University of Rhode Island v. AW Chesterton Co., Civ. A. No. 89-0342 L.
| Decision Date | 12 October 1989 |
| Docket Number | Civ. A. No. 89-0342 L. |
| Parties | UNIVERSITY OF RHODE ISLAND, Plaintiff, v. A.W. CHESTERTON COMPANY, Defendant. |
| Court | U.S. District Court — District of Rhode Island |
Mary E. Kennard, Gen. Counsel, University of Rhode Island, Kingston, R.I., Merlyn P. O'Keefe, Packer & O'Keefe, Peace Dale, R.I., for plaintiff.
Patridge, Snow & Hahn, Steven E. Snow, Providence, R.I., for defendant.
This matter is presently before the Court on plaintiff's motion to remand to the Rhode Island Superior Court sitting in Washington County where this action was originally initiated. The University's complaint seeks $100,000 in damages for injury to its property which allegedly resulted from its use of a specific type of paint purchased from the defendant A.W. Chesterton Company.
On or about May 31, 1989, defendant filed a petition in Superior Court for removal of this case to the United States District Court for the District of Rhode Island pursuant to 28 U.S.C. § 1441(a). The defendant, a citizen of Massachusetts, contends that this Court has original jurisdiction over this matter pursuant to 28 U.S.C. § 1332 because of diversity of citizenship and amount in controversy. The University asserts that it is merely the alter ego of the State of Rhode Island and therefore is not a citizen of Rhode Island for purposes of diversity jurisdiction. The Court, after having heard arguments on the motion to remand, took the matter under advisement. The motion is now in order for decision.
The issue raised by this motion is whether the University of Rhode Island is a citizen of the State of Rhode Island for the purposes of diversity jurisdiction conferred upon the federal courts by 28 U.S.C. § 1332. It is well settled that a state is not a "citizen" for purposes of diversity jurisdiction. Moor v. County of Alameda, 411 U.S. 693, 717, 93 S.Ct. 1785, 1799, 36 L.Ed.2d 596 (1973); Postal Telegraph Cable Company v. Alabama, 155 U.S. 482, 487, 15 S.Ct. 192, 194, 39 L.Ed. 231 (1894). It is equally well settled, however, that a political subdivision of a state, unless it is simply "the arm or alter ego of the State," is a citizen of the state for diversity purposes. Moor, 411 U.S. at 717, 93 S.Ct. at 1800 (citation omitted). Thus, in a suit involving a state agency, the crucial question in determining whether diversity exists is whether the agency is the arm or alter ego of the state, thereby making the state the real party in interest. See Northeast Federal Credit Union v. Neves, 837 F.2d 531, 533 (1st Cir.1988). In light of Judge Selya's ruling when he was on this Court that the University of Rhode Island is not the alter ego of the state for Eleventh Amendment purposes, Vanlaarhoven v. Newman, 564 F.Supp. 145 (D.R.I.1983), this writer must now conclude that the state is not the true party in interest (plaintiff) in this case and therefore that the University is a citizen of Rhode Island subject to the diversity jurisdiction of the federal courts.
Plaintiff acknowledges that in Vanlaarhoven, Judge Selya expressly rejected the same argument proffered here that the University is nothing more than the alter ego of the state. Although the Vanlaarhoven case grew out of the University's failed attempt to shield itself from suits in federal court based upon Eleventh Amendment sovereign immunity, the holding is directly relevant to the case sub judice because the "alter ego" test employed in Eleventh Amendment cases is "pretty much the same" as that employed for the purpose of determining diversity jurisdiction. Northeast Federal Credit Union v. Neves, 837 F.2d at 533-34.
The factors to be considered in determining whether an agency is an arm of the state include:
Vanlaarhoven, 564 F.Supp. at 148 (citing Whitten, 493 F.2d at 180). In addition, he held in Vanlaarhoven that "the nature of the entity created by state law," (citation omitted), "the financial relationship of that body to the state, and the extent to which it operates independently from the state are relevant to a consideration of state liability." Id.
After careful consideration of all of these factors, Judge Selya concluded in Vanlaarhoven that the University of Rhode Island was not simply an arm of the state. The University now suggests that the Vanlaarhoven case has lost its vitality due to the subsequent repeal of R.I.Gen.Laws §§ 16-31-1 through 16-31-15 by 1988 R.I.Pub. Laws ch. 84 §§ 52 and 121. A careful review of any substantive changes in the law resulting from the repeal of the abovementioned statutes and the enactment of new provisions establishes that plaintiff's assertion is without merit. Consequently, Judge Selya's lengthy description of the fiscal relationship between the University and the State of Rhode Island is as accurate today as when it was written in 1983 (although the statutory citations have changed as a result of the aforementioned Public Laws) and his conclusion as to the independent status of the University remains valid.
As was the case in 1983 when Judge Selya wrote the Vanlaarhoven opinion, the University is governed by a Board of Governors for Higher Education (the "Board"). R.I.Gen.Laws §§ 16-32-2 and 16-59-1 (1988). The Board is constituted as a "public corporation, empowered to sue and be sued in its own name," and "to exercise all the powers ... usually appertaining to public corporations entrusted with control of postsecondary educational institutions and functions." Id. at § 16-59-1(a). The Board is empowered to hold and operate property in trust for the state and "to acquire, hold, and dispose of said property ... as deemed necessary for the execution of its corporate purposes." Id. at § 16-59-1(b).
The fiscal relationship between the University and the State of Rhode Island is also the same today as it was in 1983. Thus, although the Rhode Island General Assembly must appropriate funds for the support and maintenance of the University, it remains true that once the funds are appropriated, the Board has plenary control over those monies: the Board may reallocate the funds between the agencies under its jurisdiction, id. at § 16-59-9(a), and...
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