     09-1215-cv
     Liberty Mutual Ins. Co. v. Hurlbut



 1                             UNITED STATES COURT OF APPEALS
 2                                 FOR THE SECOND CIRCUIT

 3                                         August Term 2008
 4
 5                                        Docket No. 09-1215

 6   Argued: June 22, 2009                                Decided: November 4, 2009


 7   LIBERTY MUTUAL INSURANCE COMPANY , LIBERTY MUTUAL FIRE INSURANCE COMPANY ,
 8   LIBERTY INSURANCE CORPORATION , LM INSURANCE COMPANY , EMPLOYERS INSURANCE
 9   COMPANY OF WAUSAU , WAUSAU BUSINESS INSURANCE COMPANY , WAUSAU GENERAL INSURANCE
10   COMPANY, WAUSAU UNDERWRITERS INSURANCE COMPANY , PEERLESS INSURANCE COMPANY ,
11   PEERLESS INDEMNITY INSURANCE COMPANY , THE NETHERLANDS INSURANCE COMPANY ,
12   EXCELSIOR INSURANCE COMPANY , THE AMERICAN FIRE AND CASUALTY COMPANY , THE OHIO
13   CASUALTY INSURANCE COMPANY ,

14          Plaintiffs-Appellants,

15          - v.-

16   ROBERT H. HURLBUT , DONALD T. DE CARLO , C. SCOTT BOWEN , JOHN F. CARPENTER ,
17   DENIS M. HUGHES , CHARLES L. LOIODICE , WILLIAM A. O’LOUGHLIN JR ., KENNETH R.
18   THEOBALDS, PATRICIA SMITH , in their official capacities as the
19   COMMISSIONERS OF THE NEW YORK STATE INSURANCE FUND , ZACHARY S. WEISS , DONNA
20   FERRARA, MONA A. BARGNESI , RICHARD A. BELL , GERALDINE CHAPEY , CANDACE K.
21   FINNEGAN, SCOTT C. FIRESTONE , AGATHA EDEL GROSKI , KARL A. HENRY , MARK D.
22   HIGGINS, FRANCES M. LIBOUS AND ELLEN O. PAPROCKI , in their official
23   capacities as MEMBERS OF THE NEW YORK STATE WORKERS COMPENSATION BOARD ,

24          Defendants-Appellees.



25   Before:        MINER, LIVINGSTON, Circuit Judges, and TRAGER, District
26   Judge.*

27        Appeal from a judgment entered in the United States District
28   Court for the Southern District of New York (Chin, J.) in favor
29   of defendants-appellees Commissioners of the Workers’
30   Compensation Board of the State of New York and Trustees of the
31   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   plaintiffs-appellants, Liberty Mutual Insurance Company and
 2   affiliate companies, challenging two amendments enacted in 2007
 3   to the New York Workers’ Compensation Law as violative of the
 4   Contracts, Takings, Due Process and Equal Protection provisions
 5   of the United States Constitution, the District Court having
 6   abstained from the exercise of federal jurisdiction and dismissed
 7   the action for that reason.

 8        Affirmed.


 9                                 Evan Glassman, Steptoe & Johnson
10                                 LLP, New York, New York, for
11                                 Plaintiffs-Appellants.

12                                 MARK F. HORNING , Jeffrey M. Theodore,
13                                 Mark F. Horning, Steptoe & Johnson
14                                 LLP, Washington D.C., for
15                                 Plaintiffs-Appellants.

16                                 STEVEN C. WU (on behalf of Andrew M.
17                                 Cuomo, New York State Attorney
18                                 General;, Barbara K. Hathaway, on
19                                 the brief), for Defendants-
20                                 Appellees.




                                     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”).       Liberty Mutual brought the

 9   action giving rise to the judgment seeking injunctive and
10   declaratory relief from two amendments to the New York Workers’

11   Compensation Law enacted in 2007.       Liberty Mutual challenges

12   these amendments as violative of the Contracts, Takings, Due

13   Process and Equal Protection provisions of the United States

14   Constitution.   Relying on the doctrine announced in Younger v.

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.    We agree that abstention is appropriate but rely on
19   different precedent.
20                                BACKGROUND

21   I.   The New York Workers’ Compensation System — Policy and

22   Procedure

23         The New York Workers’ Compensation System is governed by the

24   Workers’ Compensation Law (the “WCL” or “Law”).       The Law requires

25   employers to pay benefits to workers who are injured or disabled

26   during the course of their employment, regardless of fault.         N.Y.


                                        3
 1   WORKERS’ COMP . LAW § 10(1).   These benefits include medical care,

 2   replacement of lost wages (“indemnify payments”) and death

 3   benefits.    Id. §§ 13, 14, 16.    To assure that these payments are

 4   made, the Law requires employers to obtain insurance coverage in

 5   one of the following ways:      purchase workers’ compensation

 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.        Id. §§

 9   10(1), 50.    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.      Id. § 11; see also O’Rourke v.

13   Long, 41 N.Y.2d 219, 222 (1976).        (The WCL “was designed to

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        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.”        Jensen v.

25   S. Pac. Co., 215 N.Y. 514, 524 (1915), rev’d on other grounds,

26   244 U.S. 205 (1917).     Numerous refinements to the Law over the


                                         4
 1   years have resulted in a statute of some complexity.            As one

 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.”     See Greenberg v. N.Y. City Transit Auth.,

 8   7 N.Y.3d 139, 145–46 (2006) (Read, J., dissenting).

 9        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.    See MARTIN MINKOWITZ , NEW YORK PRACTICE SERIES : NEW

12   YORK WORKERS’ COMPENSATION , § 15:1, at 594 (2003).     The Law provides

13   a comprehensive system for resolving contested claims.            The

14   responsibility for operation of that system lies with the Board.

15   N.Y. WORKERS’ COMP . LAW § 20(1).   An injured worker who seeks

16   benefits under the WCL is required to file a claim with the Board

17   or his employer.    Id. § 20.    The carrier is afforded the

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).     A party dissatisfied with the decision of

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


                                          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.         N.Y. WORKERS ’ COMP . LAW §

 5   23.   The designation of a single court for this purpose

 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.           Empire Ins. Co.

 9   v. Workers’ Comp. Bd., 607 N.Y.S.2d 675, 675 (N.Y. App. Div.
10   1994).   The Law provides that appeals in workers’ compensation

11   cases “shall be heard in a summary manner and shall have

12   precedence over all other civil cases in such court.”            N.Y.

13   WORKERS’ COMP . LAW § 23.   An opportunity for further review may be

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.”    Id. (2007).

20         The jurisdiction of the Board is far-reaching.           The WCL,

21   administered by the Board, covers approximately 7.9 million

22   workers.   See N.Y. STATE WORKERS ’ COMPENSATION BOARD , BASIC FACTS ABOUT

23   THE BOARD, at www.wcb.state.ny.us, \content\main\TheBoard\

24   factsht.jsp (last visited Sept. 21, 2009).         In 2006, the Board

25   received 140,109 new claims, re-opened 182,028 claims; received

26   13,258 applications for appeals; and rendered 12,072 decisions.


                                          6
 1   Id.   The Law vests the Board with extensive powers beyond the

 2   adjudication of claims.    For example, it licenses workers’

 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.    Among the Board’s powers is the authority

 7   to order payments for certain types of indemnity awards to be

 8   made to the Aggregate Trust Fund (“ATF”).     The ATF is

 9   administered by the Trustees as an aggregate, indivisible fund
10   separate and apart from other money held by the State Insurance

11   Fund.   Id. § 27.   Deposits to the ATF ordered by the Board are

12   made by insurance carriers and, at the Board’s discretion, by

13   self-insured employers.    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”).     A PPD is a condition

17   that restricts an employee’s ability to work but does not totally

18   foreclose it.   A “scheduled” award is so-called because it refers
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).    PPD awards for injuries not identified in the

22   schedule are determined by a WCLJ and are designated as “non-

23   scheduled” or “classified.”    See id. § 15(3)(w).   Until 2007, the

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         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.      See id. § 32(a) (2007).     Approval by the

 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.”      Id. § 32(b)(1); N.Y. COMP . CODES R. & REGS . tit.

 9   12, § 300.36(d), (e).      Court review may be sought in the case of
10   the Board’s disapproval of a settlement.        Id. § 300.36(g).

11   II.   The 2007 Amendments and the Challenge

12         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.         See N.Y. WORKERS ’

17   COMP. LAW § 27(2).    The Board calculates the deposit by

18   ascertaining the present, discounted value of future long-term
19   benefits owed by the carrier to the injured employee.          After

20   making the deposit, the carrier is “discharged from any further

21   liability” for indemnity payments but remains liable for medical

22   benefits.   Id. § 27.     Future indemnity payments are then made by

23   the ATF.    A carrier may contest a PPD claim and a deposit order

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.      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.   See id. § 32(a).   The amendments

 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
10   the amount of the carrier’s deposit, the carrier is not entitled

11   to a refund of the excess paid.   Id. § 27(8).   ATF settlements

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.   Although the settlement decisions of the ATF do not

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        Liberty Mutual’s constitutional challenges are directed to

21   the 2007 amendments to WCL §§ 27 and 32.   Specifically, Liberty

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
 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.”   Liberty Mutual alleges that the Contracts Clause

 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
10   settle claims after a deposit has been made.   Contending that the

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        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).   Accordingly, Liberty

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. . . .”   U.S.


                                     10
 1   CONST. art. I, § 10, cl. 1.

 2        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.”     Liberty Mutual

 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.”   Although an insurer has nothing further to do with

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        Finally, Liberty Mutual challenges the 2007 amendments as

24   violative of the Equal Protection Clause.     See U.S. CONST . amend.

25   XIV, § 1.   The basis for this challenge lies in the fact that

26   self-insured employers are not required to make deposits to the


                                      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.    In the Board proceeding,

18   bearing WCB case number 7050-8896, Daniel Del Plato was named as
19   claimant and Genesee County ARC was named as employer.      In its

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.”    Wausau asserted in its administrative protest that

25   self-insured employers and the State Insurance Fund “are treated

26   differently [from Wausau] in regard to a direction to make a


                                      12
 1   deposit into the Aggregate Trust Fund and therefore, such a

 2   direction is unconstitutional.”    The WCB made an interim

 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).    See Employer Genesee Co. ARC, No. 7050 8896, 2008

 7   WL 4862978 (N.Y. Work. Comp. Bd. Oct. 31, 2008).    There does not

 8   yet appear to be a ruling on the merits of the constitutional

 9   claim.
10   III.    The Decision of the District Court

11          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.”    Liberty Mut. Ins. Co. v.

15   Hurlbut, No. 08 CIV 7192, 2009 WL 604430, at *3 (S.D.N.Y. Mar. 9,

16   2009).    The District Court noted that “under Younger, abstention

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.’”    Id. (quoting Hartford Courant Co. v. Pelligrino, 380

22   F.3d 83, 100-01 (2d Cir. 2004)).

23          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.      Id.

 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.     Id. at *3-4.   Moreover, the

 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.”     Id. at *4 (internal
10   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.     Id. at *5.

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.   Id.   The District Court found that “[t]he

20   preliminary injunction [against enforcement of the challenged WCL

21   amendments] sought by plaintiffs would interfere with these

22   regulatory mechanisms.”   Id.

23        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.     Id.   Because review of WCB

26   decisions is available in the Appellate Division, Third


                                      14
 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.     Id.     Accordingly, the District Court

 5   concluded that the third Younger factor has been met here.

 6        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.       Id.   The

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.”       Id.

18   at *6.   All that is needed, according to the District Court “is
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.”   Id.
23                                   ANALYSIS

24        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.   This determination is said

 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).   Recognizing a special “concern for comity and

 6        federalism,” the Supreme Court has

      7        applied the Younger principle to civil proceedings in
      8        which important state interests are involved . . .
      9        [and] also [has] applied it to state administrative
     10        proceedings in which important state interests are
     11        vindicated, so long as in the course of those
     12        proceedings the federal plaintiff would have a full and
     13        fair opportunity to litigate his constitutional claim.

14        Id. at 627 (internal citations omitted).

15             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.   See Moore v. Sims, 442 U.S. 415,

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             Reviewing Supreme Court precedent, we have noted that

29        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.”   Philip Morris, Inc.

 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).   The existence

 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
10   abstention [is] clearly erroneous.”   Ankenbrandt v. Richards, 504

11   U.S. 689, 705 (1992).    Not only must state proceedings be pending

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.’”    Hawaii Hous. Auth. v.

15   Midkiff, 467 U.S. 229, 238 (1984) (quoting Hicks v. Miranda, 422

16   U.S. 332, 349 (1975)).

17        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.    In that administrative

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
 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.       In

 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.”     Culvert, 815 F.2d at

12   224.    Such opportunities were available to the plaintiff in

13   Culvert.

14          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.”    Id.   In support of Younger abstention, we
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. 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.        At the

 4   time the action was commenced, the claim had been denied and

 5   administrative proceedings were pending.      The employer contended

 6   that the claim was preempted by the National Labor Relations Act

 7   (NLRA), 29 U.S.C. §§ 157-58.     The employee claimed that he was

 8   totally disabled from work due to anxiety and major depression

 9   arising from harassment and stress in the workplace.        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.    In dismissing the federal action on the

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        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.”   See 1A FEDERAL PROCEDURE LAWYERS ’ EDITION § 1:621 (2002).

24   The requirement is not fulfilled if the proceedings “are merely

25   incipient or threatened.”    Id. § 1:622.    The pendency of state

26   proceedings is problematic in the case now before us.        At least


                                        19
 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.   Indeed, Liberty Mutual advises that “the ATF has

 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.”   Liberty Mutual

 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
10   settlements.   It is not clear that this is so.   See N.Y. COMP .

11   CODES R. & REGS . tit 12, § 300.36(d)(3).

12        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.   However, there is no indication from either

15   side whether the claim, relating to an injury that occurred in

16   2005, is still pending.   As to the mandatory deposits now

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.   Again, we have not been favored with specific

20   information as to whether any proceedings regarding the mandatory

21   deposits are pending or ongoing in any state tribunal.

22        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.    In doing so, we exercise our


                                      20
 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.”          Doninger v. Niehoff, 527

 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).      Although we do not pronounce on the merits

 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
10        abstention] requires a federal court not to act . . . appear to

11        be a special case of Burford-type abstention.”            17A CHARLES ALAN

12        WRIGHT, ARTHUR R. MILLER , EDWARD H. COOPER & VIKRAM DAVID AMAR , FEDERAL

13        PRACTICE & PROCEDURE § 4241, at 318 n.70 (3d ed. 2007).

14              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.        Taking note of the need of the state

21        to protect the oil and gas industry as well as the public

22        interest, the Court found that

     23         Texas interests in this matter are more than that very
     24         large one of conserving gas and oil, two of our most
     25         important natural resources. It must also weigh the
     26         impact of the industry on the whole economy of the
     27         state and must consider its revenue, much of which is
     28         drawn from taxes on the industry and from mineral lands
     29         preserved for the benefit of its educational and
     30         eleemosynary institutions. To prevent “past, present,

                                                21
     1        and imminent evils” in the production of natural gas, a
     2        statute was enacted “for the protection of public and
     3        private interests against such evils by prohibiting
     4        waste and compelling ratable production.” The primary
     5        task of attempting adjustment of these diverse
     6        interests is delegated to the Railroad Commission which
     7        Texas has vested with “broad discretion” in
     8        administering the law.

 9       Id. at 320.

10            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.”   Id. at 327.   The Court further observed that “[t]he

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.    Id. at 333–34.   The

21       Court concluded that, under the circumstances revealed, proper

22       respect for independent state action commanded abstention and
23       dismissal of the complaint.

24            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        Where timely and adequate state-court review is
      3        available, a federal court sitting in equity must
      4        decline to interfere with the proceedings or orders of
      5        state administrative agencies: (1) when there are
      6        difficult questions of state law bearing on policy
      7        problems of substantial public import whose importance
      8        transcends the result in the case then at bar; or (2)
      9        where the exercise of federal review of the question in
     10        a case and in similar cases would be disruptive of
     11        state efforts to establish a coherent policy with
     12        respect to a matter of substantial public concern.

13        (internal quotation marks omitted).

14             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.”   Hachamovitch v. DeBuono, 159 F.3d 687, 697 (2d Cir.

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).

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.”     Burford, 319 U.S. at 333-34.      In

 2       Alabama Public Service Commission, the Court emphasized the

 3       importance of the availability of recourse to the state courts:

     4        Not only has Alabama established its Public Service
     5        Commission to pass upon a proposed discontinuance of
     6        intrastate transportation service, but it has also
     7        provided for appeal from any final order of the
     8        Commission to the circuit court of Montgomery County as
     9        a matter of right.

10       Ala. Pub. Serv. Comm’n, 341 U.S. at 348.      Citing Burford, the

11       Court stated: “Whatever rights [the Railway Company] may have are
12       to be pursued through the state courts.”      Id. at 350.    And while

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            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.”        See

28       Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 725 (1996).         The

29       WCL is a reticulated statute that governs a complex system

                                            24
 1        designed to benefit the interests of employer and employee in the

 2        State of New York.   Maintaining the balance between these

 3        interests has been the goal throughout the history of the

 4        statute.   To that end, an elaborate system for the compensation

 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.   Indeed, the 2007

 8        amendments to the WCL (and there are a number not under attack

 9        here) are designed to maintain the balance.   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        This bill establishes comprehensive reforms to New
     13        York’s workers’ compensation law by: (1) increasing
     14        maximum and minimum benefits for injured workers and
     15        indexing the maximum to New York’s average weekly wage;
     16        (2) dramatically reducing costs in the workers’
     17        compensation system, making hundreds of millions of
     18        dollars available annually to be translated into
     19        premium reductions; (3) establishing enhanced measures
     20        to combat workers’ compensation fraud; (4) replacing
     21        the Special Disability Fund with enhanced protections
     22        for injured veterans; (5) preventing insurance carriers
     23        from transferring costs to New York employers by
     24        closing the Special Disability Fund to new claims; and
     25        (6) creating a financing mechanism to allow for
     26        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.    As is

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
 1   the WCL.   The manner of compensating workers for lost wages and

 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.    The adjustments

 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.    In carrying out

 8   coherent public policy objectives, the New York Legislature has

 9   been very specific in prescribing the methods and means for
10   providing compensation for injured workers.

11        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.    For example, a

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.   Moreover, the deposits now required are

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.    Likewise, the

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


                                     26
1   matters of substantial public concern and would hamper resolution

2   by the state of challenges similar to those made here.    The

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.
7                              CONCLUSION

8        For the foregoing reasons, the judgment of the District

9   Court is affirmed.




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