Court Opinion

ID: 807837
Source: CourtListenerOpinion
Date Created: 2012-09-04 15:04:59+00
Date Added: 2024-06-11T18:00:27.570584
License: Public Domain

United States Court of Appeals
                             For the Eighth Circuit
                         ___________________________

                                 No. 11-2984
                         ___________________________

                      Sprint Communications Company, L.P.

                        lllllllllllllllllllll Plaintiff - Appellant

                                            v.

     Elizabeth S. Jacobs; Swati A. Dandekar; Darrell Hanson, in their official
                capacities as members of the Iowa Utilities Board

                      lllllllllllllllllllll Defendants - Appellees1
                                       ____________

                     Appeal from United States District Court
                  for the Southern District of Iowa - Des Moines
                                  ____________

                             Submitted: March 13, 2012
                              Filed: September 4, 2012
                                   ____________

Before WOLLMAN, COLLOTON, and BENTON, Circuit Judges.
                       ____________

WOLLMAN, Circuit Judge.

     Sprint Communications Company, L.P. (Sprint) contests the Iowa Utilities
Board’s (IUB) order compelling it to pay intrastate access charges to Windstream, an

      1
      Board members Jacobs and Dandekar are substituted for their predecessors
pursuant to Federal Rule of Appellate Procedure 43(c)(2).
Iowa communications company, for Voice over Internet Protocol (VoIP) calls. Sprint
filed a complaint in federal district court seeking declaratory and injunctive relief.
The same day, Sprint also filed a petition for review in Iowa state court, asserting,
among other claims, that the IUB’s order was preempted under federal law. The
federal district court abstained pursuant to Younger v. Harris, 401 U.S. 37 (1971), and
dismissed the action. Sprint appeals, arguing that abstention is inappropriate in this
case, and that even if appropriate, the district court should have stayed the case rather
than dismissing it. We affirm the district court’s decision to abstain, but we vacate
the judgment of dismissal and remand the case with instruction to stay the
proceedings.

                                            I.

        Windstream charges Sprint intrastate access charges to connect certain VoIP
calls to Windstream customers. Sprint initially paid the charges, but later concluded
that it was not required to pay intrastate access charges for the VoIP traffic. Sprint
determined that the calls at issue are an “information service” and, as such, “not
subject to access charges, whether those charges are interstate or intrastate.”
Appellant Br. 10. After Sprint discontinued payment, it filed a complaint with the
IUB seeking a declaration that its decision to withhold the access charges claimed by
Windstream was appropriate. Sprint argued that because only the Federal
Communications Commission (FCC) has authority to classify the VoIP traffic, the
IUB lacked jurisdiction to decide the issue. The IUB determined that it had
jurisdiction and that Sprint was required to pay the access charges. Following the
IUB’s denial of Sprint’s motion for reconsideration, Sprint filed this action in federal
district court and, on the same day, a petition for review of the IUB’s decision in Iowa
state court. The IUB filed a motion to dismiss the federal litigation on abstention
grounds. The district court granted the motion and dismissed the case, concluding
that the state of Iowa has a substantial interest in the regulation of utilities within the
state.

                                           -2-
       Because we decide only whether abstention was appropriate in this case, we
do not reach the merits of Sprint’s claim that Windstream’s intrastate access charges
do not apply to Sprint’s VoIP traffic. The determination of that issue will turn on
whether Sprint’s VoIP traffic is an intrastate “telecommunications service” subject
to IUB regulation, see 47 U.S.C. § 152(b),2 or whether, as Sprint suggests, the calls
at issue are included within the definition of “information service,” see 47 U.S.C. §
153(24), which classification remains largely unregulated and exempt from access
charges. For our discussion of the FCC’s preemption of state regulation of the VoIP
service at issue in that case, see Minnesota Public Utilities Commission v. Federal
Communications Commission, 483 F.3d 570 (8th Cir. 2007).

                                          II.

      We review a district court’s decision to abstain for abuse of discretion. Plouffe
v. Ligon, 606 F.3d 890, 893 (8th Cir. 2010); but see id. at 894-95 (Colloton, J.,
concurring).

       Sprint first argues that it had the right to challenge the IUB’s order in federal
court. We do not disagree. But Sprint goes on to argue that its decision to file a state
court petition for review should not affect our Younger abstention analysis. Sprint
cites Alleghany Corp. v. McCartney, for the proposition that “a party cannot avoid
Younger by choosing not to pursue available state appellate remedies.” 896 F.2d
1138, 1144 (8th Cir. 1990). Sprint argues that McCartney teaches “that a federal
plaintiff cannot trigger or avoid Younger abstention simply by filing or choosing not
to file state-court proceedings.” Appellant Br. 24. More accurately, McCartney

      2
        Section 152(b) provides that, with certain exceptions, “nothing in this chapter
shall be construed to apply or to give the Commission jurisdiction with respect to (1)
charges, classifications, practices, services, facilities, or regulations for or in
connection with intrastate communications service . . . .” Section 152(b) thus
reserves a role for state regulation of intrastate communications.

                                          -3-
holds that once a party initiates state “judicial” proceedings in which the state has an
important interest, the party must follow the proceedings through to the end. The
parallel state court proceeding thus has a bearing on our abstention analysis.3

       Next, Sprint argues that abstention is inappropriate in this case because this
case does not implicate the concerns the Younger abstention doctrine addresses.
Whether Younger abstention is appropriate is determined by the factors outlined in
Middlesex County Ethics Committee v. Garden State Bar Association. 457 U.S. 423
(1982). Middlesex held that federal courts should exercise Younger abstention when
(1) there is an ongoing state judicial proceeding, which (2) implicates important state
interests, and (3) the state proceedings provide an adequate opportunity to raise
constitutional challenges. Id. at 432; see also Fuller v. Ulland, 76 F.3d 957, 959 (8th
Cir. 1996). Sprint argues that neither the first factor nor the second was met in this
case. The third factor is not in dispute.

                                           A.

       Sprint contends that the first Middlesex factor is not met because the remedy
it seeks would not interfere with any ongoing state proceeding. Sprint seeks a
declaration that the IUB’s order violates federal law and an order enjoining the IUB
from enforcing its order requiring Sprint to pay intrastate access charges for the VoIP
traffic at issue. Sprint argues that the only interference that could result from these
remedies is the possible effect of collateral estoppel on the state court proceeding, an
effect that is not the type of interference that Younger abstention seeks to prevent.
We conclude that interference beyond simple collateral estoppel would result from
a federal court’s declaration of how a state utilities board should interpret its state’s

      3
       Contrary to Sprint’s contention, we conclude that Verizon Maryland, Inc. v.
Public Service Commission of Maryland, 535 U.S. 635 (2002), a case in which there
was no ongoing state judicial proceeding, has no bearing on this case.

                                          -4-
laws and regulations governing intrastate access charges and the entry of an order
enjoining enforcement thereof. See Cedar Rapids Cellular Tel., L.P. v. Miller, 280
F.3d 874, 882 (8th Cir. 2002) (concluding that the serious possibility of interference
resulting from the use of a federal court injunction to preclude a state court remedy
warranted Younger abstention). Interests of comity and federalism support federal
abstention where state judicial review of the IUB’s order has not yet been completed.
See New Orleans Pub. Servs., Inc. v. Council of New Orleans (NOPSI), 491 U.S. 350,
367-69 (1989).

                                           B.

       Sprint also contends that the important state interest prong of Middlesex is also
not met. Sprint first suggests that Iowa lacks a sufficiently important interest in the
proceeding at issue because the proceedings are remedial, rather than coercive,
arguing that Younger applies only to coercive proceedings. Following our holding
in McCartney, we held otherwise in Hudson v. Campbell, 663 F.3d 985, 987-88 (8th
Cir. 2011). “Although we have recognized the existence of the coercive-remedial
distinction in other of our abstention cases, we have not considered the distinction to
be outcome determinative.” Id. at 987 (internal citations omitted). The same analysis
applies in the present case.

       Sprint continues by arguing that the state proceedings do not implicate an
important state interest because telecommunications issues are not solely within the
ambit of state regulatory authority. Sprint points to McCartney, in which we stated
that cases in the public utility area involve “a pervasive federal regulatory scheme
which indicate[s] a strong federal interest.” 896 F.2d at 1145. True enough, but as
the Supreme Court observed in NOPSI, states have “a substantial, legitimate interest
in regulating intrastate retail rates.” 491 U.S. at 365. “[T]he regulation of utilities is
one of the most important of the functions traditionally associated with the police

                                           -5-
power of the States.” Id. (alteration in original) (quoting Ark. Elec. Coop. Corp. v.
Ark. Pub. Serv. Comm’n, 461 U.S. 375, 377 (1983)).

      The Supreme Court also noted in NOPSI that:

      [W]hen we inquire into the substantiality of the State’s interest in its
      proceedings we do not look narrowly to its interest in the outcome of the
      particular case – which could arguably be offset by a substantial federal
      interest in the opposite outcome. Rather, what we look to is the
      importance of the generic proceedings to the State.

Id. at 365. In this case, as in NOPSI, the generic proceedings involve the state’s
regulation of intrastate utility rates. Sprint attempts to avoid the conclusion that Iowa
has an important interest in the proceedings by contesting the IUB’s authority even
to decide whether intrastate access charges apply to VoIP traffic. This argument
impermissibly narrows the focus to the outcome of the case, rather than the
importance of the generic proceedings to the state. See id. at 366 (rejecting a similar
argument challenging “the very right of the Council to conduct . . . deliberations”).
Just as it had in enforcing its consumer protection statutes, see Cedar Rapids Cellular,
280 F.3d at 879-80, Iowa has an important state interest in regulating and enforcing
its intrastate utility rates.

       The Supreme Court went on in NOPSI to determine “whether the [state] court
action is the type of proceeding to which Younger applies.” 491 U.S. at 367. The
Court distinguished between state judicial inquiries and legislation, noting that only
judicial proceedings are entitled to Younger abstention. Id. at 368. In discussing the
difference between judicial and legislative proceedings, the Court quoted Prentis v.
Atlantic Coast Line Company, 211 U.S. 210 (1908):

      A judicial inquiry investigates, declares and enforces liabilities as they
      stand on present or past facts and under laws supposed already to exist.

                                          -6-
      That is its purpose and end. Legislation on the other hand looks to the
      future and changes existing conditions by making a new rule to be
      applied thereafter to all or some part of those subject to its power. The
      establishment of a rate is the making of a rule for the future, and
      therefore is an act legislative and not judicial in kind . . . .

Id. at 226. The IUB is not attempting to establish a rate for the future, but rather is
seeking to enforce the status quo that existed before Sprint ceased paying the
intrastate access charges. The IUB’s order attempts to enforce liabilities based on
present facts and existing laws, and thus it constitutes a judicial proceeding that is
entitled to Younger abstention.

                                         III.

       Finally, Sprint contends that, if abstention is appropriate, the district court
should have stayed rather than dismissed the case. We agree, for we have held that
district courts should stay the case when there is a possibility that the parties will
return to federal court. Cedar Rapids Cellular, 280 F.3d at 882-83; Fuller, 76 F.3d
at 960-61. That being the case here, we conclude that the district court should have
stayed rather than dismissed the case.

                                         IV.

       We affirm the district court’s decision to abstain from exercising jurisdiction
over Sprint’s claims. We vacate the judgment of dismissal and remand the case to the
district court for the entry of a stay of this action.
                         ______________________________

                                         -7-