Opinion ID: 77879
Heading Depth: 2
Heading Rank: 1

Heading: Shands

Text: The test that governs whether Eleventh Amendment immunity may extend to defendants other than the state is discussed in Shands. The factors to be considered are as follows: (1) how state law defines the entity, (2) what degree of control the State maintains over the entity, and (3) from where the entity derives its funds and who is responsible for judgments against the entity. Shands, 208 F.3d at 1311. In Shands, the plaintiff hospital sued third-party claims administrators for the state employees' health plan for non-payment under the network agreement. The Florida statute governing the state employees health plan authorized the Florida Department of Management Services (DMS) to employ a professional association to process claims. Fla. Stat. Ann. § 110.123(3)(d). The contract between the state agency and the administrator had a clause allowing for termination by the DMS for convenience, for inspection and audit rights by DMS, and for state approval of subcontracts and printed material. Shands, 208 F.3d at 1311 n. 2. However, the DMS retained final decision-making authority concerning the existence of coverage or benefits under the health plan. Id. at 1310; Fla. Stat. Ann. § 110.123(5)(c). The Court then considered the test it had previously set out. In so doing, it stated as follows: 1) the pertinent inquiry is the company's function or role in a particular context; 2) the question is whether and to what extent these corporations are contractually acting as representatives of the State; 3) the companies are protected when they are clearly acting as agents of the state; and 4) the dispositive question for Eleventh Amendment purposes is whether a judgment against [the contractors] would implicate the state treasury or interfere with the administration of the state group insurance program. . . . 208 F.3d at 1311. The Court did note that it found no case directly on point that has accorded Eleventh Amendment immunity to a private corporation such as [these contractors]. . . . Id. In looking at Florida law and the implementing contracts, the Court in Shands concluded that the contractors were simply administrators acting at the behest of the State with reference to the health insurance program. Although the contractors made initial benefits decisions, the retention of final decision-making authority as to benefits determinations by DMS meant that the contractors were agents of DMS. Id. at 1312. In addition, the Court concluded that a judgment against the contractors with regard to disputes over benefits would affect the state treasury, as the state insurance fund would be obliged to increase payments on the number of covered services. Id.