Tradigrain, Inc. v. Mississippi State Port Authority

701 F.2d 1131, 1983 U.S. App. LEXIS 29011

• Court: Court of Appeals for the Fifth Circuit
• Decided: April 7, 1983
• Docket: 82-4120
• Status: Published

Opinions

CLARK, Chief Judge:

Tradigrain, Inc., a Louisiana corporation, brought this action against the Mississippi State Port Authority alleging that its rice was damaged while it was stored in the Port Authority’s warehouse. Tradigrain predicated jurisdiction on diversity of citizenship between the parties. 28 U.S.C. § 1332. The Port Authority moved to dismiss. It contended that it was an alter ego of the State of Mississippi, and therefore, not a “citizen” for purposes of diversity jurisdiction. The district court rejected this challenge to its jurisdiction, but, certified the issue for appeal. 28 U.S.C. § 1292(b). We permitted the appeal. Finding that the Port Authority is not a “citizen” for purposes of diversity jurisdiction, we reverse and remand with instructions to dismiss for lack of subject matter jurisdiction.

It is well established that a state is not a “citizen” for purposes of diversity jurisdiction. Moor v. County of Alameda, 411 U.S. 693, 717, 93 S.Ct. 1785, 1799, 36 L.Ed.2d 596 (1973); Illinois v. City of Milwaukee, 406 U.S. 91, 98 n. 1, 92 S.Ct. 1385, 1390 n. 1, 31 L.Ed.2d 712 (1972); Postal Telegraph Cable Co. v. Alabama, 155 U.S. 482, 487, 15 S.Ct. 192, 194, 39 L.Ed. 231 (1894). If suit is brought against an agency which is merely an alter ego of the state, it follows that federal jurisdiction is also lacking. On the other hand, if the agency is an independent one, separate and distinct from the state, the district court can properly proceed to the merits. Department of Health and Rehabilitative Services v. Davis, 616 F.2d 828, 833 (5th Cir.1980); Splendour Shipping and Enterprising Co. v. Bd. of Commissioners of Port of New Orleans, 477 F.2d 122, 123 (5th Cir.1973); C.H. Leavell & Co. v. Bd. of Commissioners of Port of New Orleans, 424 F.2d 764, 765 (5th Cir.1970); Centraal Stikstof Verkoop., N.V. v. Alabama State Docks Department, 415 F.2d 452, 457 (5th Cir.1969).

In determining whether the agency is an alter ego of the state or an independent agency, the essential question is whether the state is the real party in interest in the lawsuit. Centraal Stikstof Verkoop., N.V., supra at 457. The resolution of this question is a matter of state law. C.H. Leavell & Co., supra at 765. Cf. Laje v. R.E. Thomason General Hospital, 665 F.2d 724, 727 (5th Cir.1982) (When considering whether an agency is immune under the eleventh amendment, the court must “examine the particular entity in question and its powers and characteristics as created by state law to determine whether the suit is in reality a suit against the state itself.”).

The proper approach to a determination of the alter ego status of the agency was outlined in Huber, Hunt & Nichols v. Architectural Stone Co., 625 F.2d 22 (5th Cir.1980). Huber, Hunt & Nichols was decided in the context of the eleventh amendment. However, 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. Therefore, we adopt the approach outlined in Huber, Hunt & Nichols for our analysis in this case.

If the agency’s status is unclear, the court must look to any and all available sources for guidance. Id. at 24. 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 management authority, and “a factor that subsumes all others,” the treatment of the agency by the state courts. Id. at 24-25. When examining the extent of the agency’s independent management authority, the court should look to whether the agency has the power to make its own hiring decisions, the power to enter into its own contracts, and the power to engage its own counsel. Laje, supra at 727; Davis, supra at 833 (agency which possesses “generally recognized corporate powers” is a citizen for purposes of diversity jurisdiction); C.H. Leavell & Co., supra at 767. 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 did not normally run against the state itself, ran against the agency. C.H. Leavell & Co., supra at 766-767. 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. See Laje, supra at 727; Annot., 6 A.L. R.Fed. 615 (1971, supp. 1981). The source material for the court’s analysis is found in the state’s constitutional, statutory and decisional law.

In a typical situation, some factors will suggest 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. With these concepts in mind, we now proceed to place the weights in the pans of the balance to test whether the Authority is a “citizen” for purposes of diversity jurisdiction.

At the outset, we find there is no constitutional or decisional law directly on point. We are therefore left with the Port Authority’s enabling act, found at Miss.Code Ann. § 59-5-1 et seq. (1972 supp. 1982). Under the act, the Authority is granted some of the generally recognized powers of an independent agency. For example, it may sue and be sued in its own name, Miss.Code Ann. § 59-5-37 (1972 supp. 1982); purchase, lease and own property, § 59-5-7 (facilities, buildings, vessels), § 59-5-31 (public utility systems and necessary easements), § 59-5-37 (land); and enter into contracts necessary to its operation, § 59-5-37. The Authority is vested with “wide latitude and discretion” in the exercise of its duties. § 59-5-9.

There are many weights, however, that must go on the opposite side. Although the Authority may acquire property, title to all such property vests in the State of Mississippi. Miss.Code Ann. § 59-5-39. While the Authority may cause bonds to be issued to provide funds for operational expenses, the issuance of such bonds is controlled by the state bond commission, § 59-5 — 41, and the bonds become general obligations of the State of Mississippi and are backed by the full faith and credit of the state. § 59-5-51. Although the Authority may enter into some contracts, contracts involving sums in excess of $2,500 must be advertised, and the contract must be awarded to the lowest bidder. All contracts let for port or waterway improvements must be advertised “as required by law for the letting of public contracts.” § 59-5-37.

The Authority, in the course of performing its “essential governmental function,” is instructed to carry out its purposes “for the benefit of the people of the State of Mississippi.” Miss.Code Ann. § 59-5-7. The Authority must make financial reports to the state legislature at each of its regular sessions. § 59-5-54 It is audited at the end of each fiscal year by the state auditor. § 59-5-67. It has the power of eminent domain. § 59-5-39.

Miss.Code Ann. § 59-5-37 is particularly revealing:

The authority is granted the power to sue and be sued in its “own name, and the authority is hereby authorized and directed to take liability insurance on the operation and said facilities, and may be sued by anyone affected to the extent of such insurance carried; provided, however, that immunity from suit is only waived to the extent of such liability insurance carried, and a judgment creditor shall have recourse only to the proceeds or right to proceeds of such liability insurance.

(emphasis added). Inferentially, the Mississippi legislature necessarily must have intended that the Authority enjoy sovereign immunity. Otherwise, it would not have been concerned with waiving that immunity to the extent that insurance was purchased.

The language in the statute strongly suggests that the legislature considered the Authority an alter ego of the State. At the time this statute was enacted, the State of Mississippi enjoyed sovereign immunity. See Pruett v. City of Rosedale, 421 So.2d 1046 (Miss.1982) (abolishing doctrine of sovereign immunity, but mandate not to take effect until July 1, 1984). The Authority could only have been immune if it was a part of the state. Jagnandan v. Mississippi State University, 373 So.2d 252, 253 (Miss.1979), cert. denied, 444 U.S. 1026, 100 S.Ct. 690, 62 L.Ed.2d 660 (1980) (A state college is an arm of the state and is therefore immune from, suit.); Horne v. State Building Commission, 233 Miss. 810, 103 So.2d 373, 379-381 (1958) (State Building Commission, with broad discretionary powers to erect and maintain buildings, is an instrumentality of the state, and is therefore immune from suit.)

It is unnecessary to base our conclusion on the statutory language in Miss.Code Ann. § 59-5-37 alone. But that language, in combination with other statutory provisions discussed above, clearly tips the balance in favor of our finding that the Mississippi State Port Authority is merely the alter ego of the State of Mississippi, and as such is not a “citizen” for purposes of diversity jurisdiction.¹ For these reasons, the judgment of the district court is REVERSED. The case is REMANDED with instructions to dismiss for lack of subject matter jurisdiction.

1 . The Authority places strong reliance on C.H. Leavell & Co. v. Bd. of Commissioners of Port of New Orleans, 424 F.2d 764 (5th Cir.1970). In that case, we held that the Board of Commissioners of the Port of New Orleans was a citizen for purposes of diversity jurisdiction. But that case turned on two significant factors not present here. In C.H. Leavell & Co., the State of Louisiana had sued the Board in its own courts. In addition, the state courts had previously held that prescription ran against the Board but not against the state itself.