Federal Exp. Corp. v. Tennessee Public Service Com'n

• Decision Date: 14 February 1991
• Docket Number: No. 90-5596,90-5596
• Citation: 925 F.2d 962
• Parties: FEDERAL EXPRESS CORPORATION, Plaintiff-Appellant, v. TENNESSEE PUBLIC SERVICE COMMISSION, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 962

925 F.2d 962

FEDERAL EXPRESS CORPORATION, Plaintiff-Appellant, v. TENNESSEE PUBLIC SERVICE COMMISSION, et al., Defendants-Appellees.

No. 90-5596.

United States Court of Appeals Sixth Circuit.

Argued Jan. 23, 1991.

Decided Feb. 14, 1991.

William R. Willis, Jr., Marian F. Harrison (argued), Willis & Knight, Nashville, Tenn., for plaintiff-appellant.

Henry M. Walker (argued), Tennessee Public Service Com'n, Nashville, for defendant-appellee.

Before KEITH and MILBURN, Circuit Judges, and CONTIE, Senior Circuit Judge.

MILBURN, Circuit Judge.

Plaintiff-appellant Federal Express Corporation appeals the judgment of the district court dismissing on grounds of abstention its action seeking a declaration that the Tennessee Motor Carrier Act, Tennessee Code Annotated Sec. 65-15-101 et seq., is expressly preempted by the Airline Deregulation Act of 1978, 49 U.S.C.App. Sec. 1305, and impliedly preempted by the commerce clause, 738 F.Supp. 1140. For the reasons that follow, we affirm.

I.

Federal Express is a recognized leader in the overnight delivery business. "Approximately 90 percent of all packages transported by Federal Express are sorted at its Superhub in Memphis, Tennessee, the corporation's principal place of business." Federal Express Corp. v. Tennessee Public Serv. Comm'n, 693 F.Supp. 598, 600 (M.D.Tenn.1988), rev'd without opinion, 909 F.2d 1483 (6th Cir.1989) (table). "Of the more than 700,000 packages transported nightly, approximately 1000 have both an origin and destination in Tennessee." Id. "Federal Express estimates that it transports approximately 500 packages per night by motor vehicle solely within the state of Tennessee." Id.

On July 2, 1986, the Tennessee Public Service Commission (TPSC) directed Federal Express to show cause why it was not subject to the Tennessee Motor Carrier Act, Tenn.Code Ann. Sec. 65-15-102. A hearing was held before an administrative law judge (ALJ) who ruled that Federal Express was a motor carrier under Tennessee law and was therefore required to apply for a certificate of convenience and necessity from the TPSC. The TPSC reviewed the ALJ's decision and following oral argument, the TPSC issued an order on June 9, 1987, ordering Federal Express to apply for a certificate of convenience and necessity to operate as an intrastate motor carrier. "The TPSC gave Federal Express 30 days to comply with its order, later extending that deadline to August 25, 1987." Federal Express, 693 F.Supp. at 601.

On July 9, 1987, Federal Express filed with the Tennessee Court of Appeals a petition for review of the TPSC's order and an application for an immediate stay of the order. On August 6, 1987, the Tennessee Court of Appeals denied the application for a stay of the TPSC's order. In its one-page order, the court stated that the application for a stay was denied "on condition that compliance with said order of the Public Service Commission will not prejudice the prosecution of the present proceeding for review of said order." J.A. at 653.

On August 7, 1987, Federal Express filed the present action in the district court seeking declaratory and injunctive relief against the TPSC. ¹ Federal Express argued that the Tennessee Motor Carrier Act was expressly preempted by the Airline Deregulation Act of 1978, 49 U.S.C.App. Sec. 1305, and impliedly preempted by the commerce clause. Federal Express filed a motion for a temporary restraining order which the district court granted on August 10, 1987. The district court stated in its order that there was a substantial risk of irreparable injury to Federal Express "because submission to the jurisdiction of the Public Service Commission by filing an application may render moot the plaintiff's constitutional and federal statutory claims, and unduly interfere with and harm the plaintiff's alleged integrated transportation system developed under federal authorization." J.A. at 135-36.

On September 9, 1987, prior to the district court's hearing arguments on the motion for a preliminary injunction, Federal Express filed a motion to voluntarily dismiss its petition for review in the Tennessee Court of Appeals, which the court granted on September 11, 1987. Pursuant to a motion by the TPSC, the district court consolidated the hearing on the motion for a preliminary injunction with a bench trial on the merits, and the consolidated proceeding was conducted on September 11 and 12, 1987.

On June 16, 1988, the district court issued an opinion and order dismissing the case for lack of federal subject matter jurisdiction. See Federal Express Corp. v. Tennessee Public Serv. Comm'n, 693 F.Supp. 598 (M.D.Tenn.1988). The TPSC and intervenor Purolator Courier filed a motion for reconsideration, arguing that the court had jurisdiction pursuant to Shaw v. Delta Air Lines, 463 U.S. 85, 96 n. 14, 103 S.Ct. 2890, 2899 n. 14, 77 L.Ed.2d 490 (1983), but that the court should abstain from a decision on the merits. The court denied the motion and adhered to its decision dismissing the action for lack of jurisdiction.

Federal Express appealed the dismissal of its action and a panel of this court initially affirmed the judgment of the district court. Federal Express Corp. v. Tennessee Public Serv. Comm'n, 878 F.2d 381 (6th Cir.1989) (unpublished opinion). However, Federal Express filed a petition for rehearing en banc, and the panel amended its original opinion and reversed the judgment of the district court. Federal Express Corp. v. Tennessee Public Serv. Comm'n, 909 F.2d 1483 (6th Cir.1989) (unpublished order). The panel remanded the case for further proceedings "including consideration of the question of abstention in view of this court's opinion in" CSXT, Inc. v. Pitz, 883 F.2d 468 (6th Cir.1989), cert. denied, --- U.S. ----, 110 S.Ct. 1480, 108 L.Ed.2d 616 (1990).

On remand, the parties briefed the abstention issue, and following a hearing, the district court entered an order on April 23, 1990, dismissing the action on the basis of the abstention doctrine of Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971). Using the three-step analysis for Younger abstention, the court first applied the day-of-filing rule to conclude that Federal Express' petition for review in the Tennessee Court of Appeals constituted an ongoing state judicial proceeding. Second, the court held that Tennessee has an important state interest in regulating the intrastate trucking industry. Third, the court concluded that Federal Express had an adequate opportunity to raise its constitutional concerns in the state proceedings. The court also held that the TPSC had not waived the abstention argument. Accordingly, the district court dismissed the case and dissolved the injunction against the TPSC. This timely appeal followed.

The principal issue on appeal is whether the district court erred by applying the Younger abstention doctrine.

II.

A. Waiver

Before reviewing the district court's application of the Younger abstention doctrine, we must address Federal Express' contention that the TPSC has waived the abstention argument. Federal Express argues that the TPSC waived any abstention argument because it did not plead abstention in its answer, it did not file a motion for abstention, it urged the district court to hold a hearing on the merits of the case, and at the hearing, counsel for TPSC stated that abstention was no longer an issue in the case since the state court appeal had been dismissed. Federal Express asserts that the TPSC raised the Younger abstention argument for the first time two months after the bench trial when the district court asked the parties to brief the issue of res judicata. Thus, Federal Express contends that the TPSC waived the abstention argument by not actively pursuing the issue. See City of Paducah v. Investment Entertainment, 791 F.2d 463 471 (6th Cir.) (Wellford, J., concurring), cert. denied, 479 U.S. 915, 107 S.Ct. 316, 93 L.Ed.2d 290 (1986). ²

Younger abstention is "designed to allow the State an opportunity to 'set its own house in order' when the federal issue is already before a state tribunal." Ohio Bureau of Employment Services v. Hodory, 431 U.S. 471, 479-80, 97 S.Ct. 1898, 1903-04, 52 L.Ed.2d 513 (1977). "If the State voluntarily chooses to submit to a federal forum, principals of comity do not demand that the federal court force the case back into the State's own system." Id. at 480, 97 S.Ct. at 1904. "[F]ailure to raise abstention could arguably amount to waiver of its application...." Hughes v. Lipscher, 906 F.2d 961, 964 (3d Cir.1990). However, in each case where the Supreme Court has found waiver of the abstention argument, "the State expressly urged [the] Court or the District Court to proceed to an adjudication of the constitutional merits." Ohio Civil Rights Comm'n v. Dayton Christian Schools, 477 U.S. 619, 626, 106 S.Ct. 2718, 2722, 91 L.Ed.2d 512 (1986).

In the present case, the abstention issue was first raised by the district court during a status conference on August 20, 1987. Although the TPSC did not plead abstention in its answer, Federal Express has cited no case requiring abstention to be raised in the pleadings. Indeed, the Supreme Court has indicated that "abstention may be raised by the court sua sponte." Bellotti v. Baird, 428 U.S. 132, 143 n. 10, 96 S.Ct. 2857, 2864 n. 10, 49 L.Ed.2d 844 (1976); see also Louisiana Power & Light v. Thibodaux, 360 U.S. 25, 79 S.Ct. 1070, 3 L.Ed.2d 1058 (1959).

After the district court raised the abstention issue, the TPSC filed a supplemental trial brief on September 2, 1987, arguing for abstention. However, in its brief, the TPSC argued for Burford-type ³ abstention rather than Younger abstention. At the outset of the consolidated hearing and trial before the district court on September 11-12, 1987, the district judge directed the parties to address the abstention issue. The TPSC urged the district court to abstain, arguing that abstention is appropriate where ...