Globe Glass & Mirror Co. v. Brown

• Decision Date: 19 June 1995
• Docket Number: Civ. A. No. 94-4033.
• Citation: 888 F. Supp. 768
• Parties: GLOBE GLASS & MIRROR CO. v. James H. "Jim" BROWN, et al.
• Court: U.S. District Court — Eastern District of Louisiana

888 F. Supp. 768

GLOBE GLASS & MIRROR CO. v. James H. "Jim" BROWN, et al.

Civ. A. No. 94-4033.

United States District Court, E.D. Louisiana.

June 19, 1995.

George C. Freeman, III, David L. Stone, Stone, Pigman, Walther, Wittmann & Hutchinson, New Orleans, LA, Joel G. Chefitz, Robert K. Niewijk, Katten, Muchin & Zavis, Chicago, IL, for plaintiff Globe Glass & Mirror Co.

David Charles Kimmel, La. Dept. of Justice, Baton Rouge, LA, Stephen Whitlow, La. Dept. of Justice, Atty. Gen. Office, Baton Rouge, LA, for defendant James H. Brown, M.D., in His Official Capacity as Com'r of Ins. for State of La., aka Jim Brown.

ORDER AND REASONS

JONES, District Judge.

Pending before the Court is a motion to dismiss filed by defendant, James H. "Jim" Brown, who has been sued in his official capacity as Louisiana's Insurance Commissioner. Having reviewed the memoranda of the parties, the record and the applicable law, the Court DENIES the motion.

Background

Plaintiff, Globe Glass & Mirror Company (hereinafter "Globe"), is an Illinois corporation, whose wholly-owned subsidiary, USA-GLAS, Inc., provides automobile glass repair and replacement services throughout the United States.¹ (Complaint, paragraphs 3 and 5, R.Doc. 1.) Globe or USA-GLAS enter into contractual agreements with insurance companies to offer their policyholders auto glass services at competitive prices in a "network," and USA-GLAS enters into agreements with local glass shops to provide such services at negotiated prices. Id., paragraph 6. These shops then become part of the "network." Id. When a policyholder, including a policyholder in Louisiana, needs to repair his auto glass, he calls an "800" number. Id., paragraph 7. USA-GLAS has an affiliated local shop provide the services at the policyholder's home, place of work, or other location. Id. "The policyholder's insurance company then pays USA-GLAS for the work pursuant to the terms of Globe's or USA-GLAS's agreement with the insurer." Id.

In 1992 and 1993, the Louisiana legislature passed two statutes, which, on their face, allegedly affect Globe's right to conduct business in the aforementioned fashion. The first, LSA-R.S. 22:1214.1, is entitled "Automobile insurance; unfair trade practice" and provides:

It shall be an unfair method of competition and unfair or deceptive act or practice for any insurer to establish a contract or agreement with any company to manage, handle, or arrange insurance repair work or to act as an agent for the insurer in any manner, where the company establishes a price which must be satisfied by a repair shop as a condition of doing claims repair work for the insurer, and then retains a percentage of the claim paid by the insurer.

The second statute, LSA-R.S. 22:1214.2, also is entitled "Automobile insurance; unfair trade practice" and provides:

It shall be an unfair method of competition and unfair or deceptive act or practice for any insurer to establish a contract or agreement with any individual or company to manage, handle, subcontract, broker or arrange insurance repair work for any glass repair or replacement on a motor vehicle.

In 1993, defendant brought an administrative action against Allstate Insurance Company, one of USA-GLAS's major customers, contending that its relationship with USA-GLAS violated the above-cited statutes, because it constituted an impermissible arrangement for the handling of glass repair or replacement services. (R.Doc. 1, Paragraph 20.)

Globe has filed this suit for injunctive and declaratory relief, alleging that the abovecited statutes unconstitutionally burden interstate commerce and impair contracts in violation of U.S. Const. art. I §§ 8, 10, by protecting independent, in-state auto glass shops from competition posed by automobile glass repair networks. (R.Doc. 1, Paragraphs 24-27.)

Globe also alleges that some, but not all insurers have terminated their contractual relationships in "auto glass networks" in Louisiana, including cancellations with Globe and USA-GLAS. (R.Doc. 1, Paragraph 19.) Further, because the "vast majority of auto glass repair and replacement work in Louisiana is paid for or reimbursed by insurers ... without a contractual relationship with an insurer, an auto glass network such as USA-GLAS will have virtually no business." Id., Paragraph 21. Therefore, Globe faces the prospect of losing more business, including that with Allstate. Id., Paragraph 22.

The defendant filed this motion to dismiss, contending that venue is improper and that the federal courts should abstain due to the pendency of administrative proceedings involving the same nucleus of facts against Allstate. Globe contends that venue is proper and that this court should not abstain because no proceedings are pending against the plaintiff.

Law and Application

I. Venue

Brown contends that the Eastern District of Louisiana is an improper venue for this suit for declaratory and injunctive relief because he maintains his official residence in the Middle District of Louisiana, relying on 28 U.S.C. § 1391(b) and Butterworth v. Hill, 114 U.S. 128, 5 S.Ct. 796, 29 L.Ed. 119 (1885).

However, defendant relies on the pre-1990 version of § 1391(b), which provided that venue was proper only in the district where all the defendants resided or "in the judicial district ... where the claim arose." 28 U.S.C. § 1391(b) (before the 1990 amendments). See Leroy v. Great Western United Corp., 443 U.S. 173, 184, 99 S.Ct. 2710, 2717, 61 L.Ed.2d 464 (1979). In 1990, Congress amended the venue statute, replacing the language "the judicial district ... in which the claim arose" with "a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred." 28 U.S.C. § 1391(b)(2). "Under the amended statute it is now absolutely clear that there can be more than one district in which a substantial part of the events giving rise to the claim occurred." Wright & Miller, Federal Practice and Procedure: Civil 2d § 3806 (1994 supp.). Therefore, under the current version of the venue statute, an action may be brought in the district "where any defendant resides, if all defendants reside in the same state," 28 U.S.C. § 1391(b)(1), or in any district "in which a substantial part of the events ... giving rise to the claim occurred. 28 U.S.C. § 1391(b)(2). According to the affidavit of Mary Jo Prigge, a substantial part of USA-GLAS's existing Louisiana business occurs in the Eastern District.² Therefore, this suit is properly brought in this district. See Farmland Dairies v. McGuire, 771 F.Supp. 80 (S.D.N.Y.1991) (venue proper in district where milk distributions primarily occur in action seeking declaratory relief as to constitutionality of order issued by state commissioner for application of compensatory payments).

II. Abstention

A. Younger Abstention

Defendant first contends that this Court should abstain from exercising jurisdiction in this matter pursuant to Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971). In Younger the Supreme Court held that a federal court should abstain from enjoining pending state court proceedings, absent bad faith, harassment or other extraordinary circumstances, because of the principles of comity and federalism,³ and because a federal plaintiff can raise his constitutional objections in the state court proceeding. Id. at 41-45, 91 S.Ct. at 749-51. In the companion case of Samuels v. Mackell, 401 U.S. 66, 91 S.Ct. 764, 27 L.Ed.2d 688 (1971), the Court extended the abstention doctrine enunciated in Younger to include suits for declaratory judgment.⁴

Younger teaches that "the accused or federal plaintiff should first set up and rely upon his defense in the state courts, even though this involves a challenge of the validity of some statute, unless it plainly appears that this course would not afford adequate protection." Younger, 401 U.S. at 45, 91 S.Ct. at 751. "Minimal respect for the state process, of course, precludes any presumption that the state courts will not safeguard federal constitutional rights." Middlesex County Ethics Committee v. Garden State Bar Association, 457 U.S. 423, 430, 102 S.Ct. 2515, 2521, 73 L.Ed.2d 116 (1982).

In Middlesex County, the Supreme Court extended the Younger abstention doctrine to include state administrative proceedings which are judicial in nature. Id. at 432-34, 102 S.Ct. at 2521-22 (holding that federal court should abstain from enjoining disciplinary proceedings of the state bar ethics committee). "The policies underlying Younger are fully applicable to noncriminal judicial proceedings when important state interests are involved," as long as "`the state proceedings afford an adequate opportunity to raise the constitutional claims.'" Id. at 432, 102 S.Ct. at 2521 (citations omitted). "Where vital state interests are involved, a federal court should abstain `unless state law clearly bars the interposition of the constitutional claims.'" Id. at 432, 102 S.Ct. at 2521. In summary, a federal court should abstain when:

1. There are ongoing state proceedings, judicial in nature;

2. The state proceedings involve important state interests; and

3. The state proceedings afford the federal plaintiff an adequate opportunity to raise the constitutional issues.

Id. at 432, 102 S.Ct. at 2521.⁵ In Middlesex County, the federal plaintiff had adequate opportunity to raise his constitutional claims, because the administrative proceedings were subject to review by the state supreme court. Id. at 435-37, 102 S.Ct. at 2523-24. The Supreme Court construed this statement in Middlesex to mean that "it is sufficient ... that constitutional claims may be raised in state-court judicial review of the administrative proceeding." Ohio Civil Rights Commission, 477 U.S. at 629, 106 S.Ct. at 2724.

Applying these principles to the present case, the Court finds that the pending state administrative proceedings are judicial in nature, having been brought against an insurance...