Summary
In Straabe v. Yupiit School District, 1999 WL 33456490 (D.Alaska 1999), the district court held that a school district that was a Regional Education Attendance Area was an arm of the State because, whether or not the State accepted any responsibility for satisfying the Area's judgments, it would in fact pay such a judgment.
Summary of this case from Holz v. Nenana City Public School DistrictOpinion
Case No. A97-270 CV (JWS)
February 26, 1999
I. MOTIONS PRESENTED
At docket 14, defendants Yupiit School District and Yupiit School District Regional Board of Education (hereafter collectively referred to as "Yupiit") move for summary judgment. The motion is opposed at docket 26 by plaintiffs Reid and Millie Straabe, who cross-move for summary judgment on their contract claims. Oral argument was held February 18, 1999.
Plaintiffs have named the Board as a separate defendant, but have not named any of the individual Board members as defendants. The court cannot see, and no party suggests, any principled distinction between the District and the Board as an entity for Eleventh Amendment purposes. Of course, matters would be very different for Eleventh Amendment purposes if plaintiffs had sued individual Board members.
II. BACKGROUND
This is an employment dispute alleging breach of contract and civil rights violations. The principal issue is whether Yupiit is entitled to assert Eleventh Amendment immunity.
III. STANDARD OF REVIEW
Rule 56 of the Federal Rules of Civil Procedure provides that summary judgment should be granted if there is no genuine dispute as to material facts and if the moving party is entitled to judgment as a matter of law. The moving party has the burden of showing that there is no genuine dispute as to material fact. The moving party need not present evidence; it need only point out the lack of any genuine dispute as to material fact. Once the moving party has met this burden, the nonmoving party must set forth evidence of specific facts showing the existence of a genuine issue for trial. All evidence presented by the nonmovant must be believed for purposes of summary judgment and all justifiable inferences must be drawn in favor of the nonmovant. However, the nonmoving party may not rest upon mere allegations or denials, but must show that there is sufficient evidence supporting the claimed factual dispute to require a fact-finder to resolve the parties' differing versions of the truth at trial.
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
Id. at 323-325.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-9 (1986).
Id. at 255.
Id. at 248-9.
IV. DISCUSSION
Yupiit's ability to assert Eleventh Amendment immunity depends on whether it is an arm of the state. The Ninth Circuit uses a five-factor test to determine whether an entity is an arm of the state: (1) whether state funds would satisfy a money judgment; (2) whether central government functions are performed; (3) whether it may sue or be sued; (4) whether the entity holds property in its name or in the state's name; and (5) the entity's corporate status. To determine how these factors should be applied, the court examines how state law treats the organization. Of these five factors, the most important is the first.1. Whether State Funds Would Satisfy A Money Judgment
The Yupiit School District ("YSD") is a Regional Education Attendance Area ("REAA"). The Yupiit School District Regional Board of Education ("Board") is YSD's governing body. There is no direct authority on point regarding whether state funds would be used to satisfy a money judgment against an REAA or Regional Board, but it is undisputed that the state provides significant funding for REAA's. State law provides that "[t]he legislature shall provide the state money necessary to maintain and operate the regional educational attendance areas." Public school funding is received pursuant to a state-calculated formula. Yupiit has no authority to generate independent revenue through taxation because the Alaska Constitution only permits the state to delegate taxing powers to organized boroughs and cities. REAA's are formed from unorganized boroughs. Under the Alaska Constitution, the state legislature acts as an assembly for unorganized boroughs:The legislature shall provide for the performance of services it deems necessary or advisable in unorganized boroughs, allowing for maximum local participation and responsibility. It may exercise any power or function in an unorganized borough which the assembly may exercise in an organized borough.
Alaska Const. art. X, § 6.
REAA's cannot bond for projects, but must recommend projects to the state which may approve or disapprove the recommendation. At oral argument, Yupiit submitted a recently obtained affidavit from Lucienne Harger, who was Yupiit's business manager from 1990-1997. Harger states that during the time she served as Yupiit's business manager, 78 percent of Yupiit's revenues were received from the State of Alaska. Harger states that the rest of Yupiit's revenues came from the federal government. The State of Alaska Attorney General's Office issued an opinion in 1982 that the State of Alaska should honor judgments against REAA's. An opinion from the state attorney general's office is entitled to some deference, but is not controlling on matters of statutory interpretation. The 1982 opinion was authored by Bruce Botelho, who was then an assistant attorney general, but who is now the Attorney General for the State of Alaska. The preceding circumstances all establish that state funds control REAA's and would be used to satisfy a judgment against Yupiit.
AS 14.08.101(7); 14.11.005-.015.
Op. Att'y. Gen., April 22, 1982 (authored by then Assistant Attorney General now Attorney General Bruce Botelho) (submitted with Bruce Falconer's affidavit at docket 26).
Cissna v. State, 931 P.2d 363, 368 (Alaska 1996).
At oral argument, the Straabes essentially conceded that the State of Alaska was responsible for most of the funding for REAA's, and that under Ninth Circuit precedent the level of funding would suggest that REAA's qualify as arms of the state. However, the Straabes argued that Ninth Circuit precedent was less persuasive than case law developed in the Tenth Circuit. In the Tenth Circuit, the court analyzes whether a judgment would be paid directly from the state treasury. If a judgment is not paid directly from a state treasury, the Tenth Circuit holds the state is not responsible for money judgments entered against the entity in question. The Tenth Circuit summarized its analysis as follows:
Docket 26 at 54 n. 31.
Ambus v. Granite Bd. of Educ., 995 F.2d 992, 996-97 (10th Cir. 1993).
Id.
That some public funds might be implicated is not dispositive for Eleventh Amendment purposes. Even though judgments against municipalities must invariably be paid from public funds, such suits are not barred by the Eleventh Amendment. Further, an entity's receipt of some state funding does not mean that damage awards must be considered to have been paid from the state treasury. The proper analysis focuses on whether the damage award would be paid directly by the state treasury, rather than indirectly through commingled state and local funds or state indemnification provisions.
Ambus, supra, 995 F.2d at 996 (citations omitted).
To the extent, if any, that one reads Tenth Circuit precedent as being contrary to Ninth Circuit precedent, this court must apply Ninth Circuit precedent. In Belanger and more recently in Alaska Cargo Transp., Inc. v. Alaska R.R. Corp., the Ninth Circuit rejected the same argument that the Straabes now ask the court to accept. In Alaska Cargo, the Ninth Circuit held that the Alaska Railroad was an arm of the state even though under state statute it was liable for any judgment entered against it. The court noted that the "most critical factor . . . is whether a judgment would impact the state treasury." Given the state's interest in ensuring the railroad continued operations, the court concluded "that a money judgment against ARRC likely would impact Alaska's treasury because of the state's strong interest in keeping ARRC operationally and fiscally sound." The court quoted with approval the district court's opinion:
5 F.3d 378, 381-82 (9th Cir. 1993).
Belanger, supra, 963 F.2d at 251-52.
Alaska Cargo, supra, 5 F.3d at 380.
Alaska Cargo, supra, 5 F.3d at 382.
We agree with the district court that, "if faced with a large money judgment, ARRC would be compelled to turn to legislative appropriation in order to remain in business, and the legislature would have to respond favorably so that the 'essential' transportation function would continue to be performed and to protect the state's very substantial investment in the Alaska Railroad."
Alaska Cargo, supra, 5 F.3d at 381.
A similar rationale applies here. As will be addressed in greater detail in the next section, the State of Alaska has a strong interest in funding and overseeing public education in Alaska. If faced with a large money judgment, Yupiit would have to turn to the state legislature. In light of Belanger and Alaska Cargo, this court must reject the Straabes' invitation to apply Tenth Circuit precedent.
Finally, the Straabes submit an affidavit from Bruce Falconer, who represented another REAA in a different case. After a money judgment was entered against that REAA, both the party securing the judgment and the REAA sought to have the State of Alaska satisfy the money judgment. The state refused. Attorney General Botelho authored a new letter dated January 6, 1995. Attorney General Botelho's January 6, 1995, letter clarifies his earlier opinion. Attorney General Botelho noted that AS 14.17.225(a) provides that "the state is not responsible for the debts of a school district." This provision was repealed in 1998, but another provision similarly provides that "The state is not responsible for the debts of a school district." This includes REAA's. Attorney General Botelho therefore concluded that REAA's could seek a legislative appropriation to cover debts, but that the State was not obligated to satisfy debts incurred by REAA's.
The Falconer affidavit with attachments is submitted as an unmarked exhibit to the Straabes' opposition and cross-motion at docket 26.
Docket 26, attachment D to unmarked Falconer affidavit.
Id.
AS 14.17.900(a).
AS 14.17.990(2). However it should be noted that a "school district" includes an REAA "unless the context otherwise requires." AS 14.17.900. Given the considerations relating to the REAA/State relationship, it is reasonable to conclude that the context would otherwise require when the topic is the satisfaction of a judgment arising out of the REAA's discharge of a state government function as delegatee of the Alaska legislature. AS 14.08.021.
For present purposes, this court need not decide whether it agrees or disagrees with Attorney General Botelho's most recent opinion. The vast majority of Yupiit's funds are received from the State of Alaska. As Alaska Cargo makes clear, whether or not the State of Alaska accepts any responsibility for satisfying judgments against Yupiit does not change the fact that a judgment against Yupiit would "impact the state treasury." Under these circumstances, the court finds that the State of Alaska would satisfy a money judgment entered against Yupiit. This suggests that Yupiit is an arm of the state entitled to Eleventh Amendment immunity.
Belanger, supra, 963 F.2d at 251 (quoting Jackson v. Hayakawa, 682 F.2d 1344, 1350 (9th Cir. 1982)).
2. Whether Central Government Functions Are Performed
The State of Alaska is responsible for educating its children. The Alaska Constitution expressly provides that "[t]he legislature shall by general law establish and maintain a system of public schools open to all children of the State[.]" The Alaska Supreme Court has long-recognized that Alaska's "constitutional mandate for pervasive state authority in the field of education could not be more clear." The court noted, "[t]hat the legislature has seen fit to delegate certain educational functions to local school boards . . . does not diminish this constitutionally mandated state control over education." The State requires mandatory school attendance and sets forth standards regarding suspension or denial of admission. The authority of the state legislature to provide for education outside the boundaries of organized local governments has been specifically delegated to REAA's. All of these circumstances suggest that Yupiit is performing a central government function and should be considered as an arm of the state. This conclusion is bolstered by reference to state law. The Alaska Supreme Court has held that the University of Alaska is an instrumentality of the state. Although the Alaska Supreme Court's "instrumentality of the state" analysis is somewhat different than the Ninth Circuit's test for determining whether an entity is an arm of the state, the two analyses are conceptually related. The University of Alaska enjoys far more autonomy than do REAA's. Given the extent of state control over education, Yupiit is performing a central government function.
Alaska Const. art. VII, § 1.
Macauley v. Hildebrand, 491 P.2d 120, 122 (Alaska 1971).
Id.
AS 14.30.010; AS 14.30.045.
AS 14.08.011(a); AS 14.08.021.
University of Alaska v. National Aircraft Leasing, Ltd., 536 P.2d 121, 128 (Alaska 1975).
See, e.g., National Aircraft, supra, 536 P.2d at 123-25 (for discussion of constitutional and statutory provisions related to the University of Alaska).
3. Whether The Yupiit School District May Sue or be Sued
Yupiit may sue or be sued in its own name. The fact that Yupiit may sue or be sued in its own name militates in favor of holding it is not an arm of the state. However, the Ninth Circuit has held amenability to suit does not destroy Eleventh Amendment immunity.
AS 14.08.010(1).
Belanger, supra, 963 F.2d at 254.
4. Whether Property is Held in The State's Name
The State of Alaska holds title to land and buildings used by REAA's. Title may be transferred upon request. Even if title is transferred to a school district, however, the funding and capital improvement restrictions previously discussed still apply. Moreover, the Ninth Circuit has held that an entity may be an arm of the state even though it was entitled to hold property in its own name.5. Whether Corporate Status Affects the Analysis
REAA's are service areas created by the state to fulfill its educational mission. While they are thus distinct entities, they exist as delegatees of the state legislature's authority to operate public schools.6. Analysis Regarding Eleventh Amendment Immunity
Application of the Ninth Circuit's five-factor test establishes that Yupiit is an arm of the state. The most significant factor in this respect is the fact that a money judgment against Yupiit would impact the State of Alaska. The court therefore holds that Yupiit is an arm of the state entitled to assert Eleventh Amendment immunity.V. CONCLUSION
For the foregoing reasons, the motion at docket 14 is GRANTED on the basis of Yupiit's Eleventh Amendment immunity. In light of this disposition, it would be inappropriate to reach the merits of Yupiit's remaining arguments which are DENIED without prejudice. The cross-motion for summary judgment at docket 26 is DENIED without prejudice. The court expresses no opinion as to the merits of the parties' substantive arguments. This case is DISMISSED.