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Maliandi v. Montclair State University

United States Court of Appeals, Third Circuit

December 27, 2016


          Argued: April 4, 2016

         On Appeal from the United States District Court for the District of New Jersey (D.C. No. 2-14-cv-01398) District Judge: Honorable Stanley R. Chesler

          Jennifer J. McGruther, Esq. (Argued) Office of Attorney General of New Jersey Counsel for Appellant

          Michael R. DiChiara, Esq. (Argued) Krakower DiChiara Counsel for Appellee

          Before: AMBRO, KRAUSE, Circuit Judges, and THOMPSON, [*] District Judge


          KRAUSE, Circuit Judge.

         Our federalist system of government accords respect for the sovereignty of the States in a variety of ways, including the Eleventh Amendment to the United States Constitution, which immunizes States from suits brought in federal court by both their own citizens and citizens of other States. The Eleventh Amendment's protection, however, is not limited to the States alone, but rather extends to entities that function as "arms of the State." In this case, we are asked to resolve a split among the district courts in our Circuit as to whether Montclair State University ("MSU") is an arm of the State of New Jersey, which would render it immune from the discrimination suit brought by Appellee Paula Maliandi. Applying the balancing test we have developed to make such determinations, we conclude that, while a close case, MSU is an arm of the State, thus affording it access to the refuge of the Eleventh Amendment. Accordingly, we will reverse the decision of the District Court and remand for proceedings consistent with this opinion.

         I. Background

         According to her complaint, Paula Maliandi began working for MSU in November 2007 and took medical leave for breast cancer treatment in early 2013. Despite having complied with all pertinent policies and procedures for taking such leave, Maliandi allegedly was denied her original position when she returned and instead was offered an inferior position, which she declined. She was subsequently terminated. Maliandi then filed suit against MSU for wrongful termination, seeking money damages and equitable relief under both federal and state law. Maliandi's federal claim arises under the Family Medical Leave Act ("FMLA") for termination on account of a "serious [health] condition." While she does not cite a specific provision in her complaint, it would appear her claim is rooted in the so-called "self-care provision, " 29 U.S.C. § 2612(a)(1)(D), and its corresponding retaliation provision, 29 U.S.C. § 2614(a). Together, these provisions entitle a qualifying employee to twelve weeks of leave for a "serious health condition" and require an employer to restore an employee who took leave under § 2612 to her prior position or an equivalent one upon her return. Maliandi's state law claim arises under the New Jersey Law Against Discrimination ("NJLAD"), N.J. Stat. Ann. §§ 10:5-1 to -49, which, among other things, prohibits discrimination on account of a disability or handicap.

         MSU moved to dismiss Maliandi's complaint under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction based on its contention that, as an arm of the State, it is owed Eleventh Amendment immunity from suit in federal court.[1] The District Court denied the motion, determining that MSU is not the State's alter ego and, in turn, concluding that MSU is subject to suit in federal court for both the federal and state law claims.[2] MSU appeals.

         The District Court had jurisdiction under 28 U.S.C. § 1331 to adjudicate Maliandi's FMLA claim and under 28 U.S.C. § 1367 to consider her associated state law claim. The District Court's order denying MSU's 12(b)(1) motion to dismiss on Eleventh Amendment immunity grounds is immediately appealable under the collateral order doctrine, imbuing us with jurisdiction under 28 U.S.C. § 1291. Cooper v. Se. Pa. Transp. Auth., 548 F.3d 296, 298 (3d Cir. 2008) (citing P.R. Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 144-45 (1993)). We consider whether MSU is owed Eleventh Amendment immunity de novo; as "the party asserting immunity, " MSU "bears the burden of production and persuasion." Febres v. Camden Bd. of Educ., 445 F.3d 227, 228-29 (3d Cir. 2006).

         II. Discussion

         Our Eleventh Amendment jurisprudence has wound its way through a number of variations-both subtle and significant-over the past decades. To distill the principles that govern our analysis today, we first review the constitutional underpinnings and precedent relevant to the arm of the State inquiry, and we then apply those principles to determine whether MSU qualifies as an arm of the State entitled to immunity.

         A. History and Precedent

         The Eleventh Amendment began as a simple rebuke of the Supreme Court's decision in Chisolm v. Georgia, 2 U.S. 419 (1793), that would have subjected States to suits in federal court and saddled them with the weight of the burgeoning republic's Revolutionary War debts. Hans v. Louisiana, 134 U.S. 1, 10-11 (1890); see also Hess v. Port Auth. Trans-Hudson Corp., 513 U.S. 30, 39 (1994). More than two centuries later, however, it has evolved into a potent tool for States to ensure that States retain their sovereignty and integrity as constituent polities of our national government. Hess, 513 U.S. at 39-40. Thus, the Supreme Court has recognized that the Amendment does not merely shield state treasuries. Instead, it advances two fundamental goals: safeguarding States' dignity and protecting their financial solvency. Id. at 52. And although, by its terms, the Eleventh Amendment only withholds from the federal judiciary the power to decide cases brought against a State by a citizen of another State or a foreign government, U.S. Const. amend. XI, the Court has interpreted it to bar suits against a State by its own citizens-not just those from other jurisdictions. Hans, 134 U.S. at 10-15; see also Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 54 (1996).

         Importantly for this case, the Court also has read the Amendment to bar not only suits against States themselves, but also suits for damages against "arms of the State"- entities that, by their very nature, are so intertwined with the State that any suit against them renders the State the "real, substantial party in interest." Edelman v. Jordan, 415 U.S. 651, 663 (1974) (quoting Ford Motor Co. v. Dep't of Treasury, 323 U.S. 459, 464 (1945)); see also Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 280 (1977) (using the term "arm of the State"); Febres, 445 F.3d at 229.

         Because the Eleventh Amendment provides the States with sweeping immunity from suit, we have been careful to ensure that its reach does not extend beyond proper bounds. Accordingly, we employ a fact-intensive, three-step balancing test to ascertain whether a state-affiliated entity is an "arm of the State" that falls within the ambit of the Eleventh Amendment. Our initial recitation of the test came in Urbano v. Board of Managers, 415 F.2d 247, 250-51 (3d Cir. 1969), cert. denied, 397 U.S. 948 (1970), where we identified nine factors to consider. Two decades later in Fitchik v. New Jersey Transit Rail Operations, Inc., 873 F.2d 655, 659 (3d Cir. 1989) (en banc), we attempted to consolidate those Urbano factors into a more manageable three-factor test that still governs today.

         As explained in more detail below, the Fitchik factors are (1) the funding factor: whether the state treasury is legally responsible for an adverse judgment entered against the alleged arm of the State; (2) the status under state law factor: whether the entity is treated as an arm of the State under state case law and statutes; and (3) the autonomy factor: whether, based largely on the structure of its internal governance, the entity retains significant autonomy from state control. Id. Because, for the most part, we did not disagree with the Urbano factors, [3] but rather organized them under the headings of Fitchik's three factors, the layers of factors, subfactors, and considerations that inform those subfactors can still make an analysis seem dense, if not impenetrable. Moreover, each step of that analysis is a "fact-intensive" undertaking that requires a fresh analysis and "individualized determinations" for each entity claiming Eleventh Amendment immunity. See Bowers v. Nat'l Collegiate Athletic Ass'n, 475 F.3d 524, 546 (3d Cir. 2007).

         After identifying the direction in which each factor points, we balance them to determine whether an entity amounts to an arm of the State. Fitchik, 873 F.2d at 664; see also Cooper, 548 F.3d at 311. While our jurisprudence had long afforded the first factor-state funding-more weight than the others, see Fitchik, 655 F.2d at 664, we recalibrated the factors in light of the Supreme Court's observation in Regents of the University of California v. Doe, 519 U.S. 425, 431 (1997), that an Eleventh Amendment inquiry should not be a "formalistic question of ultimate financial liability." We now treat all three Fitchik factors as co-equals, Benn v. First Judicial Dist. of Pa., 426 F.3d 233, 239-40 (3d Cir. 2005), with the funding factor breaking the tie in a close case, see Febres, 445 F.3d at 229-30 (citing Hess, 513 U.S. at 47-48, 52).

         We have had many occasions to apply the Fitchik (and, earlier, Urbano) factors, ruling on the Eleventh Amendment status of entities ranging from school boards to public transit authorities to state-affiliated institutions of higher learning. Of particular relevance to this case are our decisions concerning the Pennsylvania State College System, Rutgers University, and the University of Iowa. In 1976, we ruled en banc that Pennsylvania's Bloomsburg State College was an arm of the State, Skehan v. Bd. of Trs. of Bloomsburg State Coll., 538 F.2d 53, 62 (3d Cir.) (en banc) (Skehan I), cert. denied, 429 U.S. 979 (1976), though our opinion there never mentioned, much less applied, Urbano. We later concluded, under the Urbano rubric, that the Eleventh Amendment also shields Pennsylvania's State System of Higher Education. Skehan v. State Sys. of Higher Educ., 815 F.2d 244, 249 (3d Cir. 1987) (Skehan II). That same year, we concluded in Kovats v. Rutgers, The State University, 822 F.2d 1303 (3d Cir. 1987), that Rutgers-a New Jersey public university that was initially chartered as a private institution-was not an arm of the State under our Urbano framework. Then in 2007, we considered the status of the University of Iowa in Bowers and determined that, under Fitchik, it was an arm of the State on account of two of the three factors supporting immunity. See Bowers, 475 F.3d at 549.

         These cases provide guidance as we consider MSU and are "helpful in terms of analytic models, " but they ultimately do not "govern our decision as to [MSU] because 'each state university exists in a unique governmental context, and each must be considered on the basis of its own peculiar circumstances'"-including the specific statutes at play and the practical reality of the institution's autonomy. Kovats, 822 F.2d at 1312 (quoting Soni v. Bd. of Trs. of the Univ. of Tenn., 513 F.2d 347, 352 (6th Cir. 1975)).[4]

         The case law from our Sister Circuits is also illuminating. As MSU points out, they have almost uniformly concluded that state-affiliated universities are arms of their respective States. See, e.g., Kreipke v. Wayne State Univ., 807 F.3d 768 (6th Cir. 2015), cert. docketed, No. 15-1419 (May 23, 2016); Irizarry-Mora v. Univ. of P.R., 647 F.3d 9 (1st Cir. 2011); Md. Stadium Auth. v. Ellerbe Becket Inc., 407 F.3d 255, 262 (4th Cir. 2005) (collecting cases for proposition that state universities are "[a]lmost universally" found to be arms of the State); Watson v. Univ. of Utah Med. Ctr., 75 F.3d 569, 575 (10th Cir. 1996) (collecting cases for the proposition that the Tenth Circuit has "consistently found state universities are arms of the state"); Kashani v. Purdue Univ., 813 F.2d 843, 845 (7th Cir.), cert. denied, 484 U.S. 846 (1987) ("The vast majority of cases considering the issue have found state universities to be forfended by the Eleventh Amendment."); id. ("[While] [t]here are district court opinions to the contrary[, ] . . . it would be an usual state university that would not receive immunity."); Hall v. Med. Coll. of Ohio at Toledo, 742 F.2d 299, 301-02 (6th Cir. 1984), cert. denied, 469 U.S. 1113 (1985) (collecting cases for the proposition that "[t]he great majority of cases addressing the question of Eleventh Amendment immunity for public colleges and universities have found such institutions to be arms of their respective state governments and thus immune from suit").

         As we proceed with our own analysis, we are mindful of the near unanimity among the Courts of Appeals that the factors relevant to an Eleventh Amendment inquiry typically favor immunity in the state college setting. However, because the particulars of our Fitchik test differ from analogous tests in other Circuits and because each entity seeking immunity warrants an individualized analysis, these cases do not dictate the answer to the question of first impression with which we are presented today.

         That question has bedeviled district judges in our Circuit, who are divided in their application of the Fitchik test to MSU. Compare Maliandi v. Montclair State Univ., C.A. No. 14-01398 (SRC), 2014 WL 3778259 (D.N.J. July 31, 2014) (not published) (concluding MSU is not an arm of the State), and Ventura v. Montclair State Univ., C.A. No. 08-5792 (SRC), 2011 WL 550720 (D.N.J. Feb. 9, 2011) (not published) (same), with Sarmiento v. Montclair State Univ., C.A. No. 04-cv-4176, letter op. (D.N.J. Mar. 31, 2005) (concluding MSU is an arm of the State).[5] We now resolve this dispute by concluding that MSU is an arm of the State, and in the process, we seek to synthesize our jurisprudence regarding the Fitchik factors for the benefit of district courts in future Eleventh Amendment cases.

         B. Fitchik Analysis for MSU

         After undertaking our own analysis of MSU's Eleventh Amendment immunity, we cannot agree with the District Court's determination that all three Fitchik factors counsel against immunity. For the reasons set forth below, we conclude that the funding factor counsels against immunity, but that the status under state law and autonomy factors-while close-tilt in favor of extending MSU immunity from suit. On balance, because two of the three co- equal factors support MSU's claim for immunity, we hold that MSU is an arm of the State that enjoys the protections afforded by the Eleventh Amendment.

         1. The Funding Factor

         The funding factor, also called the "state-treasury criterion, " Febres, 445 F.3d at 232 & n.4, hinges on "[w]hether the money that would pay [a] judgment [against the entity] would come from the state, " Fitchik, 873 F.2d at 659. We consider three subfactors: (1) a State's legal obligation to pay a money judgment entered against the alleged arm of the State; (2) alternative sources of funding (i.e., monies not appropriated by the State) from which the entity could pay such judgments; and (3) specific statutory provisions that immunize the State from liability for money judgments. Id.; see also Cooper, 548 F.3d at 302-06.

         i. The State's Legal Obligation to Pay Money Judgments

         The Supreme Court has made clear in the years since Fitchik that we must focus our Eleventh Amendment inquiry not on a mechanical analysis of whether a State will ultimately pay a judgment, but rather "the crux of the state-treasury criterion [is] whether the state treasury is legally responsible for the payment of a judgment against the [alleged arm of the State]." Febres, 445 F.3d at 233; id. at 236 ("The absence of any legal obligation on the part of New Jersey to provide funds in response to an adverse judgment . . . is a compelling indicator that the state-treasury criterion . . . weighs against immunity."); accord Bowers, 475 F.3d at 546-47 (citing Doe, 519 U.S. at 431). Specifically, the Supreme Court has characterized the operative question as "whether a money judgment against a state instrumentality or official would be enforceable against the State, " Doe, 519 U.S. at 430, meaning that if a State only voluntarily indemnifies an entity, the funding factor is unlikely to tip in favor of immunity, despite the practical reality that the State foots the bill for a money judgment, Bowers, 475 F.3d at 547.[6]

         Rather than identify a legally enforceable obligation on the part of the State to pay money judgments entered against it, MSU relies largely on the argument that such money judgments would indirectly affect the state treasury because "the University financial statements are included in the State's annual financial accounting." Appellant's Br. 27-28. MSU's primary argument thus appears to be that this reporting requirement would cause New Jersey to increase appropriations to cover losses that result from money judgments entered against the university. Maliandi, 2014 WL 3778259, at *2.

         We have consistently rejected the argument that a State's voluntary choice to pay a state-affiliated entity's liabilities-even if that choice might be a foregone conclusion because of the State's desire to keep the entity afloat-favors Eleventh Amendment immunity. E.g., Bowers, 475 F.3d at 547; Febres, 445 F.3d at 236; Bolden v. Se. Pa. Transp. Auth., 953 F.2d 807, 819 (3d Cir. 1991) (en banc); Fitchik, 873 F.2d at 661; Kovats, 822 F.2d at 1309. Instead, in conformance with Doe, we have made clear that "practical or indirect financial effects of a judgment may enter a court's calculus, but rarely have significant bearing on a determination of an entity's status as an arm of the state"; rather, "[a] state's legal liability (or lack thereof) for an entity's debts merits far greater weight, and is therefore the key factor in our assessment of" the funding factor.[7] Febres, 445 F.3d at 236. MSU's indirect effects argument is therefore unavailing.

         MSU does not argue that judgments against it would have a direct effect on the state treasury-and with good reason. We have identified only two exceptions to the rule that New Jersey law imposes no all-encompassing legal obligation on the part of the State to pay judgments entered against MSU. First, N.J. Stat. Ann. § 18A:3B-6(h) allows state colleges to elect to have the Attorney General represent them in suits brought under the New Jersey Tort Claims Act (the "Tort Claims Act"), id. §§ 59:1-1 to:12-3, in which case the State is obligated to indemnify a college (or its employees) for any resulting judgment. See also id. §§ 59:10-1 to -10.[8] Second, the New Jersey Contractual Liability Act (the "Contractual Liability Act"), id. ยงยง 59:13-1 to ...

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