The opinion of the court was delivered by: BROTMAN
These are two related civil rights actions brought under 42 U.S.C. § 1983, seeking declaratory and injunctive relief. Plaintiffs challenge the constitutionality of certain provisions of the Casino Control Act of New Jersey, N.J.Stat.Ann. §§ 5:12-1 et seq. (West Supp.1981), as applied to plaintiffs by order of the New Jersey Casino Control Commission entered January 13, 1981. Before the court is defendants' motion to dismiss the actions on abstention grounds.
Defendants in both actions are the New Jersey Casino Control Commission ("Commission") and its individual members. The State of New Jersey and the Division of Gaming Enforcement have intervened as defendants. The Division of Gaming Enforcement ("DGE") was established by N.J.Stat.Ann. 5:12-55 through -57 (West Supp.1981) in the Department of Law and Public Safety under the supervision and direction of the Attorney General. It is responsible for, among other things, investigating all applicants for casino licensure, enforcing the provisions of the Casino Control Act and prosecuting violations thereof before the Commission. Plaintiff Bally Manufacturing Corp. ("Bally") is a publicly traded Delaware corporation engaged in the business of gaming equipment and the casino industry. Bally owns 82.8% of Bally's Park Place, Inc., of Delaware, which in turn wholly owns Bally's Park Place, Inc., of New Jersey. The Park Place plaintiffs own and operate a major hotel and casino in Atlantic City, New Jersey. Plaintiff William T. O'Donnell, Sr., is the former President and Chairman of the Board of Bally Manufacturing.
II. FACTS AND PROCEDURAL HISTORY
In February, 1978, Bally and Park Place applied to the New Jersey Casino Control Commission for a casino license and a casino service industry license, pursuant to N.J.Stat.Ann. §§ 5:12-82 to -88 and -92 (West Supp.1981). In connection with this application, plaintiff O'Donnell submitted an application for a casino "key employee" license, pursuant to N.J.Stat.Ann. § 5:12-89 (West Supp.1981). In December, 1979, Park Place was granted a temporary one-year operating permit, under N.J.Stat.Ann. § 5:12-95.1 to -95.11 (West Supp.1981). As a condition of this permit, O'Donnell was required to resign and place his stock in a voting trust pending final adjudication of the license applications. The DGE imposed this condition because, as a result of its investigations, it anticipated a "substantial likelihood" that it would object to O'Donnell's suitability for licensure. The DGE believed that O'Donnell would not be able to meet the statutory qualification requirement that applicants establish their good character and reputation for honesty and integrity by clear and convincing evidence. N.J.Stat.Ann. §§ 5:12-84(c) and -89(b)(2) (West Supp.1981).
In August, 1980, the DGE concluded its investigation and the Attorney General submitted a report to the Commission, in accordance with the Act. N.J.Stat.Ann. 5:12-76(a) (West Supp.1981). Along with the report, the Attorney General filed a "Statement of Issues" summarizing the major points of the investigation and objecting to the licensure of plaintiffs. The formal licensing hearing before the Commission began in November, 1980, and continued for six weeks. At its conclusion, the Commission ruled that O'Donnell had not proved by clear and convincing evidence his good reputation for honesty and integrity. The Commission denied O'Donnell's application because of his "associations" with persons "of unsuitable character and reputation," and because of his alleged participation in an attempt to influence improperly Kentucky legislators in 1968. (Def. Ex. J). As a condition of the Bally companies' licensure, O'Donnell was required to submit a plan for divestiture of his Bally stock and to sever all business relationships with the corporate plaintiffs. Such a plan was submitted, but actual divestiture has been stayed pending appeal of the licensing decisions in state court. On January 13, 1981, the Commission's final orders were entered. (Def. Ex.s G, H, I). The Commission's formal opinion, including findings of fact and conclusions, was filed on March 16, 1981. (Def. Ex. J).
On February 13, 1981, plaintiffs simultaneously filed appeals of the Commission's orders in the Superior Court of New Jersey, Appellate Division (Def. Ex.s E, F, G), and filed these actions in this court.
In their federal complaints, plaintiffs allege that the Commission's decision is arbitrary and capricious, violates plaintiffs' First Amendment associational rights, results from bias and prejudgment, and is not rationally related to the State's interests, in violation of the Fourteenth Amendment's Due Process Clause. Plaintiffs also allege that the licensing conditions imposed by the Commission unduly burden interstate commerce and interfere with national securities markets in violation of the Supremacy Clause.
On appeal in state court, plaintiffs argue that the Commission's decision was arbitrary and capricious, against the weight of the evidence, and that it violated plaintiffs' due process rights under the state constitution. They also argue that the Commission's actions were inconsistent with its prior decisions, contrary to legislative intent, and in excess of the authority delegated by its enabling legislation, N.J.Stat.Ann. §§ 5:12-1 et seq. (West Supp.1981). Plaintiffs informed the Appellate Division that they intended to preserve all federal claims for consideration by this court, pursuant to England v. Louisiana State Bd. of Medical Examiners, 375 U.S. 411, 84 S. Ct. 461, 11 L. Ed. 2d 440 (1964). (Brief of the Applicants-Appellants in the Superior Court of New Jersey, Appellate Division, Def. Ex. O).
We begin consideration of defendants' motion to dismiss with three important principles in mind. First, federal courts are obligated to exercise the jurisdiction conferred upon them by Congress and the Constitution. As Chief Justice Marshall wrote: "We have no more right to decline the exercise of jurisdiction which is given, than to usurp that which is not given. The one or the other would be treason to the Constitution." Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 404, 5 L. Ed. 257 (1821). Thus, the exercise of jurisdiction is the rule; abstention is the "extraordinary and narrow exception." Colorado River Water Conservation District v. United States, 424 U.S. 800, 813, 96 S. Ct. 1236, 1244, 47 L. Ed. 2d 483 (1976), quoting County of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 188-89, 79 S. Ct. 1060, 1062-63, 3 L. Ed. 2d 1163 (1959).
Second, in actions under 42 U.S.C. § 1983, the plaintiff is not required to exhaust state judicial remedies. "The federal remedy is supplementary to the state remedy, and the latter need not first be sought and refused before the federal one is invoked." Monroe v. Pape, 365 U.S. 167, 183, 81 S. Ct. 473, 482, 5 L. Ed. 2d 492 (1961). See Steffel v. Thompson, 415 U.S. 452, 472-73, 94 S. Ct. 1209, 1222, 39 L. Ed. 2d 505 (1974); Wilwording v. Swenson, 404 U.S. 249, 92 S. Ct. 407, 30 L. Ed. 2d 418 (1971) (per curiam); McNeese v. Board of Education, 373 U.S. 668, 83 S. Ct. 1433, 10 L. Ed. 2d 622 (1963). See also United States ex rel. Ricketts v. Lightcap, 567 F.2d 1226 (3rd Cir. 1977); Leonard v. City of Columbus, 551 F.2d 974 (5th Cir.), adopted mem. en banc, 565 F.2d 957 (5th Cir. 1977), cert. denied, 443 U.S. 905, 99 S. Ct. 3097, 61 L. Ed. 2d 872 (1979).
The third and final principle is that of comity within the federal system, a principle that rests in an uneasy tension with the previous two. Comity consists of a proper respect for state functions, and a
sensitivity to the legitimate interests of both State and National Governments, ... in which the National Government, anxious though it may be to vindicate and protect federal rights and federal interests, always endeavors to do so in ways that will not unduly interfere with the legitimate activities of the States.
Younger v. Harris, 401 U.S. 37, 44-45, 91 S. Ct. 746, 750-51, 27 L. Ed. 2d 669 (1971).
We will first address the question of whether the Pullman abstention/England reservation procedure is appropriate in this case, as plaintiffs assert. Then we will discuss the two grounds ...