Sunday, November 02, 2008

State consumer protection action warrants Younger abstention

Arbitron Inc. v. Cuomo, 2008 WL 4735227 (S.D.N.Y.)

This September, New York’s AG Cuomo began investigating whether Arbitron, the leading publisher of radio audience estimates, was engaging in deceptive business practices associated with a new method for compiling radio ratings in New York. The issue is whether Arbitron’s newer method, which electronically records listening habits, underrepresents racial minorities, which could dampen ad revenues for minority-targeted radio stations.

The AG announced his intention to sue Arbitron in state court, and Arbitron filed a federal lawsuit seeking a TRO and a preliminary injunction against the AG, arguing that any restraint on Arbitron’s publication of its new estimates would violate its First Amendment rights. The AG subsequently filed the state lawsuit alleging fraudulent and deceptive business practices and moved to dismiss the federal case under the Younger abstention doctrine.

Younger abstention requires a federal court to allow a state court to resolve a pending matter within its jurisdiction that implicates an important state interest, so long as the state proceeding affords the federal plaintiff an adequate opportunity for judicial review of its federal constitutional claims. Arbitron did not contest the existence of adequate opportunity for judicial review in state court.

Arbitron argued that there was no pending state proceeding at the time it sued in federal court. The AG only sued four days after Arbitron sought a federal TRO. However, the test looks at how far the federal lawsuit has gotten, not how far the state proceeding has gotten. No proceedings of substance on the merits had taken place in the federal case before the state proceeding began.

Arbitron further argued that the AG’s investigation didn’t implicate an important state interest, because the AG was simply substituting himself for private parties, the minority radio stations. Under Younger, a state interest is important where it concerns the central sovereign functions of state government. Here, enforcing laws against discrimination and deceptive practices is an important state interest. The state has interest in protecting the health of radio stations serving minority communities in New York against unreliable and misleading ratings.

The Second Circuit refused to apply Younger abstention in a deceptive business practices claim by Connecticut seeking reimbursement from tobacco companies for Medicaid expenses from tobacco-related illnesses. But eliminating discrimination is an important state interest under Younger, and the AG isn’t bringing what is essentially a suit for money damages—he’s seeking to change business practices and enforce state laws.

Private parties may also be able to sue under some of the statutes at issue, but the AG has an independent obligation to enforce the law, and the AG’s lead claim was brought under Executive Law § 63(12), which gives the Attorney General sole authority to sue to restrain repeated fraud in commercial activities.

Thus, abstention was appropriate.

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