Peter Kiewit Sons Co. v. SOUTH DAKOTA STATE HIGHWAY COM'N

• Decision Date: 15 June 1967
• Docket Number: Civ. No. 67-27S.
• Citation: 269 F. Supp. 333
• Parties: PETER KIEWIT SONS CO., a Corporation, Massman Construction Co., a Corporation, and Johnson, Drake & Piper, Inc., a Corporation, Plaintiffs, v. SOUTH DAKOTA STATE HIGHWAY COMMISSION, consisting of Nils A. Boe, Gordon Gunderson, James Burns and W. E. (Bill) Dorsey, members of said South Dakota Highway Commission, acting for and on Behalf of DEPARTMENT OF HIGHWAYS, STATE OF SOUTH DAKOTA, Defendants.
• Court: U.S. District Court — District of South Dakota

269 F. Supp. 333

PETER KIEWIT SONS CO., a Corporation, Massman Construction Co., a Corporation, and Johnson, Drake & Piper, Inc., a Corporation, Plaintiffs, v. SOUTH DAKOTA STATE HIGHWAY COMMISSION, consisting of Nils A. Boe, Gordon Gunderson, James Burns and W. E. (Bill) Dorsey, members of said South Dakota Highway Commission, acting for and on Behalf of DEPARTMENT OF HIGHWAYS, STATE OF SOUTH DAKOTA, Defendants.

Civ. No. 67-27S.

United States District Court D. South Dakota, S. D.

June 15, 1967.

Ellsworth E. Evans, of Davenport, Evans, Hurwitz & Smith, Sioux Falls, S. D., for plaintiffs.

John B. Wehde, Sp. Asst. Atty. Gen., and Kenneth J. Morgan, Highway Asst. Atty. Gen., of Pierre, S. D., for defendants.

MEMORANDUM DECISION

NICHOL, Chief Judge.

Peter Kiewit Sons Co., a Nebraska corporation, Massman Construction Co., a Missouri corporation, and Johnson Drake & Piper, Inc., a Minnesota corporation, brought suit against the South Dakota State Highway Commission for damages incurred in the performance of a construction contract and for a declaration of the rights of the parties thereto. The cause comes before this court on motion of the Highway Commission to dismiss the action for lack of jurisdiction on the premise, among others, that the state of South Dakota is the real party in interest, that diversity of citizenship does not exist, and that the suit is in violation of the Eleventh Amendment to the United States Constitution.

Plaintiffs, invoking diversity jurisdiction, brought this suit under chapter 110 of the 1964 Session Laws of the State of South Dakota. This statute provides:

"Section 1.

"The state of South Dakota may be sued and made defendant in any court in which an action is brought against the South Dakota State Highway Commission respecting any claim, right, or controversy arising out of the work performed, or by virtue of the provisions of any construction contract entered into by the South Dakota State Highway Commission. Such action shall be heard and determined pursuant to rules otherwise applicable to civil actions brought in the particular court having jurisdiction of the suit and the parties to the suit shall have the right of appeal from any judgment, decree, or decision of the trial court to the appropriate appellate court under the applicable rules of appeal.

"Section 2.

"Any such action shall name the South Dakota State Highway Commission as defendant and the venue for trial shall be the county where all or part of the construction work was performed.

"Section 3.

"Service upon the state of South Dakota shall be made by serving a copy of the summons, with the complaint attached, upon any member of the South Dakota State Highway Commission, and also by serving copies of the summons and complaint upon the Governor and Attorney General of the state of South Dakota, in the manner provided for the service of process in actions brought in the circuit courts of the state of South Dakota, or by serving a copy of the summons, with the complaint attached, upon any member of the South Dakota State Highway Commission, and also by serving copies of the summons and complaint upon the Governor and Attorney General of the state of South Dakota in the manner provided for service of process in actions brought in United States District Courts, except only that the state shall be required to appear within thirty (30) days after the day such process is served in the manner herein provided.

"Section 4.

"Actions against the state of South Dakota authorized under the provisions of section one (1) shall be instituted within two (2) years from the date of the completion of the work as provided under the terms of that particular contract or contracts.

"Section 5.

"The state of South Dakota shall pay to any successful litigant, the amount of damages awarded and the amount of costs assessed against the state of South Dakota, out of the state highway fund from all the moneys levied and collected by the state by general state taxation for state highway purposes, or appropriated for state highway purposes.

"Section 6.

"No execution shall issue against the state on any final judgment obtained under the provisions of this chapter; but whenever final judgment against the state shall have been obtained in any such action as herein provided, the clerk of the court wherein the final judgment was obtained, shall forthwith, send a certified copy of said judgment by registered mail to the State Highway Director, and to the State Auditor, and the Auditor shall thereupon audit the amount of damages and costs therein finally awarded, and the same shall be paid out of the state highway fund by the State Treasurer."

Plaintiffs argue in substance that by this statute the Legislature has waived the state's immunity under the 11th Amendment, and authorized suit to be brought against the Highway Commission, that a fund is provided for payment of judgments, that the state is not affected by this suit, and that the Highway Commission is an entity separate from the state, constituted and recognized as such by the Legislature through the enactment of chapter 110, S.D.Sess.Laws 1964.

The question of whether the state has consented to be sued is not determinative of the question of diversity jurisdiction. Even where there is consent, jurisdiction is lacking if the action is in reality a suit against the state. State Highway Commission of Wyoming v. Utah Construction Co., 278 U.S. 194, 199-200, 49 S.Ct. 104, 73 L.Ed. 262 (1929); State of North Dakota v. National Milling & Cereal Co., 114 F.2d 777, 779 (8th Cir. 1940). Nor is the question of whether a special fund has been provided the only factor to be considered on the question of diversity jurisdiction. Weyerhaeuser Co. v. State Roads Comm'n of Maryland, 187 F.Supp. 766, 771 (D.C. Md.1960). Under 28 U.S.C.A. Sec. 1332, "(a) the district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $10,000, exclusive of interest and costs, and is between — (1) citizens of different States; * * *." Thus, if the state is the real party in interest, there is an absence of diversity jurisdiction, even though the state may not be named. DeLong Corporation v. Oregon State Highway Comm'n, 233 F. Supp. 7, 10 (D.C.Ore.1964); aff'd 343 F.2d 911 (9th Cir. 1965); cert. denied 382 U.S. 877, 86 S.Ct. 161, 15 L.Ed.2d 119 (1965).

To determine the question of real parties in interest the court must consider the nature of the case as presented by the whole record rather than by reference to the nominal parties to the record. Ex parte Nebraska, 209 U.S. 436, 444-445, 28 S.Ct. 581, 52 L.Ed. 876 (1908). The question of whether a suit is one between citizens of different states is one as to which the federal courts must express an independent judgment. State Highway Commission in Arkansas v. Kansas City Bridge Co., 81 F.2d 689, 691 (8th Cir. 1936).

Thorough and exhaustive analyses of previous federal court decisions and the relevent state statutes on the problem of federal diversity jurisdiction exist in Weyerhaeuser Co. v. State Roads Comm'n of Maryland, supra, 187 F.Supp. at 766, and in DeLong Corporation v. Oregon State Highway Comm'n, supra, 233 F. Supp. at 7. To avoid prolonged treatment of the cases discussed therein, this court adopts the rationale of the above cases with regard to diversity jurisdiction. As Judge Oliver points out in Maryland Casualty Co. v. State Highway Comm'n of Missouri, 256 F.Supp. 666 (D.C.Mo.1966):

"The fact that diversity was held to exist in some cases and not in others does not indicate any inconsistency in either the applicable law or the application of that law to a particular case. It merely means that the legislatures of particular states pass different sorts of statutes that differ greatly one from the other and that State and federal courts so hold." Id. at 670.

In order to arrive at an intelligent decision, the court must closely analyze not only the legislation which created the South Dakota Highway Commission, but also the legislation subsequently enacted touching on the powers and duties of the Commission. DeLong Corporation v. Oregon State Highway Comm'n, supra, 233 F.Supp. at 10.

Under S.D.Sess.Laws 1903, chapter 152, the boards of county commissioners were given power to establish, alter or vacate highways and roads within the county. S.D.Sess.Laws 1913, chapter 233, established a State Highway Commission, to be appointed by the governor, with the duty of giving advice, assistance and supervision with regard to road and bridge construction throughout the state. The commission was to prepare and adopt rules and regulations concerning construction of roads and bridges, approve county applications for designated state roads and advise and consult with county boards in the construction or improvement of county roads. The highway commission, as created, was clearly a state agency created to supervise and coordinate road construction within the state, in cooperation with the county boards.

By S.D.Sess.Laws 1917, chapter 359, the 1913 law was repealed and a state highway department was created, with the governor and state engineer as ex officio members, and a third member to be appointed. The duty of the state highway department was to supervise, control and direct the building of public roads and bridges. The duties of the county boards remained the same, subject to...