CLAY, J., delivered the opinion of the court, in which GWIN, D.J., joined. SUHRHEINRICH, J. (pp. 394-405), delivered a separate dissenting opinion.
CLAY, Circuit Judge.
Plaintiffs, J. Richard Ernst, William T. Ervin, James E. Wilson, and John Patrick O'Brien, appeal from the order issued by the United States District Court for the Eastern District of Michigan, entered on September 30, 2002, granting the motion to dismiss of Defendants (Treasurer of the State of Michigan Douglas B. Roberts and affiliated parties), declining to exercise supplemental jurisdiction over Plaintiffs' state law claims, and denying as moot Defendants' motion for abstention or, alternatively, for a stay of proceedings, and Plaintiffs' motion to strike an affidavit, in this action under 42 U.S.C. § 1983, challenging the Michigan Judges Retirement Act of 1992, Mich. Comp. Laws § 38.2101 et seq., as violating the United States and Michigan Constitutions and also asserting state law claims for wasting trust and breach of fiduciary duty. For the reasons set forth below, we
On September 5, 2001, Plaintiffs filed a complaint, in which they alleged that the Michigan Judges Retirement Act of 1992, Mich. Comp. Laws § 38.2101 et seq., violates the Equal Protection Clauses of the United States and Michigan Constitutions and various provisions of state law. The complaint set forth ten counts. The initial eight counts of Plaintiffs' complaint alleged four separate theories of violation of equal protection. For each theory of the complaint, one count is devoted to federal law and another to state law. The final two counts of the complaint alleged violations of state law not related to equal protection, namely, wasting trust and breach of fiduciary duty.
Plaintiffs sought various forms of relief. Plaintiffs sought certification of the action as a class action pursuant to Fed.R.Civ.P. 23. Plaintiffs also sought restitution in the form of monetary awards. Additionally, Plaintiffs sought declaratory and injunctive relief, to alter the retirement system's functioning, for the purpose of bringing it into compliance with the laws whose violation Plaintiffs alleged.
The federal law counts relied upon 42 U.S.C. § 1983 as the basis for pleading the liability of Defendants (the Treasurer of the State of Michigan and affiliated parties), all of whom are government officials. On December 7, 2001, Defendants filed a Motion for Abstention or, Alternatively, for a Stay in the Proceedings. On December 18, 2001, Defendants filed a Motion to Dismiss or, in the Alternative, for Summary Judgment. On February 8, 2002, Plaintiffs filed a Motion to Strike the Affidavit of Daniel A. Norberg. On March 20, 2002, the district court held a hearing on Plaintiffs' motion to strike, Defendants' motions to dismiss or for summary judgment, and Defendants' motion for abstention or for a stay of proceedings.
On September 30, 2002, the district court entered an opinion and order, granting
The district court stated the background facts that gave rise to this case as follows:
The defendants are:
Ernst v. Roberts, 225 F.Supp.2d at 783-84. More of a factual background is not needed, for purposes of this opinion, because the district court never reached the merits. As explained below, the district court's dismissal of the federal claims under the Eleventh Amendment constituted a dismissal for lack of jurisdiction.
Plaintiffs make four arguments. First, Plaintiffs claim that the district court erred in dismissing the federal claims on the basis of Eleventh Amendment immunity. Secondly, Plaintiffs argue that even if, arguendo, the federal claims were properly dismissed due to Eleventh Amendment immunity, the district court erred in dismissing the claims with prejudice. Thirdly, Plaintiffs aver that the district court erred by granting Defendants' motion to dismiss without identifying the precise rule upon which it relied and by ruling without affording Plaintiffs discovery regarding the Eleventh Amendment immunity defense. Finally, Plaintiffs argue that if Defendants are not entitled to Eleventh Amendment immunity, then the district court should be required to revisit the issue of assuming supplemental jurisdiction over Plaintiffs' state law claims.
Because we rule that Defendants are not entitled to Eleventh Amendment immunity on any of the claims, we decline to address Plaintiffs' second argument. We take the remaining three issues in order.
The first two issues that we address are reviewed de novo, because these issues address the ruling on Eleventh Amendment immunity. Barton v. Summers, 293 F.3d 944, 948 (6th Cir.2002).
Eleventh Amendment immunity bars federal courts from exercising jurisdiction
Plaintiffs argue that Eleventh Amendment immunity does not bar the federal claims in this case. The Eleventh Amendment bars suits against a state by citizens of another state, and, under Hans
When a state or an arm of the state is sued, there are various exceptions to immunity;
Under Ex Parte Young, there is no immunity for a claim for only prospective, non-monetary relief. See supra note 8. Various federal claims in this case clearly seek monetary relief, including the refund and payment of portions of Plaintiffs' contributions to the JRS. Because we hold that none of the claims for monetary relief are covered by Eleventh Amendment immunity, we need not reach the issue of whether there are any federal claims seeking only prospective, non-monetary relief. The dissent has gone to great pains to emphasize that monetary relief is sought. But, as explained below, the question of Eleventh Amendment immunity hinges on whether or not the state would potentially be liable for a judgment in the case; hence, the fact that monetary relief is sought is not determinative — rather, the key question is where the monetary relief would come from, if a judgment were entered. (The dissent rightfully acknowledges this point, stating, "To rephrase the issue a bit: by providing the requested relief, would we be ordering prospective injunctive relief, or monetary damages? And if the latter, where would the money come from?")
The dispute as to jurisdiction in the present case arises due to the fact that the Eleventh Amendment does not bar all suits against non-federal public agencies. The Eleventh Amendment does not apply to political subdivisions, such as municipalities. Monell v. Dep't of Soc. Servs., 436 U.S. 658, 691, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978). As stated in Hall v. Medical College of Ohio,
742 F.2d 299, 301 (6th Cir.1984) (citing Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 280, 97 S.Ct. 568, 50 L.Ed.2d 471 (1977)). The question before us is whether the JRS is identifiable as an arm or alter ego of the state, as is necessary for the JRS and its agents
State law is crucial to the analysis, because state law defines the nature of agencies. In Mount Healthy City School District Board of Education v. Doyle, the Supreme Court made clear that state law plays a role in determining whether an agency is more akin to a municipality or to an arm of the state:
429 U.S. 274, 280, 97 S.Ct. 568, 50 L.Ed.2d 471 (1977), superseded on other grounds by statute, by 5 U.S.C. § 1221(e)(2). In accordance with this principle, in Blake v. Kline, 612 F.2d 718 (3d Cir.1979), state law was vital to the analysis of a state treasury's potential legal liability. The Third Circuit stated that once Pennsylvania made a contribution to a retirement plan, the funds contributed might no longer be general state funds, under Pennsylvania law. Id. at 724, 728 (remanding for further inquiry into state law).
Citing Blake, this Court determined that Eleventh Amendment immunity barred suit against the Medical College of Ohio at Toledo ("MCO"), in part due to the definition of this entity under state law; in explaining the decision, this Court explicitly emphasized the importance of state law, which can be controlling, in Eleventh Amendment analysis:
Hall, 742 F.2d at 303-04. The law of this Circuit is so clear in emphasizing the importance of state law in questions of Eleventh Amendment immunity that another circuit has cited our Circuit on this issue. Jacintoport Corp. v. Greater Baton Rouge Port Comm'n, 762 F.2d 435, 439 (5th Cir.1985) ("the ... Sixth Circuit[ ] ha[s] held that although the question of Eleventh Amendment immunity is a matter of federal law, state decisions concerning the relationship of the entity to the state may be an important, and under certain circumstances a controlling factor in determining immunity under the Eleventh Amendment.") (citing Hall, 742 F.2d at 302; internal quotation marks omitted).
The dissent misconstrues the law, here, by failing to recognize the significant role that state law plays in the analysis. The dissent states, "If the state treasury is immune from liability ..., it is because of the Eleventh Amendment and not Article IX, § 24 of the Michigan Constitution or the Musselman decision." Apparently, in the dissent's view, the Eleventh Amendment provides this Court the basis for determining whether a non-federal public agency is akin to an arm of a state or is akin to a municipality. The dissent would have us consult the Eleventh Amendment to determine whether or not the Michigan state treasury could potentially be held liable for a judgment against the JRS. This reasoning overlooks this Court's pronouncement that in employing Eleventh Amendment analysis to determine whether an entity is akin to an arm of the state or is akin to a municipality, state statutes and state court decisions "are important, and potentially controlling." Hall, 742 F.2d at 303-04.
The general question of how to characterize a non-federal public entity has not been left to federal courts' whim or intuition. Rather, under established case law, in Eleventh Amendment analysis, the question of whether a public entity is best characterized as an arm or alter ego of the state, instead of being deemed a political subdivision of the state, hinges on whether there is potential legal liability of the state treasury to satisfy a judgment. If a claim against a public agency exposes the state treasury to potential legal liability, then Eleventh Amendment immunity bars the claim from being heard in federal court; if there is no such potential liability, then there is no immunity. Regents of the Univ. of Cal. v. Doe, 519 U.S. 425, 431, 117 S.Ct. 900, 137 L.Ed.2d 55 (1997) ("[I]t is the [state] entity's potential legal liability for judgments, rather than its ability or inability to require a third party to reimburse it, or to discharge the liability in the first instance, that is relevant in determining the underlying Eleventh Amendment question."); Dubuc v. Mich. Bd. of Law Exam'rs, 342 F.3d 610, 615 (6th Cir.2003) ("To determine whether an entity is a state department or agency for purposes of the Eleventh Amendment, the primary issue is whether the state would ultimately be liable for any money judgment against the entity. Brotherton v. Cleveland, 173 F.3d 552, 560-61 (6th Cir.1999)."); Brotherton v. Cleveland, 173 F.3d 552, 561 (6th Cir.1999) ("The Hess [v. Port Auth.
Prior to Hess v. Port Authority Trans-Hudson Corp., 513 U.S. 30, 51, 115 S.Ct. 394, 130 L.Ed.2d 245 (1994), potential state treasury liability was only one of a number of factors in the Eleventh Amendment analysis. The other factors included the entity's status under state law; whether the entity performs a governmental or proprietary function; whether the entity has been separately incorporated; the degree of autonomy that the entity exercises over its own operations; whether the entity can sue or be sued and enter into contracts; immunity from state taxation; and whether the sovereign has immunized itself from responsibility for the entity's operations. Hall, 742 F.2d at 302 (quoting Blake v. Kline).
But Hess enhanced the importance of state treasury liability, to the extent that, after Hess, the possibility arose that other factors (aside from state treasury liability) can no longer be considered at all. In Brotherton v. Cleveland, we were able to reach a ruling without determining whether Hess had eliminated any consideration of the other factors, and we explicitly left this question unresolved. 173 F.3d at 561 ("Whether we view as dispositive Hess's emphasis on the State treasury, or interpret it as placing significant weight on one factor of a multi-factor test, we conclude that EBAA may not properly invoke the Eleventh Amendment.") (citation omitted).
In Dubuc, we dealt with the question of whether the other factors (aside from state treasury liability) survived Hess in any form. We ruled that when no evidence is presented regarding the issue of whether the funds to satisfy a judgment would come from the state treasury, the other factors may be considered. 342 F.3d at 615 ("The parties have not submitted any evidence regarding whether the State of Michigan would be ultimately responsible for any money judgment against the Board or the Bar. The other factors, however, weigh in favor of finding the Board and the Bar immune from this lawsuit."). However, in Dubuc and in Alkire v. Irving, 330 F.3d 802 (6th Cir.2003), we reiterated our statement from Brotherton that, after Hess, it is unclear whether other factors may even be considered when evidence is presented regarding the whether the state treasury would be liable for a judgment. Dubuc, 342 F.3d at 615 (citing Brotherton); Alkire, 330 F.3d at 811-12 (citing Brotherton).
Our cases uniformly make clear that, even if the other factors can be considered, still, the most significant factor is potential liability of the state treasury. Alkire, 330 F.3d at 811 ("we now recognize that the question of who pays a damage judgment against an entity as the most important factor in arm-of-the-state analysis, though it is unclear whether it is the only factor or merely the principal one.") (citing Brotherton).
In light of the statements in Brotherton, Alkire, and Dubuc, indicating that Hess may have completely eliminated any consideration of the other factors, we reiterate the position taken in those cases: potential liability of the state treasury is the most important factor, and the other factors may have been rendered completely obsolete by Hess. This could mean that the other factors are of no significance, unless
But we need not determine which interpretation of the role of the other factors is correct, because in the present case it is undisputed that there is sufficient evidence and legal authority to support a conclusion as to state treasury liability,
To be sure, certain of the remaining factors favor the view of the JRS as an arm of the state; for example, it is undisputed that the JRS is not separately incorporated. But we express no definitive view as to the remaining other factors, because, even if they all weighed in favor of Defendants' position, they would not be sufficient to change the analysis. In light of the numerous factors enumerated above, which indicate that the JRS is akin to a municipality, and in light of our analysis of potential state treasury liability below, reaching the same conclusion, the other remaining factors could not possibly sway our conclusion that there is no Eleventh Amendment immunity.
Thus, we proceed to the analysis of the key factor, potential legal liability of the state treasury for a judgement. Theoretically, there are two ways in which potential legal liability for a judgment against the JRS might reach state treasury funds. First, JRS funds might be commingled with general state funds — which is to say that JRS funds might be available for general use by the state for other purposes, unrelated to the retirement system. If funds are commingled, then any JRS liability would be tantamount to state treasury liability. Secondly, even if JRS funds are segregated from state treasury funds, the JRS might not have sufficient funds to satisfy a judgment; applicable state law could make state treasury funds available to satisfy the part of the judgment that exceeded the amount of funds available to the JRS. We examine both possibilities.
A. Whether JRS Funds Are Segregated from State Treasury Funds
The first question is whether JRS funds are commingled with general state funds. If the JRS's funds are not separate from the state treasury, then any judgment against the JRS would necessarily impose liability on the state treasury.
Defendants argue that Michigan law makes retirement funds general state funds. Defendants cite the Michigan Constitution, Art. IX, § 19, which specifies, "The state shall not subscribe to, nor be interested in the stock of any company, association or corporation, except as follows: (A) Funds accumulated to provide retirement or pension benefits for public officials and employees may be invested as provided by law." Defendants argue, "If the retirement funds were not considered State funds, there would be no need for the framers to carve out this exception." (Defendants' Br. at 20 n. 9.) However, this argument is one of semantics. The use of the term "state" in Art. IX, § 19 of the Michigan Constitution does not establish that JRS funds are state funds, under Eleventh Amendment analysis. Eleventh Amendment analysis hinges upon potential state treasury liability — Defendants' argument here does not bear on this issue.
Other sources of law make clear that JRS funds are segregated from the state treasury. This means that relief for Plaintiffs' claims would not come from general state funds but, rather, from the trust devoted solely to the JRS. As stated in mich. Comp. Laws § 38.2604(6):
See also mich. Comp. Laws § 38.2208 (stating that retirement payments are "payable out of funds of the retirement system").
It is true that some of the funds in the JRS are contributed by the state. Part of the JRS comes from contributions from the public employees themselves (such as Plaintiffs). As Plaintiffs state, "Any judgment for Plaintiffs ... might require a refund to Plaintiffs of contributions illegally extracted from them...." (Plaintiffs' Br. at 23.) The remainder of the JRS comes from annual state contributions, under mich. Comp. Laws § 38.2302. See Ernst v. Roberts, 225 F.Supp.2d at 789 ("Part of the relief plaintiffs are seeking in this case is a refund of the allegedly overfunded Tier 1 plan which, they concede, includes `the State's mandatory contribution to the Tier 1 Plan.'") (emphasis added).
However, the dissent mischaracterizes the significance of the state contributions to the JRS, under mich. Comp. Laws § 38.2302. The presence of funds contributed by the state is simply the scenario described in Blake — after the state funds are contributed to the retirement plan, "that money loses its identity as [general state] funds and becomes trusteed funds earmarked for a particular purpose." 612 F.2d at 724. State law specifies with clarity
Indeed, not only is state law clear on this matter; also, the record before us helps to confirm our conclusion. The JRS makes arms length payments to the state, for office rental space and services rendered.
B. Whether State Treasury Funds Might Be Called Upon, if the JRS Lacked Sufficient Funds to Satisfy a Judgment
Even where, as here, the agency's funds are segregated from the state treasury, there remains the possibility that a monetary judgment would exceed the current amount of funds held by the agency and that such a judgment could reach the state treasury. We must determine whether, under state law, if there were a judgment
In determining "potential legal liability," we do not consider the actual level of funding of the JRS. It is irrelevant whether the JRS actually has enough funds to satisfy the amount sought in any judgment. Brotherton, 173 F.3d at 561 ("The Hess opinion focused on the impact on a State treasury, and [Regents of the University of California v.] Doe slightly altered that emphasis by establishing that potential liability, not actual ability to pay or indemnification, determines the Eleventh Amendment status of an entity. See Doe, 117 S.Ct. at 904-05.") (emphasis added). Rather, the relevant question is whether the state could be legally obligated to pay part of a judgment, under the hypothetical scenario in which the funds of the separate agency (in this case, the JRS) were not sufficient to satisfy the judgment. For the purposes of this hypothetical inquiry, we must assume that the amount of liability imposed by a judgment would exceed the agency's current level of funds; we then ask whether the state treasury could be held liable for the remainder of the judgment. If, under our hypothetical inquiry, the state treasury could be liable for a judgment on a claim, then that claim is barred by Eleventh Amendment immunity — there is potential legal liability, notwithstanding that the probability of the state treasury being forced to actually pay part of a judgment may be quite low.
Defendants allege that a legal obligation, creating state treasury liability, arises from Art. IX, § 24 of the Michigan Constitution, which states:
Yet there is no potential legal liability of the state treasury if there cannot be a legal action to compel the state to divert funds from the state treasury to satisfy a judgment that exceeds the JRS's funds. Legal liability exists only when some legal action can be brought to enforce a legal duty.
533 N.W.2d at 245-46, 448 Mich. at 522-23 (footnotes and internal quotation marks and brackets omitted).
The Supreme Court of Michigan explained that the purpose of Art. IX, § 24 was to prevent the legislature from borrowing from the accrued assets of plan participants. 533 N.W.2d at 241-42, 448 Mich. at 511-12. Such borrowing, or "back door" spending, as it was called, could create situations in which the liabilities of a public retirement system far surpassed the system's assets. Id. Yet even where this purpose was being circumvented — as in Musselman, where current health care benefits were not being funded — the legislature could not be legally compelled to devote state treasury funds to fund the benefits. 533 N.W.2d at 242, 448 Mich. at 522 ("the drafters of art 9, § 24 ... did not contemplate that the prefunding requirement could be enforced by a court."). The state treasury cannot be held legally liable, even where the very purpose of Art. IX, § 24 is at stake.
Under Musselman, a legal action cannot be maintained in state court, in Michigan, to compel the state to devote state treasury funds to fulfill the mandate of Art. IX, § 24. Nor could Art. IX, § 24 provide the basis for any subsequent legal action in federal court to compel state treasury funds to be devoted to fulfilling a judgment in a lawsuit. As stated in Musselman,
In a legal action, rights and remedies are separate elements.
Absent the Musselman case, it might have been argued that the state treasury could have been held liable pursuant to Art. IX, § 24. Governmental actors have been held liable for damages based on rights granted in a constitution, even where no statute explicitly authorizes such damages. See Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971) (establishing monetary liability of federal officials for violations of the Fourth Amendment
The dissent's counter-arguments prove unpersuasive. The dissent states that "any funding requirement, even if it must be honored by the legislature and not ordered by a court, will necessarily impact on the state treasury." However, an "impact" on the state treasury — resulting from the legislature's voluntary decision to appropriate funds to make up for a possible depletion in an agency's funds — is not akin to "liability." The cases cited by the dissent in support of its proposition
The dissent states that the majority's "reasoning is faulty because a state's exercise of state sovereign immunity does not control the question of federal constitutional immunity." Indeed, the dissent repeatedly characterizes Michigan as exercising "state sovereign immunity." However, the dissent is mistaken, here. The state has not immunized the JRS from suit in state court; to the contrary, the JRS has been named as the defendant in an action in state court that was adjudicated on the merits. See supra note 13. Nor does it appear that there would be state court immunity for any of the state
The Musselman case had nothing to do with state court immunity. Immunity is a defense, where a suit could otherwise be brought (absent the immunity). E.g., Cartwright v. City of Marine City, 336 F.3d 487, 490 (6th Cir.2003) ("Qualified immunity is an affirmative defense shielding governmental officials from liability as long as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known.") (citation and internal quotation marks omitted); see also supra note 7. Musselman held that there never had been any mechanism for bringing a suit in state court to enforce Art. IX, § 24 against the state treasury. Thus, under Musselman's holding, it would be superfluous, even meaningless, to speak of immunizing the state treasury from suit in state court to enforce Art. IX, § 24. Immunity applies as a defense only where, contrary to the situation here, there is an existing means for bringing a suit.
Nothing in our ruling would prevent a state from exercising state sovereign immunity for its agencies. The state could prohibit suit in state court against any of its agencies. Where a judgment against an agency would potentially impose liability on the state treasury, the agency would be immune from suit in federal court; the agency could also be immune from suit in state court. Where a judgment against an agency could not potentially impose liability on the state treasury, the agency could be immune from suit in state court but not in federal court. Our ruling in no way impedes states from implementing state court immunity for agencies.
The dissent quotes from Dubuc, 342 F.3d at 617, which states, "[w]hile [a provision of the Michigan Supreme Court Rules Concerning the State Bar of Michigan providing the staff of the State Bar and the Board of Law Examiners] may immunize the individual defendants from state law claims, no state law or rule can immunize anyone from liability for violating the United States Constitution." The dissent selectively ignores the phrase "individual defendants." In Dubuc, this Court simply made clear that a state cannot invoke federal immunity for individual state officials who violate the federal constitution, because the act of violating the constitution strips the individuals of their status as state officials:
Dubuc, 342 F.3d at 617. This reasoning is inapposite here, because the state treasury would not be stripped of its public character, if a judgment rendered the JRS liable for violations of the federal constitution. The phrase "individual defendants" is not
Under the dissent's misreading of Dubuc, municipalities would enjoy sovereign immunity: state laws and rules create and define municipalities, but "no state law or rule can immunize anyone from liability for violating the United States Constitution." In essence, the dissent would attempt to contradict the Supreme Court's clear ruling that municipalities are not entitled to sovereign immunity, Monell v. Department of Social Services, 436 U.S. 658, 691, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978), and the Supreme Court's clear ruling that non-federal public agencies are not entitled to immunity if they are akin to municipalities. Mt. Healthy City Sch. Dist. Bd. of Educ., 429 U.S. at 280, 97 S.Ct. 568 ("The issue here thus turns on whether the Mt. Healthy Board of Education is to be treated as an arm of the State partaking of the State's Eleventh Amendment immunity, or is instead to be treated as a municipal corporation or other political subdivision to which the Eleventh Amendment does not extend.").
The dissent misconstrues our ruling as determining that there has been a waiver of Eleventh Amendment immunity: "The majority's unique use of state sovereign immunity doctrine as some kind of implied waiver of constitutional immunity constitutes an impermissible end run around the well-established principles of the Eleventh Amendment." Yet there is no "implied waiver" here. For something to be waived, it must initially have been applicable (prior to the waiver). The majority holds that the JRS never enjoyed immunity, because the JRS is akin to a municipality. The state cannot waive immunity that the JRS never had.
The state does not "waive" immunity by establishing a municipality or a municipality-like agency, in this or any other instance. Municipalities and municipality-like entities never enjoy immunity; these entities are created by state law, but there is no immunity to "waive" for these entities. Under the dissent's bizarre, erroneous use of the term "waive," a state would "waive" its immunity for a city, through the state's act of first establishing the city. The dissent's misunderstanding of the law stems from its unwillingness to accept that state law is a crucial part of defining the nature of a non-federal public entity in Eleventh Amendment analysis. Mt. Healthy City Sch. Dist. Bd. of Educ., 429 U.S. at 280, 97 S.Ct. 568; Hall, 742 F.2d at 303-04; Jacintoport Corp., 762 F.2d at 439; Blake, 612 F.2d at 724.
Finally, the dissent argues that an alternative basis for dismissal exists, because the dissent concludes that Plaintiffs' claims fail on the merits. The district court never ruled on the merits, instead dismissing the case for lack of jurisdiction; thus, ordinarily it would be improper for this Court to issue the initial ruling on Defendants' motion for summary judgment. Moreover, on appeal, neither of the parties has raised the issue of the merits of the claims; rather, the parties' appellate briefs discuss only the issue of jurisdiction. Because the merits of the claims are not argued on appeal, Defendants' motion for summary judgment cannot be addressed by this Court, in the present appeal proceeding. E.g., Kocsis v. Multi-Care Mgmt., 97 F.3d 876, 881 (6th Cir.1996) ("Although plaintiff's notice of appeal indicates that she is appealing the entire district court judgment,
Plaintiffs claim that the district court erred by not identifying the rule it relied upon in dismissing the case and in not affording Plaintiffs discovery regarding the Eleventh Amendment immunity issue. However, here, Plaintiffs fail to assert an additional meritorious basis for relief.
Neither Defendants' motion to dismiss nor the district court's opinion cited a subsection of fed.R.Civ.P. 12(b). Plaintiffs claim that Defendants' motion failed to meet the pleading standard, under fed.R.Civ.P. 7(b)(1) (requiring that a motion "shall state with particularity the grounds therefor"). However, we do not require a citation to a specific subsection of Rule 12, in asserting Eleventh Amendment immunity. In fact, although Eleventh Amendment immunity is a defense to jurisdiction, Defendants and the district court had good reason to avoid citing fed.R.Civ.P. 12(b)(1) (subject matter jurisdiction) or 12(b)(2) (personal jurisdiction): namely, the Supreme Court has dispelled the notion of this immunity as simply an issue of subject matter jurisdiction, without classifying this immunity as entirely an issue of personal jurisdiction. See supra note 4. Defendants and the district court acted properly when they cited the Eleventh Amendment itself as the controlling legal authority — no specific citation to a subsection of Rule 12(b) was necessary.
Additionally, we note that if, arguendo, it were clear which subsection of Rule 12(b) were applicable, then this Court could substitute the proper subsection of Rule 12(b) for an erroneous or incomplete citation by the district court; this is assuming that, contrary to our ruling on issue I, above, Defendants had established Eleventh Amendment immunity.
Since there was sufficient evidence on the record for us to reverse the grant of Eleventh Amendment immunity, we decline to entertain Plaintiffs' argument that the district court erred in failing to grant discovery.
Plaintiffs argue that the district court should be required to revisit the issue of assuming supplemental jurisdiction over Plaintiffs' state law claims if, as we concluded in issue I, above, Defendants are not entitled to Eleventh Amendment immunity on all of the claims.
A district court's decision to decline supplemental jurisdiction over state law claims is reviewed for abuse of discretion. As stated in Musson Theatrical v.
See also Smith v. Dearborn Fin. Servs., Inc., 982 F.2d 976, 983 (6th Cir.1993) ("because the district court properly dismissed plaintiff's federal claims for lack of subject matter jurisdiction, the district court also was within its discretion to dismiss plaintiff's pendent state law claims without prejudice.") (citations omitted).
Under 28 U.S.C. § 1367(c):
The district court concluded that each of these four provisions would provide independent grounds for declining supplemental jurisdiction. Ernst v. Roberts, 225 F.Supp.2d at 790. Because Eleventh Amendment immunity does not apply, the district court erred in stating that § 1367(c)(3) would provide cause for declining supplemental jurisdiction. However, Plaintiffs wrongly identify the district court as relying solely on § 1367(c)(3). Plaintiffs do not challenge the other three independent reasons for declining supplemental jurisdiction. A district court has "broad discretion" in deciding whether to exercise supplemental review. Musson Theatrical, 89 F.3d at 1254. Plaintiffs fail to establish error in any of the district court's three other independent, unchallenged reasons for declining supplemental jurisdiction. Therefore there was no abuse of discretion.
Of course, nothing would prevent the district court from reconsidering its exercise of discretion, on its own volition, in light of our remand of the federal claims. Under 28 U.S.C. 1367(c); the district court has the option of declining supplemental jurisdiction if any one of the provisions apply, but the district court is not bound to decline supplemental jurisdiction merely because one or more provisions apply. By declining to instruct the district court to reconsider the issue of supplemental jurisdiction, in light of our reversal of the dismissal of all federal claims, we in no way impair the district court's discretion to exercise supplemental jurisdiction, notwithstanding the applicability of other provisions of 28 U.S.C. § 1367(c). Indep. Enters. v. Pittsburgh Water & Sewer Auth., 103 F.3d 1165, 1170 n. 3 (3d Cir.1997) ("The district court, having dismissed the federal claims, declined to exercise supplemental jurisdiction over Independent's state claims and dismissed them without prejudice. It may reconsider that decision on remand in light of our disposition
For the aforementioned reasons, we
SUHRHEINRICH, Circuit Judge, dissenting.
I dissent because I believe that the Eleventh Amendment bars all of the claims in this case. Further, the state law claims should have been dismissed under the doctrine of Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984). Finally, to the extent that Plaintiffs have stated a valid federal equal protection claim for prospective injunctive relief, I would dismiss that claim because the state law at issue has a rational basis and is therefore not unconstitutional.
The case before us involves a straightforward application of Eleventh Amendment principles. In Hans v. Louisiana, 134 U.S. 1, 10 S.Ct. 504, 33 L.Ed. 842 (1890), the Supreme Court held that the Eleventh Amendment bars suits against a state by its own citizens. Barton v. Summers, 293 F.3d 944, 948 (6th Cir.2002). Here, the state is not a named party; various state officials are the named defendants. The Eleventh Amendment does not preclude official capacity suits against state officials for injunctive relief. Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908). However, it prohibits a federal court from awarding retroactive monetary relief against state officials when those damages will be paid by the state treasury. See, e.g., Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974); Ford Motor Co. v. Dep't of Treasury, 323 U.S. 459, 65 S.Ct. 347, 89 L.Ed. 389 (1945). In Ford Motor Co., the Supreme Court said: "[W]hen the action is in essence one for the recovery of money from the state, the state is the real, substantial party in interest and is entitled to invoke its sovereign immunity from suit even though individual officials are nominal defendants." Ford Motor Co., 323 U.S. at 464, 65 S.Ct. 347. In short, "[a] federal court may order future compliance by state officials, but it may not compel payment of damages to compensate for past violations." Erwin Chemerinsky, Federal Jurisdiction 425 (4th ed.2003).
So the central question in this case is whether the state is the real, substantial party in interest even though the named defendants are Douglas B. Roberts, Treasurer of the State of Michigan; Christopher DeRose, Director, Department of Management and Budget Office of Retirement Systems; George M. Elworth, Member of the Michigan Judges Retirement Board ("MJRB"); Roy Pentilla, Member of the MJRB; Eric E. Doster, Member of the MJRB; Lyle Van Houten, Member of the MJRB; and Robert Ransom, Member of the MJRB.
To answer these questions, we must examine the nature of the relief sought,
Count III alleges that the Act does not provide for annual percentage increases in the retirement allowance paid under the Tier 1 Plan although certain of the statutes creating the retirement plans of other state and governmental employees provide for an annual percentage increase in the retirement allowance paid. Count V challenges the constitutionality of the Act because it prescribes the calculation of the retirement account value of the judges who transferred from the Tier 1 Plan to the Tier 2 Plan in a disparate manner. Count VII alleges that the Act violates the constitutional rights of Plaintiffs because per the terms of the Act judges of the 36th District Court who elected to transfer from the Tier 1 Plan to the Tier 2 Plan were able to transfer substantially greater amounts of money than non-36th District Court judges of the same age and same length of service because the Act, as complained of in Count I, afforded 36th District Court judges a higher allowance under the Tier 1 Plan.
Counts II, IV, VI, and VIII mirror Counts I, III, V, and VII, but instead of being founded upon the Equal Protection Clause of the Fourteenth Amendment, are founded upon Article I, Section 2 of the Michigan Constitution. Counts IX and X assert state law claims for wasting trust and breach of fiduciary duty, respectively.
Also critical to the analysis is the relief requested. Plaintiffs' prayer for relief reveals that the primary thrust of the suit is to obtain monetary relief.
Paragraphs 9 through 11 similarly seek to correct past errors by requiring Defendants to recalculate how benefits should be calculated.
So the question becomes, if the requested relief is ordered, where would the money come from? Because all of the defendants are sued in their official capacities, it is anticipated that the monies would come from the related agencies, the JRS, and the state treasury (the state treasurer Douglas Roberts, is also a named defendant). This brings us to the next issue, is the JRS an arm of the state for purposes of the Eleventh Amendment? As the majority correctly states, "[i]n Eleventh Amendment analysis, the question of
As the majority notes, there are two ways in which potential legal liability for a judgment against the JRS might reach state treasury funds. "First, JRS funds might be co-mingled with general funds — which is to say that JRS funds might be available for general use by the state for other purposes, unrelated to the retirement system. If funds are co-mingled, then any JRS liability would be tantamount to state treasury liability." The second method asks whether "even if JRS funds are segregated from state treasury funds, the JRS might not have sufficient funds to satisfy a judgment; applicable state law could make state treasury funds available to satisfy the part of the judgment that exceeded the amount of funds available to satisfy the part of the judgment that exceeded the amount of funds available to the JRS." Maj. Op. at 380-381.
The majority concludes that under the first method, "JRS funds are kept in a separate trust from general state funds — thus, funds taken from the JRS to satisfy a judgment would not be funds from the state treasury." Maj. Op. at 381.
Musselman v. Governor, 448 Mich. 503, 533 N.W.2d 237, 240 n. 7 (1995), on reh'g on other grounds, 450 N.W.2d 574, 545 N.W.2d 346 (1996). The provision itself is clear, and Musselman further indicates that the state is obligated to prefund said benefits: "We hold that the state is obligated to prefund health care benefits under art. 9, § 24." Id. at 246.
However, Musselman also held that Article IX, § 24 is not self-executing:
Id. (alteration in original; footnote omitted); see also id. ("However, because we have no authority to order the Governor or the Legislature to appropriate funds, mandamus is denied.")
The majority acknowledges that "[a]bsent the Musselman case, it might have been argued that the state treasury could have been held liable pursuant to Art. IX, § 24." Maj. Op. at 384-385; see also id. at 379 n. 8 ("Various federal claims in this case clearly seek monetary relief, including the refund and payment of portions of
Maj. Op. at 383-384.
In other words, the majority reasons that, because state law says that the money cannot come from the state treasury, a federal court could not order such relief either, so there is no need to worry about the Eleventh Amendment. This reasoning is faulty because a state's exercise of state sovereign immunity does not control the question of federal constitutional immunity. Cf. Dubuc, 342 F.3d at 617 (stating that "[w]hile [a provision of the Michigan Supreme Court Rules Concerning the State Bar of Michigan providing the staff of the State Bar and the Board of Law Examiners] may immunize the individual defendants from state law claims, no state law or rule can immunize anyone from liability for violating the United States Constitution").
The raison d'etre for the Eleventh Amendment is to protect, in a federal forum, a state's exercise of sovereignty immunity. As recently observed by a majority of Justices in Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996):
Seminole Tribe, 517 U.S. at 54, 116 S.Ct. 1114. The majority's unique use of state sovereign immunity doctrine as some kind of implied waiver of constitutional immunity constitutes an impermissible end run around the well-established principles of the Eleventh Amendment. If the state treasury is immune from liability for such purposes, it is because of the Eleventh Amendment and not Article IX, § 24 of the Michigan Constitution or the Musselman decision. And the Eleventh Amendment directs that if, as here, the state is the real party in interest, has not consented to suit in a federal forum, and monetary relief is sought, the suit must be dismissed.
Contrary to its assertion, the majority and I actually agree that state law plays a significant role in the Eleventh Amendment immunity analysis. However, I do not perceive Art. IX § 24 and the Musselman decision as leading to the conclusion that the JRS is not an arm of the state. Rather, I see them as confirming the contrary conclusion. Further, any funding requirement, even if it must be honored by the legislature and not ordered by a court, will necessarily impact on the state treasury. Cf. Fitzpatrick v. Bitzer, 519 F.2d 559 (2d Cir.1975), rev'd on other grounds, 427 U.S. 445, 96 S.Ct. 2666, 49 L.Ed.2d 614 (1976). (holding that "[a] judgment against the Connecticut State employees fund would automatically increase the obligations of the general state treasury and amount to a judgment against the state" because the state was required to appropriate funds annually on an actuarial basis such that at least 75% of the total retirement income payment for each year had to made by the state). See generally Edelman, 415 U.S. at 664, 94 S.Ct. 1347 (stating that "the general rule is that relief sought nominally against an officer is in fact against the sovereign if the decree would operate against the latter" (internal quotations omitted)); see id. n. 11 (stating that "[t]he general rule is that a suit is against the sovereign if the judgment sought would expend itself on the public treasury or domain" (internal quotations omitted)).
Finally, the majority fails to address the impact of Mich. Comp. Laws. § 38.2302, which imposes mandatory state contribution requirements:
Mich. Comp. Laws Ann. § 38.2302 (West 1997). See also § 38.2208 (stating that "[t]he retirement system shall draw its warrants upon the state treasury, payable out of funds of the retirement system, for the payment of retirement allowances, accumulated contributions, and the payment of salaries and other expenses necessary in the administration of the retirement system"). In my view, the foregoing provisions clearly reflect that the state considers the JRS a state agency, in the department of budget and management, §§ 38.2201(1), 38.2104(5), funded by the treasury, and not merely a political subdivision.
In sum, I would affirm the district court's dismissal on the basis of Eleventh Amendment immunity.
Plaintiffs' state law claims were also properly dismissed, although for reasons different than those stated by the district court. In Pennhurst State Sch. & Hosp. v. Halderman, supra, the Supreme Court held that the Eleventh Amendment prohibits federal courts from ordering state officials to conform their conduct to state law, and also bars state law claims brought under pendent jurisdiction. 465 U.S. at 103-06, 104 S.Ct. 900. This is true whether the relief sought is prospective or retroactive. Id. In distinguishing federal claims against state officials from state law claims against state officials, the Court reasoned that:
Id. at 106, 104 S.Ct. 900. Thus, even if only injunctive relief were sought, dismissal of Counts II, IV, VI, VIII, IX, and X was proper.
Paragraph 3 asks the court to enjoin Defendants from requiring Plaintiffs who have remained as participants in the Tier 1 Plan to pay a larger contribution to the JRS than the 36th District Court judges. Although couched as prospective language, in essence Plaintiffs seek to require the allocation of state funds that are subject to the requirements of the Act.
Furthermore, even if this claim — and any of the others for that matter — truly seeks prospective, nonmonetary injunctive relief and is therefore not barred by the Eleventh Amendment, relief is still not appropriate if there is no constitutional violation. In my view, dismissal was proper because the JRS has a rational basis and therefore its application does not violate the federal equal protection clause. See generally Village of Belle Terre v. Boraas, 416 U.S. 1, 94 S.Ct. 1536, 39 L.Ed.2d 797 (1974) (holding that in equal protection cases not involving a suspect classification or fundamental right, courts apply a rational basis test). As the Michigan Supreme Court ruled in Harvey v. Michigan, 469 Mich. 1, 664 N.W.2d 767 (2003):
For the foregoing reasons, I believe that we should affirm the judgment of the district court dismissing in its entirety Plaintiffs' complaint.
Bennett v. CONRAIL Matched Sav. Plan Admin. Comm., 168 F.3d 671, 675 n. 2 (3d Cir.1999).
Generally, the party asserting jurisdiction has the burden of establishing it. E.g., Hudson v. Coleman, 347 F.3d 138, 141 (6th Cir.2003). The difference between Eleventh Amendment immunity and other jurisdictional issues, in this respect, supports the view of the immunity as an affirmative defense to jurisdiction.
There is further support for the characterization as an affirmative defense in the fact that Eleventh Amendment immunity can be waived by the state or agency (see infra note 8), while original jurisdiction cannot be waived. E.g., United States v. County of Muskegon, 298 F.3d 569, 579 (6th Cir.2002).
The notion of this immunity as an affirmative defense to jurisdiction helps to explain its differences from other issues of jurisdiction. Henry v. Metro. Sewer Dist., 922 F.2d 332, 338 (6th Cir.1990) ("the atypical jurisdictional bar of the eleventh amendment").
Immunity may be waived by the state or agency. Lapides v. Bd. of Regents, 535 U.S. 613, 619, 122 S.Ct. 1640, 152 L.Ed.2d 806 (2002); Lawson v. Shelby County, 211 F.3d 331, 334 (6th Cir.2000); Nelson v. Miller, 170 F.3d 641, 646 (6th Cir.1999).
Immunity may be waived by Congress. Nelson v. Miller, 170 F.3d at 646; Will v. Mich. Dep't of State Police, 491 U.S. 58, 66, 109 S.Ct. 2304, 105 L.Ed.2d 45 (1989).
There will be no immunity if the claim challenges the constitutionality of actions against state officials and seeks only prospective, non-monetary damages, such as an injunction. Rossborough Mfg. Co. v. Trimble, 301 F.3d 482, 489 (6th Cir.2002) (citing Edelman v. Jordan, 415 U.S. 651, 664, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974) and Ex Parte Young, 209 U.S. 123, 150-60, 28 S.Ct. 441, 52 L.Ed. 714 (1908)); Nelson v. Miller, 170 F.3d at 646.
When sued in their official capacities, individual defendants enjoy immunity if they are officials of a state agency that would enjoy immunity. Will v. Mich. Dep't of State Police, 491 U.S. 58, 71, 109 S.Ct. 2304, 105 L.Ed.2d 45 (1989) (stating, regarding a claim against an individual state official, pursuant to 42 U.S.C. § 1983, "a suit against a state official in his or her official capacity is not a suit against the official but rather is a suit against the official's office. As such, it is no different from a suit against the State itself.") (citations omitted). See also Hall v. Med. Coll. of Ohio, 742 F.2d 299, 301 (6th Cir.1984).
The dissent somehow misses this point, stating, in its footnote 16, "This leads to a curious result: although the state cannot be sued in state court because it has exercised its sovereign immunity, it can be sued in federal court because it cannot be sued in state court." The dissent conflates the JRS with the state. It is undisputed that the JRS can be sued in state court.
The JRS is a state-created public agency that performs a function within the narrow area of retirement benefits. Thus, potential legal liability analysis applies to determine whether the JRS is more akin to a municipality than an arm or alter ego of the state. But this analysis only applies to specialized state entities, such as agencies that perform administrative functions within narrow areas.
The state legislature is not specialized in one particular area but a constitutionally authorized branch of state government. Mich. Const. art. IV, § 1. The state legislature is by definition an arm of the state, not an agency. Of course, this distinction is ultimately moot. Even if, arguendo, the state legislature were subject to potential liability analysis, immunity would apply. A federal monetary judgment for a claim against the state legislature would be interpreted as attempting to compel the legislature to use its authority to appropriate state treasury funds to satisfy the judgment. The claim would thus be barred by the Eleventh Amendment, under potential legal liability analysis.
Elizabeth L. Hisserich, Comment, The Collision of Declaratory Judgments and Res Judicata, 48 UCLA L.Rev. 159, 165-66 (2000) (footnotes omitted). See also Dorothy M. Robins, Comment, When the Gleam in Your Eye Becomes A Glare: Capped Damages in Fertility Malpractice Actions, 26 U.S.F. L.Rev. 717, 751 n. 66 (1992) ("Every judicial action must ... involve the following elements: a primary right possessed by the plaintiff, and a corresponding primary duty devolving upon the defendant; a delict or wrong done by the defendant which consisted in a breach of such primary right and duty; a remedial right in favor of the plaintiff, and a remedial duty resting on the defendant springing from this delict, and finally the remedy or relief itself.") (citations omitted).
Other courts have held that funds deposited in a retirement system do not lose their fundamental character as public funds. See Fitzpatrick v. Bitzer, 519 F.2d 559, 565 n. 4 (2d Cir.1975), aff'd in part, rev'd in part on other grounds, 427 U.S. 445, 96 S.Ct. 2666, 49 L.Ed.2d 614 (1976). Relatedly, courts have held that retirement systems are arms of the state and therefore entitled to Eleventh Amendment immunity. See, e.g., McGinty v. New York, 251 F.3d 84 (2d Cir.2001) (holding that the New York Retirement System is an arm of the state; dismissing the plaintiffs' claims as barred by the Eleventh Amendment); JMB Group Trust IV v. Pennsylvania Mun. Ret. Sys., 986 F.Supp. 534, 538 (N.D.Ill.1997) (holding that the Pennsylvania Retirement System was an arm of the state where the duties and responsibilities of the Retirement System were "totally defined and limited by the Commonwealth of Pennsylvania under the provisions of the Pennsylvania Code"); Sculthorpe v. Virginia Ret. Sys., 952 F.Supp. 307 (E.D.Va.1997) (holding that Virginia's Retirement System is an arm of the state entitled to Eleventh Amendment immunity); Mello v. Woodhouse, 755 F.Supp. 923 (D.Nev.1991) (holding that suit against the Nevada Public Employees' Retirement Board was barred by the Eleventh Amendment).
Blake v. Kline, 612 F.2d 718 (3d Cir.1979), cited by the majority, is not particularly persuasive. Although the Third Circuit directed the district court to consider on remand an opinion by the Pennsylvania Attorney General stating that the money deposited in the retirement fund had lost its identity as Commonwealth funds, the Court ultimately stated that the district court needed to determine whether the state, in making a contribution, was acting in the role of sovereign or some other capacity. Id. at 724.
Other factors, see Hall v. Med. College of Ohio, 742 F.2d 299, 302 (6th Cir.1984), reflect that the JRS is an arm of the state. The Michigan Judges Retirement System and the Michigan Judges Retirement Board were created by the Michigan Judges Retirement Act. of 1992, Mich. Comp. Laws §§ 38.2101-2670. The Act mandate that the Board consist of the State Treasurer and the Attorney General of Michigan, as well as one sitting judge and two additional members appointed by Governor of Michigan with the advice and consent of the Michigan Senate. Mich. Comp. Laws § 38.2202(1). The Act is integrated with other Michigan departments. Indeed, the Michigan Judges Retirement Board "is created in the department [of management and budget]." §§ 38.2202(1); 38.2104(5). The Michigan Department of Management is responsible "for the budgeting, procurement, and related management functions of the retirement system." Id. § 38.2206(1). The State Treasurer "is the treasurer of the retirement system." Id. § 38.2206(l). The Michigan Attorney General is the Board's legal advisor and represents the Board in all litigation. Id. § 38.2207. The retirement system is required to prepare an annual report each fiscal year "regarding the financial, actuarial, and other activities of the retirement system," and present it to the Governor and Legislature. Id. § 38.2209. Furthermore, "[t]he retirement system shall draw its warrants upon the state treasury, payable out of funds of the retirement system, for the payment of retirement allowances, accumulated contributions, and the payment of salaries and other expenses necessary in the administration of the retirement system." Id. § 38.2208. The retirement system, is funded, in part, by annual legislative appropriations and other public monies. Id. 38.2303, 38.2304.