UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
filed: October 24, 1988.
JOSEPH P. FITCHIK, APPELLANT
NEW JERSEY TRANSIT RAIL OPERATIONS, INC., APPELLEE V. NON DESTRUCTIVE TESTING CORP., THIRD-PARTY DEFENDANTS, LINDA A. DEGIROLAMO, APPELLANT V. NEW JERSEY TRANSIT AUTHORITY D/B/A NEW JERSEY TRANSIT, APPELLEE, FELIX E. GUZMAN, APPELLANT V. NEW JERSEY TRANSIT RAIL OPERATIONS, INC., APPELLEE, SIDNEY KINNEAR, APPELLANT V. NEW JERSEY TRANSIT RAIL OPERATIONS, INC., APPELLEE, KENNETH G. BANTA, APPELLANT V. NEW JERSEY TRANSIT RAIL OPERATIONS, INC., APPELLEE V. EVERRETTE G. WHITENOUR, CHRISTOPHER MIDDLETON, JUSTINE SMITH, AND TOWN OF DOVER, THIRD PARTY DEFENDANTS, WILLIAM ROCKWELL, APPELLANT V. NEW JERSEY TRANSIT RAIL OPERATIONS, INC., ROBERT K. HEATON, APPELLANT V. NEW JERSEY TRANSIT RAIL OPERATIONS, INC. APPELLEE WILLIAM P. MCKENNA, APPELLANT V. NEW JERSEY TRANSIT RAIL OPERATIONS, INC., APPELLEE, ANDY M. SEAMON, APPELLANT V. NEW JERSEY TRANSIT RAIL OPERATIONS, INC., APPELLEE, CRAIG A. CONLON, APPELLANT V. NEW JERSEY RAIL OPERATIONS, INC. APPELLEE LAURENCE O'HALLORAN, APPELLANT V. NEW JERSEY TRANSIT RAIL OPERATIONS, INC., APPELLEE, DENNIS MARTIN, APPELLANT V. NEW JERSEY TRANSIT CORPORATION & NEW JERSEY TRANSIT RAIL OPERATIONS, INC., APPELLEE, ROBERT G. STOCKER, SR., APPELLANT V. NEW JERSEY TRANSIT RAIL OPERATIONS, INC., APPELLEE, CLIFFORD E. WILLIAMSON, APPELLANT V. NEW JERSEY TRANSIT RAIL OPERATIONS, INC., APPELLEE, DAVID J. CHWASZCZEWSKI, APPELLANT V. NEW JERSEY TRANSIT RAIL OPERATIONS, INC., APPELLEE, ASHRAF GHOBRIAL APPELLANT V. NEW JERSEY TRANSIT RAIL OPERATIONS, INC., APPELLEE
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY (NEWARK), D.C. Civ. Nos. 86-3060, 86-0799, 86-0802, 86-3413, 86-4829. 87-1534, 87-4688, 87-4689, 87-2266, 84-4244, 87-1322, 87-1535, 86-0584 ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY (TRENTON), D.C. Civ. Nos. 86-3901, 84-4214
ROSEANN, Circuit Judge.
These consolidated appeals require us to resolve the important question of whether the eleventh amendment precludes the plaintiff-appellants from instituting actions in federal court under the Federal Employees' Liability Act (FELA) action against the defendant-appellee, New Jersey Transit Rail Operations, Inc. (NJTRO). By opinion, the United States District Court for the District of New Jersey granted defendant's motion to dismiss plaintiff's complaint for lack of subject matter jurisdiction. Fitchik appeals and we affirm.
On December 30, 1985, the plaintiff, Joseph P. Fitchik, a NJTRO conductor, was seriously injured when his train struck a track guard. Fitchik thereafter filed a complaint against defendant pursuant to the FELA, 45 U.S.C. § 51 et seq., seeking compensatory damages. Based upon Fed. R. Civ. P. 12(h)(3), and upon the Supreme Court's recent decision in Welch v. State Department of Highways and Public Transportation, 55 U.S.L.W. 5046 (1987), the district court dismissed plaintiff's complaint, holding that the FELA failed to manifest the unmistakable statutory language necessary to abrogate the states' immunity from suit in federal court. In conformity with established eleventh amendment jurisprudence, the district court additionally held that New Jersey was the real and substantial party in interest.
Relying principally upon our decisions in Urbano v. Board of Managers, 415 F.2d 247 (3d Cir. 1969), cert. denied, 397 U.S. 948 (1970), and in Kovats v. Rutgers, The State University, 822 F.2d 1303 (3d Cir. 1987), plaintiff contends that NJTRO is not the alter ego of New Jersey.*fn1 Fitchik correctly observes that our consideration of whether the FELA abrogates eleventh amendment immunity is premised upon a determination that NJTRO is an arm of the state.*fn2 Our review of defendant's entitlement to eleventh amendment immunity is plenary. Skehan v. State Sys. of Higher Educ., 815 F.2d 244, 246 (3d Cir. 1987).
The eleventh amendment provides:
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 Citizens of another State, or by Citizens or Subjects of any Foreign State. Despite the amendment's language, the Supreme Court has consistently interpreted it to immunize an unconsenting state "from suits brought in federal court by her own citizens as well as by citizens of another state." Pennhurst State School & Hosp. v. Halderman, 465 U.S. 89, 100 (1984) (quoting Employees v. Missouri Dep't of Pub. Health and Welfare, 411 U.S. 279, 280 (1973)).
A suit may be barred by the eleventh amendment even though a state is not named a party to the action. Edelman v. Jordan, 415 U.S. 651, 663 (1974). The Court has attempted on several occasions to determine just when a suit against an entity is actually a suit against the state itself. In Pennhurst, for example, the Court asserted that the state is the real party in interest when "the judgment sought would expend itself on the public treasury or domain, or interfere with the public administration," or if the effect of the judgment would be 'to restrain the Government from acting or to compel it to act.'" 465 U.S. at 101 n.11 (quoting Dugan v. Rank, 372 U.S. 609, 620 (1963)). This court, however, has formulated a more specific and more comprehensive test to determine whether eleventh amendment immunity extends to an entity:
[L]ocal law and decisions defining the status and nature of the agency involved in its relations to the sovereign are facts to be considered, but only one of a number that are of significance. 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.
Urbano, 415 F.2d at 250-51.
Before applying Urbano to the present action, we observe that NJTRO is a wholly owned subsidiary of New Jersey Transit Corporation (NJT). Brotherhood of Locomotive Engineers v. New Jersey Transit Rail Operations, Inc., 608 F.Supp. 1216, 1217 (S.D.N.Y. 1985). Therefore, any eleventh amendment immunity conferred upon NJTRO would be derivative of that possessed by NJT. See Kovats, 822 F.2d at 1306. Finally, the issue of NJT's immunity from suit has been the subject of a multitude of reported and unreported decisions. To our knowledge, every district court that has considered the question has held that NJT is the alter ego of New Jersey.*fn3
The apparent clarity of the nine factor Urbano standard may sometimes be compromised by its actual application to a specific statutory entity. For example, a single statutory power or limitation may implicate more than one factor. We therefore consider the relevant factors in the sequence which best illuminates NJT's complex enabling statute.
1. Incorporation and Function
NJT was created by the New Jersey Public Transportation Act of 1979 ("the Act") as the successor to the Commuter Operating Agency of the New Jersey Department of Transportation. N.J.S.A. § 27:25-1, et seq. (West Supp. 1988). NJT's operating property, plant, and equipment were acquired by New Jersey State and subsequently transferred to the corporation at cost. See Reply Brief App. at 73. Section 27:25-4(a) of the Act asserts that NJT was created within New Jersey's executive branch as "a body corporate and politic with corporate succession." The section additionally declares that "the corporation is hereby constituted as an instrumentality of the state exercising public and essential government functions . . . ." Id.
Based upon N.J.S.A. § 27:25-4(a), it appears that NJT's performance of essential government functions supports its status as New Jersey's alter ego. However, in light of the Supreme Court's decision in Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528 (1985), we believe that the governmental function criterion is no longer a reliable means for deciding whether an entity is entitled to eleventh amendment protection. Garcia explicitly rejected the governmental-proprietary distinction as a basis for determining whether states must comply with federal legislation enacted pursuant to the commerce clause. Id. at 541-47. We fail to comprehend how a dichotomy that is unhelpful for commerce clause purposes can somehow become illuminating when applied to the eleventh amendment. Although we cannot disturb the New Jersey legislature's declaration of NJT's corporate purpose, we nonetheless conclude that whether an entity performs a traditionally proprietary, or governmental function is of little significance for the eleventh amendment.*fn4
In deciding whether NJT is separately incorporated, we note that the legislature imbued it with somewhat conflicting characteristics; it is at once "a body corporate and politic" and an "instrumentality of the state." N.J.S.A. § 27:25-4(a). Therefore, the separate incorporation factor mediates neither in favors, nor thwarts NJT's alter ego status.
2. Suits and Immunities
N.J.S.A. § 27:25-5(a) grants NJT the power to sue and be sued; however, claims against the corporation are governed by the New Jersey Tort Claims Act, N.J.S.A. § 59:1-1 et seq. (West 1982 & Supp. 1988), and by the New Jersey Contractual Liability Act, N.J.S.A. § 59:13-1 et seq. (West 1982) see also N.J.S.A. § 27:25-19. Although the power to sue and be sued generally implies an entity's independence from a state, NJT is subjected to the foregoing statutes which apply exclusively to claims against public entities.
Several statutory provisions accord NJT the ability to enter into contracts. See N.J.S.A. §§ 27:25-5(r), 25-5(v) and 25-6. The corporation may buy land, N.J.S.A. § 27:25-13, and may purchase capital stock, equipment and personal property. N.J.S.A. §§ 27:25-5(u), 25-10 and 25-5(j).*fn5 All property owned by the corporation or by any of its wholly owned subsidiaries is deemed state property. N.J.S.A. § 27:25-16. NJT has additionally been given the power of eminent domain. N.J.S.A. § 27:25-13(a)-(c). See Gibson, 560 F.Supp. at 113. Finally, N.J.S.A. § 27:25-16 exempts NJT from all state taxation including, but not limited to, sales taxes, real property taxes or assessments, corporate franchise taxes, and income taxes.*fn6
In sum, NJT's power to enter into contracts suggests its independence from New Jersey. On the other hand, the entity's exemption from state taxation and its power of eminent domain support its alter ego status. Finally, the impact of NJT's ability to sue and be sued is attenuated by its subjection to the Tort Claims and Contractual Liability Acts.
3. Funding and insulation from Responsibility
Our precedents have uniformly asserted that among the most important factors in the eleventh amendment inquiry is whether a judgment against an entity will have a financial impact upon the state treasury. See Blake v. Kline, 612 F.2d 718, 723 (3d Cir. 1979) cert. denied, 447 U.S. 921 (1980). In this respect, the question of whether the state is the real party in interest generally depends upon whether "the action is in essence one for the recovery of money from the state." Ford Motor Co. v. Department of Treasury, 323 U.S. 459, 464 (1945).
Our analysis of the effect of a judgment against NJT is illuminated by our recent opinion in Kovats, where we decided that the State University at Rutgers was not entitled to eleventh amendment immunity. 822 F.2d at 1303. Considering the funding issue, we observed that Rutgers had four distinct sources of income: auxiliary income from dining hall and room rental fees; restricted income from governmental and private groups; general university income from tuition, fees, and investments; and state appropriations. Id. at 1308. Rutgers' use of the first two revenue sources was restricted to the service or program that engendered the income. The remaining sources, which comprised approximately seventy-two percent of the University's total income, were commingled in a general operating account used to fund daily operations.*fn7 Id.
Importantly, a judgment against Rutgers could be satisfied in its entirety from non-state funds contained in both the commingled account and in several segregated accounts. Segregated accounts consisted entirely of non-state funds. For example, Rutgers Board of Trustees held title to land and buildings valued at more than $40 million. Id. at 1309. Rutgers deposited interest income from these and other assets into segregated accounts available for use by its Board of Governors.*fn8 Id. By virtue of N.J.S.A. § 18A:65-25(d) (West 1968 & Supp. 1988), Rutgers retained sole discretionary control over both its commingled and segregated accounts subject only to state audit. Unlike many state agencies, the University maintained its own accounts and was not required to manage its funds as public monies. Id. Based upon Rutgers' retention of substantial non-state funds subject to its discretionary use, we concluded that a judgment for the recovery of money against it would have no impact upon the state treasury.
Rutgers, however, argued that even a judgment paid from non-state funds would have an indirect effect on the state treasury because New Jersey would be compelled to make up any resultant shortfalls with increased appropriations. Id. The court rejected defendant's contention, asserting that because New Jersey had insulated itself by statute from the university's obligations, any increase in appropriations would be entirely the result of discretionary action by the state. Id.; see also Fuchilla v Layman, 109 N.J. 319, 537 A.2d 652, 656 (1988) (although legislature might increase the size of an appropriation because of a judgment the indirect effect of that payment on the state treasury is not sufficient to invoke eleventh amendment immunity). Although the court ultimately held that Rutgers was not immune from suit in federal court, it asserted that a particular entity's entitlement to eleventh amendment protection must be considered on a case-by-case basis:
The decisions in other cases, while helpful in terms of analytic models, cannot govern our decision as to Rutgers because "[e]ach state university exists in a unique governmental context, and each must be considered on the basis of its own peculiar circumstances."
822 F.2d at 1312 (quoting Soni v. Board of Trustees, 513 F.2d 347, 352 (6th Cir. 1975), cert. denied, 426 U.S. 919 (1976)).
We do not believe that Kovats stands for the rather broad proposition that a state sufficiently disassociates itself from an entity merely by funding it through appropriations rather than by direct payments to its creditors. Instead, we are required to discern whether the payment of any judgment against the entity must be made out of funds subject to the control of the state. Any impact upon funds subject to state control affects the state as a "real, substantial party in interest," Ford, 323 U.S. at 464, entitling it to invoke its sovereign immunity from suit. To the extent that an entity's income derives predominantly from property and monies subject to state control, a judgment against it can be said to impact on the state treasury. With these principles in mind, we turn to the facts of the present dispute.
NJT may collect fares from its operations, N.J.S.A. § 27:25-5(n), and may collect fees and rental charges from its properties. N.J.S.A. § 27:25-5(o). The Act additionally empowers the corporation to seek money from any federal, state, county, or municipal agency, or from any private source. N.J.S.A. § 27:25-5(g). Moreover, the legislature recently amended the Act to permit NJT to issue "Grant Anticipation Notes" (GANs), or short term credit obligations issued in advance of federal operating subsidies. N.J.S.A. § 27:25-5(w). The GANs, however, do not constitute a debt or liability of either the corporation or of New Jersey and specifically are payable only from the federal grants to the corporation and from the note proceeds and investment earnings thereon. Id. Indeed, the Act explicitly prohibits NJT from incurring a deficit of any kind. N.J.S.A. § 27:25-17. Although New Jersey has explicitly disclaimed liability for obligations incurred by NJT, id.,*fn9 the state will appropriate over $193 million to the corporation for the 1988-89 fiscal year.*fn10 Supp. Inf. App. at 5. During the 1987 fiscal year, state appropriations and state fare assistance programs comprised approximately thirty-three percent of NJT's total revenues and operating subsidies, while passenger fares constituted fifty-three percent.*fn11 Reply Brief App. at 69. NJT derived the balance of its 1987 income from federal grants and other operating revenues.
NJT may deposit its revenues in interest bearing accounts or in the State of New Jersey Cash management Fund (CMF). N.J.S.A. § 27:25-5(p). The CMF, a common trust fund established and maintained by the Director of the Division of Investment and by the State Treasurer, is a legal depository for public monies. N.J.S.A. § 52:18A-90.4 (West 1986). The CMF may additionally contain money that inures to the benefit of the General State Fund. N.J.S.A. § 52:18A-90.1. NJT additionally maintains a non-interest bearing General Operating Account (GOA) which provides funds for payroll and other daily expenditures. NJT's 1987 audited financial report, supplied by plaintiff in his reply brief, discloses that injury and damage claims are satisfied from a restricted fund unavailable for daily operations. From our examination of the financial report, we presume that the GOA is the source of monies deposited in the restricted fund.*fn12 Reply Brief App. at 69-75.
We note that all of NJT's revenues, including its passenger fares, are by definition, public monies because they may be deposited in the CMF. See N.J.S.A. § 27:25-5(p). We again observe that New Jersey owns all of NJT's property. It follows that any revenues generated by the corporation's capital are public in nature. Thus, even if some of the corporation's revenue were non-public in origin, it would nonetheless constitute public monies. Moreover, NJT does not segregate its state funds from its non-state funds. Presumably, the restricted fund, out of which NJT satisfies judgments against it, consists of a combination of state appropriations, which the state is mandated to make by virtue of its statutory commitment to provide public transportation, and operating revenues. These two income sources constitute approximately eighty-eight percent of NJT's total income, and the balance comprises principally federal grants and some non-operative revenues. Therefore, unlike Rutgers, NJT simply has no segregated non-state funds available for its use that are not subject to state control.
Additionally, NJT does not have discretionary control over investment of its revenues and subsidies. Income invested in the CMF*fn13 is subject to the same restrictions provided for investment in the state treasury.*fn14 See N.J.S.A. § 52:18A-90.4. Thus, while Rutgers was empowered to maintain its own accounts and exercise discretionary control over both its commingled and segregated funds, NJT is compelled to manage its funds as public monies. See Kovats 822 F.2d at 1309. Based upon the foregoing we conclude that NJT is unable to pay a judgment against it from non-state funds subject to its discretionary use. Therefore, recovery of a judgment against NJT would have an impact upon the New Jersey treasury. See Gibson-Homans, 560 F.Supp. at 113.
Relying on Kovats, Fitchik vigorously argues that because New Jersey has insulated itself from NJT's liabilities, any effect that ajudgment might have upon the state treasury would be indirect. See Kovats, 822 F.2d at 1309. Plaintiff, however, ignores the differences between the respective enabling statutes. We noted in Kovats that the legislature's decision to increase Rutgers' appropriation was discretionary. Id. On the other hand, N.J.S.A. § 27:25-2 asserts that "it is the responsibility of the State to establish and provide for the operation and improvement of a coherent public transportation system in the most efficient and effective manner" (emphasis added). We believe that this language mandates the state's continuing financial obligation to NJT so long as the corporation remains a public entity.*fn15 See also Port Auth. Police Benevolent Ass'n v. Port Auth., 819 F.2d 413, 416 (3d Cir), cert. denied, 108 S. Ct. 344 (1987) (agency entitled to eleventh amendment immunity at least in part because governing statute provided that "unless . . . revenues from operations conducted by the port authority are adequate to meet all expenditures, the legislatures of the two states shall appropriate [the amounts needed]"). As evidence of its continuing obligations, New Jersey increased NJT's appropriations from approximately $80 million in 1980-81 to $193 million for the current fiscal year. We therefore concur with the Gibson-Homan court's assertion that: "The fiscal realities of operating a public transportation system, coupled with the inability of the corporation to incur debt or to raise money through sale of its own bonds, dictates the continuation of appropriations of state funds to New Jersey Transit."*fn16 560 F.Supp. at 113-14.
Fitchik finally argues that NJT's ability to issue GANs constitutes a revenue raising device sufficient to satisfy a judgment against it. We disagree. The Act explicitly asserts that GANs are not bonds, but rather a specified means of dealing with short term cash flow problems arising out of delays in receiving federal subsidies. See N.J.S.A. § 27:25-5 (Introductory Statement). For the foregoing reasons we conclude that the funding factor supports NJT's alter ego status.
Because the eleventh amendment is designed to assure that federal courts do not interfere with a state's public policies the degree of an entity's autonomy is a significant factor in the immunity inquiry. Blake, 612 F.2d at 725.
NJT's administrative authority is vested in a seven member board consisting in part of the Commissioner of Transportation the State Treasured and another member of the executive branch selected by the Governor.*fn17 N.J.S.A. § 27:25-4(b). The remaining members are drawn from the public and are appointed by the Governor with the advice and consent of the Senate. Id. Although the Act declares that NJT "is independent of any supervision or control" by the department of Transportation, it requires the Commissioner of the department to serve as chairman of the Board of NJT and the Act empowers the Governor to remove any public member of the Board for cause and to veto any board action. N.J.S.A. § 27:25-4(b) and (f). Both the Governor and the Commissioner of Transportation receive a report containing the corporation's operational, capital, and financial plans for the current and ensuing fiscal year. N.J.S.A. §§ 27:25-4(d); 25-20(a) and (b). The Governor additionally receives a copy of the minutes of every board meeting, N.J.S.A. § 27:25-4(f). Finally, all board meetings are subject to the New Jersey Open Public Meetings Act. N.J.S.A. § 27:25-4(g).
Labor relations between NJT and its employees are governed by the New Jersey Employer-Employee Relations Act, N.J.S.A. § 34:13A-1 et. seq. (West 1988), and are within the jurisdiction of the Public Employment Relations Commission. N.J.S.A. § 27:25-14(c). In developing its employee compensation schedule, NJT is required to consult with state authorities. N.J.S.A. § 27:25-15. Upon its completion, the schedule must be filed with the state along with a list of all of NJT's full and part time officers and employees. Id. The corporation is additionally subject to New Jersey's competitive bidding statutes. See N.J.S.A. § 27:25-11. The State Auditor may examine the corporation's accounts, N.J.S.A. § 27:25-20(e), and the general public may inspect its records and papers. N.J.S.A. § 27:25-20(c). Finally, rules and regulations adopted by NJT are published in accordance with the Administrative Procedure Act, and are filed with the Director of the Office of Administrative Law. N.J.S.A. § 27:25-5(e).
The preceding statutory presentation compels the conclusion that NJT has only limited autonomy from New Jersey. Three members of NJT's board are members of the state's executive branch and the remaining members may be removed by the Governor for cause. The State's pervasive authority over NJT's operations is further demonstrated by the Governor's veto power over any board action. Even though the Act asserts that NJT is independent of the Department of Transportation, the Commissioner of that Department is given the power to review the corporation's expenditures and budget. Moreover, NJT is subject to several statutes governing public entities, including the Administrative Procedure Act and the Employer Employee Relations Act. Once again, we believe that Kovats is distinguishable from the case before us. Rutgers' enabling statute explicitly accorded the University Trustees "a high degree of self-government." 822 F.2d at 1311. Among other things, the University was not required to manage its funds as public monies, nor comply with New Jersey's civil service, competitive bidding, or state administrative procedure statutes. Id. at 1311-12. We conclude that the autonomy factor decisively favors NJT's alter ego status.
5. Status and Nature of NJT under New Jersey Law
Although the eleventh amendment inquiry remains one of federal, and not state, law, local law decisions concerning an entity's relationship to a state may be an important, and under some circumstances, a controlling factor in the determination of immunity. Blake, 612 F.2d at 722. New Jersey courts have had at least two opportunities to consider NJT's status under state law. In both Transport of New Jersey v. Matos, 202 N.J. Super. 571, 495 A.2d 503 (1985); and Travelers Insurance Co. v. Transport of New Jersey, 204 N.J. Super. 63, 497 A.2d 900 (1985), the Superior Court of New Jersey held, relying upon the relevant provisions of NJT's enabling statute, that the corporation was a public entity.*fn18 Thus, local law decisions weigh in favor of NJT's alter ego status.
Based upon our determination that a majority of the Urbano factors militate in favor of NJT's alter ego status, we hold that the corporation's wholly owned subsidiary, NJTRO, is entitled to eleventh amendment protection.
We now consider whether any exception applies to remove NJTRO's immunity from suit in federal court. Eleventh amendment immunity may be avoided by congressional abrogation under the power granted by the enforcement provisions of section 5 of the fourteenth amendment, see Fitzpatrick v. Bitzer, 427 U.S. 445, 456 (1976), or, as we have previously held, under the commerce clause of Article I. See United States v. Union Gas Co., 832 F.2d 1343, 1356 (3d Cir. 1987). Furthermore, a state can waive its eleventh amendment immunity and consent to suit in federal court. Welch, 55 U.S.L.W. at 5048. Fitchik argues that both exceptions apply.
Plaintiff argues that the FELA, considered in conjunction with the wealth of federal safety legislation applicable to state owned railroads, manifests Congress' unmistakable intention to abrogate the state's eleventh amendment immunity. Fitchik additionally contends that New Jersey constructively waived its eleventh amendment immunity when it undertook to operate an interstate railroad while Parden was prevailing law. Both contentions require examination into the impact that the Supreme Court's recent decision in Welch has upon Parden.
In Welch, the petitioner, an employee of the Texas Department of Highways and Public Transportation, filed a personal injury suit against the respondent pursuant to the Jones Act. 55 U.S.L.W. at 5047. Significantly, the Jones Act applied the remedial provisions of the FELA to seamen. Initially, the Court recognized that the eleventh amendment functions as an affirmative limitation on Article III's grant of judicial authority. Id. at 5048. The Court, however, then considered the two exceptions that limit states' eleventh amendment protection. Discussing the waiver exception, the Court cautioned that because constructive consent is not a doctrine Commonly associated with the surrender of constitutional rights," a court will find "a waiver by the state only where stated by such overwhelming implications from the text as [will] leave no room for any other reasonable construction. " Id. (quoting Edelman, 415 U.S. at 673). Discussing the abrogation exception, the Court explained that Congress may abrogate the eleventh amendment without the states' consent when it expresses "its intention . . . in unmistakable language in the statute itself." Id. (quoting Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 243 (1985)).
Applying the preceding analysis to the case before it, the Court held that the Jones Act's reference to "any seaman who shall suffer personal injury" did not constitute the unmistakable statutory language necessary for congressional abrogation of eleventh amendment immunity.*fn19 It reasoned that because the doctrine of sovereign immunity implies a constitutional distinction between the states and other employers of seamen, "a general authorization for suit in federal court is not the kind of unequivocal statutory language necessary to abrogate the eleventh amendment." Id. at 5048-49 (quoting Atascadero, 473 U.S. at 246).
The Court next considered the effect of its decision upon Parden, a case holding that Congress intended to abrogate the states' eleventh amendment immunity merely by making the FELA applicable to every common railroad carrier. See 377 U.S. at 190. The Court concluded that Parden was mistakenly decided insofar as it interpreted Congress' failure to explicitly exclude state railway workers from the scope of the FELA as a sufficient indication of its desire to subject the states to suit in federal court. Observed the Court: "Although our later decisions do not expressly overrule Parden, they leave no doubt that Parden's discussion of congressional intent to negate Eleventh Amendment immunity is no longer good law." Welch, 55 U.S.L.W. at 5049. Thus, the Court overruled Parden to the extent that it was inconsistent with the requirement that congressional abrogation of eleventh amendment immunity be expressed in unmistakably clear language.
In light of Welch, plaintiffs argument that the FELA manifests Congress' intention to abrogate the states' immunity is simply incomprehensible. Welch's rejection of Parden unequivocally stands for the proposition that the language of the FELA is insufficient to subject the states to suit in federal court. Fitchik's reliance upon the Rail Safety and Service Improvement Act, 45 U.S.C. § 431, upon federal legislation transfering the railroad to state control, and upon other federal legislation applicable to state owned railroads similarly fails to manifest the unmistakable congressional intention necessary to abrogate the eleventh amendment.
Plaintiff further contends that New Jersey constructively waived its immunity when it chose to operate a railroad while Parden was the law of the land. Parden was premised at least in part upon the conclusion that the state had consented to suit in federal court. Fitchik argues that Welch does not reject entirely the notion of constructive consent; it merely holds that finding consent in Parden was inappropriate because the FELA did not provide a sufficiently clear statement that a state's operation of a railroad would work a waiver of eleventh amendment immunity. Plaintiff distinguishes this case by reasoning that the Supreme Court's decision in Parden, rather than the FELA itself, provided the clear statement that New Jersey would waive its immunity by assuming control of an interstate railroad.
Although this argument may have some initial appeal, it cannot withstand scrutiny. By 1982, when New Jersey undertook to operate the railroad, it was already questionable whether Parden was good law. Significantly, in Employees v. Missouri Department of Public Health & Welfare, 411 U.S. 279 (1973), the Supreme Court refused to extend the reasoning of Parden to hold states subject to suit in federal court under the Fair Labor Standards Act, even though the FSLA and the FELA did not differ greatly in terms relevant to eleventh amendment immunity. See Employees, 411 U.S. at 299 (Brennan, J, dissenting); see also Edelman, 415 U.S. at 673-74 (rejecting argument that state waived eleventh amendment immunity by participating in federal program when legislation creating program lacked clear language that participation would signal constructive consent to suit in federal court). It is therefore arguable whether Parden provided a clear statement that New Jersey would waive its eleventh amendment immunity by operating the railroad. Consequently, it is uncertain whether New Jersey consented to federal jurisdiction when NJTRO began operations.
The ambiguity In decisional law at the time New Jersey began operation of the railroad is especially significant in light of the rule that a court will find waiver only where it is stated explicitly or is the only "reasonable construction." See Welch, 55 U.S.L.W. at 5048 (quoting Edelman, 415 U.S. at 673). Plaintiff has not established that New Jersey has waived its immunity by "express language." See id. Moreover, we are unwilling to draw the broad inference that New Jersey accepted the doubtful rule of Parden and waived its immunity to suit in federal court as a condition to operating the railroad. It is equally reasonable to assume that New Jersey chose to operate the railroad despite Parden, and was willing to challenge the decision in that case should the need arise. We therefore decline to hold that New Jersey constructively consented to suit in federal court. Thus, we hold that the eleventh amendment precludes plaintiff from maintaining a FELA action against NJTRO in federal court.*fn20
For the foregoing reasons, the district court's order dismissing plaintiff's complaint for lack of subject matter jurisdiction will be affirmed. Each side to bear its own costs.
BECKER, Circuit Judge, dissenting.
A state agency is entitled to immunity from suit in a federal court under the eleventh amendment when a judgment against it "would have had essentially the same practical consequences as a judgment against the State itself." Lake Country Estates, Inc. v. Tahoe Regional Planning Agency, 440 U.S. 391, 401 (1979). As the majority explains, this court has identified nine interrelated factors that determine whether an entity is an "alter ego" of the state and thus entitled to immunity. Urbano v. Board of Managers of New Jersey State Prison, 415 F.2d 247, 250-51 (3d Cir. 1969), cert. denied, 397 U.S. 948 (1970). As the majority also explains, several of the Urbano factors are interrelated.*fn1 For clarity's sake, I divide the Urbano factors into three larger questions as follows:
(1) Whether the money that would pay the judgment would come from the state (this includes three of the Urbano factors -- whether payment will come from the state's treasury, whether the agency has the money to satisfy the judgment, and whether the sovereign has immunized itself from responsibility for the agency's debts);
(2) The status of the agency under state law (this includes four factors -- how state law treats the agency generally, whether the entity is separately incorporated. whether the agency can sue or be sued in its own right, and whether it is immune from state taxation); and
(3) What degree of autonomy the agency has.
As will be seen infra, these factors are not weighed evenly in striking the balance. As will also be seen, an evaluation of the relevant factors leads me to the conclusion that ajudgment against New Jersey Transit Rail Operations ("NJTRO") is not a judgment against New Jersey, and therefore that NJTRO is not shielded by New Jersey's sovereign immunity. I therefore respectfully dissent.
Although no single Urbano factor is dispositive, the most important is whether any judgment would be paid from the state treasury. Urbano itself calls this "the most significant factor," 415 F.2d at 251, and this conclusion is supported by the Supreme Court's jurisprudence which identifies the amendment's central goal as the prevention of federal court judgments that must be paid out of the state's treasury. See, e.g.. Lake Country Estates, 440 U.S. at 400-01. For example, federal litigants cannot get damages from the state treasury by suing a state officer in his or her official capacity, see Edelman v. Jordan, 415 U.S. 651 (1974), although suits against officers for injunctive relief, which affect the state's discretion to pursue its own policies, are permitted. See Ex Parte Young, 209 U.S. 123 (1908).
The majority points to the following facts to support its conclusion that New Jersey Transit's ("NJT's") money is in fact the state's money and thus that any judgment against NJT constitutes ajudgment against the state: (1) New Jersey gives a significant amount of money to NJT; (2) NJT is entitled to invest its money in the state Cash Management Fund ("CMF"); (3) New Jersey controls the money invested in the CMF; and (4) NJT does not segregate its state and non-state funds.*fn2 The linchpin of the majority's legal analysis lies in the proposition that "[t]o the extent that an entity's income derives predominantly from property and monies subject to state control, a judgment against it can be said to impact on the state treasury." See Majority Opinion, Typescript at 19.
To place the matter in proper perspective, I note at the outset that NJT's money does not come predominantly from the state. As the majority notes, only 33% of NJT's funds come from New Jersey. See New Jersey Transit 1987 Annual Report, at 30 (hereinafter "Annual Report"). But even putting that significant factor aside, I note that the fact that an entity derives some of its income from the state does not mean that it is entitled to partake of the state's immunity. "[T]he nature of the state's obligation to contribute may be more important than the size of the contribution." Blake v. Kline, 612 F.2d 718, 723 (3d Cir. 1979), cert. denied, 447 U.S. 921 (1980). What is significant is whether the money that pays the fine will come from the state treasury rather than the agency's funds, or (alternatively) whether the state must reimburse the agency and thus effectively pay the debt. See Kovats v. Rutgers, The State University, 822 F.2d 1303, 1309 (3d Cir. 1987) (holding that a judgment against Rutgers is not a judgment against the state, in large part because the state is not obligated to reimburse Rutgers).
New Jersey, however, is under no obligation to pay NJT's debts, nor to reimburse NJT for judgments that it pays. Indeed, New Jersey has specifically disclaimed any liability for NJT's debts. See N.J. Stat. Ann. § 27:25-17. Thus, "[a]ny increase in [NJT's] state appropriation as a result of a judgment against [NJT] will be entirely the result of discretionary action by the state." Kovats, 822 F.2d at 1309. Although New Jersey might appropriate funds to NJT to meet any shortfall caused by judgments against NJT, such voluntary payments by a state do not trigger sovereign immunity.*fn3 See id.; Blake, 612 F.2d at 726 (holding that "an ancillary effect on the state treasury will not create an eleventh amendment jurisdictional bar").
Furthermore, it is not clear that NJT would need to request funds from the state coffers in order to meet shortfalls caused by adverse judgments. NJT gets most of its money from fares. See Annual Report at 30. Just like a private railroad, NJT can raise revenues by raising fares, thus spreading the costs of accidents among its users. See N.J. Stat. Ann. § 27:25-5(n). Alternatively, NJT could cover any shortfall by reducing its expenses or capital budget.
Finally, judgments against NJT will not necessarily lead to shortfalls. NJT is authorized to purchase liability insurance. N.J. Stat. Ann. § 27:25-5(r). It is self-insured for up to three million dollars per occurrence for rail operations, subject to additional participation for larger losses. See Annual Report at 34. Thus NJT can meet at least some of the claims against it with the money it has set aside to cover such liabilities, and therefore need not ask the state or anyone else for help.
The other facts to which the majority points are similarly unpersuasive. As the majority notes, NJT is entitled to invest its funds in the CMF, and funds contained in the CMF are, by definition, "public moneys." N.J. Stat. Ann. § 52: 18A-90.4. But the fact that a statute terms property "public" does not mean that it constitutes the state's property for purposes of the eleventh amendment. "Counties, municipalities and school districts" are allowed to deposit moneys in the CMF, N.J. Stat. Ann. § 52:18A-90.4, but it is crystal clear that these entities are not entitled to immunity from suit in federal court. See Mt. Healthy City School District Board of Education v. Doyle, 429 U.S. 274, 280-81 (1977).*fn4 The designation of the money as "public" simply does not answer the question of who has dominion over the money in NJT's accounts.
The only evidence of state dominion over NJT's money to which the majority points is the state's control of monies invented in the CMF. I find this inadequate for three reasons. First, NJT is not obliged to invest in the CMF. The state only gets control of the investments with NJT's consent, so in the first instance control remains with NJT. See N.J. Stat. Ann. § 27:25-5(p). Second, control is only significant to the funding factor if it somehow indicates ownership.*fn5 Since New Jersey does not have a financial interest that would be directly and deleteriously affected by the fund's diminution, the funds in the CMF do not belong to New Jersey, notwithstanding the fact that New Jersey makes investment decisions about the money in the CMF. Third, the control that New Jersey exercises over NJT's money is identical to the control It has over the county, city, and school district funds in the CMF. Yet, as noted above, it is clear that those entities are subject to suit in federal court.
Finally, the fact that NJT does not segregate its accounts is not a reason to accord it sovereign immunity. The commingling of the funds does not affect New Jersey's obligation (or rather non-obligation) to replace the money that NJT spends. Nor does it indicate any greater control by New Jersey of the money in the accounts. Furthermore, the bulk of the funds in the account were provided by non-state sources; payments from the fund up to the amount received from other sources (plus interest) can be considered as coming from monies that NJT obtained from the other sources, and thus do not fall under the rubric of state-provided funds. And, in any case, in light of the discussion above, see supra pp. 4-5, even if some of the money that pays the judgments came from state appropriations, that does not entitle NJT to sovereign immunity.
Therefore, with respect to the funding issue, unlike the majority, I find this case to be indistinguishable from Kovats. Both Rutgers and NJT were created by statute to serve a public purpose, and both receive significant funding from the state. But in neither case has New Jersey obligated itself to pay the entity's debts. Thus judgments against both Rutgers and NJT would be paid out of their own funds, rather than the public fisc. Furthermore, both Rutgers and NJT can turn to sources besides state appropriations to meet shortfalls, and NJT also has insurance to help offset its losses. Finally, neither the fact that NJT may invest its funds in the CMF, nor the fact that it does not segregate the funds it gets from state appropriations, provides a meaningful distinction between NJT and Rutgers. Just as it did in Kovats, the funding factor here weighs strongly against NJT's claim that it is entitled to immunity from suit in federal court.
II. STATUS UNDER STATE LAW
The second basic Urbano question is whether state law treats an agency as independent, or as a part of the state. NJT's capacity to sue and its immunities from state taxation are best considered as part of this inquiry because they help provide a complete picture of New Jersey's treatment of NJT. New Jersey law on the area is checkered; some factors counsel toward according NJT sovereign immunity, while others counsel against. Because NJT's status under New Jersey law is uncertain, the analysis of this factor does not significantly help in determining whether NJT is entitled to immunity from suit in federal court. Cf. Kovats, 822 F.2d at 1310 (finding Rutgers' status under New Jersey law to be too indeterminate to aid in the sovereign immunity inquiry).
There is some indication that New Jersey law considers NJT to be an arm of the state. New Jersey law declares that NJT was created to serve a "public purpose." N.J. Stat. Ann. § 27:25-1. More importantly, NJT is subject to the New Jersey Tort Claims Act, Transport of New Jersey v. Matos, 202 N.J. Super. 571, 573, 495 A.2d 503, 505 (1985); is immune from state property tax,*fn6 N.J. Stat. Ann. § 27:25-16; has the power of eminent domain,*fn7 id. at § 27:25-13(a) and (c); and is subject to the strictures of the state administrative procedure act, id. at § 27:25-5(e). Further, as the majority notes, the Superior Court of New Jersey has twice declared NJT to be a "public" entity, albeit never in the context of sovereign immunity. See Majority Opinion, Typescript at 27-28.
On the other hand, New Jersey has given power to NJT in two spheres that Urbano identified as indicative that an agency is not entitled to sovereign immunity. New Jersey has accorded NJT a separate corporate existence, N.J. Stat. Ann. § 27:25-4(a), and has given NJT the ability to sue and be sued in its own right. Id. at § 27:25-5(a). Furthermore, New Jersey law allows NJT to enter into contracts on its own behalf, id. at § § 27:25-5(r) and (v), and purchase land, stock, equipment, and personal property. Id. at § § 27:25-13, 25-5(u), 25-10, and 255(j). Moreover, the New Jersey Supreme Court has held that the University of Medicine and Dentistry of New Jersey, a state university created by statutes similar to the ones that created NJT, is not entitled to eleventh amendment immunity. See Fuchilla v. Layman, 109 N.J. 319, 537 A.2d 652 (1988). This evinces some reluctance on the part of the New Jersey courts to accord immunity to agencies whose status under New Jersey statutes is ambiguous.
If characterization by state law were the only factor to be analyzed in the sovereign immunity inquiry, the proper conclusion would be difficult to draw. On balance, however, the "status under state law" factors seem to tilt slightly in favor of the majority's conclusion that NJTRO is entitled to sovereign immunity.
Turning to the final Urbano consideration, the degree of NJT's autonomy from the state, I conclude that, in terms of autonomy, NJT lies somewhere between Rutgers and the Port Authority of New York and New Jersey -- an agency which this Court declared to be entitled to eleventh amendment immunity. See Port Authority Police Benevolent Association v. Port Authority of New York and New Jersey, 819 F.2d 413 (3d Cir.), cert. denied, 108 S. Ct. 344 (1987).
In favor of its autonomy, NJT is governed by its own board of directors and is "independent of any supervision or control by the department [of transportation] or any body or officer thereof." N.J. Stat. Ann. § 27:25-4(a) and (b). Moreover, the board has significant powers. Among other things, it can cause the corporation to enter contracts, bring lawsuits, purchase and sell property, buy insurance, structure the corporation's internal management, and set and collect fares. See N.J. Stat. Ann. 27:25-5. Furthermore, only the board can initiate action by NJT. The Governor and other members of New Jersey's executive branch have no such authority.
On the other hand, as the majority points out, three out of seven of the board members are required to be members of the executive branch, and the Governor has veto power over the board's actions. N.J. Stat. Ann. § 27:25-4. I agree with the majority that this distinguishes this case from Kovats. But this case is also distinguishable from cases in which agencies were found to be alter egos of the state. In Port Authority, for example, in addition to being subject to gubernatorial veto, the agency could not embark on new projects without the authorization of both the New York and New Jersey legislatures. 819 F.2d at 417. NJT falls between the cracks of the prior cases. Although not "highly autonomous" like Rutgers, NJT is significantly autonomous. Since the degree of control by the governor is fairly substantial, in the end I think that this factor counsels in favor of according immunity to NJT, but only with modest force.
IV. STRIKING THE BALANCE
Since 1890, the eleventh amendment has been construed to entitle states to immunity from suit in federal court. Hans v. Louisiana, 134 U.S. 1 (1890). The amendment is intended to provide a partial solution to "the problems of federalism inherent in making one sovereign appear against its will in the courts of the other." Employees of the Department of Public Health and Welfare v. Missouri, 411 U.S. 279, 294 (1973) (Marshall, J. concurring). The amendment's general purpose is to foster the states' autonomy. See Pennhurst State School and Hospital v. Halderman, 465 U.S. 89, 101 n.11. (1984). This court has attempted to effectuate the amendment's purpose by application of the factors listed in Urbano. In this case, the most important Urbano factor -- whether the judgment would be paid by state funds -- provides extremely strong indication that NJT is not the alter ego of New Jersey. Other factors -- NJT's treatment under state law, and its degree of autonomy -- provide only weak support for the conclusion that NJT is New Jersey's alter ego.
On balance, therefore, I believe the correct conclusion is that NJT is not the alter ego of New Jersey, and thus that its subsidiary, NJTRO is not entitled to eleventh amendment immunity.*fn8 This conclusion is consistent with my understanding of the eleventh amendment's central goal of fostering the states' autonomy. I would therefore reverse the judgment of the district court and remand the case for pretrial proceedings and trial.