Cooper v. SEPTA

Opinions of the United

2008 Decisions States Court of Appeals

for the Third Circuit

11-26-2008

Cooper v. SEPTA

Precedential or Non-Precedential: Precedential

Docket No. 07-1522

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 07-1522

ALLISON COOPER,

ON BEHALF OF HERSELF

AND ALL OTHERS SIMILARLY SITUATED

v.

SOUTHEASTERN PENNSYLVANIA

TRANSPORTATION AUTHORITY,

Appellant

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

D.C. Civil Action No. 06-cv-0888

(Honorable Thomas M. Golden)

Argued March 4, 2008

Before: SCIRICA, Chief Judge,

FISHER and ROTH, Circuit Judges.

(Filed: November 26, 2008)

THOMAS S. BIEMER, ESQUIRE (ARGUED)

STEVEN B. GOODMAN, ESQUIRE

MARIANA ROSSMAN, ESQUIRE

Dilworth Paxson

3200 Mellon Bank Center

1735 Market Street

Philadelphia, Pennsylvania 19103

MICHAEL G. TIERCE, ESQUIRE

JO BENNETT, ESQUIRE

Stevens & Lee

1818 Market Street, Suite 2900

Philadelphia, Pennsylvania 19103

Attorneys for Appellant

JORDAN M. LEWIS, ESQUIRE (ARGUED)

Siegel, Brill, Greupner, Duffy & Foster

1300 Washington Square

100 Washington Avenue South

Minneapolis, Minnesota 55401

PATRICIA V. PIERCE, ESQUIRE

HANNAH SCHWARZSCHILD, ESQUIRE

Willig, Williams & Davidson

1845 Walnut Street, 24th Floor

Philadelphia, Pennsylvania 19103

2

Attorneys for Appellee,

Allison Cooper

LAWRENCE A. KATZ, ESQUIRE

Coffey & Kaye

Two Bala Plaza, Suite 718

Bala Cynwyd, Pennsylvania 19004

Attorney for Amici Curiae-Appellee,

United Transportation Union,

Brotherhood of Railroad Signalmen,

Brotherhood of Locomotive Engineers and Trainmen

OPINION OF THE COURT

SCIRICA, Chief Judge.

At issue is whether the Southeastern Pennsylvania

Transportation Authority (“SEPTA”) is entitled to sovereign

immunity under the Eleventh Amendment. In 1991, we

determined SEPTA was not an arm of the state. Bolden v.

SEPTA, 953 F.2d 807 (3d Cir. 1991) (en banc), cert. denied, 504

U.S. 943 (1992). Now SEPTA contends that subsequent

changes in Eleventh Amendment jurisprudence and in SEPTA’s

state funding formula demand reconsideration and entitle it to

sovereign immunity. The District Court disagreed. We will

affirm.

3

Plaintiff Allison Cooper, a bus driver for SEPTA,

brought a collective action under the Fair Labor Standards Act

(“FLSA”), 29 U.S.C. § 207(a). She contends SEPTA

undercompensates its bus drivers by failing to fully account for

their performance of required pre-trip safety inspections.

SEPTA filed a motion to dismiss citing the Eleventh

Amendment bar of sovereign immunity. After allowing

discovery on SEPTA’s funding, the District Court construed the

motion as one for summary judgment and denied it. SEPTA

appealed.

I.

SEPTA, a metropolitan transportation authority created

by the Commonwealth of Pennsylvania, 1 operates a mass-transit

system within Philadelphia and its surrounding counties, as well

as points in New Jersey. The pay period for SEPTA’s bus

drivers commences ten minutes before the bus is scheduled to

pull out of the depot in the morning. Those who drive a “swing

run” – two shifts a day, with a break in between – are

compensated for the second shift commencing at the time of the

scheduled pull-out in the afternoon. The bus drivers must

perform a safety inspection before any departure, whether in the

morning or afternoon. According to Cooper, these inspections

take ten to thirty minutes to complete.

Cooper filed this collective action, bringing claims under

1

See 74 Pa. Cons. Stat. §§ 1701–1785.

4

the FLSA, 29 U.S.C. § 207(a), as well as under state law.2 She

contended SEPTA deprived its bus drivers of compensation by

paying them for only a portion of the time it took to perform

morning inspections and by failing to pay them at all for

2

Count 1 asserted “SEPTA has willfully and intentionally

engaged in ongoing and knowing violations of the overtime

provisions of the FLSA by requiring plaintiff and all others

similarly situated to conduct pre-trip inspections before their

runs, but not paying them for all time worked performing the

pre-trip inspections, and not counting the inspection time for

purposes of calculating overtime.” Compl. ¶ 40. Count 1 was

brought as a collective action on behalf of “those bus drivers

who, without factoring in the time spent performing pre-trip

inspection, were already working at least 40 hours a week.” Id.

¶ 38. Count 2 set forth two classes – a “swing shift class” and

a “morning pre-trip class” – and contended SEPTA’s conduct

was prescribed by state statute and breached its collective

bargaining agreement. Counts 3-5 adopted these two classes

and asserted various other claims under state law.

Subsequent to filing her complaint, Cooper “narrowed

her lawsuit to a single claim and now asserts a single class,

brought under the FLSA. The class consists of all SEPTA

‘swing run’ bus drivers (defined as all drivers who work two

shifts in a day, with lengths of varying breaks between their

runs) who work at least 40 hours a week but who are not paid

for their required afternoon pretrip vehicle inspections.”

Cooper’s Mem. in Support of Motion to Certify 4.

5

inspections before the second shift of a swing run. Proceedings

in the District Court were stayed pending the outcome of this

appeal.3

II.

The District Court had jurisdiction under 28 U.S.C. §

1331. An order denying Eleventh Amendment immunity is

immediately appealable as a final order under the collateral

order doctrine. P.R. Aqueduct & Sewer Auth. v. Metcalf &

Eddy, Inc., 506 U.S. 139, 144-45 (1993). Accordingly, we have

jurisdiction under 28 U.S.C. § 1291. Our review of a denial of

summary judgment is plenary. Hampe v. Butler, 364 F.3d 90, 93

(3d Cir. 2004). “The party asserting immunity bears the burden

of production and persuasion.” Febres v. Camden Bd. of Educ.,

3

On July 18, 2007, after briefing but before oral argument,

the General Assembly enacted Act 44, 74 Pa. Cons. Stat. §§

1501–1520. Act 44 replaced the provisions contained in

Chapter 13 of Title 74 (§§ 1301–1315), which pertained to

“Public Transportation Assistance” and (with the exception of

§ 1315) were enacted as part of Act 26 of 1991 (“Act 26”). As

discussed infra, Act 26’s provisions created a dedicated source

of funding for public transportation throughout the state and

imposed certain requirements on the entities applying for this

funding. Act 44 repealed the provisions in Chapter 13,

implemented a new source of funding, and established a new

financing scheme for entities applying for and receiving

funding.

6

445 F.3d 227, 229 (3d Cir. 2006).

III.

Since our decision in Bolden, the Supreme Court has

refined its Eleventh Amendment jurisprudence. We have

followed suit. SEPTA contends these changes have wrought a

“fundamental shift in emphasis,” so that a state’s

characterization of an agency as an arm of the state is essentially

dispositive. SEPTA’s Reply Br. 8. We have modified our own

jurisprudence to reflect direction from the Supreme Court, but

we have not concluded that a state’s characterization warrants

dispositive treatment in our sovereign immunity analysis.

A brief review of Bolden and subsequent case law is in

order. In Bolden, we addressed en banc whether SEPTA was

entitled to sovereign immunity. We applied the test set forth in

our analysis of New Jersey Transit’s claim of immunity in

Fitchik v. New Jersey Transit Rail Operations, Inc., 873 F.2d

655 (3d Cir. 1989) (en banc). This test determines whether an

agency is entitled to sovereign immunity by balancing three

factors: (1) state treasury, (2) status under state law, and (3)

autonomy.4 Noting that the state-treasury factor was “the

4

In Urbano v. Board of Managers of the New Jersey State

Prison, we identified nine factors to consider when determining

whether an entity is the “alter ego” of the state, and thus entitled

to sovereign immunity. 415 F.2d 247, 250-51 (3d Cir. 1969).

In Fitchik, we realigned the Urbano factors into three larger

7

‘most important’” of the three, Bolden, 953 F.2d at 818 (quoting

Fitchik, 873 F.2d at 659), we first addressed the

Commonwealth’s funding of SEPTA. With “only about 27% of

its revenue [coming] from the state government,” SEPTA did

questions, while eliminating one of the nine factors – “whether

the agency exercises a governmental or proprietary function” –

because it was no longer relevant in light of Garcia v. San

Antonio Metropolitan Transit Authority, 469 U.S. 528 (1985).

Fitchik, 873 F.2d at 659 & n.2. The three “Fitchik factors” are:

(1) Whether the money that would pay the

judgment would come from the state (this

includes three of the Urbano factors – whether

payment will come from the state’s treasury,

whether the agency has the money to satisfy the

judgment, and whether the sovereign has

immunized itself from responsibility for the

agency’s debts);

(2) The status of the agency under state law (this

includes four factors – how state law treats the

agency generally, whether the entity is separately

incorporated, whether the agency can sue or be

sued in its own right, and whether it is immune

from state taxation); and

(3) What degree of autonomy the agency has.

Id. at 659. We stipulated that “[a]lthough no single Urbano

factor is dispositive, the most important is whether any judgment

would be paid from the state treasury.” Id.

8

not derive its funding primarily from the Commonwealth. Id. at

819. “[T]his most important fact” weighed heavily against a

finding of immunity. Id. Furthermore, the Commonwealth was

shielded from liability for SEPTA’s obligations. Id. Nor was

SEPTA required to request funds from the Commonwealth to

pay for adverse judgments because it could raise revenues by

increasing fares. Id. And even though SEPTA contended it

might not be able to meet a significant shortfall by raising fares

and would be forced to rely on increased state subsidies, we

rejected that argument. We found “discretionary subsidies

committed in reaction to a judgment . . . would not necessarily

transform the recipients into alter egos of the state.” Id. Given

this funding relationship between SEPTA and the

Commonwealth, we found the state-treasury factor “weigh[ed]

at least as strongly against SEPTA’s Eleventh Amendment

argument as it did against New Jersey Transit’s argument in

Fitchik.” Id. at 820.5

We then considered the second factor – SEPTA’s status

5

SEPTA also relied on Act 26, which created a “Public

Transportation Assistance Fund” that provided for the

Commonwealth to make an annual appropriation to meet certain

public transportation needs. Bolden, 953 F.2d at 819 (citing Act

26, 74 Pa. Cons. Stat. §§ 1302(2)(iii) & (3), 1303(a) (repealed

2007), § 1314 (repealed 1994)). Because Act 26 had just been

enacted, we found its impact “too uncertain to be given

significant weight” in our determination. Id. at 819-20.

9

under state law. We found some of SEPTA’s attributes were not

characteristic of an arm of the state: it had (1) a “separate

corporate existence,” (2) “the power to sue and be sued,” and (3)

“the power to enter into contracts and make purchases on [its]

own behalf.” Id. But we also found attributes of SEPTA that

were characteristic of an arm of the state: (1) it was “exempt[]

from state property taxation,” (2) it possessed “certain public

powers such as the power of eminent domain,” and (3) it was

“subject to the Pennsylvania Sovereign Immunity statute.” Id.

SEPTA shared all of these attributes with New Jersey Transit.

We noted “SEPTA differ[ed] from [New Jersey Transit] in that

SEPTA [was] proclaimed by statute to be ‘an agency and

instrumentality’ of the Commonwealth, but this same provision

also describe[d] SEPTA as a ‘separate body corporate and

public.’” Id. (quoting 55 Pa. Cons. Stat. Ann. § 600.303(a)

(West 1991) (repealed 1991); Act 26, 74 Pa. Cons. Stat. § 1502

(repealed 1994)). Thus, we found SEPTA’s status under state

law, like that of New Jersey Transit in Fitchik, weighed only

“‘slightly’ in favor” of sovereign immunity. Id.

Third, we considered SEPTA’s degree of autonomy from

the Commonwealth. Although in Fitchik this factor weighed

slightly in favor of according New Jersey Transit immunity, we

found SEPTA enjoyed more autonomy than New Jersey Transit.

SEPTA possessed powers similar to New Jersey Transit’s,

which gave the entities “a measure of autonomy.” Id. These

powers included “the exclusive power to initiate action and the

power ‘to enter contracts, bring lawsuits, purchase and sell

10

property, buy insurance, structure the corporation’s internal

management, and set and collect fares.’” Id. (quoting Fitchik,

873 F.2d at 663). Only five of SEPTA’s fifteen board members

were appointed by state officials, with the other ten appointed by

the counties SEPTA served, whereas three of New Jersey

Transit’s seven board members were (by statute) members of the

state’s executive branch. Id. Significantly, New Jersey’s

Governor could veto the actions of New Jersey Transit’s board,

but SEPTA was not subject to the Commonwealth’s

gubernatorial veto. Id. Because SEPTA had greater control

over its own actions, we found “the autonomy factor, which

weighed ‘slightly’ in [New Jersey Transit’s] favor, is

appreciably weaker here.” Id.

We considered these three factors, treating the state-

treasury factor as the most important. Id. at 821. Finding

SEPTA’s argument for immunity weaker than New Jersey

Transit’s, we held SEPTA, like New Jersey Transit, was not

entitled to Eleventh Amendment protection. Id.

Supreme Court jurisprudence since Bolden has prompted

us to alter our sovereign immunity analysis. In Hess v. Port

Authority Trans-Hudson Corp., the Court held PATH, a

subsidiary of the Port Authority, was not an arm of the state

entitled to sovereign immunity. 513 U.S. 30, 52-53 (1994). In

its analysis, the Court recognized “the States’ solvency and

dignity” as “the concerns . . . that underpin the Eleventh

Amendment.” Id. at 52; see also id. at 47 (describing these

concerns as “the Eleventh Amendment’s twin reasons for

11

being”). Drawing on Hess, the Court in Regents of the

University of California v. Doe found the University of

California retained sovereign immunity despite the federal

government’s agreement to indemnify it against costs of

litigation, including adverse judgments. 519 U.S. 425, 431

(1997). The Court clarified that, when assessing whether an

entity is an arm of the state, “it is the entity’s potential legal

liability, rather than its ability or inability to require a third party

to reimburse it, or to discharge the liability in the first instance,

that is relevant.” Id.; see also id. (refusing “to convert the

inquiry into a formalistic question of ultimate financial

liability”).

In Federal Maritime Commission v. South Carolina

State Ports Authority, 535 U.S. 743 (2002), the Supreme Court

considered whether sovereign immunity applied to

administrative adjudications conducted by the Federal Maritime

Commission (“FMC”). In finding sovereign immunity

prohibited the FMC from adjudicating complaints filed by

private parties against non-consenting states, the Court said

“[t]he preeminent purpose of state sovereign immunity is to

accord States the dignity that is consistent with their status as

sovereign entities.” Id. at 760; see also id. at 765 (“While state

sovereign immunity serves the important function of shielding

state treasuries and thus preserving the States’ ability to govern

in accordance with the will of their citizens, the doctrine’s

central purpose is to accord the States the respect owed them as

joint sovereigns.” (internal quotation marks and citations

12

omitted)).

In light of Doe and FMC, we held that “we can no longer

ascribe primacy to the [state-treasury] factor” in our sovereign

immunity analysis. Benn v. First Judicial Dist. of Pa., 426 F.3d

233, 239 (3d Cir. 2005). We still consider all three factors

relevant in assessing whether an entity warrants Eleventh

Amendment protection, but none is predominant. Id. at 240.

SEPTA contends Benn “essentially relegated the ‘state treasury

factor’ to a non-factor.” SEPTA’s Br. 19 n.8. Under this view,

the District Court erred by giving equal consideration to each

factor because, as SEPTA argues, “[w]hile the District Court’s

analysis may be appropriate where the status of an entity is

uncertain under state law, given SEPTA’s clear status as a

Commonwealth agency, the District Court’s approach

effectively ignores the Supreme Court’s mandate that protection

of a State’s dignity interests require [sic] giving greater credence

to the State’s intentions and the manner in which the State has

structured the entity.” Id. at 20. SEPTA contends our recent

case law demonstrates that “the State’s characterization and

treatment of [an] entity” merits “substantial, if not dispositive”

weight in our analysis. Id. at 21. But in the cases SEPTA cites

as support, we gave equal consideration to each of the three

Fitchik factors. See Bowers v. Nat’l Collegiate Athletic Ass’n,

475 F.3d 524, 546 (3d Cir. 2007) (“[E]ach of the factors must be

considered equally in this case . . . .”); Febres, 445 F.3d at 229

(“We now accord equal consideration to all three prongs of the

analysis . . . .” (citing Benn, 426 F.3d at 239-40)). In Benn, we

13

addressed whether the First Judicial District of Pennsylvania

(Philadelphia’s state court system) was entitled to sovereign

immunity. We noted the funding scheme for this judicial system

placed “considerable financial responsibility” on the local

counties rather than the state. Benn, 426 F.3d at 240. But more

significant was the judicial system’s status under state law and

its lack of autonomy from the Pennsylvania Supreme Court.

Therefore, we concluded “the Fitchik factors strongly favor

Eleventh Amendment immunity.” Id. In Febres, we found two

of the three factors – treasury and status – suggested the Camden

Board of Education was not entitled to immunity, while the

autonomy factor slightly favored a finding of immunity. 445

F.3d at 237. With two factors counseling against immunity, we

held the Board was not an arm of the state. Id. In Bowers, we

found the University of Iowa was entitled to sovereign immunity

even though the state was not obligated to pay a judgment

against the University. 475 F.3d at 549-50. Because the state-

treasury factor weighed only slightly against immunity and the

status and autonomy factors weighed heavily in favor of it, we

held the University was entitled to immunity. Id.

As set forth in these post-Bolden cases, our inquiry into

sovereign immunity is not merely “a formalistic question of

ultimate financial liability.” Doe, 519 U.S. at 431. We

recognize and consider the state-treasury factor on the same

terms as the other two Fitchik factors. It has not been reduced

to a “non-factor,” nor has the status factor become

independently “dispositive” of our sovereign immunity inquiry.

14

See Benn, 426 F.3d at 240 (“The relegation of financial liability

to the status of one factor co-equal with others in the immunity

analysis does not mean that it is to be ignored. Like the other

two factors referred to in Fitchik, it is simply to be considered

as an indicator of the relationship between the State and the

entity at issue.”). Our approach is consistent with Supreme

Court precedent following Bolden. As noted, the Court has

stressed the centrality of state dignity to the Eleventh

Amendment. But state dignity does not preclude consideration

of an entity’s financial relationship with the state and its degree

of autonomy. See, e.g., Fed. Maritime Comm’n, 535 U.S. at 765

(recognizing that “accord[ing] the States the respect owed them

as joint sovereigns” is the “central purpose” of Eleventh

Amendment immunity, and that “shielding state treasuries and

thus preserving the States’ ability to govern in accordance with

the will of their citizens” is an “important function” served by

that doctrine (internal quotation marks omitted)). State dignity

encompasses all three factors – we give them equal

consideration, and how heavily each factor ultimately weighs in

our analysis depends on the facts of the given case.

Accordingly, we will apply the approach set forth in Benn,

Febres, and Bowers here to reexamine each factor in light of the

changes – both in the case law and in the funding structure of

SEPTA – since Bolden. Though our method of balancing the

factors has changed, our analysis of each individual factor in

Bolden remains instructive.

15

IV.

A. State Treasury

As previously noted, the first factor asks “[w]hether the

money that would pay the judgment would come from the state,”

which includes considering “whether payment will come from

the state’s treasury, whether the agency has the money to satisfy

the judgment, and whether the sovereign has immunized itself

from responsibility for the agency’s debts.” Fitchik, 873 F.2d at

659. We emphasized in Bolden the percentage of funding

SEPTA received from the Commonwealth as the “most

important fact” in this inquiry. 953 F.2d at 819. Accordingly,

in determining the state-treasury factor weighed against a

finding of immunity for SEPTA, we considered it very

significant that SEPTA received only 27% of its revenues from

the Commonwealth. Id.

Since Bolden, the amount of funding SEPTA receives

from the Commonwealth has increased, although the precise

amount is in dispute. SEPTA contends state subsidies constitute

over half of its annual operating expenses.6 Cooper responds

that state funding constitutes 35% of these annual operating

expenses. This disparity is explained by how the

Commonwealth’s contribution is calculated. Both parties rely

on the affidavit of Richard G. Burnfield, the Senior Director of

6

According to SEPTA, state subsidies constituted a 51%

share in 2005 and a 52% share in 2006.

16

Budgets for SEPTA. In his affidavit, he said:

For fiscal year 2006, $494,844,000 is budgeted to

come from the Commonwealth for SEPTA’s

operating expenses. This budgeted amount

includes $333,144,000 in operating subsidy,

which includes direct payments to SEPTA’s

bondholders, through the Pennsylvania

[Transportation] Assistance Fund, set up pursuant

to the Public Transportation Assistance

[provisions of Act 26]. It also includes $92.1

million in “flexed” highway funding. Also

in c lu d e d is $ 5 2 .3 m illion from th e

Commonwealth in a senior subsidy, and $17.3

million in the shared ride subsidy.

SEPTA considers all $494.8 million to be state funding, while

Cooper contends only the operating subsidy, amounting to

approximately $333.1 million, constitutes state funding. Cooper

cites SEPTA’s 2006 budget, which defines “subsidy” as

“[f]unds received from another source that are used to cover the

cost of a service or program that is not self-supporting.” 7

7

Cooper contends SEPTA’s numbers are wrong for two

reasons. First, the $92.1 million in “Flexible Highway funds” is

provided by the federal government, not by the Commonwealth,

which Burnfield acknowledges. These “flex funds” are

allocated by the Commonwealth but are subject to approval by

the Delaware Valley Regional Planning Commission, an

17

It is unclear whether all of these contributions should be

considered part of the Commonwealth’s funding of SEPTA.

The funds are, at least to some extent, under the

Commonwealth’s control, and are being given to SEPTA.

Whether SEPTA now receives 35% or 52% of its revenue from

the Commonwealth, however, is not determinative. Although

relevant, the percentage of Commonwealth funding is no longer

“interstate, intercounty and intercity agency.” Cooper’s Br. 18-

19. Second, Cooper contends SEPTA’s $52.3 million “senior

subsidy” and its $17.3 million “shared ride subsidy” are

operating revenue, not part of the state’s subsidies. Id. at 20-21.

The flex funds and the senior and shared ride subsidies

are not treated the same by SEPTA or the Commonwealth for

accounting purposes. SEPTA’s budget defines two types of

funding sources – operating revenue and subsidies – and notes

that, under SEPTA’s enabling legislation, no less than half of

SEPTA’s budget must be funded through operating revenue. In

order to meet this requirement, the Commonwealth has allowed

SEPTA to count certain subsidies as revenue. According to

Burnfield, the senior and shared ride subsidies were considered

operating revenue in order to satisfy this requirement.

Similarly, the flex funds were described as a federal

subsidy in every SEPTA budget until 2007, when the funds were

then described as a state subsidy. This recharacterization was

not due to any change in legislation; rather, SEPTA felt the

funds were better described as state subsidies because the

Governor had to initiate action to allocate them to SEPTA.

18

predominant. Since Doe, we have recognized that “the crux of

the state-treasury criterion [is] whether the state treasury is

legally responsible for the payment of a judgment against the

[entity].” Febres, 445 F.3d at 233; see also Bowers, 475 F.3d at

547 (“The appropriate question to ask . . . is whether the State is

obligated to pay or reimburse the [entity] for its debts.”). In

Febres, we explained that, even though the Camden Board of

Education received 85% to 90% of its funding from New Jersey,

“the fact that New Jersey is the principal source of the Board’s

finances does not alone confer immunity, or even compel a

finding that this prong of the analysis favors immunity.” 445

F.3d at 232-33; see also id. at 233 n.5 (noting that “the quantity

or proportion of state funding received by an entity is not

dispositive,” but may be “potentially probative”). Although,

relative to Bolden, the increased proportion of Commonwealth

funding SEPTA now receives – whether 35% or 52% –

improves SEPTA’s argument for immunity under the state-

treasury factor, we no longer afford this subfactor the same

weight we did in Bolden.8

8

Nor are we able at this time to forecast what impact, if any,

the enactment of Act 44 may have on the extent of funding

SEPTA receives from the Commonwealth. As noted, Act 44, 74

Pa. Cons. Stat. §§ 1501–1520, was enacted after briefing but

before oral argument. Act 44 repealed the provisions under

Title 74’s “Public Transportation Assistance” chapter, most of

which were enacted as part of Act 26, and set forth a new

chapter entitled “Sustainable Mobility Options.” This new

19

Post-Doe, “the key factor in our assessment of the state-

treasury prong” is the potential legal liability of the

Commonwealth for SEPTA’s debts. Febres, 445 F.3d at 236.

By statute, the Commonwealth has disclaimed any liability for

SEPTA’s debts:

The authority shall have no power, at any time or

chapter established the Public Transportation Trust Fund

(“PTTF”), from which public transit entities throughout the state

may apply for and receive funding. See id. § 1506. Under Act

26, the Commonwealth annually determined the level of

appropriation to distribute to these entities. See 74 Pa. Cons.

Stat. § 1303(a) (repealed 2007). Now, Act 44 sets forth the

amount to be placed into the PTTF each year. 74 Pa. Cons. Stat.

§ 1506(b)(1). From 2007 to 2010, $250 million is placed into

the fund each fiscal year, and for every fiscal year thereafter, the

fund will be increased 2.5% from the previous year’s amount.

Id. Although the Commonwealth may contribute more money

to SEPTA because of the PTTF’s creation, there is no evidence

as to how much money SEPTA will receive from the PTTF.

While the statute sets forth a definitive number for the fund

overall, public transit entities from around the state may apply

for financial assistance, so we cannot know whether the

Commonwealth will contribute more to SEPTA because Act 44

was enacted. Accordingly, since Act 44’s impact on SEPTA’s

funding is still uncertain, we will not give it weight in our

consideration of the state-treasury factor.

20

in any manner, to pledge the credit or taxing

power of the Commonwealth or any other

government agency, nor shall any of the

authority’s obligations be deemed to be

obligations of the Commonwealth or of any other

government agency, nor shall the Commonwealth

or any government agency be liable for the

payment of principal or interest on such

obligations.

74 Pa. Cons. Stat. § 1741(c). SEPTA concedes that the

Commonwealth is not obligated to pay for an adverse judgment

against it. This absence of legal liability provides “a compelling

indicator that the state-treasury criterion . . . weighs against

immunity.” Febres, 445 F.3d at 236.

Nevertheless, SEPTA contends the Commonwealth,

despite its legal shield from liability, would be forced as a

practical matter to pay excess judgments against SEPTA. Thus,

the arguable practical effect of an adverse judgment against

SEPTA would be an increase in state funding. But “if a State is

not under a legal obligation to satisfy a judgment, then any

increase in expenditures in the face of an adverse judgment is

considered a voluntary or discretionary subsidy not entitled to

Eleventh Amendment protections.” Bowers, 475 F.3d at 547;

see also Bolden, 953 F.2d at 819 (“Such discretionary subsidies

committed in reaction to a judgment . . . would not necessarily

transform the recipients into alter egos of the state.”); Fitchik,

873 F.2d at 661 (“Although New Jersey might appropriate funds

21

to [New Jersey Transit] to meet any shortfall caused by

judgments against [New Jersey Transit], such voluntary

payments by a state do not trigger sovereign immunity.”).

Although in Febres we did not disregard the practical effects of

an adverse judgment, neither did we afford them substantial

weight:

In view of the controlling Supreme Court

jurisprudence, as well as our own conforming

case law, we find that the practical or indirect

financial effects of a judgment may enter a court’s

calculus, but rarely have significant bearing on a

determination of an entity’s status as an arm of

the state.

445 F.3d at 236.

In support, SEPTA points to two cases in which Courts

of Appeals have found transit operations were arms of the state.

See Alaska Cargo Transp., Inc. v. Alaska R.R. Corp., 5 F.3d 378

(9th Cir. 1993); Morris v. Wash. Metro. Area Transit Auth., 781

F.2d 218 (D.C. Cir. 1986). These cases were cited by the

Supreme Court in Hess and their facts, as we noted in Febres,

“suggest the types of limited circumstances in which the Court

might expect . . . concerns [regarding the practical effects of an

adverse judgment] to require immunity, regardless of the state’s

legal liability.” Febres, 445 F.3d at 235 n.9. In rejecting

sovereign immunity, our analysis in Febres distinguished both

cases:

22

In Morris, immunity was accorded to an interstate

transit system. Analysis of both the entity’s status

under state law and its limited autonomy

suggested it was an arm of the two states the

transit system served. While the states involved

were not directly liable, Congressional funding

for the system was made contingent upon the

states’ agreement to meet the system’s operating

deficits, which could include adverse judgments.

And, from the beginning it was fully anticipated

that the entity would have large deficits and thus

continually be dependent on the states for its

financial survival. Alaska Cargo Transport held

that the railroad at issue was entitled to immunity

as an alter ego of the state, even though the state

had expressly disclaimed liability for it by statute.

The case turned on the critical function performed

by the railroad in Alaska, and federal laws which

essentially required the state to keep the railroad

afloat.

Id. (citations omitted).

SEPTA’s funding relationship with the Commonwealth

does not fall within such “limited circumstances.” Morris and

Alaska Cargo Transport are factually distinguishable. In

Morris, the states at issue were compelled to cover the deficits

of the bi-state transit system because, if they did not, they would

lose congressional funding. 781 F.2d at 225-26. In Alaska

23

Cargo Transport, Alaska would have lost the real property

conveyed to it by the United States if the railroad failed. 5 F.3d

at 381. The Commonwealth here does not face the same sort of

practical obligation to support SEPTA in the event of an adverse

judgment. As the District Court found, if the Commonwealth

fails to cover a deficit, SEPTA can satisfy the deficit itself by

raising fares, reducing service, and/or laying off employees.

The Commonwealth may choose to relieve SEPTA of these

measures, but it is not obligated – through risk of losing its own

funding or its own property – to do so. Cf. Hess, 513 U.S. at 49-

51 (distinguishing Morris and Alaska Cargo Transport and

finding that, since “legally and practically” neither New York

nor New Jersey was “obligated to bear and pay . . . [PATH’s]

indebtedness . . . [,] the Eleventh Amendment’s core concern

[was] not implicated”).

According to SEPTA, measures like fare increases and

service reductions “are not practical options under the

circumstances” because “the fare increases and service cuts

necessary to meet SEPTA’s budget shortfall would so reduce the

level of service and ridership as to create a public crisis in the

region.” SEPTA’s Br. 32 (internal quotation marks and

emphasis omitted). Given these consequences, SEPTA

contends, the Commonwealth would effectively be obligated to

increase its funding to cover any excess judgment. While fare

increases, service reductions, and/or employee layoffs are not

the preferred method of meeting budget deficits, these measures

24

are available to SEPTA 9 and do not give rise to an obligation for

the Commonwealth. Accordingly, even when we allow the

practical effects asserted by SEPTA to “enter [our] calculus,”

we believe this is not the rare case in which such considerations

should have any “significant bearing” on our determination.

Febres, 445 F.3d at 236.

Despite SEPTA’s practical-effects argument, the state-

treasury factor weighs against a finding of immunity. While the

Commonwealth provides substantial funding, SEPTA also

receives a significant amount of its funding from non-state

sources of revenue – and whether two-thirds or one-half of

SEPTA’s overall budget, it totals in the hundreds of millions.

SEPTA could satisfy an adverse judgment from these sources,

or through alternate measures such as raising fares or reducing

service. See id. at 233-34 (noting that, “[w]hile non-state funds

comprise a relatively small percent of the Board’s budget, they

still total a significant sum [of nearly $32.5 million],” and the

Board could “increase funds” further by “reduc[ing] expenses”

or “sell[ing] assets”). SEPTA has provided no evidence that the

9

Although SEPTA presents these measures as impractical, it

did account for them in its budget: “Further efforts to achieve

the legislated balanced budget can only be successful through a

long-term dedicated source of subsidies. If this fails, SEPTA

will be forced to consider steep fare increases and significant

service reductions in order to fund projected budget deficits of

nearly $325 million by Fiscal Year 2011.”

25

Commonwealth would, in fact, contribute additional funding to

SEPTA in the event of an excess judgment. See id. at 236

(“While we have little doubt that the state has an interest in

seeing that Camden’s schools remain operational, it would be

improper to confer immunity based on our conjecture about the

steps New Jersey might take following a judgment.”). Most

importantly, the Commonwealth is not legally obligated to

provide funds to satisfy a judgment against SEPTA. As Doe

makes clear, the state’s potential legal liability is the “key

factor” under this prong of analysis and “merits far greater

weight” than practical consequences. Id. And, as discussed,

SEPTA’s asserted consequences do not give rise to the sort of

practical obligation that could, in some circumstances, bear on

our determination. Accordingly, the relevant criteria under the

state-treasury factor weigh against a finding of sovereign

immunity.

B. Status Under State Law

Under the second factor, we consider “[t]he status of the

agency under state law,” which includes “how state law treats

the agency generally, whether the entity is separately

incorporated, whether the agency can sue or be sued in its own

right, and whether it is immune from state taxation.” Fitchik,

873 F.2d at 659; see also Febres, 445 F.3d at 230 (noting these

as the “[f]our sub-factors . . . relevant to assessing [an entity’s]

legal status under state law”). According to SEPTA, the

Commonwealth’s statutory declaration that SEPTA is an arm of

the state is essentially dispositive of this factor and our overall

26

inquiry. But as noted, we disagree, and little has changed with

regard to SEPTA’s status under state law since Bolden.

The subfactors here do not point clearly in one direction.

Certain attributes of SEPTA under state law weigh against

immunity. Under its enabling statute, SEPTA has (1) a separate

corporate existence, 74 Pa. Cons. Stat. § 1711(a); (2) the power

to sue and be sued, id. § 1741(a)(2); and (3) the power to enter

into contracts and make purchases on its own behalf, id. §

1741(a)(8), (9), (12), (18), (20), (21), (22), (24), (25). Other

attributes support immunity: (1) its enabling statute provides that

SEPTA “shall in no way be deemed to be an instrumentality of

any city or county or other municipality or engaged in the

performance of a municipal function, but shall exercise the

public powers of the Commonwealth as an agency and

instrumentality thereof,” id. § 1711(a), and “shall continue to

enjoy sovereign and official immunity, as provided [by the

statutory provisions that comprise and pertain to the

Pennsylvania Sovereign Immunity Act],” id. § 1711(c)(3);10 (2)

10

This particular language from § 1711(c)(3) was not in effect

at the time of our decision in Bolden, but first appeared as one

of the “transition provisions” codified under § 1711(c) when

SEPTA’s enabling legislation was amended in 1994. The

language from § 1711(a), however, was in effect at the time of

Bolden and was considered in our analysis there. See Bolden,

953 F.2d at 820 (quoting 55 Pa. Stat. Ann. § 600.303(a) (West

1991) (repealed 1991); Act 26, 74 Pa. Cons. Stat. § 1502

27

SEPTA has the power of eminent domain, id. § 1741(a)(13);11

and (3) SEPTA is immune from state taxation.12 As noted in

Bolden, 953 F.2d at 820, Pennsylvania state courts have

recognized SEPTA to be a Commonwealth agency to which the

Pennsylvania Sovereign Immunity Act applies. See, e.g., Jones

v. SEPTA, 772 A.2d 435, 444 (Pa. 2001) (holding SEPTA

immune in a tort case because the case did not fall within an

exception to the Sovereign Immunity Act); Feingold v. SEPTA,

517 A.2d 1270, 1276-77 (Pa. 1986) (finding that SEPTA is “an

agency of the Commonwealth” against whom “it would be

inappropriate to assess punitive damages”). In other contexts,

however, Pennsylvania courts have declined to treat SEPTA as

(repealed 1994)).

11

In Fitchik, we did not accord significant weight to this

factor because counties, municipalities, and privately owned

public utilities all have the power of eminent domain. 873 F.2d

at 663.

12

The District Court said the Supreme Court of Pennsylvania,

in SEPTA v. Board of Revision of Taxes, 833 A.2d 710 (Pa.

2003), held SEPTA is not immune for all purposes from state

taxation. That case, however, addressed SEPTA’s immunity

from local real estate taxes, finding SEPTA was not immune

from these taxes for property it operates as a commercial

landlord because such use was not within its operations as a

“metropolitan transportation authority.” Id. at 717.

28

the Commonwealth. See, e.g., Fraternal Order of Transit

Police v. SEPTA, 668 A.2d 270, 272 (Pa. Commw. Ct. 1995)

(holding “that for purposes of determining jurisdiction, SEPTA

is a local agency and not a Commonwealth agency”); SEPTA v.

Union Switch & Signal, Inc., 637 A.2d 662, 669 (Pa. Commw.

Ct. 1994) (“Because SEPTA is financially independent of the

Commonwealth and its operations are not statewide, we

conclude that the General Assembly did not intend SEPTA to be

the Commonwealth for purposes of the Board Claims Act.”);

Fisher v. SEPTA, 431 A.2d 394, 397 (Pa. Commw. Ct. 1981)

(“We do not believe that the Legislature intended SEPTA to be

a Commonwealth agency in the traditional sense or for SEPTA

employees to be considered Commonwealth employees for

purposes of other legislative enactments.”).

SEPTA contends that, in light of Supreme Court

precedent, the “explicit treatment of SEPTA as a

Commonwealth agency entitled to sovereign immunity cannot

be evaluated as merely just another ‘factor’ – let alone one

which weighs only ‘slightly’ in favor of immunity – but should

effectively be dispositive as to whether SEPTA is an arm of the

State.” SEPTA’s Br. 23-24. According to SEPTA, the District

Court “inappropriately minimize[d] the significance of how the

Commonwealth has structured SEPTA and intentionally

invested the agency with sovereign immunity.” Id. at 21-22.

The Commonwealth’s designation of SEPTA as an

agency covered under the Pennsylvania Sovereign Immunity Act

is significant but not dispositive. As discussed, SEPTA’s

29

enabling legislation grants it attributes that are characteristic of

an arm of the state, and those that are not. In Bolden, we

rejected SEPTA’s contention that “the Pennsylvania Sovereign

Immunity Act conferred Eleventh Amendment protection upon

SEPTA.” 953 F.2d at 817; see also id. (explaining that “[i]f this

reasoning were accepted, each state legislature apparently could

confer Eleventh Amendment protection on any entity it wished,

including counties and cities, by enacting a statute clothing these

entities with ‘sovereign immunity’ from suit on state claims”).

Although we have revised our immunity analysis since Bolden,

we do not believe this alters our ultimate conclusion on this

point.

In Doe, the Court recognized that an inquiry into an

agency’s immunity “can be answered only after considering the

provisions of state law that define the agency’s character.” 519

U.S. at 429 n.5. The Court also made clear that “[u]ltimately, of

course, the question whether a particular state agency has the

same kind of independent status as a county or is instead an arm

of the State . . . is a question of federal law.” Id. This

distinction corresponds with the status-under-state-law analysis

we applied in Bolden and have applied since. The

Commonwealth’s statutory declaration of SEPTA’s immunity

under state law is significant but not “dispositive”of our inquiry

– it is certainly relevant, but does not necessarily overshadow

the other relevant subfactors in assessing an agency’s status

under state law for Eleventh Amendment purposes.

SEPTA misinterprets the District Court’s analysis. The

30

court did not find the Commonwealth’s characterization of

SEPTA weighed only slightly in favor of finding immunity;

rather, the court weighed that consideration together with the

other subfactors in the status-under-state-law analysis.

SEPTA’s status under state law has not changed markedly since

Bolden – it retains the same essential attributes as before. Nor

has the law since Bolden changed in a manner that would alter

the outcome when these attributes are weighed together.

Accordingly, we find SEPTA’s status under state law weighs

slightly in favor of a finding of sovereign immunity.

C. Autonomy

Under the third factor, we consider “[w]hat degree of

autonomy the agency has.” Fitchik, 873 F.2d at 659. The

District Court found SEPTA’s autonomy from the

Commonwealth has not changed since Bolden. While SEPTA’s

organizational structure has remained the same over that time,

SEPTA contends the Commonwealth’s current statutory scheme

for the financing of public transportation – which allows the

Commonwealth to oversee and place certain requirements on the

use of the funds it provides to SEPTA – marks a significant

change in SEPTA’s autonomy.

In Bolden, we did not explicitly say whether the

autonomy factor weighed in favor of granting or denying

immunity. We noted that, while this factor weighed slightly in

favor of immunity for New Jersey Transit in Fitchik, SEPTA

enjoyed greater autonomy than New Jersey Transit, making its

31

argument for immunity under this factor “appreciably weaker.”

Bolden, 953 F.2d at 820. The structure of SEPTA’s board has

not changed since Bolden. SEPTA’s board includes five

members who are appointed by the Commonwealth, while the

remaining ten members are appointed by the counties SEPTA

serves.13 74 Pa. Cons. Stat. § 1713(a). The board’s decisions

are not subject to gubernatorial veto. Moreover, the board has

substantial authority: it has the power to bring lawsuits; organize

its internal structure; buy insurance; buy, sell, or lease property;

set and alter fares; and enter into contracts. The District Court,

looking at this unchanged structure, found the autonomy factor

weighed against immunity.

SEPTA contends its autonomy has decreased since

Bolden because of the passage of Act 26. We did not consider

Act 26 in Bolden because we believed its future impact was too

uncertain at that time. 953 F.2d at 819-20. In creating a

dedicated source of Commonwealth funding for public transit

entities, Act 26 increased the Commonwealth’s oversight of

SEPTA – by, for example, requiring SEPTA to submit budgets

and accountings to the Pennsylvania Department of

Transportation (“PennDOT”), to perform audits and submit

action plans to the Pennsylvania legislature, and to seek the

13

As we noted in Bolden, the board’s makeup suggests

influence on SEPTA by the counties, but “it is the influence of

the state, not that of the counties, that is important for Eleventh

Amendment purposes.” 953 F.2d at 820.

32

review and approval of the Commonwealth for use of the

distributed funds in SEPTA’s capital projects. See Act 26, 74

Pa. Cons. Stat. §§ 1301–1313 (repealed 2007), § 1314 (repealed

1994). Act 44, however, recently replaced this portion of Act

26.

Act 44 established the Public Transportation Trust Fund

(“PTTF”), which provides a source of state funding for public

transportation, and set forth certain requirements for public

transit providers to obtain funding. To initiate funding through

the PTTF, a provider of public transit must submit a written

application to PennDOT. 74 Pa. Cons. Stat. § 1507(a). If

PennDOT determines the applicant is eligible, PennDOT and the

applicant enter into a “financial assistance agreement,” which

“set[s] forth the terms and conditions governing the use of the

financial assistance and the timing of payment of the funds.” Id.

§ 1507(b). PennDOT is required to develop guidelines

governing the application for and awarding of financial

assistance. Id. All funds “shall be used only for activities set

forth under the financial assistance agreement unless the

department grants the award recipient a waiver allowing the

funds to be used for a different purpose.” Id. § 1507(c).

PennDOT also “may conduct performance reviews of an award

recipient . . . to determine the effectiveness of the financial

assistance.” Id. § 1513(e)(1). Based on these reviews,

PennDOT must deliver a report to the Governor and to the chair

and minority chair of both the House and Senate Transportation

Committees. Id. § 1513(e)(2). If a recipient does not satisfy

33

certain “performance criteria” set forth by PennDOT, it risks

losing funding, although PennDOT may also waive any

reduction in funding upon a recipient’s written request. Id. §

1513(g).

Act 26 and Act 44 have increased the Commonwealth’s

level of oversight since Bolden. But the Commonwealth’s

control over SEPTA is not sufficient to support a finding of

immunity under this factor. Act 44 allows the Commonwealth,

through financial assistance agreements, to set terms and

conditions for the use of the funds provided to SEPTA. Thus,

the more SEPTA relies on the Commonwealth for funding, the

greater the impact this financing scheme may have on SEPTA’s

autonomy. As it currently stands, however, sources other than

the Commonwealth contribute one-half to two-thirds of

SEPTA’s funding, a substantial sum over which the

Commonwealth exerts no control. Should the percentage of

SEPTA’s funding provided by the Commonwealth increase, the

Commonwealth’s potential influence over SEPTA would also

increase under the terms and conditions it may choose to impose

on those funds. But, as previously noted, we are presently

unable to forecast whether and to what extent such an increase

may occur under Act 44.

Furthermore, even though this financing scheme may

grant the Commonwealth more influence over SEPTA than it

enjoyed in Bolden, the amount of autonomy SEPTA retains with

respect to its operations and decisions demonstrates that it is still

not an arm of the state. Febres provides a good comparison. In

34

that case, the Camden Board of Education was subject to a New

Jersey statute that granted the Governor authority to accept or

reject any action taken by the Board. Febres, 445 F.3d at 231.

The Governor also appointed board members, though not

enough to make a majority. Id. Given this degree of state

control, we found the autonomy factor weighed slightly in favor

of Eleventh Amendment immunity. Id. at 232.

The amount of state control in Febres exceeds the

amount of Commonwealth control here. While PennDOT can

influence SEPTA by setting certain requirements for the use of

Commonwealth funds, the Commonwealth lacks a mechanism,

such as the gubernatorial veto in Febres, by which it may dictate

the outcome of decisions made by SEPTA’s board of directors.

As noted, the Commonwealth appoints only a minority of the

directors on the board, nor does it review every board decision.

Through conditional funding, the Commonwealth can affect the

consequences of these decisions, limiting SEPTA’s autonomy

to some extent. But this is insufficient to transform SEPTA into

an arm of the state. Nor does it distinguish SEPTA from other

entities that do not enjoy sovereign immunity – the

Commonwealth exercises this same conditional-funding

influence over any entity that applies for financial assistance

through the PTTF, including political subdivisions which, as the

Supreme Court has made clear, are not arms of the state.14 See

14

Act 44 specifies the following entities as eligible applicants

“for financial assistance for operating expenses”: “(1) The

35

Lake Country Estates, Inc. v. Tahoe Reg’l Planning Agency, 440

U.S. 391, 401 (1979) (“[T]he Court has consistently refused to

construe the [Eleventh] Amendment to afford protection to

political subdivisions such as counties and municipalities . . . .”);

see also Bolden, 953 F.2d at 813 (recognizing the same). Given

how recently Act 44 was enacted, the precise degree of control

the Commonwealth wields over SEPTA through this financing

scheme is still uncertain at this time. We do not know yet how

the scheme will be interpreted and implemented – the evidence

before us, for example, does not include an Act 44 “financial

assistance agreement” with which SEPTA would have to

comply in order to receive Commonwealth funding. Thus, as

with Act 26 in Bolden, it is too early for us to tell what impact,

if any, Act 44 may have on SEPTA’s autonomy from the

Commonwealth.

While SEPTA’s autonomy has diminished since Bolden

because of the Commonwealth’s financing scheme under Act 26

and now Act 44, it is SEPTA’s burden to show it is entitled to

sovereign immunity. Febres, 445 F.3d at 229. Based on the

evidence presented, the Commonwealth’s control over SEPTA

falls short of the state control present in Febres, a case in which

we found the autonomy factor weighed only slightly in favor of

governing body of a municipality or an instrumentality of a

municipality. (2) A Commonwealth agency or instrumentality.

(3) A local transportation organization.” 74 Pa. Cons. Stat. §

1513(a).

36

sovereign immunity. Here, by comparison, we find this factor

weighs slightly against a finding of Eleventh Amendment

immunity.

D. Balancing the Factors

As noted, we no longer give primacy to the state-treasury

factor in our immunity analysis. Instead, we give equal

consideration to all three factors and weigh and balance them.

Here, despite an increase in state funding, the state-treasury

factor still weighs against a finding of sovereign immunity. As

SEPTA’s status under state law has not changed significantly

since Bolden, that factor weighs slightly in favor of immunity.

The autonomy factor weighs slightly against immunity.

Balancing these factors, we agree with the District Court that

SEPTA is not entitled to Eleventh Amendment immunity.

V.

Accordingly, we will affirm the District Court’s denial of

SEPTA’s motion for summary judgment. We will remand to the

District Court for proceedings consistent with this opinion.

37