PORT AUTHORITY TRANS-HUDSON CORP. v. FEENEY
Legal provision: Amendment 11: Eleventh Amendment
Argument of Joseph Lesser
Chief Justice Rehnquist: We'll hear argument first this morning in No. 89-386, Port Authority Trans-Hudson Corporation v. Patrick Feeney.
Mr. Lesser: Thank you, Mr. Chief Justice, and may it please the Court:
The Port Authority of New York and New Jersey was created in 1921 by a compact between the states to which Congress consented.
And the principal burden of my argument today before the Court is to demonstrate beyond any question whatsoever that the Port Authority is structured, administered and operated as a direct instrumentality of the compacting states, and is politically and legally accountable as such to the governors and legislatures of the compacting states.
It should therefore, I submit, be recognized for what it clearly is: an integral part of the governmental machinery of the two states, completely subject to their control and direction.
As a direct arm of the states, the Port Authority should be held, I believe, to share the states' constitutional protections and immunities, including their Eleventh Amendment immunity.
Such a holding, I shall show, fulfills not only the underlying purpose of the Eleventh Amendment's conceded deference to state's sovereignty, but also that of the compact clause, by encouraging the states to solve cooperatively their regional problems, thus enhancing, I submit, the vitality of our Federal system.
That the Port Authority is unquestionably a direct arm of the states, fully subject to their control and direction is most easily demonstrated.
The compact declares that the commissioners of the Port Authority, 12 in all, constitute the Port Authority.
Six of these commissioners are appointed by the governor of each state, with the advice and consent of the respective state senates.
The commissioners are subject to removal after charges upon hearing in New York by the governor of the state, and in New Jersey by the state senate.
The governors significantly possess a veto power over all actions which the commissioners of the Authority take.
The Authority cannot take any action which is not subject to gubernatorial veto.
And the Authority, as an arm of the states, is completely subject to legislative control and direction.
The Authority has no autonomous powers of government, like a county or a municipality, which of course, counties and municipalities do not share the states' sovereign immunity from suit.
The Port Authority has no such powers.
Everything the Port Authority does is authorized by bi-state legislation.
And the Port Authority is duty bound to be obedient to the legislatures and to follow their directions.
Because of the Port Authority's closeness, intimate relationship to the compacting states, it is not surprising that before 1950 and '51, when the states waived the Port Authority's sovereign immunity, every court that had occasion to pass upon this question, the courts of New York, the courts of New Jersey and the lower Federal courts held that the Port Authority shared the sovereign immunity from suit of the compacting states.
As a matter of fact--
Unknown Speaker: Mr. Lesser, suppose a municipal corporation had those characteristics.
Suppose state law provided that the chief executive officer of a municipality could be impeached by the legislature, and was appointed initially by the... by the governor.
Would that... would that make a... a municipal corporation an arm of the state for Eleventh Amendment purposes?
Mr. Lesser: --No, I don't think so.
I think this question before the Court is really fact intensive or fact specific.
A municipal corporation has autonomous powers.
As this Court said years ago, it's too remote from the states.
The Port Authority is not too remote from the states.
In fact, the only reason probably the Port Authority is not a department of state government was that the necessity of interstate cooperation.
It was the necessity to draft a compact between the states creating this agency.
Unknown Speaker: Well, you... you... you say that... you say that either... either governor can veto the... the action.
Mr. Lesser: --Absolutely.
Unknown Speaker: But being able to veto it is not the same as being able to direct it.
In the absence of a veto, I assume it's just run by the... by the governors.
Mr. Lesser: Well, they... what the Port Authority does is subject to legislative control.
The Port Authority has not inherent home rule powers, as do municipalities or counties.
Unknown Speaker: Well, how can it be subject to legislative control when you have to have the two legislatures get together on it?
If the legislators... two legislatures disagree, I suppose the Authority does whatever it wants.
Mr. Lesser: Not... not at all.
It could only do what the two legislatures authorize.
It can't do what it wants in the abstract.
As a matter of fact, the only time the Port Authority was held to exceed its statutory powers was a case in the early 1950s when the Port Authority thought it had the power to construct a third tube to the Lincoln Tunnel, relying upon a statutory directive that said that the Lincoln Tunnel shall consist of tubes or tube... tube or tubes within a narrow geographical compass.
And the Port Authority thought that the plural meant two or more.
But the New Jersey Supreme Court held to the contrary.
And the New Jersey Supreme Court said that the Port Authority is bound... duty bound to be obedient to the legislatures.
And with that decision of the New Jersey Supreme Court, the Port Authority subsequently got a specific bi-state legislation authorizing the construction of the third tube.
The Port Authority, Justice Scalia, could do nothing that the legislatures do not authorize.
Is completely subject to their control in the same way that almost any department of state government is subject to their control.
The states originally tried to act cooperatively when they entered into a compact in 1919, relating to the Holland Tunnel.
There were separate state commissions in New York and in New Jersey that were acting cooperatively.
And that just didn't work.
It didn't work efficiently.
And therefore, the legislatures, under the compact clause, which as Felix Frankfurter and James M. Landis wrote from the path-breaking article in the Yale Law Journal in 1925, fosters Federalism by encouraging the states to solve cooperatively problems that transcend their state boundaries but yet do not need national solutions at the Federal level.
Unknown Speaker: Getting back to the Holland Tunnel, wasn't that supposed to be tax... toll free at a certain time?
Mr. Lesser: No, I think that was the--
Unknown Speaker: When it was built, wasn't it two or three years, then it was supposed to be toll free?
Mr. Lesser: --No, it was never written into the statute.
That was the normal... that was the normal assumption at the time, that when the--
Unknown Speaker: Assumption by whom?
Mr. Lesser: --By--
Unknown Speaker: All the people.
Mr. Lesser: --By the general public, yes.
Unknown Speaker: Yes.
Mr. Lesser: And the legislatures--
Unknown Speaker: Well, speaking of the general public, is this true that the tunnel... I mean that your Authority has more funds in its pocket than the treasury of New York State?
Mr. Lesser: --Oh, I would doubt that, Justice Marshall.
Unknown Speaker: Sir?
Mr. Lesser: I would doubt it.
As a matter of fact, at the present time, the Port... the Port Authority was originally funded by the states.
The states appropriated money until the Port Authority became self-sufficient.
When the Port Authority finally became self-sufficient, now the Port Authority is a source of funds for the compacting states.
In fact, the Port Authority in recent years has been subject to legislative direction, has been engaged in providing the states with nonrevenue-producing projects that they... that they need.
The Port Authority's surplus funds are now available, pursuant to legislation and pursuant to gubernatorial veto power, really, at the request of the states and subject to the rights of bondholders.
Unknown Speaker: Does the treasury of New York have surplus funds?
Mr. Lesser: I... I really don't know.
And judging from the newspapers, I would doubt it.
Unknown Speaker: Oh, yes, you do.
Mr. Lesser: I would--
Unknown Speaker: You don't read the newspapers?
Mr. Lesser: --I do.
I think there's a problem in New York.
The Port Authority has no surplus funds as such.
The Port Authority funds are subject to legislative control.
As a matter of fact, when the states gave the Port Authority the Holland Tunnel, which was a source of... at least during the 1930s and '40s... of immense revenue to the Port Authority, they controlled the flow of Port Authority funds.
Because the last paragraph in the Authority's General Reserve Fund Act, which the legislatures passed in 1931, provides any surplus revenues not required for the establishment and maintenance of the aforesaid general reserve fund shall be used for such purposes as may hereafter be directed by the two said states.
And the states, as I mentioned before, are now the recipient of Port Authority funds, all subject to legislative direction and control.
Unknown Speaker: Well, sir, I... I... I'm not sure what you mean when you say that the... that the Port Authority can't do anything that isn't authorized by the... by the legislature.
Surely it can do something without a specific bill.
I mean, why does it have its own... own independent executives, then?
Mr. Lesser: Well, the compact, which both state legislatures adopted, states that the commissioners of the Port Authority constitute a board.
They can hire a staff, provide for their compensation, and that they should make plans to be submitted for the better improvement of the terminal transportation of the facilities of commerce in the bi-state port district that should be subject to legislative approval.
The Port Authority makes plans, makes recommendations to the legislature--
Unknown Speaker: Well... suppose... suppose they want to hire more... more policemen for the tunnel, or suppose they want to paint a bridge.
Do they have to get authorization from the legislature?
Mr. Lesser: --Well, they... when they appropriate... when the Port Authority adopts a budget, that's subject to gubernatorial veto.
As a matter of fact--
Unknown Speaker: No, I'm not talking about... I understand, everything is subject to veto.
Mr. Lesser: --Right.
Unknown Speaker: But I'm talking about prior legislative approval.
Mr. Lesser: Well, the prior legislative approval to appoint a staff has come in the initial compact.
Unknown Speaker: Well, then, you can say the same thing about municipalities.
I mean, municipalities can't do anything that isn't authorized by the state.
If that's all you mean by state authorization, that--
Mr. Lesser: Only in a very--
Unknown Speaker: --that... that you need a state statute.
Mr. Lesser: --only in a very remote sense.
Municipalities can adopt laws not subject to gubernatorial veto.
Let me specifically state that this Court has had two cases involving compact agencies.
In the first, Petty against the Tennessee-Missouri Bridge Commission, this Court... this Court assumed that the Commission, which was modeled after the Port Authority... in fact, I was struck when I looked at the legislation authorizing the Tennessee-Missouri Bridge Commission, that legislation was almost copied word from word from the Port Authority's port compact.
And the question that this Court had, in Justice Douglas' opinion was, the question here is whether Tennessee and Missouri have waived their immunity under the facts of this case.
And in that case, the only major difference between the compact authorization of that agency and the Port Authority's was, in that agency there was a sue and be sued clause.
And Justice Douglas' opinion went into detail whether that sue and be sued clause constituted a waiver of Eleventh Amendment immunity.
Unknown Speaker: Mr. Lesser, do the directors of the Port Authority have the power to waive immunity in any suit that they choose?
Mr. Lesser: No, they do not.
The waiver has to come from the state legislatures.
Unknown Speaker: Well, if that's the case, then it would seem to me that your construction of what you call the venue permission... provision... is unacceptable because then we have to interpret it as a waiver in all cases.
Mr. Lesser: No, I think... I think--
Unknown Speaker: If... if... if it's not a venue provision because there's no authority to waive on a suit-by-suit basis, then maybe the best interpretation of that provision is that it is a waiver.
Mr. Lesser: --I think not, Justice Kennedy.
Until 1950 and '51, the courts of both states and the lower Federal courts held that the Port Authority shared the sovereign immunity from suit of the compacting states.
In fact, one New York court said, it is hard to see how there could be a clearer instance of an agency sharing the immunity of its creators.
And a New Jersey court said, since the Authority is undoubtedly a direct agency of the states, exercising an essential governmental function and is therefore an alter ego of the state, it follows that the present action is, in effect, a suit against the state itself, which will be clothed with sovereign immunity unless a waiver or consent can be found.
Unknown Speaker: Now, were these--
Mr. Lesser: xxx--
Unknown Speaker: --I'm asking you a question, Mr. Lesser, if you will just stop for a moment.
Mr. Lesser: --I'm sorry.
Unknown Speaker: Were these cases decided in the context of the Eleventh Amendment?
Mr. Lesser: No, not directly, no.
They were decided... I guess what this Court now calls common-law sovereign immunity from suit.
Unknown Speaker: Sovereign--
Mr. Lesser: No, they were not.
With the decision of these cases in 1950 and '51, both legislatures adopted the Port Authority suability legislation.
And in that legislation, section 1 of that legislation constitutes the waiver.
Section 1 of that legislation states that the States of New York and New Jersey consent to suits against the Port Authority.
That's the waiver.
That's the giving of jurisdiction.
The venue provision to which Justice Kennedy alluded a moment ago states, the foregoing consent is granted upon the condition that venue.
So you have to find the waiver of immunity from suit in section one.
Unknown Speaker: --But it would seem to me that one way to make your interpretation work is if, on a suit-by-suit basis, the directors could determine that they will either waive or not waive.
But if they never have authority to waive on their own, then it seems to me that the statute constitutes the waiver.
Mr. Lesser: I think... well, I don't know what that statutory venue provision means, that reference... that obscure reference to Federal courts in the venue provision.
But it certainly doesn't meet the strict and stringent standard that this Court had said is necessary for there be... to be a waiver of Eleventh Amendment immunity.
This Court has said that only where stated by the most express statutory language or by such overwhelming implication from the text, as will leave no room for any other reasonable construction, will it find a waiver.
Unknown Speaker: Well, Mr. Lesser, what is the language, judicial district established by the United States, mean, then, if--
Mr. Lesser: I--
Unknown Speaker: --if it doesn't mean Federal court?
Mr. Lesser: --That... that undoubtedly meant Federal court.
I think that that reference was probably an ineffectual attempt by the states to limit venue over actions brought against the Port Authority in Federal court, if jurisdiction already existed.
I don't think it's effective.
Because I think there's a general Federal venue provision that would overrule that provision of state law.
Unknown Speaker: Well, it is... do I understand correctly that the Port Authority has never in fact consented to be sued in Federal court in any case?
Mr. Lesser: The Port Authority has never knowingly consented to be sued.
But when the original statute... suability statute was passed, the Port Authority has been a defendant in Federal courts.
This was in the era, I think, of Pardon against Alabama Dock Railroad, when this Court stated that when an agency is involved in interstate commerce, and Congress regulates that agency, the states, by engaging in such activity, impliedly waive their Eleventh Amendment immunity.
But Pardon was expressly overruled by this Court a few years ago in Welch.
And since the Welch decision, the Port Authority has always maintained that it shares the Eleventh Amendment immunity.
The Port Authority was suable in Federal courts, unknowingly, during the era of Pardon.
But with Pardon's being overruled by Welsh, the Port Authority, I believe, shares the Eleventh Amendment immunity.
And I think this obscure reference is not the type... to Federal courts... is not the type of knowing waiver that this Court has required.
I don't understand it.
The Second and Third Circuits disagreed as to its meaning.
And if there is... and with both decisions, the Second and Third Circuits' disagreement, I don't think either ruling of either circuit could be considered arbitrary or capricious.
And then the question is, where does the presumption lie?
If the presumption was that uncertain language results in a waiver, then there would have been a waiver.
Unknown Speaker: Doesn't the Port Authority own office buildings?
Mr. Lesser: It operates and owns the World Trade Center, yes.
Unknown Speaker: It owns other ones.
Doesn't it own 10 Columbus Circle?
Mr. Lesser: No.
No, that is probably the Transit Authority.
Or the Metropolitan Transportation Agency.
Unknown Speaker: The Metropolitan Transit?
Mr. Lesser: Yes.
Not the Port Authority.
The Port Authority's operation of the World Trade Center was linked by the legislatures to the operation of the Hudson tubes, the PATH system, which is the focal point of this suit.
Unknown Speaker: And that's immune from suit?
Mr. Lesser: No, the Port Authority is suable, pursuant to the provisions of the bi-state suability statutes that were adopted in 1950 and '51.
The Port Authority is fully suable in state court.
As a matter of fact, if this Court should hold that the Port Authority possesses the Eleventh Amendment immunity, these petitioners and others have the normal workman's compensation action in state court.
In fact, I think these petitioners have an action presently pending against the Port Authority in the Supreme Court of New York County.
Unknown Speaker: Mr. Lesser, what is the closest case from this Court that has extended Eleventh Amendment immunities to some body other than the state itself, or a state official?
Mr. Lesser: Well, I... I said that this... that this Court has had two cases, Petty against--
Unknown Speaker: There... there in Petty it was just assumed that there was immunity, was there not?
The Court didn't decide it.
Mr. Lesser: --Well, it was... it was assumed, yes.
It was assumed.
But Justice Frankfurter, in his opinion... his dissenting opinion in Petty stated, had there been no sue and be sued clause in the compact, this bridge commission could not have been sued in the Federal courts, despite the fact that it was operating a vessel on navigable waters in interstate commerce.
Unknown Speaker: But--
Mr. Lesser: The Eleventh Amendment would not have permitted it.
Unknown Speaker: --But that was a dissenting opinion.
Mr. Lesser: That was a... but two other justices concurred.
Unknown Speaker: Yes.
Mr. Lesser: The closest case to this--
Unknown Speaker: Well, how about a majority case?
Mr. Lesser: --A majority case was the opinion in the Tahoe Regional Planning Agency case.
In that case, this Court set forth six factors.
Unknown Speaker: But that case did not... that case ruled against the particular entity in question, didn't it?
Mr. Lesser: Yes.
And I think wisely so.
Unknown Speaker: Well, so... so the Court... there's never been a holding of the Court extending Eleventh Amendment immunity to any body other than the state itself, or a state official, is that correct?
Mr. Lesser: That's correct.
But the Court has never had a case where an agency closely... so closely identified with the states as the Port Authority.
In the Tahoe Regional Planning case, the Ninth Circuit adopted what this Court has called an absolute rule that any agency that was so important enough to be created by acts of two state legislatures, with the consent of Congress, automatically... this is what the Ninth Circuit held... automatically possessed the Eleventh Amendment immunity of the states'.
And I think this Court quite properly rejected that absolute rule.
This Court set forth six factors in which it can be determined whether an agency is so closely allied with the states as to share their Eleventh Amendment immunity.
Unknown Speaker: Mr. Lesser, before you go on to that.
In Petty, what was the sue or be sued clause?
Mr. Lesser: It was contained in the compact between Missouri and Tennessee.
Unknown Speaker: And did it say sue or be sued in Federal court?
Mr. Lesser: It did not.
And the... and the argument--
Unknown Speaker: It was... it was a sue or be sued clause just like yours?
Mr. Lesser: --Just like ours.
But it was before this Court required an absolute waiver of Eleventh Amendment immunity in Federal court.
Unknown Speaker: So what you're saying is that even under Frankfurter's view in Petty, the sue or be sued clause here would have sufficed.
Mr. Lesser: No, not under Frankfurter's view... not under the view of the three dissenters in Petty.
They said that this Court should interpret the sue and be sued clause as the state courts in Tennessee and Missouri interpreted it.
And they interpreted that clause to mean that the agency was not liable in tort.
And the majority... Justice Douglas stated that the sue and be sued clause... that when Congress adopted or consented to the compact with the sue and be sued clause, it consented it to the compact in the light of an earlier decision by this Court in the late 1930s involving the Reconstruction Finance Corporation... Keefer against the Reconstruction Finance Corporation.
And in that case, this Court ruled that a sue and be sued clause relating to a Federal agency constitutes a waiver of immunity.
And Justice Douglas said that that decision in the Keefer case, involving the Reconstruction Finance Corporation, show that Congress, when it consented to a sue and be sued clause, consented to a full waiver of Eleventh Amendment immunity.
But I think, as far as the waiver provision is concerned, this Court has, in recent years, clearly taken a much more stringent view, saying that the general sue and be sued clause does not include a waiver of Eleventh Amendment immunity unless it's absolutely crystal clear.
But let me just go through... Your Honor, the factors listed in the Tahoe Regional Planning Association case.
This Court listed six factors.
And we think the Port Authority meets all of those six factors to be accorded Eleventh Amendment immunity.
First, this Court said, how were the governing officials appointed?
Are they appointed by local governing boards?
In that case, the local... the majority of the Lake Tahoe Regional Planning Association Board was appointed by county officials.
Then this Court said is there a veto at the state level?
There was no veto at the state level in that case.
There is a veto at the state level in this case.
Then this Court said how is the agency designated in the enabling state legislation?
And the Port Authority, in the enabling state legislation, is clearly designated as a joint or common agency of the two states.
In fact, in the compact to which Congress consented be... there was no sue and be sued clause as I already mentioned... the legislatures, in their preamble, stated that the development of necessary terminal transportation and other facilities of commerce in the region require the cordial cooperation of the states.
And this can be best accomplished, said the legislatures, through the cooperation of the two states by and through a joint or common agency.
That's... and there are many similar descriptions in the legislation of the Port Authority, as the common agency of the states.
Then the next factor that this Court set forth in the Tahoe Regional Planning Association case was how was the agency funded.
And as I previously mentioned, the Port Authority was funded by the state legislatures until it became self-sufficient.
And in the early days in its history, when... faced a default on its first bridge bonds.
And the legislatures were faced with the problem of a default by an agency like the Port Authority, they turned over to the Port Authority their Holland Tunnel, which, as I mentioned before, was constructed by separate state commissions or state departments, operating cooperatively.
Unknown Speaker: Mr. Lesser, to what extent might the general funds of New York or New Jersey be held applicable to the debts of the Port Authority?
Mr. Lesser: Technically, they're not... a judgment against the Port Authority is not payable out of the state treasuries.
But that doesn't mean that the states are not adversely affected by judgments against the Port Authority in the same way that they're adversely affected by judgments against either state.
In fact, the New Jersey Supreme Court recognized that there can be multiple state treasuries in a case involving the Port Authority.
In this particular case, the New Jersey Supreme Court was faced with the problem of whether the Authority should have the states' rights to require the uncompensated relocation of private/public utilities in the streets and the thoroughfares of the state.
And the New Jersey Supreme Court said that that state rule was equally applicable to the Port Authority.
The Port Authority cannot be thus divorced from the citizens and taxpayers it was created to serve.
And the New Jersey Supreme Court stated that the general state taxpayer has a tremendous interest in the financial solvency and the operations of the Port Authority.
I think there can be no doubt, Mr.... this Court, that the Port Authority is a direct arm an agency of the states, and it should, therefore, share the states' sovereign immunity from suit.
Such a holding will, I believe, foster the principles of Federalism that both the Eleventh Amendment and the compact clause were designed to serve.
I'll reserve my remaining time for rebuttal.
Unknown Speaker: Very well, Mr. Lesser.
Argument of Richard W. Miller
Mr. Miller: Thank you, Mr. Chief Justice, may it please the Court.
I'd like to begin, if I may, by responding to a question that Justice Marshall posed.
In the legislation governing the World Trade Center, the language is quite specific that the Port Authority is supreme in its operation.
All details of the effectuation, including but not limited to, financing, leasing, rentals, tolls, fares, shall be within its sole discretion.
And its decision in connection with all matters, including the Hudson tubes, shall be controlling and conclusive.
The Port Authority has been described in the enabling legislation as a body corporate and politic.
It has been described as a private corporation in the statute that authorizes suit against the Port Authority.
It says, as if it were a private corporation.
Now the Port Authority has broad powers, which it exercises as it sees fit.
It does not go to either state to get second opinions.
It does not go to either state to ask their approval for what it wants to do.
It owns real estate in its own name.
It operates real property.
It operates marine terminals.
It issues bonds in its own name.
It borrows money.
It operates its own general reserve fund.
And the decisions have held... opinion of the attorney general that's cited in the brief... that the bonds of the Port Authority are not obligations of either the State of New York or New Jersey.
It operates commuter railroads, bridges, tunnels, the World Trade Center.
It even has its own police department, and they're called Port Authority Police.
Now, the best way, I suppose, to find out what the Port Authority really is, is to see how they describe themselves.
The Port Authority describes itself in its comprehensive annual financial report in 1987, which they issue every year: Unlike many other authorities and governmental agencies, the Port Authority, by law, must be self-supporting.
It has neither the power to tax nor the right to pledge the credit of either state to support its general obligations.
The Port Authority pays its own way for operations on capital investment, pooling revenues earned from its facilities through rents, fees, fares, tolls and other user charges.
It finances new construction, major improvements and repairs by selling its bonds and other obligations.
Now, there is specific... there is a specific section, 7031, which says that all bonds issued by the Port Authority are deemed to be negotiable instruments.
And they are traded widely in brokerage houses and the stock exchange.
Unknown Speaker: Mr. Miller, how is it that some degree of independence from the state by the... this agency mean that the entity, the Port Authority, is still not ultimately controlled by the state, and operate as... as states' agency?
I don't see that they're... that the fact that it has some independence from the states necessarily means that the Authority is not an agency of the authorizing states.
Mr. Miller: Well, it doesn't have any of the... the dressings of an agency.
Unknown Speaker: Well, do you think it's a political subdivision of the states, like a city or a county?
Mr. Miller: It's been described--
Unknown Speaker: Is that your position?
Mr. Miller: --Well, it's been described in the... in the enabling statutes as a private corporation.
It's been described as a municipal corporate entity.
In fact, I believe the second statute establishing the Port Authority... the first statute, I believe, reciting the theory of the two states working together to develop the Port Authority.
Right in that section, it does not say that it's an agency.
It calls it a municipal corporate entity.
It's never called an agency in any of the statutes that I've read, and... or cited in this--
Unknown Speaker: Well, I suppose it doesn't matter whether the word is used, because this would be a Federal question.
And we have to determine whether in fact, for purposes of Federal law, it shares the sovereign immunity of the states.
Isn't that so?
Mr. Miller: --Yes, Your Honor.
I suppose the best answer to your question would be to look at the Tahoe case.
In the Tahoe case, although there was--
Unknown Speaker: Well, I'm not sure that application of the so-called six factors yields a crystal clear result here.
Because some factors exist here on both sides of that question.
Mr. Miller: --I don't think we have to look at six, Your Honor.
I think it's sufficient to use the language in that... in that case, which says that... as I... as... as... as I interpret it, the most important factor to look at is the impact on the state treasury of a judgment against the Authority.
In this particular case, there is a specific statute involving the Port Authority which obligates the states only to $100,000 as initial start-up fees and only for a very narrow category of... of expenses.
In other words, they weren't able to be used as... as the Port Authority see fit.
The statute said office expenses, administrative expenses.
It couldn't have been used for a judgment.
Other than that particular amount, $100,000 as initial start-up expenses, there was no exposure at all of the state treasury to any judgment.
And as I read the Tahoe--
Unknown Speaker: That sort of begs the question.
If the money of the Port Authority is state money, it's kept in a separate pile, and it's still state money.
Mr. Miller: --But it's not state money.
The monies that are earned by the Port Authority are plowed back into their general reserve fund.
From that general reserve fund they continue to operate the Authority and its numerous activities.
And they also use it to issue their bonds.
And the statute sets out exactly what has to be kept in, what percentage can be used, and the like.
But the monies are not turned over to the states from the Port Authority's earnings.
They're kept within the Port Authority.
Unknown Speaker: Well, what if... what if a state set up a... say... say Massachusetts set up an authority to... to develop the harbor there.
And there was no interstate compact involved at all.
And they just set up an agency, a department of the state government to develop the... to develop the harbor.
Would that agency share the Eleventh Amendment immunity of the state?
Mr. Miller: Well, Your Honor, without knowing some of the specific sections, et cetera... but I would say you'd, again, have to look at the... what I consider the most important factor in Tahoe, is the... what happens if there is a judgment?
Is the state treasury insulated?
Unknown Speaker: Well, I know, but you... I... I don't suppose you can sue a state in the Federal court for an injunction, can you?
Mr. Miller: No.
Unknown Speaker: Well, in... in those cases there is nothing... the... a state is immune even though its treasury isn't in danger.
Mr. Miller: Well, that's handled in the statutes for the Port Authority.
I mean, that... there is a specific section that deals with injunctions, where you can't sue the Port Authority.
7101 says we waive it.
You can sue us on any kind of case with certain exceptions, that being one of them.
Unknown Speaker: Well, you're arguing waiver now.
Mr. Miller: Specific, yes, Your Honor.
Unknown Speaker: Let... let's assume the state creates a statewide police force, a state police, and... and... and... and it provides that the state... that this agency may be sued.
And that its liability, however, will not exceed its available funds.
And there's a separate funding for this agency which it appropriates the funds every year.
The state treasury is not... not liable beyond what's in the pot for that agency.
You would say that is not a state agency, simply because the general treasury is not... is not liable?
Mr. Miller: I would say that is not a state agency that falls within the parameters of the Tahoe case, which said, if there's an impact on the treasury we will consider it.
Unknown Speaker: I... I know that.
I... I know it doesn't come within Tahoe.
Mr. Miller: If--
Unknown Speaker: --And you think that simply because of the one feature, that the state's general funds are not available for judgments, therefore it is not a state agency?
Mr. Miller: --I think that's the most workable feature, yes.
I think it's the most practical way to approach these... these problems.
Unknown Speaker: That... that's very risky.
Well, it may well be.
But I don't think anybody would believe that.
Mr. Miller: Well--
Unknown Speaker: That if... if a state creates what, in all other respects, is thoroughly a state agency, the mere fact that the... that the general state funds are not liable in any suit, although it makes it liable to suit up to the amount of its own... its own budget, that alone makes it a nonstate agency?
Mr. Miller: --Well, is Your Honor saying in your question that the question of agency is somehow set out in... in... in... in its description of this police department?
Because here we don't--
Unknown Speaker: No, I'm just saying that I never thought that the criterion... the exclusive criterion of whether a body is a state agency or not is whether it can render the state's treasury liable.
Mr. Miller: --I... I wouldn't say it is the exclusive factor, Your Honor.
Unknown Speaker: But that is what you just said before, I thought.
That you don't have to look beyond that.
Mr. Miller: I'm saying that under the authority of Tahoe, looking at that factor, appeared to be the most important factor as far as that agency was concerned and as far as this one is concerned.
Unknown Speaker: Well, Mr. Miller, a number of states, I believe, certainly those with debt limits, have been following the practice of setting up separate state agencies to fund construction projects.
For example, university housing.
And they'll structure the state board of regents as an entity to issue bonds for the housing, but not subject the state treasury, independently, to liability.
Now, under your view, all those, what I would have thought were state agencies, now have no sovereign immunity.
And we might have thought, for example, in the State of Arizona, that the state board of regents was a state agency under those circumstances.
But you would say no.
Mr. Miller: Well, Your Honor, I think if it's clear from looking at the agency that it is in fact an agency, then I don't think--
Unknown Speaker: Well, but, liability of the state has shielded.
That's my assumption.
Mr. Miller: --Yes.
What... what I'm... what I'm saying here is that in the... in the case of the Port Authority, it is... it is not an agency.
It is not set up as Your Honor's example.
This is set up to run a particular function.
It's set up by the two states, and it runs itself.
It has its own operating budget.
It has its own people.
It has its own land.
It has its own bonds.
It doesn't go to the State of New York or New Jersey for anything.
As in Your Honor's example, I... I would assume that, being an agency, they would be much more closely connected to the state that... that set them up.
Perhaps state officials would be... would be partially running the... the Authority.
In this case, other than the... the commissioner, the board of commissioners sits and does as it... as it wants.
It doesn't have to go to the State of New York for approval.
And in fact--
Unknown Speaker: You could say the same about the FCC here... here in Washington.
You can say the same about any so-called independent agency.
Its members are appointed, and once they're appointed, they go off and do what they want.
Mr. Miller: --But they get... I believe the FCC gets some appropriations from Congress.
I believe that they have reports... in this particular case, there is no appropriations for PATH.
Unknown Speaker: And you think if the FCC were authorized to raise all the funds it needed by assessments of the people using its services, or by imposing a... a tax on television sets, or something, you think that would make the FCC not a Federal agency anymore?
Mr. Miller: No, I don't.
No, I don't.
I think you'd have to cut the ties a little bit more than that.
I think you would have to do something such as they have here, where you have... the FCC, if it did, as Port Authority did, if it could own its land, it if had its own buildings it ran, whatever, I think, yes, you'd become a lot closer to answering the question that, yeah, there would no longer be an agency.
And assuming that they no longer got their funding, they no longer got appropriations, they... they had their own board of directors or board of commissioners that met and ran it without answering to Congress or anyone, yeah, I think then, at that point in time, you're moving away from it being an agency.
Which is exactly what I... I... I feel that is... is the case here with Port Authority.
Unknown Speaker: I take it you would... you would say that the Eleventh Amendment immunity is available if the Port Authority is deemed to be an agency of the state?
Mr. Miller: Your Honor is not talking about the waiver issue now?
We're not getting into that?
Unknown Speaker: No.
Mr. Miller: xxx... yes.
Unknown Speaker: Even though... even though there is no risk to the state treasury?
Mr. Miller: Yes.
Now, on the question of waiver, it would appear that the two sections must be read together.
One section, 7101 that says you can sue us in any court, in any type of matter, with a few limited exceptions, injunction being one of them.
The other section says we will condition that upon the condition that you sue us in the Port Authority district.
Or otherwise there is no jurisdiction for such a suit.
The last part of that section says that is shall be considered a private corporation for such lawsuits.
Unknown Speaker: Do you think that the provisions having to do with suit and the venue section meet the standards set out in the Atascadero case for a clear, unmistakable waiver?
Mr. Miller: Yes, I do, Your Honor.
I believe it's clear.
Unknown Speaker: How is that?
Mr. Miller: Well, there can be no doubt, for example, that when the say judicial district of the United States they mean the Federal courts.
Unknown Speaker: Yes, well, I suppose you heard Mr. Lesser's explanation of what he thought might have been intended by that provision.
Mr. Miller: Well, I thought I heard him say at one point in time that he would agree that it meant the Federal courts.
Unknown Speaker: The language meant the Federal courts, but he offered an explanation for why that language might have been inserted in there, that was something other than an intent to waive sovereign immunity.
Mr. Miller: Well, Your Honor, I can only answer that by saying if... if it's read in conjunction with the prior statute, and they were passed at the same time, 7101 and 7106 were passed at the same time, then you would have to conclude, I believe, that when they say you can sue us in any court for any lawsuit, and the only condition we will impose is it must be within a court, be it state or Federal, within the Port Authority district.
I don't believe that there has to be some prior determination of... of jurisdiction before you... before you can say that judicial district means Federal courts.
I think, in response just to... to... to go into a little background... there was a case called Howell, which is widely cited in... in the petitioner's brief.
Howell was a case that came down in the District Court of New Jersey in 1940.
The Second Circuit refers to Howell and says that following that decision there was response by the legislatures, and these two sections, among others, were partially in response to the holding in that... in that decision, which found that there was sovereign immunity in the Port Authority.
The Second Circuit said, partially in response to Howell, these two sections were enacted.
The intent is... is fairly clear, I believe, that Port Authority says you can sue us.
We intend for you to sue us as long as you do it in the Port Authority district, be it a state court or a Federal court.
Unknown Speaker: Do we have to regard that venue provision as a waiver?
Couldn't we regard it as an indication that the state did not consider this entity to be... to be the state?
It just assumed that it was suable in Federal courts.
In other words, you're... you're... you're assuming the Atascadero test applies.
But the Atascadero test is applied to a situation where you know that the entity is the state.
Here we have an entity that we're not sure whether it's the state or not.
Mr. Miller: True.
Unknown Speaker: Why can't one say that the venue provision doesn't have to be a waiver.
It can be an indication of whether the states themselves regarded this entity as being suable in Federal court?
Mr. Miller: I think--
Unknown Speaker: In which case you wouldn't need the Atascadero level of... of certainty.
Mr. Miller: --That's true, Your Honor.
I would agree with that.
The... I think the... the... one way to look at the waiver is that it is simply a... a further condition to their agreement or waiver of... of... of such lawsuits.
Unknown Speaker: Do you agree with me you've got to stop calling it a waiver?
Mr. Miller: Okay.
In conclusion, therefore, I would urge the Court... I think the holding of the Second Circuit is good law.
I think it proposes and found a workable solution to these types of problems presented in this case.
I think it's a good solution.
I think it's a reasonable decision.
And I would ask this Court to affirm the holding of the court below.
Unknown Speaker: Do you think it has to be the same... the same... have the same status in both states?
Mr. Miller: I'm sorry, Your Honor, I don't follow the... your inquiry?
Unknown Speaker: Well, are we talking here about New York?
Mr. Miller: Well, we're talking about a compact between the two states.
We're talking Second Circuit is New York, yes.
Unknown Speaker: So you say, if it isn't an agency in New York, it isn't an agency in New Jersey, either?
Mr. Miller: Well, it's... it's... if it's... it's either an agency or it isn't.
If it's not an agency, then it... it... it... it's not an agency in either state.
Unknown Speaker: Do you mean the two states... the two states couldn't have different views about whether the... whether the Authority is an agency?
Mr. Miller: Well, the states have always passed parallel legislation.
7101... or the... the general consent to be sued, is just a parallel--
Unknown Speaker: So you... so... so if the Second Circuit is affirmed... if we affirm the Second Circuit, we are necessarily disagreeing with the Third?
Mr. Miller: --Yes.
Unknown Speaker: Thank you, Mr. Miller.
Mr. Lesser, you have four minutes remaining.
Rebuttal of Joseph Lesser
Mr. Lesser: Thank you.
If there's any doubt any... the mind of any Justice of this Court that the Port Authority is a direct arm and agency of the States of New York, I would really request that you look at appendix A to our reply brief.
Because that appendix sets forth the 150-odd statutes... separate statutes that the states have passed in reference to the Port Authority from 1921 to the present.
Those statutes, dealing with major considerations of state public policy to minor housekeeping chores, in my mind, demonstrates beyond question that the Port Authority is a direct agency and arm of the states that created them.
This list of statutes, by subject matter and title, I think leaves no doubt in anybody's mind... should leave no doubt in anybody's mind... of the status of the Port Authority.
It has been... the Port Authority has been questioned as a state agency.
It is referred to in the compact as a joint or common agency of the states.
The reason why the Port Authority was created and given those functions was that those problems transcend state boundary lines.
The states try to cooperate in the 1919 compact, to which Congress consented, by setting up independent commissions that were really departments of state government to act cooperatively.
It wasn't an efficient mechanism.
I think the compact clause, with the Eleventh Amendment, would fortify Federalism, would fortify the underlying principles of Federalism by giving the states the power to set up an entity like the Port Authority, which is undoubtedly a state agency.
Unknown Speaker: Well, of course, it was called a municipal corporate instrumentality in the compact, wasn't it?
Mr. Lesser: That was... yes, it was, in contradiction to a normal municipality.
In the same provision of the compact, it refers to ordinary municipal corporations.
It was something different.
It was unknown at the time what the Port Authority was.
It was a major advance, I think, in American public law on government that the states could use the compact clause creatively, to create an agency that would represent them in all affairs.
My opponent referred to the fact--
Unknown Speaker: What did that... what were the words after those... that... that phrase, municipal corporate instrumentality in the compact?
Did it say an instrumentality of the two states?
Mr. Lesser: --It... it, in other portions of the compact, it refers to the Port Authority as a joint... a common agency.
I just haven't got the phrase right before me.
But it distinguishes between ordinary municipality and municipal corporate instrumentality, which is the Port Authority.
The Port Authority is assuredly not a municipality.
It has no power to tax; it has no general police power; it has no right to enact ordinances; it has no general condemnation power; it has no home law powers.
My opponent referred to the provision in the suability statute that the Port Authority should be liable as if it were a private corporation.
That provision was inserted to get around the New York Court of Appeals decision in State against Smith.
Unless that provision applied, specifically waiving immunity from... creating immunity... creating tort liability, the Port Authority might not have been liable in tort, even though it was otherwise suable.
The same language, practically, apply... is found in the New York Court of Claims Act, where the state waived its sovereign immunity for itself in the New York Court of Claims.
My opponent also referred to some language saying that the Port Authority, in operating its facilities, shall not... does not have to comply with rules and regulations of others.
That just means--
Chief Justice Rehnquist: Thank you, Mr. Lesser.
The case is submitted.