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NEW JERSEY v. GLOUCESTER ENVTL. MGMT. SERVS.

March 22, 1995

STATE OF NEW JERSEY, DEPARTMENT OF ENVIRONMENTAL PROTECTION, Plaintiff,
v.
GLOUCESTER ENVIRONMENTAL MANAGEMENT SERVICES, INC., et al., Defendants, AIR PRODUCTS AND CHEMICALS, INC., et al., Third-Party Plaintiffs, v. ANCORA PSYCHIATRIC HOSPITAL; GLASSBORO STATE COLLEGE; NEW JERSEY STATE HOSPITAL (TRENTON STATE HOSPITAL); and TRENTON STATE TEACHERS' COLLEGE (TRENTON STATE COLLEGE), et al., Additional Third-Party Defendants.



The opinion of the court was delivered by: SIMANDLE

 SIMANDLE, District Judge:

 I. Introduction and Procedural History

 The present motion raises interesting questions of Eleventh Amendment immunity and its waiver. The plaintiff State of New Jersey, Department of Environmental Protection and Energy [NJDEPE] seeks in this multi-party hazardous waste case to recover monetary and injunctive relief against several hundred parties pursuant to various federal and state environmental protection laws, arising at the GEMS Landfill in Gloucester Township, Camden County, New Jersey. Originally filed in the Superior Court of New Jersey and asserting only claims arising at state law, this action was removed to this court in 1984. The court denied a private party's motion to remand or dismiss, finding that removal was proper and that federal question jurisdiction existed. State of N.J. Dept. of Environmental Protection v. GEMS, 719 F. Supp. 325, 333-341 (D.N.J. 1989). *fn1"

 On February 1, 1990, NJDEPE filed a Seventh Amended Complaint pursuant to which it asserted claims under the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. ยงยง 9601-9675 ("CERCLA"), against all the direct defendants it had previously brought into the litigation under the previous six amended complaints. On March 16, 1990, NJDEPE filed its Eighth Amended Complaint naming a large number of additional parties as direct defendants, including many parties who had allegedly used the waste hauling and processing services of the Almo Anti-Pollution and Tank Cleaning Corporations ("Almo"). The NJDEPE alleged that these many parties had hired Almo to transport and dispose of various substances, and that these were disposed of at the GEMS Landfill.

 A group of alleged Generator Defendants obtained leave of court to file a Second Amended Third-Party complaint, naming additional third-party defendants based on the alleged Almo connection. Among the parties joined as third-party defendants were the movants on the present motion, which are two hospitals and two colleges of the State of New Jersey. The Second Amended Third-Party Complaint, analogous to the State's Eighth Amended Complaint, asserts claims based on State statutory and common laws, including the Spill Compensation and Control Act, N.J.S.A. 58:10-23-11, et seq. ("Spill Act"). The NJDEPE asserts no CERCLA claims against these Almo-connection parties.

 In the present motion, the third-part defendants Ancora Psychiatric Hospital, Trenton State Hospital (Trenton Psychiatric Hospital), Glassboro State College (subsequently renamed "Rowan College") and Trenton State College seek summary judgment dismissing the claims against them based upon immunity from suit under the Eleventh Amendment of the United States Constitution. They argue that they are agencies of the State of New Jersey, protected by the Eleventh Amendment from monetary relief on a claim arising only at State law. These state entities pleaded the Eleventh Amendment as an affirmative defense and seek summary judgment dismissing the pleadings against them.

 In opposition, the Generator Defendants contend that these state entities are not the equivalent of the State of New Jersey for purposes of Eleventh Amendment immunity, and that even if such immunity would otherwise preclude suit against these state entities in federal court, the State of New Jersey has through its conduct and claims as plaintiff in this multi-million-dollar, multi-party litigation waived its Eleventh Amendment immunity.

 This court holds, for reasons stated below, that where the State of New Jersey has acted in its sovereign capacity to invoke the jurisdiction of the federal court to assert claims arising at state law against a waste hauler and many of its customers, it has waived its Eleventh Amendment immunity with respect to claims brought by others, as third-party plaintiffs, seeking contribution for the same liability against state agencies that were also allegedly customers contributing to the same waste stream through the same waste hauler.

 II. Discussion of Law

 A. Whether these Entities are the Alter Ego of the State for Eleventh Amendment Purposes

 The four state entities that have been named as third-party defendants based on their alleged "Almo connection" have jointly moved for summary judgment claiming that the Eleventh Amendment bars the Generators' third-party action against them. The Generators argue that because the State, through the NJDEPE, is the plaintiff in this action, no State entity can assert the Eleventh Amendment as a jurisdictional defense. The State contends that notwithstanding the NJDEPE's actions as the plaintiff in this litigation, the State, via the NJDEPE, has not waived the Eleventh Amendment immunity available to these four purportedly separate and distinct state agencies who are not voluntary participants in this lawsuit.

 For these two State colleges and psychiatric institutions to assert Eleventh Amendment immunity in the face of the NJDEPE's actions, they must initially establish that they are entitled to invoke the protection of the Eleventh Amendment in the first place. See Lake Country Estates, Inc. v. Tahoe Regional Planning Agency, 440 U.S. 391, 400-01, 59 L. Ed. 2d 401, 99 S. Ct. 1171 (1979). As the parties claiming the entitlement of Eleventh Amendment protection, the two colleges and the two psychiatric institutions bear the burden of making this requisite showing. See ITSI TV Productions, Inc. v. Agricultural Assoc., 3 F.3d 1289, 1291 (9th Cir. 1993); Crawford v. Richard Stockton State College, Civil Action No. 90-1230 (D.N.J. Sept. 26, 1990) (Gerry C.J.).

 The Eleventh Amendment provides:

 
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 State, or by Citizens or Subjects of any foreign State.

 U.S. Constitution, XI Amendment. Notwithstanding its express, limited terms, the Supreme Court has interpreted the Eleventh Amendment as encompassing suits brought against a State by its own citizens as well. See Hans v. Louisiana, 134 U.S. 1, 33 L. Ed. 842, 10 S. Ct. 504 (1890). See also Pennhurst State School & Hospital v. Halderman, 465 U.S. 89, 98, 79 L. Ed. 2d 67, 104 S. Ct. 900 (1984) (citing Hans). Further, although the language of the Amendment refers only to the State itself, the Supreme Court has held that it also bars actions against a State in federal court for money damages when "the state is the real, substantial party in interest." Pennhurst, 465 U.S. at 101-02 (1984). *fn2" Stated differently, a state agency is entitled to the same Eleventh Amendment immunity enjoyed by the State itself when a judgment against the agency "would have had essentially the same practical consequences as a judgment against the State itself." Lake Country Estates, Inc. v. Tahoe Regional Planning Agency, 440 U.S. 391, 401, 59 L. Ed. 2d 401, 99 S. Ct. 1171 (1979). In Urbano v. Board of Managers, 415 F.2d 247, 251-52 (3d Cir. 1969), cert. denied, 397 U.S. 948, 25 L. Ed. 2d 128, 90 S. Ct. 967 (1970), the Third Circuit laid down a nine-factor test to be used to determine whether a state agency is entitled to invoke Eleventh Amendment immunity. Noting that several of the Urbano factors were interrelated, the Third Circuit, for purposes of clarity and simplicity, later divided them into three broader categories. See Fitchik v. New Jersey Transit Rail Operations, Inc., 873 F.2d 655 (3d Cir.) (en banc), cert. denied, 493 U.S. 850, 107 L. Ed. 2d 107, 110 S. Ct. 148 (1989). Under Fitchik's three-part analysis, the court is to determine:

 
(1) Whether the money that would pay the judgment would come from the state (this includes three of the Urbano factors--whether payment will come from the state's treasury, whether the agency has the money to satisfy the judgment, and whether the sovereign has immunized itself from responsibility for the agency's debts);
 
(2) The status of the agency under state law (this includes four factors--how state law treats the agency generally, whether the entity is separately incorporated, whether the agency can sue or be sued in its own right, and whether it is immune from state taxation); and
 
(3) What degree of autonomy the agency has.

 Fitchik, 873 F.2d at 659. *fn3"

 1. The State Colleges

 Applying the three Fitchik factors to the state colleges now moving for summary judgment, one finds that the issue whether they are alter egos of the State for purposes of Eleventh Amendment immunity is a very close question.

 a. Funding of the State Colleges

 None of the three Fitchik factors is itself dispositive. Id., 873 F.2d at 659. The Third Circuit has stated, however, that the question of whether any judgment would be paid out of the state treasury is the "most important" factor. Id. See also Urbano, 415 F.2d at 251 (referring to it as "the most significant factor"). The importance ascribed to this factor is premised upon the Amendment's central goal--"the prevention of federal court judgments that must be paid out of the state's treasury." Fitchik, 873 F.2d at 659-60 (citation omitted).

 Citing its earlier opinion in Blake v. Kline, 612 F.2d 718 (3d Cir. 1979), cert. denied, 447 U.S. 921, 65 L. Ed. 2d 1112, 100 S. Ct. 3011, the Third Circuit in Kovats v. Rutgers, The State University, 822 F.2d 1303 (3d Cir. 1987), cert. denied, 489 U.S. 1014 (1989), explained that "relief should not be viewed as coming from the state where an entity has the ability to pay a judgment from private funds not subject to state control." Kovats, 822 F.2d at 1308. Rutgers, the Court noted, received substantial amounts of money from sources other than the State itself. Id. at 1309.

 Moreover, as the Court further explained, the Eleventh Amendment inquiry does not turn upon whether the state contributes a majority of an agency's funds, either directly or indirectly. Id. at 1309. What mattered instead was "whether [the agency's] segregated general fund would be sufficient to pay the judgment and whether the state treasurer's control over [the agency's] funds was discretionary or simply ministerial." Id. at 1308-09. In finding that the funding factor tipped in favor of a finding of no Eleventh Amendment immunity, the Court observed that Rutgers retained considerable discretion in the use of its non-state funds. It also noted that Rutgers had "substantial non-state funds" in both commingled and segregated accounts out of which a judgment could be paid. Id. at 1309. The Court was not persuaded by Rutgers' argument that even a payment from non-state sources would result in an indirect payment from the state treasury to the extent that the state budget compensated for any resulting shortfall to Rutgers. The Court observed that any increase in Rutgers' state appropriation as a result of an adverse judgment against the university would be entirely the result of "discretionary action by the state." Id.4

 The Third Circuit also found in favor of the plaintiff, and against a finding of Eleventh Amendment immunity for New Jersey Transit ("NJT"), in Fitchik. The Court stated that:

 
The most striking financial detail is that NJT's money does not come predominately from the state. New Jersey provides less than 33% of NJT's operating funds. . . . But even putting that significant fact aside, we note that the fact that an entity derives some of its income from the state does not mean that it is entitled to partake of the state's immunity. "The nature of the state's obligation to contribute may be more important than the size of the contribution." . . . What is significant is whether the money that pays the fine will come from the ...

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