Opinion ID: 2641189
Heading Depth: 3
Heading Rank: 2

Heading: Sources of Funding

Text: According to King, “[f]rom 2005 until 2009, state funding and federal funding have contributed an approximately equal percentage of the revenue collected by UTH[S]CH” and “[s]tate funding has only contributed between 23% and 26.5% of the gross revenue for UTHSCH from 2005 to 2009.” Despite King’s attempts to downplay state funding’s importance, the magnitudes are substantial. The district court noted that in 2009, UTHSCH took in more than $26 million from student tuition and fees, received about $170 million in direct state appropriations, and received over $25 million from other state agencies. 10 Case: 12-20795 Document: 00512429000 Page: 11 Date Filed: 11/04/2013 No. 12-20795 King asserts that despite the significant amounts of state funding, UTHSCH would be unable to reach into segregated state funds in order to pay a judgment here because the Center’s federal and state funding are “strictly and carefully segregated,” with state funding only available to support state-funded missions. We disagree. “[T]he most significant factor in assessing an entity’s status is whether a judgment against it will be paid with state funds.” Richardson, 118 F.3d at 455 (quoting McDonald v. Bd. of Miss. Levee Comm’rs, 832 F.2d 901, 907 (5th Cir. 1987)). But this does not mean we can find sovereign immunity or an arm of the state only “where payment would be directly out of the state treasury.” United Carolina Bank v. Bd. of Regents of Stephen F. Austin State Univ., 665 F.2d 553, 560 (5th Cir. Unit A 1982). “The crucial question . . . is whether use of . . . unappropriated funds to pay a damage award . . . would interfere with the fiscal autonomy and political sovereignty of Texas.” Id. at 560–61. The district court in United Carolina found that the Eleventh Amendment did not bar suit against Stephen F. Austin State University (“SFA”) in part because “SFA could itself pay such an award because it had substantial unappropriated, separately held, locally generated funds” and, as a result, “payment of an award c[ould] be made without resort to general revenues of the state or legislative appropriation.” Id. at 559–60. We reversed, holding that “[t]he key is not the ability to identify segregated funds, but the larger concept of jurisdiction over state sovereignty which the eleventh amendment proscribes.” Id. at 560. We found that the SFA’s local funds were “either held in the Treasury or restricted as to use,” were “subject to audit and budget planning,” and as a result “any award from those funds would directly interfere with the state’s fiscal autonomy.” Id. at 561. 11 Case: 12-20795 Document: 00512429000 Page: 12 Date Filed: 11/04/2013 No. 12-20795 Similarly, in Jagnandan v. Giles, we held that tuition refunds would implicate the state treasury. 538 F.2d 1166 (5th Cir. 1976). The tuition “fees were factored into the preparation of the annual budget for [Mississippi State University] and were relied upon by the state legislature in determining the maximum amount of expenditures allowed.” Id. at 1176. The refunds would have “add[ed] an expenditure not figured in the budget.” Id. We explained: The Eleventh Amendment was fashioned to protect against federal judgments requiring payment of money that would interfere with the state’s fiscal autonomy and thus its political sovereignty. Retroactive monetary relief . . . would have just that effect. Mississippi has devised a complex statutory design which governs the state’s schools of higher education and their control by the Board of Trustees. The Board is required to submit budgetary proposals for legislative acceptance. To require refund payments from the Board for overpayment of tuition fees would be the kind of tampering the Eleventh Amendment sought to avoid. Id. (footnote omitted). We hold that Texas provides substantial funding to the Center and that allowing for civil recovery would interfere with the state’s fiscal autonomy, even if payment is not made directly from the state treasury. Clark’s second factor supports finding UTHSCH to be an arm of the state. C. Degree of Local Autonomy and Right to Hold and Use Property A board of regents, appointed by the governor with the advice and consent of the senate, governs the University of Texas System, and “govern[s], operate[s], support[s], and maintain[s] each of the component institutions.” Tex. Educ. Code §§ 65.11, 65.31. All UTHSCH contracts must be in accordance with board rules or specially approved by the board of regents. Id. § 65.35. As a state agency, the Center is required to follow 12 Case: 12-20795 Document: 00512429000 Page: 13 Date Filed: 11/04/2013 No. 12-20795 specific accounting and financial reporting requirements. Tex. Gov’t Code § 2101.011(b). With respect to UTHSCH’s right to hold and use property, “[t]he board of regents of the University of Texas System has the sole and exclusive management and control of the lands set aside and appropriated to, or acquired by, The University of Texas System.” Tex. Educ. Code § 65.39. “The board has the power of eminent domain to acquire for the use of the university system any land that may be necessary and proper for carrying out its purposes. . . . The taking of the property is declared to be for the use of the state.” Id. § 65.33 We find that Clark’s third and sixth factors support finding UTHSCH to be an arm of the state. D. Local vs. Statewide Concerns The University of Texas System, of which UTHSCH is a part, has locations throughout the state of Texas. We do not accept King’s contention that the Center is primarily concerned with local issues because it “does not provide statewide services or have a statewide presence” since “[a]ll of its facilities are in Houston.” Education and research are statewide concerns. See e.g., Tex. Educ. Code § 61.002 (Texas Higher Education Board created to “benefit the citizens of the state in terms of the realization of the benefits of an educated populace”); Richardson, 118 F.3d at 455–56 & n.15 (“That Southern is only one of many state-funded schools does not deprive it of Eleventh Amendment immunity.”). Clark’s fourth factor supports finding UTHSCH to be an arm of the state. 13 Case: 12-20795 Document: 00512429000 Page: 14 Date Filed: 11/04/2013 No. 12-20795 E. Authority to Sue and Be Sued in its Own Name Texas law provides for the University of Texas System’s ability to sue on behalf of a component institution “to recover a delinquent loan, account, or debt owed.” Tex. Educ. Code § 65.42. Texas statutory law does not appear to authorize the Center to bring suit or allow plaintiffs to sue UTHSCH directly. Nonetheless, King identifies several cases in which UTHSCH either sued or was sued, and in none of them did it object to proceeding in its own name or insist that the University of Texas System be substituted in its stead. See Duncan v. Univ. of Tex. Health Sci. Ctr. at Hous., 469 F. App’x 364 (5th Cir. 2012); Watson v. Univ. of Tex. Health Sci. Ctr. at Hous., No. H-090881, 2009 WL 1476469 (S.D. Tex. May 27, 2009); Butcher v. Univ. of Tex. Health Sci. Ctr. at Hous., No. H-08-cv-0244, 2008 WL 4935723 (S.D. Tex. Nov. 18, 2008); Cheatham, 357 S.W.3d 747. The number of cases in which the Center is a named party leads us to conclude that, for arm-of-the-state purposes, it has the authority to sue and be sued in its own name. 3 Clark’s fifth factor weighs against finding UTHSCH to be an arm of the state. But because five out of the six Clark factors weigh in favor of finding the Center to be one, we conclude that UTHSCH is an arm of the state and that Stevens applies. UTHSCH is not a “person” under the FCA, and is not subject to qui tam liability. We affirm the district court’s dismissal of King’s qui tam claim under Rule 12(b)(6) for failure to state a claim under the FCA. 3We note that these cases focusing on an entity’s ability to sue or be sued are usually within the context of determining whether a state has waived immunity. As noted above, the arm-of-the-state test was developed for sovereign immunity purposes. A recent Fourth Circuit decision case applied a four-factor test that excludes “the authority to sue and be sued in its own name” from the analysis. U.S. ex rel. Oberg v. Ky. Higher Educ. Student Loan Corp., 681 F.3d 575, 580 (4th Cir. 2012); see also S.C. Dep’t of Disabilities & Special Needs v. Hoover Universal, Inc., 535 F.3d 300, 303 (4th Cir. 2008). Because our result would be the same under either our current test or the Fourth Circuit’s, there is no need to change our test. 14 Case: 12-20795 Document: 00512429000 Page: 15 Date Filed: 11/04/2013 No. 12-20795