ROWAN UNIVERSITY v. FACTORY MUTUAL INSURANCE COMPANY

NOT FOR PUBLICATION

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

CAMDEN VICINAGE

:

ROWAN UNIVERSITY, :

:

Plaintiff, : Civil No. 21-08992 (RBK/AMD)

:

v. : OPINION

:

FACTORY MUTUAL INSURANCE CO., :

:

Defendant. :

:

:

KUGLER, United States District Judge:

This matter comes before the Court upon Plaintiff Rowan University’s Motion to

Remand (Doc. No. 12). The reasons set forth in the Opinion below, Plaintiff’s Motion to

Remand is GRANTED.

I. Background

This case involves a single breach of contract claim. Plaintiff Rowan University

(“Plaintiff” or “Rowan” or “the University”) filed a complaint against its insurance company,

Defendant Factory Mutual Insurance (“Defendant” or “Factory Mutual”), asserting breach of

contract following Factory Mutual’s denial of a claim of coverage under Plaintiff’s insurance

policy. Defendant Removal Notice ¶ 8–10 (“Def. Removal Notice”) (Doc. No. 1).

Plaintiff originally filed suit against Defendant in federal court in this district on March 5,

2021, invoking the court’s federal diversity jurisdiction under 28 U.S.C. § 1332(a). Def.

Removal Notice ¶ 11–13. On March 9, 2021, the District Court Judge issued an Order to Show

Cause instructing Plaintiff to amend its complaint to specifically plead its citizenship. Id. at ¶ 2.

In this Order, the Court noted that alter egos of the state do not have state citizenship for

diversity purposes. Id. The next day, Rowan voluntarily dismissed the federal action, id. at ¶ 4,

and filed suit in the Superior Court of New Jersey, Gloucester County, Civil Division, id. at ¶ 3,

Ex. A.

On April 12, 2021, Defendant removed the state action to federal court based on federal

diversity jurisdiction pursuant to 28 U.S.C. § 1441(a). Id. Defendant asserts removal is proper

under § 1332(a) because Factory Mutual, a citizen of Rhode Island, is diverse from Plaintiff, a

citizen of New Jersey, and the amount in controversy exceeds $75,000. Def. Removal Notice ¶¶

12–27, 28–31. Defendant avers that Plaintiff is not an arm of the State of New Jersey under the

applicable Third Circuit test and thus can be properly regarded as a citizen of New Jersey. Id. at ¶

15–27. On May 7, 2021, Plaintiff filed a Motion to Remand and Memorandum in Support of the

Motion to Remand, contending that federal diversity jurisdiction does not exist here because

Rowan is an arm of the State of New Jersey and therefore has no citizenship for diversity

purposes. (Collectively “Pl. Remand Motion”) (Doc. No. 12). The parties conducted

jurisdictional discovery related to the question of Rowan’s citizenship under the direction and

supervision of U.S. Magistrate Judge Donio. See (Doc. Nos. 9, 10, 13, 16, 23). Defendant filed a

Memorandum of Opposition in response to Plaintiff’s Motion to Remand on July 12, 2021.

(“Def. Opp. Mem.”) (Doc. No. 26). Plaintiff then filed a Reply (“Pl. Reply”) (Doc. No. 30), to

which Defendant filed a Sur-reply, (“Def. Sur-reply”) (Doc. No. 31).

II. Legal Standard

Pursuant to 28 U.S.C. § 1441(a), a defendant may remove an action filed in state court to

a federal court with original jurisdiction over the action. Once an action is removed, a plaintiff

may challenge removal by moving to remand the case back to state court. 28 U.S.C. § 1447(c). A

case that is removed shall be remanded to state court “[i]f at any time before final judgment it

appears that the district court lacks subject matter jurisdiction.” Id. To defeat a motion to remand

for lack of subject-matter jurisdiction, the defendant bears the burden of showing that the federal

court has jurisdiction to hear the case. Samuel-Bassett v. KIA Motors Am., Inc., 357 F.3d 392,

396 (3d Cir. 2004); Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 29 (3d Cir. 1995) (citing

Pullman Co. v. Jenkins, 305 U.S. 534, 537 (1939)). Generally, where the decision to remand is a

close one, “the removal statute should be strictly construed and all doubts should be resolved in

favor of remand.” Abels, 770 F.2d at 29 (“[L]ack of jurisdiction would make any decree in the

case void and the continuation of the litigation in federal court futile[.]”).

“‘Diversity of citizenship subject matter jurisdiction falls within the original jurisdiction

of the district court,’ pursuant to § 1332(a) of Title 28 of the United States Code, and thus ‘a

state court case that implicates diversity jurisdiction’ may generally be removed.” Johnson v.

SmithKline Beecham Corp., 724 F.3d 337, 346 (3d Cir. 2013) (quoting Brown v. Francis, 75

F.3d 860, 865 (3d Cir. 1996)). A district court may properly exercise subject matter jurisdiction

only if the amount in controversy exceeds $75,000 and complete diversity of citizenship exists

among the adverse parties. See 28 U.S.C. § 1332(a).

“There is no question that a State is not a ‘citizen’ for purposes of the diversity

jurisdiction.” Moor v. Alameda Cty., 411 U.S. 693, 717 (1973). “Diversity jurisdiction is also

lacking where suit is brought against an agency or instrumentality that is the alter ego of the

state.” Gibson-Homans Co. v. New Jersey Transit Corp., 560 F. Supp. 110, 111–12 (D.N.J.

1982) (citing Harris v. Pennsylvania Turnpike Commission, 410 F.2d 1332, 1333 n.1 (3d

Cir.1969)); see also Blake v. Kline, 612 F.2d 718, 726 (3d Cir. 1979) (“The federal courts cannot

entertain a suit in diversity jurisdiction against a state or its Alter ego.”).

III. Discussion

a. Plaintiff Launches a Facial and Factual Challenge to Diversity Jurisdiction

The dispute in this case concerns whether diversity of citizenship exists between Rowan

and Factory Mutual. Plaintiff contends that diversity is decided on the face of the complaint. Pl.

Remand Motion 2–3. Defendant responds that a court contemplating a factual challenge to

diversity jurisdiction is permitted to look beyond the face of the complaint. Def. Opp. Mem. 4–5.

“Because a motion to remand shares an essentially identical procedural posture with a

challenge to subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), it is

properly evaluated using the same analytical approach.” Papp v. Fore-Kast Sales Co., 842 F.3d

805, 811 (3d Cir. 2016). A court evaluating a challenge to diversity jurisdiction in Rule 12(b)(1)

motion or a motion to remand “must determine whether the challenge is a facial attack or a

factual attack.” GBForefront, L.P. v. Forefront Mgmt. Grp., LLC, 888 F.3d 29, 35 (3d Cir. 2018).

The Third Circuit has instructed,

A facial attack ... is an argument that considers a claim on its face and asserts

that it is insufficient to invoke subject matter jurisdiction of the court because, for

example, ... there is no indication of a diversity of citizenship among the parties[.]

A factual attack, on the other hand, is an argument that there is no subject matter

jurisdiction because the facts of the case ... do not support the asserted jurisdiction.

Id. (quoting Constitution Party of Pa. v. Aichele, 757 F.3d 347, 357–58 (3d Cir. 2014))

(alterations in original) (quotations and internal citations omitted). Put another way, a facial attack

“challenges subject matter jurisdiction without disputing the facts alleged in the notice of removal,

and it requires the court to consider the allegations as true” whereas a factual attack challenges

“the factual allegations underlying the assertion of jurisdiction, and involves the presentation of

competing facts.” Papp, 842 F.3d at 811 (quoting Davis v. Wells Fargo, 824 F.3d 333, 346 (3d

Cir. 2016)) (cleaned up). Here, Plaintiff puts forth both a facial and factual attack on jurisdiction.

b. Plaintiff’s Facial Challenge to Diversity Jurisdiction

The Court construes Plaintiff’s assertion that “nothing on the face of Rowan’s Complaint

support[s] Defendant’s assertion of diversity jurisdiction” as a facial attack on jurisdiction. Pl.

Remand Motion 3. It is true that Rowan does not specifically plead its own citizenship in its state

court Complaint.1 Def. Removal Notice, Ex. A. But a court deciding a motion to remand must

evaluate the facial sufficiency of jurisdictional allegations based on the removal petition. See

Jones & Laughlin Steel Corp. v. Johns-Manville Sales Corp., 626 F.2d 280, 282 n.1 (3d Cir.

1980) (finding that diversity jurisdiction existed where diversity was sufficiently alleged in the

removal petition, but not the face of the state court complaint); Doe I v. UPMC, No. 2:20-CV-

359, 2020 WL 4381675, at *2 (W.D. Pa. July 31, 2020), motion to certify appeal denied, No.

2:20-CV-359, 2020 WL 5742685 (W.D. Pa. Sept. 25, 2020) (“In a facial challenge, the court

looks to the face of the notice of removal[.]”). Otherwise, “a plaintiff could always prevent

removal based on diversity simply by careful pleading.” Samson v. Allis-Chalmers Prod. Liab.

Tr., No. 90-0139, 1990 WL 87394, at *1 (E.D. Pa. June 21, 1990) (unpublished). In its removal

petition, Defendant asserts Rowan is a citizen of New Jersey, not an arm of the state, and

supports this contention with detailed factual allegations. Def. Removal Notice ¶ 15–27. As

Plaintiff does not attack the facial sufficiency of the allegations in Defendant’s removal petition,

the Court finds Plaintiff’s facial challenge unavailing.

c. Plaintiff’s Factual Challenge to Diversity Jurisdiction

The bulk of Plaintiff’s motion is best understood as a factual attack on subject matter

jurisdiction, as Plaintiff disputes Defendant’s allegation that Rowan is a citizen of New Jersey

and sets forth additional facts to indicate that diversity of citizenship does not exist in this matter.

1 In its state Complaint, Plaintiff avers only that “Plaintiff is a New Jersey public institution of higher education

headquartered and operating in New Jersey[.]” Def. Removal Notice, Ex. A.

See generally Pl. Remand Motion; Pl. Reply. “To resolve a factual challenge, the ‘[c]ourt may

look beyond the pleadings to ascertain the facts[.]’” GBForefront, 888 F.3d at 35 (quoting

Aichele, 757 F.3d at 358) (alterations in original). Facing a factual challenge, the party asserting

jurisdiction has “the burden of proof to establish diversity jurisdiction by a preponderance of the

evidence[,]” id., and “the court ‘is free to weigh the evidence and satisfy itself as to the existence

of its power to hear the case[,]’” Davis, 824 F.3d at 346 (quoting Mortensen v. First Fed. Sav. &

Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977)).

The Court notes, however, that the crux the issue at hand is not a dispute over the

jurisdictional facts themselves but the legal significance of those facts. Cf. GBForefront, 888

F.3d at 35 n.8 (noting that a party’s “factual attack ultimately came down to a question of law on

how to determine the citizenship of certain trusts”). Whether Rowan is an arm of the state is a

legal question. If Plaintiff is an alter ego of the state under the Third Circuit’s legal test, Plaintiff

has no citizenship for diversity purposes and this matter must be remanded to state court due to

lack of federal subject matter jurisdiction.2 28 U.S.C. § 1447(c). But if Plaintiff is not the State’s

alter ego, Defendant has met its burden of establishing federal diversity jurisdiction over this

matter. Defendant has alleged complete diversity between itself, a citizen of Rhode Island, and

Plaintiff, a purported citizen of New Jersey, and the parties do not dispute that the amount in

controversy exceeds $75,000. Def. Removal Notice ¶¶ 16–27, 28–31.

The question of Rowan’s legal status as an arm of the state has come before federal

courts in this district several times before, with inconsistent results. E.g., Bowman v. Rowan

Univ., No. 1804239, 2018 WL 6617831, at *4–5 (D.N.J. Dec. 18, 2018) (suggesting without

2 As the parties acknowledge, there is no basis for federal question jurisdiction pursuant to 28 U.S.C.§ 1331. This

suit involves a breach of contract claim, which does not implicate a question of federal law. Pl. Remand Motion 1;

Def. Removal Notice ¶ 8–9.

deciding that structural changes to Rowan University following Nannay v. Rowan Coll., 101 F.

Supp. 2d 272, 283 (D.N.J. 2000), call into question whether Rowan could still be considered arm

of the state); Nannay, 101 F. Supp. 2d at 283 (finding that “Rowan University is the alter ego of

the State for Eleventh Amendment purposes”); State of N.J., Dep't of Env't Prot. v. Gloucester

Env't Mgmt. Servs., Inc., 923 F. Supp. 651, 657–60 (D.N.J. 1995) (holding that Glassboro State

College—later renamed Rowan College and then Rowan University—was not an alter ego of the

State for immunity purposes); Rehberg v. Glassboro State Coll., 745 F. Supp. 1113, 1117 (E.D.

Pa. 1990) (concluding Glassboro State College, a predecessor of Rowan University, was entitled

to Eleventh Amendment immunity). In the most recent of these cases, Nannay, the district court

found that Rowan constituted an alter ego of the state under the Eleventh Amendment. 101 F.

Supp. 2d at 283. Nonetheless, subsequent changes to Rowan’s governance following the

implementation of the New Jersey Medical and Health Science Education Restructuring Act

(“the Restructuring Act” or “the Act”), N.J.S.A. § 18A:64M-1 et seq., require the Court revisit

the issue yet again.

To establish whether an entity is a state’s alter ego for diversity purposes, the Third

Circuit employs the same test used to evaluate an entity’s entitlement to Eleventh Amendment

immunity. Doolin v. Kasin, 424 F. App'x 106, 109 (3d Cir. 2011) (“[A] court must perform the

same analysis as is required to determine Eleventh Amendment immunity” to determine if an

entity is an alter ego of the state for diversity purposes (citing Blake, 612 F.2d at 726)); Gibson-

Homans Co., 560 F. Supp. at 112 (“In determining whether or not [an entity] is the alter ego of

the State for diversity purposes, the Court must perform the same analysis required in order to

determine whether New Jersey Transit is immune from suit under the Eleventh Amendment.”).

In Fitchik v. New Jersey Transit Rail Operations, the Third Circuit laid out a consolidated

three-part test to evaluate whether an entity is an arm of the state entitled to Eleventh

Amendment immunity. 873 F.2d 655, 659 (3d Cir. 1989). Under Fitchik, a court must consider:

“(1) whether the payment of the judgment would come from the state; (2) what status the entity

has under state law; and (3) what degree of autonomy the entity has.” Karns v. Shanahan, 879

F.3d 504, 513 (3d Cir. 2018) (quoting Bowers v. Nat'l Collegiate Athletic Ass'n, 475 F.3d 524,

546 (3d Cir. 2007), amended on reh'g (Mar. 8, 2007)); see Fitchik, 873 F.2d at 659.3 The court

must then balance these factors, affording them equal weight. See Karns, 879 F.3d at 513–15

(emphasizing that “none of the three Fitchik factors is ‘predominant’” (quoting Cooper v. Se. Pa.

Transp. Auth., 548 F.3d 296, 301 (3d Cir. 2008))). Importantly, “each case must be considered

on its own terms, with courts determining and then weighing the qualitative strength of each

individual factor in the unique factual circumstances at issue.” Karns, 879 F.3d at 514. The Court

will address each subfactor in turn.

i. The Funding Factor

The funding factor asks whether state money would be used to cover a legal judgment

against the entity in question. Patterson v. Pennsylvania Liquor Control Bd., 915 F.3d 945, 950

(3d Cir. 2019) (citing Fitchik, 873 F.2d at 659). The Third Circuit has articulated three subfactors

relevant to the assessment of the first Fitchik factor: “(1) a state's legal obligation to pay a money

judgment entered against the entity; (2) whether the agency has money to satisfy the judgment;

and (3) whether there are specific statutory provisions that immunize the state from liability for

money judgments.” Id. at 951 (citing Fitchik, 873 F.2d at 659).

3 The Court will refer to these factors as (1) the funding factor; (2) the status under state law factor; and (3) the

autonomy factor.

The parties concur, however, that the first Fitchik factor is less directly relevant in the

instant matter where the alleged “arm of the state,” Rowan, is the plaintiff rather than the

defendant.4 Def. Opp. Mem. 8; Pl. Reply 6. The Court agrees, but still finds the funding factor to

be indicative of Rowan’s relationship with the State and, consequently, its alter ego status. See

New Jersey Dep't of Env't Prot. v. Nestle USA, Inc., No. 06-4025, 2007 WL 703539, at *2 n.1

(D.N.J. Mar. 2, 2007) (“[T]he first factor is not helpful in this analysis because it is more suited

to litigation in which an agency is a defendant in an action.”).

1. State’s Legal Obligation to Pay a Money Judgment

A court evaluating the funding factor must examine the state’s legal obligation to

indemnify an entity in case of an adverse legal judgment against that entity. See Patterson, 915

F.3d at 951. The Third Circuit has “consistently rejected the argument that a State's voluntary

choice to pay a state-affiliated entity's liabilities…favors Eleventh Amendment immunity.”

Maliandi v. Montclair State Univ., 845 F.3d 77, 87 (3d Cir. 2016).

The Third Circuit’s analysis in Maliandi is instructive. In that case, the Court was

evaluating whether Montclair State University (“Montclair” or “MSU”), then governed as a state

college by N.J.S.A § 18A:64-1 et seq., was entitled to immunity as an arm of the state.5 See

generally, id. The Court stressed that a state’s overarching legal liability for an entity’s debts is

the “key factor” in a court’s funding evaluation.6 Id. at 87 (quoting Febres, 445 F.3d at 236).

4 Defendant suggests that “[i]n cases involving state agency plaintiffs, courts have looked instead to whether any

recovery by the entity inures to the state's benefit.” Def. Opp. Mem. 8 (citing Commonwealth of Pa. Pub. Sch.

Employees' Ret. Sys. v. Citigroup, Inc., No. 11-2583, 2011 WL 1937737, at *2 (E.D. Pa. May 20, 2011)

(unpublished)). Assuming, arguendo, that this is the proper analysis, the Court finds no evidence to suggest that

Plaintiff’s recovery in this case would inure to the state of New Jersey.

5 As Defendant points out, Montclair underwent a statutory change after Maliandi was decided. See N.J.S.A. §

18A:64N-1, et seq. (“Montclair State University Act”). Throughout this opinion, the Court will refer to Montclair

and its governing statutes as they existed at the time Maliandi was decided.

6 While the Third Circuit found the funding factor weighed against immunity, the Court ultimately concluded that,

on balance, the Fitchik factors counselled in favor of a finding that Montclair was entitled to immunity.

As with Montclair, New Jersey has no “all-encompassing legal obligation to pay

judgements against Rowan.” Pl. Remand Motion 4; Def. Opp. Mem. 9; see N.J.S.A § 18A:64M-

28. The State may be responsible for some of Rowan’s liability under the New Jersey Tort

Claims Act (“Tort Claims Act”) and Contractual Liability Act, but this does not sway the Court’s

analysis here for the reasons articulated by the Third Circuit in Maliandi. In Maliandi, the Third

Circuit concluded:

Even assuming that New Jersey would have the legal obligation to pay judgments

against MSU under the Tort Claims Act and the Contractual Liability Act … the

exceptions embodied in those statutes only prove the rule, confirming the absence

of an overarching legal obligation on the part of the State.

Maliandi 845 F.3d at 88. Indeed, only if Plaintiff elects to be represented by the Attorney

General will the State indemnify Rowan under the Tort Claims Act. See N.J.S.A §§ 18A:64M-

9(z), (aa)(2), -33. The State’s lack of overarching legal obligation to cover adverse judgments

against Rowan suggests Plaintiff is not an arm of the state. See Maliandi 845 F.3d at 88 (“Absent

such obligation, this subfactor counsels against treating MSU as an arm of the State.”).

2. Alternative Sources of Money

Subfactor two of the funding analysis asks whether Rowan has sufficient non-state funds

to cover an adverse judgment against it. Maliandi, 845 F.3d at 88. Consideration of alternative

sources of funding “necessarily involves a review of the percentage of funds [the University]

receives from the State” as well as “the extent to which the State retains ownership over the

funds it appropriates and whether the entity is insured against money judgments.” Id. While

“there is no hard-and-fast rule about how much funding from the State is enough to trigger

immunity,” the Third Circuit has “regularly determined that alternative sources of funding—even

where only a small part of the entity's overall budget—counsel against immunity.” Id.

Rowan admits to having alternative sources of funds including “tuition, fees, and room

and board,” Pl. Remand Motion 5, and has the power to set fees and tuition rates as it sees fit,

N.J.S.A. § 18A:64M-9(n), (o). “Net Student Revenues” constituted over 40% of Rowan’s total

revenue in 2018, 2019, and 2020. Miller Declaration Ex. A (“Miller Decl. Ex. A”) 3. Moreover,

state appropriations account for a relatively small portion of Rowan’s operating budget—11.5%

in 2020 and roughly 16% in 2021, Def. Opp. Mem. 12; Miller Decl. Ex. A 4—particularly when

compared to other cases in which the Third Circuit has found sufficient alternative funds exist.

See, e.g., Maliandi, 845 F.3d at 88 (“[W]e have concluded that an entity has the capacity to pay

money judgments out of its own funds even where the State appropriates 85-90% of the entity's

operating budget.” (citing Febres, 445 F.3d at 232–34)); Kovats v. Rutgers, The State Univ., 822

F.2d 1303, 1308–09 (3d Cir. 1987) (concluding “a judgment against Rutgers can be paid from

non-state funds” even though “between 50 and 70 percent of the general operating account is

made up of state appropriations.”).

Further, there is no indication of continued state ownership of appropriations once

allocated to Rowan. If, once deposited, state-appropriated funds “belong” to an entity, judgments

paid out using those funds are considered to be satisfied with the entity’s—not the state’s—

money. Febres, 445 F.3d at 234. Although Rowan must comply with certain budgetary reporting

requirements and is subject to state audit, N.J.S.A. § 18A:64M-9(f), these requirements do not

show proof of state control. See Maliandi, 845 F.3d at 89–90 (concluding that because Montclair

“may spend state-appropriated funds as it sees fit[,]” the requirement that the school “spend its

funds within the general parameters of the State's overall budget appropriations” was a “minimal

constraint” and did not indicate continued state ownership over funds allocated to MSU (citation

and internal quotation omitted)).7 The University alone is empowered to “disburse all moneys”

and “direct and control expenditures[.]” N.J.S.A. § 18A:64M-9(e), (f). In sum, Rowan has

considerable alternative sources of funding from which to draw to cover an adverse judgment.

3. State Immunity from Liability

“The third subfactor stands for the simple proposition that where the State has expressly

immunized itself from the entity's liabilities, it thereby indicates the entity is not an arm of the

State ….” Maliandi, 845 F.3d at 90. The provision of the Restructuring Act governing State

immunity with respect to Rowan, N.J.S.A. § 18A:64M-28 (“No provision of this act shall be

deemed or construed to create or constitute a debt, liability, or a loan or pledge of the credit, of

the State of New Jersey”), is now identical to the provision governing state liability with respect

to Rutgers, N.J.S.A. § 18A:65-8, which the Third Circuit considered to be demonstrative of

broad state immunity against liability in Kovats, 822 F.2d at 1310–11 (evaluating whether

Rutgers was an arm of the state entitled to Eleventh Amendment immunity); see Maliandi, 845

F.3d at 90 (characterizing N.J.S.A. § 18A:65-8 as affording the state “sweeping statutory

immunity” against liability for judgments against Rutgers).8 We agree.

Upon consideration of the relevant subfactors, the Court concludes that the funding factor

unambiguously points towards the conclusion that Rowan is not an arm of the state.

ii. The Status Under State Law Factor

7 The Restructuring Act also requires that Rowan “shall carry its own liability insurance or maintain an actuarially

sound program of self insurance[,]” providing yet another alternative source of funding from which the University

could draw in case of an adverse judgment against it. N.J.S.A. § 18A:64M-9(aa)(1) (emphasis added).

8 Rowan has indicated that the State has not immunized itself from liability arising from medical malpractice or

personal injury claims, Kanner Declaration (“Kanner Decl.”) Ex. A 7, under the Tort Claims Act, Miller Decl. Ex. F

1–2. As the Court understands, the State is only liable in Tort Claims Act cases in which Rowan elects to be

represented by the state Attorney General. N.J.S.A. § 18A:64M-9(aa)(2). Thus, state liability for such claims is the

exception, not the rule.

The second Fitchik factor calls for an examination of “whether the entity is treated as an

arm of the State under state case law and statutes.” Maliandi, 845 F.3d at 83. Pertinent subfactors

include: “(1) how the law treats the agency generally; (2) whether the agency is separately

incorporated; (3) whether the agency can sue and be sued in its own right; (4) and whether it is

immune from state taxation.” Patterson, 915 F.3d at 953 (citing Fitchik, 873 F.2d at 659).

1. Rowan’s General Treatment Under State Law

When analyzing how state law treats an entity generally, courts take stock of: “(1)

explicit statutory indications about how an entity should be regarded; (2) case law from the state

courts—especially the state supreme court—regarding an entity's immunity or status as an arm of

the State; and (3) whether the entity is subject to laws for which the State itself has waived its

own immunity (such as state tort claims acts).” Bradley v. W. Chester Univ. of Pa. State Sys. of

Higher Educ., 880 F.3d 643, 655 (3d Cir. 2018) (quoting Maliandi, 845 F.3d at 91). Overall,

there is limited evidence as to Rowan’s general treatment under state law, and the available

evidence points in opposite directions.

As to the first consideration, Rowan contends that “the Legislature, by statute, … has

deemed Rowan to be a State instrumentality performing essential governmental functions.” Pl.

Remand Motion 8 (citing N.J.S.A. §§ 18A:64M-4, -29). The Third Circuit has recognized “that

providing education has long been recognized as a function of state government[,]” tilting the

scale slightly in favor of finding that Rowan is an arm of the state. Kovats, 822 F.2d at 1310

(quoting Skehan v. State System of Higher Education, 815 F.2d 244, 248 (3d Cir.1987).

New Jersey caselaw related to Rowan is largely unhelpful in the instant matter. 9 No state

cases decided after the implementation of the Restructuring Act specifically address whether

9 Plaintiff cites several unpublished state cases purportedly indicative of Rowan’s status under state law. Pl. Remand

Motion 5–6. The most relevant of these cases is Eze v. Rowan University, in which the New Jersey Appellate

Rowan University is an arm of the state. Defendant highlights a few recent cases indicating that

state courts generally refer to Rowan as a public entity, as opposed to a state agency, for the

purposes of the Tort Claims Act. Def. Opp. Mem. 16–17 (citing McFeely v. Kar, No. A-4543-

17T1, 2019 WL 254591, at *4–5 (N.J. Super. Ct. App. Div. Jan. 18, 2019), cert. denied, 238 N.J.

58, 207 A.3d 762 (2019); Garriga v. Rowan Univ. No. A-1353-17T1, 2018 WL 5532491, at *1

(App. Div. Oct. 30, 2018); McNellis-Wallace v. Hoffman, 464 N.J. Super. 409, 417–18 (App.

Div. 2020)). The parties debate at length the significance of one such case, McFeely, where the

Court was considering whether notice of a claim against Rowan served on the state Attorney

General had been properly effectuated under the Tort Claims Act though Rowan was not

explicitly named in the notice. 2019 WL 254591, at *4–5. The McFeely court concluded that,

although Rowan was being represented by the Attorney General in the matter, because the

University was a “public entity”—not a state agency—under the Tort Claims Act “the failure to

name Rowan University in the notice made the notice ineffective[.]” Id. at *4. In reaching this

conclusion, the McFeely court considered Rowan’s power to sue, right to retain independent

counsel, and “high degree of self-governance”—factors also germane to a Fitchik inquiry. Id.

(quoting N.J.S.A. §§ 18A:64M-5, -9(y), (z)). The McFeely court, at least, viewed Rowan not as

Division considered Rowan to be a “public entity” within the meaning of the Tort Claims Act and the “State” within

the meaning of the Contractual Liability Act. A-2659-07T2, 2009 WL 232181, at *2 (App. Div. Feb. 3, 2009). The

Restructuring Act specifically provides that Rowan is subject to the Contractual Liability Act, N.J.S.A. § 18A:64M-

23, though the Court notes that the University technically no longer falls within the Contractual Liability Act’s

definition of the “State” as it is now an entity that can sue and be sued, N.J.S.A. § 59:13-2. The Court does not find

Eze particularly illuminating as to whether state courts would view Rowan, as it exists now, as an arm of the state. If

anything, § 18A:64M-23 is a recognition that Rowan no longer satisfies the Contractual Liability Act’s definition of

the “State.”

Nor does the Court find the two additional cases cited by Plaintiff to be persuasive as to this matter. Rose v. Rowan

University involved a contract dispute, in which there was a passing reference to the state forms required for the

termination of a Rowan employee. No. A-3337-17-T2, 2019 WL 1870883 (App. Div. Apr. 26, 2019). In re State,

Rowan University involved the state court’s review of the University’s decision to terminate a medical resident in

which Rowan was represented by the state Attorney General and referred to as the State of New Jersey in the

caption of the case. No. A-1286-15T3, 2016 WL 3981082 (App. Div. July 26, 2016).

an entity that “shares in the State’s sovereignty” but one that “possess sovereignty parceled to it

from the state” and enjoys a certain degree of independence from the state. Id. (citing English v.

Newark Hous. Auth., 138 N.J. Super. 425, 429–30 (App. Div. 1976)). While not directly on

point, McFeely is relevant and pushes slightly in favor of the conclusion that Rowan is not an

arm of the state.

The additional considerations under this subfactor are inconclusive.10 For example,

Rowan is subject to New Jersey’s Tort Claims Act, which implies that Rowan would otherwise

be immune from tort claims. However, the Third Circuit has previously noted that the Tort

Claims Act also applies to entities that are not considered arms of the state, like municipalities,

diminishing the salience of this attribute in the context of an immunity inquiry. Maliandi, 845

F.3d at 95. The same logic applies to the Court’s arm of the state inquiry here.

In addition, Rowan’s new designation as a public research university has little bearing on

this subfactor. Defendant contends that the Restructuring Act shifted Rowan’s status from a state

college to a public research university, “a designation Plaintiff now shares with Rutgers

University[,]” and thus supports a finding that Rowan, like Rutgers, is not an arm of the state.

Def. Opp. Mem. 15 (citing N.J.S.A. 18A:64M-2(c), (v)). But Defendant does not show that this

new designation, itself, has any independent legal or statutory significance. Further, the Kovats

court did not mention Rutgers’ designation as a public research university when determining the

school’s alter ego status. Kovats, 822 F.2d at 1310. Therefore the Court does not find Rowan’s

new designation to be probative of the University’s status under state law.

10 Defendant cites language in the Restructuring Act that purportedly indicates the Legislature’s intent for Rowan to

exercise substantial institutional autonomy. N.J.S.A. §§ 18A:64M-5, -30. While true and examined in more detail in

the autonomy section below, the Court notes that one of these provisions also allocates Rowan to the New Jersey

Department of State, and is thus a “double-edged sword” that weighs both in favor of and against the claim that

Rowan is an arm of the state. Maliandi, 845 F.3d at 93 (holding that the virtually identical language of N.J.S.A. §

18A:3B–27 cuts both for and against a finding that MSU was entitled to immunity and was therefore of little use in

the court’s assessment of the state law factor).

2. Incorporation, Ability to Sue and Be Sued, & Immunity from State

Taxation

First, “[s]eparate incorporation disassociates an entity from its State and thus weakens its

claim to Eleventh Amendment immunity.” Maliandi, 845 F.3d at 93. As Rowan, like Montclair,

has the power to adopt and use a corporate seal but has opted not to do so, N.J.S.A. § 18A:64M-

9(a), we find that this has “little bearing” on the question of Rowan’s citizenship. Maliandi, 845

F.3d at 93 (concluding that this subfactor had “little bearing” on MSU’s arm of the state status

since Montclair had the authority to incorporate but had chosen not to do so).

Second, “[a]n entity is more likely to be an arm of the State … if it lacks the ability to sue

and be sued in its own name.” Maliandi, 845 F.3d at 94. The Restructuring Act has changed the

balance of this subfactor, which worked in Rowan’s favor in Nannay. 101 F. Supp. 2d at 284.

Unlike in Nannay, Rowan now can sue and be sued in its own name. N.J.S.A. § 18A:64M-9(y).

This differentiates Rowan from Montclair in Maliandi and New Jersey state colleges generally,

which cannot sue or be sued in their own right. Maliandi, 845 F.3d at 94.

Third, the fact that Rowan is immune from state taxation, Nannay, 101 F. Supp. 2d at 284;

(Pl. Remand Motion 9 (citing N.J.S.A § 54:32B-1, et seq.)), weighs in favor of a finding that it is

an arm of the state, see Karns, 879 F.3d at 517; Maliandi, 845 F.3d at 95 (noting the fact that MSU

was immune from state taxes weighed in favor of immunity).

3. Other Relevant Considerations

When evaluating an entity’s status under the second Fitchik factor, the Third Circuit also

looks at “the entity's authority to exercise the power of eminent domain, application of state

administrative procedure and civil service laws to the entity, the entity's ability to enter contracts

and make purchases on its own behalf, and whether the entity owns its own real estate.” Karns,

879 F.3d at 516 (quoting Maliandi, 845 F.3d at 91).

First, Rowan’s ability to exercise eminent domain per N.J.S.A. § 18A:64M-9(l)—typically

a sovereign power—weighs in favor of a conclusion that Rowan should be afforded alter ego

status. See Maliandi, 845 F.3d at 95. Defendant is correct, however, that this factor must be taken

“with a grain of salt” because some entities not considered arms of the state may also exercise

eminent domain. Id. (citing Fitchik, 873 F.2d at 663).

Second, the Court considers whether New Jersey’s administrative procedure and civil

service laws apply to Rowan as “[a]n entity's claim to immunity is stronger if it is subject to a

State's administrative procedure and civil service laws.” Maliandi, 845 F.3d at 95. Rowan is

subject to New Jersey’s Administrative Procedure Act (“Administrative Procedure Act”), Pl.

Remand Motion 9 (citing N.J.S.A. § 18A:3B-6(f)); Nannay, 101 F. Supp. 2d at 284, civil service

laws, Miller Decl. Ex. A 8, and its employees are eligible for state healthcare and pension plans,

N.J.S.A. § 18A:64M-16. These attributes tip the scale in favor of remand. Cf. Kovats, 822 F.2d at

1310 (finding that Rutgers’ exemption from state civil service laws and administrative procedure

requirements indicated the school was “not treated as synonymous with the state”). Defendant

counters that because only a portion of Rowan’s employees are subject to civil service laws—20%

by Defendant’s calculation—it is of “minimal consequence” to the Court’s analysis. Def. Opp.

Mem. 22. Even assuming the accuracy of this estimate, the Court finds that 20% constitutes a

considerable subset of Rowan’s employees and is thus pertinent to the Court’s inquiry. See

Maliandi, 845 F.3d at 95 (noting the fact that a “significant subset” of state college employees are

subject to New Jersey’s civil service laws counsels in favor of immunity).

Third, the Court considers Rowan’s ability to enter into contracts, as entities free to contract

without state approval or oversight are less likely to be considered arms of the state. Maliandi, 845

F.3d at 95; Bowers, 475 F.3d at 548 (concluding the second Fitchik factor weighed in favor of

immunity in part because “the University is unable to buy or transfer real estate without the express

permission of a State Executive Council”). Rowan may enter into contracts of its own accord,

N.J.S.A. § 18A:64M-9(k), (q), (v), (aa), but is subject to a state-imposed competitive bidding

requirement in certain instances, N.J.S.A. § 18A:64M-9(v) (imposing a competitive bidding

requirement on all contracts entered into by Rowan for “the purchase of services, materials,

equipment and supplies, for the performance of any work, or for the hiring of equipment or

vehicles” valued above a specific threshold set by the Governor). These facts that simultaneously

cut for and against its arm of the state status.11

Fourth, Rowan can make purchases without state approval or input and own its own real

estate. N.J.S.A. § 18A:64M-9(q). These attributes suggest Rowan is not the State’s alter ego.

The Third Circuit has acknowledged that “the multifaceted nature of the status under state

law factor can make it so hopelessly checkered that it does not significantly help in determining”

whether an entity is an arm of the state. Maliandi, 845 F.3d at 91 (quoting Fitchik, 873 F.2d at

662) (cleaned up). Rowan’s general treatment under state law, ability to contract, and incorporation

status provide little clarification as to whether Rowan is entitled to alter ego status. As to the

remaining considerations, while Rowan may exercise eminent domain, is immune from state taxes,

and subject to the Administrative Procedure Act and civil service laws, the University can also sue

11 Defendant attempts to compel a different conclusion here by noting the numerous types of contracts exempt from

a competitive bidding requirement, allegedly indicating a lack of practical constraints on Rowan’s contractual

freedom. Def. Opp. Mem. 20–21. The Court is not persuaded by this argument. Rowan is undisputedly subject to a

state-imposed constraint on its ability to contract, N.J.S.A. § 18A:64M-9(v), which is not the case for all public

universities in New Jersey, e.g., Kovats, 822 F.2d at 1310 (noting Rutgers is not bound by competitive bidding

statutes). The Court also notes that these exceptions to the requirement are not unique to Rowan but apply to state

colleges as well, N.J.S.A. § 18A:64-56, which have been held to be arms of the state, e.g., Maliandi, 845 F.3d at 96.

and be sued, makes purchases on its own behalf, and own its own real estate. Where, as here,

examination of an entity’s status under state law is inconclusive, the second Fitchik factor

“effectively drops out of [the Court’s] overall Fitchik analysis.” Id.

iii. The Autonomy Factor

“The third factor instructs us to examine the degree to which an entity is autonomous from

the state, while ‘focusing on the entity's governing structure and the oversight and control exerted

by a State's governor and legislature.’” Patterson, 915 F.3d at 955 (quoting Maliandi, 845 F.3d at

96). This factor asks whether an entity’s autonomy is “constrained enough” by the State to be

considered an arm of that state. Maliandi, 845 F.3d at 99.

The Third Circuit’s analyses in Kovats and Maliandi are useful reference points for the

Court’s autonomy assessment here. The Maliandi court concluded that MSU was not autonomous,

using Rutgers and the University of Iowa as “benchmarks” for its evaluation. Id. at 96–99. In

reaching its conclusion, Maliandi court emphasized the Governor’s power to appoint all members

of MSU’s Board of Trustees and collectively bargain on behalf of MSU’s employees. Id. at 97.

The court also stressed that Montclair was “subject to significant reporting requirements and rules

for internal governance.” Id. at 98 (noting MSU was required to “hire an independent auditor and

prepare a publicly available audit, prepare an annual report on their general operations, prepare a

long-range facilities plan that includes a description of the source of non-state funds, and present

the Governor and legislature with an annual budget report.”). The State also constrained state

colleges like Montclair “by subjecting them to the Administrative Procedure Act, the State College

Contracts Law, and the civil service laws.” Id. (citations omitted). Importantly, the Maliandi court

recognized MSU retained some autonomy but was “constrained enough” to “tip this factor in favor

of immunity.” Id. at 99.

In contrast, the Third Circuit deemed Rutgers “largely autonomous” in Kovats. 822 F.2d at

1311. The court focused its autonomy analysis on Rutgers’ “dual governing structures”—which

“evolved from Rutgers' history as a privately chartered institution”—and the school’s financial

independence. Id. Rutgers was governed by two boards, the Board of Governors and the Board of

Trustees, who enjoyed a “high degree of self-government” over the school. Id. Roughly half of the

Board of Governors were appointed by the state Governor with advice and consent of the state

senate, and less than half of Rutgers’ Board of Trustees were appointed by the Governor. Id. The

court found “both boards may exercise their powers without recourse or reference to any

department or agency of the state” subject only to two minimal state constraints: (1) compliance

with state budget appropriations; and (2) compliance with state laws and regulations. Id. (citing

N.J.S.A. § 18A:65-28). As to the first constraint, the fact that “individual spending decisions are

not regulated beyond a requirements [sic] that the state be informed of those spending decisions”

was indicative of Rutgers’ autonomy. Id. Moreover, the court noted that “Rutgers is not required

to manage its funds as public moneys, but rather is free to establish accounts and invest and

withdraw funds as desired.” Id. The school was also free from the broad “operational constraints”

placed on most state agencies. Id. (noting Rutgers “need not comply with civil service, competitive

bidding or administrative procedure requirements”).

Rowan shares certain attributes with Rutgers and Montclair but is slightly more akin to

Montclair. Rowan, unlike Rutgers, was originally established as a state institution and operated

pursuant to the power afforded state colleges. N.J.S.A. § 18A:64M-2(h) (citing N.J.S.A. § 18A:64-

1 et seq. and N.J.S.A. § 18A:3B-1 et seq.); Pl. Remand Motion 10. And as with Montclair, “[t]he

Governor looms large” in Rowan’s affairs. Maliandi, 845 F.3d at 97. All members of Rowan’s

Board of Trustees are appointed by the Governor with the advice and consent of the Senate.

N.J.S.A. § 18A:64M-7(a); cf. Febres, 445 F.3d at 231 (“Gubernatorial appointment of board

members typically weighs only ‘slightly’ in favor of immunity.”). In addition, the Restructuring

Act provides that the Governor will continue to serve as the “public employer” for Rowan

employees and engage in collective bargaining on their behalf, as is the case for state college

employees. N.J.S.A. § 18A:64M-19(c) (incorporating N.J.S.A. § 18A:64-21.1).

Further, Rowan’s Board is required to make recommendations to the Governor and

Legislature regarding the University’s facilities and services needs “as an educational

instrumentality of the State[,]” N.J.S.A. § 18A:64M-15, and present an annual budget report to the

Governor and Legislature, N.J.S.A. § 18A:64M-9(d). The Restructuring Act empowers the

Secretary of Higher Education “to visit the university to examine into its manner of conducting its

affairs and to enforce an observance of its laws and regulations and the laws of the State[,]”

N.J.S.A. § 18A:64M-22.12 Rowan is also required to prepare a publicly available annual audit and

submit a long-range facilities plan to the State. N.J.S.A. §§ 18A:3B-6(l), -39(a).

Moreover, Rowan remains subject to the Administrative Procedure Act, N.J.S.A. §

18A:3B-6(f), state competitive bidding requirements, N.J.S.A. § 18A:64M-9(v), and state civil

services laws, Miller Decl. Ex. A 7–8, all of which demonstrate continued state control over the

University. See Nannay, 101 F. Supp. 2d at 284 (citing Rowan’s adherence to the “New Jersey

Administrative Procedure Act, New Jersey civil service rules, and State competitive bidding

requirements” as evidence that the State retains “significant control” over the school); cf. Kovats,

822 F.2d at 1311–12 (emphasizing that Rutgers’ “boards are not subject to the operational

12 Defendant urges the Court to discount these considerations because Rutgers is subject to the same state oversight

and statutory requirements per N.J.S.A. §§ 18A:65-25(b), -34 and was nonetheless found to be autonomous. Def.

Opp. Mem. 26. The Court notes that each Fitchik inquiry is particular to the entity at issue, and, while not

dispositive, these statutory requirements are undoubtedly relevant to the question of Rowan’s autonomy. Indeed, the

Maliandi court explicitly considered in these same statutory requirements and concluded that the autonomy factor

weighed in favor of MSU’s alter ego status. Maliandi, 845 F.3d at 98.

constraints placed on most other state agencies. For example, they need not comply with civil

service, competitive bidding or administrative procedure requirements.”).

Yet there are indicia of Rowan’s autonomy from the State. Like Rutgers, powers granted

to Rowan’s Board under the Restructuring Act may be exercised “without recourse or reference to

any department or agency of the State” subject to specific exceptions. N.J.S.A. § 18A:64M-12. As

discussed supra, Rowan can freely spend and invest the money in its accounts without state

interference. N.J.S.A. § 18A:64M-9(e), (f), (w). Rowan can also sue and be sued in its own name

and own property. N.J.S.A. § 18A:64M-9(q), (y). And though appointed by the Governor, Rowan’s

Board members are removable only for cause, N.J.S.A. § 18A:64M-7(a), “according them

considerable decisional independence once appointed[,]” Maliandi, 845 F.3d at 98.

Further, the Restructuring Act makes clear that the New Jersey Legislature intended Rowan

to have “a high degree of self-government.” N.J.S.A. § 18A:64M-5. As Defendant stresses, the

Act emphasizes that “the university shall be independent of any supervision or control of the

Department of State … and the allocation shall not in any way affect the principles of institutional

autonomy established by that act ….” N.J.S.A. § 18A:64M-30. This is relevant but not dispositive,

however, as virtually the same language also applies to New Jersey state colleges, including MSU.

Compare N.J.S.A. § 18A:64M-30 and N.J.S.A. § 18A:3B-27; see Maliandi, 845 F.3d at 98–99

(recognizing that “the New Jersey legislature has on many occasions declared its intention for state

colleges to have ‘institutional autonomy’” but nonetheless concluding MSU was not autonomous

(citing N.J.S.A. § 18A:3B-27)).

On balance, the Court finds that Rowan’s autonomy is roughly comparable to that of MSU

in Maliandi. Though able to exercise significant autonomy, Rowan is constrained enough by state

oversight and regulations to push the autonomy factor slightly in Plaintiff’s favor.

iv. Balancing the Fitchik Factors

“After identifying the direction in which each factor points, [courts] balance them to

determine whether an entity amounts to an arm of the State.” Maliandi, 845 F.3d at 84. In the

instant matter, the question of whether Rowan constitutes an arm of the state for diversity purposes

is a very close call. The funding factor weighs decisively against Rowan’s claim of alter ego status,

while the autonomy factor slightly favors a finding that the University is an arm of the state. The

status under state law factor is inconclusive. As only one of the three Fitchik factors falls in

Defendant’s favor, the Court concludes that Defendant has failed to show that Rowan is not an

arm of the state.

As noted above, Defendant bears the burden of proof to show that diversity jurisdiction is

proper. Samuel-Bassett, 357 F.3d at 396. Ultimately, it is the burden of proof coupled with the

Third Circuit’s command that “all doubts should be resolved in favor of remand” that tips the

balance towards remand here. Abels, 770 F.2d at 29. In the instant matter, Defendant has failed to

show that Rowan is citizen of New Jersey for diversity purposes. Because Defendant has not

established that diversity of citizenship exists between the parties in this case, the Court lacks

subject matter jurisdiction to decide the matter. See 28 U.S.C. § 1332(a).

IV. Conclusion

For the foregoing reasons, Plaintiff’s Motion to Remand is GRANTED. This case shall be

remanded to the New Jersey Superior Court, Gloucester County, Civil Division. An order shall

issue.

Date: 10/25/2021 /s/ Robert B. Kugler

ROBERT B. KUGLER

United States District Judge