Minnesota Living Assistance v. Ken B. Peterson , 899 F.3d 548 ( 2018 )

United States Court of Appeals
For the Eighth Circuit
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No. 17-2658
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Minnesota Living Assistance, Inc., doing business as Baywood Home Care
lllllllllllllllllllllPlaintiff - Appellant
v.
Ken B. Peterson, Commissioner, Department of Labor and Industry, State of
Minnesota, in his official capacity; John Aiken, Interim Director of Labor
Standards, Department of Labor and Industry, State of Minnesota, in his official capacity
lllllllllllllllllllllDefendants - Appellees
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Appeal from United States District Court
for the District of Minnesota - Minneapolis
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Submitted: June 13, 2018
Filed: August 8, 2018
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Before GRUENDER, ERICKSON, and GRASZ, Circuit Judges.
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GRUENDER, Circuit Judge.
This case involves two sets of proceedings. In the first, the Minnesota
Department of Labor and Industry (“DLI”) brought an administrative action against
Minnesota Living Assistance, Inc. (“Baywood”) for failing to pay overtime
compensation to companionship-services employees in violation of the Minnesota
Fair Labor Standards Act (“MFLSA”). In the second, the one before us today,
Baywood sued in federal court the Commissioner and the Director of Labor Standards
at the DLI, arguing that the federal Fair Labor Standards Act (“FLSA”) preempts the
MFLSA and that Baywood therefore need not pay state penalties for any MFLSA
violation. The district court1 found that the Younger doctrine required it to abstain
while the state proceeding was pending and dismissed the case. Because we find
abstention appropriate, we affirm.
I.
Baywood is a Minnesota corporation that employs domestic-service workers
who provide companionship services.2 The FLSA and the MFLSA both provide
requirements regarding the minimum wage and the maximum hours per week that an
individual can work before an employer is required to pay overtime compensation.
But during the relevant time period, there were two pertinent differences between the
statutes: (1) the FLSA standards were generally more protective than the MFLSA,
compare 29 U.S.C. §§ 206(a)(1)(C), 207(a)(1), with Minn. Stat. §§ 177.24, subdiv.
1(b) (2012), 177.25; and (2) the FLSA exempted companionship-services employees
from protection, whereas the MFLSA did not, compare 29 U.S.C § 213(a)(15), with
Minn. Stat. § 177.23, subdiv. 11.
1
The Honorable David S. Doty, United States District Judge for the District of
Minnesota.
2
“[C]ompanionship services means the provision of fellowship and protection
for an elderly person or person with an illness, injury, or disability who requires
assistance in caring for himself or herself.” 29 C.F.R. § 552.6. The MFLSA adopts
the FLSA definition of companionship services. See Minn. Stat. § 177.23, subdiv.
11.
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In 2014, a Baywood employee filed a complaint alleging that Baywood
violated the MFLSA by failing to pay overtime compensation to companionship-
services employees from March 2012 to March 2014. The DLI conducted an
investigation into Baywood’s practices and determined that Baywood had not paid
its companionship-services employees the wages required by the MFLSA. The DLI
issued a compliance order in May 2016. The order assessed a penalty of $1,000 for
failure to keep records pursuant to Minn. Stat. § 177.30 and required Baywood to pay
back wages of $557,714.44 in addition to liquidated damages of $557,714.44. The
order also indicated that Baywood should cease its illegal practices and comply with
the MFLSA.
Baywood contested the compliance order, so, in August 2016, the DLI initiated
a contested case proceeding before an administrative law judge (“ALJ”) at the
Minnesota Office of Administrative Hearings. In June 2017, the ALJ issued a report
recommending that the DLI Commissioner enforce the compliance order as to
backpay and liquidated damages but that he deny it as to the determination that
Baywood failed to keep accurate records.
While the proceeding before the ALJ was pending, but before the June
recommendation, Baywood filed suit in federal district court seeking (1) a declaration
that the FLSA preempts the MFLSA and (2) injunctive relief prohibiting the DLI
from further processing, investigating, or adjudicating its claims against Baywood.
The DLI moved to dismiss the complaint, arguing that the district court should
abstain from exercising jurisdiction under Younger v. Harris, 401 U.S. 37 (1971).
The district court granted the DLI’s motion to dismiss under Younger.
II.
We review the district court’s decision to abstain under Younger for abuse of
discretion. Whether Younger abstention is appropriate is a question of law, and the
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district court abuses its discretion when it makes an error of law. Geier v. Mo. Ethics
Comm’n, 715 F.3d 674, 678 (8th Cir. 2013) (citing Plouffe v. Ligon, 606 F.3d 890,
894-95 (8th Cir. 2010) (Colloton, J., concurring)). Although federal courts have a
“virtually unflagging obligation . . . to exercise the jurisdiction given them,” Colo.
River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976),
exceptions to this obligation exist in limited circumstances. In Younger v. Harris, the
Supreme Court held that, consistent with our nation’s commitment to the principles
of comity and federalism, a federal court should abstain from exercising jurisdiction
in cases where there is a parallel, pending state criminal proceeding, so long as certain
conditions are met. 401 U.S. 37, 43-46 (1971). Since Younger, the Supreme Court
has issued a series of decisions that have clarified and expanded the Younger
abstention doctrine. See Sprint Commc’ns, Inc. v. Jacobs, 571 U.S. 69 (2013); New
Orleans Pub. Serv., Inc. v. Council of City of New Orleans (NOPSI), 491 U.S. 350
(1989); Middlesex Cty. Ethics Comm. v. Garden State Bar Ass’n, 457 U.S. 423
(1982).
Three lines of inquiry for determining whether Younger abstention is
appropriate emerge from these decisions. See Sirva Relocation, LLC v. Richie, 794
F.3d 185, 192-93 (1st Cir. 2015) (distilling a three-part taxonomy from the Court’s
abstention analyses). First, does the underlying state proceeding fall within one of
the three “exceptional circumstances” where Younger abstention is appropriate? See
Sprint, 571 U.S. at 78. Second, if the underlying proceeding fits within a Younger
category, does the state proceeding satisfy what are known as the “Middlesex”
factors? See id. at 81 (discussing Middlesex). And third, even if the underlying state
proceeding satisfies the first two inquiries, is abstention nevertheless inappropriate
because an exception to abstention applies? See NOPSI, 491 U.S. at 367. We address
these three lines of inquiry in turn.
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A.
We begin by determining whether the underlying enforcement proceeding
against Baywood fits within one of the three categories where Younger abstention
applies. Sprint, 571 U.S. at 72-73, 78. Younger abstention is applicable only where
the state proceeding qualifies as (1) a criminal prosecution, (2) a civil enforcement
proceeding that is akin to a criminal prosecution, or (3) a proceeding implicating a
state’s interest in enforcing the orders and judgments of its courts. Id.
Here, the parties agree that a civil enforcement proceeding resembling a
criminal prosecution is the only abstention category into which the DLI proceeding
could fit. Sprint identified three important characteristics for recognizing a civil
proceeding that resembles a criminal prosecution: (1) the action was initiated by the
State in its sovereign capacity; (2) the action involves sanctions against the federal
plaintiff for some wrongful act; and (3) the action includes an investigation, often
culminating in formal charges. 571 U.S. at 79-80. In this case, the underlying
proceeding meets all three criteria and thus falls within an applicable Younger
category.
The DLI proceeding satisfies both the state-involvement and the investigation
criteria because the action was initiated by the State, via the DLI, following an
investigation into Baywood’s failure to pay overtime wages to companionship-
services employees. Baywood contests this conclusion by arguing that “the case was
initiated by an employee complaint about Baywood’s nonpayment of overtime,”
rather than the State. According to Baywood, because the case was initiated by an
employee, the DLI merely “stepped in to settle the dispute between Baywood and its
employees about overtime.” Indeed, Baywood attempts to analogize the facts here
to those in Sprint, where administrative proceedings were triggered by a private
complaint. See 571 U.S. at 74. But this analogy falls short.
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In Sprint, “[a] private corporation . . . initiated the action[,] [n]o state authority
conducted an investigation into Sprint’s activities, and no state actor lodged a formal
complaint against Sprint.” 571 U.S. at 80. Under those circumstances, the Supreme
Court concluded that Iowa’s authority was merely “invoked to settle a civil dispute
between two private parties,” and thus, the proceeding was not a civil proceeding akin
to a criminal proceeding for purposes of Younger. Id. By contrast, here, the DLI
conducted the investigation, issued the compliance order, and brought the contested
case proceeding against Baywood before the ALJ to enforce Minnesota law. The DLI
was not merely an arbiter of a private dispute. Thus, even though the investigation
was triggered by an employee complaint, the underlying proceeding bears the first
and third characteristics of a civil proceeding akin to a criminal prosecution.3 See
Ohio Civil Rights Comm’n v. Dayton Christian Schs., Inc., 477 U.S. 619, 623-24, 625
(1986) (finding abstention appropriate even where the agency investigation was
initiated by a private complaint); see also Sirva, 794 F.3d at 194.
The DLI proceeding also involves “sanctions for wrongful conduct.” Baywood
argues that the underlying proceeding is merely an administrative wage claim with
no criminal analog, yet Baywood concedes that the MFLSA provides for criminal
penalties in addition to the civil penalties pursued here. See Minn. Stat. § 177.32,
subdiv. 1(7). Thus, the underlying proceeding resembles cases in which the Supreme
3
Baywood also makes a related argument that because the proceeding could
have been brought by a private party, Younger abstention is inappropriate. In other
words, it suggests that Younger abstention is not applicable where a private cause of
action is available. But neither Dayton nor Sprint, nor any circuit deciding cases in
their wake, suggests that the presence of a private right of action renders abstention
inappropriate. See, e.g., Sirva, 794 F.3d at 194, 200 (applying Younger abstention
even where a private cause of action was available). Therefore, we reject this
argument.
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Court affirmed the exercise of abstention where “state authorities also had the option
of vindicating the[] policies through criminal prosecutions,” but instead chose to
pursue less severe civil sanctions. Trainor v. Hernandez, 431 U.S. 434, 444 (1977);
see also id. at 449-50 (Blackmun, J., concurring) (“The propriety of abstention should
not depend on the State’s choice to vindicate its interests by a less drastic, and
perhaps more lenient, route.”).
Here, the DLI imposed significant liquidated damages in addition to backpay.
Minn. Stat. § 177.27, subdiv. 7 (providing for the imposition of equal liquidated
damages). These double damages function to sanction Baywood for its failure to pay
overtime wages. See Helvering v. Mitchell, 303 U.S. 391, 400 (1938). Furthermore,
the cease and desist order sought by the State operates to restrain Baywood’s conduct
going forward. Minn. Stat. § 177.27, subdiv. 7 (“If an employer is found by the
commissioner to have violated [the MFLSA] . . . the commissioner shall order the
employer to cease and desist from engaging in the violative practice . . . .”); Wilson
v. Commodity Futures Trading Comm’n, 322 F.3d 555, 561 (8th Cir. 2003)
(characterizing an agency’s order to “cease and desist” as a sanction). Though not
themselves criminal penalties, the sanctions sought support Younger abstention.
Because all three essential characteristics identified by Sprint are present here,
the underlying proceeding qualifies as a civil proceeding akin to a criminal
prosecution.
B.
Given that the DLI proceeding falls into one of the categories that triggers
Younger, we now consider the three Middlesex factors as “additional factors
appropriately considered by [a] federal court before invoking Younger.” See Sprint,
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571 U.S. at 81. Under Middlesex, we ask whether the state proceeding (1) is judicial
in nature, (2) implicates important state interests, and (3) provides an adequate
opportunity to raise constitutional challenges. 457 U.S. at 432.
Before the district court, Baywood challenged only the second factor, arguing
that abstention was inappropriate because an important state interest was not
implicated. On appeal, Baywood contests all three factors. “Ordinarily this court will
not consider arguments raised for the first time on appeal,” see Wever v. Lincoln Cty.,
388 F.3d 601, 608 (8th Cir. 2004), and Baywood offers no persuasive reason to
deviate from our general practice, see Weitz Co. v. Lloyd’s of London, 574 F.3d 885,
891 (8th Cir. 2009). Thus, we limit our analysis to whether the underlying
proceeding implicates important state interests. See Middlesex, 457 U.S. at 432.
Here, Minnesota has an important interest in the application of its wage and
hour laws. Indeed, “States possess broad authority under their police powers to
regulate the employment relationship to protect workers within the State.” Metro.
Life Ins. Co v. Massachusetts, 471 U.S. 724, 756 (1985). Taking our cue from the
Supreme Court, we recognize that “States have traditionally regulated the payment
of wages,” and, “[a]bsent any indication that Congress intended [otherwise],” we are
hesitant to “significantly interfere with the separate spheres of governmental authority
preserved in our federalist system.” Massachusetts v. Morash, 490 U.S. 107, 119
(1989) (internal quotation marks omitted). Under this view, the underlying
proceeding satisfies the important-state-interest factor.
Baywood raises three counter arguments. First, it points to cases in which
federal courts were found to be uniquely situated to adjudicate a claim even though
it implicated a traditionally state-law matter. But those cases involved, at their core,
non-state interests. See Barzilay v. Barzilay, 536 F.3d 844, 850 (8th Cir. 2008)
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(addressing issues related to the Hague Convention on child abduction); Ayers v.
Philadelphia Hous. Auth., 908 F.2d 1184, 1195 n.21 (3d Cir. 1990) (focusing on the
federal interest in allocating funds for HUD housing programs). Here, the state
proceeding resolved a question of Minnesota wage and hour law. Second, Baywood
claims that there can be no important state interest “when the state law has been
preempted and the state does not have the authority to regulate.” But this argument
assumes preemption when the very purpose of our inquiry is to determine whether we
can address preemption.4 In any case, the mere allegation of preemption does not
undermine the propriety of abstention. Third, Baywood claims that finding an
important state interest in this case would be the equivalent of finding an important
interest any time a state enacts and enforces its own laws. But this fear is unfounded.
Here, the Supreme Court has specifically confirmed the importance of the state
interest. See Morash, 490 U.S. at 119.
C.
Because the underlying proceeding satisfies the first two layers of the
abstention inquiry, we move to the final consideration: whether an exception to
Younger applies. Even where the proceeding falls into a Younger category and
satisfies the Middlesex factors, the Court in NOPSI left open the possibility that a
“facially conclusive” claim of federal preemption may be sufficient to render
abstention inappropriate. See 491 U.S. at 367. While many of our sister circuits have
adopted such an exception to abstention, we have never addressed the question in
those terms.5 See Cedar Rapids Cellular Tel., L.P. v. Miller, 280 F.3d 874, 880 (8th
4
To the extent that Baywood argues facial preemption, we address that issue
in the next section.
5
We need not decide today whether this exception is a required part of the
abstention analysis because it does not affect the outcome of the case. We address
it here for completeness.
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Cir. 2002) (noting that NOPSI left open the possibility of an exception but declining
to address the issue). The courts that have considered this question have found that
preemption is facially conclusive if binding precedent already decided the issue or if
it is otherwise “readily apparent.” See, e.g., Woodfeathers, Inc. v. Washington Cty.,
180 F.3d 1017, 1021-22 (9th Cir. 1999). In other words, preemption is not facially
conclusive if it requires a “detailed analysis.” Colonial Life & Accident Ins. Co. v.
Medley, 572 F.3d 22, 27-28 (1st Cir. 2009); GTE Mobilnet of Ohio v. Johnson, 111
F.3d 469, 478 (6th Cir. 1997).
Here, Baywood asks the court to find facially conclusive its assertion that the
FLSA preempted the MFLSA, even as to companionship-services employees, during
the relevant time period. But Baywood cites no binding precedent deciding the issue,
and we do not find preemption “readily apparent.” Although the MFLSA generally
adopted a lower minimum wage and higher maximum hours than did the FLSA, the
FLSA exempted companionship-services employees from its protection. Resolving
the preemption question would require a detailed analysis of the relative protections
of the two statutes.6 Thus, as the district court correctly determined, preemption is
not facially conclusive, and no exception to Younger abstention applies.
6
Indeed, similar preemption questions have generated conflicting results in
other courts. Compare, e.g., Pac. Merch. Shipping Ass’n v. Aubry, 918 F.2d 1409,
1418-19 (9th Cir. 1990) (holding that the FLSA overtime provision did not preempt
a state’s overtime provision as applied to seamen, a group of individuals, like
companionship-services employees, who are excluded from relevant FLSA
protection), with Coil v. Jack Tanner Co., 242 F. Supp. 2d 555, 558-59, 561 (S.D. Ill.
2002) (holding that the FLSA preempted a state’s overtime law as applied to the same
group of excluded workers).
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III.
For the foregoing reasons, we affirm the district court’s decision to abstain.
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