2015 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

4-21-2015

Anthony Lang, Sr. v. PHEAA

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"Anthony Lang, Sr. v. PHEAA" (2015). 2015 Decisions. Paper 406.

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NOT PRECEDENTIAL 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

______________ 

No. 14-1080 

______________ 

ANTHONY LANG, SR.; AHKEEM BROWN, individually and on behalf of all others 

similarly situated, 

 Appellants 

v. 

PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY, a/k/a PHEAA, 

a/k/a American Education Services, a/k/a AES, a/k/a FedLoan Servicing; JAMES L. 

PRESTON, both as President and Chief Executive Officer of PHEAA and individually; 

STEPHANIE FOLTZ, individually; TODD MOSKO, individually; MATTHEW SESSA, 

individually; DOES #1 THROUGH #10, individually 

______________ 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE MIDDLE DISTRICT OF PENNSYLVANIA 

(D.C. No. 1-12-cv-01247) 

District Judge: Hon. John E. Jones, III 

______________ 

Submitted Under Third Circuit LAR 34.1(a) 

April 16, 2015 

______________ 

Before: AMBRO, VANASKIE, and SHWARTZ, Circuit Judges. 

(Filed: April 21, 2015) 
2 

______________ 

OPINION

______________ 

SHWARTZ, Circuit Judge. 

 Anthony Lang, Sr. and Ahkeem Brown sued the Pennsylvania Higher Education 

Assistance Agency (“PHEAA”) and several of its employees, alleging that they failed to 

pay them for time worked. The District Court dismissed the action pursuant to Fed. R. 

Civ. P. 12(b)(6), holding that PHEAA and one of the individual defendants in his official 

capacity were immune from suit under the Eleventh Amendment, and that all individual 

defendants were entitled to qualified immunity. Because we find these issues more 

properly resolved after further factual development, we will vacate and remand for 

further proceedings. 

I 

PHEAA is a servicer of student loans organized under Pennsylvania law and 

headquartered in Harrisburg. Lang and Brown worked at its customer service call centers 

and allege that PHEAA unlawfully failed to compensate its call center employees for the 

time spent before their shifts “log[ging] into various computer applications to be ready to 

begin handling calls at the beginning of their paid shift,” in violation of the Fair Labor 

 

 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 

does not constitute binding precedent. 
3 

Standards Act (“FLSA”), 29 U.S.C. § 201 et seq. App. 50.1 Their complaint named the 

following defendants: PHEAA; James L. Preston, PHEAA’s President and CEO, in his 

official and individual capacities; Stephanie Foltz, PHEAA’s Vice President of Loan 

Operations, in her individual capacity; Todd Mosko, PHEAA’s Vice President of Loan 

Assets Management, in his individual capacity; and Matthew Sessa, PHEAA’s Vice 

President of FedLoan Servicing, in his individual capacity (collectively, “Defendants”). 

The District Court dismissed the pertinent aspects of the complaint pursuant to 

Fed. R. Civ. P. 12(b)(6).2

 First, applying the three factors set forth in Fitchik v. New 

Jersey Transit Rail Operations, Inc., 873 F.2d 655 (3d Cir. 1989), the District Court 

concluded that PHEAA and Preston in his official capacity were immune from suit under 

the Eleventh Amendment, reasoning that, while “a judgment against PHEAA is legally 

distinguishable from a judgment against the Commonwealth,” App. 14, Pennsylvania law 

considers PHEAA an arm of the state. 

Second, the District Court held that the claims against the individual Defendants in 

their individual capacities were barred by qualified immunity, holding that they were 

government officials and that, “[i]n light of the considerable dispute surrounding the 

applicability of the FLSA to preparatory activities and the lack of any express statute or 

precedential ruling on the particular issue . . . , we cannot conclude that all reasonable 

 1

 The original complaint included state law claims under Pennsylvania’s Wage 

Payment and Collection Law and its Minimum Wage Act. Those claims were dismissed 

in a separate order that was not appealed. 

2

 Plaintiffs dismissed the remainder of the complaint, which embodied a request 

for prospective declaratory relief against Preston in his official capacity. 
4 

officials should have understood PHEAA’s policy to be in violation of the FLSA.” App. 

30. Plaintiffs appeal.3

II

A 

 We first address whether PHEAA and Preston in his official capacity are entitled 

to Eleventh Amendment immunity. The Eleventh Amendment “immunize[s] an 

unconsenting state from suits brought in federal courts by her own citizens as well as by 

citizens of another state.” Fitchik, 873 F.2d at 658 (internal quotation marks omitted). A 

suit brought against an entity that is in essence “an arm of the state” is similarly barred by 

the Eleventh Amendment. Id. To determine whether such an entity is entitled to 

Eleventh Amendment immunity, we consider: “(1) [w]hether the money that would pay 

the judgment would come from the state,” which entails consideration of “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”;4

 “(2) [t]he status of the agency under state law,” including “how state 

 3

 The District Court had jurisdiction under 28 U.S.C. § 1331. We have jurisdiction 

under 28 U.S.C. § 1291. We review the District Court’s dismissal of the complaint de 

novo and “accept all factual allegations in the complaint as true, construe the complaint 

in the light favorable to the plaintiff, and ultimately determine whether plaintiff may be 

entitled to relief under any reasonable reading of the complaint.” Mayer v. Belichick, 

605 F.3d 223, 229 (3d Cir. 2010). We may also consider “any matters incorporated by 

reference or integral to the claim, items subject to judicial notice, [and] matters of public 

record.” Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir. 2006). 

4

 The focus of this first factor is “the entity’s potential legal liability, rather than its 

ability or inability to require a third party to reimburse it, or to discharge the liability in 
5 

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) [w]hat degree of autonomy the agency has.” Id. at 659. Applying these factors 

requires “a fact-intensive review that calls for individualized determinations.” Bowers v. 

NCAA, 475 F.3d 524, 546 (3d Cir. 2007). We treat Eleventh Amendment immunity as 

an affirmative defense, and “the party asserting [it] bears the burden of proving 

entitlement to it.” Christy v. Pa. Turnpike Comm’n, 54 F.3d 1140, 1144 (3d Cir. 1995). 

 Presented with little beyond the allegations in the complaint (which we assume to 

be true at this stage) and several Pennsylvania statutes, we cannot conclude that the 

Fitchik factors necessarily cloak PHEAA with Eleventh Amendment immunity. As to 

the first factor, the complaint asserts that PHEAA would be responsible for paying a 

judgment against it and that this burden would not fall directly on the state. The 

complaint’s allegation that Pennsylvania does not expend tax dollars “to support 

PHEAA’s lending, servicing, and other proprietary activities,” App. 55-56, is consistent 

with the statutory scheme governing PHEAA, pursuant to which “no obligation of 

[PHEAA] shall be a debt of [Pennsylvania] and [PHEAA] shall have no power to pledge 

the credit or taxing power of [Pennsylvania] nor to make its debts payable out of any 

moneys except those of [PHEAA].” 24 Pa. Stat. Ann. § 5104(3). Further, PHEAA’s 

funds are kept in a segregated account under the PHEAA board’s control, id. § 5105.10, 

 

the first instance.” Benn v. First Judicial Dist. of Pa., 426 F.3d 233, 239-40 (3d Cir. 

2005) (internal quotation marks omitted). 
6 

and used at its discretion to carry out its corporate purposes, id. § 5104(3); see Blake v. 

Kline, 612 F.2d 718, 723 (3d Cir. 1979) (noting in Eleventh Amendment context that 

Pennsylvania’s Public School Employees’ Retirement Board fund was “set apart in the 

state treasury from general state funds” and “administered by the State Treasurer at the 

direction of the Board” (footnote omitted)).5

 Thus, viewing the allegations in the 

complaint as true and considering them in light of the statutory scheme governing 

PHEAA, we conclude that the first Fitchik factor weighs against Eleventh Amendment 

immunity, as it appears that PHEAA would be obligated to pay any judgment against it 

from its segregated funds. 

 As to the second factor, PHEAA has allegedly stated “that it is not considered part 

of the primary government of Pennsylvania,” App. 61 (internal quotation marks 

omitted),6

 but Pennsylvania law appears to treat it as an arm of the state. First, courts 

 5

 Citing a Pennsylvania statute providing that the State Treasurer must generally 

approve payment of funds from the State Treasury, the District Court reasoned that 

“although the Commonwealth has disclaimed legal liability for PHEAA’s debts, payment 

of those debts will necessarily be taken from the State Treasury and require the approval 

of the State Treasurer.” App. 13 (citing 72 Pa. Stat. Ann. § 307). As this Court has made 

clear, however, it is the legal obligation to satisfy the agency’s debts that carries the most 

weight with respect to this first prong of the Eleventh Amendment analysis: “if a State is 

not under a legal obligation to satisfy a judgment, then any increase in expenditures in the 

face of an adverse judgment is considered a voluntary or discretionary subsidy not 

entitled to Eleventh Amendment protections.” Bowers, 475 F.3d at 547 (emphasis in 

original). The present record provides no indication that Pennsylvania is legally 

obligated to satisfy a judgment against PHEAA and, for this further reason, we cannot 

hold that application of the first Fitchik factor favors Eleventh Amendment immunity. 

6

 Although the complaint alleges that “PHEAA is not an arm of the 

Commonwealth of Pennsylvania,” App. 55, this is a legal conclusion and is not entitled to 

the assumption of truth. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 
7 

have described PHEAA as “undeniably an agency of the Commonwealth.” PHEAA v. 

Barksdale, 449 A.2d 688, 689-90 (Pa. Super. Ct. 1982). Second, PHEAA’s enabling 

legislation describes it as “a public corporation and government instrumentality,” 24 Pa. 

Stat. Ann. § 5101, with the public purpose of “improv[ing] the higher educational 

opportunities of persons who are residents of [Pennsylvania] . . . by assisting them in 

meeting their expenses of higher education,” id. § 5102, and thereby performing “an 

essential governmental function,” id. § 5105.6. Thus, on the limited record before us, the 

second Fitchik factor weighs in favor of Eleventh Amendment immunity. 

 The third Fitchik factor—PHEAA’s autonomy—presents a close question that is 

difficult to resolve without the benefit of additional facts. Several allegations in the 

complaint are supported by statutory provisions that govern PHEAA and are suggestive 

of its autonomy. First, PHEAA allegedly uses no tax dollars to support its salaries or 

activities, and it is controlled by a relatively autonomous board of directors that has 

unfettered control over PHEAA funds kept in a segregated account within the state’s 

Treasury. Id. §§ 5014(3), 5105.10. Second, PHEAA may independently enter into 

contracts, id. § 5104(1.1)(iii), (4); Christy, 54 F.3d at 1149 (ability to enter contracts in its 

own name demonstrates Pennsylvania Turnpike Commission’s autonomy), sue and be 

sued in its own name, purchase and sell property, borrow money, earn profits from 

investments, and provide substantial bonuses to its executives. Third, PHEAA describes 

itself as more akin to a corporation than a state agency and states that it competes with 

loan servicing competitors nationwide. App. 59. These factual allegations demonstrate a 
8 

high degree of autonomy. Other statutory provisions, however, reveal limits on 

PHEAA’s autonomy. PHEAA is subject to state audits and is required to report annually 

to the Governor and the Legislature. 24 Pa. Stat. Ann. § 5108. Further, the composition 

of PHEAA’s board is determined by state officials: of its twenty members, one is the 

state Secretary of Education, three are appointed by the Governor, eight are appointed by 

the President pro tempore of the state Senate, and eight are appointed by the Speaker of 

the state House of Representatives. 71 Pa. Stat. Ann. § 111.2. State control of the 

composition of the board suggests PHEAA lacks autonomy and thus may be entitled to 

Eleventh Amendment immunity. Christy, 54 F.3d at 1149. Viewing the allegations in 

the complaint in the light most favorable to Plaintiffs, however, we cannot definitively 

conclude that the third Fitchik factor weighs in favor of Eleventh Amendment immunity. 

 Because the first and third factors on this record do not weigh in favor of 

immunity, we are unable to conclude at this stage that PHEAA has established it is 

entitled to Eleventh Amendment immunity. Accordingly, we will vacate the District 

Court’s judgment and remand for further development of the factual record. Cf. U.S. ex 

rel. Oberg v. PHEAA, 745 F.3d 131, 140-41 (4th Cir. 2014) (vacating and remanding 

with respect to status of PHEAA for similar reasons); Blake, 612 F.2d at 726 (vacating 

and remanding on Eleventh Amendment immunity question where, “in a close case . . . , 

evidence beyond the mere statutory language is required”). 
9 

B 

 We next address whether the individual Defendants are entitled to qualified 

immunity. “The doctrine of qualified immunity protects government officials from 

liability for civil damages insofar as their conduct does not violate clearly established 

statutory or constitutional rights of which a reasonable person would have known.” 

Messerschmidt v. Millender, 132 S. Ct. 1235, 1244 (2012) (internal quotation marks 

omitted). The qualified immunity doctrine enables government officials “to preserve 

their ability to serve the public good or to ensure that talented candidates were not 

deterred by the threat of damages suits from entering public service.” Wyatt v. Cole, 504 

U.S. 158, 167-68 (1992). 

 In light of the uncertainty of PHEAA’s status as a governmental entity under our 

Eleventh Amendment analysis, we are unable to conclude that the individual defendants 

are government employees.7

 We will therefore vacate the District Court’s dismissal of 

Plaintiffs’ claims against the individual Defendants in their individual capacities to 

 7

 Qualified immunity also may be available to private individuals under certain 

circumstances where they are in effect acting as government officials. See Filarsky v. 

Delia, 132 S. Ct. 1657, 1667-68 (2012) (extending qualified immunity under § 1983 to 

private investigator who “was retained by [a] [c]ity to assist in conducting an official 

investigation into potential wrongdoing”); see also Richardson v. McKnight, 521 U.S. 

399, 413 (1997) (holding qualified immunity under § 1983 is unavailable where “a 

private firm, systematically organized to assume a major lengthy administrative task 

(managing an institution) with limited direct supervision by the government, undertakes 

that task for profit and potentially in competition with other firms”); Williams v. 

O’Leary, 55 F.3d 320, 323 (7th Cir. 1995) (permitting private defendant to raise qualified 

immunity defense where he, “through his employer . . . , was under a government 

contract to provide [medical] services to inmates which the State was obligated to 

provide under the Constitution”). 
10 

permit development of a factual record with respect to the status of PHEAA to resolve 

both its status as an arm of the state and whether its employees are government officials.8

 

Cf. Grant v. City of Pittsburgh, 98 F.3d 116, 122-23 (3d Cir. 1996) (remanding to district 

court for reevaluation of qualified immunity defense). 

III

 For the foregoing reasons, we will vacate the judgment of the District Court and 

remand for further proceedings. 

 8

 We express no opinion as to whether the District Court correctly concluded 

entitlement to compensation for pre-shift computer login time was not clearly established 

and that, as a result, the individual Defendants (if found to be government employees) 

would be entitled to qualified immunity.