PDX NORTH, INC. v. HAROLD J. WIRTHS

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

____________________________________

:

PDX NORTH, INC. :

:

Plaintiff, :

:

and :

:

SLS DELIVERY SERVICES, INC. :

: Case No.: 3:15-cv-7011-BRM-TJB

Plaintiff-Intervenor, :

v. : OPINION

:

ROBERT ASARO-ANGELO, in his :

capacity as Commissioner of the New :

Jersey Department of Labor and Workforce :

Development :

:

Defendant. :

:

MARTINOTTI, DISTRICT JUDGE

Before this Court are Defendant Robert Asaro-Angelo’s Motion for Judgment on the

Pleadings or for a Stay of Proceedings (ECF No. 63) and Plaintiff PDX North, Inc.’s (“PDX”)

Cross-Motion for Summary Judgment (ECF No. 69). Both motions are opposed (ECF Nos. 70,

74, & 78). Having reviewed all parties’ submissions filed in connection with the motion and

having declined to hear oral argument pursuant to Federal Rule of Civil Procedure 78(b), for the

reasons set forth below and for good cause having been shown, the Defendant’s Motion for

Judgment on the Pleadings is GRANTED, and PDX’s Cross-Motion for Summary Judgment is

ADMINISTRATIVELY TERMINATED.

I. FACTUAL AND PROCEDURAL BACKGROUND1

A. New Jersey’s Unemployment Compensation Law

Robert Asaro-Angelo (the “Commissioner”) is New Jersey’s Commissioner of Labor and

Industry and leads the state’s Department of Labor and Workforce Development. See N.J. Stat.

Ann. § 34:1A-2. The Commissioner enforces New Jersey’s unemployment compensation law.

See id. § 43:21-7f. The unemployment compensation law requires employers to pay into the

state’s unemployment compensation fund an amount in proportion to the wages each employer

pays to its employees. See id. § 43:21-7. The statutory calculation exempts payments both to

independent contractors and to certain commercial freight truck drivers. See id. § 43:21-19(i)(6),

(i)(7)(X).

B. PDX North, Inc.

“PDX is a company that facilitates, brokers, and provides distribution and transportation

services of wholesale auto parts to auto dealers and third-party auto suppliers throughout New

Jersey, Pennsylvania, New York, Connecticut, Rhode Island, Massachusetts, and Vermont.”

(PDX’s Am. Compl. ¶ 11.) The company specializes in providing its customers with these auto

parts on demand, often on short notice. (Id. ¶ 20.) Given the nature of its business model,

PDX’s “shipments are often time-sensitive and unscheduled.” (Id.) To meet customers’ needs,

the company contracts with drivers to perform deliveries. (Id.)

PDX characterizes its drivers as an independent contractors. (Id.) However, the

company fears that its drivers will not meet the statutory exemption in § 43:21-19(i)(6) or

(i)(7)(X). (Id. ¶ 6.) The company alleges that if it were forced to treat its drivers as employees

1 When reviewing a motion for judgment on the pleadings, “[t]he court will accept the

complaint’s well-pleaded allegations as true, and construe the complaint in the light most

favorable to the nonmoving party, but will not accept unsupported conclusory statements.”

DiCarlo v. St. Mary Hosp., 530 F.3d 255, 262-63 (3d Cir. 2008).

for purposes of the unemployment compensation law, the company would incur additional costs

so great that its current business model would no longer be viable. (Id. ¶ 5.)

The Commissioner audited PDX three times in connection with the company’s

obligations under the unemployment compensation law, covering the years 2006-09 (first audit),

2010-12 (second audit), and 2013-15 (third audit). (Id. ¶¶ 22-25.) Following the audits, the

Commissioner determined PDX owed a total of approximately $1.83 million in unpaid

contributions to the unemployment compensation fund, interest on those unpaid contributions,

and financial penalties. (Id.) PDX appealed the Commissioner’s decision to the New Jersey

Office of Administrative Law. See PDX N., Inc. v. N.J. Dep’t of Labor & Workforce Dev., OAL

Dkt. No. LID 02451-2015 S (filed Feb. 19, 2015). PDX also brought this action seeking

declaratory and injunctive relief against the Commissioner, alleging that the Federal Aviation

Administration Authorization Act of 1994 (“FAAAA”), 49 U.S.C. § 14501(c)(1), preempts New

Jersey’s unemployment compensation law, and the Dormant Commerce Clause, see U.S. Const.,

art. I, § 8, bars the enforcement of New Jersey’s unemployment compensation law. (ECF No. 52

¶¶ 50-67.)

The Court previously denied the Commissioner’s motion to dismiss, holding that neither

sovereign immunity nor the the Rooker-Feldman,2 Colorado River,3 or Burford4 doctrines barred

the Court from hearing this case on the merits, and PDX stated a valid claim for relief under

Federal Rule of Civil Procedure 12(b)(6). (ECF No. 22, at 6-10.) The Court also denied PDX’s

motion for summary judgment. (ECF No. 22, at 12.) The Commissioner subsequently moved

2 D.C. Court of Appeals v. Feldman, 460 U.S. 462, 482-87 (1983); Rooker v. Fidelity Trust Co.,

263 U.S. 413, 415-17 (1923).

3 Burford v. Sun Oil Co., 319 U.S. 315, 331-34 (1943).

4 Colo. River Water Consv’n Dist. v. United States, 424 U.S. 800, 817-20 (1976).

for judgment on the pleadings, while PDX moved again for summary judgment.

C. SLS Delivery Services, Inc.

“SLS is a motor carrier that facilitates and provides interstate distribution, delivery[,] and

transportation services of packages as a contractor to national and international carriers between

and within the States of New Jersey and New York.” (SLS’s Compl. ¶ 11.) The company’s

business model is to transport packages on-demand and as-needed between shipping companies

—for instance, between the U.S. Postal Service and private shipper DHL. (Id. ¶¶ 24-25.) These

inter-carrier “shipments are often time-sensitive and as-needed.” (Id. ¶ 26.) SLS contracts with

drivers to shuttle packages between shipping companies. (Id.)

SLS also characterizes its drivers as independent contractors. (Id. at ¶ 25.) However, the

company alleges that its drivers will not meet the statutory exemption in § 43:21-19(i)(6). (Id.

¶ 6.) SLS alleges that if it were forced to treat its drivers as employees for purposes of the

unemployment compensation law, the company would incur additional costs so great that its

current business model would no longer be viable. (Id. ¶ 5.)

The Commissioner initiated an audit of SLS for the years 2013 to the present, in an effort

to determine whether SLS improperly characterized its drivers as independent contractors and

therefore underpaid its obligations to New Jersey’s unemployment compensation fund. (Id.

¶ 28.) Although the audit is not yet complete, SLS expects that the audit will determine that SLS

improperly characterized its drivers as independent contractors because the Commissioner

“audited a substantially smaller entity affiliated with SLS with the same business model as SLS,”

and found that the smaller entity should not have characterized its drivers as independent

contractors. (Id. ¶ 31.)

The Court granted SLS’s motion to intervene as a plaintiff on July 27, 2018. (ECF No.

50.) The company filed its own complaint seeking declaratory and injunctive relief, arguing that

the FAAAA preempts New Jersey’s unemployment compensation law and that the Dormant

Commerce Clause bars the enforcement of New Jersey’s unemployment compensation law.

II. LEGAL STANDARD

“After the pleadings are closed—but early enough not to delay trial—a party may move

for judgment on the pleadings.” Fed. R. Civ. P. 12(c). When reviewing a motion for judgment

on the pleadings, the Court may not review matters outside the pleadings without converting the

motion into a motion for summary judgment. Fed. R. Civ. P. 12(d).

“A court will grant a motion for judgment on the pleadings if the movant establishes that

‘there are no issues of material fact, and that he is entitled to judgment as a matter of law.’”

Allstate Prop. & Cas. Ins. Co. v. Squires, 667 F.3d 388, 390 (3d Cir. 2012) (quoting Sikirica v.

Nationwide Ins. Co., 416 F.3d 214, 220 (3d Cir. 2005)). “In considering the motion for judgment

on the pleadings, [this] Court [is] required to accept all of the [non-movants’] allegations as true

and draw all reasonable inferences in their favor.” Sherzer v. Homestar Mortg. Servs., 707 F.3d

255, 257 (3d Cir. 2013).

A motion for judgment on the pleadings is an appropriate vehicle to address an argument

for abstention. See Disability Rights N.Y. v. New York, 916 F.3d 129, 131 (2d Cir. 2019).

III. YOUNGER ABSTENTION

The Commissioner argues that this Court should abstain from exercising jurisdiction over

the plaintiff’s and plaintiff-intervenor’s claims. See Younger v. Harris, 401 U.S. 37, 44-45

(1971). The Court agrees.

The Younger abstention doctrine provides that federal courts should generally abstain

from exercising jurisdiction over cases that seek to interfere with certain types of pending state

litigation, when “the State’s interests in the proceeding are so important that exercise of the

federal judicial power would disregard the comity between the States and the National

Government.” Pennzoil Co. v. Texaco, Inc., 481 U.S. 1, 11 (1987). One qualifying type of state

litigation is “civil enforcement proceedings.” New Orleans Pub. Serv., Inc. v. Council of the City

of New Orleans (“NOPSI”), 491 U.S. 350, 368 (1989).

A qualifying “civil enforcement proceeding” has certain characteristics. Traditionally,

courts looked to three so-called Middlesex factors: (1) whether there was an ongoing state

proceeding that was judicial in nature, (2) whether the state proceeding implicated important

state interests, and (3) whether the state proceeding offered an adequate opportunity for the

federal plaintiff to litigate federal constitutional challenges. Middlesex Cty. Ethics Comm. v.

Garden State Bar Ass’n, 457 U.S. 423, 432 (1982). However, recent decisions caution that

“these three factors [are not] the alpha and omega of the abstention inquiry,” and “were never

intended to be independently dispositive.” Gonzalez v. Waterfront Comm’n of N.Y. Harbor, 755

F.3d 176, 182 (3d Cir. 2014); see also Hamilton v. Bromley, 862 F.3d 329, 337 (3d Cir. 2017).

Before analyzing the Middlesex factors, courts must first determine whether the state

proceedings possess a quasi-criminal character. Sprint Commc’ns, Inc. v. Jacobs, 571 U.S. 69,

81 (2013).

A. Quasi-Criminal Proceedings

“[Q]uasi-criminal proceedings of this ilk share several distinguishing features.”

Gonzalez, 755 F.3d at 181. For instance, the proceeding will “characteristically [be] initiated to

sanction the federal plaintiff, i.e., the party challenging the state action, for some wrongful act.”

Sprint Commc’ns, 571 U.S. at 79. This is more than mere “negative consequences.” ACRA Turf

Club, LLC v. Zanzuccki, 748 F.3d 127, 140 (3d Cir. 2014). “Sanctions are retributive in nature

and are typically imposed to punish the sanctioned party ‘for some wrongful act.’” Id. (quoting

Sprint Commc’ns, 571 U.S. at 79). Sanctions must be more than the mere “cost of doing

business, with the choice of whether to make such payment resting entirely with Plaintiffs.” Id.

Additionally, “a state actor [will] routinely [be] a party to the state proceeding and often

initiates the action.” Sprint Commc’ns, 571 U.S. at 79. “To be sure, the Supreme Court has not

directly held that Younger applies only when a state actor files a complaint or formal charges.”

ACRA Turf Club, 748 F.3d at 140. However, “the state’s ‘initiation’ procedure must proceed with

greater formality than merely sending a targeted advisory notice to a class of people that may be

affected by new legislation.” Id.

Often, “the proceeding [will be] both in aid of and closely related to criminal statutes.”

Huffman v. Pursue, Ltd., 420 U.S. 592, 604 (1975). A proceeding is more likely to be quasi-

criminal if “the State could have alternatively sought to enforce a parallel criminal statute” that

“vindicates similar interests.” ACRA Turf Club, 748 F.3d at 138; see also Trainor v. Hernandez,

431 U.S. 434, 444 (1977); Gonzalez, 755 F.3d at 182. For that reason, “[i]nvestigations are

commonly involved, often culminating in the filing of a formal complaint or charges.” Sprint

Commc’ns, 571 U.S. at 79-80; see also Gonzalez, 755 F.3d at 182.

While quasi-criminal proceedings may share many attributes with actual criminal

prosecutions, they will differ in one key respect: unlike a criminal prosecution, a quasi-criminal

proceeding need not occur before the state’s judiciary. To the contrary, abstention will apply “to

state administrative proceedings in which important state interests are vindicated, so long as in

the course of those proceedings the federal plaintiff would have a full and fair opportunity to

litigate his constitutional claim.” Ohio Civil Rights Comm’n v. Dayton Christian Schs., Inc., 477

U.S. 619, 627 (1986); see also Gonzalez, 755 F.3d at 182 (describing a state administrative

proceeding as “a textbook example of a quasi-criminal action”).

The administrative proceedings in this case—which seek to recover unpaid

unemployment compensation payments—constitute quasi-criminal proceedings because they

meet all5 of these elements. First, New Jersey’s unemployment compensation law provides for

sanctions against employers who are delinquent in their payment of unemployment

compensation contributions. However, not all the remedies available to the Commissioner

constitute sanctions. For instance, the Commissioner can institute a civil action to collect the

unpaid contributions. N.J. Stat. Ann. § 43:21-14(b). Likewise, the Commissioner may collect

interest on those unpaid contributions. Id. § 43:21-14(a). The statute authorizes the

Commissioner to issue a certificate detailing an employer’s liability for unpaid unemployment

compensation contributions, and provides that the certificate “shall have the same force and

effect as a judgment obtained in the Superior Court of New Jersey.” Id. § 43:21-14(e).

The unemployment compensation law empowers the Commissioner with punitive

remedies, as well. The Commissioner may fine an employer “who makes a false statement or

representation, knowing it to be false, or who knowingly fails to disclose a material fact, . . . [in

order] to avoid or reduce any contribution or other payment required” under the unemployment

compensation law. Id. § 43:21-16(b)(1). “Any penalties imposed by this paragraph shall be in

addition to those otherwise prescribed” by the unemployment compensation law. Id. The

statutory scheme intends these fines to be punitive: the statute is itself entitled “Penalties;

5 PDX argues a state proceeding necessarily lacks a quasi-criminal character if the proceeding

is missing even a single one of the above attributes. This argument misunderstands the nature

of the inquiry. These factors are not a mandatory checklist for quasi-criminal proceedings;

instead, a court determining a state proceeding’s quasi-criminal character weighs the factors

above; no single factor is dispositive. See Sprint Commc’ns, 571 U.S. at 79-81 (noting that

quasi-criminal proceedings “characteristically” exist to sanction the federal plaintiff,

“commonly” following an investigation by a state actor who “routinely” is a party and

“often” initiates the proceeding, “often” by the filing of formal charges).

investigative staff.” Id. Because these fines are more than the mere cost of doing business, they

constitute sanctions as contemplated by the Younger abstention framework.

Second, a state actor—the Commissioner—is a party to administrative proceedings. See

N.J. Stat. Ann. § 34:1A-1 (establishing6 the Department of Labor and Workforce Development);

id. § 34:1A-2 (creating a “Commissioner of Labor and Industry” to head the department). No

party contests that the Commissioner is a state actor.

Third, the state in its sovereign capacity initiated the administrative proceedings with

sufficient formality. After conducting multiple audits, the Commissioner gave PDX formal

notice of its liability for unpaid unemployment compensation contributions, interest, and

penalties—including the exact amounts owed in each category. The Commissioner also filed

certificates concerning PDX’s liability—certificates with the force and effect of court judgments.

See id. § 43:21-14(e). Because there are few, if any, legal documents with more formality than a

court judgment, the filing of certificates with the force and effect of court judgments constitutes

sufficiently formal notice from the Commissioner that it sought to initiate proceedings against

PDX for unpaid unemployment compensation contributions.

PDX and SLS focus their argument not on the formality of the notice, but on the identity

of the party who initiated the administrative proceedings. They characterize PDX—not the

Commissioner—as the initiating party because PDX filed an administrative appeal of the

Commissioner’s liability determination. This argument places form over function. The

Commissioner, not PDX, initiated an investigation and audit of PDX’s unemployment

compensation contribution payments. The Commissioner, not PDX, filed the certificates

6 The New Jersey Legislature created the “Department of Labor and Industry” in 1948. See

N.J. Stat. Ann. § 34:1A-1. A statute renamed the department to the “Department of Labor” in

1981. See id. § 34:1A-1.1. The department obtained its current name, “Department of Labor

and Workforce Development,” following a 2004 enactment. See id. § 34:1A-1.2.

concerning PDX’s unemployment compensation liability—certificates with the force and effect

of court judgments. The fact that PDX is technically the party seeking review before the Office

of Administrative Law is a mere function of New Jersey administrative procedure.7 PDX’s

request for review before the Office of Administrative Law merely continues the ongoing legal

process initiated in substance by the state when the Commissioner began auditing PDX. Because

the proceedings are, in substance, initiated by the state in its sovereign capacity, this factor

weighs in favor of finding that the state administrative proceedings possess a quasi-criminal

character.

Fourth, the administrative provisions to recover unpaid unemployment compensation

contributions are in aid of, and are closely related to, criminal statutes. The criminal provisions

are so closely related that they fall within the same statutory section as the civil enforcement

language. See N.J. Stat. Ann. § 43:21-16. The criminal and civil enforcement provisions

vindicate similar interests: namely, encouraging the prompt, full payment of unemployment

compensation contributions and the recovery of unpaid payments. Compare id. § 43:21-16(e)(1)

(criminal provisions), with id. § 43:21-16(b) (civil enforcement provisions). The investigation of

civil non-payment violations in this case may lead to a potential criminal fraud prosecution.

Accordingly, the close relationship between the administrative and criminal proceedings suggests

that the administrative proceedings constitute quasi-criminal proceedings.

Because every factor weighs in this direction, the administrative proceedings at issue here

possess a quasi-criminal character. The next step in the Younger analysis is to consider the

7 Generally speaking, administrative proceedings begin “in the State agency with appropriate

subject matter jurisdiction.” N.J. Admin. Code § 1:1-3.1(a). The agency then transmits these

cases to the Office of Administrative Law. See id. However, the agency may issue a rule or

regulation assigning to the private party the obligation of seeking review in the Office of

Administrative Law. See N.J. Stat. Ann. § 52:14B-9(g). The Commissioner has issued such

a rule. See N.J. Admin. Code § 12:16-22.2(a).

Middlesex factors. See Gonzalez, 755 F.3d at 182.

B. Middlesex Factors

Middlesex outlines three factors weighing in favor of abstention. See id. First, a court

determines whether there was an ongoing state proceedings that is judicial in nature. See NOPSI,

491 U.S. at 370. This is not to say the proceedings must occur before the state’s judiciary:

administrative proceedings suffice, if they “command the respect due court proceedings.”

Dayton Christian Schs., 477 U.S. at 627 (quoting Gibson v. Berryhill, 411 U.S. 564, 576-77

(1973)). Courts consider whether the state proceeding shares the hallmarks of court litigation:

the “present[ation] of facts and evidence in an open hearing;” a decision-maker “empowered to

make factual determinations with respect to the charges filed” against the federal plaintiff;

whether the state proceeding provides the federal plaintiff “with an opportunity to be heard, the

right to be represented by counsel, and the right to present evidence and witnesses on [the federal

plaintiff’s] behalf;” and whether the state courts have jurisdiction over any appeal of the

“ultimate decision.” Gonzalez, 755 F.3d at 183.

Second, a court considers whether the proceeding implicates important state interests.

See Middlesex Cty. Ethics Comm., 457 U.S. at 432. This inquiry focuses “narrowly [on the

state’s] interest in the outcome of the particular case—which could arguably be offset by a

substantial federal interest in the opposite outcome. Rather, what [courts] look to is the

importance of the generic proceedings to the State.” NOPSI, 491 U.S. at 365.

Finally, a court inquires into whether the federal plaintiff has an adequate opportunity to

raise federal constitutional claims in the state proceeding. See Dayton Christian Schs., 477 U.S.

at 627. Federal plaintiffs “need be accorded only an opportunity to fairly pursue their

constitutional claims in the ongoing state proceedings, and their failure to avail themselves of

such opportunities does not mean that the state procedures were inadequate.” Juidice v. Vail, 430

U.S. 327, 337 (1977) (citing Berryhill, 411 U.S. at 577). Where the decision-maker in the state

proceeding is an attorney (not a lay-person), or is a body made up primarily of attorneys (rather

than lay-persons`), courts assume that the decision-maker will entertain federal constitutional

claims in the state proceeding. Middlesex Cty. Ethics Comm., 457 U.S. at 435. The right to

appeal the proceeding’s result in a state court also demonstrates that a federal plaintiff will

receive a hearing on any federal constitutional claims. See Dayton Christian Schs., 477 U.S. at

629 (citing Middlesex Cty. Ethics Comm., 457 U.S. at 436); Gonzalez, 755 F.3d at 184.

Generally speaking, courts will assume the existence of an adequate opportunity to raise federal

constitutional claims in the state proceeding unless state law explicitly prohibits the state

decision-maker from considering them. See Pennzoil, 481 U.S. at 14; Moore v. Sims, 442 U.S.

415, 425-26 (1979); Gonzalez, 755 F.3d at 184.

All three Middlesex factors weigh in favor of abstention. First, the administrative

proceedings at issue in this case are ongoing and judicial in nature. New Jersey’s Administrative

Procedure Act (“APA”), N.J. Stat. Ann. § 52:14B-1 et seq., governs these administrative

proceedings. See N.J. Admin. Code § 12:16-22.4. Courts routinely find that administrative

proceedings governed by New Jersey’s APA are “judicial in nature.” See Howard v. N.J. Div. of

Youth & Fam. Servs., 398 F. App’x 807, 811 (3d Cir. 2010); Zahl v. Harper, 282 F.3d 204, 209

(3d Cir. 2002); Getson v. New Jersey, Civ. No. 07-3509, 2008 WL 11161698, at *6 (D.N.J. July

31, 2008).

The nature of APA proceedings demonstrates why. An administrative law judge presides

over the hearing. See N.J. Stat. Ann. § 52:14B-10(c) (emphasis added). The proceeding must

allow “all parties to respond, appear and present evidence and argument on all issues involved.”

Id. § 52:14B-9(c). This includes the introduction of documentary evidence and the presentation

of witnesses, including the right to cross-examination. See id. § 52:14B-10(a). New Jersey’s

APA generally requires that proceedings remain open to the public. See N.J. Admin. Code § 1:1-

14.1(a). The state APA also entitles the parties to representation by counsel. See id. § 1:1-5.1.

Following the close of evidence and argument, the administrative law judge makes findings of

fact and conclusions of law. See N.J. Stat. Ann. § 52:14B-10(c); N.J. Admin. Code § 1:1-18.1.

The Commissioner issues a final decision. See N.J. Stat. Ann. § 52:14B-10(d); N.J. Admin Code

§ 12:16-22.6(a). The state judiciary has jurisdiction over any appeal from the Commissioner’s

decision. See N.J. Court Rule 2:2-3(a)(2); N.J. Admin. Code § 12:16-22.6(b). Given these

features, the administrative proceeding at issue here qualifies as judicial in nature. See Zahl, 282

F.3d at 209; Getson, 2008 WL 11161698, at *6.

Second, the proceedings below implicate an important state interest—namely, the timely

and prompt collection of unemployment compensation payments. Cf. Ardan v. Bd. of Rev., 177

A.3d 768, at 774-75 (N.J. 2018) (noting, outside the context of Younger abstention, that “[t]he

Legislature enacted the Unemployment Compensation Law to further an important public

policy”). This Court agrees with its sister courts that a state’s “interest in the administration of

its unemployment compensation system is a sufficiently important state interest to bring the case

within the ambit of the Younger doctrine.” Kelly v. Lopeman, 680 F. Supp. 1101, 1108 (S.D.

Ohio 1987); see also Bridgeforth v. U.S. Dep’t of Labor, Civ. No. 13-120, 2013 WL 1914313, at

*4 (D. Del. May 7, 2013); Lorah v. Delaware, 2010 WL 2132059, at *3 (D. Del. May 25, 2010);

cf. Moore v. Ross, 502 F. Supp. 543, 550 (S.D.N.Y. 1980) (finding that “the administration of

unemployment insurance programs arguably constitutes a significant state interest” but declining

to abstain under Younger because “there is presently no on-going proceeding”).

Finally, the federal plaintiffs will have an adequate opportunity to raise any federal

constitutional challenges in the state proceeding in light of their right to appeal any adverse

administrative determination to the New Jersey judiciary. See N.J. R. Ct. 2:2-3(a)(2); N.J.

Admin. Code § 12:16-22.6(b). The right to “appeal to the New Jersey Superior Court, Appellate

Division” satisfies the requirement that the federal plaintiff have an adequate opportunity to raise

constitutional claims in the state proceeding. Gonzalez, 755 F.3d at 184.

Because this quasi-criminal proceeding satisfies all three Middlesex factors, the Court

will abstain from exercising jurisdiction over this case. As a result, PDX’s complaint is

dismissed. Berryhill, 411 U.S. at 577. PDX remains free to present its federal claims in the state

proceedings. Id.

C. “Pending” Proceedings

SLS argues that even if Younger requires this Court to abstain from deciding PDX’s

action, Younger does not apply to SLS because unlike PDX, SLS is not a party to any “pending”

state “proceedings.” The Court disagrees in light of the broad scope of the phrase “pending

proceeding” under Younger.8

The Supreme Court has issued dicta stating that Younger applies to federal actions that

seek “to restrain an already-pending or an about-to-be-pending state criminal action, or civil

action involving important state interests.” Morales v. TWA, Inc., 504 U.S. 374, 381 n.1 (1992)

(emphasis added). For example, the Third Circuit held that federal plaintiffs subject to state

8 Additionally, the Court finds that SLS has waived its argument that SLS is not party to any

pending proceeding. “[C]asual mention of an issue in a brief is cursory treatment insufficient

to preserve the issue” for review. Kost v. Kozakiewicz, 1 F.3d 176, 182 (3d Cir. 1993); see

also Vente v. Gonzales, 415 F.3d 296, 299 n.3 (3d Cir. 2005). “[A]n argument consisting of

no more than a conclusory assertion such as the one made here (without even a citation to the

record) will be deemed waived.” Reynolds v. Wagner, 128 F.3d 166, 178 (3d Cir. 1997).

SLS’s brief makes only a passing reference to Younger’s “pending proceeding” requirement,

without citing any authority. (ECF No. 74, at 16.)

child support obligations were parties to an “ongoing proceeding” for Younger purposes, even

though the plaintiffs were “not currently appearing or scheduled to appear in any particular child

support hearing.” Anthony v. Council, 316 F.3d 412, 419 (3d Cir. 2003). “For purposes of

Younger,” the Third Circuit explained, “such a comprehensive and fluid system designed to

address the ever-present and ever-changing realities of child support orders must be viewed as a

whole, rather than as individual, discrete hearings,” especially in light of the fact that the

plaintiffs could expect to “be subject to future ongoing contempt proceedings.” Anthony, 316

F.3d at 420-21. In the criminal context, courts have determined that the issuance of a grand jury

subpoena and the issuance of a search warrant each constitute a “pending proceeding” under

Younger, irrespective of whether any indictment was yet pending. See Nick v. Abrams, 717 F.

Supp. 1053, 1056 (S.D.N.Y. 1989) (search warrants); Notey v. Hynes, 418 F. Supp. 1320, 1326

(E.D.N.Y. 1976) (grand jury subpoena).

SLS finds itself in a similar situation: the Commissioner has audited SLS for multiple tax

years, and an assessment and subsequent administrative challenge are imminent. On these facts,

the Commissioner’s audit is part of a “pending proceeding” under Younger, even though SLS has

not yet formally requested review before the Office of Administrative Law.

Because the Court previously considered and rejected all other arguments against

Younger abstention,9 see parts III.A. & III.B., supra, abstention is appropriate. Accordingly,

SLS’s complaint is dismissed. See Berryhill, 411 U.S. at 577. SLS remains free to submit its

federal claims in the state proceedings. See id.

9 SLS also adopts PDX’s Younger arguments by reference and incorporates them into its brief.

This Court generally permits this practice. See, e.g., Polanco v. Omnicell, Inc., 988 F. Supp.

2d 451, 466 n.15 (D.N.J. 2013); cf. Fed. R. App. P. 28(i). Therefore, SLS has not waived any

of the Younger arguments that PDX briefed and argued. However, PDX did not address the

existence of a “pending proceeding.” Accordingly, SLS’s adoption and incorporatation of

PDX’s arguments does not save SLS from waiver of any “pending proceeding” argument.

IV. TAX INJUNCTION ACT

No party briefed whether the Tax Injunction Act (“TIA”), 28 U.S.C. § 1341, deprives this

Court of jurisdiction over this case. Even so, a district court is generally “required to raise the

issue on [its] own motion, as a determination that the [TIA] precludes a suit deprives the federal

courts of subject matter jurisdiction over that action, and a state cannot waive the [TIA]’s

protection” by failing to raise the issue. In re Hechinger Inv. Co. of Del., 335 F.3d 243, 247 n.1

(3d Cir. 2003). While the general rule requires sua sponte consideration of the TIA, the general

rule yields when there are multiple threshold issues which preclude a court from considering a

case’s merits. See, e.g., Tenet v. Doe, 544 U.S. 1, 6 n.4 (2005) (noting that a court may choose to

dismiss a case on abstention before addressing jurisdiction). Because the parties briefed the

abstention issue but not the application of the TIA, judicial economy weighs in favor of deciding

this case on the basis of abstention.

Nonetheless, the Court has significant doubts that the TIA would permit this action to go

forward, even if abstention did not compel the same result. The TIA provides, “The district

courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under

State law where a plain, speedy and efficient remedy may be had in the courts of such State.” 28

U.S.C. § 1341. This action to enjoin the collection of New Jersey unemployment compensation

contributions would appear to qualify. See Sipe v. Amerada Hess Corp., 689 F.2d 396, 402-03

(3d Cir. 1982) (holding that “it cannot be seriously disputed that the unemployment

compensation and disability benefits contributions mandated by New Jersey law are ‘taxes’

within the meaning of the” TIA and that the TIA’s prohibition against judicial interference with

any “essential administrative mechanism for the orderly collection of taxes” likewise applies to

state unenemployment compensation statutes).

V. CONCLUSION

For the reasons set forth above, the Commissioner’s Motion for Judgment on the

Pleadings is GRANTED, and PDX’s Cross-Motion for Summary Judgment is

ADMINISTRATIVELY TERMINATED. An appropriate order will follow.

Dated: July 29, 2019 /s/ Brian R. Martinotti ___________

HON. BRIAN R. MARTINOTTI

UNITED STATES DISTRICT JUDGE