Court Opinion

ID: 620157
Source: CourtListenerOpinion
Date Created: 2012-01-04 01:00:24+00
Date Added: 2024-06-11T17:50:51.069411
License: Public Domain

10-3859-cv
Jackson Hewitt v. Kirkland

                                 UNITED STATES COURT OF APPEALS
                                     FOR THE SECOND CIRCUIT

                                             SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY
PARTY NOT REPRESENTED BY COUNSEL.

        At a stated Term of the United States Court of Appeals for the Second Circuit, held at the
Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New York,
on the 3rd day January, two thousand twelve.

Present:           ROSEMARY S. POOLER,
                   DEBRA ANN LIVINGSTON
                   RAYMOND J. LOHIER, JR.,
                             Circuit Judges.

___________________________________________________
JACKSON HEWITT TAX SERVICE INC.,
JACKSON HEWITT INC.,

                                              Plaintiffs-Appellants,

                              -v.-                                                 10-3859-cv

GALEN D. KIRKLAND, IN HIS OFFICIAL CAPACITY
AS COMMISSIONER OF THE NEW YORK STATE
DIVISION OF HUMAN RIGHTS,*

                                              Defendant-Appellee.

Appearing for Appellants:            Benjamin B. Klubes, Victoria Holstein-Childress, BuckleySandler
                                     LLP, Washington, D.C.

Appearing for Appellee:              Steven C. Wu, Assistant Solicitor General; Richard Dearing,
                                     Deputy Solicitor General; Barbara D. Underwood, Solicitor
                                     General, for Eric T. Schneiderman, Attorney General of the State
                                     of New York, New York, N.Y.

         *
           The Clerk of Court is directed to conform its caption to the corrected one hereon.
     Appeal from a judgment of the United States District Court for the Southern District of
New York (Koeltl, J.).

     ON CONSIDERATION WHEREOF, IT IS HEREBY ORDERED, ADJUDGED,
AND DECREED that the judgment of said District Court be and it hereby is AFFIRMED.

        Plaintiffs-appellants Jackson Hewitt Tax Service Inc. and Jackson Hewitt Inc.
(collectively, “Jackson Hewitt”) appeal from a judgment of the United States District Court for
the Southern District of New York dismissing, pursuant to Younger v. Harris, 401 U.S. 37
(1971), their suit to enjoin New York’s administrative action against them. We assume the
parties’ familiarity with the underlying facts, procedural history, and specification of issues for
review.

        When the three conditions of Younger are met, “abstention is mandatory and its
application deprives the federal court of jurisdiction in the matter.” Id. at 197. The three
conditions, which the parties in this case agree have been satisfied, are: “(1) there is an ongoing
state proceeding; (2) an important state interest is implicated in that proceeding; and (3) the state
proceeding affords the federal plaintiff an adequate opportunity for judicial review of the federal
constitutional claims.” Id. at 198.

        There are, however, two “tightly defined exceptions to the Younger abstention doctrine,”
id. at 197, the “bad faith” exception and the “extraordinary circumstances” exception. Id. at 198.
A plaintiff seeking “to head off Younger abstention bears the burden of establishing that one of
the exceptions applies.” Id. The sole issue on appeal is whether the district court erred in
concluding that no exception to Younger applied.

        “[This Court] review[s] de novo the essentially legal determination of whether the
requirements for abstention have been met.” Diamond “D” Constr. Corp. v. McGowan, 282
F.3d 191, 197 (2d Cir. 2002). “While we review the district court’s findings of fact only for
clear error, whether those facts come within the ambit of either the ‘bad faith’ or ‘extraordinary
circumstances’ exceptions to the Younger abstention doctrine is a mixed question of law and fact
that we must also review de novo.” Id. at 198 (citation and internal quotation marks omitted).

        A federal plaintiff seeking to establish that the bad faith exception to Younger applies
must show that “the party bringing the state action [has] no reasonable expectation of obtaining a
favorable outcome,” Cullen v. Fliegner, 18 F.3d 96, 103 (2d Cir. 1994), but rather brought the
proceeding with “a retaliatory, harassing, or other illegitimate motive.” Diamond “D”, 282 F.3d
at 199. The “subjective motivation of the state authority in bringing the proceeding is critical to,
if not determinative of” the bad faith inquiry. Id. Jackson Hewitt argues that the New York
State Division of Human Rights (the “Division”) brought its action in bad faith because it is not
truly motivated by an intent to prevent unlawful discrimination. Instead, Jackson Hewitt
contends, the Division’s action is “nothing more than a thinly-veiled attempt to eliminate a legal
loan product that the Division dislikes and as to which it has no regulatory authority.”
Appellants’ Br. 16.

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         First, the district court correctly concluded that “Jackson Hewitt has not shown that the
Division’s theory is so unreasonable as to suggest that its proceedings are in bad faith or are
motivated by a desire to harass.” At best, Jackson Hewitt has shown that the Division is
pursuing a novel legal theory under the New York Human Rights Law; it has not demonstrated
that the Division has “no reasonable expectation of obtaining a favorable outcome,” Cullen, 18
F.3d at 103, and therefore commenced the action in bad faith. “Younger [abstention] is grounded
in concern for comity toward our co-equal sovereigns.” Diamond “D”, 282 F.3d at 199-200.
“[I]t is only when the state proceeding is brought with no legitimate purpose that this state
interest in correcting its own mistakes dissipates, and along with it, the compelling need for
federal deference.” Id. at 200 (emphasis added).

        Second, as to evidence of subjective bad faith, Jackson Hewitt relies chiefly upon
statements of former Division Commissioner Kumiki Gibson in press releases and news reports.
To establish bad faith, “the federal plaintiff must show that the state proceeding was initiated
with and is animated by a retaliatory, harassing, or other illegitimate motive.” Id. at 199.
Former Commissioner Gibson’s statements do not satisfy that standard. Gibson’s statements do
not suggest any motivation for bringing the action beyond a desire to protect racial minorities
and military families from illegal discriminatory treatment by predatory lenders— a legitimate
goal of the Human Rights Division, which is charged, inter alia, with eliminating and preventing
discrimination in credit transactions. See N.Y. Exec. Law § 290(3). Any animus expressed in
these statements is directed at the alleged discriminatory conduct. Further, there is no evidence
that the proceedings were intended to retaliate against Jackson Hewitt for conduct extrinsic to
the proceedings, as in Cullen, nor is there any evidence or allegation that the Division singled
out Jackson Hewitt, in particular, for unfair treatment.

        Jackson Hewitt further argues that “[t]he Younger doctrine also is inapplicable because
the Division’s action impedes Jackson Hewitt’s constitutionally protected right to commercial
speech.” Appellants’ Br. 22. The district court properly rejected this argument because “the
existence of a ‘chilling effect,’ even in the area of First Amendment rights, has never been
considered a sufficient basis, in and of itself, for prohibiting state action.” Younger, 401 U.S. at
51; see also Spargo v. New York State Comm’n on Judicial Conduct, 351 F.3d 65, 81 (2d Cir.
2003) (quoting Younger, 401 U.S. at 51). If the federal plaintiff demonstrates that “the
prosecution is in retaliation for past speech or shows a pattern of prosecution to inhibit speech
beyond the acts being prosecuted, the exception should apply and abstention may be improper.”
Schlagler v. Phillips, 166 F.3d 439, 443 (2d Cir. 1999) (emphases added). Here, however,
Jackson Hewitt has not demonstrated that the administrative action was intended to inhibit its
First Amendment rights. Thus, even if the Division’s action will impinge on Jackson Hewitt’s
First Amendment rights, abstention is nonetheless warranted: “[a] state proceeding that is
legitimate in its purposes, but unconstitutional in its execution—even when the violations of
constitutional rights are egregious—will not warrant the application of the bad faith exception.”
Diamond “D”, 282 F.3d at 199.

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        Finally, Jackson Hewitt requests that we remand the matter to the district court for
limited discovery and findings of fact in order to determine “what the new Commissioner, who
has not repudiated what was said in the past and who has made no comment publicly, might be
saying internally . . . , what he might have said . . . to the administrative law judge presiding over
the state administrative proceeding, as well as other statements and information relating to the
Division’s bad faith.” Appellants’ Br. 30-31. This argument is not persuasive because the
evidence sought would be irrelevant. Even if the new Commissioner were biased against
Jackson Hewitt, there is no allegation that he was involved in the original decision to bring the
proceeding; further fact-finding as to his current views would not be probative of whether the
Division brought the proceeding in subjectively bad faith.

       We have considered Jackson Hewitt’s remaining arguments on appeal and found them to
be without merit. Accordingly, the judgment of the district court hereby is AFFIRMED.

                                                       FOR THE COURT:
                                                       Catherine O’Hagan Wolfe, Clerk

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