Braderman v. Pennsylvania Housing Finance Agency

• Decision Date: 04 December 1984
• Docket Number: Civ. A. No. 84-1244.
• Citation: 598 F. Supp. 834
• Parties: Sandra BRADERMAN, Plaintiff, v. PENNSYLVANIA HOUSING FINANCE AGENCY, Commonwealth of Pennsylvania, et al., Defendants.
• Court: U.S. District Court — Middle District of Pennsylvania

598 F. Supp. 834

Sandra BRADERMAN, Plaintiff, v. PENNSYLVANIA HOUSING FINANCE AGENCY, Commonwealth of Pennsylvania, et al., Defendants.

Civ. A. No. 84-1244.

United States District Court, M.D. Pennsylvania.

December 4, 1984.

Greg Knight, Tive, Hetrick & Pierce, P.C., Harrisburg, Pa., for plaintiff.

Gregory R. Neuhauser, Deputy Atty. Gen., Harrisburg, Pa., for defendants.

MEMORANDUM

CALDWELL, District Judge.

I. Introduction

Plaintiff, Sandra Braderman, has filed a complaint in which she alleges she was discharged from her position as a legal secretary at the Pennsylvania Housing Finance Agency (PHFA) in violation of her First Amendment right to freedom of association. The complaint also makes state constitutional and state law claims for relief. Defendants, PHFA, Harold Dunbar, its former chief counsel, and Trudy Baum, PHFA's director of personnel, have filed motions to dismiss plaintiff's complaint pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6).

II. PHFA's Motion to Dismiss

PHFA contends as its sole ground for dismissal that it is a part of the Commonwealth and, accordingly, the Eleventh Amendment divests this court of jurisdiction to adjudicate plaintiff's claim against it. Conversely, plaintiff contends that the Eleventh Amendment is inapplicable because PHFA is financially independent of the Commonwealth. After careful review of the briefs of both parties and the applicable law we conclude that PHFA is not a part of the Commonwealth and not entitled to Eleventh Amendment immunity.

Defendant correctly points out that state authority, cited by plaintiff, dealing with sovereign immunity from tort is not dispositive of its claim of Eleventh Amendment immunity. "Whether or not an agency or instrumentality is the alter ego of the state and, therefore, immune from suit by virtue of the Eleventh Amendment is a question of federal, not state, law." Harris v. Pennsylvania Turnpike Commission, 410 F.2d 1332, 1333 n. 1 (3d Cir.1969), cert. denied, 396 U.S. 1005, 90 S.Ct. 558, 24 L.Ed.2d 497 (1970). We cannot agree with defendant, however, that the "general rule" set forth in Pennhurst State School & Hospital v. Halderman, ___ U.S. ___, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984) (Pennhurst II) applies to Eleventh Amendment determinations. There, the Supreme Court stated: "The general rule is that a suit is against the sovereign if `the judgment sought would expend itself on the public treasury or domain, or interfere with the public administration,' or if the effect of the judgment would be `to restrain the Government from acting, or to compel it to act.'" Id. at ___ n. 11, 104 S.Ct. at 908 n. 11, 79 L.Ed.2d at 79 n. 11 (quoting Dugan v. Rank, 372 U.S. 609, 620, 83 S.Ct. 999, 1006, 10 L.Ed.2d 15, 23 (1963)). While this quotation is correct as an abstract statement of the law, it provides no guidance in determining what constitutes the "government" for Eleventh Amendment purposes nor do we believe that it was intended for such a purpose. The Third Circuit Court of Appeals has adopted a more specific and comprehensive test which is as follows:

* * * Local law and decisions defining the status and nature of the agency involved in its relations to the sovereign are factors to be considered, but only one of a number that are of significance. Among the other factors, no one of which is conclusive, perhaps the most important is whether, in the event plaintiff prevails, the payment of the judgment will have to be made out of the state treasury; significant here also is whether the agency has the funds or the power to satisfy the judgment. Other relevant factors are whether the agency is performing a governmental or proprietary function; whether it has been separately incorporated; the degree of autonomy over its operations; whether it has the power to sue and be sued and to enter into contracts; whether its property is immune from state taxation, and whether the sovereign has immunized itself from responsibility for the agency's operations.

Urbano v. Board of Managers of New Jersey State Prison, 415 F.2d 247, 250-51 (3d Cir.1969), cert. denied, 397 U.S. 948, 90 S.Ct. 967, 25 L.Ed.2d 129 (1970) (footnotes omitted) (quoting Krisel v. Duran, 258 F.Supp. 845, 849 (S.D.N.Y.1966), aff'd per curiam, 386 F.2d 179 (2d Cir.1967), cert. denied, 390 U.S. 1042, 88 S.Ct. 1635, 20 L.Ed.2d 303 (1968)).

This test requires us to review PHFA's statutory scheme.

The Housing Finance Agency Law, Act of Dec. 3, 1959, P.L. 1688, Art. I, § 101 et seq., as amended, 35 P.S. § 1680.101 et seq., created PHFA as a "public corporation," see 35 P.S. § 1680.201, to provide financing for the construction and rehabilitation of homes and rental housing for persons, including the elderly, of moderate and low incomes. 35 P.S. § 1680.102. The members of the agency are the Secretary of Community Affairs, the State Treasurer, the Secretary of Commerce and the Secretary of Banking. Six additional members are appointed by the governor. The latter are each appointed for a six year term with the approval of two-thirds of the state senate. Id. at § 1680.202. The agency's governing board consists of its members. Id. at § 1680.203.

Among other powers, PHFA can adopt, use and alter at will a corporate seal, make and alter bylaws for the management and regulation of its affairs, enter into contracts of all kinds and execute all instruments necessary or convenient for carrying on its operations, be a party litigant to lawsuits, acquire, hold and dispose of tangible and intangible personal property, acquire, hold and dispose of real property, borrow money for the operation and work of the agency by the making of notes and by the issuance of bonds, employ an executive director and such other officers, agents, employees, professional and business advisers as may from time to time be necessary in its judgment and to fix their compensation, and do all things necessary or convenient to carry out the powers granted by the Act; Id. at § 1680.205.

Agency moneys are paid to the treasurer of the agency and held in one or more special accounts. Id. at § 1680.206. The agency's bonds and notes are issued subject to the written approval of the governor. Id. at §§ 1680.501a, 1680.501a.1. They are tax exempt, general obligations of the agency and are "not deemed to constitute a debt of the Commonwealth or of any political subdivision thereof or a pledge of the faith and credit of the Commonwealth or of any such political subdivision." Id. at §§ 1680.502a, 1680.506a. While the agency is authorized to create "capital reserve funds" into which the General Assembly may contribute, the General Assembly has no legal obligation to do so. Id. at § 1680.504a(c); Johnson v. Pennsylvania Housing Finance Agency, 453 Pa. 329, 309 A.2d 528 (1973).

PHFA generates revenue by lending money to any mortgagor for the construction, reconstruction or rehabilitation of housing for sale or lease to persons of low or moderate incomes. Id. at §§ 1680.301a, 1680.401a. The agency also finances the purchase, construction, improvement or rehabilitation of owner-occupied single family residences by contract with lending institutions. Id. at § 1680.401b (Purdon Supp. 1984-85).

Finally, PHFA administers the Home-owner's Emergency Mortgage Assistance Fund. The Fund is a separate account used to make emergency loans to mortgagors who, through no fault of their own, are suffering financial hardships making them delinquent on their mortgage payments. Id. at §§ 1680.401c, 1680.404c. The program differs from others carried out by PHFA in that the Fund cannot be used by the agency unless funding is specifically authorized and appropriated by the Pennsylvania General Assembly for the purposes provided for by Article IV-C of the Act. Id. at § 1680.408c (Purdon Supp. 1984-85). PHFA also cannot independently raise revenue for the Fund. Aside from the General Assembly, which authorized appropriation of up to $25,750,000.00 for the Fund in fiscal year 1984-85, see Act of May 31, 1984, No. 73-1984, § 3, its funding comes from business entities, which may make tax deductible contributions to it. 35 P.S. § 1680.410c. Repayments to the Fund by mortgagors are to be transferred back to the source from which the money was appropriated. Id. at § 1680.408c.

We now apply the Urbano test in light of the above statutory organization of PHFA.

A. Whether PHFA has corporate powers and is automonous.

PHFA possesses those specific attributes the Court of Appeals considers significant in concluding that a governmental body is automonous. It is separately incorporated, can sue and be sued in its own name, can enter into contracts, acquire property, and perform all things necessary or convenient to carry out its corporate powers.

Against these indications of autonomy, defendant PHFA asserts the following: (1) four members of the governing board are also members of the governor's cabinet who serve at the governor's pleasure while the remaining six members are appointed by the governor subject to confirmation by the Senate; and (2) the issuance of PHFA's bonds and notes are subject to the written approval of the governor.

Defendant's contentions have some merit but not enough, in showing that PHFA is not independent of the Commonwealth. In connection with the governor's authority over the membership in the agency, we first note that defendant incorrectly asserts that the State Treasurer serves "at the pleasure of the Governor." Defendant's reply brief at 6. Actually, the office of State Treasurer is an elective one. See Pa. Const. Art. IV, § 18. As such, the State Treasurer is independent of the Governor. Additionally, 35 P.S. § 1680.202 provides that the six appointive members of the agency, who together with the State Treasurer, form a seven person majority of the agency and governing board, shall serve staggered six year terms. Thus, the governor cannot remove these members at his pleasure. Commonwealth ex rel. Sortino v. Singley, 481...