Documente Academic
Documente Profesional
Documente Cultură
No. 13-1523
Appeal from the United States District Court for the District of
South Carolina, at Florence.
J. Michelle Childs, District
Judge. (4:10-cv-02018-JMC)
Argued:
Decided:
December 5, 2014
the
ARGUED:
Richard
Harpootlian,
RICHARD
A.
HARPOOTLIAN,
PA,
Columbia, South Carolina, for Appellants.
Tina Marie Cundari,
SOWELL, GRAY, STEPP, & LAFFITTE, LLC, Columbia, South Carolina,
for Appellees.
ON BRIEF: Graham L. Newman, Christopher P.
Kenney, RICHARD A. HARPOOTLIAN, PA, Columbia, South Carolina;
James M. Griffin, Margaret N. Fox, LEWIS, BABCOCK & GRIFFIN,
LLP, Columbia, South Carolina, for Appellants. Robert E. Stepp,
SOWELL, GRAY, STEPP, & LAFFITTE, LLC, Columbia, South Carolina,
for Appellees.
Acts
Carolinas
1697
(the
retirement
2005
laws
Act).
by
That
requiring
Act
amended
public
South
employees
who
Amendment.
They
named
as
defendants
two
state-
Retirement
Systems
Group
Trust
(the
Trust),
which
sought
July 1,
2005,
repayment
and
of
all
injunctive
contributions
relief
For relief,
withheld
prohibiting
the
since
future
to
the
defendants
motion,
the
district
court
court, that the pension plans and the Trust are arms of the
State of South Carolina and therefore have sovereign immunity.
Likewise, we conclude that the state officials sued in their
official capacities for repayment of pension-plan contributions
have sovereign immunity.
officials
official
sued
in
their
capacities
for
prospective
no
relation
to
the
collection
of
the
public
employees
Young,
conclusions,
claims
209
we
under
the
U.S.
reject
123
the
Takings
(1908).
In
plaintiffs
Clause
of
the
reaching
argument
Fifth
that
these
their
Amendment
are
I
The plaintiffs are public employees and participants in two
pension plans created by South Carolina in 1962 -- the South
Carolina
Retirement
Officers
Retirement
System). 1
System
System
and
the
South
(collectively,
Carolina
the
Police
Retirement
In their
into
effect,
and
who
are,
by
reason
of
the
2005 Act,
or
interest
on
their
retirement
accounts.
Before
benefits
and
without
having
to
make
further
System
as
pre-retirement
employees
but
without
Code
Carolina
Ann.
General
9-1-1790(C),
Assembly
made
9-11-90(4)(c).
the
change
to
The
help
See
South
fund
the
the
2005 Act,
the
defendants
confiscated
their
the two pension plans, the plaintiffs named the Trust, which
holds the assets of the Retirement System, and a number of state
officials
in
their
official
capacities
who,
as
members
or
Control Board and the Public Employee Benefit Authority are the
statutorily
designated
co-trustees
of
the
Retirement
System.
relief,
that
the
the
against
plaintiffs
2005
its
Act
is
enforcement;
sought
(1) a
declaratory
unconstitutional;
(3) an
accounting
(2) an
of
all
(4) an
injunction
compelling
the
return
of
all
such
Rules
of
motion
Civil
to
dismiss
Procedure
the
complaint
12(b)(1),
pursuant
12(b)(3),
to
and
Federal
12(b)(6),
discretionary
abstention,
and
failure
to
state
With
respect
to
the
institutional
defendants,
the
court
Hutto v. S.C.
Ret.
2012).
Sys.,
899 F. Supp.
2d
457,
473
(D.S.C.
And
plaintiffs
Rule 59(e),
dismissing
filed
asserting
their
motion
that
claims
the
for
for
reconsideration
district
court
declaratory
under
erred
judgment
in
and
to
with
respect
remedy
to
ongoing
claims
for
violations
prospective
of
federal
injunctive
law.
The
the
undeniably
Retirement
monetary
System,
and
Plaintiffs
because
an
requested
injunction
relief
ordering
is
the
the
alter
ego
of
the
state.
Ram
Ditta
v.
Md.
Natl
Capital Park & Planning Commn, 822 F.2d 456, 457 (4th Cir.
1987).
The plaintiffs contend that the Retirement System and the
Trust do not have the sovereign immunity afforded a State under
the Eleventh Amendment because they are non-state entit[ies]
and that the district courts contrary conclusion was based on
an erroneous application of the factors articulated in Ram Ditta
for determining whether an entity is an alter ego of the State.
They argue, [T]he District Court should have given effect to
the
express,
unambiguous
language
of
[South
Carolinas
corporate
entities
for
which
the
State
has
no
maintain that the Retirement System and the Trust are arms of
the State and [therefore] immune from suit.
Whether an action is barred by the Eleventh Amendment is a
question of law that we review de novo.
While
the
Supreme
Court
has
described
sovereign
44,
73
(1996),
and
constitutional
limitation
on
the
Amendment
matter,
assert
can
waive
its
structurally
the
protection,
necessary
immunity.
We
to
it
is,
require
therefore
as
the
conclude
practical
defendant
that
to
sovereign
In so concluding, we join
See
Woods v. Rondout Valley Cent. Sch. Dist. Bd. of Educ., 466 F.3d
232, 237-39 (2d Cir. 2006); Fresenius Med. Care Cardiovascular
Res., Inc. v. P.R. & the Caribbean Cardiovascular Ctr. Corp.,
322
F.3d
56,
61
(1st
Cir.
2003);
Gragg
v.
Ky.
Cabinet
for
Workforce Dev., 289 F.3d 958, 963 (6th Cir. 2002); Skelton v.
Camp, 234 F.3d 292, 297 (5th Cir. 2000); Christy v. Pa. Turnpike
Commn, 54 F.3d 1140, 1144 (3d Cir. 1995); Baxter v. Vigo Cnty.
Sch. Corp., 26 F.3d 728, 734 n.5 (7th Cir. 1994), superseded by
statute on other grounds as recognized in Holmes v. Marion Cnty.
Office
of
Family &
Children,
349
F.3d
914,
918-19
(7th
Cir.
the
Trust
are
arms
of
the
State,
the
most
important
Amendment
at 223.
immunity
applies
to
that
entity.
Cash,
242
F.3d
against
the
entity
would,
despite
the
fact
that
the
though
state
sovereign
immunity
serves
Id.
At bottom,
the
important
the
respect
owed
them
as
joint
sovereigns.
Fed.
Maritime Commn v. S.C. State Ports Auth., 535 U.S. 743, 765
(2002) (internal quotation marks and citations omitted).
A
We address first the most important factor -- whether South
Carolina
could
be
responsible
for
the
payment
of
judgment
A State treasury
Assistance Agency, 745 F.3d 131, 137 (4th Cir. 2014) (quoting
12
Stoner v. Santa Clara Cnty. Office of Educ., 502 F.3d 1116, 1122
(9th Cir. 2007)) (internal quotation marks omitted); see also
Ristow v. S.C. Ports Auth., 58 F.3d 1051, 1053 (4th Cir. 1995)
(holding that courts must [c]onsider[] the practical effect of
a
putative . . .
judgment
on
the
state
treasury
(emphasis
added)).
The
plaintiffs
argue
that
the
Retirement
Systems
Act
1-1690, 9-11-280.
This
context
statutory
of
Article
language,
X,
however,
Section 16
must
of
the
be
read
South
in
the
Carolina
appropriate
funds
and
prescribe
member
contributions
body
of
(emphasis added).
the
system.
S.C.
Const.
art. X,
16
the
retirement
laws
in
the
context
of
the
South
Carolina
General
Assembly
would
be
obligated
to
account
for
any
by
requiring
employers,
including
the
State
itself,
to
in
statement
purposes
the
preparation
of
and
by
entities
of
outside
issuance
of
the
bonds.
States
in
annual
rating
Wehle,
611
the
financial
State
S.E.2d
for
at 242.
14
Consequently,
functionally
we
liable
conclude
for
any
that
South
judgment
Carolina
against
the
remains
Retirement
at 137.
We
reject
contrary.
the
plaintiffs
various
arguments
to
the
General
Assembly
could
not
have
imposed
on
future
Section 16.
the
plaintiffs
See
Wehle,
argument
611
that
we
S.E.2d
must
at 242-43.
construe
the
Retirement
Systems
funds.
Yet,
given
that
the
More
importantly,
whether
or
not
judgment
would
Id.
Office,
767
F.3d
379,
412
(4th
Cir.
2014)
(When
an
an
entitys
added)
Consequently,
treasury
(quoting
the
would
potential
be
proper
legal
Regents,
inquiry
liable
in
is
this
liability
519
not
U.S.
at
whether
case,
is
431)).
the
but
key
state
whether,
F.3d 351, 362 (6th Cir. 2005) (quoting Regents, 519 U.S. at
431)); see also Pub. Sch. Ret. Sys. v. State St. Bank & Trust
Co., 640 F.3d 821, 830 (8th Cir. 2011) (similar).
Here, as in
reality
that
the
States
funding
requirement
assuredly
could
427 F.3d
the
plaintiffs
read
much
into
the
fact
that
the
funds and assets of the Retirement System are not funds of the
State, S.C. Code Ann. 9-1-1310(C), but instead are held in a
group
trust
under
Section 401(a)(24)
of
the
Internal
Revenue
Revenue Code requires that group trust funds not be used for,
or diverted to, purposes other than for the exclusive benefit
of . . .
as a group trust.
26 U.S.C. 401(a)(24).
While we have
the
Trust
could
potentially
affect
the
State
treasury.
discovery
resolving
the
affirmed
and
the
development
sovereign
immunity
Rule 12(b)(6)
motions
of
factual
issue.
to
But
dismiss
record
we
on
before
have
the
often
basis
of
434 (4th Cir. 1995), upon which the plaintiffs rely for their
argument, we vacated the district courts dismissal under the
Eleventh
Amendment
not
because
the
district
court
failed
to
had
changed
the
applicable
Eleventh
Amendment
standard
while the appeal was pending and the barrenness of the record
rendered us ill-suited to apply the new standard.
Finally, the plaintiffs contend that we are bound by our
earlier decision in Almond v. Boyles, 792 F.2d 451 (4th Cir.
1986).
and
State
Employees
Retirement
System,
which
district
retirement
court
system
had
would
found
not
that
come
18
from
judgment
State
they
Id. at 456.
against
funds
for
the
three
reasons,
the
most
important[]
of
which
was
that
the
defendants [had] not shown the court that the relief requested
by
the
plaintiffs
would
inevitably
228
(E.D.N.C.
requirement
that
1985)
the
lead
to
an
additional
(emphasis
defendants
added).
show
that
But
Almonds
judgment
would
and
therefore
Almonds
framework
is
no
longer
applicable.
As
the
Supreme
Court
has
framed
the
Eleventh
Amendment
When
Hess v.
In
light
of
Wehles
interpretation
of
Article
X,
addition
to
South
Carolinas
potential
funding
favor of finding that the Retirement System and the Trust are
arms of the State.
When
assessing
whether
allowing
suit
against
state
entity
the
entitys
directors
or
officers,
who
funds
the
entity, and whether the State retains a veto over the entitys
actions, Oberg, 745 F.3d at 137 (quoting U.S. ex rel. Oberg v.
Ky. Higher Educ. Student Loan Corp., 681 F.3d 575, 580 (4th Cir.
2012)) (internal quotation marks omitted), as well as whether
an entity has the ability to contract, sue and be sued, and
purchase and sell property, and whether it is represented in
legal matters by the state attorney general, id. (citations
omitted).
In this case, the Retirement System does have the power
and privileges of a corporation, S.C. Code. Ann. 9-1-20, 911-20,
including
to
make
But,
contrary
to
the
the
powers
plaintiffs
to
sue
argument,
20
and
the
be
sued,
designation
of
an
at 139 (finding that the autonomy factor cut both ways, even
though the entity had the power to enter into contracts, sue
and be sued, and purchase and sell property in its own name);
see also State Highway Commn v. Utah Const. Co., 278 U.S. 194,
199 (1929) (It is unnecessary for us to consider the effect of
the general grant of power to sue or be sued . . . -- this suit,
in effect, is against the state and must be so treated).
And other factors point to state control.
which
the
entities
officers
are
appointed
The means by
suggest
that
the
are
Retirement
the
co-trustees
System
of
Investment
the
Retirement
Commission,
System,
which
has
and
the
exclusive
authority to invest the Trusts assets, see S.C. Code Ann. 916-20(A), are comprised almost entirely of the Governor of South
Carolina,
the
State
Treasurer,
the
Comptroller
General,
the
selected
by
state
administrators
of
officials.
the
Trust
are,
While
the
trustees
of
course,
and
required
to
any
influence
appointment.
or
control
when
it
has
the
power
of
of
the
and
Senate,
indemnify
id.
the
9-16-90(A);
members
of
the
(3) the
State
Retirement
must
System
the
Code
of
Laws
of
South
Carolina
is
devoted
to
the
(finding
that
the
control
factor
present[ed]
close
composed
of
state
officials
or
gubernatorial
the
board
of
trustees,
the
retirement
systems
corporate
status, and the boards powers to sue and be sued and to buy and
sell property).
Turning
to
the
factor
considering
whether
the
entities
in
favor
of
sovereign
immunity.
In
assessing
this
functions
are
classified
as
typically
state
or
1996)
(quoting
Hess,
513
U.S.
at
45).
The
Retirement
And like
the
state
legislature,
operates
in
part
through
the
and
Budget,
operates
on
statewide
basis
and
system
performs
traditional
state
function);
McGinty v. New York, 251 F.3d 84, 98 (2d Cir. 2001) (Although
the
Retirement
System
does
not
service
state
employees
This
and
constitutional
provisions
which
characterize
South
Benefit
Carolina
Public
Employee
Authority
in
Layman,
the
South
24
Carolina
as
an
Id. 9-4-10(H).
Supreme
Court
characterized
the
Retirement
System
as
state
agency
for
working
Carolina
retirees.
courts
have
709 S.E.2d
frequently
at
5860.
referred
to
Indeed,
the
South
individual
See, e.g.,
Kennedy v. S.C. Ret. Sys., 549 S.E.2d 243, 251 (S.C. 2001); S.C.
Police Officers Ret. Sys. v. City of Spartanburg, 391 S.E.2d
239, 241 (S.C. 1990).
At
bottom,
we
conclude
that
the
relevant
indicators
strongly indicate that the Retirement System and the Trust are
arms of the State of South Carolina and are therefore protected
under the Eleventh Amendment.
arms
of
the
State.
See
Pub.
Sch.
Ret.
Sys.,
640
F.3d
Teachers
2324114,
at
Ret.
*1
Fund,
(S.D.
No.
Ind.
1:07cv1637DFHJMS,
June
5,
2008);
Larsen
2008
v.
WL
State
Employees Ret. Sys., 553 F. Supp. 2d 403, 420 (M.D. Pa. 2008);
JMB Grp. Trust IV v. Pa. Mun. Ret. Sys., 986 F. Supp. 534, 538
(N.D. Ill. 1997); Sculthorpe v. Va. Ret. Sys., 952 F. Supp. 307,
30910 (E.D. Va. 1997); Hair v. Tenn. Consol. Ret. Sys., 790 F.
Supp. 1358, 1364 (M.D. Tenn. 1992); Mello v. Woodhouse, 755 F.
Supp. 923, 930 (D. Nev. 1991); Reiger v. Kan. Pub. Emps. Ret.
Sys.,
755
F.
Supp.
360,
361
(D.
Kan.
1990);
Retired
Pub.
III
Turning
to
the
claims
against
the
state
officials,
the
the
deduction
class
have
from
[Plaintiffs]
suffered
and
will
earnings,
continue
Plaintiffs
to
suffer
they
requested,
among
26
other
relief,
injunctions
the
class
all
monies
Defendants
have
deducted
as
we
interpret
the
plaintiffs
request
for
an
money
capacities
damages.
for
State
officials
retrospective
money
sued
in
damages
their
have
official
the
same
Care Home, Inc. v. W. Va. Dept of Health & Human Res., 532 U.S.
598, 609 n.10 (2001); Edelman v. Jordan, 415 U.S. 651 (1974);
Martin v. Wood, ___ F.3d ___, No. 13-2283 (4th Cir. Nov. 18,
2014).
Commn, 535 U.S. 635, 645 (2002) (In determining whether the
27
[the]
federal
law
Complaint
and
prospective
[1] alleges
[2] seeks
(first
relief
alteration
in
an
ongoing
properly
violation
of
characterized
as
original)
(quoting
Coeur
concurring
in
the
judgment)));
see
also
Va.
Office
for
was
also
correct
in
dismissing
the
claim
seeking
the
See Greenhouse v.
MCG Capital Corp., 392 F.3d 650, 660 (4th Cir. 2004) ([W]e may
affirm the dismissal by the district court upon the basis of any
ground supported by the record even if it is not the basis
relied
upon
by
the
district
court
(quoting
Ostrzenski
v.
see also S.C. Wildlife Fedn v. Limehouse, 549 F.3d 324, 333
28
(4th Cir. 2008); Lytle v. Griffith, 240 F.3d 404, 410 (4th Cir.
2001).
we
have
held
that
circuit
court
clerk
bore
In
the
be
enjoined
from
enforcing
them,
because
the
clerk
was
statute
prevents
parties
from
circumventing
States
As the
the
former,
as
the
executive
of
the
State,
was,
in
general sense, charged with the execution of all its laws, and
the latter, as attorney general, might represent the state in
29
the
fundamental
principle
that
[States]
cannot,
law
vests
general
administration
and
responsibility
Benefit
the
State
Authority,
Budget
id.
and
9-1-210,
Control
Board
9-11-30.
nor
the
But
Public
employees
System.
paychecks
and
transmitted
to
the
Retirement
who
fails
to
remit
withheld
30
contributions
to
the
Retirement
System
is
guilty
of
misdemeanor
and
must
be
Id. 9-11-210(7);
Retirement
System
and,
Retirement
once
the
funds
have
arrived,
to
Systems
trustees
and
administrators
from
plaintiffs
contend
that
notwithstanding
any
Eleventh
maintain
that
the
Takings
31
Clause
provides
an
absolute
Coeur dAlene
brought
by
the
United
States
or
another
State;
(3) when
Ports Auth. v. Fed. Maritime Commn, 243 F.3d 165, 176-77 (4th
Cir. 2001), affd, 535 U.S. 743 (2002).
the
United
States
by
citizens
of
that
State
or
another
the
court,
sovereign
under
the
immunity
Eleventh
[that]
Amendment,
States
does
enjoy
generally
in
federal
bar
tax
Id. at 110
avenue for relief, the Court held that state courts must hear
suits
to
recover
taxes
unlawfully
exacted,
the
sovereign
Reasoning
to
Carolina
courts
sue
State
the
have
for
long
recognized
unconstitutional
right
takings.
of
See
Graham v. Charleston Cnty. Sch. Bd., 204 S.E.2d 384, 386 (S.C.
1974) (In this jurisdiction neither the State nor any of its
political subdivisions is liable in an action ex delicto unless
by express enactment of the General Assembly, except where the
acts complained of, in effect, constitute a taking of private
property
for
public
use
without
just
compensation
(emphasis
claims
heard
South
Carolina
state
courts,
the
takings
claim
or
the
question
whether
the
Eleventh
34
suits
to
recover
held
property
not
to
illegally
have
been
seized
barred
the
government
were
immunity.
States
permitted
officers
Robert
an
who
E.
States.
v.
Lee,
106
ejectment
served
Lee
as
because
U.S.
196,
action
to
custodians
the
suit
222
(1882),
was
the
not
sovereign
For example, in
proceed
of
by
by
the
against
estate
against
of
the
Court
federal
General
United
of
South
permitted
Carolina,
a
suit
221
U.S.
636,
takings
alleging
648-49
claim
(1911),
to
the
proceed
Mar.
Commn,
531
F.3d
868,
884
(D.C.
Cir.
2008).
By
682,
689
(1949),
the
Court
dismissed
an
action
brought
or
delivering
that
coal
to
anyone
sometimes
decided
takings
claims
else,
because
the
considering
Schweitzer, 523 F.3d 948, 954 (9th Cir. 2008) ([W]e conclude
that the constitutionally grounded self-executing nature of the
Takings Clause does not alter the conventional application of
the Eleventh Amendment); DLX, Inc. v. Kentucky, 381 F.3d 511,
526 (6th Cir. 2004) (Treating DLXs claim as a self-executing
reverse condemnation claim, . . . we conclude that the Eleventh
Amendments
grant
of
immunity
protects
Kentucky
from
that
claim . . .); Harbert Intl, Inc. v. James, 157 F.3d 1271, 1279
(11th Cir. 1998) (holding that a takings claim was barred under
the Eleventh Amendment, where state courts provided a means of
redress for such claims); John G. & Marie Stella Kenedy Meml
Found. v. Mauro, 21 F.3d 667, 674 (5th Cir. 1994) (holding that
36
Amendment
against
the
inverse
State
of
condemnation
Texas
was
claim
barred
brought
directly
by
Eleventh
the
(1st
require
Cir.
1982)
compensation
(Even
in
an
if
the
inverse
constitution
is
condemnation
read
case,
to
the
for
Amendment
damages
stands
as
against
an
the
express
United
bar
to
States,
the
Eleventh
federal
power
when
37