federal courts - abstention

http://www.supremecourt.gov/opinions/13pdf/12-815_qol1.pdf

Syllabus

SPRINT COMMUNICATIONS, INC. v. JACOBS ET AL.
CERTIORARI TO THE U.S. COURT OF APPEALS FOR THE 8th CIRCUIT
      No. 12–815. Argued November 5, 2013—Decided December 10, 2013

Sprint Communications, Inc. (Sprint), a national telecommunicationsservice provider, withheld payment of intercarrier access fees im­posed by Windstream Iowa Communications, Inc. (Windstream), a lo­cal telecommunications carrier, for long distance Voice over InternetProtocol (VoIP) calls, after concluding that the TelecommunicationsAct of 1996 preempted intrastate regulation of VoIP traffic. Wind­stream responded by threatening to block all Sprint customer calls,which led Sprint to ask the Iowa Utilities Board (IUB) to enjoin Windstream from discontinuing service to Sprint. Windstream re­tracted its threat, and Sprint moved to withdraw its complaint. Con­cerned that the dispute would recur, the IUB continued the proceed­ings in order to resolve the question whether VoIP calls are subject to intrastate regulation. Rejecting Sprint’s argument that this questionwas governed by federal law, the IUB ruled that intrastate fees ap­plied to VoIP calls.Sprint sued respondents, IUB members (collectively IUB), in Fed­eral District Court, seeking a declaration that the Telecommunica­tions Act of 1996 preempted the IUB’s decision. As relief, Sprintsought an injunction against enforcement of the IUB’s order. Sprintalso sought review of the IUB’s order in Iowa state court, reiterating the preemption argument made in Sprint’s federal-court complaintand asserting several other claims. Invoking Younger v. Harris, 401 U. S. 37, the Federal District Court abstained from adjudicatingSprint’s complaint in deference to the parallel state-court proceeding. The Eighth Circuit affirmed the District Court’s abstention decision, concluding that Younger abstention was required because the ongo­ing state-court review concerned Iowa’s important interest in regulat­ing and enforcing state utility rates.

 

Held: This case does not fall within any of the three classes of excep­tional cases for which Younger abstention is appropriate. Pp. 6–12.

 

(a) The District Court had jurisdiction to decide whether federal law preempted the IUB’s decision, see Verizon Md. Inc. v. Public Serv. Comm’n of Md., 535 U. S. 635, 642, and thus had a “virtually unflagging obligation” to hear and decide the case, Colorado River Water Conservation Dist. v. United States, 424 U. S. 800, 817. In Younger, this Court recognized an exception to that obligation for cases in which there is a parallel, pending state criminal proceeding. This Court has extended Younger abstention to particular state civil proceedings that are akin to criminal prosecutions, see Huffman v. Pursue, Ltd., 420 U. S. 592, or that implicate a State’s interest in en­forcing the orders and judgments of its courts, see Pennzoil Co. v. Texaco Inc., 481 U. S. 1, but has reaffirmed that “only exceptional cir­cumstances justify a federal court’s refusal to decide a case in defer­ence to the States,” New Orleans Public Service, Inc. v. Council of City of New Orleans, 491 U. S. 350, 368 (NOPSI). NOPSI identified three such “exceptional circumstances.” First, Younger precludes federal intrusion into ongoing state criminal prosecutions. See 491 U. S., at 368. Second, certain “civil enforcement proceedings” war­rant Younger abstention. Ibid. Finally, federal courts should refrain from interfering with pending “civil proceedings involving certain or­ders . . . uniquely in furtherance of the state courts’ ability to perform their judicial functions.” Ibid. This Court has not applied Younger outside these three “exceptional” categories, and rules, in accord with NOPSI, that they define Younger’s scope. Pp. 6–8.

 

(b) The initial IUB proceeding does not fall within any of NOPSI’s three exceptional categories and therefore does not trigger Younger abstention. The first and third categories plainly do not accommo­date the IUB’s proceeding, which was civil, not criminal in character, and which did not touch on a state court’s ability to perform its judi­cial function. Nor is the IUB’s order an act of civil enforcement of the kind to which Younger has been extended. The IUB proceeding is not “akin to a criminal prosecution.” Huffman, 420 U. S., at 604. Nor was it initiated by “the State in its sovereign capacity,” Trainor v. Hernandez, 431 U. S. 434, 444, to sanction Sprint for some wrongful act, see, e.g., Middlesex County Ethics Comm. v. Garden State Bar Assn., 457 U. S. 423, 433–434. Rather, the action was initiated by Sprint, a private corporation. No state authority conducted an inves­tigation into Sprint’s activities or lodged a formal complaint against Sprint. Once Sprint withdrew the complaint that commenced administra­tive proceedings, the IUB argues, those proceedings became, essen­tially, a civil enforcement action. However, the IUB’s adjudicative , authority was invoked to settle a civil dispute between two privateparties, not to sanction Sprint for a wrongful act.

 

In holding that abstention was the proper course, the Eighth Cir­cuit misinterpreted this Court’s decision in Middlesex to mean that Younger abstention is warranted whenever there is (1) “an ongoing state judicial proceeding, which (2) implicates important state inter­ests, and (3) . . . provide[s] an adequate opportunity to raise [federal]challenges.” In Middlesex, the Court invoked Younger to bar a feder­al court from entertaining a lawyer’s challenge to a state ethics com­mittee’s pending investigation of the lawyer. Unlike the IUB’s pro­ceeding, however, the state ethics committee’s hearing in Middlesex was plainly “akin to a criminal proceeding”: An investigation andformal complaint preceded the hearing, an agency of the State’s Su­preme Court initiated the hearing, and the hearing’s purpose was todetermine whether the lawyer should be disciplined for failing tomeet the State’s professional conduct standards. 457 U. S., at 433– 435. The three Middlesex conditions invoked by the Court of Appealswere therefore not dispositive; they were, instead, additional factors appropriately considered by the federal court before invoking Young­er. Younger extends to the three “exceptional circumstances” identi­fied in NOPSI, but no further. Pp. 8–11.

 

690 F. 3d 864, reversed.

GINSBURG, J., delivered the opinion for a unanimous Court

fraud - silence, active concealment

Gnagy Gas and Oil v. Pa. Underground Storage Tank Indemnification Fund – Cmwlth. Court – December 6, 2013

http://www.pacourts.us/assets/opinions/Commonwealth/out/1371CD12_12-6-13.pdf?cb=1

Generally, as a matter of common law, the elements to prove a claim for fraud or deceit are a misrepresentation, a fraudulent utterance thereof, an intention to induce action thereby, justifiable reliance thereon, and damage as a proximate result. Wilson v. Donegal Mutual Insurance Co., 598 A.2d 1310, 1315 (Pa. Super. 1991).4 To be actionable, a misrepresentation need not be in the form of a positive assertion but may be by concealment of that which should have been disclosed. Id. at 1315-16. See Moser v. DeSetta, 527 Pa. 157, 165, 589 A.2d 679, 682 (1991) (concluding that “the concealment of a material fact can amount to a culpable misrepresentation no less than does an intentional false statement.”). However, while active concealment may constitute fraud, mere silence is not sufficient in the absence of a legal duty to disclose information. Wilson, 598 A.2d at 1315-16; Smith v. Renaut, 564 A.2d 188, 192 (Pa. Super. 1989). Otherwise, fraud by omission is actionable “only where there is an independent duty to disclose the omitted information.” Estate of Evasew, 526 Pa. 98, 105, 584 A.2d 910, 913 (1990).

Pennsylvania law recognizes a difference between active concealment and mere silence in the context of common law fraud. Wilson, 598 A.2d at 1315-16; Smith, 564 A.2d at 192; see American Plan Communities, Inc. v. State Farm Insurance Co., 28 F. Supp. 2d 964, 968 (E.D. Pa. 1998) (citing Wilson) (acknowledging that “[c]oncealment alone may create a sufficient basis for finding that a party engaged in fraud so long as the other elements of fraud are present.”); American Plan Communities, Inc., 28 F. Supp. 2d. at 968 (citing Roberts v. Estate of Barbagallo, 531 A.2d 1125 (Pa. Super. 1987) (noting that Pennsylvania common law subsumes and recognizes the tort of fraudulent concealment as stated in the Restatement (Second) of Torts §550, which imposes liability for intentional concealment of material information regardless of any duty to disclose)), and compare with Duquesne Light Company v. Westinghouse Electric Corporation, 66 F.3d 604, 611 (3d. Cir. 1995) (applying Pennsylvania law) (reiterating that Pennsylvania has adopted the Restatement (Second) of Torts §551, which imposes liability for fraudulent nondisclosure in those situations where there is an affirmative duty to speak/disclose, yet noting that Pennsylvania law is unclear as to when such a duty arises). While this Court is unable to locate any authority within our Commonwealth that expounds meaningfully upon the distinction between “active concealment” and “mere silence,” and given the dichotomy evidenced by the above authorities, perhaps the best way to illustrate, on a surface level, the distinction is by comparing §550 and §551 of the Restatement (Second) of Torts. Section 550 states that liability occurs when “[o]ne party to a transaction who by concealment or other action intentionally prevents the other from acquiring material information.”

 On the other hand, section 551 imposes liability for nondisclosure of information when the defendant has a specific duty to disclose, which arises only in certain, enumerated circumstances.  In United States v. Colton, 231 F.3d 890 (4th Cir. 2000), the United States Court of Appeals for the Fourth Circuit addressed the two legal concepts in a very detailed and scholarly manner. In so doing, the Colton court explained how and why the doctrine of “active concealment” constitutes fraud even if there is no independent legal duty to disclose the information, while the concept of “mere silence” requires the disclosure of information only if there is a positive statutory, regulatory, or legal duty mandating disclosure.

 

As the Colton court elucidated:

At common law, fraud has not been limited to those situations “where there is an affirmative misrepresentation or the violation of some independently-prescribed legal duty”…. Rather, even in the absence of a fiduciary, statutory, or other independent legal duty to disclose material information, common-law fraud includes acts taken to conceal, create a false impression, mislead, or otherwise deceive in order to “prevent[] the other [party] from acquiring material information.” Restatement (Second) of Torts § 550 (1977); see also W. Page Keeton et al., Prosser and Keeton on Torts §106 (5th ed. 1984) (“Any words or acts which create a false impression covering up the truth, or which remove an opportunity that might otherwise have led to the discovery of a material fact ... are classed as misrepresentation, no less than a verbal assurance that the fact is not true.”).

Thus, fraudulent concealment, without any misrepresentation or duty to disclose can constitute common-law fraud. This does not mean, however, that simple nondisclosure similarly constitutes a basis for fraud. Rather, the common law clearly distinguishes between concealment and nondisclosure. The former is characterized by deceptive acts or contrivances intended to hide information, mislead, avoid suspicion, or prevent further inquiry into a material matter. The latter is characterized by mere silence. Although silence as to a material fact (nondisclosure), without an independent disclosure duty, usually does not give rise to an action for fraud, suppression of the truth with the intent to deceive (concealment) does. See, e.g., Stewart v. Wyoming Cattle Ranche Co., 128 U.S. 383, 388, 9 S.Ct. 101, 32 L.Ed. 439 (1888).

The Supreme Court in Stewart carefully explained why concealment is “equivalent to a false representation” and so appropriately forms the basis for a common law fraud action: “the concealment or suppression is in effect a representation that what is disclosed is the whole truth. The gist of the action is fraudulently producing a false impression upon the mind of the other party; and if this result is accomplished, it is unimportant whether the means of accomplishing it are words or acts of the defendant, or his concealment or suppression of material facts not equally within the knowledge or reach of the plaintiff.” 128 U.S. at 388, 9 S.Ct. 101; see also … 37 C.J.S. Fraud § 18 (1997) (distinguishing between silence and concealment); 37 Am.Jur.2d Fraud and Deceit §145 (1968) (same). Thus, the common-law principle that, in the absence of an independent disclosure duty, “nondisclosure is not fraudulent, presupposes mere silence, and is not applicable where, by words or conduct, a false representation is intimated or any deceit practiced.” Id. at §174 (and the many cases cited therein); see also Stuart M. Speiser et al.,  The American Law of Torts §32:73 (1992).

Indeed, we have expressly held that the distinction between simple nondisclosure and concealment “is in accord with traditional principles of common law fraud.” Fox v. Kane-Miller Corp., 542 F.2d 915, 919 (4th Cir. 1976). In Fox, we upheld the district court’s reliance on the following explanation of this principle by Maryland’s highest court:  Concealment and non-disclosure are closely related and in any given situation usually overlap.... When [either is] done without intent to mislead and without misrepresentation, it has no effect except where there is a duty of disclosure.... To create a cause of action, concealment must have been intentional and effective - the hiding of a material fact with the attained object of creating or continuing a false impression as to that fact. The affirmative suppression of the truth must have been with intent to deceive.  Fegeas v. Sherrill, 218 Md. 472, 147 A.2d 223, 225 (1958) (quoting Restatement of Restitution §8 cmt. b (1937) and citing Restatement of Torts §550 (1938)).

Given this “close relationship” between nondisclosure and concealment, numerous decisions expressly distinguish between passive concealment - mere nondisclosure or silence - and active concealment, which involves the requisite intent to mislead by creating a false impression or representation, and which is sufficient to constitute fraud even without a duty to speak.

In short, at common law, no fiduciary relationship, no statute, no other independent legal duty to disclose is necessary to make active concealment actionable fraud - simple “good faith” imposes an obligation not to purposefully conceal material facts with intent to deceive. Strong v. Repide, 213 U.S. 419, 430, 29 S.Ct. 521, 53 L.Ed. 853 (1909); Tyler v. Savage, 143 U.S. 79, 98, 12 S.Ct. 340, 36 L.Ed. 82 (1892); Stewart, 128 U.S. at 388, 9 S.Ct. 101.  Colton, 231 F.3d at 898-99. Accord, e.g., Wells Fargo Bank v. Arizona Laborers, 38 P.3d 12, 21 (Ariz. 2002) (differentiating between mere silence or nondisclosure and intentional concealment and concluding that “[u]nlike simple nondisclosure, a party may be liable for acts taken to conceal, mislead or otherwise deceive, even in the absence of a fiduciary, statutory, or other legal duty to disclose.”).

The Colton court’s in-depth analysis is consistent with the observations made by our Superior Court in Youndt v. First National Bank, 868 A.2d 539 (Pa. 26 Super. 2005), and Baker v. Cambridge Chase, Inc., 725 A. 2d 757 (Pa. Super. 1999). In Youndt, the Superior Court concluded that the tort of fraudulent concealment in the Restatement (Second) of Torts §550 was not applicable because there was no allegation that the defendant in that case engaged in active concealment, but the court also stated that the defendant could be held liable for nondisclosure under the Restatement (Second) of Torts §551 if an enumerated duty to disclose existed. 868 A.2d at 549-51. In Baker, the Superior Court noted that for purposes of the Restatement (Second) of Torts §550, “concealment or other action” occurs, inter alia, when there is “an intentional concealment of true facts which is calculated to deceive the other party.” 725 A.2d at 769. Accordingly, we find the Colton court’s commentary consonant with Pennsylvania law and persuasive.

welfare - transfer of assets - renunciation of right to remaining principal in residual trust

Shell v. DPW – Cmwlth. Court – December 4, 2013

http://www.pacourts.us/assets/opinions/Commonwealth/out/203CD13_12-4-13.pdf?cb=1

This case presents an issue of first impression as to whether a beneficiary’s renunciation of her right to the remaining principal in a terminated residual trust, originally created by will, constitutes a transfer of assets for less than fair consideration thereby affecting her eligibility for Medical Assistance - Long Term Care (MA-LTC) benefits.

Specifically, Dorothy Schell petitions for review of the final administrative action order of the Department of Public Welfare, affirming the adjudication and order of an administrative law judge ) recommending the denial of Petitioner’s appeal from the determination of the Northumberland County Assistance Office  that she was ineligible for MA-LTC benefits for the period from January 28, 2011, through August 16, 2012. We affirm.

arbitration - two-contract setting - no arb. clause in retail installment sales contract

Knight v. Springfield Hyundai – Pa. Super. – December 2, 2014

http://www.pacourts.us/assets/opinions/Superior/out/J-A23029-13o%20-%201016343761821856.pdf?cb=1

Pennsylvania has a well-established public policy that favors arbitration, and this policy aligns with the federal approach expressed in the Federal Arbitration Act.” . “Arbitration is a matter of contract, and parties to a contract cannot be compelled to arbitrate a given issue absent an agreement between them to arbitrate that issue.” . “Even though it is now the policy of the law to favor settlement of disputes by arbitration and to promote the swift and orderly disposition of claims, arbitration agreements are to be strictly construed and such agreements should not be extended by implication.

The Pennsylvania Legislature enacted the MVSFA in 1947 in an attempt to promote the welfare of its inhabitants and to protect its citizens from abuses presently existing in the installment sale of motor vehicles, and to that end exercise the police power of the Commonwealth to bring under the supervision of the Commonwealth all persons engaged in the business of extending consumer credit in conjunction with the installment sale of motor vehicles; to establish a system of regulation for the purpose of insuring honest and efficient consumer credit service for installment purchasers of motor vehicles; and to provide the administrative machinery necessary for effective enforcement. 69 P.S. § 602.

Pursuant to the MVSFA, if a buyer is purchasing a vehicle via installment sale, the contract must be in writing, signed by the buyer and the seller, “and shall contain all of the agreements between the buyer and the seller relating to the installment sale of the motor vehicle sold[.]” 69 P.S. § 613(A) (emphasis added).

There are no cases interpreting section 613(A) of the MVSFA. Looking at the clear and unambiguous language of the statute, it is apparent that when a buyer makes a purchase of a vehicle by installment sale, the retail installment sales contract (RISC) subsumes all other agreements relating to the sale. See 1 Pa.C.S.A. § 1921(b) (“When the words of a statute are clear and free from all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit.”).

In this case, the Buyer’s Order contained an arbitration agreement, but the RISC did not. Thus, we conclude there was no enforceable arbitration agreement between Knight and Appellees, and the trial court erred as a matter of law by granting Appellees’ Preliminary Objections and submitting the case to binding arbitration.