United States District Court, M.D. Pennsylvania
Christopher C. Conner, Chief Judge
Pennsylvania Higher Education Assistance Agency
("PHEAA") commenced this action against the
collective defendants in the Commonwealth Court of
Pennsylvania. Before the court is PHEAA's motion (Doc.
22) to remand pursuant to 28 U.S.C. § 1447(c). PHEAA
maintains that it is an "arm of the state" rather
than a citizen thereof, divesting this court of diversity
jurisdiction. For the reasons that follow, the court will
deny PHEAA's motion.
Factual Background & Procedural History
is a servicer of student loans established by and organized
under the laws of the Commonwealth. See 24 Pa. Stat.
& Cons. Stat. Ann. § 5101 et seq.; (see
also Doc. 1 ¶ 4). On August 2, 2016, PHEAA filed a
complaint in the Commonwealth Court of Pennsylvania. (Doc. 1
¶ 1; Doc. 1-2 at 3-25). Therein, PHEAA advances state
law claims for breach of contract, tortious interference with
contract, and fraudulent inducement against the collective
defendants. (Doc. 1 ¶ 2; see also Doc.
1-2 at 3-25). Defendants removed the case to this court
pursuant to 28 U.S.C. § 1441 on September 2, 2016. (Doc.
1). Defendants assert that the parties are citizens of
different states and that the amount in controversy exceeds
$75, 000, satisfying the desiderata for diversity
jurisdiction under 28 U.S.C. § 1332(a). (Id.
timely moved to remand. (Doc. 22). PHEAA submits that it is
not a "citizen" of Pennsylvania as contemplated by
the diversity jurisdiction statute but rather "an arm
... of the Commonwealth, " such that the court must
remand for lack of jurisdiction. (Id. ¶¶
11-14). PHEAA requests attorney fees and costs in connection
with its motion pursuant to 28 U.S.C. § 1447(c).
(Id. ¶¶ 15-16). The motion is fully
briefed and ripe for disposition.
28 U.S.C. § 1441, a defendant may remove an action
brought in state court to federal district court when the
claims fall within the federal court's original
jurisdiction. See 28 U.S.C. § 1441(a). A
plaintiff may challenge removal for lack of jurisdiction by
moving to remand the matter to state court. See id.
§ 1447(c). Such motions may be filed at any time before
final judgment is entered. Id. If the district court
indeed lacks subject matter jurisdiction, it must remand to
the state court from which the action was removed.
Id. Statutes permitting removal "are to be
strictly construed against removal and all doubts should be
resolved in favor of remand." Boyer v. Snap-On Tools
Corp., 913 F.2d 108, 111 (3d Cir. 1990) (quoting
Steel Valley Auth. v. Union Switch & Signal
Div., 809 F.2d 1006, 1010 (3d Cir. 1987)).
party asserting jurisdiction, defendants bear the burden of
proving that the matter is properly before the federal court.
See Frederico v. Home Depot, 507 F.3d 188, 193 (3d
Cir. 2007) (citations omitted); Steel Valley Auth,
809 F.2d at 1010 (citing Abels v. State Farm Fire &
Cas. Co., 770 F.2d 26, 29 (3d Cir. 1985)). In order to
invoke diversity jurisdiction, defendants must establish that
the matter is between citizens of different states and that
the amount in controversy, exclusive of interest and costs,
exceeds $75, 000. See 28 U.S.C. § 1332(a).
is well-settled that an agency which is "a mere arm of
the State" is not a "citizen" of that state
for diversity jurisdiction purposes. See Moor v. Cty. of
Alameda, 411 U.S. 693, 717-19 (1973). PHEAA attempts to
invoke this principle in its instant motion to remand.
(See Doc. 22). PHEAA contends that it is an arm of
the Commonwealth of Pennsylvania and, ipso jure,
cannot qualify as a "citizen" of the state.
(Id. ¶¶ 11-12; Doc. 26 at 3-21).
rejoin that the doctrine of collateral estoppel, also known
as issue preclusion, forestalls PHEAA's argument. (Doc.
30 at 4-14). Defendants aver that PHEAA has previously
litigated and lost the arm-of-the-state argument raised
sub judice. (Id.) This averment is correct.
Federal courts have thrice rebuffed PHEAA's theory.
First, in United States ex rel. Oberg v.
PHEAA ("Oberg III"), the Fourth
Circuit Court of Appeals applied its Eleventh Amendment
arm-of-the-state jurisprudence to assess PHEAA's status
as an agent of the state under the False Claims Act, 31
U.S.C. § 3729. See Oberg III, 804 F.3d 646,
650-77 (4th Cir. 2015), cert, denied, 137 S.Ct. 617
(2017). Following exhaustive review of a massive factual
record, the court held that PHEAA is an independent political
subdivision, not an arm of the Commonwealth. Id. at
677. Second, in Pele v. PHEAA, the Fourth
Circuit determined that Oberg III applies with equal
force to the agency's claim to Eleventh Amendment
immunity under the Fair Credit Reporting Act, 15 U.S.C.
§ 1681 et seq. Pele, 628 F.App'x 870, 872
(4th Cir. 2015) (per curiam). And third, in
Lang v. PHEAA, our colleague, Judge John E.
Jones III, concluded that Oberg III
collaterally estops PHEAA from raising an arm-of-the-state
immunity defense under the Fair Labor Standards Act, 29
U.S.C. § 201 et seq. See Lang, 201 F.Supp.3d
613, 620-28 (M.D. Pa. 2016).
contend that this jurisprudential triptych precludes
PHEAA's present argument in two ways. Defendants first
assert that Lang estops this court from revisiting
the preclusive effect of Oberg III. (See
Doc. 30 at 7-8). Defendants alternatively assert that
Oberg III independently precludes PHEAA's
jurisdictional challenge. (See id. at 9-14). Assuming
arguendo that the court declines to apply collateral
estoppel, defendants separately maintain that PHEAA cannot
establish itself as an arm of the Commonwealth. (See
id. at 14-24). We begin by considering the preclusive
effect of Lang itself.
Third Circuit Court of Appeals applies the Restatement
(Second) of Judgments to determine the preclusive effect of
prior federal rulings. See Nat'l R.R. Passenger Corp.
v. Pa. Pub. Util. Comm'n, 288 F.3d 519, 525 (3d Cir.
2002) (quoting Restatement (Second) OF Judgments § 27
(Am. Law Inst. 1980)). Per the Restatement: "When an
issue of fact or law is actually litigated and determined by
a valid and final judgment, and the determination is
essential to the judgment, the determination is conclusive in
a subsequent action between the parties, whether on the same
or a different claim." RESTATEMENT (SECOND) OF JUDGMENTS
factors are prerequisite to application of collateral
estoppel: (1) the issue subjudice must be "the
same" as that involved in the antecedent action; (2) the
issue must have been "actually litigated" in that
action; (3) the issue must have been resolved by a
"valid and final judgment"; and (4) the issue must
have been "essential" to that judgment.
Nat'l R.R. Passenger Corp., 288 F.3d at 525
(quoting Burlington N. R.R. Co. v. Hyundai Merchant
Marine, 63 F.3d 1227, 1231-32 (3d Cir. 1995)). These
factors, in combination, ensure that the party against whom
estoppel is wielded has had a "full and fair"
opportunity to litigate the issue. See Peloro v. United
States, 488 F.3d 163, 175 (3d Cir. 2007) (quoting
Parklane Hosiery Co. v. Shore, 439 U.S. 322, 332,