United States District Court, E.D. North Carolina, Northern Division
PAULSON BEACH VENTURES, LLC, d/b/a First Light Breakfast & Burgers, Plaintiff,
CHARLTON L. ALLEN, in his official capacities as Chair of the North Carolina Industrial Commission, BRYAN A. STRICKLAND, in his official capacities as the Director of the Compliance and Fraud Investigative Division of the North Carolina Industrial Commission, LAUREN HALBERT, in her official capacities as Assistant Director of the Compliance and Fraud Investigative Division of the North Carolina Industrial Commission, and AMANDA M. PHILLIPS, in her official capacities as Special Deputy Commissioner for the North Carolina Industrial Commission, THE NORTH CAROLINA INDUSTRIAL COMMISSION, and THE STATE OF NORTH CAROLINA, Defendants.
C. DEVER III, Chief United States District Judge
7, 2017, the court held a hearing concerning Paulson Beach
Ventures, LLC's ("Paulson Beach Ventures" or
"plaintiff') motion for a preliminary injunction. As
explained below, Younger v. Harris. 401 U.S. 37
(1971), and its progeny mandate abstention. Thus, the court
denies plaintiff's motion for a preliminary injunction,
abstains, and stays the action pending conclusion of ongoing
Beach Ventures challenges an $86, 750 civil penalty the North
Carolina Industrial Commission assessed on March 7, 2017,
pursuant to N.C. Gen. Stat. § 97-94(b). See Compl. [D.E.
1] ¶¶ 1-10, 16-50; [D.E. 5-7] (copy of order
imposing the civil penalty). The North Carolina Industrial
Commission assessed the civil penalty because Paulson Beach
Ventures failed to have worker's compensation insurance
for 1, 735 days between 2012 and 2016. See [D.E. 5-7].
Paulson Beach Ventures contends that the civil penalty
violates the Eighth Amendment's Excessive Fines Clause.
See Compl. ¶¶ 56-74. Paulson Beach Ventures also
contends that defendants violated its rights to due process
and equal protection in assessing the civil penalty. See
Id. ¶¶ 75-99. Paulson Beach Ventures seeks
a declaratory judgment that the N.C. Gen. Stat. § 97-94
penalty assessment and associated practices, facially and as
applied, violate its Eighth and Fourteenth Amendment rights.
See id (prayer for relief). Paulson Beach Ventures also seeks
a preliminary and permanent injunction, compensatory and
nominal damages, and reasonable attorney's fees and
Paulson Beach Ventures filed this federal action, Paulson
Beach Ventures had not paid the civil penalty and was in the
midst of state administrative proceedings in the North
Carolina Industrial Commission disputing the civil penalty.
See Compl. ¶¶ 30-50. Paulson Beach Ventures can
raise its constitutional challenges in the North Carolina
Industrial Commission. If Paulson Beach Ventures is
unsatisfied with the result of those state administrative
proceedings, it can seek judicial review in the North
Carolina Court of Appeals and raise its constitutional
challenges in that court. See N.C. Gen. Stat. §
97-94(b); Atiapo v. Goree Logistics, Inc., 240
N.C.App. 1, 6-8, 770 S.E.2d 684, 688-89 (2015); Johnson
v. Herbie's Place, 157 N.C.App. 168, 178-79, 579
S.E.2d 110, 117-18 (2003); Harrison v. Tobacco Transport,
Inc., 139 N.C.App. 561, 570, 533 S.E.2d 871, 877 (2000).
If unsatisfied with the result in the North Carolina Court of
Appeals, Paulson Beach Ventures can seek review in the
Supreme Court of North Carolina.
Younger, the Supreme Court detailed our national
policy forbidding federal courts to stay or enjoin pending
state court proceedings except under special
circumstances." Nivens v. Gilchrist,
444F.3d237, 241 (4th Cir. 2006) (quotation omitted); see
Younger, 401 U.S.at41. Under Younger, a federal court
generally must abstain from exercising jurisdiction and
interfering in a state proceeding if "(1) there is an
ongoing state judicial proceeding brought prior to
substantial progress in the federal proceeding; that (2)
implicates important, substantial, or vital state interests;
and (3) provides adequate opportunity to raise constitutional
challenges." Nivens, 444 F.3d at 241; see
Ohio Civil Rights Comm'n v. Davton Christian Sch.,
477 U.S. 619, 626-29 (1986); Middlesex Cty. Ethics Comm.
v. Garden State Bar Ass'n, 457 U.S. 423, 431-37
Younger applies, it "contemplates the outright
dismissal of the federal suit, and the presentation of all
claims, both state and federal, to the state courts."
Nivens, 444 F.3d at 246 (quotation omitted); see
Gibson v. Berryhill, 411 U.S. 564, 577 (1973).
Nonetheless, where a plaintiff files a federal action and
seeks not only an injunction concerning an ongoing state
proceeding but also damages in the federal action, the proper
resolution under Younger is to stay the plaintiffs
federal action pending conclusion of the state proceeding.
See, e.g., Ouackenbush v. Allstate Ins. Co., 517
U.S. 706, 731 (1996); Beam v. Tatum, 299 F.App'x
243, 248 (4th Cir. 2008) (per curiam) (unpublished);
Traverso v. Penn, 874 F.2d 209, 213 (4th Cir. 1989).
cannot avoid Younger simply by refusing to exhaust
state administrative or judicial remedies. See Moore v.
City of Asheville. 396 F.3d 385.394-97 (4th Cir. 2005).
In Moore, a street preacher received two citations for
violating the city's noise ordinance. The street preacher
paid the fine for the first citation without challenging the
citation, but initiated the administrative appeals process
for the second citation by filing an appeal with the Noise
Ordinance Appeals Board. Id. at 389. After the Board
affirmed the assessment of the citation, the street preacher
paid the fine on the second citation and abandoned further
state administrative and judicial review. Id. By
statute, the street preacher had the right to appeal the
Board's decision to the City Manager and then seek a writ
of certiorari in North Carolina superior court. Id.
at 3 8 8. Instead, the street preacher let the time for
taking appeal from his citations lapse and filed suit in
federal district court for damages and ' declaratory and
injunctive relief against the city and its officials.
Id. at 388-89. The street preacher alleged that the
noise ordinance, as well as related ordinances, violated the
First and Fourteenth Amendments to the U.S. Constitution on
their face and as applied. Id. at 387. Among other
things, the street preacher sought a refund of the fines that
he had paid. See Id. at 396-97.
Moore, the district court stayed the proceedings
based on Younger "pending the outcome o[f]
state court proceedings." Id. at387. The Fourth
Circuit affirmed the district court's abstention, even
though the time for exhausting state-court remedies had
expired and the street preacher's complaint contained a
prospective, facial challenge to the noise ordinance and
related statutes based on the First Amendment. The Fourth
Circuit analyzed "Younger's policy of commanding
federal restraint when the federal action is duplicative,
casts aspersion on state proceedings, disrupts important
state enforcement efforts, and is designed to annul a state
proceeding." Id. at 394-95. The Fourth Circuit
held that the case "present[ed] the same concerns for
federalism and comity that animate established
Younger jurisprudence, and therefore ... as a
'necessary concomitant' of Younger....
abstention was appropriate." Id. at 388
(quoting Huffman v. Pursue. Ltd., 420 U.S. 592, 608
filing suit in this court while litigating the civil penalty
in the ongoing proceedings before the North Carolina
Industrial Commission, Paulson Beach Ventures seeks to enjoin
a dispute that is ongoing at the state administrative level.
To the extent Paulson Beach Ventures "seeks to annul or
trample on the results of state administrative proceedings,
[it] interferes with the State's interest in enforcing
its substantive laws as well as its interest in enforcing
those laws through available administrative procedures and in
its own courts." Id. at 395. Furthermore,
unlike the street preacher in Moore, the time for
Paulson Beach Ventures to seek state judicial remedies has
not expired. See N.C. Gen. Stat. § 97-94(b). Thus, the
case for abstention is even stronger than in Moore.
the remaining two Younger factors, North Carolina
has a substantial interest in enforcing its Workers'
Compensation Act and ensuring that employers subject to the
Workers' Compensation Act comply with it. Furthermore, as
discussed, Paulson Beach Ventures will receive a full and
fair opportunity to litigate its three constitutional claims
during the state proceedings. See N.C. Gen. Stat. §
97-94(b); see also Id. §§ 97-77, 97-80,
97-85, 97-86; Ohio Civil Rights Cnmm'n, 477 U.S.
at 627; Middlesex Cty. Ethics Comm., 457 U.S. at
435-37. Accordingly, Younger and its progeny warrant
abstaining. See, e.g., Moore. 396 F.3d at 397.
opposition to this conclusion, Paulson Beach Ventures cites
Sprint Communications. Inc. v. Jacobs. 134 S.Ct. 584
(2013), and argues that the Supreme Court in Sprint
Communications substantially narrowed how and when
Younger applies. According to Paulson Beach
Ventures, in Sprint Communications, the Supreme
Court limited Younger's application to (1) state
criminal prosecutions; (2) state civil enforcement
proceedings; and (3) state civil proceedings involving
certain orders that are uniquely in furtherance of the state
courts' ability to perform their judicial functions. See
Id. at 588. Paulson Beach Ventures then argues that
the ongoing administrative proceedings in the North Carolina
Industrial Commission do not fit into any of the three
categories the Supreme Court discussed in Sprint
court disagrees with Paulson Beach Ventures's
interpretation of Sprint Communications. In Sprint
Communications, the Supreme Court applied settled
Younger abstention doctrine and held that
Younger abstention did not apply to parallel
federal-court and state-court proceedings challenging
intrastate access charges for telephone calls transported via
the internet. Id. at 588. In so holding, the Supreme
Court applied New Orleans Public Service. Inc. v. Council
of City of New Orleans, 491 U.S. 350 (1989)
("NOPSJ"), which involved similar parallel federal
and state proceedings that fell outside the three categories
of proceedings described in Sprint Communications
Sprint Communications or NOPSI, the ongoing
administrative proceeding before the North Carolina
Industrial Commission is a proceeding designed to sanction
Paulson Beach Ventures for wrongfully failing to have
workers' compensation insurance. A state agency is a
party to that ongoing administrative proceeding, and the
administrative proceeding fits comfortably within the
examples of state civil enforcement proceedings described in
Sprint Communications and NOPSI to which
Younger abstention applies. See Sprint
Commc'ns, 134 S.Ct. at 592; NOPSI, 491 U.S.
at 368; Ohio Civil Riphts Cnmm'r, 477 U.S. at
621-25; Middlesex Cty. F.thics Cnmm., 457 U.S. at
433-34; Moore v. Sims. 442 U.S. 415, 419-23 (1979);
Trainor v. Hernandez,431 U.S. 434, 444 (1977);
Huffman, 420 U.S. at 598-99; see also Doe v.
Univ. of Ky., No. 16-5170, 2017 WL 2590513, at *2-3 (6th
Cir. June 15, 2017); Si ...