Cooper v. SEPTA ( 2008 )

Opinions of the United
2008 Decisions States Court of Appeals
for the Third Circuit
11-26-2008
Cooper v. SEPTA
Precedential or Non-Precedential: Precedential
Docket No. 07-1522
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 07-1522
ALLISON COOPER,
ON BEHALF OF HERSELF
AND ALL OTHERS SIMILARLY SITUATED
v.
SOUTHEASTERN PENNSYLVANIA
TRANSPORTATION AUTHORITY,
Appellant
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
D.C. Civil Action No. 06-cv-0888
(Honorable Thomas M. Golden)
Argued March 4, 2008
Before: SCIRICA, Chief Judge,
FISHER and ROTH, Circuit Judges.
(Filed: November 26, 2008)
THOMAS S. BIEMER, ESQUIRE (ARGUED)
STEVEN B. GOODMAN, ESQUIRE
MARIANA ROSSMAN, ESQUIRE
Dilworth Paxson
3200 Mellon Bank Center
1735 Market Street
Philadelphia, Pennsylvania 19103
MICHAEL G. TIERCE, ESQUIRE
JO BENNETT, ESQUIRE
Stevens & Lee
1818 Market Street, Suite 2900
Philadelphia, Pennsylvania 19103
Attorneys for Appellant
JORDAN M. LEWIS, ESQUIRE (ARGUED)
Siegel, Brill, Greupner, Duffy & Foster
1300 Washington Square
100 Washington Avenue South
Minneapolis, Minnesota 55401
PATRICIA V. PIERCE, ESQUIRE
HANNAH SCHWARZSCHILD, ESQUIRE
Willig, Williams & Davidson
1845 Walnut Street, 24th Floor
Philadelphia, Pennsylvania 19103
2
Attorneys for Appellee,
Allison Cooper
LAWRENCE A. KATZ, ESQUIRE
Coffey & Kaye
Two Bala Plaza, Suite 718
Bala Cynwyd, Pennsylvania 19004
Attorney for Amici Curiae-Appellee,
United Transportation Union,
Brotherhood of Railroad Signalmen,
Brotherhood of Locomotive Engineers and Trainmen
OPINION OF THE COURT
SCIRICA, Chief Judge.
At issue is whether the Southeastern Pennsylvania
Transportation Authority (“SEPTA”) is entitled to sovereign
immunity under the Eleventh Amendment. In 1991, we
determined SEPTA was not an arm of the state. Bolden v.
SEPTA, 953 F.2d 807 (3d Cir. 1991) (en banc), cert. denied, 504
U.S. 943 (1992). Now SEPTA contends that subsequent
changes in Eleventh Amendment jurisprudence and in SEPTA’s
state funding formula demand reconsideration and entitle it to
sovereign immunity. The District Court disagreed. We will
affirm.
3
Plaintiff Allison Cooper, a bus driver for SEPTA,
brought a collective action under the Fair Labor Standards Act
(“FLSA”), 29 U.S.C. § 207(a). She contends SEPTA
undercompensates its bus drivers by failing to fully account for
their performance of required pre-trip safety inspections.
SEPTA filed a motion to dismiss citing the Eleventh
Amendment bar of sovereign immunity. After allowing
discovery on SEPTA’s funding, the District Court construed the
motion as one for summary judgment and denied it. SEPTA
appealed.
I.
SEPTA, a metropolitan transportation authority created
by the Commonwealth of Pennsylvania, 1 operates a mass-transit
system within Philadelphia and its surrounding counties, as well
as points in New Jersey. The pay period for SEPTA’s bus
drivers commences ten minutes before the bus is scheduled to
pull out of the depot in the morning. Those who drive a “swing
run” – two shifts a day, with a break in between – are
compensated for the second shift commencing at the time of the
scheduled pull-out in the afternoon. The bus drivers must
perform a safety inspection before any departure, whether in the
morning or afternoon. According to Cooper, these inspections
take ten to thirty minutes to complete.
Cooper filed this collective action, bringing claims under
1
See 74 Pa. Cons. Stat. §§ 1701–1785.
4
the FLSA, 29 U.S.C. § 207(a), as well as under state law.2 She
contended SEPTA deprived its bus drivers of compensation by
paying them for only a portion of the time it took to perform
morning inspections and by failing to pay them at all for
2
Count 1 asserted “SEPTA has willfully and intentionally
engaged in ongoing and knowing violations of the overtime
provisions of the FLSA by requiring plaintiff and all others
similarly situated to conduct pre-trip inspections before their
runs, but not paying them for all time worked performing the
pre-trip inspections, and not counting the inspection time for
purposes of calculating overtime.” Compl. ¶ 40. Count 1 was
brought as a collective action on behalf of “those bus drivers
who, without factoring in the time spent performing pre-trip
inspection, were already working at least 40 hours a week.” Id.
¶ 38. Count 2 set forth two classes – a “swing shift class” and
a “morning pre-trip class” – and contended SEPTA’s conduct
was prescribed by state statute and breached its collective
bargaining agreement. Counts 3-5 adopted these two classes
and asserted various other claims under state law.
Subsequent to filing her complaint, Cooper “narrowed
her lawsuit to a single claim and now asserts a single class,
brought under the FLSA. The class consists of all SEPTA
‘swing run’ bus drivers (defined as all drivers who work two
shifts in a day, with lengths of varying breaks between their
runs) who work at least 40 hours a week but who are not paid
for their required afternoon pretrip vehicle inspections.”
Cooper’s Mem. in Support of Motion to Certify 4.
5
inspections before the second shift of a swing run. Proceedings
in the District Court were stayed pending the outcome of this
appeal.3
II.
The District Court had jurisdiction under 28 U.S.C. §
1331. An order denying Eleventh Amendment immunity is
immediately appealable as a final order under the collateral
order doctrine. P.R. Aqueduct & Sewer Auth. v. Metcalf &
Eddy, Inc., 506 U.S. 139, 144-45 (1993). Accordingly, we have
jurisdiction under 28 U.S.C. § 1291. Our review of a denial of
summary judgment is plenary. Hampe v. Butler, 364 F.3d 90, 93
(3d Cir. 2004). “The party asserting immunity bears the burden
of production and persuasion.” Febres v. Camden Bd. of Educ.,
3
On July 18, 2007, after briefing but before oral argument,
the General Assembly enacted Act 44, 74 Pa. Cons. Stat. §§
1501–1520. Act 44 replaced the provisions contained in
Chapter 13 of Title 74 (§§ 1301–1315), which pertained to
“Public Transportation Assistance” and (with the exception of
§ 1315) were enacted as part of Act 26 of 1991 (“Act 26”). As
discussed infra, Act 26’s provisions created a dedicated source
of funding for public transportation throughout the state and
imposed certain requirements on the entities applying for this
funding. Act 44 repealed the provisions in Chapter 13,
implemented a new source of funding, and established a new
financing scheme for entities applying for and receiving
funding.
6
445 F.3d 227, 229 (3d Cir. 2006).
III.
Since our decision in Bolden, the Supreme Court has
refined its Eleventh Amendment jurisprudence. We have
followed suit. SEPTA contends these changes have wrought a
“fundamental shift in emphasis,” so that a state’s
characterization of an agency as an arm of the state is essentially
dispositive. SEPTA’s Reply Br. 8. We have modified our own
jurisprudence to reflect direction from the Supreme Court, but
we have not concluded that a state’s characterization warrants
dispositive treatment in our sovereign immunity analysis.
A brief review of Bolden and subsequent case law is in
order. In Bolden, we addressed en banc whether SEPTA was
entitled to sovereign immunity. We applied the test set forth in
our analysis of New Jersey Transit’s claim of immunity in
Fitchik v. New Jersey Transit Rail Operations, Inc., 873 F.2d
655 (3d Cir. 1989) (en banc). This test determines whether an
agency is entitled to sovereign immunity by balancing three
factors: (1) state treasury, (2) status under state law, and (3)
autonomy.4 Noting that the state-treasury factor was “the
4
In Urbano v. Board of Managers of the New Jersey State
Prison, we identified nine factors to consider when determining
whether an entity is the “alter ego” of the state, and thus entitled
to sovereign immunity. 415 F.2d 247, 250-51 (3d Cir. 1969).
In Fitchik, we realigned the Urbano factors into three larger
7
‘most important’” of the three, Bolden, 953 F.2d at 818 (quoting
Fitchik, 873 F.2d at 659), we first addressed the
Commonwealth’s funding of SEPTA. With “only about 27% of
its revenue [coming] from the state government,” SEPTA did
questions, while eliminating one of the nine factors – “whether
the agency exercises a governmental or proprietary function” –
because it was no longer relevant in light of Garcia v. San
Antonio Metropolitan Transit Authority, 469 U.S. 528 (1985).
Fitchik, 873 F.2d at 659 & n.2. The three “Fitchik factors” are:
(1) Whether the money that would pay the
judgment would come from the state (this
includes three of the Urbano factors – whether
payment will come from the state’s treasury,
whether the agency has the money to satisfy the
judgment, and whether the sovereign has
immunized itself from responsibility for the
agency’s debts);
(2) The status of the agency under state law (this
includes four factors – how state law treats the
agency generally, whether the entity is separately
incorporated, whether the agency can sue or be
sued in its own right, and whether it is immune
from state taxation); and
(3) What degree of autonomy the agency has.
Id. at 659. We stipulated that “[a]lthough no single Urbano
factor is dispositive, the most important is whether any judgment
would be paid from the state treasury.” Id.
8
not derive its funding primarily from the Commonwealth. Id. at
819. “[T]his most important fact” weighed heavily against a
finding of immunity. Id. Furthermore, the Commonwealth was
shielded from liability for SEPTA’s obligations. Id. Nor was
SEPTA required to request funds from the Commonwealth to
pay for adverse judgments because it could raise revenues by
increasing fares. Id. And even though SEPTA contended it
might not be able to meet a significant shortfall by raising fares
and would be forced to rely on increased state subsidies, we
rejected that argument. We found “discretionary subsidies
committed in reaction to a judgment . . . would not necessarily
transform the recipients into alter egos of the state.” Id. Given
this funding relationship between SEPTA and the
Commonwealth, we found the state-treasury factor “weigh[ed]
at least as strongly against SEPTA’s Eleventh Amendment
argument as it did against New Jersey Transit’s argument in
Fitchik.” Id. at 820.5
We then considered the second factor – SEPTA’s status
5
SEPTA also relied on Act 26, which created a “Public
Transportation Assistance Fund” that provided for the
Commonwealth to make an annual appropriation to meet certain
public transportation needs. Bolden, 953 F.2d at 819 (citing Act
26, 74 Pa. Cons. Stat. §§ 1302(2)(iii) & (3), 1303(a) (repealed
2007), § 1314 (repealed 1994)). Because Act 26 had just been
enacted, we found its impact “too uncertain to be given
significant weight” in our determination. Id. at 819-20.
9
under state law. We found some of SEPTA’s attributes were not
characteristic of an arm of the state: it had (1) a “separate
corporate existence,” (2) “the power to sue and be sued,” and (3)
“the power to enter into contracts and make purchases on [its]
own behalf.” Id. But we also found attributes of SEPTA that
were characteristic of an arm of the state: (1) it was “exempt[]
from state property taxation,” (2) it possessed “certain public
powers such as the power of eminent domain,” and (3) it was
“subject to the Pennsylvania Sovereign Immunity statute.” Id.
SEPTA shared all of these attributes with New Jersey Transit.
We noted “SEPTA differ[ed] from [New Jersey Transit] in that
SEPTA [was] proclaimed by statute to be ‘an agency and
instrumentality’ of the Commonwealth, but this same provision
also describe[d] SEPTA as a ‘separate body corporate and
public.’” Id. (quoting 55 Pa. Cons. Stat. Ann. § 600.303(a)
(West 1991) (repealed 1991); Act 26, 74 Pa. Cons. Stat. § 1502
(repealed 1994)). Thus, we found SEPTA’s status under state
law, like that of New Jersey Transit in Fitchik, weighed only
“‘slightly’ in favor” of sovereign immunity. Id.
Third, we considered SEPTA’s degree of autonomy from
the Commonwealth. Although in Fitchik this factor weighed
slightly in favor of according New Jersey Transit immunity, we
found SEPTA enjoyed more autonomy than New Jersey Transit.
SEPTA possessed powers similar to New Jersey Transit’s,
which gave the entities “a measure of autonomy.” Id. These
powers included “the exclusive power to initiate action and the
power ‘to enter contracts, bring lawsuits, purchase and sell
10
property, buy insurance, structure the corporation’s internal
management, and set and collect fares.’” Id. (quoting Fitchik,
873 F.2d at 663). Only five of SEPTA’s fifteen board members
were appointed by state officials, with the other ten appointed by
the counties SEPTA served, whereas three of New Jersey
Transit’s seven board members were (by statute) members of the
state’s executive branch. Id. Significantly, New Jersey’s
Governor could veto the actions of New Jersey Transit’s board,
but SEPTA was not subject to the Commonwealth’s
gubernatorial veto. Id. Because SEPTA had greater control
over its own actions, we found “the autonomy factor, which
weighed ‘slightly’ in [New Jersey Transit’s] favor, is
appreciably weaker here.” Id.
We considered these three factors, treating the state-
treasury factor as the most important. Id. at 821. Finding
SEPTA’s argument for immunity weaker than New Jersey
Transit’s, we held SEPTA, like New Jersey Transit, was not
entitled to Eleventh Amendment protection. Id.
Supreme Court jurisprudence since Bolden has prompted
us to alter our sovereign immunity analysis. In Hess v. Port
Authority Trans-Hudson Corp., the Court held PATH, a
subsidiary of the Port Authority, was not an arm of the state
entitled to sovereign immunity. 513 U.S. 30, 52-53 (1994). In
its analysis, the Court recognized “the States’ solvency and
dignity” as “the concerns . . . that underpin the Eleventh
Amendment.” Id. at 52; see also id. at 47 (describing these
concerns as “the Eleventh Amendment’s twin reasons for
11
being”). Drawing on Hess, the Court in Regents of the
University of California v. Doe found the University of
California retained sovereign immunity despite the federal
government’s agreement to indemnify it against costs of
litigation, including adverse judgments. 519 U.S. 425, 431
(1997). The Court clarified that, when assessing whether an
entity is an arm of the state, “it is the entity’s potential legal
liability, rather than its ability or inability to require a third party
to reimburse it, or to discharge the liability in the first instance,
that is relevant.” Id.; see also id. (refusing “to convert the
inquiry into a formalistic question of ultimate financial
liability”).
In Federal Maritime Commission v. South Carolina
State Ports Authority, 535 U.S. 743 (2002), the Supreme Court
considered whether sovereign immunity applied to
administrative adjudications conducted by the Federal Maritime
Commission (“FMC”). In finding sovereign immunity
prohibited the FMC from adjudicating complaints filed by
private parties against non-consenting states, the Court said
“[t]he preeminent purpose of state sovereign immunity is to
accord States the dignity that is consistent with their status as
sovereign entities.” Id. at 760; see also id. at 765 (“While state
sovereign immunity serves the important function of shielding
state treasuries and thus preserving the States’ ability to govern
in accordance with the will of their citizens, the doctrine’s
central purpose is to accord the States the respect owed them as
joint sovereigns.” (internal quotation marks and citations
12
omitted)).
In light of Doe and FMC, we held that “we can no longer
ascribe primacy to the [state-treasury] factor” in our sovereign
immunity analysis. Benn v. First Judicial Dist. of Pa., 426 F.3d
233, 239 (3d Cir. 2005). We still consider all three factors
relevant in assessing whether an entity warrants Eleventh
Amendment protection, but none is predominant. Id. at 240.
SEPTA contends Benn “essentially relegated the ‘state treasury
factor’ to a non-factor.” SEPTA’s Br. 19 n.8. Under this view,
the District Court erred by giving equal consideration to each
factor because, as SEPTA argues, “[w]hile the District Court’s
analysis may be appropriate where the status of an entity is
uncertain under state law, given SEPTA’s clear status as a
Commonwealth agency, the District Court’s approach
effectively ignores the Supreme Court’s mandate that protection
of a State’s dignity interests require [sic] giving greater credence
to the State’s intentions and the manner in which the State has
structured the entity.” Id. at 20. SEPTA contends our recent
case law demonstrates that “the State’s characterization and
treatment of [an] entity” merits “substantial, if not dispositive”
weight in our analysis. Id. at 21. But in the cases SEPTA cites
as support, we gave equal consideration to each of the three
Fitchik factors. See Bowers v. Nat’l Collegiate Athletic Ass’n,
475 F.3d 524, 546 (3d Cir. 2007) (“[E]ach of the factors must be
considered equally in this case . . . .”); Febres, 445 F.3d at 229
(“We now accord equal consideration to all three prongs of the
analysis . . . .” (citing Benn, 426 F.3d at 239-40)). In Benn, we
13
addressed whether the First Judicial District of Pennsylvania
(Philadelphia’s state court system) was entitled to sovereign
immunity. We noted the funding scheme for this judicial system
placed “considerable financial responsibility” on the local
counties rather than the state. Benn, 426 F.3d at 240. But more
significant was the judicial system’s status under state law and
its lack of autonomy from the Pennsylvania Supreme Court.
Therefore, we concluded “the Fitchik factors strongly favor
Eleventh Amendment immunity.” Id. In Febres, we found two
of the three factors – treasury and status – suggested the Camden
Board of Education was not entitled to immunity, while the
autonomy factor slightly favored a finding of immunity. 445
F.3d at 237. With two factors counseling against immunity, we
held the Board was not an arm of the state. Id. In Bowers, we
found the University of Iowa was entitled to sovereign immunity
even though the state was not obligated to pay a judgment
against the University. 475 F.3d at 549-50. Because the state-
treasury factor weighed only slightly against immunity and the
status and autonomy factors weighed heavily in favor of it, we
held the University was entitled to immunity. Id.
As set forth in these post-Bolden cases, our inquiry into
sovereign immunity is not merely “a formalistic question of
ultimate financial liability.” Doe, 519 U.S. at 431. We
recognize and consider the state-treasury factor on the same
terms as the other two Fitchik factors. It has not been reduced
to a “non-factor,” nor has the status factor become
independently “dispositive” of our sovereign immunity inquiry.
14
See Benn, 426 F.3d at 240 (“The relegation of financial liability
to the status of one factor co-equal with others in the immunity
analysis does not mean that it is to be ignored. Like the other
two factors referred to in Fitchik, it is simply to be considered
as an indicator of the relationship between the State and the
entity at issue.”). Our approach is consistent with Supreme
Court precedent following Bolden. As noted, the Court has
stressed the centrality of state dignity to the Eleventh
Amendment. But state dignity does not preclude consideration
of an entity’s financial relationship with the state and its degree
of autonomy. See, e.g., Fed. Maritime Comm’n, 535 U.S. at 765
(recognizing that “accord[ing] the States the respect owed them
as joint sovereigns” is the “central purpose” of Eleventh
Amendment immunity, and that “shielding state treasuries and
thus preserving the States’ ability to govern in accordance with
the will of their citizens” is an “important function” served by
that doctrine (internal quotation marks omitted)). State dignity
encompasses all three factors – we give them equal
consideration, and how heavily each factor ultimately weighs in
our analysis depends on the facts of the given case.
Accordingly, we will apply the approach set forth in Benn,
Febres, and Bowers here to reexamine each factor in light of the
changes – both in the case law and in the funding structure of
SEPTA – since Bolden. Though our method of balancing the
factors has changed, our analysis of each individual factor in
Bolden remains instructive.
15
IV.
A. State Treasury
As previously noted, the first factor asks “[w]hether the
money that would pay the judgment would come from the state,”
which includes considering “whether payment will come from
the state’s treasury, whether the agency has the money to satisfy
the judgment, and whether the sovereign has immunized itself
from responsibility for the agency’s debts.” Fitchik, 873 F.2d at
659. We emphasized in Bolden the percentage of funding
SEPTA received from the Commonwealth as the “most
important fact” in this inquiry. 953 F.2d at 819. Accordingly,
in determining the state-treasury factor weighed against a
finding of immunity for SEPTA, we considered it very
significant that SEPTA received only 27% of its revenues from
the Commonwealth. Id.
Since Bolden, the amount of funding SEPTA receives
from the Commonwealth has increased, although the precise
amount is in dispute. SEPTA contends state subsidies constitute
over half of its annual operating expenses.6 Cooper responds
that state funding constitutes 35% of these annual operating
expenses. This disparity is explained by how the
Commonwealth’s contribution is calculated. Both parties rely
on the affidavit of Richard G. Burnfield, the Senior Director of
6
According to SEPTA, state subsidies constituted a 51%
share in 2005 and a 52% share in 2006.
16
Budgets for SEPTA. In his affidavit, he said:
For fiscal year 2006, $494,844,000 is budgeted to
come from the Commonwealth for SEPTA’s
operating expenses. This budgeted amount
includes $333,144,000 in operating subsidy,
which includes direct payments to SEPTA’s
bondholders, through the Pennsylvania
[Transportation] Assistance Fund, set up pursuant
to the Public Transportation Assistance
[provisions of Act 26]. It also includes $92.1
million in “flexed” highway funding. Also
in c lu d e d is $ 5 2 .3 m illion from th e
Commonwealth in a senior subsidy, and $17.3
million in the shared ride subsidy.
SEPTA considers all $494.8 million to be state funding, while
Cooper contends only the operating subsidy, amounting to
approximately $333.1 million, constitutes state funding. Cooper
cites SEPTA’s 2006 budget, which defines “subsidy” as
“[f]unds received from another source that are used to cover the
cost of a service or program that is not self-supporting.” 7
7
Cooper contends SEPTA’s numbers are wrong for two
reasons. First, the $92.1 million in “Flexible Highway funds” is
provided by the federal government, not by the Commonwealth,
which Burnfield acknowledges. These “flex funds” are
allocated by the Commonwealth but are subject to approval by
the Delaware Valley Regional Planning Commission, an
17
It is unclear whether all of these contributions should be
considered part of the Commonwealth’s funding of SEPTA.
The funds are, at least to some extent, under the
Commonwealth’s control, and are being given to SEPTA.
Whether SEPTA now receives 35% or 52% of its revenue from
the Commonwealth, however, is not determinative. Although
relevant, the percentage of Commonwealth funding is no longer
“interstate, intercounty and intercity agency.” Cooper’s Br. 18-
19. Second, Cooper contends SEPTA’s $52.3 million “senior
subsidy” and its $17.3 million “shared ride subsidy” are
operating revenue, not part of the state’s subsidies. Id. at 20-21.
The flex funds and the senior and shared ride subsidies
are not treated the same by SEPTA or the Commonwealth for
accounting purposes. SEPTA’s budget defines two types of
funding sources – operating revenue and subsidies – and notes
that, under SEPTA’s enabling legislation, no less than half of
SEPTA’s budget must be funded through operating revenue. In
order to meet this requirement, the Commonwealth has allowed
SEPTA to count certain subsidies as revenue. According to
Burnfield, the senior and shared ride subsidies were considered
operating revenue in order to satisfy this requirement.
Similarly, the flex funds were described as a federal
subsidy in every SEPTA budget until 2007, when the funds were
then described as a state subsidy. This recharacterization was
not due to any change in legislation; rather, SEPTA felt the
funds were better described as state subsidies because the
Governor had to initiate action to allocate them to SEPTA.
18
predominant. Since Doe, we have recognized that “the crux of
the state-treasury criterion [is] whether the state treasury is
legally responsible for the payment of a judgment against the
[entity].” Febres, 445 F.3d at 233; see also Bowers, 475 F.3d at
547 (“The appropriate question to ask . . . is whether the State is
obligated to pay or reimburse the [entity] for its debts.”). In
Febres, we explained that, even though the Camden Board of
Education received 85% to 90% of its funding from New Jersey,
“the fact that New Jersey is the principal source of the Board’s
finances does not alone confer immunity, or even compel a
finding that this prong of the analysis favors immunity.” 445
F.3d at 232-33; see also id. at 233 n.5 (noting that “the quantity
or proportion of state funding received by an entity is not
dispositive,” but may be “potentially probative”). Although,
relative to Bolden, the increased proportion of Commonwealth
funding SEPTA now receives – whether 35% or 52% –
improves SEPTA’s argument for immunity under the state-
treasury factor, we no longer afford this subfactor the same
weight we did in Bolden.8
8
Nor are we able at this time to forecast what impact, if any,
the enactment of Act 44 may have on the extent of funding
SEPTA receives from the Commonwealth. As noted, Act 44, 74
Pa. Cons. Stat. §§ 1501–1520, was enacted after briefing but
before oral argument. Act 44 repealed the provisions under
Title 74’s “Public Transportation Assistance” chapter, most of
which were enacted as part of Act 26, and set forth a new
chapter entitled “Sustainable Mobility Options.” This new
19
Post-Doe, “the key factor in our assessment of the state-
treasury prong” is the potential legal liability of the
Commonwealth for SEPTA’s debts. Febres, 445 F.3d at 236.
By statute, the Commonwealth has disclaimed any liability for
SEPTA’s debts:
The authority shall have no power, at any time or
chapter established the Public Transportation Trust Fund
(“PTTF”), from which public transit entities throughout the state
may apply for and receive funding. See id. § 1506. Under Act
26, the Commonwealth annually determined the level of
appropriation to distribute to these entities. See 74 Pa. Cons.
Stat. § 1303(a) (repealed 2007). Now, Act 44 sets forth the
amount to be placed into the PTTF each year. 74 Pa. Cons. Stat.
§ 1506(b)(1). From 2007 to 2010, $250 million is placed into
the fund each fiscal year, and for every fiscal year thereafter, the
fund will be increased 2.5% from the previous year’s amount.
Id. Although the Commonwealth may contribute more money
to SEPTA because of the PTTF’s creation, there is no evidence
as to how much money SEPTA will receive from the PTTF.
While the statute sets forth a definitive number for the fund
overall, public transit entities from around the state may apply
for financial assistance, so we cannot know whether the
Commonwealth will contribute more to SEPTA because Act 44
was enacted. Accordingly, since Act 44’s impact on SEPTA’s
funding is still uncertain, we will not give it weight in our
consideration of the state-treasury factor.
20
in any manner, to pledge the credit or taxing
power of the Commonwealth or any other
government agency, nor shall any of the
authority’s obligations be deemed to be
obligations of the Commonwealth or of any other
government agency, nor shall the Commonwealth
or any government agency be liable for the
payment of principal or interest on such
obligations.
74 Pa. Cons. Stat. § 1741(c). SEPTA concedes that the
Commonwealth is not obligated to pay for an adverse judgment
against it. This absence of legal liability provides “a compelling
indicator that the state-treasury criterion . . . weighs against
immunity.” Febres, 445 F.3d at 236.
Nevertheless, SEPTA contends the Commonwealth,
despite its legal shield from liability, would be forced as a
practical matter to pay excess judgments against SEPTA. Thus,
the arguable practical effect of an adverse judgment against
SEPTA would be an increase in state funding. But “if a State is
not under a legal obligation to satisfy a judgment, then any
increase in expenditures in the face of an adverse judgment is
considered a voluntary or discretionary subsidy not entitled to
Eleventh Amendment protections.” Bowers, 475 F.3d at 547;
see also Bolden, 953 F.2d at 819 (“Such discretionary subsidies
committed in reaction to a judgment . . . would not necessarily
transform the recipients into alter egos of the state.”); Fitchik,
873 F.2d at 661 (“Although New Jersey might appropriate funds
21
to [New Jersey Transit] to meet any shortfall caused by
judgments against [New Jersey Transit], such voluntary
payments by a state do not trigger sovereign immunity.”).
Although in Febres we did not disregard the practical effects of
an adverse judgment, neither did we afford them substantial
weight:
In view of the controlling Supreme Court
jurisprudence, as well as our own conforming
case law, we find that the 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.
445 F.3d at 236.
In support, SEPTA points to two cases in which Courts
of Appeals have found transit operations were arms of the state.
See Alaska Cargo Transp., Inc. v. Alaska R.R. Corp., 5 F.3d 378
(9th Cir. 1993); Morris v. Wash. Metro. Area Transit Auth., 781
F.2d 218 (D.C. Cir. 1986). These cases were cited by the
Supreme Court in Hess and their facts, as we noted in Febres,
“suggest the types of limited circumstances in which the Court
might expect . . . concerns [regarding the practical effects of an
adverse judgment] to require immunity, regardless of the state’s
legal liability.” Febres, 445 F.3d at 235 n.9. In rejecting
sovereign immunity, our analysis in Febres distinguished both
cases:
22
In Morris, immunity was accorded to an interstate
transit system. Analysis of both the entity’s status
under state law and its limited autonomy
suggested it was an arm of the two states the
transit system served. While the states involved
were not directly liable, Congressional funding
for the system was made contingent upon the
states’ agreement to meet the system’s operating
deficits, which could include adverse judgments.
And, from the beginning it was fully anticipated
that the entity would have large deficits and thus
continually be dependent on the states for its
financial survival. Alaska Cargo Transport held
that the railroad at issue was entitled to immunity
as an alter ego of the state, even though the state
had expressly disclaimed liability for it by statute.
The case turned on the critical function performed
by the railroad in Alaska, and federal laws which
essentially required the state to keep the railroad
afloat.
Id. (citations omitted).
SEPTA’s funding relationship with the Commonwealth
does not fall within such “limited circumstances.” Morris and
Alaska Cargo Transport are factually distinguishable. In
Morris, the states at issue were compelled to cover the deficits
of the bi-state transit system because, if they did not, they would
lose congressional funding. 781 F.2d at 225-26. In Alaska
23
Cargo Transport, Alaska would have lost the real property
conveyed to it by the United States if the railroad failed. 5 F.3d
at 381. The Commonwealth here does not face the same sort of
practical obligation to support SEPTA in the event of an adverse
judgment. As the District Court found, if the Commonwealth
fails to cover a deficit, SEPTA can satisfy the deficit itself by
raising fares, reducing service, and/or laying off employees.
The Commonwealth may choose to relieve SEPTA of these
measures, but it is not obligated – through risk of losing its own
funding or its own property – to do so. Cf. Hess, 513 U.S. at 49-
51 (distinguishing Morris and Alaska Cargo Transport and
finding that, since “legally and practically” neither New York
nor New Jersey was “obligated to bear and pay . . . [PATH’s]
indebtedness . . . [,] the Eleventh Amendment’s core concern
[was] not implicated”).
According to SEPTA, measures like fare increases and
service reductions “are not practical options under the
circumstances” because “the fare increases and service cuts
necessary to meet SEPTA’s budget shortfall would so reduce the
level of service and ridership as to create a public crisis in the
region.” SEPTA’s Br. 32 (internal quotation marks and
emphasis omitted). Given these consequences, SEPTA
contends, the Commonwealth would effectively be obligated to
increase its funding to cover any excess judgment. While fare
increases, service reductions, and/or employee layoffs are not
the preferred method of meeting budget deficits, these measures
24
are available to SEPTA 9 and do not give rise to an obligation for
the Commonwealth. Accordingly, even when we allow the
practical effects asserted by SEPTA to “enter [our] calculus,”
we believe this is not the rare case in which such considerations
should have any “significant bearing” on our determination.
Febres, 445 F.3d at 236.
Despite SEPTA’s practical-effects argument, the state-
treasury factor weighs against a finding of immunity. While the
Commonwealth provides substantial funding, SEPTA also
receives a significant amount of its funding from non-state
sources of revenue – and whether two-thirds or one-half of
SEPTA’s overall budget, it totals in the hundreds of millions.
SEPTA could satisfy an adverse judgment from these sources,
or through alternate measures such as raising fares or reducing
service. See id. at 233-34 (noting that, “[w]hile non-state funds
comprise a relatively small percent of the Board’s budget, they
still total a significant sum [of nearly $32.5 million],” and the
Board could “increase funds” further by “reduc[ing] expenses”
or “sell[ing] assets”). SEPTA has provided no evidence that the
9
Although SEPTA presents these measures as impractical, it
did account for them in its budget: “Further efforts to achieve
the legislated balanced budget can only be successful through a
long-term dedicated source of subsidies. If this fails, SEPTA
will be forced to consider steep fare increases and significant
service reductions in order to fund projected budget deficits of
nearly $325 million by Fiscal Year 2011.”
25
Commonwealth would, in fact, contribute additional funding to
SEPTA in the event of an excess judgment. See id. at 236
(“While we have little doubt that the state has an interest in
seeing that Camden’s schools remain operational, it would be
improper to confer immunity based on our conjecture about the
steps New Jersey might take following a judgment.”). Most
importantly, the Commonwealth is not legally obligated to
provide funds to satisfy a judgment against SEPTA. As Doe
makes clear, the state’s potential legal liability is the “key
factor” under this prong of analysis and “merits far greater
weight” than practical consequences. Id. And, as discussed,
SEPTA’s asserted consequences do not give rise to the sort of
practical obligation that could, in some circumstances, bear on
our determination. Accordingly, the relevant criteria under the
state-treasury factor weigh against a finding of sovereign
immunity.
B. Status Under State Law
Under the second factor, we consider “[t]he status of the
agency under state law,” which includes “how state law treats
the agency generally, whether the entity is separately
incorporated, whether the agency can sue or be sued in its own
right, and whether it is immune from state taxation.” Fitchik,
873 F.2d at 659; see also Febres, 445 F.3d at 230 (noting these
as the “[f]our sub-factors . . . relevant to assessing [an entity’s]
legal status under state law”). According to SEPTA, the
Commonwealth’s statutory declaration that SEPTA is an arm of
the state is essentially dispositive of this factor and our overall
26
inquiry. But as noted, we disagree, and little has changed with
regard to SEPTA’s status under state law since Bolden.
The subfactors here do not point clearly in one direction.
Certain attributes of SEPTA under state law weigh against
immunity. Under its enabling statute, SEPTA has (1) a separate
corporate existence, 74 Pa. Cons. Stat. § 1711(a); (2) the power
to sue and be sued, id. § 1741(a)(2); and (3) the power to enter
into contracts and make purchases on its own behalf, id. §
1741(a)(8), (9), (12), (18), (20), (21), (22), (24), (25). Other
attributes support immunity: (1) its enabling statute provides that
SEPTA “shall in no way be deemed to be an instrumentality of
any city or county or other municipality or engaged in the
performance of a municipal function, but shall exercise the
public powers of the Commonwealth as an agency and
instrumentality thereof,” id. § 1711(a), and “shall continue to
enjoy sovereign and official immunity, as provided [by the
statutory provisions that comprise and pertain to the
Pennsylvania Sovereign Immunity Act],” id. § 1711(c)(3);10 (2)
10
This particular language from § 1711(c)(3) was not in effect
at the time of our decision in Bolden, but first appeared as one
of the “transition provisions” codified under § 1711(c) when
SEPTA’s enabling legislation was amended in 1994. The
language from § 1711(a), however, was in effect at the time of
Bolden and was considered in our analysis there. See Bolden,
953 F.2d at 820 (quoting 55 Pa. Stat. Ann. § 600.303(a) (West
1991) (repealed 1991); Act 26, 74 Pa. Cons. Stat. § 1502
27
SEPTA has the power of eminent domain, id. § 1741(a)(13);11
and (3) SEPTA is immune from state taxation.12 As noted in
Bolden, 953 F.2d at 820, Pennsylvania state courts have
recognized SEPTA to be a Commonwealth agency to which the
Pennsylvania Sovereign Immunity Act applies. See, e.g., Jones
v. SEPTA, 772 A.2d 435, 444 (Pa. 2001) (holding SEPTA
immune in a tort case because the case did not fall within an
exception to the Sovereign Immunity Act); Feingold v. SEPTA,
517 A.2d 1270, 1276-77 (Pa. 1986) (finding that SEPTA is “an
agency of the Commonwealth” against whom “it would be
inappropriate to assess punitive damages”). In other contexts,
however, Pennsylvania courts have declined to treat SEPTA as
(repealed 1994)).
11
In Fitchik, we did not accord significant weight to this
factor because counties, municipalities, and privately owned
public utilities all have the power of eminent domain. 873 F.2d
at 663.
12
The District Court said the Supreme Court of Pennsylvania,
in SEPTA v. Board of Revision of Taxes, 833 A.2d 710 (Pa.
2003), held SEPTA is not immune for all purposes from state
taxation. That case, however, addressed SEPTA’s immunity
from local real estate taxes, finding SEPTA was not immune
from these taxes for property it operates as a commercial
landlord because such use was not within its operations as a
“metropolitan transportation authority.” Id. at 717.
28
the Commonwealth. See, e.g., Fraternal Order of Transit
Police v. SEPTA, 668 A.2d 270, 272 (Pa. Commw. Ct. 1995)
(holding “that for purposes of determining jurisdiction, SEPTA
is a local agency and not a Commonwealth agency”); SEPTA v.
Union Switch & Signal, Inc., 637 A.2d 662, 669 (Pa. Commw.
Ct. 1994) (“Because SEPTA is financially independent of the
Commonwealth and its operations are not statewide, we
conclude that the General Assembly did not intend SEPTA to be
the Commonwealth for purposes of the Board Claims Act.”);
Fisher v. SEPTA, 431 A.2d 394, 397 (Pa. Commw. Ct. 1981)
(“We do not believe that the Legislature intended SEPTA to be
a Commonwealth agency in the traditional sense or for SEPTA
employees to be considered Commonwealth employees for
purposes of other legislative enactments.”).
SEPTA contends that, in light of Supreme Court
precedent, the “explicit treatment of SEPTA as a
Commonwealth agency entitled to sovereign immunity cannot
be evaluated as merely just another ‘factor’ – let alone one
which weighs only ‘slightly’ in favor of immunity – but should
effectively be dispositive as to whether SEPTA is an arm of the
State.” SEPTA’s Br. 23-24. According to SEPTA, the District
Court “inappropriately minimize[d] the significance of how the
Commonwealth has structured SEPTA and intentionally
invested the agency with sovereign immunity.” Id. at 21-22.
The Commonwealth’s designation of SEPTA as an
agency covered under the Pennsylvania Sovereign Immunity Act
is significant but not dispositive. As discussed, SEPTA’s
29
enabling legislation grants it attributes that are characteristic of
an arm of the state, and those that are not. In Bolden, we
rejected SEPTA’s contention that “the Pennsylvania Sovereign
Immunity Act conferred Eleventh Amendment protection upon
SEPTA.” 953 F.2d at 817; see also id. (explaining that “[i]f this
reasoning were accepted, each state legislature apparently could
confer Eleventh Amendment protection on any entity it wished,
including counties and cities, by enacting a statute clothing these
entities with ‘sovereign immunity’ from suit on state claims”).
Although we have revised our immunity analysis since Bolden,
we do not believe this alters our ultimate conclusion on this
point.
In Doe, the Court recognized that an inquiry into an
agency’s immunity “can be answered only after considering the
provisions of state law that define the agency’s character.” 519
U.S. at 429 n.5. The Court also made clear that “[u]ltimately, of
course, the question whether a particular state agency has the
same kind of independent status as a county or is instead an arm
of the State . . . is a question of federal law.” Id. This
distinction corresponds with the status-under-state-law analysis
we applied in Bolden and have applied since. The
Commonwealth’s statutory declaration of SEPTA’s immunity
under state law is significant but not “dispositive”of our inquiry
– it is certainly relevant, but does not necessarily overshadow
the other relevant subfactors in assessing an agency’s status
under state law for Eleventh Amendment purposes.
SEPTA misinterprets the District Court’s analysis. The
30
court did not find the Commonwealth’s characterization of
SEPTA weighed only slightly in favor of finding immunity;
rather, the court weighed that consideration together with the
other subfactors in the status-under-state-law analysis.
SEPTA’s status under state law has not changed markedly since
Bolden – it retains the same essential attributes as before. Nor
has the law since Bolden changed in a manner that would alter
the outcome when these attributes are weighed together.
Accordingly, we find SEPTA’s status under state law weighs
slightly in favor of a finding of sovereign immunity.
C. Autonomy
Under the third factor, we consider “[w]hat degree of
autonomy the agency has.” Fitchik, 873 F.2d at 659. The
District Court found SEPTA’s autonomy from the
Commonwealth has not changed since Bolden. While SEPTA’s
organizational structure has remained the same over that time,
SEPTA contends the Commonwealth’s current statutory scheme
for the financing of public transportation – which allows the
Commonwealth to oversee and place certain requirements on the
use of the funds it provides to SEPTA – marks a significant
change in SEPTA’s autonomy.
In Bolden, we did not explicitly say whether the
autonomy factor weighed in favor of granting or denying
immunity. We noted that, while this factor weighed slightly in
favor of immunity for New Jersey Transit in Fitchik, SEPTA
enjoyed greater autonomy than New Jersey Transit, making its
31
argument for immunity under this factor “appreciably weaker.”
Bolden, 953 F.2d at 820. The structure of SEPTA’s board has
not changed since Bolden. SEPTA’s board includes five
members who are appointed by the Commonwealth, while the
remaining ten members are appointed by the counties SEPTA
serves.13 74 Pa. Cons. Stat. § 1713(a). The board’s decisions
are not subject to gubernatorial veto. Moreover, the board has
substantial authority: it has the power to bring lawsuits; organize
its internal structure; buy insurance; buy, sell, or lease property;
set and alter fares; and enter into contracts. The District Court,
looking at this unchanged structure, found the autonomy factor
weighed against immunity.
SEPTA contends its autonomy has decreased since
Bolden because of the passage of Act 26. We did not consider
Act 26 in Bolden because we believed its future impact was too
uncertain at that time. 953 F.2d at 819-20. In creating a
dedicated source of Commonwealth funding for public transit
entities, Act 26 increased the Commonwealth’s oversight of
SEPTA – by, for example, requiring SEPTA to submit budgets
and accountings to the Pennsylvania Department of
Transportation (“PennDOT”), to perform audits and submit
action plans to the Pennsylvania legislature, and to seek the
13
As we noted in Bolden, the board’s makeup suggests
influence on SEPTA by the counties, but “it is the influence of
the state, not that of the counties, that is important for Eleventh
Amendment purposes.” 953 F.2d at 820.
32
review and approval of the Commonwealth for use of the
distributed funds in SEPTA’s capital projects. See Act 26, 74
Pa. Cons. Stat. §§ 1301–1313 (repealed 2007), § 1314 (repealed
1994). Act 44, however, recently replaced this portion of Act
26.
Act 44 established the Public Transportation Trust Fund
(“PTTF”), which provides a source of state funding for public
transportation, and set forth certain requirements for public
transit providers to obtain funding. To initiate funding through
the PTTF, a provider of public transit must submit a written
application to PennDOT. 74 Pa. Cons. Stat. § 1507(a). If
PennDOT determines the applicant is eligible, PennDOT and the
applicant enter into a “financial assistance agreement,” which
“set[s] forth the terms and conditions governing the use of the
financial assistance and the timing of payment of the funds.” Id.
§ 1507(b). PennDOT is required to develop guidelines
governing the application for and awarding of financial
assistance. Id. All funds “shall be used only for activities set
forth under the financial assistance agreement unless the
department grants the award recipient a waiver allowing the
funds to be used for a different purpose.” Id. § 1507(c).
PennDOT also “may conduct performance reviews of an award
recipient . . . to determine the effectiveness of the financial
assistance.” Id. § 1513(e)(1). Based on these reviews,
PennDOT must deliver a report to the Governor and to the chair
and minority chair of both the House and Senate Transportation
Committees. Id. § 1513(e)(2). If a recipient does not satisfy
33
certain “performance criteria” set forth by PennDOT, it risks
losing funding, although PennDOT may also waive any
reduction in funding upon a recipient’s written request. Id. §
1513(g).
Act 26 and Act 44 have increased the Commonwealth’s
level of oversight since Bolden. But the Commonwealth’s
control over SEPTA is not sufficient to support a finding of
immunity under this factor. Act 44 allows the Commonwealth,
through financial assistance agreements, to set terms and
conditions for the use of the funds provided to SEPTA. Thus,
the more SEPTA relies on the Commonwealth for funding, the
greater the impact this financing scheme may have on SEPTA’s
autonomy. As it currently stands, however, sources other than
the Commonwealth contribute one-half to two-thirds of
SEPTA’s funding, a substantial sum over which the
Commonwealth exerts no control. Should the percentage of
SEPTA’s funding provided by the Commonwealth increase, the
Commonwealth’s potential influence over SEPTA would also
increase under the terms and conditions it may choose to impose
on those funds. But, as previously noted, we are presently
unable to forecast whether and to what extent such an increase
may occur under Act 44.
Furthermore, even though this financing scheme may
grant the Commonwealth more influence over SEPTA than it
enjoyed in Bolden, the amount of autonomy SEPTA retains with
respect to its operations and decisions demonstrates that it is still
not an arm of the state. Febres provides a good comparison. In
34
that case, the Camden Board of Education was subject to a New
Jersey statute that granted the Governor authority to accept or
reject any action taken by the Board. Febres, 445 F.3d at 231.
The Governor also appointed board members, though not
enough to make a majority. Id. Given this degree of state
control, we found the autonomy factor weighed slightly in favor
of Eleventh Amendment immunity. Id. at 232.
The amount of state control in Febres exceeds the
amount of Commonwealth control here. While PennDOT can
influence SEPTA by setting certain requirements for the use of
Commonwealth funds, the Commonwealth lacks a mechanism,
such as the gubernatorial veto in Febres, by which it may dictate
the outcome of decisions made by SEPTA’s board of directors.
As noted, the Commonwealth appoints only a minority of the
directors on the board, nor does it review every board decision.
Through conditional funding, the Commonwealth can affect the
consequences of these decisions, limiting SEPTA’s autonomy
to some extent. But this is insufficient to transform SEPTA into
an arm of the state. Nor does it distinguish SEPTA from other
entities that do not enjoy sovereign immunity – the
Commonwealth exercises this same conditional-funding
influence over any entity that applies for financial assistance
through the PTTF, including political subdivisions which, as the
Supreme Court has made clear, are not arms of the state.14 See
14
Act 44 specifies the following entities as eligible applicants
“for financial assistance for operating expenses”: “(1) The
35
Lake Country Estates, Inc. v. Tahoe Reg’l Planning Agency, 440
U.S. 391, 401 (1979) (“[T]he Court has consistently refused to
construe the [Eleventh] Amendment to afford protection to
political subdivisions such as counties and municipalities . . . .”);
see also Bolden, 953 F.2d at 813 (recognizing the same). Given
how recently Act 44 was enacted, the precise degree of control
the Commonwealth wields over SEPTA through this financing
scheme is still uncertain at this time. We do not know yet how
the scheme will be interpreted and implemented – the evidence
before us, for example, does not include an Act 44 “financial
assistance agreement” with which SEPTA would have to
comply in order to receive Commonwealth funding. Thus, as
with Act 26 in Bolden, it is too early for us to tell what impact,
if any, Act 44 may have on SEPTA’s autonomy from the
Commonwealth.
While SEPTA’s autonomy has diminished since Bolden
because of the Commonwealth’s financing scheme under Act 26
and now Act 44, it is SEPTA’s burden to show it is entitled to
sovereign immunity. Febres, 445 F.3d at 229. Based on the
evidence presented, the Commonwealth’s control over SEPTA
falls short of the state control present in Febres, a case in which
we found the autonomy factor weighed only slightly in favor of
governing body of a municipality or an instrumentality of a
municipality. (2) A Commonwealth agency or instrumentality.
(3) A local transportation organization.” 74 Pa. Cons. Stat. §
1513(a).
36
sovereign immunity. Here, by comparison, we find this factor
weighs slightly against a finding of Eleventh Amendment
immunity.
D. Balancing the Factors
As noted, we no longer give primacy to the state-treasury
factor in our immunity analysis. Instead, we give equal
consideration to all three factors and weigh and balance them.
Here, despite an increase in state funding, the state-treasury
factor still weighs against a finding of sovereign immunity. As
SEPTA’s status under state law has not changed significantly
since Bolden, that factor weighs slightly in favor of immunity.
The autonomy factor weighs slightly against immunity.
Balancing these factors, we agree with the District Court that
SEPTA is not entitled to Eleventh Amendment immunity.
V.
Accordingly, we will affirm the District Court’s denial of
SEPTA’s motion for summary judgment. We will remand to the
District Court for proceedings consistent with this opinion.
37