F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

R E A D Y L I

N K H E A L T H C A

R E , I N C ., a Nevada Corporation, on behalf of itself and others similarly situated,

Plaintiff-Appellant
,

v

.
S T A T E C O M P E

N S A T I O N I

N S U R A N C E F U N D ; D A V E J O N E S , I nsurance Commissioner, in his official capacity
, Defendants-Appellees

. N o. 12-56248

D.C. No. 2:11-cv-09934- PSG-PJ W

OPI NI ON

Appeal from the United States District Court for the Central District of California Philip S. Gutierrez , District J udg e, Presiding

Arg ued and Submitted April 10, 2014—Pasadena, California

F iled J une 12, 2014

B efore: J e rome F arris and Andrew D. Hurwitz
, Circuit J udg es, and Paul L . F riedman, District J udg e. *

Opinion by

J udg e Hurwitz

* T h e H o n o rab le P au l L . Fried m an , District J u d g e f o r th e U.S. District Co urt f o r th e District o f

Co lu m bia, sittin g b y

d esig n atio n

.R E A D Y L I N K H E A L T H C A R

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. SCI F 2

SUMMARY * *

Abstention/Issue P reclusion

A f firming the dismissal of an action c halleng ing a decision of the Commissioner of t he California Department of I nsurance, th e panel held that the district court erred b y abstaining
, but that issue preclusion barred the plaintiff’s clai m t h at the Commissioner’s decision was preempted b y I nternal Revenue Service reg ulations.

The panel held that under Sprint Communications, Inc. v

. Jacobs
, 1 34 S. Ct. 584 (2013), Y ounger a b stention was not appropriate because p arallel state c ourt proceeding s were not criminal proceeding s, the Commiss i o n er’s and the state

cour t’s orders were not “core” orders involving the

a d m i nistration o f the state judicial process, and th e proceeding s were n ot civil enforcement proceed i ng s akin to a criminal prosecution.

The panel held that the plaintiff’s p reemption claim wa s barred by issue preclusion u nder California law because while this appeal was pending
, the California Court of Appeal rejected the preemption claim, a n d the California S u p r eme Court denied review.

** T h is su m m ary co n stitu

t es n o p ar t o f t h e o p in io n o f th e co urt. It h as b eenp rep ared b y

co urt staf

f f o r th e co n v en i en ce o f

th e read er.R E A D Y L I N K H E A L T H C A R

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. SCI F 3

COUNSEL

Seth A. Rafkin (arg

ued) a nd J ennifer M. B og ue, Cooley L L P, San Dieg o, California, for Plaintiff-Appellant.

Kamala D. Harris, Attorney G eneral of California, Paul D

. Gifford, Senior Assistant Attorney G eneral, F elix E. L e a t h e r w o o d
, Supervising Deputy A ttorney G eneral, B r i a n D

. W e sley (arg

ued), Deputy Attorne y General, L os Ang eles, California, for Defendant-App e l lee D ave J ones, California I nsurance Commissioner, in his official capacity

.

Br u ce D. Celebrez z e (arg u e d ) and B enjamin E. Shiftan, Sedg wick L L P, San F rancisco, California; L aDonna W a llace, J ody A. DeB ernardi, and J udith D. Sapper, State Compensation I nsurance F und
, Santa Ana, California, for Defendant-Appellee State Compensation F und.

OP INION

HURW I TZ , Circuit J udg e:

This c as e involves parallel judicial proceeding s, one in state court and the other in federal court. Each was initiated by Ready

L ink Healthcare, I nc. (Ready L ink), and e ach

co n t e n d e d that a decision by the Commissioner o f the California Department o f I n surance ( Commissioner) was preempted by I nterna l R evenue Service (I RS) reg ulations. The federal district court abstained, r ely ing o n Y ounger v

. H a rris , 401 U.S. 37 (1971). W hile this appeal f rom th e district court judg ment was pending
, the California Court ofR E A D Y L I N K H E A L T H C A R

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. SCI F 4
Appeal rejected Ready

L ink’s preemption claim, and the California Supreme Court denied review. 1

Apply ing th e Supreme Court’s g uidance in Sprint Communications, Inc. v. J a c o bs
, 134 S. Ct. 584 (2013), we find that the district c o u r t erred by abstaining

. However, because issue preclusion n ow bars Rea d y L i n k ’s claim, we affirm the judg ment dismissing the complaint.

I. Background
Ready L ink provides temporary nurses fo r medical facilities. F rom 2000 to 2006, Ready L ink purchased

w o r k e r s ’ c o m p e n s a t i o n i n s u r a n c e f r o m t h e S t a t e Compensation I nsurance F und (SCI F ). See Cal. I n s. Code §§ 11770, 11773. Althoug h a c reature of California statutes, “SCI F is a

n ‘insurer’ on the same b asis as any private carrier offering workers’ compensation insurance.” P. W

. Stephens, Inc. v

. State Comp. Ins. F und
, 27 Cal. Rptr. 2d 107, 108 (Ct. App. 1994).

W h en SCI F a

udited Ready

L ink for the 2005 policy y ear, it found that Ready

L ink had failed to r eport certain per diem pay ments to employ ees as pay roll, and billed Ready

L ink for

an additional premium o f $555,327.53. Ready L ink appealed that decisio n t o the California Department of I nsurance, see Cal. I ns. Code § 11737(f), and a n administrative law judg e (AL J ) approved SCI F ’s premium calculation.

1 W e g ran t b o t

h p arties’ m o t io n s f

o r j u dicial n o tice o f th e C alif o rn ia state co u rt p ro ceed i n g s

. See Fed

. R

. Ev id

. 2 0 1 ; Trig u ero s v. Ad a ms , 6 5 8 F.3 d 9 8 3 , 9 87 (9 th

Cir. 2 0 1 1 ).R E A D Y L I N K H E A L T H C A R

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The A L J first found that the California W orkers’ C o mpensation Uniform Statistical Reporting Plan (USRP), 2 which SCI F u sed t o calculate Ready L ink’s premium rates,

ex e mpts pay

ments for “additional living ex penses not

n ormally assumed” from pay roll. B ecause Ready

L ink’s p e r diem pay ments were not tied to t h e e x penses that nurses accrued while working away from the i r h o mes, the AL J concluded that the pay

ments were a ctually w ag es. I n d o i n g so, the AL J rejected Ready L ink’s arg ument that t h e USRP should be interp r e t ed consistently w ith I RS per diem reporting rules. T he Commissioner affirmed and desig nated the decision as precedential.

Ready L ink th e n p etitioned the L os Ang eles Superior Court f or a writ of ad m i n i strative mandamus pursuant to California Code of Civil Procedure § 1 0 9 4 .5. I t a lleg ed, among o ther thing s, that the Commiss ioner should have followed I RS reporting r

ules in interpreting t he USRP. The Superior Court denied relief. Ready L in k a p p ealed to the C a l ifornia Court of Appeal, e x pressly arg uing that I RS reg ulations preempted the Commissioner’s decision.

W h ile the state c ourt ap peal was pending
, Ready L ink filed this putative class action a g ainst SCI F a n d the C o mmissioner in the Central District of California. The federal c omplaint alleg ed that I RS reg ulations preempted the Commissioner’s decision, re q uested both declaratory a nd

2 T h e USRP is a “ co m

p e n d ia o f ad m i n istrativ e ru les an d reg u latio n s g o v ern in g th e issu an ce o f w o rk ers’ co m

p en satio n co v erag e b y SCIF an d

o th er carriers. T h ey set f o r t h c l assif

icatio n s , rates an d ratin g sy stem s ap p ro v ed b y

th e Co m m issio n er p ursu an t to sectio n s 1 1 6 5 8 an d 1 1 7 3 0 et seq

. an d h av e b een in co rp o rated b y ref eren ce in to th e Calif

o rn ia Co d e of Reg u latio n s.” Al l i e d I

n tersta te, In c. v. S

essio n s Pa

yro ll Mgmt., In c ., 1 3 7 Cal. Rp t

r. 3 d 5 1 6 , 5 22 (Ct. A pp . 2 0 1 2 ).R E A D Y L I N K H E A L T H C A R

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injunctive relief, and asserted various s tate-law damag e claims. Aft e r S C I F moved to dismiss the complaint, the district court or d e r ed supplemental briefing to address possible abstention under Y ounger and Colorado River W ater Conservation District v. U nited S tates , 4 24 U.S. 800 (1976). The d istrict court then dismissed the federal preemption claim

on Y ounger g rounds and declined to ex ercise supplemental jurisdiction over the r emaining state-law claims. Ready L ink appealed.

As Ready

L ink’s appeal to th i s c ourt was pending
, the California Court o f Appeal affirmed the Superior Court’s d e n i al o f m a n d a m u s , e x p r e s s l y h o l d i n g t h a t t h e Commissioner’s decision was n ot preempted by federal law. ReadyLink HealthCare, Inc. v. Jones
, 148 Cal. Rptr. 3d 881, 886–92 (Ct. App. 2012). Th e C a lifornia Supreme Court denied Ready

L ink’s subsequent petition for review.

II. Younger Abstention

A.

The district court had jurisdiction over Ready L ink’s complaint under 28 U.S.C. § 1331, s ee Veriz on Md. Inc. v

. Pub. Serv. Comm’n of

Md
., 535 U.S. 635, 642 (2002), and we have jurisdiction over this appeal under 28 U.S.C. § 1 291, see Agriesti v

. MGM Grand Hotels, Inc.
, 53 F .3d 1000, 1000–01 (9th Cir. 1 9 9 5 ). We review the district court’s Y ounger determination de novo. Gilbertson v. Albright
, 381 F .3d 965, 982 n.19 (9th Cir. 2004) (en banc).R E A D Y L I N K H E A L T H C A R

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B.

I n Y ounger v. H

arris , the Supreme Court rea f f i r med the long -standing principle that federal courts sitting in e quity cannot, absent ex ceptional circumstances, enjoin pend i ng state criminal proceed i n gs

. 401 U.S. at 43–54. The Court, citing c omity concerns, later ex tended the Y ounger principle to civil enforcement actions “akin to” cri m i n al proceeding s, Huffman v. Pursue, Ltd.
, 4 20 U .S. 592, 604 (1975), and to suits challeng ing “the core of the administration of a State’s judicial sy stem,” Juidice v. Vail , 430 U.S. 327, 335 (1977).

T he Court’s subsequent o pinion in Middlesex Cou n t y Ethics Committee v. Gard en S t a te B ar Ass’n
, 457 U.S. 423 (1982), found abstention appropriate when ( 1 ) there is “an ong oing state judicial proceeding
, ” (2) those “proceeding s implicate important state interests,” and ( 3 ) there is “an adequate opportunity in the state procee d i n g s to raise constitutional challeng es.” Id. at 432. Our ensuing decisions concluded that the three Middlesex factors cont r o l l e d Yo u n ge r abstention in civil actions. See, e. g

. , Meredith v. Oregon
, 321 F .3d 807, 816–17 (9th Cir. 2003) ; F r esh Int’l Corp. v

. Agric. Labor Relations Bd.
, 805 F .2d 1353, 1357–62 (9th Cir. 1986). A nd, althoug h n ot a threshold element, we identified

a fourth requirem e n t : The requested r elief must seek to enjo i n

— or h ave the practical effect of enjoining —ong oing state proceeding s. A m e risourceBergen Corp. v. Roden
, 495 F .3d 1 143, 1149 ( 9th Cir. 2 007); Gilbertson
, 381 F

. 3d at 977–78 (citing Samuels v. M ackell
, 4 01 U.S. 66, 72 (1971)).

B ut , o u r p o s t- Middlesex decisions h ave sent mix ed s i g n a l s
on whether Y

o unger remains limited to c riminal cases, quasicriminal actions, and orders involvin g t he administration o f

a state’s judicial sy stem. A number of o ur opinions sug g estedR E A D Y L I N K H E A L T H C A R

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that, notwithstanding Middlesex
, Y ounger applies o nly to those three ty

p es of proceeding s. S

e e, e.g. , Logan v. U

.S. Bank Nat. A ss’n
, 7 22 F

. 3d 1163, 1167–69 (9th Ci r. 2 013); Potrero Hills Landfill, Inc. v. Cnty. of Solano
, 657 F .3d 876, 8 8 3 –85 & n.7 (9th Cir. 2011); Martori Bros. Distribs. v. James-Massengale
, 781 F .2d 1349, 1 354–56 (9th Cir. 1986), abrogated o n othe r g rounds
, Ohio Civ. Rights Comm’n v

. Dayton Christian S

c h s., Inc.
, 4 77 U.S. 6 19, 627 n.2 (1986). Others, however, implied that district courts must abstain in
any action when the Middlesex factors are present. See, e.g. , Delta Dental Plan of Cal., Inc. v. Mendoza
, 139 F. 3 d 1289, 1295 (9th Cir. 1998); Fresh Int’l Corp. , 805 F .2d at 1358.

W e also h ave been less than clear on whether Y ounger applies only to state-initiated proceeding s. Compare Potrero Hills
, 657 F .3d at 8 83 n.7 (“[ O] ur c a s e l a w clearly demonstrates that the f

irst Y ounger prong may be satisfied

even when the ong oing state proceeding involves only private l i t i ga nts.”), with San J ose Silicon Valley Chamber of Commerce Political Act i on Comm. v. City o f San Jose
, 546 F

. 3d 1 087, 1093 (9th Cir. 2 008) (“W e must abstain under Young er if four requirements are m et : (1) a state-initiated proceeding is ong oing . . . .”).

Sp r i n t r esolved these interpretive dilemmas, squarely holding that Y

ounger abstention is limited to the “three

ex c e ptional c ateg ories” o f cases identified in New O rleans Public Service, Inc. v. Council o f New Orleans (

NOPSI ), 491 U .S. 350, 3 6 7

– 6 8 (1989). Sprint
, 134 S. Ct. at 592. Those cases are: ( 1 ) “parallel, pending state criminal proceeding [s] ,” (2) “state civi l proceeding s that are akin to criminal p rosecutions,” and (3) state civi l proceeding s that “implicate a State’s interest in enforcing the orders a nd judg ments of its courts.” I d

. a t 588.R E A D Y L I N K H E A L T H C A R

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F or o rders at the “core” of the judicial process, the underlying state proceeding plainly need not have been initiated by the state

. S e e Juidice
, 430 U.S. at 329–30, 335–36; P ennzoil Co. v. Texaco, Inc.
, 481 U.S. 1, 4–5, 12–14 (1987). F o r civil enforcem e n t actions that are akin to criminal proceeding s, h owever, “a state actor is rou t i n el y a party to the state proceeding a nd o ften initiat e s the action,” the proce ed i n g s “are characteristically initiated to sanction the federal plaintiff

. . . for some wrong ful a ct , ” a nd “[ i] nvestig ations are c o mmonly involved, often culminating in the filing of a f

ormal complaint o r charg es.” Sprint
, 134 S. Ct. at 592.

I n civil cas e s , t

herefore, Y

o unger abstention is appropriate only w hen the state proceeding s: ( 1) are o ng oing
, (2) a re quasi-criminal enforcement actions or involve a state’s interes t i n e n forcing the orders and judg ments of its courts, (3) implicate an important state int e r e s t, and (4) allow litig ants to r aise f

ederal c halleng es. See Sprint
, 134 S. Ct. at 593–94; Gilbertson
, 381 F .3d a t 977–78. I f these “threshold elements” are met, we then c o nsider whether the federal action would have the practical e ffect of enjoining the state proceeding s a

nd whether a

n ex ception to Y

ounger a pplies. See Gilbertson
, 381 F .3d at 9 7 8, 983–84. Each element must be satisfied, AmerisourceBergen
, 495 F .3d at 1148, a nd the date for d etermining w hether Y ounger applies “is the date the federal action is filed,” Gilbertson , 381 F .3d at 969 n.4.

C.

The state proceedin gs h e r e did not fall within the three

ex c e ptional c ateg ories of cases identified in S print a nd NOPSI

. F irst, obviously they were not parallel state criminal proceeding s.R E A D Y L I N K H E A L T H C A R

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Second, neither the Commissioner’s approval of SCI F’s premium calculation nor the L os Ang eles Supe r i o r Court’s affirmance was an order at “the c o re of” California’s court sy stem, Juidice
, 430 U .S. a t 3 35, implicating the “State’s interest in enforcing the orde r s and judg ment of its courts,” Sprint
, 134 S. Ct. at 5 88. “Core” orders i n v o l v e t he administration of the state judicial process—for ex ample, an appeal bond requirement, P e nnzoil Co. v. Texaco, Inc.
, 481 U .S. at 12–14, a civil contempt order, Juidice
, 430 U.S. at 335–36, or a

n appointment of a receiver, Lebbos v. Judges of the Superior Court
, 883 F

. 2 d 8 1 0, 815 ( 9th Cir. 1989). This case, in c ontrast, involves a “ sing le state cou r t judg ment” interpreting an insurance ag reement and state law, not the process by which a state “compel[ s] compliance with the judg ments of its courts.” Potrero H ills
, 657 F .3d a t 886. I f the mere possibility of inconsistent federal and state court judg ments justified Y

ounger abstention, Y

ounger would swal l o w whole both Colorado River abstention a nd preclusion. See AmerisourceBergen , 495 F .3d at 1150.

Third, the state court proceeding s here do not “rank as an act o f c ivil enforcement

. . . ‘akin to a c r i minal prosecution’ in ‘important respects.’” S p r i nt , 1 34 S. Ct. at 592 (quoting Huffman
, 420 U.S. at 604). Even assuming arguendo that the Commissioner’s decision and the sub sequent state court review was a “unitary p r oceeding
, ” see San Jose Silicon V a lley
, 546 F .3d a t 1093, it plainly was not a ci v i l enforcement proceeding

. SCI F
, acting as a priv a t e p a rty , audited and billed Ready L ink f or its y early premium. Ready L ink, a p rivate party , requested ag ency review o f that decisi o n

. T he Commissioner adjudicated the dispute b etween Ready L ink a nd SCI F by interpr e t i n g state law, a nd Ready L ink then requested judicial review.R E A D Y L I N K H E A L T H C A R

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SCI F and the Commissi o n e r arg ue that the state proceeding s were akin to a criminal prosecution because the Commissioner “co n v ened” an administrative hearing a nd issued an opinion interpreting state reg ulations. The assertion proves too much. I f the m e r e “ initiation” of a judicial o r quasi-judicial a dministrative proceeding were an act of civil enf o r c e m e nt, Y

ounger would ex tend to every case in which

a state judicial officer resolves a dispute between two private parties. T his w ould render mea n i n g less the “virtually unflag g ing o blig ation of the federal courts to ex ercise the jurisdiction g iven them,” Colorado River
, 424 U

. S

. a t 817, and “would ex tend Y

ounger to virtually all parallel state a nd federal proceedin gs , at least where a party could identify a plausibly important state interest,” S print , 134 S. Ct. at 593. That the Commissioner interpreted a California reg ulation is similarly irrelevant: I n nearly every civil case, l i t i g ants request that a court or a quasi-judicial ag ency i n t erpret a statute, a reg

ulation, or the common law.

The district court therefore erred by abstainin g

. B ut, thing s have chang e d since the distric t c o u r t’s decision: The California c ourts have now directly rejected Rea d y L i n k’s preemption claim. We t urn to the consequences of that rejection.

III. P r eclusion

A.

B e cause the California Court o f Appeal r e j e cted Ready L ink’s preemption claim a fter the federal district court entered its judg ment, n e i ther p arty addressed preclusion below. H owever, we may c o nsider issue preclusion, a q u e s t i o n of law, for the first time on appeal. Clements v.R E A D Y L I N K H E A L T H C A R

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A i r p o rt Auth.
, 69 F .3d 321, 329–30 (9th Cir. 1995). I ssu e preclusion “bars ‘successive l i t i g a tion of an issue o f f act o r law actually litig ated and resolved in a va l i d c o u rt determination essential to t h e p rior judg ment,’ e ven if the issue recurs in the contex t of a different claim.” Taylor v

. Sturgell
, 553 U.S. 880, 892 (2008) (quoting New H ampshire v. Maine , 532 U.S. 742, 748–49 (2001)).

W e d e termine the preclusive effect o f a state co u r t judg ment by a p p ly ing that state’s preclusion principles. 28 U.S.C. § 173 8 ; Migra v. W arren City Sch. Dist. Bd. of Educ
., 465 U.S. 75, 81 (1984). State law g overns even if the state court action challeng ed “administrative decisions under section 1 0 94.5, California’s administrative mandamus statute,” W

hite v. City of Pasadena
, 671 F .3d 918, 926 (9th Cir. 2012), and the federal court action a l l e ge s a constitutional violation, Allen v. McCurry
, 449 U .S. 90, 98 (1980).

California law b ars relitig ation o f an issue of law or fact if five requirements are met:

F irst, the issue soug ht to be precluded f rom relitig ation must be identical to that decided in

a f ormer proceeding

. Second, this issue must have been actually litigated in the f ormer proceeding

. Third, it must ha v e been necessarily decided in the f ormer proceeding

. F ourth, the decision in the former proceeding must b e final and on t h e m e r i ts. F inally
, the party a g ainst whom preclusion is soug ht must be the same as, or in privity with, the party to the former proceeding

.R E A D Y L I N K H E A L T H C A R

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Lucido v. Superior C o u r t , 795 P.2d 1223, 1225 (Cal. 1 990) (en banc). I f these threshold requirements are satisfied, a court t hen determines whether preclusion would be consistent with the “preservation of the integ rity of the judicial sy stem, p romotion o f judicial economy , and protection of liti ga n t s from harassment by vex atious litig ation.” Id. at 1227.

B.

A p p ly ing the California issue preclusion test, w e c o n c l u d e that the decisi o n o f the California Court of Appeal bars Ready L ink’s preemption claim.

F irst, the California co u r t r esolved the very issue that Ready L ink raised in the dis t r i c t court—whether the Commissioner’s decision creates an obstacl e t o federal tax law. Jones
, 148 Cal. Rptr. 3 d at 888–89. The state c ourt h eld t h a t Ready

L ink’s preemption a

rg u ment was a misg u ided attempt “to compare two d istinct a reas of law,” a

nd concluded that the C ommissioner may impose more demandi n g per diem reporting requirements for workers’ compensation purposes than the I RS imposes for federal tax purposes. Id. at 888–90.

Se c ond, Ready

L ink actually litig ated the issue. “ F o r purposes o f collateral estoppel, an issue w as a ctually litig ated in a prior proceeding if it was properly raised, subm itted for determination, and det e r mined in that proceeding

. ” Hernandez v. City o

f Pomona
, 207 P.3d 506, 514 (Cal. 2009). Ready L ink’s stat e b r iefing asserted that I RS reporting reg ulations preempted the Commissioner’s decisi o n

. The California Court of Appeal disag reed.R E A D Y L I N K H E A L T H C A R

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I ssue preclusion app l i e s e v e n i f t he Commissioner himself had n o authority to d e c l ar e the USRP unenforceable in the underlying administrative p roce e d ing s. See Cal. Const. art I I I
, § 3.5. W e do not today consider the preclusive effect o f t he Commissioner’s finding s. See U niv. of Tenn. v. Ellio t t , 478 U.S. 788, 796–99 (1986); Miller v. Cnty. of Santa Cruz
, 39 F .3d 1 030, 1033 ( 9 t h C i r

. 1 994). Rather, we address the holding o f the C o u r t of Appeal, which in the first instance rejected Ready

L ink’s preemption claim. Jones
, 1 4 8 Cal. Rptr. 3d a t 8 8 8 –89; see a lso Turnbow v. Pac. Mut. Life Ins. Co.
, 934 F .2d 1100, 1 103 (9th Cir. 1991) (holding that state court preemption ruling s are entitled to preclusive effect).

Ready L ink i nsists that it could not fully present its preemption c laim without conducting discovery or presenting evidence to a trial court. Re a d y L ink, however, made the

s ame p o int to the California Court of Appeal, w h i c h determined as a matter of law that the Commis s i o n e r’s decision would not frustrate the purpose of federal reporting reg ulations. Jones
, 148 Cal Rptr. 3d a t 888–89. This satisfies the “actually litig ated” requirement. See Lucido
, 795 P.2d at 1225 (requiring “the opportunity to present full cases”); see also Kremer v. Chem. Const. Corp.
, 456 U.S. 461, 481 (1982) (“[ S] tate proceeding s need d o n o more than satisfy the minimum p rocedural requirements of the F ourteenth Amendment’s Due Process Clause in order to qualify f or the full faith and c redit g uaranteed by federal law.”). Preemption is almost alway s a leg al question, the resolution of w h i ch is rarely a ided “by d evelopment of a mor e complete f actual record.” Hotel Emps. & Rest. Emps. Int’l U n i o n v

. Nev. Gaming Comm’n
, 984 F .2d 15 0 7
, 1 513 (9th Cir. 1993). Thus, w e have g ranted prec l u s i v e effect to a Rule 1 2(b)(6) dismissal of a conflict p reemption claim, see Stewart v. U.S. B a n corp , 2 97 F .3d 953, 956, 959 (9th Cir. 2002), and h a v eR E A D Y L I N K H E A L T H C A R

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approved the dismiss a l o f claims on the basis of obstacle preemption at the p leading stag e, see Pub. Util. Dist. No. 1 of Grays Harbor Cnt

y. v

. I DACORP Inc.
, 379 F .3d 6 41, 650 (9th Cir. 2004); Firema n ’ s F und Ins. Co. v. City of Lodi
, 302 F .3d 928, 949–51 (9th Cir. 2002). California courts have d o n e t h e same. See, e .g. , Y arick v

. PacifiCare of Cal.
, 102 Cal. Rptr. 3d 379, 386–87 (Ct. App. 2009) (sustaining a demurrer on the basis of o b stacle preemption); Pollock v

. Univ. of S. Cal.
, 6 Cal. Rptr. 3d 122, 132 (Ct. App. 2 003) (g ranting pr e cl usive e ffect to a “purely leg al” judg ment sustaining a demurrer).

The third, fourth, a

n d fifth requirements for i s s u e preclusion under California law are n ot subj e ct to debate. The sta t e c o urt necessarily decided the p reemption issue, a s “the resolutio n o f the issue was not ‘entirely unnecessary to the jud gm e nt in the initial proceeding .’” Zevnik v

. Superior Court
, 7 0 Cal. Rptr. 3d 817, 821 (Ct. A p p

. 2 008) (quoting Lucido
, 795 P.2d at 1226). The California Court of Appeal’s decision was o n the merits, and became final a fter r e view was denied. See Abelson v. Nat’l Union Fire Ins. Co.
, 3 5 Cal. Rptr. 2d 13, 19 (Ct. App. 1994). And, the parties in the state and federal actions were the same.

Moreover, apply ing issue preclusion would preserve “the integ rity of the judic ial sy stem” b y promoting judicial economy

. Lucido , 795 P.2d at 1229. There is no reason for

a federal court to tackle anew the precise leg al issue resolved by the California Court of Appeal.

Contrary to Ready L ink’s assertion, g iving the California Cou r t of Appeal’s d ecision p reclusive effect does not close federal courts to c onstit u t ional claims ag ainst California ag encies. Had Ready

L ink not made its Suprem a c y C l auseR E A D Y L I N K H E A L T H C A R

E V

. SCI F 16

claim in the mandamus action, the Court of Appeal’s opinion would not have precluded a federal suit raising that c laim. See Honey v. Distelrath
, 195 F

. 3 d 531, 533 (9th Cir. 1 999); Gallagher v

. Frye
, 631 F .2d 1 27, 1 29–30 (9th Cir. 1 9 8 0 ). Ready L ink also could have avoided c l aim preclusion b y initial l y re q u e s t ing both administrative review a nd declaratory relief in federal court. Cf. City of Chi. v. I nt’l Coll. o f Surgeons
, 522 U.S. 156, 163–69 (1997) (holding that federal distr i ct courts have supplemental jurisdiction over state law claims arising under a s t ate administrative r eview statute); Duchek v. J

a cobi
, 646 F .2d 415, 419 (9th Cir. 1 981) (“However ex tensive their p ower to cre a t e a n d define substantive rig hts, the states have n o power directly to enlarg e
or contract federal jurisdiction.”). B ut, Ready L ink instead voluntarily chose to litig ate the Supremacy Clause c la i m in the state mandamus action, and the appellate court’s decision therefore has preclusive effect.

IV. Conclusion

F or the foreg oing reasons, the judg ment of the distr i ct court dismissing the complaint is AF F IRMED

.