TX Education Agency v. EDUC ( 2021 )

Case: 20-60051 Document: 00515791713 Page: 1 Date Filed: 03/23/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
No. 20-60051 March 23, 2021
Lyle W. Cayce
Clerk
Texas Education Agency,
Petitioner,
versus
United States Department of Education,
Respondent.
Petition for Review of an Order of
the United States Department of Education
No. 19-73-CP
Before Higginbotham, Smith, and Dennis, Circuit Judges.
Jerry E. Smith, Circuit Judge:
The National Defense Authorization Act of 2013 (“NDAA”) pro-
hibits any recipient of federal dollars from retaliating against whistleblowers
who report an abuse of that money. Laurel Kash filed a complaint with the
U.S. Department of Education (“DOE”), alleging that the Texas Education
Agency (“TEA”) had discharged her in retaliation for whistleblowing; the
TEA maintains it did so for legitimate reasons.
The DOE investigated Kash’s complaint, credited it, and awarded her
damages. The TEA contends that violated Texas’s sovereign immunity.
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Agreeing with the TEA, we grant the petition for review, vacate the offending
order, and remand for prompt entry of dismissal.
I.
Congress enacted a broad-based whistleblower protection program as
part of the NDAA. 1 The operative provision reads as follows:
An employee of a contractor, subcontractor, grantee, or sub-
grantee or personal services contractor may not be discharged,
demoted, or otherwise discriminated against as a reprisal for
disclosing to a person or body described in paragraph (2) infor-
mation that the employee reasonably believes is evidence of
gross mismanagement of a Federal contract or grant, a gross
waste of Federal funds, an abuse of authority relating to a Fed-
eral contract or grant, a substantial and specific danger to pub-
lic health or safety, or a violation of law, rule, or regulation
related to a Federal contract (including the competition for or
negotiation of a contract) or grant.
41 U.S.C. § 4712(a)(1). The NDAA, by its terms, applies to any federal con-
tract or grant and is not limited to a particular appropriation or class of grant.2
If an employee believes he was subject to unlawful retaliation, he sub-
mits a complaint to the Inspector General of the agency responsible for the
relevant federal money, at which point that agency investigates the complaint
and determines whether the employer unlawfully retaliated. See id.§ 4712(b)(1)–(2)(A). Depending on its findings, the agency then issues an
1
See Pub. L. No. 112-239, 126 Stat. 1632, 1837–40 (2013) (codified at 41 U.S.C.
§ 4712); see also Pub. L. No. 114-261, 130 Stat. 1362, 1362 (2016) (making the program
permanent).
2
Compare id., with American Recovery and Reinvestment Act of 2009, Pub L.
No. 111–5, § 1553, 123 Stat. 115, 297 (2009) (limiting its application to stimulus funds
appropriated under the act), and 10 U.S.C. § 2409(a)(1)(A)–(B) (limiting its application to
Department of Defense and NASA contracts and grants).
2
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order denying or granting relief, which can include reinstating the whistle-
blower, otherwise abating the adverse employment action, and paying dam-
ages that can cover backpay and attorney’s fees. See id. § 4712(c)(1)(A)–(C).
Any person aggrieved by that order (i.e., a complainant denied relief or an
employer ordered to give relief) may petition the appropriate U.S. Court of
Appeals for review, which conforms with the provisions for judicial review in
the Administrative Procedure Act (“APA”). Id. § 4712(c)(5).
Kash was hired as the TEA’s Director of Special Education in the
summer of 2017. During the hiring process, the TEA conducted a back-
ground check in which it discovered allegations that Kash had kissed a high
school student at her previous job in Oregon. Kash explained that the allega-
tions were false, had been made by a disgruntled and discredited colleague,
and had been rejected by Oregon state officials. The TEA hired Kash despite
the allegations because she had been exonerated.
Kash’s employment at the TEA got off to a rocky start. She reported
directly to Justin Porter, who observed and received reports of Kash’s alleg-
edly unprofessional behavior throughout the early parts of her tenure. He
held multiple counseling sessions with her in her first few months.
In October, Kash voiced her concerns about the TEA’s data analysis
contract with an entity called SPEDx, funded with money granted under the
Individuals with Disabilities Education Act (“IDEA”). Kash told Porter she
believed the contract was unnecessary and that it was awarded because the
SPEDx contractor and a sub-contractor were friends of Penny Schwinn,
Porter’s direct supervisor. Schwinn caught wind of those allegations and
discussed them with Kash and Porter. The same day as that conversation,
Kash reported her concerns about the SPEDx contract to Bill Wilson, the
TEA’s Director of Internal Audit. She repeated her belief that the contract
was awarded because the contractor and sub-contractor had a personal rela-
3
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tionship with Schwinn, and she added a concern that the contract was
inappropriately awarded on a sole-source basis.
The following month, Porter issued Kash a formal letter of reprimand
that alleged instances of Kash’s purported unprofessionalism and in-
appropriate communications with external stakeholders. The letter also dis-
cussed Kash’s complaints about the SPEDx contract, saying that, although
Kash could report the allegations through appropriate channels, it was
inappropriate to voice her complaints in the way that the letter asserted she
had. The letter said that voicing those concerns to external stakeholders in
particular could undermine Schwinn’s reputation and negatively impact the
TEA. Shortly thereafter, Kash followed up with Wilson about her concerns
with the SPEDx contract and expressed her fear that she would be fired. 3
A few weeks later, an allegation became public that Kash had “tried
to cover up the physical and sexual abuse of a six-year-old special education
student and retaliated against the teaching assistants who reported it.” The
teaching assistants had filed a lawsuit in Oregon detailing those allegations.
And the TEA received emails from members of the public concerned about
the allegations. Upon learning of the lawsuit, Porter texted Kash that he was
going to direct questions about the allegations to the TEA’s communications
director; Kash responded that she was not liable for anything and that the
lawsuit was brought by “that crazy employee I told you about this summer.” 4
3
Wilson opened a formal investigation into the SPEDx contract, in part at
Schwinn’s request. That investigation concluded that the contract was not improperly
awarded. The DOE investigator, however, determined that the internal audit was not
credible, because Wilson was not adequately independent. That finding was not a signifi-
cant factor in the decision of the administrative law judge (“ALJ”).
4
The parties dispute whether the TEA knew of those allegations when it hired
Kash. The TEA avers that the emails from the public were the first it learned of them.
Kash, however, asserts that she informed the TEA of those allegations at the same time she
4
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Days after the cover-up allegations broke, Kash filed a complaint
about the SPEDx contract with the DOE Office of the Inspector General
(“OIG”). Before that, the TEA had been discussing whether to terminate
Kash’s employment. The day after she filed her complaint, the TEA did so. 5
Kash filed a whistleblower-retaliation complaint with the OIG the
following September. She claimed that both her termination and the letter of
reprimand she received were retaliation for her reporting legal problems with
the SPEDx contract. The TEA maintained that it terminated her because
she could no longer effectively do her public-facing job after the cover-up
allegations broke. Following a yearlong investigation, the OIG “sustained
Kash’s allegations of whistleblower reprisal” based on her termination. 6
After a full hearing, an ALJ agreed and ordered the TEA to pay Kash
damages. The TEA petitions for review, claiming, among other things, that
the investigation and award of damages violates Texas’s sovereign immunity.
Since that is a constitutional issue, our review is de novo. 7
II.
In general, states 8 are immune from federal agencies’ adjudication of
discussed with the TEA the assertions of improper contact with a student. It is not nec-
essary for us to opine on whether the DOE’s findings on this point were arbitrary and
capricious.
5
The TEA may not have been aware of Kash’s disclosure to the OIG when it
decided to terminate her employment. But that’s moot because the TEA was aware of her
earlier disclosure to its internal auditor.
6
The ALJ ruled that the letter of reprimand could not be retaliatory because the
TEA was unaware of any protected disclosures Kash had made when it issued the letter.
Neither side appeals that ruling.
7
Emp. Sols. Staffing Grp. II, L.L.C. v. Off. of Chief Admin. Hearing Officer, 833 F.3d
480, 484 (5th Cir. 2016).
8
The TEA is entitled to sovereign immunity as an arm of the state. Cf. Perez v.
5
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private parties’ complaints in the same way they are immune from suit. Fed.
Mar. Comm’n v. S.C. State Ports Auth., 535 U.S. 743, 747 (2002). The DOE
and Kash submit different theories of why, despite that general rule, sover-
eign immunity does not bar the DOE’s investigation and award of damages.
Kash analogizes the proceeding to a suit brought by the United States, which
would not be barred by sovereign immunity. The DOE contends that the
TEA waived its immunity from whistleblower-retaliation claims because the
NDAA conditions acceptance of federal money on such a waiver. Both theo-
ries fall short. 9
A.
Though states are immune from suits brought by private parties, “[i]n
ratifying the Constitution, the States consented to suits brought by . . . the
Federal Government.” Alden v. Maine, 527 U.S. 706, 755 (1999). Kash con-
tends that the NDAA’s whistleblower-retaliation provision “reflects Con-
gress’s longstanding, but growing recognition of the indispensable role whis-
tleblowers play in revealing waste, fraud, and abuse in federal grantmaking
and contracting with a variety of parties, including states.” On that basis,
Region 20 Educ. Serv. Ctr., 307 F.3d 318, 327 (5th Cir. 2002) (finding that regional education
service centers are arms of the state). Neither party suggests otherwise.
9
A third theory that neither the DOE nor Kash posits is that Congress abrogated
Texas’s sovereign immunity through the NDAA. Congress does not need to spend money
to induce states to waive their immunity; in some cases it can merely abrogate it. See Allen
v. Cooper, 140 S. Ct. 994, 1000–01 (2020). Congress may do so only with “unequivocal
statutory language,” and even then, only where “it is a valid exercise of constitutional
authority.” Id. (cleaned up).
Not pressing this theory was a good choice, because the the NDAA lacks the
“unequivocal statutory language” needed to constitute effective abrogation, given that it
makes no mention of states or sovereign immunity. And, if it did, the harm the NDAA
addresses is unrelated to the Fourteenth Amendment, as required for abrogation. See id.
at 1001, 1003–04.
6
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Kash theorizes that the DOE’s investigation and order advance the United
States’ “interest in having state grantee compliance with federal law be un-
hindered by whistleblower retaliation.” Therefore, she posits that the pro-
ceeding is less like one in which a private complainant hales the state before
the administrative agency and more like a suit brought by the United States
to defend its own interests.
Whether whistleblower-retaliation investigations into a state are con-
stitutionally permissible because they advance the United States’ interests is
res nova in this circuit. For three reasons, they, like any other administrative
proceedings brought by private parties, are barred by sovereign immunity.
First, the logic of Alden does not apply to whistleblower-retaliation
investigations. In Alden, 527 U.S. at 756, the Court relied on the fact that
“[s]uits brought by the United States itself require the exercise of political
responsibility for each suit prosecuted against a State, a control which is
absent from a broad delegation to private persons to sue nonconsenting
States.” But the NDAA lacks that control for whistleblower-retaliation
investigations of nonconsenting states. Instead, it authorizes any “person
who believes that the person has been subjected to a reprisal prohibited” by
the NDAA to “submit a complaint,” which the Inspector General must10
investigate. 41 U.S.C. § 4712(b)(1). That is exactly the sort of “broad dele-
gation to private persons” against which Alden, 527 U.S. at 756, drew a
distinction.
Second, the reasoning in our qui tam caselaw is persuasive and applic-
able. The False Claims Act authorizes private citizens to sue on behalf of the
10
“[T]he Inspector General shall investigate the complaint,” unless it “is frivo-
lous, fails to allege a violation of the prohibition in subsection (a), or has previously been
addressed in another Federal or State judicial or administrative proceeding initiated by the
complainant . . . .” 41 U.S.C. § 4712(b)(1) (emphasis added).
7
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United States to recover its money from “any person” who falsely claims it.
31 U.S.C. §§ 3729(a)(1), 3730(b)(1). But where that “person” is a state,
unless the United States intervenes, the suit is barred by sovereign immunity.
United States ex rel. Foulds v. Tex. Tech Univ., 171 F.3d 279, 294 (5th Cir.
1999). 11 That is because sovereign immunity bars suits “commenced or pro-
secuted against one of the United States by” a citizen. 12 And though “the
United States is a real party in interest” in a False Claims Act qui tam action,
that does not make it “the party who commences or prosecutes the suit.” Id.
at 289 (quotation omitted). Nor can the United States delegate to private
citizens its authority to sue sovereign states. Id. at 291–94 (citing Blatchford
v. Native Vill. of Noatak & Circle Vill., 501 U.S. 775, 785 (1991)). In sum,
though the United States’ money is at stake in qui tam cases, they are barred
by sovereign immunity because they are commenced and prosecuted by a
private citizen.
So too here. Kash’s contention means, at most, that the United States
is a party in interest in the whistleblower-retaliation proceeding. But the
United States certainly did not commence the action; Kash, a private citizen,
triggered the investigation by filing a complaint with the OIG. Nor did the
United States prosecute the action; the OIG investigator played a neutral role
in determining whether to recommend ordering or denying relief based on his
11
But see Vt. Agency of Nat. Res. v. United States ex rel. Stevens, 529 U.S. 765, 802
(2000) (Stevens, J., dissenting) (reasoning that, because the qui tam relator is effectively an
assignee of the United States’ claim and because the Justice Department retains some
supervision, sovereign immunity did not bar the suit). After Foulds, the Supreme Court
interpreted the False Claims Act’s reference to “person” not to include states, mooting
the holding in Foulds. See id. at 787. Nonetheless, the reasoning in Foulds, though no longer
relevant to the False Claims Act, is still good law.
12
U.S. CONST. amend. XI; see also Hans v. Louisiana, 134 U.S. 1 (1890) (holding
sovereign immunity bars suits against a state brought by its own citizens).
8
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analysis of Kash’s claim. Thus, the reasoning in Foulds applies.
Third, “[w]e are always chary to create a circuit split,” and accepting
Kash’s theory would do so. Alfaro v. Comm’r, 349 F.3d 225, 229 (5th Cir.
2003). In Rhode Island Department of Environmental Management v. United
States (“Rhode Island”), 304 F.3d 31 (1st Cir. 2002), the court rejected a con-
tention very similar to Kash’s. That case involved the whistleblower-
protection provision of the Solid Waste Disposal Act, 42 U.S.C. § 6971,
which, much like the NDAA, established an administrative scheme for
employees who believe they were retaliated against to seek relief. Four com-
plainants brought claims to the Department of Labor, alleging that the Rhode
Island agency retaliated against them, and Rhode Island sued to enjoin the
administrative proceedings based on sovereign immunity. In finding for the
state, the First Circuit rejected the complainants’ argument “that the Secre-
tary, rather than the individual complainant, [was] the ‘true’ plaintiff . . . .”
Rhode Island, 304 F.3d at 53. The court reasoned that the administrative
adjudication was not prosecuted by the Secretary, but, “[i]nstead, the indi-
vidual complainant trie[d] a case against the employer, and the Secretary
(through the ALJ) act[ed] as the neutral arbiter of law and fact.” Id. There-
fore, unless the Secretary intervened as a party or amicus curiae, sovereign
immunity barred the suit. Id.As in Rhode Island, a private individual—Kash—tried a case against
the employer—the TEA—and the Secretary (first through its OIG and then
through an ALJ) acted as a neutral arbiter of law and fact. Accepting Kash’s
argument would require rejecting the First Circuit’s holding that this neutral
role meant the Secretary was not the true plaintiff.
Kash contends we can distinguish Rhode Island on the ground that the
NDAA applies only to states that have a contractual or grantor-grantee rela-
tionship with a federal agency, while the Solid Waste Disposal Act applied
9
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even without such a relationship. But that distinction is apropos of nothing.
The reasoning of Rhode Island does not rely on the lack of a relationship
between the state and federal governments, but instead on the role the federal
government played in the whistleblowers’ claims. And—grantor-grantee
relationship or not—the federal government plays that same role in Kash’s
claim. Nor is there any authority for the proposition that the existence of a
contractual or grantor-grantee relationship is relevant to the state’s consent
to suit. In fact, as discussed above, Foulds is to the contrary.
B.
Though states are immune from suit by private parties, they can waive
their immunity for particular types of cases. 13 And “Congress can induce a
state to do so by making waiver a condition of accepting federal funds.” Gru-
ver, 959 F.3d at 181 (citing Pace v. Bogalusa City Sch. Bd., 403 F.3d 272, 277–
79 (5th Cir. 2005) (en banc)). The DOE contends that the NDAA conditions
the acceptance of any federal grant or contract on waiving immunity from
whistleblower retaliation claims related to that grant or contract. 14 But the
13
Gruver v. La. Bd. of Supervisors for La. State Univ. Agric. & Mech. Coll., 959 F.3d
178, 180 (5th Cir. 2020), cert. denied, No. 20-494, 2020 WL 7132339 (U.S. Dec. 7, 2020).
14
The DOE’s argument differs from the ALJ’s reason for rejecting the TEA’s sov-
ereign immunity argument. The ALJ looked specifically at whether the IDEA conditioned
the receipt of federal funds on waiver, and, finding that it did, held the TEA had waived
immunity from the NDAA by receiving IDEA funds. But, as both parties now recognize,
that reasoning is erroneous because the IDEA waiver is limited to violations of the IDEA.
See 20 U.S.C. § 1403.
The agency’s shifting rationale on appeal raises the specter of Securities & Exchange
Commission v. Chenery Corp., 318 U.S. 80, 95 (1943), but is ultimately not a problem. Chen-
ery held that “an administrative order cannot be upheld unless the grounds upon which the
agency acted in exercising its powers were those upon which its action can be sustained.”
Id. But the Court was clear that it was not disturbing “the settled rule that, in reviewing
the decision of a lower court, it must be affirmed if the result is correct although the lower
court relied upon a wrong ground or gave a wrong reason.” Id. at 88 (quotation omitted).
Instead, the Chenery principle applies where “an order is valid only as a determination of
10
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NDAA is not adequately clear for any such waiver to be effective. In so
holding, we join the two other federal courts that have directly addressed the
question. 15
1.
A state’s waiver of sovereign immunity “must be knowing and vol-
untary.” 16 Where the waiver is effected by accepting federal funds condi-
tioned on waiver, the “knowing” and “voluntary” requirements align with
two of the requirements for all conditions placed on federal money: “[A]ny
condition on the receipt of federal funds must be unambiguous . . . [and] the
grant and its conditions cannot amount to coercion as opposed to encourage-
ment.” Gruver, 959 F.3d at 182 (citing South Dakota v. Dole, 483 U.S. 203,
207–08 (1987)). Where those constraints on Congress’s spending power are
met, the requirements for an effective waiver are also satisfied. See id.The “voluntary” requirement is usually, but not always, met where
the “knowing” requirement is. Pace, 403 F.3d at 279. Neither party con-
tends that the NDAA’s condition would be coercive, so we express no opin-
ion on the matter and focus our analysis on the “knowing” requirement.
The “knowing” requirement is a “stringent clear-statement rule
. . . .” Id. 17 That is because for Spending Clause analysis, “the key is not
policy or judgment which the agency alone is authorized to make . . . .” Id. Whether sov-
ereign immunity bars the action is not such a determination, so the DOE theoretically can
prevail on its new reasoning despite Chenery.
15
See Williams v. Morgan State Univ., No. GLR-19-5, 2019 WL 4752778, at *6
(D. Md. Sept. 30, 2019), appeal filed, No. 19-2477 (Dec. 27, 2019); Slack v. Washington
Metro. Area Transit Auth., 353 F. Supp. 3d 1, 11–12 (D.D.C. 2019).
16
Gruver, 959 F.3d at 182 (citing Pace, 403 F.3d at 277–78); see also Coll. Sav. Bank
v. Fla. Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666, 682 (1999).
17
See also Edelman v. Jordan, 415 U.S. 651, 673 (1974) (“[W]e will find waiver only
where stated by the most express language or by such overwhelming implications from the
11
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[Congressional intent] but what the States are clearly told regarding the con-
ditions that go along with the acceptance of those funds.” Arlington Cent.
Sch. Dist. Bd. of Educ. v. Murphy, 548 U.S. 291, 304 (2006). The statute need
not include a “talismanic incantation[] of the magic words” “‘waiver’ or
‘condition,’” but it must be “unambiguous . . . .” Pace, 403 F.3d at 281–82.
Furthermore, “[a] general authorization for suit in federal court is not the
kind of unequivocal statutory language sufficient to” overcome sovereign
immunity. Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 246 (1985).
Instead, the statute must “manifest[] a clear intent to condition” the funding
“on a State’s consent to waive its constitutional immunity.” Id. at 247.
The DOE asserts that the NDAA unambiguously put the TEA on
notice that it would be subject to the remedial scheme of § 4712, including
the possibility of damages, should the TEA choose to accept federal funds
through any grant, including the IDEA. The TEA counters that the NDAA
is inadequately clear because the “statutory text makes no reference to
‘states’ or to ‘immunity.’” Further, the TEA points out the breadth of the
DOE’s interpretation, which would mean “that the NDAA—solely by refer-
encing ‘contractor’ and ‘grantee’—acts as a global waiver of sovereign
immunity for any State that enters into any contract with or receives any grant
from the federal government.” The breadth of the waiver that interpretation
invokes, they posit, belies the possibility that the waiver would be knowing.
The TEA is correct. The NDAA lacks the clarity required for a know-
ing waiver under our and Supreme Court caselaw. Comparing the NDAA to
other statutes that we have held are and are not sufficiently clear elucidates
text as will leave no room for any other reasonable construction.”(cleaned up)).
12
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this. We have held that the IDEA 18 and Title IX 19 unambiguously condi-
tioned a federal grant on states’ waiving their immunity. Both cases relied on
statutory language expressly mentioning sovereign immunity. For example,
in Pederson, we held that the language, “‘a State shall not be immune under
the Eleventh Amendment of the Constitution of the United States from suit
in Federal court for a violation of title IX of the Education Amendments of
1972’ . . . . clearly, unambiguously, and unequivocally conditions receipt of
federal funds under Title IX on the State’s waiver of Eleventh Amendment
Immunity.” Pederson, 213 F.3d at 875–76 (quoting 42 U.S.C. § 2000d-
7(a)(1)) (cleaned up). We held that using the word “waiver” or “condition”
was unnecessary where the statute so plainly contemplated states’ being sued
for violations related to the grant. Id. at 876. In Pace, 403 F.3d at 281–82, we
applied that reasoning to the IDEA. 20
Conversely, we have held that statutes lacking an explicit reference to
sovereign immunity are not sufficiently clear. For example, the Rehabilita-
tion Act says “Any party aggrieved by a final decision described in subpara-
graph (I), may bring a civil action for review of such decision. The action may
be brought in any state court of competent jurisdiction or in a district court
of the United States of competent jurisdiction . . . .” 29 U.S.C. § 722(c)-
(5)(J)(i). In Hurst v. Texas Department of Assistive & Rehabilitative Services,
482 F.3d 809, 810–14 (5th Cir. 2007), we held that language did not consti-
tute waiver, based on the holding in Atascadero that general authorizations for
18
Pace, 403 F.3d at 285.
19
Pederson v. La. State Univ., 213 F.3d 858, 876 (5th Cir. 2000).
20
The relevant IDEA provision reads, “A State shall not be immune under the 11th
amendment to the Constitution of the United States from suit in Federal court for a
violation of this chapter.” 20 U.S.C. § 1403(a).
13
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suit in federal court are insufficiently clear. 21
The NDAA is much more like the Rehabilitation Act than like the
IDEA or Title IX. The NDAA does not mention states, leaving it ambiguous
whether it applies to them. 22 And other whistleblower retaliation provisions,
such as the provision in the American Recovery and Reinvestment Act, 23 do,
demonstrating that Congress knows how to make such provisions’ applica-
tion to states clear. Moreover, the NDAA makes no mention of sovereign
immunity or the Eleventh Amendment. Though we have not required the
“talismanic incantations of [the] magic words,” “waiver” or “condition,”
the caselaw shows that we have tended to require that the statute at least
mention immunity. 24 The NDAA does not, and therefore the TEA did not
knowingly waive immunity. Finally, the sheer breadth of the opposite
holding—that states must forgo every dollar of federal funding or else waive
21
Importantly, Hurst distinguished the Rehabilitation Act from the Telecommun-
ications Act, which similarly provided that “any party aggrieved by [a State Commission’s]
determination may bring an action in an appropriate Federal district court . . . .” 47 U.S.C.
§ 252(e)(6). In AT&T Commc’ns v. BellSouth Telecomms., Inc., 238 F.3d 636, 646–47 (5th
Cir. 2001), we held that was sufficiently clear. But AT&T was not a Spending Clause case.
Instead, the waiver was conditioned on allowing states to regulate in an otherwise federally
preempted field. See Hurst, 482 F.3d at 813. Hurst distinguished that comprehensive fed-
eral regulatory scheme from more typical waiver cases in which states could “offer similar
services with or without participation in the federal program.” Id. at 814. Because the
present case does not involve a federally preempted field, Hurst, not AT&T, is the relevant
comparison.
22
Because the TEA has not contended that the NDAA does not, by its terms, apply
to it, we express no opinion on that.
23
Pub. L. No. 111-5, § 1553, 123 Stat. 115, 297–302 (2009).
24
Compare Pace, 403 F.3d at 281 (finding waiver for a statute that mentioned
immunity), and Pederson, 213 F.3d at 876 (same), with Hurst, 482 F.3d at 810–14 (finding
no waiver for a statute that did not mention immunity). To be clear, there is no rule that a
statute must mention immunity to be sufficiently pellucid; instead, it is an important factor,
which here demonstrates the NDAA is insufficiently clear.
14
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immunity—is reason to be skeptical that states knowingly made that choice.
2.
The DOE does not rest its waiver argument solely on the text of the
NDAA. It also contends that regulations clarify what the statute may have
left ambiguous, thereby making the state’s waiver knowing and voluntary.
Specifically, 2 C.F.R. § 200.300(b) (2020) clarifies that “the non-Federal
entity is responsible for complying with all requirements of the Federal
award. . . . See also statutory requirements for whistleblower protections
[including the NDAA].” “Non-Federal entity” is defined to include state
governments. Id. § 200.69. And that regulation applies to Department of
Education grantees. Id. § 3474.1.
A question of first impression is whether the clarity required for a
waiver of sovereign immunity to be “knowing” can be met by regulations
clarifying an ambiguous statute. The needed clarity cannot be so provided—
it must come directly from the statute, for two reasons.
First, when Congress places conditions on “the States’ receipt of fed-
eral funds, it ‘must do so unambiguously . . . .’” Dole, 483 U.S. at 207 (quot-
ing Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S. 1, 17 (1981)). Regu-
lations that interpret statutes are valid only if they either match Congress’s
unambiguous command or are clarifying a statutory ambiguity. See Chevron,
U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 843–44 (1984). Rely-
ing on regulations to present the clear condition, therefore, is an acknowledg-
ment that Congress’s condition was not unambiguous, so that method of
analysis would not meet the requirements of Dole. Given Gruver’s ac-
knowledgment that Dole’s unambiguity condition overlaps with College Sav-
ing Bank’s “knowing” requirement, it would be odd if the regulation could
15
Case: 20-60051 Document: 00515791713 Page: 16 Date Filed: 03/23/2021
No. 20-60051
be satisfactory for one but not the other. 25
Second, the ability to place conditions on federal grants ultimately
comes from the Spending Clause, which empowers Congress, not the Exec-
utive, to spend for the general welfare. The Constitution carefully separates
the “purse” from the “sword” by assigning to Congress and Congress alone
the power of the purse. The Federalist Nos. 78 (Alexander Hamil-
ton), 58 (James Madison). Allowing the Executive to require states to waive
immunity to receive federal funds would grant the Executive a power of the
purse and thus would be inconsistent with the Constitution’s meticulous
separation of powers. Therefore, regulations cannot provide the clarity
needed to render the state’s waiver of sovereign immunity knowing.
The petition for review is GRANTED. The order granting relief to
Kash is VACATED; this proceeding is REMANDED to the agency with
direction to dismiss the proceedings without delay. 26
25
See also Slack, 353 F. Supp. 3d at 11 (holding Congress itself must condition
receipt of federal funds on waiving sovereign immunity).
26
Because sovereign immunity barred the proceedings against the TEA, we ex-
press no opinion on whether the DOE’s decision was arbitrary and capricious, without
jurisdiction because the statutory deadline had passed, unlawfully delegated, or violative of
due process.
16