Steadfast Ins. Co. v. Agricultural Ins. Co.

• Decision Date: 20 November 2007
• Docket Number: No. 06-5212.,06-5212.
• Citation: 507 F.3d 1250
• Parties: STEADFAST INSURANCE COMPANY, Plaintiff-Counter-Defendant-Appellee, v. AGRICULTURAL INSURANCE COMPANY, now known as Great American Assurance Company, Defendant-Counter-Claimant-Cross-Claimant-Appellant, v. Grand River Dam Authority, Defendant-Cross-Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

507 F.3d 1250

STEADFAST INSURANCE COMPANY, Plaintiff-Counter-Defendant-Appellee, v. AGRICULTURAL INSURANCE COMPANY, now known as Great American Assurance Company, Defendant-Counter-Claimant-Cross-Claimant-Appellant, v. Grand River Dam Authority, Defendant-Cross-Defendant-Appellee.

No. 06-5212.

United States Court of Appeals, Tenth Circuit.

November 20, 2007.

George W. Dahnke (Sarah J. Timberlake with him on the brief), Abowitz, Timberlake & Dahnke, P.C., Oklahoma City, OK, for Appellant.

Galen L. Brittingham (Michael P. Atkinson with him on the brief), Atkinson, Haskins,

Nellis, Brittingham, Gladd & Carwile, Tulsa, OK, for Appellee.

Before KELLY, BALDOCK, and BRISCOE, Circuit Judges.

BALDOCK, Circuit Judge.

In several underlying actions, multiple claimants brought suit against the Grand River Dam Authority (GRDA) for damages related to a series of flood incidents, which began in 1992. Plaintiff Steadfast Insurance Company (Steadfast) serves as the GRDA's primary insurer. Steadfast filed this declaratory judgment action in federal court under 28 U.S.C. § 1332, seeking a ruling that it had no obligation to cover these underlying claims. Subsequently, Steadfast added Defendant Agricultural Insurance Company (Agricultural), the GRDA's excess liability insurer, to this action, alleging the possibility that the GRDA's excess liability policy might come into play.

Agricultural filed a counter-claim against Steadfast, and a cross-claim against the GRDA, requesting a declaratory judgment that it had no duty to indemnify the GRDA. The GRDA moved to dismiss both Steadfast's complaint and Agricultural's cross-claim based on its entitlement to Eleventh Amendment immunity. The district court ruled the GRDA was entitled to sovereign immunity and granted its motion to dismiss. The question presented on appeal is whether the GRDA is a state agency entitled to Eleventh Amendment immunity. See U.S. Const. amend. XI. We have jurisdiction under 28 U.S.C. § 1291, and affirm.¹

I.

The Eleventh Amendment states: "The 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. Eleventh Amendment immunity's primary purpose is to accord states the respect owed them as joint sovereigns. See Fed. Mar. Comm'n v. S.C. State Ports Auth., 535 U.S. 743, 765, 122 S.Ct. 1864, 152 L.Ed.2d 962 (2002). Consequently, state sovereign immunity applies to any action brought against a state in federal court, including suits initiated by a state's own citizens. See Edelman v. Jordan, 415 U.S. 651, 662-63, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974). Eleventh Amendment immunity applies regardless of whether a plaintiff seeks declaratory or injunctive relief, or money damages. See Fed. Mar. Comm'n, 535 U.S. at 765-66, 122 S.Ct. 1864.

The Eleventh Amendment does not automatically destroy a federal court's jurisdiction to decide lawsuits brought against a state. See Wis. Dept. of Corrs. v. Schacht, 524 U.S. 381, 389, 118 S.Ct. 2047, 141 L.Ed.2d 364 (1998). Rather, the Eleventh Amendment grants states a legal power to assert sovereign immunity as a defense. See id. A state may, therefore, waive its sovereign immunity. See id. The decision to waive Eleventh Amendment immunity is, however, "altogether voluntary" and we will not readily find such a waiver. Coll. Sav. Bank v. Fla. Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666, 675, 119 S.Ct. 2219, 144 L.Ed.2d 605 (1999). In most cases, waiver of sovereign immunity occurs either when a state voluntarily invokes the jurisdiction of a federal court, or when a state makes a "clear declaration" that it intends to submit itself to a federal court's jurisdiction. Id. at 675-76, 119 S.Ct. 2219. A state's removal of a case to federal court is a voluntary invocation of federal jurisdiction sufficient to waive that state's Eleventh Amendment immunity. See Lapides v. Bd. of Regents, 535 U.S. 613, 624, 122 S.Ct. 1640, 152 L.Ed.2d 806 (2002).

In terms of scope, Eleventh Amendment immunity extends to states and state entities but not to counties, municipalities, or other local government entities. See Mt. Healthy City Sch. Dist. v. Doyle, 429 U.S. 274, 280, 97 S.Ct. 568, 50 L.Ed.2d 471 (1977). To determine the category into which a given entity falls, we consider whether that entity is, or is not, an "arm of the state." Id. The answer to this question depends, in large part, upon our analysis of the "nature of the entity created by state law." Regents of the Univ. of Cal. v. Doe, 519 U.S. 425, 429 & n. 5, 117 S.Ct. 900, 137 L.Ed.2d 55 (1997); Sturdevant v. Paulsen, 218 F.3d 1160, 1164 (10th Cir.2000). If a state entity is more like a political 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. See Mt. Healthy, 429 U.S. at 280, 97 S.Ct. 568; Sturdevant, 218 F.3d at 1164-65.

We look to four primary factors in determining whether an entity constitutes an "arm of the state." Mt. Healthy, 429 U.S. at 280, 97 S.Ct. 568. 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. See Sturdevant, 218 F.3d at 1164, 1166. 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. See id. at 1162, 1164, 1166. 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. See id. 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. See id. at 1166, 1168-69.

II.

We recognize that we are not writing on a blank slate. The GRDA has been in existence since 1935. In the intervening period, the agency has been a party to multiple lawsuits in both state and federal courts. For example, in Wyoming v. Oklahoma, 502 U.S. 437, 437, 112 S.Ct. 789, 117 L.Ed.2d 1 (1992), the Supreme Court referred to the GRDA as "a state agency." We ourselves have stated the GRDA is an "agency of the State of Oklahoma." Grand River Dam Auth. v. Fed. Power Comm'n, 246 F.2d 453, 454 (10th Cir.1957); see also Dalrymple v. Grand River Dam Auth., 145 F.3d 1180, 1182 (10th Cir.1998) (referring to the GRDA as "a state agency"). Because these categorizations of the GRDA are all likely dicta, however, we proceed to consider the status of the GRDA anew. Eleventh Amendment immunity is a question of federal law and our review is de novo. See Sturdevant, 218 F.3d at 1164. We give deference to state court decisions regarding whether a given entity is an arm of the state, but we do not view these rulings as dispositive. See id.

A.

First, we examine the character of the GRDA under Oklahoma law. The GRDA's foundational statute describes the GRDA as "a governmental agency of the State of Oklahoma." 82 Okla. Stat. § 861. Other Oklahoma statutes also explicitly classify the GRDA as a state entity. See 62 Okla. Stat. § 695.3(4) ("`State Governmental Entity' means the State of Oklahoma or any agency . . . or other instrumentality of state government . . . including . . . [the] Grand River Dam Authority."); 82 Okla. Stat. § 861A(A) ("The Grand River Dam Authority . . . is a nonappropriated agency of the State of Oklahoma."). In addition, the Supreme Court of Oklahoma has declared, on more than one occasion, that the GRDA is an agency of the state. See Mustain v. Grand River Dam Auth., 68 P.3d 991, 1000 (Okla.2003) (stating the GRDA "is a state agency"); Sheldon v. Grand River Dam Auth., 182 Okla. 24, 76 P.2d 355, 361 (1938) (finding the GRDA was created "for the purpose of conducting a state function"). Both Oklahoma statutory and case law, therefore, expressly identify the GRDA as an agency of the state of Oklahoma.²

B.

Second, we assess the extent of the State of Oklahoma's control over the GRDA. Oklahoma law circumscribes the GRDA's ability to deal freely with the property under its control. For example, Oklahoma law specifically prohibits the GRDA from encumbering its property. See 82 Okla. Stat. § 874. State law regulates the GRDA's acquisition and sale of property, as well as the GRDA's ability to lease the property it administers. See id. The Oklahoma Legislature has further precluded the GRDA from preventing the "free public use of its lands and lakes" for recreational purposes. Id. § 875(A).

Oklahoma law also regulates the GRDA's relationship with its employees. All GRDA employees are "state employees" generally "subject to the same benefits and restrictions" that apply to the employees of other state agencies. Id. § 861A(A). Various members of Oklahoma's executive and legislative branches have the power to appoint five of the GRDA's seven-member board of directors. See id. § 863.2(F). The Governor of Oklahoma retains the power to remove any director for "just cause." Id. § 863.2(M). Other GRDA employees are brought under the protection of the State of Oklahoma's Merit System. See 74 Okla. Stat. § 840-5.7. In addition, Oklahoma law requires the GRDA, and certain GRDA employees, to participate in the Oklahoma Law Enforcement Retirement System. See 47 Okla. Stat. § 2-315(B).

The State of Oklahoma also places restrictions on the GRDA's handling of its finances. Funds "generated, received and expended" by the GRDA are classified as "public funds." 82 Okla. Stat. § 861A(A). The GRDA's treatment of these funds is circumscribed by the same "state laws and regulations" that apply to the use of public funds by "all other state agencies." Id. In particular, Oklahoma imposes...