Opinion ID: 159803
Heading Depth: 3
Heading Rank: 2

Heading: College Savings Bank

Text: 22 Because College Savings Bank overruled Parden's constructive waiver doctrine, we begin with a brief discussion of Parden. In Parden, the employees of a railroad owned and operated by the State of Alabama sued the railroad under the Federal Employer's Liability Act (FELA). 377 U.S. at 184-85. Alabama asserted a sovereign immunity defense. Id. The Supreme Court held that Alabama had waived its immunity because FELA conditioned a state's right to operate a railroad in interstate commerce upon amenability to suit in federal court. Id. at 192. Since Alabama chose to operate a railroad in interstate commerce, it impliedly accepted the conditions imposed by the act, including the condition that it consent to suit. Id. 23 In College Savings Bank, a New Jersey bank sued the Florida Prepaid Postsecondary Education Expense Board (Florida Prepaid), an arm of the State of Florida. 119 S. Ct. at 2223. Florida Prepaid administers a program designed to ensure that individuals have sufficient funds to finance a college education. Id. The bank claimed that Florida Prepaid misrepresented its product in its marketing brochures and annual reports in violation of the Lanham Act. Id. As amended by the Trademark Remedy Clarification Act (TRCA), the Lanham Act provides that states are not immune from suit in federal court for violations of the Act. Id. Florida Prepaid claimed, however, that it was immune from suit because the TRCA was enacted pursuant to Congress's Article I power and Congress may not abrogate state sovereign immunity when it legislates under Article I. Id. at 2224. The bank contended that, under Parden, Florida Prepaid had waived its immunity when it engaged in the interstate marketing and administration of its program after the TRCA made it clear that such activity would subject Florida Prepaid to suit. Id. The Court overruled Parden and concluded that Florida Prepaid had not waived its immunity. See id. at 2226-28. 24 The Court reasoned that it could not square Parden with [its] cases requiring that a State's express waiver of sovereign immunity be unequivocal. Id. at 2228 (citing Great Northern Life Ins. Co. v. Read, 322 U.S. 47 (1944)). The whole point of requiring a 'clear declaration' by the State of its waiver is to be certain that the State in fact consents to suit. Id. Where Congress clearly expresses its intention that if a state takes certain action it will waive its immunity, the most that can be said with certainty is that the State has been put on notice that Congress intends to subject it to suits brought by individuals. Id. However, this is very far from concluding that the State made an 'altogether voluntary' decision to waive its immunity. Id. 25 Furthermore, if the Court recognized a congressional power to exact constructive waivers of sovereign immunity through the exercise of Article I powers, it would thereby permit Congress to circumvent the antiabrogation holding of Seminole Tribe. Id. at 2229 (emphasis added). Forced waiver and abrogation are not even different sides of the same coin they are the same side of the same coin. Id. (emphasis added). 4 26 Thus, for a constructive waiver of sovereign immunity to be valid under College Savings Bank, it must be altogether voluntary and not forced from a state by Congress. A constructive waiver is voluntary only where Congress threatens a state with the denial of a gift or gratuity if the state refuses to consent to suit in federal court. See id. at 2231. Where Congress threatens a state with a sanction if it refuses to consent to suit, then the waiver is no longer freely given. See id. In addition, it may be that the difference between a gift and a sanction disappears when the gift Congress threatens to withhold is large enough. See id. 27 To illustrate its holding in College Savings Bank, the Court distinguished the legitimate conditions Congress placed on states in Petty v. Tennessee-Missouri Bridge Comm'n, 359 U.S. 275 (1959), and South Dakota v. Dole, 483 U.S. 203 (1987), from the forced waivers in Parden and the case at bar. In Petty, the Court held that a bistate commission created pursuant to an interstate compact had consented to suit by reason of a suability provision attached to the congressional approval of the compact. College Sav. Bank, 119 S. Ct. at 2231 (citing Petty). In Dole, the Court held that Congress may, in the exercise of its spending power, condition its grant of funds to the States upon their taking certain actions that Congress could not require them to take, and that acceptance of the funds entails an agreement to the actions. Id. (citing Dole). 28 The College Savings Bank court explained that the bistate commission's waiver was valid because, under the Compact Clause of the U.S. Constitution, states may not form an interstate compact without the consent of Congress. Id. The granting of consent therefore is a gratuity. Id. Similarly, Congress has no obligation to disburse funds to the States; such funds are gifts. Id. 29 In contrast, in both Parden and the case before the Court, Congress did not threaten the denial of a gift or gratuity if the states refused to waive their sovereign immunity. See id. Instead, in both Parden and College Savings Bank, Congress threatened a sanction: exclusion of the State from otherwise permissible activity. Id. Specifically, the federal statute in Parden required Alabama to waive its immunity or give up its ability to own and operate a railroad in interstate commerce. In College Savings Bank, the TRCA required Florida to waive its immunity or give up its ability to engage in the business of advertising and selling a for-profit educational investment vehicle. The voluntariness of a waiver is destroyed when what is attached to the refusal to waive is the exclusion of the State from otherwise lawful activity. Id.; see also Innes, 184 F.3d at 1284 (holding that a state university knowingly and voluntarily waived the state's immunity by agreeing, as a prerequisite to its participation in the Perkins Loan program, to undertake certain enumerated actions in federal bankruptcy court in the event of a claim for discharge filed by the student-borrower).