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The presence of an ongoing dispute in a New York state court over the failure of a construction company to pay the prevailing wage should have led a federal judge to abstain from hearing the case, the 2nd U.S. Circuit Court of Appeals has ruled. Despite accusations that foot-dragging by the New York Department of Labor in a state proceeding jeopardized the finances of the Diamond “D” Construction Corp., the 2nd Circuit said that Western District of New York Senior Judge John T. Curtin did not have the power to grant an injunction. The court said that the facts of Diamond “D” Construction Corp. v. McGowan, 01-7055, did not fit the “extraordinary circumstances” or “bad faith” exceptions to the general principal that federal courts should abstain from taking jurisdiction over federal constitutional claims where there is a pending state action, otherwise known as the Younger abstention doctrine. The dispute arose when the Department of Labor investigated allegations that Diamond “D,” a major road construction company, was not paying its workers union scale wages. The agency exercised its power to withhold payments to Diamond that were due from the New York State Department of Transportation and the Erie County Department of Public Works. All told, the Department of Labor withheld $1.4 million in payments owed under the contracts — a measure that also damaged the company’s ability to win new contracts because its insurance company would not bond future contracts while withholding notices were pending. When the Department of Labor delayed beginning state administrative proceedings, Diamond “D” went to federal court, where the company charged that a slipshod investigation by the agency, and its failure to begin hearings, violated its due process rights. Although he denied Diamond “D” ‘s motion for a preliminary injunction at first, finding that all the elements for federal abstention were present, Judge Curtin later reconsidered. Ultimately, he granted the injunction after finding that the Department of Labor’s shabby investigation and the severity of the impact on Diamond “D” qualified the case for both the “bad faith” and the “extraordinary circumstances” exceptions to the Younger abstention doctrine. Curtin enjoined the administrative proceedings that finally had been initiated by the Department of Labor. CIRCUIT RULING On the agency’s appeal to the 2nd Circuit, Senior Judge Joseph M. McLaughlin said that there was no need to address the lower court’s findings “because we find that Younger abstention is mandated in this case … .” “However, assuming the district court’s characterization of the DOL’s investigation, Diamond “D” ‘s financial condition, and the pace of the DOL administrative proceedings is accurate, we conclude that these circumstances do not come within either of the tightly defined exceptions to the Younger abstention doctrine,” Judge McLaughlin said. The most recent cases to deal with the bad faith exception, he said, emphasize the motivation of the state in bringing the action in the first place. “To invoke this exception, the federal plaintiff must show that the state proceeding was initiated with and is animated by a retaliatory, harassing or other illegitimate motive,” he said. In this case, he said, Diamond “D” ‘s complaints go to the “manner in which the administrative proceedings were conducted; they do not speak to the subjective intent of the DOL in commencing the prevailing wage proceedings.” “On that score, the district court never concluded and Diamond “D” has not demonstrated that the DOL’s proceedings were brought with an intent to harass or any other illegitimate motive,” McLaughlin said. Turning to the rarely used “extraordinary circumstances” exception, McLaughlin said that U.S. Supreme Court case law outlines two predicates for the exception” that there be an absence of an adequate, meaningful and timely remedy available at the state level for the constitutional violation; and, that the litigant will suffer “great and immediate” harm if the federal court abstains. McLaughlin said the 2nd Circuit disagreed with Judge Curtin’s finding that there was no state process available to remedy the due process violation. “It is significant that to the extent that the DOL was dragging its feet, Diamond ‘D’ was free to file a mandamus petition in the Appellate Division to compel the DOL to provide expeditious post-deprivation review as required by the prevailing wage law,” McLaughlin said. Where such a state remedy was available, he said, the court must abstain from exercising jurisdiction. Judge Rosemary S. Pooler and Southern District of New York Judge Leonard B. Sand, sitting by designation, joined in the opinion. The New York State Department of Labor was represented by: Assistant Attorneys General Seth Kupferberg, M. Patricia Smith and Pico Paul Ben-Amotz; and Deputy Solicitor General Daniel Smirlock. Henry W. Killeen III, Anna Marie Richmond and Timothy J. Greenan of Killeen & Killeen in Orchard Park, N.Y., represented Diamond “D,”, along with Brian P. Fitzgerald of Napier, Fitzgerald & Kirby in Buffalo, N.Y.

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