University System of New Hampshire v. US Gypsum

• Decision Date: 17 January 1991
• Docket Number: Civ. No. 84-716-D.
• Citation: 756 F. Supp. 640
• Court: U.S. District Court — District of New Hampshire
• Parties: UNIVERSITY SYSTEM OF NEW HAMPSHIRE v. UNITED STATES GYPSUM COMPANY; Pfizer Minerals, Pigment and Metals Division, Charles Pfizer & Co., Inc.; Keene Corporation.

756 F. Supp. 640

UNIVERSITY SYSTEM OF NEW HAMPSHIRE v. UNITED STATES GYPSUM COMPANY; Pfizer Minerals, Pigment and Metals Division, Charles Pfizer & Co., Inc.; Keene Corporation.

Civ. No. 84-716-D.

United States District Court, D. New Hampshire.

January 17, 1991.

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Michael Hall, Manchester, N.H., for plaintiff.

Stephen G. Hermans, Exeter, N.H., for U.S. Gypsum Co.

Kenneth M. Brown, Nashua, N.H., for Pfizer Minerals Pigment and Metals Div., Charles Pfizer & Co., Inc.

Michael A. Pignatelli, Concord, N.H., for Keene Corp.

OPINION AND ORDER

DEVINE, Chief Judge.

This diversity action is brought by University System of New Hampshire ("USNH") on claims of negligence, strict liability, misrepresentation, conspiracy, enhanced damages, and alternative, market share, and risk contribution liability.¹ USNH seeks to recover from defendants United States Gypsum Company ("USG"), Pfizer Minerals, Pigment and Metals Division, Charles Pfizer & Co., Inc. ("Pfizer"), and Keene Corporation ("Keene")² the costs associated with removal of asbestoscontaining products from many USNH buildings.

Presently before the court are several dispositive motions filed by various defendants.³ The court will address them individually.

BACKGROUND

USNH owns and operates approximately 150 buildings located throughout New Hampshire.⁴ It claims that many of these buildings contain asbestos-containing products manufactured by defendants, including ceiling products and thermal (pipe and boiler) insulation.⁵ USNH claims that defendants' products release asbestos fibers which cause cancer, impair lung function, and result in other deadly diseases. The asbestos products have released and continue to release asbestos fibers which have resulted in damage to USNH's buildings by contaminating the air, walls, floors, etc. Plaintiff claims it must remove or contain the asbestos products to prevent those who use USNH buildings from being exposed. USNH further alleges that defendants knew or should have known of the dangers of asbestos as early as the 1930s and conspired to keep such knowledge from the public.

I. Motion to Dismiss (document no. 439)

Before the court is the jurisdictional issue raised by defendants' motion to dismiss plaintiff's entire action on the ground that the parties are not diverse. In order to maintain diversity jurisdiction in this court, the plaintiff must plead an amount in controversy as required by the statute and must plead complete diversity of citizenship between plaintiff and all defendants. 28 U.S.C. § 1332(a).⁶

For purposes of this motion, the amount in controversy is not at issue. The issue is whether USNH is a citizen of the state of New Hampshire for the purposes of diversity jurisdiction. Defendants argue that USNH is a mere "arm" or "alter ego" of the state, and as such cannot be a citizen of New Hampshire for the purpose of diversity jurisdiction. Plaintiff USNH contends that under New Hampshire Revised Statutes Annotated ("RSA") 187-A:1, it was established as a "body politic and corporate,"⁷ and thus, although it is a political subdivision of the state, it is not an "alter ego" of the state, and is therefore a citizen.

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); Northeast Federal Credit Union v. Neves, 837 F.2d 531, 533 (1st Cir.1988) (quoting Postal Telegraph Cable Co. v. Alabama, 155 U.S. 482, 487, 15 S.Ct. 192, 194, 39 L.Ed. 231 (1894)); University of R.I. v. A.W. Chesterton Co., 721 F.Supp. 400, 401 (D.R.I.1989). It is equally well settled that a political subdivision of a state is a citizen of the state for diversity purposes unless it is "simply `the arm or alter ego of the State.'" Moor, supra, 411 U.S. at 694, 93 S.Ct. at 1788 (quoting State Highway Comm'n of Wyoming v. Utah Constr. Co., 278 U.S. 194, 199, 49 S.Ct. 104, 106, 73 L.Ed. 262 (1929)); George R. Whitten, Jr., Inc. v. State Univ. Constr. Fund, 493 F.2d 177, 179 n. 2 (1st Cir.1974); University of R.I., supra, 721 F.Supp. at 401.

Counties, municipalities, and, usually, local school districts are classified as political subdivisions, not arms of the state, and therefore are citizens for the purpose of diversity jurisdiction. See generally Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction 2d § 3524, at 130, 133. State agencies are not as easily classified. Id. at 134.

In the context of the Eleventh Amendment, for instance, the classification of a public agency or institution "depends upon whether the entity `is to be treated as an arm or alter ego of the state partaking of the State's Eleventh Amendment immunity, or is instead to be treated as a municipal corporation or other political subdivision to which the Eleventh Amendment does not extend.'" Ainsworth Aristocratic Int'l Pty. Ltd. v. Tourism Co. of the Commonwealth of P.R., 818 F.2d 1034, 1036 (1st Cir.1987) (quoting Mt. Healthy City School Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 280, 97 S.Ct. 568, 572, 50 L.Ed.2d 471 (1977)); Rodriguez Diaz v. Sierra Martinez, 717 F.Supp. 27, 29 (D.P.R.1989) (citations omitted). The determinative factor when a state organization is a party to a suit in federal court is whether the state is the real party in interest. Neves, supra, 837 F.2d at 533 (citations omitted); Whitten, supra, 493 F.2d at 179; University of R.I., supra, 721 F.Supp. at 401. See also State Highway Comm'n of Wyoming, supra, 278 U.S. at 199-200, 49 S.Ct. at 105-106.

The test to determine the real party in interest is "pretty much the same" whether used to determine diversity jurisdiction, Neves, supra, 837 F.2d at 534, to determine whether a state is "`entitled to invoke its sovereign immunity,'", id. (quoting Ford Motor Co. v. Department of Treasury of Indiana, 323 U.S. 459, 464, 65 S.Ct. 347, 350, 89 L.Ed. 389 (1945)), or to determine whether an agency "`is sufficiently an arm of the state to qualify for the protection of the Eleventh Amendment,'" id. (quoting Paul N. Howard Co. v. Puerto Rico Aqueduct Sewer Auth., 744 F.2d 880, 886 (1st Cir.1984), cert. denied, 469 U.S. 1191, 105 S.Ct. 965, 83 L.Ed.2d 970 (1985)).

Courts in this circuit have primarily considered the following factors in determining whether a state agency is an arm of the state:

Whether it performs a government function, whether it functions with substantial autonomy, to what extent it is financed independently of the state treasury, and if a judgment sought to be entered against the entity will be satisfied out of the state treasury.

In re San Juan Dupont Plaza Hotel Fire Litigation, 888 F.2d 940, 942 (1st Cir.1989) (citations omitted). Accord Ainsworth, supra, 818 F.2d at 1037; Whitten, supra, 493 F.2d at 179-80; University of R.I., supra, 721 F.Supp. at 401-02; Rodriguez Diaz, supra, 717 F.Supp. at 29; Vanlaarhoven v. Newman, 564 F.Supp. 145, 148 (D.R.I. 1983). Other relevant factors considered by the courts include:

Whether the entity "has been separately incorporated; ... 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 entity's operations."

In re San Juan, supra, 888 F.2d at 942 (quoting Ainsworth, supra, 818 F.2d at 1037). No one of these factors is considered conclusive. Ainsworth, supra, at 1037. However, "the entity's financial and operational autonomy is often one of the most significant of the factors." Id. at n. 4

With sufficient autonomy from the state, especially with regard to financial matters, an agency, political subdivision, or state university is the real party in interest and is thus a "citizen" for the purposes of diversity jurisdiction. See University of R.I., supra, 721 F.Supp. at 403 (state university with "a considerable amount of economic and operational authority" is a citizen, not an alter ego of the state); Howard supra, 744 F.2d at 886 (suggesting that "an autonomous governmental corporation" is not an alter ego of the state because it is financially independent even though it received periodic appropriations from the state treasury). But see In re San Juan, supra, 888 F.2d at 943 (state agency that received more than 70 percent of a recent annual budget from general funds of Puerto Rico and whose policies are under significant control by the governor's office found to be so financially and politically dependent upon the Commonwealth as to be an arm of it); Whitten, supra, at 181 (university construction fund, with "no financial independence of its own", was held to be an alter ego of the state); Perez v. Rodriguez Bou, 575 F.2d 21, 25 (1st Cir.1978) (extent and nature of the Commonwealth of Puerto Rico's financial support for the University of Puerto Rico was a dispositive factor in concluding that the university was an "arm" of the state).

Defendants urge the court to rely on the analysis and result in an opinion by the United States District Court for the District of South Carolina in which Clemson University's class action suit against a number of asbestos manufacturers was dismissed for lack of diversity jurisdiction. Defendants' Motion to Dismiss at Exhibit I, Clemson Univ. & the College of Charleston v. W.R. Grace, No. 86-2055-2 (D.S.C. July 15, 1988). But as Clemson points out, "each state university exists in a unique governmental context, and each must be considered on the basis of its own peculiar circumstances." Id. at 4 (citing Soni v. Board of Trustees of Univ. of Tenn., 513 F.2d 347, 352 (6th Cir.1975)). Considering similar factors as those adopted by the First Circuit, the court concluded that Clemson University did not have enough financial and operational autonomy to escape an alter ego characterization. At Clemson, six of the members of the Board of Trustees are elected by the General Assembly, Cle...