ReadyLink Healthcare v. SCIF

Abstention in civil cases is proper when state proceedings: (1) are ongoing; (2) either involve a state’s interest in enforcing orders or judgments of its courts or are quasi-criminal actions; (3) are of an important state interest; and, (4) permit involved parties to bring federal challenges.

The State Compensation Insurance Fund (“SCIF”) determined that ReadyLink owed a substantial sum in additional premiums, based off of improper calculation of employee payroll. After both an Administrative Law Judge and the Los Angeles Superior Court affirmed SCIF’s findings, ReadyLink filed this federal preemption claim in the district court for the Central District of California, while awaiting additional state court review of SCIF’s actions, arguing that SCIF acted improperly by not applying federal IRS reporting rules in determining whether additional premiums needed to be paid. The district court dismissed ReadyLink’s action stating abstention was proper under Younger v. Harris, to which ReadyLink appealed. The Ninth Circuit held that the district court’s abstention under Younger was not warranted. The panel held that under Younger in civil cases, abstention is proper when state proceedings: (1) are ongoing; (2) either involve a state’s interest in enforcing orders or judgments of its courts or are quasi-criminal actions; (3) are of an important state interest; and, (4) permit involved parties to bring federal challenges. Abstention was improper here because there was no ongoing state criminal action, the state was not attempting to enforce one of its courts judgments, and the state action here was not analogous to a criminal prosecution of ReadyLink. However, prior to the Ninth Circuit’s decision, California’s courts finalized their review of the initial action and ReadyLink’s claim became barred by issue preclusion. AFFIRMED.