Twins or triplets? Protecting the Eleventh Amendment through a three-prong arm-of-the-state test.

• Author: Bladuell, Hector G.

TABLE OF CONTENTS INTRODUCTION I. PROBLEMS WITH THE HESS APPROACH A. Lack of Uniformity B. Unprotected Interests 1. Main Purpose 2. Equal Interests 3. Independent Evaluation C. Public Policy II. A UNIFORM THREE-PRONG TEST A. The Test 1. State Intent 2. State Liability 3. State Function B. The Test's Impact C. Why Should Courts Adopt this Test? CONCLUSION INTRODUCTION

In 1999, the Supreme Court held that the common law principle that the sovereign cannot be sued in its own courts without its consent was embedded in the Constitution's structure when it was ratified. (1) The Court, however, has not always adhered to this view. In 1793, when a citizen of South Carolina sued the State of Georgia to enforce a debt arising from the sale of Revolutionary War supplies, the Court ordered the State to fulfill its obligation even though the State had not consented to the suit. (2) Alarmed by the sudden opening of their treasuries to federal courts over which they had no control, states swiftly pushed through Congress and ratified the Eleventh Amendment. (3) Although the facts that triggered the adoption of the Eleventh Amendment are undisputed, the Amendment's core purpose has long been the subject of debate. While the language of the Amendment suggests that the most immediate purpose was reversing Chisholm v. Georgia and closing state treasuries to federal courts, (4) its broader purpose may have been confirming sovereign immunity as a constitutional principle and thus protecting the states' dignity interests. (5)

Although the Supreme Court has extended Eleventh Amendment immunity to a wide variety of bodies that states have created to administer their affairs, no practical and uniform method exists for determining whether such an entity is entitled to it. Federal courts, relying on particular views about the Amendment's core purpose, have created different "arm-of-the-state" tests to determine whether a particular entity should benefit from the state's immunity from suit. In Mount Healthy City School District Board of Education v. Doyle, (6) the Supreme Court applied a balancing test in holding that a school district was a political subdivision, rather than an arm of the state. The Court first noted that Ohio law classified school districts as political subdivisions. (7) Moreover, although the Ohio State Board of Education provided some guidance and funding to school districts, the districts had extensive powers to raise revenue by issuing bonds and levying taxes. (8) The school district's status under state law and its ability to generate its own revenue outweighed the state's financial assistance and administrative control. (9) The Court, however, did not explain the relative weight of the factors or indicate if other factors could be considered. (10)

In its next arm-of-the-state case, Lake Country Estates v. Tahoe Regional Planning Agency, (11) the Court employed more factors in holding that the Tahoe Regional Planning Agency ("TRPA"), an entity created by an interstate compact between California and Nevada, was not entitled to Eleventh Amendment immunity. (12) The Court reached its conclusion after finding that: (1) the interstate compact described TRPA as a "separate legal entity" and a "political subdivision;" (2) counties and cities, rather than the states, appointed most of the directors of TRPA; (3) counties and cities provided TRPA's funding; (4) the compact provided that TRPA's obligations were not binding on either state; (5) local rather than state governments performed TRPA's function, the regulation of land; and (6) TRPA's authority to make rules was not subject to a veto by the state. (13) The Court noted that "[t]he intentions of Nevada and California, the terms of the Compact, and the actual operation of TRPA" made it clear that TRPA could not claim sovereign immunity. (14)

The Court in Lake Country Estates conducted a more comprehensive analysis than it had in Mount Healthy. In assessing the control factor, the Lake Country Estates Court looked at who selected the entity's directors and whether the states had veto power over the entity's decisions. (15) This provided more guidance to lower courts than the Court's remark in Mount Healthy that school districts received "some guidance" from the Ohio State Board of Education. (16) Moreover, by asking whether the states would be liable for TRPA's debts, the Court in Lake Country Estates directly considered the vulnerability of the state's treasury to a potential judgment. (17) Finally, in Lake Country Estates, the Court examined for the first time the state's intent in creating the entity and the entity's actual operation. (18)

Although Lake Country Estates offered more guidance than Mount Healthy, lower courts struggled in applying the arm-of-the-state test. The Third Circuit stated that Lake Country Estates did not set out "an exclusive list of factors to be considered." (19) In addition, some courts added their own criteria (20) and others weighed the factors differently. (21) The District of Columbia Circuit underscored specific problems with the status under state law and control factors. (22) It also added its own twist to the control factor by considering the states' power to remove or suspend the state-appointed directors from office. (23) The clearest indication of confusion was when the Second and Third Circuits reached different conclusions regarding the same bi-state entity: the Port Authority Trans-Hudson Corporation ("Authority"). (24) The circuits reached different outcomes because they weighed the factors differently and took different information into consideration to determine whether the factors were met. (25) When the Supreme Court first resolved the split, it did so without addressing the different applications of the arm-of-the-state test. (26)

Four years later, the Court again dealt with the Authority's immunity and articulated the "twin reasons" analysis in Hess v. Port Authority Trans-Hudson Corp. (27) Noting that indicators of immunity did not point in the same direction, (28) the Court stated that the Eleventh Amendment's "twin reasons for being"--respecting the dignity of the states and insulating state treasuries from federal-court judgments--should be the prime guide in such a situation. (29) The Court first found no threat to the dignity of either New York or New Jersey. (30) Then, the Court found that the two states and Congress had not designed the Authority to enjoy Eleventh Amendment immunity. (31) Although the two states exercised significant control over the Authority, control was not considered determinative because state control of counties and other political subdivisions does not make these entities immune from suit under the Eleventh Amendment. (32) The Court next evaluated the vulnerability of the state's purse, noting that various Courts of Appeals had recognized it as the most salient factor in determining Eleventh Amendment immunity. (33) The Court ultimately decided that this factor was not met because the Authority had a long history of paying its own debts and its actual financial independence contrasted with other entities that placed heavy fiscal tolls on their founding states. (34) The Authority did not enjoy immunity because a judgment against it would not, as a practical matter, expend itself against the state treasury. (35)

This Note argues that Hess failed to provide an adequate standard for determining whether an entity is an arm of the state and proposes such a standard. Part I argues that Hess is not an appropriate approach for three reasons. First, Hess does not provide uniformity in solving the arm-of-the-state inquiry. Second, Hess's nearly exclusive focus on the vulnerability of the state's treasury ignores other legitimate Eleventh Amendment interests. Third, Hess is counterproductive from a public policy perspective because it does not allow relatively autonomous entities to be considered arms of the state. Part II solves these problems by presenting and arguing for an alternative three-prong test that safeguards legitimate Eleventh Amendment concerns and promotes efficient public administration. This test considers three elements, each of which protects a core Eleventh Amendment purpose. To protect the state's dignity interests, courts should first look at state intent. Second, to protect state treasuries, courts should evaluate the state's legal and practical liability for the judgment. Third, to give due consideration to the state's ability to administer its affairs, courts should determine whether the entity serves a state function. An entity that meets at least two of these factors should have immunity because only then would Eleventh Amendment interests be strongly implicated.

I. PROBLEMS WITH THE HESS APPROACH

This Part argues that the Supreme Court's approach in Hess is objectionable for three reasons. Section I.A argues that Hess does not promote uniformity in solving an important federal issue: which entities are clothed with Eleventh Amendment immunity. Section I.B argues that Hess does not fully protect legitimate Eleventh Amendment interests because it gives undue weight to the state treasury factor. Finally, Section I.C contends that Hess is counterproductive from a public policy perspective because it provides disincentives for public-private partnerships and entity independence. These problems suggest that the Court should adopt a new test.

1. Lack of Uniformity

   Hess did not provide uniformity to the arm-of-the-state test. First, Hess left important questions unanswered regarding the overall application of the "twin reasons" analysis, allowing courts to address these differently. Second, Hess allowed courts to choose which and how many factors to consider. Third, Hess provided meager guidance to courts about how to evaluate whether a factor is met and how to weigh the different factors. The disparity that Hess has promoted disserves the strong interest in the...