Air Evac EMS, Inc. v. McVey

• Decision Date: 10 June 2022
• Docket Number: 21-1301
• Parties: AIR EVAC EMS, INC., d/b/a Air Evac Lifeteam, d/b/a AirMedCare Network, Plaintiff - Appellee, v. Allan MCVEY, in his official capacity as West Virginia Insurance Commissioner, Defendant - Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

37 F.4th 89

AIR EVAC EMS, INC., d/b/a Air Evac Lifeteam, d/b/a AirMedCare Network, Plaintiff - Appellee,

v.Allan MCVEY, in his official capacity as West Virginia Insurance Commissioner, Defendant - Appellant.

No. 21-1301

United States Court of Appeals, Fourth Circuit.

Argued: March 10, 2022

Decided: June 10, 2022

ARGUED: Michael Ray Williams, OFFICE OF THE ATTORNEY GENERAL OF WEST VIRGINIA, Charleston, West Virginia, for Appellant. Charlotte Hemenway Taylor, JONES DAY, Washington, D.C., for Appellee. ON BRIEF: Patrick Morrisey, Attorney General, Lindsay S. See, Solicitor General, Katherine A. Schultz, Senior Deputy Attorney General, Caleb A. Seckman, Assistant Solicitor General, Thomas T. Lampman, Assistant Solicitor General, Cassandra L. Means, Assistant Attorney General, OFFICE OF THE ATTORNEY GENERAL OF WEST VIRGINIA, Charleston, West Virginia, for Appellant. Carte P. Goodwin, Alex J. Zurbuch, FROST BROWN TODD, LLC, Charleston, West Virginia; Benjamin J. Cassady, Washington, D.C., Joshua L. Fuchs, Nicole M. Perry, JONES DAY, Houston, Texas, for Appellee.

Before GREGORY, Chief Judge, and THACKER and QUATTLEBAUM, Circuit Judges.

Affirmed by published opinion. Judge Quattlebaum wrote the opinion, in which Chief Judge Gregory and Judge Thacker join.

QUATTLEBAUM, Circuit Judge:

Federalism, a fundamental principle under our Constitution, requires that federal courts respect the sovereignty of their state counterparts. One way federal courts do this is through the doctrine of abstention. Under Younger v. Harris , 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), federal courts should abstain from exercising jurisdiction to consider matters related to ongoing state criminal proceedings. And Younger abstention may also apply to quasi-criminal proceedings if the state proceeding is ongoing, implicates important state interests and provides an adequate opportunity to raise constitutional challenges. Sprint Commcns., Inc. v. Jacobs , 571 U.S. 69, 81–82, 134 S.Ct. 584, 187 L.Ed.2d 505 (2013). However, there are exceptions to Younger abstention. Under one of those exceptions, a federal court should not abstain when confronted with "extraordinary circumstances." Younger , 401 U.S. at 53, 91 S.Ct. 746.

Here, a district court was confronted with a motion to preliminarily enjoin a state administrative proceeding on the grounds that the proceeding was preempted by federal law. Although the court found that the elements of Younger abstention may have been met, it did not abstain because it determined that the existence of extraordinary circumstances rendered Younger abstention inappropriate. We must decide if the district court abused its discretion in doing so. We reaffirm the importance of Younger abstention. But our deferential standard of review compels that we affirm the district court's application of the extraordinary circumstances exception to Younger abstention.

We also review another decision of the district court. After declining to abstain, the district court issued a preliminary injunction enjoining the state court administrative proceeding. That decision is also reviewed for abuse of discretion. And like its decision concerning Younger , we find no abuse of discretion in the district court's preliminary injunction order.

I.

Air Evac EMS, Inc., is an emergency air ambulance provider operating throughout the United States, including West Virginia. Because air ambulance services are expensive and insurance does not always reimburse the full cost, Air Evac offers a membership program to West Virginia residents, businesses and municipalities. For anyone covered by the membership, which generally costs less than $100 per year for an individual, Air Evac cancels any portion of the bill not covered by insurance. Air Evac characterizes this program as a debt cancellation agreement.

According to Air Evac, this lawsuit "arises from West Virginia's longstanding campaign to assert regulatory dominance over Air Evac[ ]" in favor of Air Evac's in-state competitor, HealthNet. See Resp. Br. 9–10. To illustrate its point, Air Evac refers to a different lawsuit, Air Evac EMS, Inc. v. Cheatham , 910 F.3d 751 (4th Cir. 2018). At issue in Cheatham was a West Virginia statute that effectively capped what Air Evac could receive for transporting injured in-state workers and the state's own employees. See id. at 758. We affirmed the district court's decision to enjoin the enforcement of such legislation, concluding that the Airline Deregulation Act preempts West Virginia's enforcement efforts. See id. at 759, 769–70. From Air Evac's perspective, West Virginia's legislative efforts were a product of state officials "work[ing] close[ly]" with HealthNet. See Resp. Br. 14 (citing J.A. 97).

"Only months [after Cheatham ], the OIC [West Virginia Offices of the Insurance Commissioner] initiated its investigation into another method of regulating Air Evac's pricing and compensation structure." J.A. 229. The OIC eventually filed an administrative complaint against Air Evac, alleging that Air Evac's membership program constituted an unauthorized transaction of "insurance" in West Virginia. See id. at 218. In particular, the administrative complaint alleged that Air Evac's membership program constitutes insurance, but Air Evac had not obtained a license to sell insurance as required by West Virginia law.

Air Evac, based on the documents it secured through state Freedom of Information Act requests, views this administrative complaint as a larger part of West Virginia officials' efforts to favor HealthNet. Those documents included an email exchange from the Commissioner to HealthNet's executives. The email stated:

As far as an update on what we're doing, I currently have my legal team looking into a two-pronged approach. First, I want to determine whether, under my existing statutory authority, I can take action now to shut down the subscription plans on the basis they are unlicensed insurance products sold by unlicensed insurance producers. We know this will draw litigation. Second, I am working with the NAIC [National Association of Insurance Commissioners] on model legislation that we might be able to introduce in the upcoming legislative session.

Id. at 72. Air Evac's position, ever since the investigations preceding the eventual administrative complaint, has been that the Airline Deregulation Act preempts any state law applicable to Air Evac's membership program.

In response to the administrative action referenced in the email, Air Evac sued the Commissioner in federal court claiming the Airline Deregulation Act preempts the Commissioner's enforcement efforts. Air Evac EMS, Inc. v. Dodrill ("Dodrill I "), 523 F. Supp. 3d 859 (S.D.W. Va. 2021). Air Evac also moved for a temporary restraining order and preliminary injunction to stop the administrative proceedings. The district court granted the preliminary injunction. Id. at 874. In doing so, the district court declined to abstain under Younger . See id. at 867–70. The district court reasoned that, "while the formal requirements of Younger may be present," the case presents an "extraordinary circumstance" in which abstention would be inappropriate.

See id. at 869. In addition, the district court agreed with Air Evac that the Airline Deregulation Act preempts the state regulations, and that the McCarran-Ferguson Act (a federal law that preserves insurance regulation to the province of the states) does not save the enforcement at issue from preemption. See id. at 870–73.

Then, in response to the eventual legislation referenced in the email, Air Evac sued the Commissioner again in federal court once the new bill became law. Air Evac EMS., Inc. v. Dodrill ("Dodrill II "), 548 F. Supp. 3d 580 (S.D.W. Va. 2021). Citing to the bill's text and the Commissioner's testimony before the West Virginia House, Air Evac characterizes these new laws as "a legislative declaration that in fact [Air Evac's Membership Program] is insurance." See Resp. Br. 20 (alteration in original) (citing Addendum 7, 45–46, 54). The lawsuit sought to enjoin the Commissioner from enforcing these new laws against Air Evac. Here too, the district court sided with Air Evac and issued a preliminary injunction. It concluded Air Evac was likely to show that the Airline Deregulation Act preempts the state statutes, and that the McCarran-Ferguson Act does not save the laws from preemption. Dodrill II , 548 F. Supp. 3d at 588–94.

Dodrill II , however, is not before us. Before us is only the Commissioner's timely appeal in Dodrill I. The Commissioner argues the district court erred in declining to abstain under Younger and in enjoining the administrative proceedings. We have jurisdiction to hear the interlocutory appeal of the district court's injunction order pursuant to 28 U.S.C. § 1292(a)(1).

II.

We begin with the district court's decision not to abstain. We review for abuse of discretion the district court's decisions about whether or not to abstain under Younger . Nivens v. Gilchrist , 444 F.3d 237, 240 (4th Cir. 2006). Guided by that standard, we will first discuss when Younger applies and exceptions to abstention before determining if the district court abused its discretion in not abstaining here.

A.

Younger abstention expresses "the ‘national policy forbidding federal courts to stay or enjoin pending state court proceedings except under special circumstances.’ " Robinson v. Thomas , 855 F.3d 278, 285 (4th Cir. 2017) (quoting Younger , 401 U.S. at 41, 91 S.Ct. 746 ). Two principles drive the doctrine: equity and comity. As for equity, "courts of equity should not act, and particularly should not act to restrain a criminal prosecution, when the moving party has an adequate remedy at law and will not suffer irreparable injury if denied equitable relief." Younger , 401 U.S. at 43–44, 91 S.Ct. 746. And for comity, federal courts must show "proper respect for state functions." See id. at 44, 91 S.Ct. 746.

Between equity and comity, Younger itself...