Erie Ins. Exch. v. Md. Ins. Admin.

• Docket Number: 23-1958
• Decision Date: 18 June 2024
• Citation: Erie Ins. Exch. v. Md. Ins. Admin., 105 F.4th 145 (4th Cir. 2024)
• Parties: ERIE INSURANCE EXCHANGE; Erie Insurance Company; Erie Insurance Property & Casualty Company; Erie Family Life Insurance Company; Erie Insurance Company of New York; Flagship City Insurance Company, Plaintiffs - Appellants, v. The MARYLAND INSURANCE ADMINISTRATION; Kathleen A. Birrane, Defendants - Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

105 F.4th 145

ERIE INSURANCE EXCHANGE; Erie Insurance Company;Erie Insurance Property & Casualty Company; Erie Family Life Insurance Company;Erie Insurance Company of New York;Flagship City Insurance Company, Plaintiffs - Appellants, v. The MARYLAND INSURANCE ADMINISTRATION;Kathleen A. Birrane, Defendants - Appellees.

No. 23-1958

United States Court of Appeals, Fourth Circuit

Argued: May 7, 2024

Decided: June 18, 2024

Appeal from the United States District Court for the District of Maryland, at Baltimore.Julie R. Rubin, District Judge.(1:23-cv-01553-JRR)

ARGUED: Alex Jonathan Brown, SHAPIRO SHER GUINOT & SANDLER, Baltimore, Maryland, for Appellants.John Van Lear Dorsey, MARYLAND INSURANCE ADMINISTRATION, Baltimore, Maryland, for Appellees.ON BRIEF: Michael S. Bullock, SHAPIRO SHER GUINOT & SANDLER, Baltimore, Maryland, for Appellants.Anthony G. Brown, Attorney General, Betty S. Diener, Assistant Attorney General, OFFICE OF THE ATTORNEY GENERAL OF MARYLAND, Baltimore, Maryland, for Appellees.

Before GREGORY, HEYTENS, and BENJAMIN, Circuit Judges.

Affirmed by published opinion.Judge Heytens wrote the opinion, which Judge Gregory and Judge Benjamin joined.

TOBY HEYTENS, Circuit Judge:

An insurance company is facing an enforcement action by a state regulatory agency.Asserting the agency has violated state and federal law and thus tainted the upcoming administrative proceeding, the company asked a federal district court to step in.But "the normal thing to do when federal courts are asked to enjoin pending proceedings" like these is "not to issue such injunctions."Younger v. Harris, 401 U.S. 37, 45, 91 S.Ct. 746, 27 L.Ed.2d 669(1971).Like the district court, we see no reason to depart from that norm here.We thus affirm the district court's dismissal of the insurance company's complaint.

I.

In 2021, the Maryland Insurance Administration (MIA) opened "two separate administrative investigations" into Erie Insurance Company after receiving complaints that Erie was "engaged in racial and geographic discrimination."JA 9-10.The first investigation broadly examined Erie's "market conduct."JA 10.The second investigation focused on the "specific . . . allegations" in the individual complaints.Id.The two investigations were handled by different divisions within the MIA.

Between 2021 and 2023, the MIA repeatedly advised Erie that the individual complaints investigation "was subject to a de facto'stay,' or on hold, pending completion of the" market conduct investigation.JA 10.Still, Erie provided written responses to three sets of questions about the individual complaints investigation while the market conduct investigation "was in full swing."JA 11.Erie also understood that there would be "further discussions and interviews" with the MIA about the individual complaints investigation once the market conduct investigation was finished.Id.

In 2022 and 2023, the MIA received letters from the NAACP asking about the progress of each investigation, and it sent back letters in response.In both responses, the MIA confirmed that the investigations were "ongoing."JA 92, 95.The MIA's second letter also advised that, under Maryland law, all information about its market conduct investigation—including "the materials provided to the MIA during the course of the investigation"—would remain "confidential" while the investigation was pending.JA 95.

A few months later, the division responsible for the individual complaints investigation issued "four public Determination Letters" that Erie had violated the state's insurance laws.JA 12.Those letters referenced documents obtained by the MIA as part of the market conduct investigation, for which the MIA had not issued a report or determination letter.

Erie exercised its statutory right to a hearing on all four determination letters, and the MIA granted each request.In its initial letters granting the hearing requests, the MIA said that the materials "that were considered as part of the complaint investigation process w[ould] be submitted to the hearing officer to become part of the evidentiary file" but that Erie could "object to having a document accepted as evidence" by filing an objection with the hearing officer "before the hearing."JA 199-206.In a follow-up letter sent after Erie filed this lawsuit, the MIA said it would not send the documents to the hearing officer before the hearing and would instead submit evidence during the hearing itself.

Shortly after the MIA granted its requests for administrative hearings, Erie sued the MIA and its commissioner in federal district court, asserting due process claims under 42 U.S.C. § 1983 and violations of Maryland state law.¹The complaint asked the district court to declare that the determination letters were "unlawful," to enjoin the defendants"from disseminating the Determination Letters to any person or entity," and to require the defendants to "publicly withdraw" them.JA 42, 45.That same day, Erie requested a temporary restraining order or a preliminary injunction "enjoin[ing]" the MIA from "us[ing] . . . the unlawful Determination Letters and the confidential Market Conduct Materials" in "any Administrative Hearing" related to the determination letters.JA 52-53.

The district court convened a teleconference, during which it set a hearing on Erie's motion and directed the parties to submit pre-hearing briefs "on Younger and Burford abstention," as well as "any other briefing re the motion."JA 3.After reviewing the submitted materials, the court determined no hearing was necessary because "the issues raised can be resolved on the parties' submissions alone."JA 228.The court said it was "going to abstain from exercising jurisdiction under both the Burford and Younger abstention doctrines,""deny the PI Motion on grounds of abstention," and "dismiss the complaint without prejudice."JA 246; see JA 255 (order dismissing complaint without prejudice).

II.

Erie first asserts that the district court committed reversible error by denying its motion for a preliminary injunction without holding a hearing on that motion.That argument fails because it misapprehends the case's procedural posture.

"The traditional office of a preliminary injunction is to protect the status quo and to prevent irreparable harm during the pendency of a lawsuit" so as "to preserve the court's ability to render a meaningful judgment on the merits."United States v. South Carolina, 720 F.3d 518, 524(4th Cir.2013)(quotation marks removed);seeDi Biase v. SPX Corp., 872 F.3d 224, 230(4th Cir.2017)(describing the purpose of a preliminary injunction as "protect[ing] the status quo and prevent[ing] irreparable harm during the pendency of a lawsuit").But a preliminary injunction plays no role in preserving the status quo once a lawsuit has reached final judgment, and this lawsuit ended the moment the district court dismissed Erie's complaint.AccordMount Graham Red Squirrel v. Madigan, 954 F.2d 1441, 1450(9th Cir.1992)(dismissing appeal from denial of preliminary injunction as moot where the district court later entered summary judgment against the party whose motion was denied).Erie also has not asked this Court to grant an injunction pending its appeal of the district court's dismissal order.SeeFed. R. App. P. 8(a)(2).This case thus comes to us as an appeal of the district court's final decision dismissing Erie's complaint, not as an appeal of an interlocutory order denying interim injunctive relief.

True, it does not appear that the defendants ever formally moved to dismiss Erie's complaint under Federal Rule of Civil Procedure 12.But Erie does not ask us to reverse the district court's judgment on that ground.And at any rate, "[e]ven if a party does not make a formal motion,"a district court may dismiss a complaint on its own motion so long as "the procedure employed is fair to the parties."Robertson v. Anderson Mill Elementary Sch., 989 F.3d 282, 291(4th Cir.2021)(quotingWright & Miller, 5B Fed. Prac. & Proc. Juris. § 1357).That is exactly what happened here.Before it ruled, the district court directed the parties to "submit briefing on Younger and Burford abstention"(JA 3), which gave Erie "notice of the court's intention" to potentially dismiss the case and the "opportunity to amend the complaint or otherwise respond."Robertson, 989 F.3d at 291.Erie then submitted a "bench memorandum on abstention," attaching four exhibits not previously included in the complaint.JA 176.No further procedure was required.

Finally, as much as Erie's briefs can be read as suggesting that a district court must always conduct an evidentiary hearing or make findings of fact before dismissing a complaint based on abstention, that argument fails.Both the Supreme Court and this one have affirmed district court decisions that abstained under Federal Rule of Civil Procedure 12(b)(6).See, e.g., Kugler v. Helfant, 421 U.S. 117, 125 n.5, 95 S.Ct. 1524, 44 L.Ed.2d 15(1975);Nivens v. Gilchrist(Nivens II), 444 F.3d 237, 240, 247 n.7(4th Cir.2006).And—of course—a district court applying Rule 12(b)(6) need not hold an evidentiary hearing and cannot make factual findings.See, e.g., National Rifle Ass'n of Am. v. Vullo, 602 U.S. 175, 144 S.Ct. 1316, 1330-31, — L.Ed.2d — (2024).

III.

We turn to the merits of the district court's abstention ruling.Because the district court dismissed Erie's complaint, we must assume the truth of Erie's well-pleaded "factual allegations."Kugler, 421 U.S. at 125 n.5, 95 S.Ct. 1524.We review the district court's ultimate decision to abstain "for abuse of discretion," while remembering that "whether a case satisfies the basic requirements of abstention constitutes a legal question subject to de novo review."VonRosenberg v. Lawrence, 781 F.3d 731, 734(4th Cir.2015)(brackets and quotation marks removed).Applying those standards, we conclude the district court committed no reversible error in abstaining under ...