Hennessey v. University of Kansas Hospital Authority ( 2022 )

Appellate Case: 22-3000 Document: 010110766276 Date Filed: 11/09/2022 Page: 1
FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS November 9, 2022
Christopher M. Wolpert
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
TAMATHA HENNESSEY,
Plaintiff - Appellant,
v. No. 22-3000
UNIVERSITY OF KANSAS HOSPITAL
AUTHORITY,
Defendant - Appellee.
_________________________________
Appeal from the United States District Court
for the District of Kansas
(D.C. No. 2:21-CV-02231-EFM-TJJ)
_________________________________
Mary Beth Beasley and April Fortner, University of Colorado Law School Appellate
Advocacy Practicum (Matthew Cushing on the briefs), Boulder, Colorado, for Plaintiff –
Appellant.
J. Wesley Smith, Simpson, Logback, Lynch, Norris, P.A. (Trevin E. Wray with him on
the brief), Overland Park, Kansas, for Defendant – Appellee.
_________________________________
Before BACHARACH, McHUGH, and MORITZ, Circuit Judges.
_________________________________
McHUGH, Circuit Judge.
_________________________________
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Tamatha Hennessey alleges a radiology technician sexually assaulted her during
her visit to the University of Kansas hospital for emergency medical care. Proceeding pro
se, Ms. Hennessey brought a civil action for negligent supervision against the University
of Kansas Hospital Authority (“UKHA”), which oversees operation of the hospital.
UKHA moved to dismiss the action, arguing Ms. Hennessey failed to plead facts
supporting subject matter/diversity jurisdiction and that it is entitled to sovereign
immunity. UKHA premised both arguments on it being an arm of the state of Kansas and
therefore entitled to the same immunities as the state. But UKHA failed to support its
motion with any evidence demonstrating it is an arm of the state or any analysis of the
factors governing whether a state-created entity is an arm of the state. The district court,
relying on the statutory scheme creating UKHA, Kan. Stat. Ann. §§ 76-3301–3323 (the
“University of Kansas Hospital Authority Act” or the “Act”), took it upon itself to
analyze whether UKHA is an arm of the state. Finding the Act characterizes UKHA as an
entity of the state, UKHA is not autonomous from the state, and UKHA is concerned
with state-wide rather than local functions, the district court concluded UKHA is an arm
of the state and, therefore, dismissed Ms. Hennessey’s action.
Ms. Hennessey appeals, raising three arguments: (1) a procedural argument that
the burden is on UKHA to demonstrate it is an arm of the state and it failed to meet this
burden by not presenting any evidence and not arguing the factors governing the arm-of-
the-state analysis; (2) a substantive argument that, regardless of the burden, the
University of Kansas Hospital Authority Act supports the conclusion that UKHA is not
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an arm of the state; and (3) a fallback argument that a remand for limited discovery and
presentation of evidence is appropriate.
We now join every other circuit to consider the issue and hold the burden falls on
the entity asserting it is an arm of the state. UKHA did not meet its burden. Furthermore,
while our precedent permits a district court to raise the arm-of-the-state issue sua sponte,
the district court erred in concluding that UKHA is not autonomous under the language of
the University of Kansas Hospital Authority Act. Accordingly, we vacate the district
court’s order granting UKHA’s motion to dismiss and remand for further proceedings.
I. BACKGROUND
A. Factual Allegations
Ms. Hennessey alleges the following facts in her pro se complaint.1 See Moore v.
Guthrie, 438 F.3d 1036, 1039 (10th Cir. 2006) (“[A]ll well-pleaded factual allegations in
the complaint are accepted as true and viewed in the light most favorable to the
nonmoving party.” (quotation marks and ellipsis omitted)).
After suffering from right shoulder and left jaw pain for a few weeks,
Ms. Hennessey sought treatment at the University of Kansas Hospital Emergency
Room. A nurse ordered an MRI and CT scan. Jonathan McIntire, a radiology
technician, was assigned to perform the tests. Mr. McIntire took Ms. Hennessey to a
1
Although Ms. Hennessey is represented by counsel on appeal, she proceeded
pro se in the district court. Thus, we liberally construe her complaint and response to
UKHA’s motion to dismiss, and hold these pleadings “to a less stringent standard
than formal pleadings drafted by lawyers.” Hall v. Bellmon, 935 F.2d 1106, 1110
(10th Cir. 1991).
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radiology room in a new part of the hospital far removed from the ER. Once there,
Mr. McIntire instructed Ms. Hennessey to change into a different hospital gown and
then strapped Ms. Hennessey’s arms and legs to the MRI board. Mr. McIntire
commenced the MRI.
During the MRI, Ms. Hennessey fell asleep, possibly from Ativan medication
administered by ER staff. Ms. Hennessey awoke to Mr. McIntire “pinching her
nipples.” ROA at 12. Mr. McIntire then “groped one breast” and “put his mouth over
[Ms. Hennessey’s] breasts.” Id. at 13.
It was not until four hours after the nurse ordered the MRI and CT scan that
Mr. McIntire completed the tests and returned Ms. Hennessey to the ER.
Ms. Hennessey contends a radiology technician could complete the tests in an hour
and alleges hospital personnel were unaware she was out of the ER for a longer
period than necessary to complete the tests.
B. Procedural History
Ms. Hennessey, through counsel, initially filed a civil suit in a Wyandotte
County, Kansas district court, naming UKHA and Mr. McIntire as defendants.
UKHA moved for judgment on the pleadings, raising various immunity and failure-
to-state-a-claim defenses. Before the state district court ruled on the motion,
Ms. Hennessey and UKHA stipulated to the voluntary dismissal of the action without
prejudice.
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Proceeding pro se, Ms. Hennessey turned to federal court, filing the action
underlying this appeal in the United States District Court for the District of Kansas.2
In describing the parties, Ms. Hennessey alleged she was “a resident of the State of
Missouri residing [in] Belton, MO.” Id. at 6. And Ms. Hennessey alleged UKHA “is
and was a corporate entity established by law that operates the hospital located at
4000 Cambridge Street, Kansas City, Kansas 66106.” Id. In a section labeled
“Jurisdiction and Venue,” Ms. Hennessey pleaded that “[j]urisdiction is proper
because Defendant is a Kansas corporation and/or entity operating a hospital located
in Kansas City, Wyandotte County, Kansas.” Id. at 7. Ms. Hennessey’s filing raised a
single claim against UKHA for negligent supervision.
Supported by a three-page memorandum of law, UKHA moved to dismiss for
lack of subject matter jurisdiction and based on sovereign immunity. In pertinent
part, the memorandum of law read:
While the Petition generally states that Plaintiff is a citizen of Missouri,
she does not explicitly assert diversity jurisdiction. If she did assert
diversity jurisdiction, however, sovereign immunity would similarly
prevent the Court from allowing the case to proceed. The University of
Kansas Hospital Authority is an instrumentality of the State of Kansas,
and Eleventh Amendment immunity would prohibit a federal exercise of
personal jurisdiction as to this Defendant. See K.S.A. 76-3304(a);
Perkins v. Univ. of Kan. Med. Ctr., 2014 U.S. Dist. LEXIS 47491, *9-10
(D. Kan. Apr. 7, 2014), citing Ellis v. University of Kansas Medical
Center, 163 F.3d 1186, 1196 (10th Cir. 1998).
2
Although Ms. Hennessey filed her action in the District of Kansas, the
caption of her filing identified the court as “In The District Court of Wyandotte
County Kansas.” ROA at 6. Ms. Hennessey subsequently moved to amend or correct
the caption to identify the District of Kansas as the court in which she filed the
action, and the district court granted the motion.
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Id. at 26–27. UKHA neither submitted any evidence in support of its motion nor
identified or analyzed the factors governing whether an entity is an arm of the state.
Ms. Hennessey responded to UKHA’s motion to dismiss by arguing she (1) pleaded
the elements of diversity jurisdiction by identifying the state of residence of each
party and (2) could overcome sovereign immunity because UKHA was a corporate
entity and a political subdivision of the state. Ms. Hennessey, however, did not
request any discovery on the arm-of-the-state issue underlying UKHA’s subject
matter jurisdiction and sovereign immunity defenses.
UKHA filed a reply. On the issue of subject matter jurisdiction, UKHA
contended it was an instrumentality and arm of the state such that it was therefore not
a citizen of any state for purposes of diversity jurisdiction. But, once again, UKHA
provided no factual support and no real analysis on this point, stating only:
Plaintiff argues she invoked the jurisdiction of the United States District
Court based upon diversity of citizenship as provided for in 28 U.S.C.
§ 1332. “To sustain diversity jurisdiction there must exist an ‘actual’,
‘substantial’, controversy between citizens of different states from all
parties on the other side.” City of Indianapolis v. Chase Nat’l Bank of
City of N.Y., 314 U.S. 63, 69 (1941). First and foremost, a state is not a
citizen for purposes of diversity jurisdiction. Moor v. Cty. of Alameda,
411 U.S. 693, 717, 93 S. Ct. 1785, 1800 (1973). Defendant University
of Kansas Hospital Authority is an instrumentality of the State of
Kansas; therefore, it is not a citizen of the State for diversity purposes.
See Wilkins v. Kan. Dep’t of Labor, No. 6:12-CV-01363-JAR-KMH,
2013 U.S. Dist. LEXIS 19912, at *5 (D. Kan. Feb. 14, 2013); Perkins v.
Univ. of Kan. Med. Ctr., No. 13-2530-JTM, 2014 U.S. Dist. LEXIS
47491, at *6 (D. Kan. Apr. 7, 2014). Therefore, this Court lacks
diversity jurisdiction over Plaintiff’s claims.
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Id. at 89. As to sovereign immunity, UKHA argued (1) entities created by and
serving as alter egos of the state are entitled to sovereign immunity; and (2) it had not
waived its right to sovereign immunity. UKHA supported the former argument with
the following passage:
The University of Kansas Hospital Authority . . . was created by the
University of Kansas Hospital Act . . . in 1998. K.S.A. 76-3304(a). The
act established the Authority as “a body politic and corporate, with
corporate succession” whose exercise of rights, powers, and privileges
are “deemed and held to be the performance of an essential government
function.” Id. A nineteen-member board of directors, thirteen of which
are appointed by the governor and subject to confirmation by the senate,
governs the Authority. K.S.A. 77-3304(b). Additionally, the Act grants
the Authority the “duties, privileges, immunities, rights, liabilities, and
disabilities of a body corporate and a political instrumentality of the
state.” K.S.A 77-3308(a)(1). Therefore, the immunity to suit in federal
court granted to the State of Kansas by the Eleventh Amendment to the
United States Constitution has been bestowed upon the Authority.
Id. at 90.
The district court undertook the heavy lifting that UKHA did not undertake in
its motion to dismiss. The district court began by identifying the four factors from
Steadfast Ins. Co. v. Agriculture Ins. Co., 507 F.3d 1250, 1253 (10th Cir. 2007), that
govern the initial inquiry in the arm-of-the-state analysis—(1) state law
characterization of the entity, (2) the entity’s autonomy from the state, (3) the entity’s
finances and financial independence from the state, and (4) whether the entity
addresses matters of local or state-wide concern. Although recognizing UKHA failed
to present any evidence, the district court attempted to sua sponte analyze the four
Steadfast factors by turning to the language of the University of Kansas Hospital
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Authority Act. The district court concluded the Act characterized UKHA as an arm of
the state, entitled to the “privileges” and “immunities” of a “body corporate and a
political instrumentality of the state.” Id. at 112 (quoting Kan. Stat. Ann. § 76-
3308(a)(1)). The district court, for purposes of the fourth factor, also concluded
UKHA served the goals of the citizens of Kansas such that it addressed matters of
state-wide concern. The district court further found that the autonomy factor favored
an arm-of-the-state conclusion, looking at (1) the appointment process for UKHA’s
Board of Directors; (2) the state’s ownership of buildings in which UKHA operates;
and (3) the requirement that UKHA obtain approval from the state before repairing or
constructing any building. As for the finances factor, the district court indicated the
factor was “difficult” to analyze in the absence of evidence but observed UKHA
could not levy taxes and surmised that UKHA receives some state funding. Id. at 114.
Concluding that at least three of the Steadfast factors favored an arm-of-the-state
conclusion, the district court determined it could overlook the uncertainty on the
finances factor and that UKHA was an arm of the state. From this determination, the
district court concluded UKHA (1) was not a citizen of any state for purposes of
diversity jurisdiction such that diversity of citizenship and subject matter jurisdiction
were lacking, and (2) was entitled to sovereign immunity. Accordingly, the district
court granted UKHA’s motion to dismiss.
On appeal, Ms. Hennessey is now represented by the University of Colorado
Law School Appellate Advocacy Practicum. In her opening brief, Ms. Hennessey
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raises three arguments. First, Ms. Hennessey advances a procedural argument,
contending the burden is on UKHA to prove it is an arm of the state and it could not
have met its burden where it never identified, analyzed, or presented any evidence on
the Steadfast factors. Second, Ms. Hennessey argues an analysis of the University of
Kansas Hospital Authority Act under the Steadfast factors favors the conclusion that
UKHA is not an arm of the state. Third, and in the alternative, Ms. Hennessey
contends that if we are unsure whether UKHA is an arm of the state, we could
remand for limited discovery on the Steadfast factors, particularly the factors
regarding UKHA’s autonomy from the state and its finances.
II. DISCUSSION
We start by providing the standard of review. Then we discuss sovereign
immunity and the analytical framework and factors governing the arm-of-the-state
analysis. Next, we consider the legal question of whether a plaintiff or the entity asserting
it is an arm of the state has the burden of proof relative to the arm-of-the-state factors.
Finally, after concluding this burden falls on the entity asserting it is an arm of the state,
we assess whether UKHA met its burden.
A. Standard of Review
We review a district court’s grant of a motion to dismiss de novo. Albers v. Bd.
of Cnty. Comm’rs, 771 F.3d 697, 700 (10th Cir. 2014). Specific to a dismissal for
lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure
12(b)(1), we review the dismissal de novo but review any factual findings underlying
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the dismissal for clear error. Stuart v. Colo. Interstate Gas Co., 271 F.3d 1221, 1225
(10th Cir. 2001). We also “review de novo the district court’s dismissal based on
sovereign immunity.” Mojsilovic v. Okla. ex rel. Bd. of Regents for Univ. of Okla.,
841 F.3d 1129, 1131 (10th Cir. 2016).
B. Sovereign Immunity and Legal Framework for Arm-of-the-State Analysis
The Eleventh Amendment states that “[t]he Judicial power of the United States
shall not be construed to extend to any suit in law or equity, commenced or prosecuted
against one of the United States by Citizens of another State, or by Citizens or Subjects of
any Foreign State.” U.S. Const. Amend. XI. Derived from this language “is the privilege
of the sovereign not to be sued without its consent.” Va. Office of Protection & Advocacy
v. Stewart, 563 U.S. 247, 253 (2011). But although the Eleventh Amendment imposes a
jurisdictional limitation on a court’s ability to hear a case against a state once raised by
the state, Kimel v. Fla. Bd. of Regents, 528 U.S. 62, 73 (2000), it “does not automatically
destroy original jurisdiction” because a “[s]tate can waive the defense,” Wisc. Dep’t of
Corrs. v. Schacht, 524 U.S. 381, 389 (1998).
“In terms of scope, Eleventh Amendment immunity extends to states and state
entities but not to counties, municipalities, or other local government entities.”
Steadfast Ins. Co., 507 F.3d at 1253; see also Sturdevant v. Paulsen, 218 F.3d 1160,
1164 (10th Cir. 2000) (“[T]he arm-of-the-state doctrine bestows immunity on entities
created by state governments that operate as alter egos or instrumentalities of the
states.” (quotation marks omitted)). “If a state entity is more like a political
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subdivision—such as a county or city—than it is like an instrumentality of the state,
that entity is not entitled to Eleventh Amendment immunity.” Steadfast Ins. Co., 507
F.3d at 1253. “Although ultimately a matter of federal law, arm-of-the-state status
must be determined in each case by reference to the particular state laws
characterizing the entity.” Sturdevant, 218 F.3d at 1164; see also Duke v. Grady
Mun. Schls., 127 F.3d 972, 975 (10th Cir. 1997) (“[T]hat federal question can be
answered only after considering the provisions of state law that define the agency’s
character.” (quoting Regents of the Univ. of Cal. v. Doe, 519 U.S. 425, 429 n.5
(1997))).
In assessing whether an entity is an arm of the state, we employ a two-step
process. Duke, 127 F.3d at 978; see also Hess v. Port Auth. Trans-Hudson Corp., 513
U.S. 30, 47 (1994) (“When indicators of immunity point in different directions, the
Eleventh Amendment’s twin reasons for being remain our prime guide.”).3 As an
initial, sometimes dispositive, step, we evaluate four “primary factors”:
3
Hess v. Port Authority Trans-Hudson Corp. involved an entity created by an
interstate compact with Congressional approval rather than an entity created by a
single state. 513 U.S. 30, 40–41 (1994). The Supreme Court, however, has cited
Hess, without qualification, in subsequent cases featuring arm-of-the-state analyses
involving entities created by a single state. See Auer v. Robbins, 519 U.S. 452, 456
n.1 (1997); Regents of the Univ. of Cal. v. Doe, 519 U.S. 425, 430 (1997). Thus,
circuit courts have presumed principles set forth in Hess are applicable to the analysis
of an intrastate entity created by a single state. Fresenius Med. Care Cardiovascular
Res., Inc. v. Puerto Rico & Caribbean Cardiovascular Ctr. Corp., 322 F.3d 56, 64–
68 (1st Cir. 2003); see also Takle v. Univ. of Wis. Hosp. & Clinics Auth., 402 F.3d
768, 769–72 (7th Cir. 2005) (citing Hess while conducting analysis of entity created
by a single state).
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First, we assess the character ascribed to the entity under state law.
Simply stated, we conduct a formalistic survey of state law to ascertain
whether the entity is identified as an agency of the state. Second, we
consider the autonomy accorded the entity under state law. This
determination hinges upon the degree of control the state exercises over
the entity. Third, we study the entity’s finances. Here, we look to the
amount of state funding the entity receives and consider whether the
entity has the ability to issue bonds or levy taxes on its own behalf.
Fourth, we ask whether the entity in question is concerned primarily
with local or state affairs. In answering this question, we examine the
agency’s function, composition, and purpose.
Steadfast Ins. Co., 507 F.3d at 1253 (double emphasis added).
If these factors are in conflict and point in different directions, a court should
proceed to the second step and consider the “twin reasons” underlying the Eleventh
Amendment—avoiding an afront to the dignity of the state and the impact of a
judgment on the state treasury. Duke, 127 F.3d at 978 (quoting Hess, 513 U.S. at 47);
see also Fresenius Med. Care Cardiovascular Res., Inc. v. Puerto Rico & Caribbean
Cardiovascular Ctr. Corp., 322 F.3d 56, 65 (1st Cir. 2003) (“If the structural
indicators point in different directions, then the second stage of analysis comes into
play.”). Of these twin reasons, the “foremost” reason for sovereign immunity is
avoiding state liability for any judgment against the entity. U.S. ex rel. Sikkenga v.
Regence Bluecross Blueshield of Utah, 472 F.3d 702, 718 (10th Cir. 2006),
abrogated on other grounds by Cochise Consultancy, Inc. v. U.S. ex rel. Hunt, 139 S.
Ct. 1507, 1511 n.* (2019); see also Fresenius Med. Care Cardiovascular Res., Inc.,
322 F.3d at 66 (“[T]he circuits almost uniformly find that, when there is an ambiguity
about the direction in which the structural analysis points, the potential payment from
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the state treasury is the most critical factor in determining whether an entity is
operating as an arm of the state.” (citing 17A J.W. Moore, Moore’s Federal Practice
§ 123.23(4)(b), a 123–60 & n.51 (3d ed. 2000))); Duke, 127 F.3d at 974 (“The
Supreme Court has indicated more recently that ‘the vulnerability of the State’s purse
is the most salient factor in Eleventh Amendment determinations’” (brackets omitted)
(quoting Hess, 513 U.S. at 48)).
The focus of this judgment liability issue is on direct legal liability and not on
any indirect or practical loss of funds to the state. Sikkenga, 472 F.3d at 718; see also
Duke, 127 F.3d at 981 (“We interpret Doe to require us to focus on legal liability for
a judgment, rather than practical, or indirect, impact a judgment would have on a
state’s treasury.” (citing Doe, 519 U.S. at 429–30)). While focusing on legal liability
rather than practical effect may “ignore[] economic reality,” it “provides a clear and
workable test in this very confused area of the law. It directs courts away from
having to make case-by-case fact-specific determinations of the practical impact on
state treasuries.” Duke, 127 F.3d at 981. “Where it is clear that the state treasury is
not at risk, then the control exercised by the state over the entity does not entitle the
entity to Eleventh Amendment immunity.” Fresenius Med. Care Cardiovascular
Res., Inc., 322 F.3d at 65.
As to the dignity of the state, a court must remember that where “the state has
not clearly demarcated the entity as sharing its sovereignty, there is great reason for
caution” because “[i]t would be every bit as much an affront to the state’s dignity and
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fiscal interests were a federal court to find erroneously that an entity was an arm of
the state, when the state did not structure the entity to share its sovereignty.” Id. at
63. To this point, “[n]ot all entities created by states are meant to share state
sovereignty. Some entities may be part of an effort at privatization, representing an
assessment by the state that the private sector may perform a function better than the
state.” Id. at 64. In fact, incorrectly designating an entity as an arm of the state may
have negative consequences on the state’s goal of creating an entity with better
commercial and employee hiring bargaining power based on its independent
structure. Id.C. Burden on Entity Asserting Arm-of-the-State Status
Before analyzing whether UKHA is an arm of the state, it is necessary to
determine whether Ms. Hennessey or UKHA bore the burden on this matter. This
question is a matter of first impression for our circuit. See Patterson v. Rural Water Dist.
2, 438 F. Supp. 3d 1258, 1268 (W.D. Okla. 2020) (“Neither the Supreme Court nor the
Tenth Circuit has decided who carries the burden of persuasion regarding Eleventh
Amendment immunity.”); see also Ross v. Colo. Dep’t of Transp., No. 11-cv-02603-
REB-KMT, 2012 WL 5975086, at *5 (D. Colo. Nov. 14, 2012). Other circuits, however,
unanimously agree that the burden falls on the entity asserting it is an arm of the state
when the issue arises solely in the context of sovereign immunity.4 See Woods v. Rondout
4
District court decisions both within our circuit and in other circuits without
precedent on the issue also advance the position that the burden falls on the entity
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Valley Central Sch. Dist. Bd. of Educ., 466 F.3d 232, 237 (2d Cir. 2006) (collecting cases
from Third, Fifth, Sixth, Seventh, and Ninth Circuits and stating, “[w]e now join these
sister courts in holding that the governmental entity invoking the Eleventh Amendment
bears the burden of demonstrating that it qualifies as an arm of the state entitled to share
in its immunity”); Fresenius Med. Care Cardiovascular Res., Inc. v. Puerto Rico &
Caribbean Cardiovascular Ctr. Corp., 322 F.3d 56, 61 (1st Cir. 2003) (“[T]he entity
asserting Eleventh Amendment immunity[] bears the burden of showing it is an arm of
the state.”). For four reasons, we adopt the position advanced by this persuasive
authority.
First, we have described sovereign immunity as a “defense” that a state or a state-
formed entity may assert. Steadfast Ins. Co., 507 F.3d at 1252. Although some exceptions
exist, the defendant typically bears the burden when asserting a defense.
Second, in assigning the burden, we are cognizant of which party possesses the
evidence on the issue. As stated by the Ninth Circuit when assigning the burden to the
asserting arm-of-the-state status. See Brady v. Office of the Cnty. Prosecutor, No. 19-
16348 (ES) (SCM), 2020 WL 5088634, at *2–3 (D. N.J. Aug. 28, 2020); Robinson v.
Paulhus, No. 19-12572 (MAS) (TJB), 2020 WL 2732132, at *2 (D. N.J. May 22,
2020); Patterson v. Rural Water Dist. 2, 438 F. Supp. 3d 1258, 1268 (W.D. Okla.
2020);Giddings v. Utah Transit Auth., 107 F. Supp. 3d 1205, 1208 (D. Utah 2015);
Ross v. Colo. Dep’t of Transp., No. 11-cv-02603-REB-KMT, 2012 WL 5975086 at
*5 (D. Colo. Nov. 14, 2012); Thomas v. Guffy, No. Civ-07-823-W, 2008 WL
2884368, at *1, *4 (W.D. Okla. July 25, 2008) (order adopting report and
recommendation with report and recommendation attached to order); Teichgreaeber
v. Memorial Union Corp. of the Emporia State Univ., 946 F. Supp. 900, 903 (D. Kan.
1996); see also Reynolds v. Flynn, No. 21-cv-01154-RM-NYM, 2022 WL 252327, at
*6 (D. Colo. Jan. 27, 2022) (placing burden on sheriff sued in official capacity to
establish county was an arm of the state).
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entity asserting arm-of-the-state status, it is a “familiar principle that, ‘when the true facts
relating to a disputed issue lie peculiarly within the knowledge of’ one party, the burden
of proof may properly be assigned to that party ‘in the interest of fairness.’” ITSI T.V.
Prods., Inc. v. Agric. Assocs., 3 F.3d 1289, 1292 (9th Cir. 1993) (brackets omitted)
(quoting United States v. Hayes, 369 F.2d 671, 676 (9th Cir. 1966)). Here, while the text
of the University of Kansas Hospital Authority Act is readily available to a would-be
plaintiff, UKHA is in possession of key evidence regarding its finances, day-to-day
operations, and operating procedures. Accordingly, it makes sense to assign the burden to
UKHA.5
Third, placing the burden on the party asserting sovereign immunity indirectly
advances one of the primary purposes of sovereign immunity. “Sovereign immunity does
not merely constitute a defense to monetary liability or even to all types of liability.
Rather, it provides an immunity from suit.” Fed. Maritime Comm’n v. S.C. State Ports
Auth., 535 U.S. 743, 766 (2002). If the burden is placed on the plaintiff to rebut a blanket
and cursory assertion of sovereign immunity like the one advanced by UKHA, the
plaintiff will need to seek limited discovery to obtain the evidence necessary to sustain
her burden. But if the burden is placed on the defendant, the defendant will put forth its
5
At oral argument, UKHA contended a plaintiff could obtain evidence on
these matters through an open records request. Aside from whether the average pro se
litigant could successfully navigate the open records request process, we doubt a
plaintiff, counseled or pro se, would pursue an open records request for information
the party could obtain through limited discovery. And, as discussed next, placing the
burden on the entity asserting arm-of-the-state status, rather than requiring limited
discovery, advances one of the primary goals of sovereign immunity.
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evidence with its motion, potentially obviating the need for discovery. And if discovery is
avoided, the district court may resolve the motion raising the sovereign immunity issue
more quickly, giving an entity entitled to sovereign immunity the benefits of immunity
sooner.
Fourth, assigning the burden to the entity asserting it is an arm of the state is
consistent with our precedent assigning the burden in a similar sovereign immunity
context. Within the context of the Foreign Sovereign Immunities Act (“FSIA”) and the
right of a foreign sovereign to assert immunity from suit, we have held the foreign
sovereign bears the initial burden of making a prima facie showing of immunity, and a
burden of rebutting evidence presented by a plaintiff to overcome that prima facie
showing. Southway v. Cent. Bank of Nigeria, 328 F.3d 1267, 1271 (10th Cir. 2003).
Indeed, other courts have found the assignment of the burden in the foreign sovereign
immunity context instructive when placing the burden on the entity asserting sovereign
immunity under the Eleventh Amendment. Woods, 466 F.3d at 238; ITSI T.V. Prods.,
Inc., 3 F.3d at 1292.
For these four reasons, and given the weight of persuasive authority, we conclude
the burden falls on UKHA to establish it is an arm of the state and, therefore, entitled to
sovereign immunity. In concluding the burden in this case falls on UKHA, we recognize
but dispel two countervailing points.
First, our precedent allows a district court to raise Eleventh Amendment sovereign
immunity sua sponte. U.S. ex rel. Burlbaw v. Orenduff, 548 F.3d 931, 942 (10th Cir.
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2008); see also Colby v. Herrick, 849 F.3d 1273, 1276–78 (10th Cir. 2017) (raising arm-
of-the-state issue within sovereign immunity sua sponte); Elam Const., Inc. v. Reg.
Transp. Dist., 129 F.3d 1343, 1345 (10th Cir. 1997) (raising sovereign immunity sua
sponte where defendant contended it was an arm of the state and not a citizen for
purposes of 42 U.S.C. § 1983 action). On the surface, the ability of a court to raise an
issue sua sponte cuts against placing a burden on the party who might raise a defense of
entitlement to immunity. However, although a district court may raise the issue sua
sponte, “it is not obligated to do so.” Burlbaw, 548 F.3d at 942. Consistent with this
discretion, a district court may properly raise and resolve the sovereign immunity issue
sua sponte where judicially noticeable evidence clearly resolves an entity’s arm-of-the-
state status and entitlement to sovereign immunity. But a district court should refrain
from resolving the sovereign immunity issue, without evidence from the parties, where
judicially noticeable evidence on the Steadfast factors points in different directions.
Further, in instances of conflicting evidence from judicially noticeable sources, if the
district court opts to raise the sovereign immunity issue sua sponte, the burden remains
with the entity that would benefit from arm-of-the-state status. Under this framework, a
court’s ability to sua sponte raise sovereign immunity where an arm-of-the-state analysis
is required is preserved and operates in harmony with the burden falling on the entity
where the Steadfast factors point in conflicting directions based solely on judicially
noticeable evidence.
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Second, an arm-of-the-state determination not only implicates sovereign immunity
but may also impact whether the district court has subject matter jurisdiction over the
cause of action. Ms. Hennessey, in advancing only a state law claim for negligent
supervision, relied exclusively on diversity jurisdiction to bring her action in federal
court. “The district courts shall have original jurisdiction of all civil actions where the
matter in controversy exceeds the sum or value of $75,000, exclusive of interest and
costs, and is between . . . citizens of different States.” 28 U.S.C. § 1332(a). Meanwhile,
“a State is not a ‘citizen’ for purposes of diversity jurisdiction” and, by extension, an
“arm or alter ego of the State” is also not a citizen of a state. Moor v. Alameda Cnty., 411
U.S. 693, 717 (1973). Thus, if UKHA is an arm of the state, then it is not a citizen of
Kansas for purposes of diversity jurisdiction and Ms. Hennessey cannot satisfy the
“citizens of different States” requirement of § 1332(a).
It is well established that “[i]t is incumbent upon the plaintiff properly to allege the
jurisdictional facts, according to the nature of the case.” McNutt v. Gen. Motors
Acceptance Corp. of Ind., Inc., 298 U.S. 178, 182 (1936). This includes the “party
invoking diversity jurisdiction bear[ing] the burden of proving its existence.” Middleton
v. Stephenson, 749 F.3d 1197, 1200 (10th Cir. 2014). From this, one might conclude that
even though the burden is on UKHA to prove it is an arm of the state for purposes of
sovereign immunity, the burden is on Ms. Hennessey to establish UKHA is not an arm of
the state for purposes of subject matter jurisdiction. But the burden on the plaintiff to
establish jurisdiction does not extend this far. Rather, once the plaintiff sufficiently
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alleges and adequately supports that an entity was created in and principally operates
within a state, the plaintiff has met her burden and the burden shifts to the entity to
demonstrate it is an arm of the state. We reach this conclusion in part because, like in the
sovereign immunity context, it is the defendant, not the plaintiff, that possesses the
evidence essential to the arm-of-the-state inquiry. Cf. ITSI T.V. Prods., Inc., 3 F.3d at
1292. Furthermore, although the Supreme Court has stated sovereign immunity “partakes
of the nature of a jurisdictional bar,” Welch v. Tex. Dep’t of Highways & Pub. Transp.,
483 U.S. 468, 476 n.6 (1987) (quoting Edelman v. Jordan, 415 U.S. 651, 678 (1974)),
courts have already shifted the burden to the defendant on the arm-of-the-state inquiry in
the sovereign immunity context such that it is natural to also do so where the identical
inquiry impacts the diversity-of-citizenship basis for subject matter jurisdiction. Finally,
placing a burden on the entity claiming arm-of-the-state status is similar to the placement
of burdens in the foreign sovereign context, where the FSIA provides the “exclusive
source of jurisdiction for claims against foreign states or their instrumentalities,” but the
“‘foreign state [must] make[] a prima facie showing of immunity’” and may be required
to “meet its ultimate burden of proving that [an exception allowing for suit] does not
apply.” Southway, 328 F.3d at 1271 (quoting Gen. Elec. Capital Corp. v. Grossman, 991
F.2d 1376, 1382 (8th Cir. 1993)).
For these reasons, we conclude the burden is on the entity asserting it is an arm of
the state, both for purposes of sovereign immunity and for purposes of an attack on a
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prima facie showing of diversity jurisdiction. We now turn to whether UKHA met its
burden.
D. UKHA did not Meet its Burden and Remand is Required
Review of UKHA’s memorandum in support of its motion to dismiss and its reply
brief on its motion to dismiss clearly demonstrates UKHA did not even attempt to meet
its burden. Neither document so much as identified the four Steadfast factors, no less
cited evidence relevant to the factors or analyzed the factors. All UKHA did before the
district court was cite to the University of Kansas Hospital Authority Act.
Under the framework discussed earlier, a district court may sua sponte raise and
resolve the arm-of-the-state inquiry only where judicially noticeable evidence clearly
resolves the inquiry. This is not such a case. While the Act may provide a sufficient basis
to resolve two of the Steadfast factors—the state’s characterization of UKHA and
UKHA’s focus on matters of state-wide concern—in favor of UKHA being an arm of the
state, it does not support such a conclusion on the finances factor or, as we discuss later,
the autonomy factor. Accordingly, we assume the state’s characterization of UKHA and
UKHA’s focus on state-wide concerns support the district court’s decision and address
only the Steadfast factors we conclude weigh against the district court’s ruling.
1. Finances Factor
In considering the finances factor a court must look to “the amount of state
funding the entity receives and consider whether the entity has the ability to issue bonds
or levy taxes on its own behalf.” Steadfast Ins. Co., 507 F.3d at 1253; see also Sikkenga,
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472 F.3d at 721 (considering whether the bulk of an entity’s operating funds come from
its own revenues or from the state). The inability of an entity to levy taxes, combined
with its receipt of all or most of its funding from the state, will serve as a strong indicator
that the entity is an arm of the state. Duke, 127 F.3d at 980. Likewise, if an entity cannot
levy taxes and its ability to issue bonds is subject to state review or state procedures, this
is also an indicator that the entity is an arm of the state. Sturdevant, 218 F.3d at 1170.
Conversely, an entity’s ability to generate its own revenue so as not to need financial
assistance from the state supports a finding that the entity is not an arm of the state. Hess,
513 U.S. at 45. Finally, we consider the existence, or lack thereof, of regulations on how
an entity may handle its finances and whether the entity’s funds are “classified as ‘public
funds.’” Steadfast Ins. Co., 507 F.3d at 1254 (quoting Okla. Stat. tit. 82, § 861A(A)).
Without evidence of UKHA’s financing and revenue streams we are unable to
fully assess the factor. But what we do know from the text of the University of
Kansas Hospital Authority Act supports the conclusion that UKHA is not an arm of
the state. The “Findings, purpose” provision of the Act indicates the hospital needed
to have a means of earning revenues necessary for operation so as “to remain
economically viable to earn revenues necessary for its operation and to engage in
arrangements with public and private entities” and to compete with private healthcare
providers. Kan. Stat. Ann. § 76-3302(a)(6). From a more concrete perspective, the
Act gives the board of UKHA authority to set the salary of employees, including the
president, and to decide whether to provide supplemental benefits for employees.
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Kan. Stat. Ann. §§ 76-3304(l), (m), 76-3308(a)(14), 76-3311(a). UKHA also has the
power to “borrow money . . . and pledge all or any part of [its] assets therefor.” Kan.
Stat. Ann. § 76-3308(a)(6). And UKHA may make loans to corporations,
partnerships, associations, joint ventures, and other entities. Kan. Stat. Ann. § 76-
3308(e).
The Act also gives UKHA wide authority to open and maintain bank accounts.
For instance, the Act, when describing UKHA’s powers and duties, instructs that
UKHA has the power to “deposit moneys of [UKHA] in any banking institution
within or without the state or in any depository authorized to receive such deposits,
one or more persons to act as custodians of the moneys of [UKHA].” Kan. Stat. Ann.
§ 76-3308(a)(12). Similarly, a later provision of the Act states:
all moneys of [UKHA] shall be deposited in one or more bank or trust
companies in one or more special accounts. All banks and trust
companies are authorized to give security for such deposits if required
by [UKHA]. The moneys in such accounts shall be paid out on a
warrant or other orders of the treasurer of [UKHA] or any such other
person or persons as [UKHA] may authorize to execute such warrants or
orders.
Kan. Stat. Ann. § 76-3308(f) (emphasis added). From these provisions, it is clear the
legislature envisioned that UKHA would have its own funds and would manage those
funds outside of the state treasury.
Evidencing the rather obvious fact that UKHA generates revenues, the Act
authorizes UKHA to hire one or more “collection services provider[s].” Kan. Stat. Ann.
§ 76-3308(h). And, UKHA has the ability to control the amount of revenue it generates in
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that it has the power to “fix, revise, charge and collect rates, rentals, fees and other
charges for services or facilities furnished by or on behalf of [UKHA],” without the
affixing of said rates being subject to supervision or regulation by the state. Kan. Stat.
Ann. § 76-3308(a)(15).
Even if UKHA’s ability to generate revenues and control those monies was
insufficient for the finance factor to counsel against an arm-of-the-state finding, UKHA
additionally has seemingly unconstrained authority to issue bonds. An entire section of
the University of Kansas Hospital Authority Act addresses the issuance of bonds, with
the lead provision stating that UKHA
has the power and is authorized to issue from time to time [UKHA’s]
bonds in such principal amounts as the authority determines to be
necessary to provide sufficient funds for achieving any of [UKHA’s]
corporate purposes, including the payment of interest on bonds of
[UKHA], the establishment of reserves to secure such bonds, refunding
any outstanding bonds and all other expenditures of [UKHA] incident to
and necessary or convenient to carry out its corporate purposes and
powers.
Kan. Stat. Ann. § 76-3312(a)(1) (emphasis added). In managing the bonds, the
UKHA board is tasked with (1) selecting a “bond financing team, including bond
counsel and bond underwriter . . . , to provide all professional services required to the
bond issuance,” Kan. Stat. Ann. § 76-3312(b)(2); (2) pledging any part of UKHA’s
revenues and/or assets to secure the bond, Kan. Stat. Ann. § 76-3312(c); (3) limiting
“the purpose to which the proceeds of sale of bonds may be applied and pledging
such proceeds to secure the payment of the bonds,” id.; (4) limiting “the issuance of
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additional bonds” or the terms of additional bonds, id.; and (5) limiting “the amount
of moneys to be expended by [UKHA],” id.It is also abundantly clear that any bond issued by UKHA is the sole
responsibility of UKHA and not backed by the State of Kansas. Specifically, a
provision of the Act says that “every issue of [UKHA’s] bonds shall be obligations of
[UKHA] payable out of any revenues or moneys of [UKHA].” Kan. Stat. Ann. § 76-
3312(a)(2) (emphasis added). More explicitly showing a division between UKHA
and the state relative to bonds, the Act says that “[n]either the state of Kansas nor the
regents shall be liable for bonds of [UKHA], and such bonds shall not constitute a
debt of the state or of the regents.” Kan. Stat. Ann. § 76-3312(n). The same provision
requires that a statement to this effect be printed on the face of any bond issued by
UKHA. Id. Reciprocally, the state has pledged that it “will not limit or alter the rights
. . . vested in [UKHA] to fulfill the terms of any agreements made with [bond]
holders . . . or in any way impair the rights and remedies of such holders until such
bonds [are fully paid and discharged].” Kan. Stat. Ann. § 76-3312(q). And, somewhat
like with the state’s disclaimer of liability, the board is authorized to print language
to this effect on the face of any bond it issues. Id.Against this weighty and voluminous evidence that UKHA generates revenue,
controls its own finances, and can issue bonds, UKHA presents two less persuasive
arguments. First, UKHA argues its financial structure supports an arm-of-the-state
finding because it cannot levy taxes. But, under our precedent, an entity’s inability to
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levy taxes is emblematic of it being an arm of the state only if the entity also cannot
issue bonds without state oversight and cannot generate its own revenue. Sturdevant,
218 F.3d at 1169–1170; Duke, 127 F.3d at 980. Accordingly, UKHA’s inability to
levy taxes is of minimal weight in the calculus.
Second, UKHA notes it is subject to reporting and review requirements. It is
true that an entity being subject to reporting and auditing requirements favors an arm-
of-the-state finding. Steadfast Ins. Co., 507 F.3d at 1254–55. And the Act does
require UKHA to submit financial information for review to various state actors, in
that UKHA
shall submit to the regents, the governor and the legislature within six
months after the end of the fiscal year a report which shall set forth a
complete and detailed operating and financial statement of [UKHA]
during such year. Also included in the report shall be comprehensive
information regarding all audit reports performed in such year.
Kan. Stat. Ann. § 76-3312(p). But we are unpersuaded this consideration is capable
of swinging the finance factor in favor of an arm-of-the-state finding given the
extensive latitude the Act provides UKHA regarding the management of its finances,
its ability to generate revenue, and its ability to issue bonds.6 This is particularly true
where local governmental entities that do not benefit from sovereign immunity, such
as counties, also must make their financial information available for public
6
Additionally, it is debatable whether the requirement that an entity report its
finances falls within the finances factor rather than the autonomy factor, which we
discuss next. See Steadfast Ins. Co., 507 F.3d at 1254–55 (discussing auditing and
reporting requirements as part of autonomy factor).
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inspection. See Kan. Stat. Ann. §§ 12-866(b); 19-26,105(c), (d); 19-228(b); 19-3521.
Thus, without any evidence in the record demonstrating UKHA receives subsidies,
not to be confused with revenue streams, from the State of Kansas, the finances
factor cuts against UKHA being an arm of the state.7 This conclusion alone is
sufficient to vacate the district court’s grant of UKHA’s motion to dismiss and
remand so the parties might submit evidence on the Steadfast factors.
2. UKHA’s Reliance on Sturdevant is Misplaced
To overcome this conclusion, UKHA attempts to rely upon Sturdevant. There,
we indicated a court may conclude an entity is an arm of the state where there is
ambiguity regarding the entity’s legal liability for judgment but other factors all favor
an arm-of-the-state conclusion. Sturdevant, 218 F.3d at 1166, 1171. Three things
distinguish the present case from Sturdevant. First, as discussed, the text of the
University of Hospital Kansas Authority Act supports the conclusion that the
finances factor favors a finding that UKHA is not an arm of the state.
Second, even if one were to determine the factor was neutral, such a
conclusion would still require remand. From an evidentiary standpoint, in Sturdevant,
7
In discussing the finances factor, the district court cited a provision of the
Act allowing UKHA to receive compensation for services it provided to the
University of Kansas Medical School in the training of medical students and for
patient care services to indigent Kansas citizens. It is not apparent how these revenue
streams differentiate UKHA from a private hospital that contracts with the state and
provides like services. The proper focus is on whether the state provides financial
assistance to and subsidizes the entity. See Hess, 513 U.S. at 45 (discussing the
financial solvency of an entity and its ability to generate its own revenue). Thus, the
ability to generate these revenues cuts in favor of financial autonomy, not against it.
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the ambiguity regarding the liability for any judgment arose from the presentation of
conflicting evidence, not from the absence of evidence. Id. at 1165–66. Thus, the
entity asserting it was an arm of the state attempted to meet its burden. Here, there is
no reason to conclude ambiguity exists regarding UKHA’s finances where UKHA
merely failed to present any evidence on the subject.8
Third, and most problematic for UKHA’s reliance on Sturdevant, exercising de
novo review, we are unable to concur with the district court’s assessment that, based
exclusively on the language of the University of Kansas Hospital Authority Act, the
autonomy factor favors UKHA being an arm of the state. We begin by providing a
brief overview of how to approach the autonomy factor. We then apply that analysis,
relying on six considerations apparent from the text of the Act.9
8
If the absence of evidence permitted a finding of ambiguity, we would
incentivize an entity that bore liability for any judgment against it and with finances
independent of a state to demur from presentation of evidence on these matters,
especially in situations where the entity is in possession of the evidence. To avoid
this perverse incentive, if the entity with the burden fails to present evidence of its
finances and legal liability, and the judicially noticed evidence is unclear, the factor
counts against the entity being an arm of the state.
9
The considerations we discuss are (1) control of the entity by the governor
and legislature, (2) classification of the entity’s employees, (3) the entity’s ownership
and control over property, (4) the entity’s ability to form contracts, (5) the entity’s
ability to set policies, and (6) the ability of the entity to sue and be sued. These
considerations are not an exhaustive list, just those that other courts have relied upon
when analyzing the autonomy factor and that are apparent from the present record
evidence.
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a. Autonomy factor basics
The autonomy factor is the most complex of the four factors because it spans a
broad range of considerations. In analyzing this factor, a court must remain cognizant
that some ties and oversight will always remain between the state and an entity
created by the state. Takle v. Univ. of Wis. Hosp. & Clinics Auth., 402 F.3d 768, 771
(7th Cir. 2005). This is true even where it was the state’s intent to privatize an entity.
See id. To this point, the Seventh Circuit, when considering a very similar set of
circumstances as those underlying the formation and operation of UKHA, pointedly
opined,
[t]he strings that tie the hospital to the state are found in many cases in
which a state decides to privatize a formerly state function. They do not
require the privatization be treated as a farce in which the privatized
entity enjoys the benefits both of not being the state and so being freed
from the regulations that constrain state agencies, and of being the state
and so being immune from suit in federal court.
Id.b. Autonomy factor considerations
i. Control of entity by governor & legislature
Turning to specifics, a common consideration in analyzing the autonomy
factor is the role the state executive branch, specifically the governor, and the state
legislature play in the operations of the entity. See id. at 770; see also Steadfast Ins.
Co., 507 F.3d at 1254; Fresenius Med. Care Cardiovascular Res., Inc., 322 F.3d at
71–72; Sturdevant, 218 F.3d at 1168–69. In many cases involving entities asserting
arm-of-the-state status, the governor and legislature respectively appoint and confirm
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members of the board that oversees the entity, and this structure weighs against the
entity’s autonomy from the state. Steadfast Ins. Co., 507 F.3d at 1254; Fresenius
Med. Care Cardiovascular Res., Inc., 322 F.3d at 71–72; Sturdevant, 218 F.3d at
1169. However, “the power to appoint is not the power to control.” Takle, 402 F.3d at
770. As such, this is but one consideration and a governor’s appointment power is not
sufficient to establish that the autonomy factor favors an arm-of-the-state finding.
Fresenius Med. Care Cardiovascular Res., Inc., 322 F.3d at 71. Rather, courts also
look at (1) the ability of the governor to remove appointees, Steadfast Ins. Co., 507
F.3d at 1254; Fresenius Med. Care Cardiovascular Res., Inc., 322 F.3d at 71; and
(2) the governor’s power to block or veto action taken by the board of the entity,
Hess, 513 U.S. at 44; Fresenius Med. Care Cardiovascular Res., Inc., 322 F.3d at 72.
While the district court concluded this consideration favored UKHA not being
autonomous from the state, we conclude the consideration produces mixed results
that favor a finding of autonomy. The board governing UKHA is composed of
nineteen members, of which thirteen were appointed by the governor and confirmed
by the legislature at UKHA’s inception. Kan. Stat. Ann. § 76-3304(b). However, the
Act greatly curtails the governor’s discretion in appointments after selection of the
first board. This is because, upon a vacancy on the board, the appointment of a new
member is a two-step process, with the board identifying two or three candidates
from whom the governor must select when making an appointment to fill the
vacancy. Kan. Stat. Ann. § 76-3304(e). Thus, while the governor had wide-ranging
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appointment power at UKHA’s inception, that power contracted long ago.
Additionally, nothing in the Act gives the governor any authority to remove a
member of the board. Rather, that function is expressly left to the board itself. Kan.
Stat. Ann. § 76-3304(j). Furthermore, although the governor appoints the majority of
board members, the Act leaves it to the board to select its leadership and to form
committees. Kan. Stat. Ann. § 76-3304(g). Likewise, the Act tasks the board, not the
governor, with power to “appoint a president who shall serve at the pleasure of the
board” and “as the chief executive officer of [UKHA].” Kan. Stat. Ann. § 76-3304(l);
see also Kan. Stat. Ann. § 76-3308(a)(14). And, interestingly, taking the mantra of
“the power to appoint is not the power to control” a step further, Takle, 402 F.3d at
770, it is the president, not the board, who “shall direct and supervise administrative
affairs and the general management of [UKHA],” Kan. Stat. Ann. § 76-3304(l). Thus,
the governor determines neither who among the board members leads the board nor
the individual in charge of overseeing the day-to-day operations of UKHA.
Accordingly, we disagree with the district court’s conclusion that this consideration
supports a finding that UKHA is under the control of the state.
ii. Classification of employees
Another common consideration within the autonomy factor is how employees
of the entity are classified, including whether they are “state” employees, whether
they must partake in state retirement and benefit programs, and whether they are
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subject to a state merit system for purposes of hiring.10 Steadfast Ins. Co., 507 F.3d at
1254; see also Takle, 402 F.3d at 771 (noting that employees remained “state
employees” but not counting this consideration significantly against autonomy where
the structure was established only to permit employees to take part in retirement
system); cf. Fresenius Med. Care Cardiovascular Res., Inc., 322 F.3d at 64(hypothesizing that entity might gain advantage in employment market if it is not an
arm of the state and subject to state regulations and systems on hiring and firing of
employees and benefits). This consideration favors a finding of autonomy.
In multiple places, the University of Kansas Hospital Authority Act explicitly
declares that employees of the hospital and UKHA “shall not be considered state
employees” both for purposes of the Act and for purposes of any other state law or
regulation. Kan. Stat. Ann. § 76-3303(h); see also Kan. Stat. Ann. § 76-3303(n) (“A
[UKHA] employee shall not be considered to be a state employee, as such term is
defined in this act or in any other statute or regulation.”). Likewise, the Act instructs
that “nothing . . . shall be construed as placing any officer or employee of [UKHA] in
the classified or unclassified service under the Kansas civil service act.” Kan. Stat.
Ann. § 76-3311(b). And rather than placing UKHA in existing state benefit programs
and subjecting them to the state merit hiring system, the Act leaves discretion to the
10
The district court never discussed the classification of employees when
analyzing the autonomy factor.
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UKHA board to create these programs and systems and to set the terms of
employment, stating that UKHA
may employ such employees as it may require and upon such terms and
conditions as it may establish. [UKHA] shall establish personnel,
payroll, benefit and other such systems as authorized by the board . . . .
[UKHA] shall determine the qualifications and duties of its employees
subject to any statutes concerning licensure, certification or registration
under state law. The board shall develop and adopt policies and
procedures that will afford its employees grievance rights, ensure that
employment decisions shall be based upon merit and fitness or
applicants and shall prohibit discrimination because of race, religion,
color, sex, or national origin.
Kan. Stat. Ann. § 76-3311(a) (emphasis added). The Act also delegates additional
discretion to the board relative to the establishment of retirement benefits for
employees hired after the transfer of the hospital from the regents to UKHA,
permitting the board to either (1) affiliate with the state retirement system or
(2) create an independent retirement system for UKHA employees. Kan. Stat. Ann.
§ 76-3322. Accordingly, the Act largely treats UKHA like a private hospital when it
comes to hiring, firing, managing, and providing benefits for its employees.
The Act’s classification and parameters for UKHA hiring and managing
employees have all the hallmarks of UKHA being autonomous. And, through its brief
on appeal, UKHA does not identify a single provision of the Act contradicting this
conclusion. Nor have we located any such provision. Accordingly, consideration of
the classification of employees strongly favors a finding of autonomy.
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iii. Ownership & control of property
A third consideration in the autonomy factor analysis is whether the entity has
ownership and control over property. Steadfast Ins. Co., 507 F.3d at 1254; Takle, 402
F.3d at 771. Unlike the prior two considerations, this consideration demonstrates a
degree of control by the state over UKHA and favors UKHA being an arm of the
state.
As a starting point, nothing in the University of Kansas Hospital Authority Act
transfers ownership of any of the buildings or facilities in which UKHA operates
from the University of Kansas to UKHA. This, on its own, might not be of great
significance, as “[m]any private entities operate on public land or in public
buildings,” including clearly private commercial entities like “concessionaires in
airports.” Takle, 402 F.3d at 771. However, UKHA also has no hope of ever owning
any new buildings or facilities because the Act instructs that even if UKHA finances
the construction of buildings and facilities, “the buildings and facilities constructed
shall become the property of Kansas upon completion and acceptance by the
secretary of administration.” Kan. Stat. Ann. § 76-3308a(a). Moreover, UKHA is not
free to undertake the construction of new buildings or facilities or to repair or
renovate existing buildings and facilities without first obtaining approval from the
state board of regents and the secretary of the administration at the University of
Kansas. Kan. Stat. Ann. § 76-3308a(a)–(b). To add to the web of oversight and state
control over buildings and facilities, the board of regents may not approve any capital
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improvement proposed by UKHA without consulting with the State Building
Construction Joint Committee. See id. Thus, when it comes to the most tangible and
valuable property, UKHA lacks autonomy.
Provisions of the Act governing UKHA’s control over intangible property and
over tangible and real properties that are not buildings or facilities take a generally
different tack. The Act envisioned properties of this nature might be transferred from
the University of Kansas to UKHA on the date that responsibility for operation of the
hospital was transferred from the regents to UKHA.11 Kan. Stat. Ann. § 76-3309(a).
Of more consequence and certainty, the Act gives UKHA the power to
purchase, lease, trade, exchange, or otherwise acquire, maintain, hold,
improve, mortgage, sell, lease and dispose of personal property,
whether tangible or intangible, and any interest therein; and to
purchase, lease, trade, exchange or otherwise acquire real property or
any interest therein, and to maintain, hold, improve, mortgage, lease
and otherwise transfer such real property, so long as such transactions
do not conflict with the mission of the authority as specified in th[e] act.
Kan. Stat. Ann. § 76-3308(a)(7) (emphasis added). Likewise, UKHA has the power
to “acquire space, equipment, services, supplies and insurance necessary to carry out
the purposes of th[e] act.” Kan. Stat. Ann. § 76-3308(a)(11). The board has additional
powers to regulate the use of property, in that the Act tasks it with “develop[ing]
policies and procedure generally applicable to the procurement of goods, services and
11
The Act goes on to say that “[a]ny disputes that arise in the transfer of
property from the university to [UKHA] shall be resolved by the governor.” Kan.
Stat. Ann. § 76-3309(d). This provision demonstrates a degree of control by the state,
indicating UKHA might be an arm of the state, as a typical dispute over property
would be resolved through judicial channels.
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construction.” Kan. Stat. Ann. § 76-3308(a)(9). And the board is tasked with the
power to “establish policies and procedures regarding . . . the use, occupancy or
operation of any [UKHA] facility,” with said policies and procedures “not . . . subject
to supervision or regulation by any commission, board, bureau or agency of the
state.” Kan. Stat. Ann. § 76-3308(a)(15) (emphasis added).
Overall, while the legislature’s decision not to transfer existing buildings and
facilities to UKHA may not be surprising, UKHA’s inability to own buildings and
facilities it constructs with funds from its revenues cuts against UKHA having
autonomy from the state. And while UKHA has authority over other types of
property, its authority here is not so vast as to swing the consideration against an
arm-of-the-state conclusion.
iv. Ability to form contracts
Another consideration, albeit one discussed with less frequency, is an entity’s
ability to form its own contracts with government entities and commercial
enterprises. Sikkenga, 472 F.3d at 719–20. This consideration overwhelmingly favors
UKHA having autonomy from the state because the University of Kansas Hospital
Authority Act contains at least five separate provisions giving the board and UKHA
power to form contracts without approval or oversight from the state or any state
agency. First, the “Findings, purpose” section of the Act indicates that, to provide the
desired level of care, the hospital needed freedom “to engage in arrangements with
public and private entities.” Kan. Stat. Ann. § 76-3302(a)(6). Second, the Act grants
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UKHA the power to “develop policies and procedures generally applicable to the
procurement of goods [and] services,” Kan. Stat. Ann. § 76-3308(a)(9), which
naturally implicates the formation of contracts with commercial entities. Third, the
Act delegates to UKHA the power to “contract for and to accept any gifts, grants and
loans of funds, property, or any other aid.” Kan. Stat. Ann. § 76-3308(a)(10)
(emphasis added). Fourth, the Act also delegates to UKHA the power to “participate
in joint ventures with individuals, corporations, governmental bodies or agencies,
partnerships, associations, insurers or other entities to facilitate any activities or
programs.” Kan. Stat. Ann. § 76-3308(c). Fifth, and directly to the point, the Act
grants UKHA the broad and unregulated power to
make and execute contracts, guarantees or any other instruments and
agreements necessary or convenient for the exercise of its powers and
functions including, without limitation, to make and execute contracts
with hospitals or other health care businesses to operate and manage any
or all of the hospital facilities or operations and to incur liabilities and
secure the obligations of any entity or individual.
Kan. Stat. Ann. § 76-3308(a)(5) (emphasis added).
Similar to the classification-of-employees consideration, UKHA’s brief on
appeal does not identify a single statutory provision placing any direct limit or any
state oversight on UKHA’s ability to enter into contracts. And our review of the Act
identifies no such provision. Accordingly, consideration of UKHA’s ability to form
contracts strongly supports a finding that UKHA is autonomous from the state.
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v. Ability to set policies
An entity’s ability to set its own policies, without oversight and control from
the state or a state agency, is instrumental in the entity being autonomous from the
state. Sikkenga, 472 F.3d at 720. Conversely, if day-to-day operations of an entity
were controlled by the state, autonomy would almost certainly not exist. The
University of Kansas Hospital Authority Act unambiguously provides UKHA
unrestricted power to set policies governing its day-to-day operations. For instance,
UKHA has the power to “establish policies and procedures regarding any services
rendered for the use, occupancy or operation of any [UKHA] facility” and the
policies established are “not to be subject to supervision or regulation by any
commission board, bureau or agency of the state.” Kan. Stat. Ann. § 76-3308(a)(15).
Similarly, the Act grants to the board of UKHA the power to “adopt, repeal and
amend such rules, procedures and bylaws, not contrary to law . . ., as it deems
expedient for its own governance and for the governance and management of
[UKHA].” Kan. Stat. Ann. § 76-3304(k). And, as noted earlier, the president, who is
selected by and serves at the pleasure of the board, is tasked with supervising and
managing UKHA’s affairs. Kan. Stat. Ann. § 76-3304(l). If these three provisions do
not demonstrate UKHA’s control over its own affairs free of state oversight, a fourth
provision definitively does. Under the provision of the Act entitled “Cessation of
regents’ authority of hospital operations,” UKHA assumed full control of the hospital
upon its creation, with the provision stating, “[f]ollowing the creation of [UKHA]
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and on the transfer date under th[e] act, the regents shall have no further control over,
or responsibility for the operation of the university of Kansas hospital.” Kan. Stat.
Ann. § 76-3310. In sum, the consideration regarding the power to set policies and
control the day-to-day operation of the hospital strongly favors UKHA being
autonomous.12
vi. Ability to bring suit on own behalf
A final consideration courts have looked at is the ability of the entity to sue
and be sued, with the existence of such ability supporting a finding that the entity is
autonomous. Sikkenga, 472 F.3d at 719; see also U.S. ex rel. Oberg v. Penn. Higher
Educ. Assistance Agency, 804 F.3d 646, 668 (4th Cir. 2015); cf. Daniel v. Univ. of
Tex. SW Med. Ctr., 960 F.3d 253, 259 (5th Cir. 2020) (considering whether an entity
can sue or be sued as a standalone fifth factor rather than as part of the autonomy
analysis). Here, the University of Kansas Hospital Authority Act directly speaks to
this consideration as UKHA “shall have all the powers necessary to carry out the
purposes and provision of th[e] act, including, without limitation, the [power] to . . .
sue and be sued in its own name.” Kan. Stat. Ann. § 76-3308(a). Indeed, UKHA has
12
The only limitation on UKHA’s ability to set its own policies involves the
performance of abortions in UKHA’s facilities as the Act instructs that “no abortion
shall be performed, except in the event of a medical emergency, in any medical
facility, hospital or clinic owned, leased or operated by [UKHA].” Kan. Stat. Ann.
§ 76-3308(i). Viewed in totality with the otherwise unlimited and unregulated control
vested in UKHA regarding use and operation of the hospital and associated facilities,
this one carveout carries little weight in the context of an autonomy and arm-of-the-
state analysis.
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been a party in over a dozen suits before the Kansas Court of Appeals. See e.g., Univ.
of Kan. Hosp. Auth. v. Bd. of Cnty. Comm’rs of Franklin Cnty., 469 P.3d 806 (Kan.
Ct. App. 2020); Clayton v. Univ. of Kan. Hosp. Auth., 388 P.3d 187 (Kan. Ct. App.
2017); Univ. of Kan. Hosp. Auth. v. Bd. of Cnty. Comm’rs of Wyandotte Cnty., 313
P.3d 60 (Kan. Ct. App. 2013); Univ. of Kan. Hosp. Auth. v. Yang, 293 P.3d 816 (Kan.
Ct. App. 2013) (unpublished table decision); Univ. of Kan. Hosp. Auth. v. Bd. of
Comm’rs of Cnty. of Wabaunsee, 251 P.3d 673 (Kan. Ct. App. 2011) (unpublished
table decision). Accordingly, this consideration favors a finding of autonomy.
vii. Totality of considerations
When viewing the considerations together, we conclude the autonomy factor,
based only on the language of the University of Kansas Hospital Authority Act,
favors concluding that UKHA is an autonomous entity and not an arm of the state.
Alternatively, at best, this factor is neutral for UKHA’s arm-of-the-state position.
The considerations surrounding the classification of employees, the ability to form
contracts, the ability to establish policies and govern day-to-day affairs without
interference from the state, and the ability to sue all unquestionably favor autonomy.
Meanwhile, the remaining two considerations—control by the governor and
legislature and ownership of property—have mixed analyses, with some aspects
favoring a finding of autonomy and other aspects countenancing against such a
finding. Furthermore, the aspects weighing against a finding of autonomy are ones on
which other courts, when analyzing whether a healthcare provider was an arm of the
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state, have placed limited importance. See Takle, 402 F.3d at 771 (observing that
there will always be strings between state and entity created by the state and
downplaying importance of state owning property used by entity); see also Oberg,
804 F.3d at 672 (placing minimal weight on annual reporting requirement placed on
entity); Fresenius Med. Care Cardiovascular Res., Inc., 322 F.3d at 71–72
(concluding entity autonomous and not arm of the state even though governor had
wide authority to appoint board members). Therefore, we conclude this is not a case
where an entity asserting arm-of-the-state status can overcome uncertainty regarding
its finances. As a result, the approach we employed in Sturdevant is inapplicable.
E. Summation & Disposition
As discussed above, we conclude the burden was on UKHA to present
evidence and argument demonstrating it is an arm of the state. UKHA failed to meet
this burden. Although the district court attempted to undertake that burden it erred in
conducting sua sponte review of the University of Kansas Hospital Authority Act
because, applying the Steadfast factors, (1) the finances factor appears to weigh
against an arm-of-the-state conclusion; (2) any uncertainty regarding UKHA’s
finances weighs against UKHA’s position given it bore the burden; and (3) de novo
review of the Act supports the conclusion UKHA is autonomous from the state such
that UKHA could not overcome any uncertainty regarding the finances factor.
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This leads us to the appropriate disposition and to how the litigation should
proceed on remand.13 We could reverse the district court’s grant of UKHA’s Federal
Rule of Civil Procedure 12(b) motion to dismiss and remand for UKHA to file an
answer. Instead, for two reasons, we take a slightly different approach and merely
vacate the district court’s order so it might receive evidence from UKHA on remand
and reevaluate whether UKHA is an arm of the state. First, such an approach is more
efficient where UKHA could renew the gist of its arm-of-the-state argument through
a Rule 12(c) motion. See Fed. R. Civ. P. 12(h) (providing that challenges to subject
matter jurisdiction may be raised at any time). Second, requiring UKHA to first file
an answer before being permitted to further pursue its arm-of-the-state argument
could subject UKHA to unnecessary litigation in the event it can muster evidence that
it is entitled to sovereign immunity. And delaying proceedings on UKHA’s arm-of-
the-state defense tilts against basic principles of fairness where we had not previously
held the burden fell on the entity asserting it is an arm of the state. Accordingly, on
remand, UKHA may opt to renew its Rule 12(b) motion or to file an answer so the
13
UKHA argues that even if we disagree with the district court’s arm-of-the-
state analysis, Ms. Hennessey failed to plead the elements of diversity of citizenship.
This argument is without merit, particularly in light of Ms. Hennessey’s pro se status
when filing her federal complaint. Ms. Hennessey alleged she is a citizen of Missouri
and UKHA is “a corporate entity established by law that operates the hospital located
at 4000 Cambridge Street, Kansas City, Kansas 66106” and “a Kansas corporation
and/or entity operating a hospital located in Kansas City, Wyandotte County,
Kansas.” ROA at 6–7. These allegations, taken as true and liberally construed, permit
the conclusion that UKHA is incorporated in and has a principal place of business in
Kansas, a state diverse from Ms. Hennessey’s residence in Missouri.
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case may proceed to the next step in litigation.14 If UKHA renews its Rule 12(b)
motion, the district court should employ the two-step process discussed earlier, first
considering the four structural factors from Steadfast and then, if those factors point
in different directions, considering the twin aims of sovereign immunity. See Hess,
513 U.S. at 47; Fresenius Med. Care Cardiovascular Res., Inc., 322 F.3d at 65;
Duke, 127 F.3d at 978.
III. CONCLUSION
We VACATE the district court’s order granting UKHA’s motion to dismiss and
REMAND for further proceedings consistent with this opinion.
14
If UKHA renews its Rule 12(b) motion, the motion shall be limited to the
subject matter jurisdiction and sovereign immunity grounds raised in the earlier Rule
12(b) motion. Our vacatur and remand does not provide UKHA the opportunity to
restart Rule 12(b) proceedings and advance new Rule 12(b) theories for dismissal.
43