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The Third Circuit's Approach to the Extension of Eleventh Amendment Immunity to Instrumentalities As Arms of the State in Benn V

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The Third Circuit's Approach to the Extension of Eleventh Amendment Immunity to Instrumentalities As Arms of the State in Benn V Volume 51 Issue 5 Article 2 2006 Reaching for Immunity: The Third Circuit's Approach to the Extension of Eleventh Amendment Immunity to Instrumentalities as Arms of the State in Benn v. First Judicial District of Pennsylvania Analisa Dillingham Follow this and additional works at: https://digitalcommons.law.villanova.edu/vlr Part of the State and Local Government Law Commons Recommended Citation Analisa Dillingham, Reaching for Immunity: The Third Circuit's Approach to the Extension of Eleventh Amendment Immunity to Instrumentalities as Arms of the State in Benn v. First Judicial District of Pennsylvania, 51 Vill. L. Rev. 999 (2006). Available at: https://digitalcommons.law.villanova.edu/vlr/vol51/iss5/2 This Issues in the Third Circuit is brought to you for free and open access by Villanova University Charles Widger School of Law Digital Repository. It has been accepted for inclusion in Villanova Law Review by an authorized editor of Villanova University Charles Widger School of Law Digital Repository. Dillingham: Reaching for Immunity: The Third Circuit's Approach to the Extens 2006] Issues in the Third Circuit REACHING FOR IMMUNITY: THE THIRD CIRCUIT'S APPROACH TO THE EXTENSION OF ELEVENTH AMENDMENT IMMUNITY TO INSTRUMENTALITIES AS ARMS OF THE STATE IN BENN V FIRST JUDICIAL DISTRICT OF PENNSYLVANIA I. INTRODUCTION The United States Court of Appeals for the Third Circuit recently changed its multi-factor test to determine whether to extend Eleventh Amendment sovereign immunity to state entities and instrumentalities where the state is not a named party in the suit.1 The Third Circuit's test previously consisted of three factors: (1) the risk that a potential judgment against the entity will be paid out of state funds, (2) state law's treatment 2 of the entity and (3) the entity's degree of autonomy from the state. Al- though no factor was "dispositive," the Third Circuit treated the first fac- tor-the potential risk to the state's treasury-as the "most important" factor and afforded the treasury risk factor the most weight. 3 In Benn v. FirstJudicial District of Pennsylvania,4 however, the Third Circuit chose to treat the state treasury risk factor as a co-equal factor in its Eleventh Amendment immunity analysis, focusing on the state's "legal liability" in- stead of the practical effect of an adverse judgment on the state's trea- sury. 5 Many circuits still give the state treasury risk factor the most 1. See Benn v. First Judicial Dist. of Pa., 426 F.3d 233, 239 (3d Cir. 2005) (changing previous multi-factor test, which gave most weight to treasury risk factor, to new test making treasury risk factor co-equal factor). 2. See Fitchik v. N.J. Transit Rail Operations, 873 F.2d 655, 659 (3d Cir. 1989) (stating "Fitchik Factors" used by Third Circuit to determine whether entity is enti- tled to Eleventh Amendment sovereign immunity). For a discussion of Fitchik, see infra notes 3944 and accompanying text. 3. See id. at 659-60 (discussing relative weight of factors and stressing impor- tance of treasury risk factor). 4. 426 F.3d 233 (3d Cir. 2005). 5. See id. at 239 (discussing previous multi-factor test and reasons for change, including focus on "entity's potential legal liability"). But see Febres v. Camden Bd. of Educ., 445 F.3d 227, 236 (3d Cir. 2006) (affirming Benn, but noting that "in close cases where indicators of immunity point in different directions ... preven- tion of ...judgments that must be paid out of a State's treasury [should be courts'] prime guide" (internal citations and quotations omitted)). Recently, the Third Circuit expanded on its focus on "legal liability" in Febres, 445 F.3d at 236 (discussing legal liability). The Febres court stated: [T]he 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. A state's legal liability (or lack thereof) for an entity's debts merits far greater weight, and is therefore (999) Published by Villanova University Charles Widger School of Law Digital Repository, 2006 1 Villanova Law Review, Vol. 51, Iss. 5 [2006], Art. 2 1000 VILLANOVA LAW REVIEW [Vol. 51: p. 999 6 weight. This Casebrief discusses the Third Circuit's recent change to its Elev- enth Amendment immunity analysis. 7 Part II summarizes United States Supreme Court precedent relating to state sovereign immunity and recent decisions involving its arm of the state doctrine. 8 Part III discusses the development of the arm of the state doctrine in the Third Circuit and the Third Circuit's new approach to its multi-factor inquiry in Benn.9 Part IV examines other circuits' arm of the state immunity tests and compares these tests with the new Third Circuit test, focusing in particular on the differences in how various circuits treat the state treasury risk factor.10 Part V concludes that (1) there is Supreme Court precedent that supports both the Third Circuit's test and the other circuits' slighdy different tests, and (2) despite some differences in the circuits' various tests, the tests are unlikely to produce different results in most situations." II. THE SUPREME COURT: ELEVENTH AMENDMENT IMMUNITY AND ARM OF THE STATE DOCTRINE The Eleventh Amendment provides that: "[t] he Judicial power of the United States shall not be construed to extend to any suit in law or equity, the key factor in our assessment of the state treasury prong of the Fitchik analysis. Id. (stressing importance of "legal liability" rather than "practical" effect of judg- ment). For a discussion of the facts and reasoning of Benn and the reasons for the new Third Circuit approach, see infra notes 45-66 and accompanying text. For a discussion of the facts and reasoning of Febres, see infra notes 67-72 and accompa- nying text. 6. See, e.g., Morris-Hayes v. Bd. Chester Union Free Sch., 423 F.3d 153, 164 (2d Cir. 2005) (finding state treasury risk controls if other factors and considera- tion of twin aims of Eleventh Amendment are not dispositive); Md. Stadium Auth. v. Ellebre Becket, Inc., 407 F.3d 255, 261 (4th Cir. 2005) (instrncting court must first establish effect on state treasury); Ernst v. Rising, 427 F.3d 351, 364 (6th Cir. 2005) (stating "state-treasury inquiry" is "generally ... most important" inquiry); Fresenius Med. Care Cardiovascular Res. v. Puerto Rico, 322 F.3d 56, 68 (1st Cir. 2003) (holding state treasury risk controls if other factors not dispositive); Hudson v. City of New Orleans, 174 F.3d 677, 682 (5th Cir. 1999) (considering risk to state treasury most important factor); Hadley v. N. Ark. Cmty. Tech. Coll., 76 F.3d 1437, 1439-42 (8th Cir. 1996) (treating risk to treasury as most important factor). For an illustration of the circuits' differing approaches to the state treasury risk factor, see infra note 21 and accompanying text. 7. For a discussion of the facts and reasoning of Benn and the reasons for the new Third Circuit approach, see infra notes 45-66 and accompanying text. 8. For a discussion of Supreme Court Eleventh Amendment immunity and arm of the state doctrine, see infra notes 12-33 and accompanying text. 9. For a discussion of the development of the Third Circuit's arm of the state doctrine and the facts and reasoning of Benn, see infra notes 34-66 and accompany- ing text. 10. For a discussion of the arm of the state immunity tests of other circuits, see infra notes 67-137 and accompanying text. 11. For an analysis and comparison of the differing approaches to the state treasury risk factor to the Third Circuit approach, see infra notes 138-53 and ac- companying text. https://digitalcommons.law.villanova.edu/vlr/vol51/iss5/2 2 Dillingham: Reaching for Immunity: The Third Circuit's Approach to the Extens 2006] CASEBRIEF 1001 commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State." 12 Addition- ally, the Supreme Court has construed the Eleventh Amendment to pro- vide immunity in a third category of lawsuits, those commenced against a state by citizens of that state.'" Despite this seemingly broad grant of im- munity, Congress can abrogate states' immunity from suit when: (1) Con- gress has "unequivocally" expressed the "intent" to abrogate immunity and 4 (2) Congress is acting "pursuant to a valid exercise of power."' 12. U.S. CONST. amend. XI. The Eleventh Amendment was adopted to re- spond to "States' fears that federal courts would force them to pay their Revolu- tionary War debts, leading to their financial ruin." See Hess v. Port Auth. Trans- Hudson Corp., 513 U.S. 30, 39 (1994) (discussing Eleventh Amendment history). The Amendment was adopted to ensure that states would receive the "respect" and "integrity" they deserved. See id. (same). 13. See Hans v. Louisiana, 134 U.S. 1, 13 (1890) (recognizing each state's sov- ereignty and noting that "[i]t is inherent in the nature of sovereignty not to be amenable to the suit of an individual without its consent" (quoting THE FEDERALIST No. 81 (Alexander Hamilton))); see also P.R. Aqueduct & Sewer Auth. v. Metcalf & Eddy, 506 U.S. 139, 146 (1993) ("The Amendment is rooted in a recognition that the States, although a union, maintain certain attributes of sovereignty, including sovereign immunity."). 14. See Green v. Mansour, 474 U.S. 64, 68 (1985) (describing requirements to determine whether Congress has abrogated state immunity). Regarding the first requirement, the Court has required that Congress state its intent to abrogate states' immunity by making a "clear legislative statement." See Blatchford v.
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