she was denied the opportunity to raise her due process
challenge at the precomplaint stage of the state proceedings because she was not provided with the
names of all persons contacted in the course of the investigation against her. See id. We found the
plaintiff’s argument unavailing because it conflicted with Middlesex, since the plaintiff failed to
raise her constitutional claim in the state disciplinary proceedings, but, instead, took her claim
directly to federal district court. See id. at 557. Even though there was no specific procedure in
place under the Ohio Bar Rules for bringing a constitutional challenge at the precomplaint stage of
the grievance process, we found dispositive that the plaintiff had failed to show that the Disciplinary
Counsel would not have considered her constitutional challenge had it been brought. Id.
        American Family faces two obstacles in overcoming Younger’s third prong. First, it never
raised its constitutional claims in its brief in opposition to the CBA’s motion for a cease and desist
order. Although American Family contends this is without consequence as the claims were
eventually raised in its Motion to Clarify, filed after the Ohio Supreme Court granted the Interim
Order, we have considered arguments raised for the first time in similar motions deemed waived.
See Am. Meat Inst. v. Pridgeon, 724 F.2d 45, 47 (6th Cir. 1984) (holding that defendants waived
issue where it was raised for first time in motion for reconsideration after injunction had already
been issued); see also Jones v. Unibilt Indus., Inc., 2004-Ohio-5983 (Ct. App. 2004) (not reported
in N.E.2d) (arguments raised for the first time in a motion for reconsideration deemed waived).
Because American Family did not properly raise its due process claim in the state proceedings, it
cannot show that it was not afforded an adequate opportunity to raise its constitutional claims. See
Squire, 469 F.3d at 557; see also Berger, 983 F.2d at 723 (holding that Younger abstention was
appropriate because the “plaintiffs had the opportunity to present their constitutional claims in their
answer to the [disciplinary] complaint against them”).
        Second, as we explained in Fieger, “federal courts should refrain from enjoining lawyer
disciplinary proceedings initiated by state ethics committees if the proceedings are within the
appellate jurisdiction of the appropriate State Supreme Court.” 74 F.3d at 78 (quoting Ohio Civil
No. 06-3758              Am. Family Prepaid Legal Corp. v. Columbus Bar Ass’n                   Page 6

Rights Comm’n v. Dayton Christian Sch., 477 U.S. 619, 627 (1986)). UPL 02-10 and UPL 05-02
are currently pending before the UPL Board. The final report of the UPL Board is subject to review
by the Ohio Supreme Court. See Gov. Bar. R. VII, § 19(a). Nothing in Gov. Bar R. VII prohibits
a party from raising constitutional claims during the Ohio Supreme Court’s review of the UPL
Board’s final report. Absent evidence to the contrary, there is no reason to presume that the Ohio
Supreme Court would not entertain American Family’s due process claim during its review of the
UPL Board’s findings. See Squire, 469 F.3d at 557 (“An absence of explicit procedures however,
does not establish that [the plaintiff] had an inadequate opportunity to raise her [constitutional]
claim.”); Fieger, 74 F.3d at 749 (“We are confident that the Michigan Supreme Court takes
constitutional challenges to its regulations very seriously.”). Thus, the third prong of Younger is
met.
B. Younger Abstention Exceptions
        As previously noted, we have recognized several exceptions to Younger abstention “such as
bad faith, harassment, or flagrant unconstitutionality.” Squire, 469 F.3d at 557 (citation and
quotation marks omitted). Here, American Family has not raised bad faith or harassment, but claims
that an exception to Younger abstention exists because the Rule “plainly does not provide for a
meaningful and prompt post-deprivation hearing.” However, as we explained of the underlying due
process challenge in Squire, the district court “must abstain” where, like here, the plaintiff is
“involved in [an ongoing state judicial] proceeding” and “has an adequate opportunity to present her
constitutional claim in that proceeding.” 468 F.3d at 558. Therefore, this argument is without merit.
         American Family cites another exception to Younger abstention narrowly carved out in
Habich v. City of Dearborn, 331 F.3d 524 (6th Cir. 2003). Habich held that Younger abstention was
inappropriate where the issues raised in the federal lawsuit were “collateral” to the state
proceedings–that is–the plaintiff’s suit would not be resolved by the case-in-chief or as an
affirmative defense to the state court proceedings. Id. at 531-32. Although this exception appears
applicable at first glance, a closer look renders Habich inapplicable  as evidenced by American
Family’s brief. American Family correctly sets forth the Mathews5 factors as the relevant inquiry
in reviewing whether a due process violation has occurred. The Mathews factors include: 1) the
respondent’s interest; 2) the government’s interests and fiscal and administrative burdens; and 3)
the risk of erroneous deprivation. 424 U.S. at 335. American Family suggests that these factors can
be evaluated “without ever touching on the factual and legal issues within the jurisdiction of the
UPL Board.”
         However, in its discussion of the Mathews factors, American Family correctly notes Ohio’s
interest “in prohibiting the unauthorized practice of law and protecting its citizens against persons
who hold themselves out to be lawyers but are not licensed.” It further explains that in this case,
“Ohio . . . does not have an interest in prohibiting the lawful conduct of companies engaged merely
in the sale of memberships in prepaid legal plans that provide access to properly-licensed attorneys.”
This is the very issue that is being adjudicated by the UPL Board–whether American Family’s
services are lawful or constitute the unauthorized practice of law. Therefore, by American Family’s
admission, any undertaking of its due process claim involves adjudicating issues that are intertwined
with the state court proceeding. Accordingly, this case does not fit into the collateral issue exception
of Habich.

       5
           Mathews v. Eldridge, 424 U.S. 319, 335 (1976)
No. 06-3758              Am. Family Prepaid Legal Corp. v. Columbus Bar Ass’n                                Page 7

       Because the three-part Younger abstention test has been satisfied and none of the Younger
exceptions are implicated, the district court did not err by abstaining in this case.6
         AFFIRMED.

         6
          American Family’s reliance on Barry v. Barchi, 443 U.S. 55 (1979), and Gershenfeld v. Justices of the
Supreme Court of Pa., 641 F. Supp. 1419 (E.D. Pa. 1986), does not compel a different result, as neither of those cases
discussed Younger abstention.