McDonough Associates, Incorpor v. Ann Schneider

In the

United States Court of Appeals

For the Seventh Circuit

No. 12-2702

M C D ONOUGH A SSOCIATES, INC.,

Plaintiff-Appellee,

v.

B ILL G RUNLOH and A NN L. S CHNEIDER,

Defendants-Appellants.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 1:12-cv-05035—Milton I. Shadur, Judge.

A RGUED N OVEMBER 13, 2012—D ECIDED JULY 16, 2013

Before C UDAHY, S YKES, and H AMILTON, Circuit Judges.

H AMILTON, Circuit Judge. This case presents an attempt

by a state contractor, plaintiff McDonough Associates,

Inc., to pursue what amounts to a breach of contract

claim against the State of Illinois in federal court. Threat-

ened with bankruptcy and collapse if it did not receive

payments it contends were due from the state,

McDonough presented the district court with a creative

2 No. 12-2702

theory for relief under the Due Process Clause of the

Fourteenth Amendment. Facing these exigencies, the

district court entered a temporary restraining order

(TRO) that effectively ordered state officials to pay

McDonough from the state treasury to compensate for

alleged breaches of contract. While McDonough has

cloaked its claim in the language of federal due

process, its suit remains in substance an effort to have

a federal court order state officials to make payments

from the state treasury to remedy past alleged breaches

of contract. Such relief is prohibited by the Eleventh

Amendment. We reject McDonough’s attempt to side-

step the Eleventh Amendment, and we vacate the

district court’s TRO.

I. Factual and Procedural Background

Plaintiff McDonough Associates, Inc. is an architecture

and engineering firm that frequently bid on and won

contracts for design jobs for the Illinois Department of

Transportation, commonly known as IDOT. IDOT regu-

larly contracts with private firms like McDonough. To

appreciate the relief the district court ordered, we need

to provide some background information regarding

IDOT’s practices for negotiating supplemental terms

when the scope of an original contract is not large

enough to complete the needed work.

When that happens, IDOT negotiates terms with the

contractor for the remaining work. IDOT then sends the

contractor a “prior approval” letter. The prior approval

letter reflects this negotiation and asks the contractor to

No. 12-2702 3

draft a supplemental agreement package for IDOT’s

consideration. The prior approval letter authorizes the

contractor to continue working until it has accrued $50,000

in additional costs. The letter explains that, up to the

$50,000, “[a]ll costs accrued under this authorization will

be included in, and this letter of authorization superseded

by, the supplemental agreement.” The prior approval

letter makes clear that it is not a contractual agreement

that supplements the old contract. It states explicitly

(in bold and underlined text) that until the supplemental

agreement “is fully executed,” the firm “may not invoice

for any of this additional work until the required supple-

mental agreement between the Department and your firm

is fully executed.” The state thus disclaims liability absent

a signed supplemental agreement for work beyond the

$50,000 stopgap authorization.

The Illinois Procurement Code governs the state’s

contractual relationships and imposes certain require-

ments that must be met for a contract with the state to

be fully executed. The Code provides that “The State

shall be under no obligation to issue an award or execute

a contract,” and “No person shall have any right to a

specific contract with the State unless that person has

a contract that has been signed by an officer or

employer of the purchasing agency with appropriate

signature authority.” 30 ILCS 500/1-25. Illinois statutes

include specific provisions for contracts over $250,000,

one of which is the requirement that certain individuals

sign a contract before it is considered validly executed.

Under Illinois law, the agency’s chief executive officer

must sign the contract and the chief legal counsel and

4 No. 12-2702

chief fiscal officer must either sign the contract or other-

wise approve the contract in writing. 30 ILCS

105/9.02(a)(1). Within IDOT, internal policy also requires

that the chief procurement officer signs the contract.

Absent these signatures, under Illinois state law

a contract of the type in dispute here is not valid and

therefore not an enforceable debt. 30 ILCS 500/20-80(d).

IDOT’s chief executive officer is defendant Ann Schneider

and IDOT’s chief procurement officer is defendant

Bill Grunloh. Thus, for a supplemental agreement to

have been fully executed and contractually binding

on the state under Illinois law, it must have had

Grunloh’s and Schneider’s signatures. Their decisions not

to sign the supplemental agreements in question form

the basis of McDonough’s federal due process claim.

McDonough claims that IDOT owed it nearly $2 million

accrued from additional work beyond the limits of the

original contracts in three separate projects. In each of

these projects, a prior approval letter had been sent to

and received by McDonough between June and October

2011. In none of these projects had a supplemental agree-

ment been fully executed, yet McDonough continued

working on the contracts beyond the $50,000 caps.

In January 2012, based on findings that McDonough

had made significant accounting errors that called its

business integrity into question, chief procurement

officer Grunloh, pursuant to his power under 44 Ill.

Admin. Code § 6.530, suspended (on an interim basis)

McDonough’s status as a “prequalified vendor” automati-

cally eligible to bid on IDOT projects. In June 2012, follow-

No. 12-2702 5

ing an investigation, hearing, and recommendation by

a neutral decision-maker, as required by 44 Ill. Admin.

Code § 6.630, Grunloh converted the interim suspension

to a three year suspension.

In other words, in the interim after prior

approval letters had been sent but before supplemental

agreements had been executed, McDonough’s status

with IDOT changed considerably. Its billing practices

had been questioned and were ultimately adjudicated

as lacking integrity and being untrustworthy. Informed

by the same findings that resulted in McDonough’s

suspension, IDOT’s Grunloh and Schneider declined

to approve or sign any further contractual agreements

with McDonough, including the three supplemental

agreements in question. The supplemental agree-

ments were therefore not legally binding on IDOT because

they lacked Schneider’s signature, required by Illinois law.

McDonough claims that it continued working on the

three projects beyond the $50,000 caps without executing

supplemental agreements because it was IDOT’s normal

business practice always to sign a supplemental agree-

ment once a prior approval letter had been sent.

McDonough claims that the supplemental agreement is

something of a bureaucratic formality. 1 Based on this

1

The transmission and receipt of these prior approval letters

and their contents saying that contractors may not invoice

for work prior to the execution of a supplemental agreement

are all undisputed. The parties dispute, however, IDOT’s

customary business practices. McDonough argues that the

(continued...)

6 No. 12-2702

understanding, McDonough alleged, Grunloh’s and

Schneider’s refusal to sign the supplemental agreements

deprived it of its property interests in payment on

the accrued debts without receiving federally guaran-

teed due process of law.2

McDonough argued to the district court that the defen-

dants’ refusal to release the funds it claimed it had

earned would render it bankrupt, resulting in immediate

(...continued)

text of the prior approval letters is contrary to IDOT’s

customary practice. McDonough claims that the $50,000 figure

in the prior approval letters is a “universally used plug-in

dollar amount” that “has no relation to the amount agreed upon

between IDOT and its consultants.” Furthermore, McDonough

argues that it is “IDOT’s practice, not only to allow, but to

require, consultants [such as McDonough Associates, Inc.]

continue to work on projects after the $50,000 stated plug-in

amount has been exhausted.” Without conceding the point,

IDOT argues that whatever its customary practice might be, it

is not relevant here because McDonough’s suspension took

the parties’ business relationship well outside the normal

course of business. We need not resolve this factual dispute,

which does not affect the controlling constitutional question.

2

McDonough’s original complaint sued Grunloh and Schneider

in both their individual and official capacities and included

additional claims related to McDonough’s suspension from

IDOT’s pre-approved contractor list after an audit revealed

questionable business practices. Prior to this appeal of the

TRO, McDonough voluntarily dismissed all claims without

prejudice except the due process claim against Grunloh and

Schneider in their official capacities. We thus do not consider

or discuss the dismissed claims.

No. 12-2702 7

layoffs and corporate collapse. McDonough requested

and the district court granted a TRO that compelled

Grunloh and Schneider to sign the supplemental agree-

ments, ordering them to “cease and desist from

interfering with the processing of any paperwork in the

normal course of business related to monies claimed

by McDonough Associates, Inc.” The district court ap-

preciated that the relief it fashioned via the TRO

compelled state officials to execute contracts with

private parties, necessarily resulting in payment to

private parties. The court explained that “what is going

to happen is that your — Mr. Grunloh is going to take

his hot little hand and a pen in hand or whatever has to

be done . . . and he is going to sign the thing that is neces-

sary for the processing in the orderly course.” As a

result of that TRO, the supplemental agreements were

fully executed and binding under Illinois state contract

law and thus IDOT disbursed nearly $1.3 million to

McDonough before we stayed the TRO on an emergency

basis.

While defendants were complying with the TRO, they

also moved the district court to dissolve or decline to

extend the TRO, arguing that it was essentially a “contract

claim for money damages against the State of Illinois,

and the Eleventh Amendment forbids retrospective

awards of damages directly against the State Treasury.”

The district court denied defendants’ request, concluding

that the relief granted fell under the Ex parte

Young, 209 U.S. 123 (1908), exception to state sovereign

immunity. Defendants next requested that we issue an

emergency stay of the TRO pending appeal, which

we granted though, as noted, $1.3 million had already

8 No. 12-2702

been paid. We now consider the appeal on a non-emergent

basis.

II. Analysis

Under 28 U.S.C. § 1331, the district court had jurisdic-

tion to consider McDonough’s complaint alleging viola-

tions of federal due process rights. We have jurisdiction

under 28 U.S.C.§ 1292(a) to review the TRO and the

district court’s determination that the Eleventh Amend-

ment did not bar the TRO. Moreover, district court deci-

sions rejecting state claims of sovereign immunity

under the Eleventh Amendment are immediately

reviewable under 28 U.S.C. § 1291 as final decisions

pursuant to the collateral order doctrine. Puerto Rico

Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S.

139 (1993); Goshtasby v. Bd. of Trustees of Univ. of Illinois, 123

F.3d 427, 427-29 (7th Cir. 1997). When considering

the appeal of a TRO, we review the district court’s

legal conclusions de novo, its findings of fact for clear

error, and its balance of the equities for abuse of discre-

tion. H-D Michigan, LLC v. Hellenic Duty Free Shops S.A.,

694 F.3d 827, 841 (7th Cir. 2012). The denial of state sover-

eign immunity is a legal conclusion that we therefore

review de novo. Burrus v. State Lottery Comm’n of Indiana,

546 F.3d 417, 419 (7th Cir. 2008); Richman v. Sheahan, 270

F.3d 430, 434 (7th Cir. 2001).3

3

After oral argument, McDonough was put into Chapter 7

bankruptcy proceedings, but that does not prevent our

decision in this appeal. The automatic stay under 11 U.S.C.

(continued...)

No. 12-2702 9

A. Mootness

The TRO in question expired on August 8, 2012. The

expiration of the TRO, however, has not mooted the

appeal. Compliance with injunctions “does not moot

an appeal if it remains possible to undo the effects of

compliance or if the order will have a continuing impact

on future action.” 13B Wright & Miller, Federal Practice

& Procedure, Jurisdiction & Related Matters, § 3533.2.2 (3d

ed. 2012). “Mootness is particularly inapposite if an ill-

conceived injunction creates a standoff by compelling

conduct that is prohibited by other law.” Id. See also

Dale M. ex rel. Alice M. v. Bd. of Educ. of Bradley Bourbonnais

High Sch. Dist. No. 307, 237 F.3d 813, 815 (7th Cir. 2001)

(“A judgment creditor who pays the judgment pending

appeal instead of posting a supersedeas bond . . . is entitled

to the return of its money if the decision is reversed, and

3

(...continued)

§ 362(a)(1) for judicial proceedings against the debtor does not

apply to suits brought by the debtor. Martin-Trigona v.

Champion Federal Savings and Loan Ass’n, 892 F.2d 575, 577 (7th

Cir. 1989). The fact that plaintiff McDonough is now the

appellee does not matter. Whether a suit is “against the

debtor” depends on the party’s status at the time the initial

action was filed. Cathey v. Johns-Manville Sales Corp., 711 F.2d

60, 61-62 (6th Cir. 1983); Ass’n of St. Croix Condominium Owners

v. St. Croix Hotel Corp., 682 F.2d 446, 449 (3d Cir. 1982); In re Mid-

City Parking, Inc., 332 B.R. 798, 807 (Bankr. N. D. Ill. 2005)

(collecting cases). If the state seeks restitution from

McDonough on remand, of course, it may need to deal with

the complications caused by the bankruptcy, including the stay.

10 No. 12-2702

so the payment does not moot the appeal unless the

appellant has relinquished his right to seek repay-

ment if he wins.”).4

Before we granted the emergency stay, IDOT paid

McDonough approximately $1.3 million as a result of

the TRO. These disputed payments were made

because, and only because, the TRO compelled Grunloh

and Schneider to execute otherwise unenforceable con-

tracts. These contracts, which the district court required

Grunloh and Schneider to sign under threat of contempt

sanctions, would remain legally binding even after the

expiration of the TRO. As the parties explained at oral

argument, the emergency stay interrupted the ongoing

payments that the district court had ordered, and those

4

If a private party appeals a TRO or preliminary injunction that

forced it to make payment to the state, mootness is a more

pressing concern. Ordering a state to reimburse a private party

based on payments compelled by an erroneous injunction

exceeds our judicial power. In such cases, the Eleventh Amend-

ment would bar the relief sought on appeal, namely the pay-

ment of funds back to the plaintiff. See Porco v. Trustees of

Indiana Univ., 453 F.3d 390 (7th Cir. 2006) (dismissing as moot

an appeal of an injunction ordering private party to make

payments to state university; plaintiff had already made

payments to state defendants, so the Eleventh Amendment

barred the remedy sought by the appeal); 13B Wright & Miller,

Federal Practice & Procedure, Jurisdiction & Related Matters,

§ 3533.2.2 (3d ed. 2012) (“Payment of a money judgment,

however, may moot an appeal if some legal obstacle, such as

the Eleventh Amendment, prevents the court from ordering

repayment.”).

No. 12-2702 11

payments would continue absent a decision by this

court on the propriety of the TRO in the first place.

Thus the question of the state’s Eleventh Amendment

immunity “is not merely academic.” Alabama v. Pugh,

438 U.S. 781, 782 (1978) (per curiam). The state officials

have “an interest in being dismissed from this action

in order to eliminate the danger of being held in

contempt if [they] should fail to comply with the man-

datory injunction.” Id.

B. The Eleventh Amendment

Having established jurisdiction, we turn to the applica-

tion of the Eleventh Amendment. In Chisholm v. Georgia,

2 U.S. (2 Dall.) 419 (1793), the Supreme Court allowed

an action by a private citizen of South Carolina against

the State of Georgia to collect a debt incurred during

the American Revolution. One member of the majority

explained that the “concept of sovereignty had no place

in democracy [and] sovereign immunity could not pre-

clude federal court jurisdiction.” John E. Nowak, The

Scope of Congressional Power to Create Causes of Action

Against State Governments and the History of the Eleventh

and Fourteenth Amendments, 75 Colum. L. Rev. 1413, 1431

n.109 (1975), citing Chisholm, 2 U.S. (2 Dall.) at 454-58

(opinion of Wilson, J.). The Chisholm decision “created

such a shock of surprise that the Eleventh Amendment

was at once proposed and adopted.” Monaco v.

Mississippi, 292 U.S. 313, 325 (1934). The Eleventh Amend-

ment rejected Chisholm, commanding: “The Judicial

power of the United States shall not be construed to

12 No. 12-2702

extend to any suit in law or equity, commenced or prose-

cuted against one of the United States by Citizens of

another State, or by Citizens or Subjects of any Foreign

State.” The Eleventh Amendment established that “each

State is a sovereign entity in our federal system; and

second, that [it] is inherent in the nature of sovereignty

not to be amenable to the suit of an individual without

[a State’s] consent . . . .” Seminole Tribe of Florida v.

Florida, 517 U.S. 44, 54 (1996) (internal quotations omit-

ted). Accordingly, the general rule is that private indi-

viduals are unable to sue a state in federal court absent

the state’s consent.

Ex parte Young recognized what has become one of

several well-established exceptions to the Eleventh

Amendment bar on suing states in federal court, permit-

ting private citizens to sue state officials in their official

capacities to require them to comply with federal law on

an ongoing basis. 209 U.S. 123 (1908). In such cases,

the state official is violating federal law and therefore

“the use of the name of the state to enforce an uncon-

stitutional act to the injury of complainants is a

proceeding without the authority of, and one which

does not affect, the state in its sovereign or govern-

mental capacity.” Id. at 159. Ex parte Young employed a

chameleon-like legal fiction, reasoning that when a state

official violates the federal Constitution, that official is

“stripped of his official or representative character” and

thus also of any immunity defense. Id. at 160. In these

kinds of cases, “the officer is simply prohibited from

doing an act which he had no legal right to do.” Id. at 159;

see also Indiana Protection & Advocacy Svcs. v. Indiana

No. 12-2702 13

Family & Social Svcs. Admin, 603 F.3d 365, 371 (7th Cir.

2010) (en banc) (collecting cases applying Ex parte

Young exception). The Ex parte Young exception allows

the lower federal courts to enforce federal law against

the states themselves, so that plaintiffs asserting

federal rights against the states have recourse to federal

courts short of the Supreme Court itself.

Edelman v. Jordan explained the limits of the relief a

court may grant under Ex parte Young. 415 U.S. 651 (1974).

In Edelman, plaintiffs sought declaratory and injunctive

relief for injuries suffered when a state agency incor-

rectly administered a federal-state program providing

aid to the elderly, blind, and disabled. Plaintiffs also

sought money damages for all “benefits wrongfully

withheld.” Id. at 656. The Court affirmed the grant

of injunctive and declaratory relief but vacated the retro-

active monetary award as barred by the Eleventh Amend-

ment. Edelman thus prohibited relief that was not pros-

pective in nature, specifically barring awards of

“accrued monetary liability which must be met from

the general revenues of a State.” Id. at 664. The Court

recognized, of course, that, in some cases injunctive

relief ordering the state to stop violating federal law on

an ongoing basis might cost the state money. Id. at 667-

68, discussing Goldberg v. Kelly, 397 U.S. 254 (1970). This

was acceptable in such cases because “the fiscal conse-

quences to state treasuries in these cases were the neces-

sary result of compliance with decrees which by their

terms were prospective in nature.” Id. at 667-68.

In such cases, the state expenditure was an ancillary

rather than primary effect of the relief ordered and there-

14 No. 12-2702

fore did “not involve individual citizens’ conducting a

raid on the state treasury for an accrued monetary liabil-

ity.” Milliken v. Bradley, 433 U.S. 267, 290 n.22 (1977). Cf.

Bowen v. Massachusetts, 487 U.S. 879, 893-94 (1988)

(“The fact that a judicial remedy may require one party

to pay money to another is not a sufficient reason to

characterize the relief as ‘money damages.’ Thus, we

have recognized that relief that orders a town to

reimburse parents for educational costs that Congress

intended the town to pay is not ‘damages.’ ”).

A payment of state funds, however, that is not “a neces-

sary consequence of compliance in the future with a

substantive federal-question determination,” is not per-

mitted. Edelman, 415 U.S. at 668. The Eleventh Amend-

ment was adopted to ensure that such retroactive

damages claims would not be heard in federal court

absent the state’s consent. Thus, courts may enjoin

ongoing behavior by state officials that violates federal

law. They may also order state officials to act in a

certain manner going forward that may cost the state

money to implement. They may not, however, direct a

state to make payments to resolve a private debt or to

remedy a past injury to a private party.5 The district

5

The federal courts retain the ability to ensure that state

agencies and departments comply with the conditions and

requirements set forth in federal grant and aid programs, for

example. See, e.g., Quern v. Jordan, 440 U.S. 332 (1979) (holding

that injunction that state officials must inform individuals

that they are entitled to apply to state for wrongly withheld

(continued...)

No. 12-2702 15

court determined that the relief sought by McDonough

fell under the Ex parte Young exception and therefore

was not barred by the Eleventh Amendment. This deter-

mination was in error for reasons we now explain.

C. The TRO

“In determining whether the doctrine of Ex parte Young

avoids an Eleventh Amendment bar to suit, a court

need only conduct a ‘straightforward inquiry into

5

(...continued)

benefits is not retroactive and thus not barred by Eleventh

Amendment, even though such applications may ultimately

result in state expenditures of money); see also James M.

Hirschhorn, Where the Money Is: Remedies to Finance Compliance

with Strict Structural Injunctions, 82 Mich. L. Rev. 1815, 1864

(1984) (pointing out that in these types of cases “the payment of

retroactive benefits will depend on the assent of the state

authorities, including the appropriation of funds by the legisla-

ture”). State sovereign immunity and federal oversight are

thus compatible because the state has the “option to stop

providing a program if it chooses not to meet federal legal

requirements for engaging in the activity.” Id. Cf. Bowen v.

Massachusetts, 487 U.S. 879, 893-95 (1988) (explaining distinc-

tion between money damages understood properly as compen-

satory relief “to substitute for a suffered loss” and specific

remedies that do not substitute for a loss “but attempt to give

the plaintiff the very thing to which he is entitled”) (internal

quotations and citations omitted). Nothing in this opinion

should call into question this established power of the

federal government.

16 No. 12-2702

whether [the] complaint alleges an ongoing violation of

federal law and seeks relief properly characterized as

prospective.’ ” Verizon Md. Inc. v. Public Svcs. Comm’n of

Md., 535 U.S. 635, 645 (2002), quoting Idaho v. Coeur

d’Alene Tribe of Idaho, 521 U.S. 261, 296 (1997). McDonough

argues it has a property right to the money bound up in

the unsigned supplemental agreements and that defen-

dants’ refusal to sign the supplemental agreements de-

prived it of this property right without its federal Con-

stitutional right to due process. Based on this argument,

McDonough persuaded the district court to order the

state officials, Grunloh and Schneider, to sign the agree-

ments and thus authorize payment of the alleged debts.

McDonough recognizes that the Eleventh Amend-

ment bars federal courts from ordering the state to dis-

burse funds to a private party for retroactive damages

but argues that this case falls under the Ex parte Young

exception to state sovereign immunity. McDonough

argues that the relief requested is not payment for a past

injury but rather a court order that defendants resume

the normal course of business. Framing the relief in

this way, McDonough has tried to shoehorn its request

into Ex parte Young by characterizing it as a prospective

decree that merely ordered state officials to stop

violating its federal due process rights. As we explained

above, however, the only prospective action that remains

before payment is for Grunloh and Schneider to sign

the supplemental agreements.

While the payment of funds is indeed the second step

following from the TRO after the procedural act of

No. 12-2702 17

signing, it is more importantly the primary effect. Ex parte

Young and its progeny permit equitable relief resulting

in the state expenditure of funds only when that expendi-

ture is an ancillary, not primary, effect of the relief.

McDonough essentially requested and received retro-

active damages for the alleged breaches of contracts or,

as the district court put it, “payment for past services.”

The TRO restored “any flow of funds that were

attributable not to the future services, not to the con-

tinuation of services, but the prior services.” We find

that this relief is clearly barred by the Eleventh Amend-

ment as reflected in Edelman.

Here the relief sought, “processing of paperwork,”

was tantamount to signing a check made out to plaintiff,

as all parties and the district court understood. Such

relief clearly violates Edelman and thus cannot be saved

by reliance on Ex parte Young. Casting this relief in terms

of the act of signing as opposed to the act of paying

does not make the payment, though second in time,

ancillary. The only purpose of the compelled signatures

was to secure payment. “Ex parte Young cannot be used

to obtain an injunction requiring the payment of funds

from the State’s treasury . . . or an order for specific

performance of a State’s contract . . . .” Virginia Office

for Protection & Advocacy v. Stewart, 131 S. Ct. 1632, 1639

(2011) (internal quotations omitted); see also MSA

Realty Corp. v. Illinois, 990 F.2d 288, 294 (7th Cir. 1993)

(“Even after Ex parte Young was decided in 1908, the

Supreme Court has never approved a lower court order

requiring officials of a state to take actions that con-

stitute performance by a state of obligations that are the

18 No. 12-2702

state’s in its political capacity.”); Zych v. Wrecked Vessel

Believed to be the Lady Elgin, 960 F.2d 665, 669 (7th Cir.

1992) (“Edelman holds that courts may command

public officials to obey the Constitution and federal

statutes as they carry out their duties in the future but

may not direct them to invade the state treasury to

make good for past misdeeds.”).

Council 31 of AFSCME v. Quinn, recently decided by

this court, is instructive. 680 F.3d 875 (7th Cir. 2012). In

Council 31, we considered the claim that the state’s

decision to freeze employees’ salaries and wages

violated the employees’ collective bargaining agree-

ments. A public employee union requested a preliminary

injunction compelling the state to pay the wages set by

the collective bargaining agreements, arguing that the

failure to do so would violate the Contracts and Equal

Protection Clauses of the federal Constitution. We

found the fact that the injunction requested by the

union would not “specifically require the court to

direct payment of funds out of the State’s treasury” to be

“immaterial.” Id. at 883-84.

We explained: “It is necessary to look not at the type

of relief sought, but the effect the relief would have on

the State if it were afforded to the plaintiff.” Id. at 883.

The essential nature of the relief sought would “require

direct payments by the state from its treasury,” which

would thus “force the defendants acting in their official

capacities to extract funds from the State’s treasury for the

ultimate benefit of the plaintiffs.” Id. at 883-84 (internal

quotations omitted). This ultimate result would have

No. 12-2702 19

violated the Eleventh Amendment and we therefore

affirmed the district court’s denial of the requested relief,

holding that the Ex parte Young exception did not apply.

That same analysis applies equally here. Thus, we are not

persuaded by McDonough’s creative styling of its claim.

It remains in substance a prayer for relief based on

state law for an alleged “monetary loss resulting from

a past breach of a legal duty on the part of the

defendant state officials,” which is barred by the

Eleventh Amendment. Edelman, 415 U.S. at 668. The TRO

thus exceeded the boundaries set by the Eleventh Amend-

ment by ordering state officials to pay a private party

for an alleged debt.

The idea that a state should make good on its

contracts has considerable appeal to judges, lawyers, and

state creditors, and that was exactly what the Supreme

Court ordered in Chisholm v. Georgia:

A state, like a merchant, makes a contract. A

dishonest State like a dishonest merchant, willfully

refuses to discharge it: The latter is amenable to a

Court of Justice: Upon general principles of right, shall

the former when summoned to answer the fair de-

mands of its creditor, be permitted, proteus-like, to

assume a new appearance, and to insult him and

justice by declaring I am a Sovereign State? Surely not.

2 U.S. (2 Dall.) 419, 456 (1793) (opinion of Wilson, J.). As

understandable as that view may be, the Eleventh Amend-

ment was a swift and direct rejection of it, and it

deprived federal courts of the power to issue such

orders without the state’s consent. We understand

the predicament that McDonough described and the

20 No. 12-2702

district court’s response to it, especially when the court

was told that failure to enter the TRO would result in

bankruptcy and lost jobs. Those reasons, however,

do not authorize the district court or us to avoid

complying with the Eleventh Amendment.

The temporary restraining order of the district court

is V ACATED and the case is R EMANDED for further pro-

ceedings consistent with this opinion.

7-16-13