Professional Documents
Culture Documents
No. 15-1093
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria.
Claude M. Hilton, Senior
District Judge. (1:07-cv-00960-CMH-JFA)
Argued:
Decided:
ARGUED: Bert Walter Rein, WILEY REIN LLP, Washington, D.C., for
Appellant.
Paul D. Clement, BANCROFT PLLC, Washington, D.C.,
for Appellee. ON BRIEF: Michael L. Sturm, Brendan J. Morrissey,
Stephen J. Obermeier, WILEY REIN LLP, Washington, D.C., for
Appellant.
John S. West, Megan C. Rahman, Richmond, Virginia,
Christopher G. Browning, Jr., TROUTMAN SANDERS LLP, Raleigh,
North
Carolina,
for
Appellee
Vermont
Student
Assistance
Corporation; George W. Hicks, Jr., Raymond P. Tolentino,
BANCROFT PLLC, Washington, D.C., Joseph P. Esposito, Jill M.
deGraffenreid, HUNTON & WILLIAMS LLP, Washington, D.C., Daniel
B. Huyett, Neil C. Scur, STEVENS & LEE P.C., Reading,
Pennsylvania,
for
Appellee
Pennsylvania
Higher
Education
Assistance Agency.
Pennsylvania
Higher
Education
Assistance
Agency
United States ex
In addition to administering
activities,
and
it
now
constitutes
one
of
the
Jon
H.
Oberg
brought
this
action
against
PHEAA
and
2002
hundreds
through
of
2006,
millions
the
of
defendants
dollars
in
fraudulently
federal
claimed
student-loan
See
were
dismissed
from
the
case,
and
PHEAA
is
now
the
sole
remaining defendant.
The only issue in this appeal is whether PHEAA qualifies as
an arm of the state or alter ego of Pennsylvania such that
it cannot be sued under the FCA.
judgment
in
favor
of
PHEAA
and
remand
for
further
U.S.C.
3729(a)(1).
Corporations,
including
municipal
Vermont
determine
Agency
whether
of
PHEAA
Nat.
falls
Res.,
into
529
U.S.
at
the
former
787-88.
or
the
To
latter
If
See
Corp. (Oberg I), 681 F.3d 575, 580 (4th Cir. 2012) (internal
quotation marks omitted).
We
whether
evaluate
a
four
non-exclusive
state-created
entity
factors
functions
when
as
an
considering
arm
of
its
creating state:
(1) whether any judgment against the entity as
defendant will be paid by the State . . . ;
(2) the degree of autonomy exercised by the
entity, including such circumstances as who appoints
the entitys directors or officers, who funds the
entity, and whether the State retains a veto over the
entitys actions;
(3) whether the entity is involved with state
concerns
as
distinct
from
non-state
concerns,
including local concerns; and
(4) how the entity is treated under state law,
such as whether the entitys relationship with the
State is sufficiently close to make the entity an arm
of the State.
Id.
(quoting
S.C.
Dept
of
Disabilities
&
Special
Needs
v.
Hoover Universal, Inc., 535 F.3d 300, 303 (4th Cir. 2008)).
Although
the
focus
of
the
first
factor
is
whether
the
Where
is
to
survive,
judgment
must
expend
itself
against
U.S.
30,
50
(1994)
(alteration
omitted),
the
agency
will
be
found to be an arm of the state, see Oberg II, 745 F.3d at 137;
Cash v. Granville Cnty. Bd. of Educ., 242 F.3d 219, 223 (4th
Cir. 2001).
[I]f
the
State
treasury
will
be
called
upon
to
pay
creating
state],
becomes unnecessary.
and
consideration
of
any
other
factor
If the state
created.
See
id.
at
224;
accord
Lee-Thomas
v.
Prince
Georges Cty. Pub. Sch., 666 F.3d 244, 248 n.5 (4th Cir. 2012).
The purpose of the arm-of-state inquiry is to distinguish
arms
or
alter
egos
of
the
state
from
mere
political
179, 184 (4th Cir. 2002); see Mt. Healthy Bd. of Educ. v. Doyle,
429 U.S. 274, 280 (1977) (The issue here thus turns on whether
the Mt. Healthy Board of Education is to be treated as an arm of
the State partaking of the States Eleventh Amendment immunity,
or is instead to be treated as a municipal corporation or other
political subdivision to which the Eleventh Amendment does not
6
extend.).
of
federal
law,
id.
(internal
quotation
marks
omitted).
In
our
first
opinion
in
this
case,
we
held
that
the
court
the
arm-of-state
On remand, the
analysis
and
again
See Oberg
See id.
Id. at
138.
PHEAA
for
statutes
argued
that
judgment
require
PHEAA
As to practical or functional
Pennsylvania
against
to
PHEAA
deposit
its
was
functionally
because
Pennsylvania
commercially
generated
We rejected
also
not
segregated
Because
explicitly
the
Treasurer,
account
PHEAA
granted
had
within
and
the
control
control
the
over
funds
Treasury.
over
those
were
See
substantial
funds
held
id.
at
moneys
in
to
a
138-39.
[that]
its
segregated
fund,
id.
at
139,
and
we
therefore
Id.
The
and
the
fact
that
PHEAAs
activities
were
subject
to
Id.
Id.
of
arm-of-state
status
because
PHEAA
was
focused
on
Id. at 140.
We rejected Obergs
argument that
out-of-state
commercial
activities.
Noting
the
not
encompassed
seem
by
plausible
Dr.
that
Obergs
by
2006
allegations
--
--
Id.
the
PHEAAs
last
year
operations
See id.
to
render
it
part
of
the
state.
Id.
at
140-41
and
PHEAA
remand,
the
parties
engaged
in
discovery,
10
See United
States
ex
rel.
Oberg
v.
Pa.
Higher
Educ.
Assistance
Agency
In the
be
sustained
in
light
of
the
post-remand
Id. at 497.
factual
again
appeals,
arguing
that
the
district
courts
In Obergs view,
Cir.
denied,
2013),
cert.
134
S.
Ct.
1761
(2014).
Summary
11
detailing
Pennsylvania.
PHEAAs
operations
and
relationship
with
fact
in
correctly
dispute,
applied
we
the
determine
substantive
whether
the
law.).
district
And
that
See United
134 S. Ct. 2312 (2014); cf. Hutto v. South Carolina Ret. Sys.,
773 F.3d 536, 542 (4th Cir. 2014) (Whether an action is barred
by the Eleventh Amendment is a question of law that we review de
novo.).
PHEAAs
and
operations
before
turning
to
Obergs
and
politic
was
constituting
created
a
instrumentality.
as
public
body
corporate
corporation
and
government
sue and be sued; enter into contracts; and own, encumber, and
dispose of real and personal property.
II, 745 F.3d at 139.
of
appointees;
Senates
the
eight
Secretary
of
Education;
members
of
the
president;
and
eight
Senate
members
three
gubernatorial
appointed
of
the
the
House
by
of
See 24
(All
they
behave
removed
on
themselves
conviction
infamous crime.
well
of
while
in
office,
misbehavior
in
and
office
shall
or
of
be
any
by
which
they
shall
have
been
appointed.);
Burger
v.
School Bd., 923 A.2d 1155, 1162 (Pa. 2007) ([A]rticle VI, 7
of]
the
Constitution
does
not
vest
in
the
appointing
power
purpose
opportunities
of
is
to
improve
[Pennsylvania]
the
residents
higher
.
educational
.
who
are
Id. 5104(3).
all debt issuances, see id., and the General Assembly has capped
the total amount of debt that PHEAA may incur, see 24 Pa. Stat.
5105.1(a.1).
for
its
bonds
and
other
debts.
See
id.
5104(3)
([N]o
function,
PHEAA
bonds
are
generally
free
from
PHEAA
is
now
one
of
the
nations
largest
names
American
Education
Services
and
FedLoan
issued
Virginia.
to
students
PHEAAs
2014
in
Delaware,
financial
Georgia,
statements
and
show
West
revenues
The
have
earnings
made
from
PHEAA
PHEAAs
financially
extensive
See J.A.
commercial
independent
of
the
Commonwealth, Oberg II, 745 F.3d at 139, and PHEAA has received
no appropriations to support its operations since 1988.
15
PHEAA
administers
Pennsylvanias
State
Grant
Program,
bonds
with
purpose
to
fund
the
loan-repayment
entities
loans
it
revenues. 4
incorporated
under
originated,
PHEAA
Delaware
repaying
the
created
special-
law
formally
to
Pennsylvania
Treasury,
see
24
Pa.
Stat.
5104(3),
segregated
Fund.
fund
known
as
the
Educational
Loan
Assistance
and
payments
made
into
the
[Educational
Loan
See 72
like
mutual
fund
taking
money
from
[separate
Treasury
Department
devises
and
executes
the
investment
72 Pa. Stat.
the
Treasurer,
PHEAA
must
by
present
the
Treasurer
with
reviewing
backup
documentation
such
as
match
between
payment request.
be
lawful
payment.
Department
and
amount
J.A 673-74.
correct,
J.A.
673.
transfers
PHEAA a check.
the
the
If
funds
due
on
the
invoice
and
the
Treasurer
payment
to
issues
is
PHEAA
his
approved,
warrant
the
for
Treasury
electronically
or
sends
includes
732-101
732-506,
independent
and
the
term
executive
18
Commonwealth
agencies;
agency
PHEAA
is
case
with
other
Commonwealth
agencies,
if
the
As is
Attorney
like
other
Commonwealth
agencies,
submit
contracts
The review
that
the
Commonwealth
requires
and
no
terms
that
are
actions
authorized
independently,
Commonwealth
General
is
to
Attorneys
represent
see
to
pursue
24
Act
PHEAA
Pa.
student-loan
Stat.
otherwise
in
civil
collection
5104.3,
requires
but
the
litigation
Attorney
absent
the
PHEAAs
standard
practice
is
to
seek
such
delegations
in
all
non-
PHEAAs
board.
The
Generals
office
would
have
but
the
regulations
must
be
approved
by
It
J.A. 2312.
from state taxation, see 24 Pa. Stat. 5107, and all of its
properties revert to the Commonwealth upon dissolution, see id.
5109.
PHEAAs
receive
employees
healthcare
are
paid
benefits
through
through
the
the
state
Commonwealth,
Treasury,
and
PHEAAs
2007,
PHEAAs
top
executives
were
At least
compensated
under
unique and very generous pay scale created by the PHEAA board.
J.A. 2342.
For accounting purposes, the Commonwealth treats PHEAA as a
component unit of the primary government, J.A. 595, and it
includes
PHEAAs
financial
information
in
the
Commonwealths
primary
Commonwealth
government
Commonwealth
to
departments,
include
the
agencies,
boards,
J.A. 595.
and
and
all
organizations
Component units
government]
is
financially
accountable,
and
other
[of
with
the
their
[primary
financial
government]
information]
are
would
such
cause
that
the
Id.
IV.
We turn now to Obergs specific challenges to the district
courts analysis of the arm-of-state issue.
A.
State Treasury
21
The
first
arm-of-state
factor
focuses
on
whether
any
Oberg
omitted),
an
I,
681
F.3d
inquiry
that
at
580
(internal
includes
legal
quotation
or
marks
functional
We held in Oberg II
that Pennsylvania was not legally liable, see id. at 138, and
that conclusion remains controlling in this appeal, see Everett
v. Pitt Cty. Bd. of Educ., 788 F.3d 132, 142 (4th Cir. 2015)
(explaining that under the law of the case doctrine, rulings
by an appellate court on questions of law generally must be
followed in all subsequent proceedings in the same case in the
trial
court
omitted)). 6
or
on
later
appeal
(internal
quotation
marks
on functional liability.
Authoritys
judgment,
is
Authoritys
net
not
revenues,
necessary
operation).
which,
or
state
in
its
desirable
for
may
also
be
legislative
the
Ports
functionally
was
not
functionally
liable
because
PHEAA
was
would
Pennsylvania.
be
paid
with
funds
belonging
to
PHEAA,
not
law instructs that PHEAA would pay any judgment in this case
with its own moneys from its segregated fund, the first factor
weighs
heavily
against
holding
that
PHEAA
is
an
arm
of
the
moneys
derive
exclusively
from
its
own
operations).
The
district
however.
court
Believing
rejected
that
this
that
courts
conclusion
analysis
on
remand,
could
not
be
that
Pennsylvania
would
be
fact
that
PHEAAs
earnings
functionally
liable
for
any
deposited
in
the
state
Treasury, where they are commingled with other state funds and
cannot be spent without approval of the Treasurer, showed that
the
Commonwealth
PHEAAs
assets
and
retains
[such]
generated
significant
revenue
control
that
over
[p]ractically
Id.
We agree
As we
because PHEAA was statutorily vested with control over the funds
on deposit with the state Treasury, PHEAAs revenues remained
moneys
of
the
corporation
despite
the
statutory
that
we
were
reviewing
the
granting
of
Rule
Oberg had plausibly alleged that PHEAA was not an arm of the
state,
we
governing
necessarily
PHEAAs
concluded
operations
that
did
the
not,
statutory
in
and
of
framework
itself,
courts
erroneous,
analysis
reversal
would
of
the
not
be
state-treasury
required
if
factor
the
was
evidence
against
PHEAA.
See
Oberg
II,
745
F.3d
at
140-41
the
state
(emphasis
alterations omitted)).
added;
internal
quotation
marks
and
Discovery
produced
substantial
evidence
of
PHEAAs
financial
statements
show
gross
revenues
of
$416
J.A 2573-74.
The
has
evidence
thus
establishes
that
PHEAA
substantial
PHEAA
is
in
fact
exercising
control
over
its
funds.
that
based
revenue
on
PHEAAs
and
board
approves
expenses
PHEAAs
estimates
Guenther
annual
developed
by
budget
PHEAA
staff; decides each year what portion (if any) of its earnings
will
be
used
to
supplement
the
State
Grant
Program;
report
financial
of
its
condition
major
that
financial
PHEAA
is
And as to the
decisions
required
and
to
and
make
overall
to
the
decisions
PHEAAs board.
reflected
in
that
report
were
made
by
that
PHEAA,
not
the
Commonwealth,
controls
PHEAAs
and
and
financial
financial
requirements,
assistance
is
for
contributed
the
benefit
to
of
id.
those
decisions
(PHEAAs
Board
and
directions
reviews,
on
analyzes
day-to-day
and
approves
28
Specific
incidents
and
events
described
revenues
fall
short
of
in
the
record
expectations,
it
is
not
and
make
it
clear
that
PHEAA
has
control
over
its
make
the
jurisdiction
same
(emphasis
sacrifice
added));
as
the
J.A.
agencies
3120
under
(letter
[his]
from
Gov.
1.9%
reserve
of
but
their
discretionary
ask[ing]
[PHEAA]
to
budgets
make
into
the
same
budgetary
spending
addition,
in
2007,
PHEAA
settled
dispute
with
the
According to
funds
Pennsylvania Treasury.
held
in
trust
in
accounts
outside
the
IRS for $12.3 million, and a portion of the IRS settlement was
also paid
Attorney
from
assets
General
held
would
have
in
trust.
conducted
See
J.A.
2480.
The
the
form-and-legality
the
substantive
decision
to
settle
General
Assembly
was
not
the
disputes
or
the
required
to
approve
the
creation
and
support
of
the
Pennsylvania
Higher
Although PHEAA
that
many
private
donors
are
reluctant
to
donate
30
74,
Exhibit
to
Obergs
Opposition
to
PHEAAs
PHEF,
one-employee, 10
tax-exempt
Motion
for
PHEAA thus
charitable
provided PHEF with more than $86 million in cash and donated
services.
in private donations.
had
no
specific
statutory
authority
to
create
or
make
preparing
committee
PHEAA
stating
that
CEO
for
there
appearance
was
[n]o
before
legislative
express
legislative
functional liability:
generated
revenues
Treasury,
and
held
that
PHEAA
417,
revenue
420
on
operations,
(7th
its
and
inside
and
exercises
its
outside
the
statutory
state
right
to
Cir.
own
does
both
2008)
(Because
account,
not
expose
the
Lottery
controls
and
funds
state
coffers
raises
its
when
own
monetary
As we discuss
primary
way
the
Commonwealth
exercises
some
control
provisions
in
the
establish
state
that
Treasury
32
all
of
effectively
PHEAAs
belong
funds
to
on
the
See Oberg II, 745 F.3d at 138; cf. Fitchik v. New Jersey
Transit Rail Operations, Inc., 873 F.2d 655, 661 (3d Cir. 1989)
(en banc) (The [statutory] designation of the money as public
simply does not answer the question of who has dominion over the
money
in
[state-created
entitys]
accounts.).
Indeed,
accounts
301
(requiring
all
moneys
of
Treasurer
the
to
deposit
Commonwealth
See 72 Pa.
in
specified
received
by
it,
also
contends,
process,
as
however,
that
established
the
actual
through
payment-
discovery,
of
control
that
makes
the
Commonwealth
functionally
liable.
We disagree.
such
orders,
as
to
invoices,
confirm
receipts,
the
contracts,
existence
of
[and]
contract
request
issues.
and
returns
it
to
PHEAA
for
resolution
of
the
Id.
approval
Commonwealth
process
control
over
clearly
PHEAA,
as
reflects
it
some
effectively
level
of
requires
The approval
process
thus
does
not
constrain
or
otherwise
interfere
with
PHEAA
and
utilized
at
the
discretion
of
the
board
of
approval
process
doesnt
even
commence
until
Indeed,
PHEAA
has
however,
of
argues
requisition
discovery
clearly
stamp.
Brief
approval
process
show,
of
[a]s
questions
and
Treasurys
Respondent
is
that,
not
at
ministerial
thousands
of
produced
in
denials
review
19.
the
In
in
is
no
mere
PHEAAs
nature
rubber
view,
because
the
it
of
submission,
substantive
review,
and
authorization.
the
review-and-approval
process
is
ministerial
orders,
and
invoices.
Complicated
contracts
may
simply
to
confirm
that
valid
contract
authorizes
the
in
payment
spending
places
which
some
PHEAA
procedures,
policy
Departments
not-insignificant
pays
its
however,
is
and
bills.
Dictating
not
same
priorities.
ministerial,
constraints
the
Because
checklist-focused
on
the
specific
as
dictating
the
Treasury
approval
process
requirement
does
not,
12
in
and
of
itself,
give
When
arguing
that
the
approval
process
is
not
ministerial, PHEAA notes that after receiving a $63 invoice
from PHEAAs outside counsel seeking reimbursement for a meal,
Treasury demanded an itemized receipt from PHEAA and inquired
whether the meal included alcohol.
Brief of Respondent at 19
n.5.
Given that Pennsylvanias reimbursement policy precludes
reimbursement for alcoholic beverages and requires [c]omplete
justification for reimbursement requests, see Commonwealth
Travel Procedures Manual 4.1, 7.1 (Nov. 1, 2011) (PDF file
saved as ECF opinion attachment), the Treasury Department simply
asked PHEAA to provide the information necessary to show that
payment was authorized.
We see no relevant difference between
that request and a request for PHEAA to provide the contract
underlying a given invoice.
36
PHEAAs
independently
earned
revenues
into
money
We disagree.
liability.
While
discovery
has
added
to
those
about
investing
these
commingled
funds,
we
do
not
of
substantive
control
by
PHEAA.
That
is,
PHEAA
is
The Treasurers
not
somehow
divest
PHEAA
of
control
over
its
funds
or
its
moneys,
funds.
generated
Accordingly,
through
we
PHEAAs
37
conclude
that
commercial
PHEAAs
own
activities
and
the
Commonwealth
simply
because
they
are
commingled
with
and
the
Commonwealth
is
therefore
functionally
the
total
amount
of
debt
PHEAA
can
incur,
and
the
Brief of Respondent
Again, we disagree.
PHEAAs participation in
requirement,
make
dependent
PHEAA
accounting
fiscally
purposes.
See
these
on
Pennsylvania
Commonwealths
38
provisions
may
well
for
state
Comprehensive
Annual
its
debt).
For
purposes
of
the
arm-of-state
inquiry,
we
note
that
while
the
debt-limit
and
requirements
obviously
have
not
Moreover, these
been
obstacles
to
powers
to
shrink
PHEAAs
operations
and
revenues
to
See
financial
independence
to
some
degree,
Pennsylvania
municipalities--which are subject to liability under the FCA-also face similar requirements. 13
13
little
help
in
draw[ing]
entity
functioning
the
line
independently
of
between
the
State
State-created
from
State-
Oberg
omitted).
I,
681
F.3d
at
580
(internal
quotation
marks
As
we
have
explained,
PHEAAs
substantial,
functional-liability
analysis.
The
evidence
discussed
Stat.
8022(a)
(placing
limitations
on
the
amount
of
nonelectoral debt incurred by local government units); 53 Pa.
Cons. Stat. 8110(a) (requiring local governments to submit a
debt statement to the Department of Community and Economic
Development of the Commonwealth before issuing bonds); 53 Pa.
Cons. Stat. 8111 (Department must approve local governments
application before local government may issue bonds).
40
than
$1
billion
in
net
assets.
While
its
commercial
See 24 Pa.
course,
PHEAA
is
subject
to
some
measure
of
state
did
PHEAA
not
outweigh
the
control
had
over
its
independent
and
legislative
cap
The gubernatorial-approval
may
theoretically
place
The Treasury
collectively,
materially
diminish
or
constrain
PHEAAs
its
corporate
wealth
and
its
ability
to
fund
judgment
PHEAA argues that for the first two decades of its existence, it
depended on state appropriations to fund its operations.
PHEAA
on
the
hook
to
pay
judgment
against
PHEAA,
and
it
enjoys
mission.
financial
success
by
discharging
its
statutory
We disagree.
Those facts, as
that
PHEAAs
access
to
its
Oberg II thus
substantial
corporate
Cir. 2009) (The law of the case doctrine posits that when a
court decides upon a rule of law, that decision should continue
to
govern
the
same
issues
in
subsequent
stages
in
the
same
case
law
would
still
require
their
consideration.
There is no such
43
sustaining.
Id. 14
creating
states
otherwise
exercised
Although
not-insignificant
amount of control over the entity, see id. at 36-37, the Court
held in Hess that the entity was not entitled to share in the
states
Eleventh
Amendment
immunity
given
the
entitys
id.
at
52
([T]he
Port
Authority
is
financially
self-
Regents,
the
an
question
arm
of
was
the
whether
state
for
We disagree.
the
University
Eleventh
of
California
was
Amendment
purposes.
legally liable for the Universitys debts, see id. at 428, the
Ninth Circuit nonetheless concluded that the University was not
an
arm
of
agreement
California
with
the
because
federal
contractual
government
would
indemnification
have
relieved
see
id.
that
The
the
Supreme
presence
Court
or
reversed.
absence
of
Rejecting
a
third
the
partys
in
the
first
instance,
(emphasis added).
45
that
is
relevant,
id.
for
judgment
against
the
state-created
entity,
the
that
immunity
by
virtue
of
an
indemnity
agreement
that
See id. at
430-31; see also Cash, 242 F.3d at 221-22 n.1 ([I]n Regents,
the Court held that the fact that a judgment against the State
would be covered by the voluntary indemnification agreement of a
third party did not strip away the States Eleventh Amendment
immunity
because
the
State
still
bore
the
legal
risk
addressed
its
own
Hess
and
ruling,
built
see
on
Hesss
Regents,
519
of
Because
analysis
U.S.
at
an
when
430-31,
silent
rejection
of
the
heart
of
Hesss
analysis
of
functional liability. 15
15
In
sum,
PHEAA
is
engaged
in
nationwide,
commercial
in
accumulate
net
more
revenues
every
than
billion
one
year
and
dollars
have
in
allowed
net
it
assets,
to
and
A
judgment in this case would thus be paid with PHEAA funds, not
funds belonging to the Commonwealth.
effectively
support. 16
be
Accordingly,
required
in
light
to
of
swoop
in
PHEAAs
with
financial
anticipated
and
actual
financial
independence,
Hess,
513
U.S.
at
49,
the
And because
Pennsylvania
liable,
is
neither
legally
nor
functionally
the
see Cash, 242 F.3d at 225 (explaining that if the state treasury
will not be affected by a judgment, that fact weighs against
arm-of-state status).
B.
The
second
Autonomy
arm-of-state
factor
requires
us
to
determine
as
who
appoints
the
entitys
directors
or
officers, who funds the entity, and whether the State retains a
veto over the entitys actions.
(internal
quotation
marks
omitted).
relevant
to
the
omitted).
1.
In Oberg II, we held that while the composition of PHEAAs
board, the gubernatorial-approval requirement for bond issuances
and the Auditor Generals oversight over PHEAA pointed towards
arm-of-state status, other relevant factors, including PHEAAs
financial
independence
and
its
corporate
powers
strongly
Id. at 139.
remand,
developed
the
through
Id.
district
discovery
made
district
board
--
court
concluded
that
Pennsylvanias
the
facts
control
over
believed
gubernatorial
court
that
the
appointees
composition
and
state
of
PHEAAs
legislators
or
direction
of
PHEAA.
Id.
The
court
also
noted
that
expenditures,
issuances,
the
and
Governor
the
must
Attorney
approve
General
49
all
must
of
PHEAAs
approve
all
debt
PHEAA
contracts
in
excess
of
$20,000.
Id.
The
district
court
Id.
the
Oberg
autonomy
II.
factor
In
is
Obergs
inconsistent
view,
the
with
evidence
our
analysis
produced
in
through
and
the
evidence
operational autonomy.
the
ultimate
question
sufficient
state
(emphasis
added;
in
the
record
establish
PHEAAs
control
whether
to
internal
PHEAA
render
it
quotation
is
truly
part
marks
of
subject
the
and
to
state
alteration
omitted)).
2.
The record contains substantial evidence showing that PHEAA
operates autonomously, largely free from state interference in
its substantive decisions.
The
[m]ost
critical[]
evidence
of
PHEAAs
the
evidence
developed
50
through
autonomy
Id.
discovery
is
As already
confirmed
PHEAA is not
dependent on state money for its survival and has not received
appropriated funds for operational support since 1988.
supports
itself
activities,
through
through
which
its
it
commercial
earns
PHEAA
financial-services
hundreds
of
millions
of
PHEAAs
own
officials
establishes
that
PHEAA
in
fact
acknowledging
that
PHEAA
board
makes
the
financial
approves
PHEAAs
internal
budget,
which
substantial,
independently
is
proposed
by
generated
revenues
thus
139.
Testimony from PHEAA board members also shows the lack of
involvement
affairs.
by
the
General
Assembly
in
PHEAAs
operational
policy or business recommendations to PHEAA, one of the nonlegislative members of the board responded,
51
also
reflected
in
the
testimony
of
PHEAAs
chairman, who stated that [i]f the Speaker of the House or any
member of the General Assembly would ask me a question regarding
PHEAA, I certainly would meet with them and discuss whatever the
matter is with them.
General Assembly.
Chairman
of
the
Board,
J.A.
249
(The
Board
oversees
PHEAA,
tasks
PHEAAs
executives
and
managers
with
implementing
17
PHEAA
has the power to enter into contracts, sue and be sued, and
purchase and sell property in its own name, all of which suggest
operational autonomy.
granting
PHEAA
control
its
funds
on
The statutes
deposit
with
the
to
solicit
and
charitable
donations,
it
created PHEF and gave PHEF more than $10 million a year to do
that job. 18
authority
create
and
support
dependent
charitable
Assembly
beyond
the
routine
review-and-approval
telling
example
of
PHEAAs
financial
and
From all that appears in the record, PHEF did its job
quite
poorly.
PHEF
collected
$11
million
in
private
contributions over a six-year period in which PHEAA provided
PHEF with more than $86 million in cash and donated services.
53
offer
made
Sallie
in
Mae.
2005
by
PHEAAs
the
board
SLM
Corporation,
rejected
the
better
offer
on
known
its
as
own,
the
programs
agency
administering
provides
another
Commonwealth
concrete
employee-benefit
example
of
PHEAAs
benefits
outside
the
Commonwealth.
J.A.
2880.
and
PHEAA
its
itself
routinely
independence
from
asserts
the
its
financial
Commonwealth.
For
similar
to
not-for-profit
business,
J.A.
3408.
newspaper
defending
PHEAAs
salaries
and
bonuses
the
Commonwealth
has
indicated,
through
both
the
formal
side,
the
Commonwealths
54
Comprehensive
Annual
Financial
Reports
state
that
the
Commonwealth
does
J.A. 596.
not
Less
this
evidence
J.A. 3364.
is
considered
along
with
PHEAAs
that
PHEAA
operates
independently,
without
levee
district
to
be
autonomous
for
arm-of-state
[and]
no
branch
of
government
exercises
supervisory
there
is
evidence
showing
certain
level
of
most
significant
evidence
contracts
over
$20,000
of
state
control
is
that
the
Attorney
General
for
in
improper
form,
unconstitutional.
not
71
Pa.
statutorily
Stat.
authorized
732-204(f)).
or
Deputy
3055;
see
also
J.A.
3058
(agreeing
that
the
Attorney
legal
formalities
to
ensure
that
it
complies
with
I dont look
I look
checklist-driven,
essentially
process.
56
non-substantive
review
absent
delegation
of
authority
and
the
binding
finances
and
operations:
PHEAA
was
created
by
the
Commonwealth,
and
can
be
dissolved
by
the
Commonwealth.
must
Treasury,
deposit
and
those funds.
the
its
commercial
Treasurer
must
revenues
approve
In addition,
in
the
payments
made
state
from
and the General Assembly has capped the total amount of debt
PHEAA can incur.
subject
to
audit
by
the
Commonwealths
57
Auditor
General.
the
various
statutory
strings
that
tie
PHEAA
to
the
For example,
19
Certain of PHEAAs contracts are exempt from the RightTo-Know Law. See 24 Pa. Stat. 5104(1.1)(iii).
20
in
distinguishing
political subdivisions.
arms
of
the
state
from
independent
to
certain
degree.
The
arm-of-state
inquiry,
independently
of
the
state
despite
the
state
at
the
administrative
edges
rather
than
the
is
whether
state
exercises
such
control
When the
over
an
21
matters.
See
United
States
ex
rel.
Sikkenga
v.
Regence
BlueCross BlueShield of Utah, 472 F.3d 702, 720 (10th Cir. 2006)
(state-created entity autonomous under arm-of-state test because
entitys
board
of
directors
sets
policies
and
operational
federal
government
policymaker
(emphasis
exerts
added;
control
over
internal
Amtrak
as
quotation
marks
omitted)).
As discussed above, the record establishes that PHEAA, not
the
Commonwealth,
controls
PHEAAs
funds
and
makes
the
22
We therefore conclude
that
the
autonomy
factor
weighs
heavily
against
arm-of-state
status.
C.
The
third
State Concerns
arm-of-state
factor
requires
us
to
consider
also
however,
do
encompass
state operations.
not
other
mean
only
non-state
local
interests
Oberg I,
Non-state
concerns,
like
but
out-of-
In Oberg II, we found this factor weighed in favor of armof-state status because PHEAAs focus on improving access to
higher education was a matter of legitimate state concern.
Oberg II, 745 F.3d at 140.
operations
do
not
involve
an
area
of
legitimate
state
The
district
notwithstanding
court
PHEAAs
on
remand
substantial
concluded
out-of-state
that,
activity
and
In
constitute
non-state
concerns
because
this
was
done
to
Id.
factor
weighs
against
arm-of-state
status.
As
to
income
Oberg
[October
was
derived
contends
percentage
2014],
of
from
that
the
majority
of
out-of-state
our
analysis
out-of-state
in
earnings
PHEAAs
revenue
activity.
Oberg
J.A.
II
determinative
and
172.
makes
the
of
this
factor.
majority
of
activities,
PHEAAs
Oberg
revenues
argues
are
that
63
the
generated
district
by
out-of-state
court
erred
in
it
argues.
makes
out-of-state
activity
dispositive,
as
Oberg
that
if
one-third
of
PHEAAs
earnings
We then
came
from
Id.
state
cannot
be
understood
23
as
an
acceptance
of
Obergs
concerns factor considered facts beyond the in- versus out-ofstate source of PHEAAs earnings, see id. at 140, and there is
no reason to think those facts would suddenly become irrelevant
the
moment
Accordingly,
out-of-state
while
we
earnings
find
it
cross
highly
the
halfway
relevant
to
point.
the
state-
of
services,
Oberg
Pennsylvania
education
by
II,
745
believes
to
supplying
F.3d
be
student
at
an
140
--
essential
financial
involves
aid
what
governmental
See Ram
Ditta v. Md. Natl Capital Park & Planning Commn, 822 F.2d 456,
459 (4th Cir. 1987) (considering whether the services provided
by the entity inured primarily to the benefit of local residents
rather than state citizens in general).
65
employees,
they
inure
to
the
benefit
these
facts
of
Pennsylvania
citizens.
After
considering
all
of
and
the
relevant
statutory provisions, we conclude that PHEAAs case for arm-ofstate status under this factor has been weakened by discovery.
The extent of PHEAAs out-of-state earnings is relevant to the
state-concern
factor,
see
Oberg
II,
745
F.3d
at
137,
and
Nonetheless, in light of
entity
is
treated
under
state
law.
In
addressing
this
and
constitutional
provisions
which
characterize
the
status.
state-law
factor
weighed
in
favor
of
arm-of-state
district
General
court
Assembly,
observed
that
that
PHEAA
of
PHEAAs
[a]ll
was
created
limited
by
the
powers
and
We see nothing in
established
that
PHEAA
employees
are
treated
as
are
not
paid
in
accordance
with
Commonwealth
pay
Accordingly, although
point.
determination
judgment
As
that
against
to
the
state-treasury
Pennsylvania
PHEAA
remains
is
not
factor,
legally
controlling.
Oberg
liable
And
IIs
for
as
a
to
wealth
foreclose
--
finding
were
of
confirmed
functional
through
liability.
discovery
and
Because
the
68
to
the
autonomy
factor,
the
statutes
and
evidence
makes
otherwise
manages
without
areas
the
significant
in
which
primarily
PHEAAs
policy
state
over
its
own
activities
from
the
exercises
ministerial
control
sets
day-to-day
interference
the
involve
decisions,
substantive
of
the
amount
and
do
of
not
matters.
and
company
Commonwealth.
some
matters
budget,
The
control
diminish
Because
the
for
purposes
of
during
the
PHEAAs
revenues
through
out-of-state
this
case
relevant
activities,
that
the
period
however,
majority
were
the
of
generated
state-concerns
up
to
political
Pennsylvania.
subdivision,
not
alter
ego
of
twin
reasons
for
being
69
remain
our
prime
guide.
For purposes of
student-loan
financial-services
activities.
It
is
commercial
revenues
have
made
PHEAA
entirely
self-
sovereign
dignity
of
Pennsylvania.
Although
the
operations,
the
Commonwealth
has
nonetheless
vested
PHEAA,
not the Governor or the General Assembly, sets policy for the
corporation
and
makes
the
substantive
70
fiscal
and
operational
decisions.
Indeed,
the
Commonwealth
admits
in
its
public
operationally
independent,
and
PHEAA
in
fact
operates
supervision.
In
light
of
PHEAAs
intended
and
at
52
([T]he
Port
Authority
is
financially
self-
therefore
conclude
that
PHEAA
is
an
independent
heighten
mystery
of
legal
evolution
by
spread[ing]
an
Accordingly, we
71
72