Patterson v. Pa. Liquor Control Bd.

• Decision Date: 12 February 2019
• Docket Number: No. 17-2742,17-2742
• Citation: 915 F.3d 945
• Parties: Earl PATTERSON, Appellant v. PENNSYLVANIA LIQUOR CONTROL BOARD
• Court: U.S. Court of Appeals — Third Circuit

915 F.3d 945

Earl PATTERSON, Appellant

v.PENNSYLVANIA LIQUOR CONTROL BOARD

No. 17-2742

United States Court of Appeals, Third Circuit.

Argued: June 19, 2018

Opinion Filed: February 12, 2019

Wayne A. Ely, Timothy M. Kolman, W. Charles Sipio, [ARGUED], Kolman Ely, 414 Hulmeville Avenue, Penndel, PA 19047, Counsel for Appellant

J. Bart DeLone, Josh Shapiro, Claudia M. Tesoro [ARGUED], Office of Attorney General of Pennsylvania, 1600 Arch Street, Suite 300, Philadelphia, PA 19103, Counsel for Appellee

Before: GREENAWAY, JR., RESTREPO, BIBAS, Circuit Judges.

OPINION OF THE COURT

RESTREPO, Circuit Judge.

Earl Patterson was employed as a maintenance person for the Pennsylvania Liquor Control Board ("PLCB") when he reported for duty at a PLCB-operated liquor store in Eddystone, Pennsylvania. Shortly after his arrival, the location's assistant manager accused him of attempting to rob the store. Patterson was detained by the police as a result of the PLCB employee's accusation. Patterson filed a Complaint pursuant to 42 U.S.C. §§ 1981 and 1983 against the PLCB alleging race discrimination and violations of Fourteenth Amendment Equal Protection in connection with these events. Patterson now appeals the District Court's Order granting the PLCB's motion to dismiss his Complaint on Eleventh Amendment sovereign immunity grounds.¹ For the reasons that follow, we will affirm.

I.

On the morning of November 17, 2014, Patterson—an African-American male and a longtime PLCB employee performing maintenance—arrived at a PLCB-run store in Eddystone, Pennsylvania to inquire about the store's operating condition. Upon his arrival, Patterson asked for a manager and was directed by a store clerk to the assistant manager. Patterson then identified himself to the assistant manager as a maintenance worker for the PLCB and asked whether the store's electricity and plumbing were in working order or if the store might otherwise be in need of repairs. The assistant manager became "very rude" to Patterson, so he exited the liquor store, entered his "state-owned van, and reported the assistant manager to his foreman over the phone." App. 11. Per his foreman's instruction, Patterson left the Eddystone store and drove towards another PLCB store in Newtown Square, Pennsylvania.

En route to the Newtown Square store, Patterson was stopped by the police and questioned about "robbing" the Eddystone store. Id. During the stop, an officer informed Patterson that the Eddystone assistant manager had called to report a "black guy" in a "state van" who was trying to "rob her store." App. 11-12.

Patterson filed a Complaint against the PLCB alleging race discrimination and violations of the Fourteenth Amendment's Equal Protection Clause, pursuant to 42 U.S.C. §§ 1981 and 1983. The PLCB filed a motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), which the District Court granted upon a finding that the PLCB was entitled to Eleventh Amendment sovereign immunity from suit. Patterson appeals, arguing that the District Court erred in finding that the PLCB was an "arm" of the Commonwealth of Pennsylvania. Patterson contends that, in reaching its conclusion that the PLCB is immunized from suit under the Eleventh Amendment, the District Court improperly weighed this Court's three-factor test, established in Fitchik v. N.J. Transit Rail Operations, Inc. , 873 F.2d 655, 659 (3d Cir. 1989) (en banc).

II.

The District Court had jurisdiction pursuant to 28 U.S.C. § 1331. We have jurisdiction pursuant to 28 U.S.C. § 1291. We exercise plenary review over a District Court's dismissal of an action pursuant to Rule 12(b)(6). Estate of Lagano v. Bergen Cty. Prosecutor's Office , 769 F.3d 850, 853 (3d Cir. 2014). We review de novo whether an entity is entitled to sovereign immunity. Karns v. Shanahan , 879 F.3d 504, 512 (3d Cir. 2018).

III.

Though, by its terms, the Eleventh Amendment immunizes only "States" against private actions brought by citizens of other states, see U.S. Const. amend. XI, it is "well established" that suits brought by in-state litigants against "arms" of a state "may nonetheless be barred by the Eleventh Amendment." Karns , 879 F.3d at 512–13 (quoting Edelman v. Jordan , 415 U.S. 651, 663, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974), and Bowers v. Nat'l Collegiate Athletic Ass'n , 475 F.3d 524, 545 (3d Cir. 2007) ); see also Hans v. Louisiana , 134 U.S. 1, 20, 10 S.Ct. 504, 33 L.Ed. 842 (1890).

A party is an "arm of the state" for sovereign immunity purposes when "the state is the real, substantial party in interest." Ford Motor Co. v. Dep't of Treasury of Ind. , 323 U.S. 459, 464, 65 S.Ct. 347, 89 L.Ed. 389 (1945), overruled on other grounds by Lapides v. Bd. of Regents of Univ. Sys. of Ga. , 535 U.S. 613, 623, 122 S.Ct. 1640, 152 L.Ed.2d 806 (2002). "[T]he relationship between the State and the entity in question" is critical to this inquiry. Regents of the Univ. of Cal. v. Doe , 519 U.S. 425, 429, 117 S.Ct. 900, 137 L.Ed.2d 55 (1997). We employ a three-factor test to determine an entity's sovereign immunity status: "(1) whether the payment of the judgment would come from the state; (2) what status the entity has under state law; and (3) what degree of autonomy the entity has." Karns , 879 F.3d at 513 (quoting Bowers , 475 F.3d at 546 ). We regard the three factors as "co-equal." Benn v. First Judicial Dist. of Pa. , 426 F.3d 233, 239–40 (3d Cir. 2005). Thus after assessing in which direction each factor points, "we balance them to determine whether an entity amounts to an arm of the State." Maliandi v. Montclair State University , 845 F.3d 77, 84 (3d Cir. 2016).

Below, we will assess the factors and their relevant subfactors. Part III.A. considers whether the state or the PLCB funds payment of an adverse judgment; Part III.B. reviews whether state law treats the PLCB as an arm of the state; and Part III.C. examines the PLCB's autonomy relative to the state.

A .

When analyzing the funding factor, we first ask "[w]hether the money that would pay the judgment would come from the state." Fitchik , 873 F.2d at 659. To evaluate this question, we consider three subfactors: (1) a state's legal obligation to pay a money judgment entered against the entity; (2) whether the agency has money to satisfy the judgment; and (3) whether there are specific statutory provisions that immunize the state from liability for money judgments. Id. ; see also Maliandi , 845 F.3d at 86. We evaluate each subfactor in turn, below.

i.

The first funding subfactor focuses on "whether the state treasury is legally responsible for the payment of a judgment." Febres v. Camden Bd. of Educ. , 445 F.3d 227, 233 (3d Cir. 2006) (emphasis added). Accordingly, if a state indemnifies an entity voluntarily, the funding factor will likely disfavor granting sovereign immunity. See Maliandi , 845 F.3d at 87. Pennsylvania is not legally obligated to pay for judgments entered against the PLCB. After the PLCB pays a judgment, the Governor may choose to reimburse the PLCB—but there is no legal obligation to do so. See 47 Pa. Cons. Stat. § 744-910 ("The State Treasurer is hereby authorized and directed to transfer such sums from the General Fund to the State Stores Fund as the Governor ... shall direct."). Accordingly, this subfactor weighs definitively against granting the PLCB sovereign immunity.

The PLCB instead argues that this subfactor only slightly disfavors a finding of sovereign immunity. Appellee's Br. 19. Specifically, the PLCB contends that its funds effectively "morph into Commonwealth funds" because the funds are subject to a high level of oversight from state officials. Id. Therefore, an adverse judgment's practical effect would constitute a state legal obligation to keep the PLCB afloat. Id.

We do not agree. Although practical effects arguments have, on occasion, "enter[ed] [our] calculus," Febres , 445 F.3d at 236, such instances have been limited to situations where "Congress has put a proverbial ‘gun to the head’ of the State to sustain the entity even without a legal obligation." Maliandi , 845 F.3d at 87 n.7 (citing Alaska Cargo Transp., Inc. v. Alaska R.R. Corp. , 5 F.3d 378 (9th Cir. 1993) (holding that an adverse judgment against the state agency had the practical effect of impacting the state's treasury because federal law effectively required Alaska to keep the entity operational); Morris v. Wash. Metro. Area Transit Auth. , 781 F.2d 218 (D.C. Cir. 1986) (finding that a judgment against the Washington Metropolitan Area Transit Authority would directly affect Maryland and Virginia's treasuries because of their practical financial commitments to the entity) ).

Here, we find the PLCB's argument unavailing, as the state is not legally obligated to pay for an adverse judgment, and there is no legislative coercion for the state to do so. Though the practical effects argument is not convincing in terms of this subfactor, the state's high level of control over the PLCB is relevant to the third subfactor—the PLCB's autonomy—and, accordingly, we will discuss it below. Fitchik , 873 F.2d at 660 (reasoning that New Jersey's veto power over New Jersey Transit's operations indicated a lack of autonomy from the state, not financial dependency).

In sum, as the PLCB is responsible for the payment of judgments, and the state has no legal obligation to indemnify it, this subfactor points definitively against affording the PLCB sovereign immunity.

ii .

The second subfactor requires us to determine whether the entity has money to pay an adverse judgment, and whether "the entity has sources of funding aside from state appropriations" that could satisfy the judgment. Maliandi , 845 F.3d at 88 ; accord Fitchik , 873 F.2d at 660–62. We also consider the degree of control the state maintains over any funds it appropriates to the entity. See Fitchik , 873 F.2d at 661.

The PLCB obtains revenue from the sale of liquor, which is then deposited into the State Stores Fund, a "separate...