Les HADLEY, Plaintiff-Appellee, v. NORTH ARKANSAS COMMUNITY TECHNICAL COLLEGE, Defendant-Appellant.
No. 94-3703.
United States Court of Appeals, Eighth Circuit.
Submitted Sept. 11, 1995. Decided Feb. 14, 1996.
Order Denying Rehearing and Suggestion for Rehearing En Banc April 19, 1996.
76 F.3d 1437
Barbara E. Lingle, Rogers, AR, argued for appellee.
Before LOKEN and LAY, Circuit Judges, and NANGLE,* District Judge.
LOKEN, Circuit Judge.
Les Hadley filed this civil rights action under
I.
The Eleventh Amendment immunizes an unconsenting State from damage actions brought in federal court, except when Congress has abrogated that immunity for a particular federal cause of action. See generally Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974). Section 1983 does not override Eleventh Amendment immunity. See Will v. Michigan Dept. of State Police, 491 U.S. 58, 63, 109 S.Ct. 2304, 2308, 105 L.Ed.2d 45 (1989), construing Quern v. Jordan, 440 U.S. 332, 99 S.Ct. 1139, 59 L.Ed.2d 358 (1979). Therefore, if NACTC is entitled to the State of Arkansass Eleventh Amendment immunity, the district court properly dismissed Hadleys claim.
A state agency or official may invoke the States Eleventh Amendment immunity if immunity will protect the state treasury from liability that would have had essentiаlly the same practical consequences as a judgment against the State itself. Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 123 n. 34, 104 S.Ct. 900, 920, 79 L.Ed.2d 67 (1984), quoting Lake Country Estates, Inc. v. Tahoe Reg. Planning Agency, 440 U.S. 391, 401, 99 S.Ct. 1171, 1177, 59 L.Ed.2d 401 (1979); see Ford Motor Co. v. Department of Treasury, 323 U.S. 459, 463-64, 65 S.Ct. 347, 350, 89 L.Ed. 389 (1945). On the other hand, Eleventh Amendment immunity does not extend to independent political subdivisions created by the State, such as counties and cities. See Lincoln County v. Luning, 133 U.S. 529, 10 S.Ct. 363, 33 L.Ed. 766 (1890). The issue is whether NACTC is to be treated as an arm of the State ... or is instead to be treated as a municipal corporation or other political subdivision to which the Eleventh Amendment does not extend. Mt. Healthy City Bd. of Educ. v. Doyle, 429 U.S. 274, 280, 97 S.Ct. 568, 572, 50 L.Ed.2d 471 (1977) (holding that Ohio local school districts are like political subdivisions and therefore not immune). State universities and colleges almost always enjoy Eleventh Amendment immunity.2 On the other hand, community and technical colleges often have deep roots in a local community. When those roots include local political and financial involvement, the resulting Eleventh Amendment immunity questions tend to be difficult and very fact-specific.3
II.
Like the district court, we begin by examining the nature of the entity created by state law. Mt. Healthy, 429 U.S. at 280, 97 S.Ct. at 572; see Seibert v. University of Okl. Health Sciences Ctr., 867 F.2d 591, 594-95 (10th Cir. 1989). Amendment 52 to the Arkansas Constitution authorizes the General Assembly to establish community college districts. The General Assembly has authorized the State Board of Higher Education to formulate criteria for establishing community colleges, and to certify proposed community college districts. See
By statute, the State must provide community colleges [f]unds for the general operation of an adequate comprehensive educational program.
The amount of state revenues to bе recommended for the general operation of each community college shall be the difference between the recommended budget and the total of income for general operation, including student fees and any other income except local taxes. The recommended budget for general operation shall be sufficient to provide an adequate comprehensive educational program ... as determined by the [State Board of Higher Education].
To this point, it seems clear that NACTC is, both financially and institutionally, an arm of the State, and that any damage award to Hadley would inevitably be paid from the state treasury. Those are the factors that led us to conclude in Dover Elevator, 64 F.3d at 446-47, that Arkansas State University is entitled to Eleventh Amendment immunity. But Arkansas community collegеs also have elements of local funding and control that require further analysis.
The Arkansas Constitution permits community colleges to be partially funded at the local level:
The General Assembly shall prescribe the method of financing such community college and technical institutes, and may authorize the levy of a tax upon the taxable property in such districts for the acquisition, construction, reconstruction, repair, expansion, operation, and maintenance of facilities therefor.
Amendment 52, § 1. The General Assembly has made local financial participation mandatory:
(a) Each community college district shall be responsible for all capital outlay expenses4 ... except that the state may share the responsibility for capital outlay expenses for any community college which has an enrollment of at least one thousand (1,000) full-time equivalent students....
(b) Capital outlay expenses shall be paid from gifts, grants, profits from auxiliary enterprises, tuition, fees, local millages, and other local funds and may be paid from state funds appropriated for such purposes.
In fiscal 1993-1994, NACTC received $317,366 in local tax revenues, some three percent of its total budget. Those funds were dedicated to new acquisitions or the issuance of bonds to finance new acquisitions. See
In these circumstances, we conclude that Hadleys claim is in reality a suit against the state, Sherman, 16 F.3d at 863, because the funds to pay any award will be derived from the state treasury, Dover Elevator, 64 F.3d at 446. Hadley argues that he seeks damages of less than $250,000 and therefore any award could be paid from other sources, such as future local tax increases, tuition, federal grants, or other discretionary funds. However, while there is dictum in Sherman suggesting it is relevant whether a judgment against the University can be paid
Arkansas calls NACTC a state agency6 and has made its daily operations financially dependent upon the state treasury. The districts never-exercised authority to supplement NACTCs operating budget with limited local tax revenues7 does not change the fact that the State has created an institution of higher learning that is dependent upon and functionally integrated with the state treasury. Kashani v. Purdue Univ., 813 F.2d 843, 846 (7th Cir.), cert. denied, 484 U.S. 846, 108 S.Ct. 141, 98 L.Ed.2d 97 (1987). The relevant funding inquiry cannot be whether NACTC enjoys some non-state funding, such as user fees (tuition), because then most state departments and agencies, and all state universities, would be denied Eleventh Amendment immunity.8 Here, even if NACTC could initially satisfy a judgment from other operating revenues, such as tuition payments or federal grants, the judgment would produce a higher operating budget shortfall that must, by state law, be satisfied by an appropriаtion from the state treasury. Thus, Hadleys action is in essence one for the recovery of money from the state. Ford Motor, 323 U.S. at 463-64, 65 S.Ct. at 350.
III.
Moving from the critical subject of state funding to the less important question of state control, we agree with the district court that there is substantial, but far from total, state control over NACTC. The State Board of Higher Education is comprised of thirteen members appointed by the governor and confirmed by the Senate.
However, the General Assembly has also granted substantial control over NACTCs daily affairs tо locally-elected officials. NACTC has a Local Board of nine qualified electors of the community college district
Read together, the provisions delimiting the responsibility of the State and Local Boards reveal a community college system that blends state and local interests and authorities. The local cоntrol is of course relevant but falls short, in our view, of making NACTC the Eleventh Amendment equivalent of a political subdivision. In the final analysis, while Eleventh Amendment immunity is a question of federal law, the structuring of state government is the province of the States. Nothing precludes a State from delivering regional or even local governmental services through an arm of the State, from permitting voters in an affected locale to help staff a state agency, or from providing highly structured local input to state agency decisionmaking.9 Here, Arkansas calls NACTC a state agency, allows for substantial local autonomy but provides ultimate state control, and—most importantly—funds the agencys general operations primarily from the state treasury. We agree with the district court that NACTC is entitled to Eleventh Amendment immunity.
The judgment of the district court is affirmed.
LAY, Circuit Judge, dissenting.
Todays decision amplifies the disarray of approaches applied by lower courts when confronted with the defense of Eleventh Amendment immunity by state-created entities. Little would be served by setting forth the diverse reasoning of this Court or other courts. These cases are already of historical record.1 My disagreement with the majority opinion is that it is not faithful to Supreme Court precedent or to this Courts rulings covering the same issue.
Local Control
On June 5, 1995, we remanded this case to make a complete record as to local autonomy and control and most importantly, whether the funds to pay any award will be derived from the state treasury. Hadley v. North Arkansas Community Technical College, No. 94-3703, 1995 WL 329591, at *1 (8th Cir. June 5, 1995) (per curiam) (quoting Greenwood v. Ross, 778 F.2d 448, 453 (8th Cir. 1985) (quoting Laje v. R.E. Thomason Gen. Hosp., 665 F.2d 724, 727 (5th Cir. 1982)); see Sherman v. Curators of Univ. of Mo., 16 F.3d 860, 863 (8th Cir. 1994)). Subsequent to our remand, the Supreme Court issued its ruling in Hess v. Port Auth. Trans-Hudson Corp., 513 U.S. 30, 115 S.Ct. 394, 130 L.Ed.2d 245 (1994). As the Court therein observed, the issue of ultimate control cannot be the determining factor in Eleventh Amendment cases, for the State may destroy or reshape any unit it creates. Id. at 47, 115 S.Ct. at 404. The majority concedes that NACTC possesses a high level of local autonomy, but erroneously discounts this factor because the statе legislature calls
I read the record much differently. In my judgment, the record reveals that NACTC resembles a local school district, albeit subject to state guidance, whose Local Board possesses broad authority to direct the college educational program and apply the colleges resources to that end. The Local Board has broad power over the direction of NACTCs educational program. Specifically, the Local Board is empowered, inter alia, to: (1) select its officers; (2) develоp, with the advice of the State Board, the educational program; (3) appoint, with the advice of the State Board, a president and fix the compensation and terms of office of the president who shall be the executive officer of the colleges Local Board; (4) appoint, upon nomination of the president, members of the administrative and teaching staffs and fix their compensation and terms of employment; (5) enter into contracts; (6) accept grants or contributions of money to be used for any of its purposes; (7) acquire, own, lease, use, operate аnd dispose of property; (8) exercise the right of eminent domain; (9) make rules and regulations to govern the colleges administration and operation; and (10) exercise all other necessary powers to operate the college.
Thus, viewed in light of the authority of the Local Board, the State Boards role is more appropriately characterized as that of an advisor, rather than that of a regulator. As the district court acknowledged, for example, NACTC is significantly more autonomous than Arkansass universities. Dist.Ct.Op. at 19. NACTC has the power to tax, to acquire, use, and own property in the colleges name, and to govern itself locally.
Stated differently, I find merit in Hadleys contentions that the State Boards supervision of NACTC is not appreciably different from that it exercises over local school boards. Although the state approves NACTC decisions with respect to educational policy, many if not most of them are initiated at the local level. For example, while the consolidation of North Arkansas Community College and Twin Lakes Technical College was subject to state approval, NACTCs Local Board, and not the General Assembly or the State Board, initiated that decision. The same is true of the colleges curricular decisions. Thus, although state law governs several administrative aspects of the colleges operations, substantive judgments concerning NACTCs educational policy are made locally. In sum, a thorough analysis of NACTCs local control supports the conclusion that NACTC may not invoke the Eleventh Amendments protection.
NACTCs Financial Relationship with the State of Arkansas
The Supreme Court observed in Hess, however, that control cannot be dispositive since it does not hone in on the impetus for the Eleventh Amendment: the prevention of federal court judgments that must be paid out of a states treasury. 513 U.S. at 48, 115 S.Ct. at 404. Rather, the cоre concern in Eleventh Amendment analysis is whether a judgment against NACTC must be satisfied from the state treasury. Id. at 51, 115 S.Ct. at 406.
The means by which NACTC acquires funding is established by Arkansas constitutional and statutory law. Amendment Fifty-two to the Arkansas Constitution empowers the General Assembly to establish districts to furnish community college instruction and technical training.2 Ark. amend. 52. Specifically, Amendment Fifty-two provides that [t]he General Assembly shall prescribe the method of financing such community college and technical institutes, and may authorize the levy of a tax upon the taxable property in such districts for the acquisition, construction, reconstruction, reрair, expan
The Arkansas General Assembly has fulfilled its constitutional mandate by legislating that [f]unds for the general operation of an adequate comprehensive educational program shall be provided by the state.
NACTC has far greater discretion in its management of monies received from non-state sources. Bequests, gifts, and donations are exempted from state accounting and budgetary procedures,
As I read the majority opinion, it adopts an impact rule, which apparently reasons that, since the schools general operations are funded primarily by the state, any judgment paid by NACTC would produce a higher operating budget shortfall that must, by state law, be satisfied by an appropriation from the state treasury.4 Maj.Op. at 1441.
I respectfully must disagree with this reasoning. On the record presented here, it is clear that NACTC has independent discretionary power to raise funds for educational purposes and payment of money judgments. As the Court in Hess stated: If the expenditures of the enterprise exceed receipts, is the State in fact obligated to bear and pay the resulting indebtedness of the enterprise? When the answer is no—both legally and practically—then the Eleventh Amendments core concern is not implicated. 513 U.S. at 51, 115 S.Ct. at 406.
The record in this case reveals that the state is not required, legally or practically, to indemnify NACTC for debts incurred as a result of locally generated bond revenues. Arkansas law states quite the opposite: The bonds shall be revenue bonds secured solely by the revenues pledged thereto, аnd in no event shall they be considered a debt for which the faith and credit of the State of Arkansas or any of its revenues are pledged.
Moreover, although the district court found that local tax funds amount to an insignificant percentage of NACTCs overall
Alternatively, Hadley suggests that NACTC has other sources of discretionary funding, such as tuition, federal grants, private donations, and other monies, from which a judgment against him could be paid. NACTC correctly replies that, like funds from local millage, these funds may only be used for specific, limited purposes. Tuition monies, for example, are dedicated to the payment of educational expenses. Dist.Ct.Op. at 12. But the fact thаt these monies are dedicated solely to educational expenses does not necessitate the conclusion that an award of back-pay to an instructor is not such an expense. Hadley suggests, quite persuasively, that the payment of an instructors salary constitutes the quintessential educational expense, Supp.Br. for Appellee at 10, and asserts that the reduction of these expenses to the form of a judgment does not render them non-educational, id. I agree. Although the district court concluded otherwise, I find no expressed rationale supporting that conclusion. The monies involved here, if damages were to be awarded, constitute back salary for an instructor. These are clearly educational expenses. Although NACTC receives the majority of its funding from the state, a judgment in Hadleys favor need not implicate the state treasury. The college may levy additional millage or apply tuition monies designated educational to satisfy the award.
In addition, the majority opinion is not faithful to the unanimous Courts rationale in Mt. Healthy City Bd. of Educ. v. Doyle, 429 U.S. 274, 97 S.Ct. 568, 50 L.Ed.2d 471 (1977). In Mt. Healthy, the Supreme Court passed on the Eleventh Amendment defense proffered by a local school board in the State of Ohio. In holding that thе board was akin to a political subdivision to which the Eleventh Amendment does not extend, the Court stated:
[The board] is subject to some guidance from the State Board of Education, and receives a significant amount of money from the State. But local school boards have extensive powers to issue bonds, and to levy taxes within certain restrictions of state law. On balance, the record before us indicates that a local school board such as petitioner is more like a county or city than it is like an arm of the State. We therefore hold that it was not entitled to assert any Eleventh Amendmеnt immunity from suit in the federal courts.
429 U.S. at 280-81, 97 S.Ct. at 572-73 (Rehnquist, J.) (citations omitted).
A searching inquiry of the record reveals that NACTC enjoys independence, financially and otherwise, such that, notwithstanding its states funding, it should be treated as an entity much like any other political subdivision or local school board. Moreover, upon analysis of the overall record, any judgment against NACTC will not be paid from the state treasury.
In summary, the majoritys holding allows NACTC to enjoy the benefits of local tuition monies and local property assessments without sharing in the costs and responsibilities that attend the power to generate such funds. NACTC must take the bitter with the sweet. As we observed in Sherman:
[A govеrnmental entity] cannot create its own eleventh amendment immunity by structuring its resources so as to pay all breach of contract damages out of state funds. Thus, the question on remand is not whether the [entity] chooses to pay contract damages out of state funds, but whether a judgment against the [entity] can be paid from non-state funds under [its] discretionary control.
16 F.3d at 864-65 (emphasis added).
The majority seeks to avoid our holding in Sherman by indicating that it is dicta. This is puzzling to me since the portion quoted in the text is the precise holding of the case. If the test of Sherman is to be applied, then the majority is clearly in error. There is no evidence in the present case that any judgment here must necessarily be paid from
I respectfully dissent.
ORDER
April 19, 1996
The suggestion for rehearing en banc is denied. Judge McMillian and Judge Murphy would grant the suggestion.
The petition for rehearing by the panel is also denied. Judge Lay would grant the petition.
McMILLIAN, Circuit Judge, with whom MURPHY, Circuit Judge, joins, dissenting from the denial of the petition for rehearing with suggestion for rehearing en banc.
The majority opinion of the panel acknowledges that the core concern in Eleventh Amendment immunity cases is whether a judgment must be satisfied from the state treasury. 76 F.3d 1437, 1439 (citing Hess v. Port Auth. Trans-Hudson Corp., 513 U.S. 30, 115 S.Ct. 394, 130 L.Ed.2d 245 (1994)). Yet the opinion completely ignores that the North Arkansas Community Techniсal College (NACTC) is given legislative authorization to issue revenue bonds to raise general operation monies,
The majority holding that NACTC enjoys Eleventh Amendment immunity thus defies Supreme Court precedent,1 the law of this circuit,2 and the law of Arkansas. The decision promises to expand uncertainty for litigants and district courts as to future Eleventh Amendment cases in this circuit. I fail to understand how this court can refuse to hear this case en banc. Hopefully, the Supreme Court of the United States will give us further direction.