Febres v. Camden Board of Education , 445 F.3d 227 ( 2006 )

Opinions of the United
2006 Decisions States Court of Appeals
for the Third Circuit
4-18-2006
Febres v. Camden Bd Education
Precedential or Non-Precedential: Precedential
Docket No. 05-1178
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 05-1178
HERMINIO FEBRES; LARRY WILLIAMS; DAVID SIMS;
DEREK COPELAND; ROBERT HAWKINS;
CHARLES E. SMITH; JUAN A. DIAZ;
NELSON ALEXANDER; THE ESTATE OF ROBERT
HAWKING; ESTATE ANGEL PAGAN
v.
THE CAMDEN BOARD OF EDUCATION
Herminio Febres, Larry Williams, David Sims,
Derek Copeland, Robert Hawkins, Charles E. Smith,
Juan A. Diaz, Nelson Alexander,
Appellants
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil No. 01-cv-02844)
District Judge: Honorable Robert B. Kugler
________
Argued: November 16, 2005
Before: BARRY and AMBRO, Circuit Judges,
and POLLAK,* District Judge.
*
Honorable Louis H. Pollak, District Judge for the United
States District Court for the Eastern District of Pennsylvania,
sitting by designation.
________
(Opinion Filed: April 18, 2006)
________
Rosemarie Cipparulo, Esq. (Argued)
Weissman & Mintz LLC
One Executive Drive, Suite 2000
Somerset, NJ 08873
Counsel for Appellants
Louis Lessig, Esq. (Argued)
William M. Tambussi, Esq.
Brown & Connery, LLP
360 Haddon Avenue
Westmont, NJ 08108
Counsel for Appellee
________
OPINION OF THE COURT
________
POLLAK, District Judge:
Appellants Herminio Febres, Larry Williams, David
Sims, Derek Copeland, Charles Smith, Juan Diaz, Nelson
Alexander, and now-deceased Angel Pagan and Robert Hawkins
were employed by the appellee Camden Board of Education
(“Board”) as custodians and mechanics. On or about June 26,
2000, they were fired for excessive absenteeism. Appellants
brought this suit in the United States District Court for the
District of New Jersey, invoking the self-care provision of the
Family and Medical Leave Act of 1993 (“FMLA”), 29 U.S.C. §
2612(a)(1)(D), to contest their terminations. The District Court
granted appellee’s motion to dismiss on Eleventh Amendment
jurisdictional grounds, holding that the Board is an “arm of the
state.” Cf. Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429
U.S. 274, 280 (1977). The District Court concurrently denied
2
appellants’ motion for leave to amend their complaint to add
claims under 42 U.S.C. § 1983 against various school district
administrators and officials of the Board.
Appellants now appeal the District Court’s order.
Appellants’ primary target is the Eleventh Amendment ruling: if
we reverse the District Court’s jurisdictional ruling, then we are
not asked to address the denial of appellants’ motion for leave to
amend.
We have appellate jurisdiction under 28 U.S.C. § 1291.
Our review is plenary. See Farley v. Phila. Housing Auth., 102
F.3d 697 (3d Cir. 1996). Because we conclude that the Board
has not established it is an arm of the state, we will reverse.
I.
The Eleventh Amendment provides unconsenting states
with immunity from suits brought in federal courts by private
parties. See Edelman v. Jordan, 415 U.S. 651 (1974). The
Supreme Court has long held that counties, municipalities and
political subdivisions of a state are not protected by the Eleventh
Amendment. See Mt. Healthy, 429 U.S. at 280; see also Bolden
v. Se. Pa. Transp. Auth., 953 F.2d 807, 814 (3d Cir. 1991) (en
banc). School boards and school districts are typically
considered political subdivisions of a state, not entitled to
immunity. See, e.g., Mt. Healthy, 429 U.S. at 280-281; Lester H.
v. Gilhool, 916 F.2d 865, 870-71 (3d Cir. 1990). In some cases,
however, such entities may be viewed as “arm[s] of the State
partaking of the State’s Eleventh Amendment immunity . . . .”
Mt. Healthy, 429 U.S. at 280; see Pennhurst State Sch. & Hosp.
v. Halderman, 465 U.S. 89, 101 (1984) (holding that the
Eleventh Amendment bars actions in federal court whenever
“the state is the real, substantial party in interest”). The party
asserting immunity bears the burden of production and
persuasion. See Christy v. Pa. Turnpike Comm’n, 54 F.3d 1140,
1144 (3d Cir. 1995).
More than thirty-five years ago the Third Circuit
identified nine factors to be considered when determining
whether an entity is an arm or alter ego of the state for Eleventh
3
Amendment purposes. Urbano v. Bd. of Managers, 415 F.2d
247, 250-51 (3d Cir. 1969). The numerous factors articulated in
Urbano were subsequently condensed into three major criteria:
(1) whether the payment of the judgment would come from the
state, (2) what status the entity has under state law, and (3) what
degree of autonomy the entity has. Fitchik v. N.J. Transit Rail
Operations, Inc., 873 F.2d 655, 659 (3d Cir. 1989) (en banc).1
The three-part test––sometimes referred to as the Fitchik
test––has been reiterated and applied many times since. See,
e.g., Carter v. City of Phila., 181 F.3d 339, 347 (3d Cir. 1999);
Christy, 54 F.3d at 1144-45; Peters v. Del. River Port Auth., 16
F.3d 1346, 1350-52 (3d Cir. 1994); Bolden, 953 F.2d at 816.
We now accord equal consideration to all three prongs of
the analysis––payment from the state treasury, status under state
law, and autonomy. Benn v. First Judicial Dist. of Pa., 426 F.3d
233, 239-40 (3d Cir. 2005).2 However, in Hess v. Port Authority
Trans-Hudson Corp., the Supreme Court instructed that in close
cases, where “indicators of immunity point in different
directions,” 513 U.S. 30, 47 (1994), the principal rationale
behind the Eleventh Amendment––protection of the sovereignty
of states through “the prevention of federal-court judgments that
1
The test incorporates the considerations outlined by the
Supreme Court in Lake Country Estates, Inc. v. Tahoe Regional
Planning Agency, 440 U.S. 391 (1979), and is consistent with
Pennhurst, 465 U.S. 89. See Fitchik, 873 F.2d at 659. Fitchik
eliminated one of the original nine Urbano factors, which
distinguished between governmental and proprietary functions,
following the Supreme Court’s decision in Garcia v. San Antonio
Metro. Transit Auth., 469 U.S. 528 (1985).
2
Historically, we have regarded the first criterion––whether
payment would come from the state (referred to as the “funding
factor” or the “state-treasury criterion”)––as the most important
consideration, although not alone dispositive. See Fitchik, 873
F.2d at 659. In Benn, we concluded that “we can no longer ascribe
primacy to the first factor” and therefore “[relegated] financial
liability to the status of one factor co-equal with others in the
immunity analysis.” 426 F.3d at 239, 240.
4
must be paid out of a State’s treasury,” id. at 48––should
“remain our prime guide.” Id. at 47; see id. at 52 (identifying
states’ solvency and dignity as the concerns underpinning the
Eleventh Amendment).
II.
The controversy over classification of the Camden Board
of Education centers around the first and third criteria of the
Fitchik test. The Board’s legal status under state law, the second
criterion, clearly militates against immunity.
A. The Status of the Board Under State Law
Four sub-factors are relevant to assessing the Board’s
legal status under state law: how state law treats the Board
generally, whether the Board can sue or be sued in its own right,
whether the Board is separately incorporated, and whether it is
immune from state taxation. See, e.g., Carter, 181 F.3d at 347
n.22; Fitchik, 873 F.2d at 662-63. As the District Court noted in
its oral opinion, the Board can sue or be sued under state law, is
separately incorporated, and is not immune from state taxation.
See N.J. Stat. Ann. §§ 18A:10-1, 11-2. Moreover, New Jersey
state law generally treats school boards as separate political
subdivisions. See id. § 18A:10-1; see, e.g., Otchy v. Elizabeth
Bd. of Educ., 737 A.2d 1151 (N.J. Super. Ct. App. Div. 1999)
(noting that under state law a school board is a distinct legal
entity, which, for example, may hold property in its name).
In 2002, the New Jersey legislature enacted the Municipal
Rehabilitation and Economic Recovery Act (“MRERA”), N.J.
Stat. Ann. §§ 52:27BBB-1 to -65, which provides that a
municipality fulfilling specified criteria3 will be designated a
3
The MRERA applies to any New Jersey municipality:
(1) that has been subject to the supervision of a
financial review board pursuant to the ‘Special
Municipal Aid Act,’ P.L.1987, c. 75 (C.52:27D-118.
24 et seq.) for at least one year; (2) that has been
subject to the supervision of the Local Finance
5
“qualified municipality” and subjected to a series of measures to
try to alleviate its ongoing fiscal distress. See N.J. Stat. Ann. §§
52:27BBB-1 to -3, -7 to -30. Camden has been so designated.
See Camden City Bd. of Educ. v. McGreevey, 850 A.2d 505 (N.J.
Super. Ct. App. Div. 2004) (upholding the MRERA). The
MRERA also provides for “limited school district oversight” in
these qualified municipalities. N.J. Stat. Ann. § 52:27BBB-
2.1(c)-(d); see id. §§ 52:27BBB-63 to -64 (regarding
appointment of school board members and gubernatorial veto
power).
The District Court suggested that the Governor’s power,
under the MRERA, to veto actions taken at school board
meetings abrogated the Board’s status as a separate political
entity. Cf. id. § 52:27BBB-64. This, however, conflates the
second and third criteria of the Fitchik test; the gubernatorial
veto is better addressed with regard to the Board’s autonomy.
See discussion infra; Fitchik, 873 F.2d at 660, 663-64
(addressing gubernatorial veto power under the autonomy prong
of the arm-of-the-state analysis).
In sum, the various factors relating to the Board’s “status
under state law” support appellants’ contention that the Board is
not an arm of the state and therefore not entitled to immunity.
B. The Board’s Degree of Autonomy
The District Court concluded that the “autonomy factor”
weighed heavily in favor of immunity based on the MRERA’s
grant of veto and appointment powers to the Governor. We find
that this factor weighs only slightly in favor of the Board’s
Board pursuant to the ‘Local Government
Supervision Act (1947),’ P.L.1947, c. 151
(C.52:27BB-1 et seq.) for at least one year; and (3)
which, according to its most recently adopted
municipal budget , is dependent upon State aid and
other State revenues for not less than 55 percent of
its total budget.
N.J. Stat. Ann. § 52:27BBB-3.
6
immunity.
According to the MRERA, the minutes of any meeting of
the Board must be delivered to the Governor. Further, according
to the Act, the actions taken by the Board at a meeting become
effective fifteen days after delivery, unless during the fifteen-day
period the Governor (1) approves the minutes, in which case the
Board’s actions become effective upon that approval, or (2)
vetoes any action taken by the Board at that meeting, in which
case the vetoed action does not take effect. See N.J. Stat. Ann. §
52:27BBB-64(b).
We note that the Governor’s veto power is constrained, in
accord with the “limited school district oversight” the MRERA
describes, since the Governor has a limited period to respond to
the Board’s actions, and the default remains that the Board’s
actions have force or effect after approximately two weeks.
Moreover, the Board continues to control its agenda, pursuant to
its powers to act under N.J. Stat. Ann. § 18A:11-1.
The MRERA also grants the Governor the power to
appoint members of the Board: the Act provides for a temporary
increase in the size of the school board from nine members to
twelve, to allow the Governor to appoint three members. See
N.J. Stat. Ann. § 52:27BBB-63(h). The MRERA states that “to
ensure substantial local representation on any such board, in no
case shall the number of the positions appointed by the
[municipality’s] mayor and elected by the voters, combined,
constitute less than a majority of the total positions on the
board.” Id. § 52:27BBB-63(a).
The Board argues, by way of comparison, that it is
significantly less autonomous than entities which have been held
not to be arms of the state, and cites Kovatz v. Rutgers, 822 F.2d
1303, 1312 (3d Cir. 1987) (holding that Rutgers University was
“largely autonomous and subject only to minimal state
supervision and control”). (Appellees’ Brief at 9.) We note,
however, that even in the case of Rutgers University, members
of the University’s two governing bodies were appointed by the
Governor with the advice and consent of the state senate.
Rutgers, 822 F.3d at 1311 (noting that at least six of the eleven
7
members of the Board of Governors were appointed in this way,
and that the eleven state-appointed members of the Board of
Trustees were responsible for, in turn, selecting up to fifty
additional trustees to serve with them).
Gubernatorial appointment of board members typically
weighs only “slightly” in favor of immunity. See, e.g., Christy,
54 F.3d at 1149 (finding that the state controlled the membership
of the Pennsylvania Turnpike Commission and holding, on
balance, that this weighed “slightly” in favor of alter ego status
and immunity); Peters, 16 F.3d at 1351-52 (finding that New
Jersey and Pennsylvania appointed all sixteen members of the
Board of Commissioners of the Delaware River Port Authority
and holding that this weighed “slightly” in favor of alter ego
status and immunity); Bolden, 953 F.2d at 820 (finding that the
state appointed one-third of SEPTA’s board members but
holding that SEPTA was autonomous).
While we agree that in the case before us the Board may
be subject to more overall state oversight than Rutgers
University, we note that other entities which have been held by
this Court not to be arms of a state have been subject to state
controls strikingly similar to those placed upon the Board.
Fitchik v. N.J. Transit Rail Operations, Inc. offers a close
comparison to the case before us: “three out of seven of the
[New Jersey Transit] board members [were] required to be
members of the [state’s] executive branch, and the Governor
ha[d] veto power over the board’s actions.” 873 F.2d at 663
(citing N.J. Stat. Ann. § 27:25-4). Much like the Camden Board
of Education, New Jersey Transit (“NJT”) was required to
deliver minutes of its board meetings to the Governor, so that,
within the designated time period, the Governor could veto any
proposed board action. See N.J. Stat. Ann. § 27:25-4(f); see also
Fitchik, 873 F.2d at 663; id. at 668 (Rosenn, J., dissenting). We
held that while NJT was “not ‘highly autonomous’ like Rutgers,”
it was still “significantly autonomous” and concluded that the
autonomy factor only “counsel[ed] slightly in favor of according
immunity to NJT.” Fitchik, 873 F.2d at 664; see also Hess, 513
U.S. at 47 (finding that the Port Authority was not an arm of the
states of New York and New Jersey, even though the “States
appoint and can remove the commissioners, the Governors can
8
veto Port Authority actions, and the States’ legislatures can
determine the projects the Port Authority undertakes”).
Guided by our case law, we find that the autonomy factor
slightly favors the Board’s immunity. Since the Board’s legal
status, supra, plainly suggests the opposite result, we observe
that the indicators of immunity point in different directions.
Thus, the question of the state’s financial liability––which we
turn to next––is particularly significant. Cf. Hess, 513 U.S. at
47, 48-50.
C. The State Treasury’s Liability for the Payment of
the Judgment
In support of its holding, the District Court referenced a
prior New Jersey district court opinion, which found that the
Camden Board of Education was entitled to alter ego status
because of its limited autonomy and “[b]ecause the vast majority
of the School Board’s funding [came] from the State of New
Jersey.” Camden County Recovery Coal. v. Camden Bd. of
Educ., 262 F. Supp. 2d 446, 450 (D.N.J. 2003) (granting the
Board’s cross-motion to dismiss, and dismissing as moot an
order to show cause why a preliminary injunction, requested by
plaintiffs, should not be granted). The Camden County Recovery
Coalition court reported that approximately 85% to 90% of the
Board’s monies came from the state, and concluded this left “no
question” that “any judgment against the School Board [would]
lead to the direct expenditure of state funds in order to comply
with such a judgment.” Id. at 449.
In the case at bar, the District Court’s analysis of the
Fitchik prong that we will term the “state-treasury criterion”4
similarly attributed overwhelming significance to the fact that
Camden is “almost entirely State funded.” (A34.) The court
4
While this prong of arm-of-the-state analysis has
frequently been referred to in the case law as the “funding factor”
or “funding analysis,” we think it may be closer to the mark to
describe it as the “state-treasury criterion” or “state-treasury
analysis.”
9
reasoned that, given the magnitude of the state’s funding, any
judgment “would ultimately have to be paid by state funds.”
(A33.) The District Court acknowledged that this was not
because New Jersey bears any affirmative, legal obligation to
satisfy a judgment against the Board––either directly or by
reimbursing the Board. Rather the court concluded that, as a
practical matter, it was inevitable that funds provided by the
state would be used to pay a judgment and that such funds would
have to be replaced by the state. (A20, A22.) In fact, the
District Court concluded that New Jersey’s “indirect liability”
was so compelling an indicator of immunity that the court
deemed all other funding-related considerations irrelevant.
(A20, A32.)
On appeal, the Board’s argument mirrors the reasoning
articulated by the Camden County Recovery Coalition court and
the District Court in this case. The Board’s brief asserts: “If the
[Board’s] only significant revenue stream is the State of New
Jersey, it stands to reason that any judgment owed would in fact
be coming directly from State funding, even though it is
commingled with a minuscule amount of funds from the local
municipality.” (Appellees’ Brief at 7.) At oral argument, the
Board also contended that practical necessity would require New
Jersey to replenish any funds used by the Board to pay a
judgment. The Board argues that immunity is appropriate where
the state makes such an “overwhelming financial contribution.”
(Appellees’ Brief at 5.)
As explained infra, we find the Board’s assertions, and
the District Court’s corresponding conclusions, unsupported by
the record. Moreover, close consideration of our case law leads
us to conclude that the Board’s central argument side-steps the
crux of the state-treasury criterion––whether the state treasury is
legally responsible for the payment of a judgment against the
Board. Contrary to the Board’s contention, the fact that New
Jersey is the principal source of the Board’s finances does not
alone confer immunity, or even compel a finding that this prong
of the analysis favors immunity. See Rutgers, 822 F.3d at 1308,
10
1312;5 see also Mt. Healthy, 429 U.S. at 280. We must consider
the nature of the state’s financial contributions to the Board.
1. State Funds Contributed to the Board’s Budget
Whether an entity claiming immunity has, or can raise,
sufficient funds to satisfy a judgment has typically been a factor
in our state-treasury analysis. See, e.g., Peters, 16 F.3d at 1350;
Fitchik, 873 F.2d at 659-60. In the instant case, the District
Court concluded that payment of a judgment would necessarily
come from the portion of the Board’s budget received from the
state. We find this unsupported. The record before us indicates
that Camden schools receive revenue from a number of sources.
While non-state funds comprise a relatively small percent of the
Board’s budget, they still total a significant sum, with nearly
$7.5 million in local taxes and nearly $25 million in federal
grants in 2004-2005. (A48.)6 In addition, the Board is
5
While we have consistently explained that the quantity or
proportion of state funding received by an entity is not dispositive,
we have described it as potentially probative. See Blake v. Kline,
612 F.2d 718, 723 (3d Cir. 1979); see also Carter, 181 F.3d at 348
(reasoning that “[t]he funding factor weighs even more heavily
against immunity in this case than it did in Fitchik and Bolden,”
where larger portions of the agencies’ funds came from the states);
Bolden, 953 F.2d at 819 (similarly comparing the portion of the
agency’s funding contributed by the state with the portion
contributed in Fitchik). Rutgers illustrates the limited weight that
attaches to the size, absolute or relative, of the state’s contribution,
822 F.3d at 1308 (noting that state funding, one of Rutgers’ four
sources of funding, composed up to seventy percent of the
University’s general operating account).
6
As noted in Camden County Recovery Coalition, the state
provides the lion’s share of funding to the Camden schools. The
state’s sizeable contribution in part reflects Camden’s status, dating
back to the 1990s, as a so-called Abbott district. Cf. Abbott v.
Burke, 575 A.2d 359 (N.J. 1990) (authorizing funds to provide
remedial programs and services to disadvantaged students); N.J.
Admin. Code §§ 6A:24-1.1 et seq.
11
statutorily authorized to raise revenues through taxes, pursuant
to the Comprehensive Educational Improvement and Financing
Act, N.J. Stat. Ann. § 18A:7F-5(d). Alternatively, to increase
funds, the Board could undertake to reduce expenses, cf. Fitchik,
873 F.2d at 661, or, as counsel for the Board acknowledged in
the District Court, sell assets (A14-15).
Furthermore, we are not persuaded that it is of legal
consequence whether Board funds employed to satisfy a
judgment were funds which had initially been provided by the
state. The record does not suggest that New Jersey retains
ownership or control of the funds appropriated to the Board.
(A22.) As we noted in Fitchik, “[w]e do not see [the
gubernatorial veto] as indicating state ownership of the money
already in [an entity’s] accounts. We think it, instead, to be
relevant to the third factor . . . [,] autonomy.” 873 F.2d at 660;
see also Christy, 54 F.3d at 1146 (finding that the state’s control
over the Pennsylvania Turnpike Commission’s “authority to
issue bonds, notes, and other obligations falls short of indicating
state ownership of funds obtained through the issuance of such
bonds, notes, and other obligations” (emphasis in original)). The
magnitude of the state’s contribution does not alter the fact that,
once deposited in the Board’s accounts, these funds belong to
the Board. If then used to pay a judgment, we can say only that
the judgment was satisfied with the Board’s monies. Cf. Fitchik,
873 F.2d at 661-62; Rutgers, 822 F.2d at 1308; Blake v. Kline,
612 F.2d 718, 723-24 (3d Cir. 1979); cf. also Metcalf & Eddy,
Inc. v. Puerto Rico Aqueduct & Sewer Auth., 991 F.2d 935, 941
(1st Cir. 1993) (reaching the same conclusion).
It is undisputed that the Camden Board of Education has a
relatively poor tax base and is less financially independent than
many of the entities we have previously found not clothed with
immunity, such as NJT, SEPTA, and Rutgers University.
Nonetheless, given what the record before us discloses with
respect to the Board’s varied sources of existing and potential
funds, the Board has not established that it cannot satisfy a
judgment with its own monies. Cf. Christy, 54 F.3d at 1146-47.
2. Additional State Funds to Compensate for Payment
of a Judgment
12
While the parties agree that New Jersey is not legally
responsible for the Board’s unassumed debts, the Board presses
us to consider the likely impact of an adverse judgement: The
Board alleges that New Jersey would be forced, as a practical
matter, to increase its appropriations to refill the Board’s coffers,
following the Board’s payment of a judgment.
Since the state is under no legal obligation to do so, such
appropriations––if they were to be made––would constitute a
voluntary or discretionary subsidy. (The fact that such a
contribution might be sorely needed and greatly appreciated by
the Board, would not alter the nature of the state treasury’s
obligations.) We have long held that a state’s voluntary
contributions to an entity do not create an Eleventh Amendment
jurisdictional bar: “Although the [state] might well choose to
appropriate money to [an entity] to enable it to meet a shortfall
caused by an adverse judgment, such voluntary payments by a
state simply do not trigger Eleventh Amendment immunity.”
Christy, 54 F.3d at 1147 (internal quotation marks omitted)
(emphasis in original); see, e.g., Fitchik, 873 F.2d at 661; Blake,
612 F.2d at 726.7
At the same time, we recognize that some of our case
discussions can be read as intimating that attention may properly
be given to the derivative consequences for the state that might
flow from a substantial judgment against the sued entity. See,
e.g., Carter, 181 F.3d at 348 & n.25 (observing that any
judgment would not be paid “directly or indirectly” by the state);
Bolden, 953 F.2d at 819 (commenting that a state “might feel
compelled as a practical matter to subsidize . . . financially
pressed municipalities,” but concluding that this “would not
necessarily transform the recipients into alter egos of the state”
(emphasis added)).
In Hess, the Supreme Court emphasized the import of
7
Other circuits have reached the same conclusion. See, e.g.,
Barket, Levy & Fine, Inc. v. St. Louis Thermal Energy Corp., 948
F.2d 1084, 1087 (8th Cir. 1991).
13
legal liability, without disavowing practical considerations.8 The
Court queried, for example: “Is the State in fact obligated to bear
and pay the resulting indebtedness of the enterprise? When the
answer is “No”––both legally and practically––then the Eleventh
Amendment’s core concern is not implicated.” Hess, 513 U.S. at
51; id. at 45-46 (assessing the Port Authority’s financial
independence, as well as the states’ legal liability for its debts).9
8
In an earlier decision, the Supreme Court also explained
that an agency may “invoke the [Eleventh] Amendment in order to
protect the state treasury from liability that would have . . .
essentially the same practical consequences as a judgment against
the State itself.” Lake Country Estates, Inc., 440 U.S. at 401.
9
The Hess Court acknowledged, in dicta, that immunity
properly attaches where an agency in question “‘is so structured
that, as a practical matter, if the agency is to survive, a judgment
must expend itself against state treasuries . . . .’” Id. at 50 (quoting
Morris v. Wash. Metro. Area Transit Auth., 781 F.2d 218, 227
(D.C. Cir. 1986), and citing Alaska Cargo Transp., Inc. v. Alaska
R.R. Corp., 5 F.3d 378 (9th Cir. 1993)). The facts of the two cases
cited by the Court suggest the types of limited circumstances in
which the Court might expect such concerns to require immunity,
regardless of the state’s legal liability.
In Morris, immunity was accorded to an interstate transit
system. Analysis of both the entity’s status under state law and its
limited autonomy suggested it was an arm of the two states the
transit system served. Morris, 781 F.2d at 226-28. While the states
involved were not directly liable, Congressional funding for the
system was made contingent upon the states’ agreement to meet the
system’s operating deficits, which could include adverse
judgments. And, from the beginning it was fully anticipated that
the entity would have large deficits and thus continually be
dependent on the states for its financial survival. Id. at 225-26.
Alaska Cargo Transport held that the railroad at issue was entitled
to immunity as an alter ego of the state, even though the state had
expressly disclaimed liability for it by statute. The case turned on
the critical function performed by the railroad in Alaska, and
federal laws which essentially required the state to keep the
railroad afloat. Alaska Cargo Transp., Inc., 5 F.3d at 381.
14
More recent Supreme Court opinions, such as Auer v.
Robbins, 519 U.S. 452, 456 n.1 (1997) and Regents of the
University of California v. Doe, 519 U.S. 425 (1997), shed some
further light on the role of state funding in arm-of-the-state
analysis. Doe, in particular, illustrates the Court’s emphasis on
the question of legal liability. There, the Supreme Court,
confronting a “narrow question,” held that the University of
California––an entity for which the state was legally liable and
which had previously been deemed an arm of the state––retained
immunity even when the state had been indemnified, such that a
final judgment would actually be paid by the federal
government. Doe, 519 U.S. at 426, 430-31. The case thus
stands, at least, for the proposition that an entity’s immunity is
not vitiated when the state, which is legally liable, does not
actually pay a judgment. Although, as a California court later
observed, it does “not follow that the converse is also true, i.e.,
that if an entity uses funds provided by the state to pay a
judgment for which the state is not legally liable, there can be no
immunity,” Kirchmann v. Lake Elsinore Unified Sch. Dist., 83
Cal. App. 4th 1098 (Cal. Ct. App. 2000), Doe effectively
conveyed the centrality of legal liability: “Of course, the
question whether a money judgment against a state
instrumentality or official would be enforceable against the State
is of considerable importance to any evaluation of the
relationship between the State and the entity or individual being
sued.” Doe, 519 U.S. at 430.10 The Court further explained:
Just as with the arm-of-the state inquiry, . . . with
respect to the underlying Eleventh Amendment
question it is the entity’s potential legal liability,
rather than its ability or inability to require a third
party to reimburse it, or to discharge the liability in
the first instance, that is relevant.
Id. at 431; see Benn, 426 F.3d at 239 (quoting Doe for this
proposition); Cash v. Granville County Bd. of Educ., 242 F.3d
10
We do not mean to suggest that Doe was a departure from
Hess. To the contrary, Doe here draws upon Hess, including the
portion we have quoted, supra.
15
219, 224-25 (4th Cir. 2001); Duke v. Grady Municipal Schs.,
127 F.3d 972, 980-82 (10th Cir. 1997).
In view of the controlling Supreme Court jurisprudence,
as well as our own conforming case law, we find that the
practical or indirect financial effects of a judgment may enter a
court’s calculus, but rarely have significant bearing on a
determination of an entity’s status as an arm of the state. A
state’s legal liability (or lack thereof) for an entity’s debts merits
far greater weight, and is therefore the key factor in our
assessment of the state-treasury prong of the Fitchik analysis.
In the case before us, the Board does not point to any
evidence demonstrating that additional funds would, in fact, be
provided by the state (as opposed to the Board finding it
necessary to draw on the sources discussed supra, such as
additional tax levies or sales of assets).11 While we have little
doubt that the state has an interest in seeing that Camden’s
schools remain operational, it would be improper to confer
immunity based on our conjecture about the steps New Jersey
might take following a judgment. The absence of any legal
obligation on the part of New Jersey to provide funds in
response to an adverse judgment against the Board is a
compelling indicator that the state-treasury criterion––the first
prong of the Fitchik test––weighs against immunity. Further,
while the record shows that the Board receives very substantial
11
In support of its position, the Board reminds us of
Camden’s weak tax base and of the large portion of total revenue
provided by the state. Neither of these facts tells us how the state
is likely, let alone obliged, to respond to a Board shortfall.
We note that state aid to the Camden school district is
calculated using a statutory formula, and that a process for applying
for supplemental aid is also provided by state statute. See
Comprehensive Educational Improvement and Financing Act of
1996, N.J. Stat. Ann. § 18A:7F-1 et seq. No argument has been
made, nor evidence presented, that applying for funds to cover or
to reimburse a liability would qualify for supplemental aid. The
state retains the option to reject supplemental requests. See N.J.
Stat. Ann. § 18A:7F-6.
16
state funding, the Board possesses some alternative sources of
revenue, and has not demonstrated that it would be incapable of
satisfying a judgment against it, see supra Subsection II.C.1.
Thus, we are not in accord with the District Court’s view that the
state-treasury criterion weighs in favor of finding the Board to be
an arm of the state.
D. The Totality of the Factors
The Board’s legal status under state law supports the
conclusion that it is not an arm of the state of New Jersey. The
Board’s somewhat constrained autonomy, on the other hand,
slightly favors its classification as an arm of the state.
Therefore, the state-treasury analysis is decisive in this case, and
it counsels against the Board’s immunity as an arm of the state.
On balance, we hold that the Board has failed to show that it is
entitled to Eleventh Amendment immunity. Accordingly, we
find that the Board is subject to suit in federal court. The
judgment of the District Court will therefore be reversed, and the
case remanded for further proceedings.12
12
Because we so conclude we need not reach the issue of
whether Congress has abrogated the state’s immunity under the
self-care provision of the FMLA. In addition, in accordance with
the appellants’ stated position, we need not address the District
Court’s denial of appellants’ request for leave to amend their
complaint.
17