Petition for Writ of Certiorari — New York State Thruway Authority v. Mancuso

Supreme Court brief1996

Ask Donna

What actually matters in this document.

Text

No.

96 38 1 SEP 111996

Supreme Court

IN THE

of the Hnited States

OCTOBER TERM, 1996

> § a

NEW YORK STATE THRUWAY AUTHORITY,

Petitioner,

FRANK MANCUSO and ELLEN MANCUSO, Individually and on

behalf of their children DEANNA and THERESA MANCUSO:

F. MANCUSO BOATYARD, INC., d/b/a ECHO BAY MARINA,

Respondents

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

BARBARA G. BILLET

Solicitor General

PETER H. SCHIFF

Deputy Solicitor General

GORDON J. JOHNSON*

Deputy Bureau Chief

Environmental Protection

Bureau

JOHN S. SIPOS

ELIZABETH A. GRISARU

Assistant Attorneys General

* Counsel of Record

DENNIS C. VACCO

Attorney General of the

State of New York

Attorney for Petitioner New York

State Thruway Authority

New York State Department

of Law

120 Broadway

New York, New York 10271

(212) 416-8448

Questions Presented

1. Whether certiorari should be granted to resolve the con-

flict between the decision below and other circuit court deci-

sions on the means for determining when a single-state entity

is entitled to Eleventh Amendment immunity?

2. Whether, given the confusion expressed by federal

courts over the appropriate Eleventh Amendment analysis to

apply to single-state entities following this Court’s decision

in Hess v. Port Authority Trans-Hudson Corp.,___ U.S. __,

115 S.Ct. 394, 130 L.Ed.2d 245 (1994), certiorari should be

granted to determine the tests to be applied and the manner of

applying them when determining whether a public authority

is an “arm of the State?”

Sa i

Parties

The parties to the proceeding are:

|. Frank Mancuso and Ellen Mancuso, individually and on

behalf of their children, Deanna and Theresa Mancuso, and

F. Mancuso Boatyard, Inc., d/b/a Echo Bay Marina, respon-

dents;

2. The New York State Thruway Authority, petitioner.

The City of New Rochelle, New York, is a defendant in the

district court action, but was not a party to the Second Circuit

proceeding.

ill

TABLE OF CONTENTS

PAGE

QUESTIONS PRESBNTED............................ i

TABLE OF AUTHORITIES ......................... Vill

ee sae cana EEE re aR el l

iy ae ay get ROPE ESS 2

Constitutional and Statutory Provisions............... 2

<sstney niet adie nate. EET een 2

NI ei coc i che a 7

Reasons For RE OO I 8

Ir ilocss el ce tes ae 17

Index to Appendix

Opinion of the United States Court of Appeals for

I st la

Opinion of the United States District Court for the

Southern District of New York ................_. 20a

CONSTITUTION OF THE STATE OF NEW YORK

ee TOM 26a

matters A-—Corporations ............................... 26a

§ 5. [Public corporations; restrictions on creation

and powers; accounts: obligations of]....... 26a

PAGE

§ 6. [Liability of state for payment of bonds of

public corporations to construct state thru-

ways; use of state canal lands and properties

DY SUG COPDOTIMAGRS « o000's ocuncvisecsnseian’s 27a

Rate HY Ee 6 i on. das ie cnecccucsaasicn 28a

§ 1. [Disposition of canals and canal properties

DOCRONONOGE 5 o's sind bh scanadndevenceees i weanaens 28a

§ 2. [Prohibition inapplicable to lands and

properties no longer useful; disposition

GOTT kas 08 06 cndacdnceokamoratcnt tales 28a

§ 3. [No tolls to be imposed; contracts for work

and materials; no extra compensation] ...... 29a

§ 4. [Lease or transfer of barge canal and terminals

and facilities to federal government]........ 29a

STATE FINANCE LAW (Selected Provisions) ........ 30a

§ 88-b. Suburban transportation fund.................. 30a

§ 89. Emergency highway reconditioning and

OCCSOEVORIOR TRG «66 vnkievedvans heewsiccScninands 33a

§ 89-a. Emergency highway construction and

PRO RMRUTACTIOD TING 5 oo. 59 on 0esdced irs on ccnaneee 37a

§ 89-b. Dedicated highway and bridge trust fund ..... 42a

§ 92-u. New York state canal system development

ROE ssw dion dypucannwassant des seekunekealeweunsees 47a

5 ea rats ep

COURT OF CLAIMS ACT (Selected Provisions) .....

§ 8. Waiver of immunity from deiustsas, Re TREO S

§ 9. Jurisdiction and Powers of the court.........

§ 12. Conditions Oe I is aa Sy sis

PUBLIC AUTHORITIES LAW (Selected Provisions)

TITLE 9—NEW YORK STATE THRUWAY

TERRES S oSsaeicts (ease ec os aes

Fee WOOTEN oh Esecci asc es ie ee

Sabet sncaceed eT ON

§ 352. New York State thruway eas i, SE ee

§ 353. Purposes of the authority and benefits

nasencsict ge Eee eR

§ 354. Powers of the cpassgntiigicx’ ECL E TTPOeE eTeeaE

§ 355. Officers and employees; transfer, promotion

perinteesina in, Sei eo es

§ 356. Thruway sections and connections; assuming

PON a cea ns,

§ 357. Right of authority to use state property;

payment for improvements .................

§ 358. Acquisition of real property by the

CORMRIIINIOGR 6 «5.5 ic bn 55:4indindGdintenks Oeraeeaa

§ 358-a. Acquisition of real property by the authority

§ 359. Construction, reconstruction and improvement

§ 360. Operation and maintenance.....................

§ 361-b. Jurisdiction in certain suits against the

ne PRCT PETC EE TS STEEP OTT! CEPTS feoree ry

§ 362. Assistance by state officers, departments,

boards, divisions and commissions.............

6 3635. AGMMRL CORO oo. hkisciviviciissiecieemetae

§ 364. Deposit and investment of moneys of the

QUROTTY on viasrccnccctsagesdeneakseelesseneneses

§ 365. Notes or bonds of the authority.................

& 366. Guaranty By Che SOONG oi. isik ss Nisieess claenieuns

§ 367. State’s right to require redemption of bonds...

§ 368. Remedies of noteholders and bondholders .....

B SED. LADetety OC SOUND oan icc bcanaccccecdaebeeG ities

§ 370. Notes and bonds legal investments for public

OFICOTS GREG TIGRCIALIOS 2 6ki i ic deci edibinesiesi

D Sra. COE CONOOIEE «anh cineca nkhntsaaauavens es cekueaes

PAGE

67a

68a

69a

73a

74a

76a

77a

§ 373.

§ 376.

§ 379.

§ 380.

§ 381.

§ 382.

§ 383.

§ 384.

§ 385.

§ 386.

Vii

PAGE

Agreement of the state.......................... 78a

Further additional powers of the authority ..... 78a

Further additional powers of the authority to

finance certain repayment obligations of the state

in connection with the purchase of real property

ioe Bighway perpesee.. 86a

Further additional powers of the authority to

finance certain local highway and bridge

improvements and payments to the authority .. 89a

Further additional powers of the authority ..... 92a

wigtitneleien. iuis:exiactet eee Ee 94a

Additional powers of the authority to finance

certain projects in connection with the New York

wecpcie trun sect: chao ee eae oe 99a

Additional powers of the authority to undertake

and finance certain transportation projects..... lOla

Additional powers of the authority to issue

special dedicated highway and bridge trust

scnginisn dee Te Pe 103a

Additional powers of the authority to issue

special rail and aviation transportation bonds.. 110a

§ 2827. Removal of authority members.............__. ll3a

Vill

TABLE OF AUTHORITIES

Cases: PAGE

Christy v. Pennsylvania Turnpike Com’n., 54 F.3d

1140 (3d Cir.), cert. denied, ___ U.S. ___, 116

S.Ct. 340, 133 £..36.26 25S. CI99S) iv iccsaeysss 11

Crosetto v. State Bar of Wisconsin, 12 F.3d 1396

(7th Cir. 1993), cert. denied, ___ U.S. __, 114

SAA. ZESG, UF Lee WT CESS O) casa szvcewncs 11-12

Gray v. Laws, 51 F.3d 426 (4th Cir. 1995) ............. 13-14

Hadley v. North Arkansas Community Technical

College, 76 F.3d 1437 (8th Cir. 1996), petition

for cert. filed, 65 U.S.L.W. 3001 (June 24,

SSG CIRO, FRAG) uss kvunkecancitensseresannies 10, 15

Hess v. Port Authority Trans-Hudson Corp., ___

U.S... 115. S.Ce. 394, 130 L.Bd.2d 245

CEDOED 5 a kscccacesccwescansdesieteneieeer i, 7-9, 13-15

Highland Farms Dairy, Inc. v. Agnew, 300 U.S. 608

CEDARS vs 00icccasadah cies 15

Lake Country Estates, Inc. v. Lake Tahoe Regional

Planning Agency, 440 U.S. 391 (1979)........... 7,9

Levine v. Supreme Court of Wisconsin, 679 F.Supp.

1478 (W.D.Wis. 1988), rev’d on other grounds,

864 F.2d 457 (7th Cir.), cert. denied, 493 U.S.

CIS CEDIGD ia caaciti aes deaaks cabweevncepanethesns 12

Monell v. Department of Social Services, 436 U.S.

GSS CIF TS) cc cnccccounvaarcesssenadviemeleneser is 9

Mt. Healthy City Sch. Dist. Bd. of Education v. Doyle,

G20 US. FIERO TE x cie ence cc vacaeeipasaank 9

PAGE

Pillsbury Co. v. Port of Corpus Christi Authority, 66

F.3d 103 (Sth Cir. 1995), cert. denied, __—U SS.

——, 116 S.Ct. 1705, 134 L.Ed.24 803 (1996)... 15

Ristow v. South Carolina Ports Authority, 58 F.3d

1051 (4th Cir.), cert. denied, __U.S. ee

116 S.Ct. 514, 133 L.Ed.24 423 (1995)....... 10-13, 15

Schulz v. State, 84 N.Y.2d 231, 616 N.Y.S.2d 343

RUMWD Sera U alan eas igs ora 9 eh 5, 16

Thiel v. State Bar of Wisconsin, Pree WO ee

No. 95-3442, 1996 WL 496629 (7th Cir.

PP ROME a Meas tivin vccecd es 11-12

United States Constitution:

ss Sma agar oene, ROE ER POORER passim

New York State Constitution:

N.Y. Const. Art. X, do Re NY EON ere ID Rae iy 5

N.Y. Const. Art. X. Lig ESE OCT ORO LAE Tene 6

N.Y. Const. Art. WTERPRNE Sibicieiocedss cu ee 4

Federal Statutes:

Bid fy Seo LN PRO OA de ane 7

oe Mia OS PAPC RENE NEEe On Ge Seco bet 2

tetas adh Tadcigd AE PTE POE eR TOA 2

née bie sebeg SEio do sae i, PMO Cee ane 2

33 U.S.C. § 1251 ef POM USS SUAKS MURS LAGE awa Cee 2

PAGE

New York Statutes:

hss O Uae, Cleese UF U canccsnnténdconictecqueatenaenaasabens 16

Ro RXR > err err Tr eee 3

hee SO Fe Cobde OS cvwh candvccsnnssicecs isudetiddsinwwebes 3

SS, SP Perr yrrerrer errr eer ere 4

ce Sy CBOs OS OE baka dakodebecoduecpesousseceaanenas 10

®, Fs, FS Po) rrr sree 4

ne Bey Ch Pee Be SOSNOe oc ceccdccccccctocssncasesises 4

cc By Oc BO Oy OU coteuscaderseces Haanvantesucevenss 4

hs SP Ra Og Te ORs cnnedhed nd dunecdacsses sdea séeenesecas 10

L.1991, ¢.329, § 1, as amended by L.1991, c.330,

DS ak ccicnneweehénesensdnestecéhcunuietanaanenbeanes 3

B) 2h. ere i dwandedetvivevccecedieuuegeianaea 4

PR, SS Pree ee ee 4

ec is Cete OD ec canskncaccasectcdensensenananncabonts 5

lnc Otte Cae WUD 0 chawnsan cas Gd nducessncsecthant &h4e000% 3

Los BO g Gale Tee Kidenkcancekbcnccasevbeeasenstdasevuces 4-5

ln Bs Cites OE ckodeeceresowcsccecensvace thssadkuss beck 5

Fee Ce KER GE Gore FAR. SS acecedccccscdcscevetess 7

N.Y. Pub. Auth. L. §ix§ 350 ef seg. ...... 6... cece ees 3

RA. FS OP RR eee 6, 10

RA, OF OUD rer eee 6

OE. ex Ws FUT, Bes BGO cc cs boccactcvancisacccsesesesss 6

N.Y.

Pub.

. Pub.

". Pub.

Pub.

’. Pub.

". Pub.

’. Pub.

. Pub.

Y. Pub.

’. Pub.

". Pub.

’. Pub.

Pub.

’. Pub

Pub.

’. Pub.

. Pub.

Pub

Auth.

Auth

Auth.

Auth

Auth.

Auth

Wack s

LSP

pee

$$ 382-383.

J Reo

PP A sakes chcans

. § 385(2)(b).....

PAGE

6-7

Xii

PAGE

N.Y. Pele. AMR. Bi: G FES). ve cvcds cecsGviseadneseene 4

ee, SS CE Te ee yet 5

284. FF, SF 5 s ener tre 5

he Oe re ree 5

ee | MF sR eee ere 6, 10

Pes ha. CCD FROMOD Bes BN wok asin hh kndceneneueWecewks 3

Pa, Ba NE POS Ee, SO hi kcduxcesctecdabanasaseeusaue 3

ee rer rere 3

Other Authorities:

Note, Clothing State Governmental Entities with

Sovereign Immunity: Disarray in the Eleventh

Amendment Arm-of-the-State Doctrine, 92

COLUM.L.RBV. 1243 (T99Z) .......cccccesecceness 16

N.Y. Assembly Bill No. 11336-a............cccceeenesss 5

Pa, Ks POROMDEY BASE INGO. DRDO oon dvccaccecccssavnannes 5

IN THE

Supreme Court of the United States

OCTOBER TERM, 1996

NEW YORK STATE THRUWAY AUTHORITY.

Petitioner.

—against—

FRANK MANCUSO and ELLEN MANCUSO, Individually and on

behalf of their children DEANNA and THERESA MANCUSO:

F. MANCUSO BOATYARD, INC., d/b/a ECHO Bay MARINA.

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

Opinions Below

The decision of the Court of Appeals for the Second Circuit

is printed in petitioner's appendix at pages la to 19a. It is

reported at 86 F.3d 289 (June 13, 1996).

The opinion of the district court is printed in petitioner’s

appendix at pages 20a to 25a. It is reported at 909 F. Supp.

133 (S.D.N.Y. 1995),

Jurisdiction

The judgment of the United States Court of Appeals for the

Second Circuit was entered on June 13, 1996. This Court's

jurisdiction is invoked under 28 U.S.C. § 1254(1).

Constitutional and Statutory Provisions

This case involves the Eleventh Amendment to the Con-

stitution of the United States, which provides:

The Judicial power of the United States shall not be

construed to extend to any suit in law or equity, com-

menced or prosecuted against any one of the United

States by Citizens of another State, or by Citizens, or

Subjects of any foreign State.

This case also involves several provisions of the New York

State Constitution, New York State Finance Law, New York

Court of Claims Act, and New York Public Authorities Law,

which are set out in full in petitioner’s appendix at pages

26a to 1 13a.

Statement of the Case

Plaintiffs brought the underlying action against the New

York State Thruway Authority (“NYSTA” or “the Authority”)

pursuant to the federal Water Pollution Control Act, 33 U.S.C.

§ 1251 et seq., and New York State statutory and common

law. The district court has jurisdiction pursuant to 28 U.S.C.

§ 1331 and 28 U.S.C. § 1367.

Plaintiffs have alleged, among other things, that NYSTA

has unlawfully discharged pollutants into Long Island Sound

via a storm drain that collects storm water runoff from a por-

tion of the New York State Thruway. In a summary judgment

motion, NYSTA claimed it was immune from suit as an

arm of New York State under the Eleventh Amendment. The

district court rejected NYSTA’s argument. 22a-23a; 909

F. Supp. at 135. The Second Circuit, on different reasoning,

affirmed. 16a-17a; 86 F.3d at 296.

The facts material to this petition are those that relate to

NYSTA’s status under State law and its role in the State gov-

ernment. The Authority was created by the State in the early

1950's for the purpose of constructing and maintaining a

State-wide highway, the New York State Thruway. The State

Legislature has since expanded the Authority’s mandate to

include the management and maintenance of the 500-mile

State canal system and certain other State roadways, and the

financing of transportation projects throughout the State.

N.Y. PUB. AUTH. L. §§ 350 et seq.

The State directs NYSTA to make specific expenditures for

general State projects, relies on the Authority’s credit in the

bond market to raise funds for non-Thruway purposes, and

takes measures to preserve the Authority’s solvency. NYSTA

also receives certain money through direct annual appropri-

ations from the State legislature and Statutory reimburse-

ments.

Over the last two decades, NYSTA has been directed by the

Legislature to raise capital to finance the construction, refur-

bishment, and maintenance of State roadways and trans-

portation facilities. For instance, in legislation enacted at

various times since 1972, the Legislature created programs

for the State’s transportation infrastructure which are funded

through specified State tax revenue Streams. N.Y. STATE

FINANCE L. §§ 88-b; 89; 89-b: L.1987, c.13, § 5; L.1972.

c.678, § 2; L.1991, ¢.329, § 1, as amended by L.1991, ¢.330,

§ 1; L.1993, c.56, § 35. The Legislature simultaneously autho-

rized NYSTA to issue bonds, the proceeds of which are paid

over to the State Department of Transportation (“DOT”) or.

upon DOT approval, to certain municipalities to finance the

actual construction and maintenance work under agreements.

In return, DOT was authorized to make payments to NYSTA

from dedicated funds or legislative appropriations to cover the

principal, interest, and issuance costs of these bonds. N.Y.

PuB. AUTH. L. §§ 376, 380, 385. In 1990, the Legislature

amended PuB. AUTH. L. § 376 in order “[t]o assure the con-

tinued operation and solvency of the [NYSTA] by maintain-

ing the Authority’s debt reserve fund through payments from

the State.” L.1990, c.190, § 364, amending PUB. AUTH. L.

§ 376(5)(a)-(b). Under this provision, the State annually

appropriates funds to NYSTA as may be necessary to cover

the debt services on the bonds issued in support of these

transportation programs. N.Y. PUB. AUTH. L. § 376(5)(a)-(b);

see also id. at §§ 380(2)(b), 380(5), 385(2)(b), 385(5).

Similarly, in 1992 the Legislature directed that NYSTA

“make available” $50 million for public works projects

throughout the State, including the Syracuse inner-harbor pro-

ject, the Buffalo waterfront development project, and the

improvement of highway access to Stewart Airport in Orange

County. N.Y. PuB. AUTH. L. § 384; L.1992, c.766. The Leg-

islature has also directed NYSTA to assume control, opera-

tion, and maintenance of Interstate 287 and to enter into a

financing agreement for the operation of that roadway con-

ditioned on the issuance of bonds by NYSTA. L.1990, c.190,

§§ 348, 350-351, 353-354.

Also in 1992, the State Legislature transferred control over

the State canal system to NYSTA. L. 1992, c.766. In 1994, the

Legislature authorized NYSTA to issue up to $60 million in

bonds to finance the maintenance of the canal system,

directed NYSTA to enhance funding for the canal, and appro-

priated $2.6 million to NYSTA for the maintenance and plan-

ning for the canal. N.Y. PUB. AUTH. L. §§ 382-383; L.1994,

c.54, § 1 at p. 93.!

The construction of the canal system, the biggest public works

project of its era, was financed exclusively by the State beginning in

1817. In appointing NYSTA as guardian of the Canal System, the Leg-

islature found that NYSTA’s jurisdiction over the system “will keep man-

agement and control over the canals with the state as required by the state

constitution.” L.1992, c.766, § 1; see N.Y. CONST. ART. XV(1)-(4).

~~ rows wht.

tS a ll lg ja

ee a ne

At the same time that the Legislature directs NYSTA to

take responsibility for various non-Thruway projects, it also

allocates money directly to the Authority. In 1993, the Leg-

islature appropriated $33 million of its federal highway funds

allocation to NYSTA. L.1993, c.54, § 1 at p. 71. In 1994,

NYSTA’s direct appropriation was $32 million. L.1994, c.54.

§ 1 at p. 74. In 1995, the Legislature appropriated approxi-

mately $37 million to NYSTA. L.1995, ¢.54, § 1.

The Legislature draws on the Authority as a funding source

for major public infrastructure projects. In 1993, the State

Legislature enacted a financing plan for the State’s trans-

portation system. Under that legislation, NYSTA was autho-

rized to issue up to $4 billion through fiscal 1996-97 in bonds

for authorized state and local highway, bridge, aviation, and

rail construction projects throughout the State.? The legisla-

tion requires NYSTA to pay over the proceeds of the bonds to

the State. Meanwhile, through the annual State budget appro-

priation process, money is paid back to NYSTA to cover the

bonds’ principal and interest. N.Y. PUB. AUTH. L. §§ 385,

386; see also Schulz v. State, 84 N.Y.2d 231, 237-39. 616

N.Y.S.2d 343, 345-46 (1994). The Legislature has also autho-

rized NYSTA to issue up to $40 million in special rail and

aviation bonds to finance State Department of Transportation

projects. N.Y. Pur. AUTH. L. § 386. The Legislature, in turn,

appropriates money to pay NYSTA’s debt service and certain

other costs related to the financing. /d. at § 386(2).

Other financial inter-relationships also exist. The State

Comptroller has custody over NYSTA’s funds, N.Y. Pus.

AUTH. L. § 364, must approve NYSTA bond issues, N.Y. Pus.

AUTH. L. § 365(2), and has discretionary supervision over

NYSTA’s accounts, N.Y. CONST. ART. X, §5; N.Y. Pus.

AUTH. L. §§ 364, 2803. Moreover, as with the case of the

Legislation currently before the Governor for approval would,

among other things, increase NYSTA’s bonding authorization and extend

the programs through fiscal year 1999-2000. N.Y. Assembly Bills Nos.

11336-a and 11340.

construction of the State canal a century before, New York

State guaranteed $500 million in bonds for the construction of

the Thruway, one of the biggest public work projects of its

time. N.Y. CONST. ART. X, § 6; N.Y. PUB. AUTH. L. § 366.

The last of these bonds were finally redeemed in July, 1995,

two years after this litigation was commenced.

The Legislature created NYSTA to ensure the defense of

the State and to promote commerce, N.Y. PUB. AUTH. L.

§§ 352, 353, and the highway system built and maintained by

NYSTA under this original mandate traverses almost every

region of the State. The Legislature’s transfer of responsi-

bility for the 500-mile canal system and other highways to

NYSTA further broadened its state-wide responsibilities.

NYSTA’s governing board members are appointed by the

Governor with the advice and consent of the Senate. N.Y.

PuB. AUTH. L. § 352. Board members may be removed from

office by the Governor and Senate as well for “inefficiency,

neglect of duty or misconduct.” N.Y. PuB. AUTH. L. § 2827.

As discussed above, the State Comptroller disperses and may

audit the Authority’s funds and reviews NYSTA’s proposed

bond offerings. /d. at §§ 364 and 365(2). The Authority is

required to make an annual report of its operations and finan-

cial condition to the Legislature, the Governor, the

Comptroller, and the Director of the Budget. /d. at § 363.

NYSTA holds property “in the name of the State.” N.Y.

PuB. AUTH. L. § 354(4). The Legislature authorized NYSTA

to acquire property through the exercise of the State’s eminent

domain powers. N.Y. PuB. AUTH. L. § 358-a. All of NYSTA’s

property will vest in the State upon the termination of the

Authority’s existence. /d. at § 352(4).

While NYSTA may sue and be sued under its governing

legislation, the waiver of its sovereign immunity is limited.

Thus, tort and contract claims may be brought against NYSTA

only in the New York State Court of Claims and according to

the same terms applicable to the State. See N.Y. PUB. AUTH.

POLIO A ALL MAINE 20 PARED AA,

Weel ne Rtg Vor eWay teen et

L. § 361-b; N.Y. CourT oF CLAIMS ACT § 8. Furthermore,

the State has structured NYSTA to exempt its property and

income from State taxation. N.Y. PUB. AUTH. L. § 371. The

Legislature has also exempted the bonds issued by the

Authority from most State taxes. /d. at § 372. Similarly, the

United States Internal Revenue Service views the Authority

as a State entity and exempts both NYSTA’s revenue and the

interest paid on its bonds from federal taxation. 26 U.S.C.

§ 115; Appellate Record at 47.

The Authority also receives technical assistance and other

services from other State agencies. N.Y. PUB. AUTH. L. § 362.

Finally, the Authority’s employees are protected under the

State's Civil Service Law and are treated the same as employ-

ees of State departments for purposes of transfers, promo-

tions, and seniority calculations within and among all State

agencies. /d. at §§ 354(6) and 355.

The Decision Below

The Second Circuit began its analysis with reference to this

Court’s decisions in Lake Country Estates, Inc. v. Lake Tahoe

Regional Planning Agency, 440 U.S. 39] (1979), and Hess v.

Port Authority Trans-Hudson DO ee” BESS ie

394, 130 L.Ed.2d 245 (1994), and the various “indicators of

immunity” identified in those decisions. The court recognized

that there are two rationales that underpin the Eleventh

Amendment—protecting the State’s sovereign dignity and

protecting the State’s fisc. 9a-10a; 86 F.3d at 293. It then

noted, however, that protection of the State’s fisc wil] control

where the indicators of immunity are evenly balanced even in

the instance of a single-state entity. Jd. The court examined

Six indicators: (1) how the entity is referred to; (2) how the

entity’s governing members are appointed; (3) how the entity

is funded; (4) whether the entity’s function is traditionally one

of the local or State government; (5) whether the State has a

veto power over the entity’s decision; and (6) whether the

entity’s obligations are binding upon the State. /d. After con-

cluding that the factors were evenly balanced, the court stated

that the sovereign dignity concern was “not fully implicated”

because NYSTA was not a “traditional” State agency. 17a; 86

F.3d at 296. Since the State was not obligated to pay a pos-

sible judgment against the Authority, NYSTA was not entitled

to Eleventh Amendment immunity. 8a-17a; 86 F.3d at 293-96.

Reasons For Granting The Writ

The question of how to determine whether an agency like

the Authority is entitled to Eleventh Amendment immunity as

an arm of the State raises an important issue with respect to

which the Courts of Appeals are in conflict. Unfortunately,

this Court’s decision in Hess has engendered confusion

among the lower courts in dealing with single-state agencies

even though the Hess case dealt with a bi-state, Compact

Clause entity. As the Court in Hess observed, bi-state entities

“occupy a significantly different position in our federal sys-

tem than do the States themselves.” 115 S.Ct. at 400. The rul-

ing below ignored this distinction, conflicts with other

circuits’ analyses, and improperly restricts the State’s

sovereign immunity. The issue in this matter is of substantive

importance because States need to know what structures of

government are entitled to Eleventh Amendment immunity in

order to plan and implement the most efficient forms of State

government consistent with each State’s policies on the asser-

tion of sovereign immunity.’ Consequently, the Court should

As Justice O’Connor recognized, autonomy in planning is a cru-

cial attribute of state sovereignty. “If a State were vulnerable at any time

to retroactive damage awards in federal court, its ability to set its own

agenda, to control its own internal machinery, and to plan for the future—

all essential perquisites of sovereignty—would be grievously impaired.”

Hess, 115 S.Ct. at 410 (O’Connor, J., dissenting).

i eal Be 18 at

PORE NEG. HE 8 ite PRI NE, es

grant certiorari to resolve the conflict and remove the lower

courts’ confusion.

This Court has held that the Eleventh Amendment bars suits

in federal court not only against a State itself, but also against

a State agency and any other governmental entity character-

ized as an “arm of the State.” Mr. Healthy City Sch. Dist. Bd.

of Education v. Doyle, 429 U.S. 274, 280 (1977): Monell y.

Department of Social Services, 436 U.S. 658, 690 n. 54

(1978). By contrast, political subdivisions of a State, such as

municipalities and counties, are not entitled to Eleventh

Amendment immunity “even though such entities exercise a

‘slice of State power.’ ” Lake Country Estates, Inc. v. Tahoe

Regional Planning Agency, 440 U.S. at 401.

In Hess, the Court addressed whether a subsidiary of the

New York New Jersey Port Authority, a bi-state or “Compact

Clause” entity, was entitled to Eleventh Amendment immu-

nity as an “arm of the State.” The Hess majority opinion

identifies “twin” guiding concerns behind the Eleventh

Amendment: (1) respect for a State’s sovereign dignity; and

(2) protection of a State’s treasury and finances. 115 S.Ct. at

400, 404. The Hess opinion, however, did not address what

constituted interference with a “State’s Sovereign dignity”

because the defendant in that case was a bi-state entity and

therefore suit against it did not implicate issues of “sovereign

dignity.” 115 S.Ct. at 400-401. Because there was no need.

the Court also did not determine how to weigh the two con-

cerns when both were implicated.

The Eleventh Amendment test applied by the Second Cir-

cuit did not respect the underpinnings of Eleventh Amend-

ment jurisprudence which are applicable to single-state

created entities. While the Second Circuit did identify two

rationales that underpin the Eleventh Amendment, it then

devalued one of the two—sovereign dignity—by providing

that protection of the treasury “will control” in close cases.

10a; 86 F.3d at 293. This devaluation is even more ques-

tionable given the lower court’s failure to acknowledge the

Legislature’s repeated directives to NYSTA to maintain and

fund the State canals and highways, N.Y. PUB. AUTH L.

§§ 376, 379-386, and the State’s ability to appoint and remove

NYSTA’s board members, N.Y. PUB. AUTH L. §§ 352, 2827.

The lower court’s analysis was further marred by its inex-

plicable statement that NYSTA is not a “traditional” state

agency—a concept that the lower court does not define or

state why such a characterization is significant.

Further, the court ignored the practical interrelationships

between NYSTA and the rest of State government, conclud-

ing that because the State treasury was technically not liable

for most debts and other liabilities of NYSTA, there could be

no impact on the public fisc. 16a; 86 F.3d at 296; compare,

Ristow v. South Carolina Ports Authority, 58 F.3d 1051, 1054

(4th Ciz.), cort. dented, U.S... HG SAR. 524, 135

L.Ed.2d 423 (1995). Contrary to the court’s reasoning below,

were plaintiffs to recoup the $105 million in damages that

they claim, NYSTA’s bond rating could very well be

adversely affected, resulting in higher debt service and inter-

est costs to the Authority. Furthermore, an award of such

magnitude would cause significant problems for NYSTA in

meeting its obligations to maintain and operate I-84 and I-

287. If NYSTA’s abilities were so compromised, the State

would still be responsible for the mandated maintenance and

operation function, which would be payable directly from the

State treasury. L.1990, c.190, § 350; L. 1991, c.53, § 11; com-

pare Hadley v. North Arkansas Community Technical College,

76 F.3d 1437, 1441 (8th Cir. 1996), petition for cert. filed, 65

U.S.L.W. 3001 (June 24, 1996) (No. 95-2060) (recognizing

that even if the college could initially satisfy a judgment, the

judgment would produce a higher budgetary shortfall).

The Second Circuit’s approach in placing primary reliance

on the effect that a judgment against an agency may have on

the State treasury in determining whether an agency is enti-

tled to Eleventh Amendment Immunity is in direct conflict

with the decision of the Seventh Circuit in Thiel v. State Bar

of Wisconsin, ___ F.3d ___, No. 95-3442, 1996 WL 496629

(7th Cir. Sept. 3, 1996), although consistent with Christy v.

Pennsylvania Turnpike Com'n., 54 F.3d 1140 (3d Cir.), cert.

denied, ___ U.S. __, 116 S.Ct. 340, 133 L.Ed.2d 238 (1995).

It is also inconsistent with the approach of the Fourth Circuit

in Ristow v. South Carolina Ports Authority, supra.

In Thiel, the Seventh Circuit decided that the Wisconsin

State Bar was entitled to Eleventh Amendment immunity as

an arm of the State. The Wisconsin Supreme Court created the

Bar in 1956. It controls Bar dues and its budget through rule-

making, establishing deadlines within which members must

enroll and pay dues, penalties for nonpayment, and limitations

on the use of dues monies. The Wisconsin Supreme Court

requires the Bar to include in the dues adequate funds to pay

the costs of legal education activities and professional over-

sight and has specified the manner in which the Bar conducts

its daily business and establishes its governance. The court

has ultimate authority to review amendments to the Bar’s

bylaws. 1996 WL 496629 at *2. The Bar, however, may sue

and be sued, enter into contracts, buy or dispose of real and

personal property in its own name, maintain bank accounts in

its own name, and handle its own personnel matters itself.

Its governing board is elected by its membership and operates

the Bar without daily oversight by the court. 1996 WL 496629

et "2.

On the basis of these facts, the Seventh Circuit concluded

that the Bar was entitled to Eleventh Amendment immunity.

Id. Unlike the court below, however, the Thiel court did not

examine what impact a judgment might have on the State

treasury, instead explaining that “the effect on the State trea-

sury was the least important of the three factors, and would

be irrelevant if the first two weigh in favor of Eleventh

Amendment immunity.” 1996 WL 496629 at *3 (emphasis

added), citing to Crosetto v. State Bar of Wisconsin, 12 F.3d

1396, 1402 (7th Cir. 1993), cert. denied, ie SI kc

Ve ee ee

S.Ct. 2138, 128 L.Ed.2d 867 (1994). As to the other two fac-

tors—the extent of control the Wisconsin Supreme Court

exercised over the Bar and whether the Bar acted as the agent

of the court when it promulgated the rule in question—the

Seventh Circuit concluded that sufficient control had been

exercised and that the Bar was acting as an agent. As a result,

the Circuit did not even “consider whether a judgment against

the Bar would be satisfied by State funds.” 1996 WL 496629,

*3. Indeed, the Seventh Circuit did so in the face of findings

of the court in Levine v. Supreme Court of Wisconsin, 679

F.Supp. 1478, 1487 (W.D.Wis. 1988), rev'd on other grounds,

864 F.2d 457 (7th Cir.), cert. denied, 493 U.S. 873 (1989),

that the Bar was an autonomous institution and that “[a] judg-

ment against the State Bar would not affect the state trea-

sury.” See, Thiel at 1996 WL 496629 at *7 FN3.

In contrast, the result in this case turned on whether the

State was liable for a judgment against NYSTA. |5a-17a; 86

F.3d at 296. In addition, while the Seventh Circuit concluded

that the supervisory oversight of the Wisconsin Supreme

Court constituted “sufficient” State control over the Bar to

trigger immunity, here the Second Circuit rejected that con-

clusion despite much greater State oversight and control in

the affairs and governance of the NYSTA. 10a-16a; 86 F.3d at

295-6; compare, Levine v. Supreme Court of Wisconsin, 679

F.Supp. at 1480-82, 1487-88.

In Ristow, the Fourth Circuit accorded Eleventh Amend-

ment immunity to the South Carolina Ports Authority. Instead

of determining whether the State would be liable as a matter

of law in the event of a judgment against the authority,

the major factor utilized by the court below, the Fourth Cir-

cuit conceded that “in the strictest sense there is no legal obli-

gation by the State of South Carolina to cover the Ports

Authority's debts.” 58 F.3d. at 1054. Nevertheless, the Fourth

Circuit determined that the South Carolina Ports Authority

was entitled to Eleventh Amendment immunity because

“practicably . . . a judgment against the Ports Authority

involves the ‘core concern’ of the Eleventh Amendment—

the ebb and flow of funds in and out of South Carolina’s

treasury.” /d. at 1054-55. In conducting this “practical anal-

ysis” of the “continuing picture,” the Fourth Circuit noted that

South Carolina had provided funding for threnovation of port

facilities, id. at 1053-54, and over the authority's lifetime had

withdrawn funds from the authority, id. at 1054.4 In contrast,

despite the existence of similar factors, ranging from the ini-

tial State constitutional guarantee of $500 million in bonds,

the regular infusing of monies into NYSTA, and the Legis-

lature’s reliance on the Authority as a source of funds for

State projects, the court below concluded that a judgment

posed “no threat” to NYSTA and rejected immunity.°

Il.

The need to resolve the conflict among the circuits is

heightened by accelerating changes in State governmental

structure that will require the courts to apply an “arm of the

State” test to a multitude of state-created entities, and by the

confused reaction of the lower courts to Hess.-The-lower

court’s emphasis on a traditional and narrow view of the State

On the issue of control the Fourth Circuit has stated “we believe

that in many instances the degree of State control over the particular

entity will be sufficiently clear to render the degree of control a sub-

Stantively meaningful factor in the overall calculus. This is particularly

true where the question is only whether the entity is only under State or

local control and not which among a number of ‘multiple creator-con-

trollers’ is actually in control, as is the question with compact clause

entities.” Gray v. Laws, 51 F.3d 326, 432 n. 3 (4th Cir. 1995).

; The import of the Second Circuit's “no threat” test is disturbing.

If NYSTA has a series of poor years where the Legislature is required to

infuse money into the Authority, see, e.g., N.Y. PUB. AUTH. L. § 376,

would NYSTA become “an arm of the State” until it recovered its fiscal

stability? Would suits demanding only small judgments proceed in fed-

eral court while those demanding large amounts be barred? The opinion

below is silent on these issues raised by the court's reasoning.

treasury—essentially reducing the question to whether the

State must write a check against its general funds to cover the

debts of the entity claiming “arm of the State” status—ignores

the reality of modern State governance. The “State treasury”

is no longer a single vault in the basement of the Capitol;

rather, States employ numerous funds, accounts, and trusts,

often interconnected, in order to finance State projects and

federally-mandated programs. This restrictive view, coupled

with uncertainty concerning how to evaluate the State

“dignity” element of Eleventh Amendment underpinnings,

contributes to the lower courts’ confusion and consequent

conflicting approaches and results. Indeed, giving proper

weight to the State sovereignty concept would require

acknowledging the immunity of many of these entities, as the

preservation of the States’ autonomy in organizing and

financing their public undertakings must be a core concern of

the Eleventh Amendment.

Here, not only has the State clothed NYSTA with many ele-

ments of the State’s own identity and charged it with the exe-

cution of a state-wide public function, but the State relies on

NYSTA as an integral component in the planning, financing,

and implementing of state-wide transportation facilities. Thus,

in a practical sense, it is impossible to view the State’s funds

as entirely separate and insulated from NYSTA’s finances and

financial condition. The test applied by the Second Circuit

failed to appreciate these factors.

While Hess provides the lower courts with a roadmap for

determining whether a bi-state entity is entitled to Eleventh

Amendment immunity, the lower courts by their own admis-

sion have become confused when attempting to apply the

Court’s analysis to single-state creations. For example, in

Gray v. Laws, 51 F.3d 426 (4th Cir. 1995), the Fourth Cir-

cuit characterized Hess as “an opinion that is certain to gen-

erate confusion.” /d. at 431. The Fourth Circuit complained

that while the Hess Court, which was only addressing Com-

pact Clause entities, identified considerations the circuit

)

—___

considered relevant to Single-state created entities. “[The

Supreme Court] did not offer any guidance as to how to apply

any of the various factors in that context.” Id. at 433.

Other circuits have also noted since Hess that “[t}he

jurisprudence over how to apply the arm-of-the-state doctrine

is, at best, confused.” 8a: 86 F.2d at 293 (2d Cir.): see. €.2.,

Hadley v. North Arkansas Community Technical College, 76

F.3d at 1443 (8th Cir.) (Lay, J., dissenting) (“Today's decision

amplifies the disarray of approaches applied by lower courts

when confronted with the defense of Eleventh Amendment

immunity by state-created entities. Little would be served by

setting forth the diverse reasoning of this Court or other

courts. These cases are already of historical record.”); Ristow

v. South Carolina Ports Authority, 58 F.3d at 1053 n.4

(4th Cir.) (court declines to “attempt to interpret” Hess’

sovereignty discussion): see Pillsbury Co. v. Port of Corpus

Christi Authority, 66 F.3d 103, 104 (Sth Cir. 1995), cert

denied, __ U.S. __., 116 S.Ct. 1705. 134 L.Ed.2d 803

(1996) (court stated that Hess did not apply in single-state

context).

The Second Circuit's restrictive view. coupled with uncer-

tainty concerning how to evaluate the State “dignity” element

of Eleventh Amendment underpinnings recognized in Hess

even in the bi-state context, will add to the lower courts’ con-

fusion and consequent conflicting approaches and results.

Indeed, giving proper weight to the State sovereignty concept

would require acknowledging the immunity of many of these

entities, as the preservation of the States’ autonomy in orga-

nizing and financing their public undertakings must be a core

concern of the Eleventh Amendment. As Justice O'Connor

stated in Hess, “We have always respected state flexibility in

setting up and maintaining agencies charged with furthering

State objectives.” Hess, 115 S.Ct. at 41] (dissenting), citing

Highland Farms Dairy, Inc. v. Agnew, 300 U.S. 608. 6]?

(1937).

As a consequence, States cannot predict whether the lower

courts will find that the single-state entities they have created

or may create are entitled to Eleventh Amendment immunity,

an important consideration in planning the structures of State

government. This issue is particularly important because State

governments have been compelled to diversify their functions

and to develop new means of financing the programs

demanded by their citizens or delegated to them by the federal

government. See, Note, Clothing State Governmental Entities

with Sovereign Immunity: Disarray in the Eleventh Amend-

ment Arm-of-the-State Doctrine, 92 COLUM.L.REV. 1243,

1247-51 (1992); see also L.1972, c.678, § 1 (in authorizing

NYSTA to issue bonds, Legislature made finding of State

financial crisis and pressing need to finance essential highway

construction and repair projects).°

With the diversification in government structures and the

increasing demands on States, courts are presented with new

kinds of entities that share aspects of their creating States’

identity (such as political accountability or State law immu-

nity) and that also have varying degrees of financial rela-

tionship to their creators. Many of these entities are

intentionally self-financing, despite their obvious govern-

mental functions and State agency characteristics. Thus, given

the confusion of the lower courts, their Eleventh Amendment

immunity is unsettled.

For these reasons, this Court should grant certiorari to

resolve the conflict and confusion in the circuits regarding the

tests to apply and how they are to be applied when deter-

mining whether a single-state entity is an arm of the State.

. New York is among many states that have utilized public author-

ities to meet the demands of modern state government. 92 COL. L. REV.

at 1250 n. 32; see Schulz v. State of New York, 84 N.Y.2d at 241-47, 616

N.Y.S.2d at 347-51 (summarizing the history of the State’s efforts to

finance governmental activities through its public authorities).

CONCLUSION

The Court should grant a writ of certiorari in this matter to

resolve the conflict among the lower courts and to provide

essential guidance to the lower courts when deciding whether

a single-state created entity is an “arm of the State.”

Dated: New York, New York

September 11, 1996

Respectfully submitted.

DENNIS C. Vacco

Attorney General of the

State of New York

Attorney for Petitioner New

York State Thruway Authority

New York State Department

of Law

120 Broadway

New York, New York 1027]

(212) 416-8448

BARBARA G. BILLET

Solicitor General

PETER H. SCHIFF

Deputy Solicitor General

GORDON J. JOHNSON*

Deputy Bureau Chief

Environmental Protection Bureau

JOHN J. Sipos

ELIZABETH A. GRISARU

Assistant Attorneys General

*Counsel of Record

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.