Altice USA Inc v. New Jersey Board of Public Uty ( 2022 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______________
No. 21-1791
______________
ALTICE USA, INC.
v.
NEW JERSEY BOARD OF PUBLIC UTILITIES;
JOSEPH FIORDALISO,
in his official capacity as President of the New Jersey Board
of Public Utilities; COMMISSIONER MARY-ANNA
HOLDEN; DIANE SOLOMON;
UPENDRA J. CHIVUKULA; BOB M. GORDON,
Appellants
______________
Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 3-19-cv-21371)
U.S. District Judge: Honorable Brian R. Martinotti
______________
Argued January 27, 2022
______________
Before: HARDIMAN, SHWARTZ, and SMITH, Circuit
Judges.
(Filed: February 24, 2022)
______________
Alec Schierenbeck [ARGUED]
Meliha Arnautovic
Office of Attorney General of New Jersey
Division of Law
7th Fl, West Wing
25 Market Street
Richard J. Hughes Justice Complex
Trenton, NJ 08625
Counsel for Appellants
Matthew Hellman [ARGUED]
Howard J. Symons
Jenner & Block
1099 New York Avenue, N.W.
Suite 900
Washington, DC 20001
Thomas N. Gamarello
Jeffrey T. LaRosa
Schenck Price Smith & King
220 Park Avenue
P.O. Box 991
Florham Park, NJ 07932
Counsel for Appellee
2
______________
OPINION OF THE COURT
______________
SHWARTZ, Circuit Judge.
The New Jersey Board of Public Utilities (“BPU”)
ordered Altice USA, Inc. (“Altice”), a cable service provider,
to prorate its bills for the month in which a cable customer
cancels his service, as required by New Jersey law (“Proration
Requirement”). Altice asserts that the Proration Requirement
is preempted by the Cable Communications Policy Act of 1984
(“Cable Act”). The District Court agreed and granted Altice’s
motion for judgment on the pleadings, concluding that
abstention under Younger v. Harris, 401 U.S. 37 (1971), was
not warranted and that the Proration Requirement was
preempted. Because the Younger ruling was incorrect, we will
vacate and remand.
I
A
Under N.J.A.C. § 14:18-16.7, a cable television
company may seek relief from, among other things, N.J.A.C.
§ 14:18-3.8(c)’s requirement that, “[u]nless otherwise
provided for . . . , initial and final bills . . . be prorated as of the
date of the initial establishment and final termination of
service.” See also N.J.A.C. § 14:18-3.8(a). Relief from the
Proration Requirement may be granted “provided that the cable
television company provides a sample bill to be utilized in lieu
of compliance with [the] section.” N.J.A.C. § 14:18-
3
16.7(a)(1).
In 2011, Cablevision petitioned the BPU for relief from
N.J.A.C. § 14:18-3.8 and provided sample bills. The BPU
accepted Cablevision’s assertion that “its sample bill
demonstrate[d] that the company [wa]s billing in a proper
manner and show[ed] how [it] will prorate its bills pursuant to
the requirements of this section,” J.A. 123, and granted its
request for relief.
In 2016, Altice received the BPU’s approval to acquire
Cablevision. As part of the approval, Altice agreed to
abide by applicable customer service
standards, performance standards, and service
metrics as delineated under N.J.A.C. Title 14,
including but not limited to Chapters 3, 10 and
18, and N.J.S.A. 48:5A, including, but not
limited to, requirements related to billing
practices and termination.
J.A. 144.
Despite this agreement, and unlike Cablevision, Altice
chose not to prorate its monthly bills absent “extraordinary
circumstances.” J.A. 82 ¶ 2. As a result, “customers who . . .
seek to cancel service continue to receive service and are billed
through the end of their monthly billing cycle.” J.A. 82 ¶ 2.
B
The BPU received numerous customer complaints
about Altice’s failure to prorate bills. N.J.S.A. § 48:5A-9
4
empowers the BPU to investigate complaints of alleged
violations of the New Jersey Cable Television Act and render
decisions necessary to enforce its terms. Pursuant to that
authority, the BPU issued a Show Cause Order, directing
Altice to explain why its failure to prorate its bills was not a
violation of the order Cablevision obtained and the order
approving the merger.
Altice filed an answer to the Show Cause Order,
asserting that the Proration Requirement was preempted by
federal law and that, in any event, it need not comply with the
Proration Requirement based upon the relief Cablevision
secured in 2011.
The BPU disagreed, found that Altice violated the
Proration Requirement, and issued a cease and desist order that
directed Altice to (1) prorate bills, (2) issue refunds to
customers whose bills were not prorated, (3) pay $10,000 to
the Altice Advantage Internet program, which “provide[s] low
cost internet service” to eligible customers, and (4) conduct an
audit to determine which customers were not given prorated
bills and provide the BPU with the names and account numbers
of those customers. J.A. 230–31. Altice then filed an appeal
with the New Jersey Superior Court. See In re Altice USA,
Inc., No. A-1269-19, 2021 WL 4808399 (N.J. Super. Ct. App.
Div. Oct. 15, 2021), petition for cert. filed, No. 086408 (N.J.
Nov. 23, 2021).
C
While its state court appeal was pending, Altice filed a
complaint in the United States District Court for the District of
New Jersey. In its amended complaint, Altice asserted that (1)
5
the Proration Requirement is preempted by the Cable Act; (2)
enforcing the Proration Requirement deprives Altice of its
rights under the Cable Act; (3) the BPU failed to obey Federal
Communications Commission orders that determined
Cablevision, and Altice by extension, is subject to effective
competition; and (4) the BPU’s actions violate New Jersey law.
The District Court granted Altice a preliminary
injunction on federal preemption grounds alone, enjoining
enforcement of the BPU’s order. See Altice USA, Inc. v. N.J.
Bd. of Pub. Utils., No. 3:19-CV-21371-BRM-ZNQ, 2020 WL
359398, at *1 (D.N.J. Jan. 22, 2020), reconsideration denied,
2020 WL 1151045 (D.N.J. Mar. 10, 2020). The Court
concluded that (1) abstention under Younger was not
warranted; and (2) Altice had shown, among other things, a
likelihood of success in establishing that the Proration
Requirement is a rate regulation preempted by the Cable Act.
See id. at *6–8. The BPU appealed the preliminary injunction
ruling but later withdrew that appeal.
After the District Court granted the preliminary
injunction, Altice moved for judgment on the pleadings, and
the BPU cross-moved to dismiss. The District Court granted
Altice’s motion and denied the BPU’s cross-motion. See
Altice USA, Inc. v. Fiordaliso, No. 3:19-CV-21371-BRM-
ZNQ, 2021 WL 1138152 (D.N.J. Mar. 23, 2021). The District
Court again declined to abstain under Younger, holding that
the underlying proceeding was not “quasi-criminal” in nature
and noting that the purported absence of a criminal analog was,
in its view, dispositive. Id. at *2–3. As to the merits, the
District Court held that the Proration Requirement was
preempted as a rate regulation because it has “the effect of
prescribing a daily rate for the service that was provided before
6
the cancellation,” id. at *4 (quotation marks and citation
omitted), and that the Cable Act’s savings clauses “do not
affect the Cable Act’s express preemption over N.J.A.C.
14:18-3.8(c),” id. at *7.
The BPU appeals.
II1
A2
In general, “federal courts are obliged to decide cases
within the scope of federal jurisdiction.” Sprint Commc’ns,
1
The District Court had jurisdiction pursuant to 28
U.S.C. §§ 1331, 1332, and 1367. We have jurisdiction
pursuant to 28 U.S.C. § 1291. We review the Younger ruling
and the order granting judgment on the pleadings under Rule
12(c) de novo. PDX N., Inc. v. Comm’r N.J. Dep’t of Lab. &
Workforce Dev., 978 F.3d 871, 881 n.11 (3d Cir. 2020), cert.
denied sub nom. PDX N., Inc. v. Asaro-Angelo, 142 S. Ct. 69(2021); In re Fosamax (Alendronate Sodium) Prods. Liab.
Litig. (No. II), 751 F.3d 150, 156 n.11 (3d Cir. 2014). In
reviewing a Rule 12(c) motion, “we must ‘view the facts
presented in the pleadings and the inferences to be drawn
therefrom in the light most favorable to the nonmoving party,’
and we may not affirm the grant of such a motion ‘unless the
movant clearly establishes that no material issue of fact
remains to be resolved and that he is entitled to judgment as a
matter of law.’” PDX N., 978 F.3d at 881 n.11 (quoting
Wolfington v. Reconstructive Orthopaedic Assocs. II PC, 935
F.3d 187, 195 (3d Cir. 2019) (quotation marks omitted)).
2
Altice claims that the BPU forfeited its Younger
7
Inc. v. Jacobs, 571 U.S. 69, 72 (2013). In certain limited
circumstances, however, “the prospect of undue interference
with state proceedings counsels against federal relief.” Id.Under the Younger abstention doctrine, federal courts must
refrain from interfering with three types of state proceedings:
(1) “state criminal prosecutions,” (2) “civil enforcement
proceedings,” and (3) “civil proceedings involving certain
orders . . . uniquely in furtherance of the state courts’ ability to
perform their judicial functions.” Id. at 73. The BPU argues
that the District Court should have abstained under Younger
argument by failing to raise it in its withdrawn appeal from the
District Court’s order granting Altice’s motion for a
preliminary injunction. In its motion for judgment on the
pleadings, Altice informed the District Court that the BPU did
not raise Younger in its withdrawn appeal, but it did not make
a specific forfeiture argument. Cf. In re Ins. Brokerage
Antitrust Litig., 579 F.3d 241, 262 (3d Cir. 2009) (“A fleeting
reference or vague allusion to an issue will not suffice to
preserve it for appeal.”). “Whether an argument remains fair
game on appeal is determined by the degree of particularity
with which it was raised in the trial court . . . and parties must
do so with exacting specificity.” Spireas v. Comm’r, 886 F.3d
315, 321 (3d Cir. 2018) (quotation marks and citations
omitted). Accordingly, Altice forfeited its forfeiture argument,
and “we will not reach a forfeited issue in civil cases absent
truly ‘exceptional circumstances.’” Barna v. Bd. of Sch. Dirs.,
877 F.3d 136, 147 (3d Cir. 2017) (quoting Brown v. Philip
Morris Inc., 250 F.3d 789, 799 (3d Cir. 2001)). In any event,
a court may raise Younger abstention sua sponte. O’Neill v.
City of Phila., 32 F.3d 785, 786 n.1 (3d Cir. 1994).
8
because the administrative proceeding before the BPU is a civil
enforcement proceeding.
A “civil enforcement proceeding” warrants Younger
abstention where the proceeding is “akin to a criminal
prosecution” in “important respects.” Sprint, 571 U.S. at 79
(quoting Huffman v. Pursue, Ltd., 420 U.S. 592, 604 (1975)).
To determine if a civil enforcement proceeding is quasi-
criminal in nature, courts may consider whether (1) “the action
was commenced by the State in its sovereign capacity,” (2) the
action was “initiated to sanction the federal plaintiff for some
wrongful act,” (3) “there are other similarities to criminal
actions, such as a preliminary investigation that culminated
with the filing of formal charges,” and (4) “the State could have
alternatively sought to enforce a parallel criminal statute.”
ACRA Turf Club, LLC v. Zanzuccki, 748 F.3d 127, 138 (3d
Cir. 2014); see also Sprint, 571 U.S. at 79–80 (enumerating the
first three factors). If these considerations demonstrate that the
civil proceeding is quasi-criminal in nature, then we consider
whether abstention is warranted under the factors set forth in
Middlesex County Ethics Committee v. Garden State Bar
Association, 457 U.S. 423 (1982). PDX N., Inc. v. Comm’r
N.J. Dep’t of Lab. & Workforce Dev., 978 F.3d 871, 883 (3d
Cir. 2020), cert. denied sub nom. PDX N., Inc. v. Asaro-
Angelo, 142 S. Ct. 69 (2021). We will first examine whether
the BPU Show Cause proceeding is a civil enforcement
proceeding.
B
The BPU, a New Jersey regulatory agency, initiated the
administrative action in its sovereign capacity. See In re RCN
of NY, 892 A.2d 636, 637, 640 (N.J. 2006). The proceeding
9
began when the BPU issued a Show Cause Order pursuant to
its authority under “the Cable Television Act and the BPU’s
implementing rules and regulations.” J.A. 95 ¶ 46. Thus, the
BPU commenced the action against Altice by filing a formal
complaint—the Show Cause Order—and did so in its
sovereign capacity.
We disagree with Altice’s assertion that the Show
Cause Order was an extension of Cablevision’s 2011 petition
for relief from certain provisions of the New Jersey
Administrative Code. The Cablevision proceeding concluded
in 2011 and the record does not show that either party sought
to reopen it. Further, although Altice views the BPU’s action
as modifying the 2011 order, the record shows that the BPU
used the Show Cause Order to start a new proceeding based on
recent customer complaints about Altice’s conduct, and it
assigned the matter a new name and docket number, examined
complaints about that conduct, and granted relief that did not
impact the 2011 order Cablevision secured based on its
prorated bills. Accordingly, the BPU commenced a
proceeding in its sovereign capacity that had attributes similar
to the filing of formal charges.
The action was also initiated to sanction the federal
plaintiff for a wrongful act. The failure to prorate bills is
wrongful conduct because it violates duly promulgated BPU
regulations. A violation of the Cable Television Act, or any
rule, regulation, or order promulgated under it, carries the
possibility of an injunction and “penalt[ies]” of up to $10,000
“for a third and every subsequent offense.” N.J.S.A. § 48:5A-
51(b)–(c). “Penalties are, by their very nature, retributive: a
sanction for wrongful conduct,” PDX N., 978 F.3d at 884, and
the BPU imposed penalties here. Among other things, the
10
BPU ordered Altice to cease its non-proration practice. Cease
and desist orders qualify as sanctions that support Younger
abstention. See Minn. Living Assistance, Inc. v. Peterson, 899
F.3d 548, 553 (8th Cir. 2018). The BPU also assessed a
$10,000 penalty. Altice asserts that this $10,000 penalty was
not a sanction for Younger purposes because the BPU directed
that the fine go towards Altice’s Advantage Program, but how
the government chooses to allocate the proceeds of a fine does
not change its character as a sanction. See also PDX N., 978
F.3d at 884 (holding that monetary penalties constitute
sanctions even when they are directed to a special government
fund). Accordingly, the BPU’s directives for noncompliance
with the Proration Requirement go beyond “incentiv[es]” to
comply, or mere “negative consequences,” ACRA Turf Club,
LLC, 748 F.3d at 140 (emphasis omitted), and instead
constitute penalties for Younger purposes. We therefore
conclude that the action was initiated to—and did—sanction
the federal plaintiff, Altice, for a wrongful act.
The Show Cause Order and sanctions followed an
investigation into customer complaints. See Minn. Living
Assistance, Inc., 899 F.3d at 552–53 (concluding an
“underlying proceeding [bore] the first and third characteristics
of a civil proceeding akin to a criminal prosecution” “even
though the investigation was triggered by an employee
complaint” (citing Ohio Civ. Rts. Comm’n v. Dayton Christian
Schs., Inc., 477 U.S. 619, 623–24 (1986))). The BPU is
empowered to investigate violations of the Cable Television
Act. See N.J.S.A. § 48:5A-9 (“The [B]oard . . . shall have full
right, power, authority and jurisdiction to: . . . (c) institute all
. . . investigations . . . necessary to enforce the provisions of
[the Cable Television Act], [and] of the rules and regulations
adopted thereunder[.]”). In response to more than 100
11
complaints concerning Altice’s billing practices, the BPU
examined those practices, reviewed documents, and spoke with
Altice representatives. Based upon this information, the BPU
found that Altice violated New Jersey law and imposed
sanctions.
Finally, the lack of a criminal analog is not a
prerequisite to Younger abstention. See, e.g., Sirva
Relocation, LLC v. Richie, 794 F.3d 185, 194 (1st Cir. 2015).
Indeed, the Supreme Court has sustained Younger abstention
in cases where no criminal analog existed. See Ohio Civ. Rts.
Comm’n, 477 U.S. at 627–28 (civil rights proceeding
regarding workplace sex discrimination); Middlesex Cnty.
Ethics Comm., 457 U.S. at 428–29 (attorney disciplinary
hearing).
Even if a criminal analog were required, however, New
Jersey law criminalizes some violations of the Cable
Television Act. See ACRA Turf Club, LLC, 748 F.3d at 139
(considering whether “the policies implicated in the state
proceeding could have been vindicated through enforcement of
a parallel criminal statute”). Under N.J.S.A. § 48:5A-51(a),
“any person” who “knowingly violate[s]” the Cable Television
Act “is guilty of a misdemeanor.” The Cable Television Act
provides that every cable company “shall obey and comply
with every rule and regulation and order adopted or issued by”
the Director of the Office of Cable Television. N.J.S.A.
§ 48:5A-36(c). One such regulation is the Proration
Requirement. N.J.A.C. § 14:18-3.8. Moreover, N.J.S.A.
§ 48:5A-39 forbids cable companies from “adopt[ing],
maintain[ing,] or enfor[ing] . . . [a] practice . . . which shall be
unjust, unreasonable, . . . or otherwise in violation of law.” Cf.
N.J.S.A. § 48:5A-11a(a) (requiring the Director to promulgate
12
rules and regulations regarding prorated credits or rebates
during certain outages). Thus, if a cable company violates
provisions of the Cable Television Act, it may be subject to
prosecution, which is enough to show that there is a criminal
analog to the civil proceeding here. See PDX N., 978 F.3d at
884; Minn. Living Assistance, Inc., 899 F.3d at 553 (rejecting
the contention that no criminal analog existed where the
Minnesota Fair Labor Standards Act “provide[d] for criminal
penalties in addition to . . . civil penalties”).
Altice’s assertion that the state authorities could not
have proven Altice violated a criminal statute is irrelevant.
“[T]he question is not whether the current action is criminal or
whether criminal charges are warranted.” PDX N., 978 F.3d at
884. The relevant “question is whether there is a criminal
analog.” Id. A court need not evaluate the evidence and decide
whether a criminal case against the party would succeed. See
Bristol-Myers Squibb Co. v. Connors, 979 F.3d 732, 737–38
(9th Cir. 2020) (“[W]hen evaluating whether the
characteristics of actions entitled to Younger abstention are
present, the Supreme Court has considered the nature of a
State’s interest in different classes of proceedings, not its
interest in specific cases.”). We therefore conclude that, while
a criminal analog is not required, one does exist here.
For these reasons, the BPU’s civil enforcement
proceeding was quasi-criminal in nature and, thus, the type of
proceeding to which Younger applies.
C
To determine whether the District Court should have
abstained pursuant to Younger, we next examine the
13
Middlesex factors. See PDX N., 978 F.3d at 883. We will
therefore now consider whether: (1) there are “ongoing . . .
judicial proceeding[s];” (2) the “proceedings implicate
important state interests;” and (3) the party against whom
abstention is asserted has “an adequate opportunity in the state
proceeding[] to raise constitutional challenges.” Middlesex,
457 U.S. at 432. Each factor supports Younger abstention
here.
First, the proceeding was judicial in nature and ongoing
when the federal complaint was filed. “[P]roceedings may be
judicial in nature if,” for example, judicial review is available,
“they are initiated by a complaint, adjudicative in nature,
governed by court rules or rules of procedure, or employ legal
burdens of proof.” Kendall v. Russell, 572 F.3d 126, 131 (3d
Cir. 2009).3 Here, the BPU initiated proceedings with the
Show Cause Order; Altice answered; the New Jersey Rate
Counsel responded; the BPU considered evidence, made
factual determinations and ordered relief; and the BPU’s
“ultimate decision . . . [was then] appealed to an undeniably
judicial forum—the New Jersey Superior Court, Appellate
Division.” Gonzalez v. Waterfront Comm’n of N.Y. Harbor,
755 F.3d 176, 183 (3d Cir. 2014); see also N.J.A.C. § 14:18-
16.8 (listing procedures to be followed in enforcement
actions); N.J.S.A. § 48:5A-51(b)-(c) (noting procedures when
3
“[W]hen confronted with administrative matters
appealable to the state courts, ‘[w]e will assume . . . that an
administrative adjudication and the subsequent state court’s
review of it count as a unitary process’ for Younger purposes.”
Gonzalez v. Waterfront Comm’n of N.Y. Harbor, 755 F.3d
176, 183 (3d Cir. 2014) (alteration in original) (quoting Sprint,
571 U.S. at 78).
14
BPU seeks an injunction or a penalty). Moreover, the state
court appeal was pending when Altice filed its federal
complaint. “‘[S]tate proceedings are ongoing for Younger
abstention purposes’ . . . if the state proceeding ‘was pending
at the time [the plaintiff] filed its initial complaint in federal
court.’” PDX N., 978 F.3d at 885 (second alteration in
original) (quoting Addiction Specialists, Inc. v. Twp. of
Hampton, 411 F.3d 399, 408–09 (3d Cir. 2005)). Altice was,
therefore, subject to an ongoing judicial proceeding when it
filed its federal complaint.
Second, the proceeding here implicates important state
interests. Altice does not dispute that the state has an important
interest in ensuring compliance with the Cable Television Act,
particularly its consumer-oriented provisions. See, e.g., New
Orleans Pub. Serv., Inc. v. Council of City of New Orleans,
491 U.S. 350, 365 (1989) (“[W]hen we inquire into the
substantiality of the State’s interest in its proceedings we do
not look narrowly to its interest in the outcome of the particular
case . . . . , [r]ather, what we look to is the importance of the
generic proceedings to the State.”).
Third, Altice has an adequate opportunity to raise its
federal claims in the state proceeding. See, e.g., Gonzalez, 755
F.3d at 184 (concluding that the ability to appeal an
Administrative Law Judge determination to the New Jersey
Superior Court, Appellate Division, was sufficient for Younger
purposes). In fact, Altice raised with the Appellate Division its
assertion that the Proration Requirement is preempted by the
Cable Act. In re Altice USA, Inc., 2021 WL 4808399, at *2.
Because the Middlesex factors support abstaining in
favor of the quasi-criminal proceeding, we will abstain.
15
III
For the foregoing reasons, we will vacate the District
Court’s order and remand for it to dismiss the amended
complaint.
16