Petition for Writ of Certiorari — Pillsbury Co. v. Port of Corpus Christi Authority

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Supa Court, U.5.

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9B 1467 mar i 2 19%

In The

Supreme Court of the United States

October Term, 1995

THE PILLSBURY COMPANY, INC.,

)

Petitioner

THE PORT OF CORPUS CHRISTI AUTHORITY,

Respondent

. o- re

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Fifth Circuit

PETITION FOR WRIT OF CERTIORARI

pnaiapibnenstainiapiniataamnteel e seimapiimnaiiiann =

(SEORGE F. CHANDLER, III

Counsel of Record

DANA K. MAartTIN

Rosert G. Mout

Hitt Rivkins LOESBERG

O’BriEN Mutroy & Hayper

712 Main Street, Suite 1515

Houston, Texas 77002

Telephone: 713/222-1515

Telefax: 713/222-1359

Attorneys for Petitioner

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTION PRESENTED

1. Does the analysis announced by this Court in Hess v.

Port Auth. Trans-Hudson Corp., 513 U.S. __, 115 S.Ct.

394 (1994), for determining a governmental entity’s

entitlement to Eleventh Amendment immunity apply

to single-state entities?

PARTIES

The parties are Petitioner/Plaintiff The Pillsbury

Company, Inc.! and Respondent/Defendant The Port of

Corpus Christi Authority. The Port of Houston Authority

appeared as amicus curiae in support of Respondent in

the Court of Appeals, but it was not a party below and is

not a party before this Court.

1 Pursuant to Rule 29.1, Petitioner states that the non-

wholly owned subsidiaries of Petitioner are as follows:

Seretram, Pacific Star S.A. de C.V., Distribudora H.D. Mexico

S.A. de C.V., Haagen-Dazs Japan Inc., Gigante Verde Y Asso-

ciados S.N.C. de C.V., B.K. Do Brasil Limitada, and Burger

King Sweden K.D.

lil

TABLE OF CONTENTS

Page

UMMM UME BREEN OTEID, 5 osc acces cccnssecsceces i

EE OS RE ae ii

SS ee so iii

er Og gs te | vi

SE IU so bey esses sscccscecndiecuaes 1

hn ea ares o oelk as whee «si a's eb viens Aa

CONSTITUTIONAL PROVISION INVOLVED....... 2

DeMeRMemneeee GPE Pht CASE... ccc cccccssssncees 2

REASONS FOR GRANTING THE WRIT ........... 4

I. THE FIFTH CIRCUIT, IN CONFLICT WITH THE

FOURTH CIRCUIT, HAS SO LIMITED HESS

THAT IT HAS VIRTUALLY NO APPLICATION

ne RUA RSER Sse svaswceesecsacesees 4

A. The Decision Below Refused to Apply Hess.. 4

1. The Fifth Circuit’s Decision............ 4

SESE OU eee ee eee eee 6

B. If the Fifth Circuit Had Applied Hess, the

Port Would Not Have Been Entitled to Elev-

enth Amendment Immunity................ 7

1. The Effect on the State Treasury ....... 7

ee Se eee 8

3. Other Lake Country Factors............. 9

C. The Fourth Circuit Correctly Recognizes that

the Hess Analysis Applies to Single-State

EE ee eee 11

TABLE OF CONTENTS - Continued

Page

1. Gray v. Laws and Ristow v. South Carolina

OE MEME, Se or ee Oe ae ee ary 11

2. Other Circuits Implicitly Support the

Fourth Circuit’s Conclusion............ 12

3. The Fourth Circuit is Correct .......... 12

D. The Inter-Circuit Conflict is Ripe for Resolu-

oe ae ee, Sees sa ecoe en 13

1. The Number of Bi-State Entities is Fairly

Small, Not Only in the Fifth Circuit, but

POOR hack havc ar beers Saxe caw was 13

2. Different Analyses for Eleventh Amend-

ment Immunity Will Result in Forum-

ee eer eee rr Pree 13

3. The Decision Below Affects Interstate

and International Commerce........... 14

Il. IF THE COURT DECLINES TO RESOLVE THE

CONFLICT BETWEEN THE FOURTH AND

FIFTH CIRCUITS AT THIS TIME, THE COURT

SHOULD NONETHELESS SUMMARILY

REVERSE THE DECISION BELOW ............ 16

hE 8 POP rr ey ene Tae ree eee 19

APPENDIX A - Fifth Circuit’s Corrected Opin-

MO a CPLR EV eh vba eee bs oe Al

APPENDIX B_ —- Fifth Circuit’s Original Opin-

PEE SL MER NN RMR TEMP, eaten Bl

rTABLE OF CONTENTS - Continued

APPENDIX C

APPENDIX D

APPENDIX E

APPENDIX F

APPENDIX G

District Court’s Memorandum

and Order (Admiralty Juris-

GS 5 bk oe a kk

District Court’s Memorandum

and Order (Eleventh Amend-

od ee

Order Certifying Eleventh

Amendment Immunity Deci-

sion for Interlocutory Appeal. .

Order Granting Permission for

Interlocutory Pee

Order Denying Petition for

Panel Rehearing /Suggestion

for Rehearing En Banc........

Page

TABLE OF AUTHORITIES

Page

CASES

Alabama v. Pugh, 438 U.S. 781 (1978) 6

Christy v. Pennsylvania Turnpike Comm'n, 54 F.3d

1140 (3d Cir. 1995)... eves eek ve 12

Fristoe v. Blum, 92 Tex. 76, 45 S.W. 998 (Tex. 1898) . 15

Gray v. Laws, 51 F.3d 426 (4th Cir. 1995) . 11, 12, 13

Hess v. Port Auth. Trans-Hudson Corp., 513 U.S. !

115 S.Ct. Gee Ukpe a oc ct cde beweass ess .. passim

Jacintoport v. Greater Baton Rouge Port Comm'n, 762

F.2d 435 (5th Cir. 1985), cert. denied, 478 U.S.

UY A0) |.) er rey ee eee 4,5

Kamani v. Port of Houston Auth., 702 F.2d 612 (5th

Cir. 1983) .... Ai te ods Se Oe fe 10

Lake Country Estates, Inc. v. Tahoe Regional Planning

Agency, 440 U.S. 391 (1979) ae passim

Lincoln County v. Luning, 133 U.S. 529 (1890) . 6

Marbley v. Bane, 57 F.3d 224 (2d Cir. 1995) .. 12

Marine Indem. Ins. Co. of Am. v. Yangming Marine

lransp. Corp., 1990 A.M.C. 547 (S.D.N.Y. 1989)..... 14

Matter of Merchants Grain, Inc., 59 F.3d 630 (7th Cir.

|.) FP Py Cr re en 2 Bee 12

McCrea v. Harris County Houston Ship Channel Nav

Dist., 423 F.2d 605 (5th Cir.), cert. denied, 400

U.S. 927 (1970) 5

-y

eeeees see : a 4, 16

Mireles v. Waco, 502 U.S. 9 (1991) ; 17

[ABLE OF AUTHORITIES —- Continued

Moor v. County of Alameda, 411 U.S. 693 (1973) f

Mt. Healthy City School Dist. Bd. of Educ. Doyle

429 U.S. 274 (1977) f

Pennhurst State School & Hosp. v. Halderman. 465

U.S. 89 (1984)

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

(4th Cir.), cert. denied, 116 S.Ct. 514 (1

Thomas v. FAG Bearings Corp., 50 F.3d 502 (8th Cir

1995) 2

LInited States v. Nachtigal, 507 U.S. 1 (1993

OTHER AUTHORITIE:

Tex. Civ. Prac. & Rem. Code § 101.001(2)(B) 10]

Tex. Civ. Prac. & Rem. Code § 101.001(5) lf

lex. Const. Art. XVI, Sec. 59 2 ee 17

Vill

TABLE OF AUTHORITIES - Continued

Filing of Marine Tariffs by Marine Terminal Operator

Exculpatory Tariff Provisions, Docket 86-15,

F.M.C. ruling, 1987 A.M.C. 896 (1986)

K. Stern, E. Gressman & S. Shapiro, Supreme Court

Practice (6th ed. 1986)

1994-95 Texas Almanac (Dallas Morning News

1993)

W. Voit, Interstate Compacts & Agencies (The Coun-

cil of State Governments 1995)

mth

}

Petitioner, The Pillsbury Company, Inc., respectfully

petitions for a writ of certiorari to review the judgment of

the United States Court of Appeals for the Fifth Circuit in

this case.

OPINIONS BELOW

The “corrected opinion” of the court of appeals,

reprinted as Appendix A (“App. A”), is reported at 66

F.3d 103 (5th Cir. 1995). The original opinion, reprinted as

Appendix B (“App. B”), appears at 66 F.3d 103 (5th Cir.

1995) in the advance sheets.

The district court’s Memorandum Opinion and Order

entered January 31, 1994, reprinted as Appendix C (“App.

C”), is unreported. The district court’s Memorandum

Opinion and Order entered May 27, 1994, reprinted as

Appendix D (“App. D”), is unreported.

JURISDICTION

Petitioner seeks review of the judgment of the Court

of Appeals for the Fifth Circuit, which was dated and

entered on October 11, 1995. A timely petition for rehear-

ing was filed on October 24, 1995, and denied on Decem-

ber 13, 1995. See App. G at Gl. This petition for certiorari

was filed within ninety days of that date, and this Court's

jurisdiction is invoked ur ‘er 28 U.S.C. § 1254(1). Peti-

tioner filed suit in the district court under 28 U.S.C

§§ 1332 and 1333. The district court assumed jurisdiction

under 28 U.S.C. § 1332.

CONSTITUTIONAL PROVISION INVOLVED

The Eleventh Amendment to the United States Con-

stitution provides, in pertinent part: “The Judicial power

of the United States shall not be construed to extend to

any suit in law or equity, commenced or prosecuted

against one of the United States by Citizens of another

Stele ....”

STATEMENT OF THE CASE

Petitioner, The Pillsbury Company, Inc., alleging

breach of contract and breach of a bailment, brought this

action against the Port of Corpus Christi Authority,

respondent, for damage to sugar stored in the Port's

warehouses pursuant to a wharfage/storage contract

between the Port and Pillsbury (App. D at D2). The Port

of Corpus Christi Authority was created pursuant to Art.

XVI, Sec. 59 of the Texas Constitution, which authorizes

the creation of local navigation districts (App. D at D14).

The Port admits that it receives no funds from the state

treasury, that judgments rendered against it are not paid

from the state treasury, and that the Port commissioners

are not appointed by the state (App. D at D15-D16).

The Port filed a motion to dismiss the case on the

ground that it was entitled to Eleventh Amendment

immunity from suit in federal court (App. D). The district

)

court, treating this as a motion for summary judgment,

held that the Port was not entitled to Eleventh Amend-

ment immunity (App. D). The court found that the Port

receives no funds from the state treasury and that judg-

ments against the Port are not paid from the state treas-

ury. In addition, the district court found that the Port may

sue and be sued in its own name; may buy, sell, hold, and

use property; may enter into contracts; and carries lia-

bility insurance that would cover any money judgment

entered in this case. Further, the district court found that

the Port was not an arm of the state, was autonomous,

and was primarily concerned with local problems.

Accordingly, the district court concluded that the Port

was “sufficiently independent and distinct from the

state” that it was not entitled to Eleventh Amendment

immunity (App. D at D14-D19).

The district court certified its order concerning Elev-

enth Amendment immunity for interlocutory appeal

under 28 U.S.C. § 1292(b) (Appendix E, “App. E”), and

the Fifth Circuit granted the Port’s petition for permis-

sion to appeal (Appendix F, “App. F”).

The Fifth Circuit reversed the district court on the

basis of its earlier decision in Kamani v. Port of Houston

Auth., 702 F.2d 612 (5th Cir. 1983), which held that the

similarly-situated Port of Houston Authority was entitled

to Eleventh Amendment immunity because it was “a

creature of state law and a political subdivision of the

state of Texas” (App. A at A2, 66 F.3d at 104). The Fifth

Circuit distinguished Hess v. Port Auth. Trans-Hudson

Corp., 513 U.S. __, 115 S.Ct. 394 (1994), this Court's

recent decision holding that The Port Authority of New

York and New Jersey was not entitled to Eleventh

Amendment immunity because judgments against it did

not affect either state treasury, declaring that Hess was “a

limited holding addressing the standard to be applied to

bi-state entities not created pursuant to state statute”

(App. A. at A3-A4, 66 F.3d at 104).

In a petition for rehearing, Pillsbury renewed its

argument that Kamani was inconsistent with Hess, and

that the Fifth Circuit should also follow this Court’s

earlier Eleventh Amendment decision in Lake Country

Estates, Inc. v. Tahoe Regional Planning Agency, 401 U.S. 391

(1979). In response, the Fifth Circuit denied the petition

for rehearing (App. G) and issued a “corrected” opinion

adding a footnote stating, without explanation, that the

Port would meet the Fifth Circuit’s test for Eleventh

Amendment immunity set forth in Jacintoport v. Greater

Baton Rouge Port Comm’n, 762 F.2d 435 (5th Cir. 1985), cert.

denied, 478 U.S. 1057 (1986), if the Court were to apply it

(App. A at A4 n.5, 66 F.3d at 105 n.5). The Fifth Circuit,

however, did not discuss whether the Port met this

Court’s criteria for Eleventh Amendment immunity

announced in Hess, Lake Country, or any other decision

(App. A at A3-A4, 66 F.3d at 104-05).

REASONS FOR GRANTING THE WRIT

I. THE FIFTH CIRCUIT, IN CONFLICT WITH THE

FOURTH CIRCUIT, HAS SO LIMITED HESS THAT

IT HAS VIRTUALLY NO APPLICATION IN THE

FIFTH CIRCUIT.

A. The Decision Below Refused to Apply Hess

1. The Fifth Circuit’s Decision

The court below based its decision on an earlier Fifth

Circuit decision that the similarly-situated Port of

CRRA aM RT coh. , ae a aa cee a

Houston Authority was entitled to Eleventh Amendment

immunity because it was “a creature of state law and a

political subdivision of the state of Texas.” App. A at A3,

66 F.3d at 104 (citing Kamani v. Port of Houston Auth., 702

F.2d 612, 613 (5th Cir. 1983) (citing McCrea v. Harris

County Ship Channel Nav. Dist., 423 F.2d 605 (5th Cir.), cert.

denied, 400 U.S. 927 (1970))).

Almost a year before the Fifth Circuit’s initial deci-

sion, this Court issued its most recent Eleventh Amend-

ment opinion. Hess v. Port Auth. Trans-Hudson Corp., 513

U.S. __, 115 S.Ct. 394 (1994). This Court held that

because the fundamental purpose of the Eleventh

Amendment was to protect state treasuries, a govern-

mental entity is not entitled to Eleventh Amendment

immunity if a judgment against the entity would not

affect the state treasury. Id. at 404-06. The Fifth Circuit

distinguished Hess as “a limited holding addressing the

standard to be applied to bi-state entities not created

pursuant to state statute” and declined to follow it.

On rehearing, the Fifth Circuit issued a “corrected”

opinion to add a footnote stating, without explanation,

that even if the Fifth Circuit applied its Jacintoport test for

Eleventh Amendment immunity, the Port would meet it.

App. A at A4 n.5, 66 F.3d at 105 n.5 (citing Jacintoport v.

Greater Baton Rouge Port Comm'n, 762 F.2d 435, 440-41 (5th

Cir. 1985), cert. denied, 478 U.S. 1057 (1986)). The Fifth

Circuit did not consider whether the Port would satisfy

either the Hess or Lake Country criteria for Eleventh

Amendment immunity. As explained in Part I.B, infra, the

Port cannot do so.

2. Implications

By limiting the Hess analysis to agencies created by

interstate compact, the decision below effectively evisce-

rates this Court’s opinion. There are fewer than 25 inter-

state agencies under compacts adopted by any of the

states in the Fifth Circuit. See W. Voit, Interstate Compacts

& Agencies (The Council of State Governments 1995) (cat-

aloging all interstate compacts and the agencies created

under them). Indeed, there are fewer than 100 agencies

created by interstate compact nationwide. See id. When

these relatively small numbers are compared to the tens

of thousands of potential Eleventh Amendment claimants

that exist within a single state,? it can be seen that the

2 There is no published listing of “potential Eleventh

Amendment claimants,” but a brief examination of some of the

numbers in a single state gives an idea of the relevant

comparison. Texas has joined only 15 compacts that create

interstate agencies. See Voit, supra at 86-87. The 1,060 Texas

school districts, see 1994-95 Texas Almanac 594 (Dallas Morning

News 1993), have school boards that are presumably similar to

the one that unsuccessfully sought Eleventh Amendment

prote. .on in Mt. Healthy City School Dist. Bd. of Educ. v. Doyle,

429 U.S. 274, 279-81 (1977). Texas has 254 counties and 1,176

incorporated municipalities. See 1994-95 Texas Almanac, supra at

525; cf. Moor v. County of Alameda, 411 U.S. 693, 717-721 (1973);

Lincoln County v. Luning, 133 U.S. 529, 530 (1890). There are over

200 state boards and commissions in Texas. See 1994-95 Texas

Almanac, supra at 503-518; cf. Alabama v. Pugh, 438 U.S. 781 (1978)

(per curiam). The Texas Department of Mental Health & Mental

Retardation operates 27 state hospitals, state schools, and state

centers, and contracts with 35 community MHMR centers to

provide services. See 1994-95 Texas Almanac, supra at 490; cf.

Pennhurst State School & Hosp. v. Halderman, 465 U.S. 89 (1984).

The decision below more seriously restricts this Court's

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court below has deprived Hess of the vast majority of its

precedential force.

B. If the Fifth Circuit Had Applied Hess, the Port

Would Not Have Been Entitled to Eleventh

Amendment Immunity

Because the court below felt that it was bound by one

of its prior decisions directly on point, it never consid-

ered how Hess (or any of this Court’s earlier Eleventh

Amendment decisions) would have changed the result.

Even the “corrected” opinion simply announces that the

decision below is consistent with Fifth Circuit autharity,

with no indication that the court below considered any of

this Court’s Eleventh Amendment decisions. If the court

below had considered these decisions, it would have seen

that its McCrea-Kamani line of authority is directly con-

trary to this Court’s precedents.

1. The Effect on the State Treasury

In Hess, this Court considered the various factors for

Eleventh Amendment immunity announced in Lake Coun-

try, supra. Because these factors pointed in different direc-

tions, the Court turned to the Eleventh Amendment's

“reasons for being” to guide its analysis. See Hess, 115

S.Ct. at 404. In particular, the Court held that an entity is

not entitled to Eleventh Amendment immunity if a judg-

ment against it would not affect the state treasury. Id. at

precedent than would a decision limiting the Pennhurst analysis

to state schools and hospitals!

404-406; cf. id. at 408 (O’Connor, J., dissenting). In the

present case, the Port has admitted that it receives no

state funds and that judgments against it are not satisfied

from the state treasury (App. D at D17). Recognizing this

exposure, the Port thus carried liability insurance that

would cover any judgment entered in this case (see App.

D at D16-D18). The Hess Court’s reasoning accordingly

requires that the Port be denied Eleventh Amendment

immunity.

2. Control by the State

The Hess dissenters also recognized the value of pro-

viding guidance to the lower courts in cases where the

Lake Country factors point in different directions. See Hess,

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

dissenters would have established a different test. As

Justice O’Connor explained,

the proper question is whether the State pos-

sesses sufficient control over an entity perform-

ing governmental functions that the entity may

properly be called an extension of the State

itself.

Id. (emphasis in original). Justice O’Connor elaborated on

the application of this test in the next paragraph:

The critical inquiry . . . should be whether and

to what extent the elected state government

exercises oversight over the entity. If the lines of

oversight are clear and substantial - for exam-

ple, if the State appoints and removes an entity’s

governing personnel and retains veto or

approval power over an entity’s undertakings —

———

PPA ee

—

CREB? RAN SRE FoR “AERO

then the entity should be deemed an arm of the

State for Eleventh Amendment purposes.

Id. at 411.

The state of Texas exercises no more control over port

authorities in Texas than it does over counties and other

political subdivisions that are undoubtedly not entitled to

Eleventh Amendment immunity. The state does not

appoint the ports’ commissioners and the port authorities

enjoy a great deal of freedom from state supervision

(App. D at D16-D18). The state of Texas retains no veto or

approval power over the ports’ undertakings, and has

frequently itself litigated disputes with port authorities in

Texas (App. D at D19-D20). Indeed, the state of\ Texas in

this context retains no “real, immediate control and over-

sight.” Hess, 115 S.Ct. at 411 (O’Connor, J., dissenting).

3. Other Lake Country Factors

To the extent that the remaining Lake Country factors

remain relevant, they too point against Eleventh Amend-

ment immunity in the circumstances of this case. The

Port’s treatment under state law, for example, is as a

“political subdivision,” not as a part of “state govern-

ment.” The Texas Tort Claims Act (a limited waiver of the

state’s common-law immunity from tort) defines a “navi-

gation district” like the Port as a “political subdivision”

and “state government” as follows:

“State government” means an agency, board,

commission, department, or office, other than a

district created under Article XVI, Section 59, of the

Texas Constitution, that:

(A) was created by the constitution or a statute

of this state; and

(B) has statewide jurisdiction.

Tex. Civ. Prac. & Rem. Code § 101.001(2)(B), 101.001(5)

(emphasis added). Given such an express declaration by

the Texas Legislature and the findings of the district

court, the Port cannot qualify for Eleventh Amendment

immunity as an “arm of the state.” As Justice Rehnquist

said for a unanimous Court in Mt. Healthy City School

Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 280 (1977), Elev-

enth Amendment immunity “does not extend to counties

and similar municipal corporations.”

Indeed, the district court carefully considered all of

the Lake Country factors and found that the Port did not

satisfy any of the criteria for Eleventh Amendment

immunity. The criteria include whether the entity is con

sidered a political subdivision instead of an arm of the

state, whether the commissioners are appointed by the

state, whether funding comes from the state, whether

judgments against the entity are satisfied from the state

treasury, whether the entity functions autonomously, and

whether the entity is concerned with local rather than

statewide issues. Id. at 401-02. The district court found

the Port was a political subdivision, that the commission-

ers were not appointed by the state, that no funding

comes from the state, that judgments against the Port are

not satisfied from the state treasury, that the Port func-

tions autonomously, and that the Port is concerned with

local issues (App. D at D16-D20).

In sum, if the court below had applied Hess (or any

prior decision in this Court’s Eleventh Amendment juris-

prudence), it would have reached the opposite result.

C. The Fourth Circuit Correctly Recognizes That

The Hess Analysis Applies To Single-State

Entities

The Fifth Circuit concluded that Hess applies only to

bi-state entities. App. A at A3-A4, 66 F.3d at 104. This

position directly conflicts with the well-reasoned conclu-

sion of the Fourth Circuit in two recent decisions.

1. Gray v. Laws and Ristow v. South Carolina

Ports Auth.

The Fourth Circuit, undertaking a detailed analysis,

concluded that the principles of Hess applied equally to

single-state entities. Gray v. Laws, 51 F.3d 426, 431-33 (4th

Cir. 1995). In Gray, the Fourth Circuit reviewed Hess and

noted this Court’s focus on state treasury and state sover-

eignty concerns as fundamental to Eleventh Amendment

inquiry. Id. at 432. The Fourth Circuit concluded that

there was no logical reason that the factors recognized by

this Court in Hess should be any less applicable in the

single-state context. Id. at 432-33.

Furthermore, in a case on remand from this Court for

further consideration in light of Hess, the Fourth Circuit

recently reaffirmed this analysis. Ristow v. South Carolina

Ports Auth., 58 F.3d 1051, 1053 n.5 (4th Cir. 1995), cert.

denied, 116 S.Ct. 514 (1995).

2. Other Circuits Implicitly Support the

Fourth Circuit’s Conclusion

The Second, Third, Seventh, and Eighth Circuits have

implicitly agreed with the Fourth Circuit, citing Hess as

authoritative in the context of single-state entities. See

Marbley v. Bane, 57 F.3d 224, 233 (2d Cir. 1995); Christy v.

Pennsylvania Turnpike Comm'n, 54 F.3d 1140, 1145 (3d Cir.

1995); Matter of Merchants Grain, Inc., 59 F.3d 630, 632 (7th

Cir. 1995); Thomas v. FAG Bearings Corp., 50 F.3d 502, 506

(8th Cir. 1995).

3. The Fourth Circuit is Correct

Even though Hess involved a bi-state entity, nothing

in this Court’s Eleventh Amendment jurisprudence sug-

gests as sharp a distinction between the analysis for bi-

state and single-state entities as the Fifth Circuit indi-

cates. The court below applied a different standard for

Eleventh Amendment immunity for single-state entities:

port authorities in Texas are entitled to Eleventh Amend-

ment immunity because they are created by the state

constitution and are political subdivisions of the state.

App. A at A3-A4, 66 F.3d at 104. There may be some

distinction between single-state and bi-state entities

(insofar as the state’s dignity could theoretically be

impacted somewhat more in the single-state context), but

the criteria for Eleventh Amendment immunity must nev-

ertheless be uniform for both because no logical policy or

other reason suggests the two should be analyzed any

differently. Gray, 51 F.3d at 433. This Court relied on

single-state authority when deciding Hess, and the lower

courts repeatedly have applied this Court’s bi-state Lake

Country decision in the single-state context. See Hess, 115

S.Ct. at 404-05. No logical policy or other reason exists for

creating two lines of Eleventh Amendment jurisprudence

for bi-state and single-state entities. Gray, 51 F.3d at

432-33.

D. The Inter-Circuit Conflict is Ripe for Resolu-

tion By This Court

1, The Number of Bi-State Entities is Fairly

Small, Not Only in the Fifth Circuit, but

Nationwide

As noted above, see supra section I.A.2, there are

fewer than 25 interstate agencies under compacts

adopted by any of the states in the Fifth Circuit and fewer

than 100 agencies created by interstate compacts nation-

wide. The conflict between the Fourth Circuit and the

court below thus addresses the question whether this

Court’s most recent Eleventh Amendment decision will

have broad impact or will instead be restricted to a rela-

tively trivial range of cases. If a decision of this court is to

be confined to its narrow facts, this Court should be the

one to so decide.

2. Different Analyses for Eleventh Amend-

ment Immunity Will Result in Forum-Shop-

ping

The need for uniformity in the application of the

Eleventh Amendment is self-evident, for this issue goes

to the very heart of our federal system. The balance of

power between the states and the federal government

should not depend on the circuit in which a case is filed.

The need for uniformity is particularly acute in the pre-

sent context where interstate and international commerce

are involved and opportunities for forum-shopping

abound.

Lawsuits against port authorities in Texas are not

limited to Texas, or even courts within the Fifth Circuit,

because the ports can be sued in any state where their

activities result in damage to cargoes. They are also sub-

ject to out-of-state suits for breaches of their contractual

obligations with out-of-state entities. To consider one par-

ticularly relevant example, the Port of Houston Authority

has been sued in federal court in New York for cargo

damage, and the court held that it was not entitled to

Eleventh Amendment immunity. Marine Indem. Ins. Co. of

Am. v. Yangming Marine Transp. Corp., 1990 A.M.C. 547,

551-52 (S.D.N.Y. 1989). If the decision below stands, par-

ties that are able to do so will have every incentive to

bring their actions against these port authorities in a

court outside the Fifth Circuit. This Court should man-

date the uniform application of the Eleventh Amendment

to prevent this kind of forum-shopping.

3. The Decision Below Affects Interstate and

International Commerce

The uniformity and predictability of the application

of Eleventh Amendment immunity to state port authori-

ties is vital to local, national, and international commer-

cial transactions involving the United States. Domestic

and foreign companies require assurance that United

States courts will hold state port authorities accountable

for their contractual obligations.

Under Texas law, a political subdivision waives its

common-law immunity from liability when it contracts,

but not its immunity from suit in state court. Fristoe v.

Blum, 92 Tex. 76, 45 S.W. 998, 999 (Tex. 1898). Under the

decision below, domestic and foreign companies have no

legal recourse if port authorities in Texas fail to fulfill

their contractual obligations.

The national importance of this issue is further illus-

trated by how confusion over the application of the Elev-

enth Amendment to port authorities in Texas and port

authorities from other states can interfere with the

nationwide jurisdiction of the Federal Maritime Commis-

sion (FMC). The tariffs of state port authorities must be

filed with the FMC, which has jurisdiction over the

nation’s port authorities. The FMC has ruled that a port

authority violates federal law by including provisions in

its tariff which purport to exculpate it from liability for its

own negligence. 46 C.F.R. 515.7; see also Filing of Marine

Tariffs by Marine Terminal Operator-Exculpatory Tariff Provi-

sions, Docket 86-15, F.M.C. ruling, 1987 A.M.C. 896 (1986).

When the FMC has determined that it violates federal law

for state port authorities to escape liability for their own

negligence through their tariffs, the need for uniformity

in Eleventh Amendment analysis becomes particularly

acute given the need for uniform FMC jurisdiction over

state port authorities.

Il. IF THE COURT DECLINES TO RESOLVE THE

CONFLICT BETWEEN THE FOURTH AND FIFTH

CIRCUITS AT THIS TIME, THE COURT SHOULD

NONETHELESS SUMMARILY REVERSE THE

DECISION BELOW

Twenty-six years ago, the Fifth Circuit, in a case that

did not mention the Eleventh Amendment, held that the

predecessor of the Port of Houston Authority was “a

creature of state law and a political subdivision of the

State of Texas.” McCrea v. Harris County Houston Ship

Channel Nav. Dist., 423 F.2d 605, 607 (5th Cir.), cert. denied,

400 U.S. 927 (1970). Thirteen years ago, the Fifth Circuit

applied McCrea, without considering this Court’s Elev-

enth Amendment jurisprudence, to hold that the Port of

Houston Authority was entitled to Eleventh Amendment

immunity “because [it] is ‘a creature of state law and a

political subdivision of the State of Texas.’” Kamani v.

Port of Houston Auth., 702 F.2d 612, 613 (5th Cir. 1983)

(quoting McCrea, 423 F.2d at 607). Most recently, the court

below, again without considering this Court’s Eleventh

Amendment jurisprudence, held that it was bound by

Kamani to grant the Port Eleventh Amendment immunity

because it “is factually and legally indistinguishable from

the Port of Houston Authority.” App. A at A3, 66 F.3d at

104.

The decision below demonstrates that the Fifth Cir-

cuit has a well-established line of cases holding that port

authorities in Texas operating pursuant to Article XVI,

Section 59 of the Texas Constitution? are entitled to Elev-

enth Amendment immunity. As explained above, see

supra section [.B, this result is plainly inconsistent with

the majority’s approach in Hess, the dissent’s approach in

Hess, and this Court’s Eleventh Amendment jurispru-

dence in general. The Fifth Circuit has chosen to follow

its own well-established precedents, which are directly

on point, instead of determining the correct result with

the guidance of this Court’s more recent decisions.

Petitioner recognizes that “ ‘[a] summary reversal

. ls a rare and exceptional disposition,’ ” Mireles v.

Waco, 502 U.S. 9, 15 (1991) (Scalia, J., dissenting) (quoting

R. Stern, E. Gressman & S. Shapiro, Supreme Court Practice

281 (6th ed. 1986)), but a lower court’s adherence to its

own precedents in the face of inconsistent decisions by

this Court is one situation in which summary reversal is

particularly appropriate. See also Sup. Ct. R. 10 (“court of

appeals . . . has decided a federal question in a way that

conflicts with applicable decisions of this Court”).

Indeed, the present case is remarkably similar to

United States v. Nachtigal, 507 U.S. 1 (1993). In Nachtigal,

the Court summarily reversed the Ninth Circuit because

it had followed one of its own precedents, which was

directly on point, instead of determining the correct

result under the guidance of a more recent decision of

+ In addition to Houston’s and Corpus Christi’s, other port

authorities operating pursuant to Article XVI, Section 59 of the

Texas Constitution include Freeport, Beaumont, and

Brownsville.

this Court. Such a summary reversal reinforces the princi-

ple that this Court’s decisions take priority over inconsis-

tent decisions of the lower courts, even in the absence of

an express overruling. This fundamental principle

enables the Court to give broad guidance to the lower

courts by deciding a relatively small number of cases that

raise questions of general application. The court below

has ignored this fundamental principle in the present

case.

This case presents an important conflict between the

Fourth and Fifth Circuits, and the lower court’s rejection

of the Fourth Circuit’s position was an essential element

of its decision. Nevertheless, this Court could summarily

reverse the decision below without resolving the conflict,

without extending (or even endorsing) the Hess decision

in any way, and without announcing any new principles

of law. This is because the court below not only explicitly

rejected the application of Hess, it also implicitly rejected

the application of this Court’s Eleventh Amendment

jurisprudence in its entirety. In view of the facts admitted

by the Port and found by the district court, a relatively

routine application of this jurisprudence points to rever-

sal here.

CONCLUSION

The petition for writ of certiorari should be granted.

Respectfully submitted,

GeorGE F. CHANDLER, III

Counsel of Record

DANA K. MartIN

Rosert G. Mout

Hitt Rivkins Loesserc O’Brien

Mutroy & HaypDen

712 Main Street, Suite 1515

Houston, Texas 77002

Telephone: 713/222-1515

Telefax: 713/222-1359

Attorneys for Petitioner

March 12, 1996

APPENDIX A

CORRECTED

UNITED STATES COURT OF APPEALS

ano FOR THE FIFTH CIRCUIT

No. 94-20597

THE PILLSBURY COMPANY, INC.,

Plaintiff-Appellee,

versus

THE PORT OF CORPUS CHRISTI AUTHORITY,

Defendant-Appellant.

Appeal from the United States District Court

for the Southern District of Texas

(Filed Oct. 11, 1995)

Before JOLLY, BENAVIDES, Circuit Judges, and

SHAW’, District Judge.

BENAVIDES, Circuit Judge:

Defendant-Appellee The Port of Corpus Christi

Authority (“Corpus Port”) appeals the district court’s

denial of its motion to dismiss for lack of diversity juris-

diction and/or motion for summary judgment alleging

* Chief Judge for the Western District of Louisiana, sitting

by designation.

that it is an “arm of the State of Texas” entitled to Elev-

enth Amendment immunity and not a “citize»” for pur-

poses of diversity jurisdiction. We reverse the district

court’s ruling and dismiss for lack of jurisdiction.

FACTS AND PROCEDURAL HISTORY

The facts of the case are undisputed. The Pillsbury

Company (“Pillsbury”), a Delaware corporation with its

principal place of business in Minnesota, and the Corpus

Port entered into a contractual arrangement concerning a

shipment of bagged sugar consigned to Pilisbury. The

shipment arrived at the Corpus Port in March 1991, and

was allegedly damaged while being stored in the Corpus

Port’s cargo dock sheds (warehouses).

On March 8, 1993, Pillsbury sued the Corpus Port for

breach of contract/bailment for the damage caused to the

sugar stored at the Corpus Port. The Corpus Port filed a

motion to dismiss for lack of diversity jurisdiction and/or

motion for summary judgment, alleging that it was an

“arm of the State of Texas,” and therefore not considered

a “citizen” for purposes of diversity jurisdiction. The

Corpus Port also alleged that it was entitled to Eleventh

Amendment immunity from suit in federal court.

After allowing the parties extra time for briefing the

jurisdictional issue, the district court determined that the

Corpus Port is not an arm of the State of Texas and thus, as a

citizen within the meaning of 28 U.S.C. § 1332, is capable of

supporting the exercise of the court’s diversity jurisdiction. !

1 The court also ruled that it lacked admiralty jurisdiction

because 1) the contract at issue did not involve a maritime

The Corpus Port filed a motion for reconsideration or, in

the alternative, a motion for certification under 28 U.S.C.

§ 1292(b). The district court denied the motion for recon-

sideration, but certified the interlocutory order for imme-

diate appeal. This Court subsequently granted the

interlocutory appeal.?

DISCUSSION

The district court’s finding that the Corpus Port is

legally and factually indistinguishable from the Port of

Houston Authority (“Houston Port”) is unassailed in this

appeal. Accordingly, we are bound by our decision in

Kamani v. Port of Houston Authority,> in which we upheld

an earlier decision finding the Houston Port “a creature

of state law and a political subdivision of the State of

Texas” entitled to Eleventh Amendment immunity. Id. at

613 (quoting McCrea v. Harris County Houston Ship Chan-

nel Navigation Dist., 423 F.2d 605, 607 (5th Cir.), cert.

denied, 400 U.S. 927, 91 S.Ct. 189, 27 L.Ed.2d 186 (1970)).

Therefore, we find that the Corpus Port, like the Houston

Port, is entitled to Eleventh Amendment immunity.

We reject Pillsbury’s contention that the U.S.

Supreme Court's decision in Hess v. Port Authority Trans-

obligation to provide wharfage and 2) there was no evidence of

a claim for damages arising from the breach of a severable

maritime obligation of the contract.

2 The Port of Houston Authority has filed a brief of amicus

curiae in this appeal.

3 702 F.2d 612 (5th Cir. 1983)

Hudson Corp.* overrules our decision in Kamani. Hess is

not broad enough to support Pillsbury’s contention. We

view Hess as a limited holding addressing the standard to

be applied to bi-state entities not created pursuant to

state statute. Because the Corpus Port and the Houston

Port were both created and still operate pursuant to Arti-

cle XVI, Section 59 of the Texas Constitution, Hess does

not overrule Kamani or control the disposition of this

appeal. Likewise we find Jacintoport, decided after Kamani

by a panel of this Court and pertaining to the Eleventh

Amendment exception status of a port created under

Louisiana law and not Texas law, is of no benefit to

Pillsbury.°

CONCLUSION

Having found that the Corpus Port is entitled to

Eleventh Amendment immunity, we REVERSE the ruling

of the district court and DISMISS Pillsbury’s claim for

lack of jurisdiction.

4115 S.Ct. 394, 130 L.Ed.2d 245 (1994).

> Even were we to determine that the application of the

Jacintoport six-part test for determining Eleventh Amendment

immunity is appropriate in this case, we would conclude upon

the application of the Jacintoport test that the Corpus port is

entitled to such immunity.

APPENDIX B

The PILLSBURY COMPANY,

INC., Plaintiff-Appellee,

The PORT OF CORPUS CHRISTI

AUTHORITY, Defendant-Appellant.

No. 94-20597.

United States Court of Appeals,

Fifth Circuit.

Oct. 11, 1995.

Nonresident corporation brought action against Port

of Corpus Christi Authority for breach of contract related

to damage of goods stored in port warehouse. The United

States District Court for the Southern Division of Texas,

Sim Lake, J., denied defendant’s motion to dismiss and

motion for summary judgment, but certified interlocutory

appeal. The Court of Appeal, Benavides, Circuit Judge,

held that defendant was political subdivision of state and

was therefore immune from suit under Eleventh Amend-

ment.

Reversed and dismissed.

Appeal from the United States District Court for the

Southern District of Texas.

Before JOLLY and BENAVIDES, Circuit Judges, and

SHAW’, District Judge.

BENAVIDES, Circuit Judge:

* Chief Judge of the Western District of Louisiana, sitting by

designation.

Defendant-Appellee The Port of Corpus Christi

Authority (“Corpus Port”) appeals the district court’s

denial of its motion to dismiss for lack of diversity juris-

diction and/or motion for summary judgment alleging

that it is an “arm of the State of Texas” entitled to Elev-

enth Amendment immunity and not a “citizen” for pur-

poses of diversity jurisdiction. We reverse the district

court’s ruling and dismiss for lack of jurisdiction.

FACTS AND PROCEDURAL HISTORY

The facts of the case are undisputed. The Pillsbury

Company (“Pillsbury”), a Delaware corporation with its

principal place of business in Minnesota, and the Corpus

Port entered into a contractual arrangement concerning a

shipment of bagged sugar consigned to Pillsbury. The

shipment arrived at the Corpus Port in March 1991, and

was allegedly damaged while being stored in the Corpus

Port’s cargo dock sheds (warehouses).

On March 8, 1993, Pillsbury sued the Corpus Port for

breach of contract/bailment for the damage caused to the

sugar stored at the Corpus Port. The Corpus Port filed a

motion to dismiss for lack of diversity jurisdiction and/or

motion for summary judgment, alleging that it was an

“arm of the State of Texas,” and therefore not considered

a “citizen” for purposes of diversity jurisdiction. The

Corpus Port also alleged that it was entitled to Eleventh

Amendment immunity from suit in federal court.

After allowing the parties extra time for briefing the

jurisdictional issue, the district court determined that the

Corpus Port is not an arm of the State of Texas and thus,

as a citizen within the meaning of 28 U.S.C. Sec. 1332, is

capable of supporting the exercise of the court's diversity

jurisdiction.! The Corpus Port filed a motion for recon-

sideration or, in the alternative, a motion for certification

under 28 U.S.C. Sec. 1292(b). The district court denied the

motion for reconsideration, but certified the interlocutory

order for immediate appeal. This Court subsequently

granted the interlocutory appeal.?

DISCUSSION

The district court’s finding that the Corpus Port is

legally and factually indistinguishable from the Port of

Houston Authority (“Houston Port”) is unassailed in this

appeal. Accordingly, we are bound by our decision in

Kamani v. Port of Houston Authority%, in which we upheld

an earlier decision finding the Houston Port “a creature

of state law and a political subdivision of the State of

Texas” entitled to Eleventh Amendment immunity. Id. at

613 (quoting McCrea v. Harris County Houston Ship Chan-

nel Navigation Dist., 423 F.2d 605, 607 (5th Cir.), cert.

denied, 400 U.S. 927, 91 S.Ct. 189, 27 L.Ed.2d 186 (1970)).

Therefore, we find that the Corpus Port, like the Houston

Port, is entitled to Eleventh Amendment immunity.

1 The court also ruled that it lacked admiralty jurisdiction

because 1) the contract at issue did not involve a maritime

obligation to provide wharfage and 2) there was no evidence of

a claim for damages arising from the breach of a severable

maritime obligation of the contract.

2 The Port of Houston Authority has filed a brief of amicus

curiae in this appeal.

3 702 F.2d 612 (5th Cir.1983)

We reject Pillsbury’s contention that the U.S.

Supreme Court’s decision in Hess v. Port Authority Trans-

Hudson Corp.* overrules our decision in Kamanti. Hess is

not broad enough to support Pillsbury’s contention. We

view Hess as a limited holding addressing the standard to

be applied to bi-state entities not created pursuant to

state statute. Because the Corpus Port and the Houston

Port were both created and still operate pursuant to Arti-

cle XVI, Section 59 of the Texas Constitution, Hess does

not overrule Kamani or control the disposition of this

appeal. Likewise we find Jacintoport Corp. v. Greater Baton

Rouge Port Commission, 762 F.2d 435 (5th Cir.1985), cert.

denied, 474 U.S. 1057, 106 S.Ct. 797, 88 L.Ed.2d 774 (1986),

decided after Kamani by a panel of this Court and pertain-

ing to the Eleventh Amendment exception status of a port

created under Louisiana law and not Texas law, is of no

benefit to Pillsbury.

CONCLUSION

Having found that the Corpus Port is entitled to

Eleventh Amendment immunity, we REVERSE the ruling

of the district court and DISMISS Pillsbury’s claim for

lack of jurisdiction.

4__ US. __, 115 S.Ct. 394, 130 L.Ed.2d 245 (1994).

APPENDIX C

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

THE PILLSBURY COMPANY, §

INC., 7

Plaintiff, § CIVIL ACTION NO.

§ H-93-0656

V. 3

PORT OF CORPUS CHRISTI § (Entered

AUTHORITY, § Jan. 31, 1994)

Defendant. ;

MEMORANDUM AND ORDER

Pending before the court are the Motion for Summary

Judgment (Docket Entry No. 11) of plaintiff, the Pillsbury

Company (Pillsbury), and the Motion to Dismiss (Docket

Entry No. 15) and Motion for Summary Judgment

(Docket Entry No. 12) of defendant, Port of Corpus

Christi Authority (the Port). Pillsbury, a Delaware corpo-

ration with its principal place of business in Minnesota,

argues that it is entitled to a judgment in the amount of

$659,706.72, plus attorney’s fees, because the Port either

breached a maritime contract or committed a maritime

tort by negligently allowing a substantial portion of a

cargo of bagged sugar to become rain-water damaged

while it was stored on Port premises as the subject of a

bailment. The Port argues that it is entitled to a judgment

that (1) no bailment was ever created, (2) it breached no

warranties expressed or implied in its contract with Pills-

bury, and (3) the contract contains a valid exculpatory

clause for the type of damage the cargo suffered.

Separately, the Port moves for dismissal of this action

under Fed. R. Civ. P. 12(b)(1) because the court lacks

subject matter jurisdiction. Specifically, the Port argues

that the court lacks admiralty jurisdiction and that diver-

sity of citizenship is unavailable because the Port is the

alter ego of the State of Texas. Alternatively, citing the

Eleventh Amendment to the United States Constitution,

the Port argues that dismissal is appropriate because it is

not subject to suit in any court of the United States.

On December 10, 1993, the parties presented oral

argument on the Port's jurisdictional challenges. Because

the hearing was inconclusive, the court allowed the par-

ties to file supplemental briefing on the jurisdictional

issues and reserved its decision until it had sufficient

time to review the submissions of the parties. Addi-

tionally, because the Port’s motion contains non-jurisdic-

tion related arguments and relies on materials outside the

complaint to advance those arguments, the court con-

verted those portions into a motion for summary judg-

ment pursuant to Fed. R. Civ. P. 12(c). (Docket Entry No.

32)

I. Subject Matter Jurisdiction

Pillsbury first argues that the court should not enter-

tain the Port’s motion to dismiss for lack of subject matter

jurisdiction and Eleventh Amendment immunity because

the motion was filed after the deadline established in the

docket control order for dispositive motions. However,

“[i]t is axiomatic that a district court may inquire into the

basis of its subject matter jurisdiction at any stage of the

proceedings.” Menchaca v. Chrysler Credit Corp., 613 F.2d

507, 511 (5th Cir.), cert. denied, 101 S.Ct. 358 (1980). Thus,

even though the Port’s 12(b)(1) motion was filed after its

Answer and its Motion for Summary Judgment the court

will treat that motion as a timely suggestion that the

court lacks subject matter jurisdiction over this action.

The Supreme Court has noted that, unlike a defect in

the court’s subject matter jurisdiction, a party can waive

its right to assert Eleventh Amendment immunity by

inaction. See Blatchford v. Native Village of Noatak, 111 S.Ct.

2578, 2584 n.3 (1991) (citing Moe v. Confederated Salish &

Kootenai Tribes, 96 S.Ct. 1634 (1976), for the proposition

that failure to raise Eleventh Amendment immunity in

briefs or oral argument before the Supreme Court led to

waiver of consideration of that issue). But see Edelman v.

Jordan, 94 S.Ct. 1347, 1363 (1974) (Eleventh Amendment

immunity can be raised for the first time on appeal even

though it is not the equivalent of a true attack on the

court’s jurisdiction such that the court must raise it sua

sponte). Here, the Port’s failure to raise immunity in its

initial motion for summary judgment does not preclude

review of that issue because the Port preserved its right

to advance the argument by mentioning it in its original

answer. See Mello v. Woodhouse, 755 F. Supp. 923, 925-26

(D. Nev. 1991) (no waiver where defendant raised immu-

nity in answer, alluded to the issue in briefs, but failed to

expressly assert that the action was in fact barred in

either a motion to dismiss or for summary judgment).

—

A. Admiralty

1. Breach of a maritime contract

The parties agree that they entered into a contractual

arrangement concerning a shipment of bagged sugar con-

signed to Pillsbury and that the sugar arrived at the Port

in March of 1991 aboard the M/V LACON. They also

agree that the essential terms of that contract were estab-

lished by a series of letters, faxes, telephone communica-

tions, and the Port’s published tariff, even though the

parties’ negotiations concerning these documents related

to a similar shipment of sugar aboard the M/V HAFNIA

that never called at the Port.

The contract formed by these communications obli-

gated Pillsbury to pay one dollar per ton of cargo for

wharfage, nine cents per gross registered ton of the M/V

LACON per day for dockage, a flat $150.00 dock cleaning

fee, a flat $525.00 shed and/or wharf hire fee, and ten

cents per net ton of cargo for each five-day period (or

portion thereof) the cargo remained on Port premises in

excess of the agreed free time of 45 days.' The jurisdic-

tional question arises from the parties’ dispute concern-

ing the nature of the contract and the role each party

played in performing that contract once the cargo had

been unloaded from the vessel, delivered to Pillsbury,

and placed in the sheds at the Port.

! Pillsbury’s acceptance increased the Port’s original offer

of 30 days free time to 45 days. This counter-offer was accepted

by the Port in its confirmation.

A maritime contract can sustain admiralty jurisdic-

tion. New England Mutual Ins. Co. v. Dunham, 78 U.S. (11

Wall.) 1, 26 (1870) (“[A]s to [jurisdiction over] con-

tracts, . . . the true criterion is the nature and subject-

matter of the contract, as whether it was a maritime

contract, having reference to maritime service or mar-

itime transactions.” (emphasis in original)). The parties

do not dispute that their contract includes agreements

concerning wharfage and dockage, two traditional mar-

itime elements. See, e.g., Ex parte Easton, 95 U.S. 68, 76-77

(1877) (“[T]he pecuniary charge for the use of the dock or

wharf is called wharfage or dockage, and ... it is clear

that [such] a contract . . . is a maritime contract, and... .

cognizable in the admiralty. . . . ”). However, mere inclu-

sion of maritime elements is insufficient because a con-

tract must be wholly maritime to support admiralty

jurisdiction. Id. at 72 (“Maritime jurisdiction . . . in cases

of contracts . . . is limited to such subjects as are purely

maritime, and have respect to commerce and navigation

within the meaning of the Constitution.”); The Ada, 250 F.

194, 197-98 (2d Cir. 1918) (Rogers, J., concurring) (“The

jurisdiction of the admiralty courts is restricted to mar-

itime subjects. . . . For a contract to fall within the admi-

ralty jurisdiction, it must concern transportation by sea,

relate to navigation or maritime employment, or be one

of navigation and commerce on navigable waters.”).

“In determining whether a contract be of maritime

nature . . . the true test is the subject-matter . . . the nature

and character of the work to be done.” State Industrial

Comm'n v. Nordenholt Corp., 42 S.Ct. 473 (1922). Accord,

Exxon Corp. v. Central Gulf Lines, Inc., 111 S.Ct. 2071, 2077

(1991) (“[L]ower courts should look to the subject matter

of the . . . contract and determine whether the services

performed . . . are maritime in nature.”). The Port argues

that its contract with Pillsbury fails to satisfy this test

because the nature and character of work it was to per-

form under the contract includes the decidedly non-

maritime duty to provide a storage facility for landed

cargo. See, e.g., Howmet Corp. v. Tokyo Shipping Co., 320 F.

Supp. 975, 977-78 (D. Del. 1971) (“[A]n action for nonper-

formance or faulty performance of a storage contract is

nonmaritime in nature and does not fall within maritime

jurisdiction.”).

The Port recognizes that a contract need not literally

be entirely maritime to support jurisdiction despite the

tenor of the Supreme Court’s opinions. To satisfy the

“wholly maritime” requirement a contract must be one in

which the maritime elements give that character to the

whole. See, e.g., The Ada, 250 F. at 198 (Hough, J., concur-

ring) (“The rule that a contract, to be maritime, must be

‘wholly maritime,’ means that the principal subject-

matter of agreement gives character to the whole.”)

Admiralty jurisdiction will be extended (1) to the entire

contract if all of the nonmaritime elements are merely

incidental, and (2) to the maritime elements of a contract

in which the nonmaritime elements, though not inciden-

tal, are severable and capable of separate adjudication.

See, e.g., Kuehne & Nagel (AG & CO) v. Geosource, Inc., 874

F.2d 283, 290 (5th Cir. 1989); United Fruit Co. v. United

States Shipping Bd. Merchant Fleet Corp., 42 F.2d 222, 224

(D. Mass. 1930).

The parties agree that any water damage attributable

to the Port occurred after (1) the stevedoring company

hired by Pillsbury had unloaded the cargo, (2) Pillsbury

(or its agent) had accepted delivery of the ca’go as con-

signee, and (3) the cargo had been placed in the Port's

covered sheds.? Thus, admiralty jurisdiction can only

exist if the Port’s obligation to provide space in these

sheds is incidental to a contract that is principally mar-

itime.* Pillsbury cites three cases to support its argument

that a covenant to provide a place to store landed cargo

can be incidental to a maritime contract for wharfage and

dockage: Marubeni-lida (American), Inc. v. Nippon Yusen

Kaisha, 207 F. Supp. 418 (S.D.N.Y. 1962); Hoogovens Estel

Verkoopkantoor, B.V. of Ijmuiden v. Ceres Terminals, Inc.,

1984 A.M.C. 1417 (S.D.N.Y. 1984); and Moore-McCormack

Lines, Inc. v. International Terminal Operating Co. (I.T.O.),

619 F. Supp. 1406 (S.D.N.Y. 1985).

Marubeni-lida began as a suit by a consignee of cargo,

Marubeni-lida, against a steamship company, N.Y.K.

Line, for breach of an ocean bill of lading by delivering

the cargo in a water-damaged condition. N.Y.K. Line

impleaded Universal Terminal & Stevedoring alleging

that the cargo was damaged by flooding on the wharf

2 Pillsbury acknowledges that most, if not all of the damage

accrued after delivery had been effected and the cargo had been

placed in the sheds. See, e.g., Plaintiff's Motion for Summary

Judgment, Docket Entry No. 11 at 1-2 (“The cargo was delivered

in good order and condition. . . . No exceptions were made by

any party concerning the sugar’s good condition on delivery... .

During the storage period, water damaged the cargo due to

leaking roofs in the warehouses.” (emphasis added)).

> A finding of severability would only afford admiralty

jurisdiction if the damage that accrued during the performance

of the maritime obligation was capable of separate adjudication

from the damage that accrued during the performance of the

nonmaritime obligation. That situation does not exist here.

after being unloaded by Universal. 207 F. Supp. at 418-19.

The court first held that the long-term contract between

Universal and N.Y.K. Line was maritime since it obligated

the former to provide wharfage as well as to discharge

and deliver cargo.* Universal argued that the third-party

action against it should be dismissed because N.Y.K.

Line’s third-party complaint alleged that the damage

occurred while the cargo was stored on land. After noting

that courts had not yet harmonized their positions on

cargo damage sustained while “held in a dock warehouse

prior to loading,” the court concluded that it is “more

reasonable to hold that if the cargo is on the wharf as an

incident to maritime carriage . . . the action is within the

admiralty jurisdiction.” Id. at 419 (emphasis added).

When read in a vacuum this pronouncement appears

to favor Pillsbury’s argument. However, to properly eval-

uate this holding it is necessary to consider the relation-

ship between the parties. The contract at issue in

Marubeni-lida was between an ocean carrier and a termi-

nal operator. One commentator, when examining the

question of admiralty jurisdiction over contracts between

terminal operators and other entities involved in marine

transportation, has observed that

[iJn the eyes of the law, the terminal is the

chameleon of the maritime industry. The law

treats the termina! at various times, and occa-

sionally at the same time, as an ocean carrier, an

4 “Both the loading and unloading of cargo and the

furnishing of wharf facilities are maritime services. The contract

between N.Y.K. Line and Universal to furnish these facilities is

therefore a maritime contract.” Id. at 419.

Interstate Commerce Commission (ICC) com-

mon carrier, a warehouse, a common-law bailee,

an agent of an ocean carrier, an agent of an ICC

common carrier, an agent of a cargo shipper,

and an agent of a cargo consignee.

Chester D. Hooper, Legal Relationships: Terminal Owners,

Operators, and Users, 64 Tul. L. Rev. 595 (1989). The

description of the relationship between the parties, there-

fore, does not end with recognition of the fact that one

party is a terminal operator.

The contract in Marubeni-lida not only obligated the

terminal operator to provide wharfage but also to per-

form traditional stevedoring services. In this role the

terminal acted as the carrier’s agent in discharging the

cargo under its ocean bill of lading. See Leather’s Best, Inc.

v. §.$. MORMACLYNX, 451 F.2d 800, 807 (2d Cir. 1971)

(an ocean bill of lading ordinarily “continues to govern

the relationship between a shipper and a carrier after

discharge but before delivery.”). See also Tapco Nigeria,

Ltd. v. M/V WESTWIND, 702 F.2d 1252 (5th Cir. 1983)

(describing a carrier’s duty to deliver and unusual cir-

cumstances exonerating a carrier from liability for negli-

gent stevedoring). Properly viewed in context, the court

merely concluded that jurisdiction would be proper if the

cargo was damaged during the terminal operator’s per-

formance as the carrier’s agent of maritime services that

were directly related to fulfilling the carrier’s respon-

sibility under the bill of lading.5 Because the record failed

5 This is the accepted view of a stevedore’s role. See, e.g., La

Salle Mach. Tool, Inc. v. Maher Terminals, Inc., 611 F.2d 56, 59 n.4

(4th Cir. 1979) (“[T]he stevedore has historically been

C10

to demonstrate when the damage occurred, the court was

willing to exercise admiralty jurisdiction over the action

unless “the facts developed at the trial indicate that the

damage occurred under circumstances not cognizable in

admiralty.” Marubeni-lida, 207 F. Supp. at 420. Marubeni-

lida thus stands for the proposition that admiralty juris-

diction over an action between a carrier and its stevedore

for failure to properly perform the ocean carrier’s mar-

itime obligation under the bill of lading to discharge and

deliver the cargo is proper, even though the contract

included the incidental shoreside activity of storing the

landed cargo.

The key element in the other cases cited by Pillsbury

was the relationship between the nonmaritime service

and the provider’s role in performing the maritime duty

to discharge and deliver the cargo. In Moore-McCormack

Lines v. I.T.O. the court rejected the magistrate’s finding

that the contract between the ocean carrier and its steve-

dore/terminal operator was severable into maritime and

nonmaritime obligations. It explained that I.T.O. had

“agreed to load and discharge cargoes for [Moore-McCor-

mack’s] vessels . . . and to receive and deliver those

cargoes.” 619 F. Supp. at 1408. The court then charac-

terized the parties’ relationship as follows:

The nature and character of the . . . contract is

not for storage. I.T.O.’s duties include the fol-

lowing functions traditionally performed by or

for an ocean carrier of goods: To supply clerical

considered to occupy a special relationship with the carrier, and

his services in loading the ship fulfill the carrier’s responsibility

under the contract of carriage.” (citation omitted)).

Cll

personnel to record delivery and receipt of

cargo; to sort and stack cargo; to make repairs to

cooperage, rebag goods, etc.; to receive and tier

outbound cargo; to break down cargo according

to lot designations; to load and unload trucks

and harborcraft; and to perform cleaning and

general housekeeping on the piers. The storage

that does occur under the contract is incident to

the performance of the numerous maritime ser-

vices undertaken for the ocean carrier by I.T.O.

619 F.2d at 1409. This holding is consistent with the view

that a contract containing a mixture of nonmaritime,

land-based storage and maritime services is nonetheless

maritime if the storage is incident to provision of cargo-

transportation related maritime services.

In Hoogovens a shipper of steel coils sued the steve-

dore/terminal operator it hired to discharge the cargo

and “to store the coils in its terminal on the pier until

they were picked up by the consignee.” 1984 A.M.C. at

1421 (emphasis added). The party to whom the steve-

dore’s contractual obligation flowed was not the carrier

but the shipper. Nonetheless, because the stevedore/ter-

minal operator was obligated to perform maritime ser-

vices with respect to the transportation of cargo, i.e.,

discharge and delivery, the court held that admiralty

jurisdiction was proper because the covenant to store

landed cargo “was incidental to the unloading.”®

6 Hoogovens, 1984 A.M.C. at 1421 (emphasis added).

Although the damage in Hoogovens began to accrue while the

cargo was being unloaded and handled on the pier prior to

storage, that fact is irrelevant to determination of the nature and

character of the work to be performed under the contract.

C12

Pillsbury recognizes that its contract with the Port

did not involve any cargo-transportation related mar-

itime services. Nonetheless, Pillsbury asks the court to

find that the Port’s nonmaritime obligation to provide

storage space is merely incidental to its maritime obliga-

tion to provide wharfage. The Port, citing Howmet Corp. v.

Tokyo Shipping Co., 320 F. Supp. 975, 977-78 (D. Del. 1971),

counters that a covenant to provide storage has been

found insufficiently incidental to an agreement to provide

wharfage to support admiralty jurisdiction. In Howmet

the court explained that

“[w]harfage” is the fee charged for the tempor-

ary use of a dock furnished in the ordinary

course of navigation to a ship for the purpose of

mooring in safety in order to load and unload

cargo, to receive and land passengers, to make

temporary repairs and to refuel, resupply and

reprovision.

320 F. Supp. at 978. The court concluded that a covenant

for storage is not an essential incident to wharfage

because “all of the services embraced in wharfage are

intimately related to and are essential incidents to a ship

in the ordinary course of navigation, . . . [but w]harfage

does not extend to the storage of cargo, as this service is

not an essential incident to navigation.” Id.

Moore-McCormack v. I.T.O., 619 F. Supp. at 1409 (“That the

magistrate found that the losses occurred during the storage of

the cargo, i.e., after discharge and before delivery to the

consignee, or prior to loading . . . is essentially irrelevant. . . .

[T]he jurisdictional inquiry begins and ends with the subject

matter of the contract.”).

C13

Howmet is neither the only nor the first case to exam-

ine the relationship between wharfage on the one hand

and transportation and storage of cargo on the other. The

most instructive of the early cases to consider this issue

are the two opinions in Evans v. New York & P. S.S. Co.,

Ltd., 145 F. 841 (S.D.N.Y. 1906) (Adams, J.) and 163 F. 405

(S.D.N.Y. 1906) (Hough, J.). In Evans the consignee of a

shipment of rubber sued the carrier and a wharfinger/

terminal operator for breach of contract by failing to

deliver some of the consignment. The complaint failed to

establish which party was actually at fault: The carrier

blamed the terminal operator, alleging that it had com-

pleted its obligations under the bill of lading by deliver-

ing the entire shipment to the terminal’s warehouse,

while the terminal operator argued that it delivered all of

the rubber that the carrier had delivered to it. Judge

Adams, who decided the jurisdictional question on the

strength of the pleadings, overruled the terminal opera-

tor’s objections to admiralty jurisdiction, stating: “The

case at bar seems to be of a maritime character as the

delivery was to be completed through the [terminal oper-

j ator]....” 145 F. at 843.

The facts developed at trial in Evans differed mate-

rially from those alleged in the complaint. The entire

shipment of rubber was unloaded from the vessel and

placed for safekeeping in an enclosed room within the

wharfinger/terminal operator’s warehouse on a Friday

afternoon pursuant to an agreement between the carrier

and the terminal operator. No warehouse receipts were

issued, but the carrier and terminal operator had an

ongoing contractual arrangement that provided for both

wharfage and the use of the warehouse. 163 F. at 405-06.

iii

C14

The contract obligated the terminal operator to maintain

security — which it claimed to have done - but the cargo

was stolen during the weekend, i.e., post-discharge but

pre-delivery. Id. at 406. Judge Hough found that the car-

rier could have, but did not, discontinue its obligation to

effect a proper delivery to the consignee under the bill of

lading by placing the cargo in actual storage on the

consignee’s account. Most persuasive in arriving at this

conclusion was the fact that the carrier, not the terminal

operator, ultimately made delivery of the goods that were

not stolen. Id. On the basis of these newly established

facts Judge Hough re-decided the question of jurisdiction

and concluded:

Exceptions to this libel were overruled in 145

Fed. 841, upon the ground that on the allega-

tions of the libel there had been a delivery of the

rubber to the [terminal operator] in order that

the latter might in turn deliver to the [con-

signee], which fact rendered the matter one of

admiralty jurisdiction; the storage being incident

to the contract of carriage. 1 do not think that the

evidence sustains this allegation. . . . It seems

clear that neither the [consignee] nor the steam-

ship company could have maintained an origi-

nal suit in admiralty against the [terminal

operator], because the negligence resulting in

the disappearance of the rubber from the land

warehouse did not give rise to a maritime tort,

and neither was the contract between shipowner and

warehousemen a maritime contract.

Id. at 407 (emphasis added).

Howmet and Evans are consistent with those cases

that characterize the obligation to provide wharfage as

C15

nothing more than a covenant to ensure that the offered

berth is a safe place to conduct other necessary maritime

services.? Thus, even if the Port’s obligation to provide

wharfage was the main purpose of Pillsbury’s contract

with the Port, the nature of that maritime service was

only to maintain a safe platform from which others could

provide additional maritime services to the vessel. Nota-

bly lacking from this description of the Port’s duties is

the obligation to provide any maritime service directly

relating to the marine transportation of the cargo. Cf. Luvi

Trucking, Inc. v. Sea-Land Service, Inc., 650 F.2d 371, 373

(1st Cir. 1981) (“[C]Jontracts involving cargo are maritime

only to the extent the cargo is on a ship or being loaded

on or off a ship.”). The Port’s only contractual obligation

relating to the cargo was the entirely land-based obliga-

tion to provide a safe place for the cargo to be stored once

discharge by stevedores and delivery to Pillsbury had

been accomplished. Howmet and Evans provide ample

authority for the Port’s argument that providing storage

in this situation was not a mere incident of the Port’s

maritime obligation to provide wharfage.

Because the court concludes that the contract

between Pillsbury and the Port contains the nonmaritime

element of storage that is not a mere incident to a pri-

mary maritime obligation, and because the damages did

7 See, e.g., Eastern Massachusetts St. Ry. Co. v. Transmarine

Corp., 42 F.2d 58 (1st Cir.), cert. denied, 51 S.Ct. 86 (1930)

(exercising jurisdiction over suit for breach of covenant to

maintain a safe berth in a lease of a wharf [ordinarily

nonmaritime] since the covenant was both identical to a

maritime contract for wharfage and severable from the rest of

the lease).

C16

not accrue during the performance of a separately adjudi-

cable maritime phase of the contract, the court concludes

that the contract is incapable of supporting admiralty

jurisdiction.

2. Jurisdiction based on a maritime tort

The Fifth Circuit has reaffirmed that two require-

ments must be met before a party may successfully

invoke admiralty jurisdiction based on a marine tort: “the

damage or injury must take place on navigable

waters . . . [and] the wrong must have a ‘significant

relationship to traditional maritime activity.” Palmer v.

Fayard Moving & Transp. Corp., 930 F.2d 437, 439 (5th Cir.

1991). It is undisputed that all of the damage attributable

to the Port occurred as a result of defects in the Port’s

covered storage sheds. In determining whether admiralty

jurisdiction exists those sheds are considered land-based

structures despite the fact that they extend over water

and are used to facilitate maritime commerce. See, ¢.g.,

Victory Carriers, Inc. v. Law, 92 S.Ct. 418, 425 (1971)

(declining to extend admiralty tort jurisdiction to per-

sonal injuries sustained by longshoreman working on

piers and docks); Thomson v. Chesapeake Yacht Club, Inc.,

255 F. Supp. 555 (D. Md. 1965) (“[P]iers, docks, wharves

and similar structures extending over navigable waters

are extensions of land, though their use and purpose be

maritime.”).

Though admiralty jurisdiction may be proper over a

maritime tort even when the negligent act took place on

land, the court has found no cases upholding admiralty

jurisdiction where, as here, the action involves a land-

ae ee eR ee

sala os

C17

based shipper or consignee suing a land-based terminal

operator for damages to a landed cargo caused by rain

water that allegedly passed through the roof of a land-

based structure. See Schmoll Fils, Inc. v. $.S. FERNGLEN,

1949 A.M.C. 756, 757 (S.D.N.Y. 1949) (allegation that pier

owners failed to furnish protection from water damage

on the pier did not state a maritime tort). Cf, Whitcombe v.

Stevedoring Svcs. of America, 2 F.3d 312, 314-15 (9th Cir.

1993) (no maritime tort occurred where cargo was dam-

aged when container destined for ocean voyage fell to the

ground prior to loading); Roco Carriers, Ltd. v. M/V

NURNBERG EXPRESS, 899 F.2d 1292, 1294-95 (2d Cir.

1990) (“However, inasmuch as [Roco Carriers’ conver-

sion] claim against [the crating and carting agent] arose

while the cargo was on land, Roco’s claim. . . is grounded

on state law and not within federal admiralty jurisdic-

tion.”). The court therefore concludes that admiralty

jurisdiction is not available to resolve a tort action arising

from these facts.

B. Diversity jurisdiction

Having concluded that admiralty jurisdiction does

not exist the court must determine whether it can exercise

diversity jurisdiction. “It is well established that a state is

not a ‘citizen’ for purposes of diversity jurisdiction.”

Tradigrain v. Mississippi State Port Authority, 701 F.2d 1131,

1132 (5th Cir. 1983). Although the Tradigrain court

observed that the inquiry into the availability of diversity

jurisdiction over a state agency is nearly identical to the

inquiry conducted when examining whether that entity is

entitled to immunity from suit in federal court under the

C18

Eleventh Amendment, there are two important distinc-

tions between these analyses. First, as discussed supra at

page 3, a jurisdictional defect cannot be waived while the

right to assert immunity can. Second, the burden of proof

lies with different parties. When a defendant “challenges

the existence of subject matter jurisdiction in fact [as

opposed to facially, i.e., attacking the pleadings’ allega-

tion of jurisdiction] . . . matters outside the plead-

ings ... are considered .. . and plaintiff bears the burden

of proof that jurisdiction does in fact exist.” Menchaca v.

Chrysler Credit Corp., 613 F.2d 507, 511 (5th Cir.), cert.

denied, 101 S.Ct. 358 (1980). Conversely, since a party

asserts Eleventh Amendment immunity as an affirmative

defense, “it is ultimately ‘the defendant [that] must prove

its entitlement to immunity by a preponderance of the

evidence.’ ” ITSI TV Productions v. Agricultural Associa-

tions, 3 F.3d 1289, 1291-92 (9th Cir. 1993) (noting that the

issue was a matter of first appellate impression).

Neither party has cited a single case that decided the

question of the status of the Port of Corpus Christi for

diversity purposes.® Instead, both parties have attempted

to analogize the Port’s diversity status to cases with

differing outcomes concerning the Port of Houston

8 The only case cited by either party even potentially

relevant to the Port's status is Dillard v. Nueces County Nav. Dist.

No. 1 Term. Grain El. Proj., 214 F. Supp. 868 (S.D. Tex. 1963)

(finding that the Port’s nominal predecessor was a subscriber

under Texas workers’ compensation law). However, the Dillard

court never discussed the propriety of exercising its subject

matter jurisdiction over the Port, and the issue of Eleventh

Amendment immunity was not raised.

Sia a a oe St

ee ey rte i eeiar ee ee

C19

Authority. Recognizing that Fifth Circuit authority enti-

tles the Port of Houston to Eleventh Amendment immu-

nity, the Port asks the court to hold it immune as well

because it is practically identical to the Port of Houston.

Pillsbury replies that to properly determine the Eleventh

Amendment immunity and diversity status of the Port

the court must conduct an independent assessment of

that entity. Pillsbury relies upon the Fifth Circuit's pro-

nouncement that

sweeping comparisons [between purportedly

similar state agencies performing analogous

tasks] cannot substitute for a careful examina-

tion of the particular entity at issue. For exam-

ple, the Port of Houston Authority [enjoys

Eleventh Amendment] immun|ity] . . . while the

Greater Baton Rouge Port Commission [doe]s

McDonald v. Board of Mississippi Levee Comm'rs, 832 F.2d

901, 908 (5th Cir. 1987).

The Port’s attempt to escape independent analysis

through analogy of its position with that of the Port of

Houston Authority is further thwarted because it is not

clear that Texas law treats them the same. Fireman's Fund

Ins. Co. v. Department of Transp., 792 F.2d 1373, 1375 (5th

Cir. 1986) (independent analysis of “parallel executive

departments . . . [is unnecessary when] the State . . . treats

all of the[m]... the same.”). Neither the Port of Houston

Authority nor the Port of Corpus Christi Authority was

originally organized under Article XVI, § 59 of the Texas

Constitution. Rather, the Port’s predecessor, the Nueces

County Navigation District Number 1,

C20

[a]fter an election on October 31, 1922, [] was

created under Article 3, Section 52 of the Consti-

tution and the General Laws of the State of

Texas, Vernon’s Ann.St. On April 23, 1931, [it]

was duly converted to a Navigation District oper-

ating under Article 16, Section 59, of the Consti-

tution of the State of Texas (Conservation and

Reclamation) and the laws applicable thereto

and so exists today.

Meaney v. Nueces County Nav. Dist. No. 1, 222 S.W.2d 402,

404 (Tex. Civ. App. — Austin 1949, writ ref’d) (emphasis

added) (holding that legislative grant of eminent domain

to the Port and other navigation districts includes the

power to condemn either a fee simple or smaller estate).

Converting from one constitutional provision to another-

allows “[w]ith minor exceptions, any Texas navigation

district [to] avail itself .. . of any powers conferred on

navigation districts under chapters 61, 62, and 63 of the

Water Code.” G. Sidney Buchanan, Texas Navigation Dis-

tricts and Regional Planning in the Texas Gulf Coast Area, 10

Hous. L. Rev. 533, 542 (1973). According to Professor

Buchanan, the availability of conversion accounts for the

“great variety in the governing structures of Texas navi-

gation districts . . . [because] the statutory conversion

provisions . . . are worded to enable each type of naviga-

tion district to preserve its governing structure even it it

elects to convert... .” Id. at 542-43.

On the record now before the court it is not possible

to resolve the issue of subject matter jurisdiction because

the parties have failed to identify which of the potentially

relevant statutory and administrative provisions govern-

ing navigation districts actually govern the Port’s struc-

ture and functions. By way of example the court notes

PMA eH tt

C21

that Pillsbury urges a finding of no immunity in part

because the Port is subject to suit in its own name.

However, due to the ambiguity of the Port’s status under

Texas law after its voluntary conversion the court is

unable to determine whether the Port is subject to suit “in

any court in this state in the name of the district,” pur-

suant to Tex. Water Code Ann. § 61.082 (presumably

including federal courts), or only “in all courts of this

state in the name of the district,” pursuant to Tex. Water

Code Ann. § 62.078 (implying the opposite result). See

Fylipoy v. Gulf Stevedore Corp., 257 F. Supp. 166, 168-69

(S.D. Tex. 1966) (holding the-predecessor of the latter

statute effects no waiver of the predecessor of the Port of

Houston Authority’s Eleventh Amendment immunity).

II. Conclusion

After considering the subject matter of the contract

between Pillsbury and the Port, the court concludes that

the contract is not capable of supporting admiralty juris-

diction because it contains nonmaritime elements that are

not merely incidental to a primarily maritime obligation,

and although the nonmaritime elements might be sever-

able, the parties do not dispute that any damages that

arose during performance of the maritime obligation are

not capable of being separately adjudicated. In accor-

dance with traditional as well as recent conceptions of

admiralty tort jurisdiction, the court concludes that no

maritime tort was committed capable of supporting the

exercise of its admiralty jurisdiction because the parties

admit that all of the damage at issue in this case occurred

while the cargo was on land.

C22

The court cannot decide whether diversity jurisdic-

tion exists because the record does not reflect the Port’s

current status under Texas law as an entity sufficiently

separate from the state to satisfy the diversity of citizen-

ship requirement. The court therefore ORDERS the Port

to supplement the record by providing, within ten days

from the entry of this Memorandum and Order, properly

authenticated copies of all relevant statutes, session laws,

administrative regulations, and charter or other docu-

ments that currently govern its activities and composi-

tion, together with a copy of any other matter relevant to

the inquiry into the nature of its status as an alter ego of

the state. Pillsbury will have ten days from the receipt of

the Port’s submission within which to respond by con-

testing the validity or content of the materials submitted

by the Port. With these submissions the parties may pro-

vide five additional pages of briefing on the issues of

diversity jurisdiction and Eleventh Amendment immu-

nity.

SIGNED at Houston, Texas, on this 27th day of Janu-

ary, 1994.

/s/ Sim Lake

SIM LAKE

UNITED STATES DISTRICT JUDGE

Pe 24 aR? Bae iat y

;

APPENDIX D

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

THE PILLSBURY COMPANY, §

INC., 8

me §

ieee § CIVIL ACTION

v. § NO.

PORT OF CORPUS CHRISTI § H-93-0656

AUTHORITY, : (Entered

Defendant. § May 27, 1994)

MEMORANDUM AND ORDER

Pending before the court are the Motion to Recon-

sider Opinion on Admiralty Jurisdiction (Docket Entry

No. 38) of plaintiff, the Pillsbury Company (Pillsbury),

and the Motion to Dismiss (Docket Entry No. 15) of

defendant, Port of Corpus Christi Authority (the Port). In

its motion to dismiss, the Port argued that the court

lacked subject matter jurisdiction over the action.’ On

December 10, 1993, the court heard oral argument on the

Port’s jurisdictional challenges,? denied both Pillsbury’s

1 Specifically, the Port argued that it was entitled to the

immunity from suit in federal court provided the State of Texas

under the Eleventh Amendment, and that neither admiralty nor

diversity jurisdiction existed.

2 When reviewing a motion to dismiss for lack of subject

matter jurisdiction that appears to involve a need to determine

factual matters not contained within the plaintiff’s complaint

“the district court must give plaintiff an opportunity for

discovery and for a hearing that is appropriate to the nature of

and the Port’s motions for summary judgment (Docket

Entry Nos. 11 & 12), and partially converted the Port’s

motion to dismiss into a motion for summary judgment.

(Docket Entry No. 32) Based on the parties’ argument

presented at the hearing and in papers supplementing

their arguments the court, in a Memorandum and Order

dated January 27, 1994 (Memorandum I; Docket Entry No.

37), determined that Pillsbury had not stated a claim

within the admiralty jurisdiction of the federal courts,

and ordered the Port to submit additional evidentiary

materials to enable the court to determine whether diver-

sity jurisdiction existed. Pillsbury not only responded to

the Port’s submission but also asked the court to recon-

sider its ruling that admiralty jurisdiction was lacking.

I. PILLSBURY’S MOTION TO RECONSIDER

The facts relevant to existence of admiralty jurisdic-

tion are simply stated and, as stated, are undisputed.

Pillsbury, as consignee of a cargo of bagged sugar,

entered a contract with the Port obligating the Port to

provide both wharfage to the vessel that carried the cargo

and wharf-side covered storage for the cargo once it had

been unloaded. Shortly after Pillsbury’s stevedores fin-

ished unloading the cargo and placing it into the wharf-

side sheds provided by the Port, rainwater began to leak

through the roofs of several sheds. Many bags, even

though covered with plastic, became damaged by water,

dirt, and other contaminants. The parties’ dispute centers

the motion to dismiss.” Williamson v. Tucker, 645 F.2d 404, 414

(5th Cir.), S.Ct. 396 (1981).

‘

around the Port's liability for that portion of the damage

caused by rainwater that leaked through the shed roofs.

In Memorandum I the court heeded the Supreme

Court’s instruction that when determining whether to

exercise admiralty jurisdiction over a dispute concerning

a contract, “lower courts should look to the subject mat-

ter of the... contract and determine whether the services

performed under the contract are maritime in nature.”

Exxon Corp. v. Central Gulf Lines, Inc., 111 S.Ct. 2071, 2077

(1991). The court concluded that the contract between

Pillsbury and the Port contained both the maritime oblig-

ation to provide wharfage for the vessel and the non-

maritime obligation to provide storage for landed cargo

where a contract contains both maritime and non-

maritime obligations, “[a]Jdmiralty jurisdiction will be

extended (1) to the entire contract if all of the non-

maritime elements are merely incidental, and (2) to the

maritime elements of a contract in which the non-

maritime elements, though not incidental, are severable

and capable of separate adjudication.” Memorandum I, at

6. The court determined that the parties, contract was

incapable of supporting admiralty jurisdiction because

the nonmaritime obligation of storage was neither merely

incidental to nor severable from the maritime portion of

the contract.

Pillsbury now argues that the court reached this

result because it erroneously placed undue emphasis on

Pillsbury’s admission that

most, if not all of the damage accrued after

delivery had been effected and the cargo had

been placed in the sheds. See, e.g., Plaintiff’s

Motion for Summary Judgment, Docket Entry

No. 11, at 1-2 “The cargo was delivered in good

order and condition. . . . No exceptions were

made by any party concerning the sugar’s good

condition on delivery. . . . During the storage

period, water damaged the cargo due to leaking

roofs in the warehouses.” (emphasis added)

Memorandum I, at 7 n.2. Pillsbury contends that the court

erred when it relied on these admissions because no

“legal” delivery of the sugar could be effected in the

United States because the sugar was travelling in-bond.3

The court is not persuaded by this argument because

admiralty jurisdiction would not exist in this case even if

delivery had not occurred.

In Memorandum I the court determined that the par-

ties’ contract obligated the Port to perform both maritime

and nonmaritime services. In order to support admiralty

jurisdiction over such a contract Pillsbury must show that

the maritime portions of the contract were either inciden-

tal to or severable from the nonmaritime portions. Kuehne

& Nagel (AG & CO) v. Geosource, Inc., 874 F.2d 283, 290

3 Pillsbury employs the term “in-bond” to mean that

United States Customs allowed Pillsbury to land the cargo

within the United States without duty because the goods were

to be transported from Corpus Christi, Texas, into Mexico

through a port of exportation (a term encompassing inland

locations) without “coming to rest” (i.e., being consumed or

permanently warehoused) in the United States. The court notes,

however, that “in-bond” is a term ordinarily reserved to

describe goods that are to be transported under Customs seal

from an initial U.S. entry port to a final U.S. destination for

storage or consumption within the US., while the term “in-

transit” is applied to the situation Pillsbury describes. See 19

C.F.R. §§ 18.1 (defining merchandise travelling “in-bond”);

18.20(a) (defining merchandise travelling “in-transit”).

BP Bee Lo IO Re tei TE OL

(Sth Cir. 1989). When the damage accrued is not relevant

in making the jurisdictional inquiry whether a particular

nonmaritime obligation is incidental to a primarily mar-

itime contract.4 Accordingly, the court did not rely on

Pillsbury’s admission concerning delivery during this

portion of its analysis. Instead, as the court detailed in

Memorandum I, it is the fact that the Port could fully

perform its contract with Pillsbury without ever perform-

ing a maritime service relating directly to the cargo that

distinguishes this case from those relied upon by Pills-

bury> and that completes the paralle! between this case

4 Memorandum I, at 11-12 n.6, quoting Moore-McCormack

Lines, Inc. v. International Terminal Operating Co. (I.T.O.), 619 F.

Supp. 1406, 1409 (S.D.N.Y. 1985), appeal granted, 784 F.2d 1542

(2d Cir. 1986) (“that the losses occurred during the storage of the

cargo, i.e., after discharge and before delivery to the consignee,

or prior to loading . . . is essentially irrelevant. . . . [The

jurisdictional inquiry begins and ends with the subject matter of

the contract.”). Cf. Americas Ins. Co. v. J. Aron & Co., No. 93 CIV.

2503(MBM), 1994 WL 172407 (S.D.N.Y. May 4, 1994) (maritime

insurance contract supported admiralty jurisdiction over

coverage dispute even though loss occurred while petroleum

products were temporarily stored on land during or after

refining; the contract was essentially maritime and providing

coverage for the products while temporarily on land implicated

maritime commerce even though they were not travelling in

maritime commerce when the loss occurred).

5 Marubeni-lida (America), Inc. v. Nippon Yusen Kaisha, 207 F.

Supp. 418 (S.D.N.Y. 1962) (jurisdiction proper over damage to

landed cargo where contract included maritime obligation to

perform stevedoring services); Hoogovens Estel Verkoopkantoor,

B.V. of Ijmuiden v. Ceres Terminals, Inc., 1984 A.M.C. 1417

(S.D.N.Y. 1983) (same); and Moore-McCormack Lines v. I.T.O., 619

F. Supp. 1406 (jurisdiction proper over damage to staged and

landed cargoes where terminal operator was also obligated to

perform a variety of marine transportation services).

and the two opinions in I'vans v. New York & P. S.S. Co.,

Shipping Co.7

Only that portion of a claim arising from damage that

is separately and distinctly attributable to a breach of the

maritime obligations of a contract containing both mar-

itime and nonincidental nonmaritime obligations may be

maintained in admiralty.® Because Pillsbury admitted that

jurisdiction where it appeared that wharfinger would also

perform delivery of landed cargo), and 163 F. 405 (S.D.N.Y. 1906)

(Hough, J.) (no jurisdiction where facts at trial established that

wharfinger was never obligated to perform delivery).

7 320 F. Supp. 975, § 77-78 (D. Del. 1971) (“Further, if the

alternative claim against the City could be construed as a cause

of action for breach of a storage contract, it would still not be

within the admiralty jurisdiction of this Court.”). This language

demonstrates that the Howmet court never considered the

consignee’s claim against the city as wharfinger/terminal

operator to be based on an implied contract as Pillsbury

suggests. Rather, the court, in dicta, considered the relationship

between the city’s real maritime obligation to provide wharfage

and an imaginary covenant to provide storage and concluded

that a claim based on breach of the storage obligation would not

support admiralty jurisdiction. While this fact does not

undermine the analogy between that case and this one to the

degree Pillsbury suggests, it partially explains why this court

preferred not to base the entirety of its opinion on the

hypothetical discussion in Howmet.

8 In Kuehne & Nagel the Fifth Circuit examined claims

arising from the breach of a multi-modal through bill of lading:

[E]ven if the maritime and nonmaritime (overland)

portions of the contract were separable, the

forwarders have not limited their claim to damages

accruing from breach of the maritime obligations.

—— 4 -

anid

ie.

all of the damages to its cargo occurred after delivery the

court determined that an inquiry into the severability of

the obligations in the parties, contract was unnecessary.

Memorandum I, at 7 & n.2. Reliance on Pillsbury’s admis-

sion was expedient and appears even now to have been

justified. Nevertheless, Pillsbury’s admission is super-

fluous; neither party has argued or presented evidence

that the cargo sustained any damage as a result of a

breach of a potentially severable obligation to provide

wharfage. Because there is no evidence that the cargo

suffered discrete and separately adjudicable damage as a

result of a breach of the maritime obligation contained

within the contract the court is persuaded that no inquiry

into whether the cargo had been delivered is necessary to

a resolution of the jurisdictional this case.

While the question whether delivery had occurred

has no effect on the court’s analysis in Memorandum I,

Pillsbury’s attempt to retract its admission concerning

delivery is relevant to its belated invitation that the court

find that admiralty jurisdiction would be proper even

though the cargo was landed and stored in the Port's

sheds because the cargo had to continue its international

travel until someone delivered it at some later time in

Instead, more than half of the damages sought by the

forwarders are attributable to [defendant’s] failure to

provide trucking services. . . . In other words, the

forwarders seek adjudication of the obligations in the

whole contract, not just tl > -na.itime portions.

874 F.2d at 290. Of course o.uce admiralty jurisdiction is

exercised over a portion of the claims arising in the case, a court

may exercise supplemental jurisdiction over the nonmaritime

portions of claims pursuant to 28 U.S.C. § 1367.

Mexico.9 However, because the contract between Pills-

bury and the Port had nothing to do with the obligation

to complete this delivery, to accept Pillsbury’s invitation

the court would have to ignore the Supreme Court's

instruction to focus on the nature of “the services per-

formed under the contract” at issue.!° Accordingly, the

court declines Pillsbury’s invitation.

Since the contract at issue does not primarily involve

a maritime obligation to provide wharfage to which the

nonmaritime obligation to provide storage is a mere inci-

dent, and because there is no evidence that a claim for

damages arising from the breach of a severable maritime

obligation of the contract capable of supporting the exer-

cise of the court’s admiralty jurisdiction has been or

could be advanced, Pillsbury’s Motion to Reconsider

9 For the sake of clarity the court observes that 19 C.F.R.

§ 18.23(b) provides a mechanism for the beneficial owners of

merchandise originally entered as goods in-transit to change

entry status by complying with the entry procedures detailed in

19 C.F.R. pts. 141 & 142. It appears, therefore, that it was not

legally impossible for Pillsbury to have arranged for delivery of

its sugar within the United States.

10 Exxon, 111 S.Ct. at 2077 (emphasis added). Cf. Luvi

Trucking, Inc. v. Sea-Land Service, Inc., 650 F.2d 371, 374 (1st Cir.

1981) (contract that only obligated a trucking company to

transport cargo overland from one pier to another was

incapable of supporting admiralty jurisdiction because that

obligation was merely collateral to other maritime contracts,

even though cargo was destined to be further transported by

ocean carriers). While the contract in this case also obligated the

Port to provide wharfage, Pillsbury seeks to link only the

performance of the nonmaritime obligation to provide storage

to the separate contracts of others who would perform delivery.

Opinion on Admiralty Jurisdiction (Docket Entry No. 38)

is DENIED.

II. DIVERSITY JURISDICTION

Because admiralty jurisdiction does not exist the

court must consider whether diversity of citizenship will

support the exercise of federal jurisdiction. The Port

argues that 28 U.S.C. § 1332 does not provide this court

with subject matter jurisdiction because the Port is an

arm of the State of Texas.!! Because neither party has

cited a case in which the status of the Port of Corpus

Christi for diversity purposes has been addressed, resolu-

tion of that issue requires the court to weigh competing

arguments. The Port argues that Kamani v. Port of Houston

Authority, 702 F.2d 612, 613 (Sth Cir. 1983) (Port of

Houston Authority is entitled to Eleventh Amendment

immunity),!2 should be extended to it because the two

11 E.g., Tradigrain, Inc. v. Mississippi State Port Authority, 701

F.2d 1131, 1132 (5th Cir. 1983) (“It is well established that a state

is not a ‘citizen’ for purposes of diversity jurisdiction. If suit is

brought against an agency which is merely an alter ego of the

state, it follows that federal jurisdiction is also lacking.”

(citations omitted)).

12 Specifically, the court stated:

Although the claim is in admiralty, the Eleventh

Amendment sovereign immunity of the State of Texas

and its instrumentalities stands. The state is free from

a maritime tort claim absent its consent. Appellant's

suit does not lie in this case unless the state of Texas

has consented to the suit because the Port of Houston

Authority is a “creature of state law and a political

subdivision of the Siate of Texas.” McCrea v. Harris

County Houston Ship Channel Navigation Dist., 423 F.2d

D10

ports are legally and factually indistinguishable. Pills-

bury adheres to its position that the court must indepen-

dently determine whether the Port is a citizen by utilizing

the factors applied by the Fifth Circuit in McDonald v.

Board of Mississippi Levee Comm’rs,'3 Jacintoport Corp. v.

Greater Baton Rouge Port Comm'n," Tradigrain, and earlier

cases'> even if Kamani is still good law.'¢

605, 607 (5th Cir.), cert. denied, 91 S.Ct. 189 (1970). The

Port of Houston Authority is the successor to the

earlier Harris County ship Channel Navigation

District, the subject of this earlier holding

Id. Because “the analysis of an agency’s status is virtually

identical whether the case involves a determination of

immunity under the eleventh amendment or a determination of

citizenship for diversity jurisdiction,” a conclusion that an

entity enjoys Eleventh Amendment immunity is the equivalent

of a finding that it is not a citizen. Tradigrain, 701 F.2d at 1132

'3 832 F.2d 901, 908 (Sth Cir. 1987). Pillsbury’s argument

stems from the following language in McDonald:

[S]weeping comparisons [between purportedly

similar state agencies performing analogous tasks]

cannot substitute for a careful examination of the

particular entity at issue. For example, the Port of

Houston Authority [enjoys Eleventh Amendment]

immun|ity] . . . while the Greater Baton Rouge Port

Commission [doe]s not... .

Id.

14 762 F.2d 435 (5th Cir. 1985), cert. denied, 106 S.Ct. 797

(1986).

1S See, e.g., Huber, Hunt & Nichols, Inc. v. Architectural Stone

Co., Inc., 625 F.2d 22, 24-25 (Sth Cir. 1980); C.H. Leavell & Co. v

Board of Comm'rs of the Port of New Orleans, 424 F.2d 764 (5th Cir

1970).

16 Pillsbury argues that the Kamani court’s Eleventh

Amendment immunity statement is not binding on this court

D11

Even though Kamani does not literally control the

outcome in this action because the Port of Houston

Authority is not the defendant seeking to define itself as

an alter ego of the state of Texas, the holding of Kamani

can not be ignored because of stare decisis.

[S]tare decisis . . . embraces a basic concept of

fairness, the sense that people similarly situated

should be similarly dealt with, and that judg-

ments should be consistent, rather than arbi-

trary so that one may predict the consequences

of contemplated conduct by reference to the

treatment afforded similar conduct in the past.

Morris L. Cohen et al., How to Find the Law, 3 (9th ed.

1989). The Port’s argument is not without force because

no case in the Fifth Circuit has examined the applicability

because it was either dicta or has been overruled. The statement

that “[a]ppellant’s suit does not lie in this case [because of the

Eleventh Amendment] unless the state of Texas has consented

to the suit” is not dicta; resolution of that issue was a necessary

prerequisite to the exercise of the court’s appellate jurisdiction.

Neither was the holding in Kamani overruled sub silentio by

Jacintoport Corp. v. Greater Baton Rouge Port Comm'n, 762 F.2d 435

(Sth Cir. 1985), cert. denied, 106 S.Ct. 797 (1986). Kamani was

written by Judge Williams, with Judges Rubin and Johnson on

the panel, while Jacintoport was written by Judge Wisdom, with

Judges Reavely and King on the panel. Two years after

Jacintoport Judge King wrote that “the Port of Houston

Authority is immune, [citing Kamani) . . . while the Greater

3aton Rouge Port Commission is not, [citing Jacintoport].”

McDonald v. Board of Mississippi Levee Comm'rs, 832 F.2d at 908

(King, J., writing for Williams and Garwood, JJ.). If Jacintoport

had overruled Kamani one would expect there to be an

expression of the disagreement between the two positions in

McDonald, or at least an acknowledgement that Kamani had

been modified by Jacintoport, but there is none.

D12

of precedent to parallel agencies performing identical

functions under virtually identical legal and factual cir-

cumstances.'” Nevertheless, in the specific context of

determining the Eleventh Amendment and diversity sta-

tus of state agencies the Fifth Circuit has provided ample

notice that agencies located within the same state may

not rely upon a federal court to reflexively apply prece-

dent.18 The court concludes that a fair reading of Fifth

Circuit authority requires it to independently assess the

17 In Memorandum I the court noted that Texas law does not

treat all navigation districts equally. Because the record was

inadequate for the court to determine whether Texas law treated

the Port of Houston Authority and the Port the same the court

requested additional information from the parties. As discussed

below, that information establishes that for all practical

purposes the Port is legally and factually indistinguishable from

the Port of Houston Authority.

18 See, e.g., McDonald, 832 F.2d at 908 (performing

independent analysis of the Board of Mississippi Levee

Commissioners despite invitation to analogize that entity to

Mississippi’s Port Authority and Highway Department

previously found entitled to immunity); Jacintoport, 762 F.2d at

443 n.9 (court bolstered its thorough analysis of the Greater

Baton Rouge Port Commission by comparing that entity to the

Board of Commissioners of the Port of New Orleans, which had

previously been found to be similarly distinct from the state,

without hinting that the comparison could be a substitute for

the analysis). But cf. Fireman's Fund Ins. Co. v. Department of

Transp., 792 F.2d 1373, 1375 (5th Cir. 1986) (while reticent to

analogize the Louisiana Department of Transportation to its

Texas counterpart because “each state decides the relationship

between the state government and the public agencies it

creates,” the court suggested that where it was evident that a

state treated all of its parallel departments the same, a careful

analysis into the extent that their identical powers might differ

could be avoided).

D13

Port’s diversity status under the Tradigrain analysis not-

withstanding the holding of Kamani.'?

In Tradigrain the Fifth Circuit provided a detailed

blueprint for determining whether a particular state

agency is sufficiently independent from the state to be

treated as a citizen:

In determining whether [a state] agency is

an alter ego of the state . . . the essential ques-

tion is whether the state is the real party in

interest in the lawsuit. The resolution of this

question is a matter of state law.

If the agency’s status 1s unclear, the court

must look to any and all available sources for

guidance. The court should consider whether

the agency has been granted the right to hold

and use property, whether it has the express

authority to sue and be sued in its corporate

name, the extent of its independent manage-

ment authority, and “a factor that subsumes all

others,” the treatment of the agency by the state

courts. When examining the extent of the

agency’s independent management authority,

2 ree CP eee. tae ne

19 Pillsbury argues that the court should simply decline to

follow Kamani as did the court in Marine Indemnity Ins. Co. of

America v. Yangming Marine Transport Corp., 1990 A.M.C. 547

(S.D.N.Y. 1989) (Port of Houston Authority failed to

demonstrate that it was entitled to Eleventh Amendment

immunity in admiralty action despite citation to Kamani). Unlike

the Southern District of New York, this court would not be free

to discount Fifth Circuit authority even if the court believed that

Kamani’s reliance on McCrea as a substitute for a detailed

analysis may have been misplaced since the Eleventh

Amendment was not implicated in McCrea.

\alintihetiadel

D14

the court should look to whether the agency has

the power to make its own hiring decisions, the

power to enter its own contracts, and the power

to engage its own counsel. When examining the

treatment of the agency by the state courts, this

court has taken note of the fact that the state has

sued the agency in its own courts, and of a state

court holding that the statute of limitations,

which normally did not run against the state

itself, ran against the agency. Other relevant

factors might include: (1) whether the state is

responsible for the agency’s debt; (2) whether

the agency is primarily concerned with local, as

opposed to statewide problems; and (3) the

degree of general financial autonomy of the

agency.

701 F.2d at 1132. If an examination of these factors dem-

onstrates that an agency has little autonomy over its own

fiscal and managerial affairs because it is dependent on

state funds, or is allowed to act only under the direct

supervision of the state, the analysis will point to a find-

ing that the agency is an arm of the state and is entitled to

Eleventh Amendment immunity. If, on the other hand, an

agency has significant autonomy and suffers little inter-

ference and supervision from the state, the agency is less

likely to be afforded Eleventh Amendment immunity.

In a typical situation, some factors will sug-

gest that the agency is a “citizen” while others

will just as strongly suggest that the agency is

merely an alter ego of the state. The court must

balance these against each other in reaching its

conclusion. It must never, however, lose sight of

the primary question involved: whether the

state is the real party in interest in the lawsuit

nominally brought against the agency.

D15

Id. at 1133. State agencies like the Port are creatures of

state statutes; by granting or withholding authority to

conduct their own affairs “each state decides the relation-

ship between the state government and the public agen-

cies it creates.” Fireman’s Fund Ins. Co. v. Department of

Transp., 792 F.2d at 1375. Therefore, “[t]he source material

for the court’s analysis is found in the state’s constitu-

tional, statutory and decisional law.” Tradigrain, 701 F.2d

at 1132.

The Port has now submitted uncontested evidence

that following an election held on October 31, 1922, and

pursuant to Tex. Const. art. III, § 52, and Acts 1909, 31st

Leg., 1st C.S., ch. 15 (as amended by Acts 1921, 37th Leg.,

lst C.S., ch. 39), the Nueces County Commissioners’

Court ordered that the Nueces County Navigation Dis-

trict No. 1, whose borders would be coextensive with the

borders of Nueces County, be established on November

13, 1922. At the same time the Commissioners, Court also

ordered that $1 million of bonds of that district be issued,

and that an ad valorem property tax sufficient to retire

the principal and interest of those bonds be levied on all

property within the district. On April 23, 1931, the dis-

trict’s governing body ordered that it be converted, pur-

suant to Acts 1929, 41st Leg., 1st C.S., ch. 103 (now

codified at Tex. Water Code Ann. § 60.241), into a naviga-

tion district operating under Texas Const. art. XVI, § 59.

The district’s name was changed to the Port of Corpus

Christi Authority by passage of Acts 1981, 6th Leg., Ist

C.S., ch. 165, on May 20, 1981.

D16

The Texas legislature has expressly granted both the

port and the Port of Houston Authority?° the right to

hold and use property,?) to sue and be sued in their

corporate names,*? to make their own hiring decisions,?3

20 The Port contends that it is primarily governed by

chapters 60 and 62 of the Texas Water Code due to the effect of

Tex. Water Code Ann. §§ 60.245, 60.246(c). While Pillsbury does

not dispute the Port’s contention, the court observes that the

supposedly “identically” situated Port of Houston Authority

appears to be governed, at least in part, by chapters 60 and 63.

See, e.g., Jones v. Texas Gulf Sulphur Co., 397 S.W.2d 304, 307 (Tex.

Civ. App. — Houston 1965, writ ref’d n.r.e.) (applying, inter alia,

the predecessors of §§ 60.112 & 63.112 to the predecessor of the

Port of Houston Authority); Fylipoy, 257 F. Supp. at 168-69

(interpreting the predecessor of § 63.112 as applied to the

predecessor of the Port of Houston Authority). This distinction

is of no consequence, however, because, as explained below,

even if they are governed by different statutes the two entities

are factually and legally identical in every relevant respect.

21 Tex. Water Code Ann. §§ 62.105, 62.107; 63.155, 63.157.

Both are expressly permitted to sell surplus lands. Id., § 60.038.

22 Id., §§ 62.078; 63.112. In Memorandum I the court cited

§§ 61.082 and 62.078 of the Water Code to illustrate the existence

of divergent language in the several chapters of that Code that

might apply to the Port. The ensuing reference to Fylipoy was

misleading, however, because the Fylipoy court interpreted

former Tex. Rev. Civ. Stat. Ann. art. 8263e § 75 (Vernon 1954) -

the predecessor of current § 63.112, not of § 62.078 (successor to

former art. 8263h § 46) as stated in Memorandum I. This error is

immaterial, however, because both superseded provisions

contained identical language when Fylipoy was decided, and the

Port has submitted uncontradicted evidence that the

subsequent alterations in language effected no substantive

change in the meaning of the statute. See Defendant's Brief

Clarifying its Legal Status (Docket Entry No. 39) at 3, and

Exhibit G.

23 Id., §§ 62.076, 62.077; 63.099, 63.105, 63.107, and 63.109.

D17

to enter contracts,24 and to engage their own counsel.?5

Thus, both ports have significant managerial autonomy.

Moreover, the Port has admitted that it “receives no

funds from the treasury of the State of Texas,” and that

“{jJudgment[s] rendered against the Port are not paid

from the treasury of the State of Texas.”?6 The substance

of these admissions establishes that the state is protected

from responsibility for the ordinary debts of the Port.?”

The state’s treasury also appears to be insulated from

paying any of the Port of Houston Authority’s debts.”

24 Ids., §§ 62.107(b) (leases of realty); 62.109 - 62.114

(authority and governance of contracting under bids where

improvements are the subject of the contract); 62.113 (“All

contracts made by the commission shall be in writing and . . . [a]

copy ... shall be filed with the county clerk); 63.153 (“A district

may: .. . (6) enter into valid and binding contracts. .. . ”).

25 Jd., § 62.077(b); 63.106 & 63.109.

26 Defendant’s Responses to Plaintiff’s Request for

Admissions, attached as Exhibit C to Plaintiff’s Motion for

Summary Judgment (Docket Entry No. 11), Nos. 19 & 20, at 6.

27 In addition to the Port’s admission, the court notes that

the combined effect of Texas Water Code Ann. §§ 60.101; 60.104;

60.105; 60.111; 60.122; 60.171; 60.174; 60.176; 60.179;

60.331-60.349; 62.073 - 62.075; and 62.191 - 62.208 makes it

apparent that the obligations of navigation districts may only be

secured by the operating revenues they generate, the ad

valorem taxes they levy on the property located within their

geographic confines, and the property and improvements they

own.

28 See, e.g., § 63.221 (providing that “[a]ll expenses incurred

in connection with the . . . maintenance of the district . . . shall be

paid from the construction and maintenance fund” which is

comprised of the Port of Houston’s revenue from sources other

than taxes and other funds used to form a sinking fund to retire

outstanding bond obligations).

D18

Additionally, the State of Texas neither acts as a deposi-

tory for either port’s funds nor controls their disburse-

ments.?? Nor does the state audit either port’s accounting

practices. It is readily apparent, therefore, that both

ports enjoy a great deal of fiscal freedom from state

supervision.

Finally, despite the Texas Supreme Court's gratuitous

statement concerning the Eleventh Amendment status of the

Port of Houston Authority contained in Guillory v. Port of

Houston Authority, there is significant evidence that Texas

courts consider navigation districts to be separate from the

state. For example, in Monsanto Co. v. Cornerstones Municipal

Utility Dist., 865 S.W.2d 937 (Tex. 1993), the Texas Supreme

Court grouped municipal utility districts created under Arti-

cle XVI, § 59 with navigation districts created under that

provision. After noting that none of these entities were

expressly included in Tex. Civ. Prac. & Rem. Code Ann.

§ 16.061, it held that because these political subdivisions

were not included in the general definition of state they were

not entitled to the state’s protection from generally applica-

ble statutes of limitations.4? To paraphrase the Fifth Circuit, it

29 Texas Water Code Ann. §§ 62.153 - 62.157; 63.222 &

63.223.

30 Id., §§ 62.158; 63.224.

31 845 S.W.2d 812, 815 (Tex. 1993) (while holding that the

Port of Houston Authority is entitled to state sovereign

immunity the supreme court acknowledged, as does this court,

that the holding of Kamani is still entitled to precedential effect

in federal courts within the Fifth Circuit).

32 Specifically, the Monsanto court held that

[t]o read “political subdivision” into “state” would by

implication enlarge “state” and section 16.061 beyond

D19

is obvious that the Texas Supreme Court would not have

ruled that political subdivisions are subject to statutes of

limitations if they were the same entity as the state, since

§ 16.061 provides that statutes of limitations do not run

against the state. C.H. Leavell & Co., 424 F.2d at 767. To

further paraphrase C.H. Leavell, equally telling? is the fact

that the state has litigated disputes concerning the extent of

each port’s ownership interest in lands granted to them by

the state.*4 Finally, the Texas Supreme Court has also opined

their plain and ordinary meaning . . . Applying the

ordinary meaning of “state” to section 16.061, we

conclude that it was the intent of the legislature to

include within “state” only those entities having

statewide jurisdiction.

Id. at 940.

33 The C.H. Leavell court considered the fact that Louisiana

had instituted litigation against the Board of Commissioners of

the Port of New Orleans (in an action concerning the Board’s

power to sublease port warehouse facilities) as important an

indication of the Board’s independent status as the fact that a

prescriptive period was interrupted for the Board under

circumstances in which the opposite treatment would have been

accorded the state. C.H. Leavell & Co., 424 F.2d at 766-67.

34 See Texas Parks & Wildlife Dept. v. Champlin Petroleum Co.,

616 S.W.2d 668 (Tex. Civ. App. - Corpus Christi 1981, writ ref’d

n.r.e.) (the Port and Champlin Petroleum Co. were co-plaintiffs

in a declaratory judgment action against the Department; court

held that Texas had conveyed a fee simple interest in the surface

estate to the Port thus freeing the Port’s grantee, Champlin,

from having to pay Parks & Wildlife for a permit to dredge that

land for navigational purposes); State of Texas v. Harris County

Houston Ship Channel Nav. Dist., 158 F.2d 861 (5th Cir. 1946)

(State of Texas took an adversarial position against its co-

defendant, the Port of Houston’s predecessor, in a dispute over

proceeds from the federal condemnation of land the state had

granted to the port).

D20

that navigation districts are primarily concerned with local,

as opposed to statewide, problems:

A political subdivision differs from a

depariment, board or agency of the State. A

political subdivision has jurisdiction over a por-

tion of the State; a department, board or agency

of the State exercises its jurisdiction throughout

the state. Members of the governing body of a

political subdivision are elected in local elec-

tions or are appointed by locally elected offi-

cials; those who govern departments, boards or

agencies of the State are elected in statewide

elections or are appointed by state officials.

Political subdivisions have the power to assess

and collect taxes; departments, boards and

agencies do not have that power.

Guaranty Petroleum Corp. v. Armstrong, 609 S.W.2d 529, 531

(Tex. 1980) (Brownsville Navigation District is a political

subdivision, not a “department, board, or agency of the

state.”). These statements are indicia that Texas courts do

not view navigation districts as arms of the State of Texas.

Even though it appears that the Port is legally and

factually indistinguishable from the Port of Houston

Authority, which, under existing Fifth Circuit authority, is

entitled to Eleventh Amendment immunity on the basis

of the court’s analysis, which is also mandated by Fifth

Circuit precedent, the court holds that the Port is suffi-

ciently independent and distinct from the state to be a

citizen within the meaning of 28 U.S.C. § 1332.

D21

Ill. CONCLUSION

After considering the additional argument submitted

by Pillsbury, the court adheres to its conclusion that the

contract between Pillsbury and the Port is not capable of

supporting admiralty jurisdiction because it contains

nonmaritime elements that are not merely incidental to a

primarily maritime obligation and because although the

nonmaritime elements might be severable, the parties do

not argue that any damages arose during performance of

the maritime obligation. Accordingly, Pillsbury’s Motion

to Reconsider Opinion on Admiralty Jurisdiction (Docket

Entry No. 38) is DENIED.

Because the Port is not an arm of the State of Texas

and is therefore a citizen capable of supporting the exer-

cise of the court’s diversity jurisdiction, the port’s Motion

to Dismiss (Docket Entry No. 15) is DENIED insofar as it

attacks the ability of this court to exercise subject matter

jurisdiction over this action.

SIGNED at Houston, Texas, on this 26th day of May,

1994.

/s/ Sim Lake

SIM LAKE

UNITED STATES DISTRICT JUDGE

APPENDIX E

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

THE PILLSBURY §

COMPANY, INC. §

VS. : C.A. NO. H-93-0656

PORT OF CORPUS § (Entered June 20, 1994)

CHRISTI AUTHORITY §

ORDER

ON THIS DAY, came on to be heard Defendant Port

of Corpus Christi Authority’s Motion for Reconsideration

or, in the Alternative, Motion for Certification under 28

U.S.C. §1292(b), and the Court, having considered same,

and the opposition and responses thereto, and the plead-

ings on file herein is of the opinion that the Port of

Corpus Christi’s Motion for Reconsideration should be

DENIED. However, the Port of Corpus Christi’s Motion

for Certification under 28 U.S.C. §1292(b) should be

GRANTED.

The undersigned is of the opinion that this Order

involves a controlling question of law as to which there is

a substantial ground for difference of opinion and that an

immediate appeal from this Order as authorized by 28

U.S.C. §1292(b) may materially advance the ultimate ter-

mination of this litigation. It is, therefore, accordingly;

ORDERED that the Port of Corpus Christi Author-

ity’s Motion to Dismiss is certified for immediate appeal

under 28 U.S.C. §1292(b).

SIGNED at Houston, Texas this 17th day of June,

1994.

/s/ Sim Lake

THE HONORABLE

SIM LAKE

UNITED STATES

DISTRICT JUDGE

LI ES A ON Ay

APPENDIX F

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 94-00127

USDC No. CA-H-93-0656

THE PILLSBURY COMPANY, INC.,

Plaintiff-Respondent,

versus

PORT OF CORPUS

CHRISTI AUTHORITY,

Defendant-Petitioner.

Petition for Permission to Appeal

an Interlocutory Order

(Filed Aug. 19, 1994)

Before GARWOOD, WIENER and EMILIO M. GARZA,

Circuit Judges.

BY THE COURT:

The petition of the Port of Corpus Christi Authority

for permission to appeal, pursuant to 28 U.S.C. 1292(b),

the interlocutory order certified by the district court on

June 17, 1994, is GRANTED.

APPENDIX G

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 94-20597

THE PILLSBURY COMPANY, INC.,

Plaintiff-Appellee,

versus

PORT OF CORPUS CHRISTI AUTHORITY,

Defendant-Appellant.

Appeal from the United States District Court for the

Southern District of Texas

ON PETITION FOR REHEARING AND SUGGESTION

FOR REHEARING EN BANC

(Opinion 9-7-94, 5 Cir, __, ___ F.3d __)

( 12/13/95 )

Before JOLLY and BENAVIDES, Circuit Judges, and

SHAW* District Judge.

PER CURIAM:

(X) The Petition for Rehearing is DENIED and no mem-

ber of this panel nor Judge in regular active service on the

* Chief Judge of the Western District of Louisiana, sitting

by designation.

Court having requested that the Court be polled on

rehearing en banc, (FRAP and Local Rule 35) the Sugges-

tion for Rehearing En Banc is also DENIED.

( ) The Petition for Rehearing is DENIED and the Court

having been polled at the request of one of the members

of the Court and a majority of the Judges who are in

regular active service not having voted in favor, (FRAP

and Local Rule 35) the Suggestion for Rehearing En Banc

is also DENIED.

( ) A member of the Court in active service having

requested a poll on the reconsideration of this cause en

banc, and a majority of the judges in active service not

having voted in favor, rehearing en banc is DENIED.

ENTERED FOR THE COURT:

/s/ Fortunato P. Benavides

FORTUNATO P. BENAVIDES

UNITED STATES CIRCUIT JUDGE

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