REGENTS OF THE UNIVERSITY OF CALIFORNIA v. DOE
John Doe sued the University of California alleging that it had agreed to employ him at a laboratory it operated pursuant to a contract with the federal Department of Energy (DOE), and that it had wrongfully breached its agreement upon determining that he could not obtain a required security clearance. The university argued that it was immune from liability under the Eleventh Amendment. Mr. Doe asserted that the Eleventh Amendment did not apply to the case because any damages awarded would be paid by the DOE. The District Court held that the university was an arm of the state and therefore the Eleventh Amendment prohibited Mr. Doe from maintaining his breach-of-contract claim in federal court. The Court of Appeals reversed the decision citing the university's agreement with the DOE, under which the department was liable for any judgments rendered against the university, not the state.
Does the Eleventh Amendment shield state-run schools from being sued unwillingly in federal court even though any award of monetary damages would not come from the state?
Legal provision: Amendment 11: Eleventh Amendment
Yes. Justice John Paul Stevens, writing for a unanimous Court, stated that the California university could not be sued by Doe regardless of his claim that the job offer was illegally withdrawn and despite the fact the federal government would be responsible for the judgment. Stevens declared that the Eleventh Amendment shields the state from "the risk of adverse judgments even though the state may be indemnified by a third party."
Argument of Charles A. Miller
Chief Justice Rehnquist: We'll hear argument next in Number 95-1694... the spectators are admonished not to talk until you get out of the courtroom.
The Court remains in session.
We'll hear argument next in Number 95-1694, Regents of the University of California v. John Doe.
Mr. Miller, you may proceed.
Mr. Miller: Thank you, Mr. Chief Justice, and may it please the Court:
The issue presented for review in this case is whether the Eleventh Amendment immunity is lost if the State or a State entity has a claim for indemnification or reimbursement for any judgment entered against it.
Here, the potential indemnitor is the United States Department of Energy.
The issue arises in the context of a breach of contract action brought in Federal court on diversity grounds where the plaintiff is a citizen of New York and, thus, the issue does not implicate the question of the scope of the Eleventh Amendment that the Court has focused on in a number of cases, most recently in the Seminole Tribe case of last year, for even under the most narrow view of the scope of the amendment the question presented in this case would need to be addressed.
The Ninth Circuit court held that the university lost its immunity in this case because in this particular case it had a claim for indemnification against the United States Department of Energy.
The core error of the court below was its premise that in each case involving a State entity the court can consider, and parties can litigate, the question of the payment source that would be used to satisfy a judgment that might be entered in that particular case.
Nothing in the Court's Eleventh Amendment cases supports that view, and we believe it is inconsistent with the terms, the meaning, and the purpose of the Eleventh Amendment.
The core purpose of the Eleventh Amendment is to withhold jurisdiction from Federal courts and to withhold the exercise of Federal judicial power against a State in respect of that State's sovereignty.
Under the Ninth Circuit approach, Federal judicial power is potentially exercised against the State or its entity in virtually every case, or any case in which the plaintiff alleges that there is some payment source for the judgment that might be entered in the case that would satisfy the judgment and that would avoid payment of that judgment directly from the State treasury.
Unknown Speaker: Mr. Miller, I want to make sure I understand one thing.
I take it that it's your position that this reference to a source of indemnity is simply irrelevant as a matter of law, that there is no circumstance in which that should be taken into consideration in order to determine the Eleventh Amendment status of some supposed arm of the Government.
Mr. Miller: Yes, Your Honor, with this one qualification.
We acknowledge that at some point any entity, not the State itself, may have to be subject to a determination as to whether it is a State entity--
Unknown Speaker: Right.
Mr. Miller: --for Eleventh Amendment purposes, and it would be looked at with its overall character.
If in some case there were an agency of the State which was entirely supported by indemnification from an outside source like the Federal Government, in that hypothetical situation conceivably the factor of indemnification would be relevant.
Unknown Speaker: Well, are you assuming in the hypothetical that you raise, are you assuming in that case that the State treasury or "State funds" could never be reached, and that the only funds that could be reached would be those of the third party nongovernmental indemnitor?
Mr. Miller: In fact, Your Honor, yes, and beyond that, that the entity was established on the premise--
Unknown Speaker: Okay.
Mr. Miller: --that its... the State funds would never be reached.
Unknown Speaker: So that... in other words, that doesn't really qualify, I take it, your answer, because your answer is, on the assumption that State funds are reachable at least in theory, the existence of a third party indemnitor is irrelevant as a matter of law to the Eleventh Amendment determination.
Mr. Miller: Yes, Your Honor.
Unknown Speaker: Okay.
Mr. Miller: That's the position.
Whether it's an indemnification, insurance claim, a possible claim over or against a third party, a possible joint tortfeasor, anything of the sort.
None of those possibilities we say should be relevant, and yet the Ninth Circuit court decision would seem to make any one of those possibilities relevant to a determination in a particular case as to whether a State entity would be entitled to Eleventh Amendment immunity.
Unknown Speaker: There was discussion in the Hess case of the potential for judgments to reach or not reach the State treasury.
We seemed to think that was important in the Hess case.
Why is that not important here?
Mr. Miller: Two reasons, Your Honor.
First, in the Hess case the inquiry that the Court made was whether that bi-State entity there, the path, had been established by the two States involved, New York and New Jersey, with an intention that those States be responsible for its various debts, and in that case the Court looked at that overall structure and concluded that the States did not intend their treasuries to be responsible.
Unknown Speaker: So you're saying that the discussion there simply was a way for us to inquire or measure the connection between the bi-State entity and the State?
Mr. Miller: Yes, Your Honor.
In fact, that was the standard that the Court announced when it made that... when it took those factors into account.
The Court asked--
Unknown Speaker: Mr. Miller, was an antecedent to getting to that in the Hess case that we were dealing with an entity that had not simply two States as creators, but the Federal Government as well, and then said, there is a presumption that such an entity founded by three sovereigns does not wear the mantle of a State, and maybe that presumption is undone if the States are legally obligated to pick up the tab for it, but--
Mr. Miller: --That is absolutely right, Your Honor.
That was going to be my second point, that the Court in the Hess case adopted a standard which started with a presumption against cloaking that particular entity with Eleventh Amendment immunity and required a demonstration that not only the States involved intended for the agency to have their sovereign power, but that the Congress agreed with it.
That's not the standard that would apply in judging whether an arm of the State is entitled to Eleventh Amendment immunity, but even under that approach there have been situations where a bi-State entity has been found to have Eleventh Amendment immunity.
I think of the case in the D.C. Circuit of the Washington Metropolitan Area Transit Authority, which Justice Ginsburg's opinion cited in the Hess case, I think, but that was again an application of a special standard for the bi-State entity situation.
Unknown Speaker: --But in any event, here there is no legal... there's no release of the university from legal liability.
As there was in the Hess case there was no legal liability.
Mr. Miller: That's unquestionably true, Your Honor, and were a judgment to be entered on this breach of contract case, claim against the university, the university would be legally liable, and all of the consequences that would flow from having had a court make a legal determination of a violation of someone's rights would apply in the case.
The university, to be sure, under the contract here would look to the Department of Energy to satisfy the monetary judgment awarded by the court, and it would hope, in the unlikely event that this occurs, that the Department would respond, but if it didn't, the university would be on the hook to pay the judgment.
Unknown Speaker: In these cases involving universities, is it important for us to inquire whether, as a matter of State law, there is sovereign immunity that attaches to the institution, or is it not important, because sovereign immunity can always be waived?
Mr. Miller: I think it's an element, Your Honor, of the inquiry, the ultimate inquiry which this Court announced in the Mount Healthy case, and I think it's been repeated again in the Hess case and others, was what is the intention of the State in establishing the entity?
Did the State intend this entity to exercise State sovereign powers?
Whether that particular entity has State sovereign immunity could be relevant to that inquiry.
In this particular case, there is a general State statute that explains just exactly how, and to what extent, the State waives its sovereign immunity for itself and its entities, and the Regents of the University of California are explicitly named as one of the entities covered by that provision.
Unknown Speaker: Do those statutes, do you think, supersede the California supreme court's decision, the 1899 decision where they... in the Royer case where the California supreme court said that the university, while a governmental institution, is not clothed with the sovereignty of the State and it's not a sovereign?
Do we just ignore that sentence, or has it been superseded by statute, or--
Mr. Miller: I think that sentence has to be read for precisely what it said.
The Court pursued it by saying the State is an instrument... I mean, the Regents is an instrumentality of the State.
It is not, however, the State itself, and I think that's what the State, what the supreme court was saying, and for that reason, it said, it can be subjected to legislative enactments.
In that case, it was enactments relating to the probate--
Unknown Speaker: --Haven't we held in one of our decisions that even though the State may... State law may say it's... an entity is suable in State court, that does not conclude the Eleventh Amendment inquiry in Federal court?
Mr. Miller: --Yes, Your Honor.
This Court has made clear that a waiver of Federal court Eleventh Amendment sovereign immunity must be explicit, and is not accomplished simply by a general waiver.
Unknown Speaker: What about the converse proposition, not waiver, but could a State... let's take a cement plant as an example... go into the cement business and create the cement administration entity as an arm of the State and say it shall not be immune... it shall be immune from all suit in Federal court and also in State court?
Mr. Miller: Yes, Your Honor.
I mean, it could.
It would have to make a decision that it wants the cement operation to be part of the State government, to be clothed with the rights and attributes of State sovereignty.
Unknown Speaker: Is there any Federal limit on the extent to which a State can create subdivisions that will be entitled to Eleventh Amendment immunity?
Mr. Miller: I don't think there are any Federal limits, Your Honor, because the whole point here of the Eleventh Amendment is to respect State sovereignty and the State's decision as to how to organize itself to carry out its governmental functions, and if the State decides hypothetically that the... operating a cement plant is a sovereign function it wants to undertake, that decision should be respected.
Unknown Speaker: Well, it is not respected in international law any more.
There is an exception to international sovereign immunity with respect to commercial activities of Governments, and that may well be ex... I mean, it isn't out of the question that that could be extended to the Eleventh Amendment as well, but that's not involved here anyway, is it?
I mean, this is not a commercial--
Mr. Miller: It's not involved in this case but I'm happy to--
Unknown Speaker: --Yes.
Mr. Miller: --comment on it, Justice Scalia.
I mean, this Court has looked at the commercial versus governmental distinction in a number of contexts and has tended to find it wanting in every case.
The most prominent one I'm thinking of is the Garcia case, where it rejected that basis for distinguishing between functions of governmental entities that would be beyond Federal regulation.
Unknown Speaker: And of course, if you applied that distinction here you'd be on the proprietary side of the distinction, wouldn't you?
Mr. Miller: I don't think so, Your Honor, because I think what you'd be looking at would be the university as a whole, and the whole point of this case is that you've got to look at the university as a whole and examine its overall character.
And the fact that it happens to have a particular operation that someone might say looks more commercial in nature, just as one might say providing parking lots for the faculty is a little more commercial in nature than a governmental... one could break this down and in every case perhaps find some basis for arguing that there is an exception to the immunity, and under such an approach I think in the end there would be no immunity, because the university and every other State entity would have to defend itself in every case against the contention that in that particular case its functions are not protected by the immunity, and instead of having an immunity suit, which is what was intended by the Eleventh Amendment, what you'd have would be--
Unknown Speaker: I don't understand that argument.
There are clearly some things that the Government would do that are purely governmental... I mean, carrying out Government policy in one way or another.
You're saying there is no... you're just saying there is no valid distinction between the two kinds of function, and there's a lot of support for that, of course.
Mr. Miller: --Yes, Your Honor, and I would say, Justice Stevens, that in the context that we're talking about here, which is how does the State organize itself to carry out functions, I don't think there's any evidence that States elect their form of organization or their activities based upon whether the Eleventh Amendment applies, and no one would make such a suggestion, so if a State, to take your hypothetical, decides--
Unknown Speaker: I don't know why they wouldn't.
If they go into the cement business, as Colorado did, why, they might take that into account.
It seems to me perfectly legitimate.
Mr. Miller: --I don't know of any evidence that any State in fact takes that kind of consideration into account.
At least until that evidence was present it would seem to me not worth distorting the purposes of the Eleventh Amendment simply to protect against that somewhat unlikely scenario.
Unknown Speaker: In any event, Mr. Miller, in this case you're saying that we have to deal with the University of California as an entity and not whatever Livermore Laboratory might be if it were a discrete entity.
Mr. Miller: That's correct, Your Honor, and you may ask why is that the case, and my response would be because the minute you start breaking down the activity of an entity function by function, activity by activity, you are inviting in every case an opportunity for litigation in the Federal court as to whether or not that particular entity is entitled to immunity in that particular case.
And that series of events has as its ultimate consequence the evisceration of the immunity that the Eleventh Amendment was intended to present, and it makes no difference whether it's a Federal question case or a diversity case like this case, where the issue involved is one of State law, and it seems to us in that situation the cases of this Court are clear that the entity needs to be viewed as a whole.
If I may reserve the balance of my time, Mr. Chief Justice--
Unknown Speaker: Very well, Mr. Miller.
Ms. Blatt, we'll hear from you.
Argument of Lisa Schiavo Blatt
Ms Blatt: Mr. Chief Justice, and may it please the Court:
We believe that the court of appeals erred for two reasons.
First, regardless of whether a State entity has a potential right of indemnity from a third party, the State's sovereign interests are implicated whenever the State has been sued.
Second, the court of appeals approach creates an unworkable approach to resolving the immunity question.
As to our first point, this Court has repeatedly held that the Eleventh Amendment does not exist simply to protect a State against damages that must be paid out of the State's treasury.
It also exists to protect the State's dignitary interest in not being sued by private parties without the State's consent, and it applies regardless of the relief sought.
Here, respondent seeks both damages and injunctive relief from the State.
The fact that the Federal Government might be contractually obligated to pay the cost of any judgment in this case does not change the fact that the university has been sued and legally will be responsible for any judgment.
Secondly, this case illustrates the problems created by the court of appeals decision.
The Department of Energy has not determined whether the cost of any judgment in this case would be indemnified under its contract.
The court of appeals opinion that the Department of Energy must pay those costs is merely advisory as to the Department, which is not a party to the case.
A binding determination on the indemnity issue will be made by the Department of Energy's contracting officer after he or she reviews the relevant facts in the contract.
Unknown Speaker: You say binding?
Is that not... that will be reviewable in court, certainly.
Ms Blatt: --Yes.
Under the contract there's an issue resolution process, and then it would be appealable to the Energy Board of Contract Appeals or the Court of Federal Claims, and then--
Unknown Speaker: Ms. Blatt, you mentioned with respect to the Department of Energy's... what it assumes, what liabilities it will assume, that that is now undergoing revision.
What is the status of the revision that you described in your brief?
Ms Blatt: --The final rule has not been issued yet, but the Department of Energy hopes to have it out in the near future.
It's just in the form of a notice, and they're assembling responses to the public comments.
Unknown Speaker: What would be the principal change from the indemnity as it now exists and as it will exist if this rulemaking is final?
Ms Blatt: There's a very significant change in the third party liability clause.
It will now be... the burden of proof will be on the contractor to persuade the contracting officer that damages were not caused by lack of prudent business judgment by the contractor's managerial personnel.
It's both a widening of the scope of the potential contractor's officers that can commit misconduct or, if you will, conduct that would result in unallowable costs, as well as it's a heightening of the standard.
It's no longer wilful misconduct or lack of good faith.
It's simply lack of prudent business judgment, and the Department and the University of California are currently negotiating their contract to begin in the fall of '97, so we'll know then what that clause looks like.
Unknown Speaker: Thank you.
Ms. Blatt, does the United States have a position on the question of whether the University of... the Regents of the University of California are an arm of the State?
Ms Blatt: No, other than to assume that they are, based on the way the question presented is worded, that if they're otherwise immune, then as a State entity the Department of Energy's contractual obligation to indemnify them doesn't change anything because it is the university who is subject to the coercive enforcement powers of the court and in any event may turn around to the Department of Energy and the Department may not pay.
Unknown Speaker: Ms. Blatt, that was the way the question presented was worded, but the Ninth Circuit decision was more diffuse, wasn't it?
They said, this is one of... they have five factor tests, and we're reviewing that determination, so how could we just pick out the neat question presented and say that's what's before us, when we're reviewing a Ninth Circuit decision that says there are these five factors, add them all up, and we come out with not an arm of the State?
Ms Blatt: I think it's a fair characterization of the Ninth Circuit's opinion that what distinguished the university in this situation was the court of appeals view of the Department of Energy's contractual obligations, and our position is not to dispute any of the factors the Ninth Circuit looked at except for what they relied on, this payment factor that an indemnity allegation is solely a matter between the university and the Department of Energy.
It doesn't affect the fact that the university is the party against whom judgment is sought.
Unknown Speaker: And you take the position also, I understand, that in making the determination of the university's status for Eleventh Amendment purposes that the existence of an indemnification agreement as such is simply an irrelevant consideration.
Ms Blatt: That's correct, and you have here what certainly we did not dispute, was that the State of California is legally obligated to satisfy the university's debts based on both the Constitution and the fact it appropriates significant amounts of money to the university each year.
Unknown Speaker: Given that fact, that's where you stop, on your view.
Ms Blatt: Yes.
Given those facts, if there's a legal connection, a legal liability to the State entity in question the existence of an indemnity agreement with a third party does not alter that entity's status under the Eleventh Amendment, and that's again because the university is on the hook for the judgment and that third party may or not... may or may not be forthcoming, and in any event, that doesn't change the relationship between the plaintiff, the university as a defendant, and the court, who can enforce the court's enforcement powers against the university.
And this case could... illustrates what could happen is, the court of appeals opinion that the university will have the Department of Energy pay its judgment, the university might find itself compelled to pay damages in this case, yet ultimately unable to shift those costs to the Department of Energy, and in our view that would be impermissible under the Eleventh Amendment, and again that's because judgment is sought against a State entity.
I don't have any more points to make, so if there are no questions--
Unknown Speaker: I don't believe my colleagues do, either.
Ms Blatt: --Okay.
Unknown Speaker: Thank you, Ms. Blatt.
Mr. Gayer, we'll hear from you.
Argument of Richard Gayer
Mr. Gayer: Mr. Chief Justice... excuse me... and may it please the Court:
This is a Federal case involving 100 percent Federal money at a Federal facility, the Lawrence Livermore National Laboratory, which executes a Federal program for an exclusively Federal interest: nuclear weapons research.
The Regents here, Regents' corporation is not managing a university.
It's not even running its hospital.
What it's doing is managing the Lawrence Livermore National Laboratory as a public service to the Nation, for no loss or gain.
That's on page 1 of the contract, which is not part of the joint appendix.
Unknown Speaker: But I didn't think we had taken this case to go into whether, absent the indemnification provision, there is sovereign immunity or not.
You know, there are a million different entities, and each one of them have different considerations, and we normally don't take up each case to decide whether the court of appeals got it right that applying the normal factors this was the State or this wasn't the State.
I thought the only issue before us here was whether, assuming it is otherwise the State, the indemnification feature makes a change.
That's a point of law I think we can grapple with that has, you know, permanent significance Nationwide.
Mr. Gayer: Focusing on that narrow issue, which I personally believe that the broader issue is subsumed within the question presented--
Unknown Speaker: Well, let's read--
Mr. Gayer: --Focusing on the--
Unknown Speaker: --Let's read the question presented.
Mr. Gayer: --Well, I agree with Your Honor's statement of the question presented so--
Unknown Speaker: --Well--
Mr. Gayer: --I'd like to focus on that.
Here we have something where the university is really some sort of facade or name between the outside world and the Federal Government.
The Federal Government has made a solemn, written promise to pay directly... not to indemnify, not to reimburse, but to pay directly any judgment awarded against the name of the university.
Unknown Speaker: --Well, if the university is just a facade, Mr. Gayer, perhaps you should sue only the Federal Government, not the university.
Mr. Gayer: The problem is we have no jurisdiction in the Federal District Court over the Department of Energy until... ever, and we don't have any jurisdiction in the Federal District Court over the Department of Energy until and unless such time as the plaintiff in this case gets a judgment against the name of the university, so step one is to sue the university here in U.S. district court and get a judgment.
At that point, we would have a claim against--
Unknown Speaker: But the university says the court has no jurisdiction over it either, because of the Eleventh Amendment.
Mr. Gayer: --Obviously, we contend that the university is wrong, because there can be no impact on the State treasury.
That was the point of the--
Unknown Speaker: Well, what if the university just had a big insurance policy to cover any liability.
Mr. Gayer: --Different answer.
There, the university paid for the insurance, therefore that has an impact on the university's treasury, which happens to be separate and distinct from the State treasury, but that's a different situation.
Unknown Speaker: They paid for the Government's indemnification promise as well.
I mean, you don't think that promise is made for free.
Mr. Gayer: Yes, it is.
Unknown Speaker: The contract would... you know, the university would have demanded a lot more money for the contract if that indemnification provision weren't in it, so the payment isn't the difference between the two.
Mr. Gayer: Your Honor, I would respectfully disagree, because here the university is doing this as a public service.
The contract says so.
It's true they get a $20 million annual fee for using the name of the university, but this is not a case where there's any connection between this nominal fee and any indemnity or judgmental risk.
Unknown Speaker: Do you deny that they would have demanded much more reimbursement from the Federal Government if they did not have the Federal Government's indemnification guarantee?
Mr. Gayer: Well, this calls for my--
Unknown Speaker: If they had to be either self-insurers, or had to buy insurance from an insurance company?
Mr. Gayer: --Well, we can only... Your Honor, we can only speculate on that.
Unknown Speaker: I know.
How would you speculate about that?
Mr. Gayer: I would speculate that the--
I would speculate that the university would never sign such a contract.
They would tell the Department of Energy to get lost.
Unknown Speaker: Because the cost is too high.
Mr. Gayer: There's too much risk.
It's not worth the risk.
The Department of Energy wants to use the good and prestigious name of the University of California to attract talented scientists, technical professionals to work on Government projects, and the DOE has determined that it's to its advantage to get a prestigious name, and the DOE is willing to pay for it.
Unknown Speaker: Aside from the fact that the university would pay for a private insurance policy, is there any other feature that would distinguish Justice O'Connor's question from the case before us?
Mr. Gayer: Thank you, Justice Scalia, yes, there's an important distinction here, I think, that in general an indemnitor such as an insurance company is quite separate from the contract, say, between the Government and the Regents corporation.
It would be some outside insurance company that would be agreeing to indemnify.
Here, it's the Department of Energy itself, for which the Regents is doing the work, that is saying, you do this work for us, you run our labcratory, and we'll pay directly any judgment, so there is no outside insurers.
I think that--
Unknown Speaker: I thought they didn't pay just any judgment no matter what.
Isn't there some provision in the contract for reimbursement that if it's willful misconduct they won't reimburse?
Mr. Gayer: --Well, that's true.
I assume that means we're talking about something wherein perhaps an employee of the laboratory engaged in some sort of assault and battery, or embezzlement, or what-have-you, something approaching on the criminal, but that's neither alleged here, and there's no hint of it here.
In the joint appendix near the end at page... let's see if I can find this.
I believe it's 82a--we have a letter from the Department of Energy directly to the plaintiff dated November 23, 1993, where they make a technical reservation regarding Justice O'Connor's mention of bad faith and willful misconduct.
But if you read this in context, knowing that the event sued upon in this case occurred in June of 1991, and this letter was issued approximately 2-1/2 years later, we have a statement that, you know, while we still reserve this business about bad faith, which never occurs, the Department is saying we'll bear the cost of defending the university, and of any monetary judgment in your favor.
I submit there has been no hint of willful misconduct or bad faith.
It's not alleged, it didn't happen, it's not going to happen, and this is something that in any event the Solicitor General in its brief says these exceptions are rarely, if ever, applied... not to worry.
I think with regard to any arm of the State question, if... the Regents corporation first of all has never been established as an arm of the State in any decision by this Court, and according to the Solicitor General the... this Court has never determined whether any State university or college is an arm of the State for purposes of the Eleventh Amendment, so I don't think we can just sort of assume that.
And what the Ninth Circuit did, it says, let's look at the facts.
We look at the facts, and we assume that a promise made by the Federal Government in writing is a solemn promise, that the Department of Energy, when it says it's going to pay directly, will pay directly.
Why not assume that the Government is going to act in bad faith?
I think that's a fair presumption.
I think it would unduly expand the immunity provided by the Eleventh Amendment if you could let States structure entities as they pleased which would be totally commercial, and for which they would have no risk at all financially, and still give them immunity.
I think that--
Unknown Speaker: Mr. Gayer, I'd like to know how far your position about a State university goes with respect to insulating the State against any monetary liability for that piece of the university.
Let's take an athletic department, where they sell tickets to the games and there's a big profit-making center for the university, and a spectator at such an event slips and falls, says it's because the stairs were in disrepair, and sues the University of California in Federal court, a diversity case, and the State says, we're the State university.
Under your theory, could the plaintiff prevail by saying, not in this instance, because we've got a money-making venture, and any money that's going to be paid will come out of the profits of that entity?
Mr. Gayer: --Well, it depends on how the entity is structured.
I don't know if this is going beyond Justice Ginsburg's question, but in this particular case we assume the athletic endeavor has no contract with the Department of Energy, and there's no pay directly provision there.
Unknown Speaker: It's just that the State budget is never going to be touched because this is such a profitable department that it pays all its own bills.
Mr. Gayer: Oh, I think that's what happened in Hess, that initially the bi-State entity was receiving something like $100,000 a year from each State, but that was years and years ago and--
Unknown Speaker: It was not an entity of any single State.
I mean, it was a totally different situation.
Mr. Gayer: --But according to the dissent in Hess the same test applies.
Unknown Speaker: But, Mr.--
--You stand squarely with the dissent in Hess.
Mr. Gayer: I stand squarely with the entire decision in Hess.
Unknown Speaker: But it is--
Mr. Gayer: I'm trying to harmonize--
Unknown Speaker: --You must admit it's rather peculiar to do what you did in your brief.
That is, to take the essence of what the majority held from a statement in the dissenting opinion.
Mr. Gayer: --No, I'm trying to harmonize--
Unknown Speaker: It is rather unusual.
Mr. Gayer: --Because we... in our proposed test the first thing you look at is the impact on the S-t-a-t-e treasury.
Unknown Speaker: You don't agree that, in general, to find out what the majority opinion says one looks to the majority opinion rather than the dissent?
Mr. Gayer: It sounds like a good idea, Your Honor.
Unknown Speaker: Occasionally.
Mr. Gayer: And that's why in our proposed test we say first you look to the State treasury factor as the majority did in Hess.
If that's dispositive of the case, that's the end of the inquiry.
Unknown Speaker: The majority did not do that first.
The first thing the majority said is, this is a creature of three sovereigns.
One of them is the U.S. Government.
Mr. Gayer: In any event, as Your Honor pointed out, the respondents do rely on Hess, where it said that the twin reasons for being of the Eleventh Amendment are State treasury and dignity, and we take the State treasury factor, very important here.
That's why we're here.
If the State treasury factor wasn't here we couldn't argue about the pay directly provision.
Unknown Speaker: You say, but you don't take the dignity factor.
Mr. Gayer: Well, yes, we do, because here we claim that the attorneys for the Regents corporation in submitting for 1 year to discovery, taking depositions, submitting to depositions, answering interrogatories, responding to requests for production of evidence, has diluted its dignitary interest, has said, in effect--
Unknown Speaker: Oh, so dignitary interest is one that's... that you waive.
Without waiving the... you can sort of back into waiving the Eleventh Amendment?
Mr. Gayer: --No.
Well, you weaken your Eleventh Amendment claim if you act as though you don't mind being coerced by the discovery power of the court not--
Unknown Speaker: But you don't have any ready appeal from a discovery order pretrial.
I mean, a discovery order isn't appealable as a matter of right.
Mr. Gayer: --Mr. Chief Justice, that's true, but here the petitioners cooperated with discovery.
They didn't say, we have an Eleventh Amendment dignitary interest and therefore we're not going to respond to your discovery on the merits.
They just went along as if it were ordinary litigation.
Unknown Speaker: Isn't that just one form of good lawyering?
You don't have any right to appeal the... either your order to discover, or the discovery order makes... the discovery request is reasonable.
You raise what you can at a different time.
Mr. Gayer: With due respect, Your Honor, it's our position that if a purported Eleventh Amendment entity takes its Eleventh Amendment immunity seriously, especially its dignitary interest, that the first thing it will do is move to dismiss based on the Eleventh Amendment.
It won't play around with litigation for a year.
The... it's also our position that each case, especially since the Eleventh Amendment immunity issue can be raised sua sponte by any court at any time, that any time a court, especially the Supreme Court, considers an Eleventh Amendment case, it will look at the whole picture, and so whether or not, of course, the university has been held to be an arm of the State in other contexts in other cases that were not in this Court doesn't really matter.
It's certainly not determinative or dispositive or anything.
I think that each case, as the Ninth Circuit did, looks at the facts, looks at the law as presented by the plaintiffs.
In our proposed procedure, we suggest that the plaintiff had the burden of inducing facts and law that shows that the purported... that the State entity is not a State agency, that is to say, is not an arm, therefore doesn't deserve Eleventh Amendment protection.
Otherwise, you run the risk of undue expansion of Eleventh Amendment immunity, and anything that says "of California" is immune, and that's the end of it.
Now, Justice Ginsburg, I was thinking of something about insulating treasuries, and in this case the State law of California does insulate the State treasury from the Regents.
Under State of California law, a judgment against the Regents can be executed only against the treasury of the Regents.
There is no claim against the very separate and probably larger State treasury.
That applies under all circumstances.
So it's our position that even absent the pay directly provision in the contract, that the State treasury... as opposed to the Regents' treasury, the State treasury has no risk at all in any case, and that's--
Unknown Speaker: So a State university is not an arm of any State if that university has a budget that's discrete and pays all its expenses out of that.
That's the end of a State university being an arm of the State.
Mr. Gayer: --A State... a treasury, a treasury that's independent and wherein the university or college has no claim against the treasury of the State itself.
In other words, here, the Regents' treasury has a lot of money in it.
I think according to a footnote in the reply brief something... in one particular year, $10 billion.
Now, in that year, $2.2 billion came in the form of a block grant from the State.
The legislature made an appropriation to give the money to the Regents to use for any lawful purpose.
After that, the State lets go.
The legislature lets go, and the Regents must make do with whatever money they can get, and most of their money comes from outside the State, but the point is that a judgment creditor of the Regents has no claim against the State treasury, ever, and that's why I think this case--
Unknown Speaker: Well, do I understand that the question that's before us is, even if the university would otherwise be a State agency, it isn't when this particular liability is covered in full by a third party?
Mr. Gayer: --Yes.
I think we've addressed that fully in the briefs, and perhaps this morning.
That's true, but I think in order to do a thorough, complete, and meaningful job this Court might consider the general question, otherwise the courts below are still having to wonder about this fundamental issue, and one can assume arguendo so many things that there's nothing left to argue about.
Unknown Speaker: Well, perhaps there would be a problem of parties who are not before us.
There must be many State universities that are patterned the same way, intended to have a large budget and to pay their expenses out of that.
Mr. Gayer: My research, although not complete, says the answer to that question, Your Honor, is no, that those cases I have read... for instance, the Rutledge case, Rutledge v. the Regents of the University of Arizona, another Ninth Circuit case, held that there, there is control by the legislature.
Unknown Speaker: But now, you haven't been talking about control.
You've been talking about does... the university has to operate out of a special budget for it with no call on other State funds.
Mr. Gayer: Well, the point I'm trying to make is that in the Rutledge case the Ninth Circuit held that the Regents there were very different, and they were not separate and independent and autonomous, whereas in the instant case the Regents are very separate, very independent, and very autonomous of any control by the elected branches of State government.
Unknown Speaker: May I... I'd like to make sure I understand one part of your argument.
The court of appeals applied this five-factor test, the first factor whether this money judgment would be satisfied out of State funds, and they said it would not be because of the indemnity agreement.
You are arguing, if I understand you correctly, that even without the indemnity agreement, the judgment would not have been satisfied out of State funds.
Mr. Gayer: That's correct, Your Honor.
It says I could have done a better job in the Ninth Circuit.
Unknown Speaker: And... but... so we're not... what's... we're only addressing the indemnity question, or are we supposed to decide the whole case?
I'm still a little puzzled about that.
Mr. Gayer: Well--
Unknown Speaker: Because this focuses on... everything focuses on point 1 in their five-factor test.
Mr. Gayer: --That's correct.
Unknown Speaker: Does your opponent agree that it would not be satisfied out of State funds even without the indemnity agreement?
Mr. Gayer: I don't think so.
Unknown Speaker: Oh.
Mr. Gayer: I don't think so, but Your Honor, to respond to your question, I'm not an expert on this Court's Rule 14.1, but I believe that the general question of the Regents' overall immunity is subsumed within the question presented.
If I'm wrong, I'm sure Your Honors will tell me.
Unknown Speaker: Well, subsumed generally means a smaller question included in a larger question.
What you're saying is that a larger question is included in a smaller question, which is quite different.
Mr. Gayer: Well, as I say, I'm here to please the Court--
--and if that doesn't do so, I'll just move on.
I think the point made by the Ninth Circuit in its conclusion is really important.
Certainly under its decision the Regents corporation would lose very little.
They would still retain all the immunity they have in Justice Ginsburg's athletic event question, and any... certainly anything related to their universities which provide higher education.
They... the only thing they would lose, so to speak, is immunity if they're sued in the operation of the laboratory, wherein the owner of the laboratory will pay directly any judgment.
That's really no loss, because it's not the university's operation.
It's really the Department of Energy's operation.
It's their facilities, their building, their ground, everything, and so that there is really no impact at all.
Unknown Speaker: Excuse me for being so slow to grasp this, but in the dissenting opinion the judge... dissenting judge said, no one has disputed that a judgment against the University of California is a legal obligation of the State of California.
Is that a correct statement of the case?
Mr. Gayer: Well, as, of course, it wasn't disputed, it wasn't even mentioned.
There was no... no argument.
Unknown Speaker: But did you argue in the court below that even without the indemnity agreement the judgment could not have been satisfied out of State funds?
Mr. Gayer: Unfortunately, no.
I was, shall we say... I won't use the dirty word, but that was an omission on my part.
Unknown Speaker: Well, you... it wasn't such a... I mean, it was an understandable omission, inasmuch as the Ninth Circuit had held in a number of cases that the State universities were, indeed, the State for purposes of sovereign immunity, haven't they?
Mr. Gayer: But those cases are built, I submit, on a foundation of sand.
Unknown Speaker: I understand, but you didn't want to antagonize the district court and the court of appeals.
You were there to please them, just as you're here to please us--
--and they wouldn't have been pleased at your calling their whole circuit law into question.
Mr. Gayer: --Well, the point is there the issue wasn't fully litigated, and one of the cases, the Jackson v. Hayakawa, the Regents corporation was not even a party.
The other cases, BV Engineering, Armstrong v. Meyers, and the Mascheroni case out of the Tenth Circuit, all those cases simply cited either Jackson v. Hayakawa, where the--
Unknown Speaker: Yes, but Mr. Gayer, if you did not call into question... I don't think your job is to please the court.
Your job is to represent your client, and if, on behalf of your client, you did not challenge a line of authority in the Ninth Circuit, I'm not sure you can challenge it for the first time up here, despite everybody else's saying how important it is to be friendly to the Court.
Mr. Gayer: --Well, I... if I'm wrong, Your Honor, I apologize, but I don't think this Court is bound by any decision of the Ninth Circuit or the Tenth Circuit, and if they were wrong, they were wrong.
They can't be reversed, I guess, without--
Unknown Speaker: Mr. Gayer, this is the point, that we review rulings that have been made by a court below.
We don't make rulings here in the first place, and you are asking us to decide something as though we were a... the court getting this in the first instance, and that is not what we do.
Mr. Gayer: --Well, that being the case, Your Honor, then I think the safest and most appropriate thing to do is simply affirm the judgment of the Ninth Circuit and let us proceed.
That... because that does apply the five factor test.
It's not contrary to anything in Hess, since it focused almost entirely on the impact of the State treasury, and it has minimal policy impact on the immunity generally of the Regents corporation.
Unknown Speaker: Are you suggesting that if we are of the view that whatever this arm is or is not should not be affected by whether they've got insurance from the Government or somebody else that covers this particular risk, this particular liability, as even if we think that we should nonetheless affirm because the Ninth Circuit used a five-factor test and we have nothing to say about those other factors?
Mr. Gayer: Oh, sure, this Court has everything to say about the other factors, but it's my position that the Ninth Circuit applied the factors correctly and did nothing contrary to this Court's decision in Hess or any other decision of this Court.
The Ninth Circuit properly distinguished these other opinions, of which I disapprove, and said on the facts of this case there's no possible, conceivable impact on a State treasury, and Justice Canby in his dissent got it wrong.
He assumed something that had not been argued at all.
Neither side said anything about who would actually bear the burden of the judgment, and he just assumed that the State would do it.
That was incorrect--
Unknown Speaker: Are you saying--
Mr. Gayer: --and once you assume that it's all over.
Unknown Speaker: --Are you saying it would be irrelevant to the Ninth Circuit where we would say, we think you were wrong, we are telling you you were wrong in one particular, it's not relevant whether there was indemnity for this liability, what's relevant is who has the legal liability?
If we were to say that, do you think that would be... wouldn't make any difference in how the Ninth Circuit came out?
Mr. Gayer: If I understand the question, Your Honor, it's my position that since the State of California has no legal liability in this case, that the result would be the same.
Now, I've also... I've been lectured by Mr. Chief Justice that that may not be within the question presented, and I'll have to accept that, but it's still our position, as I stated, that Judge Canby is wrong when he said the State is legally liable.
That's simply wrong as a matter of California State law.
Unknown Speaker: Which is a determination you're asking us to make in the first instance.
Mr. Gayer: Excuse me, Your Honor?
Unknown Speaker: You're asking us to make that determination in the first instance, because it certainly wasn't made by the Ninth Circuit or the district court.
Mr. Gayer: Yes.
I think the answer is yes, because I think that would be the best way to give guidance to the courts below and to attorneys who might bring a suit against some purported, or... some purported arm of the State.
Unknown Speaker: Of course, you say--
Mr. Gayer: It would be very helpful.
Unknown Speaker: --You say it's wrong as a matter of State law.
That's... that makes the further assumption that the treasury of the Regents of the University of California is not part of the State, and I'm sure the counsel for the appellants are going to tell us that the whole purpose of the very substantial separation that the California constitution decrees for the university is to clothe it with attributes of sovereignty and to make sure that it is an instrumentality of the State, actually separate from the legislative and executive branches.
Mr. Gayer: But if--
Unknown Speaker: So to say that it's not part of the State's liability in a way elides the question, because the treasury of the University of California are State funds in one sense--
Mr. Gayer: --Well--
Unknown Speaker: --and in a very important sense.
Mr. Gayer: --Well, Justice Kennedy, my reading of State law is that the Regents funds are not State funds in that they're not under the control of the legislature or the Governor or any other part of the executive branch.
Unknown Speaker: But they're in control of another State entity which has to... which happens to be the Regents of the University of California.
Mr. Gayer: And that State entity is not an arm of the State.
It's a separate and independent public corporation established to manage the University of California and free to engage in other businesses, such as running a hospital for which it charges the market rates for services, and for managing the Lawrence Livermore National Laboratory.
Of course it's a State entity, but it's very independent, and it's treasury is separate and apart from the State treasury, and the Regents have no claims at all to anything in the State treasury.
They get a block grant from the State, from the State legislature once a year, and that's it.
If there are no further questions, thank you very much.
Unknown Speaker: Thank you, Mr. Gayer.
Mr. Miller, you have 4 minutes remaining.
Mr. Gayer: Thank you, Mr. Chief Justice.
I'd like to begin by referring to this... I don't mean to be... try to inject too much levity, but the foundation of sand.
The foundation of sand starts here, because the ultimate foundation is the Hamilton v. Board of Regents case in 293 U.S., where this Court determined, based upon a study of the California constitution and statutes, that the university and its Regents were the State, and in fact that its orders, the orders of the Board of Regents, were equivalent to state statutes, would be deemed the same for purposes of that case.
Now, that wasn't an Eleventh Amendment case, but I do think it's an important decision that was built upon in the decisions of the district courts and in the Ninth Circuit court that have held repeatedly that the university is an arm of the State.
The decision in the Vaughn case which is cited in our brief, a district court case, is the case in which the factors were reviewed and then, in the various Ninth Circuit cases, Vaughn and other cases subsequent to Vaughn were referred to and relied upon as precedent.
The fact that the university is an arm of the State is now beyond serious debate as far as the Ninth Circuit's concerned as a general proposition, and it ultimately rests on the decision of this Court in Hamilton.
That leads me to the next point, which is the contention that the university is separate from the State because the State is not responsible for its debts.
Justice Kennedy, you anticipated our point on this.
The treasury of the Regents is very much a State fund, and all of the attributes of sovereignty that are given to the Regents in the California constitution and statutes are designed to assure that the Regents would be treated as a branch of State government, albeit independent of political control, for the very important reasons of academic freedom and independence of education that animated the founders of the State back in the middle 19th Century.
Notwithstanding that, the constitution of California, Article XVI, section 8, provides a very special provision for any obligations of State universities.
It states as follows, that all... from all State revenues there shall first be set apart the moneys to be applied by the State for the support of the public school system and public institutions of higher education.
We referred to that in our brief, and pointed out that that gives in effect a first charge on the revenues of the State to satisfy the obligations of the university.
The manner in which that is done is the same manner in which the Congress funds Federal agencies, by appropriation, and no doubt until the appropriation is made a debt can't be paid if the Regents don't have otherwise sufficient funds, but in the end, the legislature is responsible, by constitutional provision, to meet the obligations of the university, and in that additional way ties the university tightly to the State of which it is a part and an arm, if not a branch.
I want to make just one other point, and that is that the relief in this case seeks not only damages against the university, but also hiring of the plaintiff.
He calls it reinstatement.
He never was instated in the first place, so it's really instatement.
One of the... he asks for specific performance of the alleged contract, and he asks that in any event that he be hired by the university, or at the very least that his application for employment be reconsidered.
Each of those forms of relief, if granted, would work--
Chief Justice Rehnquist: Thank you, Mr. Miller.
The case is submitted.