Court Opinion

ID: 3051066
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:33:55.053516+00
Date Added: 2024-06-11T12:46:23.242323
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

ELENA M. DEL CAMPO, on behalf           
of herself and all others similarly
situated; LOIS ARTZ; MIRIAM
CAMPOS; LISA JOHNSTON; ASHORINA
MEDINA,
                Plaintiffs-Appellees,
                 v.
GEORGE KENNEDY, District
Attorney; DON R. MEALING; BRUCE              No. 07-15048
D. RAYE; ACCS ADMINISTRATION,
INC.; R. D. DAVIS; GREEN, Mister;             D.C. No.
                                            CV-01-21151-JW
KRAMER, Mister; LOPEZ, Mrs.;
FULFILLMENT UNLIMITED, INC.;                   OPINION
FUNDAMENTAL PERFORMANCE
STRATEGIES; LYNN R. HASNEY;
FUNDAMENTALS, INC.,
                         Defendants,
                and
AMERICAN CORRECTIVE COUNSELING
SERVICES, INC.,
               Defendant-Appellant.
                                        
        Appeal from the United States District Court
          for the Northern District of California
          James Ware, District Judge, Presiding

                 Argued and Submitted
      September 27, 2007—San Francisco, California

                   Filed February 6, 2008

                             1747
1748     DEL CAMPO v. AMERICAN CORRECTIVE COUNSELING
       Before: John R. Gibson,* A. Wallace Tashima, and
                Marsha S. Berzon, Circuit Judges.

                    Opinion by Judge Berzon

   *The Honorable John R. Gibson, Senior United States Circuit Judge for
the Eighth Circuit, sitting by designation.
1750    DEL CAMPO v. AMERICAN CORRECTIVE COUNSELING

                         COUNSEL

Charles D. Jenkins (argued), of Jenkins Goodman Neuman &
Hamilton LLP, San Francisco, California, Kimbley A. Kear-
ney and Edward M. Kay, of Clausen Miller P.C., and David
L. Hartsell, of McGuire Woods LLP, Chicago, Illinois, for the
defendant-appellant.

Deepak Gupta (argued) and Brian Wolfman, of the Public Cit-
izen Litigation Group, Washington, DC, Paul Arons, of the
Law Office of Paul Arons, Friday Harbor, Washington, and
O. Randolph Bragg, of Horwitz, Horwitz & Associates, Chi-
cago, Illinois, for the plaintiffs-appellees.

John R. Poyner, Colusa, California, for amicus curiae Califor-
nia District Attorneys Association.

Robert J. Hobbs, Boston, Massachussetts, for amici curiae
National Consumer Law Center, Inc., and National Associa-
tion of Consumer Advocates.

                         OPINION

BERZON, Circuit Judge:

  Our question is whether a private company contracting with
a district attorney for services related to a diversion program
          DEL CAMPO v. AMERICAN CORRECTIVE COUNSELING                   1751
is entitled to state sovereign immunity. We decide that it is
not.

                                      I.

    American Corrective Counseling Services (“ACCS”), a pri-
vate corporation, contracted with the District Attorney for
Santa Clara County, California, (the “DA”) to run a bad check
diversion program. Its conduct of that program generated this
litigation.

   California criminalizes the making, drawing, uttering, or
delivery of any check, draft, or money order “willfully, with
intent to defraud” and with knowledge that insufficient funds
are available. CAL. PENAL CODE § 476a(a). California has
authorized a DA to create a bad check diversion program in
which the DA may agree not to prosecute for bad check
offenses if the potential defendant provides restitution to the
victim of the bad check, completes a course, and pays applica-
ble collection fees. CAL. PENAL CODE §§ 1001.60-67. Such a
program “may be conducted by the [DA] or by a private
entity under contract.” CAL. PENAL CODE § 1001.60. ACCS
has built its business around such contracts, based upon the
collection of program fees from participants in the diversion
program, id. at § 1001.65, which ACCS shares with the DA.

   This case grows out of ACCS’s contract with the Santa
Clara County DA. Under that contract, ACCS is entitled to
collect a $100 class fee, 60% of all administrative fees, and
various additional fees and late charges.1 In exchange for
these fees, ACCS runs nearly every aspect of the bad check
program. It provides “daily management of all clerical and
accounting functions,” including sending “demand notices to
suspected bad check writers, collection and disbursement of
victim restitution and administrative revenue and all financial
  1
    Whether these fees are authorized by statute is in dispute in this litiga-
tion and is a question that we do not decide.
1752    DEL CAMPO v. AMERICAN CORRECTIVE COUNSELING
reporting.” It provides staff to contact county businesses
about the program, runs financial education courses for bad
check writers, and maintains all program files. The DA pro-
vides “intake criteria” — a two-page checklist — designating
the checks that are appropriate for the program. The contract
imposes no obligation upon the DA initially to decide which
overdrawn checks should be referred to the program because
they appear to indicate that a crime has been committed,
requiring only that the DA “review all cases transferred by
ACCS [to the DA] for failure to comply” with its program.

  The contract makes clear that ACCS is an “INDEPEN-
DENT CONTRACTOR” (emphasis in original) and that
“[n]othing within this agreement shall be construed as creat-
ing a relationship of employer or employee, or principal and
agent, between the County of Santa Clara and ACCS” or its
employees or agents. ACCS is required to indemnify the
county, and must carry its own insurance.

   ACCS operated the program aggressively. When Elena del
Campo bounced a check for $95.02, ACCS sent her a letter
on the Santa Clara County DA’s stationary, purporting to be
from the DA’s office, warning that his office had received “an
INCIDENT REPORT alleging that you have violated Penal
Code 476(a) of the California State Statute: Passing a
Worthless Check” (emphasis in original). It claimed that
“YOU MAY AVOID A COURT APPEARANCE if you agree
to enroll [in the bad check program]” (emphasis in original)
and demanded, after taking into account ACCS’s various fees,
$265.02 in payment.

   When del Campo sent payment only for the amount of her
check, she received a second letter entitled “Notice of Failure
to Comply” and warning that “[y]our failure to respond may
now result in the filing of this incident report by the District
Attorney in MUNICIPAL COURT!” (emphasis in original).
          DEL CAMPO v. AMERICAN CORRECTIVE COUNSELING                   1753
Instead of paying, del Campo filed this action against the DA,
ACCS, and several related companies and officials.2

   She alleged equal protection and due process violations
under 42 U.S.C. § 1983, various violations of the California
Constitution, violations of the California Unfair Business
Practices Act (“CUBPA”), CAL. BUS. & PROF. CODE §§ 17200
et seq., and violations of the federal Fair Debt Collection
Practices Act (“FDCPA”), 15 U.S.C. §§ 1692 et seq.

   The district court dismissed the causes of action under
§ 1983 and the California Constitution but allowed the FDCPA3
and CUBPA causes of action to go forward.

   The litigation was then stayed for several years because of
an injunction issued by a district court hearing a similar case
in the Southern District of Iowa. See generally Liles v. Ameri-
can Corrective Counseling Services, Civ. No. 4-00-CV-10497
(S.D. Iowa). During that time, new plaintiffs filed suit against
ACCS and the Santa Clara County DA in the Northern Dis-
trict of California. After the stay was lifted in 2005, the sec-
ond Santa Clara County case was consolidated with del
Campo’s in 2006 (we collectively refer to the plaintiffs as
“del Campo”). The consolidated complaint realleges all the
causes of action in the original complaint and adds allegations
of conversion, negligent misrepresentation, and fraudulent
misrepresentation.

  The defendants then moved to dismiss for lack of subject
matter jurisdiction and for failure to state a claim. Both ACCS
and the DA claimed state sovereign immunity. The district
court declined to extend such immunity.
  2
     Del Campo filed her suit as a class action. A class has not yet been cer-
tified.
   3
     The FDCPA creates civil liability for debt collectors who fail to com-
ply with its provisions and grants federal courts jurisdiction to hear such
cases. See 15 U.S.C. § 1692k.
1754      DEL CAMPO v. AMERICAN CORRECTIVE COUNSELING
   The district court’s decision turned in large part on its char-
acterization of the bad check program. California DAs serve
both state and county functions: They act as state officials,
and so possess Eleventh Amendment immunity, when “acting
in [their] prosecutorial capacity.” Weiner v. San Diego
County, 210 F.3d 1025, 1028 (9th Cir. 2000); see also Pitts
v. County of Kern, 949 P.2d 920 (Cal. 1998). The district
court held that the bad check diversion program was one of
several county-based diversion programs created by the Cali-
fornia legislature, see generally Davis v. Municipal Court for
the S. F. Judicial Dist., 757 P.2d 11 (Cal. 1988) (describing
such programs), and that the Santa Clara County DA’s role in
the program was administrative. It therefore held that the DA
acted in his county capacity while administering the program
and so was not entitled to state sovereign immunity. The court
concluded, however, that its earlier dismissal of the § 1983
and California constitutional causes of action was res judicata
and dismissed them. Because the DA faced only those causes
of action, the court dismissed the DA from the suit.4

   The district court’s characterization of the bad check pro-
gram also controlled its analysis of ACCS’s claim of state
sovereign immunity. ACCS argued that it acted as an arm of
the state when implementing the diversion program. As the
court had “determined that the diversion program in Santa
Clara County is a county program and not a state program,”
it held that “ACCS’s involvement in the diversion program
cannot be a central function of the state government” and
denied immunity.

   ACCS timely appealed the district court’s immunity deci-
sion.5
  4
   The propriety of that ruling is not before us.
  5
   Del Campo also appealed, but a motions panel of this court dismissed
her appeal, noting that the district court’s ruling had not disposed of all of
her causes of action and the district court had not certified her appeal pur-
suant to Fed. R. Civ. Pro. 54(b). See Del Campo v. Kennedy, No. 07-
15048 (9th Cir., June 13, 2007); see also Chacon v. Babcock, 640 F.2d
221, 222 (9th Cir. 1981) (discussing Rule 54(b)).
        DEL CAMPO v. AMERICAN CORRECTIVE COUNSELING         1755
                               II.

   ACCS contends that it is entitled to state sovereign immu-
nity, even though it is a private entity. For the second time in
four years “we decline the invitation to expand state sovereign
immunity dramatically by extending it to corporate actors,”
United States ex rel. Ali v. Daniel, Mann, Johnson, & Men-
denhall (“DMJM”), 355 F.3d 1140, 1147 (9th Cir. 2004), or
to private entities generally.

         1.   Jurisdiction and Standard of Review

    There has been no final judgment in this case. We nonethe-
less have “jurisdiction to review the district court’s denial of
. . . Eleventh Amendment immunity under the collateral order
doctrine.” Schulman v. California (In re Lazar), 237 F.3d 967,
974 (9th Cir. 2001) (citing Puerto Rico Aqueduct & Sewer
Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 147 (1993)).

   Del Campo argues that we should decline to exercise juris-
diction under the collateral order doctrine because Puerto
Rico Aqueduct and Sewer Authority in fact concerns “States
and state entities possessing a claim to share in that immuni-
ty,” 506 U.S. at 147 (emphasis added), and ACCS, as a pri-
vate company, is manifestly not a state or state entity. It is
true that the “ ‘narrow exception’ [of the collateral order doc-
trine] should stay that way and never be allowed to swallow
the general rule that a party is entitled to a single appeal, to
be deferred until final judgment has been entered, in which
claims of district court error at any stage of the litigation may
be ventilated.” Digital Equip. Corp. v. Desktop Direct, Inc.,
511 U.S. 863, 867 (1994) (internal citations omitted). Appeals
from denial of sovereign immunity nonetheless fall within
that narrow exception. Whether the immunity reaches beyond
“states and state entities” is the substantive issue we face,
1756     DEL CAMPO v. AMERICAN CORRECTIVE COUNSELING
which we may not prejudge by denying jurisdiction to decide
it.6

  “The existence of sovereign immunity is a question of law
reviewed de novo.” DMJM, 355 F.3d at 1144. “Under the law
of this circuit, an entity invoking Eleventh Amendment
immunity bears the burden of asserting and proving those
matters necessary to establish its defense.” In re Lazar, 237
F.3d at 974 (internal quotation omitted).

                             2.   Analysis

    ACCS argues for immunity on the ground that the DA
acted in his state capacity in administering the program and
that it, therefore, is an arm of the state entitled to immunity.
As the DA is no longer in this suit, we are reluctant to charac-
terize his role or determine whether he would have been enti-
tled to sovereign immunity had he remained in this case. As
it turns out, we need not address that question.7 Affirming the
district court on a different ground, we hold that even if the
DA acted in a state capacity in administering the program,
ACCS would not be entitled to state sovereign immunity.

   As we discuss below, the analysis provided in DMJM, 355
F.3d at 1146-48, demonstrates why private entities’ claims of
state sovereign immunity must fail. To the extent that DMJM
appeared to leave any analytic distance, as ACCS claims,
between ACCS’s case and that of the private contractor
denied immunity in DMJM, we close that gap today. Extend-
ing state sovereign immunity to private entities is, as we now
make clear, not supported by our law, by relevant Supreme
Court cases, or by the cases of the other circuits to have con-
sidered similar questions.
  6
     As we explain below, however, such appeals are likely to be summa-
rily affirmed if brought by private entities.
   7
     Because we do not inquire into the DA’s role, we deny as irrelevant
the request for judicial notice of materials concerning that question made
by amicus California District Attorneys Association.
        DEL CAMPO v. AMERICAN CORRECTIVE COUNSELING        1757
                 a.   Supreme Court Cases

   [1] State sovereign immunity, rooted deeply in our federal
structure, is strong medicine. See Alden v. Maine, 527 U.S.
715, 712-27 (1999) (recounting the history of state sovereign
immunity and of the Eleventh Amendment). The phrase
“Eleventh Amendment immunity,” often used in lieu of “state
sovereign immunity” in federal cases, see, e.g., Puerto Rico
Aqueduct & Sewer Auth., 506 U.S. at 144, is “something of
a misnomer, for the sovereign immunity of the States neither
derives from, nor is limited by, the terms of the Eleventh
Amendment.” Alden, 527 U.S. at 713. Instead, immunity is
“ ‘a fundamental aspect of the sovereignty which the States
enjoyed before the ratification of the Constitution and which
they retain today[,] except as altered by the plan of the Con-
vention or certain constitutional amendments.’ ” N. Ins. Co. v.
Chatham County, Ga., 547 U.S. 189, 193 (2006) (quoting
Alden, 527 U.S. at 731) (alteration omitted). “The preeminent
purpose of state sovereign immunity is to accord States the
dignity that is consistent with their status as sovereign enti-
ties.” Fed. Mar. Comm’n v. S. C. State Ports Auth., 535 U.S.
743, 760 (2002). In accord with this purpose, state sovereign
immunity is also intended to protect state treasuries from suit.
See Hess v. Port Auth. Trans-Hudson Corp., 513 U.S. 38, 39-
40 (1994).

   [2] Recognizing the sweep and power of the doctrine, the
Supreme Court has been cautious in extending state sovereign
immunity even to many state-created and quasi-governmental
entities. State sovereign immunity, for instance, “does not
extend to counties and similar municipal corporations,” even
though they share some portion of state power. Mt. Healthy
City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 280
(1977). The Court has also declined to grant state sovereign
immunity to some Compact Clause entities even though they
may be “exercising a specially aggregated slice of state
power,” cautioning that it could not “accept such an expansive
reading of the Eleventh Amendment.” Lake Country Estates,
1758    DEL CAMPO v. AMERICAN CORRECTIVE COUNSELING
Inc. v. Tahoe Reg’l Planning Auth., 440 U.S. 391, 400-01
(1979). In the Compact Clause context, the Court has
expressed particular concern regarding extending sovereign
immunity to entities whose “political accountability is dif-
fuse,” because “they lack the tight tie to the people of one
State an instrument of a single State has.” Hess, 513 U.S. at
42; see also id. (“In sum, within any single State in our repre-
sentative democracy, voters may exercise their political will
to direct state policy; bistate entities created by compact, how-
ever, are not subject to the unilateral control of any one of the
States that compose the federal system.”).

   [3] Given this background we should be extremely hesitant
to extend this fundamental and carefully limited immunity to
private parties whose only relationship to the sovereign is by
contract. A contractor like ACCS may perform some func-
tions for the state, but is certainly more removed from state
power, and from democratic control, than a county or a Com-
pact Clause organization. Private entities fit even less readily
than those bodies into the theoretical framework supporting
state sovereign immunity. It would thus be strange to award
private entities sweeping immunity from suit.

   Our reluctance to expand sovereign immunity to private
entities is reinforced by the consideration that the recognition
of state sovereign immunity with regard to an entity results in
restrictions on federal legislative as well as judicial authority
with regard to that entity, including “restrictions on the power
of Congress, acting under certain Article I powers, to create
privately enforced federal causes of action against the [enti-
ty].” Fresenius Med. Care Cardiovascular Res., Inc. v. Puerto
Rico & the Caribbean Cardiovascular Ctr. Corp., 322 F.3d
56, 63 (1st Cir. 2003) (citing Seminole Tribe v. Florida, 517
U.S. 44 (1996)). So limiting Congress’s power to regulate a
private company simply because it has contracted with a state
would radically alter the bounds and nature of federal author-
ity, while, at the same time, calling into question the distinc-
tive nature of states as sovereign entities.
         DEL CAMPO v. AMERICAN CORRECTIVE COUNSELING                1759
  In short, as the First Circuit rightly warned in Fresenius:

      where [a state-structured] entity claims to share a
      state’s sovereignty and the state has not clearly
      demarcated the entity as sharing its sovereignty,
      there is great reason for caution. It would be every
      bit as much an affront to the state’s dignity and fiscal
      interests were a federal court to find erroneously that
      an entity was an arm of the state, when the state did
      not structure the entity to share its sovereignty.
322 F.3d at 63.

                     b.   Ninth Circuit Cases

   In accord with these compelling considerations, our cases
confirm that private entities have no place within the state
sovereign immunity legal framework. The usual issue in our
cases has been whether a governmental entity is an arm of the
state or is better characterized as part of another level of gov-
ernment. Our inquiry has been careful, and we have often
declined to extend immunity even to governmental entities.8

  [4] The factors we apply in the state sovereign immunity
inquiry, drawn from Mitchell v. Los Angeles Community Col-
  8
    See, e.g., Beentjes v. Placer County Air Pollution Control Dist., 397
F.3d 775, 786 (9th Cir. 2005) (Placer County Air Pollution Control Dis-
trict is not immune); Holz v. Nenana City Pub. Sch. Dist., 347 F.3d 1176,
1189 (9th Cir. 2003) (Alaska school district is not immune); Savage v.
Glendale Union High Sch., Dist. No. 205, 343 F.3d 1036, 1040 (9th Cir.
2003) (Arizona school district is not immune); Eason v. Clark County Sch.
Dist., 303 F.3d 1137, 1144 (9th Cir. 2002) (Nevada school district is not
immune); Schulman v. California (In re Lazar), 237 F.3d 967, 981, 983
(9th Cir. 2001) (California State Water Resources Control Board and Cali-
fornia Underground Storage Tank Cleanup Fund are arms of the state);
Alaska Cargo Transp., Inc. v. Alaska R.R. Corp., 5 F.3d 378, 382 (9th Cir.
1993) (immunity for state-owned railroad created by statute); Durning v.
Citibank, N.A., 950 F.2d 1419, 1428 (9th Cir. 1991) (no immunity for the
Wyoming Community Development Authority).
1760     DEL CAMPO v. AMERICAN CORRECTIVE COUNSELING
lege Dist., 861 F.2d 198, 201 (9th Cir. 1988), are thus
designed to discriminate between governmental bodies, not to
determine whether private entities are arms of the state. See
id. (“To determine whether a governmental agency is an arm
of the state, the following factors must be examined . . . .)
(emphasis added) (citing Jackson v. Hayawaka, 682 F.2d
1344, 1350 (9th Cir. 1982)). Under Mitchell, courts look to
five factors: “(1) whether a money judgment would be satis-
fied out of state funds; (2) whether the entity performs central
governmental functions; (3) whether the entity may sue or be
sued; (4) whether the entity has the power to take property in
its own name or only in the name of the state; and (5) the cor-
porate status of the entity.” DMJM, 355 F.3d at 1147 (citing
Mitchell, 861 F.2d at 201)). This test was not meant for, is ill-
adapted to, and loses its utility when performed upon a private
entity. The negative result it generates will always be the
same: Only the second Mitchell factor could ever cut in favor
of granting a private entity sovereign immunity, as DMJM,
our sole case to apply the Mitchell factors to a private entity,
amply demonstrates.9

   In DMJM, a private contractor repairing state university
buildings asserted state sovereign immunity, deriving from its
state contract, against a qui tam action under the False Claims
Act, 31 U.S.C. § 3729 et seq. See DMJM, 355 F.3d at 1144.
DMJM rejected the contractor’s argument that “common law
agency principles” could transmit sovereignty by contract, as
such an “analysis would lead to the surprising result that pri-
vate contractors acting on behalf of the state are immune . . .
while local governments performing local government func-
  9
    Our cases extending “regulatory immunity” to “self-regulatory organi-
zations” acting under the aegis of statutorily-delegated authority, such as
the National Association of Securities Dealers, are not to the contrary.
Those cases are rooted in policy considerations and make clear that “[a]s
a private corporation, [such an entity] does not share in . . . sovereign
immunity.” Sparta Surgical Corp. v. Nat’l Ass’n of Sec. Dealers, Inc., 159
F.3d 1209, 1214 (9th Cir. 1998) (quoting Barbara v. N.Y. Stock Exch., 99
F.3d 49, 59 (2nd Cir. 1996)).
         DEL CAMPO v. AMERICAN CORRECTIVE COUNSELING                1761
tions are not.” Id. at 1146. Instead, DMJM applied Mitchell to
determine whether the contractor was an arm of the state.
Doing so, DMJM “assume[d]” that the contractor was per-
forming a central government function and so fulfilled the
second Mitchell factor. Id. at 1147. But “all other factors
weigh[ed] against granting DMJM sovereign immunity,” id.,
as the state had no legal obligation to pay the contractor’s
debts, and, as a private company, the contractor’s “corporate
status” was clearly private and it could, of course, sue and be
sued and take property in its own name. Id. at 1147-48.10 The
contractor therefore could not claim immunity. Id. at 1148.

    [5] Given DMJM, there is no reason to apply Mitchell
every time a private entity under contract with the state asserts
state sovereign immunity, as immunity will invariably be
denied under that test. In each case, such an entity will fail at
least four of the five Mitchell factors, and the possibility that
it has contracted to perform a central governmental function
will not be sufficient to convey immunity. See DMJM, 355
F.3d at 1148 (citing Durning, 950 F.2d at 1426-28, for the
proposition that “an entity [is] not immune where only the
‘central government functions’ factor weigh[s] in the entity’s
favor.”). Nor would it be relevant to the first Mitchell factor
if such an entity’s contract specified that the state would
indemnify it for its losses. As the Supreme Court held in
Regents of the University of California v. Doe, 519 U.S. 425,
431 (1997), “it 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 the first instance, that is rele-
vant.”
   10
      DMJM also made clear that the federal government contractor
defense, as stated by Boyle v. United Technologies Corp., 487 U.S. 500
(1988), is not of relevance here. “Neither the Supreme Court nor the Ninth
Circuit nor any other court of which we are aware has applied the defense
to state contractors.” DMJM, 355 F.3d at 1147. In any event, “the govern-
ment contractor defense does not confer sovereign immunity on contrac-
tors.” Id. (citing Boyle, 487 U.S. at 505 n. 1).
1762      DEL CAMPO v. AMERICAN CORRECTIVE COUNSELING
   [6] It is, in other words, a category error11, and therefore a
waste of both judicial resources and litigants’ time, to apply
the Mitchell factors to private entities.12 By their nature, such
entities are not arms of the state. See also Durning, 950 F.2d
at 1427 (denying immunity to a state-created public develop-
ment corporation and noting that the corporation was “more
closely tied to the state than an ordinary corporation”).

   ACCS nonetheless attempts to distinguish DMJM by argu-
ing that it is performing a central governmental function
according to contract rather than committing fraud in the
course of performing on its contract, as was the case in
DMJM. But, as we have just explained, ACCS’s performance
on its contract is irrelevant to the sovereign immunity inquiry.13
That question instead turns on ACCS’s nature as a private
entity rather than on some quirk of its contract, its behavior,
or the allegations brought against it. ACCS’s argument cannot
succeed.
  11
      A category error, or “type-trespass,” occurs when we place an entity
in the wrong class or category of things, resulting in a fundamental failure
of analysis. Examples of category errors include inquiring into the gender
of a rock or into which day of the week is reptilian. See GILBERT RYLE,
Categories, in COLLECTED PAPERS, VOLUME II: COLLECTED ESSAYS 1929-
1968, 170-84 (1970).
   12
      Not surprisingly, ACCS would not fare any better if we did apply
Mitchell. It is questionable, first, that its activities — which appear to be
primarily administrative and relating to debt collection rather than to law
enforcement — constitute a central government function. See, e.g., Grad-
isher v. Check Enforcement Unit, Inc., 133 F. Supp. 2d 988, 990 (W.D.
Mich. 2001) (characterizing a company operating a similar bad check
diversion program as a debt collector). But even assuming the contrary,
ACCS is manifestly a private corporation, capable of suing and being sued
and holding property in its own name. And there is no question of the state
somehow being legally responsible for its liabilities: ACCS is an indepen-
dent contractor, is required to carry its own insurance, and must indemnify
the county for any liabilities that it might incur.
   13
      Moreover, ACCS’s attempt to distinguish DMJM assumes a favorable
outcome to it on the merits. The consolidated complaint alleges that ACCS
made “numerous false representations” and the CUBPA claim alleges that
ACCS committed “fraudulent acts or practices.”
         DEL CAMPO v. AMERICAN CORRECTIVE COUNSELING              1763
                c.   Cases from Other Circuits

   Our conclusion is in accord with that reached by our sister
circuits. All but the Eleventh Circuit have denied state sover-
eign immunity to private entities, more or less categorically.
Many of the cases concerned entities that were somewhat
more governmental in nature than a purely private contractor
like ACCS, and so lend no support to granting immunity to
such an entity. And even the Eleventh Circuit recently held
that ACCS itself is not entitled to state sovereign immunity.

   The Seventh Circuit well explained the difficulties inherent
in extending the doctrine to private parties in Takle v. Univer-
sity of Wisconsin Hospital and Clinics Authority, 402 F.3d
768 (7th Cir. 2005), a case concerning a recently privatized
state hospital originally created by statute. The hospital still
had many ties to the state, which owned its buildings and pro-
vided funds for its medical school, among other things. Id. at
770-71. Even such public/private “hybrid entities,” held
Takle, were not entitled to sovereign immunity. Connections
to the state even as substantial as those of the University of
Wisconsin Hospital’s did “not require that privatization be
treated as a farce in which the privatized entity enjoys the
benefits both of not being the state and so being freed from
the regulations that constrain state agencies, and of being the
state and so being immune from suit in federal court.” Id.

   Other circuits have denied sovereign immunity to similarly
“hybrid” entities. In Fresenius, the First Circuit held that a
statutorily-created public corporation, with a board partially-
appointed by the governor of Puerto Rico and some state
funding, was sufficiently separate from the Commonwealth as
to lack immunity.14 322 F.3d at 75; see also Pastrana-Torres
v. Corporación de Puerto Rico Para La Difusión Pública, 460
  14
     The First Circuit has held that “the Commonwealth of Puerto Rico is
treated as a state for Eleventh Amendment purposes.” Fresenius, 322 F.3d
at 61.
1764    DEL CAMPO v. AMERICAN CORRECTIVE COUNSELING
F.3d 124, 126-28 (1st Cir. 2006) (relying on Fresenius to
deny immunity to a Puerto Rican public broadcasting com-
pany created by state statute but having its own legal iden-
tity). Similarly, the Tenth Circuit, in United States ex rel.
Sikkenga v. Regence BlueCross BlueShield of Utah, 472 F.3d
702, 721 (10th Cir. 2006), declined to extend state sovereign
immunity to a laboratory wholly owned by the University of
Utah system, as its “day-to-day operations” were independent
from the University, its liabilities isolated from the state, and
its business that of “a commercial laboratory.” Id. at 718-20.
As the Tenth Circuit held, “common sense and the rationale
of the Eleventh Amendment do not require that sovereign
immunity attach when an agency is structured to be self-
sustaining and has a long history of its own way.” Id. at 721.

   Parties closer to the private end of the spectrum have, not
surprisingly, fared as poorly in their efforts to acquire state
sovereign immunity. In Brotherton v. Cleveland, 173 F.3d
552, 561 (6th Cir. 1999), “a nonprofit, private corporation”
authorized by Ohio statute to collect donated corneas was not
accorded immunity, as its only connection to the state was the
authorizing statute. And in United States ex rel. Barron v.
Deloitte & Touche, L.L.P., 381 F.3d 438, 441 (5th Cir. 2004),
the Fifth Circuit denied sovereign immunity to a Medicaid
provider which it characterized as a “purely private corpora-
tion.” It observed, as we do today, that the factors normally
used to assess whether an entity is an arm of the state are “dif-
ficult to evaluate in the context of a private corporation”
because “[m]ost ‘arm of the state’ cases address the distinc-
tion between local and state control,” rather than the operation
of a purely private entity. Id.

   Only the Eleventh Circuit has ever, as far as we can ascer-
tain, accorded sovereign immunity to a private entity, under
an analysis which we do not find persuasive and which, in any
event, the Eleventh Circuit has made clear does not accord
immunity to ACCS. Shands Teaching Hospital and Clinics,
Inc. v. Beech Street Corporation, 208 F.3d 1308, 1311 (11th
         DEL CAMPO v. AMERICAN CORRECTIVE COUNSELING               1765
Cir. 2000), provided a private administrator of a state health
care plan with sovereign immunity, reasoning that “[t]he per-
tinent inquiry is not into the nature of a corporation’s status
in the abstract, but its function or role in a particular context,”
and that the health care plan was essentially controlled by the
state. Id. Relying upon cases which it characterized as extend-
ing federal sovereign immunity to Medicare providers,
Shands extended immunity. Id.

   Shands was, in our view, doubly in error. First, albeit in the
qualified immunity context, the Supreme Court has warned
that “a purely functional approach [to the private entity immu-
nity inquiry, as used in Shands,] bristles with difficulty,”
because “government and private industry may engage in fun-
damentally similar activities,” even though private entities are
not entitled to immunity. Richardson v. McKnight, 521 U.S.
399, 409 (1997). Second, and more importantly, the Medicare
cases upon which Shands relied did not accord sovereign
immunity to private parties. Instead, Medicare regulations
provide that private intermediaries “act on behalf” of the gov-
ernment, and that the government is “the real party in inter-
est” in any litigation involving the program. See 42 C.F.R.
§ 421.5(b).15 Their contracts therefore treat suits against them
as against the sovereign governmental entity itself, rather than
extending sovereignty to private parties. We have recognized
as much. See Kaiser v. Blue Cross of Calif., 347 F.3d 1107,
1117 (9th Cir. 2003) (discussing “real party in interest” regu-
lations and citing Shands as part of the Medicare line of
cases). There is no such regulatory or statutory provision here.
  15
    All of the cases cited by Shands recognize the importance of these
regulations. See Pani v. Empire Blue Cross Blue Shield, 152 F.3d 67, 74
(2nd Cir. 1998) (citing provision); Anderson v. Occidental Life Ins. Co.,
727 F.2d 855, 856 (9th Cir. 1984) (per curiam) (referencing provision);
Pine View Gardens, Inc. v. Mut. of Omaha Ins. Co. 485 F.2d 1073, 1074-
75 (D.C. Cir. 1973) (referencing provision); Matranga v. Travelers Ins.
Co., 563 F.2d 677, 677 (5th Cir. 1977) (citing earlier version of provi-
sion); Peterson v. Weinberger, 508 F.2d 45, 51 & n. 7 (5th Cir. 1975)
(quoting earlier version of provision).
1766     DEL CAMPO v. AMERICAN CORRECTIVE COUNSELING
   Moreover, the Eleventh Circuit recently recognized that
Shands does not support ACCS’s claim to sovereign immu-
nity for its contractual diversion program activities. In Rosa-
rio v. American Corrective Counseling Services, Inc., 506
F.3d 1039, 1047 (11th Cir. 2007), which is on all fours with
this appeal in all relevant regards, the Eleventh Circuit held
that even the functional analysis supplied by Shands did not
support ACCS’s claimed immunity, holding that “[t]he stan-
dard for Eleventh Amendment immunity has never been held
to apply simply because an independent contractor performs
some government function . . . . ACCS is not entitled to Elev-
enth Amendment immunity.” Id.

   There is, then, no case of which we are aware in any circuit
that would support granting state sovereign immunity to
ACCS.

                                  III.

   [7] The law makes clear that state sovereign immunity does
not extend to private entities.16 The district court was therefore
right to let this suit proceed.

  AFFIRMED.

  16
     To be clear: Although we hold that private entities cannot be arms of
the state, we emphatically do not hold that they cannot act under color of
state law for the purposes of 42 U.S.C. § 1983 and similar statutes. The
two concepts are distinct. Compare Mt. Healthy Sch. Dist. Bd. of Educ. v.
Doyle, 429 U.S. 274, 280 (1977) (counties and similar municipal corpora-
tions are not arms of the state for sovereign immunity purposes) with
Monell v. Dep’t. of Social Serv. of the City of N.Y., 436 U.S. 658, 694
(1978) (local governments may be sued under § 1983 in some circum-
stances).