Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_14-cv-04420/USCOURTS-cand-5_14-cv-04420-2/pdf.json

Nature of Suit Code: 950
Nature of Suit: Constitutionality of State Statutes
Cause of Action: 28:1331 Fed. Question

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Case No. 14-CV-04420-LHK 

ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

LOAN PAYMENT ADMINISTRATION 

LLC, et al.,

Plaintiffs,

v.

JOHN F. HUBANKS, et al.,

Defendants.

Case No. 14-CV-04420-LHK 

ORDER GRANTING DEFENDANTS' 

MOTION TO DISMISS

Re: Dkt. Nos. 33, 34, 57, 58

Before the Court are a motion to strike (ECF No. 33) and two motions to dismiss filed by 

Defendants John F. Hubanks, Andres H. Perez, the Monterey County District Attorney’s Office, 

and the Marin County District Attorney’s Office (collectively, “Defendants”). ECF No. 33 

(“Motion to Strike”); ECF No. 34 (“First Motion to Dismiss”); ECF No. 58 (“Second Motion to 

Dismiss”). Defendants request that the Court dismiss, pursuant to Federal Rule of Civil Procedure 

12, all causes of action in a complaint filed by Plaintiffs Nationwide Biweekly Administration, 

Inc., Loan Payment Administration LLC, and Daniel S. Lipsky (collectively, “Plaintiffs” or 

“Nationwide”). Defendants also request that the Court strike the second and third causes of action 

under California’s Anti-SLAPP statute. 

The Court finds this matter suitable for decision without oral argument under Civil Local 

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Case No. 14-CV-04420-LHK 

ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

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Rule 7-1(b) and hereby vacates the motion hearing set for June 25, 2015, at 1:30 p.m. Having 

considered the submissions of the parties, the record in this case, and the relevant law, the Court 

GRANTS Defendants’ Second Motion to Dismiss without prejudice, and DENIES as moot 

Defendants’ First Motion to Dismiss and Defendants’ Motion to Strike, for the reasons stated 

below.

I. BACKGROUND

A. Factual Background

Nationwide Biweekly Administration, Inc. is an Ohio Corporation with its headquarters in 

Xenia, Ohio. ECF No. 1 (“Compl.”), ¶ 2. Loan Payment Administration LLC is a subsidiary of 

Nationwide Biweekly Administration, Inc. and also has its headquarters in Xenia, Ohio. Id. ¶¶ 3, 

15. Daniel S. Lipsky is the sole shareholder of Nationwide Biweekly Administration, Inc. Id. ¶ 4.

Defendant John F. Hubanks (“Hubanks”) is a deputy district attorney with the Monterey 

County District Attorney’s Office. Id. ¶ 5. Andres H. Perez (“Perez”) is a deputy district attorney 

with the Marin County District Attorney’s Office. Id. ¶ 6. The Monterey County District 

Attorney’s Office and the Marin County District Attorney’s Office are the local district attorney 

offices for the Counties of Monterey and Marin, respectively. Id. ¶¶ 7-8.

1. Nationwide’s “Interest Minimizer” Program

Nationwide is an administrator of biweekly loan repayment programs. Id. ¶ 12. 

Nationwide has approximately 125,000 customers around the country, including over 10,000 in 

California. Id. At issue in the instant litigation is a Nationwide program called the “Interest 

Minimizer” biweekly program, which is targeted at borrowers with home mortgages. Id. ¶ 13. 

According to Nationwide, most mortgage servicers debit a borrower’s mortgage payments on a 

monthly basis. Id. Under Nationwide’s “Interest Minimizer” program, Nationwide acts as an 

intermediary between the borrower and the mortgage servicer. Specifically, Nationwide arranges 

with the borrower to debit one-half of the borrower’s monthly mortgage payment from the 

borrower’s checking account every other week. Id. Nationwide then remits the mortgage 

payments to the mortgage servicer once per month, as required by the servicer. Id. However, 

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ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

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because Nationwide debits the mortgage payments on a bi-weekly (as opposed to monthly) basis, 

Nationwide debits 26 times over the course of the year, effectively resulting in the creation of a 

13th annual payment (as opposed to 12 annual payments under a traditional monthly repayment 

plan). Id. Nationwide claims that the extra payment per year saves its customers money by 

helping Nationwide’s customers pay off their mortgage loans faster than they otherwise would. 

Id.

2. The Investigations of the Defendant District Attorneys

On July 30, 2013, Nationwide received a letter from Hubanks, a deputy district attorney in 

the Consumer Protection Unit of the Monterey County District Attorney’s Office. ECF No. 1-1

(“Enforcement Letter”). The Enforcement Letter stated that the District Attorneys for Marin and 

Monterey County “are in receipt of numerous complaints about the marketing and business 

practices of Nationwide Bi-Weekly Administration, Inc.” Id. The Enforcement Letter further 

stated that these consumer complaints “indicate a pattern of deceptive business practices having an 

adverse impact on California consumers,” based on Nationwide’s practice of referencing the 

names of consumers’ lenders and the consumers’ loan information in Nationwide’s solicitation 

letters. Id. 

The Enforcement Letter also stated that Nationwide’s solicitation letters violate two state 

statutes. First, the Enforcement Letter stated that Nationwide’s use of lenders’ names violates 

Business and Professions Code § 14701(a), which prohibits a person from using the “name, trade 

name, logo, or tagline of a lender in a written solicitation . . . without the consent of the lender,” 

unless the letter is accompanied by a statutorily-prescribed disclaimer. Id. (quoting California 

Business and Professions Code § 14701(a)).1Second, the Enforcement Letter stated that 

 

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The relevant statute provides: “No person shall include the name, trade name, logo, or tagline of 

a lender in a written solicitation for financial services directed to a consumer who has obtained a 

loan from the lender without the consent of the lender, unless the solicitation clearly and 

conspicuously states that the person is not sponsored by or affiliated with the lender and that the 

solicitation is not authorized by the lender, which shall be identified by name. This statement 

shall be made in close proximity to, and in the same or larger font size as, the first and the most 

prominent use or uses of the name, trade name, logo, or tagline in the solicitation, including on an 

envelope or through an envelope window containing the solicitation.” Cal. Bus. & Profs. Code 

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Nationwide’s use of consumers’ loan amounts in Nationwide’s solicitation letters violates 

Business and Professions Code § 14702, which prohibits a person from using a consumer’s “loan 

amount, whether or not publicly available, in a solicitation for services or products without the 

consent of the consumer,” unless the solicitation contains a statutorily-prescribed disclaimer.2Id. 

at 2.

The Enforcement Letter then stated that, because of Nationwide’s alleged violations of 

Business and Professions Code §§ 14701(a) and 14702, “Nationwide’s solicitations have the 

capacity to deceive and mislead consumers into believing Nationwide is sponsored by or affiliated 

with the lender, the solicitation is authorized by the lender, or the consumer’s loan information 

was provided by the lender.” Id. The Enforcement Letter also stated that “the placement of the 

lender’s name in the header of the letter may lead the consumer to believe their lender is, in fact, 

the originator of the correspondence or affiliated with Nationwide.” Id. Accordingly, the 

Enforcement Letter also alleged violations of Business and Professions Code §§ 17200 and 17500. 

Id. at 2-3. The Enforcement Letter concluded by stating in part that the Monterey and Marin 

County District Attorneys “are now determining what formal legal action, if any, will be taken.” 

Id. at 3.

The Enforcement Letter also stated that Nationwide “may be in violation of California’s 

Check Sellers, Bill Payers and Proraters Law” because “it would appear Nationwide is acting as a 

prorater and therefore required to obtain a prorater license” from the state’s Department of 

Business Oversight. Id. Nationwide has filed a related lawsuit against Jan Owen, in her official 

capacity as Commissioner of the Department of Business Oversight for the State of California, in 

 

§ 14701(a).

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The relevant statute provides: “No person shall include a consumer’s loan number or loan 

amount, whether or not publicly available, in a solicitation for services or products without the 

consent of the consumer, unless the solicitation clearly and conspicuously states, when applicable, 

that the person is not sponsored by or affiliated with the lender and that the solicitation is not 

authorized by the lender, and states that the consumer’s loan information was not provided to that 

person by that lender. This statement shall be made in close proximity to, and in the same or 

larger font as, the first and the most prominent use or uses of the consumer’s loan information in 

the solicitation, including on an envelope or through an envelope window containing the 

solicitation.” Cal. Bus. & Profs. Code § 14702.

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which Nationwide has sought an injunction prohibiting the state from enforcing California’s 

prorater laws against Nationwide. See Nationwide Biweekly Administration, Inc. v. Jan Lynn 

Owen, Case No. 14-CV-05166-LHK, ECF No. 5. On March 18, 2015, this Court denied 

Nationwide’s motion for a preliminary injunction in that case, finding Nationwide’s alleged injury 

was “too speculative.” Id., ECF No. 45 at 18 n.6.

After Nationwide received the Enforcement Letter, the parties engaged in discussions and 

informal discovery in an attempt to resolve the matter. Compl. ¶ 20. For example, Nationwide

has “worked diligently” with Defendants to “explain the services Nationwide offers, how it uses 

publicly available data to obtain loan information and mailing addresses for potential customers, 

and the significant benefits it provides to consumers.” Id. Nationwide also produced over 78,000 

pages of documents and met in person with Messrs. Hubanks and Perez in 2014. Id. Ultimately, 

despite these attempts and several tolling agreements between the parties, the discussions fell 

apart. Id. ¶¶ 21-22. Before the district attorneys could bring an enforcement action in a state 

forum, Nationwide filed the instant declaratory judgment action predicated on Defendants threats 

of enforcement. Id.

B. Procedural History

On October 2, 2014, Nationwide filed the instant lawsuit in this Court. See Compl. The 

gravamen of Nationwide’s lawsuit is that Business and Professions Code §§ 14701(a) and 14702 

constitute illegal restraints on free speech as applied to Nationwide, in violation of the First 

Amendment of the U.S. Constitution and Article I, § 2 of the California Constitution. See, e.g., 

Compl. ¶¶ 25, 28. Nationwide brought one cause of action under 42 U.S.C. § 1983 alleging that 

Defendants’ threats to enforce an unconstitutional statute violate Nationwide’s First and 

Fourteenth Amendment rights; one similar cause of action under California’s Constitution, Article 

I, § 2; and a third cause of action for declaratory relief that Nationwide’s use of lenders’ names is 

exempt from liability under Business and Professions Code § 14703. Id. ¶¶ 23-33.

Also on October 2, 2014, Nationwide filed a motion for a preliminary injunction. ECF No. 

5. In that motion, Nationwide requested that the Court enjoin the Defendants from enforcing 

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ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

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California Business and Professions Code § 14700 et seq. Id. at 2. The Court denied 

Nationwide’s motion, finding that Nationwide failed to demonstrate a likelihood of success on the 

merits of Nationwide’s claim that the challenged statutes violate the First Amendment of the U.S. 

Constitution or Article I, § 2 of the California Constitution as applied to Nationwide. ECF No. 50 

at 21.3

On December 30, 2014, Defendants filed a motion to strike and a motion to dismiss. ECF 

No. 33 & 34. Defendants argue that this Court should dismiss each count of Nationwide’s threecount complaint under Federal Rule of Civil Procedure 12 for a variety of reasons: (1) Nationwide 

failed to join a necessary party, (2) the county district attorney’s offices are improper parties, (3) 

Nationwide’s claims lack prudential ripeness, (4) the Court should abstain from jurisdiction under 

the Pullman factors, and (5) Nationwide has failed to state a claim for which relief can be granted. 

ECF No. 34. Defendants also argue that this Court should strike the second and third counts of 

Nationwide’s Complaint under California’s Anti-SLAPP statute because the Defendants were 

engaged in protected activity and Nationwide cannot establish a probability of prevailing on the 

merits. See ECF No. 33. Nationwide filed oppositions (ECF Nos. 40 & 41), and Defendants filed 

replies (ECF Nos. 44 & 46). A hearing on these motions was previously set for April 30, 2015, 

and was vacated pursuant to Civil L.R. 7-1(b). ECF No. 55. The parties’ initial case management 

conference had been set for August 5, 2015 at 2:00 PM. ECF No. 56.

On May 15, 2015, Hubanks and Perez, joined by the Alameda County District Attorney’s 

Office and the California Department of Business Oversight (“DBO”), filed a civil enforcement 

action against Nationwide in Alameda County Superior Court. California v. Nationwide Biweekly 

Admin., Case No. RG15770490; see also ECF No. 57-3.4 The complaint in the civil enforcement 

 

3 On March 18, 2015, Nationwide filed a Notice of Appeal from this Court’s Order denying a 

preliminary injunction. ECF No. 51. This Court retains jurisdiction over the action on the merits 

notwithstanding Nationwide’s appeal. See, e.g., Phelan v. Taitano, 233 F.2d 117, 119 (9th Cir. 

1956) (citing Ex parte Nat’l Enameling & Stamping Co., 201 U.S. 156 (1906)).

4 Defendants’ unopposed request for judicial notice of the state court proceeding is hereby 

GRANTED. See also Holder v. Holder, 305 F.3d 854, 866 (9th Cir. 2002) (taking judicial notice 

of filings in the public record from a California state court proceeding).

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action contains six causes of action and contends that Nationwide’s practices constitute: (1) 

Unlicensed Business Activities in violation of California Financial Code § 12200; (2) Fee 

Overcharges and Unauthorized Charges in violation of California Financial Code §§ 12314, 

12314.1; (3) Unlawful Use of Lender’s Name in violation of California Business and Professions 

Code §§ 17200, 14701; (4) Unlawful Use of Consumer’s Loan Information in Violation of 

California Business and Professions Code §§ 17200, 14702; (5) False Advertising in violation of 

California Business and Professions Code § 17500; and (6) Unfair Competition in violation of 

California Business and Professions Code § 17200. See generally ECF No. 57-3.

Also on May 15, 2015, Defendants filed a supplemental motion to dismiss pursuant to 

Federal Rule of Civil Procedure 12(g), arguing that the Court should abstain under Younger v. 

Harris, 401 U.S. 37 (1971). ECF No. 57; ECF No. 58 (corrected version filed on May 18, 2015). 

Nationwide filed an opposition (ECF No. 61), and Defendants filed a reply (ECF No. 62).

II. LEGAL STANDARD

“In Younger v. Harris, [401 U.S. 37 (1971)], the Supreme Court reaffirmed the longstanding principle that federal courts sitting in equity cannot, absent exceptional circumstances, 

enjoin pending state criminal proceedings.” ReadyLink Healthcare, Inc. v. State Comp. Ins. Fund, 

754 F.3d 754, 758 (9th Cir. 2014). The Supreme Court later extended the Younger principle to 

civil enforcement actions “akin to” criminal proceedings. Huffman v. Pursue, Ltd., 420 U.S. 592, 

604 (1975). “Younger abstention is appropriate only when the state proceedings: (1) are ongoing, 

(2) are quasi-criminal enforcement actions or involve a state’s interest in enforcing the orders and 

judgments of its courts, (3) implicate an important state interest, and (4) allow litigants to raise 

federal challenges.” ReadyLink, 754 F.3d at 759 (citing Sprint Commc’ns, Inc. v. Jacobs, 134 S.

Ct. 584, 593-94 (2013)). If these “threshold elements” are met, the Court then considers whether 

the federal action would have the practical effect of enjoining the state proceedings and whether 

an exception to Younger applies. ReadyLink, 754 F.3d at 759. If the threshold elements are met,

and no exception applies, the Court should dismiss actions involving injunctive or declaratory 

relief, and stay actions where damages are at issue until the state proceedings are completed. 

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Gilbertson v. Albright, 381 F.3d 965, 968-69 (9th Cir. 2004) (en banc).

III. DISCUSSION

A. The Younger Threshold Elements

Defendants argue that each of the Younger threshold elements is satisfied in this case. 

ECF No. 58 at 5. Nationwide’s opposition only disputes the first threshold element, that the state 

enforcement action is “ongoing” pursuant to Younger. ECF No. 61 at 4. Moreover, there is no 

dispute that the instant action challenges the same statutory provisions asserted against 

Nationwide in the state enforcement action. Because each of the Younger threshold elements must 

be satisfied, this Court will address each element in turn. See ReadyLink, 754 F.3d at 759 (“[e]ach 

element must be satisfied”).

1. Ongoing state proceeding

Defendants argue that the state enforcement action is ongoing because, although the state 

enforcement action was filed approximately seven months after Nationwide filed the instant 

action, the state proceeding is now pending, and there have been no proceedings on the substance 

of the merits in this instant action. ECF No. 58 at 5. Nationwide responds that the date for 

determining whether Younger applies is the date the federal action is filed. Nationwide notes that 

when Nationwide filed the instant action on October 2, 2014, there was no state enforcement 

action pending. ECF No. 61 at 4. Nationwide further contends that the instant action has 

progressed beyond an “embryonic stage,” and therefore Younger is inappropriate. For the reasons 

stated below, the Court agrees with Defendants. The Court will first address the timing issue, 

before addressing the status of the instant action.

a. Timing

In Hicks v. Miranda, 422 U.S. 332 (1975), the U.S. Supreme Court held that “Younger v. 

Harris could not be avoided on the ground that no criminal prosecution was pending against the 

[federal plaintiffs] on the date the federal complaint was filed.” Id. at 349. Moreover, the Court 

observed that none of the Court’s prior decisions “has held that for Younger v. Harris to apply, the 

state criminal proceedings must be pending on the day the federal case is filed.” Id. Instead, 

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“where state criminal proceedings are begun against the federal plaintiffs after the federal 

complaint is filed but before any proceedings of substance on the merits have taken place in the 

federal court, the principles of Younger v. Harris should apply in full force.” Id. Thus, the critical 

issue is whether “any proceedings of substance on the merits have taken place in the federal 

court.” Id. The Ninth Circuit is in accord: “Whether the state proceedings are ‘pending’ is not 

determined by comparing the commencement dates of the federal and state proceedings. Rather, 

abstention under Younger may be required if the state proceedings have been initiated before any 

proceedings of substance on the merits have taken place in the federal court.” Polykoff v. Collins, 

816 F.2d 1326, 1332 (9th Cir. 1987).

Nationwide argues that the state enforcement action was not pending in October 2014, 

when the instant action was filed. For support, Nationwide quotes the Ninth Circuit’s 2014 

decision in ReadyLink that states: “the date for determining whether Younger applies is the date 

the federal action is filed.” ECF No. 61 at 4 (quoting ReadyLink, 754 F.3d at 759). But timing was 

not an issue in ReadyLink. In ReadyLink, the Ninth Circuit quoted the Ninth Circuit’s 2004 en 

banc decision in Gilbertson, 381 F.3d at 969 n.4. Although the quote from footnote four of

Gilbertson states that the “critical date for purposes of deciding whether abstention principles 

apply is the date the federal action is filed,” id. (emphasis added), Gilbertson was deciding that 

issue in a completely different context. The issue addressed in Gilbertson was whether Younger

abstention was mooted because the state administrative proceeding had already concluded and was 

on appeal to the Oregon Court of Appeals by the time the federal complaint was filed. Because, in 

Gilbertson, the federal action was filed while the state proceeding was on appeal in state court, the 

Ninth Circuit concluded that the “ongoing state proceeding” element of Younger was met even 

though the Oregon Supreme Court denied review in October 2002 after the federal complaint was 

filed, but before the Ninth Circuit’s decision. The Ninth Circuit held that: “The appeal is not moot 

because Gilbertson’s federal action was filed while state proceedings were pending.” Id. (noting 

that “proceedings are deemed on-going for purposes of Younger abstention until state appellate 

review is completed”). In sum, the quote from the Ninth Circuit in ReadyLink/Gilbertson does not 

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change the clear authority from the U.S. Supreme Court and earlier Ninth Circuit cases that 

“[w]hether the state proceedings are ‘pending’ is not determined by comparing the commencement 

dates of the federal and state proceedings.” Polykoff, 816 F.2d at 1332. Nationwide’s argument 

that the filing date, alone, is dispositive lacks merit. “Rather, abstention under Younger may be 

required if the state proceedings have been initiated before any proceedings of substance on the 

merits have taken place in the federal court.” Id. The Court, therefore, will address the status of 

the instant litigation and whether any proceedings of substance on the merits have taken place in 

this, the federal, case.

b. Status of instant litigation

Nationwide argues that this case has progressed beyond an embryonic stage because the 

Court has already denied Nationwide’s motion for preliminary injunction, and the parties have 

briefed two motions to dismiss and a motion to strike. The Court does not agree with 

Nationwide’s conclusion.

Although the grant of a preliminary injunction is considered to be a proceeding of 

substance for Younger purposes, the denial of a preliminary injunction is not. Haw. Hous. Auth. v. 

Midkiff, 467 U.S. 229, 238 (1984) (holding issuance of a preliminary injunction to be “a 

substantial federal court action” pursuant to Younger); Polykoff, 816 F.2d at 1332 (“denial of a 

temporary restraining order is not considered a proceeding of substance on the merits”); see also 

Fresh Int’l Corp. v. Agric. Labor Relations Bd., 805 F.2d 1353, 1358 n.5 (9th Cir. 1986) (“It may 

be that issuance of a temporary restraining order, as opposed to denial of one, is a proceeding of 

substance on the merits.”). Moreover, the mere fact that Nationwide decided to appeal this 

Court’s denial of a preliminary injunction similarly fails to advance this case beyond an 

embryonic stage. Any such appeal is not a proceeding of substance on the merits in this Court,

and Nationwide cites no authority to the contrary.

The Ninth Circuit authorities cited by Nationwide are inapposite. ECF No. 61 at 5 (citing 

Hoye v. Oakland, 653 F.3d 835 (9th Cir. 2011), and Adultworld Bookstore v. Fresno, 758 F.2d 

1348 (9th Cir. 1985)). In both Hoye and Adultworld, the Ninth Circuit reversed decisions of 

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district courts that had abstained under Younger. In Hoye, although the district court denied a 

temporary restraining order, the case continued to progress as the Court conducted four status 

conferences with the parties and the Court’s on-the-record expression of its deep reservations 

about the constitutionality of the City Council’s actions resulted in a change in policy by the City 

Council. 653 F.3d at 844. In other words, it was not the mere denial of injunctive relief that led 

the Ninth Circuit to conclude that the case had progressed beyond an embryonic stage. It was, 

instead, that “the District Court’s intervention in the case had resulted in a significant change in 

the relative positions of the parties.” Id.

Similarly, in Adultworld, although the district court denied the preliminary injunction, the 

district court previously granted a temporary restraining order. 758 F.2d at 1349. Moreover, the 

district court conducted an “extended evidentiary hearing” on plaintiff’s motion for a preliminary 

injunction and denied the motion for preliminary injunction as moot when it abstained under 

Younger. Id. at 1350-51 (“Because the district court should not have abstained, the court also 

erred in not reaching the merits of Adultworld’s motion for a preliminary injunction.”).

In the instant case, unlike in Hoye or Adultworld, the Court has not granted injunctive 

relief, conducted evidentiary hearings, held case management conferences, or even set a case 

schedule. Although Nationwide filed the instant case in October 2014, this case has not 

progressed beyond an embryonic stage. The parties have briefed a motion for preliminary 

injunction (ECF No. 17), motions to dismiss (ECF Nos. 34, 58), and a motion to strike (ECF No. 

33). Of these, the Court denied Nationwide’s motion for preliminary injunction on March 17, 

2015, without an evidentiary hearing, determining that Nationwide failed to demonstrate a 

likelihood of success on the merits and failed to carry its burden to show that real and immediate 

harm would result absent a preliminary injunction. See generally ECF No. 50. Moreover, 

Defendants have not answered Nationwide’s Complaint, nor has the Court held an initial case 

management conference in this case. ECF No. 56. Accordingly, the Court has neither set a case 

schedule nor approved a discovery plan. See Fed. R. Civ. P. 26. This case remains in its infancy 

and, because the state enforcement proceeding is currently pending, the “ongoing state 

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proceeding” element of Younger is satisfied.

2. Quasi-criminal enforcement action

Neither party disputes that the state enforcement proceeding is a quasi-criminal 

enforcement action. The Court agrees. The state enforcement proceeding was filed against 

Nationwide by the DBO and District Attorneys on behalf of the People of the State of California 

to enforce various provisions of California’s Business and Professions and Financial Codes. For 

civil enforcement actions that are akin to criminal proceedings for Younger, “a state actor is 

routinely a party to the state proceeding and often initiates the action, the proceedings are 

characteristically initiated to sanction the federal plaintiff for some wrongful act, and 

investigations are commonly involved, often culminating in the filing of a formal complaint or 

charges.” ReadyLink, 754 F.3d at 759 (citing Sprint, 134 S. Ct. at 592). Each of those facts is 

present here. Accordingly, the “quasi-criminal enforcement action” element of Younger is 

satisfied.

3. Implicates an important state interest

Neither party disputes that the state enforcement proceeding “implicates an important state 

interest.” The Court agrees. The state enforcement proceeding implicates the important 

California interest of protecting consumers from allegedly deceptive business practices, as 

evidenced by the state enforcement action having been filed in state court on behalf of the people 

of the state of California. Accordingly, the “implicates an important state interest” element of 

Younger is satisfied. See Middlesex County Ethics Comm. v. Garden State Bar Ass’n, 457 U.S. 

423, 432 (1982) (“The importance of the state interest may be demonstrated by the fact that the 

noncriminal proceedings bear a close relationship to proceedings criminal in nature.” (citing

Huffman, 420 U.S. 592)).

4. Allows Nationwide to raise federal challenges

Neither party disputes that Nationwide will be allowed to raise federal challenges in the 

state enforcement proceeding. The Court agrees. State courts are presumed to be an adequate 

venue in which to assert federal challenges “in the absence of unambiguous authority to the 

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contrary.” Pennzoil Co. v. Texaco, Inc., 481 U.S. 1, 15 (1987); Hirsh v. Justices of the Supreme 

Court of California, 67 F.3d 708, 713 (9th Cir. 1995). In the instant case, there is no such 

unambiguous authority suggesting otherwise. Accordingly, the final element of Younger is 

satisfied.

For the reasons explained above, each of the Younger threshold elements has been 

established. Accordingly, the Court will next consider whether the federal action would have the 

practical effect of enjoining the state proceedings and whether any exceptions to Younger apply. 

ReadyLink, 754 F.3d at 759.

B. Remaining Considerations

1. Practical effect of enjoining state proceedings 

Neither party disputes that the practical effect of Nationwide’s federal complaint is to 

enjoin the state proceedings. The Court agrees. Nationwide’s complaint seeks declaratory and 

injunctive relief, including, for example, a “permanent injunction against Defendants prohibiting 

them from making any threats or taking any action against Nationwide for its use of publicly 

available information as described above.” Compl. 8. Were the Court to grant such relief, it 

would enjoin the ongoing state enforcement action. Accordingly, this additional predicate for 

Younger abstention is met. ReadyLink, 754 F.3d at 759.

2. Exception for bad faith

Nationwide argues that even if the elements for Younger abstention are met, the instant 

case is excepted from the doctrine because the state enforcement action was brought in bad faith. 

ECF No. 61 at 8-10. In support of this argument, Nationwide contends that the district attorneys 

brought the state enforcement action in bad faith without regard to the merits, made 

misrepresentations to this Court, and filed the state court enforcement action after reviewing and 

analyzing Nationwide’s appellate brief. Id. Defendants dispute each of these contentions and 

respond that the delay was due to the usual complications and delays present when four 

government agencies at two different levels of government collaborate. ECF No. 62 at 6-7. Upon 

review of the parties’ arguments, the Court agrees with Defendants. The Court is not left with the 

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impression that the state enforcement action was brought in bad faith. First, each of Nationwide’s 

contentions is based on pure speculation without support, and the Court denies Nationwide’s 

request to conduct discovery into the alleged bad faith motives of the Defendants in this case (ECF 

No. 61 at 8) when these issues may be further explored in state court. Second, for the reasons 

explained above, the instant case remains in its infancy. Although the parties have made 

numerous filings in this Court, and Nationwide has already appealed this Court’s denial of 

Nationwide’s motion for a preliminary injunction, the Court’s involvement to date has been 

minimal, this being the second motion resolved in the case to date. Finally, Nationwide filed the 

instant action and its motion for a preliminary injunction based on the premise that Defendants 

would, in fact, file a state enforcement action. Nationwide’s argument that the Defendants’ actual

filing of the state enforcement action demonstrates bad faith is not persuasive.

Accordingly, Nationwide has not persuaded the Court that the “bad faith” exception to 

Younger is applicable here.

C. Dismissal Is Warranted

Having concluded that abstention under Younger is the appropriate course, the Court must 

determine how to dispose of the case. Defendants’ motion seeks dismissal under Younger (ECF 

No. 58 at 6), and Nationwide’s opposition does not argue for a stay (see generally ECF No. 61). 

In the instant case, because Nationwide seeks only declaratory and injunctive relief, not damages, 

the Court agrees that dismissal is the proper course. See Gilbertson, 381 F.3d at 968 (under 

Younger, “federal courts should not dismiss actions where damages are at issue; rather, damages 

actions should be stayed until the state proceedings are completed”). Accordingly, dismissal is 

appropriate here.

IV. CONCLUSION

For the foregoing reasons, Defendants’ Second Motion to Dismiss (ECF No. 58) is 

GRANTED. The instant action is DISMISSED without prejudice. Moreover, the Court hereby 

DENIES AS MOOT Defendants’ First Motion to Dismiss (ECF No. 34) and Defendants’ Motion 

to Strike (ECF No. 33). The Clerk shall close the file.

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IT IS SO ORDERED.

Dated: June 17, 2015 ________________________________

LUCY H. KOH

United States District Judge

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