Alaska Cargo Transport, Inc. v. Alaska R.R. Corp.

• Decision Date: 17 September 1993
• Docket Number: No. 92-35027,92-35027
• Citation: 5 F.3d 378
• Parties: 1993-2 Trade Cases P 70,359 ALASKA CARGO TRANSPORT, INC., Plaintiff-Appellant, v. ALASKA RAILROAD CORPORATION; Frank Turpin; Marty Keale; Richard Knapp; Denny Robertson; Laurie Gray; Arnold Polanchek, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 378

5 F.3d 378

1993-2 Trade Cases P 70,359

ALASKA CARGO TRANSPORT, INC., Plaintiff-Appellant, v. ALASKA RAILROAD CORPORATION; Frank Turpin; Marty Keale Richard Knapp; Denny Robertson; Laurie Gray Arnold Polanchek, Defendants-Appellees.

No. 92-35027.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Aug. 2, 1993.

Decided Sept. 17, 1993.

Thomas J. Greenan, Christopher Kane, Schwabe, Williamson, Ferguson & Burdell, Seattle, WA, for plaintiff-appellant.

Thomas J. Brewer, Gregory M. O'Leary, Molly B. Burke, and Tamara Jill Conrad, Heller, Ehrman, White & McAuliffe, Seattle, WA, William R. Hupprich, Alaska R.R. Corp., Anchorage, AK, for defendants-appellees.

Appeal from the United States District Court for the District of Alaska, H. Russel Holland, District Judge, Presiding.

Before: SCHROEDER, FLETCHER, and ALARCON, Circuit Judges.

FLETCHER, Circuit Judge:

Appellant Alaska Cargo Transport, Inc. ("Alaska Cargo") appeals the district court's dismissal of its complaint with prejudice as to federal claims and without prejudice as to state claims. The court held that appellee Alaska Railroad Corp. ("ARRC") is immune from suit under the Eleventh Amendment. We have jurisdiction over the timely filed appeal pursuant to 28 U.S.C. Sec. 1291 (1988). We affirm.

I. Facts

ARRC does not dispute the district court's recitation of the facts and summary of the allegations in Alaska Cargo's second amended complaint:

Alaska Cargo, a Washington corporation[,] is in the business of providing freight and rail car transportation services from Seattle, Washington, to Seward, Alaska....

ARRC is an Alaska corporation which provides rail service to the cities of Anchorage, Fairbanks, Seward, and Whittier, Alaska.

Prior to 1986, Alaska Cargo based its business operation in the cities of Kenai and Anchorage. In June or July of 1986, representatives of ARRC contacted Alaska Cargo regarding a move of Alaska Cargo's business operations from Kenai and Anchorage to Seward. Alaska Cargo alleges that it was contacted by ARRC concerning the move to Seward as part of a marketing venture to increase utilization of rail services out of Seward to points north of the port.

On or about July 31, 1986, representatives of Alaska Cargo and ARRC met at a restaurant in Seattle, Washington....

Alaska Cargo's complaint alleges that a verbal contract was entered into between Alaska Cargo and ARRC. The terms of the alleged agreement included favorable tariff rates and wharfage charges which ARRC would charge Alaska Cargo at ARRC's terminal in Seward. Alaska Cargo asserts that the existence of the contract was recognized by ARRC personnel at a later meeting held at a restaurant in Anchorage in September of 1986.

On October 30, 1986, believing that an agreement had been reached, Alaska Cargo made an initial shipment from Seattle to Seward. Things did not go according to plan, for when the Alaska Cargo barge arrived, ARRC refused to let it to dock. Relations between the two entities worsened with ARRC contending that no contract had been reached or entered into.

Alaska Cargo filed suit ... on July 5, 1990, alleging a cause of action against ARRC for breach of contract, defamation, antitrust violations, and unfair trade practices, and seeking injunctive relief. Alaska Cargo also brought suit against Hydro-Train [, another Washington-based freight transporter,] claiming that, on receiving notice of the favorable rates given Alaska Cargo, Hydro-Train threatened ARRC with the removal and cessation of its Whittier operations unless the arrangements with Alaska Cargo were terminated. Alaska Cargo believes the foregoing amounts to tortious interference with contract, conspiracy in restraint of trade, and an attempt to monopolize.

On November 6, 1990, ARRC filed a motion to dismiss pursuant to Rule 12(b)(1) and (6), Federal Rules of Civil Procedure, claiming that since it was an instrumentality of the State of Alaska, the Eleventh Amendment of the United States Constitution prohibits suits by state citizens against it in federal court. Additionally, the motion claims that the state action doctrine, Noerr-Pennington Doctrine, Local Government Antitrust Act, and Keough Doctrine all require that this court refrain from exercising its jurisdiction over this suit.

Alaska Cargo Transp., Inc. v. Alaska R.R., 834 F.Supp. 1216, 1218-19 (D.Alaska 1991) (footnotes omitted).

II. Discussion

A. Eleventh Amendment immunity

The Eleventh Amendment provides that "[t]he Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State." U.S. Const. amend. XI. ¹ Courts have interpreted it to bar suits in federal court against non-consenting states brought either by citizens of that state or another state. Edelman v. Jordan, 415 U.S. 651, 662-63, 94 S.Ct. 1347, 1355-56, 39 L.Ed.2d 662 (1974) (citing cases). Agencies of the state are also immune. ² Durning v. Citibank, N.A., 950 F.2d 1419, 1422-23 (9th Cir.1991) (citing, inter alia, State Highway Comm'n v. Utah Constr. Co., 278 U.S. 194, 199, 49 S.Ct. 104, 106, 73 L.Ed. 262 (1929) (Eleventh Amendment immunizes state agency that was "but the arm or alter ego of the State")). The rationale is that a plaintiff who successfully sued an arm of the state would have a judgment with " 'the same effect as if it were rendered against the State for the amount specified in the complaint.' " Id. at 1423 (quoting Smith v. Reeves, 178 U.S. 436, 439, 20 S.Ct. 919, 920, 44 L.Ed. 1140 (1900)). When a state entity is sued, the state itself is the " 'real, substantial party in interest.' " Id. (quoting Ford Motor Co. v. Department of Treasury, 323 U.S. 459, 464, 65 S.Ct. 347, 350, 89 L.Ed. 389 (1945)).

Mitchell v. Los Angeles Community College Dist., 861 F.2d 198, 201 (9th Cir.1988), cert. denied, 490 U.S. 1081, 109 S.Ct. 2102, 104 L.Ed.2d 663 (1989), sets out five factors to consider in determining whether an entity is a state arm entitled to immunity:

" whether a money judgment would be satisfied out of state funds, whether the entity performs central governmental functions, whether the entity may sue or be sued, whether the entity has the power to take property in its own name or only the name of the state, and the corporate status of the entity."

See Belanger v. Madera Unified Sch. Dist., 963 F.2d 248, 250-51 (9th Cir.1992) (quoting Mitchell, 861 F.2d at 201), cert. denied, --- U.S. ----, 113 S.Ct. 1280, 122 L.Ed.2d 674 (1993); Durning, 950 F.2d at 1423 (same). We examine these factors in light of ARRC's treatment under Alaska law. See Belanger, 963 F.2d at 251; Durning, 950 F.2d at 1423.

We conclude that ARRC is an "arm of the state." The most critical factor, the first one noted in Mitchell, is whether a judgment would impact the state treasury. Jackson v. Hayakawa, 682 F.2d 1344, 1350 (9th Cir.1982) (quoting Ronwin v. Shapiro, 657 F.2d 1071, 1073 (9th Cir.1981)); see also Rutledge v. Arizona Board of Regents, 660 F.2d 1345, 1349 (9th Cir.1981) ("[T]he source from which the sums sought by the plaintiff must come is the most important single factor in determining whether the Eleventh Amendment bars federal jurisdiction.").

ARRC concedes that, under state law, it, and not the state, is liable for a judgment against it. Alaska Stat. Secs. 42.40.500, .900(a) (1992). Section 42.40.500 provides that "[a] liability incurred by the [ARRC] shall be satisfied exclusively from the assets or revenue of the [ARRC] and no creditor or other person has a right of action against the state because of a debt, obligation, or liability of the [ARRC]." Alaska Stat. Sec. 42.40.500. Section 42.40.900(a) provides that "[a]ll claims and lawsuits involving activities of the railroad, including suits in contract, quasi-contract, or tort, shall be brought against the corporation and not against the state." Id. Sec. 42.40.900(a).

In light of these statutory provisions, ARRC must show that although the state is not directly liable for a judgment against ARRC, the state is nonetheless the "real, substantial party in interest." Durning, 950 F.2d at 1423 (internal quotation marks omitted). In determining whether ARRC can sustain this burden, we must take care not to lose sight of "the nature of the entity created by state law." Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 280, 97 S.Ct. 568, 572, 50 L.Ed.2d 471 (1977). Thus, we cannot divorce the second Mitchell factor, the governmental function ARRC performs, from our assessment of the first factor, which is the impact on the State of Alaska of a judgment against ARRC.

"[T]he entity created by state law" here is a unique and essential fixture in the lives of thousands of widely dispersed Alaskans. State law authorizes and requires ARRC to manage and operate a critical transportation, supply, and communication network running from Seward and Whittier (warm water ports) in southern Alaska to Fairbanks, in south-central Alaska. Alaska Railroad Corporation Act, 1984 Alaska Sess. Laws ch. 153. At Fairbanks, goods, services, and other essentials, of all types, are distributed into commerce streams reaching even further into the rugged outer reaches of central and northern Alaska. There can be no argument but that ARRC is the "[s]tate-owned railroad" upon which "many communities and individuals in Alaska are wholly or substantially dependent ... for freight and passenger service," service that is an "essential government function." 45 U.S.C. Secs. 1201, 1202(14) (1988). ³ The Railroad is the lifeline for many Alaskans in ways that highways are in the Lower 48.

In its brief, Alaska Cargo virtually concedes that the railroad performs a vital governmental function; the legislature has declared that "[t]he continued operation of the Alaska Railroad by [ARRC] as provided in this chapter is considered an essential...