Ramada Inns, Inc. v. Rosemount Memorial Park Ass'n

• Decision Date: 16 May 1979
• Docket Number: No. 78-2165,78-2165
• Citation: 598 F.2d 1303
• Court: U.S. Court of Appeals — Third Circuit
• Parties: RAMADA INNS, INC., a Corporation of the State of Delaware, J. O. Kislak Realty Corp., Plaintiff-Intervenor, v. ROSEMOUNT MEMORIAL PARK ASSOCIATION, a Cemetery Association of the State of New Jersey, and Gross, Demetrakis & Sinisi, Esqs., a law partnership of the State of New Jersey, successors to Gross, Demetrakis & Donohue, Esqs., as Escrow Agent, William F. Hyland, Attorney General of the State of New Jersey, and New Jersey Cemetery Board, Demetrakis & Dollinger Ramada Inns, Inc., a Corporation of the State of Delaware, Rosemount Memorial Park Association, Gross, Demetrakis & Sinisi, Esqs., a law partnership of the State of New Jersey, successors to Gross, Demetrakis & Donohue, Esqs., as Escrow Agent, Defendants-Intervenor. Appeal of RAMADA INNS, INC., Plaintiff.

Page 1303

598 F.2d 1303

RAMADA INNS, INC., a Corporation of the State of Delaware, J. O. Kislak Realty Corp., Plaintiff-Intervenor, v. ROSEMOUNT MEMORIAL PARK ASSOCIATION, a Cemetery Association

of the State of New Jersey, and Gross, Demetrakis & Sinisi,

Esqs., a law partnership of the State of New Jersey,

successors to Gross, Demetrakis & Donohue, Esqs., as Escrow

Agent, William F. Hyland, Attorney General of the State of

New Jersey, and New Jersey Cemetery Board, Demetrakis & Dollinger

Ramada Inns, Inc., a Corporation of the State of Delaware,

Rosemount Memorial Park Association, Gross, Demetrakis &

Sinisi, Esqs., a law partnership of the State of New Jersey,

successors to Gross, Demetrakis & Donohue, Esqs., as Escrow

Agent, Defendants-Intervenor.

Appeal of RAMADA INNS, INC., Plaintiff.

No. 78-2165.

United States Court of Appeals, Third Circuit.

Argued March 21, 1979.

Decided May 16, 1979.

David R. Simon (argued), Simon & Allen, Newark, N. J., for appellant; Richard B. Gelfond, Newark, N. J., on brief.

John J. Degnan, Atty. Gen. of New Jersey, Trenton, N. J., for appellees, Attorney General of New Jersey and New Jersey Cemetery Board; Erminie L. Conley, Asst. Atty. Gen., Trenton, N. J., of counsel; Mark S. Rattner (argued) Deputy Atty. Gen., Trenton, N. J., on brief.

Gladstone, Hart & Rathe, Hackensack, N. J., for appellee, Rosemount Memorial Park Association; Marvin H. Gladstone (argued), Milton Max Manshel, Jr. (argued), Hackensack, N. J., on brief.

Before SEITZ, Chief Judge, and ALDISERT and ROSENN, Circuit Judges.

OPINION OF THE COURT

ALDISERT, Circuit Judge.

This diversity case involving a contract dispute over a proposed sale of land by a private cemetery to a hotel chain requires us to decide if the state of New Jersey is a real party in interest to this controversy. Section 8A:3-21 of the New Jersey Statutes makes the Attorney General of New Jersey and the state cemetery board necessary and indispensable parties to any litigation involving a cemetery within the state. The district court held that because of this statute New Jersey was a real party in interest and therefore the Eleventh Amendment barred suit in federal court. It dismissed the complaint and plaintiff has appealed. Because we decide that § 8A:3-21 does not make New Jersey a real party in interest to every action brought against a private cemetery located within its borders, we reverse.

I.

Ramada Inns, a Delaware corporation, instituted this contract action against Rosemount Memorial Park Association, a nonsectarian cemetery located in Newark and Elizabeth, New Jersey. Jurisdiction was based on diversity of citizenship. The relief sought was cancellation of a contract to purchase a tract of vacant land suitable for the construction of a motor inn, and return of $75,000 which Ramada had deposited with Rosemount. Rosemount counterclaimed for specific performance of the contract or, alternatively, for damages.

By stipulation of the parties the Attorney General of New Jersey and the New Jersey Cemetery Board were joined as parties defendant pursuant to N.J.Stat.Ann. § 8A:3-21, which provides: "The Attorney General and the cemetery board shall be necessary and indispensable parties to any litigation involving or pertaining to a cemetery company." ¹

Following a mistrial, Rosemount moved to dismiss the action. In granting the motion, the district court noted that the state had no direct interest in the outcome of the litigation, but concluded that it was a real party in interest on the basis of New Jersey's statutory scheme for the regulation of cemeteries. The district court found particularly persuasive the requirements embodied in N.J.Stat.Ann. § 8A:4-1 Et seq., that each cemetery create an irrevocable trust fund for the permanent maintenance and preservation of the cemetery and that all trust funds be supervised by the state cemetery board. Ramada has appealed.

II.

Ramada argues that this is a contract dispute between two private parties and that the state cannot be considered a real party in interest because the attorney general and the cemetery board are only nominal parties to this action. Appellee urges us to accept the district court's reasoning that the inescapable effect of § 8A:3-21 is to make the state of New Jersey a real party in interest, and that Ramada's claim should therefore be barred by the Eleventh Amendment. ²

Before reaching the constitutional implication of this question, however, we must decide whether the district court properly had subject matter jurisdiction over this claim based on diversity of citizenship. Section 1332(a) of Title 28, United States Code, sets out the diversity jurisdiction of the federal courts.

(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;

(2) citizens of a State, and foreign states or citizens or subjects thereof; and (3) citizens of different States and in which foreign states or citizens or subjects thereof are additional parties.

Diversity jurisdiction, like all federal jurisdiction, is limited in nature, and it is well settled that a state is not a citizen within the meaning of the diversity statute. Moor v. Alameda, 411 U.S. 693, 717, 93 S.Ct. 1785, 36 L.Ed.2d 596 (1973); Minnesota v. Northern Securities Co., 194 U.S. 48, 63, 24 S.Ct. 598, 48 L.Ed. 870 (1904). An action brought by a citizen of one state against another state is not cognizable under § 1332 and may only be brought if the proceeding "arises under the Constitution, laws or treaties of the United States." Postal Telegraph Cable Co. v. Alabama, 155 U.S. 482, 487, 15 S.Ct. 192, 194, 39 L.Ed. 231 (1894); See also State Highway Commission v. Utah Construction Co., 278 U.S. 194, 200, 49 S.Ct. 104, 73 L.Ed. 262 (1929). Thus, if we were to conclude for purposes of this appeal that the state of New Jersey is a real party in interest, the district court would be without power to entertain this action under the diversity statute. For the reasons set forth below, however, we determine that the Attorney General of New Jersey and the cemetery board are only nominal parties to this dispute, so that New Jersey is not a real party in interest. Accordingly, Ramada's claim against Rosemount is cognizable under § 1332.

III.

Whether a particular case involves a question of diversity jurisdiction, ³ or Eleventh Amendment prohibition, ⁴ the initial inquiry is the same: is the state a real party in interest to the litigation? That a state, a state agency, or its officers may have been named as parties defendant in an action is not dispositive of this question because such a determination can only be derived from the "essential nature and effect of the proceeding." Ford Motor Co. v. Department of Treasury, 323 U.S. 459, 464, 65 S.Ct. 347, 350, 89 L.Ed. 389 (1945). See In re Ayers, 123 U.S. 443, 8 S.Ct. 164, 31 L.Ed. 216 (1887); Pennsylvania Turnpike Commission v. Welsh, 188 F.2d 447, 450 (3d Cir. 1951). Conversely, even though the state, a state agency, or its officers have Not been named as parties, the state may nonetheless be the real party in interest against which relief is sought. Quern v. Jordan,--- U.S. ----, ---- n. 17, 99 S.Ct. 1139, 59 L.Ed.2d 358 (1979); In re Ayers, supra, at 506, 8 S.Ct. 164. Because the question whether a state is the real party in interest will turn on factors widely variant from case to case, See Pennsylvania Turnpike Commission, supra, at 450, an examination of the cases which have considered the question will aid our determination.

In actions seeking recovery of money damages which will be paid from public funds in a state treasury, the state has been found to be a real party in interest. Edelman v. Jordan, 415 U.S. 651, 663, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974); Quern v. Jordan, supra. Likewise, in proceedings for equitable relief where, in effect, granting the relief will require some affirmative act by the state, the state has been considered the real party in interest. Hagood v. Southern, 117 U.S. 52, 66-67, 6 S.Ct. 608, 29 L.Ed. 805 (1887); In re Ayers, supra, at 502-03, 8 S.Ct. 164. In a suit against a state agency or its officers, an assessment must be made as to the degree of autonomy which the agency exercises over its own functions. Where no claim is made, or could successfully be made, that the agency or officers are personally liable, then they are held to be acting in their capacity as the "alter ego" of the state and the state is a real party in interest. See, e. g., State Highway Commission v. Utah Co., 278 U.S. 194, 199, 49 S.Ct. 104, 73 L.Ed. 262 (1929). Another relevant factor is the stake, if any, which the state has in the outcome of the litigation beyond a general desire that its laws be enforced. If a federal judgment will have no effect other than to implicate the state's general "governmental interest in the welfare of all its citizens .. . and in securing compliance with all its laws," Missouri, Kansas & Texas Ry. Co. v. Missouri R. R. & Warehouse Commissioners, 183 U.S. 53, 60, 22 S.Ct. 18, 21, 46 L.Ed. 78 (1901), then the state is not a real party in interest.

IV.

Applying this analysis, we note that no relief is sought from the state either in Ramada's complaint or Rosemount's counterclaim. No possible outcome of this suit could result in an award of damages which will be paid out of the state treasury or in equitable relief which must be satisfied by the state. Ramada requests only that the money which it deposited with appellee be returned, and Rosemount asks that Ramada be ordered to honor the contract. Regardless of whose request prevails, the state will not be affected in any substantial way. Furthermore, neither the attorney general nor the cemetery board has raised the Eleventh Amendment defense. In fact, "the State (has) elected not to take an adversarial position as regards...