Telco Communications, Inc. v. Carbaugh

Decision Date20 September 1989
Docket NumberNo. 88-2668,88-2668
Citation885 F.2d 1225
PartiesTELCO COMMUNICATIONS, INC., Plaintiff-Appellee, v. S. Mason CARBAUGH, as he is Commissioner of the Department of Agriculture and Consumer Services of the Commonwealth of Virginia, Defendant-Appellant, State of Connecticut; State of Maryland; State of North Carolina; State of West Virginia, Amici Curiae, Virginia State Lodge, Fraternal Order of Police, Amicus Curiae.
CourtU.S. Court of Appeals — Fourth Circuit

Guy Winston Horsley, Jr., Frank Seales, Jr., Sr. Asst. Atty. Gen., Edward Paul Nolde, Asst. Atty. Gen., Richmond, Va. (Mary Sue Terry, Atty. Gen., Stuart, Va., H. Lane Kneedler, Chief Deputy Atty. Gen., Gail Starling Marshall, Deputy Atty. Gen., Nashville, Tenn., on brief), for defendant-appellant.

Peter Sanderson Brooks (Brooks & Brooks, Sherborn, Mass., John G. Douglass, Wright, Robinson, McCammon, Osthimer & Tatum, Richmond, Va., Louis J. Scerra, Jr., and Goldstein & Manello, Boston, Mass., on brief), for plaintiff-appellee. (Clarine Nardi Riddle, Acting Atty. Gen., David E. Ormstedt, Asst. Atty. Gen., Lacy H. Thornburg, Pittsboro, N.C., J. Joseph Curran, Jr., Attys. Gen., James G. Klair, Asst. Atty. Gen., Baltimore, Md., and Ken Heckler, Secretary of State of West Virginia, on brief), for amici curiae, Connecticut, Maryland, North Carolina and West Virginia.

Errol Copilevitz, John P. Jennings, Jr., Copilevitz, Bryant, Gray & Jennings, P.C., Kansas City, Mo., Kevin R. Huennekens, Maloney, Yeatts & Barr, Richmond, Va., on brief, for amicus curiae, Virginia State Lodge, Fraternal Order of Police.

Before HALL and WILKINSON, Circuit Judges, and WILLIAMS, Senior United States District Judge for the Western District of Virginia, sitting by designation.

WILKINSON, Circuit Judge:

In this case we must determine if four provisions of the Virginia charitable solicitation laws, Va.Code Ann. Secs. 57-48 et seq., are constitutional. The first provision states that a professional solicitor must disclose to potential donors the percentage amount of a contribution that will go to the charitable organization for its own use. Va.Code Ann. Sec. 57-55.1. The second requires professional solicitors to disclose in writing to potential donors that their financial statements for the last fiscal year are available from the Virginia Office of Consumer Affairs. Id. at Sec. 57-55.2. The third provision mandates that a solicitor file with the Office of Consumer Affairs a copy of the script of any oral solicitation at least ten days prior to the commencement of the solicitation campaign. Id. at Sec. 57-61 D. Finally, Sec. 57-61.1 B of the Virginia Code permits the Commissioner of the Office of Consumer Services to suspend or revoke the registration of a solicitor if certain provisions of the Act are violated.

The district court held that each of the four challenged provisions impermissibly infringed on First Amendment freedoms. Telco Communications, Inc. v. Carbaugh, 700 F.Supp. 294 (E.D.Va.1988). We find Telco's challenge to the percentage disclosure requirement to be moot. We likewise find the challenge to the suspension and revocation provisions in Sec. 57-61.1 B non-justiciable. We affirm the district court with respect to the prior submission of solicitation scripts. We reverse, however, with regard to the required disclosure of financial statements on file with the state.


Plaintiff Telco Communications, Inc. is engaged in the business of providing fund raising services to police organizations and fire fighter unions. Plaintiff publishes a series of handbooks relating to public health and safety. Topics for the handbooks have included drug and alcohol abuse awareness and crime prevention. The client on whose behalf Telco conducts a fund raising campaign receives a percentage of the gross advertising revenue of these handbooks, and Telco is responsible for the preparation, printing, and distribution of the handbooks. Plaintiff contracted with local police fraternal organizations in the Commonwealth of Virginia to publish and distribute a pamphlet on their behalf and to solicit advertisements for the publication.

Following a complaint that Telco had violated Virginia solicitation laws, the Virginia Office of Consumer Affairs (OCA) advised plaintiff in March 1988, that it was investigating plaintiff's fund raising activities in Virginia. Thereafter, on June 3, 1988, OCA informed plaintiff's attorneys of the specific violations which Telco had allegedly committed and invited plaintiff to an informal fact-finding conference. The conference was held on July 6, 1988. No resolution of the charges was reached, however, and OCA continued its investigation.

On July 21, 1988, Telco filed suit in the Eastern District of Virginia seeking to enjoin the OCA from enforcing certain provisions of the Virginia charitable solicitation laws. Count I of the complaint alleged that four provisions of the Virginia charitable solicitation laws, see Va.Code Ann. Secs. 57-55.1; 57-55.2; 57-61 D; 57-61.1 B and C, infringed on Telco's rights to free speech, in violation of the First and Fourteenth Amendments. Count II was a pendent state claim alleging that the charitable solicitation provisions at issue did not apply to plaintiff's operations.

Through a motion for summary judgment, defendant Mason Carbaugh, Commissioner of the Department of Agriculture and Consumer Services of the Commonwealth of Virginia, requested the district court to abstain from exercising jurisdiction because of the ongoing state administrative proceedings against Telco. The district court denied defendant's motion.

On September 26, 1988, plaintiff moved for partial summary judgment on Count I of its complaint. Defendant cross-moved for partial summary judgment. After oral argument the district court granted summary judgment in Telco's favor on all issues raised in Count I. Telco Communications, Inc. v. Carbaugh, 700 F.Supp. 294 (E.D.Va.1988). Plaintiff then stipulated to a dismissal without prejudice of Count II.

Defendant appeals.


The Commonwealth contends the district court should have abstained from hearing Telco's constitutional claims. It asserts that administrative proceedings had been instituted against Telco on June 3, 1988, by a letter to Telco's attorneys specifying violations of state law and inviting them to attend a fact-finding conference. Since such procedures were still pending when Telco filed suit on July 21, 1988, it argues that abstention was proper. Younger v. Harris, 401 U.S. 37, 91 S.Ct 746, 27 L.Ed.2d 669 (1971). We hold, however, that the district court did not err in declining to abstain where state proceedings were in a preliminary stage and where the state had imposed a prior restraint upon protected speech.

Abstention is the exception, "not the rule." Colorado River Water Conservation District v. United States, 424 U.S. 800, 813, 96 S.Ct. 1236, 1244, 47 L.Ed.2d 483 (1976); Cox v. Planning Dist. I Community Mental Health and Mental Retardation Services Bd., 669 F.2d 940, 942 (4th Cir.1982). Under Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), federal courts should abstain "whenever federal claims have been or could be presented in ongoing state judicial proceedings that concern important state interests." Hawaii Housing Authority v. Midkiff, 467 U.S. 229, 237-38, 104 S.Ct. 2321, 2328, 81 L.Ed.2d 186 (1984); Middlesex County Ethics Committee v. Garden State Bar Ass'n, 457 U.S. 423, 432-37, 102 S.Ct. 2515, 2521-24, 73 L.Ed.2d 116 (1982). Important to Younger abstention is the existence of an ongoing state proceeding. If such a proceeding exists, "reinstituting the action in the federal courts" is impermissible; indeed to do so would involve a loss of time and duplication of effort. Wulp v. Corcoran, 454 F.2d 826, 831 (1st Cir.1972). If no state proceeding is pending, however, a federal action may be permissible because it guarantees a party which has violated state law "a chance for ultimate vindication of constitutional claims." Id. If the ongoing state proceeding is "judicial in nature," Younger abstention plainly applies. Middlesex, 457 U.S. at 433-34, 102 S.Ct. at 2522. Administrative proceedings are not judicial in nature, however, if state law expressly indicates that the proceeding is not a judicial proceeding or part of one, Midkiff, 467 U.S. at 238-39, 104 S.Ct. at 2328-29, or if the proceeding lacks trial-like trappings.

Here Telco's action did not disrupt any ongoing state proceeding. Upon learning that the OCA was investigating its activities in Virginia, Telco requested a meeting with OCA. After several months, an "informal fact-finding conference" was held on July 6, 1988. The OCA, however, never initiated a formal hearing in conformance with the Commonwealth's Administrative Process Act, Va.Code Ann. Sec. 9-6.14:1 et seq. Nor did the OCA request a formal prosecution against Telco. An informal conference need not be followed by the institution of formal proceedings. See Va.Code Ann. Sec. 9-6.14:12. As such, it is not indicative of whether administrative proceedings will continue. While Telco's filing of the federal action on July 21, 1988, may or may not have led the state to refrain from filing formal charges, that in no way diminishes the uncertain prospects that plaintiff was facing. Indeed, after learning of the investigation of its activities, Telco had to wait months before any meaningful response to its request for a meeting with state officials was received.

Likewise, the July 6 meeting with those officials was not remotely "judicial in nature." Only Telco, the OCA, and their respective counsel participated at the meeting. The participants were not sworn nor was a record maintained. No opportunity was provided to examine or cross-examine. The meeting was simply a settlement conference to see if the dispute could be consensually resolved. The Virginia Administrative Process Act carefully...

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