Springboards v. McAllen Indep School ( 2023 )

Case: 21-40333 Document: 00516670330 Page: 1 Date Filed: 03/08/2023
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
FILED
March 8, 2023
No. 21-40333 Lyle W. Cayce
Clerk
Springboards to Education, Incorporated,
Plaintiff—Appellant/Cross-Appellee,
versus
McAllen Independent School District,
Defendant—Appellee/Cross-Appellant,
No. 21-40334
Springboards to Education, Incorporated,
Plaintiff—Appellant,
versus
IDEA Public Schools,
Defendant—Appellee.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 7:16-CV-523
USDC No. 7:16-CV-617
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Nos. 21-40333 and 21-40334
Before Smith, Duncan, and Oldham, Circuit Judges.
Stuart Kyle Duncan, Circuit Judge:
Springboards for Education (“Springboards”) brought trademark
infringement claims against McAllen Independent School District
(“MISD”), a public school district in Texas, and IDEA Public Schools
(“IDEA”), a nonprofit organization operating charter schools in Texas. The
district court dismissed the suit against IDEA, concluding it was an arm of
the state and therefore shared Texas’s sovereign immunity. As for MISD,
the court found that it did not have sovereign immunity but ultimately
granted summary judgment in MISD’s favor. Agreeing that MISD does not
have sovereign immunity and that it was entitled to summary judgment on
the merits, we affirm the district court’s judgment for MISD. Although we
disagree with the district court’s conclusion that IDEA has sovereign
immunity, we affirm the judgment for IDEA on alternate grounds.
I.
Springboards is a Texas corporation that sells educational materials
designed to encourage schoolchildren to read. At issue in this case is
Springboards’ Read a Million Words Campaign (“Campaign”), which urges
students to read one million words over the course of the schoolyear.
Participating schools receive a customized kit with Springboards’
educational materials, and students who successfully meet their reading goals
become Millionaire Readers and are inducted, with much fanfare, into the
Millionaire’s Reading Club. Springboards has registered several trademarks
in connection with the Campaign, including “Read a Million Words,”
“Million Dollar Reader,” and “Millionaire Reader.”
Springboards has been vigilant in combatting what it perceives as
infringement of its trademarks by local schools that operate their own
monetary-themed reading programs. Our court has affirmed dismissals of
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Springboards’ trademark claims against two Texas school districts. 1 This
appeal concerns similar claims against MISD and IDEA 2 under the Lanham
Act, 15 U.S.C. §§ 1051 et. seq., alleging trademark infringement, trademark
counterfeiting, and false designation of origins. 3 MISD is a public school
district in Hidalgo County, Texas, and IDEA is a nonprofit corporation that
runs public charter schools throughout Texas.
Springboards alleges that MISD infringed Springboards’ trademarks
through its reading program. Many MISD schools track the number of words
students read each year and present students who read a million words with
faux million-dollar bills bearing the phrase “Million Dollar Reader.” Various
MISD schools have posts on their websites or social media celebrating their
“Millionaire Reader[s], “Millionaires,” and referring to a “millionaire
club.”
Springboards alleges similar infringement by IDEA through its
reading program. IDEA schools present awards to students who achieve
“IDEA Millionaire Reader status” and host “IDEA Millionaire Reader’s
Celebration[s]” in recognition of their accomplishment. IDEA schools
sometimes share information about these events and the millionaire reading
program online.
In the district court, both MISD and IDEA moved to dismiss for lack
of subject matter jurisdiction, arguing they were arms of the state and thus
1
Springboards to Educ., Inc. v. Houston Indep. Sch. Dist., 912 F.3d 805 (5th Cir.
2019), as revised (Feb. 14, 2019) (affirming dismissal of Lanham Act claims against a public
school district); Springboards to Educ., Inc. v. Pharr-San Juan-Alamo Indep. Sch. Dist., 33
F.4th 747 (5th Cir. 2022) (same).
2
We address the two suits together, as did the district court.
3
Springboards also brought claims against MISD and IDEA for trademark dilution
under the Lanham Act, the dismissals of which it does not appeal.
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entitled to sovereign immunity. Both also moved for summary judgment. The
district court disposed of these motions at the same time. It ruled that only
IDEA enjoyed sovereign immunity and, accordingly, granted IDEA’s motion
to dismiss and denied MISD’s. However, the court granted MISD summary
judgment, concluding Springboards could not establish MISD’s program was
likely to cause confusion with respect to Springboards’ trademarks.
Springboards now appeals the summary judgment in favor of MISD,
while MISD cross-appeals its denial of sovereign immunity. Springboards
also appeals the dismissal of its claims against IDEA on the basis of sovereign
immunity.
II.
We review both the district court’s determination of sovereign
immunity and its summary judgment de novo. Richardson v. Flores, 28 F.4th
649, 653 (5th Cir. 2022); All. for Good Gov’t v. Coal. for Better Gov’t, 901 F.3d
498, 504 (5th Cir. 2018). We may affirm a judgment on grounds other than
those relied upon by the district court if the record contains an adequate and
independent basis for that result. Lauren C. by & through Tracey K. v.
Lewisville Indep. Sch. Dist., 904 F.3d 363, 374 (5th Cir. 2018); Chauvin v.
Tandy Corp., 984 F.2d 695, 697 (5th Cir. 1993).
III.
We begin with the threshold jurisdictional issue of whether IDEA and
MISD enjoy sovereign immunity. Vogt v. Bd. of Comm’rs of Orleans Levee
Dist., 294 F.3d 684, 688 (5th Cir. 2002) (“Federal court jurisdiction is
limited by the Eleventh Amendment and the principle of sovereign immunity
that it embodies.”). The Eleventh Amendment recognizes the background
constitutional principle that states, as separate sovereigns, are inherently
immune from suit without their consent. Hess v. Port Auth. Trans-Hudson
Corp., 513 U.S. 30, 39–40 (1994); Seminole Tribe of Fla. v. Fla., 517 U.S. 44,
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54 (1996); see also The Federalist No. 81, at 487 (Alexander Hamilton)
(Clinton Rossiter ed., 1961) (“It is inherent in the nature of [a State’s]
sovereignty not to be amenable to the suit of an individual without its
consent.”). That immunity extends to so-called arms of the state, entities
which are effectively the state itself because “the state is the real, substantial
party in interest” to the lawsuit. Hudson v. City of New Orleans, 174 F.3d 677,
681 (5th Cir. 1999) (quoting Pendergrass v. Greater New Orleans Expressway
Comm’n, 144 F.3d 342, 344 (5th Cir. 1998)); see also Mt. Healthy City Sch.
Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 280 (1977).
In determining whether an entity is an arm of the state, we balance the
so-called “Clark factors,” which our court first articulated decades ago in
Clark v. Tarrant County, 798 F.2d 736 (5th Cir. 1986). Those factors are:
(1) whether state statutes and case law view the entity as an arm of the state;
(2) the source of the entity’s funding; (3) the entity’s degree of local
autonomy; (4) whether the entity is concerned primarily with local, as
opposed to statewide, problems; (5) whether the entity has the authority to
sue and be sued in its own name; and (6) whether it has the right to hold and
use property. Clark, 798 F.2d at 744–45. The second factor carries the most
weight, while factors five and six are of lesser importance. Hudson, 174 F.3d
at 682; Black v. N. Panola Sch. Dist., 461 F.3d 584, 596 (5th Cir. 2006). But
“no single factor” is dispositive; courts consider the factors “as a whole.”
Clark, 798 F.2d at 745. The burden of proof rests with the entity asserting
immunity. Skelton v. Camp, 234 F.3d 292, 297 (5th Cir. 2000).
The Clark factors have not escaped criticism. Recently, they were
fairly described as “hav[ing] all the precision of a blunderbuss.” Cutrer v.
Tarrant Cnty. Loc. Workforce Dev. Bd., 943 F.3d 265, 270 (5th Cir. 2019), as
revised (Nov. 25, 2019). “No factor or combination of [the factors] is
necessary. None is sufficient. And Clark says nothing about how to ‘balance’
them.” Ibid. That imprecision is on display here. Making a good faith attempt
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to apply the factors, the district court concluded a public school district was
not an arm of the state, but a public charter school was. That is puzzling, to
put it mildly. See, e.g., Black, 461 F.3d at 596 (“Generally, school boards and
districts are not arms of the state shielded by Eleventh Amendment
immunity.”). As discussed below, our application of the factors differs
meaningfully from the district court’s, particularly as to IDEA.
A.
We begin with IDEA. Examining each Clark factor, we conclude that,
contrary to the district court’s ruling, IDEA is not an arm of the state.
1.
For the first Clark factor, we examine how the state perceives the
entity through its constitution, laws, and other official pronouncements.
Hudson, 174 F.3d at 683. IDEA points out that Texas considers public charter
schools as arms of the state and directs us to the Texas Supreme Court’s
decision in El Paso Educ. Initiative, Inc. v. Amex Props., LLC, 602 S.W.3d 521(Tex. 2020). That case held that because “open-enrollment charter schools
act as an arm of the State government,” they receive state sovereign
immunity. Id. at 529–30. See also HWY 3 MHP, LLC v. Elec. Reliability
Council of Texas, 462 S.W.3d 204, 210 (Tex. App. 2015) (noting that “open-
enrollment charter schools should be treated as governmental units”). While
the Texas courts’ decisions on state sovereign immunity are not dispositive
as to federal sovereign immunity, we agree with IDEA that this factor weighs
in favor of immunity. Texas law “reflects the state’s view that suing [IDEA]
is equivalent to suing the state of Texas itself.” Perez v. Region 20 Educ. Serv.
Ctr., 307 F.3d 318, 328 (5th Cir. 2002).
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2.
Factor two, the funding inquiry, is more complex and ends up cutting
against immunity. The inquiry has two parts. “[F]irst and most
importantly,” we examine “the state’s liability in the event there is a
judgment against the defendant, and second, [we consider] the state[’s]
liability for the defendant’s general debts and obligations.” Vogt, 294 F.3d at
693 (quoting Hudson, 174 F.3d at 687). Whether the state would be liable for
a judgment depends primarily on whether it indemnifies the defendant, the
degree that it funds the defendant, and the extent that it restricts the
defendant’s use of state-provided funds. See Perez, 307 F.3d at 328; Hudson,
174 F.3d at 686–88. Factor two carries the most weight because one of the
Eleventh Amendment’s central purposes is to protect state treasuries from
involuntary liability. Jacintoport Corp. v. Greater Baton Rouge Port Comm'n,
762 F.2d 435, 440–41 (5th Cir. 1985); see also Hess, 513 U.S. at 48 (noting with
approval that most circuits privilege this factor).
The district court found, and IDEA continues to argue, that the first
part of the funding inquiry favors immunity because “94 percent of [IDEA’s]
funding comes from State and federal sources.” We disagree. For several
reasons, a hypothetical judgment against IDEA would likely not be paid with
state funds. To begin with, IDEA’s argument improperly aggregates state
and federal funds. See Cutrer, 943 F.3d at 271 (denying immunity where an
entity claimed to depend on public funds but failed to demonstrate its
reliance on “state funds”) (emphasis in original). The Eleventh Amendment
is concerned only about the potential impact on the state treasury. See
Pendergrass, 144 F.3d at 345 (explaining that the relevant rationale is “the
protection of state treasuries”). Whether federal money is at stake is
irrelevant.
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Disaggregating the sources of IDEA’s funding shows that any risk of
a judgment’s being paid from state funds is remote. IDEA draws its 94%
figure from IDEA’s 2016–2018 financial reports. Those show that roughly a
quarter of IDEA’s annual funding comes from local and federal sources.
Those amounts run into the tens of millions. In 2018 alone, IDEA took in
about $27 million from local sources and $71 million from the federal
government, including almost $17 million given directly to IDEA without any
state processing. This cuts sharply against IDEA’s immunity, because the
funding inquiry “concerns whether the state is ‘directly responsible for a
judgment’ or ‘indemnifies the defendant.’” Stratta v. Roe, 961 F.3d 340, 354
(5th Cir. 2020) (quoting U.S. ex rel. Barron v. Deloitte & Touche, L.L.P., 381
F.3d 438, 440 (5th Cir. 2004) (cleaned up)). IDEA’s ample funding from
local and federal sources belies the assertion that Texas would be “directly
responsible for a judgment.” 4 And IDEA points to no evidence that Texas is
obligated to indemnify it. See Vogt, 294 F.3d at 693 (weighing against
immunity the fact that “the state has no duty to pay a judgment” against the
entity).
Moreover, IDEA concedes that the “overwhelming majority” of its
state funding is “earmarked”—meaning it comes with state-imposed
restrictions on how the funds may be spent. Those restrictions also cut
against immunity. Whether “funding is earmarked for any particular
purpose” is relevant “to determine whether a judgment likely would be paid
with state funds.” Perez, 307 F.3d at 328. When state funds are set aside for
specific uses, that weighs against immunity because those funds are
necessarily unavailable to satisfy legal liabilities. Hudson, 174 F.3d at 688
4
To be clear, as in past cases, “we do not draw a bright-line rule as to the amount
of [non-state] funding necessary to hold an entity financially independent from the state.”
Daniel v. Univ. of Texas Sw. Med. Ctr., 960 F.3d 253, 258 (5th Cir. 2020).
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(“Importantly, either all or substantially all of the funds from the State are
earmarked for specific purposes . . . . These funds cannot be used to pay a . . .
judgment.”); Vogt, 294 F.3d at 694 (“Because the state funds are already
earmarked for other purposes, the state monies cannot be used to pay a
judgment against [the entity].”); Pendergrass, 144 F.3d at 345–46. IDEA
cannot concede that the bulk of its state funds is restricted while at the same
time arguing it would have to use those same funds to pay a judgment. 5
We turn to the second (and less important) part of factor two: whether
Texas may be indirectly liable because it is “responsible for the defendant’s
general debts and obligations.” Hudson, 174 F.3d at 688. Unlike its traditional
public school counterparts, IDEA cannot generate its own revenue by levying
taxes. Tex. Educ. Code § 12.102(4). It must instead issue bonds, which
Texas guarantees. Id. § 45.05219; 19 Tex. Admin. Code §33.67. IDEA’s
inability to independently raise revenue counsels in favor of immunity. Perez,
307 F.3d at 329. And the fact that Texas guarantees its bonds is also relevant.
Williams v. Dallas Area Rapid Transit, 242 F.3d 315, 320 (5th Cir. 2001).
However, these indirect indicators do not ultimately move the needle. We
have suggested that “where the state’s only liability was in guaranteeing a
state authority’s notes and bonds,” this “‘ancillary effect’ on the state
treasury does not confer immunity under the Eleventh Amendment.”
Jacintoport, 762 F.2d at 441 (citing Blake v. Kline, 612 F.2d 718, 726 (3d Cir.
1979)). Here, in light of the reasons discussed above, “[a]ny influence upon
the state treasury by . . . a judgment would be too indirect and remote to
5
Nor can IDEA argue that a judgment against it might lead Texas to provide
additional unrestricted funds to satisfy the liability. We have rejected the argument that the
“remote possibility that the state will elect to pay a judgment” constitutes a threat to the
state treasury. Hudson, 174 F.3d at 689. Nor does IDEA provide any evidence that Texas
regularly provides money to satisfy liabilities, despite having no obligation to do so. Cf.
Vogt, 294 F.3d at 693.
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characterize it as a potential liability of the state treasury or to make the state
the real, substantial party in interest.” Pendergrass, 144 F.3d at 346. So, to
sum up, factor two weighs against immunity because Texas is unlikely to have
to pay for an adverse judgment and its indirect responsibility is limited to its
“ancillary” backing of IDEA’s bonds.
3.
Factor three considers whether the entity is autonomous or controlled
by the state. We look to the degree of independence enjoyed by the entity and
its managers, as well as how its managers are appointed. Vogt, 294 F.3d at
694; Stratta, 961 F.3d at 354. “Frequent and broad oversight by the state
suggests that the entity is an arm of the state.” Perez, 307 F.3d at 330. Texas
pervasively regulates charter entities like IDEA. Texas courts have
recognized that a charter school’s charter is “entirely contingent on State
discretion.” Texas Educ. Agency v. Am. YouthWorks, Inc., 496 S.W.3d 244,
262 (Tex. App. 2016). Texas may unilaterally withhold funding or suspend
the charter school’s authority to operate if the school violates its charter or
state law. Tex. Educ. Code § 12.1162(b). Texas may even “reconstitute”
the governing body of a charter school and appoint new members to the
governing body. Id. § 12.115(a), (d). And charter schools must satisfy Texas’s
annual performance evaluations by meeting state-mandated benchmarks. Id.
§ 12.1181. Provisions like these show that Texas has broad oversight and
control over IDEA, which counsels in favor of immunity.
4.
The fourth factor turns on “whether the entity acts for the benefit and
welfare of the state as a whole or for the special advantage of local
inhabitants.” Pendergrass, 144 F.3d at 347. The district court found that
IDEA “operates campuses statewide and with a statewide purpose of
providing public education,” and IDEA continues to press that argument
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here, contending “education is a statewide concern.” But IDEA sets the
inquiry at too high a level of generality. We have already rejected this
argument in the context of a levee board’s arguing that it combatted the
“statewide problem” of flooding. Vogt, 294 F.3d at 695. The relevant inquiry,
we explained, “focuses on the tasks undertaken by the particular defendant.”
Ibid. By contrast, we noted that “primary education and law enforcement are
also statewide concerns, yet school boards and sheriffs are not arms of the
state.” Ibid. So too here. Education may be a statewide concern in the
abstract, but IDEA’s day-to-day “tasks” consist in operating local schools.
Just as the levee board in Vogt contributed to a statewide undertaking but was
local in nature because its primary concern was the local levees, IDEA too is
a local entity acting “for the special advantage of local inhabitants.”
Pendergrass, 144 F.3d at 347.
Nor can IDEA turn this factor to its advantage by pointing to the sheer
number of schools it operates throughout Texas. To the contrary, our
precedent teaches that an entity’s limited scope of jurisdiction counsels
against immunity. See Vogt, 294 F.3d at 695 (“[M]ost entities that are entitled
to Eleventh Amendment immunity have statewide jurisdiction.”). While
IDEA may operate schools throughout Texas, that does not somehow give
IDEA statewide jurisdiction. Rather, IDEA’s schools each serve
geographically limited communities. Properly understood, IDEA’s
“jurisdiction” is limited to particular areas where it has a school.
Accordingly, factor four weighs against immunity.
5.
Factor five, which carries little weight, considers whether the entity
can sue and be sued in its own name. That ability points against immunity.
Perez, 307 F.3d. at 331. IDEA concedes it has previously sued and been sued
under its own name. But it argues that this factor still favors immunity
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because Texas specifically allows independent school districts to sue and be
sued, while remaining silent as to charter schools. See Tex. Educ. Code
§11.151(a) (allowing independent school districts to “sue and be sued” in the
name of the district). IDEA points to our decision in Perez, which concluded
that where state law is silent as to the entity’s power to sue but expressly
allows analogous entities to do so, this factor “slightly favors” immunity.
Perez, 307 F.3d. at 331. Perez is distinguishable, however. Perez made no
finding about whether the entity in question had a history of suing in its own
name—it based its conclusion merely on the silence in state law. Not so here.
IDEA concedes it has a history of suing in its own name. This factor thus
weighs against immunity.
6.
Finally, factor six asks whether the entity can hold and use property.
If it can, that points away from immunity. Texas law is clear on this point:
“[W]hile an open-enrollment charter school is in operation, the charter
holder holds title to any property . . . and may exercise complete control over
the property as permitted under the law.” Tex. Educ. Code § 12.128(b).
As IDEA observes, though, Texas law also states that property purchased by
a charter holder with state funding “is considered to be public property for
all purposes under state law” and is “property of this state held in trust by
the charter holder for the benefit of the students.” Id. § 12.128(a). If a charter
school ceases operations, Texas takes possession and control of the property.
Id. § 12.128(c). IDEA argues that these restrictions show that it does not truly
hold property.
We disagree. Our precedent rejects the argument that this factor
points toward immunity where the entity held title but “all of [the entity’s]
property ultimately belong[ed] to the state.” Vogt, 294 F.3d at 696. Because
Texas law provides that the charter holder holds title to its property, this
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factor also weighs against immunity. See also Pendergrass, 144 F.3d at 347(weighing this factor against immunity despite the fact that “at some time in
the distant future” the entity’s property “may revert to the state”).
***
In sum, factors one and three favor sovereign immunity while factors
two, four, five, and six do not. Balancing all the factors, and giving greater
weight to factor two, we conclude that IDEA is not an arm of the state and
does not share in Texas’s sovereign immunity.
B.
Because MISD cross-appeals the district court’s ruling that it is not
entitled to sovereign immunity, we must also apply the Clark factors to it.
Guided by our foregoing analysis, we easily conclude the district court was
correct. See Lopez v. Houston Indep. Sch. Dist., 817 F.2d 351, 353 (5th Cir.
1987) (finding a Texas independent school district was “sufficiently distinct
from the state to be outside the [E]leventh [A]mendment”), overruled on
other grounds, Walton v. Alexander, 44 F.3d 1297, 1303 n.4 (5th Cir. 1995) (en
banc); San Antonio Indep. Sch. Dist. v. McKinney, 936 S.W.2d 279, 284 (Tex.
1996) (holding that “an independent school district is more like a city or
county than it is like an arm of the State of Texas and is amenable to suit in
federal court under the Eleventh Amendment”); Black, 461 F.3d at 596(“Generally, school boards and districts are not arms of the state shielded by
Eleventh Amendment immunity.”).
As with IDEA, factor one weighs in favor of immunity. Texas courts
have long recognized that independent school districts are part of the state
itself and therefore enjoy state sovereign immunity. As far back as 1931, the
Texas Supreme Court referred to them as “state agencies, erected and
employed for the purpose of administering the state’s system of public
schools.” Love v. City of Dallas, 40 S.W.2d 20, 26 (Tex. 1931). More recently,
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the supreme court stated it is “well settled in this state that an independent
school district is an agency of the state” and thus enjoy immunity unless
Texas waives it. Barr v. Bernhard, 562 S.W.2d 844, 846 (Tex. 1978).
The second and weightier factor cuts against immunity because a
judgment against MISD would not fall upon Texas. In response, MISD
contends that recent changes to state law make school districts somewhat
more reliant on state funding. This argument fails for at least two reasons.
First, MISD still receives significant funding from non-state sources. The
record shows that roughly half of MISD’s annual revenue comes from
sources other than the state. In 2019, for instance, MISD collected about $90
million from local and intermediate sources, $20 million from federal
sources, and $6 million from “Other Resources.” There is little reason to
think the state treasury would be implicated by a judgment against MISD.
Second, while Texas law does impose some limits on school districts’ taxing
power, 6 they still maintain the power to levy certain taxes and to issue bonds.
See Tex. Educ. Code §§ 45.001, 45.002. The ability to self-finance
weighs heavily against immunity. See Pendergrass, 144 F.3d at 346.
Factor three, the degree of local autonomy, weighs in favor of
immunity because Texas exerts considerable oversight and control over its
school districts. School districts are subject to state accreditation, as well as
academic performance and financial accountability standards, and Texas can
take corrective action for any failure to comply. See Tex. Educ. Code
§ 39A.001. Indeed, Texas can close a noncompliant district and annex it to
an adjoining district. Id. § 39A.005. Texas also has significant influence over
6
See, e.g., Tex. Educ. Code § 45.0021 (preventing districts from levying
maintenance taxes to create a surplus to pay the district’s debt); id. § 45.0032 (placing
limits on maintenance, operations, and enrichment taxes); id § 45.003 (requiring some
taxes to be authorized by a majority of the district’s voters).
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the day-to-day operations of school districts, as it controls to varying degrees
matters like school curriculum and student transportation. See, e.g., id.
§ 28.002 (required curriculum); Id. § 34.002, 34.003 (statewide bus safety
standards).
As with IDEA, factor four points away from immunity because school
districts meet local rather than statewide needs. MISD serves students in
Hidalgo County, not Texans generally. It thus operates “for the special
advantage of local inhabitants.” Pendergrass, 144 F.3d at 347. This limited
jurisdiction counsels against immunity. Vogt, 294 F.3d at 695.
Factors five and six likewise weigh against immunity. Texas law
provides that the trustees of an independent school district “in the name of
the district may acquire and hold real and personal property [and] sue and be
sued.” Tex. Educ. Code § 11.151(a). While of lesser importance, this
authority shows the district is separate from the state.
Altogether, only factors one and three weigh in favor of immunity and
the marquee second factor points the other way. We therefore agree with the
district court that MISD is not an arm of the state and is not entitled to
sovereign immunity
IV.
We turn to Springboards’ trademark claims and conclude that the
district court properly granted summary judgment in MISD’s favor. We also
conclude that judgment for IDEA is proper, “exercis[ing] our discretion to
affirm on unadvocated grounds supported by the record.” United States v.
Sanchez, 900 F.3d 678, 687 n.8 (5th Cir. 2018).
The Lanham Act imposes liability on anyone who, without consent,
uses “in commerce any reproduction, counterfeit, copy, or colorable
imitation of a registered mark in connection with the sale, offering for sale,
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distribution, or advertising of any goods or services on or in connection with
which such use is likely to cause confusion . . . .” 15 U.S.C. § 1114(1)(a). The
likelihood of confusion is our focus here, as it is a prerequisite to recovery for
all of Springboards’ claims. See Springboards to Educ., Inc. v. Pharr-San Juan-
Alamo Indep. Sch. Dist., 33 F.4th 747, 750–51. (5th Cir. 2022). For
Springboards to prevail, it must show that MISD’s use of Springboards’
marks “create[d] a likelihood of confusion in the minds of potential
consumers as to the source, affiliation, or sponsorship” of MISD’s products
or services. Elvis Presley Enters., Inc. v. Capece, 141 F.3d 188, 193 (5th Cir.
1998). “Likelihood of confusion means more than a mere possibility; the
plaintiff must demonstrate a probability of confusion.” Xtreme Lashes, LLC
v. Xtended Beauty, Inc., 576 F.3d 221, 226 (5th Cir. 2009) (internal citation
omitted).
To assess whether confusion is likely, we consider a flexible list of
factors called the digits of confusion. These include:
(1) the type of mark allegedly infringed, (2) the similarity
between the two marks, (3) the similarity of the products or
services, (4) the identity of the retail outlets and purchasers,
(5) the identity of the advertising media used, (6) the
defendant's intent, (7) any evidence of actual
confusion . . . [and] (8) the degree of care exercised by
potential purchasers.
Bd. of Supervisors for LSU v. Smack Apparel Co., 550 F.3d 465, 478 (5th Cir.
2008) (cleaned up) (citation omitted). No one factor is dispositive, and we
may consider any other relevant factor. Capece, 141 F.3d at 194.
However, there is a threshold issue before we can reach the likelihood
of confusion. First, “we must identify the class of consumers at risk of
confusion.” Springboards To Educ., Inc. v. Houston Indep. Sch. Dist., 912 F.3d
805, 812 (5th Cir. 2019), as revised (Feb. 14, 2019). That is a problem here
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because Springboards is neither clear nor consistent about whom it considers
to be at risk of confusion.
Springboards represents that its business model involves selling its
Campaign to schools as units, tailoring the contents and theme to each
school. Houston Indep. Sch. Dist., 912 F.3d at 813 (“Springboards’ business
model is premised on marketing the Read a Million Words campaign to
school districts and selling those districts the products and services needed
to implement the campaign.”). Springboards does not allege that MISD
marketed its own millionaire club to outside school districts, thus causing
confusion among other districts. Rather, Springboards repeatedly refers to
the confusion of parents, students, and teachers. For instance, Springboards
argues that its Campaign and MISD’s were “directed to identical groups –
students, parents, and educators in the school district[s].” As we explained
in a materially identical case rejecting Springboards’ claims, the confusion of
those persons is “not the appropriate focus of the likelihood-of-confusion
analysis” because they are not “purchasers in any ordinary sense.” Ibid.They merely use a product that the school district buys. 7
At times, Springboards suggests that third parties in other districts
were misled into thinking that MISD’s “inferior” program was affiliated
with Springboards’ Campaign. This is the relevant class of consumers. It is
actionable if potential consumers confuse an infringing and inferior product
with the authentic mark, as that mistaken association might result in a loss of
sales or goodwill. Id. at 814. Accordingly, our likelihood of confusion analysis
is limited to the question of whether other school districts would likely
7
As in Houston Independent School District, Springboards has put forward no
evidence that these groups “exercise any influence over [MISD’s] purchasing decisions,”
so there is no potential cause of action for user confusion. Houston Indep. Sch. Dist., 912
F.3d at 813.
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confuse MISD’s use of “Million Dollar Reader” and similar phrases with
Springboards’ marks related to its Campaign. 8
We see no risk of confusion. We follow our two prior cases affirming
dismissal of Springboards’ infringement claims against other Texas school
districts. In Springboards v. Houston Independent School District, 912 F.3d 805(5th Cir. 2019), and Springboards v. Pharr-San Juan-Alamo Independent School
District, 33 F.4th 747 (5th Cir. 2022), we found no likelihood of confusion
when Springboards brought identical Lanham Act claims against school
districts for factually indistinguishable monetary-themed reading incentive
programs. The more recent of those cases called Springboards’ claims “déjà
vu all over again” and recognized that the first case was “functionally
identical.” Pharr-San Juan-Alamo Ind. Sch. Dist., 33 F.4th at 748, 749. The
déjà vu continues here. Springboards points to no material distinction
between the instant case and our ruling in Houston Independent School District.
And the district court saw so little difference between MISD and the school
district in Pharr-San Juan-Alamo Independent School District (also located in
Hidalgo County) that it granted both summary judgment at the same time
without making any distinction between the two. Nothing material separates
this case from its predecessors.
Nevertheless, we briefly recite some of the reasons that Springboards
fails to demonstrate any likelihood of confusion. “We need not parse the
individual digits [of confusion]” because any possibility of confusion is
“exceedingly remote.” Pharr-San Juan-Alamo Ind. Sch. Dist., 33 F.4th at
750. To begin with, monetary-themed literacy programs using nearly
identical language to Springboards’ marks abound and predate Springboards’
8
Because we find there is no likelihood of confusion, we need not decide the open
question of whether Springboards must first produce evidence that MISD’s program is, in
fact, inferior. See Houston Indep. Sch. Dist., 912 F.3d at 814 n.5.
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Campaign by years. Houston Indep. Sch. Dist., 912 F.3d at 815. Indeed, MISD
purchased many of its “Million Dollar Reader” products from a company
that began selling similar products in 2010, while Springboards’ earliest mark
dates only to 2011. Plus, Springboards’ sales appear to be overwhelmingly
concentrated in one school district, so it is unlikely that other school districts
would confuse MISD’s program as an inferior knockoff of Springboards’.
Ibid.Additionally, there is no evidence that MISD intended to confuse
other districts by attempting to “derive benefits from [Springboards’]
reputation by using [its] mark.” Viacom Int’l v. IJR Capital Invs., L.L.C., 891
F.3d 178, 195 (5th Cir. 2018). Springboards argues that MISD had knowledge
of Springboards’ Campaign, but “mere awareness . . .does not establish bad
intent.” Streamline Prod. Sys., Inc. v. Streamline Mfg., Inc., 851 F.3d 440, 456
(5th Cir. 2017) (cleaned up). Springboards does not offer any evidence that
MISD ever ventured beyond mere awareness. In fact, MISD did not sell or
market its program to other school districts at all.
Finally, we note that school districts typically exercise great care as
consumers, which makes them unlikely candidates for confusion.
“[P]rofessional and institutional” purchasers “are virtually certain to be
informed, deliberative buyers.” Oreck Corp. v. U.S. Floor Sys., Inc., 803 F.2d
166, 173 (5th Cir. 1986). Public school districts searching for comprehensive
literacy programs are a far cry from an individual consumer’s grabbing an
item off the shelf. They are sophisticated institutions unlikely to be led astray
by passing similarities between services. Houston Indep. Sch. Dist., 912 F.3d
at 817. In short, there is no risk that other school districts would confuse
MISD’s program with Springboards’ Campaign–related marks.
For substantially the same reasons, Springboards’ identical Lanham
Act claims against IDEA also fail. While the district court’s ruling for IDEA
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was erroneously predicated on sovereign immunity, we may affirm on other
ground “when the record contains an adequate and independent basis for
that result.” Lauren C., 904 F.3d at 374 (quoting Britt v. Grocers Supply Co.,
978 F.2d 1441, 1449 (5th Cir. 1992)). 9 The record shows no risk of confusion.
As noted, Springboards’ sales are concentrated in one school district,
indicating a relatively weak standing in the market. And school districts
commonly use other millionaire-themed reading programs, many of which
predate Springboards’ marks. See Sun Banks of Fla., Inc. v. Sun Fed. Sav. &
Loan Ass’n, 651 F.2d 311, 317 (5th Cir. 1981) (widespread third-party use
weighs heavily against a likelihood of confusion). Nor is there any evidence
that IDEA deliberately used Springboards’ marks. While Springboards
alleges deliberate misappropriation, its “evidence” is that it and IDEA both
use the same balloon vendor for some of their millionaire reader celebrations
and that IDEA schools are required to solicit multiple bids for projects rather
than engage in “sole source” procurement with a single supplier.
Additionally, IDEA consistently takes steps to signal that its reading
program bears no relation to Springboards’ Campaign. For instance, IDEA’s
program refers to “IDEA Millionaire Reader[s],” “IDEA Millionaires,” and
“IDEA Millionaire Reader’s Celebration[s].” Where a user of a mark clearly
identifies itself, there is little risk that third parties will be confused about the
origin of the mark. See Oreck, 803 F.2d at 171 (finding little chance of
confusion where a company’s advertisements “clearly indicate[d]” that it
was “the maker of the product”); Houston Indep. Sch. Dist., 912 F.3d at 816(concluding a school district’s use of its name in connection with the mark
“especially mitigates the likelihood of confusion”). Here, since IDEA clearly
9
Both parties fully briefed motions for summary judgment.
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and consistently connects its reading program to its own name, there is no
genuine possibility that other school districts would be confused.
Without a likelihood of confusion, Springboards’ Lanham Act claims
fail. Judgment is proper for both MISD and IDEA.
V.
The district court’s judgments in favor of MISD and IDEA are
AFFIRMED.
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Andrew S. Oldham, Circuit Judge, concurring:
In this case, we were asked to hold that a private charter school enjoys
state sovereign immunity while a public school district does not. The fact that
our precedents allow this question to be asked is reason enough to grant en
banc rehearing.
The line of cases that make possible such an absurd QP is called the
“arm of the State” doctrine. It’s cumbersome. It provides nonsensical
results. And worst of all, it doesn’t even ask the right question. It turns on a
multi-part balancing test, comprised of a non-exhaustive list of “Clark
factors”—none of which is necessary or sufficient to show an entity is an
“arm of the State” and thus entitled to state sovereign immunity. 1
I propose a new single-factor test: Was the entity asserting state
sovereign immunity considered “the State” in 1789? If yes, then sovereign
immunity. If no, then none.
Part I describes the original public meaning of sovereign immunity in
1789. Part II then discusses what constituted “the State” at the Founding.
Part III connects those two concepts and proposes a rule for “arms of the
State” to replace our current doctrine. Part IV concludes by applying that
rule to this case.
1
Under Clark v. Tarrant County, 798 F.2d 736 (5th Cir. 1986), the potentially
relevant factors—none of which is necessary and none of which is sufficient—include: (1)
“whether the state statutes and case law view the entity as an arm of the state”; (2) “the
source of the entity’s funding”; (3) “the entity’s degree of local autonomy”; (4) “whether
the entity is concerned primarily with local, as opposed to statewide, problems”; (5)
“whether the entity has the authority to sue and be sued in its own name”; and (6)
“whether it has the right to hold and use property.” Id. at 744–45. “Such ‘tests’ have all
the precision of a blunderbuss.” Cutrer v. Tarrant Cnty. Loc. Workforce Dev. Bd., 943 F.3d
265, 270 (5th Cir. 2019).
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I.
The doctrine of sovereign immunity was firmly established in the
English common law by the thirteenth century. Clyde E. Jacobs, The
Eleventh Amendment and Sovereign Immunity 5 (1925) (“At
least as early as the thirteenth century . . . it was recognized that the king
could not be sued in his own courts . . . .”); Louis L. Jaffe, Suits Against
Governments and Officers: Sovereign Immunity, 77 Harv. L. Rev. 1, 2 (1963)
(“By the time of Bracton (1268) it was settled doctrine that the King could
not be sued eo nominee in his own courts.”). All sovereign power was “vested
by [law] in a single person, the king or queen.” 1 William Blackstone,
Commentaries *183; see also Chisholm v. Georgia, 2 U.S. (2 Dall.) 419,
446 (1793) (Iredell, J., dissenting) (determining that the Crown alone was
“the sovereign of the Kingdom”). This meant that the Crown was
“immediately invested [with] all the ensigns, rights, and prerogatives of
sovereign power.” 1 Blackstone, supra, at *183. One such royal
prerogative the Crown enjoyed was immunity from suit. Id. at *235 (“[N]o
suit or action can be brought against the king, even in civil matters, because
no court can have jurisdiction over him.”); 3 Blackstone, supra, at *255
(“[N]o action will lie against the sovereign, (for who shall command the
king?) . . . .”); see also Chisholm, 2 U.S. (2 Dall.) at 437 (Iredell, J., dissenting)
(compiling sources).
The historical record contains competing justifications for the
doctrine of sovereign immunity. Part of the justification was that the Crown
was above everyone, so it could be amenable to suit by no one. See, e.g., 1
Blackstone, supra, at *242. Part of the justification was that the King was
the font of all law, so he could not by definition violate it. Kawananakoa v.
Polyblank, 205 U.S. 349, 353 (1907) (“A sovereign is exempt from suit, not
because of any formal conception or obsolete theory, but on the logical and
practical ground that there can be no legal right as against the authority that
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makes the law on which the right depends.”). And part of the justification
was the courts belonged to the King, so he had the right to refuse consent to
suit in his own courts. Interestingly, this last rationale was not limited to the
Crown; it extended to feudal lords who also were not amenable to suit in their
own courts. 1 F. Pollock & F. Maitland, History of English
Law 518 (2d ed. 1899) (“He can not be compelled to answer in his own
court, but this is true of every petty lord of every petty manor; that there
happens to be in this world no court above his court is, we may say, an
accident”); 3 W. Holdsworth, A History of English Law 465
(3d ed. 1927) (“[N]o feudal lord could be sued in his own court”).
At the Founding, sovereign immunity became a part of the American
common law. See Chisholm, 2 U.S. (2 Dall.) at 437 (Iredell, J., dissenting)
(concluding that state sovereign immunity comes from “the common law,”
which “is the ground-work of the laws in every State in the Union,” and
which is, “where no special act of Legislation controls it, to be in force in each
State, as it existed in England, (unaltered by any statute) at the time of the
first settlement of the country”); Alden v. Maine, 527 U.S. 706, 715–16
(1999); William Baude & Stephen E. Sachs, The Misunderstood Eleventh
Amendment, 169 U. Pa. L. Rev. 609, 614 (2021). Of course, English
conceptions of the doctrine did not map neatly onto the American Republic
where sovereignty resides in the People and where we’ve never had a king or
feudal lord.
The most important American innovation to the doctrine was that our
Founders left “to the several states, a residuary and inviolable sovereignty.”
The Federalist No. 39, at 198 (James Madison) (George W. Carey &
James McClellan eds., 2001); see also Gamble v. United States, 139 S. Ct. 1960,
1968 (2019) (discussing the well-established principle of “dual sovereignty”
at the founding (quotation omitted)). As part of their residual sovereignty, all
States retained immunity from suits without their consent—in state courts
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and in federal ones. See The Federalist No. 81, at 422 (Alexander
Hamilton) (George W. Carey & James McClellan eds., 2001) (“It is inherent
in the nature of sovereignty not to be amenable to the suit of an individual
without its consent. . . . [T]he exemption, as one of the attributes of
sovereignty, is now enjoyed by the government of every state in the union.”);
Alden, 527 U.S. at 730–754 (holding state sovereign immunity applies in state
courts as in federal ones).
For example, the Articles of Confederation provided: “Each State
retains its sovereignty, freedom, and independence, and every Power,
Jurisdiction, and right, which is not by this confederation expressly delegated
to the United States, in Congress assembled.” Articles of
Confederation art. II (U.S. 1781) (emphasis added). Likewise, courts
commonly held that States were immune from suit. For example, in Nathan
v. Virginia, 1 U.S. (1 Dall.) 77 (C.C.P. Phila., Phila. Cnty., 1981), the court
agreed with the attorney general that each State “was a sovereign” so that
“every kind of process” issued against a State was “null and void.” Ibid.; see
also Nelson, supra, at 1579. Likewise, in Moitez v. The South Carolina, 17 F.
Cas. 574 (No. 9697) (1781), a Pennsylvania Admiralty Court dismissed a suit
against a South Carolina warship on the grounds that it was owned by a
“sovereign independent state.” Ibid. Other pre-constitutional sources
confirmed. See, e.g., The Federalist No. 81, at 422 (Alexander
Hamilton) (George W. Carey & James McClellan eds., 2001) (claiming that
sovereign immunity “is now enjoyed” by each State, referring to a time
before ratification (emphasis added)); The Federalist No. 39, at 198
(James Madison) (George W. Carey & James McClellan eds., 2001)
(discussing the “inviolable sovereignty” of States); McIlvaine v. Coxe’s
Lessee, 8 U.S. (4 Cranch) 209, 212 (1808) (“This opinion is predicated upon
a principle which is believed to be undeniable, that the several states which
composed this union . . . became entitled, from the time when they declared
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themselves independent, to all the rights and powers of sovereign states
. . . .”); see also Franchise Tax Bd. of Cal. v. Hyatt, 139 S. Ct. 1485, 1493–94
(2019); Alden, 527 U.S. at 726–27; Gamble, 139 S. Ct. at 1968 (“When the
original States declared their independence, they claimed the powers
inherent in sovereignty. The Constitution limited but did not abolish the
sovereign powers of the States . . . .” (quotation omitted)).
As many have argued, the Constitution didn’t override common-law
sovereign immunity. See, e.g., Gamble, 139 S. Ct. at 1968; Franchise Tax Bd.
of Cal., 139 S. Ct. at 1495–96; William Baude, Sovereign Immunity and the
Constitutional Text, 103 Va. L. Rev. 1, 8–9 (2017); Caleb Nelson, Sovereign
Immunity as a Doctrine of Personal Jurisdiction, 115 Harv. L. Rev. 1559,
1580–1601 (2002); Stephen E. Sachs, Constitutional Backdrops, 80 Geo.
Wash. L. Rev. 1813, 1816–18, 1828–34 (2012); Bradford R. Clark, The
Eleventh Amendment and the Nature of the Union, 123 Harv. L. Rev. 1817,
1862–75 (2010); Kurt T. Lash, Leaving the Chisholm Trail: The Eleventh
Amendment and the Background Principle of Strict Construction, 50 Wm. &
Mary L. Rev. 1577, 1599–1603, 1618–27, 1649–50, 1653–76 (2009); Steven
Menashi, Article III as a Constitutional Compromise: Modern Textualism and
State Sovereign Immunity, 84 Notre Dame L. Rev. 1135, 1155–75 (2009).
The ratification debates, negative public reactions to Chisholm v. Georgia
(holding that there was no common-law sovereign immunity for States from
out-of-state citizen suits under the Constitution), and Congress’s swift
passage of the Eleventh Amendment in response to Chisholm all indicate as
much.
Common-law sovereign immunity is different from Eleventh
Amendment sovereign immunity. The latter only prohibits suits brought by
out-of-state plaintiffs in federal court: “The Judicial power of the United
States shall not be construed to extend to any suit in law or
equity, commenced or prosecuted against one of the United States by
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Citizens of another State, or by Citizens of any Foreign State.” U.S.
Const. amend. XI (emphasis added). The former is broader in a sense 2
because it applies even a citizen sues his home State. Coolbaugh v.
Commonwealth, 4 Yeates 493 (Pa. 1808) (finding it “a settled principle, that
no sovereign power [is] amenable to suits either in its own courts, or those of
a foreign country, unless by its own consent”); Beers v. Arkansas, 61 U.S. (20
How.) 527, 529 (1857) (applying the “established principle of jurisprudence
in all civilized nations that the sovereign cannot be sued in its own courts, or
in any other, without its consent and permission” in a suit against a State in
its own court); The Siren, 74 U.S. (7 Wall.) 152, 153–54 (1868) (“It is a
familiar doctrine of the common law, that the sovereign cannot be sued in his
own courts without his consent.”); Cunningham v. Macon & B.R. Co., 109
U.S. 446, 451 (1883) (“It may be accepted as a point of departure
unquestioned, that neither a state nor the United States can be sued as
defendant in any court in this country without their consent . . . .”). This
practice culminated most famously in Hans v. Louisiana, 134 U.S. 1 (1890),
which held that a State cannot be sued by its own citizen. See id. at 14–15. And
the Court continues to “uph[o]ld States’ assertions of sovereign immunity
in various contexts outside the literal text of the Eleventh Amendment”
today. Alden, 527 U.S. at 727; see also PennEast Pipeline Co., LLC v. New
Jersey, 141 S. Ct. 2244, 2264 (2021) (Gorsuch, J., dissenting); Baude &
Sachs, supra, at 612–14.
This case implicates common-law sovereign immunity, not the
Eleventh Amendment. Plaintiff Springboards to Education, Inc. is a citizen
2
In another sense common-law sovereign immunity is narrower than the immunity
recognized by the Eleventh Amendment: Common-law sovereign immunity can be waived
by the sovereign, whereas the Eleventh Amendment (at least by its plain text) speaks in
subject-matter-jurisdiction terms that presumably cannot be waived. Baude & Sachs, supra,
at 623–24.
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of Texas, and defendants McAllen Independent School District and IDEA
Public Schools both claim to be the State of Texas. So we’re necessarily
discussing the common law of sovereign immunity that predated the
Eleventh Amendment and survived its ratification.
II.
The next question is what (or who) qualified as the “State” under the
common law of sovereign immunity in 1789? As with so many historical
inquiries, this one has points of clarity and points of ambiguity. I (A) begin
with what we know for sure: Corporations were not considered the State
under the common law. They had no sovereign immunity. Then I (B)
cautiously wade into territory with limited historical evidence: whether
unincorporated state agencies, boards, and departments were considered the
State. It appears that the immunity of these entities in federal court was left
in the hands of the States.
A.
First, corporations. It’s evident that at common law, both in England
and the early American Republic, incorporated entities were not entitled to
sovereign immunity. This rule applied regardless of whether the corporations
were private or public and regardless of whether they exercised governmental
functions.
As Chief Justice Marshall said, “[a]s our ideas of a corporation, its
privileges and its disabilities, are derived entirely from the English books, we
resort to them for aid, in ascertaining its character.” Bank of U.S. v. Deveaux,
9 U.S. (5 Cranch) 61, 88 (1809). In his Commentaries on the Laws of England,
Blackstone identified many types of corporations at common law, including
civil corporations, churches, colleges and universities, hospitals,
manufacturing or commercial organizations, the royal society, and notably,
corporations “erected for the good government of a town or particular
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district.” 1 Blackstone, supra, at *458–59. These corporations could only
be created with the consent of the sovereign. Id. at *460. Once they were
created, they could “sue or be sued, implead or be impleaded, grant or
receive, . . . and do all other acts as natural persons may.” Id. at *463. And
for that reason, a corporation could not assert the sovereign’s immunity from
suit. See, e.g., Moodalay v. Morton, (1785) 28 Eng. Rep. 1245 (Ch.).
At the Founding, America embraced the English conception of
corporations. This theme was pervasive throughout the constitutional
debates and early American court cases. See Lash, supra, at 1657.
First, the constitutional debates. For all that the Federalists and Anti-
Federalists disagreed about, they agreed that corporations were not
sovereigns. Both drew sharp distinctions between corporations, which
weren’t immune from suits, and sovereigns, which were, to advance their
arguments.
The Federalists began this debate by contending that States were akin
to corporations. See 1 M. Farrand, Records of the Federal
Convention of 1787, at 323, 328 (1907) (Alexander Hamilton:
discussing how the States were “Corporations” with mere “corporate
rights”); id. at 357–58 (James Madison); id. at 471 (James Madison: “There
is a gradation of power in all societies, from the lowest corporation to the
highest sovereign. The states never possessed the essential rights of
sovereignty . . . . The states, at present, are only great corporations . . . .”);
id. at 552 (Gouverneur Morris: “[The States] were originally nothing more
than colonial corporations.”).
The Anti-Federalists responded strongly and persuasively. They
argued that the Federalists sought to reduce sovereign States to “mere
corporation[s].” The Address of the Seceding Assemblymen (Oct. 2, 1787),
reprinted in 13 The Documentary History of the Ratification
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of the Constitution 295, 296 (John P. Kaminski & Gaspare J.
Saladino eds., 1981); see also 2 The Debates in the Several State
Conventions on the Adoption of the Federal
Constitution 403 (Jonathan Elliot ed., 1836) [hereinafter Elliot’s
Debates] (Thomas Tredwell in the New York convention: “The sole
difference between a state government under this Constitution, and a
corporation under a state government, is, that a state being more extensive
than a town, its powers are likewise proportionably extended, but neither of
them enjoys the least share of sovereignty . . . .”); Democrat, Mass.
Mercury (Bos.), July 23, 1793, reprinted in 5 The Documentary
History of the Supreme Court, 1789–1800, at 393, 393 (Maeva
Marcus ed., 1994) [hereinafter DHSC] (noting that some feared the
Constitution as written “destroy[ed] the SOVEREIGNTY of the states, and
render[ed] them no more than corporate towns”); Cato II (Oct. 11, 1787),
reprinted in 13 The Documentary History of the Ratification
of the Constitution, supra, at 369, 371 (arguing that “the different
states do not retain separately their sovereignty and independency” under
the Constitution); 3 Elliot’s Debates, supra, at 527 (George Mason: “Is
this state to be brought to the bar of justice like a delinquent individual? Is the
sovereignty of the state to be arraigned like a culprit, or private offender?”).
And the Anti-Federalists proved triumphant. The Federalists
eventually conceded that States were not corporations and hence would
retain sovereign immunity. See 3 Elliot’s Debates, supra, at 533 (James
Madison); The Federalist No. 81 (Alexander Hamilton); 3 Elliot’s
Debates, supra, at 555 (John Marshall); Brutus, Indep. Chron. (Bos.),
July 18, 1793, reprinted in 5 DHSC, supra, at 392, 392 (Rufus King); Democrat,
supra, at 393–94, 394 nn.3–4 (Rufus King). The Federalists insisted,
however, that no one would be so silly as to sue a sovereign State in federal
court. See The Federalist No. 81, at 422 (Alexander Hamilton)
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(George W. Carey & James McClellan eds., 2001) (stressing that “the danger
intimated must be merely ideal”).
Second, this sharp line between corporations and sovereigns is also
clear in early American court cases. The very first case entered on the
Supreme Court docket, Van Staphorst v. Maryland, 2 U.S. (2 Dall.) 401(1791), involved a suit against a State. See 5 DHSC, supra, at 7, 16. While the
Court didn’t reach the question of immunity, many members of the public
raised red flags, and the sovereign/corporation distinction animated their
objections. For example, one anonymously published letter heralded the
danger that “[s]hould this action be maintained,” it would mean “the several
States, have relinquished all their SOVEREIGNTIES, and have become
mere corporations.” Letter from an Anonymous Correspondent, Indep.
Chron. (Phila.), Feb. 13 & 19, 1791, reprinted in 5 DHSC, supra, at 20, 21.
The letter went on: “For a Sovereign State, can never be sued, or coerced,
by the authority of another government.” Ibid. To be sued, States would have
to become “mere corporations.” Ibid. Massachusetts Attorney General James
Sullivan also published his concern that this suit reduced the States from “an
assemblage of republics” under the federal government to “divers
corporations.” James Sullivan, Observations upon the Government of the United
States of America (Bos.), July 7, 1791, reprinted in 5 DHSC, supra, at 21, 21. He
concluded that without immunity, States were “mere corporation[s]”
devoid of sovereignty. Id. at 29.
The Court confronted this problem again in Oswald v. New York, 2
U.S. (2 Dall.) 401 (1792). And again, the Court didn’t have a chance to decide
the issue. Ibid. But Justice Iredell, who would pen the lone dissent in Chisholm
v. Georgia one year later, began to explore the differences between a State and
a “mere Corporation” in a draft opinion. See James Iredell’s Observations on
State Suability (Phila.), Feb. 11–14, 1792, reprinted in 5 DHSC, supra, at 76,
87–88.
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By the time the Court heard Chisholm v. Georgia, it knew the question
of State suability boiled down to whether States were more akin to sovereigns
or corporations. The majority and dissent agreed that sovereigns were
entitled to immunity while corporations were not. They merely disagreed on
whether States were sovereigns or corporations. Compare Chisholm, 2 U.S. (2
Dall.) at 468 (Cushing, J.) (“As to corporations, all States whatever are
corporations or bodies politic.”), and id. at 472 (Jay, C.J.) (arguing there’s no
difference between suing a municipal corporation and suing a State), with id.
at 448 (Iredell, J., dissenting) (discussing the “differences between such
corporations, and the several States in the Union”).
Justice Iredell’s lone Chisholm dissent is particularly instructive.
That’s in part because his interpretation ultimately won the day—both in the
short-term with the passage of the Eleventh Amendment, and in the long-
term with the Court’s endorsement of his view of common-law sovereign
immunity. See Hans, 134 U.S. at 16. But of greater relevance for present
purposes, Justice Iredell discussed at length the “common law” of
corporations and sovereigns. Chisholm, 2 U.S. (2 Dall.) at 447 (Iredell, J.,
dissenting). He first argued that under the common law, a “corporation is a
mere creature” of the sovereign and “owes its existence . . . to the authority
which create[d] it.” Id. at 448. Conversely, a “State does not owe its origin
to the Government of the United States” but rather “derives its authority
from the same pure and sacred source as itself: The voluntary and deliberate
choice of the people.” Ibid. Similarly, a corporation “is altogether
depend[e]nt on that Government to which it owes its existence.” Ibid. Its
“charter may be forfeited,” and its “authority may be annihilated.” Ibid. But
a State is “totally independent” of the federal government. Ibid. Because of
these differences, Justice Iredell concluded that while corporations are not
immune from suits, States are “altogether exempt from the jurisdiction of
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the Courts of the United States” except for “the special instances where the
general Government has power derived from the Constitution itself.” Ibid.
The public response to Chisholm echoed this categorization. For
example, one newspaper said that while the Constitution provided that
“Congress should guarantee to every State in the Union a Republican form
of government[,] ‘[a] form of government’ was never a mode of expression
applied to the police of a town, parish, city or other corporation.” “The True
Federalist” to Edmund Randolph, Number II, Indep. Chron. (Bos.), Jan.
23 & 27, 1794, reprinted in 5 DHSC, supra, at 243, 245 [hereinafter The True
Federalist].
A few months later, Justice Iredell’s outcry reverberated through the
halls of the Massachusetts General Assembly. In opposition to a suit against
the Commonwealth, Vassall v. Massachusetts, Massachusetts Governor
Hancock delivered a rousing speech. See John Hancock’s Address to the
Massachusetts General Court, Indep. Chron. (Bos.), Sept. 18, 1793,
reprinted in 5 DHSC, supra, at 416, 416. He argued that the rights of State as
sovereigns could not be reduced to those of “mere Corporations.” Id. at 418.
Others echoed his sentiments. See, e.g., William Widgery’s Speech in the
Massachusetts House of Representatives, Indep. Chron. (Bos.), Sept. 23,
1793, reprinted in 5 DHSC, supra, at 427, 428 (distinguishing between the
State and “mere dependent corporations”); Brutus, supra, at 392 (urging the
Massachusetts General Assembly to respond or risk becoming “an
unimportant subordinate corporation”). The General Assembly rallied to its
Governor’s side. It refused to answer Vassall’s suit, and the Court eventually
dismissed it. See Reply of the Massachusetts General Court to John Hancock,
Indep. Chron. (Bos.), Sept. 27, 1793, reprinted in 5 DHSC, supra, at 441,
441.
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In the early nineteenth century, the Court relied even more on this
formal division between corporations and sovereigns. In Trustees of
Dartmouth College v. Woodward, 17 U.S. (4 Wheat.) 518 (1819), the Court
examined the nature of the Dartmouth College corporate charter with New
Hampshire. Id. at 626–27. In doing so, the Court again considered the
common law of corporations. It determined that a corporation was “a
collection of individuals, united into one collective body, under a special
name, and possessing certain immunities, privileges and capacities, in its
collective character.” Id. at 667. Notably, as “artificial person[s],”
corporations were not immune from lawsuits; they could “sue and be sued.”
Ibid.This sovereign-corporate distinction is best illustrated by a series of
suits against State-created banks. In those cases, the Court repeatedly held
that even “a bank created by the government for its own uses, whose stock
[was] exclusively owned by the government, [was a] public corporation,” and
thereby unprotected by sovereign immunity. Id. at 669 (emphasis added); see
also Bank of Commonwealth of Ky. v. Wister, 27 U.S. (2 Pet.) 318, 319 (1829)
(holding that even though Kentucky “was the sole proprietor of the stock of
the bank,” the bank was not the Commonwealth and therefore was not
entitled to sovereign immunity); Bank of U.S. v. Planters’ Bank of Ga., 22
U.S. (9 Wheat.) 904, 908 (1824) (holding that even where Georgia was a
proprietor and corporator of the Bank, the “Planters’ Bank of Georgia [was]
not exempted from being sued in the federal courts”); Briscoe v. Bank of
Commonwealth of Ky., 36 U.S. (11 Pet.) 257, 327 (1837) (holding that even
though Kentucky was the sole stockholder of the bank, the bank was not
entitled to sovereign immunity); Darrington v. Bank of Ala., 54 U.S. (13
How.) 12, 16–17 (1851) (same); Curran v. Arkansas, 56 U.S. (15 How.) 304,
309 (1853) (“[A] State . . . by owning all the capital stock [in a bank], does not
impart to that corporation any of its privileges or prerogatives . . . .”). The
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mere fact that the State held all the financial interest in a bank did not make
the bank an arm of the State. 3 Rather, the State’s incorporation of the bank
severed any connection between the State and the bank for purposes of
sovereign immunity. See Planters’ Bank of Ga., 22 U.S. (9 Wheat.) at 907
(“The suit is against a corporation, and the judgment is to be satisfied by the
property of the corporation, not by that of the individual corporators. The
State does not, by becoming a corporator, identify itself with the corporation.
The Planters’ Bank of Georgia is not the State of Georgia, although the State
holds an interest in it.”).
And while the Court highlighted the differences between corporations
and the States, it minimized any differences between types of corporations.
For example, the Court held that there was no distinction between public and
private corporations—neither was entitled to sovereign immunity. See, e.g.,
Trustees of Dartmouth College, 17 U.S. (4 Wheat.) at 668. The Court allowed
suits to proceed against corporations with “public political purposes only,
such as towns, cities, parishes and counties.” Ibid. The Court concluded that
even corporations “founded by the government, for public purposes, where
the whole interests belong also to the government,” were not “the State” for
purposes of sovereign immunity. Id. at 669; see also Osborn v. Bank of U.S., 22
U.S. (9 Wheat.) 738, 772 (1824) (The State’s “mere creation of a
corporation, does not confer political power or political character” even
where the corporation is given “public employments” normally reserved to
the State.); cf. Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 442 (1821)
(discussing how Congress’s incorporation of the City of Washington created
3
This fact alone suggests the Clark factors must be overturned. Clark’s emphasis
on the financial ties between an entity and the State to determine if the entity is an arm of
the State has no foundation in our legal history and tradition.
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a “separate body for the management of the internal affairs of the City, for its
internal government, for its police” (emphasis added)).
Other examples of corporations included “hospital[s] created and
endowed by the government for general charity,” “insurance, canal, bridge,
and turnpike companies,” “college[s],” and other “eleemonsynary
corporations.” Trustees of Dartmouth College, 17 U.S. (4 Wheat.) at 668. Even
when a college “acquire[d] the character of a public institution,” it retained
its corporate status. Id. at 669. It didn’t miraculously become the State.
Regardless of the types of corporations or the State’s involvement in them,
the Court consistently found corporations weren’t entitled to sovereign
immunity.
The Court continued to abide by this formalistic rule throughout the
nineteenth century—even as corporations grew in number and took on more
public functions. For example, when confronted with a suit against a school
board, the Court looked exclusively to the text of the State’s statute and
concluded that “the language of the Nebraska statute makes school districts
corporations in the fullest sense of the word.” School Dist. No. 56 v. St. Joseph
Fire & Marine Ins. Co., 103 U.S. (13 Otto) 707, 708 (1880). The Court
concluded its inquiry with the text, finding “no warrant for [a] distinction”
between private and public corporations and concluding that both could be
sued. Id. at 709. This principle was so well-established by the time the Court
decided Lincoln County v. Luning, 133 U.S. 529 (1890), that the Court held it
was “beyond question” that the county could be sued. Id. at 530; see also P.R.
Ports Auth. v. Fed. Mar. Comm’n, 531 F.3d 868, 881–82 (D.C. Cir. 2008)
(Williams, J., concurring). On the same day that the Court decided Hans v.
Louisiana, it held in Lincoln County that an incorporated county was not the
State for purposes of sovereign immunity. Lincoln County, 133 U.S. at 530(“[W]hile the county is territorially a part of the state, yet politically it is also
a corporation created by, and with such powers as are given to it by, the state.
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In this respect, it is a part of the state only in that remote sense in which any
city, town, or other municipal corporation may be said to be a part of the
state.”).
In sum, it’s clear that incorporated entities or entities with sue-and-
be-sued clauses did not qualify as “the State” for purposes of sovereign
immunity at the Founding. Any “arm of the State” rule must account for this
history to properly reflect the common-law immunity that predated and
survived the Constitution.
B.
It’s less clear whether unincorporated, State-created entities were
entitled to sovereign immunity. The English common law isn’t helpful since
the American notion of “dual sovereignty” had no counterpart across the
Atlantic. The constitutional ratification debates don’t have much to
contribute because the Federalists and Anti-Federalists primarily debated
whether the States would have immunity at all. See supra at 8–9. But as far as
I can tell, neither side devoted much time to discussing which state entities
might be immune from suit. And the law reports don’t provide much help
either. While some state constitutions created agencies, boards, or
departments in the late eighteenth or early nineteenth centuries, these
entities were not nearly as powerful or as numerous as they are today. And
when plaintiffs sought damages or injunctive relief against the State in federal
court, they sued “the State” or a State officer by name. 4 It isn’t clear how
4
The early Supreme Court’s record on officer suits also isn’t especially
enlightening. That’s because most of these cases post-dated Chisholm and were decided
under the rubric of the Eleventh Amendment. See, e.g., Osborn, 22 U.S. at 857. And it’s
also because Marshall’s Court wasn’t consistent. In one breath it said sovereign immunity
only barred suits naming “the State” as the defendant. See ibid. (“[T]he jurisdiction of the
Court depends . . . upon the actual party on the record. . . . [T]he 11th amendment, which
restrains the jurisdiction granted by the constitution over suits against States, is, of
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federal courts would’ve treated a defendant such as the Texas Department
of Public Safety if it existed at the time.
But we have some data points. We know that the Constitution
explicitly provided that “[t]he powers not delegated to the United States by
the Constitution, nor prohibited by it to the States, are reserved to the States
respectively, or to the people.” U.S. Const. amend. X. Under this division
of power, federal “jurisdiction extend[ed] to certain enumerated objects
only,” leaving “to the several states, a residuary and inviolable sovereignty
over all other objects.” The Federalist No. 39, at 198 (James Madison)
(George W. Carey & James McClellan eds., 2001). Among the well-
established powers reserved to the States was the power to structure their
governments as they saw fit. See, e.g., Roger Sherman, A Citizen of New
Haven, II, New Haven Gazette (Dec. 25, 1788), reprinted in Essays
on the Constitution of the United States: Published
During its Discussion by the People 1787–1788, at 237, 238 (Paul
Leceister Ford ed., 1892) (“The powers vested in the federal government are
clearly defined, so that each state still retain its sovereignty in what concerns
its own internal government, and a right to exercise every power of a
necessity, limited to those suits in which a State is a party on the record.”); see also Davis
v. Gray, 83 U.S. (16 Wall.) 203, 220 (1872) (reading Osborn to hold that “[m]aking a State
officer a party does not make the State a party, although her law may have prompted his
action, and the State may stand behind him as the real party in interest” and a “State can
be made a party only by shaping the bill expressly with that view”). And in the next breath
it said that officers may be “the State” for purposes of sovereign immunity, especially
where the suit sought to recover the State’s property. See Governor of Ga. v. Madrazo, 26
U.S. (1 Pet.) 110, 123–24 (1828) (“[W]here the chief magistrate of a state is sued, not by
his name, but by his style of office, and the claim made upon him is entirely in his official
character, we think the state itself may be considered as a party on the record.”); United
States v. Peters, 9 U.S. (5 Cranch) 115, 139 (1809) (allowing a suit against the Pennsylvania
treasurer in his personal capacity but stipulating that “[i]f these proceeds had been the
actual property of Pennsylvania” it “would have presented a case on which it was
unnecessary to give an opinion”).
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sovereign state not particularly delegated to the government of the United
States.”). That’s why, for example, Texas can have a bicameral legislature
and Nebraska can have a unicameral one. There’s no mandated, one-size-
fits-all structure for “the State.”
We also know from various discussions of sovereign immunity at the
Founding that it didn’t just rest with abstract “States.” It belonged to “state
governments.” See, e.g., The Federalist No. 81, at 422 (Alexander
Hamilton) (George W. Carey & James McClellan eds., 2001) (Sovereignty
belongs to the “government of every State in the Union.” (emphasis added));
The Federalist No. 32, at 155 (Alexander Hamilton) (George W. Carey
& James McClellan eds., 2001) (“[S]tate governments would clearly retain all
the rights of sovereignty . . . .” (emphasis added)); Brutus XIII (Feb. 21,
1788), reprinted in 2 The Complete Anti-Federalist 428, 429
(Herbert Storing ed., 1981) (subjecting a State to suit “is humiliating and
degrading to a [state] government” (emphasis added)); Federal Farmer III
(Oct. 10, 1787), reprinted in 2 The Complete Anti-Federalist,
supra, at 234, 245 (“How far it may be proper to admit a foreigner or the
citizen of another state to bring actions against state governments . . . is
doubtful . . . .” (emphasis added)); Martin v. Hunter’s Lessee, 14 U.S. 304,
325 (1816) (“[S]overeign powers vested in the state governments, by their
respective constitutions, remained unaltered and unimpaired, except so far
as they were granted to the government of the United States.” (emphasis
added)); 2 Elliot’s Debates, supra, at 403 (Thomas Tredwell’s
remarks in New York Ratifying Convention: referencing the sovereign power
as belonging to “state governments” (emphasis added)); The True Federalist,
supra, at 245 (“The word State in itself, signifies a sovereign government.”
(emphasis added)); Sullivan, supra, at 29 (“sovereignty of the [state]
governments” (emphasis added)); 1 Elliot’s Debates, supra, at 327
(New York Ratification Statement: “every power, jurisdiction, and right”
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not delegated to Congress “remains to the people of the several states, or to
their respective state governments” (emphasis added)); 1 Elliot’s
Debates, supra, at 334 (Rhode Island Ratification Statement: same); Report
of a Joint Committee of the Massachusetts General Court, Indep. Chron.
(Bos.), June 20, 1793, reprinted in 5 DHSC, supra, at 230, 230 (arguing that
subjecting States to suits is “in its principle subversive of the State
Governments” (emphasis added)); 4 Elliot’s Debates, supra, at 259–60
(Charles Pinckney speech before South Carolina House of Representatives:
“The distinction which has been taken between the nature of a federal and
state government appeared to be conclusive—that in the former, no powers
could be executed, or assumed, but such as were expressly delegated; that in
the latter, the indefinite power was given to the government, except on points
that were by express compact reserved to the people.” (emphases added)).
Thus, while the historical evidence doesn’t provide a clear answer to
whether an unincorporated entity created by the State—like a state agency—
enjoyed sovereign immunity at the Founding, any theory must account for
these well-established principles: (1) sovereign immunity belonged to state
governments, and (2) States retained the power to structure their
governments as they saw fit after the Constitution. These two principles
suggest that the State can imbue its constituent parts with sovereign
immunity when creating them as unincorporated arms of the State. For
example, Texas could choose not to have a Health and Human Services
Commission or a Department of Public Safety or a Commission on
Environmental Quality, and it could choose instead to perform its health,
safety, and environmental functions under one undifferentiated state
government that (obviously) enjoys common-law sovereign immunity. The
fact that the State chose, in its sovereign prerogative, to create those
unincorporated agencies of state government does not appear to change the
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conclusion that these agencies still constitute “the State” and enjoy the same
sovereign immunity.
III.
From this historical evidence about incorporated and unincorporated
state government entities we can distill a rule to determine whether an entity
is an immune “arm of the State.”
If an entity has a separate legal status from the State (e.g., as a
corporation, LLC, or § 501(c)(3) nonprofit organization) or the state statute
designating the entity includes a “sue-and-be-sued” clause, the entity is not
“the State” and hence is not entitled to sovereign immunity. That’s because
the State has classified these entities as distinct legal persons, and a federal
court cannot second-guess the State’s decision. 5 All other State-created
entities are presumably arms of the State and entitled to sovereign immunity.
This rule has several advantages over the Clark factors.
First, it aligns with the Supreme Court’s guidance. In Regents of the
University of California v. Doe, 519 U.S. 425 (1997), the Court stressed that
any arm-of-the-State inquiry hinges on state law:
Ultimately, of course, the question whether a particular state
agency has the same kind of independent status as a county or
is instead an arm of the State, and therefore “one of the United
States” within the meaning of the Eleventh Amendment, is a
question of federal law. But that federal question can be
5
In Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank,
527 U.S. 627 (1999), the Court accepted the district court’s determination that an
incorporated entity with such a sue-and-be-sued clause was an arm of the State. Id. at 633
n.3 (1999). But the Court stipulated that this was “a conclusion the parties did not dispute
before either the Federal Circuit or this Court.” Ibid.41
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answered only after considering the provisions of state law that
define the agency’s character.
Id. at 429 n.5 (emphasis added). Clark by contrast is a pre-Regents relic. And
it minimizes the importance of state law as only one of many factors and less
important than others. See Clark, 798 F.2d at 736, 744; Hudson v. City of New
Orleans, 174 F.3d 677, 682 (5th Cir. 1999). All else being equal, if state law
says the unincorporated entity is not the State, but the entity is funded by the
state treasury, a court will conclude it’s “the State.” See Hudson, 174 F.3d at
682 (finding that the source of funding is the most important Clark factor).
This result departs from Regents and accordingly must be overruled.
Second, the proposed bright-line rule is grounded in what sovereign
immunity meant at the Founding. As previously discussed, early American
courts expressly disavowed any connection between an entity’s entitlement
to sovereign immunity and its connection to the state treasury. See supra at
13–14 & n.2. Clark, by contrast, pivots on the funding factor. Ibid. Thus, it
abandons any tether to the common law (or the Eleventh Amendment for
that matter).
Third, the proposed rule is workable. As the majority rightly notes,
the Clark factors are cumbersome and at times irreconcilable with one
another. They don’t provide clear answers and lead to nonsensical results.
Finally, the proposed rule respects the States’ powers under the
Tenth Amendment to structure their governments however they see fit. The
Clark factors, by contrast, give federal judges the power to decide what
qualifies as “the State.” The result is a pandora’s box—there’s no telling
what will come out. States have no notice, and they cannot structure their
governments in predictable ways and in accordance with their sovereign
prerogatives. The proposed test enables state governments to order their
affairs so they can foreseeably raise sovereign immunity.
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IV.
Finally, it’s time to apply this arm-of-the-State rule to the facts at
hand.
The McAllen Independent School District concedes that the Texas
Education Code gives it the power to “sue and be sued.” The Code says:
“The trustees of an independent school district constitute a body corporate
and in the name of the district may . . . sue and be sued . . . .” Tex. Educ.
Code § 11.151(a). The district is a corporation that can be sued by name, so
it’s not entitled to sovereign immunity.
IDEA Public Schools is a § 501(c)(3) nonprofit organization. ROA.21-
40334.169, 2241. Thus, it’s not entitled to sovereign immunity.
* * *
The Clark factors do not reflect the common law of sovereign
immunity. They are cumbersome and indeterminate. And they prompt
needless litigation, as this case illustrates. Our en banc court should revisit
them. 6
6
Lest there be any confusion, the question addressed in this opinion is what
constitutes “the State”—and hence what enjoys the State’s sovereign immunity in federal
court. The States are obviously free to cloak non-State entities with all manner of
governmental immunities in state court, and as with almost everything in our federal
system, the State need not follow federal standards in doing so. See, e.g., Tex. Educ.
Code 12.1056(a).
43