Appeal from a judgment entered in the United States District Court for the Southern District of New York (Chin, J.) in favor of defendants-appellees Commissioners of the Workers' Compensation Board of the State of New York and Trustees of the New York State Insurance Fund, in an action brought by plaintiffs-appellants, Liberty Mutual Insurance Company and affiliate companies, challenging two amendments enacted in 2007 to the New York Workers' Compensation Law as violative of the Contracts, Takings, Due Process and Equal Protection provisions of the United States Constitution, the District Court having abstained from the exercise of federal jurisdiction and dismissed the action for that reason.
The opinion of the court was delivered by: Miner, Circuit Judge
Before: MINER, LIVINGSTON, Circuit Judges, and TRAGER, District Judge.*fn1
Plaintiffs-appellants Liberty Mutual Insurance Company and affiliated companies ("Liberty Mutual") appeal from a judgment entered in the United States District Court for the Southern District of New York (Chin, J.) in favor of defendants-appellees, Commissioners of the Workers' Compensation Board of the State of New York (the "Board") and Trustees of the New York State Insurance Fund (the "Trustees"). Liberty Mutual brought the action giving rise to the judgment seeking injunctive and declaratory relief from two amendments to the New York Workers' Compensation Law enacted in 2007. Liberty Mutual challenges these amendments as violative of the Contracts, Takings, Due Process and Equal Protection provisions of the United States Constitution. Relying on the doctrine announced in Younger v. Harris, 401 U.S. 37 (1971), the District Court determined that the circumstances of this case required it to abstain from the exercise of federal jurisdiction and dismiss the complaint for that reason. We agree that abstention is appropriate but rely on different precedent.
I. The New York Workers' Compensation System - Policy and Procedure
The New York Workers' Compensation System is governed by the Workers' Compensation Law (the "WCL" or "Law"). The Law requires employers to pay benefits to workers who are injured or disabled during the course of their employment, regardless of fault. N.Y. WORKERS' COMP. LAW § 10(1). These benefits include medical care, replacement of lost wages ("indemnify payments") and death benefits. Id. §§ 13, 14, 16. To assure that these payments are made, the Law requires employers to obtain insurance coverage in one of the following ways: purchase workers' compensation coverage from an approved insurance carrier ("Carrier") such as Liberty Mutual; secure coverage from the State Insurance Fund; or seek approval from the Board to act as a self-insurer. Id. §§ 10(1), 50. The benefits provided under the WCL are the exclusive remedies for injuries sustained by employees in the course of employment, and the Law thus forecloses any suit by an employee against an employer in tort. Id. § 11; see also O'Rourke v. Long, 41 N.Y.2d 219, 222 (1976). (The WCL "was designed to provide a swift and sure source of benefits to the injured employee or to the dependents of the deceased employee" in return for "the loss of the common-law tort action in which greater benefits might be obtained.").
The original law took effect on January 1, 1914, and the New York Court of Appeals soon thereafter recognized that the underlying policy of the Law was to "protect both employer and employee, the former from wasteful suits and extravagant verdicts, the latter from the expense, uncertainties and delays of litigation in all cases and from the certainty of defeat if unable to establish a case of actionable negligence." Jensen v. S. Pac. Co., 215 N.Y. 514, 524 (1915), rev'd on other grounds, 244 U.S. 205 (1917). Numerous refinements to the Law over the years have resulted in a statute of some complexity. As one judge of the New York Court of Appeals has put it, the Law has been the "object of constant legislative attention and fine-tuning," with various amendments, including 560 amendments between 1914 and 1961, and an Omnibus Reform amendment in 1996, all resulting in a "complex, integrated and unusually prescriptive statute." See Greenberg v. N.Y. City Transit Auth., 7 N.Y.3d 139, 145--46 (2006) (Read, J., dissenting).
It has been estimated that more than 90% of employee claims for benefits under the standards provided by the WCL are paid without contest. See MARTIN MINKOWITZ, NEW YORK PRACTICE SERIES: NEW YORK WORKERS' COMPENSATION, § 15:1, at 594 (2003). The Law provides a comprehensive system for resolving contested claims. The responsibility for operation of that system lies with the Board. N.Y. WORKERS' COMP. LAW § 20(1). An injured worker who seeks benefits under the WCL is required to file a claim with the Board or his employer. Id. § 20. The carrier is afforded the opportunity to dispute the claim, id. § 25(2)(a); N.Y. COMP. CODES R. & REGS. tit. 12, § 300.22(a), and the dispute is addressed in the first instance by a Workers' Compensation Law Judge ("WCLJ"). See N.Y. WORKERS' COMP. LAW § 150; N.Y. COMP. CODES R. & REGS. tit. 12, § 300.1(a)(10). A party dissatisfied with the decision of the WCLJ may seek administrative review by a three-member Board panel and, if review is granted and the panel does not make a unanimous decision, review of the full Board is mandated upon request of either party; if the decision is unanimous, any party may seek discretionary review by the full Board. The statutory scheme allows a party to seek judicial review of the Board's administrative decision in the New York State Supreme Court, Appellate Division, Third Department. N.Y. WORKERS' COMP. LAW § 23. The designation of a single court for this purpose implements the legislative intent to establish a judicial forum having "specific expertise to deal with the complexity" of the issues presented in workers' compensation cases. Empire Ins. Co. v. Workers' Comp. Bd., 607 N.Y.S.2d 675, 675 (N.Y. App. Div. 1994). The Law provides that appeals in workers' compensation cases "shall be heard in a summary manner and shall have precedence over all other civil cases in such court." N.Y. WORKERS' COMP. LAW § 23. An opportunity for further review may be sought in the New York State Court of Appeals, and "[a]n appeal to the appellate division of the supreme court, third department, or to the court of appeals, shall not operate as a stay of the payment of compensation required by the terms of the award or of the payment of the doctors' bills found to be fair and reasonable." Id. (2007).
The jurisdiction of the Board is far-reaching. The WCL, administered by the Board, covers approximately 7.9 million workers. See N.Y. STATE WORKERS' COMPENSATION BOARD, BASIC FACTS ABOUT THE BOARD, at www.wcb.state.ny.us, \content\main\TheBoard\ factsht.jsp (last visited Sept. 21, 2009). In 2006, the Board received 140,109 new claims, re-opened 182,028 claims; received 13,258 applications for appeals; and rendered 12,072 decisions.
Id. The Law vests the Board with extensive powers beyond the adjudication of claims. For example, it licenses workers' compensation attorneys, N.Y. WORKERS' COMP. LAW § 24-a; approves or rejects medical providers, id. § 13-b--13-e; and brings certain enforcement proceedings not related to the challenged amendments, id. § 26, 54-b, 141-a. Among the Board's powers is the authority to order payments for certain types of indemnity awards to be made to the Aggregate Trust Fund ("ATF"). The ATF is administered by the Trustees as an aggregate, indivisible fund separate and apart from other money held by the State Insurance Fund. Id. § 27. Deposits to the ATF ordered by the Board are made by insurance carriers and, at the Board's discretion, by self-insured employers. Id. § 27.
Prior to the 2007 amendments subject of this appeal, mandatory deposits to the ATF were made for "scheduled" awards for permanent partial disability ("PPD"). A PPD is a condition that restricts an employee's ability to work but does not totally foreclose it. A "scheduled" award is so-called because it refers to a statutory schedule that identifies certain injuries such as loss of a limb and sets the compensation amount for the injury. See id. § 15(3). PPD awards for injuries not identified in the schedule are determined by a WCLJ and are designated as "non-scheduled" or "classified." See id. § 15(3)(w). Until 2007, the Board was not required to order an ATF deposit for a non-scheduled award, although it had the discretion to do so.
Single, lump-sum payment settlements, whereby an injured employee agrees to waive all past, present, and future indemnity payments and medical benefits, were authorized by the WCL prior to the 2007 amendments. See id. § 32(a) (2007). Approval by the Board of such agreements, known as "waiver agreements" or "section 32 settlements," is mandatory, and the Board may deny approval or order modification in the case of a proposed settlement that is "unfair, unconscionable, or improper as a matter of law." Id. § 32(b)(1); N.Y. COMP. CODES R. & REGS. tit. 12, § 300.36(d), (e). Court review may be sought in the case of the Board's disapproval of a settlement. Id. § 300.36(g).
II. The 2007 Amendments and the Challenge
The 2007 amendments, inter alia, extended the requirement that deposits to the ATF be made for scheduled awards to require that such deposits be made by private carriers in all PPD cases where long-term benefits are awarded, thus ending the distinction between scheduled and non-scheduled awards. See N.Y. WORKERS' COMP. LAW § 27(2). The Board calculates the deposit by ascertaining the present, discounted value of future long-term benefits owed by the carrier to the injured employee. After making the deposit, the carrier is "discharged from any further liability" for indemnity payments but remains liable for medical benefits. Id. § 27. Future indemnity payments are then made by the ATF. A carrier may contest a PPD ...