Liberty Mutual Ins. Co. v. Hurlbut, No. 09-1215 (2d Cir. 2009)

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09-1215-cv Liberty Mutual Ins. Co. v. Hurlbut 1 2 UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT 3 4 5 August Term 2008 6 7 8 9 10 11 12 13 Docket No. 09-1215 Argued: June 22, 2009 Decided: November 4, 2009 LIBERTY MUTUAL INSURANCE COMPANY , LIBERTY MUTUAL FIRE INSURANCE COMPANY , LIBERTY INSURANCE CORPORATION , LM INSURANCE COMPANY , EMPLOYERS INSURANCE COMPANY OF WAUSAU , WAUSAU BUSINESS INSURANCE COMPANY , WAUSAU GENERAL INSURANCE COMPANY, WAUSAU UNDERWRITERS INSURANCE COMPANY , PEERLESS INSURANCE COMPANY , PEERLESS INDEMNITY INSURANCE COMPANY , THE NETHERLANDS INSURANCE COMPANY , EXCELSIOR INSURANCE COMPANY , THE AMERICAN FIRE AND CASUALTY COMPANY , THE OHIO CASUALTY INSURANCE COMPANY , 14 Plaintiffs-Appellants, 15 - v.- 16 17 18 19 20 21 22 23 24 ROBERT H. HURLBUT , DONALD T. DE CARLO , C. SCOTT BOWEN , JOHN F. CARPENTER , DENIS M. HUGHES , CHARLES L. LOIODICE , WILLIAM A. O LOUGHLIN JR ., KENNETH R. THEOBALDS, PATRICIA SMITH , in their official capacities as the COMMISSIONERS OF THE NEW YORK STATE INSURANCE FUND , ZACHARY S. WEISS , DONNA FERRARA, MONA A. BARGNESI , RICHARD A. BELL , GERALDINE CHAPEY , CANDACE K. FINNEGAN, SCOTT C. FIRESTONE , AGATHA EDEL GROSKI , KARL A. HENRY , MARK D. HIGGINS, FRANCES M. LIBOUS AND ELLEN O. PAPROCKI , in their official capacities as MEMBERS OF THE NEW YORK STATE WORKERS COMPENSATION BOARD , Defendants-Appellees. 25 26 Before: Judge.* MINER, LIVINGSTON, Circuit Judges, and TRAGER, District 27 28 29 30 31 Appeal from a judgment entered in the United States District Court for the Southern District of New York (Chin, J.) in favor of defendants-appellees Commissioners of the Workers Compensation Board of the State of New York and Trustees of the New York State Insurance Fund, in an action brought by * The Honorable David G. Trager, of the United States District Court for the Eastern District of New York, sitting by designation. 1 1 2 3 4 5 6 7 8 plaintiffs-appellants, Liberty Mutual Insurance Company and affiliate companies, challenging two amendments enacted in 2007 to the New York Workers Compensation Law as violative of the Contracts, Takings, Due Process and Equal Protection provisions of the United States Constitution, the District Court having abstained from the exercise of federal jurisdiction and dismissed the action for that reason. Affirmed. 9 10 11 Evan Glassman, Steptoe & Johnson LLP, New York, New York, for Plaintiffs-Appellants. 12 13 14 15 MARK F. HORNING , Jeffrey M. Theodore, Mark F. Horning, Steptoe & Johnson LLP, Washington D.C., for Plaintiffs-Appellants. 16 17 18 19 20 STEVEN C. WU (on behalf of Andrew M. Cuomo, New York State Attorney General;, Barbara K. Hathaway, on the brief), for DefendantsAppellees. 2 1 MINER, Circuit Judge: 2 Plaintiffs-appellants Liberty Mutual Insurance Company and 3 affiliated companies ( Liberty Mutual ) appeal from a judgment 4 entered in the United States District Court for the Southern 5 District of New York (Chin, J.) in favor of defendants-appellees, 6 Commissioners of the Workers Compensation Board of the State of 7 New York (the Board ) and Trustees of the New York State 8 Insurance Fund (the Trustees ). 9 action giving rise to the judgment seeking injunctive and Liberty Mutual brought the 10 declaratory relief from two amendments to the New York Workers 11 Compensation Law enacted in 2007. 12 these amendments as violative of the Contracts, Takings, Due 13 Process and Equal Protection provisions of the United States 14 Constitution. 15 Harris, 401 U.S. 37 (1971), the District Court determined that 16 the circumstances of this case required it to abstain from the 17 exercise of federal jurisdiction and dismiss the complaint for 18 that reason. 19 different precedent. Liberty Mutual challenges Relying on the doctrine announced in Younger v. We agree that abstention is appropriate but rely on BACKGROUND 20 21 I. 22 Procedure 23 The New York Workers Compensation System Policy and The New York Workers Compensation System is governed by the 24 Workers Compensation Law (the WCL or Law ). 25 employers to pay benefits to workers who are injured or disabled 26 during the course of their employment, regardless of fault. 3 The Law requires N.Y. 1 WORKERS COMP . LAW § 10(1). These benefits include medical care, 2 replacement of lost wages ( indemnify payments ) and death 3 benefits. 4 made, the Law requires employers to obtain insurance coverage in 5 one of the following ways: 6 coverage from an approved insurance carrier ( Carrier ) such as 7 Liberty Mutual; secure coverage from the State Insurance Fund; or 8 seek approval from the Board to act as a self-insurer. 9 10(1), 50. Id. §§ 13, 14, 16. To assure that these payments are purchase workers compensation Id. §§ The benefits provided under the WCL are the exclusive 10 remedies for injuries sustained by employees in the course of 11 employment, and the Law thus forecloses any suit by an employee 12 against an employer in tort. 13 Long, 41 N.Y.2d 219, 222 (1976). 14 provide a swift and sure source of benefits to the injured 15 employee or to the dependents of the deceased employee in return 16 for the loss of the common-law tort action in which greater 17 benefits might be obtained. ). 18 Id. § 11; see also O Rourke v. (The WCL was designed to The original law took effect on January 1, 1914, and the New 19 York Court of Appeals soon thereafter recognized that the 20 underlying policy of the Law was to protect[] both employer and 21 employee, the former from wasteful suits and extravagant 22 verdicts, the latter from the expense, uncertainties and delays 23 of litigation in all cases and from the certainty of defeat if 24 unable to establish a case of actionable negligence. 25 S. Pac. Co., 215 N.Y. 514, 524 (1915), rev d on other grounds, 26 244 U.S. 205 (1917). Jensen v. Numerous refinements to the Law over the 4 1 years have resulted in a statute of some complexity. 2 judge of the New York Court of Appeals has put it, the Law has 3 been the object of constant legislative attention and fine- 4 tuning, with various amendments, including 560 amendments 5 between 1914 and 1961, and an Omnibus Reform amendment in 1996, 6 all resulting in a complex, integrated and unusually 7 prescriptive statute. 8 7 N.Y.3d 139, 145 46 (2006) (Read, J., dissenting). 9 As one See Greenberg v. N.Y. City Transit Auth., It has been estimated that more than 90% of employee claims 10 for benefits under the standards provided by the WCL are paid 11 without contest. 12 YORK WORKERS COMPENSATION , § 15:1, at 594 (2003). 13 a comprehensive system for resolving contested claims. 14 responsibility for operation of that system lies with the Board. 15 N.Y. WORKERS COMP . LAW § 20(1). 16 benefits under the WCL is required to file a claim with the Board 17 or his employer. 18 opportunity to dispute the claim, id. § 25(2)(a); N.Y. COMP . CODES 19 R. & REGS. tit. 12, § 300.22(a), and the dispute is addressed in 20 the first instance by a Workers Compensation Law Judge ( WCLJ ). 21 See N.Y. WORKERS COMP . LAW § 150; N.Y. COMP . CODES R. & REGS . tit. 22 12, § 300.1(a)(10). 23 the WCLJ may seek administrative review by a three-member Board 24 panel and, if review is granted and the panel does not make a 25 unanimous decision, review of the full Board is mandated upon 26 request of either party; if the decision is unanimous, any party See MARTIN MINKOWITZ , NEW YORK PRACTICE SERIES : NEW Id. § 20. The Law provides The An injured worker who seeks The carrier is afforded the A party dissatisfied with the decision of 5 1 may seek discretionary review by the full Board. The statutory 2 scheme allows a party to seek judicial review of the Board s 3 administrative decision in the New York State Supreme Court, 4 Appellate Division, Third Department. 5 23. 6 implements the legislative intent to establish a judicial forum 7 having specific expertise to deal with the complexity of the 8 issues presented in workers compensation cases. 9 v. Workers Comp. Bd., 607 N.Y.S.2d 675, 675 (N.Y. App. Div. N.Y. WORKERS COMP . LAW § The designation of a single court for this purpose Empire Ins. Co. 10 1994). 11 cases shall be heard in a summary manner and shall have 12 precedence over all other civil cases in such court. 13 WORKERS COMP . LAW § 23. 14 sought in the New York State Court of Appeals, and [a]n appeal 15 to the appellate division of the supreme court, third department, 16 or to the court of appeals, shall not operate as a stay of the 17 payment of compensation required by the terms of the award or of 18 the payment of the doctors bills found to be fair and 19 reasonable. 20 The Law provides that appeals in workers compensation N.Y. An opportunity for further review may be Id. (2007). The jurisdiction of the Board is far-reaching. The WCL, 21 administered by the Board, covers approximately 7.9 million 22 workers. 23 THE BOARD, at www.wcb.state.ny.us, \content\main\TheBoard\ 24 factsht.jsp (last visited Sept. 21, 2009). 25 received 140,109 new claims, re-opened 182,028 claims; received 26 13,258 applications for appeals; and rendered 12,072 decisions. See N.Y. STATE WORKERS COMPENSATION BOARD , BASIC FACTS ABOUT 6 In 2006, the Board 1 Id. The Law vests the Board with extensive powers beyond the 2 adjudication of claims. 3 compensation attorneys, N.Y. WORKERS COMP . LAW § 24-a; approves or 4 rejects medical providers, id. § 13-b 13-e; and brings certain 5 enforcement proceedings not related to the challenged amendments, 6 id. § 26, 54-b, 141-a. 7 to order payments for certain types of indemnity awards to be 8 made to the Aggregate Trust Fund ( ATF ). 9 administered by the Trustees as an aggregate, indivisible fund 10 separate and apart from other money held by the State Insurance 11 Fund. 12 made by insurance carriers and, at the Board s discretion, by 13 self-insured employers. Id. § 27. For example, it licenses workers Among the Board s powers is the authority The ATF is Deposits to the ATF ordered by the Board are Id. § 27. 14 Prior to the 2007 amendments subject of this appeal, 15 mandatory deposits to the ATF were made for scheduled awards 16 for permanent partial disability ( PPD ). 17 that restricts an employee s ability to work but does not totally 18 foreclose it. 19 to a statutory schedule that identifies certain injuries such as 20 loss of a limb and sets the compensation amount for the injury. 21 See id. § 15(3). 22 schedule are determined by a WCLJ and are designated as non- 23 scheduled or classified. 24 Board was not required to order an ATF deposit for a non- 25 scheduled award, although it had the discretion to do so. 26 A PPD is a condition A scheduled award is so-called because it refers PPD awards for injuries not identified in the See id. § 15(3)(w). Until 2007, the Single, lump-sum payment settlements, whereby an injured 7 1 employee agrees to waive all past, present, and future indemnity 2 payments and medical benefits, were authorized by the WCL prior 3 to the 2007 amendments. 4 Board of such agreements, known as waiver agreements or 5 section 32 settlements, is mandatory, and the Board may deny 6 approval or order modification in the case of a proposed 7 settlement that is unfair, unconscionable, or improper as a 8 matter of law. 9 12, § 300.36(d), (e). See id. § 32(a) (2007). Id. § 32(b)(1); N.Y. COMP . CODES R. & REGS . tit. Court review may be sought in the case of 10 the Board s disapproval of a settlement. 11 II. 12 Approval by the Id. § 300.36(g). The 2007 Amendments and the Challenge The 2007 amendments, inter alia, extended the requirement 13 that deposits to the ATF be made for scheduled awards to require 14 that such deposits be made by private carriers in all PPD cases 15 where long-term benefits are awarded, thus ending the distinction 16 between scheduled and non-scheduled awards. 17 COMP. LAW § 27(2). 18 ascertaining the present, discounted value of future long-term 19 benefits owed by the carrier to the injured employee. 20 making the deposit, the carrier is discharged from any further 21 liability for indemnity payments but remains liable for medical 22 benefits. 23 the ATF. 24 in administrative and judicial review proceedings but has no 25 further part to play with regard to indemnity payments after the 26 deposit is made. See N.Y. WORKERS The Board calculates the deposit by Id. § 27. After Future indemnity payments are then made by A carrier may contest a PPD claim and a deposit order Id. § 27(3). 8 1 Another provision of the 2007 amendments relates to the 2 settlement of workers compensation claims. WCL § 32 as revised 3 provides a new time frame for settlements, requiring carriers to 4 make settlement offers within two years of the indexing of claims 5 by the Board or six months after classification of a permanent 6 disability, whichever is later. 7 also conferred settlement authority upon the ATF for indemnity 8 benefits. This authority becomes vested following a mandatory 9 deposit. Although the ATF may reach a settlement for less than See id. § 32(a). The amendments 10 the amount of the carrier s deposit, the carrier is not entitled 11 to a refund of the excess paid. 12 are reviewed under the same regulations that govern waiver and 13 settlements initiated by carriers and must be approved in the 14 same way. 15 require the consent of the carrier that made the deposit, it is 16 the policy of ATF to provide to the funding carrier a minimum of 17 60 days advance notice prior to entering a settlement agreement. 18 See New York State Insurance Fund, Interoffice Memorandum, Claims 19 Medical Bulletin # 2007-4. 20 Id. § 27(8). ATF settlements Although the settlement decisions of the ATF do not Liberty Mutual s constitutional challenges are directed to 21 the 2007 amendments to WCL §§ 27 and 32. 22 Mutual asserts that, because the amendments apply to awards of 23 compensation, not policies of insurance, issued after July 1, 24 2007, they operate substantially to impair contracts of insurance 25 (insurance policies) in violation of the Contracts Clause. 26 According to Liberty Mutual, the retroactive application of the 9 Specifically, Liberty 1 amendments impairs both specific provisions of Liberty Mutual s 2 insurance policies and the overall balance of liabilities and 3 premiums that is the most critical element of an insurance 4 contract. 5 violations arise from the imposition of the 3% fee that ATF 6 collects under the amendments to administer a claim after a 7 deposit is made; from the restriction of its former contractual 8 right to pay compensation benefits on the basis of a multi-year 9 schedule is restricted; and from the elimination of its right to Liberty Mutual alleges that the Contracts Clause 10 settle claims after a deposit has been made. 11 retroactivity of the amendments will impair contracts entered 12 into prior to the retroactivity date, Liberty Mutual contends 13 that it will sustain enormous losses by reason of the lack of a 14 premium adequate to cover liability under the new regime. 15 Contending that the Liberty Mutual therefore contends that the WCL amendments 16 operate[] as a substantial impairment of a contractual 17 relationship, Allied Structural Steel Co. v. Spannaus, 438 U.S. 18 234, 244 (1978), that the amendments do not have a significant 19 and legitimate public purpose, Energy Reserves Group, Inc. v. 20 Kan. Power & Light Co., 459 U.S. 400, 411 (1983), and, if the 21 amendments do have such a purpose, they are not reasonable and 22 necessary to the attainment of the purpose, U.S. Trust Co. of 23 N.Y. v. New Jersey, 431 U.S. 1, 25 (1977). 24 Mutual argues that there is a clear violation of the 25 constitutional provision that [n]o State shall . . . pass any . 26 . . Law impairing the Obligation of Contracts. . . . 10 Accordingly, Liberty U.S. 1 2 CONST. art. I, § 10, cl. 1. Liberty Mutual also asserts that the amendments are 3 violative of the Due Process Clause, see U.S. CONST . amend. XIV, 4 § 1, because WCL § 32 as amended bars an insurer from appearing 5 before the ATF and WCB on settlements of claims asserted against 6 its own insurance policies and also prohibits judicial review of 7 WCB decisions approving such settlements. 8 contends that these provisions violate due process by depriving 9 it of an opportunity to be heard, since WCL § 32(e) now provides 10 that no consultation or approval of any . . . insurance carrier 11 . . . shall be required before [the ATF] may enter into any 12 waiver agreement, or before the [WCB] may approve such waiver 13 agreement. 14 the funds deposited with the ATF, Liberty Mutual claims a 15 property interest in the funds that may be used by ATF for the 16 settlement of claims made against Liberty Mutual s insureds. 17 Liberty Mutual also claims due process violations because it is 18 denied judicial review of such settlements, N.Y. WORKERS COMP . LAW 19 § 32(f); because ATF keeps any deposits in excess of settlements; 20 and because the ATF is administered by the New York State 21 Insurance Fund, a competitor of Liberty Mutual and the State s 22 largest carrier of workers compensation insurance. 23 Liberty Mutual Although an insurer has nothing further to do with Finally, Liberty Mutual challenges the 2007 amendments as 24 violative of the Equal Protection Clause. See U.S. CONST . amend. 25 XIV, § 1. 26 self-insured employers are not required to make deposits to the The basis for this challenge lies in the fact that 11 1 ATF as are private carriers. Although the reason given for the 2 deposit requirement is to protect claimants against the risk of 3 insurer insolvencies, Liberty Mutual contends that there is no 4 rational basis to impose these measures on insurers, who are 5 already subject to multiple layers of solvency requirements, but 6 not on self-insured employers, who are not so heavily regulated. 7 Liberty Mutual contends that the discrimination in the 8 requirement of deposits to ATF is irrational, because injured 9 workers already are protected by the Workers Compensation 10 Security Fund, see N.Y. WORKERS COMP . LAW § 106, which pays awards 11 of compensation in the case of default by an insolvent carrier 12 and is financed by annual assessments on all insurers, see id. § 13 108. 14 A previous challenge to the constitutionality of amended WCL 15 § 27 was presented to the Workers Compensation Board by Wausau 16 Insurance Company, an affiliate of Liberty Mutual and a 17 plaintiff-appellant in this action. 18 bearing WCB case number 7050-8896, Daniel Del Plato was named as 19 claimant and Genesee County ARC was named as employer. 20 application for Board review of the decision of a WCLJ, Wausau 21 argued that the direction that it deposit funds into the ATF in 22 payment of a PPD award is not only unconstitutional, but also 23 premature and that the calculation of such a deposit was 24 inaccurate. 25 self-insured employers and the State Insurance Fund are treated 26 differently [from Wausau] in regard to a direction to make a In the Board proceeding, In its Wausau asserted in its administrative protest that 12 1 deposit into the Aggregate Trust Fund and therefore, such a 2 direction is unconstitutional. 3 determination with respect to Wausau s claim; it rescinded the 4 direction to deposit without prejudice and adjourned the case 5 pending resolution of Wausau s claim for reimbursement under WCL 6 § (15)(8)(d). 7 WL 4862978 (N.Y. Work. Comp. Bd. Oct. 31, 2008). 8 yet appear to be a ruling on the merits of the constitutional 9 claim. 10 11 III. The WCB made an interim See Employer Genesee Co. ARC, No. 7050 8896, 2008 There does not The Decision of the District Court In its Memorandum Decision of March 9, 2009, the District 12 Court determined that the abstention doctrine set out in Younger 13 v. Harris, 401 U.S. 37 (1971), mandates dismissal of the case for 14 lack of subject matter jurisdiction. 15 Hurlbut, No. 08 CIV 7192, 2009 WL 604430, at *3 (S.D.N.Y. Mar. 9, 16 2009). 17 is mandatory when (1) there is a pending state proceeding, (2) 18 that implicates an important state interest, and (3) the state 19 proceeding affords the federal plaintiff an adequate opportunity 20 for judicial review of his or her federal constitutional 21 claims. 22 F.3d 83, 100-01 (2d Cir. 2004)). 23 Liberty Mut. Ins. Co. v. The District Court noted that under Younger, abstention Id. (quoting Hartford Courant Co. v. Pelligrino, 380 Applying the foregoing factors in the case at hand, the 24 District Court determined that Liberty Mutual was involved in 25 pending workers compensation proceedings involving disputes over 26 PPD benefit claims in which the Board has ordered Liberty Mutual 13 1 to make ATF deposits pursuant to the challenged amendments. 2 Rejecting Liberty Mutual s contention that only state civil 3 enforcement actions implicate Younger abstention, the District 4 Court found that workers compensation proceedings are indeed 5 judicial in nature and implicate inquiries that investigate, 6 declare, and enforce liabilities. 7 District Court concluded that, although the proceedings involve 8 private parties, the state has an interest beyond its interest 9 as adjudicator of wholly private disputes. 10 Id. at *3-4. Id. Moreover, the Id. at *4 (internal quotation marks omitted). 11 Turning to the factor of important state interest, the 12 District Court observed that the general welfare of the state is 13 promoted by compensating workers for all injuries they sustain in 14 the course of employment and in preventing them from losing the 15 means of support by reason of such injuries. 16 According to the District Court, the state interest is evidenced 17 by the detailed regulatory scheme put in place by the state to 18 ensure workers a statewide system designed to provide relief for 19 job-related injuries. 20 preliminary injunction [against enforcement of the challenged WCL 21 amendments] sought by plaintiffs would interfere with these 22 regulatory mechanisms. 23 Id. Id. at *5. The District Court found that [t]he Id. Finally, the District Court determined that judicial review 24 of Liberty Mutual s constitutional claims was available within 25 the system established by the state. 26 decisions is available in the Appellate Division, Third 14 Id. Because review of WCB 1 Department, and because this review extends to WCB orders 2 directing ATF deposits, the District Court found that Liberty 3 Mutual s constitutional challenge to WCL §§ 27 and 32 can be 4 mounted in the state court. 5 concluded that the third Younger factor has been met here. 6 Id. Accordingly, the District Court The District Court rejected Liberty Mutual s argument that 7 the state and federal actions are not significantly closely 8 related so as to justify Younger abstention, holding that 9 different parties and different issues in the two actions do not 10 preclude abstention; that Liberty Mutual had not indicated that 11 it would be barred from constitutional challenges in the state 12 proceedings; and that at least one such challenge had been 13 mounted by Liberty Mutual in a WCB proceeding already. 14 District Court also rejected Liberty Mutual s argument that no 15 state proceedings would actually be enjoined by this federal 16 action and therefore that Younger does not apply, on the ground 17 that this argument interpret[s] the doctrine too narrowly. 18 at *6. 19 an ongoing state proceeding implicating an important state 20 interest, [where the] state proceeding affords the federal 21 plaintiff an adequate opportunity for judicial review of its 22 constitutional claims. 23 24 Id. The Id. All that is needed, according to the District Court is Id. ANALYSIS In Younger v. Harris, the Supreme Court held that a federal 25 court, except in cases where an injunction is necessary to 26 prevent immediate and irreparable injury, should not enjoin a 15 1 criminal proceeding in a state court. 2 to have been based on proper respect for the fundamental role of 3 States in our federal system as well as equitable principles. 4 Ohio Civil Rights Comm n v. Dayton Christian Sch., Inc., 477 U.S. 5 619, 626 (1986). 6 federalism, the Supreme Court has 7 8 9 10 11 12 13 14 15 This determination is said Recognizing a special concern for comity and applied the Younger principle to civil proceedings in which important state interests are involved . . . [and] also [has] applied it to state administrative proceedings in which important state interests are vindicated, so long as in the course of those proceedings the federal plaintiff would have a full and fair opportunity to litigate his constitutional claim. Id. at 627 (internal citations omitted). The Court has described three considerations that prompt 16 abstention in the face of broad-based challenges to state 17 statutes: (1) that a federal court will interpret state law 18 without having the benefit of a state court interpretation which 19 may come at a later time and be at odds with the federal court 20 interpretation; (2) that the federal court decision may encompass 21 matters as to which there is no real case or controversy; and (3) 22 that the domestic policies of a state may be unnecessarily 23 obstructed when a state court is impeded from interpreting and 24 applying the state s statutes. 25 428-29 (1979) (requiring Younger abstention in action challenging 26 constitutionality of child abuse statute during pendency of state 27 juvenile court protective proceedings). 28 29 See Moore v. Sims, 442 U.S. 415, Reviewing Supreme Court precedent, we have noted that Younger abstention is appropriate where that 1) there is an 16 1 ongoing state proceeding; 2) an important state interest is 2 implicated; and 3) the plaintiff has an avenue open for review of 3 constitutional claims in the state court. 4 v. Blumenthal, 123 F.3d 103, 105 (2d Cir. 1997) (internal 5 quotation marks omitted); see also Spargo v. N.Y. State Comm n on 6 Judicial Conduct, 351 F.3d 65, 75 (2d Cir. 2003). 7 of ongoing state proceedings is an essential requirement for 8 Younger abstention: Absent any pending proceeding in state 9 tribunals, . . . application by the lower courts of Younger Philip Morris, Inc. The existence 10 abstention [is] clearly erroneous. 11 U.S. 689, 705 (1992). 12 in order to invoke Younger, the proceedings must have been 13 initiated before any proceedings of substance on the merits 14 have taken place in the federal court. 15 Midkiff, 467 U.S. 229, 238 (1984) (quoting Hicks v. Miranda, 422 16 U.S. 332, 349 (1975)). 17 Ankenbrandt v. Richards, 504 Not only must state proceedings be pending Hawaii Hous. Auth. v. For example, in Christ the King Reg l High Sch. v. Culvert, 18 815 F.2d 219 (2d Cir. 1987), the Lay Faculty Association of a 19 Catholic high school filed an unfair labor practice charge with 20 the New York State Labor Relations Board. 21 proceeding, the Association charged the School with refusing to 22 bargain and with discharging striking members of the Association. 23 Various proceedings transpired before the Board, and some months 24 after the inception of the proceedings, the School commenced a 25 federal court action asserting, as it did before the Board, that 26 the Board s exercise of jurisdiction would be violative of the 17 In that administrative 1 Establishment and Free Exercise Clauses of the Constitution and 2 was preempted by the National Labor Relations Act. 3 The District Court granted summary judgment to the Board and 4 the Association, but on appeal we determined that dismissal, 5 predicated upon Younger abstention, should have been granted. 6 doing so, we referred to the Supreme Court s holding in Dayton 7 Christian Schools that a federal court should not enjoin a 8 pending state administrative proceeding when important state 9 interests are involved, as long as the federal plaintiff will 10 have a full and fair opportunity to litigate constitutional 11 claims during or after the proceedings. 12 224. 13 In Culvert. 14 Culvert, 815 F.2d at Such opportunities were available to the plaintiff in With respect to the requirement for ongoing proceedings in 15 Culvert, we concluded: As in Dayton Christian Schools, the 16 administrative agency in this case has not yet conducted its 17 formal hearing or imposed any sanctions; hence, an ongoing state 18 proceeding exists. 19 also found that there was an important state interest in the 20 regulation of the duty to bargain collectively and that 21 litigation of the constitutional claim was available before the 22 State Labor Relations Board and before the New York State Supreme 23 Court pursuant to Article 78 of the New York Civil Practice Law 24 and Rules. Id. In support of Younger abstention, we Id. at 224-25. 25 In the same vein is Westvaco Corp. Envelope Division v. 26 Campbell, 842 F. Supp. 1472 (D. Mass. 1994), in which an employer 18 1 sought to enjoin the Massachusetts Department of Industrial 2 Accidents from considering an injured worker s claim under a 3 system analogous to that established by New York s WCL. 4 time the action was commenced, the claim had been denied and 5 administrative proceedings were pending. 6 that the claim was preempted by the National Labor Relations Act 7 (NLRA), 29 U.S.C. §§ 157-58. 8 totally disabled from work due to anxiety and major depression 9 arising from harassment and stress in the workplace. At the The employer contended The employee claimed that he was The 10 employer s argument was that the employee s claim of harassment, 11 if proven to be due to union activity, would fall within the 12 provisions of the NLRA. 13 basis of the Younger abstention doctrine, the court found that 14 the pending administrative proceeding upholds an important state 15 interest, that the employer will have an adequate opportunity 16 to litigate its federal preemption claim in the state court 17 system, and that [t]he ongoing state administrative worker s 18 compensation proceedings are undoubtedly judicial in nature. 19 Id. at 1475-76. 20 In dismissing the federal action on the Common to all the cases in which the Younger abstention 21 doctrine is applied is the need to find that state proceedings, 22 whether they be criminal, civil or administrative, are ongoing or 23 pending. 24 The requirement is not fulfilled if the proceedings are merely 25 incipient or threatened. 26 proceedings is problematic in the case now before us. See 1A FEDERAL PROCEDURE LAWYERS EDITION § 1:621 (2002). Id. § 1:622. 19 The pendency of state At least 1 as to ATF s authority to settle claims after deposits are made 2 under the amendment to WCL § 32, it is clear that no state 3 administrative or judicial proceedings challenging the amendments 4 are pending. 5 not entered into any settlements of claims against Liberty Mutual 6 since passage of the 2007 legislation, and thus no settlement- 7 approval proceedings have been instituted. 8 contends that it will be unable to challenge amended § 32 in any 9 event because it is barred by statute from objecting to ATF s Indeed, Liberty Mutual advises that the ATF has 10 settlements. 11 Liberty Mutual CODES R. & REGS . tit 12, § 300.36(d)(3). 12 It is not clear that this is so. See N.Y. COMP . As to the issue of the retroactivity of the 2007 amendments, 13 the constitutional question has been raised before the Board, as 14 previously noted. 15 side whether the claim, relating to an injury that occurred in 16 2005, is still pending. 17 provided for in § 27, it appears that deposits have been made in 18 some cases and administrative review of deposit orders has been 19 sought in others. 20 information as to whether any proceedings regarding the mandatory 21 deposits are pending or ongoing in any state tribunal. 22 However, there is no indication from either As to the mandatory deposits now Again, we have not been favored with specific Our concerns with the applicability of the Younger doctrine 23 in the case at bar lead us to consider another closely-related 24 abstention doctrine which we think is applicable in this case. 25 We rely on that doctrine, known as Burford abstention, to affirm 26 the judgment of the District Court. 20 In doing so, we exercise our 1 discretion to affirm the district court s judgment on any ground 2 appearing in the record, even if the ground is different from the 3 one relied on by the district court. 4 F.3d 41, 50 n.2 (2d Cir. 2008) (internal quotation marks 5 omitted); see also ACEquip Ltd. v. Am. Eng g Corp., 315 F.3d 151, 6 155 (2d Cir. 2003). 7 of the Younger abstention question or use it as the basis for 8 dismissal in this case, we note that learned treatise authors 9 have written that [a]nalytically the cases in which [Younger Doninger v. Niehoff, 527 Although we do not pronounce on the merits 10 abstention] requires a federal court not to act . . . appear to 11 be a special case of Burford-type abstention. 12 WRIGHT, ARTHUR R. MILLER , EDWARD H. COOPER & VIKRAM DAVID AMAR , FEDERAL 13 PRACTICE & PROCEDURE § 4241, at 318 n.70 (3d ed. 2007). 14 17A CHARLES ALAN In Burford v. Sun Oil Co., 319 U.S. 315 (1943), the 15 plaintiff invoked the equity jurisdiction of the federal court in 16 seeking to enjoin an order of the Texas Railroad Commission 17 permitting the drilling of four wells on land in East Texas. 18 Claiming the protection of the Fourteenth Amendment, the 19 plaintiff challenged the reasonableness of the Commission s grant 20 of the oil-drilling permit. 21 to protect the oil and gas industry as well as the public 22 interest, the Court found that 23 24 25 26 27 28 29 30 Taking note of the need of the state Texas interests in this matter are more than that very large one of conserving gas and oil, two of our most important natural resources. It must also weigh the impact of the industry on the whole economy of the state and must consider its revenue, much of which is drawn from taxes on the industry and from mineral lands preserved for the benefit of its educational and eleemosynary institutions. To prevent past, present, 21 1 2 3 4 5 6 7 8 9 10 and imminent evils in the production of natural gas, a statute was enacted for the protection of public and private interests against such evils by prohibiting waste and compelling ratable production. The primary task of attempting adjustment of these diverse interests is delegated to the Railroad Commission which Texas has vested with broad discretion in administering the law. Id. at 320. The Court observed that the Railroad Commission had acquired 11 specialized knowledge and that, [a]s a practical matter, the 12 federal courts can make small contribution to the well-organized 13 system of regulation and review which the Texas statutes 14 provide. 15 state provided a unified method for the formation of policy and 16 determination of cases by the Commission, that federal court 17 intervention could very well lead to conflicting interpretations 18 of state law and the defeat of state policies, and that 19 expeditious and adequate state court judicial review of 20 Railroad Commission decisions was available. 21 Court concluded that, under the circumstances revealed, proper 22 respect for independent state action commanded abstention and 23 dismissal of the complaint. 24 Id. at 327. The Court further observed that [t]he Id. at 333 34. The Citing Alabama Public Service Commission v. Southern Railway 25 Co., 341 U.S. 341 (1951), a case wherein a railroad sought to 26 enjoin enforcement of an order of the Alabama Public Service 27 Commission denying permission for the discontinuance of 28 unprofitable rail lines, and referring to other cases as well, 29 the Supreme Court in New Orleans Public Service, Inc. v. Council 30 of New Orleans, 491 U.S. 350, 361 (1989), distilled the Burford 22 1 doctrine as follows: 2 3 4 5 6 7 8 9 10 11 12 13 14 Where timely and adequate state-court review is available, a federal court sitting in equity must decline to interfere with the proceedings or orders of state administrative agencies: (1) when there are difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar; or (2) where the exercise of federal review of the question in a case and in similar cases would be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern. (internal quotation marks omitted). We have identified three factors to consider in connection 15 with the determination of whether federal court review would work 16 a disruption of a state s purpose to establish a coherent public 17 policy on a matter involving substantial concern to the public. 18 Those factors are as follows: (1) the degree of specificity of 19 the state regulatory scheme; (2) the need to give one or another 20 debatable construction to a state statute; and (3) whether the 21 subject matter of the litigation is traditionally one of state 22 concern. 23 1998) (Burford abstention not warranted in case of due process 24 challenge to state physician discipline statute for lack of 25 procedure to reopen misconduct proceedings to consider newly 26 discovered evidence). Hachamovitch v. DeBuono, 159 F.3d 687, 697 (2d Cir. 27 Important to its conclusion in the Burford case itself were 28 the Court s findings that [t]he state provides a unified method 29 for the formation of policy and determination of cases by the 30 [Railroad] Commission and by the state courts and that [t]he 31 judicial review of the Commission s decisions in the state courts 23 1 is expeditious and adequate. 2 Alabama Public Service Commission, the Court emphasized the 3 importance of the availability of recourse to the state courts: 4 5 6 7 8 9 Burford, 319 U.S. at 333-34. In Not only has Alabama established its Public Service Commission to pass upon a proposed discontinuance of intrastate transportation service, but it has also provided for appeal from any final order of the Commission to the circuit court of Montgomery County as a matter of right. 10 Ala. Pub. Serv. Comm n, 341 U.S. at 348. 11 Court stated: Whatever rights [the Railway Company] may have are 12 to be pursued through the state courts. 13 it may seem[] too narrow to try to confine Burford, and the 14 later case of Alabama Public Service Commission to their own 15 facts and to hold that this kind of abstention is proper only 16 when a case involves basic matters of state policy, complicated 17 by nonlegal considerations of a predominantly local nature, and 18 the state has specially concentrated all judicial review of 19 administrative orders of the sort involved in a single state 20 court, 17A WRIGHT , COOPER , MILLER & AMAR , supra, § 4244, at 383 85, 21 consideration of the principles enunciated in the cited cases 22 surely is warranted in assessing the viability of Burford-type 23 abstention. 24 Citing Burford, the Id. at 350. And while In undertaking the assessment here, we find that federal 25 review of the WCL amendments as sought by Liberty Mutual would 26 threaten[] to frustrate the purpose of the complex 27 administrative system that [New York] ha[s] established. 28 Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 725 (1996). 29 WCL is a reticulated statute that governs a complex system 24 See The 1 designed to benefit the interests of employer and employee in the 2 State of New York. 3 interests has been the goal throughout the history of the 4 statute. 5 of those injured in the course of employment has been 6 established, with due consideration for the financial burdens 7 imposed on employers and their insurers. 8 amendments to the WCL (and there are a number not under attack 9 here) are designed to maintain the balance. Maintaining the balance between these To that end, an elaborate system for the compensation Indeed, the 2007 This is evidenced by 10 the statement of Purpose set forth in the Sponsor s Memo of the 11 New York State Assembly Bill proposing the Amendments: 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 This bill establishes comprehensive reforms to New York s workers compensation law by: (1) increasing maximum and minimum benefits for injured workers and indexing the maximum to New York s average weekly wage; (2) dramatically reducing costs in the workers compensation system, making hundreds of millions of dollars available annually to be translated into premium reductions; (3) establishing enhanced measures to combat workers compensation fraud; (4) replacing the Special Disability Fund with enhanced protections for injured veterans; (5) preventing insurance carriers from transferring costs to New York employers by closing the Special Disability Fund to new claims; and (6) creating a financing mechanism to allow for settlement of the Fund s existing liabilities. 27 New York Sponsors Memorandum, 2007 A.B. 6163, New York Assembly, 28 230th Legislature, 2007 Regular Session. 29 The WCL establishes an integrated system with interdependent 30 parts. It is a statute with a high level of specificity. 31 apparent from the statement of the Sponsor, the amendments 32 challenged here very much take into account the historic balance 33 of interests that has been the hallmark of the policy underlying 25 As is 1 the WCL. 2 medical expenses incurred by virtue of work-related injuries has 3 presented public policy questions that have been debated and 4 resolved in various ways over many years. 5 provided by the 2007 amendments to the WCL therefore serve to 6 classify the subject matter of this litigation as a matter of 7 traditional and substantial state concern. 8 coherent public policy objectives, the New York Legislature has 9 been very specific in prescribing the methods and means for 10 11 The manner of compensating workers for lost wages and The adjustments In carrying out providing compensation for injured workers. Not only would federal court intervention be disruptive of a 12 carefully established state system, it might also yield 13 inconsistent and therefore conflicting results. 14 federal court decision respecting the retroactivity of the 15 amendment to WCL § 27, relating to deposits to the ATF for non- 16 scheduled awards, may well conflict with WCB decisions already 17 made on the same issue. 18 part and parcel of the entire integrated and balanced system, 19 providing as it does for the assurance of payments after 20 determinations are made regarding the extent of injury and the 21 present value of future long-term payments. 22 settlement authority conferred upon the ATF by the provisions of 23 amended WCL § 32 would be fraught with uncertainty by differing 24 interpretations of the provision at the state and federal levels. 25 Federal review of the 2007 amendments here would unduly disrupt 26 the administration of the New York WCL, would interfere with For example, a Moreover, the deposits now required are 26 Likewise, the 1 matters of substantial public concern and would hamper resolution 2 by the state of challenges similar to those made here. 3 issues joined in this case, including constitutional issues, 4 should be resolved by the WCB and by the New York court 5 specifically designated to provide adequate and expeditious 6 review of WCB decisions. The 7 CONCLUSION 8 For the foregoing reasons, the judgment of the District 9 Court is affirmed. 27

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