Chiropractic America v. Lavecchia , 180 F.3d 99 ( 1999 )

Opinions of the United
1999 Decisions States Court of Appeals
for the Third Circuit
4-14-1999
Chiropractic America v. Lavecchia
Precedential or Non-Precedential:
Docket 99-5060
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Filed April 14, 1999
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 99-5060
CHIROPRACTIC AMERICA,
Appellant
v.
JAYNEE LAVECCHIA, in her official capacity as
Commissioner of Department of Banking and Insurance
("DOB&I"), and DONALD BRYAN, in his official capacity
as Assistant Commissioner for Legislative and Regulatory
Affairs of DOB&I, CHRISTIE WHITMAN in her official
capacity as Governor of the State of New Jersey.
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 98-cv-4986)
District Judge: Hon. Jerome B. Simandle
Argued: March 2, 1999
Before: STAPLETON, RENDELL and ALDISERT,
Circuit Judges
(Filed April 14, 1999)
Richard A. Jaffe (argued)
5 Greenway Plaza, Suite 1710
Houston, TX 77046
ATTORNEY FOR APPELLANTS
Joseph L. Yanotti (argued)
John C. Grady
Office of the Attorney General
of New Jersey
R.J. Hughes Justice Complex
CN 117
Trenton, NJ 08625
ATTORNEYS FOR APPELLEES
OPINION OF THE COURT
ALDISERT, Circuit Judge.
Several New Jersey individual chiropractors and
professional organizations that represent chiropractors
appeal from the district court's dismissal of their complaint
on the basis of abstention under Burford v. Sun Oil Co., 319
U.S. 315 (1943). They contend that the district court
should have adjudicated their federal constitutional
challenge to certain regulations of New Jersey's
comprehensive no-fault automobile insurance law. The
regulations were promulgated by Appellee Jaynee
LaVecchia, Commissioner of the Department of Banking
and Insurance. We will affirm.
I.
On May 19, 1998, in an attempt to reduce escalating
automobile insurance costs in the state, the Legislature of
the State of New Jersey enacted the Automobile Insurance
Cost Reduction Act (the "Act"). The Act substantially
restructured New Jersey's method of providing no-fault
insurance benefits to automobile accident victims. This was
an amendment of the state's 1972 no-fault insurance law,
which previously had been amended in 1983, 1988 and
1990. The new Act was the result of the Legislature's
determination
that the substantial increase in the cost of medical
expense benefits indicate[d] that the benefits [were]
being over utilized for the purpose of gaining standing
2
to sue for pain and suffering, . . . necessitating the
imposition of further controls on the use of those
benefits, including the establishment of a basis for
determining whether treatments or diagnostic tests are
medically necessary.
N.J. Stat. Ann. S 39:6A-1.1. Thus, the Act states in relevant
part:
Benefits provided under basic coverage shall be in
accordance with a benefit plan provided in the policy
and approved by the commissioner. The policy form,
which shall be subject to the approval of the
commissioner, shall set forth the benefits provided
under the policy, including eligible medical treatments,
diagnostic tests and services as well as such other
benefits as the policy may provide. The commissioner
shall set forth by regulation a statement of the basic
benefits which shall be included in the policy. Medical
treatments, diagnostic tests, and services provided by
the policy shall be rendered in accordance with
commonly accepted protocols and professional
standards and practices which are commonly accepted
as being beneficial for the treatment of the covered
injury. . . . Protocols shall be deemed to establish
guidelines as to standard appropriate treatment and
diagnostic tests for injuries sustained in automobile
accidents, but the establishment of standard treatment
protocols or protocols for the administration of
diagnostic tests shall not be interpreted in a [sic] such
a manner as to preclude variance from the standard
when warranted by reason of medical necessity.
N.J. Stat. Ann. S 39:6A-3.1(4)(a). "Medical necessity" exists
when treatment of the particular injury "(1) is not primarily
for the convenience of the injured person or provider, (2) is
the most appropriate standard or level or service which is
in accordance with standards of good practice and standard
professional treatment protocols . . . and (3) does not
involve unnecessary diagnostic testing." N.J. Stat. Ann.
S 39:6A-2m.
The precise constitutional attack lodged by these
Appellants concentrates on six so-called "care paths" in the
3
comprehensive regulations developed by the Commissioner
with the assistance of PricewaterhouseCoopers. These care
paths are a set of protocols and standard treatments and
practices for specific diagnosed back injuries. Each care
path designates the appropriate treatment for particular
back injuries that can be reimbursed absent a showing of
medical necessity. See N.J. Admin. CodeS 11:3-4. The
regulations also include an arbitration mechanism for
resolution of disputes concerning the medical necessity of
treatment that deviates from or exceeds that which has
been delineated in the care paths.
On September 8, 1998, the Commissioner published the
proposed regulations, see 30 N.J. Reg. 3211, and received
comments from the public through November 4, 1998. On
November 4, 1998, the Commissioner held a public hearing
to receive testimony concerning the proposed regulations.
Representatives of health care providers, including
chiropractic associations, attorneys and insurers,
submitted written comments to the proposed regulations
and presented testimony at the public hearing. Appellants
stated that the care paths were "ill-conceived, detrimental
to patient care, and dangerous."
After making minor modifications to the proposed
regulations, the Commissioner signed the regulations for
adoption on November 30, 1998. These modified
regulations were scheduled to become operative on March
22, 1999. See 30 N.J. Reg. 4401(a).
Appellants filed their initial complaint in the district
court on November 4, 1998, before the Commissioner
adopted the regulations. After the regulations were adopted,
three appeals challenging the regulations were filed in the
New Jersey Superior Court, Appellate Division, one by
physicians and other health care professionals and two by
trial lawyers associations. Thereafter, in their first amended
complaint filed in the District Court on January 12, 1999,
Appellants alleged that the regulations violated their
Fourteenth Amendment substantive due process,
procedural due process and equal protection rights. Before
us, Appellants explain:
The final regulations contain only two changes
concerning chiropractic care that are relevant to this
4
lawsuit. First, chiropractors can now treat auto
accident victims with no serious injuries, (i.e. sprains
and strains under care paths one, three and five for up
to twelve visits during the first months....)
The final regulations state that chiropractors can treat
patients with radiculopathy or herniated discs, (i.e.
patients who fall under care paths two, four and six) as
long as they have no positive or objective findings for
either conditions.
Appellants' Brief at 5.
The First Amended Complaint alleged that the care paths
eliminate the availability of reimbursable chiropractic care
for victims of automobile accidents and severely restrict the
number of reimbursable chiropractic care visits allowed in
the first month following an automobile accident.
Appellants based their substantive due process and equal
protection claims on assertions that the care path
provisions were arbitrary and capricious and were not
rationally related to the legitimate aim of the enabling
legislation. See App. at 50-51. As to their procedural due
process count, Appellants contended that the regulations'
arbitration provisions "den[ied] health care practitioners
any practical right to contest the medical treatment
judgments of the [personal injury protection benefits]
carriers." App. at 52. Appellants sought declaratory and
injunctive relief.
On the very next day, January 13, 1999, Appellants filed
an appeal in the New Jersey Superior Court that sets forth
issues similar to those contained in the appeals of the
health care professionals. Both of these appeals are now
pending before the New Jersey Superior Court, and
challenge the regulations as being beyond the scope of the
Department of Banking and Industry, and as establishing
rigid care paths and treatment mandates contrary to
accepted standards of medical care. They contend that the
regulations unreasonably substitute the agency's dictates
for professional medical judgment of the injured person's
physician by specifying the precise care to be provided.
They contend also that the agency has acted in a manner
inconsistent with the enabling legislation. See S.A. at 128,
5
139. All three groups of Appellants--health care
professionals and physicians, attorneys and chiropractors--
contend in these appeals that the regulations were adopted
without appropriate consultation with national and state
standard-setting for professional organizations. See S.A. at
128, 130, 139.
The district court abstained from ruling on Appellants'
federal constitutional claims on the basis of Burford, and
dismissed Appellants' First Amended Complaint. We have
jurisdiction to consider the present appeal pursuant to 28
U.S.C. S 1291. Regarding a district court's abstention
decision, our review of the underlying legal questions is
plenary, but we review the decision to abstain for abuse of
discretion. See Trent v. Dial Medical of Fla., Inc., 33 F.3d
217, 223 (3d Cir. 1994).
II.
At least since 1941, in Railroad Comm'n of Texas v.
Pullman, 312 U.S. 496 (1941), the federal courts have
recognized circumstances under which they will decline to
adjudicate cases even though they have jurisdiction under
the Constitution and statutes. These circumstances are
loosely gathered under discrete concepts of abstention
named after leading Supreme Court cases. The Court has
said: "The various types of abstention are not rigid
pigeonholes into which federal courts must try to fit cases.
Rather, they reflect a complex of consideration designed to
soften the tensions inherent in a system that contemplates
parallel judicial processes." Pennzoil Co. v. Texaco, Inc., 481
U.S. 1, 11 n.9 (1987).
Abstention from the exercise of jurisdiction, however, is
the exception rather than the rule. Colorado River Water
Conservation District v. United States, 424 U.S. 800, 813
(1976). Nevertheless, abstention is firmly rooted.
Several reasons are assigned for withholding the exercise
of jurisdiction. Abstention is recognized to avoid deciding a
federal constitutional question when the case may be
disposed on questions of state law, Pullman; to avoid
needless conflict with the administration by a state of its
own affairs, Burford; to leave to the states the resolution of
6
unsettled questions of state law, Louisiana Power & Light
Co. v. City of Thibodaux, 360 U.S. 25 (1959); to avoid
duplicative litigation, Colorado River. In addition, the
doctrine of "Our Federalism" teaches that federal courts
must refrain from hearing constitutional challenges to state
action under certain circumstances in which federal action
is regarded as an improper intrusion on the right of a state
to enforce its own laws in its own courts, Younger v. Harris,
401 U.S. 37 (1971).
At the risk of over-simplification, we can say that these
reasons come within the rubric of comity, or the idea "that
certain matters are of state concern to the point where
federal courts should hesitate to intrude; and they may also
concern judicial ``economy,' the notion that courts should
avoid making duplicate efforts or unnecessarily deciding
difficult questions." Bath Memorial Hosp. v. Maine Health
Care Fin. Comm'n, 853 F.2d 1007, 1012 (1st Cir. 1988).
We will affirm the district court's judgment on the basis
of Burford abstention. We conclude that the Act and the
regulations promulgated by the Commissioner represent a
complex legislative and regulatory package designed to
reform automobile insurance law in New Jersey, and that
the courts of New Jersey are in the best position to consider
the validity of the applicable regulations under state law,
and can do so without having to examine the constitutional
questions that have been raised by Appellants. "It is
particularly desirable to decline to exercise equity
jurisdiction when the result is to permit a state court to
have an opportunity to determine questions of state law
which may prevent the necessity of decision on a
constitutional question." Burford, 319 U.S. at 333 n.29
(citing Chicago v. Fieldcrest Dairies, Inc., 316 U.S. 168, 173
(1942)).1 Thus, Burford clearly allows a federal court, in fact
urges a federal court, to decline to exercise jurisdiction
when adjudication of questions of state law (which can only
be done by state courts) may avert the need to delve into
constitutional issues like those presented here. This case
_________________________________________________________________
1. The quoted language of Burford and Fieldcrest Dairies bears a strong
resemblance to the Court's language in Pullman, thereby exhibiting how
the various doctrines are not "rigid pigeonholes."
7
fits comfortably into the scheme envisioned by the Burford
Court.
In Burford, the Supreme Court stated that a federal court
should refuse to exercise its jurisdiction in a manner that
would interfere with a state's efforts to regulate an area of
law in which state interests predominate and in which
adequate and timely state review of the regulatory scheme
is available. See 319 U.S. at 332-334. The purpose of
Burford abstention has been articulated by this court: " ``to
avoid federal intrusion into matters of local concern and
which are within the special competence of local courts.' "
Kentucky West Virginia Gas Co. v. Pennsylvania Public Util.
Comm'n, 791 F.2d 1111, 1115 (3d Cir. 1986) (quoting
International Bhd. of Elec. Workers v. Public Serv. Comm'n,
614 F.2d 206, 212 n.1 (9th Cir. 1980)); see also Meredith v.
Talbot Cty., Md., 828 F.2d 228, 231 (4th Cir. 1987) ("The
underlying purpose of Burford abstention is to enable
federal courts to avoid needless conflict with the
administration by a state of its own affairs."); 17A Wright,
Miller & Cooper, Federal Practice and Procedure:
Jurisdiction S 4243.
Recently the Supreme Court provided a clear definition of
the Burford doctrine:
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."
New Orleans Pub. Serv., Inc. v. Council of the City of New
Orleans, 491 U.S. 350, 361 (1989) (quoting Colorado River,
424 U.S. at 814). It is from this definition that we
determine that the district court acted properly when it
dismissed Appellants' First Amended Complaint.
8
A.
We begin with an analysis of whether timely and
adequate state-court review is available, for "[o]nly if [the
court] determines that such review is available, should it
turn to the other issues." Riley v. Simmons, 45 F.3d 764,
771 (3d Cir. 1995).
Timely and adequate state-court review has been and
continues to be available to Appellants. New Jersey law
provides that a party may take an appeal as of right to the
Superior Court of New Jersey, Appellate Division, for review
of a final action of any state administrative agency or officer
and for review of the validity of any rule promulgated by
any state agency or officer. See N.J. Court Rule 2:2-3(a)(2).
Appellants and three other groups of litigants havefiled
such an appeal of the regulations promulgated by the
Commissioner pursuant to the Act.
Appellants contend that the state-court proceeding could
not provide timely and adequate review because the
Appellate Division would have been unable to resolve the
appeal prior to the regulations' March 22, 1999 effective
date. Appellants also contend that the Appellate Division
would not provide them with adequate relief because that
court could not hold an evidentiary hearing. Both
arguments fail.
First, the Appellate Division has the authority to
accelerate the usual briefing and oral argument schedule,
and is empowered to stay agency action pending appeal.
See N.J. Court Rule 2:9-7. Further, if the Appellate Division
declines its authority to stay the agency action, a party may
submit an application for a stay with the Supreme Court of
New Jersey "when necessary to prevent irreparable injury."
N.J. Court Rule 2:2-2. Therefore, the Appellate Division had
the ability to expedite the proceedings in order to rule on
the validity of the regulations at issue here prior to March
22, 1999, or at least stay their enforcement until a ruling
is issued.
Second, Appellants incorrectly assert that the Appellate
Division is without power to hold an evidentiary hearing.
New Jersey court rules permit supplementation of the
record on appeal, including the presentation of live
9
witnesses before a specially designated judge of the New
Jersey Superior Court. See N.J. Court Rule 2:5-5(b).
Further, testimony presented by Appellants during the
public hearing on November 4, 1998, as well as documents
filed during the public comment period, became part of the
record to be considered by the Appellate Division.
Appellants have not demonstrated the absence of timely
and adequate state-court review in this matter. We
therefore turn to the question of whether a federal court's
adjudication of Appellants' claims would interfere with New
Jersey's efforts to implement a policy concerning no-fault
insurance law.
B.
The district court held, and we agree, that the second
prong of the Burford doctrine, as laid out in New Orleans
Public Service, supra, is applicable here. This prong of
Burford requires us to examine three issues: (1) whether
the particular regulatory scheme involves a matter of
substantial public concern, (2) whether it is "the sort of
complex, technical regulatory scheme to which the Burford
abstention doctrine usually is applied," Felmeister v. Office
of Attorney Ethics, 856 F.2d 529, 534 (3d Cir. 1988), and
(3) whether federal review of a party's claims would
interfere with the state's efforts to establish and maintain a
coherent regulatory policy. See New Orleans Public Serv.,
491 U.S. at 361. All three issues can be answered in the
affirmative.
There can be no doubt that a state's efforts to curtail the
skyrocketing costs of automobile insurance premiums
within its borders present a matter of substantial public
concern. New Jersey's dubious notoriety for "out-of-control"
automobile insurance premiums has been well-documented
and has reflected negatively on the state. See , e.g., Thomas
Ginsburg, NJ Auto Insurance Up 8% in ``96, The Philadelphia
Inquirer, Feb. 12, 1998, at A1; Robert Schwaneberg,
Insurers, Legislators Blame Car Premium Mess on Each
Other, The Star-Ledger, Feb. 5, 1998, at 31; John Kolesar,
Stuck in the Middle of the Road: The Legislature's Failure to
Adopt True No-Fault Insurance has Permitted Jerseyans to
10
be Run Over by High Rates, The Star-Ledger, Nov. 23, 1997,
at 1; Sharon Tennyson, The Impact of Rate Regulation on
State Automobile Insurance Markets, 15 J. Ins. Reg. 502
(July 1, 1997). Since 1972, the New Jersey legislature has
attempted to refine its no-fault insurance law in order to
create a scheme that will serve New Jersey drivers and their
passengers, insurers, health care service providers and
those who represent them. The Act and the regulations
promulgated by the Commissioner clearly pertain to a
matter in which the state has a substantial and important
interest.
Additionally, a review of the Act and the regulations
establishes that we are presented with a complex regulatory
scheme for purposes of Burford abstention. The Legislature
and the Commissioner have promulgated all-encompassing,
highly technical, extremely intertwined and interrelated
provisions that describe the extent of reimbursable medical
treatment, applicable deductibles and co-pays and accepted
medical protocols. The regulations include detailedflow
charts of the accepted care paths. There is a delineated
dispute mechanism in place for accident victims who seek
reimbursement for treatments that deviate from the care
paths. There can be no doubt that the Act and regulations
at issue here constitute a complex regulatory solution to
the state's no-fault insurance problem.
Thus, we are left to examine whether federal review of
Appellants' constitutional claims would interfere with New
Jersey's efforts to establish and maintain a coherent
regulatory policy. We believe that " ``the regulatory system
[has] as a central purpose uniformity to achieve important
local interests that would be frustrated by federal court
review.' " University of Md. v. Peat Marwick Main & Co., 923
F.2d 265, 272 (3d Cir. 1991) (quoting Erwin Chemerinsky,
Federal Jurisdiction 112 (Supp. 1990)). The cases relied
upon by Appellants present distinguishable factual
scenarios from the one presented here, and lend further
support for our holding.
The Act and regulations are aimed at reducing the high
cost of automobile insurance in New Jersey. The State of
New Jersey sought to achieve this goal by revising
reimbursement standards for first-party, no-fault personal
11
injury protection medical expense benefits. The regulations
address reimbursement for nearly all medical providers who
treat automobile accident victims.
Thus, a court conducting a review of Appellants' due
process and equal protection claims would have to examine
the purpose of the Act, and determine whether the
regulations conformed with the New Jersey Legislature's
intent and whether the regulations singled out
chiropractors and their patients for unfair treatment.
Clearly, the regulations would be subject to rational
basis/arbitrary and capricious examination in either
sovereign's court. See Bowman Transportation, Inc. v.
Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 285-286
(1974) (agency action that does not implicate fundamental
rights or suspect classes is subject to arbitrary and
capricious review in which court examines whether there is
rational basis for agency's action); Brady v. Department of
Personnel, 693 A.2d 466, 472 (N.J. 1997) (review of state
regulatory policy subject to arbitrary and capricious
standard); Beattystown Community Council v. Department of
Environmental Protection, 712 A.2d 1170, 1176 (N.J. Super.
Ct. App. Div. 1998) (same). Because Appellants, and three
other groups of plaintiffs, have presented an "arbitrary and
capricious" argument to the Superior Court of New Jersey,
Appellate Division, review by this court, or any federal
court, at this time would interfere significantly with New
Jersey's efforts to establish and maintain a coherent
automobile insurance regulatory policy. See Alabama Pub.
Serv. Comm'n v. Southern Railway, 341 U.S. 341, 349
(1951) ("As adequate state court review of an administrative
order based upon predominantly local factors is available
. . . intervention of a federal court is not necessary for the
protection of federal rights.") (footnote omitted). Although
Appellants have not raised Fourteenth Amendment claims
before the Appellate Division, that court would have to
conduct the same form of "arbitrary and capricious" review
to resolve Appellants' state court allegations. The Appellate
Division's scope of review under New Jersey Rule 2:2-3(a)(2)
involves an examination of: "(1) whether the agency's action
violates the express or implied legislative policies, that is,
did the agency follow the law; (2) whether the record
contains substantial evidence to support the findings on
12
which the agency bases its action; and (3) whether, in
applying legislative policies to the facts, the agency clearly
erred in reaching a conclusion that could not reasonably
have been made on a showing of the relevant factors."
Matter of Musick, 143 N.J. 206, 216 (1996). Appellants'
federal suit is thus entangled in a "skein of state law." New
Orleans Pub. Serv., Inc., 491 U.S. at 361.
The district court recognized the problem:
As in Marx [v. Snedecker, 612 F. Supp. 1148 (D.N.J.
1985)], analysis of the constitutional questions raised
in this case would involve an in-depth analysis of the
legislative purposes of AICRA, a major reform effort in
an area of law--automobile insurance--that has
typically been left to the states to regulate. See Lac
D'Amiante du Quebec v. American Home Assurance Co.,
864 F.2d 1033, 1038-39 (3d Cir. 1988) ("the states
have assumed the primary role in regulating
insurance"). This case requires an analysis of whether
the challenged regulations, as they apply to
chiropractors and their patients, are consistent with
the Legislature's attempt in enacting AICRA to reform
New Jersey's comprehensive no-fault automobile
insurance law so as to reduce the high cost of
automobile insurance in New Jersey, or whether
chiropractors and their patients have been unfairly
singled out for unfavorable treatment. The outcome of
this inquiry turns upon an assessment of the
rationality of the basis for the regulations, which
involves an examination of the administrative
procedure and the substantive result of the state
regulatory scheme. Unlike in cases where the state
regulations under constitutional review were enacted to
comply with a federal mandate in the particular
regulatory field, see, e.g., New Jersey Hospital Assoc. v.
Waldman, 73 F.3d 509 (3d Cir. 1995) (involving a due
process challenge to a state agency's reduction in
Medicaid reimbursement rates mandated by the Boran
Amendments to the Medicaid Act, 42 U.S.C.
S 1396(a)(13)(A)), there is no federal interest in the
regulation of automobile insurance, an area in which
Congress has deferred to the states. See Lac
13
D'Amiante, 864 F.2d at 1038-39 (discussing the
McCarran-Ferguson Act, 15 U.S.C. SS 1011-15, which
provides for exclusive state regulation of the business
of insurance).
Dist. Ct. Op. at 20-21, reprinted in App. at 23-24.
III.
That the Appellants have raised federal constitutional
challenges to the regulations does not affect our analysis.
We do not consider the teachings of Bath Mem. Hosp. v.
Maine Health and Fin. Comm'n, 853 F.2d 1007 (1st Cir.
1988), to compel a different result. In that case there was
facial attack on the constitutionality of a statute that
regulated hospital charges. Such an attack is not present
here. Speaking for the court, then-Judge Breyer explained
that the Bath plaintiffs:
do not seek individualized fact- (or cost-) specific
regulatory decision making. To the contrary, they
attack the statute as it is written. Permitting a federal
court to decide this kind of constitutional claim would
not interfere with the workings of a lawful state
system, as such intervention threatened in Burford,
Alabama P.S.C., or [Allstate Insurance Co. v.] Sabbagh[,
603 F.2d 228 (1st Cir. 1979)]. Review here would not
threaten to create in the federal court a parallel
regulatory review institution. The risks of interference
here seem no greater than those present whenever a
federal court decides whether a state regulatory statute
is constitutional.
853 F.2d at 1014-1015.
In contrast with the circumstances in Bath, the
Appellants here do indeed seek individualized fact-specific
regulatory decision making. They do not attack the statute
as written; they attack only discrete portions of regulations
promulgated by the Commissioner, not the legislature, and
review here would certainly create in the federal court a
parallel regulatory review institution. The very factors that
were not present in Bath to militate against applying
Burford are unmistakably present in the case at bar. They
plainly call for the application of abstention here.
14
Our focus should not be on whether a federal claim has
been presented, but rather on the nature of that claim.
Courts have held almost uniformly, for example, that
abstention is inappropriate when a federal plaintiff asserts
a preemption/Supremacy Clause claim. See, e.g., New
Orleans Pub. Serv., Inc., 491 U.S. at 362-363; Kentucky
West Va. Gas Co. v. Pennsylvania Pub. Util. Comm'n , 791
F.2d at 1115-1116; Middle S. Energy, Inc. v. Arkansas Pub.
Serv. Comm'n, 772 F.2d 404, 417 (8th Cir. 1985); Baggett
v. Department of Professional Regulation, Bd. of Pilot
Commissioners, 717 F.2d 521, 524 (11th Cir. 1983);
International Bhd. of Elec. Workers, 614 F.2d at 212 n.1.
This is because "supremacy clause claims are``essentially
one[s] of federal policy,' so that ``the federal courts are
particularly appropriate bodies for the application of
preemption principles.' " Kentucky West Va. Gas Co., 791
F.2d at 1115 (quoting Kennecott Corp. v. Smith, 637 F.2d
181, 185 (3d Cir. 1980)). Additionally, we have held that
abstention is inappropriate in cases in which federal courts
have exclusive jurisdiction over at least a portion of the
claims presented. See Riley, 45 F.3d at 773-774 (federal
court had exclusive jurisdiction over plaintiffs' rule 10b-5
securities claims).
The reasoning that supports the exercise of federal
question jurisdiction in preemption and exclusive
jurisdiction cases is not present here. In this case,
Appellants assert that the Commissioner and the
Department of Banking and Insurance have overstepped
their lawful authority in dealing with a substantial and
complex local concern. Appellants' due process attack on
the care path regulations requires the same analysis as
their state law contentions that the regulations are
arbitrary and capricious.2 Federal court review of
Appellants' substantive due process argument would
thereby create a parallel federal regulatory review
institution.
A reviewing federal court would be required to delve
_________________________________________________________________
2. Appellants limited their New Jersey court contentions to state law
under an appropriate reservation. See England v. Louisiana State Bd. of
Medical Examiners, 375 U.S. 411 (1964).
15
beyond the text of the regulations in order to adjudicate
Appellants' constitutional claims. It would be required to
examine the Commissioner's motivations, the Legislature's
intent, the overarching goal of a reformed no-fault
insurance law and the processes promulgated regarding
dispute resolution. These are complex matters of state
concern that are currently the subject of the appeals before
the Appellate Division. The regulations can, and should, be
reviewed by the state court on state law grounds, obviating
the need to address constitutional questions. See Burford,
319 U.S. at 333 n.29.
Abstention under Burford is appropriate in this case. The
district court properly applied the law and did not exceed
the permissible bounds of discretion when it decided to
abstain.
The judgment of the district court will be affirmed.
16
STAPLETON, Circuit Judge, dissenting:
The Court today endorses the proposition that " Burford
. . . allows a federal court, in fact urges a federal court, to
decline to exercise jurisdiction when adjudication of
questions of state law (which can only be done by state
courts) may avert the need to delve into constitutional
issues like those presented here." Slip Op. at 7. Specifically,
the Court holds that because plaintiffs "have presented an
``arbitrary and capricious' argument to the [state court],
review by this court . . . would interfere significantly with
New Jersey's efforts to establish and maintain a coherent
automobile insurance regulatory policy." Slip Op. at 12.
I do not understand how adjudication of appellants' due
process and equal protection claims will in any way impair
New Jersey's ability to maintain a coherent policy. More
fundamentally, however, the propositions the Court today
affirms cannot coexist with the well established
propositions that (1) "exhaustion [of state remedies] is not
a prerequisite to an action under S 1983," Patsy v. Board of
Regents, 457 U.S. 496, 501 (1982), (2) "the opportunity to
avoid decision of a constitutional question does not alone
justify abstention by a federal court," Colorado River Water
Conservation Dist. v. United States, 424 U.S. 800, 815 n.21
(1976), (3) "the pendency of an action in the state court is
no bar to proceedings concerning the same matter in the
Federal court having jurisdiction," Colorado River, 424 U.S.
at 817 (quoting McClelland v. Carland, 217 U.S. 268, 282
(1910)), (4) "there is . . . no doctrine requiring abstention
merely because resolution of a federal question may result
in the overturning of state policy," NOPSI v. Council of City
of New Orleans, 491 U.S. 350, 363 (1989) (quoting Zablocki
v. Redhail, 434 U.S. 374, 380 n.5 (1978)), and (5) "Burford
represents an ``extraordinary and narrow exception to the
duty of [a federal court] to adjudicate a controversy properly
before it.' " Quackenbush v. Allstate Ins. Co., 517 U.S. 706,
728 (1996). Accordingly, I respectfully dissent.
I.
The plaintiffs in this case are chiropractors and
professional organizations that represent chiropractors both
17
in New Jersey and nationally. They challenge the
constitutionality of certain regulations recently promulgated
by the New Jersey Department of Banking and Insurance
("DOBI"), pursuant to authority granted in the state's
Automobile Insurance Cost Reduction Act ("AICRA"). The
New Jersey legislature enacted AICRA in 1998 in an effort
to stem the rising cost of private passenger automobile
insurance in the state. To further this objective, AICRA
calls for DOBI to promulgate standard professional
treatment protocols for the diagnosis and treatment of
common automobile injuries.
Pursuant to authority granted in AICRA, DOBI has
developed regulations which identify six "care paths"
associated with back injuries. For each care path, the
regulations specify the diagnostic procedures and
treatments for which reimbursement will be required from
an insurer, without a special showing of medical necessity.
Reimbursement for other diagnostic procedures and
treatment is required only if they are shown to be medically
necessary. The regulations also provide a process for
resolving disputes about the medical necessity of care that
deviates from or exceeds the degree of care designated in
the care paths, culminating in arbitration.
During the period for public comment, the plaintiffs and
other health care professionals objected that the "care
paths" were "ill-conceived, detrimental to patient care, and
dangerous." With few changes to the proposed regulations
relevant to the chiropractors' concerns, the final regulations
were adopted on November 30, 1998, to become operative
on March 22, 1999.
Plaintiffs first filed suit in federal court challenging the
constitutionality of the regulations. In their First Amended
Complaint, they allege that the regulations violate the
plaintiffs' substantive due process, procedural due process,
and equal protection rights. In support of their substantive
due process claim, plaintiffs assert that "[t]he care paths
and arbitration provisions are unreasonable, arbitrary and
capricious and do not bear a rational relationship to the
legitimate aim of the enabling legislation." App. at 50. In
support of their equal protection claim, plaintiffs insist that
"there is no rational basis for prohibiting chiropractors from
18
providing reimbursable care to patients under care paths 2,
4, and 6." App. at 51. Finally, in support of their procedural
due process claim, the complaint alleges that "the
arbitration provisions contained in the . . . regulations . . .
deny health care practitioners any practical right to contest
the medical treatment judgments of the PIP carriers." App.
at 52. Based on these allegations, plaintiffs requested the
District Court to declare the regulations dealing with
chiropractic care unconstitutional and to enjoin their
implementation insofar as they relate to chiropractic care.
The plaintiffs' federal complaint is thus limited to claims
that the final product of the rule making process (i.e., the
regulations) is in conflict with the United States
Constitution.1
Shortly after instituting their federal suit, plaintiffs
sought judicial review of the regulations under state law
from New Jersey Superior Court's Appellate Division. They
argued that the DOBI, in promulgating the regulations,
exceeded the scope of its authority under AICRA. They also
_________________________________________________________________
1. In support of their substantive due process claim, plaintiffs, after
asserting that the care paths and arbitration provisions are arbitrary and
capricious, allege that "the regulations appear to be targeted at
restricting chiropractic care to accident victims, and they manifest a
bias
and bad faith towards chiropractors and accident victims who opt to
undergo chiropractic care." App. at 50. I read this as further explication
of the plaintiffs' facial attack on the regulations. The briefing before
us
suggests, however, that plaintiffs may wish to argue that the regulations
are invalid because the rule makers were motivated by bias towards
chiropractors. While it would not change my view as to the propriety of
abstention if I believed the District Court would have to delve into the
subjective intent of the rule makers, I know of no authority for the
proposition that a substantive due process claim permits a federal court,
in a case not involving infringement of a fundamental right, to inquire
into the motive behind state legislative or regulatory rule making. Where
no fundamental right is implicated, a state law comports with
substantive due process and must be upheld if it is rationally related to
a legitimate governmental interest. Williamson v. Lee Optical of
Oklahoma, 348 U.S. 483, 491 (1955); Alexander v. Whitman, 114 F.3d
1392, 1403 (3d Cir. 1997). Midnight Sessions, Ltd. v. City of
Philadelphia,
945 F.2d 667 (3d Cir. 1991), relied upon by the plaintiffs, dealt with a
challenge to a refusal to issue a dance hall license, not with a challenge
to rule making.
19
attacked the process by which the regulations were
developed, arguing, inter alia, that they "were adopted
without appropriate consultation with national and state
standard setting organizations or the applicable state
professional licensing boards." App. at 86. Consistent with
England v. Louisiana State Bd. of Med. Exam'rs, 375 U.S.
411 (1964), plaintiffs expressly "reserve[d] their right to
pursue federal claims in a previously filed federal court
action." App. at 86.
The District Court abstained on the basis of Burford v.
Sun Oil Co., 319 U.S. 315 (1943). Plaintiffs ask that we
reverse the dismissal of their federal suit and remand this
matter to the District Court for further proceedings,
including consideration of their application for a
preliminary injunction. The DOBI asks that we affirm based
on Burford, or, alternatively, on the Railroad Comm'n of
Texas v. Pullman Co., 312 U.S. 496 (1941), Younger v.
Harris, 401 U.S. 37 (1971), or Colorado River, 424 U.S. 800,
abstention doctrines. I would grant the relief that plaintiffs
seek.
II.
Because the District Court dismissed plaintiffs'
complaint, we must take their allegations to be true. See
Monaghan v. Deakins, 798 F.2d 632 (3d Cir.1986), aff'd in
part and vacated in part, 484 U.S. 193 (1988). In reviewing
a District Court's decision to abstain, the underlying legal
questions are subject to plenary review, although the
decision to abstain is reviewed for abuse of discretion. "The
determination of whether this case falls in the area within
which the district court may exercise discretion is therefore
a matter of law, reviewable on a plenary basis. Only if we
determine that the case falls within this range will we apply
an abuse of discretion standard in reviewing the district
court's decision to abstain." University of Md. v. Peat
Marwick Main & Co., 923 F.2d 265, 270 (3d Cir. 1991).
III.
I begin with the Supreme Court's admonition that
abstention is the "exception and not the rule" and that a
20
federal court's obligation to adjudicate claims within its
jurisdiction is "virtually unflagging." University of Md., 923
F.2d at 271, (quoting NOPSI, 491 U.S. at 359). As the
Supreme Court recently reiterated, federal courts
have no more right to decline the exercise of
jurisdiction which is given, than to usurp that which is
not given. The one or the other would be treason to the
Constitution. [T]he courts of the United States are
bound to proceed to judgment and to afford redress to
suitors before them in every case to which their
jurisdiction extends. They cannot abdicate their
authority or duty in any case in favor of another
jurisdiction. When a Federal court is properly appealed
to in a case over which it has by law jurisdiction, it is
its duty to take such jurisdiction. . . . The right of a
party plaintiff to choose a Federal court where there is
a choice cannot be properly denied.
NOPSI, 491 U.S. at 358-59 (quotations and citations
omitted).
A District Court may abstain in a case in which it has
jurisdiction only if that case falls within one of the four,
very narrow, exceptions articulated in Burford, Pullman,
Younger, and Colorado River. To preserve the general rule,
courts have delineated the contours of these limited
exceptions and provided specific elements for each. I believe
that the majority's approach unnecessarily blurs the lines
dividing the exceptions -- most notably between the Burford
and Pullman exceptions -- and thereby establishes a
precedent that takes a substantial step toward creating the
proverbial "exception that swallowed the rule." I believe that
fidelity to the general rule obliging federal courts to exercise
their jurisdiction requires a careful analysis of each
doctrine's applicability. That analysis leads me to conclude
that none of the abstention exceptions are applicable here.
IV.
The Supreme Court has summarized the Burford doctrine
as follows:
Where timely and adequate state court review is
available, a federal court sitting in equity must decline
21
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 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."
NOPSI, 491 U.S. at 361.
I agree with my colleagues that timely and adequate state
court review has been available to plaintiffs. They have no
duty to exhaust their state remedies before pressing
forward with their S 1983 claims in the federal court,
however, and this is true even though such exhaustion
might relieve a federal court of the burden of resolving a
constitutional issue in the S 1983 case. See Patsy, 457 U.S.
at 515; Hawaii Housing Auth. v. Midkiff, 467 U.S. 229, 236-
37 (1984); Marks v. Stinson, 19 F.3d 873, 882 (3d Cir.
1994).
The District Court found, and appellees contend, that
abstention was appropriate here under the second prong of
the Burford doctrine -- i.e., because federal review would
disrupt state efforts to establish a coherent policy on a
matter of substantial public concern.
There is no dispute in this case that the legislative
scheme reflected in AICRA and the implementing
regulations constitutes a complex regulatory scheme
covering a subject matter in which the state has very
important interests. It is also indisputable that a federal
court declaration in this case that these regulations violate
the federal constitution and an injunction preventing their
implementation would disrupt this state regulatory scheme.
These undisputed facts do not alone make Burford
abstention appropriate, however. "While Burford is
concerned with protecting state administrative processes
from undue federal interference, it does not require
abstention whenever there exists such a process . . . ."
NOPSI, 491 U.S. at 362. And "there is, of course, no
doctrine requiring abstention merely because resolution of
22
a federal question may result in the overturning of a state
policy." Zablocki, 434 U.S. at 379-80 n.5.
Burford is thus not directed to the disruption that comes
from a one-time federal declaration that a state program is
unconstitutional. As the above quoted portion of NOPSI
indicates, it is concerned rather with cases in which a
federal court will be called upon to resolve issues involving
policy judgments that should be reserved for state officials
who gain special competence from administering and
developing the regulatory process. As then judge, now
Justice Breyer explained in a very similar context in Bath
Mem. Hosp. v. Maine Health and Fin. Comm'n, 853 F.2d
1007 (1st Cir. 1988), the threat to which Burford is directed
is an "institutional" one:
Federal courts abstained in Burford, and in similar
cases, such as [Alabama Public Serv. Comm'n v. S. Ry.
Co., 341 U.S. 341 (1951)] and [Allstate Ins. Co. v.
Sabbagh, 603 F.2d 228 (1st Cir. 1979)] when they
feared that excessive federal court intervention
unnecessarily threatened to impede significantly the
ongoing administration of a state regulatory system.
The threatened interference did not consist merely of
the threat that the federal court might declare the
entire state system unconstitutional; that sort of risk is
present whenever one attacks a state law on
constitutional grounds in a federal court. Rather, in
our view, abstention in the Burford line of cases rested
upon the threat to the proper administration of a
constitutional state regulatory system. The threat was
that the federal court might, in the context of the state
regulatory scheme, create a parallel, additional, federal,
``regulatory review' mechanism, the existence of which
would significantly increase the difficulty of
administering the state regulatory scheme. It was this
special and unusual "institutional threat" that, in our
view, led the federal courts to abstain.
To be more specific, in Burford, the plaintiff, invoking
diversity jurisdiction, asked a federal court to decide
that, as a matter of state law, it was entitled to a state
oil permit that would have given it a right to remove oil
through its wells from a field where large numbers of
23
other producers also had wells. A state agency, the
Texas Railroad Commission, was in charge of deciding
just who could withdraw what oil from a commonly
drilled field, a highly technical question, and one of
great local importance, for the Texas Railroad
Commission, through this regulation, sought to impose
restrictions on supply that would keep interstate oil
prices high. . . . Because of the need, in terms of both
economics and equity, to achieve a consistent set of
decisions (and the fact that changing economic
conditions could require rapidly changing decisions)
the state statute had centralized all judicial review in a
single Texas state court. As the Supreme Court pointed
out, in these circumstances, the presence of a federal
court as an independent forum of review for individual
licensing decisions based on a balancing of factually-
based local interests created a risk of inconsistency
(between diversity cases and others) that could have
threatened the viability of the Texas regulatory scheme.
Bath, 853 F.2d at 1013-14 (citations omitted) (emphasis in
original).
Here, as in Bath, the "plaintiffs do not seek individualized
review of fact . . . specific regulatory decision making. To
the contrary, they attack the [regulations] as [they are]
written. . . . Review here would not threaten to create in the
federal court a parallel regulatory review institution. The
risks of interference here seem no greater than those
present whenever a federal court decides whether a state
regulatory statute is constitutional." Id. at 1014-15.
If we were to allow the District Court to proceed in this
matter, it would be called upon, insofar as the substantive
due process and equal protection claims are concerned, to
do nothing more (and nothing less) than look at the text of
the regulation and ask whether a rational rule maker could
possibly conclude that the challenged provisions would in
some way serve the legitimate governmental interest
identified by the state in response to the challenge. See
United States v. Williams, 124 F.3d 411, 422 (3d Cir. 1997)
(equal protection); Alexander, 114 F.3d at 1406 (substantive
due process). This extremely deferential rational basis
review is deliberately designed to constrain a federal court
24
from resolving an issue of state policy -- if the court can
conceive of any rational basis for the policy choice made in
the challenged regulatory provision there is no
constitutional violation and the case is over.
With respect to plaintiffs' procedural due process claim,
the District Court would be called upon to determine
whether the arbitration process provides a fair opportunity
for health care practitioners to contest the medical
treatment judgments of the PIP carrier. Again, this would
involve examining facially the procedure provided to
determine whether it comports with the minimum
procedural due process required by the Fourteenth
Amendment. See Mathews v. Eldridge, 424 U.S. 319, 325
(1976). I fail to see how performing this task will in any way
"be disruptive of state efforts to establish a coherent policy
with respect to a matter of substantial public concern."
NOPSI, 491 U.S. at 361.
While the claims in this case and the state proceeding are
distinct, they do deal with the same subject matter and it
is conceivable that the Appellate Division may consider
arguments and issues similar to those that will be involved
here. We have clearly held, however, that parallel
proceedings dealing with the same subject matter are not a
basis for abstention. Marks, 19 F.3d at 881. Burford is
implicated only when there are issues that the federal court
would have to resolve in the federal proceeding that should
be reserved for a state tribunal having special competence
to resolve them. The issues here are conventional
challenges based on the federal constitution, and the
Appellate Division, while as competent, is no more
competent than the District Court to resolve those issues.2
_________________________________________________________________
2. The Court distinguishes the closely analogous Bath case on the
ground that plaintiffs here "attack [on due process and equal protection
grounds] only discrete portions of regulations promulgated by the
Commissioner, not the legislature." Slip Op. at 14. It fails to explain,
however, how adjudication of the constitutional issues here posed to the
District Court would be any more disruptive of the state's ability to
develop coherent policy than adjudication of the issues presented to the
federal court in Bath.
25
V.
In Artway v. Attorney Gen. of N.J., 81 F.3d 1235 (3d Cir.
1996), we explained Pullman abstention as follows:
Under our jurisprudence, a district court must make
three findings in order to justify the Pullman exception
to the general rule that federal courts must hear cases
properly brought within their jurisdiction. The Court
must find (1) that uncertain issues of state law underlie
the federal constitutional claims brought in the district
court; (2) that the state law issues are amenable to a
state court interpretation that would obviate the need
for, or substantially narrow, adjudication of the federal
claim; and (3) that important state policies would be
disrupted through a federal court's erroneous
construction of state law. If all three factors are
present, the federal court must then consider whether
abstention is appropriate by weighing such factors as
the availability of an adequate state remedy, the length
of time the litigation has been pending, and the impact
of delay on the litigants.
Artway, 81 F.3d at 1270 (citations omitted) (emphasis
added).
Thus, Pullman abstention is applicable only in the narrow
category of cases in which a federal court will have to
determine an uncertain issue of state law in the course of
reaching a federal constitutional issue and important state
policies would be frustrated should the federal court err in
deciding that issue. While DOBI repeats many times in its
brief that the federal court here would have to interpret the
statute and the regulations, it has not identified a single
specific issue of state law that is both unclear and relevant
to the issues the federal court has been asked to address.
Pullman abstention, accordingly, would be inappropriate
here.
Were it true, as the Court suggests, that Burford allows
a federal court to decline to exercise jurisdiction whenever
a state court's decision might "avert the need to delve into
constitutional issues," slip op. at 7, Pullman abstention
would serve no purpose. One would never need to ask
whether there are unclear questions of state law, the
26
resolution of which would be material to the constitutional
issues presented in the federal proceeding. Burford
abstention would be appropriate even in the absence of
such issues.
VI.
In Frank Russell Co. v. Wellington Mgmt., 154 F.3d 97,
106 (3d Cir. 1998), we summarized Younger as
"prohibit[ing]" a "federal court from enjoining an on-going
state action" if "(1) there is an on-going state judicial
proceeding; (2) the state proceeding implicates an important
state interest, and (3) the state proceeding provides an
adequate opportunity to raise the constitutional issue." As
we said in Marks, however, "while a proponent of
abstention must show [these three circumstances exist],
such a showing does not require that the federal court
abstain." Marks, 19 F.3d at 882 (emphasis supplied).
The teachings of Marks are helpful here. First, Marks
explains that the key to Younger abstention is not the
presence of parallel state proceedings, but rather the
likelihood that the federal action will interfere with the
ongoing state proceedings. "This is true even in cases where
there exists a ``potential for conflict in the results of
adjudications.' " Id. at 882 (quoting Colorado River, 424
U.S. at 816). After all, as Marks reminds, "[a] federal
plaintiff may pursue parallel actions in the state and
federal courts so long as the plaintiff does not seek relief in
the federal court that would interfere with the state judicial
process." Id. at 885.
Even though the plaintiffs in Marks sought injunctive
relief from the federal court, abstention under Younger was
not justified. As we explained,
[Marks was] not a case in which the federal plaintiffs
are seeking relief which will in any way impair the
ability of the state courts of Pennsylvania to adjudicate
anything that is currently before them. When [Marks']
suit was filed, plaintiffs . . . had instituted two
proceedings challenging the election, both of which
were then before the Court of Common Pleas. The
federal suit did not directly or indirectly ask the court
27
for any relief with respect to those state proceedings.
The plaintiffs were simply pursuing parallel tracks
seeking consistent relief in the federal and state
systems.
Id. at 884. The same is true here. Plaintiffs do not seek to
enjoin a state judicial proceeding or to enjoin enforcement
of a state judicial decree. Younger abstention would thus
violate the District Court's duty to resolve federal claims.
VII.
The "threshold inquiry that must be decided in any
Colorado River abstention case is whether the two actions
are ``parallel.' " Ryan v. Johnson, 115 F.3d 193, 196 (3d Cir.
1997). If they are not, the District Court lacks the power to
abstain. "Generally, cases are parallel when they involve the
same parties and claims." As we explained in Trent v. Dial
Med. of Fla., Inc., "it is important that only truly duplicative
proceedings be avoided. When the claims, parties or
requested relief differ, deference may not be appropriate."
Trent, 33 F.3d 217, 224 (3d Cir. 1994) (quoting Complaint
of Bankers Trust Co. v. Chatterjie, 636 F.2d 37, 40 (3d Cir.
1980)).
The state and federal proceedings here are not parallel.
As I have explained, the state proceeding involves only state
law challenges to the regulations, while the federal
proceeding involves only federal constitutional issues. As a
result, Colorado River abstention is inapposite here.
VIII.
The District Court had an obligation to entertain and
resolve plaintiffs' constitutional claims. It lacked authority
to abstain. Accordingly, I would reverse its order of
dismissal and remand this case for proceedings, including
prompt consideration of plaintiffs' application for a
preliminary injunction.
28
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
29