UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
decided: September 5, 1969.
ROBERT F. URBANO, APPELLANT,
THE BOARD OF MANAGERS OF THE NEW JERSEY STATE PRISON
Van Dusen, Aldisert and Stahl, Circuit Judges.
Opinion OF THE COURT STAHL, Circuit Judge.
This is a diversity suit by appellant, Robert F. Urbano, an inmate in the New Jersey State Prison, against the Board of Managers of the State Prison.*fn1 The suit was brought in the form of a class action*fn2 on behalf of all of the inmates of the institution who are alleged to be beneficiaries of an inmate trust or welfare fund*fn3 claimed to have been established under two New Jersey statutes: N.J.S.A. 30:4-15, 30:4-67.1.*fn4
According to appellant, the primary sources of the "trust fund," which has evidently been in existence for at least twenty years, and possibly longer, have been from
(a) a compulsory deduction from prisoners' wages up to a maximum of $10,*fn5 and
(b) profits from the sale of goods at the prison commissary.*fn6
The fund may also have been the beneficiary of gifts from private individuals or groups*fn7 or from state appropriations. The record does not disclose the present value of the corpus of the trust fund.*fn8
In his complaint appellant charges the members of the Board of Managers of the New Jersey State Prison with "mismanagement, waste and expenditures contrary to * * * statutory provisions and not for the benefit of the inmate beneficiaries" and alleges that the benefits have not been "equally distributed among the beneficiaries as required by law." (App. 14a.)
Then, in his pro se brief, appellant Urbano claims that the members of the Board have used the trust fund moneys to cover "personal losses of officers from the Trust because the losses are attributed to the prisoners; subsidization of religious services * * *; purchase of airconditioners [sic] and other luxuries for private offices; use of confiscated food items intended for distribution to prisoners in the officers' mess of the prison * * *; etc." (Brief p. 13.)*fn9
Appellant has asked for extensive relief, set forth in the margin,*fn10 on allegations which, if true, are not insubstantial. However, we choose to affirm the lower court's dismissal of the complaint, but on a different basis, namely, abstention.
Decision of Lower Court
The district court dismissed the complaint on three alternative grounds.*fn11 First, the court held that "a suit seeking to control the performance of the official duties of state officials is, in substance, a suit against the State, and is therefore barred by the Eleventh Amendment to the United States Constitution."*fn12
We have some doubt concerning the appropriateness here of the application of the Eleventh Amendment. The conclusion that must be reached before the Eleventh Amendment may be interposed by appellant is that the state is the real party in interest. Ford Motor Co. v. Department of Treasury, 323 U.S. 459, 65 S. Ct. 347, 89 L. Ed. 389 (1945);*fn13 Harris v. Pennsylvania Turnpike Comm., 410 F.2d 1332, 1333 n. 1 (3d Cir. 1969); Citizens Committee for Hudson Valley v. Volpe, 297 F. Supp. 809, 810-811 (S.D.N.Y.1969); Jackson v. Colorado, 294 F. Supp. 1065, 1071-1072 (D.Col.1968).
In determining whether an "alter ego" status attaches to the instrumentality of a state, it has been said:
Among the other factors, no one of which is conclusive, perhaps the most important is whether, in the event plaintiff prevails, the payment of the judgment will have to be made out of the state treasury; significant here also is whether the agency has the funds or the power to satisfy the judgment. Other relevant factors are whether the agency is performing a governmental or proprietary function; whether it has been separately incorporated; the degree of autonomy over its operations; whether it has the power to sue and be sued and to enter into contracts; whether its property is immune from state taxation, and whether the sovereign has immunized itself from responsibility for the agency's operations. Krisel v. Duran, 258 F. Supp. 845, 849 (S.D.N.Y.1966), aff'd per curiam, 386 F.2d 179 (2d Cir. 1967), cert. denied, 390 U.S. 1042, 88 S. Ct. 1635, 20 L. Ed. 2d 303 (1968) (footnotes omitted).
See also the comprehensive treatment of the problems of immunity in S. J. Groves & Sons v. New Jersey Turnpike Authority, 268 F. Supp. 568 (D.N.J.1967); Miller v. Vermont, 201 F. Supp. 930, 932 (D.Vt.1962); and Aerated Products Co. of Philadelphia v. Department of Health of State of New Jersey et al., 59 F. Supp. 652, 655, 660 (D.N.J.1945), aff'd, 159 F.2d 851 (3d Cir. 1947). The court said in S. J. Groves :
Counties and municipalities do not partake of the Eleventh Amendment immunity enjoyed by the States * *, although they clearly are public bodies and in many cases perform functions on behalf of the State. * * * Whether other bodies come under the Amendment depends on their relationship to the State, on the powers and responsibilities, the attributes and limitations, with which they have been endowed. * * * 268 F. Supp. at 574.
Appellant's claim for money damages, the most significant factor listed in Krisel, is not against the treasury of the state but against the individual members of the Board of Managers.*fn14 Moreover, the requested audit of the books of the trust fund would not seem to encroach directly upon the governmental functions of the state. As will be more fully developed later, however, since the authorizing statutes are not clear as to the status of the fund, and there are no state decisions regarding the "status and nature of the agency involved [ i.e., the Board of Managers] in its relation to the sovereign * * *," Krisel v. Duran, supra, the state courts should be given an opportunity to adjudicate these matters before a federal court intervenes.
We should note that in Kisielewski v. New Jersey, 68 N.J.Super. 258, 172 A.2d 203, pet. for certification denied, 36 N.J. 144, 174 A.2d 927 (1961), a comparable agency of New Jersey, the State Home for Girls, was held to be "purely an administrative subdivision of the government," and therefore the alter ego of the state for sovereign immunity purposes, in a negligence suit involving a claim for damages for personal injury to an inmate.*fn15
We do not believe that Kisielewski is dispositive of the "alter ego" question. In the first place, in the present action it is not the institution as such that is being sued, i.e., the New Jersey State Prison, but the Board of Managers of the institution. Secondly, this is not a conventional negligence action but a suit charging the instrumentality in control of the New Jersey State Prison with breaches of fiduciary duty in the handling of a trust fund of which the prisoners are claimed to be the beneficiaries. It may be that in its capacity as trustee of an inmate trust fund, the Board of Managers has a different relationship to the sovereign for immunity purposes.
If it should be concluded that the Board of Managers is not the alter ego of the state, the Eleventh Amendment would probably pose no bar to an action in the federal court. The mantle of protection afforded to the states by the Eleventh Amendment prohibits suits against state officials, unless consent is given, where they operate under the authority granted by law and in accordance with the United States Constitution. Ex Parte Young, 209 U.S. 123, 28 S. Ct. 441, 52 L. Ed. 714 (1908); 3 Davis, Administrative Law § 27.01 (Supp.1965), § 27.03 (1958); 1 Barron and Holtzoff, Federal Practice and Procedure § 54.1 (Wright ed. 1960).
The Eleventh Amendment may not be used to shield activity which is lawless.*fn16 The allegations contained in appellant's complaint, which, if true, would indicate at least malfeasance in office, would be sufficient, we believe, to avoid the application of the Eleventh Amendment. At worst, appellant alleges criminal acts by state officials. Without any intimation as to the legitimacy of these charges, such conduct, if proven, cannot be swept under the Eleventh Amendment rug. We are not disposed, therefore, to dismiss this suit on the basis of the Eleventh Amendment. Cf. Whitner v. Davis, 410 F.2d 24, 29-30 (9th Cir. 1969).
The second ground for the lower court's dismissal of the complaint was that a New Jersey statute, N.J.S.A. 30:4-16,*fn17 "may be viewed as an express grant of immunity to defendants from any action seeking to hold them liable for the performance of their official duties." (App. 10a.)
Our research discloses no New Jersey case construing this statute. Although the interpretation of state statutes is generally left to the state courts, unless a constitutional violation is alleged, we perceive the language of the statute to deal primarily with the protection of various officials of state institutions, engaged in the different phases of the detention of inmates, from suits in the nature of false imprisonment. Whether this statute can also serve to grant immunity to officials alleged to have mismanaged a trust fund established for the benefit of prisoners, even though there is a reference in the act to the "management" of inmates, is far from clear, and we do not believe it is proper to dispose of the complaint on this ground.*fn18 As we are constrained to dismiss this action under the doctrine of abstention, it will be up to the state courts, if this suit is pressed further, to gauge the applicability of this statutory grant of immunity to the facts here.*fn19
The third ground for the decision below was the court's hesitancy to interfere with the discipline of state prisoners, in the absence of any allegation of deprivation of constitutional rights, citing Negrich v. Hohn, 379 F.2d 213 (3d Cir. 1967), and Gurczynski v. Yeager, 339 F.2d 884 (3d Cir. 1964).
Whether the action of a federal court would result in "interference with state prison discipline" in the sense of the Negrich and Gurzynski cases requires a careful analysis of the nature of the conditions about which appellant complains. Certain elements of the relief he seeks, note 10 supra, would not seem to interfere with the day-to-day regulated activities of appellant and his fellow prisoners. If the allegations made are true and mismanagement has occurred, an audit of the books of the trust fund, as well as possible recovery of damages for the benefit of the fund and other aspects of the relief requested, may not materially interfere with the institution's control of appellant or of the inmates generally.
The interrelationship between the putative trust created by N.J.S.A. 30:4-5 and 30:4-67.1 with the administration of the New Jersey State Prison makes this case singularly fitting for the application of the abstention doctrine.
Thus we affirm the district court's dismissal of the complaint on the basis of the court-developed principle of abstention, Railroad Commission of Texas v. Pullman Co., 312 U.S. 496, 61 S. Ct. 643, 85 L. Ed. 971 (1941), and therefore refrain from reaching the merits of this case. In coming to this conclusion we recognize full well that the doctrine of abstention has been narrowly circumscribed when constitutional issues are presented, Zwickler v. Koota, 389 U.S. 241, 88 S. Ct. 391, 19 L. Ed. 2d 444 (1967); Kirkland v. Wallace, 403 F.2d 413 (5th Cir. 1968); Stickgold, Variations of the Theme of Dombrowski v. Pfister: Federal Intervention in State Criminal Proceedings Affecting First Amendment Rights, 1968 Wis.L.Rev. 369, 380-385, and virtually prohibited in diversity cases where the only difficulty is the unsettled posture of the state law, Meredith v. City of Winter Haven, 320 U.S. 228, 64 S. Ct. 7, 88 L. Ed. 9 (1943). See generally Annot., 20 L. Ed. 2d 1623 (1969); 1A Moore, Federal Practice para. 0.203 (2d ed. 1965). But this is not a case which appears to involve constitutional issues nor is the difficulty in deciding the case limited to the uncertainty of the state law. This case involves the sensitive problem of the operation and administration of an alleged inmates trust fund in a prison setting.
Professor Wright has stated that:
The second and third elements of the abstention doctrine, as defined above, are relevant here, i.e., to avoid interference with New Jersey's administration of its prison system, cf. Gurzynski v. Yeager, supra, and to permit the state courts to determine the status of the trust fund claimed to have been created by the statutes previously discussed and the relationship of the Board of Managers to such fund.
Professor Wright has also noted, quite significantly, that "where the federal court defers to avoid interference with state activities, dismissal of the action, rather than retention of jurisdiction pending a state determination, is normally appropriate." (Emphasis added.) Id. at 173.*fn21
The American Law Institute's Study of the Division of Jurisdiction Between State and Federal Courts would also permit a district court in its discretion to apply the abstention doctrine when the following conditions are met:
(1) * * * the issues of State law cannot be satisfactorily determined in the light of the State authorities; and
(2) * * * abstention from the exercise of federal jurisdiction is warranted * * * by a serious danger of embarrassing the effectuation of State policies by a decision of State law at variance with the view that may be ultimately taken by the State court, or by other circumstances of like character; and
(3) * * * a plain, speedy, and efficient remedy may be had in the courts of such State; and
(4) * * * the parties' claims of federal right, if any, including any issues of fact material thereto, can be adequately protected by review of the State Court decision by the Supreme Court of the United States.*fn22 § 1371(c), Final Draft (1969), adopted at the Annual Meeting in 1968. (See Field, Jurisdiction of Federal Courts -- A Summary of American Law Institute Proposals, 46 F.R.D. 141, 152 (1969)).
While the American Law Institute's proposal speaks in terms of a stay of the action by the district courts rather than outright dismissal (proposed § 1371(d)), there is authority for such dismissal, as suggested by Professor Wright. See Burford v. Sun Oil Company, 319 U.S. 315, 63 S. Ct. 1098, 87 L. Ed. 1424 (1943).*fn23
In the commentary to the § 1371 proposal the ALI recognizes the difficulty in achieving complete symmetry in the field of abstention:
On balance, we conclude that this case is one in which dismissal is justified. While jurisdiction is asserted on the basis of diversity, this is not a "routine" suit and it does involve serious issues of public law.
In Alabama Public Service Commission v. Southern R'way Co., 341 U.S. 341, 351, 71 S. Ct. 762, 95 L. Ed. 1002 n. 15 (1951), Chief Justice Vinson pointed to language in Chief Justice Stone's opinion in Meredith which we believe distinguishes the thrust of the latter ruling:
Earlier in the Meredith opinion the Court adverted to the exceptional circumstances which would warrant abstention in a diversity case, including the discretion of the federal court to "refuse to appraise or shape domestic policy of the state governing its administrative agencies, * * *." 320 U.S. at 235, 64 S. Ct. at 11.
In his dissent in Louisiana Power & Light Co. v. City of Thibodaux, 360 U.S. 25, 79 S. Ct. 1070, 3 L. Ed. 2d 1058 (1959), in which the majority required a stay of proceedings pending construction of a state statute by the state courts, Justice Brennan said:
In the majority opinion in Allegheny County v. Frank Mashuda Co., 360 U.S. 185, 79 S. Ct. 1060, 3 L. Ed. 2d 1163 (1959), filed the same day, in which abstention was held improper, Justice Brennan said:
More recently, Justice Brennan, on the basis of "narrowly limited special circumstances," concurred in a per curiam decision of the Supreme Court, reversing the Tenth Circuit, in which abstention was deemed proper in a diversity trespass action involving the novel question of whether a New Mexico statute authorized private coal companies to exercise eminent domain to secure water resources. Kaiser Steel Corp. v. W.S. Ranch Co., 391 U.S. 593, 594, 88 S. Ct. 1753, 20 L. Ed. 2d 835 (1968).*fn25
As previously noted, we have for the purpose of convenience referred to the fund in dispute here as a "trust fund" and to the prisoners as "beneficiaries." However, there is no adjudication by the state courts of New Jersey to give us guidance as to the legal attributes of the fund and what status the prisoners have in relation to it. We are therefore left without any state judicial assistance, directly or by implication, in determining what position the members of the Board of Managers hold with respect to the fund and to the prisoners.*fn26
Even if we were convinced that this "trust fund" is governed by the ordinary principles of trust law, it is a most unusual trust, intertwined with the management of the state penal system. It is clear that New Jersey would have an overriding interest in the development of its own policy regarding the establishment of trust funds for inmates of prisons and other state institutions. Normally, when federal courts are called upon to apply trust law in diversity cases, the policies which the state wishes to effectuate are quite clear. Not so here. A decision by a federal court in a barren area of state law that involves several statutes, the New Jersey State Prison and its Board of Managers, as well as general trust principles, may not only embarrass but also severely undercut the effectuation of state policies not yet clearly delineated.*fn27
Our decision in no way prejudices the appellant from resorting to the courts of New Jersey to pursue his cause. Indeed, the allegations appellant makes are of such nature that the state's interest in the integrity of its own officials and the prison system should be sufficient reason for New Jersey to provide a plain, speedy, efficient and unbiased remedy.*fn28
For the reasons expressed at length above, the dismissal of the appellant's complaint will be affirmed.