Board of Trustees of Hamilton Heights School Corp. v. Landry, 06A01-9112-CV-380

• Decision Date: 11 August 1994
• Docket Number: No. 06A01-9112-CV-380,06A01-9112-CV-380
• Citation: 638 N.E.2d 1261
• Parties: 93 Ed. Law Rep. 878 BOARD OF TRUSTEES OF HAMILTON HEIGHTS SCHOOL CORPORATION, Ronald E. McGill, Sylvia Kay Hartley, Marcia A. House, Keith Schulenberg, and Laurence C. Beck, Individually and in their capacity as members of the Board of School Trustees of Hamilton Heights School Corporation, Appellants-Defendants, v. Roger V. LANDRY, Appellee-Plaintiff.
• Court: Indiana Appellate Court

Page 1261

638 N.E.2d 1261

93 Ed. Law Rep. 878

BOARD OF TRUSTEES OF HAMILTON HEIGHTS SCHOOL CORPORATION Ronald E. McGill, Sylvia Kay Hartley, Marcia A. House, Keith Schulenberg, and Laurence C. Beck, Individually and in their capacity as members of the Board of School Trustees of Hamilton Heights School Corporation, Appellants-Defendants, v. Roger V. LANDRY, Appellee-Plaintiff.

No. 06A01-9112-CV-380.

Court of Appeals of Indiana First District.

Aug. 11, 1994.

Rodney V. Taylor, David J. Theising, Christopher & Taylor, Indianapolis, Steven A. Holt, Holt, Fleck & Free, Noblesville, for appellants.

Richard J. Darko, Mary Jane Lapointe, Lowe Gray Steele & Hoffman, Indianapolis, for appellee.

OPINION ON REHEARING

NAJAM, Judge.

In our previous opinion, Board of Trustees of Hamilton Heights School Corporation v. Landry (1993), Ind.App., 622 N.E.2d 1019, Hamilton Heights brought an interlocutory appeal from the trial court's denial of its motion for summary judgment on Landry's federal law claims. Landry had alleged infringement of his right of academic freedom and a denial of due process when Hamilton Heights suspended him for two days without pay and required him to make restitution after he permanently removed the glossaries from 146 science textbooks owned by the school. Without reaching his substantive claims, we held that Landry could not maintain a Section 1983 action against Hamilton Heights because "an Indiana school corporation is not a 'person' under 42 U.S.C. § 1983." Id. at 1025. However, after a more thorough briefing of this issue by the parties, and our additional research and further consideration, we now conclude that an Indiana school corporation is not an arm of the state entitled to Eleventh Amendment immunity and, therefore, that Hamilton Heights is a "person" amenable to suit under Section 1983.

Issue One: School Corporation's Status Under Section 1983

We applied an Eleventh Amendment immunity analysis in our previous opinion to determine whether Hamilton Heights was a "person" amenable to suit under Section 1983. See Landry, 622 N.E.2d at 1023; Will v. Michigan Department of State Police (1989), 491 U.S. 58, 71, 109 S.Ct. 2304, 2311-12, 105 L.Ed.2d 45, 58. There, our inquiry relied upon the Indiana Constitution, and Indiana statutory and decisional law regarding whether or not a particular entity was an arm of the state. See Mt. Healthy Bd. of Educ. v. Doyle (1977), 429 U.S. 274, 280, 97 S.Ct. 568, 572, 50 L.Ed.2d 471, 479.

We believe that further analysis is necessary. Once again, our discussion must begin by looking to the Supreme Court's decision in Mt. Healthy. In Mt. Healthy, the Court addressed whether an Ohio school board "is to be treated as an arm of the State partaking of the State's Eleventh Amendment immunity, or is instead to be treated as a municipal corporation or other political subdivision to which the Eleventh Amendment does not extend." Id. The Supreme Court concluded that an Ohio school board is "more like a county or a city than it is like an arm of the state" and held that the school board was not entitled to Eleventh Amendment immunity from suit in federal courts. Id.

Eleventh Amendment immunity "depends, at least in part, upon the nature of the entity created by state law." Id. The United States Court of Appeals for the Seventh Circuit has interpreted that principle to mean that "the Mt. Healthy test for whether an entity is an arm of the state is fact specific." Gary A. v. New Trier High School Dist. No. 203 (7th Cir.1986), 796 F.2d 940, 945 n. 8. In a decision involving Eleventh Amendment immunity issued shortly after Mt. Healthy was decided, the Seventh Circuit opined that the Mt. Healthy test focused primarily on the Ohio school board's authority "to raise its own funds when the need arose," either "by tax levy or by bond issuance," because of concern over who would satisfy a judgment against the school district. Mackey v. Stanton (7th Cir.1978), 586 F.2d 1126, 1130-31. The court in Mackey also inferred that the Supreme Court found it important that the Mt. Healthy school board performed its duties on a local level, although the board was subject to state supervision and depended heavily on state funds. Id. at 1131. Indeed, the Supreme Court's analysis of the Eleventh Amendment issue in Mt. Healthy is confined to a brief discussion of these criteria and citations to relevant provisions of the Ohio Code.

Since Mackey, the Seventh Circuit has expanded upon the factors the Supreme Court considered in Mt. Healthy and has adopted additional factors which we must consider in determining whether an entity, particularly an educational institution, is an arm of the state. The most important factor according to the Seventh Circuit is "the extent of the entity's financial autonomy from the state," specifically "whether a judgment would deplete the state treasury." Kashani v. Purdue University (7th Cir.1987), 813 F.2d 843, 845; Benning v. Bd. of Regents of Regency Universities (7th Cir.1991), 928 F.2d 775, 777 (citing Edelman v. Jordan (1974), 415 U.S. 651, 663, 94 S.Ct. 1347, 1355-56, 39 L.Ed.2d 662). ¹

A central concern in assessing the financial autonomy factor is whether an entity has the power to levy taxes and to issue bonds, in order that a judgment may be payed without resort to the general revenues of the state. See Mt. Healthy, 429 U.S. at 280, 97 S.Ct. at 572, 50 L.Ed.2d at 480; Kashani, 813 F.2d at 846; Gary A., 796 F.2d at 945; Mackey, 586 F.2d at 1130-31. In Indiana, although local school corporations receive a significant amount of state funding, ² they also have the power to levy taxes, to issue bonds, and to pay their own judgments. ³ See IND.CODE § 20-4-1-26.9; IND.CODE § 20-5-2-2(13); IND.CODE § 20-5-4-1; IND.CODE § 20-5-2-2(16). Thus, an Indiana school corporation possesses the degree of financial autonomy which the Supreme Court in Mt. Healthy found supported a determination that a school corporation was not an arm of the state for purposes of Eleventh Amendment immunity.

Among the other factors we must consider in our analysis is "the general legal status of the entity." Kashani, 813 F.2d at 846-47 (citing Mt. Healthy, 429 U.S. at 280, 97 S.Ct. at 572, 50 L.Ed.2d at 479). This factor involves an examination of "Indiana statutory definitions." Id. at 847. A school corporation has been defined by our statutes in at least three instances. First, the definition of "school corporation" includes "any school city, school town, school township, consolidated school corporation, metropolitan school district, township school corporation, county school corporation, united school corporation, or any community school corporation." IND.CODE § 20-6.1-1-5. The Budget Agency Act, at Indiana Code § 4-12-1-2, expressly excludes "cities, towns, townships, school cities, school towns, school townships, school districts, [and] other municipal corporations or political subdivisions of the state" from the definition of a "state agency." In addition, as stated in our previous opinion, the Tort Claims Act provides that a "school corporation" is a "political subdivision." See IND.CODE § 34-4-16.5-2. Thus, as in Mt. Healthy, these definitions also support the conclusion that a school corporation in Indiana is not an arm of the state.

Finally, we must look to whether the entity at issue can sue and be sued and enter into contracts, and whether it serves the state as a whole or only a local region. See Mt. Healthy, 429 U.S. at 280, 97 S.Ct. at 572, 50 L.Ed.2d at 479; Kashani, 813 F.2d at 847-48; Benning, 928 F.2d at 777. An Indiana school corporation has express statutory authority "to sue and be sued and to enter into contracts." IND.CODE § 20-5-2-2(1). Further, the entity at issue here is but one of many local school corporations in Indiana. Indiana "chose to organize public education through local school districts" instead of establishing "a single state agency to control all public education." See Gary A., 796 F.2d at 945 n. 9. These factors indicate as well that an Indiana school corporation does not have Eleventh Amendment immunity.

We reaffirm that an "inquiry concerning the nature of an Indiana school corporation must begin with the education clause found in Article 8, Section 1, of the Indiana Constitution," and that in the past our courts have properly determined public education to be a central function of state government. Landry, 622 N.E.2d at 1023-24. However, we must also acknowledge that Indiana has recently shifted its emphasis from centralized state control of education to greater local autonomy. See Brief in Support of Petition for Rehearing at 14. In 1989, the School Corporation Home Rule Act was enacted by the General Assembly to "grant school corporations all the powers that they need for the effective operation of each school corporation." See IND.CODE § 20-5-1.5-1. Further, the Act places limitations upon the State's control by providing that "State and other agencies may review or regulate the exercises of powers by a school corporation only to the extent prescribed by statute." See IND.CODE § 20-5-1.5-6. Finally, the Home Rule Act abrogated the common law rule that "any doubt as to the existence of a power of a school corporation shall be resolved against its existence." See IND.CODE § 20-5-1.5-2; see also IND.CODE § 20-5-1.5-3 and 4.

Based on our reexamination of Indiana law in light of the Seventh Circuit's interpretation of Mt. Healthy, we hold that an Indiana school corporation is not an arm of the state for Eleventh Amendment purposes and, therefore, is not immune from suit under Section 1983. ⁴ Thus, we must determine whether Landry can maintain a Section 1983 action against Hamilton Heights for an alleged violation of his federally protected constitutional rights.

Issue Two: Academic Freedom

As the basis for his Section 1983 claim, Landry asserts that Hamilton Heights deprived him of his First Amendment rights and substantive due...