University of Tennessee v. US Fidelity & Guar. Co.
| Decision Date | 18 September 1987 |
| Docket Number | No. Civ. 3-87-237.,Civ. 3-87-237. |
| Citation | 670 F. Supp. 1379 |
| Court | U.S. District Court — Eastern District of Tennessee |
| Parties | The UNIVERSITY OF TENNESSEE, Plaintiff, v. UNITED STATES FIDELITY & GUARANTY COMPANY, Defendant. |
Beauchamp Brogan, Knoxville, Tenn., Albert E. Phillips, Atlanta, Ga., for plaintiff.
Jack B. Draper, Knoxville, Tenn., Luther Ott, Jackson, Miss., for defendant.
On March 6, 1987, The University of Tennessee "UT" filed this action in the Circuit Court for Knox County, Tennessee, at Knoxville "Circuit Court" against a surety,* United States Fidelity & Guaranty Company "USF & G", in connection with construction of the Assembly Center and Arena "the Arena" on the campus of UT. On April 3, 1987, USF & G filed a petition to remove the action to this Court on the basis of diversity of citizenship. See Doc. 1.
On May 13, 1987, UT filed a motion to remand the case to the Circuit Court pursuant to 28 U.S.C. § 1447, alleging that the Court lacks original jurisdiction of the subject matter of this case because: (1) there is no federal question raised in this action; and (2) there is no diversity between citizens of different states. See Doc. 5. In response, USF & G filed a motion for a protective order and for an extension of time for responding to UT's motion to remand, requesting that the Court: (1) limit discovery to matters related to the issue of the subject matter jurisdiction of the Court; (2) enlarge the time period for serving USF & G's response to UT's motion to remand until ten days after discovery on the question of subject matter jurisdiction is completed; and (3) enlarge the time period for serving USF & G's answers and objections to UT's written discovery requests until 30 days after entry of an order by the Court resolving the issue of subject matter jurisdiction. See Doc. 7. Because the Court viewed USF & G's motion Doc. 7 as a means by which to limit discovery rather than to expand it, the Court granted USF & G's entire motion on May 21, 1987 see Doc. 9 before the time had run for UT to file a response to USF & G's motion. See Rule 6(a), (c), Fed.R.Civ.P., and Local Rule 12(b).
Accordingly, on May 28, 1987, UT filed a motion for reconsideration requesting that the Court vacate its order of May 21, 1987. See Doc. 11. USF & G timely responded to UT's motion on May 29, 1987, and oral argument was heard by the Court on that same day. See Doc. 12. Supplemental briefs have now been filed and have been carefully considered by the Court. See Docs. 13 and 14.
The basis of UT's motion for remand is that UT is an arm or alter ego of the State of Tennessee and thus cannot be a citizen for diversity purposes, thereby destroying this Court's subject matter jurisdiction. UT maintains that this determination is solely one of law for the Court. Thus, further factual discovery is not necessary for USF & G to respond to UT's motion for remand. Therefore, UT argues that this Court's order of May 21, 1987, should be vacated since it allows unnecessary discovery to continue. USF & G responds, however, that a determination as to whether UT is an arm or alter ego of the State is a "mixed question of fact and law" so that limited discovery is entirely appropriate and necessary. In order to resolve this discovery dispute between the parties, it will be necessary for the Court to touch, in part, upon the merits of UT's motion for remand since a resolution of both motions, i.e., UT's motion for remand and UT's motion to prevent further discovery (by vacating the May 21, 1987 Order) are inextricably intertwined.
It is well settled that a State is not a "citizen" for purposes of diversity jurisdiction under 28 U.S.C. § 1332. See, e.g., Moor v. County of Alameda, 411 U.S. 693, 717, 93 S.Ct. 1785, 1800, 36 L.Ed.2d 596 (1973); Postal Telegraph Cable Company v. Alabama, 155 U.S. 482, 487, 15 S.Ct. 192, 194, 39 L.Ed. 231 (1894). It is equally well settled that "a political subdivision of a State, unless it is simply the arm or alter ego of the State" is a citizen of the State for diversity purposes. Moor, 411 U.S. at 717, 93 S.Ct. at 1800. Moreover, the question whether a particular entity is an arm or alter ego of the State for purposes of diversity jurisdiction is purely a question of federal law. See Hughes-Bechtol, Inc. v. W. Virginia Bd. of Regents, 527 F.Supp. 1366 (S.D.Ohio 1981), aff'd, 737 F.2d 540, 543 (6th Cir.1984), cert. denied, 469 U.S. 1018, 105 S.Ct. 433, 83 L.Ed.2d 359 (1984); Long v. Richardson, 525 F.2d 74, 79 (6th Cir.1975). The precise question presently before the Court is whether the Court can determine that UT is or is not the arm or alter ego of the State for diversity purposes purely as a matter of law (as UT maintains) or as a mixed question of law and fact (as USF & G maintains), thereby requiring further factual discovery.
In support of its position, USF & G relies heavily on Soni v. Board of Trustees of University of Tennessee, 513 F.2d 347 (6th Cir.1975), cert. denied, 426 U.S. 919, 96 S.Ct. 2623, 49 L.Ed.2d 372 (1976). In Soni, the Sixth Circuit decided that, assuming that UT is a state agency within the meaning of the Eleventh Amendment, the State of Tennessee had waived its right to assert the defense of sovereign immunity in suits brought against UT in federal court because the Tennessee statutory scheme allowed UT to sue and be sued in all courts. In particular, USF & G relies on the following language from Soni:
We are uncertain whether the University of Tennessee is a state instrumentality protected by the Eleventh Amendment. The record before us contains little data on the University's financial relationship with the State of Tennessee, and the Tennessee cases and statutory materials do not compel a conclusion one way or the other.
However, the Court would note that the effect of Soni was abrogated by the Tennessee General Assembly in 1977 when the State's Sovereign Immunity Statute was amended by the addition of the following language:
No statutory or other provision authorizing the University of Tennessee and its board of trustees to sue and be sued shall constitute a waiver of sovereign immunity.
Tennessee Code Annotated § 20-13-102(b). Moreover, as Judge Wellford noted in Gross v. University of Tennessee, 448 F.Supp. 245 (W.D.Tenn.1978), aff'd, 620 F.2d 109 (6th Cir.1980), "subsequent decisions of the Sixth Circuit cast some doubt ... as to the continued vitality of Soni." Id., 448 F.Supp. at 247-48 (citing Martin v. University of Louisville, 541 F.2d 1171 (6th Cir.1976); Long v. Richardson, 525 F.2d 74). Finally, the Court would emphasize that the Soni court dealt with whether or not UT was an arm or alter ego of the State for Eleventh Amendment purposes — not for diversity of citizenship purposes.
USF & G also relies heavily on Hall v. Medical College of Ohio at Toledo, 742 F.2d 299 (6th Cir.1984), in support of its position that a determination as to whether UT is a citizen for diversity purposes requires the application and balancing of numerous factual and legal questions. USF & G specifically points to the "nine-point analysis employed by the Third Circuit in Blake v. Kline, 612 F.2d 718 (3rd Cir.1979), cert. denied, 447 U.S. 921, 100 S.Ct. 3011, 65 L.Ed.2d 1112 (1980)," which was adopted by the Hall court. This Court does not deem it necessary, however, to enumerate and discuss each of the nine factors because the Court would distinguish the test set forth in Hall, like the discussion in Soni, as one which pertains solely to determining whether some entity is an arm, agency or alter ego of the State for Eleventh Amendment purposes — not for diversity of citizenship purposes. The Court recognizes, nevertheless, that other courts have employed the same considerations to determine whether an entity is the agent or alter ego of the state for Eleventh Amendment purposes as it has for diversity of citizenship purposes. See Roberson v. Dale, 464 F.Supp. 680, 686, n. 12 (M.D.N.C. 1979).
In addition to pointing out that USF & G's reliance in Hall and Soni is somewhat misplaced because those cases turn on Eleventh Amendment considerations per se, the Court would remind the parties that this Court has already held that, in an Eleventh Amendment situation, UT is an agency of the State and is immune from suit except to the extent it has consented to be sued. See Carlson v. Highter, 612 F.Supp. 603 (D.C.Tenn.1985). In making that determination, the Court examined only Tennessee case law and the Tennessee statutory scheme. See id. at 605. It was not necessary, however, for the parties to undertake an extensive factual investigation in order for the Court to decide that case because of the clarity of the Tennessee cases and the Tennessee statutes.
Finally, USF & G relies in part on Julien v. Sarkes Tarzian, Inc., 352 F.2d 845 (7th Cir.1965), for the proposition that the Court's determination of UT's status as a citizen for diversity purposes is "a mixed question of law and fact, but mainly of fact." See id. at 847. However, as counsel for UT correctly points out, the Julien case involves the issue as to whether plaintiff was a citizen of Connecticut or Indiana. Because plaintiff was an individual, plaintiff was undeniably a citizen of some state, and therefore a factual determination was entirely appropriate to determine plaintiff's citizenship. In contrast, the issue before the Court is not whether UT is a citizen of Tennessee as opposed to some other state; rather, the issue is whether UT is a citizen at all for diversity purposes.
However, a review of some of the cases relied on by UT compels the Court to conclude that it is necessary only for this Court to examine state law — not fact — in order to determine whether or not UT is an arm or alter ego of the State which will, in turn, determine whether the Court should remand this case to the...
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