Appeal from the Order of the Commonwealth Court entered on August 10, 2009 at No. 250 C.D. 2009, reversing the Order entered on December 24, 2008 in the Court of Common Pleas, Philadelphia County, Civil Division, at No. 3034 January Term 2006, No. 3576 October Term 2006 and No. 3088 October Term 2006 Appeal from the Order of the Commonwealth Court entered on August 10, 2009 at No. 248 C.D. 2009, affirming the Order entered on January 8, 2009 in the Court of Common Pleas, Philadelphia County, Civil Division, at No. 03514 November Term 2004
The opinion of the court was delivered by: Madame Justice Todd
CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, ORIE MELVIN, JJ.
Argued: September 14, 2011
Argued: September 14, 2011
In this appeal, our Court granted review to determine whether Appellee, the Southeastern Pennsylvania Transportation Authority ("SEPTA"), may be considered an "arm" of the Commonwealth of Pennsylvania which, under the Eleventh Amendment to the United States Constitution, would confer upon SEPTA sovereign immunity from lawsuits brought by injured employees of its Regional Rail Division under the Federal Employees Liability Act ("FELA") 45 U.S.C. §§ 51-60.*fn1 After careful review, we conclude SEPTA cannot be deemed an "arm" of the Commonwealth and, thus, is not entitled to sovereign immunity from such suits under the Eleventh Amendment. We, therefore, reverse the order of the Commonwealth Court and remand this case to the trial court for further proceedings.
I. Factual Background and Procedural History
Appellants in this matter, Marjorie Goldman, Edmund Wiza, Michael Maguire, and Errol Davis, individually commenced lawsuits against SEPTA in the Court of Common Pleas of Philadelphia asserting that they sustained injuries during the course and scope of their employment with the Regional Rail Division of SEPTA.*fn2 SEPTA, which was created in 1963 by the Metropolitan Transportation Authorities Act ("MTAA"),*fn3 is a regional transportation authority tasked with establishing, developing, and maintaining an integrated mass transit system for the greater Philadelphia metropolitan area. SEPTA principally serves five counties geographically located in southeastern Pennsylvania: Bucks, Chester, Delaware, Montgomery, and Philadelphia, and it provides transportation by bus, trolley, and subway train within those counties. Additionally, it furnishes interstate transportation service between Pennsylvania and the states of Delaware and New Jersey through its Regional Rail Division which operates commuter rail lines traversing all three states.
Employees of SEPTA's Regional Rail Division have been covered by FELA since 1983 when the Regional Rail Division assumed responsibility for providing passenger rail services formerly provided by Conrail.*fn4 Since FELA provides for concurrent jurisdiction between state and federal courts for all actions brought thereunder,*fn5 all four lawsuits in the instant matter sought recovery from SEPTA pursuant to FELA, asserting, inter alia, the negligence of SEPTA in the causation of their respective injuries.
In response to each of the suits brought by Appellants Goldman, Wiza, and Maguire in the Court of Common Pleas of Philadelphia, SEPTA filed a motion for judgment on the pleadings on the basis that it was a state agency immune from suit under the doctrine of sovereign immunity. The cases were consolidated for argument before the Honorable Nitza I. Quinones Alejandro, who denied the motions.
Subsequently, SEPTA filed a motion for summary judgment in these three cases, again averring that it was a state agency, and, also, asserting that it was an instrumentality of the Commonwealth entitled to sovereign immunity under Article 1, § 11 of the Pennsylvania Constitution and 42 Pa.C.S.A. § 2310. SEPTA additionally contended that the Eleventh Amendment to the United States Constitution conferred immunity upon it under certain relevant interpretive decisions of the United States Supreme Court, discussed at greater length infra, as it viewed itself "[a]s the State's arm/alter ego for mass transit." SEPTA Motion for Summary Judgment, 7/31/08, at ¶ 62.
In response, Appellants Goldman, Wiza, and Maguire filed a joint motion for partial summary judgment seeking to dismiss or strike the affirmative immunity defenses SEPTA raised. Appellants averred that SEPTA was not a part of the Commonwealth government, and, thus, was not entitled to assert the sovereign immunity of a state against a suit by a private individual brought under federal law.
At the request of the parties, Judge Alejandro conducted extensive hearings over a three-day period in order to permit the parties to develop an evidentiary record pertaining to issues raised in the motions, such as the manner in which SEPTA was legally structured, conducted its operations, and the means by which those operations were funded Judge Alejandro subsequently denied SEPTA's motion for summary judgment, and granted Appellants' joint motion for partial summary judgment. SEPTA sought to have this order certified for purposes of immediate appeal, and Judge Alejandro granted the motion.
With respect to Appellant Davis' FELA action, also filed in the Court of Common Pleas of Philadelphia, SEPTA filed a motion for summary judgment asserting that SEPTA, as an agency of the Commonwealth, had sovereign immunity under the Pennsylvania Sovereign Immunity Act, 42 Pa.C.S.A. §§ 8501-8527, and, thus, may be sued only if the suit falls within one of the enumerated exceptions set forth in the Act, see id. § 8522. SEPTA contended that the Commonwealth had not waived SEPTA's sovereign immunity, and that since sovereign immunity was recognized as a state's constitutional right, Congress did not have the power, absent such an express waiver, to subject SEPTA to suit under FELA. The matter was assigned to Senior Judge Sheldon Jelin, who denied the motion and scheduled the case for trial.
Prior to trial, SEPTA renewed its motion for summary judgment based on its claim of sovereign immunity. Judge Jelin did not rule on this new motion, and Davis's case proceeded to jury trial, after which the jury returned a verdict in Davis's favor in the amount of $740,000. SEPTA filed post-trial motions which Judge Jelin granted in part, and he awarded SEPTA a new trial. Judge Jelin dismissed SEPTA's renewed motion for summary judgment as moot. Davis appealed to the Commonwealth Court, which reversed Judge Jelin's order granting a new trial and directed Judge Jelin to address SEPTA's motion for summary judgment on the issue of sovereign immunity. Upon reconsideration, Judge Jelin granted the motion and entered summary judgment in favor of SEPTA. Davis appealed that determination.
Inasmuch as SEPTA's appeal in the Goldman, Wiza, and Maguire matters and Davis' appeal presented the identical question of whether the Commonwealth's sovereign immunity extended to shield SEPTA from FELA claims brought in Pennsylvania courts, the Commonwealth Court consolidated both appeals for consideration. In connection with that consolidated appeal, both Judge Alejandro and Judge Jelin authored opinions pursuant to Pa.R.A.P. 1925(a) explaining their respective rationales for arriving at opposing resolutions of this question.
Judge Alejandro noted that, because Congress enacted FELA pursuant to the Commerce Clause of the United States Constitution, under Seminole Tribe v. Florida, 517 U.S. 44 (1996) (holding that a state's immunity conferred by the Eleventh Amendment may not be overridden by Congress pursuant to its Commerce Clause powers), FELA itself could not and did not abrogate the Commonwealth's Eleventh Amendment immunity; however, she found that, in a later case, Alden v. Maine, 527 U.S. 706 (1999) (holding states have sovereign immunity in their own courts from suits brought by private individuals under federal law), the high Court specified that only states themselves and entities which could be considered arms of the state were entitled to claim such immunity. Thus, she focused on the question of whether SEPTA could be considered an arm of the Commonwealth of Pennsylvania.
In this regard, Judge Alejandro discussed various decisions from our Court and the Commonwealth Court, which reached differing conclusions on the question of SEPTA's status as an agency of the Commonwealth in various cases brought under Pennsylvania law. Judge Alejandro rejected the idea that decisions from our Court recognizing SEPTA's immunity from suit under state law were controlling as to whether SEPTA was subject to the application of FELA, which is a federal statute, since she viewed the applicability of the defense of sovereign immunity to this federal cause of action as governed by federal law.
Judge Alejandro noted that the Third Circuit devised its own multifactor test, which it uses to determine if an entity constitutes an arm of the state such that it is entitled to Eleventh Amendment immunity. This test examines three principal factors to which it accords equal weight: (1) whether the payment of a judgment against the entity would come from the state, (2) the entity's status under state law, and (3) the entity's degree of autonomy. Opinion of Judge Alejandro, 12/24/08, at 17 (quoting Fitchik v. New Jersey Rail Operations, 873 F.2d 655, 659 (3d. Cir. 1989) (determining that "New Jersey Transit," a public corporation which operated commuter passenger rail service, was not the "alter ego" of the state of New Jersey entitling it to Eleventh Amendment immunity) ("the Fitchik test")).
Judge Alejandro found that the Third Circuit twice ruled, after applying the Fitchik test, that SEPTA was not a Commonwealth agency, but, rather, was a political subdivision not entitled to raise the defense of sovereign immunity. See Alejandro Opinion at 17-18 (citing and discussing Bolden v. SEPTA, 953 F.2d 807 (3d. Cir. 1991) (a civil rights action brought in federal court under 42 U.S.C.A. § 1983) and Cooper v. SEPTA, 548 F.3d 296 (3d. Cir. 2008) (a suit brought in federal court under the Fair Labor Standards Act)). Judge Alejandro noted that, in both cases, the Third Circuit concluded SEPTA could not meet the first prong of the Fitchik test, since judgments against SEPTA would not be paid from the Pennsylvania treasury; the second prong weighed only slightly in favor of treating it as an arm of the Commonwealth because SEPTA possessed characteristics of both state and municipal governments; and, finally, SEPTA could not meet the third prong of the test since it enjoyed a large degree of autonomy from the Commonwealth government. Judge Alejandro believed that the rulings in Bolden and Cooper were dispositive in establishing that SEPTA does not have sovereign immunity from actions brought under federal law, and, hence, she concluded that she was "instantly preempted from ruling otherwise."*fn6 Alejandro Opinion at 18. Even so, Judge Alejandro proceeded to conduct her own analysis using the Fitchik test, and she independently concluded that SEPTA was not an arm of the Commonwealth.
In his Rule 1925(a) opinion reaching the opposite conclusion, Judge Jelin considered SEPTA's assertion of sovereign immunity to be based on the Pennsylvania Sovereign Immunity Act and, therefore, not an assertion of immunity under the Eleventh Amendment. Even so, with respect to the Eleventh Amendment question, Judge Jelin, like Judge Alejandro, agreed that the United States Supreme Court had rejected the principle that a federal law by its own terms could override the sovereign immunity of a state, and, in a later case, College Sav. Bank v. Florida Prepaid Post-secondary Educ. Expense Bd., 527 U.S. 666 (1999), also repudiated the doctrine of "constructive waiver," under which a state's mere engagement in an activity after adoption of a federal statute regulating such activity was regarded as the state's implicit waiver of Eleventh Amendment immunity. Thus, Judge Jelin concluded there was no evidence of record to suggest that SEPTA expressly waived its sovereign immunity with respect to suits under FELA, and he regarded the Commonwealth Court's prior opinion remanding the case to have already determined that SEPTA was a "Commonwealth Party" entitled to sovereign immunity under 42 Pa.C.S. § 8521. Additionally Judge Jelin found that Davis had presented no evidence to show that his cause of action fell within any of the exceptions allowing suit against a Commonwealth party provided by 42 Pa.C.S. § 8522(b). For both reasons, Judge Jelin found dismissal of Davis's suit to have been proper.
The Commonwealth Court, in a published en banc opinion authored by Judge Johnny Butler, affirmed Judge Jelin's entry of summary judgment for SEPTA in the Davis case, and reversed Judge Alejandro's denial of SEPTA's motion for summary judgment in the Goldman, Wiza, and Maguire cases. Davis v. SEPTA, 980 A.2d 709 (Pa. Cmwlth. 2009). The Commonwealth Court observed that, under the Supreme Court's decision in Hess v. Port Auth. Trans Hudson Corp., 513 U.S. 30 (1994), as a general matter, agencies of a state do not enjoy immunity under the Eleventh Amendment, "unless there is good reason to believe that the State structured the new agency to enable it to enjoy the special constitutional protection of the State itself." Davis, 980 A.2d at 712 (quoting Hess, 513 U.S. at 43-44, in turn quoting Lake Country Estates Inc. v. Tahoe Regional Planning Agency, 440 U.S. 391, 401 (1979)) (internal quotation marks omitted). To answer this question, the court first looked at SEPTA's organic statute, the aforementioned MTAA, and concluded it "explicitly establishes SEPTA as a Commonwealth party which enjoys the Commonwealth's sovereign immunity." Davis, 980 A.2d at 712. The court cited 74 Pa.C.S.A. § 1711(a), which states that SEPTA "shall exercise the public powers of the Commonwealth as an agency and instrumentality thereof . . . for the purpose of . . . operating . . . and otherwise functioning with respect to a transportation system", and Section 1711(c)(3), which provides it is "the intent of the General Assembly that an authority created or existing under this chapter . . . shall continue to enjoy sovereign and official immunity . . . and shall remain immune from suit [subject to exceptions not relevant herein]."
The court also cited the following factors in support of a finding that SEPTA was structured to enjoy the Commonwealth's sovereign immunity: (1) the critical role that SEPTA plays in providing transportation to residents in the proximate geographic area of the Commonwealth's largest city; (2) SEPTA's right to exercise the power of eminent domain, which the court viewed as indicative of a government function; and (3) the fact that, in fiscal years 2009 and 2010, the Commonwealth provided over 50% of SEPTA's operating and capital budgets. The court additionally noted the Commonwealth Courts' own past decisions which recognized SEPTA as a Commonwealth party entitled to sovereign immunity under Section 8521 of the Pennsylvania Sovereign Immunity Act, 42 Pa.C.S.A. § 8521,*fn7 and it found that FELA claims did not fall within any of the exceptions to the sovereign immunity of Commonwealth parties, enumerated in 42 Pa.C.S. § 8522. For these reasons, the court concluded that SEPTA was immune from FELA claims in Pennsylvania courts. While the court acknowledged the Third Circuit's Cooper decision, it expressed the view that the Third Circuit failed to recognize that SEPTA's enabling statute regarded SEPTA as a Commonwealth agency for purposes of sovereign immunity. Davis, 980 A.2d at 715.
Then Judge, now President Judge Dante Pellegrini dissented. Judge Pellegrini pointed out that, in Hess and in Regents of the Univ. of California v. Doe, 519 U.S. 425 (1997), the high Court established that an important consideration in determining immunity is whether a state would be legally liable for any judgment entered against a lesser entity which it had created. Also, Judge Pellegrini noted that, in Federal Maritime Com'n v. South Carolina Ports Auth., 535 U.S. 743 (2002), the high Court suggested that the Eleventh Amendment's central purpose was to "'accord the states the respect owed to them as joint sovereigns.'" Davis, 980 A.2d at 717 (quoting Federal Maritime, 535 U.S. at 743). *fn8 Judge Pellegrini reasoned that if SEPTA were an "arm of the state," it could share in our Commonwealth's immunity as a sovereign entity under the Eleventh Amendment, but, if it were not, it would continue to be subject to FELA actions.
Because of concurrent jurisdiction over FELA actions between state courts and federal courts, Judge Pellegrini considered it "particularly appropriate to examine how the Third Circuit confers Eleventh Amendment immunity on SEPTA," reasoning that "[i]f we are at odds with the Third Circuit, the net result will be that plaintiffs will bring their actions in federal court." Davis, 980 A.2d at 717. He noted that the Third Circuit in both Bolden and Cooper applied its three-factor Fitchik "arm of the state" test and determined that SEPTA is not an arm of the Commonwealth. He pointed out that the Third Circuit regarded the factor on which the majority most relied - the designation by the legislature of SEPTA as an agency covered by the Pennsylvania Sovereign Immunity Act - to be "significant but not dispositive," on the grounds that a state legislature cannot confer Eleventh Amendment immunity on any entity simply by declaring the entity immune from suit. Davis, 980 A.2d at 719. Judge Pellegrini also observed that, in Cooper, the Third Circuit found that, despite the receipt by SEPTA of state funding, SEPTA retained autonomy because the Commonwealth had no means of dictating the outcome of decisions made by the SEPTA board of directors (the "SEPTA Board"), and, further, that other entities which depend on state governments for conditional funding, e.g., political subdivisions, are not deemed to be arms of the state simply because of receipt of that funding. Judge Pellegrini expressed his agreement with the Third Circuit's application of the Fitchik test, and, thus, endorsed its conclusion that SEPTA was not entitled to Eleventh Amendment immunity.
We granted Appellants' petition for allowance of appeal to consider the following questions, as stated by Appellants:
1. Whether the Commonwealth Court in a case of first impression-for the first time in SEPTA's 46 years existence-incorrectly held, because the court failed to follow the United States Supreme Court's mandated "arm of the state" jurisprudence, that SEPTA is not obligated to comply with federal laws, stripping SEPTA employees of the rights and protections railroad employees have enjoyed for a century under the Federal Employers' Liability Act.
2. Whether the Commonwealth Court's decision should be reversed because the decision (a) ignores the United States Supreme Court's mandate in Lake Count[r]y and Hess that sovereign immunity must be determined based upon a detailed analysis of several specific factors against which to determine an entity's nature and structure and (b) was only based on the state legislature's label of SEPTA as a "Commonwealth Agency and Instrumentality," and the Commonwealth's partial voluntary funding of SEPTA. Goldman v. SEPTA, 608 Pa. 138, 10 A.3d 898 (2010) (order).*fn9
We begin with a review of the arguments advanced by the parties. Appellants observe that our Court has always recognized that authorities and agencies are distinct legal entities and, thus, cannot automatically be considered extensions of the Commonwealth. Appellants' Brief at 14 (citing In re Acquisition of Water System in White Oak Boro, 372 Pa. 424, 427, 93 A.2d 437, 438 (1953) ("Authorities . . . have no original or inherent or fundamental powers of sovereignty or of legislation; they have only the power and authority granted them by enabling statutory legislation."); Tork Hiis v. Commonwealth, 558 Pa. 170, 177, 735 A.2d 1256, 1259 (1999) ("The commonwealth and its agencies are distinct legal entities.")). Appellants contend that the United States Supreme Court established that the question of whether a particular entity may be considered an arm of the state entitled to immunity from suits in their own courts is a question of federal law, and rejected the notion that this determination can rely solely on a state's designation.
Appellants note that Bolden established that the Commonwealth's designation of SEPTA as an instrumentality and agency of the Commonwealth was not, by itself, dispositive of the question of whether SEPTA was an arm of the Commonwealth since it would allow a state legislature to freely exempt all manner of lesser government entities from federal suit. Further, Appellants assert that following this analysis would be contrary to the principle that the will of the people as expressed through Congressional legislative enactments may not be thwarted by state legislation alone, since that would serve to remove a state's populace from the protections provided to them by Congress.
Appellants argue that, in undertaking the Lake Country inquiry to determine whether the state structured an agency to enjoy its Eleventh Amendment immunity, relevant factors in addition to the characterization of the entity in its enabling legislation which created the entity should be examined, such as: how the entity operates; who appoints its governing Board; whether the state can veto the Board action; where the Board members reside; whether the Board's actions are local or statewide in scope; whether state law decisions affect the Board's operation; and whether the state is legally obligated to either fund the entity or pay the debts of the entity. Appellants proffer that all of these factors are incorporated into the Third Circuit's three-part Fitchik test which it applied in Bolden and Cooper to hold that SEPTA is not an arm of the state. Appellants also assail the decision of the Commonwealth Court as fundamentally flawed since it did not examine all relevant factors under Lake Country and Hess, but, rather, focused exclusively on SEPTA's designation in its enabling statute as a Commonwealth instrumentality.
Appellants assert that the following additional factors support the conclusion that SEPTA is not an arm of the Commonwealth of Pennsylvania:
Neither former Governor Rendell, nor Governor Corbett list
SEPTA in their budgets as a Commonwealth ...