Ariz. Students' Ass'n v. Ariz. Bd. of Regents

• Decision Date: 01 June 2016
• Docket Number: No. 13-16639,13-16639
• Citation: 824 F.3d 858
• Parties: Arizona Students' Association, Plaintiff–Appellant, v. Arizona Board of Regents, Defendant–Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

824 F.3d 858

Arizona Students' Association, Plaintiff–Appellant

v.Arizona Board of Regents, Defendant–Appellee.

No. 13-16639

United States Court of Appeals, Ninth Circuit.

Argued and Submitted November 17, 2015 San Francisco, California

Filed June 1, 2016

Stephen Montoya (argued), Montoya Jiminez, P.A., Phoenix, Arizona, for Plaintiff–Appellant.

Joseph Andrew Kanefield (argued) and Craig Carson Hoffman, Ballard Spahr LLP, Phoenix, Arizona, for Defendant–Appellee.

Before: John T. Noonan, Kim McLane Wardlaw, and Richard A. Paez, Circuit Judges.

OPINION

PAEZ, Circuit Judge:

The Arizona Students' Association (“ASA”) brought this First Amendment retaliation case against the Arizona Board of Regents (“ABOR” or “the Board”). The district court dismissed the ASA's complaint without leave to amend, concluding that the ASA's claims were barred by sovereign immunity, and in the alternative failed to state a claim upon which relief could be granted. Reviewing de novo, we conclude that the complaint states a plausible claim for First Amendment retaliation. See Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; O'Brien v. Welty , 818 F.3d 920, 933–34 (9th Cir. 2016). We further conclude that the district court erred when it declined to grant the ASA leave to amend its complaint to comply with the requirements set forth in Ex Parte Young , 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908). We therefore reverse and remand for further proceedings consistent with this opinion.

I.

The ASA is an Arizona non-profit corporation that represents students enrolled at the state's three public universities. Its primary purpose is to advocate for the affordability, accessibility, and quality of public higher education in Arizona, and the ASA frequently engages in political activity related to financial aid, public funding of higher education, and tuition policy.

From 1974 through 1998, ABOR, a state board whose members are appointed by the Governor and confirmed by the Arizona State Senate, directly funded the ASA. In 1998, students at Arizona's three public universities voted to impose a semesterly one-dollar fee per student to fund the ASA. In 2008, students voted to increase the fee to two dollars per semester.¹ From 1998 through 2013, ABOR collected the student fee on the ASA's behalf and remitted proceeds to the ASA at no cost.

Throughout 2012, the ASA advocated for the passage of Proposition 204, a state ballot initiative that would increase funding for public education. In preparation for the November 2012 election, the ASA co-drafted the text of the initiative; collected over 20,000 petition signatures to qualify the initiative for the election; co-drafted the ballot argument that appeared in the state's official Publicity Pamphlet (voter's guide); participated in media events in support of the initiative; hosted information sessions and distributed literature explaining the initiative; engaged in social media campaigning; phone-banked and canvassed neighborhoods to encourage voter turnout in support of the initiative; and contributed $120,000 of its student-fee income to the Yes on Proposition 204 campaign. All of the ASA's activities complied with campaign disclosure and reporting laws and regulations.

Janice Brewer, the former Governor of Arizona and an ex-officio member of ABOR, opposed Proposition 204. Additionally, during the campaign and after the election, several Regents criticized the ASA for supporting Proposition 204. Within weeks of the November election, ABOR called a special meeting to discuss the ASA fee. At the special meeting, ABOR voted to suspend collection of the ASA fee, and it withheld the fee income it already had collected for the Spring 2013 semester. Several Regents commented that the suspension was “political” in nature and was undertaken in response to the ASA's Proposition 204 advocacy. ABOR held a second special meeting in January 2013, in which it proposed changing the Board's policies to collect the ASA fee only from students who “opted-in” and to require that the ASA reimburse the universities for the administrative costs of collecting the ASA fee. On February 7, 2013, ABOR adopted the policy revisions proposed at the January 2013 meeting. The ASA alleged that it lost “its only source of income” when ABOR suspended fee collection and then modified its policies to an opt-in model, and it argued to this court that since November 26, 2012, the Board has not remitted to the ASA the fees ABOR collected for Spring 2013.

The ASA filed suit pursuant to 42 U.S.C. § 1983, alleging that ABOR had modified its policies to retaliate against the ASA's exercise of its First Amendment free speech rights.² The ASA alleged that ABOR's retaliatory policy change caused it harm by chilling students' political speech and depriving the ASA of its income. ABOR moved to dismiss the complaint on sovereign immunity grounds and, in the alternative, for failure to state a claim upon which relief could be granted. Fed. R. Civ. P. 12(b)(1), 12(b)(6). In opposing the motion, the ASA emphasized that it had pleaded a claim of First Amendment retaliation, and it argued that in addition to chilling the ASA's ability to exercise its free speech rights, ABOR had harmed the ASA by depriving it of a valuable government benefit. The district court granted ABOR's motion with prejudice, concluding that sovereign immunity barred all of the ASA's claims and, in the alternative, that the ASA had failed to allege a plausible claim for relief. Additionally, the district court denied the ASA's request for leave to amend to name individual regents, concluding that such amendment would be futile.

II.

We review de novo a dismissal on the basis of sovereign immunity or for failure to state a claim upon which relief can be granted. O'Brien , 818 F.3d at 929–30 ; Kahle v. Gonzales , 487 F.3d 697, 699 (9th Cir. 2007). We limit our review to the complaint, accept the complaint's well-pleaded factual allegations as true, and construe all inferences in the plaintiff's favor for the purposes of evaluating a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). Marder v. Lopez , 450 F.3d 445, 448 (9th Cir. 2006) ; Zimmerman v. City of Oakland , 255 F.3d 734, 737 (9th Cir. 2001).

III.

The district court concluded that sovereign immunity barred the ASA from suing ABOR, and accordingly, the court determined that it lacked subject matter jurisdiction over the ASA's complaint. U.S. Const., amend XI ; Fed. R. Civ. P. 12(b)(1). Alternatively, the district court concluded that if sovereign immunity did not bar the ASA's lawsuit, then the ASA's complaint failed to state a claim upon which relief could be granted under Rule 12(b)(6). We first analyze the district court's sovereign immunity determination, and we conclude that although the district court did not err in determining that ABOR is an arm, division, or instrumentality of the State of Arizona entitled to sovereign immunity, it erred when it failed to apply the Young doctrine to the ASA's claims.

A.

Sovereign immunity provides that an individual may not sue a state, a division of a state, or an instrumentality/arm of a state without the state's consent. Frew v. Hawkins , 540 U.S. 431, 437, 124 S.Ct. 899, 157 L.Ed.2d 855 (2004) ; Seminole Tribe of Fla. v. Florida , 517 U.S. 44, 54, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996) ; Edelman v. Jordan , 415 U.S. 651, 662–63, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974). As a result, the Eleventh Amendment bars individuals from bringing lawsuits against a state for money damages or other retrospective relief, Frew , 540 U.S. at 437, 124 S.Ct. 899, so long as the “state is the real, substantial party in interest,” Regents of the University of California v. Doe , 519 U.S. 425, 429, 117 S.Ct. 900, 137 L.Ed.2d 55 (1997) (citation omitted).

We have previously held that ABOR is an arm of the State of Arizona for Eleventh Amendment purposes. See Rutledge v. Ariz. Bd. of Regents , 660 F.2d 1345, 1349 (9th Cir. 1981), abrogated on other grounds by Haygood v. Younger , 769 F.2d 1350, 1356 (9th Cir. 1985) (en banc); Ronwin v. Shapiro , 657 F.2d 1071, 1073 (9th Cir. 1981) (“[W]e conclude that the [Arizona] Board of Regents is protected by the eleventh amendment.”). In our prior analyses, we have also held that the State of Arizona treats ABOR as a division of the State under Arizona law. See Rutledge , 660 F.2d at 1349 (citing Ariz. Bd. of Regents v. Ariz. York Refrigeration Co. , 115 Ariz. 338, 565 P.2d 518 (1977) ).

We are bound by the holdings of prior three-judge panels so long as those holdings and their reasoning have not been superseded by later or intervening authority. See Rodriguez v. Robbins , 804 F.3d 1060, 1080 (9th Cir. 2015) ; Lair v. Bullock , 798 F.3d 736, 745 (9th Cir. 2015) ; Miller v. Gammie , 335 F.3d 889, 892–93 (9th Cir. 2003) (en banc). We have not revisited or abrogated our determination that ABOR is a division of the State of Arizona entitled to sovereign immunity. Accordingly, the Eleventh Amendment bars any claim by the ASA for retrospective relief, including money damages, against ABOR. As discussed below, however, the ASA's claim for prospective injunctive relief and related declaratory relief is not barred by sovereign immunity, provided such relief is sought against individual members of the Board.

B.

Although sovereign immunity bars money damages and other retrospective relief against a state or instrumentality of a state, it does not bar claims seeking prospective injunctive relief against state officials to remedy a state's ongoing violation of federal law. Ex Parte Young , 209 U.S. 123, 149–56, 28 S.Ct. 441, 52 L.Ed. 714 (1908) ; see also Quern v. Jordan , 440 U.S. 332, 337, 99 S.Ct. 1139, 59 L.Ed.2d 358 (1979) ; Agua Caliente Band of Cahuilla Indians v. Hardin , 223 F.3d 1041, 1045 (9th Cir. 2000). The Young doctrine allows individuals to pursue claims against a state for prospective equitable relief, including any measures...